Global credit rating agency DBRS Morningstar this week assigned a “good” rating to reverse mortgage industry leader Finance of America (FOA), reconfirming the ranking the company was assigned at a similar point last year.
The rating is officially classified as “MOR RVO2” by Morningstar. The agency noted the recent business history of FOA — including the abandonment of its forward mortgage business and its acquisition of American Advisors Group (AAG) — while mentioning the relative stability of its senior leadership team in the analysis to justify the rating.
“[FOA]’s executive management team has remained stable over the past year,” the analysis reads. “However, certain changes in [FOA]’s senior management occurred after [FOA]’s acquisition of AAG’s assets in March 2023, including a new chief marketing officer, chief compliance officer, and chief financial officer. The underwriting department is decentralized and consists of approximately 30 underwriters averaging six years of company tenure and 10 years of relevant experience.”
Morningstar characterized FOA’s earnings generation capacity as “acceptable” despite its reliance on transactional revenue sources, which “introduces the potential for meaningful volatility in earnings,” the rating agency said. But its credit risk is “limited” due to its securitization and selling of loans as opposed to holding them on its balance sheet.
“Similar to other nonbank mortgage companies, [FOA]’s narrow funding profile relies predominantly on secured wholesale funding sources, which result in a highly encumbered balance sheet that may limit financial flexibility during periods of market stress,” the analysis said.
Ultimately, the assigned ranking “reflects [FOA]’s experienced and stable executive management team, focused origination and underwriting practices, solid control environment, and reliable loan performance.”
HousingWire’s Reverse Mortgage Daily (RMD) reached out to FOA for comment, but the company did not immediately respond.
The news of the rating follows the company’s second-quarter earnings report, which showed FOA in the red but with reduced losses alongside growth in loan volume.
FOA last received the MOR RVO2 ranking from DBRS Morningstar in mid-August 2023. Recently, the firm announced the same ranking for FOA competitor and top 10 reverse mortgage lender and servicer Longbridge Financial.
