8 minute read
On Wednesday morning, Figure Technology Solutions announced it would acquire fix-and-flip lender Kiavi, a move executives say will add about 40% to Figure’s first-lien volume and extend its lead in real-world asset tokenization.
The move marks Figure’s first acquisition and is expected to close in August, according to a company spokesperson. Under the agreement, Figure will acquire Kiavi’s technology and operating platform, while a joint venture formed by Figure and investment firm Sixth Street will acquire Kiavi’s balance-sheet assets.
In a note to investors, Keefe, Bruyette & Woods said that the deal was viewed favorably as it expands Figure into a new category of residential transition loans (RTLs) and “adds scale with a 40%+ immediate uplift to Figure’s loan volume.”
Just hours after the acquisition was announced, Figure CEO Michael Tannenbaum sat down with HousingWire to share his expectations for how the deal is designed to turn Kiavi’s valuation and lending technology — which also covers debt-service-coverage ratio (DSCR) products — into a marketplace offering for Figure’s 380 partners. Kiavi will also serve as the inaugural use case for Adaptor, Figure’s new AI product aimed at automating agent-to-agent onboarding.
Editor’s note: This conversation has been lightly edited for length and clarity.
Sarah Wolak: Michael, what made Kiavi the right acquisition target for Figure and how did this deal come together?
Michael Tannenbaum: We have some shared investors, so that kind of introduced us to the name. They’re also professionally invested; they had some venture capital financing when they started, so we’re familiar with the name. I actually had dinner with the CEO, Arvin Mohan — we were introduced by one of our mutual investors in January 2025. So, it’s been a pretty long time since we’ve been tracking the opportunity and it always seemed like a great fit.
They’re in the housing space; they’re a market leader in what they do. There’s a lot of alignment with them as a company, but also the products that they’re in, because we really focus on home equity and mortgage. They’re also kind of broadly non-QM, but at the same time they have focused their business more on direct to consumer, whereas we are a marketplace for our partners. And that’s also why we worked with Sixth Street as a partner here to essentially turn their platform into a marketplace.
Wolak: What do you think the main selling point was for Kiavi in agreeing to this partnership/acquisition?
Tannenbaum: Kiavi is going to still do RTL, fix-and-flip loans and DSCR, it’s just going to be that they’re offering that technology to all of the 380 partners that we work with. So it’ll become more of a marketplace versus a direct-to-consumer lending company.
I think, for them, they want to grow in the partner space very much. That was a big part of their growth plans. We already have that business and we have these partners we’ve been working with — sometimes as long as five years — and doing lots of business with us, running their platforms on Figure Technology. Being able to combine made a lot of sense.
Wolak: Thinking about the umbrella that this acquisition creates, how will Kiavi continue to operate after the transaction closes? Will it remain a distinct brand?
Tannenbaum: We do want to keep their brand because I think they have a great brand in the investor market. We probably will include some of Figure in that as well, but our brand tends to be more in the capital markets and more as a private label, right?
Most of the people that partner with us use their own name and brand, so it actually makes it easier because the Figure brand — as an investor brand and as a partner brand — is really strong. But as a customer brand, I think we’ll keep Kiavi.
Wolak: Part of the acquisition has to do with Kiavi’s technology platform. Can you talk about why that was attractive to Figure?
Tannenbaum: Yes, it was primarily due to their valuation technology. They ingest documentation from contractors and investors that helps determine what post-renovation value will be and what the power of that is.
Ultimately, people tend to focus on two things when they borrow in this space. One is rate and the other is loan to value, meaning maximizing the amount of loan they can get relative to the future value. And Kiavi is the best at that. They have a lot of investor support for what they do, so we can take that technology and help improve our home valuation approach.
As an example, a lot of homes are newly developed or newly renovated, it’s hard to understand what they might be valued at. Our existing Figure approach may undervalue them, because as you know, if you redo your kitchen, Zillow doesn’t necessarily know that. But what this now allows people to do is prove that the house is worth more with investor support for that, and that’s a technology we can actually use to improve our own business as well.
