Finance of America Equity Capital, LLC (FOA), the parent company of top reverse mortgage lender Finance of America Reverse (FAR), is moving closer to its impending initial public offering (IPO) which it expects to close within or soon after the first quarter of 2021. In addition to working on the upcoming IPO, FOA is also overseeing the April introduction of “EquityAvail,” the new proprietary reverse mortgage product from FAR that aims to combine elements of a traditional, forward mortgage with those of a reverse mortgage.
To better understand how FAR will play into FOA’s future plans after the IPO, including for matters related to the introduction of EquityAvail, RMD reached out to FOA CEO Patricia “Patti” Cook to gain additional insight into what the parent company’s reverse mortgage priorities look like for 2021 and beyond.
Growth opportunities from reverse mortgages
In terms of ways in which the reverse mortgage business can help to facilitate growth opportunities for the parent company, Cook describes the necessity of a diverse portfolio as a key ingredient to engineering as much growth as possible for FOA.
“As stated during our most recent earnings call, our broadly diversified platform is what has enabled us to generate sustainable growth and capitalize on market tailwinds as they present themselves,” Cook says. “FOA exists to meet our customers’ financial needs throughout each phase of their lives, and our reverse segment is critical to that goal.”
The specific focus of the other verticals FOA maintains helps the company to have multiple specializations, and FAR’s focus particularly on retirement solutions helps to tap into a business segment that FOA sees has a great deal of growth potential. This is based on data about the home equity position of the senior demographic regularly publicized by the National Reverse Mortgage Lenders Association (NRMLA) and data analytics firm RiskSpan.
“Because of FAR’s focus on retirement solutions, FOA is uniquely positioned to address the needs of homeowners at or near retirement – a key segment currently holding $7.82 trillion of housing wealth,” Cook explains, citing the NRMLA/RiskSpan data from January. “While home equity is more commonly considered in retirement planning as of late, many seniors still do not associate a mortgage lender with their search for a retirement solution. FAR creates that relevance and provides older homeowners with important optionality through our suite of financial tools.”
The place of proprietary
Some of this positioning for FAR is accentuated by the recent announcement of its new EquityAvail product, which the lender plans to launch in April. Using a new kind of product as a way to fill in gaps that may exist in the market is key for FAR and FOA in equal measure, Cook explains.
“A critical differentiator of FOA is our ability to identify gaps in the marketplace and use our proprietary data to launch innovative new products that our customers need, and distribute those through our Portfolio Management business,” she says. “The new product that we’re launching at FAR is just the latest example of our ability to meet our customers’ needs through constant innovation, which we believe provides us with a real competitive advantage.”
The reverse mortgage industry has seen a bit of a proverbial roller coaster recently in terms of sentiment surrounding proprietary products. Headed into 2020 the industry seemed very bullish about the potential those products represented to bolster the position of the industry, but one year later some sentiment surrounding them has cooled. Nevertheless, given FAR’s position as a proprietary reverse mortgage leader, FOA sees an abundance of potential across both the government-sponsored reverse mortgage product and proprietary options, Cook says.
“The beauty of our diversified platform is that we have the opportunity to offer whichever solution best meets the needs of the customer,” Cook explains. “We always prioritize the needs of the individual customer, and allow them to choose the best path forward. We recognize that the best solution may not even be a mortgage, which is why having partnerships with companies like Silvernest is critical to our mission.”
The increasing need that seniors have to adequately finance their retirements is also a strong driver of optimism for the parent company on FAR’s prospects, Cook adds.
“FAR is supported by strong secular tailwinds as baby boomers are increasingly looking to finance their aging in place,” she says. “We remain well-positioned to provide capital to these borrowers that are looking to utilize the value accumulated in their homes, without being forced to sell and move. We offer multiple products because people have different needs, and we work closely with them to identify the best path forward to achieve their retirement goals.”
Betting on new technology, what FAR will look like post-IPO
The reverse mortgage industry has become more focused on the incorporation of new technology recently, and FOA recognizes that the reverse mortgage industry generally has a bit of a deficiency when compared to technological solutions employed by the traditional mortgage business at virtually every level. FOA hopes that it can help facilitate the modernization of certain technologies and processes in the future.
“The reverse category suffers an immense disadvantage in this regard and FAR seeks to lead the industry into the modern age,” Cook explains. “Technology is a strategic focus for FOA overall and the increasing capabilities and resources advance FAR’s technology roadmap to create a world-class experience for consumers, partners, and our back-end operations.”
When asked what the wider reverse mortgage industry should keep in mind about FAR once FOA is on the other side of its IPO, Cook describes a stronger company in a better capital position that can then be of direct benefit to FAR’s partners.
“Going public will help accelerate the growth of FOA and advance important initiatives that have made FAR the number one wholesale reverse lender for 10 years and counting,” Cook says. “Our commitment to our partners has never been stronger and we look forward to serving them through continued innovation.”