Anchor Envisions Construction-Loan Boom | Asset-Backed Alert Article Reprint

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Anchor Loans is charting a sizable presence as an issuer of home-loan securities, tapping both its core business as a fix- and-flip lender and an expansion in financing of new-home construction.

The Thousand Oaks, Calif., company already is a large fix-and-flip lender, having supplied $13 billion of such financing since its founding 25 years ago. On that front, it privately placed two securitizations of $100 million each in 2016 and 2017, but it hasn’t returned to market since.

Now, Anchor is positioning itself to resume floating such deals.

The company also is aiming for the first half of 2024 to start issuing bonds backed solely by loans that fund the construction of new homes, should the interest-rate environment and deal execution support such offerings.

Some of the collateral for those deals would stem from the expansion of a nationwide program that offers financing for the construction of single-family homes in so-called urban-infill locations — typically vacant lots in densely populated neighborhoods. And in an even more ambitious move, Anchor is launching a new loan product geared toward builders of single-family housing communities.

That initiative would see Anchor lend nationwide on suburban developments of up to 200 homes. As with its fix-and-flip loans, the company’s targeted borrowers for its urban-infill and builder loans largely would plan to sell the underlying proper- ties, as opposed to retaining them as rentals.

Currently, builders receive much of the debt financing for community construction projects in the form of loans that banks hold on their balance sheets. But banks’ capacities to fund such loans are shrinking, creating opportunities for non- bank originators — many of which would rely on securitization for financing.

In addition to securitizing its urban-infill and builder loans itself, Anchor plans to set up agreements to sell the accounts to investors with the expectation that those parties also could bundle them into bond deals.

While fix-and-flip loans typically run for six to 12 months, Anchor’s urban-infill financing carries terms of 12 to 24 months. Such loans have appeared in the securitization pools of Anchor and others before, but only alongside other mortgage products and with a typical cap of 20% of the portfolio balance.

The builder loans, meanwhile, have terms of 36 to 60 months. Such loans have never been securitized, but Anchor chief executive Rayman Mathoda said the expectation is that the company and others eventually will create a multibillion-dollar pipeline of bond offerings backed by the receivables.

Ultimately, Mathoda expects urban-infill and construction financing to total $300 billion annually. “We envision creating a new asset class and are in the first innings from a securitization standpoint,” she said.

On the fix-and-flip side, Anchor’s return to issuing would accompany an expected surge of offerings brought on by DBRS Morningstar’s Aug. 31 unveiling of a rating methodology for such offerings — the first for the asset class.

Mathoda, formerly of Emerge Life Sciences, arrived in February with a mandate to expand Anchor’s lending presence. Initial funding for the push is coming from Pretium Partners, which purchased Anchor in 2021.

Pretium had $51.8 billion under management as of June 30. Mathoda has hired several other staffers to implement the growth plan. They include chief operating officer Jim Fraser, who arrived in July from Built Technologies. Fraser is heading the construction-loan business. Also on the construction-loan team is vice president Peter Konkowski, who joined in September from Banc of California.

Anchor is adding staff in other areas across the U.S., including loan originators. “We are building a team and aggregating the best talent in the industry to be able to grow each of these businesses,” Mathoda said.

This article is reprinted by permission.

ASSET-BACKED ALERT: November 10, 2023

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