| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| (State or other jurisdiction ofincorporation or organization) |
(I.R.S. Employer Identification No.) | |
| Street Address |
||
(Address of Principal Executive Offices) |
(Zip Code) | |
| Title of each class |
Trading Symbol(s) |
Name of each exchangeon which registered | ||
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ | Smaller reporting company | ||||
| Emerging growth company | ||||||
| Table of Contents |
Page |
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3 |
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4 |
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5 |
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7 |
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9 |
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76 |
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September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
(unaudited) |
||||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ |
$ | ||||||
Restricted cash |
||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value |
||||||||
Mortgage loans held for investment, subject to nonrecourse debt, at fair value |
||||||||
Mortgage loans held for investment, at fair value |
||||||||
Mortgage loans held for sale, at fair value |
||||||||
Debt securities |
||||||||
Mortgage servicing rights, at fair value, $ |
||||||||
Derivative assets |
||||||||
Fixed assets and leasehold improvements, net |
||||||||
Goodwill |
||||||||
Intangible assets, net |
||||||||
Other assets, net |
||||||||
TOTAL ASSETS |
$ |
$ |
||||||
LIABILITIES, CONTINGENTLY REDEEMABLE NONCONTROLLING INTEREST (“CRNCI”) AND EQUITY |
||||||||
HMBS related obligation, at fair value |
$ |
$ |
||||||
Nonrecourse debt, at fair value |
||||||||
Other financing lines of credit |
||||||||
Payables and other liabilities |
||||||||
Notes payable, net |
||||||||
TOTAL LIABILITIES |
||||||||
Commitments and Contingencies (Note 21) |
||||||||
CRNCI |
||||||||
EQUITY (Note 30) |
||||||||
FoA Equity Capital LLC member’s equity |
||||||||
Class A Common Stock (Successor), $ |
— | |||||||
Class B Common Stock (Successor), $ |
— | |||||||
Additional paid-in capital (Successor) |
— | |||||||
Accumulated deficit (Successor) |
( |
) |
— | |||||
Accumulated other comprehensive (loss) income |
( |
) |
||||||
Noncontrolling interest |
( |
) | ||||||
TOTAL EQUITY |
||||||||
TOTAL LIABILITIES, CRNCI AND EQUITY |
$ |
$ |
||||||
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
(unaudited) |
||||||||
| ASSETS |
||||||||
| Restricted cash |
$ |
$ |
||||||
| Mortgage loans held for investment, subject to nonrecourse debt, at fair value |
||||||||
| Other assets |
||||||||
| |
|
|
|
|||||
| TOTAL ASSETS |
$ |
$ |
||||||
| |
|
|
|
|||||
| LIABILITIES |
||||||||
| Nonrecourse debt, at fair value |
$ |
$ |
||||||
| Payables and other liabilities |
||||||||
| |
|
|
|
|||||
| TOTAL LIABILITIES |
$ |
$ |
||||||
| |
|
|
|
|||||
| Net fair value of assets subject to nonrecourse debt |
$ |
$ |
||||||
| |
|
|
|
|||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| REVENUES |
||||||||||||||||||||
| Gain on sale and other income from mortgage loans held for sale, net |
$ |
$ |
$ | $ | $ | |||||||||||||||
| Net fair value gains on mortgage loans and related obligations |
||||||||||||||||||||
| Fee income |
||||||||||||||||||||
| Net interest expense: |
||||||||||||||||||||
| Interest income |
||||||||||||||||||||
| Interest expense |
( |
) |
( |
) |
( |
) | ( |
) | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net interest expense |
( |
) |
( |
) |
( |
) | ( |
) | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| TOTAL REVENUES |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| EXPENSES |
||||||||||||||||||||
| Salaries, benefits and related expenses |
||||||||||||||||||||
| Occupancy, equipment rentals and other office related expenses |
||||||||||||||||||||
| General and administrative expenses |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| TOTAL EXPENSES |
||||||||||||||||||||
| OTHER, NET |
( |
) | ( |
) | ( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCOME BEFORE INCOME TAXES |
||||||||||||||||||||
| Provision for income taxes |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCOME |
||||||||||||||||||||
| CRNCI |
( |
) | ( |
) | ||||||||||||||||
| Noncontrolling interest |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| EARNINGS PER SHARE (Note 28) |
||||||||||||||||||||
| Basic weighted average shares outstanding |
||||||||||||||||||||
| Basic net income per share |
$ |
$ |
||||||||||||||||||
| Diluted weighted average shares outstanding |
||||||||||||||||||||
| Diluted net income per share |
$ |
$ |
||||||||||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| NET INCOME |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
| COMPREHENSIVE LOSS ITEM: |
||||||||||||||||||||
| Impact of foreign currency translation adjustment |
( |
) |
( |
) |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| TOTAL COMPREHENSIVE INCOME |
||||||||||||||||||||
| Less: Comprehensive income (loss) attributable to the noncontrolling interest and CRNCI |
( |
) | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST |
$ |
$ |
$ | $ | $ | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
FoA Equity Capital LLC Member’s Equity |
Accumulated Other Comprehensive (Loss) Income |
Noncontrolling Interest |
Total |
|||||||||||||
| Predecessor: |
||||||||||||||||
| Balance at December 31, 2019 (audited) |
$ |
$ | ( |
) | $ | $ |
||||||||||
| Contributions from members |
— | — | ||||||||||||||
| Net (loss) income |
( |
) | — | ( |
) | |||||||||||
| Foreign currency translation adjustment |
— | ( |
) | — | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance at March 31, 2020 |
( |
) | ||||||||||||||
| Distributions to members |
( |
) | — | — | ( |
) | ||||||||||
| Noncontrolling interest distributions |
— | — | ( |
) | ( |
) | ||||||||||
| Net income |
— | |||||||||||||||
| Foreign currency translation adjustment |
— | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance at June 30, 2020 |
( |
) | ||||||||||||||
| Distributions to members |
( |
) | — |
— |
( |
) | ||||||||||
| Noncontrolling interest contributions |
— | — | ||||||||||||||
| Noncontrolling interest distributions |
— | — | ( |
) | ( |
) | ||||||||||
| Net income |
— | |||||||||||||||
| Foreign currency translation adjustment |
— | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance at September 30, 2020 |
$ |
$ |
( |
) |
$ |
$ |
||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance at December 31, 2020 (audited) |
$ |
$ |
$ |
( |
) |
$ |
||||||||||
| Contributions from members |
— | — | ||||||||||||||
| Distributions to members |
( |
) | — | — | ( |
) | ||||||||||
| Noncontrolling interest distributions |
— | — | ( |
) | ( |
) | ||||||||||
| Net income |
— | |||||||||||||||
| Accretion of CRNCI to redemption price |
( |
) | — | — | ( |
) | ||||||||||
| Foreign currency translation adjustment |
— | ( |
) | — | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance at March 31, 2021 |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||
| |
|
|
|
|
|
|
|
|||||||||
Class A Common Stock |
Class B Common Stock |
Noncontrolling Interest |
||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Additional Paid-in Capital |
Retained Earnings / Accumulated Deficit |
Accumulated Other Comprehensive Loss |
Class A LLC Units |
Amount |
Total Equity |
|||||||||||||||||||||||||||||||
| Successor: |
||||||||||||||||||||||||||||||||||||||||
| Balance |
$ | $ | — | $ | $ | ( |
) | $ | — | $ | $ | |||||||||||||||||||||||||||||
| Net (loss) income |
— | — | — | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Noncontrolling contributions |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Noncontrolling distributions |
— | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Equity compensation - Restricted Stock Units (“RSUs”) |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Balance |
$ |
$ |
— |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Net income |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||
| Noncontrolling distributions |
— |
— |
— |
— |
— |
— |
— |
— |
( |
) |
( |
) | ||||||||||||||||||||||||||||
| Equity based compensation |
— |
— |
— |
— |
— |
— |
— |
— |
||||||||||||||||||||||||||||||||
| Net surrender to settle RSUs |
( |
) |
— |
( |
) |
— |
— |
— |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— |
— |
— |
— |
— |
— |
( |
) |
— |
( |
