Finance Of America exits wholesale and mail-order lending

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Finance of America Mortgage, a non-bank lender that went public last year, is closing its wholesale and correspondent lending channels after laying off more than 1,000 people this year amid mounting losses.

The Irving, Texas-based lender is also reportedly in talks to sell its retail mortgage division, which employs about 1,000 loan originators who work in more than 200 branches nationwide.

Finance of America Mortgage TPO — the division of the company that works with mortgage brokers and correspondent lenders — sent an email notice on Friday advising partners that it would no longer fund loans traded or purchased after Dec. 16.

“We realize that this decision will have an impact on your relationships,” said the notice said. “The FAM team will continue to ensure that you and your borrowers receive the same exceptional service you have received from us over the years to ensure your existing pipeline with us closes smoothly and on time.”

Friday was the last day for mortgage brokers and correspondent lenders to submit a new floating loan or complete a new term lock to Finance of America, and October 28 will be the last day to lock loans currently in progress or submit new term locks. credit packages on previously blocked loans, the company said.

Finance of America’s commercial and reverse mortgage operations “will continue to accept new applications and operate as usual,” the company said.

Valued at nearly $2 billion when it went public last year in a SPAC merger, Finance of America Mortgage does most of its business through its direct retail and of consumption.

Finance of America Loan Origination Channels

Loan originations by channel, in billions of dollars Source: Finance of America Quarterly Investor Report

According to the National Mortgage Licensing System and Registry, the retail division of Finance of America Mortgage sponsors 1,094 mortgage originators who work in 246 branches nationwide.

In the second quarter of this year, these retail branches accounted for about 56% of the company’s $4.23 billion in total loans, with the direct-to-consumer channel’s $256 million of production accounting for another 6%.

Wholesale and correspondent lending — in which Finance of America funds loans originated by its partners — accounted for an additional $1.52 billion in loan production, more than a third of the total, the company said in its latest report. quarterly report to investors.

Although the nation’s largest wholesale mortgage lender, United Wholesale Mortgage, says it will fight for homebuyer market share, another big competitive wholesale player, Homepoint, has significantly downsized. Some other lenders that only got into the wholesale business, such as Guaranteed Rate and loanDepot, have opted to shut down these channels.

Like many other mortgage lenders, Finance of America was forced to downsize as rising mortgage rates emptied the highly profitable business of refinancing loans to existing homeowners.

Finance of America mortgage refinances plummet

Finance of America Buys Mortgages and Refinances Quarterly: Finance of America Regulatory Filings

During the first quarter of 2021 – when 30-year fixed-rate mortgage rates hit an all-time low of 2.65% – Finance of America refinanced an all-time high of $5.74 billion in mortgages, more than double the $2.66 billion in purchase loans it financed.

In its latest quarterly report, Finance of America posted a net loss of $168 million in the second quarter, as rising mortgage rates significantly limited refinances. Although the volume of purchase loans in the second quarter increased to $3.34 billion, the volume of refinancing fell to $825 million.

Graham Fleming

In an Aug. 4 conference call with investment analysts, interim CEO Graham Fleming said the company had made staff cuts in mortgages “to match the capacity of current demand from the market,” a move he said would reduce spending by $100 million a year. .

According to Finance of America annual report 2021the company employed about 5,300 people in 2021, including 3,088 in mortgage originations and 1,021 in lender services.

Fleming said that since the start of the year, Finance of America has reduced its workforce and expenses by 20% company-wide, implying that the company has reduced its workforce by more than 1,000. employees.

“We are optimizing our cost structure through headcount reductions and other cost management efforts,” Fleming said on the earnings call. “We have moved away from the direct-to-consumer channel which relied heavily on refinancing leads, and are actively scaling each of our branches.”

While purchase lending is expected to continue to account for the lion’s share of new business, Fleming said Finance of America’s retail business “remains poised to take advantage of this shift. Currently, purchase mounts accounted for approximately 85% of our volume.We also believe there remains a substantial opportunity to sell non-mortgage products through our mortgage channel, and we are focused on creating that opportunity.

Since then, Finance of America has reportedly entered into negotiations to sell its retail mortgage division, with the guaranteed rate seen as the main suitor.

Finance of America reportedly signed a non-binding letter of intent with guaranteed rate, National Mortgage Advisor reported September 29. But the guaranteed rate has “moved away from negotiations”, housing cable reported Friday, citing unnamed sources.

A Finance of America spokesperson told Inman that “it is company policy not to comment on market rumors or speculation.”

While investors have been depreciating on Finance of America since last year’s IPO, the company’s shares are trading above their all-time low.

After briefly trading above $11 in April 2021, Finance of America’s stock price gradually slipped to an all-time low of $1.20 on August 31. to a recent high of $1.74 on Oct. 4.

See you on Friday closing price of $1.60Finance of America has a market capitalization of approximately $100 million.

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Email Matt Carter