Fitch cuts Finance of America

Fitch Ratings said it downgraded the Finance of America Funding LLC's senior unsecured debt rating to CCC-/RRR6 from CCC+/RR5. The agency also lowered the long-term issuer default ratings of Finance of America Cos. Inc. and its subsidiaries, Finance of America Equity Capital LLC and Finance of America Funding LLC (together FOA) to CCC+ from B-.

The downgrades are part of a periodic peer review of non-bank mortgage companies, which is comprised of six publicly rated firms, the agency said.

“The rating downgrade reflects the operating losses and resulting erosion of tangible equity FOA has experienced over the last year, which has resulted in continuing covenant breaches, which may limit the company's ability to extend debt maturities and secure future funding. High-interest rates and borrower affordability challenges have reduced origination volumes, which, along with widening credit spreads, have resulted in significant negative fair value adjustments to FOA's assets. Tangible equity has decreased to negative $5 million at 2Q23, down from $288 million in 2Q22 and $480 million at YE21,” Fitch said in a press release.

The outlook remains negative.

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