) | |||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Balance at September 30, 2021 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the nine months ended September 30, 2020 |
||||||||||
Successor |
Predecessor |
|||||||||||
| Operating Activities |
||||||||||||
| Net income |
$ |
$ |
$ | |||||||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
( |
) |
( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
| Net cash (used in) provided by operating activities |
( |
) |
( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Investing Activities |
||||||||||||
| Purchases and originations of mortgage loans held for investment |
( |
) |
( |
) | ( |
) | ||||||
| Proceeds/payments received on mortgage loans held for investment |
||||||||||||
| Purchases and origination of mortgage loans held for investment, subject to nonrecourse debt |
( |
) |
( |
) | ( |
) | ||||||
| Proceeds/payments on mortgage loans held for investment, subject to nonrecourse debt |
||||||||||||
| Purchases of debt securities |
( |
) |
( |
) | ( |
) | ||||||
| Proceeds/payments on debt securities, net |
||||||||||||
| Purchases of mortgage servicing rights |
( |
) |
( |
) | — | |||||||
| Proceeds on sale of mortgage servicing rights |
— | |||||||||||
| Acquisition of subsidiaries, net of cash acquired |
( |
) |
( |
) | ||||||||
| Purchase of investments |
— |
— | ( |
) | ||||||||
| Acquisition of fixed assets |
( |
) |
( |
) | ( |
) | ||||||
| Payments on deferred purchase price liability |
( |
) |
( |
) | ( |
) | ||||||
| Issuance of convertible notes receivable |
— |
( |
) | — | ||||||||
| DIP Financing |
— |
( |
) | — | ||||||||
| |
|
|
|
|
|
|||||||
| Net cash used in investing activities |
( |
) |
( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
| Financing Activities |
||||||||||||
| Proceeds from securitizations of reverse mortgage loans, subject to HMBS related obligations |
||||||||||||
| Payments of HMBS related obligations |
( |
) |
( |
) | ( |
) | ||||||
| Proceeds from issuance of nonrecourse debt, net |
||||||||||||
| Payments on nonrecourse debt |
( |
) |
( |
) | ( |
) | ||||||
| Proceeds from other financing lines of credit |
||||||||||||
| Payments on other financing lines of credit |
( |
) |
( |
) | ( |
) | ||||||
| Debt issuance costs |
( |
) |
( |
) | ( |
) | ||||||
| Payments on notes payable |
— |
— | ( |
) | ||||||||
| Principal payments under capital lease obligation |
— |
— | ( |
) | ||||||||
| Member contributions |
||||||||||||
| Member distributions |
( |
) | ( |
) | ||||||||
| Settlement of CRNCI |
( |
) |
— | — | ||||||||
| Noncontrolling interest contributions |
— | |||||||||||
| Noncontrolling interest distributions |
( |
) |
( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
| Net cash provided by financing activities |
||||||||||||
| |
|
|
|
|
|
|||||||
| Foreign currency translation adjustment |
( |
) |
( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Net (decrease) increase in cash and restricted cash |
( |
) |
||||||||||
| Cash and restricted cash, beginning of period |
||||||||||||
| |
|
|
|
|
|
|||||||
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the nine months ended September 30, 2020 |
||||||||||
Successor |
Predecessor |
|||||||||||
| Cash and restricted cash, end of period |
$ |
$ | $ | |||||||||
| |
|
|
|
|
|
|||||||
| Supplementary Cash Flows Information |
||||||||||||
| Cash paid for interest |
$ |
$ | $ | |||||||||
| Cash paid for taxes, net |
||||||||||||
| Loans transferred to mortgage loans held for investment, at fair value, from mortgage loans held for investment, subject to nonrecourse debt, at fair value |
||||||||||||
| Loans transferred to mortgage loans held for sale, at fair value, from mortgage loans held for investment, at fair value |
— | |||||||||||
| Loans transferred to government guaranteed receivables from mortgage loans held for investment, at fair value, and mortgage loans held for investment, subject to nonrecourse debt, at fair value |
||||||||||||
| Loans transferred to mortgage loans held for investment, subject to nonrecourse debt, at fair value, from mortgage loans held for investment, at fair value |
||||||||||||
| Loans transferred to mortgage loans held for investment, subject to HMBS, at fair value, from mortgage loans held for investment, at fair value |
— | |||||||||||
| • | records an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based on enacted U.S. federal and state tax rates at the date of the exchange; |
| • | to the extent we estimate that the Company will not realize the full benefit represented by the deferred tax asset, based on an analysis that will consider, among other things, our expectation of future earnings, the Company reduces the deferred tax asset with a valuation allowance; and |
| • | initial measurement of the obligations is at fair value on the acquisition date. Subsequently, the liability will be remeasured at fair value each reporting period, with any changes in fair value recognized through earnings. |
| Standard |
Description |
Effective Date |
Effect on Consolidated Financial Statements | |||
ASU 2016-13 , Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2020-03, Codification Improvements to Financial Instruments |
Requires use of the current expected credit loss model that is based on expected losses (net of expected recoveries), rather than incurred losses, to determine our allowance for credit losses on financial assets measured at amortized cost, certain net investments in leases and certain off-balance sheet arrangements. Replaces current accounting for purchased credit impaired (“PCI”) and impaired loans. Amends the other-than-temporary impairment model for available for sale debt securities. The new guidance requires that credit losses be recorded through an allowance approach, rather than through permanent write-downs for credit losses and subsequent accretion of positive changes through interest income over time. |
January 2020 |
The Company determined that certain servicer advances and other receivables, net of reserves included in other assets are within the scope of ASU 2016-13. The Company determined that these receivables have limited expected credit-related losses due to the contractual servicing agreements with agencies and loan product guarantees. Furthermore, the Company determined that for outstanding servicer and other advances, the majority of estimated losses are attributable to losses due to operational servicing defects and credit-related losses are not significant because of the contractual relationship with the agencies. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements. | |||
ASU 2018-17 , Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities |
The amendments in this Update require that indirect interests held through related parties under common control be considered on a proportional basis when determining whether fees paid to decision makers or service providers are variable interests. These amendments align with the determination of whether a reporting entity within a related party group is the primary beneficiary of a VIE. |
January 2020 |
The Company adopted this guidance using the prospective method of adoption. Adoption of this standard did not have a material impact on the consolidated financial statements. | |||
ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment |
Historical guidance for goodwill impairment testing prescribed that the Company must compare each reporting unit’s carrying value to its fair value. If the carrying value exceeds fair value, an entity performs the second step, which assigns the reporting unit’s fair value to its assets and liabilities, including unrecognized assets and liabilities, in the same manner as required in purchase accounting and then records an impairment. This ASU eliminates the second step. Under the new guidance, an impairment of a reporting unit’s goodwill is determined based on the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the amount of goodwill allocated to the reporting unit. |
January 2020 |
The Company adopted this guidance using the prospective method of adoption. Adoption of this standard did not have a material impact on the consolidated financial statements. | |||
| Standard |
Description |
Effective Date |
Effect on Consolidated Financial Statements | |||
ASU 2018-13 , Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement |
