$FIGR: The Market May Be Underwriting the Wrong Business

Figure spent six years building a home equity lending platform designed to shorten origination times and reduce costs. Today, a growing portion of its business consists of marketplace activity involving loans that Figure neither sources nor funds, a model that we believe may generate attractive incremental margins. In Q1 2026, partners originate 78% of the volume crossing the platform, Connect volume has run from $8M in Q4 2024 to $1.6B, and fee lines carrying relatively high incremental margins have grown from 5% of revenue to 28%. We expect Figure to become a capital-light toll road on loan flow. The market is still underwriting the balance sheet.

The question that matters, then, is how much loan volume can move through the platform without Figure sourcing the borrower or funding the loan itself.

Summary

This memo is a joint perspective from Artemis and North Island Ventures (NIV). Artemis is a digital finance research firm focused on blockchain and equity assets. NIV is an NYC-based investment firm, focused at the intersection of blockchain, fintech, and AI.

Figure Connect, launched in June 2024, is a marketplace that sits between loan originators and institutional buyers. Partners originate the loans, institutional capital funds them, and Figure earns a fee for underwriting and distribution. Figure reports all of this activity as Consumer Loan Marketplace (CLM) volume: every loan originated on its platform, plus third-party loans traded on Connect.

The model is already scaling. Partner-originated loans are 78% of volume, Connect reached 56% of CLM volume within seven quarters of launch, loan inventory has fallen from 31 days to 16, and ecosystem and technology fees have grown from 5% of revenue to 28%.

Additional loan supply may become available from two sources. The pending Kiavi acquisition adds a $7B annual origination engine portions of which Figure should be able route through the same infrastructure. Separately, available industry data indicates that second-lien lending has begun to recover after more than a decade of contraction, expanding Figure’s core market.

Meanwhile, the Street appears to be pricing in take-rate compression as Figure expands into first liens, a structurally lower-take-rate product than its core second-lien business. Yet Figure’s disclosed net take rate has risen even as first-lien mix has nearly doubled. We think that disconnect is one piece of a broader misunderstanding of the business, and it helps explain why consensus estimates remain too low.

Background

Figure was founded in 2018 by Mike Cagney and June Ou, respectively the co-founder and the CTO of SoFi. Figure and its roughly 390 partners originated $8.4B of loans in 2025, up 63% year over year, and the platform is currently running at ~$17B annualized, up 130%. That is about 5% of all U.S. loans backed by residential real estate.

We view Figure’s original advantage as speed and cost. The company built two things in tandem: a fully automated home equity origination platform, and Provenance, a purpose-built blockchain on which every Figure loan is originated, registered, and ultimately securitized. Together, they compressed home equity lending from roughly six weeks and $11,000 of cost to under seven days and $1,000. That advantage, in our opinion, built Figure’s position in second-lien HELOCs, where it is now the largest nonbank originator.

A second lien sits behind the borrower’s existing mortgage: the homeowner leaves a low-rate first mortgage untouched and borrows against the equity above it. A first lien holds the primary claim on the home, whether that is the original mortgage or a new loan to an owner who carries none.

Connect may represent an important shift in the economics of the business.

Thesis

We see two potential catalysts playing out through 2026 and beyond: the continued scaling of Figure Connect, and the pending Kiavi acquisition, which should double Figure’s first-lien business when it closes in Q4. The third section below lays out why neither is in the price.

1. Connect is converting Figure from a lender into a marketplace

Through 2024, Figure was, in our opinion, a strong loan originator inside a structurally mediocre business model. It sourced borrowers through a sales force, funded loans with warehouse facilities, held them on balance sheet for roughly a month, and monetized them on sale.

We view those economics as typical of a specialty lender: capital-intensive, dependent on external funding, exposed to credit and volume cycles, and therefore valued at the 5–7x EBITDA multiples the sector typically commands.

Connect changes how portions of Figure’s growth are funded. Partners source the borrower and originate against presold commitments from institutional buyers, while Figure provides the underwriting and distribution infrastructure and collects a marketplace fee of roughly 3%. Connect volume can therefore scale without a corresponding increase in customer acquisition spend, warehouse funding, or credit exposure.

Connect volume went from $8M in Q4’24 to $1.6B in Q1’26. Partner-originated volume is now roughly 78% of total flow, which means most of the loans reaching Figure arrive without Figure bearing the customer acquisition cost (CAC).

Figure’s reported balance-sheet metrics also reflect the shift. Loan inventory has fallen from roughly 31 days to 16 even as volume has nearly tripled. Warehouse borrowings are just $15 million against $1.9 billion of committed capacity, less than 1% drawn. And against $6.8 billion of securitized collateral, Figure’s maximum disclosed exposure is only $378 million.

The revenue mix is shifting toward the highest-quality line on the income statement: ecosystem and technology fees. These are platform and marketplace fees that carry near-100% incremental margins, and they have grown from 5% of revenue in FY’23 to 28% in Q1’26.

From FY’23 to FY’25, revenue grew 142% against 18% cost growth. Incremental EBITDA margins ran 82% in 2024 and 91% in 2025, lifting reported adjusted EBITDA margin from negative 4% to 49%. Continued volume growth on the current cost base should support further expansion toward management’s medium-term target of 60% by 2028.

2. More loan supply may be coming

Connect gets more valuable as more volume runs through it, and Figure has two large sources of new supply potentially arriving at once.

