Warburg Pincus to sell stake in mortgage fintech Newfi to Athene

Private equity firm Warburg Pincus plans to sell its majority shareholder investment in non-agency fintech lender Newfi to Athene, a company that also recently agreed to buy a U.K. mortgage firm.

The financial terms of the transaction were undisclosed. Founder and CEO Steve Abreu will retain his equity stake in Newfi and continue to head the company while aiming to expand its footprint following the acquisition. Chief Risk Officer Michelle Constantine also will remain with the company, which is a national lender based in Emeryville, Calif. Apollo will manage the investment for Athene.

“This move allows Newfi to combine its capital market expertise with Athene’s balance sheet and deep knowledge in the mortgage space, accelerating Newfi’s presence in single family lending,” Abreu said in a press release.

Newfi’s automation, ability to originate efficiently through multiple channels that include consumer-direct, and experience with outreach to underserved markets all appear well-positioned to address some challenges the mortgage industry is broadly facing related to waning volumes, rising costs and normalizing revenues. Mortgage companies typically look to increase working with higher margin non-agency borrowers that fall outside of the typical underwriting box when volumes fall, while carefully managing risks related to these consumers’ ability to repay.

The acquisition is scheduled to close in the first quarter of next year, contingent upon the receipt of state regulatory approvals and other closing conditions.

Newfi’s exclusive financial advisor in the transaction was Houlihan Lokey. Weintraub Tobin and Kirkland & Ellis served as Newfi’s legal advisors. Sidley Austin advised Athene and Apollo on legal matters, and Zuckerman, Gore, Brandeis & Crosman served as employment counsel for Abreu and Constantine.