The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurements, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. Certain disclosure requirements were either removed, modified, or added. This guidance removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 fair value measurement methodologies, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. It also adds requirements for the disclosure of a) changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and b) the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. For certain unobservable inputs, entities may disclose other quantitative information in lieu of the weighted average if the other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. |
January 2020 |
The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. | |||
ASU 2018-15 , Intangibles - Goodwill and Other - Internal- Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract |
The amendments in this Update align the requirements for capitalizing implementation costs incurred in a service-contract hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). |
January 2020 |
The Company adopted this guidance using the prospective method of adoption. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements. | |||
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes |
This amendment simplifies various aspects of the guidance on accounting for income taxes. |
January 2021 |
The Company adopted this guidance using the prospective method of adoption. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements. | |||
| Standard |
Description |
Effective Date |
Effect on Consolidated Financial Statements | |||
ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946): Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants |
In August 2021, the FASB issued ASU 2021-06 to align the SEC paragraphs in the codification with the new SEC rules issued in May 2020 relating to changes to the disclosure requirements for acquisitions and dispositions. ASU No. 2021-06 amends and supersedes various SEC paragraphs in FASB’s Topic 205, Presentation of Financial Statements, and Topic 946, Investment Companies. In May 2020, the SEC issued Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, to update the financial disclosure requirements in Regulation S-X for acquisitions and dispositions of businesses. In addition, to address the unique attributes of investment companies and business development companies, the SEC adopted new requirements regarding fund acquisitions specific to registered investment companies and business development companies. Regulation S-X Rule 3-05 generally requires a registrant to provide separate audited annual and unaudited interim pre-acquisition financial statements of the business if it is significant to the registrant using the investment, asset, and income tests. The amendments in this Update include changes to the investment and income tests when measuring significance, and raising the significance threshold for reporting the disposition of a business on Form 8-K from |
January 2021 |
This ASU is effective for all acquisitions and disposals occurring after January 1, 2021. The Company adopted this guidance using the retrospective method of adoption. The Company evaluated the significance of all material acquisitions and disposals using the final amendments and determined it was in compliance. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements. |
| Standard |
Description |
Date of Planned Adoption |
Effect on Consolidated Financial Statements | |||
| ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ASU 2021-01, Reference Rate Reform (Topic 848): Codification Clarification |
The amendments in this Update provide temporary optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Inter-Bank Offered Rate (“LIBOR”) or other interbank offered rates expected to be discontinued. In January 2021, FASB issued an Update which refines the scope of ASU Topic 848 and clarifies the guidance issued to facilitate the effects of reference rate reform on financial reporting. The amendment permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements and calculating price alignment interest in connection with reference rate reform activities. |
TBD |
This ASU is effective from March 12, 2020 through December 31, 2022. If LIBOR ceases to exist or if the methods of calculating LIBOR change from the current methods for any reasons, interest rates on our floating rate loans, obligation derivatives, and other financial instruments tied to LIBOR rates, may be affected and need renegotiation with its lenders. The Company continues to assess the potential impact that the adoption of this ASU will have on the Company’s consolidated financial statements and related disclosures. | |||
ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation(Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options |
The amendments in this Update affect all entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in Topic 260, Earnings Per Share. |
January 2022 |
This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption of this standard is not expected to have any material impact on the Company’s consolidated financial statements as it currently does not apply. | |||
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| ASSETS |
||||||||
| Restricted cash |
$ |
$ | ||||||
| Mortgage loans held for investment, subject to nonrecourse debt, at fair value |
||||||||
| Other assets |
||||||||
| |
|
|
|
|||||
| TOTAL ASSETS |
$ |
$ | ||||||
| |
|
|
|
|||||
| LIABILITIES |
||||||||
| Nonrecourse debt, at fair value |
$ |
$ | ||||||
| Payables and other liabilities |
||||||||
| |
|
|
|
|||||
| TOTAL VIE LIABILITIES |
||||||||
| |
|
|
|
|||||
| Retained bonds and beneficial interests eliminated in consolidation |
( |
) |
( |
) | ||||
| |
|
|
|
|||||
| TOTAL CONSOLIDATED LIABILITIES |
$ |
$ | ||||||
| |
|
|
|
|||||
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Unconsolidated securitization trusts: |
||||||||
| Total collateral balances – UPB |
$ |
$ | ||||||
| |
|
|
|
|||||
| Total certificate balances |
$ |
$ | ||||||
| |
|
|
|
|||||
| Consideration transferred: |
||||
| Total cash consideration |
$ | |||
| Blocker rollover equity |
||||
| Seller earnout contingent consideration (1) |
||||
| Tax receivable agreement obligations to the seller |
||||
| |
|
|||
| Total consideration transferred |
||||
| Noncontrolling interest |
||||
| |
|
|||
| Total equity value |
$ | |||
| |
|
|||
| Assets acquired: |
||||
| Cash and cash equivalents |
$ | |||
| Restricted cash |
||||
| Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value |
||||
| Mortgage loans held for investment, subject to nonrecourse debt, at fair value |
||||
| Mortgage loans held for investment, at fair value |
||||
| Mortgage loans held for sale, at fair value |
||||
| Debt securities |
||||
| Mortgage servicing rights, at fair value |
||||
| Derivative assets |
||||
| Fixed assets and leasehold improvements, net |
||||
| Intangible assets, net (2) |
||||
| Other assets, net |
||||
| |
|
|||
| Total assets acquired |
$ | |||
| |
|
|||
| Liabilities assumed: |
||||
| HMBS related obligations, at fair value |
$ | |||
| Nonrecourse debt, at fair value |
||||
| Other financing lines of credit |
||||
| Payables and other liabilities |
||||
| Notes payable, net |
||||
| |
|
|||
| Total liabilities assumed |
$ | |||
| |
|
|||
| Net identifiable assets acquired |
||||
| |
|
|||
| Goodwill (3) |
$ | |||
| |
|
(1) |
Represents the estimated fair market value of earnout shares issued to Sellers, which will be settled with shares of Class A Common Stock and is accounted for as equity classified contingent consideration. These estimated fair values are preliminary and subject to adjustments in subsequent periods. |
(2) |
Intangible assets were identified that met either the separability criterion or contractual legal criterion. The evaluations of the facts and circumstances available as of April 1, 2021, to assign provisional fair values to assets acquired and liabilities assumed are ongoing, including the assessments of the economic characteristics of intangible assets. These evaluations may result in changes to the provisional amounts recorded based on third party valuations performed. The indefinite lived trade names and definite lived trade names intangible assets represent the values of all the Company’s trade names. The broker/customer relationships intangible asset represents the existing broker/customer relationships. |
(3) |
Goodwill represents the excess of the gross consideration transferred over the provisional fair value of the underlying net tangible and identifiable intangible assets acquired. Goodwill represents future economic benefits arising from acquiring FoA Equity, primarily due to its strong market position and its assembled workforce that are not individually identified and separately recognized as intangible assets. Approximately $ |
