Figure Technologies completed a long-awaited $150 million securitization of a bundle of home equity credit lines (HELOCs), which was billed as the first such transaction in which all aspects of the process were managed on a blockchain.
According to the company, everything from the origination of the loans to the issuance of the bonds to the collection of borrowers’ monthly installments is run on Provenance, Figure’s blockchain. This distinguishes the transaction from most enterprise blockchain projects, which have either been demonstrations of the technology rather than live applications or touched just one piece of a complex process.
As such, the bond issue may serve as a showcase to businesses for the benefits of distributed ledger technology (DLT) at a time when such use cases are no longer generating the same buzz as they were five years ago. Corporate technology experimentation now tends to take place under the radar, with the word “blockchain” being spoken, if at all, in hushed tones.
“While there are certainly other companies trying blockchain-based securitization, Figure’s project is at minimum a notable and high-profile effort,” said Lewis Cohen, a principal at DLx Law, who was not involved in the transaction. “The future of securitization involves a level of detailed and accurate information about underlying assets that blockchain technology is well-suited to provide.”
The bond sale for Figure was managed by U.S. brokerage Jefferies Group and Japanese financial giant Nomura. The two-year-old startup raised more than $225 million at a valuation of $1.2 billion, including a $103 million Series C funding round in November. In the blockchain space, it has drawn a spate of serious backers including Morgan Creek, Digital Currency Group, Foxconn’s investment arm HCM Capital, Rabbit Capital and MUFG.
The Process is a Blockchain-Based
As it stands, securitization-Wall Street’s decades-old practice of repackaging loans into bonds sold to investors-may look like a Rube Goldberg machine. One company may take the application from the consumer (the “originator”); another may fund the loan (the “warehouse lender”); another will sell the securities to investors (the “underwriter”); yet another will mail the monthly bills and dun late payers (the “servicer”). This is a streamlined version.