- What Swiched is looking at securitization as a funding strategy
- Why The company is exploring different forms of financing as it begins originations
- What next Swiched will nail down a timetable for its debut offering
A startup originator of home-equity investments is exploring securitization.
Arvada, Colo.-based Swiched launched in 2023 and is in the early stages of setting up an origination program. Along with that, the company has spoken to market participants about its intentions to bring a debut bond offering to market, likely more than a year from now.
Swiched joins a crowded pipeline of HEI originators that are tapping the asset-backed bond market or are contemplating doing so despite growing anxiety among investors over buying such bonds. Indeed, conflicting views on whether the loans should be classified and regulated as mortgages have increased scrutiny of the growing asset class.
Still, some larger mortgage companies have been aggregating such contracts with the goal of securitizing them. At the same time, large money managers including 400 Capital Management, Bain Capital, Blue Owl Capital, Deer Park Road Management and Fortress Investment are deploying similar strategies.
For Swiched, the company has the benefit of entering the market when the regulatory uncertainty already has taken hold. As such, it plans to originate its accounts with the idea that they eventually will be classified and regulated as loans.
The company in 2024 signed on mortgage veteran David Akre as an advisor tasked with oversight of its capital-markets efforts. Prior, Akre was a principal at Whole Loan Capital for nearly three years following four years at the now-defunct Sprout Mortgage. Akre also has worked at Five Oaks Investment, New York Mortgage Trust, Thornburg Mortgage and GE Capital.
The new-issue market for bonds backed by home-equity agreements has grown since Morningstar DBRS started rating such offerings in 2023. So far this year, five such transactions totaling $1 billion have priced, according to Asset-Backed Alert’s ABS Database. That essentially matches last year’s tally of six deals adding up to $1 billion.