| Identifiable intangible assets |
Provisional Fair value (in thousands) |
Provisional Useful life (in years) |
||||||
| Indefinite lived trade names |
$ | N/A | ||||||
| Definite lived trade names |
||||||||
| Broker/customer relationships |
||||||||
| |
|
|||||||
| Total |
$ | |||||||
| |
|
|||||||
(in thousands) |
For the three months ended September 30, |
For the nine months ended September 30, |
||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
| Pro forma revenues |
$ | $ | $ | $ | ||||||||||||
| Pro forma net income |
||||||||||||||||
| Pro forma net income attributable to controlling interest |
||||||||||||||||
| Pro forma net income (loss) attributable to noncontrolling interest |
||||||||||||||||
Acquisition Date Fair Value |
||||
| L oans held for sale, at fair value (1) |
$ | |||
| Intangible assets |
||||
| Goodwill |
||||
| Other assets, net |
||||
| |
|
|||
| Net assets acquired |
$ | |||
| |
|
|||
(1) |
These loans held for sale, at fair value are included as a component of mortgage loans held for sale, at fair value on the Consolidated Statements of Financial Condition. |
Provisional Fair Value (in thousands) |
Provisional Useful Life (in years) |
|||||||
| Technology |
$ | |||||||
5. |
Fair Value |
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Conditional repayment rate |
NM |
% |
NM | % | ||||||||||||
| Loss frequency |
NM |
% |
NM | % | ||||||||||||
| Loss severity |
% |
% | ||||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
| Average draw rate |
NM |
% |
NM | % | ||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Conditional repayment rate |
NM |
% |
NM | % | ||||||||||||
| Loss frequency |
% |
% | ||||||||||||||
| Loss severity |
% |
% | ||||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Weighted average remaining life (in years) |
NM |
NM | ||||||||||||||
| Conditional repayment rate |
NM |
% |
NM | % | ||||||||||||
| Loss severity |
% |
% | ||||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Weighted-average remaining life (in years) |
NM |
NM | ||||||||||||||
| Loan to value |
% |
% | ||||||||||||||
| Conditional repayment rate |
NM |
% |
NM | % | ||||||||||||
| Loss severity |
NM |
% |
NM | % | ||||||||||||
| Home price appreciation |
% |
% | ||||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Prepayment rate (SMM) |
NM |
% |
NM | % | ||||||||||||
| Discount rate |
NM |
% |
% | |||||||||||||
| Loss frequency |
% |
% | ||||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Conditional repayment rate |
NM |
% |
NM | % | ||||||||||||
| Loss frequency |
NM |
% |
NM | % | ||||||||||||
| Loss severity |
NM | % |
NM | % | ||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Weighted average remaining life (in years) |
NM |
NM | ||||||||||||||
| Loan to value |
% |
% | ||||||||||||||
| Conditional repayment rate |
NM |
% |
NM | % | ||||||||||||
| Loss severity |
NM |
% |
NM | % | ||||||||||||
| Home price appreciation |
% |
% | ||||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
September 30, 2021 |
||||||||
Successor |
||||||||
| Inputs |
Range |
Weighted Average |
||||||
| Prepayment rate (SMM) |
NM |
% | ||||||
| Discount rate |
NM |
% | ||||||
| Loss frequency |
NM |
% | ||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
| Prepayment rate (SMM) |
% |
% | ||||||||||||||
| Default rate (CDR) |
NM |
% |
% | |||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Prepayment rate (CPR) |
% |
% | ||||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
| Default rate (CDR) |
% |
% | ||||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Prepayment rate (CPR) |
% |
% | ||||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
| Default rate (CDR) |
% |
% | ||||||||||||||
December 31, 2020 |
||||||||
Predecessor |
||||||||
| Inputs |
Range |
Weighted Average |
||||||
| Prepayment rate (SMM) |
NM | % | ||||||
| Discount rate |
% | |||||||
| Loss frequency |
NM | % | ||||||
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Capitalization servicing rate |
% |
% | ||||||
| Capitalization servicing multiple |
||||||||
| Weighted average servicing fee (in basis points) |
||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Weighted average prepayment speed (CPR) |
% |
% | ||||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
| Weighted average delinquency rate |
% |
% | ||||||||||||||
September 30, 2021 |
||||||||||||
Successor |
||||||||||||
Weighted Average Prepayment Speed |
Discount Rate |
Weighted Average Delinquency Rate |
||||||||||
| Impact on fair value of 10% adverse change |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||
| Impact on fair value of 20% adverse change | ( |
) |
( |
) |
( |
) | ||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Conditional repayment rate |
NM |
% |
NM | % | ||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Performing/Nonperforming HECM securitizations |
||||||||||||||||
| Weighted average remaining life (in years) |
- |
- |
||||||||||||||
| Conditional repayment rate |
% |
% | ||||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
| Securitized Non-Agency Reverse |
||||||||||||||||
| Weighted average remaining life (in years) |
||||||||||||||||
| Conditional repayment rate |
% |
% | ||||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Weighted average remaining life (in months) |
NM |
|||||||||||||||
| Weighted average prepayment speed (SMM) |
NM |
% |
% | |||||||||||||
| Discount rate |
NM |
% |
NM | % | ||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Inputs |
Range |
Weighted Average |
Range |
Weighted Average |
||||||||||||
| Weighted average prepayment speed (CPR) |
% |
% | ||||||||||||||
| Discount rate |
% |
% | ||||||||||||||
| Weighted average delinquency rate |
NM |
% |
NM | % | ||||||||||||
September 30, 2021 |
||||||||||||
Successor |
||||||||||||
Weighted Average Prepayment Speed |
Discount Rate |
Weighted Average Delinquency Rate |
||||||||||
Impact on fair value of 10% adverse change |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||
| Impact on fair value of 20% adverse change | ( |
) |
( |
) |
( |
) | ||||||
September 30, 2021 |
||||||||
Successor |
||||||||
Inputs |
Range |
Weighted Average |
||||||
Weighted average remaining life (in years) |
||||||||
Discount rate |
% |
% | ||||||
September 30, 2021 |
||||||||||||||||
Successor |
||||||||||||||||
Total Fair Value |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||
Assets |
||||||||||||||||
Reverse mortgage loans held for investment, subject to HMBS related obligations |
$ |
$ |
$ |
$ |
||||||||||||
Mortgage loans held for investment, subject to nonrecourse debt: |
||||||||||||||||
Reverse mortgage loans |
||||||||||||||||
Fix & flip mortgage loans |
||||||||||||||||
Mortgage loans held for investment: |
||||||||||||||||
Reverse mortgage loans |
||||||||||||||||
Fix & flip mortgage loans |
||||||||||||||||
Agricultural loans |
||||||||||||||||
Mortgage loans held for sale: |
||||||||||||||||
Residential mortgage loans |
||||||||||||||||
SRL |
||||||||||||||||
Portfolio |
||||||||||||||||
Mortgage servicing rights |
||||||||||||||||
Derivative assets: |
||||||||||||||||
Forward commitments, TBAs, and Treasury Futures |
||||||||||||||||
IRLCs |
||||||||||||||||
Forward MBS |
||||||||||||||||
Interest rate swap futures |
||||||||||||||||
Other assets: |
||||||||||||||||
Investments |
||||||||||||||||
Retained bonds |
||||||||||||||||
Total assets |
$ |
$ |
$ |
$ |
||||||||||||
Liabilities |
||||||||||||||||
HMBS related obligation |
$ |
$ |
$ |
$ |
||||||||||||
Nonrecourse debt: |
||||||||||||||||
Nonrecourse debt in VIE trusts |
||||||||||||||||
Nonrecourse MSR financing liability |
||||||||||||||||
Deferred purchase price liabilities: |
||||||||||||||||
Deferred purchase price liabilities |
||||||||||||||||
TRA obligation |
||||||||||||||||
Derivative liabilities: |
||||||||||||||||
Forward MBS |
||||||||||||||||
Forward commitments, TBAs, and Treasury Futures |
||||||||||||||||
Interest rate swap futures |
||||||||||||||||
Warrants |
||||||||||||||||
Total liabilities |
$ |
$ |
$ |
$ |
||||||||||||
December 31, 2020 |
||||||||||||||||
Predecessor |
||||||||||||||||
Total Fair Value |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||
Assets |
||||||||||||||||
| Reverse mortgage loans held for investment, subject to HMBS related obligations |
$ |
$ |
— | $ |
— | $ |
||||||||||
| Mortgage loans held for investment, subject to nonrecourse debt: |
