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IPO / M&AMortgage

Finance of America to go public before IPO window closes

Blackstone-controlled firm will debut via SPAC at $1.9B valuation

Finance of America on Monday will become the latest lender to make its debut on the New York Stock Exchange.

The lender, which is controlled by the Blackstone Group and operates through retail, wholesale and correspondent channels, will begin trading Monday following the completion of its merger with blank-check company Replay Acquisition Corp.

It’s the second large-scale mortgage lender to go public via a SPAC in 2021, after broker-based United Wholesale Mortgage began trading in late January.

Like virtually all mortgage lenders, FOA posted record profits and originations in 2020. The lender increased originations by 70% to $32.63 billion in 2020 from $19.16 billion in 2019. Total revenues rose 101% to $1.80 billion, compared to $894 million in 2019, pre-tax net income grew 541% to $500 million, compared to $78 million in 2019. But the environment today is much harsher – margins for all the lenders are shrinking as mortgage rates climb into the 3% range and refinancings fall.

Finance of America’s valuation at the time of the IPO is expected to be $1.9 billion. To coincide with the IPO, institutional investors have pledged to make a private investment of $250 million in the company. Blackstone Group will retain a 70% ownership stake in the lender-and-servicer.

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Led by CEO Patricia Cook and founding chairman Brian Libman, Finance of America has been awfully busy ahead of the merger and IPO. Two weeks ago, the firm launched a home improvement vertical with the $45 million acquisition of Renovate America‘s Benji business line. Its reverse mortgage arm also released a new product that combines elements of forward and reverse mortgages for borrowers at or near retirement age.

“We are excited to enter our next chapter of growth as a publicly traded company and look forward to capitalizing on the many opportunities ahead of us,” Cook said in a statement. “Our value proposition is truly unique given our proven ability to innovate and deliver complementary financial solutions that consumers want and investors value. These attributes should continue to provide us with a sustainable competitive advantage. 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.”

In addition to its lending arms, Finance of America has a servicing arm and a portfolio management business that includes a broker-dealer and a registered investment adviser. According to Inside Mortgage Finance, FOA was the 26th largest mortgage originator by volume in 2020.

Though Finance of America appears to have made the historic mortgage IPO window before it shut, it’s unclear if others will be able. AmeriHome and Caliber Home Loans both signaled plans in the fall to go public, but delayed them indefinitely. Multiple sources have told HousingWire that Caliber’s private equity owner Lone Star Funds has held talks to sell the lender in lieu of taking it public.

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