Cara Newman, head of structured finance at Hometap, answers SCI's questions

Q: Hometap, the home equity investment (HEI) fintech, is expanding into the structured finance market (SCI 7 July). What are Hometap’s motivations behind entering the securitisation market, and why now?
A: For Hometap, it's always about supporting homeowners and fulfilling our mission on their behalf. We view a strong structured finance capability as an important avenue to the capital needed to meet the increasing demand for our home equity investments.

From a timing perspective, this is also a great moment to bring our differentiated exposure to US residential real estate to capital markets investors. We've seen meaningful progress in the second-lien securitisation space in recent years, and the newly-finalised ratings for HEI-backed securities this summer energise a wider universe of ABS investors and asset buyers to consider participation. All of this adds up to a genuine inflection point for home equity investments.

Q: What does Hometap hope to achieve in the securitisation market? Are there any specific opportunities it’s seeking to capitalise on?
A: We believe we can bring HEI-backed securities to market that boast unique collateral and compelling financial structures. Given that HEIs may be new to some investors, we expect a level of discovery and dialogue with this audience to increase awareness and familiarity with how our HEIs are structured and perform, and we love that conversation.

While we believe it is especially timely given the current macroeconomic conditions, we view today’s work as the foundation for a durable issuance platform that will stand the test of time. We see our first rated issuance, currently in development, as the first in a regular cycle - and the more knowledge and operational dexterity we can put in place, the better. We are also actively engaged with industry groups, including as a member of the Structured Finance Association (SFA), to drive collective energy and visibility around HEIs.

Q: What has caused the recent increase in interest for the HEI asset class – both as a product and the securitisation of it? 
A: The credit cycle and higher cost of borrowing make it tougher for lenders to meet homeowner demand for traditional products, and homeowners in need of financing are disinclined to add debt or sell their homes in today’s rate environment. For investors, we’ve also seen a need to diversify even further from listed markets’ correlation, driving more appetite for real assets and asset-based. There is a level of normalisation around alternative fintech-driven models for home equity, just as we've seen across other consumer finance applications, so that is driving additional demand.

In terms of securitisation, demand for yield and the universe of asset-backed investors today has widened. Sophisticated members within this group appreciate the risk premium and attributes that HEI exposure can bring.

Q: What are the benefits of HEI products – both for the economy as well as for borrowers? 
A: The impact for homeowners, their families and their communities is at the core of HEI's reason for being. The use cases we see for our financing are incredibly diverse, spanning both inevitable challenges and amazing opportunities - from paying off consumer or medical debt to funding higher education to starting a new business, buying an investment property, or even renovating or installing energy-efficient technologies.

Many of our homeowners are strong candidates for home equity financing, but they may not have the traditional credit attributes to qualify them for the traditional home equity products. That is the case even more so now than ever before, as lenders have become even more selective. So, the impact we can make with an HEI alternative is manifest and really central to what we do and how we do it.

Q: What makes Hometap different to others already in, or looking to enter this market?
A: Our peers come in a wide variety of shapes, sizes and models - and even within the broader home equity space, we think there’s a good option for every homeownership need. I believe Hometap distinguishes itself in our sincere, authentic commitment to our mission.

We take tremendous pride in the way we are able to engage with homeowners, and are deeply committed to expanding access to our financing. We see that mission through as we attract asset capital, and with the knowledge, tools and experiences we're building to enable homeowners too. I’m lucky in that all of this enterprise effort and quality shows through in the assets we can take to market.

While Hometap is a relatively young company, our strategy for the platform is for it to be a sustainable, durable and long-term business. This isn't just an attractive model to capitalise on today’s market conditions, but very much our passion - and we build in that way.

Q: The use of technology in the securitisation market is on the up. How will technology factor into Hometap’s securitisation efforts?
A: Technology has been really close to my heart at an industry level, even prior to joining Hometap. There is immense potential - and really a genuine need - to leverage tools like blockchain, tokenisation and automation initiatives to modernise the housing finance ecosystem. Inefficiencies caused by a reliance on manual processes and antiquated technology cause frustration and delays the process of obtaining financing. Technology has the potential to help us make smarter decisions, transact more accurately and quickly, as well as easing the process for homeowners.

We've seen more and more openness from market participants when it comes to integrating technology into their business operations in home finance. That has been exciting to see, although there is much more to do.

Hometap is built on a foundation of technology, engineering and data science, and innovation can be seen in all facets of our business. When it comes to our HEI origination platform, Hometap’s investment in technology positions us to scale our business to serve more homeowners. As we build our securitisation platform, I’m excited to see how we can put this technology to work to increase transparency and integrate functionalities and features that our investors find useful.

Q: What excites you most about your new role at Hometap?
A: Hometap’s authenticity is what stands out. I was incredibly excited to join, most of all because we genuinely live our mission and bring thoughtfulness, innovation and intentionality to bear at every step as we build our platform.

Hometap’s close engagement with homeowners throughout their journey is what distinguishes us; it is proven out in the reviews we are proud to have earned from homeowners who have valued their experience with our team, and I believe that closeness similarly permeates the way we approach asset capital partners. My goal as we ramp up the capital team’s capabilities is for Hometap’s structured finance platform to reflect that same level of authenticity, sophistication and dedication to the mission of making homeownership less stressful and more accessible – and making it relevant to this investor space.

Q: With women still holding a smaller minority of leadership positions with structured finance than any other financial industry, does this factor into your new role at Hometap? 
It absolutely does. Mentorship, guidance and support has been invaluable in my career progression, and I am committed to ‘paying it forward’ and driving the development of talented women in the structured finance industry.

There is so much more we can do to expand the pipeline of women moving into leadership positions, including starting that conversation earlier and introducing them to the different corners within the market and their opportunities. Industry groups like Structured Finance Association’s Women in Securitisation initiative, in which I am honoured to serve as vice chair, play an important role in supporting the development and retention of women in the industry.

As individuals, we all have the opportunity to support and encourage the next generation, and organisations play a critical role as well. I've felt tremendous support here at Hometap to continue that advocacy, and we foster it very actively within our own organisation.

Claudia Lewis