Figure CEO says $300M prefunded securitization gives ‘added certainty’ to originators

Figure announced Tuesday that it has closed a $300 million fully prefunded securitization for loans that will trade on its blockchain-based marketplace, Figure Connect.

The company said the transaction departs from the traditional securitization process by securing funding from institutional investors before loans are originated rather than after they close.

According to Figure CEO Michael Tannenbaum, the approach provides originator partners with committed liquidity in advance, helping lock in pricing and execution while reducing uncertainty in their production pipelines.

“It’s all about the perspective of the originator,” Tannenbaum said in an interview with HousingWire. “Knowing that the loans are spoken for before you even fund them just gives you added certainty because, as you know, markets can change on a dime.”

Figure said the upfront fixed-rate capital establishes what it hopes will become a repeatable funding model for loans traded through Figure Connect.

The company compared its long-term vision to the liquidity provided by Fannie Mae and the agency mortgage-backed securities to-be-announced (TBA) market, which allows lenders to secure financing before loans are delivered.

“Having investors prefund and preaccept those loans before the loans are even funded, it’s just a function of the marketplace that adds value to the originator, and I think it also reflects the scale, consistency, and quality that Figure is operating in because we’re so mature in it from a capital market standpoint that people are so comfortable with what we’re doing that they’re willing to buy these loans before they even are originated,” Tannenbaum said.

Not a one-time thing

Tannenbaum called Figure “a version of Fannie Mae, but on modern blockchain rails,” and one that can support multiple asset classes rather than a narrow slice of mortgage products.

“I think that speaks to an opportunity for Figure to expand into a broader capital market offering and services for our customers as they’re looking to build their business on the back of not only the Fannie Mae ecosystem but also now the Figure ecosystem. People could, over time, start to use this to hedge as well,” he said.

From the investor side, Tannenbaum said the willingness to prefund stems from comfort with Figure’s “shelf,” meaning its brand, technology and track record in the capital markets.

“Investors want return on time; they want return on effort,” he said, noting that Figure is executing securitizations “almost every month” and is growing volumes by more than 100% at scale. “Investors want to buy repeatable and consistent assets, and Figure’s bringing those.”

The $300 million transaction is Figure’s first prefunded securitization, and Tannenbaum stressed it is not a one-off.

“This is a part of our strategy,” he said. “We are constantly investing to make sure that our originating partners have guaranteed liquidity and have consistent access to the capital markets. … This is big. No one’s ever done anything like this.”

Rather than a single forward buyer, Tannenbaum said that the capital comes from the “institutional bond market,” with a broad investor base purchasing AAA-rated bonds.

“The whole value of a securitization is that you’re transforming loans that are relatively chunky and sort of sitting around into a security that’s liquid, has a CUSIP and can be bought by anybody who buys bonds of that nature,” he said. “It’s a much more liquid approach.”

For lenders, the structure is less about richer economics and more about liquidity and certainty, including a fixed execution price. But borrowers could ultimately see downstream benefits as well, he added, as stronger liquidity and capital markets efficiency translate into lower system costs and, over time, better rates.

Tannenbaum also highlighted Figure’s scale, noting that Figure Connect originated $1.4 billion in May, with the $300 million prefunded deal representing a meaningful slice of that volume. The company recently announced its intent to acquire Kiavi in a $717 million deal, with plans to integrate its RTL platform and DSCR rental loans into Figure Connect and Democratized Prime.