Good afternoon. My name is Chelsea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Finance of America 2022 Second Quarter Earnings Call and Webcast. All participant lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. [Operator Instructions] Thank you. And I will now turn the call over to Michael Fant, Senior Vice President of Finance with Finance of America. Sir, please go ahead.

Thank you and good afternoon, everyone. And welcome to Finance of America’s second quarter 2022 earnings call. With me today are; Graham Fleming, President and Interim Chief Executive Officer; and Johan Gericke, 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 in 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 filed with the SEC on March 15th, 2022. As such risk factors may be amended and updated in our subsequent filings with the SEC. We are not taking 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?

Thanks, Michael. Good afternoon, everyone and thank you for joining us on our second quarter ‘22 earnings call. I am pleased to be here and to be serving as FOA’s Interim CEO. Since joining the company back in 2013, I’ve witnessed the evolution of this business and believe there is more opportunity ahead. Finance of America exists to help our customers use equity to thrive and discover pathways to achieve, lasting financial freedom. Before we start with an update on the business, I want to mention how proud I am of the team’s resilience and unwavering commitment to our customers. Despite current market conditions, I am confident we will meet our challenges head on, while continuing to build for tomorrow. Given the negative impact of raising spreads on our business, we recorded a net loss of $168 million or $0.70 per fully diluted share for the second quarter. The impact on earnings fell into two categories, operating losses and balance sheet write-downs. The write-downs on the balance sheet were a result of negative fair value marks due to spread widening, and should spreads return to the mean, we would recoup these losses. Johan will discuss these write-downs in greater detail in a few moments. On an adjusted basis, excluding fair value marks and other items, the company generated an adjusted net loss of $22 million. The loss was caused by the rapid increase in rates and widening of spreads and is almost entirely attributable to our Mortgage Originations segment due to the precipitous drop off in refinance volumes. To combat the operating pressures on our business, we are prudently managing costs across the company and continue to implement expense initiatives to right-size the business as we expect current volume levels to persist into the second half of the year. We…

Thank you, Graham and good afternoon, everyone. As Graham mentioned, we faced several macro headwinds this quarter, which had a direct impact on our operating results and the value of the balance sheet. Despite these challenges, we remain committed to our business strategy, and delivering for our customers. Before I dive into the numbers, I want to touch briefly on the impact that market volatility continues to have on our results. We generated a headline loss, predominantly due to negative fair value marks on the balance sheet. As a reminder, we account for fair value marks on the balance sheet in the Portfolio Management segment, whereas revenue impacts on newly originated assets are reflected in their respective origination segments. In Q2, rates continue to be volatile, as the tenure increased by 115 basis points to 3.49% on June 14th, and then decreased by 51 basis points to close the quarter at 2.98%, up 64 basis points for the quarter. In addition, spreads on both agency and non-agency mortgages increased to new highs in a matter of weeks. This meteoric rise in both rates and credit spreads put tremendous pressures on our Origination businesses, and also negatively impacted the balance sheet. We hedged the balance sheet against rising interest rates, using a combination of mortgage MSR assets, TBAs and swaps. The fair value marks are net of hedge gains and consists predominantly of spread impacts, as we are unable to efficiently hedge the balance sheet against spread movements. It is important to note that the fair value marks due to widened spreads have not directly impacted liquidity, as these are non-cash. We also continue to see demand for our private-label securitizations, albeit at a higher cost. It is also important to note that we adjusted spreads through the lifetime of the…

Thanks, Johan. Before we take your questions, I want to briefly touch on our outlook. Given the significant volatility in the market to-date, we are not providing any specific financial guidance at this time. While we do believe conditions will settle and we will see a reversion to the mean, it is difficult to say when. As we look to the third quarter, we do expect volumes in Reverse to come down from recent record highs in response to low refinancing activity. Similarly, we expect volumes in Commercial to decline as a result of higher rates. Yet we expect to see better margins reverting closer to historical averages, assuming the market ultimately stabilizes at this level. In general, we expect profitability levels for the third quarter to fall somewhere between Q1 and Q2 for both Mortgage and SF&S, given our expectation that our increased margins will not be fully realized until the latter half of Q3. And so, in closing, I feel strongly that we are well positioned for long-term growth across the organization. And with that, let’s open up for questions. Operator?

