A new type of mortgage security that is targeted at aging Baby Boomers seeking to enhance their retirement income is being brought to market.
The instrument, known as a prime-rated individual mortgage-backed obligation
— or PRIMO — promises low risk at yields of 6 percent or more.
Each security is backed by a high-quality residential loan with a prime rating and has a high level of transparency and unprecedented customization.
That is according to two-year-old Income& (pronounced “income and”), which debuted a beta version of the product in May.
Each PRIMO is backed by a single mortgage, and it is split into $100 increments.
“Using Income&’s next-generation platform, a portfolio of PRIMOs can be selected in one simple click, or customized based on geography, risk, or desired yield,” the San Francisco-based company explains on its website.
In a phone interview, Income& Chief Executive Officer Brad Walker said that the formal launch date should take place in the next couple months.
He explained that while PRIMOs have some similarities to crowd funding, they ultimately are fixed-income investments.
Non-QM loans to borrowers with credit scores of at last 680 will back the securities.
“Our goal is to create a product that fits very well with the Baby Boomer generation,” Walker stated.
Loans are acquired through a mix of retail and third-party originators.
Initial funding for the loans comes from an affiliated outside limited liability company.
Income& is the managing member of the LLC.
He noted, though, that the company will look at establishing a warehouse line down the road once the concept has been proven out.
Walker speculated that PRIMO sales might be around $50 million during the first year.
Because the company currently operates in the private-placement space,
investors have to be accredited and Securities and Exchange Commission oversight is minimal.
“What we’ve seen is that the people who so far have shown interest are definitely in that demographic,” he said. “I mean, the thing about if you’re looking at the accredited investor market, the Baby Boomers are the majority of that; they’ve been around long enough to acquire those kind of assets that we can start serving this population now.”
But Walker noted that the company ultimately wants to make the product available to everyone, and he anticipates through full SEC registration over the next year-and-a-half to two years.
Staffing is expected to grow from just eight employees currently to 26 within a year.
Walker said that more than $1.1 million in equity capital has been raised for the venture.
He explained that one of the strongest features of the company is its management.
“The one thing that I really always like to talk about is our team. Really excited about that,” he said. “We’ve been able to get, at least from the core four executives, team members, people with long track records in the financial services and technology world that really understand that we’re going into a highly regulated environment and have past success and operated in those environments.”
