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FoA plans to sell retail division to Guaranteed Rate, close wholesale channel: sources

Company will focus on other lines of business, such as reverse mortgages, commercial and home improvement

Amid the most challenging mortgage market in decades, multichannel lender Finance of America (FoA) plans to sell its retail mortgage division and shut down its forward wholesale channel, multiple sources told HousingWire. 

According to former top executives and business partners, FoA signed a letter of intent to sell its forward mortgage retail business to competitor Guaranteed Rate, but negotiations are still in progress and remain fluid.  

FoA originated $6 billion through the retail mortgage channel from January to June, down 50.7% year-over-year, according to Inside Mortgage Finance. The company ranked no. 33 among the top U.S. retail mortgage lenders in the period. Meanwhile, Chicago-based Guaranteed Rate was the fourth-largest mortgage lender in retail, with $32.8 billion in production, down 43% year-over-year. 

FoA is expected to shut down the wholesale channel by the end of the year, sources said. Broker partners in forward haven’t yet been told, sources told HousingWire. Between January to June, the company originated $3 billion through the wholesale division, according to documents filed with the Securities and Exchange Commission (SEC). 

“It is company policy not to comment on rumors or speculation in the market,” a spokesperson for FoA said. A Guaranteed Rate spokesperson said that the company had no comment. 

FoA, which has struggled mightily this year, appears to be exiting the forward mortgage originations space with the planned restructuring. If the deal goes through, it would instead focus on other lines of business, such as reverse mortgages, commercial lending and home improvement. Incenter Mortgage Advisors, which provides advisory services for MSR and whole loan trading, would also remain part of FoA, sources said.

At FoA, reverse mortgages have been a ​​bright spot on an otherwise red-stained balance sheet. Reverse volume reached $1.58 billion in the second quarter, a 7% increase compared to the first quarter, and up 56% compared to the second quarter of 2021. It’s the fifth consecutive quarterly volume record.

Meanwhile, the lender’s forward mortgage business notched $4.23 billion in funded volume in the second quarter, down 17% quarter over quarter and 39% year over year. The company reduced its workforce, taking out roughly 35% in costs on a run rate basis, equating to over $100 million annualized.

In all, FoA reported a loss of $168 million in Q2. 

“Spreads on both agency and non-agency mortgages increased to new highs in a matter of weeks,” Johan Gericke, CFO of Finance of America, told analysts during the second-quarter earnings call. “This meteoric rise in both rates and credit spreads put tremendous pressures on our origination businesses.”

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