Moody’s issued its annual commentary on Finance of America Reverse, assigning the Tulsa, Okla.-based lender the middle of its five ratings.
FAR received an “average” rating for its jumbo reverse mortgage offerings, based on a variety of criteria. For instance, FAR earned “above average” marks for property valuation, based on the company’s two required appraisals for homes above $1.25 million; Moody’s also bestowed an “above average” rating on FAR’s loan origination technology.
“Moody’s has completed its annual review of our business and we are pleased to be recognized for strength in a number of categories including property valuation, technology, and credit risk management,” FAR president Kristen Sieffert said in a statement e-mailed to RMD.
“We welcome these regular assessments as part of our normal course of business. FAR is committed to continued improvement, industry leadership, product innovation and ensuring our customers can strategically leverage home equity in retirement.”
The company received lower ratings in areas such as credit risk, with Moody’s noting that the state of California accounts for 25% of FAR’s overall loan portfolio, and quality control. However, the New York City-based investor service also allowed that FAR had recently rolled out an internal audit program and hired a chief audit officer in the fourth quarter of 2016. In addition, Moody’s pointed out the relatively low sample size of jumbo reverse mortgages: FAR originated just 128 HomeSafe mortgages during the firm’s review period, which covered the 12 months ended June 2017.
“Due to this lack of origination volume, FAR’s ability to assess loan performance and identify ways to minimize credit risk is limited for the HomeSafe product,” Moody’s wrote in its analysis. “This challenge is mitigated by the company’s extensive experience originating HECMs.”
FAR — then known as Urban Financial — introduced the proprietary HomeSafe reverse mortgage in 2014, with a goal of reaching out to owners of non-Federal Housing Administration-approved condos and high-value homes. Properties valued at more than $1.25 million accounted for 88% of the HomeSafe loans originated during the review period, according to Moody’s.
Moody’s rates lenders on a five-point scale ranging from “strong” to “weak,” an issues its assessments on an annual basis.
Read the full report at Moody’s.
Written by Alex Spanko