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What changed in Finance of America Companies Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Finance of America Companies Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+851 added−917 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-16)

Top changes in Finance of America Companies Inc.'s 2023 10-K

851 paragraphs added · 917 removed · 567 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

57 edited+39 added−26 removed15 unchanged
Biggest changeWe are required to comply with numerous federal and state consumer protection and other laws, including, but not limited to: • restrictions on the manner in which consumer loans are marketed, originated and serviced, including, but not limited to, the making of required consumer disclosures, such as the Truth in Lending Act (“TILA”) (which regulates mortgage loan origination activities, imposes requirements related to advertising, require certain disclosures be made to mortgagors regarding terms of mortgage financing and regulate certain mortgage servicing activities), the Fair Credit Reporting Act (“FCRA”) (which regulates the use and reporting of information related to the credit history of consumers), the Equal Credit Opportunity Act (“ECOA”) (which prohibits discrimination on the basis of age, race and certain other characteristics in the extension of credit), the Fair Housing Act (which prohibits discrimination in housing on the basis of race, 10 sex, national origin, and certain other characteristics), the Real Estate Settlement Procedures Act (“RESPA”) (which govern certain mortgage loan origination activities and practices and the actions of servicers related to escrow accounts, transfers, lender-placed insurance, loss mitigation, error resolution, and other customer communications), Homeowners Protection Act, the Mortgage Acts and Practices Rule (“MAP Rule”) (which prohibits deceptive acts and practices in the marketing of mortgage loans), and similar state laws; • federal laws that require and govern communications with consumers or reporting of public data such as the Gramm-Leach-Bliley Act (“GLBA”), which requires initial and periodic communication with consumers on privacy matters and the maintenance of privacy regarding certain consumer data in our possession, and the Home Mortgage Disclosure Act (“HMDA”), together with its implementing regulations (Regulation C), which requires reporting of certain public loan data; • federal disclosure requirements including those in Regulation AB under the Securities Act, which requires registration, reporting, and disclosure for mortgage-backed securities; • state and federal restrictions on the marketing activities conducted by telephone, mail, email, mobile device, or the internet, including the Telemarketing Sales Rule, the Telephone Consumer Protection Act (“TCPA”), state telemarketing laws, federal and state privacy laws, the Controlling the Assault of Non-Solicited Pornography and Marketing (“CAN-SPAM Act”), and the Federal Trade Commission Act (“FTCA”) and their accompanying regulations and guidelines • federal and state laws requiring company, branch and individual licensing for the solicitation, brokering, or third-party processing of consumer loans, including the SAFE Act; • the Electronic Funds Transfer Act (“EFTA”) (which regulates electronic fund transfers to and from individual consumers); • federal and state laws relating to the retention of records; • federal and state laws relating to identity theft; • the Fair Debt Collection Practices Act (“FDCPA”), which regulates the timing and content of communications on debt collections; • the California Consumer Privacy Act, which provides California consumers with new privacy rights and increases the privacy and security obligations of entities handling certain personal information of such consumers; • the Servicemembers Civil Relief Act (“SCRA”); • the anti-money laundering and counter-terrorist financing provisions of the Bank Secrecy Act, including the USA Patriot Act, which require non-bank lenders to monitor for, detect and report suspicious activity to the U.S.
Biggest changeWe are required to comply with numerous federal and state consumer protection and other laws, including, but not limited to: • restrictions on the manner in which consumer loans are marketed, originated, and serviced, including, but not limited to, the making of required consumer disclosures, such as the Truth in Lending Act (“TILA”) (which regulates mortgage loan origination activities, imposes requirements related to advertising, requires certain disclosures be made to mortgagors regarding terms of mortgage financing, and regulates certain mortgage servicing activities), the Home Equity Loan Consumer Protection Act (which amends TILA to require additional disclosures relating to home equity loans and to regulate advertising of home equity loans), the Fair Credit Reporting Act (“FCRA”) (which regulates the use and reporting of information related to the credit history of consumers), the Equal Credit Opportunity Act (“ECOA”) (which prohibits discrimination on the basis of age, race, and certain other characteristics in the extension of credit), the Fair Housing Act (which prohibits discrimination in housing on the basis of race, sex, national origin, and certain other characteristics), the Real Estate Settlement Procedures Act (“RESPA”) (which governs certain mortgage loan origination activities and practices and the actions of servicers related to escrow accounts, transfers, lender-placed insurance, loss mitigation, error resolution, and other customer communications), the Mortgage Acts and Practices Rule (which prohibits deceptive acts and practices in the marketing of mortgage loans), and similar state laws; • federal laws that require and govern communications with consumers or reporting of public data such as the Gramm-Leach-Bliley Act (“GLBA”), which requires initial and periodic communication with consumers 11 on privacy matters and the maintenance of privacy regarding certain consumer data in our possession, and the Home Mortgage Disclosure Act (“HMDA”), together with its implementing regulations (Regulation C), which requires reporting of certain public loan data; • federal disclosure requirements including those in Regulation AB under the Securities Act of 1933, as amended (the “Securities Act”), which requires registration, reporting, and disclosure for mortgage-backed securities; • state and federal restrictions on the marketing activities conducted by telephone, mail, email, mobile device, or the internet, including the Telemarketing Sales Rule, the Telephone Consumer Protection Act, state telemarketing laws, federal and state privacy laws, the Controlling the Assault of Non-Solicited Pornography and Marketing Act, and the Federal Trade Commission Act and their accompanying regulations and guidelines; • federal and state laws requiring company, branch, and individual licensing for the solicitation, brokering, or third-party processing of consumer loans, including the Secure and Fair Enforcement for Mortgage Licensing Act; • the Electronic Fund Transfer Act (which regulates electronic fund transfers to and from individual consumers); • federal and state laws relating to the retention of records; • federal and state laws relating to identity theft; • the Fair Debt Collection Practices Act (the “FDCPA”), which regulates the timing and content of communications on debt collections; • the California Consumer Privacy Act, which provides California consumers with privacy rights and increases the privacy and security obligations of entities handling certain personal information of such consumers; • the Servicemembers’ Civil Relief Act; • the anti-money laundering and counter-terrorist financing provisions of the Bank Secrecy Act, including the USA Patriot Act, which require non-bank lenders to monitor for, detect, and report suspicious activity to the U.S.
It is important to acknowledge our differences and the value that our varied experiences and perspectives can bring to our Company, which can lead to innovation and revenue growth.
It is important to acknowledge our differences and the value that our varied experiences and perspectives can bring to the Company, which can lead to innovation and revenue growth.
Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is 11 engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. federal government securities and cash items on an unconsolidated basis, which we refer to as the “40% test”).
Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. federal government securities and cash items) on an unconsolidated basis (which we refer to as the “40% test”).
Certain of our competitor financial institutions typically have access to greater financial resources, have more diverse funding sources with lower funding costs, and are less reliant on loan sales or securitizations of mortgage loans into the secondary markets to maintain their liquidity. Fluctuations in interest rates and general economic conditions may also affect our competitive position.
Certain of our competitor financial institutions typically have access to greater financial resources, have more diverse funding sources with lower costs of capital and are less reliant on loan sales or securitizations of mortgage loans into the secondary markets to maintain their liquidity. Fluctuations in interest rates and general economic conditions may also affect our competitive position.
We believe that our culture, which seeks to promote the highest ethical standards, plays a significant role in producing superior outcomes not only for our customers but also for our business. We place a high value on honesty, transparency, and integrity, which we believe has engendered trust from our customers, clients, lenders, and investors.
We believe that our culture, which seeks to promote the highest ethical standards, plays a significant role in producing superior outcomes not only for our customers but also for our business. We place a high value on honesty, transparency, and integrity, which we believe has engendered trust from our customers, lenders, and investors.
Excluded from the term “investment securities,” among other things, are U.S. federal government securities and securities issued by majority owned subsidiaries that are not themselves investment companies and are not relying on the exceptions from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.
Excluded from the term “investment securities,” among other things, are U.S. federal government securities and securities issued by majority owned 12 subsidiaries that are not themselves investment companies and are not relying on the exceptions from the definition of investment company set forth in Section 3(c)(1) or 3(c)(7) of the Investment Company Act.
Any increase in these competitive pressures could be detrimental to our business. Intellectual Property We use a combination of proprietary and third-party intellectual property, all of which we believe maintain and enhance our competitive position and protect our products. Such intellectual property includes owned or licensed trademarks, trademark applications, and domain names.
Any increase in these competitive pressures could be detrimental to our business. 9 Intellectual Property We use a combination of proprietary and third-party intellectual property, all of which we believe maintain and enhance our competitive position and protect our products. Such intellectual property includes owned or licensed trademarks, trademark applications, and domain names.
Failure to comply with these rules can result in delays or rescission of foreclosure, and subject the servicer to penalties and damages. Additional Information To learn more about Finance of America Companies Inc., please visit our website at www.financeofamerica.com. From time to time, we use our website as a channel of distribution of material 12 Company information.
Failure to comply with these rules can result in delays or rescission of foreclosure and subject the servicer to penalties and damages. 13 Additional Information To learn more about Finance of America Companies Inc., please visit our website at www.financeofamerica.com. From time to time, we use our website as a channel of distribution of material Company information.
The CFPB’s jurisdiction includes those persons originating, brokering or servicing residential mortgage loans and those persons performing loan modification or foreclosure relief services in connection with such loans. Investment Company Act Considerations We conduct our operations so that we are not required to register as an investment company under the Investment Company Act.
The CFPB’s jurisdiction includes those persons originating, brokering, or servicing reverse mortgage loans and those persons performing loan modification or foreclosure relief services in connection with such loans. Investment Company Act Considerations We conduct our operations so that we are not required to register as an investment company under the Investment Company Act.
Consumer Financial Protection Bureau The CFPB directly impacts the regulation of residential mortgage loan originations and servicing in a number of ways. First, the CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, including TILA and RESPA.
Consumer Financial Protection Bureau The CFPB directly impacts the regulation of reverse mortgage loan originations and servicing in a number of ways. First, the CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, including TILA and RESPA.
Treasury’s Financial Crimes Enforcement Network; • restrictions imposed by the rules promulgated by the Office of Foreign Assets Control; and • restrictions imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and current or future rules promulgated thereunder, including, but not limited to, limitations on fees charged by mortgage lenders, mortgage broker disclosures and rules promulgated by the Consumer Financial Protection Bureau (“CFPB”), which was created under the Dodd-Frank Act.
Treasury’s Financial Crimes Enforcement Network; • restrictions imposed by the rules promulgated by the Office of Foreign Assets Control; and • restrictions imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and current or future rules promulgated thereunder, including, but not limited to, limitations on fees charged by mortgage lenders, mortgage broker disclosures, and rules promulgated by the CFPB, which was created under the Dodd-Frank Act.
We believe that we can increase employee engagement and retention and improve recruitment of the best talent by creating an inclusive culture, paying employees fairly, and providing opportunities to grow and thrive. 9 Employee Training and Development: Finance of America utilizes a modern learning management platform that houses our centralized training and organizational development content, including Compliance training.
We believe that we can increase employee engagement and retention and improve recruitment of the best talent by creating an inclusive culture, compensating employees fairly, and providing opportunities to grow and thrive. Employee Training and Development Finance of America utilizes a modern learning management platform that houses our centralized training and organizational development content, including compliance training.
The securities issued by any wholly-owned or majority owned subsidiaries that we may form in the future that are excepted from the definition of “investment company” based on Section 3(c)(1) or 3(c)(7) of the Investment Company Act, together with any other investment securities (exclusive of U.S. government securities and cash items) we may own, may not have a value in excess of 40% of the value of our total assets on an unconsolidated basis.
In order to comply with the 40% test, the securities issued by any wholly-owned or majority owned subsidiaries that we may form in the future that are excepted from the definition of “investment company” based on Section 3(c)(1) or 3(c)(7) of the Investment Company Act, together with any other investment securities (exclusive of U.S. federal government securities and cash items) we may own, may not have a value in excess of 40% of the value of our total assets (exclusive of U.S. federal government securities and cash items) on an unconsolidated basis.
Our Compliance training program covers an array of legal and regulatory topics. All consumer-facing employees are assigned required courses educating them on compliance with consumer protection laws for the industries in which we operate.
Our compliance training program covers an array of legal and regulatory topics. All consumer-facing employees are assigned required courses that educate them on compliance with consumer protection laws for the industries in which we operate.
During periods of rising rates such as the current economic environment, competitors that have locked in low borrowing costs may have a competitive advantage. Furthermore, a cyclical decline in the industry’s overall level of originations, or decreased demand for loans due to a higher interest rate environment, may lead to increased competition for the remaining loans.
During periods of rising rates such as the current economic environment, competitors that have locked in lower costs of capital may have a competitive advantage. Furthermore, a cyclical decline in the industry’s overall level of originations, or decreased demand for loans due to a higher interest rate environment, may lead to increased competition for the remaining loans.
On February 1, 2023, the Company's indirect subsidiary, Incenter, entered into an agreement to sell one hundred percent of (i) the issued and outstanding shares of capital stock of Agents National Title Holding Company (“ANTIC”), a direct subsidiary of Incenter and an indirect subsidiary of the Company, and (ii) the issued and outstanding membership interests of Boston National Holdings LLC (“BNT”), a direct subsidiary of Incenter and an indirect subsidiary of the Company (collectively, the “Incenter Transaction”).
On February 1, 2023, Incenter entered into an agreement to sell one hundred percent of (i) the issued and outstanding shares of capital stock of Agents National Title Holding Company (“ANTIC”), a direct subsidiary of Incenter and an indirect subsidiary of the Company, and (ii) the issued and outstanding membership interests of Boston National Holdings LLC (“BNT”), a direct subsidiary of Incenter and an indirect subsidiary of the Company.
Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities.
Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities.
Diversity, Equity, and Inclusion: In 2022, we continued our commitment to DEI and took steps to make that commitment clear to our employees, investors, stakeholders, and future talent. Diversity is simply a fact in our large, geographically-dispersed workforce.
Diversity, Equity, and Inclusion In 2023, we continued our commitment to DEI and took steps to make that commitment clear to our employees, investors, stakeholders, and future talent. Diversity is simply a fact in our geographically dispersed workforce.
Cyclicality and Seasonality The demand for loan originations is affected by consumer demand for home loans and the market for buying, selling, financing, and/or refinancing residential real estate, which in turn, is affected by the national economy, regional trends, property valuations, interest rates, socio-economic trends, and by state and federal regulations and programs which may encourage/accelerate or discourage/slow-down certain real estate trends.
Cyclicality and Seasonality The volume of reverse mortgage loan originations is affected by consumer demand for reverse mortgage loans and the market for buying, selling, financing, and/or refinancing residential real estate, which in turn, is affected by the national economy, regional trends, property valuations, interest rates, socio-economic trends, and by state and federal regulations and programs which may encourage/accelerate or discourage/slow-down certain real estate trends.
We believe we can more effectively dispatch our innovative suite of solutions to help retirees achieve their retirement goals through the use of home equity. • We seamlessly connect borrowers with investors.
We believe we can more effectively dispatch our innovative suite of solutions to help senior homeowners achieve their retirement goals through the use of home equity. • We seamlessly connect borrowers with investors.
We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 available free of charge under the Investor Relations section of our website as soon as reasonably practicable after we electronically file the reports with, or furnish them to, the Securities and Exchange Commission.
We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), available free of charge under the Investor Relations section of our website as soon as reasonably practicable after we electronically file the reports with, or furnish them to, the SEC.
While a reverse mortgage represents a practical solution for a significant portion of the senior population, only 2% of the population age 62 and older currently utilizes a reverse mortgage according to a report published by Reverse Mortgage Insight from June 2022.
Therefore, a reverse mortgage loan represents a practical solution for a significant portion of the senior population, but only 2% of the population age 62 and older currently utilizes a reverse mortgage loan according to a report published by Reverse Mortgage Insight from June 2022.
We incur significant ongoing costs to comply with these governmental regulations. State attorneys general, state licensing regulators, and state and local consumer protection offices have authority to investigate consumer complaints and to commence investigations and other formal and informal proceedings regarding our operations and activities. Failure to comply with state regulations can result in monetary penalties and license revocation.
State attorneys general, state licensing regulators, and state and local consumer protection offices have authority to investigate consumer complaints and to commence investigations and other formal and informal proceedings regarding our operations and activities. Failure to comply with state regulations can result in monetary penalties and license revocation.
Our strategy and long-term growth initiatives are built upon a few key fundamental factors: • We are in the process of streamlining our focus and growing our core businesses, which benefit from a shared set of demographic and economic tailwinds.
Our strategy and long-term growth initiatives are built upon a few key fundamental factors: • We are focused on growing our core retirement solutions businesses, which benefit from a shared set of demographic and economic tailwinds.
Based on quarterly estimates published by the National Reverse Mortgage Lenders Association in conjunction with RiskSpan, Inc. regarding the reverse mortgage market, homeowners 62 and older have approximately $12 trillion in home equity.
Further, based on quarterly estimates published by the National Reverse Mortgage Lenders Association in conjunction with RiskSpan, Inc. regarding the reverse mortgage market, homeowners 62 and older have approximately $13.08 trillion in home equity as of the third quarter of 2023.
