Finance of America Companies, parent to leading reverse mortgage lender Finance of America Reverse (FAR), will be making an initial public offering (IPO) with a valuation of $1.9 billion, upon a merger with a special-purpose acquisition company (SPAC). The public route being taken by Finance of America is because of the company’s investors, while the pandemic has given all of the companies under the Finance of America umbrella the opportunity to prove the resiliency of the larger organization’s business model.
This is according to Patricia Cook, CEO of Finance of America Companies in an interview with National Mortgage News.
Seeking to go public at the beginning of 2020, the company intended to go a more traditional IPO route, but the SPAC approach was decided as the road to take because of the company’s sponsors: co-CEO of Replay Acquisitions Edmond Safra, Blackstone senior equity partner Chinh Chu and Centerbridge partner Lance West, Cook said.
“It’s not the SPAC structure particularly, but it was all about those three partners,” Cook told National Mortgage News.
The timeline for Finance of America going public was not affected by the pandemic, Cook said, but it did present the opportunity to prove how strong its overarching business model really was, Cook explained.
“We’re unique in our space,” she said to the outlet. “We’re in multiple products and we were constructed that way to deliver cycle resistant returns to shareholders. And when you look at what happened in March, we had the opportunity to demonstrate that.”
Lack of market liquidity on the forward mortgage side led leadership at Finance of America to realize that forward mortgages would be “a winner,” Cook said, requiring the company to make sure its resources were pivoted in that direction. The additional flexibility represented by FAR’s presence in the portfolio also contributes to the flexibility and strength of the companies it oversees, Cook explained.
“[T]he optionality to go do forward mortgages or to pick up reverse or to originate commercial, is part of the strength of the platform,” she said in the National Mortgage News interview. “And then complement it with our fee-for-service business and our portfolio management activity, we end up generating a higher revenue per unit than our peers that are members of the MBA, for example. It’s a simple concept, diversification, but it’s not easy to execute.”
Going public gives Finance of America the opportunity to gain additional capital for growth, something which FAR President Kristen Sieffert also communicated to RMD when the public move was first announced in relation to its own reverse mortgage activities.
“FAR has been the leading innovator in our space since launching HomeSafe in 2014 and accessing the public capital markets will accelerate our ability to further fuel product innovation,” Sieffert told RMD upon the announcement of the move. “Our proprietary suite of reverse mortgage solutions is one of our key differentiators and competitive advantages, and we plan to continue investing in this important line of business so that our team and our partners can better serve the vast amount of retirees whose needs may not be met by the existing options.”
Read the interview with Patricia Cook at National Mortgage News.