Finance of America Companies (FOA) confirmed on Friday that its forward mortgage company, Finance of America Mortgage, LLC (FAM), will no longer fund and purchase loans through its wholesale and non-delegated correspondent channels according to a story at HousingWire by reporter Flávia Furlan Nunes.
Additionally, Guaranteed Rate — which had emerged as a potential buyer of the company’s forward mortgage retail channel — has reportedly walked away from negotiations, according to the reporting.
FOA sent a note to business partners Friday announcing that Friday, October 7 at 9:00pm EST is the deadline to submit a new floating loan or complete a new forward lock, HousingWire reported. In the same note, the company specified that Finance of America Reverse (FAR) would remain unaffected by these changes. FOA will plan to maintain focus on its specialty finance and service business (SF&S), according to sources.
“Please note that loans that are in process with both Finance of America Commercial and Reverse will not be impacted by this change. Finance of America Commercial and Finance of America Reverse will continue accepting new applications and operate business as usual,” the company wrote in the note, which was reviewed by HousingWire.
In a Q2 2022 earnings call this past August, FOA reported steep losses of $168 million, describing that such performance would lead to various cost control measures including a reduction in its workforce and a move away from a refinance-reliant direct-to-consumer forward channel.
However, FOA President and interim CEO Graham Fleming also took the time to describe the importance of the company’s reverse mortgage division, describing that growth in volumes and recent research illustrating the untapped potential of the market continue to demonstrate a need for further investment in this side of the business.
“Reverse origination volumes of $1.58 billion in Q2 set yet another quarterly funding record and was roughly $100 million above the first quarter,” Fleming said. “This growth is attributable primarily to market penetration in first-time reverse customers. As a result, we have seen a decrease in prepayment rates as production shifts from refinance to new volume.”
The story was largely similar in the Q1 2022 earnings call in May, where FAR’s losses on the forward side led to an emphasis on the performance of the reverse mortgage division by the executive team.
“[Our strategy centralizes] the power of our product set and how we can help our customers through the life of their financial journey, whether it’s to refinance the home improvement and ultimately to use a reverse loan to help fund their retirement and lower their payments,” said FOA CFO Johan Gericke on the May call. “And so, that whole operating model is going to become a lot more pronounced as we make investments in our technology and our organizational structure to drive this forward.”
Read the story that broke the news at HousingWire.