Based on U.S. census data, nearly 10,000 people in the U.S. have turned 65 every day since 2010 and, over time, seniors are expected to reach 20% of the population in the U.S. Additionally, according to a study by the AARP Public Policy Institute from 2012 and U.S.
Based on U.S. census data, nearly 10,000 people in the U.S. have turned 65 every day since 2010 and, over time, seniors are expected to reach 20% of the population in the U.S.
From time to time, we receive requests from state and other agencies for records, documents and information regarding our policies, procedures and practices regarding our mortgage origination, commercial lending, lender servicing, and long-term investing business activities, and expect to continue to receive such requests related to certain business we are no longer conducting.
From time to time, we receive requests from state and other agencies for records, documents, and information regarding our policies, procedures, and practices regarding our mortgage origination and long-term investing business activities, and expect to continue to receive such requests related to certain business we are no longer conducting. We incur significant ongoing costs to comply with these governmental regulations.
Accordingly, we must comply with state laws and licensing requirements in all of the states in which we conduct business. We are licensed as a loan originator in all 50 states and the District of Columbia and also are licensed as a loan servicer and loan broker in a number of states and jurisdictions in which such licenses are required.
We are licensed as a loan originator in all 50 states and the District of Columbia and also are licensed as a loan servicer and loan broker in a number of states and jurisdictions in which such licenses are required.
We are a leader in this market, and we are focused on developing and offering products for informed and savvy borrowers who use the reverse product as a retirement planning tool.
We are a leader in this market and we are focused on developing and offering products for borrowers with interest in using the reverse mortgage loan product as a retirement planning tool.
If any of our loans to consumers are found to have been originated in violation of such laws, we could incur losses, which could adversely impact our results of operations, financial condition, and business. Our Philippines branch does not conduct any consumer-facing activities relating to mortgage loan processing.
If any of our loans to consumers are found to have been originated in violation of such laws, we could incur losses, which could adversely impact our results of operations, financial condition, and business.
Our consumer-facing business leaders interface directly with the investor-facing professionals in our Portfolio Management segment, facilitating the development of attractive lending solutions for our customers with the confidence that the loans we generate can be efficiently and profitably sold to a deep pool of investors. We are in the loan originations business, not the balance sheet accumulation business.
Our consumer-facing business leaders interface directly with the investor-facing professionals in our Portfolio Management segment, facilitating the development of attractive lending solutions for our customers with the confidence that the loans we generate can be efficiently and profitably sold to a deep pool of investors, either directly via whole-loan sales or indirectly via the issuance and sale of mortgage-backed securities.
These capabilities allowed us to complete profitable sales of our loan products via securitizations in 2022, demonstrating the high quality and liquidity of the loan products we originate, the deep relationships we have with our investors, and the resilience of our business model in many economic environments.
The capabilities provided by the Portfolio Management segment allowed us to complete issuances and sales of mortgage-backed securities backed by our loan products in 2023, demonstrating the high quality and liquidity of the loan products we originate, the deep relationships we have with our investors, and the resilience of our business model in many economic environments.
The number of Ginnie Mae issuers in the reverse space is quite limited, and the number of lenders of non-agency reverse mortgage is even smaller. 8 Competition in our industry can take many forms, including the variety of loan programs being made available, interest rates and fees charged for a loan, convenience in obtaining a loan, client service levels, the amount and term of a loan, and marketing and distribution channels.
Competition in our industry can take many forms, including the variety of loan programs being made available, interest rates and fees charged for a loan, convenience in obtaining a loan, client service levels, the amount of a loan, and marketing and distribution channels.
Our business is generally subject to seasonal trends with activity generally decreasing during the winter months, especially home purchase loans and related services. Our lowest revenue and net income levels during the year have historically been in the first quarter, but this is not indicative of future results.
Our business is generally subject to seasonal trends with activity generally decreasing during the winter months. Our lowest revenue and net income levels during the year have historically been in the first quarter, but this is not indicative of future results. Employees and Human Capital Resources As of December 31, 2023, we had 922 U.S.-based employees.
We also strive to promote a strong culture across our business that recognizes the importance of respecting one another and our customers. These objectives are accomplished through a commitment to diversity, equity, and inclusion ("DEI"), an emphasis on training and development, and the provision of a comprehensive benefits package with a focus on physical and mental wellness.
These objectives are accomplished through a commitment to diversity, equity, and inclusion (“DEI”), an emphasis on training and development, and the provision of a comprehensive benefits package with a focus on physical and mental wellness.
All new employees are assigned a series of trainings during onboarding, spanning topics such as Ethics and Insider Trading, as well as an attestation to our core Company policies such as Information Security.
All new employees are assigned a series of training courses during onboarding, spanning topics such as ethics and insider trading, and are required to attest to our core Company policies such as our information security 10 policy. Such policies are also accessible to employees on the Company’s intranet site.
We originate commercial mortgage loans through our retail (consisting primarily of sales teams) and third-party originator or TPO channels (consisting primarily of a network of mortgage brokers).
We originate loans through a retail channel (consisting primarily of a centralized retail platform) and a third-party originator (“TPO”) channel (consisting primarily of a network of mortgage brokers).
We had approximately $1.4 billion of liquidity sources as of December 31, 2022, comprised of (i) $97.3 million of cash and cash equivalents and (ii) $1.3 billion of undrawn warehouse lines of credit.
As of December 31, 2023, we had approximately $0.6 billion of liquidity sources available to fund continuing operations, comprised of (i) $46.5 million of cash and cash equivalents and (ii) $0.6 billion of undrawn warehouse lines of credit.
We believe our commitment to customer service coupled with our involvement in the loan process throughout its life cycle gives us the ability to deliver a value proposition unmatched in the industry.
Our core values center around the mantra “customers first, last, and always.” We aim to always do the right thing for our customers, investors, and other counterparties. We believe our commitment to customer service coupled with our involvement in the loan process throughout its life cycle gives us the ability to deliver a value proposition unmatched in the industry.
On October 20, 2022, the Board of Directors (the “Board”) of the Company authorized a plan to discontinue the operations of the Company’s Mortgage Originations segment, other than the Home Improvement channel (the “Wind Down”). The Wind Down commenced in the fourth quarter of 2022 and was completed on February 28, 2023.
Transactions Relating to Discontinued Business Lines On October 20, 2022, the Board of Directors of the Company authorized a plan to discontinue the operations of the Company’s traditional mortgage lending segment operated by FAH’s subsidiary Finance of America Mortgage LLC (“FAM”), other than its home improvement lending business, which process commenced in the fourth quarter of 2022 and was completed on February 28, 2023.
Our pivot to retirement-focused lending was the result of macroeconomic factors, including high inflation coupled with a prolonged higher interest rate environment. Against this economic backdrop, we believe the U.S. reverse mortgage market opportunity remains strong and is a key component of an existing underserved market of seniors in the United States.
Against this economic backdrop, we believe the U.S. reverse mortgage market opportunity remains strong and is a key component of an existing underserved market of seniors in the U.S.
In addition, FoA offers complementary lending services to enhance the customer experience, as well as capital markets and portfolio management capabilities to optimize distribution to investors.
In addition, FoA offers capital markets and portfolio management capabilities primarily to optimize the distribution of its originated loans to investors.
Furthermore, there may be additional federal or state laws that place additional obligations on originators and servicers of residential loans. Because we are not a depository institution, we generally do not benefit from federal preemption of state mortgage lending, loan servicing or debt collection licensing and regulatory requirements.
Because we are not a depository institution, we generally do not benefit from federal preemption of state mortgage lending, loan servicing, or debt collection licensing and regulatory requirements. Accordingly, we must comply with state laws and licensing requirements in all of the states in which we conduct business.
None of our employees are represented by a labor union, and we consider our employee relations to be good. Our long-term success as an organization depends upon our ability to maintain and develop our human capital. We strive to foster an environment that is safe and healthy.
Our long-term success as an organization depends upon our ability to maintain and develop our human capital. We strive to foster an environment that is safe and healthy. We also strive to promote a strong culture across our business that recognizes the importance of respecting one another and our customers.
We take a holistic approach to supporting employees in need by carefully coordinating available resources and ensuring employees know what resources are available and where to turn for support. The benefits and wellness resources we offer employees include: Our Employee Assistance Program, health, dental, vision, life insurance, pet insurance, identity protection, flexible spending accounts, and 401(k) with employer match.
Employee Benefits and Wellness We offer many benefits and wellness resources to our employees, including but not limited to our Employee Assistance Program, health insurance, dental insurance, vision insurance, life insurance, pet insurance, identity protection, flexible spending accounts, and 401(k) plans with an employer match.
While we often retain a future performance-based participation in the underlying cash flows of our loan products, we seek to programmatically and profitably monetize most of our loan products through a variety of investor channels, which minimizes capital at risk. • We distribute our products through multiple channels, including upon the acquisition of the business of American Advisors Group, additional retail distribution channels, and utilize flexible technology platforms and a distributed workforce in order to scale our businesses and manage costs efficiently.
We seek to programmatically and profitably monetize our loans, which minimizes capital at risk, while often retaining a future performance-based participation interest in the underlying cash flows of our monetized loans. • We distribute our products through multiple channels, including through newer channels as a result of the asset acquisition from American Advisors Group, now known as Bloom Retirement Holdings Inc.
We have launched a very successful non-agency reverse mortgage product targeted for the U.S. senior population and have plans for additional innovative products to satisfy this vast and largely underserved market.
We have launched several proprietary reverse mortgage loan products (including our hybrid mortgage loan product) to serve the U.S. senior population and have plans for additional innovative products to satisfy this vast and largely underserved market. We also service the loans that we originate, contracting with various third-party subservicers for the subservicing of our loans.
Item 1. Business Finance of America Companies Inc. Finance of America Companies Inc. is a specialty finance consumer lending platform that provides customers with access to an innovative range of flexible solutions including reverse mortgages and home improvement loans.
Item 1. Business Finance of America Companies Inc. Finance of America Companies Inc. is a financial services holding company which, through its operating subsidiaries, is a modern retirement solutions platform that provides customers with access to an innovative range of retirement offerings centered on the home.
Reverse Originations Our Reverse Originations segment originates or acquires reverse mortgage loans through our FAR subsidiary. This segment originates home equity conversion mortgages ("HECM") and non-agency reverse mortgages. We securitize HECM into Home Equity Conversion Mortgage-Backed Securities (“HMBS”), which Ginnie Mae guarantees, and sell them in the secondary market while retaining the rights to service.
Our Portfolio Management segment provides structuring and product development expertise as well as broker/dealer and institutional asset management capabilities, which facilitates innovation and the successful monetization of our loans. We securitize HECM into Home Equity Conversion Mortgage-Backed Securities (“HMBS”), which Ginnie Mae guarantees, and sell the HMBS in the secondary market while retaining the rights to service the HECM.
We also offer paid time off or flex time off programs to full-time employees and an employee stock purchase plan (“ESPP”). Regulation Our consumer-facing lending and ancillary businesses market and provide services through a number of different channels across the United States.
We also monitor the types of benefits available in the market and consider adding new benefits from time to time in order to better meet the needs of our employees. Regulation Our consumer-facing businesses market and provide services through a number of different channels across the United States.
Competition We compete with third-party businesses such as wholesale and retail reverse mortgage origination businesses, including bank and non-bank financial services companies focused on one or more of these business lines. In Reverse Originations, we are and have been a market leader since certain banks exited the space over 10 years ago.
Competition We compete with third-party businesses such as wholesale and retail reverse mortgage origination businesses, including bank and non-bank financial services companies focused on originating reverse mortgages.
These retained investments are a source of growing and recurring earnings. The Portfolio Management segment generates revenue and earnings in the form of gains on sale of loans, fair value gains on portfolio assets, interest income, and fee income related to mortgage servicing rights, underwriting, advisory, valuation, and other ancillary services.
The Portfolio Management segment generates revenue from the sale or securitization of loans, fair value gains on portfolio assets, interest income, fee income related to mortgage servicing rights (“MSR”), and mortgage advisory fees earned on various investment and capital markets services we provide to our internal and external customers .
Employees and Human Capital Resources As of December 31, 2022, we had 1,943 U.S.-based employees. Of these, there were 1,931 full-time and 12 part-time employees. We had an additional 381 based in the Philippines. As of December 31, 2022, we also employed 45 full-time contractors.
Of these, there were 919 full-time and 3 part-time employees. We had an additional 14 employees based in the Philippines. As of December 31, 2023, we also employed 18 full-time contractors. None of our employees are represented by a labor union, and we consider our employee relations to be good.
The direct connections to investors, provided by our Financial Industry Regulatory Authority ("FINRA") registered broker-dealer, complete the lending lifecycle in a way that allows us to innovate and manage risk through better price and product discovery. Given our scale, we are able to work directly with investors and where appropriate, retain assets on balance sheet for attractive return opportunities.
Our Portfolio Management team acts as the connector between borrowers and investors. The direct connections to investors, provided by our Financial Industry Regulatory Authority (“FINRA”) registered broker-dealer, allows us to innovate and manage risk through better price and product discovery.
The Commercial Originations segment generates revenue and earnings in the form of fair value gains at the time of origination ("Net origination gains") and origination fees earned on the successful origination of commercial mortgage loans.
The Retirement Solutions segment generates revenue from fees earned at the time of loan origination as well as from the initial estimate of net origination gains, with all originated loans accounted for at fair value.
We maintain and monitor our liquidity in order to fund our loan origination businesses, manage day-to-day operations and protect against unforeseeable market events. As of December 31, 2022, we had $2.8 billion of committed or uncommitted loan funding capacity comprised of 26 facilities with 18 different counterparties.
As of December 31, 2023, we had $1.5 billion of committed or uncommitted loan funding capacity related to continuing operations, comprised of 13 lending facilities with 10 different counterparties.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 31 - Business Segment Reporting of the Notes to Consolidated Financial Statements in Part II, Item 8, for additional financial information about our segments.
See Note 1 - 8 Organization and Description of Business in the Notes to Consolidated Financial Statements for more information about the realignment of our reportable segments. Retirement Solutions The mission of our Retirement Solutions segment is to help senior homeowners achieve their financial goals in retirement.
Removed
Today, we are principally focused on offering the following loan products throughout the U.S.: (1) reverse mortgage loans and (2) certain home improvement loan products. We have built a distribution network that allows our customers to interact with us through their preferred method: in person, via a broker, telephonically, or digitally.
Added
FoA was incorporated in Delaware on October 9, 2020 and became a publicly-traded company on NYSE in April 2021, with trading beginning on April 5, 2021 under the ticker symbol “FOA.” FoA has a controlling financial interest in FoA Equity. FoA Equity owns all of the outstanding equity interests in Finance of America Funding LLC (“FOAF”).
Removed
Census Bureau, most 5 seniors prefer to age in their respective homes and many do not have enough cash flow to fund their lifestyle post-retirement, yet nearly 100 million homeowners aged 55 and up hold over 65% of their wealth in home equity.
Added
FOAF wholly owns Finance of America Holdings LLC (“FAH”) and Incenter LLC (“Incenter” and collectively, with FoA Equity, FOAF, and FAH, known as “holding company subsidiaries”).
Removed
Our Portfolio Management segment provides structuring and product development expertise, allowing innovation and improved visibility of execution for our originations, as well as broker/dealer and institutional asset management capabilities.
Added
FAH is the parent of a lending company, Finance of America Reverse LLC (“FAR”), while Incenter is the parent of operating service companies (together with FAR, the “operating subsidiaries”) that provide capital markets and portfolio management capabilities such as secondary markets advisory services, mortgage trade brokerage, and capital management services .
Removed
Our lending model is supported by a robust funding structure financed by an established and diversified mix of capital partners, which enables us to sell our loan production through various channels, including whole-loan and correspondent loan sales through agency, government sponsored entities ("GSEs"), such as Fannie Mae and Freddie Mac and private channels, as well as through securitizations.
Added
Through the end of the third fiscal quarter of 2022, the Company was principally focused on offering (1) a wide array of loan products throughout the United States of America (“U.S.”), including reverse mortgage loans, 5 traditional mortgage loans, business purpose loans to residential real estate investors, and home improvement loans, and (2) complementary lender services such as title insurance and settlement services to mortgage businesses.
Removed
Our core values center around the mantra “customers first, last, and always.” We aim to do the right thing for both our borrowers and investors every time. Business Combination On October 12, 2020, FoA, a Delaware corporation and wholly-owned subsidiary of Replay, Replay Acquisition Corp.
Added
However, as described under “Organizational Transformation” below, during the fourth quarter of 2022 and calendar year 2023, the Company exited multiple business lines, including its traditional mortgage lending segment, its commercial lending segment, its home improvement lending business, and its lender services businesses, and shifted its focus to developing a streamlined retirement solutions business.
Removed
(“Replay”), a publicly traded special purpose acquisition company, and FoA Equity agreed to a business combination that would result in FoA becoming a publicly traded company.
