Finance of America reports loss in 2Q partly due to AAG integration

Finance of America's journey to become a full-fledged reverse mortgage company has landed it in the red in the second quarter, in part due to incurred costs of integrating the recently acquired reverse lender American Advisor Group.

The company reported a $222.5 million loss, down from a reported net income of $14.5 million in the prior quarter. Leadership noted that the net loss was driven primarily by negative fair value adjustments to its portfolio as interest rates and spreads were impacted by the fallout from the bank collapses.

On an adjusted basis, the company disclosed a net loss of $26 million, which it attributed to absorbing the additional costs to integrate the AAG platform and making investments in future growth.

As part of the initiative to reinvent itself as a shop focused only on reversed mortgages, the lender has disinvested from former business lines, first and foremost closing its forward mortgage origination segment in the first quarter. Meanwhile, in the second quarter, FoA completed the sale of its title insurance business, Incenter, for $100 million to Essent and sold off a majority stake of its lender services platform in the second quarter.

FoA's focus on dominating the HECM space seems to be paying off with the company maintaining close to a 39% market share in the reverse market as of the second quarter.

The reverse lender, funded about $447 million in the second quarter, up 25% from the first quarter where originations totaled $357 million, according to CEO Graham Fleming.

"We expect to continue to see quarter-over-quarter growth in this business as we fully integrate AAG," Fleming said during the company's earnings call. "Our market opportunity at its core is helping older homeowners use their homes as a superpower to achieve their financial goals."

Total expenses ballooned to $110 million in the second quarter, up from $84 million in the prior quarter. A chunk of that sum went to covering salaries and administrative expenses. 

Fleming noted that the company is managing business "with discipline and focus on long term strategic priorities," which going forward will include streamlining operations and "reducing expenses," which may signal future layoffs for the company.

"As of June 30, we are approximately 80% of the way towards our savings target of $80 to $100 million, and we expect to secure an additional 20 million in annualized savings by the end of the year," he said. "We are working tirelessly to identify and consolidate redundant vendor engagements and overlapping loan origination systems in an effort to optimize costs and alleviate the reporting and leadership challenges that come from working out of multiple systems."