Global credit rating agency DBRS Morningstar This week, the industry leader in reverse mortgages received a “good” rating Finances of America (FOA), confirming the rating assigned to the company at a similar time last year.
The rating is officially classified by Morningstar as “MOR RVO2”. The agency referred to FOA’s recent business development – including the abandonment of the forward mortgage business and the acquisition of American Advisory Group (AAG) – and mentions the relative stability of the top management team in the analysis to justify the rating.
“(FOA’s) leadership team has remained stable over the past year,” the analysis said. “However, following (FOA’s) acquisition of AAG’s assets in March 2023, certain changes occurred in (FOA’s) senior management, including a new Chief Marketing Officer, Chief Compliance Officer and Chief Financial Officer. The underwriting department is decentralized and consists of approximately 30 underwriters with an average of six years of tenure and ten years of relevant experience.”
Morningstar described FOA’s earnings power as “acceptable,” although the company relies on transactional revenue streams, which “brings the potential for significant volatility in earnings,” the rating agency said. However, credit risk is “limited” because the company securitizes and sells loans rather than holding them on its balance sheet.
“Similar to other non-bank mortgage lenders, (FOA’s) tight funding profile relies predominantly on secured wholesale funding sources, resulting in a heavily stressed balance sheet that can limit financial flexibility in times of market stress,” the analysis said.
Ultimately, the ranking reflects “(FOA)’s experienced and stable leadership team, focused lending and credit underwriting practices, solid control environment and reliable credit 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 smaller losses while loan volume grew.
FOA last received DBRS Morningstar’s MOR RVO2 ranking in mid-August 2023. The company recently announced the same ranking for FOA’s competitor and top 10 reverse mortgage lender and servicer Longbridge Finance.