Added
(“AAG/Bloom”), that closed on March 31, 2023, and utilize flexible technology platforms in order to scale our businesses and manage costs efficiently. Today, we are principally focused on offering reverse mortgage loan products throughout the U.S. Our pivot to retirement-focused lending was the result of macroeconomic factors, including high inflation coupled with a prolonged higher interest rate environment.
Removed
FoA Equity, Replay, FoA; RPLY Merger Sub LLC, a Delaware limited liability company and wholly-owned subsidiary of FoA (“Replay Merger Sub”); RPLY BLKR Merger Sub LLC, a Delaware limited liability company and wholly-owned subsidiary of FoA (“Blocker Merger Sub”); Blackstone Tactical Opportunities Fund (Urban Feeder) – NQ L.P., a Delaware limited partnership (“Blocker”); Blackstone Tactical Opportunities Associates – NQ L.L.C., a Delaware limited liability company (“Blocker GP”); BTO Urban Holdings L.L.C., a Delaware limited liability company (“BTO Urban”), Blackstone Family Tactical Opportunities Investment Partnership – NQ – ESC L.P., a Delaware limited partnership (“ESC”), Libman Family Holdings LLC, a Connecticut limited liability company (“Family Holdings”), The Mortgage Opportunity Group LLC, a Connecticut limited liability company (“TMO”), L and TF, LLC, a North Carolina limited liability company (“L&TF”), UFG Management Holdings LLC, a Delaware limited liability company (“Management Holdings” ), and Joe Cayre (each of BTO Urban, ESC, Family Holdings, TMO, L&TF, Management Holdings and Joe Cayre, a “Seller” and, collectively, the “Sellers” or the “Continuing Unitholders”); and BTO Urban and Family Holdings, solely in their joint capacity as the representative of the Sellers pursuant to Section 12.18 of the Transaction Agreement (as defined below) (the “Seller Representative”), entered into a Transaction Agreement (the “Transaction Agreement”) pursuant to which Replay agreed to combine with FoA Equity in a series of transactions (collectively, the “Business Combination”) that resulted in FoA becoming a 6 publicly-traded company on the New York Stock Exchange as of April 1, 2021, with trading beginning on April 5, 2021 under the ticker symbol "FOA" and controlling FoA in an “UP-C” structure.
Added
Americans are often not financially prepared for retirement, with the aggregate retirement savings shortfall estimated to be $3.68 trillion, according to an estimate from the Employee Benefit Research Institute. However, according to data from Statista, over 79% of Americans ages 65 or older own their home.
Removed
Our Segments As of December 31, 2022, we conducted our business through five distinct segments: Mortgage Originations, Reverse Originations, Commercial Originations, Lender Services, and Portfolio Management.
Added
Through FAR, the Company originates, acquires, and services home equity conversion mortgages (“HECM”), which are originated pursuant to the Federal Housing Administration (the “FHA”) HECM program and are insured by the FHA, and proprietary reverse mortgage loans and hybrid mortgage loans (which combine features of both traditional residential mortgage loans and reverse mortgage loans), which are not insured by the FHA.
Removed
Our operating subsidiaries, including Finance of America Mortgage LLC (“FAM”) and Finance of America Reverse LLC (“FAR”), are indirect subsidiaries of FoA, which means that FoA holds its equity interests in each of these entities through one or more holding companies (as opposed to a subsidiary in which FoA directly holds such entity’s equity interests).
Added
When HECM are not eligible for securitization into HMBS or are required to be bought out of a 6 pool of HECM previously securitized into an HMBS, we securitize them into privately placed mortgage-backed securities or hold them for investment.
Removed
Non-agency reverse mortgages, which complement the Federal Housing Administration ("FHA") HECM for higher value homes, may be sold as whole-loans to investors or held for investment and pledged as collateral to securitized nonrecourse debt obligations. Non-agency reverse mortgage loans are not insured by the FHA.
Added
We both securitize proprietary reverse mortgage loans into mortgage-backed securities sold to investors and sell proprietary reverse mortgage loans as whole loans to investors. We may also decide to strategically hold certain proprietary reverse mortgage loans for investment.
Removed
We originate reverse mortgage loans through a retail channel (consisting primarily of field offices and a centralized retail platform) and a third-party originator or TPO channel (consisting primarily of a network of mortgage brokers). On December 6, 2022, the Company announced the agreement to acquire the assets and operations of AAG, a leading reverse mortgage lender.
Added
Our lending model is supported by a robust funding structure financed by an established and diversified mix of capital partners. We maintain and monitor our liquidity in order to fund our loan origination business, manage day-to-day operations, and protect against unforeseeable market events.
Removed
The transaction has received regulatory approval, is scheduled to close on March 31, 2023, and is expected to create the leading U.S. reverse mortgage originator. Refer to Note 39 - Subsequent Events, and the Company’s Current Report on Form 8-K, filed with the SEC on December 6, 2022, for additional information.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

322 edited+147 added−147 removed191 unchanged
Biggest changeOur failure to comply with applicable U.S. federal, state and local consumer protection and data privacy and information security laws could lead to: • loss of our licenses and approvals to engage in our servicing and lending businesses; • damage to our reputation in the industry and with consumers; • governmental investigations and enforcement actions; • administrative fines and penalties and litigation; • civil and criminal liability, including class action lawsuits; • diminished ability to sell loans that we originate or purchase, requirements to sell such loans at a discount compared to other loans or repurchase or address indemnification claims from purchasers of such loans, including the GSEs; • inability to raise capital; and • inability to execute on our new business strategy, including our transformation and growth plans. 33 These U.S. federal, state and local laws and regulations are amended from time to time, and new laws and regulations may go into effect.
Biggest changeSome of these matters are highly complex and slow to develop, and results are difficult to predict or estimate.” Our failure to comply with applicable U.S. federal, state and local consumer protection and data privacy and information security laws could lead to: • reduced payments by clients; • modification of the original terms of loans; • permanent forgiveness of debt owed to us; • delays in the foreclosure process; • increased servicing advance obligations; • loss of our licenses and approvals to engage in our servicing and lending business; • damage to our reputation in the industry and with consumers; • governmental investigations and enforcement actions; • administrative fines and penalties and litigation; • civil and criminal liability, including class action lawsuits; • diminished ability to finance loans that we originate or purchase, requirements to finance such loans at reduced advance rates compared to other financed loans or to remove financed loans from financing facilities; • diminished ability to sell or securitize loans that we originate or purchase, requirements to sell such loans at a discount compared to other loans or to repurchase or address indemnification claims from purchasers of such loans or in connection with securitizations of such loans; • inability to raise capital; and • inability to execute on our business strategy.
The risks and uncertainties described below could materially adversely affect our business, financial condition and results of operations in future periods and are not the only risks facing our Company.
The risks and uncertainties described below could materially adversely affect our business, financial condition and results of operations in future periods and are not the only risks facing the Company.
The Company maintains and procedures for compliance with various laws and risk management efforts. Our risk management policies, procedures, techniques and any updates thereof, may not be sufficient to identify all of the risks to which we are exposed, mitigate the risks we have identified, or identify additional risks to which we may become subject in the future.
The Company maintains policies and procedures for compliance with various laws and risk management efforts. Our risk management policies, procedures, techniques and any updates thereof may not be sufficient to identify all of the risks to which we are exposed, mitigate the risks we have identified or identify additional risks to which we may become subject in the future.
Various federal regulatory agencies and departments, including the DOJ and CFPB, take the position that these laws apply not only to intentional discrimination, but also to neutral practices that have a disparate impact on a group that shares a characteristic that a creditor may not consider in making credit decisions (i.e., creditor or servicing practices that have a disproportionate negative effect on a protected class of individuals).
Various federal regulatory agencies and departments, including the DOJ and the CFPB, take the position that these laws apply not only to intentional discrimination, but also to neutral practices that have a disparate impact on a group that shares a characteristic that a creditor may not consider in making credit decisions (i.e., creditor or servicing practices that have a disproportionate negative effect on a protected class of individuals).
As a result, the Company is a “controlled company” within the meaning of the NYSE corporate governance standards.
As a result, the Company is a “controlled company” within the meaning of NYSE corporate governance standards.
The risks associated with acquisitions include, among others: • failing to identify or adequately assess the magnitude of certain liabilities, shortcomings or other circumstances prior to acquiring or investing in a company, including potential exposure to regulatory sanctions or liabilities resulting from an acquisition target’s previous activities, internal controls and information security environment; • significant costs and expenses, including those related to retention payments, equity compensation, severance pay, intangible asset amortization and asset impairment charges, assumed litigation and other liabilities, and legal, accounting and financial advisory fees; • unanticipated issues in integrating information, management style, controls and procedures, servicing practices, communications and other systems including information technology system; • unanticipated incompatibility of purchasing, logistics, marketing and administration methods; • failing to retain key employees or clients; • inaccuracy of valuation and/or operating assumptions supporting our purchase price; and • representation and warranty liability relating to a target’s previous lending activities.
The risks associated with acquisitions include, among others: • failing to identify or adequately assess the magnitude of certain liabilities, shortcomings or other circumstances prior to acquiring or investing in a company, including potential exposure to regulatory 19 sanctions or liabilities resulting from an acquisition target’s previous activities, internal controls and information security environment; • significant costs and expenses, including those related to retention payments, equity compensation, severance pay, intangible asset amortization and asset impairment charges, assumed litigation and other liabilities, and legal, accounting and financial advisory fees; • unanticipated issues in integrating information, management style, controls and procedures, servicing practices, communications and other systems including information technology system; • unanticipated incompatibility of purchasing, logistics, marketing and administration methods; • failing to retain key employees or clients; • inaccuracy of valuation and/or operating assumptions supporting our purchase price; and • representation and warranty liability relating to a target’s previous lending activities.
Any failure or perceived failure by us to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security could result in damage to our reputation, as well as regulatory proceedings or litigation by governmental agencies or other third parties, including class action privacy litigation in certain jurisdictions, 40 which would subject us to significant fines, sanctions, awards, penalties or judgments, all of which could have a material adverse effect on our business, financial condition and operating results.
Any failure or perceived failure by us to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security could result in damage to our reputation, as well as regulatory proceedings or litigation by governmental agencies or other third parties, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties or judgments, all of which could have a material adverse effect on our business, financial condition and operating results.
Alternatively, if a court were to find this provision of the A&R Charter inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, the Company may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect the Company’s business, financial condition and results of operations and result in a diversion of the time and resources of the Company’s management and board of directors.
Alternatively, if a court were to find this provision of the A&R Charter inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, the Company may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect the Company’s business, financial condition and results of operations and result in a diversion of the time and resources of the Company’s management and Board.
In our mortgage business, we operate at a competitive disadvantage to federally chartered depository institutions because they enjoy federal preemption. As a result, they conduct their business under relatively uniform U.S. federal rules and standards and are not subject to licensing and certain consumer protection laws of the states in which they do business.
In our reverse mortgage business, we operate at a competitive disadvantage to federally chartered depository institutions because they enjoy federal preemption. As a result, they conduct their business under relatively uniform U.S. federal rules and standards and are not subject to licensing and certain consumer protection laws of the states in which they do business.
There can be no guarantee that HUD/FHA will retain Congressional authorization to continue the HECM program, which provides FHA government insurance for qualifying HECM loans, that any or all of these entities will continue to participate in the reverse mortgage industry or that they will not make material changes to the laws, regulations, rules or practices applicable to reverse mortgage programs.
There can be no guarantee that HUD/the FHA will retain Congressional authorization to continue the HECM program, which provides FHA government insurance for qualifying HECM, that any or all of these entities will continue to participate in the reverse mortgage industry or that they will not make material changes to the laws, regulations, rules or practices applicable to reverse mortgage programs.
Compliance with public company requirements increases costs and makes certain activities more time-consuming. For example, the Company has adopted corporate governance requirements and best practices as well as internal controls and disclosure controls and procedures which have expenses associated with them. In addition, additional expenses associated with SEC reporting requirements are incurred in the ordinary course of business.
Compliance with public company requirements increases costs and makes certain activities more time-consuming. For example, the Company has adopted corporate governance requirements and best practices as well as internal controls and disclosure controls and procedures, all of which have expenses associated with them. In addition, additional expenses associated with SEC reporting requirements are incurred in the ordinary course of business.
Specifically, our high level of debt could have important consequences, including the following: • making it more difficult for us to satisfy our obligations with respect to our debt; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements; • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; • increasing our vulnerability to general adverse economic and industry conditions; • exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest; • limiting our flexibility in planning for and reacting to changes in the industry in which we compete; • placing us at a disadvantage compared to other, less leveraged competitors; and • increasing our cost of borrowing.
Our high level of debt could have important consequences, including the following: • making it more difficult for us to satisfy our obligations with respect to our debt; 42 • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements; • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; • increasing our vulnerability to general adverse economic and industry conditions; • exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest; • limiting our flexibility in planning for and reacting to changes in the industry in which we compete; • placing us at a disadvantage compared to other, less leveraged competitors; and • increasing our cost of borrowing.
Applicable state mortgage- or loan-related laws may also impose requirements as to the form and content of 36 contracts and other documentation, licensing of our employees and employee hiring background checks, licensing of independent contractors with which we contract, restrictions on certain practices, disclosure and record-keeping requirements and enforcement of borrowers’ rights.
Applicable state mortgage- or loan-related laws may also impose requirements as to the form and content of contracts and other documentation, licensing of our employees and employee hiring background checks, licensing of independent contractors with which we contract, restrictions on certain practices, disclosure and record-keeping requirements and enforcement of borrowers’ rights.
Among other things, the CCPA requires covered companies to provide new disclosures to California residents, including consumers, employees and contractors, provide such individuals new data protection and privacy rights, including the ability to opt-out of the sale of personal information or the sharing of personal information for cross-context behavioral advertising, and create additional requirements to limit the retention of personal information.
Among other things, the CCPA requires covered companies to provide new disclosures to California residents, including consumers, employees and contractors, provide such individuals new data protection and privacy rights, including the ability to opt-out of the sale of personal information or the sharing of personal information for cross-context behavioral advertising, and create additional requirements to limit the retention of 36 personal information.
The anticipated tax basis adjustments, as well as the amount and timing of any payments under the Tax Receivable Agreements, will vary depending upon a number of factors, including the timing of exchanges, the price of shares of the Company’s Class A Common Stock at the time of the exchange, the extent to which such exchanges are taxable, the amount of tax attributes, changes in tax rates and the amount and timing of the Company’s income.
The anticipated tax basis adjustments, as well as the amount and timing of any payments under the Tax Receivable Agreements, will vary depending upon a number of factors, including the timing of exchanges, the price of shares of the Company’s Class A Common Stock at the time of the exchanges, the extent to which such exchanges are taxable, the amount of tax attributes, changes in tax rates and the amount and timing of the Company’s income.
Similarly, the A&R LLC Agreement permits FoA to issue an unlimited number of additional limited liability company interests of FoA with designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to the FoA Units, and which may be exchangeable for shares of Class A Common Stock.
Similarly, the A&R LLC Agreement permits FoA Equity to issue an unlimited number of additional limited liability company interests of FoA Equity with designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to the Class A LLC Units, and which may be exchangeable for shares of Class A Common Stock.
This could have a material adverse effect on our business, liquidity, financial condition, cash flows and results of operations. Further, if we are unable to refinance or obtain additional funds for borrowing (including through the securitization markets), our ability to maintain or grow our business could be limited.
This could have a material adverse effect on our business, liquidity, financial condition, cash flows and results of operations. 28 Further, if we are unable to refinance or obtain additional funds for borrowing (including through the securitization markets), our ability to maintain or grow our business could be limited.
In our reverse mortgage business, we believe the number of viable subservicers is limited, either due to the requisite Ginnie Mae authority and experience needed or, in the case of our proprietary hybrid mortgage loan 27 product, due to the unique nature of the product and the need to combine both forward and reverse mortgage servicing functions when subservicing the product.
In our reverse mortgage business, we believe the number of viable subservicers is limited, either due to the requisite Ginnie Mae authority and experience needed or, in the case of our proprietary hybrid mortgage loan product, due to the unique nature of the product and the need to combine both forward and reverse mortgage servicing functions when subservicing the product.
Additionally, ESG and other sustainability matters and the adequacy of our response and disclosures relating to these matters could harm our business, including in areas such as diversity, equity and inclusion, human rights, climate change and environmental stewardship, support for local communities, corporate governance and 19 transparency.
Additionally, ESG and other sustainability matters and the adequacy of our response and disclosures relating to these matters could harm our business, including in areas such as diversity, equity and inclusion, human rights, climate change and environmental stewardship, support for local communities, corporate governance and transparency.
These laws, regulations and oversight can significantly affect the way that we do business, can restrict the scope of our existing businesses, limit our ability to expand our product offerings or to pursue acquisitions, or can make our costs to service or originate loans higher, which could impact our financial results.
These laws, regulations and oversight can significantly affect the way that we do business, can restrict the scope of our existing business, limit our ability to expand our product offerings or to pursue acquisitions, or can make our costs to service or originate loans higher, which could impact our financial results.
