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Finance of America Reverse LLC -- Moody's affirms Finance of America Reverse LLC's assessment at Average, as an originator of prime jumbo reverse residential mortgage loans

Announcement: Moody's affirms Finance of America Reverse LLC's assessment at Average, as an originator of prime jumbo reverse residential mortgage loans

Global Credit Research - 03 Dec 2020

New York, December 03, 2020 -- Moody's Investors Service (Moody's) affirmed Finance of America Reverse LLC's (FAR) assessment as an Average originator of prime jumbo reverse residential mortgage loans.

Headquartered in Tulsa, OK, FAR is a wholly-owned subsidiary of Finance of America Holdings LLC (FAH), a holding company which is indirectly majority owned by funds indirectly managed by The Blackstone Group Inc. FAR began operations through a predecessor company in 2003 and, as of June 2020, has grown to approximately 300 employees across four national centers and 16 field offices. FAR is one of the largest originators of Home Equity Conversion Mortgage (HECM) loans, a Federal Housing Administration (FHA) insured reverse mortgage product. To address the need for reverse mortgage loans greater than the limit set by the FHA, FAR introduced its proprietary reverse mortgage product, HomeSafe.

ASSESSMENT RATIONALE

We assess FAR's underwriting and valuation practices as Average. FAR's HomeSafe underwriting guidelines continue to evolve as FAR is approved in more states to encompass state specific requirements. The guidelines are also clearly written with conservative lending parameters. Any exceptions to the guidelines must be approved by senior management. FAR's valuation practices are supported by their in-house licensed appraisers. The originator also has adequate appraisal management company monitoring.

Our assessment of FAR's early loan performance is affirmed at Average due to consistent performance against the HECM program.

We continue to assess FAR's credit risk management as Average. Our assessment considers certain features of the HomeSafe program designed to reduce litigation and headline risk as well as the increasing availability of loan performance history. During COVID-19, FAR constricted some of its guidelines and suspended certain HomeSafe products.

Our assessment of FAR's sales and marketing is affirmed at Average. The assessment is based on FAR's adequate process for lead vendor monitoring and also considers FAR's requirements for third-party originators (TPO). During the review period, FAR transitioned from a process that included a review by of brokers of marketing material to completion of an annual marketing compliance certification. This process is considered neutral and in line with other originators we assess.

FAR's closing practices continue to be assessed at Above Average. FAR has rigorous closing process with built-in checks and a solid trailing document procurement process. Due to COVID-19, the trailing document procurement timeline has experienced some delays not uncommon with other originators as well.

Our assessment for FAR's financial strength continues to be Below Average. FAR is one of the top originators of HECM loans with a monoline business model focused on reverse mortgage origination and low capital levels. FAR's indirect parent company, Finance of America Equity Capital LLC has agreed to a business combination with a publicly-traded special purpose acquisition company (SPAC) that will result in Finance of America becoming a publicly listed company. It is anticipated that the transaction will close in the first half of 2021.

FAR's management and staffing continues to be assessed as Average due to FAR's experienced senior management team, formal training program, and QC feedback loop.

We continue to assess FAR's oversight as Average due to its formal, independent internal audit process as well as its robust level of QC sampling.

Our assessment for FAR's legal and compliance functions is Above Average. FAR has a centralized in-house compliance and legal team and controls in place to review TPO generated disclosures.

FAR's technology continues to be assessed as Above Average due to its sophisticated origination and closing systems with well-developed built-in safeguards and acceptable disaster recovery plan. During COVID-19, FAR was able to enact remote work functionalities without disruptions to its business.

The framework used in this analysis was "Originator Assessments for Residential Mortgage Loans" published in December 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1122178. Alternatively, please see the Framework list at https://www.moodys.com/research/Listof-NCRA-Frameworks--PBC_1178235 for a copy of this framework.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Cinthia Chung-Yip Associate Lead Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 William Fricke VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653

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