||||||||||||||||
| Reverse mortgage loans |
— | — | ||||||||||||||
| Fix & flip mortgage loans |
— | — | ||||||||||||||
| Mortgage loans held for investment: |
||||||||||||||||
| Reverse mortgage loans |
— | — | ||||||||||||||
| Agricultural loans |
— | — | ||||||||||||||
| Mortgage loans held for sale: |
||||||||||||||||
| Residential mortgage loans |
— | |||||||||||||||
| SRL |
— | — | ||||||||||||||
| Portfolio |
— | — | ||||||||||||||
| Fix & flip mortgage loans |
— | — | ||||||||||||||
| Mortgage servicing rights |
— | — | ||||||||||||||
| Derivative assets: |
||||||||||||||||
| Forward commitments and TBAs |
— | |||||||||||||||
| IRLCs |
— | — | ||||||||||||||
| Interest rate swaps and interest rate swap futures |
— | |||||||||||||||
| Other assets: |
||||||||||||||||
| Investments |
— | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ |
$ |
$ |
$ |
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Liabilities |
||||||||||||||||
| HMBS related obligation |
$ |
$ |
— | $ |
— | $ |
||||||||||
| Nonrecourse debt: |
||||||||||||||||
| Nonrecourse debt in VIE trusts |
— | — | ||||||||||||||
| Nonrecourse MSR financing liability |
— | — | ||||||||||||||
| Deferred purchase price liabilities |
— | — | ||||||||||||||
| Derivative liabilities: |
||||||||||||||||
| Forward MBS |
— | — | ||||||||||||||
| Forward commitments and TBAs |
— | |||||||||||||||
| Interest rate swaps and interest rate swap futures |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
$ |
$ |
$ |
$ |
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Successor |
||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||
September 30, 2021 |
Mortgage loans held for investment |
Mortgage loans held for investment, subject to nonrecourse debt |
Mortgage loans held for sale |
Derivative assets |
Mortgage servicing rights |
Retained bonds |
Investments |
|||||||||||||||||||||
| Beginning balance, April 1, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
| Total gain or losses included in earnings |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||
| Purchases, settlements and transfers: |
||||||||||||||||||||||||||||
| Purchases and additions, net |
— |
— |
||||||||||||||||||||||||||
| Sales and settlements |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
— |
|||||||||||||||
| Transfers in/(out) between categories |
( |
) | — |
— |
— |
|||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Ending balance, September 30, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Successor |
||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
September 30, 2021 |
HMBS obligations |
Derivative liabilities |
Deferred purchase price liabilities |
Nonrecourse debt in VIE trusts |
Nonrecourse MSR financing liability |
TRA Liability |
||||||||||||||||||
| Beginning balance, April 1, 2021 |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||
| Total gains or losses included in earnings |
( |
) |
( |
) |
( |
) | ||||||||||||||||||
| Purchases, settlements and transfers: |
||||||||||||||||||||||||
| Purchases and additions, net |
( |
) |
— |
( |
) |
( |
) |
( |
) |
( |
) | |||||||||||||
| Settlements |
— |
|||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ending balance, September 30, 2021 |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Predecessor |
||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||
March 31, 2021 |
Mortgage loans held for investment |
Mortgage loans held for investment, subject to nonrecourse debt |
Mortgage loans held for sale |
Derivative assets |
Mortgage servicing rights |
Investments |
||||||||||||||||||
| Beginning balance, January 1, 2021 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total gain or losses included in earnings |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Purchases, settlements and transfers: |
||||||||||||||||||||||||
| Purchases and additions, net |
— | — | ||||||||||||||||||||||
| Sales and settlements |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | — | |||||||||||||
| Transfers in/(out) between categories |
( |
) | ( |
) | — | — | — | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ending balance, March 31, 2021 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Predecessor |
||||||||||||||||||||
Liabilities |
||||||||||||||||||||
March 31, 2021 |
HMBS related obligations |
Derivative liabilities |
Deferred purchase price liability |
Nonrecourse debt in VIE trusts |
Nonrecourse MSR financing liability |
|||||||||||||||
| Beginning balance, January 1, 2021 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
| Total gain or losses included in earnings |
( |
) | — | ( |
) | ( |
) | |||||||||||||
| Purchases, settlements and transfers: |
| |||||||||||||||||||
| Purchases and additions, net |
( |
) | — | — | ( |
) | ( |
) | ||||||||||||
| Sales and settlements |
— | |||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Ending balance, March 31, 2021 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Predecessor |
||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||
December 31, 2020 |
Mortgage loans held for investment |
Mortgage loans held for investment, subject to nonrecourse debt |
Mortgage loans held for sale |
Derivative assets |
Mortgage servicing rights |
Debt securities |
Investments |
|||||||||||||||||||||
| Beginning balance, January 1, 2020 |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Total gain or losses included in earnings |
( |
) | ( |
) | ||||||||||||||||||||||||
| Purchases, settlements and transfers: |
||||||||||||||||||||||||||||
| Purchases and additions, net |
||||||||||||||||||||||||||||
| Sales and settlements |
( |
) | ( |
) | ( |
) | — | — | ( |
) | — | |||||||||||||||||
| Transfers in/(out) between categories |
( |
) | — | — | — | — | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Ending balance, December 31, 2020 |
$ | $ | $ | $ | $ | $ | — |
$ | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Predecessor |
||||||||||||||||||||
Liabilities |
||||||||||||||||||||
December 31, 2020 |
HMBS related obligations |
Derivative liabilities |
Deferred purchase price liabilities |
Nonrecourse debt in VIE trusts |
Nonrecourse MSR Financing Liability |
|||||||||||||||
| Beginning balance, January 1, 2020 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | — | ||||||
| Total gain or losses included in earnings |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Purchases, settlements and transfers: |
||||||||||||||||||||
| Purchases and additions, net |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
| Sales and settlements |
— | |||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Ending balance, December 31, 2020 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Successor: |
||||||||
| September 30, 2021 |
Estimated Fair Value |
Unpaid Principal Balance |
||||||
| Assets at fair value under the fair value option |
||||||||
| Reverse mortgage loans held for investment, subject to HMBS related obligations |
$ |
$ |
||||||
| Mortgage loans held for investment, subject to nonrecourse debt: |
||||||||
| Reverse mortgage loans |
||||||||
| Commercial mortgage loans |
||||||||
| Mortgage loans held for investment: |
||||||||
| Reverse mortgage loans |
||||||||
| Commercial mortgage loans |
||||||||
| Mortgage loans held for sale: |
||||||||
| Residential mortgage loans |
||||||||
| Commercial mortgage loans |
||||||||
| Liabilities at fair value under the fair value option |
||||||||
| HMBS related obligations |
||||||||
| Nonrecourse debt: |
||||||||
| Nonrecourse debt in VIE trusts |
||||||||
Predecessor: |
||||||||
| December 31, 2020 |
Estimated Fair Value |
Unpaid Principal Balance |
||||||
| Assets at fair value under the fair value option |
||||||||
| Reverse mortgage loans held for investment, subject to HMBS related obligations |
$ |
$ |
||||||
| Mortgage loans held for investment, subject to nonrecourse debt: |
||||||||
| Reverse mortgage loans |
||||||||
| Commercial mortgage loans |
||||||||
| Mortgage loans held for investment: |
||||||||
| Reverse mortgage loans |
||||||||
| Commercial mortgage loans |
||||||||
| Mortgage loans held for sale: |
||||||||
| Residential mortgage loans |
||||||||
| Commercial mortgage loans |
||||||||
| Liabilities at fair value under the fair value option |
||||||||
| HMBS related obligations |
||||||||
| Nonrecourse debt: |
||||||||
| Nonrecourse debt in VIE trusts |
||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Net fair value gains on mortgage loans and related obligations: |
||||||||||||||||||||
| Interest income on mortgage loans |
$ |
$ |
