Achieve closes rare HELOC securitization

Achieve announced that it has closed on a rated $175 million securitization of fixed rate, amortizing, home equity lines of credit.

"This deal is among only a handful of AAA-rated securitizations of HELOCs issued since the Great Recession," said Andrew Housser, Achieve's co-founder and co-CEO, in a press release.

While traditional HELOCs are more typically variable rate products, some nonbanks recently gravitated more toward fixed rate/hybrid products.

HELOC securitizations largely disappeared from the market for a decade after that financial crisis, and despite a slight resurgence, growth has been slow. 

Recently, a handful of unrated HELOC securitizations have been done but rated ones have remained particularly rare, according to analysts who spoke at a recent ratings agency press briefing on the outlook for various structured finance sectors.

DBRS Morningstar rated the Achieve securitization. The notes in classes A and B received investment-grade structured finance credit ratings of AAA and BBB (low), respectively. Class C notes receive a speculative grade rating of B.

Achieve Loans, formerly known as Lendage, originated the HELOCs in the securitization. Borrowers working with Achieve Loans and using the lines of credit to consolidate unsecured debt obligations have saved an average of $860 per month since 2019, according to the company.

The HELOCs are fully drawn at origination, have 10- or 15-year terms and a five-year draw period. Most are junior liens, as is typical, but some are in first position. 

Rising first-mortgage rates have made getting a line of credit in a junior lien position relatively attractive because it doesn't require refinancing the primary loan out of a lower rate.

Because HELOCs in a junior lien position reduce consumers' home equity and the housing market is cooling, there's some wariness about highly leveraged borrowers in the sector. Achieve Loans originated its HELOCs at low combined loan-to-value ratios, according to the company.

On average, the HELOCs in the securitization have seven months of seasoning. The full range spans 2 to 33 months.

FREED Mortgage Trust 2022-HE1 is the first home equity line of credit securitization done by the Freedom Consumer Credit Fund, an investment fund managed by an Achieve company. Other securitizations done by FCCF have been personal loan transactions.