Finance of America on Monday announced that it has launched a home improvement division, using the remodeling product line it acquired in March from Renovate America’s bankruptcy.
The publicly traded nonbank will use Renovate America’s Benji system to provide renovation financing and link borrowers with contractors.
The product launch is in line with efforts by other publicly traded nonbanks to diversify because traditional mortgage offerings face housing supply constraints and are currently on track to decline in 2021 after a banner year in 2020.
“The high demand for housing combined with persistently low inventory has created an environment where … renovations are more prevalent,” said Shawn Stone, president of Finance of America Home Improvement, in a press release.
Renovation financing is expected to increase 3.3% in 2021 to $433 billion from an estimated $419 billion following some disruption to the market last year, according to a report from Harvard University’s Joint Center for Housing Studies. Finance of America estimates that 77% of U.S. homeowners will make improvements in 2021 based on a recent survey by LightStream.
Certain types of loans have made more of a post-pandemic comeback than others. Cash-out refinancing, for example, has soared, but some large banks like JPMorgan Chase, Wells Fargo and Citi haven’t resumed offering home equity lines of credit backed by second-liens.
Renovate America had an emphasis on Property Assessed Clean Energy loans that are repaid through voluntary state assessments that carry super-liens, which take precedence over mortgage payments. Fannie Mae and Freddie Mac generally will not purchase a traditional first lien mortgage on a property that also has PACE loan.
Stone said in an email that the unit would not serve as an administrator for PACE financing as Renovate America did, but added that Finance of America would offer both secured and unsecured home improvement loans.
