Figure's Kiavi deal and marketplace growth fueled a record quarter, with volume up 132% year-over-year
Due to the never-ending churn of the news cycle, one story that hasn’t gotten as much attention recently is the possibility of changes within Fannie Mae and Freddie Mac.
That changed over the weekend, when the Wall Street Journal reported that approximately 12 executives from Fannie Mae were let go. It led to some speculation that there could be movement again on the GSE front.
Some analysts have speculated that a release of Fannie Mae and Freddie Mac from conservatorship could help push mortgage rates down, something that may take on extra importance with the midterm elections just weeks away.
As it stands, the future of Fannie Mae remains one of the more unsettled questions in the mortgage market. If there is a pullback in credit availability from Fannie and Freddie, it could continue to open the door for non-QM lenders to fill that gap. One company believes it is poised to step into the space left by the GSEs.
Michael Tannenbaum (pictured top), CEO of Figure, said lenders who have historically anchored their business around Fannie Mae are starting to ask different questions.
"People want to make sure they are not getting too far away from Fannie Mae because that's the liquidity they know," Tannenbaum told Mortgage Professional America. "But there's been a fair amount of noise — is Fannie Mae focused on affordability? Is it focused on the capital markets? Is it going private? That uncertainty, when you are so tied to Fannie Mae, is something we are filling. People are looking for alternatives in an uncertain world."
Strong quarter and Kiavi acquisition
Figure's Q2 results show the appetite for that alternative is growing. Consumer loan marketplace volume hit $4.3 billion in the quarter, a 132% increase from the prior year, with net income up 192% to $87 million on revenue of $226 million, and Figure Connect reached 65% of total volume two years after launching in June 2024.
Tannenbaum said the Q2 momentum reflects the marketplace pulling in more partners and investors at the same time the Kiavi acquisition opened a new segment for Figure.
"Figure Connect coming in at 65% when we only launched that platform two years ago reflects that the market is really interested in what we're offering there," he said. "There's a lot of pull into that marketplace."
The Kiavi deal adds the business purpose lending market, where roughly 25% of US housing stock is investor-owned, and Kiavi holds approximately 10% market share while the next largest competitor sits at around 2%, according to Tannenbaum.
The combination of Figure and Kiavi opens new doors for both companies. Figure's home equity product is capped at around 85% loan-to-value, while Kiavi's technology allows loans to go above 100% of the current home price based on a post-renovation valuation, creating a valuable product for home improvement borrowers.
"Forty percent of home equity is home improvement," he said. "Think about how many people would be interested in borrowing against the pro forma — borrowing 100% of today's value or more for renovation. Kiavi is not doing the HELOC, but we have the HELOC technology, and we can add their post-renovation valuation. That's a really valuable connection point."
What brokers need to know
Tannenbaum said the $35 trillion in available home equity, a Federal Reserve figure tracked quarterly, is where the action is for mortgage partners right now, and brokers without a home equity strategy are leaving business on the table.
With rates elevated and expected to remain so, home equity gives homeowners a longer term and lower rate than any alternative for debt consolidation, which means a lower monthly payment, the number most borrowers are actually focused on.
"For people running mortgage businesses — banks, credit unions, independent mortgage banks, servicers — they're saying, ‘I need to have a home equity strategy in a way that probably feels more visceral today than it did even three to six months ago,’" he said.
At a time when the rising costs of loan origination have the industry's attention, Figure is promising to cut both the time and cost of producing a loan.
"We take what was a $12,000 process and 45 days and move it to $1,005," he said. "That's very disruptive. And with Figure Connect, we're very focused on making sure our partners not only benefit from this innovative technology, but also have Fannie Mae-like liquidity."
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