FoA suffers $302 million loss in third quarter amid futures mortgage closures

The decision to withdraw from the forward mortgage business takes a toll Finance of America Companies The third quarter of 2022 will be difficult.

The company posted a loss of $302 million from July to September, largely due to non-cash transactions. Last quarter he lost $168 million, or about half of his third-quarter loss.

FoA announced the shutdown of Finance of America Mortgage, its forward mortgage business, in late October. The costs associated with this decision are estimated at $145 million to $164 million. housing wire First reported on the topic.

“The decision to discontinue our forward mortgage business is the result of a thorough review of our business and the broader economic outlook. I decided that I needed to change.

The company’s management added, “By the end of the year, we expect the roll-off of the retail and wholesale mortgage channels to be substantially completed.”

On paper, the loss in the third quarter was due to negative changes in fair value of long-term assets, $116 million of liabilities and $138 million of impairment charges on intangibles and other long-lived assets. forward mortgage business.

The negative performance also reflected a net loss of $27 million in forward mortgage originations despite gains of $7 million in Specialty Finance and Services (SF&S).

FoA futures mortgage funding totaled $2.7 billion from July to September, down 36% quarter-over-quarter and down 63% year-over-year. This year, the company’s margin on sales rose from his 2.14% in Q2 to his 1.87% in Q3, largely due to competitive market dynamics.

“Our exit from forward mortgages allows us to optimize our resources and prioritize high-growth businesses that already have clear competitive advantages and leading positions in markets with macro tailwinds,” Fleming said. said.

One of those businesses is reverse mortgages, according to executives. FoA generated $1.1 billion in funding in Q3 2022. This was down 28% from the prior quarter and 2% from the prior year period, primarily due to lower correspondent aggregation. However, year-to-date volume in 2022 he reached $4.2 billion, up 43% year-over-year.

Commercial originations, which provide business purpose solutions to residential real estate investors, decreased 21% year-over-year and 34% quarter-over-quarter to $355 million. Transaction volume from January to September was $1.5 billion, up 23% from the same period last year.

FoA generated $44 million in revenue from lender services, including valuations and titles, down 24% quarter-over-quarter and 50% year-over-year.

Company executives hope the exit from the forward mortgage business will provide more services and products to other lenders. As part of this strategy, FoA is helping loan officers and branches migrate to other companies. American Pacific Mortgage When hallmark mortgage,

“We are helping many branches go to other mortgage lenders during the downturn. We are also working with lenders to help them implement these products,” Fleming said. said. “So we actually believe there is a big opportunity for cross-selling in 2023, not in the short term.”

Furthermore, company executives added that FoA is working with several major retailers to incorporate the company’s reverse products into their merchandise.

With respect to the servicing business, FoA’s mortgage servicing rights totaled $103 million as of September 30, down 71% from June 30. According to executives, this is due to continued MSR sales in line with market opportunities.

FoA’s cash position was $169 million at the end of the third quarter, down $50 million from the prior quarter. This was due to the repayment of secured debt.

Finance of America stock It traded at $1.46 on Wednesday morning, down 3.3% from its previous close.

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