Thank you, sir. [Operator Instructions] Our first question will come from Douglas Harter with Credit Suisse.

This is [inaudible] on for Doug. Just a quick question. Could you kind of give us an idea of your ability to kind of grow customers here for the rest of the year?

Grow customers for the rest of the year.

Yes, as I mentioned, right, in our Reverse channel, right, we’re continuing our education to seniors, we’re looking to partner with some strategic relationships that will help improve the penetration. So we’re very optimistic that we can grow customers in the Reverse space. In our Mortgage business, we’re actively looking to fill in areas of whitespace in the country, where we don’t currently have a presence, and with some additional customers into the organization as well. So, a combination of geographic diversification in Mortgage and continued education in the Reverse space. I’d also add to that, right, our ability to grow our customer base to the Home Improvement segment, and bringing additional borrowers in via the Home Improvement loans that we do today – via contractors. So we do have three ways that are identified to increase our customer base.

Got it, thank you. And then, if I can ask one more. I know we talked about sort of directionally where Reverse volumes are going, but could you size that for us kind of next quarter? Or is that something that you’re not willing to disclose at this moment?

Are you talking about Reverse volume?

Yes.

Yeah, we’re not going to give a specific number on that. You know, it’s relatively early in the quarter and a lot can happen. But we do have some visibility in terms of what we can see in our submissions and our pipelines. And so, as we’re seeing a shift away from Refinance into new to Reverse, there’ll be you know some softening of volumes. But we still feel optimistic that we’re going to see you know good business in that channel. The macro tailwinds for that business is really big. If you think about the record amount of home equity that seniors have you know and that just creates a substantial market, right. So I just – I think that channel is going to see persistent, long-term volume levels growing.

Great, thank you.

Thank you. [Operator Instructions] At this time, we have no further questions in the queue. We do have another question from [Don Casey] [ph]. Sorry, your line is open.

Yes. I just, first of all, thank you, gentlemen for, I’m a personal investor of substantial amount of shares. I’m looking at defense of the stock. You’re in a position right now where you’ve got $219 million in cash or cash equivalents and you got a short position ranging of 3% on the stock and I think all of your upside is in front of you, just listening to your narration, your articulation relative to the scope of the business. Is there any thought process or strategy to announce some sort of repurchase of shares, you have the ability to arbitrarily repurchase shares at your option, and I think if you defend the stock, I think you’re going to get a little bit more momentum and especially with your ability to execute on you know your strategy in the Reverse Mortgage market, which I think is, I think you’re totally correct with that. But I just think people are looking to defend the stock, you’ve obviously cleaned up the balance sheet, you’ve paid a lot of debt and you’re suffering the consequence of everybody in this space. But do you have a strategy to defend the stock?

Yeah, Don, appreciate the question. You know I would say a couple of things. We don’t at this point, have an intention to buy back stock. For two reasons. The first reason is, we see as you mentioned, continued growth in the Reverse business. And we need you know equity to be able to fund that growth. There is a moment here where we have you know a huge market that needs penetration and that growth comes at the cost of investing in the business on an ongoing basis. Not only in people capabilities, but also in equity in the loans that we make before we can securitize them. The second thing I’d say is, until we can see some stability or less volatility in the market, you know I think our Collective Management team thinks it’s prudent and better for us to maintain liquidity. You know until we see things stabilize, it just creates a little bit more stability and takes some risk out of the balance sheet in the operations on a day-to-day basis.

Thank you. I will now turn the call back over to Graham Fleming to make a few closing remarks.

So I want to thank everybody for their time today and participating on this call. We look forward to our Q3 earnings and our updated call in November. So with that, I would like to wrap it up and thank you all very much.

Ladies and gentlemen, this does conclude the Finance of America’s second quarter 2022 earnings call and webcast. Please disconnect your line at this time and have a wonderful day.