Unlock Technologies, Saluda Grade Announce Close of First Rated Home Equity Agreement Securitization

Unlock Technologies, a prominent home equity investment technology company, in collaboration with Saluda Grade, a private alternative real estate investment firm, has recently made headlines by closing the industry’s first rated securitization. This groundbreaking $224 million transaction, named Unlock HEA Trust 2023-1, has received an investment-grade rating from DBRS Morningstar, setting a new precedent in the realm of home equity agreements (HEAs).

Unlock HEA Trust 2023-1 comprises Class A and B notes, rated BBB (low) and BB (low), respectively, by DBRS Morningstar. This rating follows the agency’s establishment of criteria for the HEA asset class earlier this year, a significant step that facilitated this pioneering securitization. The successful rating of these notes marks a crucial endorsement of the stability and potential of the HEA market. It also reflects the growing investor confidence in alternative real estate financing solutions, broadening the scope for future transactions in this domain.

Barclays served as the sole structuring agent and lead underwriter for the transaction, with Jefferies as the joint bookrunner. Texas Capital Bank and Baird contributed as co-managers. The securitization was backed entirely by residential home equity agreements originated by Unlock, who also managed the underlying assets. Saluda Grade, marking its third securitization backed by Unlock-originated HEAs, acted as the issuer. This collaboration highlights the synergy between innovative financial technology and traditional banking expertise. The involvement of these established financial institutions underlines the growing acceptance and maturation of home equity agreements in the broader financial market.

Ryan Craft, CEO of Saluda Grade, emphasized the significance of a rated securitization in mainstreaming an asset class. He hailed this event as a watershed moment for both companies and the industry at large, transforming home equity agreements from an esoteric asset class into a well-structured consumer finance product. Craft’s vision for the future includes expanding the reach of HEAs to a wider audience, potentially revolutionizing how homeowners leverage their property’s equity. This development could pave the way for more innovative financial products, further diversifying the options available to consumers.

Jim Riccitelli, CEO of Unlock, highlighted the uniqueness of their home equity agreement. Unlike traditional debt-focused solutions, the HEA offers a debt elimination approach, providing substantial relief to families dealing with financial challenges. This innovative product is designed to be inclusive and purpose-built, offering a fresh perspective on managing financial obligations. Riccitelli envisions the HEA as a tool that can reshape the landscape of personal finance, offering a more flexible and equitable alternative to traditional home equity loans. He believes that this approach will empower homeowners, giving them greater control over their financial futures without the burden of increasing debt.