$ | $ | $ | |||||||||||||||
| Change in fair value of mortgage loans |
( |
) |
( |
) |
( |
) | ||||||||||||||
| Change in fair value of mortgage-backed securities |
— |
— |
— | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net fair value gains on mortgage loans |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Interest expense on related obligations |
( |
) |
( |
) |
( |
) | ( |
) | ( |
) | ||||||||||
| Change in fair value of derivatives |
( |
) |
( |
) | ||||||||||||||||
| Change in fair value of related obligations |
( |
) | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net fair value gains (losses) on related obligations |
( |
) |
( |
) | ( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net fair value gains on mortgage loans and related obligations |
$ |
$ |
$ | $ | $ | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Reverse mortgage loans: |
||||||||
| Reverse mortgage loans held for investment, subject to HMBS related obligations |
$ |
$ |
||||||
| Reverse mortgage loans held for investment: |
||||||||
| Non-agency reverse mortgages |
||||||||
| Loans not securitized (1) |
||||||||
| Unpoolable loans (2) |
||||||||
| Unpoolable tails |
||||||||
| |
|
|
|
|||||
| Total reverse mortgage loans held for investment |
||||||||
| Reverse mortgage loans held for investment, subject to nonrecourse debt: |
||||||||
| Performing HECM buyouts |
||||||||
| Nonperforming HECM buyouts |
||||||||
| Non-agency reverse mortgages |
||||||||
| |
|
|
|
|||||
| Total reverse mortgage loans held for investment, subject to nonrecourse debt |
||||||||
| |
|
|
|
|||||
| Total owned reverse mortgage portfolio |
||||||||
| Loans reclassified as government guaranteed receivable |
||||||||
| Loans serviced for others |
||||||||
| |
|
|
|
|||||
| Total serviced reverse mortgage loan portfolio |
$ |
$ | ||||||
| |
|
|
|
|||||
(1) |
Loans not securitized represent primarily newly originated loans. |
(2) |
Unpoolable loans represent primarily loans that have reached |
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Fixed rate loans |
$ |
$ |
||||||
| Adjustable rate loans |
||||||||
| |
|
|
|
|||||
| Total owned reverse mortgage portfolio |
$ |
$ |
||||||
| |
|
|
|
|||||
7. |
Reverse Mortgage Loans Held for Investment, Subject to HMBS Related Obligations, at Fair Value |
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Reverse mortgage loans held for investment, subject to HMBS related obligations - UPB |
$ |
$ | ||||||
| Fair value adjustments |
||||||||
| |
|
|
|
|||||
| Total reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value |
$ |
$ | ||||||
| |
|
|
|
|||||
8. |
Mortgage Loans Held for Investment, Subject to Nonrecourse Debt, at Fair Value |
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Mortgage loans held for investment, subject to nonrecourse debt - UPB: |
||||||||
| Reverse mortgage loans |
$ |
$ | ||||||
| Commercial mortgage loans |
||||||||
| Fair value adjustments |
||||||||
| |
|
|
|
|||||
| Total mortgage loans held for investment, subject to nonrecourse debt, at fair value |
$ |
$ | ||||||
| |
|
|
|
|||||
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Loans 90 days or more past due and on non-accrual status |
||||||||
| Fair value: |
||||||||
| Commercial mortgage loans |
$ |
$ | ||||||
| |
|
|
|
|||||
| Total fair value |
||||||||
| |
|
|
|
|||||
| Aggregate UPB: |
||||||||
| Commercial mortgage loans |
||||||||
| Total aggregate UPB |
||||||||
| |
|
|
|
|||||
| Difference |
$ |
( |
) |
$ | ( |
) | ||
| |
|
|
|
|||||
9. |
Mortgage Loans Held for Investment, at Fair Value |
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Mortgage loans held for investment - UPB: |
||||||||
| Reverse mortgage loans |
$ |
$ |
||||||
| Commercial mortgage loans |
||||||||
| Fair value adjustments |
||||||||
| |
|
|
|
|||||
| Total mortgage loans held for investment, at fair value |
$ |
$ | ||||||
| |
|
|
|
|||||
10. |
Mortgage Loans Held for Sale, at Fair Value |
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Mortgage loans held for sale - UPB: |
||||||||
| Residential mortgage loans |
$ |
$ |
||||||
| Commercial mortgage loans |
||||||||
| Fair value adjustments |
||||||||
| |
|
|
|
|||||
| Total mortgage loans held for sale, at fair value |
$ |
$ | ||||||
| |
|
|
|
|||||
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Loans 90 days or more past due and on non-accrual status |
||||||||
| Fair value: |
||||||||
| Residential mortgage loans |
$ |
$ | ||||||
| Commercial mortgage loans |
||||||||
| |
|
|
|
|||||
| Total fair value |
||||||||
| |
|
|
|
|||||
| Aggregate UPB: |
||||||||
| Residential mortgage loans |
||||||||
| Commercial mortgage loans |
||||||||
| |
|
|
|
|||||
| Total aggregate UPB |
||||||||
| |
|
|
|
|||||
| Difference |
$ |
( |
) |
$ | ( |
) | ||
| |
|
|
|
|||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
Cash flows: |
||||||||||||||||||||
Sales proceeds |
$ |
$ |
$ | $ | $ | |||||||||||||||
Fair value of retained beneficial interest (1) |
||||||||||||||||||||
Gross servicing fees received |
||||||||||||||||||||
Repurchases |
( |
) |
( |
) |
( |
) | ( |
) | ( |
) | ||||||||||
Gain |
||||||||||||||||||||
(1) |
Fair value of retained beneficial interest includes retained servicing rights and other beneficial interests retained as of the statement of financial condition date. |
11. |
Mortgage Servicing Rights, at Fair Value |
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
Fannie Mae/Freddie Mac |
$ |
$ |
||||||
| Ginnie Mae | ||||||||
| Private investors | ||||||||
Total UPB |
$ |
$ |
||||||
Weighted average interest rate |
% |
% | ||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
Beginning UPB |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
| Originated MSR | ||||||||||||||||||||
| Purchased MSR | — | — | ||||||||||||||||||
Payoffs, sales and curtailments |
( |
) |
( |
) |
( |
) | ( |
) | ( |
) | ||||||||||
Ending UPB |
$ |
$ |
$ | $ | $ | |||||||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
Beginning balance |
$ |
$ |
$ | $ | $ | |||||||||||||||
Originations |
||||||||||||||||||||
Purchases |
— |
— |
||||||||||||||||||
Sales |
( |
) |
( |
) |
( |
) | — |
— |
||||||||||||
Changes in fair value due to: |
||||||||||||||||||||
Changes in market inputs or assumptions used in valuation model |
( |
) |
||||||||||||||||||
Changes in fair value due to portfolio runoff and other |
( |
) |
( |
) |
( |
) | ( |
) | ( |
) | ||||||||||
Ending balance |
$ |
$ |
$ | $ | $ | |||||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||
Successor |
Predecessor |
|||||||||||||||
Number of Loans |
Unpaid Balance |
Number of Loans |
Unpaid Balance |
|||||||||||||
Portfolio delinquency |
||||||||||||||||
30 days |
% |
% |
% | % | ||||||||||||
60 days |
% |
% |
% | % | ||||||||||||
90 or more days |
% |
% |
% | % | ||||||||||||
Total |
% |
% |
% | % | ||||||||||||
Foreclosure/real estate owned |
% |
% |
% | % | ||||||||||||
12. |
Derivative and Risk Management Activities |
September 30, 2021 |
||||||||||||||||||||||||
Successor |
||||||||||||||||||||||||
Derivative assets |
Derivative liabilities |
|||||||||||||||||||||||
Fair value |
Notional amount |
Unrealized gains (losses) |
Fair value |
Notional amount |
Unrealized gains (losses) |
|||||||||||||||||||
| Interest rate lock commitments |
$ |
$ |
$ |
( |
) |
$ |
$ |
$ |
||||||||||||||||
| Forward commitments, TBAs securities and treasury futures |
( |
) |
||||||||||||||||||||||
| Interest rate swaps and futures contracts |
( |
) | ||||||||||||||||||||||
| Forward MBS |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net fair value of derivative financial instruments |
$ |
$ |
$ |
( |
) |
$ |
$ |
$ |
||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
December 31, 2020 |
||||||||||||||||||||||||
Predecessor |
||||||||||||||||||||||||
Derivative assets |
Derivative liabilities |
|||||||||||||||||||||||
Fair value |
Notional amount |
Unrealized gains (losses) |
Fair value |
Notional amount |
Unrealized gains (losses) |
|||||||||||||||||||
| Interest rate lock commitments |
$ | $ | $ | $ | — | $ | $ | |||||||||||||||||
| Forward commitments, TBAs securities and treasury futures |
( |
) | ||||||||||||||||||||||
| Interest rate swaps and futures contracts |
( |
) | ||||||||||||||||||||||
| Forward MBS |
— | — | ( |
) | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net fair value of derivative financial instruments |
$ | $ | $ | $ | $ | $ | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
13. |
Goodwill |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Beginning balance |
$ |
$ |
— |
