Finance of America Companies Inc.

Hello and welcome to the Finance of America third quarter 2022 earnings call. My name is Harry and I'll be coordinating your call today. If you would like to ask a question during the Q&A, you may do so by pressing star one on your telephone keypad. I'll now hand you over to Michael Fant, Senior Vice President, Finance to begin. Michael, please go ahead.

Thank you and good morning everyone and welcome to Finance of America's third quarter 2022 earnings call. With me today are Graham Fleming, President and Interim Chief Executive Officer, and Johan Gerrit, Chief Financial Officer. As a reminder, this call is being recorded, and you can find the earnings release and presentation on our investor relations website at www.financeofamerica.com. In addition, we will refer to certain non-GAAP financial metrics on this call. You can find reconciliations of non-GAAP to GAAP financial metrics to the extent available without unreasonable effort, discussed on today's call and our earnings press release and presentation on the Investor Relations page of our website. Also, I would like to remind everyone that comments on this conference call may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the company's expected operating and financial performance for future periods. These statements are based on the company's current expectations and are subject to the safe harbor statement for forward-looking statements that you will find in today's earnings release. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks or other factors, including those that are described in the risk factors section of Finance of America's annual report on Form 10-K for the year ended December 31st, 2021, originally thought with the SEC on March 15th, 2022, as such risk factors may be amended and updated in our subsequent periodic filings with the SEC. We are not undertaking any commitment to update these statements if conditions change. Please note, these are interim period financials and are unaudited. Now, I would like to turn the call over to Finance of America's President and Interim Chief Executive Officer, Graham Fleming. Graham? Yeah, thank you, Michael.

Good morning, everyone, and thank you for joining us on our third quarter 2022 Earnings Conference Call. On today's call, I would like to briefly touch on our recent announcement before discussing our SF&S businesses and go-forward strategy. Johan will then jump in with a review of our financials before we open the call for questions. The decision to discontinue our forward mortgage business was the outcome of a thorough review of our business and the broader economic outlook. Ultimately, we determined that market conditions have fundamentally changed and we need to change with We expect to materially complete the wind down across both retail and wholesale mortgage channels by the end of this year. As a company, we took this decision very seriously and understand the impact it will have on our employees who are highly valued members of our team. In response, we are providing support to assist departing employees in their search for new employment opportunities and are committed to facilitating the transition as they move to other mortgage lenders. I would like to thank everyone for the partnership and continued dedication to supporting our customers and our company. The exit from forward mortgage will allow FOA to optimize our resources and prioritize high growth businesses where we already hold distinct competitive advantages and leading positions in markets with positive macro tailwinds. In the near term, we believe home equity will be a crucial asset for retirees to supplement their income. We believe that in the future, many consumers will seek to broaden discussions with their financial advisors to include home equity as they reassess retirement planning and their long-term financial needs. Against this backdrop, and with FOA's leading position offering reverse mortgage products that lever home equity, we will better serve our customers in their financial journey. Our company has a history of product innovation, and our reverse business has tremendous opportunity to continue this legacy during these changing market conditions. We will also look to expand our partnership model with large mortgage lenders and other financial services companies to offer our products on their platforms. Where we previously were focused on leveraging our own mortgage retail platform to offer these products, we will now pursue the opportunity to expand this program throughout the mortgage industry. We intend to have several large retail lenders and other financial services companies offer our reverse products. Additionally, we recently debuted a collaboration with Morningstar to educate financial advisors about reverse mortgages and other home equity solutions available to their clients. We continue to believe that education is key to the growth of the reverse industry, and the collaboration will make education about reverse mortgages, including the Finance of America suite of products, available to around 150,000 advisors. By teaming with Morningstar, we can ensure that mortgage advisors are educated about home equity as they create diverse and long-term financial strategies for their clients. In the third quarter, our SF&S businesses continued to be profitable and generated $7 million in adjusted net income in line with our previous guidance. Of note, our reverse business earned $34 million in pre-tax income during the quarter. Looking a little closer at each business line, our reverse business has been the leading wholesale origination platform in the industry for more than a decade. The industry has not been immune to the impacts of the market, and we are seeing attractive opportunities to strengthen our platform and expand this cornerstone line of business. This should allow FOA to exit this downturn in a position of strength to capitalize on structural long-term market opportunities resulting from Baby Boomer's significant home equity. While we expect to see a further decline in refinance volumes, we continue to see year-over-year growth in new to reverse customers, including seven straight quarters of growth in our home safe new to reverse loans. A strong complement to our reverse business is our home improvement vertical. As one of our most efficient customer acquisition channels, home improvement complements our reverse products given the overlapping customer characteristics. The average age of a home improvement customer is 52 years old. As these customers look to update their home for retirement, a home improvement loan offers an effective solution for homeowners seeking to leverage their equity and is an attractive option for those who have already locked in low interest rates on their mortgages. The competitive dynamic has improved, and as a result, volume has increased and margins are expected to expand. This business continues to grow, and volumes in Q3 22 were 8% higher than volumes in Q3 last year. In our commercial business, we continue to focus on a return to profitability. We have raised coupons on new volume and pipeline multiple times as rates continue to rise at a rapid rate. In addition, we remain focused on our cost structure to match capacity with demand. Our lender services business continues to introduce new products to better serve our partners in the mortgage industry. With access to our appraisal management, title, insurance, and other in-house services, we are well-placed to sell a bundle of products to our existing customers and deepen the relationship. Over time, we expect these value-added products and services to replace the revenue lost due to the rapid decrease in the refinance market. In addition, we remain focused on costs to ensure we optimize the platform based on current demand. Looking forward, we believe that the combination of our SF&S platform along with continued investments in technology will enhance our customer experience. And with that, I will pass the call to Johan to discuss the financials.