Start with second liens. Industry data indicate that balances have recently increased following approximately 13 years of contraction after the global financial crisis. Bank HELOC balances reached $287B in 2026 and are growing again, having fallen from a 2009 peak of $600B. The industry opened 1.2M HELOC lines in 2025, the most since 2022 but still only about half the mid-2000s peak.

Homeowners now hold 71.6% of their real estate value as equity, the highest level in roughly 35 years. Much of that equity sits behind mortgages locked in at 3–4%, which makes a full refinancing uneconomic at today’s ~7% rates. For a homeowner who wants that equity without giving up a low-rate first mortgage, a second lien is one rational way to get it.

Figure enters this recovery as the largest nonbank HELOC originator, and into what we believe is a relatively thin competitive field: capital requirements, compliance costs, and the absence of GSE support have pushed many lenders out of the category.

Kiavi, meanwhile, gives Figure a second front — first liens, where the acquisition roughly doubles the existing business. First liens serve borrowers that second liens cannot: homeowners who own outright, roughly 40% of U.S. homes, and those for whom refinancing the existing balance still makes sense. Balances typically run $200K to $300K, and annual origination flow is roughly $2T, about ten times the size of the second-lien opportunity.

Kiavi is the largest originator of residential transition loans (RTL), short-term bridge loans of roughly 12 months that fund fix-and-flip purchases and renovations. RTL is 85% of its volume. Its RTL market share grew from 2.1% in 2020 to 9.7% in 2025, through three years of frozen housing turnover, while subscale competitors lost their warehouse lines and shut down. In 2025 it did over $7B of volume and more than $250M of revenue, growing 30%, at roughly 40% EBITDA margins.

The structure of the deal matters too in our view. Figure and Sixth Street are jointly paying $717M in cash, $538M from Figure and $179M from Sixth Street. Figure keeps the operating platform, while Sixth Street places Kiavi’s loan assets into a JV backed by more than $3B of forward purchase commitments, pre-seeding Connect demand.

3. The market is likely misreading the transition

We see three primary reasons the mispricing exists.

1. The Street may be underestimating the durability of Figure’s take rate. First liens structurally carry lower take rates than Figure’s core second-lien business, so as they become a larger share of volume, mix should mechanically pressure the company-wide take rate.

So far, it hasn’t. Figure’s disclosed net take rate rose from 3.4% in Q4’24 to 3.8% in Q1’26 even as first-lien mix nearly doubled, while second-lien pricing held at roughly 4.5–5.0%. Underlying pricing appears healthy enough to absorb the mix shift.

The distinction matters for valuation. Price erosion reduces the economics of existing volume; mix shift into first liens adds incremental volume at a lower take rate. Connect, separately, lets more of that volume scale with less capital, little to no CAC, and higher margins. Consensus appears to be underwriting take-rate compression despite little evidence of deterioration in product-level pricing.

2. Thin coverage. Only four analysts cover FIGR today. Since Q1’26 earnings, Figure has published weekly CLM volumes on its own website, giving investors a near-real-time proxy for revenue. Yet only one sell-side analyst explicitly models CLM volume, and even that analyst’s estimates sit below the volumes Figure is already self-reporting. Figure is handing the market a live read on its revenue line, and the market is largely ignoring it.

3. The stock trades in the wrong bucket. Our assessment: FIGR initially traded as a crypto proxy and now behaves more like a momentum name, even as the business comes to resemble a financial marketplace such as Tradeweb or ICE.

The valuation has yet to reflect that transition we think. FIGR trades at roughly 12x EBITDA, its lowest multiple since going public: above the 5–7x typically assigned to specialty lenders, but well below what scaled financial marketplaces command.

Figure does retain crypto-adjacent businesses, including the YLDS stablecoin and its tokenized securities marketplace, but together they contribute less than 2% of revenue. Management appears focused on correcting the perception. Figure’s Investor Education Presentation steers investors away from the crypto narrative and toward the two variables that increasingly determine the earnings power of the business: CLM volume and take rate.

Counter Thesis

The thesis breaks if Figure’s competitive advantage proves temporary, housing volumes deteriorate materially, or the economics of its core products weaken.

• AI commoditizes underwriting. A former Figure product manager argued that AI could make five-day closings table stakes, eroding Figure’s speed advantage and forcing competition on price. We believe the more durable moat is the marketplace, but industry-wide improvements in underwriting speed and cost remain a key risk.

• Housing volumes weaken. Connect reduces credit exposure but not volume risk. HELOC delinquencies are rising from record lows, and a housing downturn would pressure HELOC demand and hit fix-and-flip lending particularly hard.

• Core pricing deteriorates. The thesis depends on product-level pricing staying healthy as lower-take-rate products become a larger share of volume. A sustained decline in second-lien take rates, or a net take rate below ~3.5%, would suggest that competitive pricing pressure is starting to overwhelm the benefit of incremental volume.

• Governance risk crystallizes. Cagney and Ou control ~71% of the vote through a dual-class structure, leaving shareholders with limited recourse. The counterweight is alignment: Cagney’s substantial FIGR holdings and nearly decade spent building Figure give him significant financial and professional exposure to the company’s long-term outcome.

Conclusion

Our assessment is that the Street remains focused on two things: the risk that lower-take-rate products dilute Figure’s economics, and the loans Figure still originates itself. We think that misses the transition. Connect is letting substantially more volume move through the platform with less capital, less CAC, and higher incremental margins. From our perspective, the more lending volume that moves across those rails, the less Figure resembles the lender the market still underwrites.

Important Disclosures

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