$ | $ | $ | ||||||||||||||
| Additions from acquisitions |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Ending balance |
$ |
$ |
$ | $ | $ | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Reporting units: |
||||||||
| Mortgage Originations |
$ |
$ | ||||||
| Reverse Originations |
— | |||||||
| Commercial Originations |
||||||||
| Lender Services |
||||||||
| Portfolio Management |
||||||||
| |
|
|
|
|||||
| Total goodwill |
$ |
$ |
||||||
| |
|
|
|
|||||
14. |
Intangible Assets, Net |
September 30, 2021 |
Amortization Period (Years) |
Cost |
Accumulated Amortization |
Net |
||||||||||||
Successor: |
||||||||||||||||
Non-amortizing intangibles |
||||||||||||||||
Trade name |
N/A |
$ |
$ |
— |
$ |
|||||||||||
Total non-amortizing intangibles |
$ |
$ |
— |
$ |
||||||||||||
Amortizing intangibles |
||||||||||||||||
Broker/customer relationships |
$ |
$ |
( |
) |
$ |
|||||||||||
Trade names and other |
( |
) |
||||||||||||||
Total amortizing intangibles |
$ |
$ |
( |
) |
$ |
|||||||||||
Total intangibles |
$ |
$ |
( |
) |
$ |
|||||||||||
December 31, 2020 |
Amortization Period (Years) |
Cost |
Accumulated Amortization |
Net |
||||||||||||
Predecessor: |
||||||||||||||||
Non-amortizing Intangibles |
||||||||||||||||
Domain name |
N/A | $ | $ | — | $ | |||||||||||
Total non-amortizing intangibles |
$ | $ | — | $ | ||||||||||||
Amortizing Intangibles |
||||||||||||||||
Customer list |
$ | $ | ( |
) | $ | |||||||||||
Broker relationships |
( |
) | ||||||||||||||
Trade names |
( |
) | ||||||||||||||
Technology assets |
( |
) | ||||||||||||||
Total amortizing intangibles |
$ |
$ |
( |
) |
$ |
|||||||||||
Total intangibles |
$ |
$ |
( |
) |
$ |
|||||||||||
Year Ending December 31, |
Amount |
|||
2021 |
$ | |||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
Thereafter |
||||
Total future amortization expense |
$ | |||
15. |
HMBS Related Obligations, at Fair Value |
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
Ginnie Mae loan pools - UPB |
$ |
$ | ||||||
Fair value adjustments |
||||||||
Total HMBS related obligations, at fair value |
$ |
$ | ||||||
Weighted average remaining life |
||||||||
Weighted average interest rate |
% |
% | ||||||
16. |
Nonrecourse Debt, at Fair Value |
Issue Date |
Class of Note |
Final Maturity Date |
Interest Rate |
Original Issue Amount |
September 30, 2021 |
December 31, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||||
Securitization of nonperforming HECM loans |
2020 - February 2021 |
M3, M4, M5 |
2030 - February 2031 |
% - % |
$ | $ |
$ | |||||||||||||||
Securitization of non-agency reverse loans |
2018 - September 2021 |
A, A1, A1A, A1B, A2 |
2023 - November 2069 |
% - % |
||||||||||||||||||
Securitization of Fix & Flip loans |
2018 - April 2021 |
A-VFN, M |
- May 2025 |
% - % |
||||||||||||||||||
Issue Date |
Class of Note |
Final Maturity Date |
Interest Rate |
Original Issue Amount |
September 30, 2021 |
December 31, 2020 |
||||||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||||||||
Total nonrecourse debt |
||||||||||||||||||||||||||
Nonrecourse MSR financing liability, at fair value |
||||||||||||||||||||||||||
Fair value adjustments |
||||||||||||||||||||||||||
Total nonrecourse debt, at fair value |
$ |
$ | ||||||||||||||||||||||||
17. |
Other Financing Lines of Credit |
Outstanding Borrowings at |
||||||||||||||||||||
September 30, 2021 |
December 31, 2020 |
|||||||||||||||||||
Maturity Date |
Interest Rate |
Collateral Pledged |
Total Capacity (1) |
Successor |
Predecessor |
|||||||||||||||
Mortgage Lines: |
||||||||||||||||||||
(2) |
applicable margin |
|
Mortgages |
|
$ | $ |
$ | |||||||||||||
applicable margin |
|
|||||||||||||||||||
applicable margin |
|
Assets |
|
|||||||||||||||||
Subtotal mortgage lines of credit |
$ | $ |
$ | |||||||||||||||||
Reverse Lines: |
||||||||||||||||||||
(2) |
applicable margin |
|
Mortgages |
|
$ | $ |
$ | |||||||||||||
| |
+ applicable margin |
|
Assets |
|
||||||||||||||||
applicable margin |
|
|||||||||||||||||||
| |
Tails |
|
||||||||||||||||||
Subtotal reverse lines of credit |
$ | $ |
$ | |||||||||||||||||
Commercial Lines: |
||||||||||||||||||||
applicable margin |
|
Mortgages |
|
$ | $ |
$ | ||||||||||||||
applicable margin |
|
|
Agricultural Loans |
|
||||||||||||||||
Mortgages |
|
|||||||||||||||||||
applicable margin |
|
Assets |
|
|||||||||||||||||
Subtotal commercial lines of credit |
$ | $ |
$ | |||||||||||||||||
Total other financing lines of credit |
$ | $ |
$ | |||||||||||||||||
(1) |
Capacity is dependent upon maintaining compliance with, or obtaining waivers of, the terms, conditions and covenants of the respective agreements, including asset-eligibility requirements. Capacity amounts presented are as of September 30, 2021. |
(2) |
See Note 31 - Subsequent Events for additional information on f a cility amendments. |
| Successor |
||||||||||||
| Financial Covenants |
Requirement |
September 30, 2021 |
Maximum Allowable Distribution (1) |
|||||||||
| FAM |
||||||||||||
| Adjusted Tangible Net Worth |
$ |
$ |
$ |
|||||||||
| Liquidity |
$ |
|||||||||||
| Leverage Ratio |
||||||||||||
| Material Decline in Lender Adjusted Net Worth: |
||||||||||||
| Lender Adjusted Tangible Net Worth (Quarterly requirement) |
$ |
$ |
$ |
|||||||||
| Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) |
$ |
( |
) | |||||||||
| FACo |
||||||||||||
| Adjusted Tangible Net Worth |
$ |
$ |
$ |
|||||||||
| Liquidity |
$ |
|||||||||||
| Leverage Ratio |
||||||||||||
| FAR |
||||||||||||
| Adjusted Tangible Net Worth |
$ |
$ |
$ |
|||||||||
| Liquidity |
$ |
|||||||||||
| Leverage Ratio |
$ |
|||||||||||
| Material Decline in Lender Adjusted Net Worth: |
||||||||||||
| Lender Adjusted Tangible Net Worth (Quarterly requirement) |
$ |
$ |
$ |
|||||||||
| Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) |
$ |
|||||||||||
(1) |
The Maximum Allowable Distribution for any of the originations subsidiaries is the lowest of the amounts shown for the particular originations subsidiary. |
| Predecessor |
||||||||||||
| Financial Covenants |
Requirement |
December 31, 2020 |
Maximum Allowable Distribution (1) |
|||||||||
| FAM |
||||||||||||
| Adjusted Tangible Net Worth |
$ |
$ |
$ |
|||||||||
| Liquidity |
||||||||||||
| Leverage Ratio |
||||||||||||
| Material Decline in Lender Adjusted Net Worth: |
||||||||||||
| Lender Adjusted Tangible Net Worth (Quarterly requirement) |
$ | $ | $ | |||||||||
| Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) |
||||||||||||
| FACo |
||||||||||||
| Adjusted Tangible Net Worth |
$ |
$ |
$ |
|||||||||
| Liquidity |
||||||||||||
| Leverage Ratio |
||||||||||||
| FAR |
||||||||||||
| Adjusted Tangible Net Worth |
$ |
$ |
$ |
|||||||||
| Liquidity |
||||||||||||
| Leverage Ratio |
||||||||||||
| Material Decline in Lender Adjusted Net Worth: |
||||||||||||
| Lender Adjusted Tangible Net Worth (Quarterly requirement) |
$ | $ | $ | |||||||||
| Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) |
||||||||||||
(1) |
The Maximum Allowable Distribution for any of the originations subsidiaries is the lowest of the amounts shown for the particular originations subsidiary. |
18. |
Payables and Other Liabilities |
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Accrued compensation expense |
$ |
$ |
||||||
| Accrued liabilities |
||||||||
| Lease liabilities |
||||||||
| Deferred purchase price liabilities |
||||||||
| Ginnie Mae reverse mortgage buy-out payable |
||||||||
| Deferred tax liability, net |
— | |||||||
| Estimate of claim losses |
||||||||
| Derivative liabilities |
||||||||
| Warrant liability |
— | |||||||
| Repurchase reserves |
||||||||
| Liability for loans eligible for repurchase from Ginnie Mae |
||||||||
| |
|
|
|
|||||
| Total payables and other liabilities |
$ |
$ |
||||||
| |
|
|
|
|||||
| • | in whole and note in part; |
| • | at a price of $ |
| • | upon a minimum of |
| • | if, and only if, the last reported closing price of the Class A Common Stock equals or exceeds $ |
19. |
Notes Payable, Net |
| Description |
Maturity Date |
Interest Rate |
September 30, 2021 |
December 31, 2020 |
||||||||||||
Successor |
Predecessor |
|||||||||||||||
| Senior Unsecured Notes |
|
|
|
% |
$ |
$ |
||||||||||
| Financing Agreement |
|
|
|
|
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total aggregate principle amount |
|
|||||||||||||||
| Fair value adjustment, net of amortization (1) |
|
|||||||||||||||
| Less: Debt issuance costs |
|
( |
) | |||||||||||||
| |
|
|
|
|||||||||||||
| Total notes payable, net |
|
$ |
$ |
|||||||||||||
| |
|
|
|
|||||||||||||
(1) |
