Finance of America is profitable and aims to dominate the HECM market


Finance of America is honing its new identity as the nation’s top reverse mortgage lender, posting modest gains at the start of the year.

The Plano, Texas company generated $14.5 million in net income in the first quarter Following net loss of $182 million In the fourth quarter of last year, it was reported on Monday.this is that First profit since the second half of 2021These figures are calculated including net losses from discontinued operations. Close Origination of Futures Mortgages Business in the first quarter.

Lender net income from continuing operations was more favorable than a loss of $47.9 million in the prior quarter as FOA posted a gain of $55.5 million in the first quarter. FOA reported significant losses from discontinued operations, including his $134.1 million net loss in the fourth quarter and his $40.9 million net loss for the January through March period.

FOA is also closed Acquisition of American Advisors Group This makes it the largest reverse mortgage originator by volume, including the Finance of America Reverse division, CEO Graham Fleming said on a conference call Monday. AAG will bring his $5.6 billion in assets to the company and AAG’s earnings will be included in the business’ second quarter reporting.

Excluding AAG results, FOA’s New Retirement Solutions report segment, which includes all originations, decreased to $357 million in the first quarter from $701 million in the prior quarter. Management attributed the decline to seasonal and competitive pressures. At the same time as last year, FOA recorded his $1.5 billion trading volume.

Company leaders said they expected profitability with AAG, saying: $12.39 trillion in joint home equity As of the fourth quarter, it is owned by adults aged 62 and over.

“Current demographic trends represent a significant market opportunity, and we believe FOA has the significant competitive advantage needed to capitalize on this,” said Fleming.

The company cut costs from $87 million to $83 million by the end of 2022 after significant changes over the past seven months. FOA cut its wholesale channel last October and sold its Incenter-branded title insurance subsidiary. $100 million in Essent In February, with a deal expected to close by the third quarter. We also signed an agreement in the second quarter to sell our remaining majority stake in our Lender Services business.

The company has cut corporate salaries and benefits by 32% in the past 12 months and plans to complete the right-fitting by the third quarter, Fleming said.

The company’s new reporting segments are divided into Retirement Solutions, Portfolio Management, Corporate and Other as previously mentioned. The Portfolio Management segment, which includes gains on disposals, interest income and income from underwriting functions, was $26.3 million, up 30% quarter-to-quarter, up year-to-date.

This segment posted a figure of $20.1 million in the fourth quarter of last year. Portfolio management earnings should double for him when AAG is factored in, chief financial officer Johan Gericke said.

Total revenue increased 50%, jumping from $93.6 million in the fourth quarter to $141 million in the first quarter. The company’s cash and cash equivalents also increased slightly, from $61 million at the end of the year to $69 million at the end of March.

The company also halved its credit line from $2.3 billion at the end of September to $1.1 billion to close out the first quarter, Gericke said.

FOA has strengthened its relationship with servicers over the past few months. New subservice contract PHH Mortgage, a subsidiary of Ocwen Financial, announced last week that it renewed its partnership with major sub-servicer Celink in March. In Finance of America Reverse alone, he had 62,879 reverse mortgages with an outstanding principal balance of $17.9 billion at the end of last year.

Fleming said the company welcomes more competitors in the reverse mortgage space. Banks do not currently exist in the home equity conversion mortgage market.

“It would be exciting if banks would get into this space,” he said. “It will increase product awareness in our customer base.”

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