Finance of America’s forward exit to have minimal impact on reverse

Finance of America Mortgage does have some reverse endorsements to its name, but they are a fraction of those from the dedicated FAR brand

Earlier this month, HousingWire first reported that Finance of America Mortgage (FAM) — the traditional, forward mortgage division that shares a parent company with Finance of America Reverse (FAR) — would be closing its doors as the parent turned its focus to specialty finance and services (SF&S) businesses, which includes FAR.

Late last week, the company made the move official. Although Finance of America Companies (FOA) aimed to clarify that reverse mortgage operations would not be impacted, reports suggest some confusion among the reverse mortgage audience about the potential impacts this could have on the reverse mortgage business.

The impacts should be negligible at best according to people familiar with the matter, and the publicly-posted reverse mortgage origination data metrics by the Federal Housing Administration (FHA) and compiled by Reverse Market Insight (RMI).

FAM’s reverse mortgage endorsements

Although it is primarily a forward mortgage company that shares a parent entity with a dedicated reverse mortgage lender, FAM still logged Home Equity Conversion Mortgage (HECM) endorsements as recently as last month. According to September 2022 reverse mortgage endorsement data compiled by RMI, FAM logged 49 HECM endorsements for the month, a drop-off of nearly 50% when compared to the prior month.

Over the 12-month period ending in September, FAM logged 1,030 HECM endorsements compared to the 5,936 logged specifically by FAR, or 17.3% of the 12-month total of the dedicated reverse mortgage division.

It remains possible that some additional HECM endorsements from FAM could trickle in through the end of 2022, since according to the official announcement of the closure by FOA, the company will “discontinue the operations of its forward mortgage originations segment across both retail and wholesale channels by the end of the year,” the announcement said.

FOA intends to fund forward mortgage loans in its originations segment through the first half of 2023, based on a filing to the U.S. Securities and Exchange Commission (SEC) reviewed by HousingWire and reported there.

FAM closure to have no impact on FAR operations

Recently, when American Advisors Group (AAG) announced to its partners that it would no longer be offering proprietary reverse mortgages through a previously-established correspondent partnership with FAR to offer its “HomeSafe” product under AAG’s branding, FAR took the chance to address the recently-announced closure of FAM to its partners.

“FAR is unaffected by the FAM changes,” the bulletin to its partners read. “FAM’s announcement relating to its TPO channel has unfortunately caused confusion for some, so we are restating that FAR continues to operate as usual.”

The general messaging from FAR has aimed to reiterate that the company’s ongoing business remains unaffected by the closure of FAM, and that the reverse side of the business remains “business as usual,” according to people familiar with the matter. This was also an idea emphasized by Jonathan Scarpati, SVP of wholesale lending at FAR in a statement addressing the AAG matter.

“We also want our partners and customers to know unequivocally that it is business as usual for FAR and we remain committed to providing the highest quality customer service in the industry,” Scarpati told RMD in a statement last week. “It’s why we’ve been the top reverse wholesale lender for the last 12 years and counting.”

SF&S focus, the strength of reverse

The announcement by FOA specified that the company will aim to focus its efforts on its SF&S businesses, which include FAR as well as a dedicated home improvement division.

“The discontinuation of the forward mortgage originations segment will allow FOA to optimize its resources and prioritize businesses that have a distinct market opportunity and greater growth potential,” said Graham Fleming, interim FOA CEO. “In addition, the move will accelerate the company’s ability to partner with large mortgage lenders and other financial services companies to offer FOA’s SF&S solutions on their platforms.”

The decision to close FAM was made very carefully, Fleming goes on to say, with the impact on employees and their families understood.

“We are providing support and resources to assist our departing employees in their search for employment opportunities and are actively working to facilitate the transition of many of these employees to roles at other mortgage lenders,” Fleming says. “The impacted employees have long been valued members of our team and we recognize the many contributions they have made to the company.”

It was not specified in the statement whether or not FAM employees who originated reverse mortgages would be moved over to FAR, or if they also fall under the support umbrella for other departing employees. RMD reached out to representatives of FAR regarding whether or not such employees would be moved over to the dedicated reverse division, but the company elected not to comment.

The company’s statement also specifically cites the reverse mortgage division as a bright spot, continuing a recent pattern that the company’s corporate leadership has established in its 2022 earnings reports while lauding the recent announcement of an educational collaboration with Morningstar.

“Speaking about the strength of FOA’s SF&S business, Fleming noted that the reverse segment recently debuted its collaboration with Morningstar to educate 150,000 participating financial advisors on reverse mortgages and other home equity options available to customers aged 55 years or older,” the company said. “FOA has the leading reverse mortgage platform in an industry with strong structural tailwinds and it has been the backbone of FOA’s model since the inception of the enterprise.”

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