Figure hopes the Kiavi acquisition makes it the institutional anchor for non-QM that the agencies are for conventional lending
It had been rumored for weeks in the non-QM space that Kiavi, one of the nation’s largest non-bank lenders, was on the verge of being acquired.
That rumor was confirmed last week, when Figure announced it had entered an agreement to acquire Kiavi in a transaction valued at $717 million.
Figure, which has originated more than $25 billion in home equity loans, now adds a company in Kiavi, which has funded more than $30 billion in loans to real estate investors.
The fix-and-flip and DSCR spaces have been attracting a growing number of mortgage brokers looking to expand beyond conventional products. According to one Figure executive, the broker channel is where the combined platform has the most to offer.
Anthony Stratis (pictured top), vice president of lending partnerships at Figure, said the deal creates something brokers working in the investor space have not had before.
"Bringing the two together will create significantly more opportunities for brokers to provide end-to-end solutions to real estate investors via DSCR loans or fix and flip loans on the short term,” Stratis told Mortgage Professional America. “But then having the ability to potentially repay them off as products complete, using a HELOC, for example, and then keeping that same real estate investor within their service.
“It’s being able to just serve them up opportunity after opportunity. And I think that's going to be very, very powerful."
It’s not just large-scale brokerages that Figure looks to help with this deal. Stratis believes this combination will allow smaller brokers to have the same tools as their larger counterparts.
"We are reinventing how mortgages work just from an originations perspective and the efficiencies that we bring," he said. "All those benefits accrue to brokers. In many ways, we are bringing institutional-grade capabilities to small brokers. And that gives them the ability to sort of compete in the market head-to-head, no matter who may be trying to serve that same customer."
How the acquisition will help brokers
Stratis said the Kiavi brand recognition alone made the deal worth pursuing for Figure.
"Kiavi has a great brand in and of itself, especially amongst real estate investors, the broker community at large, even wholesale lenders who have historically competed with them, they all know who Kiavi is," he said. "And they've been successful in their own right and originating at scale. The story behind what Kiavi does in bringing solutions and the ability to fund projects for real estate investors is an area that continues to show increasing demand even in the tough mortgage market that we're in today."
Another benefit Stratis cited was the institutional liquidity Figure brings. It is the element he expects to most change the broker experience. The fix-and-flip and hard money space has historically lacked the standardized capital markets that brokers on the conventional purchase side rely on.
"I think especially the fix and flip and just hard money space, it's pretty fragmented," he said. "If we can standardize and bring the best solution possible just from predictability, speed, ease, and liquidity — which translates to pricing — having that one stop shop is something that I think would be very powerful to brokers."
In the way Fannie and Freddie serve the conventional mortgage market, Stratis hopes Figure can duplicate that in the non-QM investor space.
"Having a sizable institutional client base on the capital market side that stands always ready to buy this version of the RTL and DSCR product is hugely important," he said. "It's why the agencies do what the agencies do on purchase. We continue to want to be the alternative for that in the non-QM space."
Different than other acquisitions
The acquisition comes during a period of significant consolidation across the mortgage industry. Stratis said the Figure-Kiavi deal is driven by a different logic than much of what brokers have been watching play out.
"We've seen a number of mortgage originators consolidate and acquire each other, and in my opinion, a lot of that is driven by their need to create scale, to drive efficiencies and a path back to profitability through the consolidation," he said. "I think this acquisition is a little different. What we're actually after is getting efficiencies and capabilities and bringing that to the market to further improve what we do across asset classes, all underpinned by the technology that each of our two organizations brings."
Stratis said Figure's position in the market gives it more room to be deliberate about what it pursues.
"We are in a position of being able to be a little more selective in what opportunities we want to go after to make sure that they align with our strategic vision and that it keeps us on our path of creating that blockchain-based capital markets of the future," he said. “We feel that Kiavi is already delivering a pretty good experience, and obviously, we are too.
“Finding the best from each of the organizations and bolting it on to a singular blockchain-based solution with a bolted-on capital market should unlock a lot of synergies and efficiencies."
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This article is part of our Monthly Spotlight series, which in June focuses on residential and commercial construction. Full coverage can be found here.
