DBRS Morningstar Confirms Ranking on Finance of America Reverse LLC

DBRS, Inc. (DBRS Morningstar) confirmed its MOR RVO2 residential reverse mortgage originator ranking for Finance of America Reverse LLC (FAR or the Company). The trend on the ranking remains Stable.

FAR is a residential mortgage originator primarily focused on providing senior homeowners reverse mortgages through U.S. Department of Housing and Urban Development (HUD) insured home equity conversion mortgages (HECMs) and a proprietary jumbo reverse mortgage product branded as HomeSafe. FAR, founded in 2003 as Urban Financial Group, Inc., is a wholly owned indirect subsidiary of Finance of America Equity Capital LLC (FOAEC). Finance of America Companies Inc. (Finance of America or FOA) directly and indirectly owns a portion of the ownership interests in FOAEC and controls FOAEC. In December 2022, FAR entered into an asset purchase agreement with American Advisors Group (AAG), a direct-to-consumer reverse mortgage lender, to purchase a substantial majority of the assets and certain of the liabilities of AAG. The AAG transaction was completed on March 31, 2023, and included the acquisition by FAR of all operations of AAG, including approximately 340 AAG employees. The AAG brand and operations are continuing but as a part of FAR.

The MOR RVO2 residential reverse mortgage originator ranking reflects FAR’s experienced senior management team, proficient origination practices, and solid loan performance.

FAR is licensed to operate in all 50 states; Washington, D.C.; Puerto Rico; and the U.S. Virgin Islands. The Company originates HECMs through its retail and wholesale operations and acquires loans through correspondent, principal agent, and bulk transaction channels. The Company originates its HomeSafe loans through its retail, broker, correspondent, and principal agent channels and currently offers HomeSafe in 27 states and Washington, D.C. In 2022, the Company acquired or originated over 14,000 reverse mortgages totaling over $4.9 billion and had a servicing portfolio exceeding $18 billion.

The Company is headquartered in Tulsa, Oklahoma, with call centers in Tulsa; San Diego, California; Bohemia, New York; Mount Laurel, New Jersey; and Carmel, Indiana. FAR is led by a senior management team averaging more than 18 years of industry experience. Executive management changes include FOA naming Graham Fleming as the chief executive officer and promoting FAR president Kristen Sieffert to president of FOA. The underwriting department is decentralized and, as of December 31, 2022, consisted of approximately 21 underwriters averaging over five years of Company tenure and 10 years of relevant experience. FAR continues to grow its reverse originations and maintain strong loan performance with 2022 delinquencies averaging just under 0.5%.

FAR has an acceptable earnings generation capacity, though earnings are reliant on transactional based revenue sources, which introduces the potential for meaningful volatility in earnings. FAR’s credit risk is limited, as it primarily securitizes or sells loans it originates instead of holding them on its balance sheet for an extended period. Similar to other nonbank mortgage companies, FAR’s narrow funding profile relies predominantly on secured wholesale funding sources, which result in a highly encumbered balance sheet that may limit financial flexibility during periods of market stress. The Company’s capitalization is somewhat weak, given its high level of leverage. Still, as part of the publicly traded Finance of America parent, it has broad access to the equity capital markets.

All rankings are subject to surveillance, which could result in rankings being raised, lowered, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar mortgage originator rankings are not credit ratings. Instead, they are designed to evaluate the quality of the parties that originate residential mortgage loans. Although the originator’s financial condition contributes to the applicable ranking, its relative importance is such that an originator’s ranking should never be considered as a proxy of its creditworthiness.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is U.S. Residential Mortgage Originator Rankings (June 26, 2023), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information on this ranking or this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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