Key insights
- Figure is transitioning to a capital-light marketplace model for HELOCs, with a cost advantage and network effects. Catalysts include a shift to its Connect platform, the acquisition of Kiavi which diversifies its business and adds significant EBITDA, and a tailwind from homeowners tapping equity due to high mortgage rates. Risks include take rate compression, potential refinancing if rates fall, buyer concentration, untested credit risk in a downturn, and stock valuation disconnect from its blockchain exposure.
Core thesis: Figure is becoming a capital-light marketplace, and the stock still trades at a discount to peers (20.5x fwd PE vs a 25x median). Moats * Cost moat: Each loan costs about $717 to originate, against roughly $11.1k for the industry. About 90% of loans need no human underwriter, and the median time to fund is 10 days versus about 43. The blockchain record also saves money after the loan is made, in servicing, financing and securitization. * Network effects: About 490 partners and around $30B of home equity originated make Figure the largest non-bank HELOC provider. More lenders attract more buyers, which improves pricing and attracts more lenders. Catalysts * Connect mix shift: Connect now carries about 65% of marketplace volume, up from 42%, and management targets about 70%. Connect volume grew 262% yoy. Adjusted EBITDA margin rose from 47% to 55%. The lower take rate comes from this mix shift, not from fee cuts. * Kiavi: The acquisition adds about 40% to volume and $100M+ of adjusted EBITDA, with about $35M of synergies expected. It gives Figure the leading position in RTL (~10% share) and a DSCR business, which reduces its dependence on HELOCs. Sixth Street’s $3B+ purchase commitment keeps most new loans off Figure’s balance sheet. * HELOC tailwind: US homeowners have about $11.7T of tappable equity, and many are locked into sub-4% mortgages. They will borrow against their homes rather than refinance. Key risks * Take rate compression could outpace volume growth. * A sharp fall in mortgage rates would push homeowners to refinance instead of taking HELOCs. * The top five buyers took 54% of loans sold. * Credit has never been tested in a housing downturn at this scale, and most loans are second liens. Delinquencies rose from 0.8% to 1.1%, and buyback commitments rose to $2.9B. * The stock trades like a crypto proxy, even though blockchain products are only about 1% of revenue. * Equity awards could add about 17% dilution. Full analysis here if you are interested: https://charainvest.substack.com/p/the-infrastructure-layer-of-helocs?r=5ci2v&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true Any thoughts on my analysis? Would love any feedback