She is stepping down on the heels of first quarter losses
Finance of America Companies Inc. – a high growth consumer lending and services platform – has announced that its CEO will step down at month’s end, with the company’s president filling the role on an interim basis from July 01.
CEO Patricia L. Cook (pictured top) told the board of directors about her decision to step down due to an unspecified medical condition. She first conveyed her plan to retire but has stayed on board until her replacement was identified. While the search for a CEO continues, the board has appointed the company’s president, Graham A. Fleming (pictured below) as interim CEO, officials said.
Fleming will continue serving as company president during the interim period, overseeing the firm’s forward, reverse, commercial and home improvement lending segments along with Lender Services. Fleming formerly served as chief administrative officer, overseeing treasury, risk, compliance and corporate administration.
“After careful consideration of the impact of ongoing medical treatment, I have decided that the best course of action is for me to devote my energy to staying healthy,” Cook said in a prepared statement. “I have the utmost confidence that Graham and Finance of America’s leadership team will continue to drive the execution of the long-term growth strategy that we’ve put in place.”
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Board chairman Brian L. Libman praised Cook’s professional attributes: “Patti is the epitome of professionalism and tenacity. Her contributions to Finance of America and her impact on the company’s vision and culture will forever be woven into the fabric of who we are and what we want to be. She’s a force for good. On behalf of the board, I wish Patti the best of luck in her retirement and, importantly, with her health.”
For his part, Fleming said he would build on Cook’s legacy: “I am humbled that the board has appointed me as interim-CEO,” he said. “I am committed to carrying out Finance of America’s vision that Patti helped architect as we continue the process of identifying our CEO.”
Changes in the top leadership ranks come at a challenging time for the company. It recently released its results for the first quarter ended March 31, posting a net loss of $64 million. Net loss includes negative changes in fair value of $96 million, predominantly due to model assumption updates to account for widening spreads, the company noted. For the first quarter of 2022, the company generated adjusted net income of $37 million, or $0.20 per fully diluted share.
“The first quarter saw interest rates increase at an unprecedented pace, and spreads also increased dramatically,” Cook said during the company’s earnings call. “To account for these changes, we updated the fair value modeling assumptions for the assets and liabilities on our balance sheet. This resulted in $96 million of negative fair value adjustments as we marked our balance sheet to reflect the higher spreads over the lifetime of the balance sheet. This resulted in a GAAP loss, however, on an adjusted basis, our combined Specialty Finance and Services segments were profitable and delivered strong results in a difficult environment for the mortgage market.”
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The company’s Specialty Finance & Services segment also faced challenges amid the volatile market: “Within SF&S, our reverse and commercial originations businesses faced pressures in the first quarter as rates and spreads rose at the fastest pace in decades,” Cook said. “However, the pipeline for both reverse and commercial originations continues to be strong. Lender services revenue declined due to the decrease in refinance volume impacting the title and title insurance businesses. This was partially offset by continued expansion in third-party clients and our diversified product set. We recently added a new tax solutions business that assists homeowners with their property tax assessments, and helps our customers lower their property tax bills. Our home improvement business continues to benefit our broader business as we invest in our vision to evolve from a product-centric to a customer-centric company.”
Like many mortgage firms, the company found itself having to pivot to a purchase market after record-setting levels of refinancing cooled as rates climbed, Cook explained. She noted brokers are now refocusing efforts on commercial loans and reverse mortgage products in light of the changed environment.
“In our mortgage originations business, we remain focused on profitability as the market experiences rapidly rising rates and a switch to purchase volume,” she said. “Our pre-tax loss was due to a precipitous drop-off in refinance volumes as rates rose rapidly in Q1. In addition, spreads on non-agency mortgage products widened substantially, resulting in a reduction in revenue. We have reconfigured the business to be profitable at much lower volumes to account for anticipated lower refinance volume. Our non-agency products continue to find traction, with volume mix growing from 18% to 22% from the prior quarter. Furthermore, we believe when refinance volumes fall there remains substantial opportunity for our loan officers and brokers to sell reverse and commercial products.”
Based in the Dallas suburb of Plano, Finance of America offers a range of products, including mortgages, reverse mortgages and loans to residential real estate investors distributed across retail, third-party network and digital channels.
