Finance of America Closing FHA Origination Unit And Acquire American Advisors Group for $15 million

Finance of America (FOA), which recently announced the closure of its troubled origination unit, has closed an agreement to acquire American Advisors Group (AAG), the nation’s largest provider of FHA.

In an SEC filing released Wednesday, FOA said it had entered into a stock purchase agreement to acquire AAG, in which founder Reza Jahangiri agreed to sell more than 10 million Class A shares for $15 million. 

Jahangiri will receive approximately $10 million in cash and some FOA stock. Some of those shares are for FOA’s Class A common stock, currently trading at $1.20 a share.

In addition, current FOA shareholders, including company chairman Brian Libman, will invest an additional $30 million of capital in Finance of America through a private placement of FOA common stock. 

This investment is subject to customary closing and approval conditions, including the expected closing of the AAG transaction in the first half of 2023.

Once the deal closes, FOA’s Finance of America Reverse subsidiary will operate as a separate direct-to-consumer retail channel under the AAG brand.

Graham Fleming, president and interim CEO of FOA, said he believes home equity will become an increasingly important asset for Americans to consider supplementing their income, especially as they retire. 

He said he is confident that our expansion into this direct-to-consumer retail channel will allow us to further educate, grow and serve this market while creating greater value and opportunity for our customers, employees, partners, and investors.

Kristen Sieffert, president of finance at America Reverse, suggested it’s an incredibly exciting day for their organizations and ultimately for those they serve. 

By complementing FAR’s thought leadership and innovation with AAG’s unparalleled investments in consumer education, they will strengthen a movement that is changing the company’s retirement trajectory for the better and bringing FOA closer to its goal of helping more Americans to prosper.

According to Inside FHFA/VA Lending data, AAG is the largest FHA mortgage originator with $3.87 billion in loans. FOA, which ranks third among HECM lenders, announced in October that it would close Finance of America Mortgage, its term mortgage origination segment.

Fleming said the move would allow the company to focus on financing and specialty services, including its reverse mortgage and home improvement businesses.

He also said that FOA has the leading reverse mortgage platform in an industry with strong structural tailwinds and has been the backbone of the FOA model since the company’s inception.