Hometap raised $245 million in commitments for its third institutional asset investment fund six weeks after
Bain Capital and Group 1001's Delaware Life Insurance Co. were investors in this latest round of fundraising. Both did not participate in the previous institutional funds, but Bain also participated in the December venture capital round.
"We're also thrilled to be building an attractive asset class that provides both diversification and inflation-hedging benefits for institutional investors," Hometap CEO Jeffrey Glass said in a press release.
Hometap positions itself as an alternative for homeowners to access funds from their property instead of taking out a loan. It provides cash based on the home's current equity in exchange for a share of its future value. Participants can settle the transaction within 10 years.
Its competitors among those that market
In the early days of the pandemic, both traditional home equity lenders and several of these alternative
"Even though the house price appreciation rate will fall from 2021 to 2022, prices are still going up and we think somewhere in the 7% to 8% range," Fannie Mae Chief Economist Doug Duncan said in an interview with National Mortgage News. "So when you get interest rates rising, even though at very modest levels with house prices rising above the pace of inflation, that's going to exceed the pace of income growth."
Although Duncan was speaking about the effect on purchase activity, the sentiment can also apply to the need for consumers to tap property value through a cash-out refinance or home equity line of credit.
"With a growing number of homeowners seeking creative ways to access their home equity, Hometap offers an attractive, debt-free solution that we are proud to support," said Justin Ostroff, senior managing director of G1001 Innovation Group. "This is a compelling new asset class that fits within Group 1001's mission to offer useful and intuitive financial products accessible to everyone, and we recognize the significant opportunity for Hometap to continue to institutionalize this market."
American home owners held $9.4 trillion in tappable equity at the end of the third quarter of 2021, according to Black Knight.
While mortgage borrowers pulled out equity during the third quarter at the highest rate in almost 14 years, the more than $70B in equity tapped via cash-out refis was equivalent to just 0.8% of available equity entering the quarter, Black Knight said. That was less than a third of the rate at which people were pulling cash out of their homes at the peak of the boom period back in 2005.
