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After three consecutive quarterly losses, Finance of America Companies (FoA) is negotiating to sell its retail mortgage division, while also planning to shut down its forward wholesale channel.
According to a former company official who requested anonymity, Plano, Texas-based FoA has signed a non-binding letter of intent to sell its retail division to Chicago-based Guaranteed Rate. The letter includes a provision that Guaranteed Rate would sell “fix-and-flip” and reverse mortgage loans exclusively to FoA and its Finance of America Reverse unit, the former company official said.
The official also confirmed that FoA plans to close down its forward wholesale division, adding that the company has provided no details on when that will happen or when it will stop accepting loan applications in that channel.
In an emailed statement, an FoA spokesperson said, “It is company policy not to comment on rumors or speculation in the market.”
FoA's plan to shut down its forward wholesale channel comes during a time when wholesale has taken a beating, with loanDepot and AmeriSave also closing their wholesale units.
The Guaranteed Rate Cos. is a financial technology-based mortgage lender with more than 10,000 employees in over 850 branches across the U.S., serving all 50 states and Washington, D.C.
Guaranteed Rate did not immediately respond to request for comment.
In August, FoA reported a net loss of $168 million, or 70 cents per diluted share, for the second quarter of 2022, its third-consecutive quarterly loss. The company reported funding $4.23 billion in overall mortgage originations, down 17% from the previous quarter.
Net rate-lock volume in the quarter totaled $3.8 billion, down 29% from the first quarter, as rising interest rates continued to pressure refinance volumes industry-wide.
During an earnings conference call following the release of the second-quarter report, FoA President and Interim CEO Graham Fleming stated that the company has "reduced overall company headcount and expenses by roughly 20%" since the start of the year.
"To combat the operating pressures on our business, we are prudently managing costs across the company and continue to implement expense initiatives to right-size the business as we expect current volume levels to persist into the second half of the year," Fleming said. "We reduced our workforce in mortgage originations to match capacity with current market demand, taking out roughly 35% in costs on a run-rate basis, equating to over $100 million annualized. These reductions will be realized over the remainder of the year."
According to its website, FoA overall had 5,500 employees among its divisions, which include the multi-channel Finance of America Mortgage and Finance of America Reverse, as well as Finance of America Home Improvement, Finance of America Commercial, and Incenter Mortgage Advisors. A 20% reduction would amount to cutting 1,100 positions.