New York-based investment firm Cerberus Capital Management has entered into a definitive agreement to acquire home equity lender Spring EQ, the companies announced on Friday. The terms of the deal were not disclosed.
The transaction will allow Cerberus executives to realize new opportunities as demand for home equity solutions in the U.S. accelerates. Meanwhile, Spring EQ will be able enhance its platform through further investments in technology, new commercial opportunities and growth-based operational initiatives, the company said.
Founded in 1996, Pennsylvania-based Spring EQ offers home equity, HELOCs, refis and purchase loans. It gives customers access to 95% of their home equity, at a maximum of $500,000, with terms from five to 30 years.
Like its peers, however, higher rates put pressure on Spring EQ’s business model. According to mortgage tech platform Modex, the company originated $480 million over the last 12 months, with its monthly volume declining from about $60 million in 2022 to $28 million in 2023. The company has 76 active loan officers in four branches, according to Modex.
Mortgage industry veteran Jerry Schiano, Spring EQ founder and CEO, and the current management team, will lead the company following the completion of the transaction, which is expected to happen in the fourth quarter of 2023. The deal is subject to customary closing conditions and regulatory approvals.
Schiano has more than 30 years of entrepreneurial experience in the mortgage industry. Before Spring EQ, he founded New Penn Financial, which was sold to Shellpoint Partners and later acquired by New Residential Investment Corp., which was rebranded as Rithm Capital.
“The Cerberus team’s mortgage expertise, technology capabilities, and operational resources will help propel our growth, better positioning us to make an even greater impact,” Schiano said in a news release.
Joe Steffa, managing director of Cerberus Residential Opportunities, said demand is rapidly increasing for home equity solutions “amid higher interest rates and record levels of untapped residential home equity in the United States.”
Morgan Stanley & Co served as financial advisor to Cerberus and GreensLedge Capital Markets to Spring EQ.