Finance of America Equity Capital LLC, the parent company of leading reverse mortgage lender Finance of America Reverse, recently announced that its traditional mortgage business emerged as the winner of a judicial sale to purchase assets from Renovate America, Inc. financing product, Benji.
Benji is a home improvement financing option previously offered by Renovate America. It is offered to help homeowners upgrade parts of their home. The Finance of America Mortgage (FAM) acquisition, previously only offered to homeowners by contractors who are part of the Renovate America network, will create a new industry for the parent company called Finance of America Home Improvement (FAHI) .
With home renovations cited in the past as a reason some seniors opt for a reverse mortgage transaction, RMD reached out to FAR’s leadership to see if the company could see potential synergies between the new industry and the services of FAR identified, which the company said offers is part of the current talks.
The acquisition, new Finance of America vertical
With the creation of the new Vertical Finance of America Home Improvement under the parent company umbrella, the service will “greatly complement” its consumer credit platform, which is offered in both traditional and reverse mortgages and commercial loans for distributed retail, third-party brokers and digital direct-to-consumer channels, the company announced in an acquisition announcement.
“Finance of America Home Improvement will enable the company to capitalize on the $ 400 billion home improvement industry by offering a proprietary technology platform that helps consumers improve their homes and gives contractors the tools they need for them need to grow their business, “the announcement reads.
In late December 2020, Renovate America entered into Chapter 11 voluntary bankruptcy under a “Definitive Purchase Agreement with Finance of America Mortgage” announcement the arrangement. The conclusion of the asset purchase agreement and the filing for bankruptcy occurred on the same day. FAM made a $ 45 million cash offer that included Benji’s home improvement loan portfolio.
The sale also included a portfolio of loans drawn since the bankruptcy proceedings began and funded through a FAM-provided Debtor Owned Finance Facility (DIP).
The acquisition is in line with previous acquisitions Finance of America has made to strengthen the capabilities and additions to existing products and services offered across all companies, said Patti Cook, CEO of Finance of America.
“With this transaction, we can further develop and expand Benji, America’s industry-leading home improvement finance product, and add yet another innovative home finance solution to our comprehensive suite of consumer credit products,” said Cook in the purchase announcement. “We look forward to welcoming the Benji team to the Finance of America family.”
Shawn Stone, CEO of Renovate America, said Finance of America could prove to be an ideal manager of the Benji product and portfolio.
“When we chose this process, we identified Finance of America as the ideal partner for our Benji business,” said Stone. “We are very pleased that they emerged as winners and look forward to many positive developments for our contractors and employees in the future.”
Possible FAR / Reverse Mortgage ‘Crossover’
One of the natural questions RMD asked in discovering the news of this acquisition was how – or if – FAR would ultimately be involved in possible future collaborations with the parent company’s newest industry.
Home renovations create a high expense for seniors who may need more accessible living spaces as mobility impairments become more likely, and home equity can play an important role in funding such renovations, according to recent studies Kaiser health and Harvards Common center for housing (JCHS).
FAR President Kristen Sieffert described the potential synergies between FAR and FAHI as “enormous”, along with a possible focus on the company’s other industries. However, there could be a clearer focus, particularly for reverse mortgage customers.
“With FAR customers in particular, many of them would identify the ability to age successfully as a primary goal in retirement – renovations that are paid for in loan proceeds are often part of their planning,” Sieffert told RMD in an email. “FAR is excited to be working with the Benji team to develop innovative, bespoke solutions that will enable FAR customers to be more flexible, smoother and better out in their retirement.”
The newfound ability for FAR to work with a Ne-Vertical to advance seniors’ desires for age is an opportunity that cannot be ignored, and FAR recognizes the complementary potential, Sieffert says.
“Planning for retirement is a team effort. The addition of Finance of America Home Improvement to our team will greatly complement our overall mission to develop and deliver innovative solutions that help people meet their age goals, many of which are focused on aging, ”she told RMD. “Our goal is to give customers more options and additional financial flexibility in retirement, whether through the strategic use of home equity or, in the case of our sister company Silvernest, to provide customers with an alternative source of income and camaraderie in retirement through sharing. Together we will be able to develop optimized solutions for people who have the confidence to work with the same team. “
The transaction to take over Benji is expected to be completed by the end of March, according to FAR’s parent company. As soon as it takes place, according to an announcement, the launch of the FAHI industry will take place.