FAR’s Parent Company Reports $221M Q2 Loss Amid AAG Integration

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FAR’s Parent Company Reports $221M Q2 Loss Amid AAG Integration

Aug 18, 2023 | News | 0 comments

In the second quarter of 2023, Finance of America Companies (FOA), the parent entity of leading reverse mortgage lender Finance of America Reverse (FAR), experienced a net deficit of $221 million. This financial outcome is linked by company executives to the adverse effects of mortgage rates and spreads.

Although the company reports expansion within its reverse mortgage division, this expansion did not sufficiently counterbalance the heightened expenses linked to the ongoing integration of American Advisors Group (AAG) assets into its operational framework.

Additionally, company executives mentioned that their corporate expenditures are still on a downward trajectory, and they anticipate that the complete integration of AAG will contribute to the company’s fiscal well-being in the upcoming months.

FOA, under CEO Graham Fleming, marks a significant juncture with robust sales and the AAG acquisition. Earlier, FOA sold its lending and insurance arms. Demographics promise growth in retirement solutions, yet Q2 was hit by mortgage market volatility. Despite cost reductions, Q2 loss exceeds Q1 profit. The AAG acquisition solidifies FOA’s dominance, claiming nearly 40% of the Home Equity Conversion Mortgage market.

FAR Loan Production, Staff Integration

Fleming offered more insights into FOA’s loan production, with AAG and FAR reporting separately. Q2 saw around 2,300 clients served, a 95% loan increase from Q1, totaling $447 million in unpaid principal balance (UPB), up 25% from the prior quarter. HECM volume doubled in Q2, and the AAG platform presents a chance for jumbo reverse loan sales. Since the AAG acquisition, over 400 new employees have joined FOA’s retail and corporate divisions, along with 150 vendors. However, a California WARN report noted 48 layoffs at the Roseville office in April.

Private-Label Strategies and Future Prospects

Post-AAG acquisition, FOA’s President Kristen Sieffert highlighted the significance of AAG’s extensive reverse mortgage marketing. CEO Fleming outlined leveraging AAG’s marketing for industry dominance.

Fleming remarked, “Our acquisition of AAG’s platform and marketing assets can boost product awareness and market reach.” Despite integration complexities and economic challenges, operational traction is evident.

The HomeSafe return through AAG is notable. Before the AAG/FOA merger, FAR’s “HomeSafe” reverse mortgages were offered via a partnership since 2018. Although aiming for $0.09-$0.12 adjusted earnings per share, 2023 goals might not be met. However, Fleming envisions $0.40-$0.50/share post AAG integration and market stabilization.