In the midst of one of the toughest mortgage markets since the Great Financial Crisis, Finance of America Mortgage LLC (AMF) will close by the end of the year following its decision to leave the wholesale circuit and the collapse of a forward retail agreement with Guaranteed rate earlier this month.
The multi-channel lender’s board of directors Finance of America Companies Inc. (FoA) has authorized a plan to discontinue operations of the company’s term mortgage origination segment in order to optimize and strategically invest in the reverse origination, commercial origination, lender services and management segments of the company’s portfolio, according to the 8-K deposits.
“Discontinuing the term mortgage segment will allow FOA to optimize its resources and prioritize businesses that have a distinct market opportunity and greater growth potential,” said Graham Fleming, chief executive by interim Finance of America, in a statement.
The closure of Finance of America Mortgage will accelerate the company’s ability to partner with major mortgage lenders and other financial services companies to offer FoA’s Finance and Specialty Services (SF&S) solutions on their platforms, added Fleming.
FoA expects to fund term mortgages related to its mortgage origination segment in the first half of 2023, consisting primarily of term mortgages with extended lock-up periods and representing less than 11% of the total term mortgage pipeline. term, as filed with the US Securities and Exchange Commission.
With the closure of its term mortgage company, FoA expects to save between $110 million and $120 million a year. Of the overall pretax charges of approximately $145-164 million, FoA estimates that approximately $12-18 million will be made up of severance, retention and related benefits.
After Guaranteed Rate pulled out of talks to acquire FoA’s term mortgage retail channel earlier this month, the company reportedly closed the division. FOA may exit the retail channel if it fails to sell the business, said a source with direct knowledge of the negotiations.
The company declined to say whether Finance of America had found another buyer for the retail branches.
On October 7, FOA said it would no longer fund or purchase loans through its wholesale and non-delegated correspondent channels. The last day to block loans in the pipeline and submit a credit report on previously blocked loans is October 28. The deadline to fund the wholesale pipeline and purchase non-delegated correspondent pipeline is December 16.
FOA reported a loss of $168 million in the second quarter, with reverse mortgages being the company’s bright spot. Reverse volume reached $1.58 billion in the second quarter, an increase of 7% from the first quarter and 56% from the second quarter of 2021.
The lender’s term mortgage business posted funded volume of $4.23 billion in the second quarter, down 17% quarter-over-quarter and 39% year-over-year. other. The company reduced its workforceremoving approximately 35% of costs based on a run rate, which equates to over $100 million annualized.
FOA generated $6 billion through the retail mortgage channel from January to June, down 50.7% year-over-year, according to Inside Mortgage Financing. The company ranked no. 33 among the top US retail mortgage lenders during the period.