In order to satisfy an exclusion from being defined as an investment company, other entities, among other things, maintain at least 55% of their assets in certain qualifying real estate assets (the “55% Requirement”) and also maintain an additional 25% of their assets in such qualifying real estate assets or certain other types of real estate-related assets (the “25% Requirement”).
In order to satisfy an exclusion from being defined as an investment company, other entities, among other things, maintain at least 55% of their assets in certain 38 qualifying real estate assets (the “55% Requirement”) and also maintain an additional 25% of their assets in such qualifying real estate assets or certain other types of real estate-related assets (the “25% Requirement”).
For example, controlled companies: • are not required to have a board that is composed of a majority of “independent directors,” as defined under the NYSE rules; • are not required to have a compensation committee that is composed entirely of independent directors; and • are not required to have director nominations be made, or recommended to the full board of directors, by its independent directors or by a nominations committee that is composed entirely of independent directors.
For example, controlled companies: • are not required to have a board of directors that is composed of a majority of “independent directors,” as defined under NYSE rules; • are not required to have a compensation committee that is composed entirely of independent directors; and 53 • are not required to have director nominations be made, or recommended to the full board of directors, by its independent directors or by a nominations committee that is composed entirely of independent directors.
FAM has contracted with LoanCare, LLC, a Virginia limited liability company (“LoanCare”), and ServiceMac, LLC, a Delaware limited liability company, as subservicers to perform traditional mortgage servicing functions on our behalf (LoanCare and ServiceMac, in such capacity, each referred to herein as a “Traditional Servicer” and collectively as the “Traditional Servicers”).
FAM has contracted with LoanCare, LLC, a Virginia limited liability company (“LoanCare”), and ServiceMac as Subservicers to perform traditional mortgage servicing functions on our behalf (LoanCare and ServiceMac, in such capacity, each referred to herein as a “Traditional Servicer” and collectively as the “Traditional Servicers”).
To the extent that we do not have a right to reimburse ourselves for the same amounts under our servicing agreements or if there are insufficient collections in respect of the mortgage loans for such reimbursements, we may face losses in our servicing business.
To the extent that we do not have a right to reimburse ourselves 32 for the same amounts under our servicing agreements or if there are insufficient collections in respect of the mortgage loans for such reimbursements, we may face losses in our servicing business.
Because absent an event of default, reverse mortgages only become due and payable upon the death of the borrower, and the estate or heirs may not be engaged in the post-termination resolution of the reverse mortgage, reverse mortgages end with foreclosure more often than traditional mortgages.
Because absent an event of default, reverse mortgage loans only become due and payable upon the death of the borrower, and the estate or heirs may not be engaged in the post-termination resolution of the reverse mortgage, reverse mortgages end with foreclosure more often than traditional mortgages.
In order to develop, maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related and audit-related costs and significant management oversight.
In order to develop, maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related and audit-related costs and significant management oversight.
Most of these “change of control” statutes require that, if there is an acquisition, merger or initial public offering, the acquiring company or companies being merged or going public must notify the state regulatory agency and receive agency approval before the acquisition, merger or initial public offering is finalized.
Most of these “change of control” statutes require that, if there is an acquisition, merger or initial public offering, the acquiring company or companies being merged or going public must notify the state regulatory agency and receive agency 37 approval before the acquisition, merger or initial public offering is finalized.
Additionally, our hedge instruments may expose us to counterparty risk—the possibility that a loss may occur from 25 the failure of another party to perform in accordance with the terms of the contract, which loss exceeds the value of existing collateral, if any.
Additionally, our hedge instruments may expose us to counterparty risk—the possibility that a loss may occur from the failure of another party to perform in accordance with the terms of the contract, which loss exceeds the value of existing collateral, if any.
In addition, FoA is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of FoA (with certain exceptions) exceed the fair value of its assets.
In addition, FoA Equity is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of FoA Equity (with certain exceptions) exceed the fair value of its assets.
In order to continue to do so, however, we and each of our subsidiaries must either operate so as to fall outside the definition of an investment company under the Investment Company Act or satisfy its own exclusion under the Investment 38 Company Act.
In order to continue to do so, however, we and each of our subsidiaries must either operate so as to fall outside the definition of an investment company under the Investment Company Act or satisfy its own exclusion under the Investment Company Act.
To the extent such Warrants are exercised, additional shares of our Class A Common Stock will be issued, which will result in dilution to our shareholders and increase the number of shares of Class A Common Stock eligible for resale in the public market.
To the extent such Warrants are exercised, additional shares of our Class A Common Stock will be issued, which will result in dilution to our shareholders and an increase in the number of shares of Class A Common Stock eligible for resale in the public market.
There cannot be any assurance that the ultimate resolution of our litigation and regulatory matters will not involve losses, which may be material, in excess of our recorded accruals or estimates of reasonably probable losses.
There cannot be any 41 assurance that the ultimate resolution of our litigation and regulatory matters will not involve losses, which may be material, in excess of our recorded accruals or estimates of reasonably probable losses.
Our internal controls, including any new controls that we develop, may become inadequate because of changes in conditions in our business. Weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.
Our internal controls, including any new controls that we develop, may become inadequate because of changes in conditions in our business. Weaknesses in our disclosure controls and internal controls over financial reporting may be discovered in the future.
Secondary Market Risks: We provide representations and warranties to purchasers and insurers of the loans and in connection with our securitization transactions, as well as indemnification for losses resulting from breaches of representations and warranties.
Secondary Market Risks: We provide representations and warranties to purchasers and insurers of our loans and in connection with our securitization transactions, as well as indemnification for losses resulting from breaches of representations and warranties.
The A&R Charter further provides that, unless the Company consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America 53 will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the federal securities laws of the United States, including the Securities Act and the Exchange Act and, in each case, the applicable rules and regulations promulgated thereunder.
The A&R Charter further provides that, unless the Company consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America 55 will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the federal securities laws of the United States, including the Securities Act and the Exchange Act and, in each case, the applicable rules and regulations promulgated thereunder.
We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources. Sarbanes-Oxley requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting.
We may not be able to anticipate or implement effective preventative measures against all security breaches of these types, especially because new vulnerabilities emerge daily, used change frequently and because attacks can originate from a wide variety of sources. The occurrence of any of these events could adversely affect our business, results of operations and financial condition.
We may not be able to anticipate or implement effective preventative measures against all security breaches of these types, especially because new vulnerabilities emerge daily, uses change frequently and attacks can originate from a wide variety of sources. The occurrence of any of these events could adversely affect our business, results of operations and financial condition.
These statutes apply to loan origination, marketing, the amount and nature of fees that may be charged for transactions and incentives, such as rebates, use of credit reports, safeguarding of non-public, personally identifiable information about our clients, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features, and required disclosures and notices to clients.
These statutes apply to loan origination, servicing practices, marketing, the amount and nature of fees that may be charged for transactions and incentives, such as rebates, use of credit reports, safeguarding of non-public, personally identifiable information about our clients, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features and required disclosures and notices to clients.
In addition, we engage Subservicers to service loans which we hold on our balance sheet. FAR has contracted with Compu-Link Corporation (d/b/a Celink), a Michigan corporation (“Celink”), as a subservicer to perform reverse mortgage servicing functions on our behalf, and with ServiceMac, LLC, a Delaware limited liability company (“ServiceMac”), as a subservicer of its proprietary hybrid mortgage loan product.
In addition, we engage Subservicers to service loans that we hold on our balance sheet. FAR has contracted with Compu-Link Corporation (d/b/a Celink), a Michigan corporation (“Celink”), as a Subservicer to perform reverse mortgage servicing functions on our behalf, and with ServiceMac, LLC, a Delaware limited liability company (“ServiceMac”), as a Subservicer of its proprietary hybrid mortgage loan product.
Certain pending or threatened legal proceedings (including the PAGA Litigation) may include claims for substantial compensatory, punitive and/or 34 statutory damages or claims for an indeterminate amount of damages.
Certain pending or threatened legal proceedings (including the PAGA Litigation) may include claims for substantial compensatory, punitive and/or statutory damages or claims for an indeterminate amount of damages.
To the extent 26 any of these service providers are liable for damages to third parties that have invested in these securitization transactions, we may incur costs and expenses as a result of these indemnities. Third Party Loan Broker Risk: The brokers through whom we originate have parallel and separate legal obligations to which they are subject.
To the extent any of these service providers are liable for damages to third parties that have invested in these securitization transactions, we may incur costs and expenses as a result of these indemnities. 30 Third-Party Loan Broker Risk: The brokers through whom we originate have parallel and separate legal obligations to which they are subject.
Notably, we are subject to the California Labor Code pursuant to which several plaintiffs have filed representative actions under the California Private Attorney General Act (the “PAGA Litigation”) seeking statutory penalties for alleged violations related to calculation of overtime pay, errors in wage statements, and meal and rest break violations, among other things.
Notably, we are subject to the California Labor Code, pursuant to which certain plaintiffs have filed representative actions under the California Private Attorney General Act (the “PAGA Litigation”) seeking statutory penalties for alleged violations related to the calculation of overtime pay, errors in wage statements, and meal and rest break violations, among other things.
As a result of the application of the acquisition method of accounting in connection with the Business Combination, the historical consolidated financial statements of the Company are not necessarily indicative of the Company’s future results of operations, financial position and cash flows, and the Company has recognized, and may recognize in the future, impairment charges related to goodwill, identified intangible assets and fixed assets.
As a result of the application of the acquisition method of accounting in connection with business combinations, the historical consolidated financial statements of the Company are not necessarily indicative of the Company’s future results of operations, financial position and cash flows, and the Company has recognized, and may recognize in the future, impairment charges related to goodwill, identified intangible assets and fixed assets.
Governmental authorities and various U.S. federal and state agencies have broad oversight and supervisory and enforcement authority over our businesses. From time to time, we may also receive requests (including requests in the form of subpoenas and civil investigative demands) from federal, state and local agencies for records, documents and information relating to our servicing and lending activities.
Governmental authorities and various U.S. federal and state agencies have broad oversight and supervisory and enforcement authority over our business. From time to time, we may also receive requests (including requests in the form of subpoenas and civil investigative demands) from federal, state and local agencies for records, documents and information relating to our servicing and lending activities.
We are also subject to legal actions or proceedings resulting from actions alleged to have occurred prior to our acquisition of a company or a business.
We are also subject to legal actions or proceedings resulting from actions alleged to have occurred prior to our 40 acquisition of a company or a business.
Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), the Company could incur additional costs rectifying those issues, and the existence of those issues could adversely affect the Company’s reputation or investor perceptions of it.
Furthermore, if any issues in complying with those requirements are identified (for example, if the Company’s auditors identify a material weakness or significant deficiency in the Company’s internal controls over financial reporting), the Company could incur additional costs rectifying those issues, and the existence of those issues could adversely affect the Company’s reputation or investor perceptions of it.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal controls over financial reporting.
To the extent that an examination or other regulatory engagement reveals a failure by us to comply with applicable law, regulation or licensing requirement, this could lead to (i) loss of our licenses and approvals to engage in our businesses, (ii) damage to our reputation in the industry and loss of client relationships, (iii) governmental investigations and enforcement actions resulting in administrative fines and penalties, (iv) litigation, (v) civil and criminal liability, including class action lawsuits, and actions to recover incentive and other payments made by governmental entities, (vi) enhanced compliance requirements, (vii) breaches of covenants and representations under our servicing, debt or other agreements, (viii) inability to raise capital and (ix) inability to execute on our business strategy.
To the extent that an examination or other regulatory engagement reveals a failure by us to comply with applicable law, regulations or licensing requirements, this could lead to (i) loss of our licenses and approvals to engage in our business, (ii) damage to our reputation in the industry and loss of client relationships, (iii) governmental investigations and enforcement actions resulting in administrative fines and penalties, (iv) litigation, (v) civil and criminal liability, including class action lawsuits, and actions to recover incentive and other payments made by governmental entities, (vi) enhanced compliance requirements, (vii) breaches of covenants and representations under our servicing, debt or other agreements, (viii) inability to raise capital and (ix) inability to execute on our business strategy.
We also use models to estimate the change in value of loans held for investments due to market or model input assumptions as an add back to calculate Adjusted Net Income and Adjusted EBITDA. These models are complex and use asset-specific collateral data and market inputs for interest and discount rates.
We also use models to estimate the change in value of loans held for investment due to market or model input assumptions as an add back to calculate Adjusted Net Income and Adjusted EBITDA. These models are complex and use asset-specific collateral data and market inputs for interest and discount rates.
We may fail to comply with applicable statutes and regulations even if acting in good faith due to a lack of clarity regarding the interpretation of such statutes and regulations, which may and at times, do lead to regulatory investigations, governmental enforcement actions or private causes of action with respect to our compliance.
We may fail to comply with applicable statutes and regulations even if acting in good faith due to a lack of clarity regarding the interpretation of such statutes and regulations, which may, and at times does, lead to regulatory investigations, governmental enforcement actions or private causes of action with respect to our compliance.
To the extent that the Company does not distribute such excess cash as dividends on its Class A Common Stock or otherwise undertake ameliorative actions between FoA Units and shares of Class A Common Stock and instead, for example, hold such cash balances, the Continuing Unitholders may benefit from any value attributable to such cash balances as a result of their ownership of Class A Common Stock following a redemption or exchange of their FoA Units, notwithstanding that the Continuing Unitholders may previously have participated as holders of FoA Units in distributions by FoA that resulted in such excess cash balances at the Company.
To the extent that the Company does not distribute such excess cash as dividends on its Class A Common Stock or otherwise undertake ameliorative actions between Class A LLC Units and shares of Class A Common Stock and instead, for example, hold such cash balances, the FoA Equity unitholders may benefit from any value attributable to such cash balances as a result of their ownership of Class A Common Stock following a redemption or exchange of their Class A LLC Units, notwithstanding that the FoA Equity unitholders may previously have participated as holders of Class A LLC Units in distributions by FoA Equity that resulted in such excess cash balances at the Company.
Certain of the Company’s executive officers and certain directors have limited experience in the management of a publicly traded company. The Company’s management team may not successfully or effectively manage its transition to a public company subject to significant regulatory oversight and reporting obligations under federal securities laws.
Certain of the Company’s executive officers and directors have limited experience in the management of a publicly-traded company. The Company’s management team may not successfully or effectively manage its transition to operating a public company subject to complex laws, significant regulatory oversight and reporting obligations under federal securities laws.
Volatility in market conditions, resulting from events such as the unprecedented COVID-19 global pandemic and economic shutdown, or unstable geopolitical conditions such as the ongoing military action by Russia against Ukraine, could cause credit spreads to widen, which reduces, among other things, availability of credit to our Company on favorable terms, liquidity in the market and price transparency of real estate related or asset-backed assets.
Volatility in market conditions, resulting from events such as the unprecedented COVID-19 global pandemic and economic shutdown, or unstable geopolitical conditions such as the ongoing military action by Russia against Ukraine or the ongoing Israel-Hamas war, could cause credit spreads to widen, which reduces, among other things, availability of credit to our Company on favorable terms, liquidity in the market and price transparency of real estate related or asset-backed assets.
Due to the heavily regulated nature of the financial services industry, we are required to comply with a wide array of U.S. federal, state and local laws, rules and regulations that regulate, among other things, the manner in which we conduct our loan origination, servicing and ancillary businesses and the fees that we may charge, how we compensate our loan officers, and the collection, use, retention, protection, disclosure, transfer and other processing of personal information.
Due to the heavily regulated nature of the financial services industry, we are required to comply with a wide array of U.S. federal, state and local laws, rules and regulations that regulate, among other things, the manner in which we conduct our loan origination and servicing business and the fees that we may charge, how we compensate our loan officers and the collection, use, retention, protection, disclosure, transfer and other processing of personal information.
Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results 51 of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant.
Any decision to declare and pay dividends in the future will be made at the discretion of our Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our Board may deem relevant.
A decrease in prevailing interest rates could: • cause an increase in the expected volume of loan refinancings, which would negatively impact the fair value of our MSR and residual securities; and • reduce our earnings from our custodial deposit accounts.
A decrease in prevailing interest rates could: • cause an increase in the expected volume of new loans and loan refinancings, which would negatively impact the fair value of our MSR and residual securities; and • reduce our earnings from our custodial deposit accounts.
Ginnie Mae has provided a waiver to FAR in connection with its equity capital requirements which is necessary in large part due to the consolidation of the Ginnie Mae HECM and other non-recourse transactions onto FAR’s balance sheet.
Ginnie Mae has provided a waiver to FAR in connection with its equity capital requirements, which is necessary in large part due to the consolidation of the HMBS and other non-recourse transactions onto FAR’s balance sheet.
AAG is required to submit to the CFPB, and to follow, a comprehensive Compliance Plan related to its reverse mortgage advertising practices, and to submit a compliance progress report to the CFPB every year for five (5) years after the effective date, and to be subject to compliance monitoring by the CFPB.
AAG/Bloom is required to submit to the CFPB, and to follow, a comprehensive compliance plan related to its reverse mortgage advertising practices, and to submit a compliance progress report to the CFPB every year for five years after the effective date, and to be subject to compliance monitoring by the CFPB.
