Finance Of America exits wholesale and correspondent 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 negotiations to sell its retail mortgage division, which employs around 1,000 loan originators working in more than 200 branches across the country.

Finance of America Mortgage TPO, the company’s division that works with mortgage brokers and correspondent lenders, sent an email notice Friday informing partners that it would no longer finance loans purchased or traded after Dec. 16.

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

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

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

Worth nearly $2 billion when it went public last year in a merger with SPAC, Finance of America Mortgage does most of its business through its retail and direct-to-consumer channels.

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 Registry and System, Finance of America Mortgage’s retail division sponsors 1,094 mortgage loan originators who work out of 246 branches nationwide.

During the second quarter of this year, those retail branches accounted for about 56 percent of the company’s $4.23 billion in total loan originations, with the $256 million in output from the direct-to-consumer channel accounting for another 6 percent.

Wholesale and correspondent lending, in which Finance of America finances loans originated by its partners, accounted for another $1.52 billion in loan production or more than a third of the total, the company said in its most recent 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 player in the competitive wholesale business, Homepoint, has downsized sharply. Some other lenders that only dabbled in wholesale, such as Guaranteed Rate and LoanDepot, have chosen to close those channels.

Like many other mortgage lenders, Finance of America has been forced to downsize as rising mortgage rates have destroyed the highly profitable business of refinancing existing home loans.

Finance of America mortgage refinances plummet

Finance of America Buys Mortgage Originations and Refinances by Quarter: Finance of America Regulatory Filings

During the first quarter of 2021, when rates on 30-year fixed-rate mortgages 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 that financed.

In its most recent quarterly report, Finance of America posted a $168 million net loss in the second quarter, with rising mortgage rates severely curtailing refinances. Although second-quarter purchase loan volume rose to $3.34 billion, refinancing volume slumped to $825 million.

Graham Fleming

In an Aug. 4 conference call with investment analysts, interim CEO Graham Fleming said the company had made headcount reductions in mortgage originations “to match capacity with current market demand,” a move he said , it was expected to cut $100 million a year in expenses. .

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

Fleming said that since the beginning of the year, Finance of America had reduced headcount and expenses by 20% companywide, meaning the company has shed 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’ve moved away from the direct-to-consumer channel that relied heavily on refinance leads, and we’re actively downsizing each of our branches.”

With purchase loans expected to continue to account for the largest share of new business, Fleming said Finance of America’s retail business “remains poised to take advantage of this change. Currently, purchase originations comprised approximately 85 percent of our volume. We also believe there continues to be a substantial opportunity to sell non-mortgage products through our mortgage channel, and we are focused on capitalizing on this opportunity.”

Since then, Finance of America has reportedly been in talks to sell its retail mortgage division, with Guaranteed Rate believed to be the main suitor.

Finance of America reportedly signed a non-binding letter of intent with Guaranteed Rate, National Mortgage Professional reported on September 29. But the guaranteed rate “has moved away from the negotiations”, housingwire reported on Friday, citing anonymous sources.

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

While investors have resented Finance of America since last year’s initial public offering, 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 fell to an all-time low of $1.20 on August 31. Rumors of an imminent sale of the company’s retail mortgage division boosted the company’s share price, which rebounded 54 percent. to a recent high of $1.74 on Oct. 4.

At Friday’s closing price of $1.60, Finance of America has a market capitalization of around $100 million.

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