Figre Lending is preparing to sponsor another securitization of home equity line of credit (HELOC) assets, selling $220 million in bonds through the FIGRE Trust 2024-SL1.
Previous securitizations from Figre Lending came to market through the FIGRE Trust, HE, but the current deal puts the dominant pool asset, second-lien loans, front and center on the name. Second liens account for 84.6% of the asset pool, followed by first and third liens, with concentrations of 11.4% and 4.0%, respectively.
The current deal will sell notes to investors through about eight tranches and repay them through a pro-rata and sequential pay structure. The A1 tranche and M1 through M3 tranches will be repaid on a pro-rata basis—but the mezzanine notes must pass their respective locked-out provision without triggering performance thresholds. The B1 through B3 notes will be repaid sequentially, KBRA said.
Broken down by maturity terms, the HELOC assets have maturities of 30 years (63.3%), 15 years (20.8%), 10 years (14.2%) and five years (1.7%), according to Kroll Bond Rating Agency.
Goldman Sachs, Jeffries and JPMorgan Securities will purchase the notes initially.
KBRA noted a couple of drawbacks in terms of the pool's potential credit. Aside from the amount of second and junior liens in the pool, 82.2% of the loans were underwritten with alternative documentation. There won't be any principal and interest advancements, which creates liquidity risk.
The collateral pool contains 2,846 loans, which have an average balance of $77,333, KBRA said. On a weighted average basis the loans have an original FICO score of 744, and an original loan-to-value ratio of 21.0%. Also, on a WA basis the pool has a debt-to-income ratio of 36.2%. The pool has a net zero WA annual income of $195,252.
In terms of geographic diversity, the top three states account for 44.8% of the pool. California, Florida and Washington account for 28.1%, 10.3% and 6.4%, respectively.
KBRA assigns ratings of AAA, AA- and A- to the A1, M1 and M2, respectively. The M3, B1 and B2 receive ratings of BBB-, BB- and B-, respectively.
