Finance of America Companies Inc. (FOA), the sixth-largest U.S. reverse mortgage lender by volume, announced Wednesday it plans to acquire assets of the top HECM lender, American Advisors Group.
In exchange, FOA will provide AAG with a combination of cash and equity, company officials said.
FOA officials said the transaction underscores its commitment to invest in businesses that have strong growth potential with structural and demographic tailwinds.
“We believe home equity will be an increasingly important asset for Americans to consider in order to supplement their incomes, especially in retirement,” said FOA President and Interim CEO Graham A. Fleming. “We are confident that our expansion into this direct-to-consumer retail channel will position us to further educate, grow and service this market while driving enhanced value and opportunities for our customers, employees, partners and investors.”
AAG officials declined to comment, referring all questions to FOA.
In January, AAG sold a servicing portfolio of more than 75,000 loans totaling $12.1 billion in unpaid principal balance (UPB) to Reverse Mortgage Funding, which last week laid off about 400 employees before filing for Chapter 11 bankruptcy protection a day later.
Also, in October AAG paused new loan submissions and suspended existing applications. Later that month the company laid off 204 employees, including 43 loan officers.
Officials said that upon completing the deal, which is expected to improve tangible book value and earnings per share, FOA’s subsidiary, Finance of America Reverse LLC, will operate a separate direct-to-consumer retail channel under the brand name AAG, whose ads currently reach over 10 million consumers annually in various ways, including the use of celebrity spokesperson Tom Selleck.
The transaction is expected to close in the first half of 2023, subject to customary closing conditions and regulatory approvals, officials said.
Officials said that in support of the transaction, existing stockholders of the company — including entities affiliated with Brian L. Libman, the company’s chairman and founder — have committed to invest an additional $30 million in capital into the company through a private placement of FOA’s common stock. The investment is conditioned upon customary closing conditions, including the closing of the AAG transaction.
Kristen Sieffert, president of Finance of America Reverse, said it was an exciting day for both companies and the clients they serve.
“By complementing FAR’s thought leadership and innovation with AAG’s unmatched investments in consumer awareness, we are strengthening a movement to change society’s retirement trajectory for the better and bringing FOA closer to its goal of helping more Americans thrive,” Sieffert said.
Additional details of the transaction can be found in the Current Report on Form 8-K that has been concurrently filed by FOA with the SEC, FOA officials said.
