Finance of America Companies (NYSE: FOA), parent organization of leading reverse mortgage lender Finance of America Reverse (FAR), has officially gone public on the New York Stock Exchange under a new ticker symbol. Early trading indicated that the share price had fallen a bit below expectations, but this is not concerning for the parent company according to the perspective of FOA CEO Patricia Cook.
For FAR’s part, the company is encouraged by what going public will do for its own infrastructure, and how it can better leverage new resources to serve the senior demographic with agency and non-agency reverse mortgage products.
Going public under FOA
Late last week, FOA publicly announced that the previously-detailed transaction that would result in the company going public had been completed, and that as a term of that completion the company would begin publicly trading on April 5 under the stock ticker “FOA.”
“[FOA] enters the public markets as a highly differentiated, diversified consumer lending platform that is capable of delivering cycle-resistant earnings,” the company said in a statement. “Its lending businesses are supported by strong, uncorrelated secular tailwinds and include mortgages, reverse mortgages and commercial loans offered across distributed retail, third-party brokers and digital direct-to-consumer channels.”
FOA CEO Patricia Cook expressed confidence in the move to go public shortly before trading began, calling the value proposition of FOA’s umbrella of companies “unique” because of its track record in innovating and delivering different kinds of financial solutions to its customers.
“These attributes should continue to provide us with a sustainable competitive advantage,” Cook said. “Today’s milestone would not be possible without the support of everyone on our team who has worked diligently and passionately to advance our mission.”
Early trading activity, newly-appointed CFO
However, early indications of FOA’s share price came in lower than expected. Shortly after trading began on Monday, the company’s share price fell slightly due to what was described as a previous “lukewarm” reception by investors, according to stock market website Seeking Alpha. When reached about the early fluctuations in the stock price, Cook told the outlet that watching the day-to-day moves of a stock’s share price is not necessarily indicative of long-term health.
“I don’t know how the stock’s going to trade post-settlement, [but] honestly, I’ve learned through the course of my career that to watch that daily is a bad idea,” Cook told Seeking Alpha on Monday.
By the end of its first session on Monday, FOA saw its stock price rise by roughly 7.9% to close at $10.23 a share at one point, settling at $10.10 a share at the end of the first session. Late day trading on Tuesday, however, saw most of those first day gains evaporate as the share price fell again to $9.72 a share as of 4:00pm EST.
On Tuesday, FOA also announced the appointment of Johan Gericke to serve as executive vice president, chief financial officer. Gericke comes to FOA after a 10-year stint at Capital One, and prior to that served seven years at Wells Fargo.
“Johan is a seasoned executive with extensive finance experience and a proven track record. He has held leadership positions at major financial institutions and his corporate finance expertise will serve Finance of America well during this exciting time as we transition to a public company,” said Cook about the appointment in a statement.
FAR comments on going public
FOA specifically cited the launch of a new proprietary hybrid forward-reverse mortgage product from FAR, EquityAvail, as a proverbial feather in the cap of offerings that will drive the portfolio diversity of the wider company. For FAR’s part, the new public status of the parent company represents a solid opportunity due to the resources it now has access to, according to FAR President Kristen Sieffert.
“We’re excited to complete the merger and become a public company,” Sieffert told RMD in a statement. “With access to a permanent source of capital, FAR and the rest of the Finance of America family of companies are even better positioned to meet the needs of a diverse range of consumers at each phase of their financial lives.”
Because of the trends surrounding seniors’ desires to age in place, Sieffert believes FAR is in a beneficial position concerning the value proposition it aims to provide to senior borrowers, a position which will be bolstered with the launch of EquityAvail that is scheduled to take place sometime this month.
“At FAR, we benefit from strong secular tailwinds as people increasingly look to finance their aging in place,” Sieffert said. “We will continue to meet this demand with our comprehensive suite of products, which FAR intends to build out over time by introducing innovative new offerings such as EquityAvail.”
The company declined to comment on share price activity and investor attitudes that emerged prior to the parent company’s ticker symbol transferring to FOA.
Last month, Finance of America signified it was in a positive financial position ahead of the impending public offering with a strong Q4 2020 earnings report, describing 2020 as “exceptionally strong” for the mortgage industry in general. Company leadership described a major strength of the company as its diversified portfolio, which is made more unique because of its inclusion of both Federal Housing Administration (FHA)-sponsored Home Equity Conversion Mortgages (HECMs), as well as proprietary reverse mortgage offerings.
Soon afterward, FAR announced the development and impending launch of the hybrid EquityAvail product, a single, fixed-rate mortgage fully disbursed at closing with a maximum loan amount of up to $4 million. A tax and insurance escrow account is used for budgeting and administration, similarly to traditional mortgages.
When the property no longer serves as the borrower’s primary residence, the remaining loan balance is paid back. The product maintains the non-recourse feature of other reverse mortgages, contains no origination or monthly servicing fees, and has no minimum home value requirement.
Later in March, FOA announced the acquisition of home improvement loan product “Benji,” which will result in the launch of a new vertical for the parent company called Finance of America Home Improvement (FAHI). When asked by RMD about potential synergies between the new vertical and reverse mortgage borrowers, Sieffert said that such crossover potential certainly exists.
“Planning for retirement is a team effort,” Sieffert told RMD in March. “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.”
According to HECM endorsement data compiled by Reverse Market Insight (RMI), FAR is currently the third-largest reverse mortgage lender in the country, endorsing 4,640 loans in the 12-month period ending in March, 2021.