Assumable mortgages from Roam get seconds from Spring EQ

Roam, which facilitates assumable mortgage transactions, is teaming with Spring EQ, with the latter company providing a second lien loan in order to increase the homeowner taking on this obligation's equity position.

This product is being marketed as Roam Boost. Roam is not a lender, but works with existing lenders of Federal Housing Administration and Veterans Affairs mortgages, which are assumable, Raunaq Singh, its CEO, explained during an interview.

The combination of the assumed mortgage and Spring EQ's second will have a loan-to-value ratio of 85% and a blended interest rate of between 4% and 5%, explained Singh.

"Our mission at Spring EQ is to deliver the most cost-effective home equity financing solutions to the market, and our partnership with Roam is a great example of how we're bringing that to life for more homebuyers," said Joseph Steffa, executive chairman of Spring EQ, in a press release. "We're excited to expand the Spring EQ product offering to a new market thanks to our partnership with Roam."

Rayon Richards/Rayon Richards

As part of the transaction, the buyer must pay the difference between the home purchase price and the outstanding balance of the mortgage being assumed at the closing table, meaning they could need to come up with a lot of cash to make the transaction happen.

This arrangement helps to eat up some of that differential.

Furthermore, the agreement with Spring EQ ends alleviating a lot of the uncertainty in the transaction, Singh said.

"By partnering with Spring EQ, and [them] originating the second for every homebuyer, they can shop for any home without worry and have certainty that any assumption they take will have secondary financing," Singh said. "That gives them additional buying power and some breathing room for the purchase."

Singh tells servicers it is attractive for them to start pursuing assumption transactions.

"I often encourage them to think about it as this is a source of revenue retention," he said. "You always thought of your business as a cost center, but start thinking about it as revenue retention and you can be one of the premier revenue generators in a category where revenue is drying up."

It is a way for the servicer to differentiate itself in the marketplace and retain the client, Singh continued.

Roam prepares the file for the assumption to take place.

"Most people don't know all of the things that the servicer will need to know," Singh said. "We help put everything together such that they can actually put their best foot forward with the servicer and close in 45 days."

The second that Spring EQ provides also protects the seller by providing the knowledge the funds are available for their equity to get cashed out in a coordinated and timely manner, he said.

It also means "we're increasing the buying power for the buyer, we're giving them breathing room such that they know they don't have to put every single dollar in their bank account into the assumption.

"For agents, we're helping them say 'hey, go take your buyer shopping and tell them they can try on a little bit of a bigger house and see how it feels,'" Singh said.

In the press release, Roam said it completed a second seed round, which information from Pitchbook put at $3 million.

Keith Rabois, the leader of the pre-seed financing round when he was a partner at Founders Fund and now a partner at Khosla Ventures, also led this newest round. New investors are Tony Xu, the DoorDash CEO; Dylan Field, Figma CEO: Upstart co-founder Paul Gu; and Gokul Rajaram, who is a board member at both Pinterest and Coinbase.

"Roam has seen significant traction since launching last year and has proven that sellers, buyers, and agents need the product," Rabois said in the press release. "They have just unlocked an even larger buyer pool by addressing the down payment challenge through their second lien partnership."