Finance of America Equity Capital LLC, parent company of leading reverse mortgage lender Finance of America Reverse, announced recently that its traditional mortgage division has emerged as the winner in a court-supervised sale to acquire assets from Renovate America, Inc. These include its home financing product, Benji.
Benji is a home improvement financing option previously offered by Renovate America, which is offered to assist homeowners in upgrading parts of their home. Previously offered only to homeowners by contractors who are part of the Renovate America network, the acquisition by Finance of America Mortgage (FAM) will result in the launch of a new vertical for the parent company called Finance of America Home Improvement (FAHI).
As home renovation has been cited in the past as a reason some seniors decide to engage in a reverse mortgage transaction, RMD reached out to leadership at FAR to learn if the company is identifying potential synergies between the new vertical and FAR’s services, which the company said is a part of current conversations.
The acquisition, new Finance of America vertical
In creating the new Finance of America Home Improvement vertical under the umbrella of the parent company, the service will “strongly complement” its consumer lending platform that operates in the realm of both traditional and reverse mortgages, as well as commercial loans offered across distributed retail, third-party brokers and digital direct-to-consumer channels, the company said in an announcement of the acquisition.
“Finance of America Home Improvement will enable the company to capitalize on the $400 billion home renovation industry by offering a proprietary technology platform that helps consumers improve their homes while giving contractors the tools they need to grow their businesses,” the announcement contended.
In late December 2020, Renovate America entered into voluntary chapter 11 bankruptcy as part of “a definitive asset purchase agreement with Finance of America Mortgage,” the company said in an announcement of the arrangement. The entrance into the asset purchase agreement and the filing for bankruptcy occurred on the same day, with FAM making a cash offer of $45 million that included the portfolio of the Benji home improvement loan business.
The sale also included a portfolio of loans that had been originated since the bankruptcy case started, financed through a debtor-in-possession (DIP) financing facility which was provided by FAM.
The acquisition is in line with previous acquisitions that Finance of America has made in an effort to bolster competencies and complements to existing products and services offered across the full array of companies, according to Finance of America CEO Patti Cook.
“This transaction allows us to continue developing and growing Benji, Renovate America’s industry-leading home improvement financing product, and adds another innovative home financing solution to our comprehensive suite of consumer lending products,” Cook said in the purchase announcement. “We look forward to welcoming the Benji team to the Finance of America family.”
For Renovate America’s part, Finance of America could prove to be an ideal steward of the Benji product and portfolio according to Shawn Stone, CEO of Renovate America.
“When we decided to embark on this process, we identified Finance of America as the ideal partner for our Benji business,” Stone said. “We are very pleased that they have emerged as the winner and look forward to many positive developments for our contractors and employees in the future.”
Possible FAR/reverse mortgage ‘crossover’
One of the natural questions that emerged for RMD when discovering news of this acquisition was how – or if – FAR would end up playing a part in possible future collaborations with the parent company’s newest vertical.
Home renovations account for a major expense for seniors who may need more accessible living spaces as mobility impairments become more likely to occur, and home equity can play a major role in financing such renovations according to recent studies by Kaiser Health and Harvard’s Joint Center for Housing Studies (JCHS).
When reached by RMD, FAR President Kristen Sieffert described potential synergies between FAR and FAHI as “tremendous,” along with potential alignment across the company’s other verticals. But for reverse mortgage customers in particular, there could be a clearer alignment.
“Looking at FAR customers, specifically, many of them would identify the ability to successfully age in place as a primary goal in retirement – with home renovations that are paid for with loan proceeds often a component of their planning,” Sieffert told RMD in an email. “FAR is excited about aligning with the Benji team to create innovative, tailored solutions that can help FAR’s customers have even greater flexibility, less friction and better outcomes in retirement.”
The newfound ability that FAR will have to collaborate with a ne vertical to specifically facilitate the desires of seniors to age in place is an opportunity that cannot be ignored, and FAR recognizes the complementary potential, Sieffert says.
“Planning for retirement is a team effort. The addition of Finance of America Home Improvement to our team will be extremely complementary in our overall mission to develop and deliver innovative solutions that help people achieve their retirement goals, many of which center on aging in place,” she tells RMD. “Our aim is to help give customers more options and additional financial flexibility in retirement be that through the strategic use of home equity or in the case of our sister company, Silvernest, helping provide customers with an alternative revenue stream and companionship in retirement through home sharing. Working together, we will be able to create streamlined solutions for people that come with the confidence of working with the same team.”
The transaction to acquire Benji is expected to close at the end of March, according to FAR’s parent company, and once it takes place it will mark the launch of the FAHI vertical, according to an announcement.