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Finance of America Mortgage, a nonbank lending company that went public last year, is closing its wholesale and correspondent lending channels after laying off more than 1,000 people this year amid mounting losses.

The Irving, Texas-based lender is also reportedly in talks to sell its retail mortgage division, which employs about 1,000 loan originators working in more than 200 branches nationwide.

Finance of America Mortgage TPO, the division of the company that works with mortgage brokers and correspondent lenders, issued an email notice Friday informing partners that it will not fund brokered or purchased loans after December 16. Sent.

“We are aware that this decision will affect your relationship,” the notice said. “The FAM team will continue to ensure that borrowers and you receive the same excellent service they have received from us over the years, and that the existing pipeline with us will be completed smoothly and on time.”

Friday was the last day for mortgage brokers and correspondent lenders to submit new floating loans or complete new forward locks to Finance of America. A locked loan, the company said.

Finance of America’s commercial and reverse mortgage lending business “will continue to accept new applications and operate as normal,” the company said.

Valued at nearly $2 billion when it went public in a SPAC merger last year, Finance of America Mortgage conducts most of its business through retail and direct-to-consumer channels.

Finance of America Loan Origination Channel

Loan originations by channel, in billions Source: Finance of America Quarterly Report for Investors

The Finance of America Mortgage retail division sponsors 1,094 mortgage originators working in 246 branches nationwide, according to the Nationwide Mortgage Licensing System and Registry.

In the second quarter of this year, these retailers accounted for approximately 56% of the company’s total financing of $4.23 billion, and an additional 6% of its direct-to-consumer channel’s $256 million production value. rice field.

Wholesale and correspondent lending, where Finance of America funds loans originated by its partners, accounted for an additional $1.52 billion, or more than one-third of the total, the company said in a recent update to investors. said in its quarterly report.

United Wholesale Mortgage, the largest U.S. wholesale mortgage lender, says it will vie for market share among homebuyers, but Homepoint is another big player in the highly competitive wholesale business. Some lenders that only dabbled in wholesale, such as Guaranteed Rates and Loan Depots, have opted to close these channels.

Like many other mortgage lenders, Finance of America has been forced to scale back as rising mortgage rates ruined its lucrative business of refinancing existing homeowner loans. .

Finance of America mortgage refinancing plunges

Finance of America Quarterly Purchase Mortgage Originations and Refinancings: Finance of America Regulatory Submissions

In the first quarter of 2021 (when interest rates on 30-year fixed-rate mortgages hit an all-time low of 2.65%), Finance of America refinanced a record $5.74 billion in mortgages. The loan it funded.

In its latest quarterly report, Finance of America reported a net loss of $168 million in the second quarter, as higher mortgage rates significantly dampened refinancing. The amount of purchased loans he increased to $3.34 billion in the second quarter, but the amount of refinancing he plummeted to $825 million.

Graham Fleming

In an Aug. 4 conference call with investment analysts, interim CEO Graham Fleming said the company was laying off its mortgage originators “in line with current market demand.” .

According to Finance of America’s 2021 annual report, the company will employ about 5,300 people in 2021, including 3,088 in mortgage origination and 1,021 in lender services.

Fleming said that since the beginning of the year, Finance of America has reduced headcount and expenses by 20% across the company. This means the company has cut more than 1,000 of his employees.

“We are optimizing our cost structure through headcount reductions and other cost management efforts,” Fleming said in the earnings call. “We are moving away from the direct-to-consumer channel, which relied heavily on refinancing leads, and are actively right-sizing each branch.”

Purchase loans are expected to continue to represent the bulk of new business, Fleming said, with Finance of America’s retail business “ready to take advantage of this shift. Our launches represent approximately 85% of our volume, and we believe there remains a significant opportunity to sell non-mortgage products through the mortgage channel, and we are focused on building this opportunity. ”

Since then, Finance of America has been in talks to sell its retail mortgage division, with Guaranteed Rates believed to be a prime suitor.

Finance of America has reportedly signed a non-binding letter of intent with Guaranteed Rate. National Mortgage Professional Reported on September 29th. But guarantee rate ‘away from negotiations’ housing wire It reported Friday, citing an anonymous source.

A spokeswoman for Finance of America told Inman, “It is the company’s policy not to comment on market rumors or speculation.”

Investors have struggled with Finance of America since its IPO last year, but the company’s shares are trading above record lows.

After briefly trading above $11 in April 2021, Finance of America’s stock slid to an all-time low of $1.20 on August 31st. to the recent high of $1.74 on Oct. 4.

With a closing price of $1.60 on Friday, Finance of America has a market capitalization of about $100 million.

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