During any period in which a borrower is not making payments in respect of property taxes, insurance premiums or homeowners association dues, we are generally required under most of our servicing agreements to advance our own funds to meet contractual requirements to preserve the related mortgaged property by making such property taxes and insurance premiums, legal expenses and other protective advances.
During any period in which a borrower is not making payments in respect of property taxes, insurance premiums or homeowners association dues, we are generally required under most of our servicing agreements to advance our own funds to meet contractual requirements to preserve the related mortgaged property by paying such property taxes, insurance premiums and homeowners association dues, as well as legal expenses and other protective advances.
If the Company is found to have violated the Orders or to have engaged in other deceptive marketing practices, such regulatory violations could have a detrimental impact on our business reputation, our ability to operate our reverse mortgage business and our financial condition.
If the Company is found to have violated the Orders or to have engaged in other deceptive marketing practices, such regulatory violations could have a detrimental impact on our ability to operate our business, our reputation and our financial condition.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Accordingly, if the MBS market experiences a period of illiquidity, we might be prevented from selling the loans that we produce into the secondary market in a timely manner or at favorable prices, which could be detrimental to our business, including, but not limited to, increasing our cost of funds due to extended dwell time on our warehouse lines, and a negative impact on our liquidity due to write-downs on the value of the loans held on our balance sheet, and the application of large haircuts due to longer dwell times.
Accordingly, if the MBS market experiences a period of illiquidity, we might be prevented from selling the loans that we produce into the secondary market in a timely manner or at favorable prices, which could be detrimental to our business, including, but not limited to, increasing our cost of funds due to extended dwell time on our warehouse lines, and a negative impact on our liquidity due to write-downs on the value of the loans held on our balance sheet and the application of large decreases in advance rates due to longer dwell times on our warehouse lines.
For our mortgage loans, as home values change, we may have to reconsider certain of the assumptions underlying our decisions to make advances, and in certain situations our contractual obligations may require us to make certain advances for which we may not be reimbursed.
As home values change, we may have to reconsider certain of the assumptions underlying our decisions to make advances, and in certain situations our contractual obligations may require us to make certain advances for which we may not be reimbursed.
In addition, the principal stockholders may have an interest in the Company pursuing acquisitions, 52 divestitures and other transactions that, in their judgment, could enhance their investment, even though such transactions might involve risks to the Company and its stockholders.
In addition, the principal stockholders may have an interest in the Company pursuing acquisitions, divestitures and other transactions that, in their 54 judgment, could enhance their investment, even though such transactions might involve risks to the Company and its stockholders.
The Board of Directors of the Company, in its sole discretion, will make any determination from time to time with respect to the use of any such excess cash so accumulated, which may include, among other uses, acquiring additional newly issued FoA Units from FoA at a per unit price determined by reference to the market value of the Class A Common Stock; paying dividends, which may include special dividends, on its Class A Common Stock; funding repurchases of Class A Common Stock; or any combination of the foregoing.
The Board of Directors of the Company (the “Board”), in its sole discretion, will make any determination from time to time with respect to the use of any such excess cash so accumulated, which may include, among other uses, acquiring additional newly issued Class A LLC Units from FoA Equity at a per unit price determined by reference to the 48 market value of the Class A Common Stock; paying dividends, which may include special dividends, on its Class A Common Stock; funding repurchases of Class A Common Stock; or any combination of the foregoing.
If we experience material weaknesses or deficiencies in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports, and the price of our common stock may decline.
If we experience material weaknesses or deficiencies in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports, and the price of our securities may decline.
We are also subject to the regulatory, supervisory and examination authority of the CFPB, which has oversight of federal and state non-depository lending and servicing institutions, including residential mortgage originators and loan servicers.
We are also subject to the regulatory, supervisory and examination authority of the CFPB, which has oversight of federal and state non-depository lending and servicing institutions, including reverse mortgage loan originators and loan servicers.
In accordance with Accounting Standards Codification ("ASC") 350, Intangibles-Goodwill and Other, to the extent goodwill and intangible assets are recorded on the statement of financial condition, the Company is required to test goodwill and any other intangible assets with an indefinite life for possible impairment on an annual basis and on an interim basis if there are indicators of a possible impairment.
In accordance with Accounting Standards Codification (“ASC”) 350, Intangibles-Goodwill and Other, to the extent goodwill and intangible assets are recorded on the statement of financial condition, the Company is required to test goodwill and any other intangible assets with an indefinite life for possible impairment on an annual 23 basis and on an interim basis if there are indicators of a possible impairment.
The reverse mortgage origination business as a whole had reputational issues arising after 2007, when home values were decreasing nationwide, and the only products available to consumers were HECM products.
The reverse mortgage origination business as a whole had reputational issues arise after 2007, when home values were decreasing nationwide, and the only products available to consumers were HECM products.
In addition, for various reasons, borrowers would sometimes not have their spouses on the reverse mortgage, with the result that when the borrower died, the non-borrowing spouse would be facing a due-and-payable balance which they often were not able to refinance.
In addition, for various reasons, borrowers would sometimes not have their spouses as co-borrowers on the reverse mortgage loan, with the result that when the borrower died, the non-borrowing spouse would be facing a due-and-payable balance, which they often were not able to refinance.
If, as a result of a general economic slowdown, deterioration in one or more of the markets in which the Company operates or impairment in the Company’s financial performance and/or future outlook, the estimated fair value of the Company’s long- lived assets decreases, the Company may determine that one or more of its long-lived assets is impaired.
If, as a result of a general economic slowdown, deterioration in one or more of the markets in which the Company operates or impairment in the Company’s financial performance and/or future outlook, the estimated fair value of the Company’s indefinite and definite-lived assets decreases, the Company may determine that one or more of its indefinite and definite-lived assets is impaired.
However, while we hold MSR relating to traditional mortgages and commercial mortgages, we remain subject to risks resulting from the failure of such servicers to meeting the requirements in their applicable servicing agreements, such risk of loss of reimbursement of loan related advances, expenses, interest and servicing fees.
However, while we hold MSR relating to traditional mortgages and commercial mortgages, we remain subject to risks resulting from the failure of such servicers to meet the requirements in their applicable servicing agreements, such as the risk of loss of reimbursement of loan related advances, expenses, interest and servicing fees.
It may also be more expensive to obtain director and officer liability insurance. Risks associated with the Company’s status as a public company may make it more difficult to attract and retain qualified persons to serve on the board of directors or as executive officers.
It may also be more expensive to obtain director and officer liability insurance. Risks associated with the Company’s status as a public company may make it more difficult to attract and retain qualified persons to serve on 52 the Board or as executive officers.
In addition, our independent registered public accounting firm is required to issue a report on the effectiveness of internal control over financial reporting.
In addition, our independent registered public accounting firm is required to issue a report on the effectiveness of our internal controls over financial reporting.
Some of our competitors may have more name recognition and greater financial and other resources than we have, including better access to capital. Competitors who originate reverse mortgage or home improvement loans to retain for investment may have greater flexibility in approving loans.
Some of our competitors may have more name recognition and greater financial and other resources than we have, including better access to capital. Competitors who originate reverse mortgage loans to retain for investment may have greater flexibility in approving loans.
Loan originations may also be disrupted, as lenders are required to reinspect properties which may have been affected by the disaster prior to funding.
Loan originations may also be disrupted, as lenders are required to reinspect properties that may have been affected by the disaster prior to funding.
We may not have sufficient protection or recovery plans in certain circumstances, and our business interruption insurance may be insufficient to compensate us for losses that may occur. These types of catastrophic events may also affect loan origination which have been locked and loans which we are holding for sale or investment.
We may not have sufficient protection or recovery plans in certain circumstances, and our business interruption insurance may be insufficient to compensate us for losses that may occur. These types of catastrophic events may also affect loans pending origination that have been rate-locked and loans that we are holding for sale or investment.
HUD also provided clear guidance regarding both underwriting and servicing of loans involving non-borrower spouses, significantly decreasing the risks of those situations. Borrower counseling by a HUD-approved counseling agency is required on agency reverse mortgages.
HUD also provided clear guidance regarding both underwriting and servicing of loans involving non-borrower spouses, significantly decreasing the risks of those situations. Borrower counseling by a HUD-approved counseling agency is required on HECM.
If participation by Ginnie Mae in the reverse mortgage market were reduced or eliminated, or its structure were to change (e.g., limitation or removal of the guarantee obligation), our ability to originate HECM loans and acquire Agency HMBS could be adversely affected. These developments could materially and adversely impact our portfolio.
If participation by Ginnie Mae in the reverse mortgage market were reduced or eliminated, or its structure were to change (e.g., limitation or removal of the guarantee obligation), our ability to originate HECM and issue HMBS could be adversely affected. These developments could materially and adversely impact our portfolio.
Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events, which may increase in frequency or severity as a result of global climate change, and to interruption by man-made issues such as strikes, wars, and civil unrest.
Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events, which may increase in frequency or severity as a result of global climate change, and to interruption by man-made issues such as strikes, wars and civil unrest as well as health pandemics and epidemics.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur headquarters is in Plano, TX and is included in our corporate office space. We maintain corporate office space primarily in New York, Pennsylvania, Texas, North Carolina, Minnesota, and Oklahoma. Our 484,776 square feet of operations and branches, are primarily across California, Washington, Oregon, Nevada, Arizona, Pennsylvania, Texas and New Jersey. Leased properties are utilized amongst all reported subsidiaries.
Biggest changeOur headquarters is in Plano, Texas and is included in our corporate office space. We maintain corporate office space primarily in Pennsylvania, Texas, Oklahoma, Minnesota, and New York. Our 282,000 square feet of operations and branches are primarily across California, Arizona, North Carolina, Oregon, Washington, Colorado, Georgia, Wisconsin, and Illinois. Leased properties are utilized amongst all reported subsidiaries.
Item 2. Properties Our corporate, operations and branch real estate portfolio consists of approximately 634.633 square feet of leased office and retail space, which is used to support our business. Of this overall portfolio, approximately 149,857 square feet of space is dedicated for various corporate office use and approximately 484,776 square feet of space is for operations and branches.
Item 2. Properties Our corporate, operations, and branch real estate portfolio consists of approximately 415,000 square feet of leased office and retail space, which is used to support our business. Of this overall portfolio, approximately 133,000 square feet of space is dedicated for various corporate office use and approximately 282,000 square feet of space is for operations and branches.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of March 10, 2023, there were 16 stockholders of record of our Class A Common Stoc k and 14 stock holders of record of our Class B Common Stock.
Biggest changeAs of March 11, 2024, there were 22 stockholders of record of our Class A Common Stock and 15 stockholders of record of our Class B Common Stock.
For our Class A Common Stock, the actual number of shareholders is greater than this number of record holders and includes shareholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. There is no public market for our Class B Common Stock. Item 6. [Reserved] 56
For our Class A Common Stock, the actual number of shareholders is greater than this number of record holders and includes shareholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. There is no public market for our Class B Common Stock. Item 6. [Reserved] 59
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock has been traded on the New York Stock Exchange under the ticker symbol “FOA” since April 5, 2021.
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock has been traded on the NYSE under the ticker symbol “FOA” since April 5, 2021.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 56 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 57 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 106 Item 8. Financial Statements and Supplementary Data 109 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 215 Item 9A. Controls and Procedures 216 Item 9B.
Biggest changeItem 6. [Reserved] 59 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 60 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 92 Item 8. Financial Statements and Supplementary Data 94 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 174 Item 9A. Controls and Procedures 175 Item 9B.
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Other Information 179 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 179 PART III Item 10. Directors, Executive Officers and Corporate Governance 180 Item 11. Executive Compensation 180 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 180 Item 13. Certain Relationships and Related Transactions, and Director Independence 180 Item 14.
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Principal Accountant Fees and Services 180 PART IV Item 15. Exhibit and Financial Statement Schedules 181

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(1) Net fair value gains and losses in our Portfolio Management segment for loans held for sale only include fair value adjustments related to loans originated in the Commercial Originations segment. 81 KEY METRICS The following table provides a trend in the assets and liabilities under management by our Portfolio Management segment (in thousands) : December 31, 2022 December 31, 2021 Cash and cash equivalents $ 37,964 $ 43,261 Restricted cash 177,814 320,116 Loans held for investment, subject to HMBS liabilities, at fair value 11,114,100 10,556,054 Loans held for investment, subject to nonrecourse debt, at fair value 7,454,638 6,218,194 Loans held for investment, at fair value 907,998 1,031,328 MSR, at fair value 95,096 427,942 Other assets, net 224,386 228,069 Total long-term investment assets 20,011,996 18,824,964 Loans held for sale, at fair value 173,984 149,425 Total earning assets 20,185,980 18,974,389 HMBS related obligations, at fair value 10,996,755 10,422,358 Nonrecourse debt, at fair value 7,343,177 6,111,242 Other financing lines of credit 1,327,633 1,525,529 Payables and other liabilities 82,177 96,080 Total financing of portfolio 19,749,742 18,155,209 Net equity in earning assets $ 436,238 $ 819,180 82 The following table provides a summary of some of our Portfolio Management segment's key metrics (dollars in thousands): December 31, 2022 December 31, 2021 MSR Portfolio Loan count 27,037 118,939 Ending unpaid principal balance $ 8,602,339 $ 38,219,162 Average unpaid principal balance $ 318 $ 321 Weighted average coupon 3.59 % 3.01 % Weighted average age (in months) 18 11 Weighted average FICO credit score 752 756 90+ day delinquency rate 0.5 % 0.1 % Total prepayment speed 6.5 % 8.3 % Reverse Mortgages Loan count 62,879 59,480 Active unpaid principal balance $ 17,914,422 $ 14,902,734 Due and payable 334,303 322,057 Foreclosure 489,261 599,087 Claims pending 103,408 73,327 Ending unpaid principal balance $ 18,841,394 $ 15,897,205 Average unpaid principal balance $ 300 $ 267 Weighted average coupon 6.11 % 3.92 % Weighted average age (in months) 41 43 Percentage in foreclosure 2.6 % 3.8 % Commercial (SRL/Portfolio/Fix & Flip) Loan count 2,848 2,222 Ending unpaid principal balance $ 599,346 $ 479,190 Average unpaid principal balance $ 210 $ 216 Weighted average coupon 8.43 % 7.43 % Weighted average loan age (in months) 8 8 SRL conditional prepayment rate 0.9 % 1.4 % SRL non-performing (60+ days past due) 1.0 % 1.3 % F&F single month mortality 8.1 % 8.9 % F&F non-performing (60+ days past due) 7.4 % 13.6 % Agricultural Loans Loan count 60 80 Ending unpaid principal balance $ 123,108 $ 144,328 Average unpaid principal balance $ 2,052 $ 1,804 Weighted average coupon 7.08 % 7.14 % Weighted average loan age (in months) 9 7 83 For the year ended December 31, 2022 For the nine months ended December 31, 2021 For the three months ended March 31, 2021 For the year ended December 31, 2020 Successor Predecessor Investment and Capital Markets Number of structured deals 8 10 1 11 Structured deals (size in notes) $ 3,660,359 $ 3,477,143 $ 571,448 $ 3,286,327 Number of whole-loan trades 46 30 8 11 UPB of whole-loan trades $ 1,092,439 $ 880,315 $ 195,929 $ 366,242 Revenue In the table below is a summary of the components of our Portfolio Management segment's total revenue for the periods indicated (in thousands): For the year ended December 31, 2022 For the nine months ended December 31, 2021 For the three months ended March 31, 2021 For the year ended December 31, 2020 Successor Predecessor REVENUES Gain (loss) on sale and other income from loans held for sale, net $ (6,298) $ 39,950 $ 5,065 $ 10,192 Net fair value gains (losses) on loans and related obligations: Net fair value gains from portfolio activity 174,191 102,276 32,386 138,743 Net fair value losses from changes in market inputs or model assumptions (369,422) (133,014) (29,636) (34,871) Total net fair value gains (losses) on loans and related obligations (195,231) (30,738) 2,750 103,872 Net interest expense (85,607) (51,598) (14,816) (73,163) Fee income: Servicing income (MSR) 50,572 24,664 33,698 25,176 Underwriting, advisory and valuation fees 876 1,830 997 818 Other fees 15,313 3,961 1,496 2,008 Total fee income 66,761 30,455 36,191 28,002 Total revenues $ (220,375) $ (11,931) $ 29,190 $ 68,903 Principally all of our outstanding financial instruments are carried at fair value.
