Troubled Finance of America reports widening losses

On its third-quarter earnings call, Finance of America’s management struggled to paint a bright future for the troubled company that recently closed its futures mortgage business.

In the third quarter, FOA lost $302 million. This was driven by non-cash charges of $116 million related to changes in the fair value of long-term assets and liabilities, and a $138 million impairment charge on intangible assets and other long-lived assets related to forwards.Mortgage business closure announced It follows the quarter ending in October.

compared to $168 million loss Second quarter net income of $50 million Q3 2021This was when FOA reported its last and only profitable period since going public via the company. Special Purpose Acquisition Company Merger April 2021.

Management is bullish about the outlook for next year.

“For 2023, we expect strong macro tailwinds to continue to exist, primarily driven by our Reverse Originations segment, with adjusted full-diluted full-year earnings per share increasing from 45 cents to 55 cents. We anticipate that it will be,” said Graham Fleming, president and interim president. CEO at a financial results briefing. “By streamlining our organization, we can focus all our resources on businesses that drive growth and, in turn, long-term shareholder value.”

FOA hopes to expand partnership opportunities with large mortgage lenders and other financial services firms to offer these reverse mortgage products. Fleming said he used to focus on a proprietary platform for those retailers.

The company signed a deal with Morningstar to educate financial advisors on reverse mortgages and other home equity products. “We continue to believe that education is key to the growth of the reverse industry, and this collaboration will provide education on reverse mortgages, including the Finance of Americas product available to approximately 150,000 advisors,” said Fleming. Stated.

When asked whether FOA’s other business lines, such as its lender services segment, would be affected by the closure of forward mortgages, Fleming said the company is helping branches find new homes. I was.

“In line with that, we are working with our lenders to help them introduce these products,” he said. “So we really think there is a big opportunity for cross-selling over 23 years, not in the short term.”

FOA’s mortgage origination business posted a pre-tax loss of $170 million in the third quarter. That compares to a loss of $35 million in the last quarter and a pre-tax gain of $15 million in the same period last year.

The company raised $2.7 billion in the third quarter with a margin of 187 basis points. In the second quarter, he had $4.2 billion in revenue and a margin of 214 basis points. A year ago, FOA had $7.4 billion in volume and a margin of 261 basis points.

Meanwhile, reverse mortgage units reported originations of $1.1 billion, down from $1.6 billion in the second quarter of 2021 and $1.2 billion in the third quarter.

In addition to HECM, the company has its own Unique HomeSafe productmarked the seventh consecutive quarter of growth in new reverse mortgage borrowers.

Pre-tax income from reverse mortgages declined to $34 million in the most recent quarter from $36 million in the second quarter and $69 million a year ago.

During the quarter, FOA sold 71% of its mortgage servicing rights portfolio, down from $359 million on June 30 to $103 million.

Going forward, the company will focus on home equity conversion mortgage MSRs and acquire funding facilities secured by them, Mr. Guerike said.

Render Services segment revenue decreased 24% compared to the second quarter and 50% compared to the same period last year as originations slowed across the industry. Nearly 80% of revenue in that period came from third parties, as in the previous period.

Lender Services had gross revenues of $44 million for the quarter and a pre-tax loss of $11 million. In the second quarter, pre-tax loss was $5 million and revenue was $58 million, while in the third quarter of 2021, pre-tax income was $9 million and revenue was $88 million.

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