It seems mortgage company after mortgage company is going public, whether by IPO or through a less-traditional Special Purpose Acquisition Company (SPAC). Rocket, United Wholesale Mortgage, and Caliber Home Loans have all turned to public capital markets in the past few months, while, most recently, Finance of America companies (FOA) have thrown their hat in the public ring via a SPAC.
FOA CEO Patricia Cook said her company’s SPAC, and the spate of similar public offerings, represents a significant achievement for independent mortgage banks after a year spent growing their collective market share. She said FOA decided to make its SPAC, in partnership with Replay Acquisition Corp, for long-term strategic reasons. FOA has been growing steadily for seven years, she explained, and access to public capital offers them a huge opportunity to expand their growth horizons.
“We have always eyed going public,” Cook told MPA. “Now is the right time for us because we’re ready to grow. Being able to access the equity markets gives us the flexibility to keep growing the platform going forward. It was a strategic decision and I think the financial markets are attractive for mortgage companies, rates are low and profitability in the industry is high.”
Situating her SPAC within the wider industry, Cook said independent mortgage banks (IMBs) have taken a growing market share from bigger banks over the past several years, a trend that has only been accelerated in 2020. She said that the IPOs and SPACs we’ve seen from IMBs speak to a growing maturity in the industry and a recognition that their business models are sound.
While the IPOs and SPACs grab headlines that may indicate major changes for the industry, Cook sees them more as the next step in a long-term process, as reaching the summit after a nearly decade-long climb.
While FOA wasn’t immune to the shocks of the COVID-19 pandemic, Cook said her company managed to pivot with strength, ensuring liquidity and a stable capital base thanks to a diversified platform. Passing that test, she said, made FOA more confident about making their SPAC.
For all the opportunities public markets may provide, we’ve also seen unprecedented volatility this year in equities. Cook said, though, that the cycle is very favorable for mortgages. Thanks to the REFI boom the MBA predicts around $3 trillion in origination, highlighting the mortgage market as a bright spot in the US economy. Cook also pointed to FOA’s diversified service offering as an indicator of their stability in the public market. FOA provides reverse mortgages and commercial mortgages as well as providing a fee-for-service business and a portfolio management business in addition to their core mortgage work. The goal, Cook said, is to deliver cycle-resistant returns.
“Becoming a public company is an important milestone for Finance of America and provides further access to capital via the public markets over time,” Cook said in a press release announcing the SPAC. “We look forward to accelerating our growth across cycles as we increasingly leverage our complementary portfolio of businesses, differentiated technology capabilities, and a capital-light model with fully integrated capabilities.”