Biggest changeKEY METRICS The following table provides a summary of the assets and liabilities under management by our Portfolio Management segment (in thousands) : December 31, 2023 December 31, 2022 Cash and cash equivalents $ 32,245 $ 37,964 Restricted cash 178,319 177,814 Loans held for investment, subject to HMBS related obligations, at fair value 17,548,763 11,114,100 Loans held for investment, subject to nonrecourse debt, at fair value 8,272,393 7,454,638 Loans held for investment, at fair value 575,228 907,998 MSR, at fair value 6,436 95,096 Other assets, net 155,471 224,385 Total long-term investment assets 26,768,855 20,011,995 Loans held for sale, at fair value 4,246 173,984 Total earning assets 26,773,101 20,185,979 HMBS related obligations, at fair value 17,353,720 10,996,755 Nonrecourse debt, at fair value 7,904,200 7,343,177 Other financing lines of credit 928,479 1,327,634 Payables and other liabilities 107,664 82,175 Total financing of portfolio 26,294,063 19,749,741 Net carrying value of earning assets $ 479,038 $ 436,238 72 The following table provides a summary of our Portfolio Management segment’s key metrics (dollars in thousands): December 31, 2023 December 31, 2022 Reverse Mortgages Loan count 91,888 62,879 Active UPB $ 24,923,313 $ 17,914,422 Due and payable 371,913 334,303 Foreclosure 524,988 489,261 Claims pending 130,928 103,408 Ending UPB $ 25,951,142 $ 18,841,394 Average UPB $ 282 $ 300 Weighted average coupon 7.35 % 6.11 % Weighted average age (in months) 40 41 Percentage in foreclosure 2.0 % 2.6 % MSR Portfolio Loan count 3,385 27,037 Ending UPB $ 1,056,660 $ 8,602,338 Average UPB $ 312 $ 318 Weighted average coupon 3.71 % 3.59 % Weighted average age (in months) 27 18 Weighted average FICO credit score 763 752 90+ day delinquency rate 0.3 % 0.5 % Total prepayment speed 8.1 % 6.5 % For the year ended December 31, 2023 For the year ended December 31, 2022 Investment and Capital Markets Number of structured deals 5 8 Structured deals (size in notes) $ 1,925,699 $ 3,660,359 73 Revenues In the table below is a summary of the components of our Portfolio Management segment’s total revenues (in thousands): For the year ended December 31, 2023 For the year ended December 31, 2022 REVENUES Net fair value gains (losses) on loans and related obligations: Interest income on mortgage loans $ 1,617,954 $ 890,857 Interest expense on HMBS and nonrecourse obligations (1,273,159) (600,689) Servicing related income, net (1) 25,583 11,599 Fair value changes from model amortization (2) (228,391) (127,576) Net fair value gains from portfolio activity 141,987 174,191 Net fair value gains (losses) from changes in market inputs or model assumptions 58,696 (369,422) Net fair value gains (losses) on loans and related obligations 200,683 (195,231) Fee income: Servicing income (MSR) 1,447 50,572 Other fees 8,836 16,189 Total fee income 10,283 66,761 Loss on sale and other income from loans held for sale, net (18,691) (6,298) Net interest expense (76,916) (85,607) Total revenues $ 115,359 $ (220,375) (1) Servicing related income, net, is comprised of premiums realized on the securitization of reverse mortgage tails and miscellaneous contractual servicing fees, net of guarantee fees paid.
Volatility in market conditions, resulting from the foregoing events have caused and may continue to cause credit spreads to widen, which reduces, among other things, availability of credit to our Company on favorable terms, liquidity in the market, fair market value of the assets on our balance sheet and price transparency of real estate related or asset-backed assets.
Volatility in market conditions resulting from the foregoing events have caused and may continue to cause credit spreads to widen, which reduces, among other things, availability of credit to our Company on favorable terms, liquidity in the market, the fair market value of the assets on our balance sheet, and price transparency of real estate related or asset-backed assets.
The tax basis adjustments upon sales or exchanges of units for shares of Class A Common Stock and certain distributions with respect to Class A LLC Units may also decrease gains (or increase losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets.
The tax basis adjustments upon sales or exchanges of Class A LLC Units for shares of Class A Common Stock and certain distributions with respect to Class A LLC Units may also decrease gains (or increase losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets.
Fair value measurements considered to be Level 3 representing estimated values based on significant unobservable inputs include (i) the valuation of loans held for investment, subject to HMBS related obligations, at fair value (ii) the valuation of loans held for investment, subject to nonrecourse debt, at fair value (iii) the valuation of loans held for investment, at fair value (iv) the valuation of HMBS related obligations, at fair value, and (v) valuation of nonrecourse debt, at fair value.
Fair value measurements considered to be Level 3 representing estimated values based on significant unobservable inputs include (i) the valuation of loans held for investment, subject to HMBS related obligations, at fair value, (ii) the valuation of loans held for investment, subject to nonrecourse debt, at fair value, (iii) the valuation of loans held for investment, at fair value, (iv) the valuation of HMBS related obligations, at fair value, and (v) the valuation of nonrecourse debt, at fair value.
The facilities may also require the outstanding principal to be repaid if a loan remains on the line longer than a contractual period of time, which ranges from 45 to 365 calendar days. Interest on our warehouse facilities vary by facility and may depend on the type of asset that is being financed.
The facilities may also require the outstanding principal to be repaid if a loan remains on the line longer than a contractual period of time, which generally ranges from 45 to 365 calendar days. Interest on our warehouse facilities vary by facility and may depend on the type of asset that is being financed.
In addition to the fees earned from customers, we recognize the changes in fair value of MSR as a component of fee income. To hedge against volatility in the fair value of certain MSR, we enter into various derivative agreements, which may include but are not limited to interest rate swaps and futures contracts.
In addition to the fees earned from customers, we recognize the changes in fair value of MSR as a component of fee income. To hedge against volatility in the fair value of certain MSR, we may enter into various derivative agreements from time to time, which may include, but are not limited to, interest rate swaps and futures contracts.
Outstanding reverse mortgage loans held for investment, at fair value, include originated reverse mortgage loans that are expected to be sold or securitized in the secondary market, reverse mortgage loans that were previously securitized into either an HMBS or private securitization, or repurchased reverse loans out of Ginnie Mae securitization pools.
Outstanding reverse mortgage loans held for investment, at fair value, include originated or purchased reverse mortgage loans that are expected to be sold or securitized in the secondary market, reverse mortgage loans that were previously securitized into either an HMBS or private securitization, or repurchased reverse loans out of Ginnie Mae securitization pools.
The maturity of the HMBS related obligations is directly affected by the liquidation of the reverse loans or liquidation of real estate owned and events of default as stipulated in the reverse loan agreements with borrowers. As an HMBS issuer, FAR assumes certain obligations related to each security it issues.
The maturity of the HMBS related obligations is directly affected by the liquidation of the reverse loans or liquidation of real estate owned properties and events of default as stipulated in the reverse loan agreements with borrowers. As an HMBS issuer, FAR assumes certain obligations related to each security it issues.
Interest is payable either at the time the loan or securities are settled off the line or monthly in arrears, and principal is payable upon receipt of asset sale proceeds, principal distributions on the underlying pledged securities or transfer of assets to another line of credit, and upon the maturity of the facility.
Interest is payable either at the time the loan or securities are settled off the line or monthly in arrears, and principal is payable upon receipt of asset sale or securitization proceeds, principal distributions on the underlying pledged securities or transfer of assets to another line of credit, and upon the maturity of the facility.
These groups support our operating segments, and the cost of services directly supporting the operating segments are allocated to those operating segments on a cost of service basis. Enterprise-focused Corporate and Other expenses that are not incurred in direct support of the operating segments are kept unallocated within our Corporate and Other segment.
These groups support our operating segments, and the cost of services directly supporting the operating segments are allocated to those operating segments on a cost-of-service basis. Enterprise-focused Corporate and Other expenses that are not incurred in direct support of the operating segments are kept unallocated within Corporate and Other.
NON-GAAP FINANCIAL MEASURES The Company’s management evaluates performance of the Company through the use of certain non-GAAP financial measures, including Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Diluted Earnings (Loss) per Share. The presentation of non-GAAP measures is used to enhance the investors’ understanding of certain aspects of our financial performance.
NON-GAAP FINANCIAL MEASURES The Company’s management evaluates performance of the Company through the use of certain non-GAAP financial measures, including Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Earnings (Loss) per Share. The presentation of non-GAAP measures is used to enhance the investors’ understanding of certain aspects of our financial performance.
Net fair value gains and losses in our Portfolio Management segment include fair value adjustments related to the following assets and liabilities: • Loans held for investment, subject to HMBS liabilities, at fair value • Loans held for investment, subject to nonrecourse debt, at fair value • Loans held for investment, at fair value • Loans held for sale, at fair value (1) • Derivative assets and liabilities • HMBS liabilities, at fair value; and • Nonrecourse debt, at fair value.
Net fair value gains and losses in our Portfolio Management segment include fair value adjustments related to the following assets and liabilities: • Loans held for investment, subject to HMBS related obligations, at fair value • Loans held for investment, subject to nonrecourse debt, at fair value • Loans held for investment, at fair value • Loans held for sale, at fair value (1) • Derivative assets and liabilities • HMBS related obligations, at fair value; and • Nonrecourse debt, at fair value.
Interest is generally payable at the time the loan is settled off the line or monthly in arrears and the principal is payable upon receipt of loan sale proce eds or transfer of a loan to another line of credit.
Interest is generally payable at the time the loan is settled off the line or monthly in arrears and the principal is payable upon receipt of loan sale or securitization proce eds or transfer of a loan to another line of credit.
Minimum Liquidity The minimum liquidity requirement for Fannie Mae and Freddie Mac is defined as follows: • 3.5 basis points of total Agency Mortgage Servicing, plus • Incremental 200 basis points times the sum of the following: • The total UPB of nonperforming (90 or more days delinquent) Agency Mortgage Servicing that is not in forbearance, plus • The total UPB of nonperforming (90 or more days delinquent) Agency Mortgage Servicing that is in forbearance, and which were delinquent at the time it entered forbearance, plus • 30% of the UPB of nonperforming (90 or more days delinquent) Agency Mortgage Servicing that is in forbearance, and which were current at the time it entered forbearance • This liquidity must only be maintained to the extent this sum exceeds 6% of the total Agency Mortgage Servicing UPB. • Allowable assets for liquidity may include cash and cash equivalents (unrestricted), available for sale or held for trading investment grade securities (e.g., Agency MBS, Obligations of GSEs, U.S.
Minimum Liquidity The minimum liquidity requirement for Fannie Mae and Freddie Mac is defined as follows: • 3.5 basis points of total Agency Mortgage Servicing, plus • Incremental 200 basis points times the sum of the following: 84 • The total UPB of nonperforming (90 or more days delinquent) Agency Mortgage Servicing that is not in forbearance, plus • The total UPB of nonperforming (90 or more days delinquent) Agency Mortgage Servicing that is in forbearance, and which were delinquent at the time it entered forbearance, plus • 30% of the UPB of nonperforming (90 or more days delinquent) Agency Mortgage Servicing that is in forbearance, and which were current at the time it entered forbearance. • This liquidity must only be maintained to the extent this sum exceeds 6% of the total Agency Mortgage Servicing UPB. • Allowable assets for liquidity may include cash and cash equivalents (unrestricted), available for sale or held for trading investment grade securities (e.g., Agency MBS, Obligations of GSE, U.S.
This discussion is not meant to be considered in isolation, superior to, or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Management believes these key financial measures provide an additional view of our performance over the long-term and provide useful information that we use in order to maintain and grow our business.
This discussion is not meant to be considered in isolation, superior to, or as a substitute for the directly comparable financial measures prepared in accordance with U.S. GAAP. Management believes these key financial measures provide an additional view of our performance over the long-term and provide useful information that we use in order to maintain and grow our business.
Upon the occurrence of a change of control, the holders of the Notes will have the right to require FOAF to make an offer to repurchase each 100 holder’s Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest. FOAF has not redeemed any of the Notes since they were issued in November 2020.
Upon the occurrence of a change of control, the holders of the Notes will have the right to require FOAF to make an offer to repurchase each holder’s Notes at a price equal to 88 101% of their principal amount, plus accrued and unpaid interest. FOAF has not redeemed any of the Notes since they were issued in November 2020.
These structures resulted in us carrying the securitized loans in the Consolidated Statements of Financial Condition and recognizing the asset-backed certificates acquired by third parties as HMBS obligations. The timing of the principal payments on this nonrecourse debt is dependent on the payments received on the underlying mortgage loans and liquidation of real estate owned.
These structures resulted in us carrying the securitized loans in the Consolidated Statements of Financial Condition and recognizing the asset-backed certificates acquired by third parties as HMBS related obligations. The timing of the principal payments on this nonrecourse debt is dependent on the payments received on the underlying mortgage loans and liquidation of real estate owned properties.
"Dry" loans are loans for which all the sale documentation has been completed at the time of funding. Wet loans are held by a lender for a contractual period, typically between five and ten business days, and are subject to a reduction in the advance amount.
“Dry” loans are loans for which all the sale documentation has been completed at the time of funding. Wet loans are held by a lender for a contractual period, typically between five and ten business days and are subject to a reduction in the advance amount.
Certain of our warehouse facilities contain sub-limits for "wet" loans, which allow us to finance loans for a minimal period of time prior to delivery of the note collateral to the lender. "Wet" loans are loans for which the collateral custodian has not yet received the related loan documentation.
Certain of our warehouse facilities contain sub-limits for “wet” loans, which allow us to finance loans for a minimal period of time prior to delivery of the note collateral to the lender. “Wet” loans are loans for which the collateral custodian has not yet received the related loan documentation.
Actual tax benefits realized by the Company may differ from tax benefits calculated under the Tax Receivable Agreements as a result of the use of certain assumptions in the TRA, including the use of an assumed weighted average state and local income tax rate to calculate tax benefits.
Actual tax benefits realized by the Company may differ from tax benefits calculated under the TRA as a result of the use of certain assumptions in the TRA, including the use of an assumed weighted average state and local income tax rate to calculate tax benefits.
Performing repurchased loans are conveyed to HUD and payment is received from HUD typically within 75 days of repurchase. Nonperforming repurchased loans are generally liquidated through foreclosure, subsequent sale of the real estate owned, and claim submissions to HUD.
Performing repurchased loans are generally conveyed to HUD and payment is received from HUD typically within 45 days of repurchase. Nonperforming repurchased loans are generally liquidated through foreclosure, subsequent sale of the real estate owned, and claim submissions to HUD.
Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors. Except where the context otherwise requires, the terms “Finance of America Companies,” “Finance of America,”“FoA,” “we,” “us,” or “our” refer to the business of Finance of America Companies Inc. and its consolidated subsidiaries.
Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors. Except where the context otherwise requires, the terms “Finance of America,” “FoA,” the “Company,” “we,” “us,” or “our” refer to the business of Finance of America Companies Inc. and its consolidated subsidiaries.
FoA has no independent means of generating revenue. FoA Equity may make distributions to its holders of Class A LLC Units, including FoA and the Continuing Unitholders, in an amount sufficient to cover all applicable taxes at assumed tax rates, payments under the TRA, and dividends, if any, declared by it.
FoA has no independent means of generating revenue. FoA Equity may make distributions to its holders of Class A LLC Units, including FoA and the Equity Capital Unitholders, in an amount sufficient to cover all applicable taxes at assumed tax rates, payments under the TRA, and dividends, if any, declared by FoA.
Subsequent to the Business Combination, FoA (together with certain corporate subsidiaries through which it owns its interest in FoA Equity) is treated as a corporation for U.S. federal and state income tax purposes and is subject to U.S. federal income taxes with respect to its allocable share of any taxable income of FoA Equity and is taxed at the prevailing corporate tax rates.
FoA (together with certain corporate subsidiaries through which it owns its interest in FoA Equity) is treated as a corporation for U.S. federal and state income tax purposes and is subject to U.S. federal income taxes with respect to its allocable share of any taxable income of FoA Equity and is taxed at the prevailing corporate tax rates.
These non-GAAP financial measures should not be considered as an alternative to net income (loss), operating cash flows, or any other performance measures determined in accordance with GAAP.
These non-GAAP financial measures should not be considered as an alternative to net income (loss), operating cash flows, or any other performance measures determined in accordance with U.S. GAAP.
Our Company is actively monitoring these events and their effects on the Company's financial condition, liquidity, operations, industry, and workforce. These continuing economic impacts may cause additional volatility in the financial markets and may have an adverse effect on the Company’s results of future operations, financial position, intangible assets, and liquidity in 2023 and beyond. See Results of Operations.
Our Company is actively monitoring these events and their effects on the Company’s financial condition, liquidity, operations, industry, and workforce. 63 These continuing economic impacts may cause additional volatility in the financial markets and may have an adverse effect on the Company’s results of future operations, financial position, intangible assets, and liquidity in 2024 and beyond. See Results of Operations.
Analysts, investors, and creditors may use this measure when analyzing our operating performance and comparability to peers. Adjusted Diluted Earnings (Loss) Per Share is not a presentation made in accordance with GAAP, and our definition and use of this measure may vary from other companies in our industry.
Analysts, investors, and creditors may use this measure when analyzing our operating performance and comparability to peers. Adjusted Earnings (Loss) Per Share is not a presentation made in accordance with U.S. GAAP, and our definition and use of this measure may vary from other companies in our industry.
Adjusted Diluted Earnings (Loss) Per Share We define Adjusted Diluted Earnings (Loss) Per Share as Adjusted Net Income (Loss) (defined above) divided by the weighted average diluted shares, which includes issued and outstanding Class A Common Stock plus the Class A LLC Units owned by the noncontrolling interest on an if-converted basis.
