Figure Technologies to rollout blockchain TBA trading

Figure Technologies hopes to roll out a private “to be announced” (TBA) trade on blockchain by the end of the year.

Mike Cagney, CEO and co-founder of Figure, speaking at DC Fintech Week Tuesday, noted there is a need for a private capital market and that the fintech has partnered with two large investment firms to help this project come to fruition. Cagney did not disclose who the two firms are.

“[One] of the macro trends that I believe [is] going to persist for many years is bank credit contraction,” he said. “There needs to be a construct for a private capital solution and blockchain is a tremendous way to do this. The cost and efficiencies that we can get from the technology — the ability to build homogenous assets, the ability to have immutable transaction history — that’s the foundation that you need to create a liquid TBA and ultimately a pass-through market with a third-party guarantor.”

Currently, Fannie Mae and Freddie Mac have a TBA trade, which allows for loans to be securitized prior to closing. Cagney envisions something similar in the private market. 

“What I believe has to happen is you need to create a private TBA market to replicate what Fannie Mae and Freddie have done with TBA securities, turn it into pass through securities, and that private market, or done in conjunction with Fannie or Freddie, needs to come to fruition or we’re going to experience massive credit contraction,” he added. “This is something that we’re seeing right now in pockets of the market and elements of where we transact.”

Figure’s founder said credit contractions have been seen “in prime jumbo, we’ve seen it in home equity lending, we’ve seen it in non conforming mortgages, but it’s going to persist into auto consumer student loans and there needs to be a construct for a private capital solution. “

Cagney said he hopes to see the first private TBA trade on chain by the end of the year. 

Figure did not respond to a request for further information.

Apart from plans to introduce a private TBA trade on chain by the end of the year, Figure has also been doubling down on its HELOC business.

It announced a rollout of a Lending-as-a-Service (LaaS) platform in early November, which gives mortgage originators access to its HELOC system and allows them to originate HELOCs based on their desired loan terms, pricing parameters and fulfillment requirements. 

Earlier this year, Figure also launched a HELOC wholesale loan production platform and entered into partnerships with four independent mortgage bankers to provide a private-label HELOC product as first-lien business declined. The four companies are CMG Financial, CrossCountry Mortgage, Fairway Independent Mortgage and The Loan Store.

Cagney noted the recent rollout of its LaaS platform is a “first step toward building a robust private capital market on the blockchain.”

“We are also working with several top banks with the goal of creating a consistent and predictable takeout market for assets that are originated on Figure’s platforms,” he added.