And when you think about what we announced with Adaptor, that’s also relevant here. What we can do is convert the schema of how Kiavi funds its loans and how it uses its capital market, adapt that to what we’re doing and get those synergies — for example, this post-renovation value.
Wolak: I’m glad you brought up Adaptor, because Kiavi is going to be the first use case for that product. Why start there?
Tannenbaum: When we add a new asset class onto Figure Connect, we want to make sure that existing investors on Figure Connect can understand the data approach that Kiavi is taking, because it’s a new asset class for them. What we build with Adaptor is, people can have all kinds of naming conventions and spreadsheets that are hard to match. Someone might call something LTV, other people call it loan to value, and so Adaptor is a valid and important use of AI to kind of smooth this out and save a ton of time.
We’ve also launched it with an agenda functionality, so it’s basically like an API that also has APIs for agents. If an agent were going to be performing this activity as a customer, it could access the Adaptor agentically, so it’s kind of like an MCP server and you can access their technology agentically.
Wolak: You mentioned earlier how Kiavi will still be doing RTL and DSCR loans. Are those attractive asset classes for Figure today?
Tannenbaum: They’re attractive today in that we have about 10 partners that do those loans with us, so we do offer those products. We’re not the market leader the way that Kiavi is, and so now we’re bringing on the market-leading technology to do that.
They’ve been doing it for 13 years, and what we’re going to do is jointly roll out the Kiavi RTL and DSCR products to our 380 partners later this year, once we close the acquisition. But we’re going to also keep the relationships that Kiavi has, because one thing that’s unique about the RTL space is that these fix-and-flip investors are repeat borrowers. We want to keep those valuable relationships, and nurture and grow them as well.
Wolak: You’ve mentioned how Figure has been growing its first-lien business organically and that these products could reach roughly 40% of marketplace volume by the end of 2027. How much of that growth is expected to come from this acquisition/partnership?
Tannenbaum: We can never talk too much about forward guidance, because we’re a public company. But today, roughly, we have about $17 billion of volume that is standalone. And we’re adding another $7 billion, which is all first liens, so we’re adding 40% of our volume. Of course, Figure itself is growing really quickly, so you know we’re kind of making some projections forward there when we say 40% in 2027. But we do expect this to be a very material “pole vault” in our efforts in first lien.
Wolak: Given that this is Figure’s first acquisition, what does this signal about the company’s future M&A strategy?
Tannenbaum: Well, we are a really disciplined company. We went public back in the fall, and that does make it easier to do acquisitions. When you have a company that has access to the public markets, can raise capital, is well known, our financials are visible, it makes people more likely to want to sell to us than they would otherwise. And that does open up opportunities.
We probably saw around 30 or so opportunities over the past nine months or so, and this is the one that we chose to act on. So I think we are going to be very disciplined and continue to be good stewards of capital.
One of the things that we shared was that the unlevered — meaning without the debt payback — is under four years, which is really strong from an acquisition perspective. This is also something that we really know how to do; it’s very adjacent to our core business. It’s not like running this company is going to be a huge challenge, because we’re familiar. And I think it’s a good opportunity to leverage Figure’s really strong distribution network of tens of thousands of loan officers to scale this product quickly.
Wolak: It sounds like it was a very intentional process if you evaluated nearly 30 other options. What were the specific metrics Figure was looking for?
Tannenbaum: Profitability is important. As a company, we’re really high margin. We confirm that we’re going to stay on our medium-term goal of 60% EBITDA margin, so we want to make sure that the fact that Kiavi made money is really valuable.
We use this concept of the rule of 40, which is like your margin plus your growth rate should equal 40, and Kiavi was well above that. They were growing fast, but also high margin, so that was important to us. And I think the distribution that we have with the loan officers, a lot of things we see are much more tangential to what we do, versus this is really kind of focused in our core. And when you’re doing your first acquisition, I think it’s helpful to have something where you feel like you know what makes that company tick. This was definitely that transaction for us.
I think this deal is accelerating and amplifying. We’ve been clear that we want to be the future of the capital markets on blockchain rails, and we’ve also been clear that this includes asset classes that we’re not in today.