Adjusted Earnings (Loss) Per Share We define Adjusted Earnings (Loss) Per Share as Adjusted Net Income (Loss) (defined above) divided by the weighted average outstanding shares, which includes outstanding Class A Common Stock plus the Class A LLC Units owned by the noncontrolling interest on an if-converted basis.
These tax basis adjustments generated over time may increase (for tax purposes) the depreciation and amortization deductions available to the Company and, therefore, may reduce the amount of U.S. federal, state, and local tax that the Company would otherwise be required to pay in the future, although the IRS may challenge all or part of the validity of that tax basis, and a court could sustain such challenge.
These tax basis adjustments generated over time may increase (for tax purposes) the depreciation and amortization deductions available to the Company and, therefore, may reduce the amount of U.S. federal, state, and local tax that the Company would otherwise be required to pay in the future, although the Internal Revenue Service may challenge all or part of the validity of that tax basis, and a court could sustain such challenge.
Interest income on mortgage loans and interest expense on warehouse lines of credit are classified in net interest expense. See Note 2 - Summary of Significant Accounting Policies, within the consolidated financial statements for additional information on the Company’s accounting related to commercial and reverse mortgage loans.
Interest income on mortgage loans held for sale and interest expense on warehouse lines of credit are classified in net interest expense. See Note 2 - Summary of Significant Accounting Policies within the Notes to Consolidated Financial Statements for additional information on the Company’s accounting related to reverse and commercial mortgage loans.
The minimum net worth requirement for Ginnie Mae is defined as follows: • The sum of (i) base of $2.5 million plus 35 basis points of the issuer’s total single-family effective outstanding obligations, and (ii) base of $5 million plus 1% of the total effective HMBS outstanding obligations. • Tangible Net Worth is defined as total equity less goodwill, intangible assets, affiliate receivables, and certain pledged assets.
The minimum net worth requirement for Ginnie Mae is defined as follows: • The sum of (i) base of $2.5 million plus 35 basis points of the issuer’s total single-family effective outstanding obligations, and (ii) base of $5.0 million plus 1% of the total outstanding HMBS and unused commitment authority. • Tangible Net Worth is defined as total equity less goodwill, intangible assets, affiliate receivables, and certain pledged assets.
Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Diluted Earnings (Loss) per Share have important limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Earnings (Loss) per Share have important limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.
Further, FoA Equity is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of FoA Equity (with certain exceptions) exceed the fair value of its assets.
In addition, FoA Equity is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of FoA Equity (with certain exceptions) exceed the fair value of its assets.
Other expenses are allocated to individual segments based on the estimated value of services performed, total revenue contributions, personnel headcount, or the equity invested in each segment based on the type of expense allocated. The allocation methodology is reviewed annually. There were no changes to methodology during the year ended December 31, 2022.
Other expenses are allocated to individual segments based on the estimated value of services performed, total revenue contributions, personnel headcount, or the equity invested in each segment based on the type of expense allocated. The allocation methodology is reviewed annually. There were no changes to methodology during the years ended December 31, 2023 and 2022.
When we draw on these facilities, we generally must transfer and pledge eligible loans to the lender and comply with various financial and other covenants. The facilities generally have one-year terms and expire at various times during 2023.
When we draw on these facilities, we generally must transfer and pledge eligible loans to the lender and comply with various financial and other covenants. The facilities generally have one-year terms and expire at various times during 2024 and 2026.
New Accounting Pronouncements Refer to Note 2 - Summary of Significant Accounting Policies within the consolidated financial statements for a summary of recently adopted and recently issued accounting standards and their related effects or anticipated effects in the consolidated financial statements. 105
New Accounting Pronouncements Refer to Note 2 - Summary of Significant Accounting Policies within the Notes to Consolidated Financial Statements for a summary of recently adopted and recently issued accounting standards and their related effects or anticipated effects in the consolidated financial statements. 91
The transactions are structured as secured borrowings with the loan assets and liabilities, respectively, included in the Consolidated Statements of Financial Condition as loans held for investment, subject to nonrecourse debt, at fair value, and nonrecourse debt, at fair value. As of December 31, 2022, we had nonrecourse debt-related borrowings of $7.3 billion.
The transactions are structured as secured borrowings with the loan assets and liabilities, respectively, included in the Consolidated Statements of Financial Condition as loans held for investment, subject to nonrecourse debt, at fair value, and nonrecourse debt, at fair value. As of December 31, 2023, we had nonrecourse debt-related borrowings of $7.9 billion.
In particular, we have identified several policies that, due to the judgment, estimates, and assumptions inherent in those policies, are critical to an understanding of the consolidated financial statements. These policies relate to fair value measurements, particularly those determined to be Level 3 as discussed in Note 5 - Fair Value within the consolidated financial statements.
In particular, we have identified several policies that, due to the judgment, estimates, and assumptions inherent in those policies, are critical to an understanding of the consolidated financial statements. These policies relate to fair value measurements, particularly those determined to be Level 3 as discussed in Note 6 - Fair Value in the Notes to Consolidated Financial Statements.
(5) Provision for income taxes - We applied an effective combined corporate tax rate to adjusted consolidated pre-tax income (loss) for the respective period to determine the tax effect of adjusted consolidated net income (loss). 91 Liquidity and Capital Resources Impact of the Business Combination FoA is a holding company and has no material assets other than its direct and indirect ownership of Class A LLC Units.
(5) Provision for income taxes - We applied an effective combined corporate tax rate to adjusted consolidated pre-tax income (loss) for the respective period to determine the tax effect of adjusted consolidated net income (loss). 81 Liquidity and Capital Resources FoA is a holding company and has no material assets other than its direct and indirect ownership of Class A LLC Units.
We believe we can more effectively dispatch our innovative suite of solutions to help retirees achieve their retirement goals through the use of home equity. • We seamlessly connect borrowers with investors.
We believe we can more effectively dispatch our innovative suite of solutions to help senior homeowners achieve their retirement goals through the use of home equity. • We seamlessly connect borrowers with investors.
We evaluate net interest margin ("NIM") for our outstanding investments through an evaluation of all components of interest income and interest expense.
We evaluate net interest margin (“NIM”) for our outstanding investments through an evaluation of all components of interest income and interest expense.
For further discussion on the potential impacts of the Federal Reserve’s monetary policies, see “Risks Related to the Business of the Company”—Our business is significantly impacted by changes in interest rates.
For further discussion on the potential impacts of the Federal Reserve’s monetary policies, see “Risks Related to the Business of the Company” and “Our business is significantly impacted by changes in interest rates.
Adjusted Net Income (Loss) may also include other adjustments, as applicable based upon facts and circumstances, consistent with our intent of providing a supplemental means of evaluating our operating performance. 88 Adjusted EBITDA We define Adjusted EBITDA as net income (loss) adjusted for: 1. Taxes 2. Interest on non-funding debt 3. Depreciation 4.
Adjusted Net Income (Loss) may also include other adjustments, as applicable based upon facts and circumstances, consistent with our intent of providing a supplemental means of evaluating our operating performance. 78 Adjusted EBITDA We define Adjusted EBITDA as net loss from continuing operations adjusted for: 1. Taxes 2. Interest on non-funding debt 3. Depreciation 4.
Our warehouse facilities require each of our borrowing subsidiaries to comply with various customary operating and financial covenants, including, without limitation, the following tests: • minimum tangible or adjusted tangible net worth; • maximum leverage ratio of total liabilities (which may include off-balance sheet liabilities) or indebtedness to tangible or adjusted tangible net worth; • minimum liquidity or minimum liquid assets; and • minimum net income or pre-tax net income.
Our warehouse facilities require our borrowing subsidiaries to comply with various customary operating and financial covenants, including, without limitation, the following tests: • minimum tangible or adjusted tangible net worth; • maximum leverage ratio of total liabilities (which may include off-balance sheet liabilities) or indebtedness to tangible or adjusted tangible net worth; • minimum liquidity or minimum liquid assets; and • minimum profitability.
The yield recognized on these financial instruments and any changes in estimated fair value are recorded as a component of net fair value gains on loans and related obligations in the Consolidated Statements of Operations. However, for certain of our outstanding financing lines of credit, we have not elected the fair value option.
The yield recognized on these financial instruments and any changes in estimated fair value are recorded as a component of net fair value gains on loans and related obligations in the Consolidated Statements of Operations. However, for our outstanding financing lines of credit, we have not elected to account for these liabilities under the fair value option.
As of December 31, 2022 and December 31, 2021, the Company had a liability of $3.8 million and $29.4 million, respectively, which is included in deferred purchase price liabilities within payables and other liabilities in the Consolidated Statements of Financial Condition.
As of December 31, 2023 and December 31, 2022, the Company had a liability of $4.5 million and $3.8 million, respectively, which is included in deferred purchase price liabilities within payables and other liabilities in the Consolidated Statements of Financial Condition.
Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value; 2. Mortgage loans held for investment, subject to nonrecourse debt, at fair value; 3. Mortgage loans held for investment, at fair value; 4. Debt securities, at fair value; 5. MSR, at fair value; 6. HMBS related obligations, at fair value; and 7.
Mortgage loans held for investment, subject to nonrecourse debt, at fair value; 80 3. Mortgage loans held for investment, at fair value; 4. Debt securities, at fair value; 5. MSR, at fair value; 6. HMBS related obligations, at fair value; and 7. Nonrecourse debt, at fair value.
Adjusted Net Income (Loss) is not a presentation made in accordance with GAAP, and our definition and use of this measure may vary from other companies in our industry. Adjusted Net Income (Loss) provides visibility to the underlying operating performance by excluding the impact of certain items that management does not believe are representative of our core earnings.
GAAP, and our definition and use of this measure may vary from other companies in our industry. Adjusted Net Income (Loss) provides visibility to the underlying operating performance by excluding the impact of certain items that management does not believe are representative of our core earnings.
Changes in fair value of loans and securities held for investment - This adjustment relates to changes in the significant market or model input components of the fair value for loans and securities which are held for investment, net of related liabilities.
Changes in fair value of loans and securities held for investment and related liabilities due to assumption changes - This adjustment relates to changes in the significant market or model input components of the fair value for loans and securities and related obligations, which are held for investment.
Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of this measure and term may vary from other companies in our industry. Adjusted EBITDA provides visibility to the underlying operating performance by excluding the impact of certain items that management does not believe are representative of our core earnings.
GAAP, and our use of this measure and term may vary from other companies in our industry. Adjusted EBITDA provides visibility to the underlying operating performance by excluding the impact of certain items that management does not believe are representative of our core earnings.
Deterioration in the financial condition, earnings, or cash flow of FoA Equity and its subsidiaries for any reason could limit or impair their ability to pay such distributions.
Deterioration in the financial condition, earnings, or cash flow of FoA Equity and its subsidiaries for any reason could limit or impair FoA Equity’s ability to make such distributions.
As an issuer of HMBS, we are required to repurchase reverse loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of the maximum claim amount (“MCA”) (referred to as unpoolable loans).
The Company, as an issuer of HMBS, is required to repurchase reverse loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of the maximum claim amount (referred to as HECM buyouts).
Adjusted EBITDA is a supplemental metric utilized by our management team to assess the underlying key drivers and operational performance of the continuing operations of the business and our operating segments. In addition, analysts, investors, and creditors may use these measures when analyzing our operating performance.
Adjusted EBITDA is a supplemental metric utilized by our management team to assess the underlying key drivers and operational performance of the continuing operations of the business and our operating segments. In addition, analysts, investors, and creditors may use these measures when analyzing our operating performance. Adjusted EBITDA is not a presentation made in accordance with U.S.
Changes in fair value of loans and securities held for investment due to assumption changes, deferred purchase price obligations (including earnouts and TRA obligations), warrant liability, and minority investments 2. Amortization and impairment of goodwill, intangible assets, and certain other certain long-lived assets 3. Equity-based compensation 4. Certain non-recurring costs 5.
Changes in fair value of loans and securities held for investment and related obligations due to assumption changes, deferred purchase price obligations (including earnouts and TRA obligations), contingent earnout, warrant liability, and minority investments 2. Amortization and impairment of intangibles and other assets 3. Equity-based compensation 4. Certain non-recurring costs 5.
The transactions provide us with access to liquidity for these assets, ongoing servicing fees, and potential residual returns for the residual securities we retain at the time of securitization.
The transactions provide investors with the ability to invest in these pools of assets. The transactions provide us with access to liquidity for these assets, ongoing servicing fees, and potential residual returns for the residual securities we retain at the time of securitization.
The loans are immediately transferred to our Portfolio Management segment, and any future fair value adjustments, including interest earned, on these originated loans are reflected in revenues of our Portfolio Management segment until final disposition.
We elect to account for all originated loans at fair value. The loans are immediately transferred to our Portfolio Management segment, and any future fair value adjustments, including interest earned, on these originated loans are reflected in revenues of our Portfolio Management segment until final disposition.
The redemption price during each of the twelve-month periods following November 15, 2022, November 15, 2023 and at any time after November 15, 2024 is 103.938%, 101.969% and 100%, respectively, of the principal amount plus accrued and unpaid interest thereon.
The redemption price during the twelve-month period following November 15, 2023 and at any time after November 15, 2024 is 101.969% and 100%, respectively, of the principal amount plus accrued and unpaid interest thereon.
Unrealized gains and losses include fair value gains and losses resulting from changes in fair value in the underlying mortgages, interest rate lock commitments, and hedging derivatives, from the time of origination to the ultimate sale of the loan or other settlement of those financial instruments.
Unrealized gains and losses include fair value gains and losses resulting from changes in fair value in the underlying loans and hedging derivatives from the time of origination to the ultimate sale of the loan or other settlement of those financial instruments.
The 7.875% senior unsecured notes contain covenants limiting, among other things, Finance of America Funding LLC’s and its restricted subsidiaries’ ability to incur certain types of additional debt or issue certain preferred shares, incur liens, make certain distributions, investments and other restricted payments, engage in certain transactions with affiliates, and merge or consolidate or sell, transfer, lease or otherwise dispose of all or substantially all of Finance of America Funding LLC’s assets.
The Notes contain covenants limiting, among other things, FOAF and its restricted subsidiaries’ ability to incur certain types of additional debt or issue certain preferred shares, incur liens, make certain distributions, investments and other restricted payments, engage in certain transactions with affiliates, and merge or consolidate or sell, transfer, lease or otherwise dispose of all or substantially all of FOAF’s assets.
Change in fair value of loans and securities held for investment due to assumption changes, deferred purchase price obligations (including earnouts and TRA obligations), warrant liability, and minority investments 5. Amortization and impairment of goodwill, intangible assets, and certain other long-lived assets 6. Equity-based compensation 7.
Change in fair value of loans and securities held for investment and related obligations due to assumption changes, deferred purchase price obligations (including earnouts and TRA obligations), contingent earnout, warrant liability, and minority investments 5. Amortization and impairment of intangibles and other assets 6. Equity-based compensation 7.
The TRA generally provides for payment by the Company to the TRA Parties of 85% of the cash tax benefits, if any, that the Company is deemed to realize (calculated using certain simplifying assumptions) as a result of (i) tax basis adjustments as a result of sales and exchanges of units in connection with or following the Business Combination and certain distributions with respect to units, (ii) the Company’s utilization of certain tax attributes attributable to Blackstone Tactical Opportunities Associates - NQ L.L.C., a Delaware limited partnership, shareholders, and (iii) certain other tax benefits related to entering into the TRA, including tax benefits attributable to making payments under the TRA.
The TRA generally provide for payment by the Company to the TRA Parties of 85% of the cash tax benefits, if any, that the Company is deemed to realize (calculated using certain simplifying assumptions) as a result of (i) tax basis adjustments as a result of sales and exchanges of Class A LLC Units, (ii) the Company’s utilization of certain tax attributes attributable to Blackstone Tactical Opportunities Associates - NQ L.L.C., a Delaware limited partnership, shareholders (“Blocker GP”), and (iii) certain other tax benefits related to entering into the TRA, including tax benefits attributable to making payments under the TRA.
The TRA that was entered into in connection with the Business Combination will require payments to be made that may be significant and are not reflected in the contractual obligations tables set forth above. 102 CRITICAL ACCOUNTING ESTIMATES Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions, and other subjective assessments.
The Company’s TRA obligation will require payments to be made that may be significant and are not reflected in the contractual obligations tables set forth above. 89 CRITICAL ACCOUNTING ESTIMATES Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions, and other subjective assessments.
When we draw on these facilities, we generally must transfer and pledge eligible assets to the lender and comply with various financial and other covenants. Under our facilities, we generally transfer the assets at a haircut which serves as the primary credit enhancement for the lender.
When we draw on these facilities, we generally must transfer and pledge eligible assets to the lender and comply with various financial and other covenants. Under our facilities, we generally transfer the assets at a haircut, which serves as the primary credit enhancement for the lender. Four of these facilities are guaranteed by FAH, a consolidated subsidiary of the Company.
Changes in prevailing interest rates, rising inflation rates, U.S. monetary policies or other macroeconomic conditions that affect interest rates may have a detrimental effect on our business and earnings” under the section entitled “Item 1A.Risk Factors,” as such risk factors may be amended or updated in our subsequent periodic reports filed with the Securities and Exchange Commission.
