FAR Parent: Reverse Sets Another Third Quarter Record, Division Key to Full Service Goals

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Finance of America Companies, the parent company of the leading reverse mortgage lender Finance of America Reverse (FAR), revealed that the reverse mortgage lender set a second consecutive quarterly record for funding and that reverse mortgages are a key bid for the organization as it plans to offer loan products covering the spectrum of borrowers’ lifelong needs.

This is according to the parent company’s management team in a presentation of third quarter 2021 results.

Reverse mortgage originations also more than doubled in the third quarter of 2021 compared to the same period in 2020, contributing to a significant overall increase in revenue and pre-tax profit for the overall company. The company also plans to “double” its additional investments in FAR, as well as its booming business and home improvement business, according to the presentation.

Reverse mortgage results

Similar to the company’s presentation in Q2 2021, the parent company touted FAR’s positive performance as a notable part of the company’s success in a niche market, according to figures shared by Johan Gericke, CFO of Finance of America.

“Our reverse origination segment set a second consecutive quarterly funding record,” he said. “The strength of this market is due to both new builds and cash refinancings due to the recent appreciation in home prices. This brought in quarterly revenue of one hundred and eleven million, the first time it crossed the $ 100 million mark. And pre-tax profit of $ 69 million, which was up 30% from last quarter. “

The reverse mounts since the start of the year have generated a pre-tax profit of $ 168 million, he said, an increase of 127% from the third quarter of 2020.

The State of the Reverse Mortgage Market

In addition to FAR’s positive financial performance, the reverse mortgage business is seen by the parent company as an industry that remains full of potential due to the growing preference of senior Americans to age in place. That’s according to Patti Cook, CEO of Finance of America.

Patti Cook, CEO of Finance of America

“We will double our investments in our reverse business and home improvement businesses,” Cook said. “These lending activities have structural favorable winds that will fuel continued growth, as evidenced by the substantial multiples [that] banks and other investors pay for these companies.

The size of the potential reverse mortgage market remains huge due to favorable demographics and the growing collective home equity of the senior cohort, Cook said.

“Seniors hold nearly $ 8 trillion in home equity, and research has shown that the majority of seniors haven’t saved enough for retirement,” Cook said. “We have some tests underway to increase market awareness and position a reverse mortgage as a very effective retirement tool. [The] the first results are very encouraging. The recently high appreciation in home prices, coupled with the increased desire of older Americans to age in place, has created a unique window of opportunity for us to leverage our scale and expertise to lean on this business, which is exactly what we do.

Cook also explained Finance of America’s desire to serve people at all times in their lives – potentially from early adulthood to retirement – and that reverse mortgages will remain a vital part of a product line that can achieve such a goal.

“[One] priority […] is to leverage our infrastructure, technology and substantial mortgage data to increase the value of our clients’ lifetime household, ”she said. “We have only scratched the surface on this and see an opportunity to unlock the multigenerational value of our clients as they migrate from student loans, to personal loans, to mortgage, to home improvement and ultimately. to a reverse mortgage. “

Only a fraction of Finance of America’s total sales force currently offers all of the company’s products, she explained.

Headwinds in the reverse mortgage market, regulation

While much of the discussion regarding DFS and reverse mortgages more generally revolved around the favorable winds that could grow this business, an investor asked the management team about perceptions related to the current headwinds in the market. space, including recent evidence of further regulatory review. Rather, Cook considers the biggest barrier to reverse activity to be education and adoption of the product category, she said.

“It’s education. You have this huge population out there, [and] you have a great product that meets one of their greatest needs, ”she said. “Get to them [is a challenge], and because the reverse is still a bit of a niche market, it’s hard to do. So it’s really our collective and our competition, working with what I’ll call “industry think tanks” to really try to increase buy-in from potential borrowers in the opposite direction. “

On the issue of tighter regulatory oversight, Cook sees positive potential, as this higher level of oversight could raise awareness of reverse mortgages and potentially increase confidence in the industry, she said. .

“I think on your second question on the regulatory environment, we welcome this review,” she said. “And I mean it sincerely. We take our customer relationship into reverse mortgage [space] seriously, and we’ve proven our ability to do the right thing. We have a good relationship with CFPB, and as I said, I welcome the increased review.

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