FOA raises Blackstone borrowing level to $85 million

Finance of America Companies (FOA), which had previously borrowed $60 million from longtime backer Blackstone Group, has increased its borrowed amount to $85 million and extended the end of its repayment term from November 2024 to May 2025. This is according to an 8-K filing made this week by FOA with the U.S. Securities and Exchange Commission (SEC).

The borrowing authority, according to the filing, currently sits at 10% but increases to 15% on May 15, 2024, a provision that was in the previously amended version of the agreement in mid-2023, according to an FOA spokesperson.

“The original promissory notes were secured by tangible assets of [Finance of America Equity Capital], excluding pledges of equity interests, and certain pledged risk retention securities  held by MM Risk Retention LLC, a wholly owned subsidiary of FOA Equity,” the filing reads.

The revised agreement

The companies entered the new agreement on Jan. 30. They “have the benefit of a new guarantee and security agreement […] and include certain restrictive covenants and mandatory prepayment events,” the filing states.

An FOA spokesperson told RMD that the attitude about the new agreement inside FOA is optimistic, since it indicates confidence in the company by one of its longstanding backers and shows that Blackstone has a vested interest in the success of FOA in 2024.

Reverse mortgage business nationwide has been challenging for more than a year, stemming from higher interest rates, lower volumes and wider industry liquidity issues. In light of these ongoing business realities, the FOA spokesperson explained that the company remains appreciative of Blackstone’s ongoing support of its efforts in the face of a challenging operational environment.

Internally, FOA has renewed optimism about the trajectory of the reverse mortgage business for 2024, as interest rates fell at the end of 2023, the spokesperson explained.

The company is also in the middle of working through the final components of integrating employees and processes from its acquisition of American Advisors Group (AAG). The closure of that deal, including the consolidation of certain technology systems that have associated costs, will mark its one-year anniversary in April.

Much of the integration of AAG, however, was completed last year, so the company does not see the remaining integration tasks as intense, the spokesperson suggested.

Larger business challenges

In an interview with RMD, FOA chief marketing officer Chris Moschner explained more about the company’s general outlook in light of larger industry challenges.

“It’s obviously about the macros,” Moschner explained last month. “I don’t think it’s anything about [what] the companies themselves [are doing]; it’s strictly related to things like the health of the bond market, rates and our ability to invest [correctly] in the short term.”

In a recent interview with HousingWire, FOA President Kristen Sieffert spoke about some of the other opportunities resulting from the AAG integration, including the merging of the legacy FAR and AAG wholesale teams.

“We have this really savvy capital markets engine as well that has allowed us to be very innovative as it relates to bringing novel products to market,” Sieffert said.

Other challenges are ongoing. In December, FOA was notified by the New York Stock Exchange (NYSE) that it was not in compliance with the exchange’s continued listing standard.

Compliance with the listing standard can be regained “if on the last trading day of any calendar month during the cure period (or the last trading day of the cure period) the security has a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the prior 30 trading-day period.”

FOA is the leading lender in the reverse mortgage industry, recording 592 Home Equity Conversion Mortgage (HECM) endorsements in January. That was a 17.7% increase over December, according to data from Reverse Market Insight (RMI). FOA lender has completed 8,944 HECM endorsements in the 12 months ending Jan. 31.