Changes in prevailing interest rates due to U.S. monetary policies or other macroeconomic conditions that affect interest rates may have a detrimental effect on our operations, financial performance, and earnings” under the section entitled “Item 1A. Risk Factors,” as such risk factors may be amended or updated in our subsequent periodic reports filed with the SEC.
We compensate for these limitations by relying primarily on our GAAP results and using our non-GAAP financial measures only as a supplement. Users of our consolidated financial statements are cautioned not to place undue reliance on our non-GAAP financial measures. Adjusted Net Income (Loss) We define Adjusted Net Income (Loss) as consolidated net income (loss) adjusted for: 1.
GAAP results and using our non-GAAP financial measures only as a supplement. Users of our consolidated financial statements are cautioned not to place undue reliance on our non-GAAP financial measures. Adjusted Net Income (Loss) We define Adjusted Net Income (Loss) as consolidated net loss from continuing operations adjusted for: 1.
Other, Net Other, net, primarily includes gains or losses on non-operating assets, revaluation of the warrant liability, and remeasurement of the TRA obligations. Income Taxes FoA Equity is treated as a flow-through entity for U.S. federal income tax purposes. As a result, entity level taxes at FoA Equity are not significant.
Other, Net Other, net, primarily includes gains or losses on non-operating assets and liabilities. 65 Income Taxes FoA Equity is treated as a flow-through entity for U.S. federal income tax purposes. As a result, entity level taxes at FoA Equity are not significant.
Revenue from our Commercial Originations segment include both our initial estimate of fair value gains on the date of origination ("Net origination gains"), which is determined by utilizing quoted prices on similar securities or internally-developed models utilizing observable market inputs, in addition to fees earned at the time of origination of the associated loans.
Revenues from our Retirement Solutions segment include both our initial estimate of net origination gains from reverse mortgage loans, which is determined by utilizing quoted prices on similar securities or internally-developed models utilizing observable market inputs, in addition to fees earned at the time of origination of the associated loans.
Because of these limitations, Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Diluted Earnings (Loss) per Share should not be considered as measures of discretionary cash available to us to invest in the growth of our business or distribute to shareholders.
Because of these limitations, Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Earnings (Loss) per Share should not be considered as measures of discretionary cash available to us to invest in the growth of our business or distribute to shareholders. We compensate for these limitations by relying primarily on our U.S.
The outstanding principal balance of loans held for investment, subject to HMBS related obligations, was $10.7 billion as of December 31, 2022 .
The outstanding principal balance of loans held for investment, subject to HMBS related obligations, was $16.9 billion as of December 31, 2023 .
Our strategy and long-term growth initiatives are built upon a few key fundamental factors: • We are in the process of streamlining our focus and growing our core businesses, which benefit from a shared set of demographic and economic tailwinds.
Our strategy and long-term growth initiatives are built upon a few key fundamental factors: • We are focused on growing our core retirement solutions businesses, which benefit from a shared set of demographic and economic tailwinds.
Management considers Adjusted Net Income (Loss) important in evaluating our Company as a whole. This supplemental metric is utilized by our management team to assess the underlying key drivers and operational performance of the continuing operations of the business. In addition, analysts, investors, and creditors may use this measure when analyzing our operating performance and comparability to peers.
This supplemental metric is utilized by our management team to assess the underlying key drivers and operational performance of the continuing operations of the business. In addition, analysts, investors, and creditors may use this measure when analyzing our operating performance and comparability to peers. Adjusted Net Income (Loss) is not a presentation made in accordance with U.S.
Other factors that may affect our cost base include trends in salaries and benefits costs, sales commissions, technology, rent, legal, compliance, and other general and administrative costs. Management continually monitors these costs through operating plans.
Other factors that may affect our cost base include trends in salaries and benefits costs, sales commissions, technology, rent, legal, compliance, and other general and administrative costs. Management continually monitors these costs through operating plans. Other Recent Events Due to significant inflationary pressures, the U.S.
For the year ended December 31, 2022, the Company determined that the contingent payment is no longer probable of occurring, which is consistent with the Company’s need to record the associated valuation allowance against the deferred tax assets (for more information regarding the valuation allowance see Note 29 - Income Taxes) and has recorded an adjustment through other, net, in the Consolidated Statements of Operations to release the previously estimated contingent TRA liabilities.
During 2022, the Company determined that the contingent liability portion of the TRA obligation no longer probable of occurring, consistent with the Company’s need to record the associated valuation allowance against the deferred tax assets (for more information regarding the valuation allowance see Note 25 - Income Taxes within the Notes to Consolidated Financial Statements) and recorded an adjustment through other, net, in the Consolidated Statements of Operations to release the previously estimated contingent TRA liabilities.
The direct connections to investors, provided by our FINRA registered broker-dealer, complete the lending lifecycle in a way that allows us to innovate and manage risk through better price and product discovery. Given our scale, we are able to work directly with investors and where appropriate, retain assets on balance sheet for attractive return opportunities.
Our Portfolio Management team acts as the connector between borrowers and investors. The direct connections to investors, provided by our FINRA registered broker-dealer, allows us to innovate and manage risk through better price and product discovery. Given our scale, we are able to work directly with investors and, where appropriate, retain assets on the balance sheet for attractive return opportunities.
Our primary uses of funds for liquidity include: (i) funding of borrower advances and draws on outstanding loans; (ii) originations of loans; (iii) payment of operating expenses; (iv) repayment of borrowings and repurchases or redemptions of outstanding indebtedness, and (v) distributions to shareholders for the estimated taxes on pass-through taxable income.
Our primary uses of funds for liquidity include: (i) funding of borrower advances and draws on outstanding loans; (ii) originations of loans; (iii) payment of operating expenses; and (iv) repayment of borrowings and repurchases or redemptions of outstanding indebtedness.
Change in Fair Value of Deferred Purchase Price Obligations - We are obligated to pay contingent consideration to sellers of acquired businesses based on future performance of acquired businesses (Earnouts) as well as realization of tax benefits from the Business Combination (TRA Obligation).
Change in Fair Value of Deferred Purchase Price Obligations - We are obligated to pay contingent consideration to sellers of acquired businesses based on future performance of acquired businesses (Earnouts) as well as realization of tax benefits from certain exchanges of Class A LLC units into Class A Common Stock (TRA Obligation).
As of December 31, 2022 and December 31, 2021, we were in compliance with all of our seller/servicer financial requirements for FHA and Ginnie Mae. Fo r additional information see Note 32 - Liquidity and Capital Requirements within the consolidated financial statements.
As of December 31, 2023 and December 31, 2022, we were in compliance with or had received waivers for all of the other seller/servicer financial requirements for FHA and Ginnie Mae. Fo r additional information see Note 28 - Liquidity and Capital Requirements within the Notes to Consolidated Financial Statements.
A summary of key factors impacting our revenue include: • prevailing interest rates which impact loan origination volume, with declining interest rates leading to increases in volume, and an increasing interest rate environment leading to decreases in volume; • our ability to successfully and timely integrate the business of American Advisor Group, as well as to complete the sales our Incenter subsidiaries and commercial mortgage originations segment; • housing market trends which also impact loan origination volume, with a strong housing market leading to higher loan origination volume, and a weak housing market leading to lower loan origination volume; • demographic and housing stock trends which impact the addressable market size of mortgage, reverse, and commercial loan originations; 60 • movement of market yields required by investors, with widening of investor yields generally having negative impacts on fair value of our financial assets; • increases or decreases in default status of loans and prepayment speeds; and • broad economic factors such as the strength and stability of the overall economy, including sustained higher interest rates and inflation, the unemployment level and real estate values.
A summary of key factors impacting our revenues include: • prevailing interest rates which impact loan origination volume, with declining interest rates leading to increases in volume, and an increasing interest rate environment leading to decreases in volume; • our ability to successfully operate the newly integrated lending platform that we acquired from American Advisors Group in March 2023; • housing market trends which also impact loan origination volume, with a strong housing market leading to higher loan origination volume, and a weak housing market leading to lower loan origination volume; • demographic and housing stock trends which impact the addressable market size; • movement of market interest rates and yields required by investors, with the increasing of market interest rates and yields generally having negative impacts on the fair value of our financial assets, and the decreasing of market interest rates and yields generally having positive impacts on the fair value of our financial assets; • increases or decreases in default status of loans and prepayment speeds; and • broad economic factors such as the strength and stability of the overall economy, including sustained higher or lower interest rates and inflation, the unemployment level, and real estate values.
For the fist three fiscal quarters of 2022, our Company was principally focused on offering (1) loan products throughout the U.S., including traditional mortgage loans, reverse mortgage loans and business purpose loans to residential real estate investors, as well as home improvement loans, and (2) complimentary lender services such as title insurance and settlement services to mortgage business.
Through the end of the third fiscal quarter of 2022, the Company was principally focused on offering (1) a wide array of loan products throughout the U.S., including reverse mortgage loans, traditional mortgage loans, business purpose loans to residential real estate investors, and home improvement loans, and (2) complementary lender services such as title insurance and settlement services to mortgage businesses.
Our consumer-facing business leaders interface directly with the investor-facing professionals in our Portfolio Management segment, facilitating the development of attractive lending solutions for our customers with the confidence that the loans we generate can be efficiently and profitably sold to a deep pool of investors. We are in the moving business, not the storage business.
Our consumer-facing business leaders interface directly with the investor-facing professionals in our Portfolio Management segment, facilitating the development of attractive lending solutions for our customers with the confidence that the loans we generate can be efficiently and profitably sold to a deep pool of investors, either directly via whole-loan sales or indirectly via the issuance and sale of mortgage-backed securities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOriginations (Mortgage, Reverse and Commercial) • an increase in prevailing interest rates could adversely affect our loan origination volume as refinancing activity will be less attractive to existing borrowers. • an increase in interest rates will lead to a higher cost of funds on our outstanding warehouse lines of credit.
Biggest changeInterest Rate Risk Changes in interest rates will, in general, impact our operating segments as follows: Retirement Solutions • an increase in prevailing interest rates could adversely affect our loan origination volume as new loans or refinancing an existing loan will be less attractive to borrowers.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our principal market risk is interest rate risk, primarily to changes in long-term Treasury rates and mortgage interest rates due to their impact on mortgage-related assets and commitments. Changes in short-term interest rates will also have an impact on our warehouse financing lines of credit.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our principal market risk is interest rate risk, primarily to changes in long-term Treasury rates and mortgage interest rates due to their impact on mortgage-related assets. Changes in short-term interest rates will also have an impact on our financing lines of credit.
Interest Rate Risk Changes in interest rates will impact our operating segments as follows: Portfolio Management • an increase in interest rates could generate an increase in delinquency, default, and foreclosure rates resulting in an increase in both higher servicing costs and interest expense on our outstanding debt. • an increase in interest rates and market spreads may cause a reduction in the fair value of our long-term assets. • a decrease in interest rates may generally increase prepayment speeds of our long-term assets which would lead a reduction in the fair value of our long-term assets.
Portfolio Management • an increase in interest rates could generate an increase in delinquency, default, and foreclosure rates resulting in an increase in both servicing costs and interest expense on our outstanding debt. • an increase in interest rates will lead to a higher cost of funds on our financing lines of credit. • an increase in interest rates and market spreads may cause a reduction in the fair value of our long-term assets. • a decrease in interest rates may increase prepayment speeds of our long-term assets which could lead to a reduction in the fair value of our long-term assets.
Our total market risk is impacted by a variety of other factors including market spreads and the liquidity of the markets. There are certain limitations inherent in the sensitivity analysis presented, including the necessity to conduct the analysis based on a single point in time. The sensitivities presented are hypothetical and should be evaluated with care.
There are certain limitations inherent in the sensitivity analysis presented, including the necessity to conduct the analysis based on a single point in time. The sensitivities presented are hypothetical and should be evaluated with care.
Sensitivity Analysis We utilize a sensitivity analysis to assess our market risk associated with changes in interest rates. This sensitivity analysis attempts to assess the potential impact to earnings based on hypothetical changes in interest rates.
Interest rate spreads are impacted by several factors, including forward interest rates, general economic factors, and the quality of the loans in our portfolio. Sensitivity Analysis We utilize a sensitivity analysis to assess our market risk associated with changes in interest rates. This sensitivity analysis attempts to assess the potential impact to earnings based on hypothetical changes in interest rates.
In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.
In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects. 92 The following table summarizes the estimated change in the fair value of our significant assets and liabilities sensitive to interest rates as of December 31, 2023 (in thousands).
The fair value of certain of our outstanding mortgage loans and related liabilities, MSR, and certain investments are valued utilizing a discounted cash flow analysis. The primary assumptions we utilize in these models include prepayment speeds, market discount rates, and credit default rates.
We estimate the fair value of the outstanding mortgage loans and related liabilities using a process that combines the use of a DCF model and analysis of current market data. The cash flow assumptions and prepayment assumptions used in the model are based on various factors.
Removed
Lender Services • an increase in interest rates will lead to lower origination volumes which would negatively impact the amount of title and insurance clients we are able to service and the number of title policies that we are able to underwrite. • lower origination volumes from an increase in interest rates may lead to a reduction in our fulfillment services as we process fewer loans for our clients. • an increase in interest rates may lead to fewer student loan applications that we are asked to process for our clients.
Added
Refer to Note 6 - Fair Value in the Notes to Consolidated Financial Statements for further discussion of the key assumptions and valuation techniques. Our total market risk is impacted by a variety of other factors including market spreads and the liquidity of the markets.
Removed
We actively manage the risk profile of IRLCs and loans held for sale on a daily basis and enter into forward sales of MBS in an amount equal to IRLCs expected to close assuming no change in mortgage interest rates.
Added
December 31, 2023 Down 25 bps Up 25 bps Increase (decrease) in assets Loans held for investment, subject to HMBS related obligations $ 25,001 $ (24,967) Loans held for investment, subject to nonrecourse debt: Reverse mortgage loans 109,154 (107,614) Commercial mortgage loans 218 (217) Loans held for investment: Reverse mortgage loans 5,976 (5,612) Total assets $ 140,349 $ (138,410) Increase (decrease) in liabilities HMBS related obligations $ 21,624 $ (21,559) Nonrecourse debt 62,421 (63,514) Total liabilities $ 84,045 $ (85,073) 93
Removed
Interest rate spreads are impacted by several factors, including forward interest rates, general economic factors, and the quality of the loans in our portfolio. Consumer Credit Risk We are exposed to credit risk in the event that certain of our borrowers are unable to pay their outstanding mortgage balances.
Removed
We manage this credit risk by actively managing delinquencies and defaults through our servicers. We provide servicing oversight of our servicers to ensure they perform loss mitigation, foreclosure and collection functions according to standard acceptable servicing practices and in accordance with our various pooling and servicing agreements.
Removed
We estimate the fair values on our outstanding mortgage loans using a combination of historical loss frequency and loss experience. We principally sell our mortgage loans on a nonrecourse basis. We provide representations and warranties to purchasers of the loans sold over the life of the loan.
Removed
Whenever there is a breach of these representation and warranties we will be required to repurchase the loan or indemnify the purchaser, and any subsequent loss on the loan will be borne by us. If there is no breach of the representation and warranty provision, we have no obligation to indemnify or reimburse the investor against loss.
Removed
The outstanding UPB plus any premiums on the purchased loans represent the maximum potential exposure on outstanding representation and warranties that we are exposed to. We estimate a reserve for losses on repurchased loans and indemnifications for future breaches of representation and warranties on any sold loans.
Removed
This estimate is based on historical data on loan repurchase and indemnity activity, actual losses on repurchase loans and other factors. 106 Counterparty Credit Risk We are exposed to counterparty credit risk in the event of nonperformance by counterparties to various agreements. We monitor the credit ratings of counterparties and do not anticipate material losses due to counterparty nonperformance.
Removed
The table below is presented in thousands. 107 December 31, 2022 Down 25 bps Up 25 bps (in thousands) Increase (decrease) in assets Reverse mortgage loans held for investment, subject to HMBS related obligations $ 22,361 $ (22,370) Mortgage loans held for investment, subject to nonrecourse debt: Reverse mortgage loans 99,535 (98,119) Fix & flip mortgage loans 508 (506) Agricultural loans 129 (129) Mortgage loans held for investment: Reverse mortgage loans 9,462 (9,440) Fix & flip mortgage loans 315 (314) Mortgage loans held for sale: Residential mortgage loans 350 (398) SRL 178 (175) Portfolio 116 (115) MSR (1,439) 1,540 Other assets 332 (332) Derivative assets: IRLCs and LPCs 595 (677) Forward MBS and TBAs (941) 1,057 Interest rate swaps and futures contracts (12,095) 12,095 Total assets $ 119,406 $ (117,883) Increase (decrease) in liabilities HMBS related obligation $ 19,956 $ (19,967) Nonrecourse debt 71,284 (77,277) Derivative liabilities: IRLCs and LPCs (5,395) 5,699 Forward MBS and TBAs 41 (35) Total liabilities $ 85,886 $ (91,580) 108

Other FOA 10-K year-over-year comparisons