Finance of America acquiring top reverse lender AAG

Another domino has fallen in the reverse mortgage lending business as Finance of America has agreed to acquire the assets of the product's No. 1 originator, American Advisors Group, for $10 million in cash.

The transaction also has an equity component as AAG's owners, including founder and CEO Reza Jahangiri, will receive one share of Finance of America's class B non-publicly traded common stock (of which 15 shares total are outstanding) and the rights to purchase up to almost 33.9 million shares of class A common stock, according to a Securities and Exchange Commission filing.

"By complementing [our] innovation, thought leadership, and wholesale channel success with AAG's unmatched investments in consumer awareness, we are strengthening a movement to change society's retirement trajectory for the better," Finance of America Reverse President Kristen Sieffert said in an emailed statement.

An AAG representative directed National Mortgage News to Finance of America for any comments on the deal.

The transaction was announced prior to the market opening on Dec. 7. Finance of America began trading that morning at $1.22 per share. By 1:40 p.m. eastern time, the company was trading at $1.37 per share, although earlier in the day it had been as high as $1.45.

This deal comes just one week after another large player in this sector, Reverse Mortgage Funding, filed for Chapter 11 bankruptcy protection after it suspended its origination activity.

FOA abandoned its forward lending activity in October in order to concentrate on reverse mortgages, home improvement loans and commercial mortgages.

"Our vision is that by 2025 home equity becomes a mainstream solution for people as they think about how best to create a sustainable retirement plan," Sieffert said. "In coupling our companies' greatest strengths we believe we have a meaningful avenue toward achieving that goal and growing the pie so that all participants in our industry will benefit."

By number of endorsements, AAG was the nation's largest Home Equity Conversion lender year-to-date at 14,544, according to Reverse Market Insight. For November it produced 688 HECMs.

Mutual of Omaha Mortgage was second at 5,313 endorsements in the first 11 months of the year, followed by Finance of America Reverse at 5,005. FOA had the seventh-most endorsements in November at 186.

Total HECM endorsements continue to decline, at 3,272, versus 3,504 in October, the 2022 peak of 6,510 in March and 4,953 in November 2021.

American Advisors Group has conducted at least two rounds of layoffs, including 204 workers at the end of October.

After the deal is completed, Finance of America Reverse will operate a direct-to-consumer channel under the AAG branding, whose spokesman is Tom Selleck, the actor best known for being the original Magnum P.I.

As part of the transaction, an additional $30 million of capital will be infused into FOA. Its founder Brian Libman and entities affiliated with Blackstone will purchase approximately 10.9 million class A shares for $15 million each in a private placement.

After FOA went public via a special purpose acquisition company merger, Libman and Blackstone still controlled 80% of its equity.

Privately held AAG received a $4 million equity investment from JAM Equity Partners in August 2009. A check of Crunchbase did not turn up any other investment in the company.