In conjunction with the Business Combination discussed in Note 4, the Company was required to adjust the liabilities assumed to fair value, resulting in a premium on the Notes and the elimination of the previously recognized debt issuance costs. |
20. |
Litigation |
21. |
Commitments and Contingencies |
22. |
Incentive Compensation |
Grant Date Fair Value |
||||||||||||||||||||
| Replacement RSUs |
Number of Units Unvested |
Number of Units Vested |
Total Number of Units |
Weighted Average Price Per Unit |
Total Fair Value |
|||||||||||||||
| Outstanding, July 1, 2021 |
$ | $ | ||||||||||||||||||
| Vested |
( |
) | — | — | — | |||||||||||||||
| Forfeited |
( |
) | — | ( |
) | ( |
) | |||||||||||||
| Settled |
— | ( |
) | ( |
) | ( |
) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Outstanding, September 30, 2021 |
$ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Grant Date Fair Value |
||||||||||||||||||||
| Replacement RSUs |
Number of Units Unvested |
Number of Units Vested |
Total Number of Units |
Weighted Average Price Per Unit |
Total Fair Value |
|||||||||||||||
| Outstanding, April 1, 2021 |
|
$ | $ | |||||||||||||||||
| Granted |
— | |||||||||||||||||||
| Vested |
( |
) |
— | — | — | |||||||||||||||
| Forfeited |
( |
) | — | ( |
) | ( |
) | |||||||||||||
| Settled |
— | ( |
) |
( |
) |
( |
) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Outstanding, September 30, 2021 |
$ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Grant Date Fair Value |
||||||||||||||||||||
| Earnout Right RSUs |
Number of Units Unvested |
Number of Units Vested |
Total Number of Units |
Weighted Average Price Per Unit |
Total Fair Value |
|||||||||||||||
| Outstanding, July 1, 2021 |
$ | $ | ||||||||||||||||||
| Forfeited |
( |
) | — | ( |
) | ( |
) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Outstanding, September 30, 2021 |
$ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Grant Date Fair Value |
||||||||||||||||||||
| Earnout Right RSUs |
Number of Units Unvested |
Number of Units Vested |
Total Number of Units |
Weighted Average Price Per Unit |
Total Fair Value |
|||||||||||||||
| Outstanding, April 1, 2021 |
$ |
$ |
||||||||||||||||||
| Granted |
— | |||||||||||||||||||
| Forfeited |
( |
) | — | ( |
) | ( |
) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Outstanding, September 30, 2021 |
— |
$ |
$ |
|||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
23. |
General and Administrative Expenses |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||||||
| Title and closing |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||
| Loan origination expenses |
||||||||||||||||||||||||
| Depreciation and amortization |
||||||||||||||||||||||||
| Loan portfolio expenses |
||||||||||||||||||||||||
| Communications and data processing |
||||||||||||||||||||||||
| Securitization expenses |
||||||||||||||||||||||||
| Business development |
||||||||||||||||||||||||
| Licensing and insurance |
||||||||||||||||||||||||
| Fair value change in deferred purchase price liability |
||||||||||||||||||||||||
| Other expenses |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total general and administrative expenses |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||||||
24. |
Business Segment Reporting |
For the three months ended September 30, 2021 |
||||||||||||||||||||||||||||||||||||
Successor |
||||||||||||||||||||||||||||||||||||
Mortgage Originations |
Reverse Originations |
Commercial Originations |
Lender Services |
Portfolio Managemen t |
Total Operating Segments |
Corporate and Other |
Elim |
Total |
||||||||||||||||||||||||||||
| REVENUES |
||||||||||||||||||||||||||||||||||||
| Gain on sale of loans, net |
$ | $ | — | $ | — | $ | $ | $ | $ | — | $ | ( |
) | $ | ||||||||||||||||||||||
| Net fair value gains (losses) |
( |
) |
— | ( |
) | |||||||||||||||||||||||||||||||
| Fee income |
( |
) | ||||||||||||||||||||||||||||||||||
| Net interest income (expense) |
— | — | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total revenues |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Total expenses |
( |
) | ||||||||||||||||||||||||||||||||||
| Other, net |
— | ( |
) | |||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net income (loss) before taxes |
$ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | — | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Depreciation and amortization |
$ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total assets |
( |
) | ||||||||||||||||||||||||||||||||||
April 1, 2021 to September 30, 2021 |
||||||||||||||||||||||||||||||||||||
Successor |
||||||||||||||||||||||||||||||||||||
Mortgage Originations |
Reverse Originations |
Commercial Originations |
Lender Services |
Portfolio |
Total Operating Segments |
Corporate and Other |
Elim |
Total |
||||||||||||||||||||||||||||
| REVENUES |
||||||||||||||||||||||||||||||||||||
| Gain on sale of loans, net |
$ | $ | — | $ | — | $ | $ | $ | $ | — | $ | ( |
) | $ | ||||||||||||||||||||||
| Net fair value gains |
— | |||||||||||||||||||||||||||||||||||
| Fee income |
( |
) | ||||||||||||||||||||||||||||||||||
| Net interest income (expense) |
( |
) | — | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total revenues |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Total expenses |
( |
) | ||||||||||||||||||||||||||||||||||
| Other, net |
— | ( |
) | |||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net income (loss) before taxes |
$ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | — | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Depreciation and amortization |
$ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||||
| Total assets |
( |
) | ||||||||||||||||||||||||||||||||||
January 1, 2021 to March 31, 2021 |
||||||||||||||||||||||||||||||||||||
Predecessor |
||||||||||||||||||||||||||||||||||||
Mortgage Originations |
Reverse Originations |
Commercial Originations |
Lender Services |
Portfolio Management |
Total Operating Segments |
Corporate and Other |
Elim |
Total |
||||||||||||||||||||||||||||
| REVENUES |
||||||||||||||||||||||||||||||||||||
| Gain on sale of loans, net |
$ | $ | — | $ | — | $ | $ | $ | $ | — | $ | ( |
) | $ | ||||||||||||||||||||||
| Net fair value gains |
— | — | ||||||||||||||||||||||||||||||||||
| Fee income |
— | |||||||||||||||||||||||||||||||||||
| Net interest expense |
— | — | ( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total revenues |
( |
) | ||||||||||||||||||||||||||||||||||
| Total expenses |
||||||||||||||||||||||||||||||||||||
| Other, net |
— | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net income (loss) before taxes |
$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | — | $ | ||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Depreciation and amortization |
$ | $ | $ | $ | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||||||
| Total assets |
( |
) | ||||||||||||||||||||||||||||||||||
For the three months ended September 30, 2020 |
||||||||||||||||||||||||||||||||||||
Predecessor |
||||||||||||||||||||||||||||||||||||
Mortgage Originations |
Reverse Originations |
Commercial Originations |
Lender Services |
Portfolio Management |
Total Operating Segments |
Corporate and Other |
Elim |
Total |
||||||||||||||||||||||||||||
| REVENUES |
||||||||||||||||||||||||||||||||||||
| Gain on sale of loans, net |
$ | $ | — | $ | — | $ | $ | $ | $ | — | $ | ( |
) | $ | ||||||||||||||||||||||
| Net fair value gains |
— | — | ||||||||||||||||||||||||||||||||||
| Fee income |
||||||||||||||||||||||||||||||||||||
| Net interest expense |
— | — | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total revenues |
||||||||||||||||||||||||||||||||||||
| Total expenses |
||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Other, net |
— | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net income (loss) before taxes |
$ | $ | $ | ( |
) | $ | $ | $ | $ | ( |
) | $ | — | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Depreciation and amortization |
$ | $ | $ | $ | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||||||
| Total assets |
( |
) | ||||||||||||||||||||||||||||||||||
For the nine months ended September 30, 2020 |
||||||||||||||||||||||||||||||||||||
Predecessor |
||||||||||||||||||||||||||||||||||||
Mortgage Originations |
Reverse Originations |
Commercial Originations |
Lender Services |
Portfolio Management |
Total Operating Segments |
Corporate and Other |
Elim |
Total |
||||||||||||||||||||||||||||
| REVENUES |
||||||||||||||||||||||||||||||||||||
| Gain on sale of loans, net |
$ | $ | — | $ | — | $ | $ | $ | — | $ | ( |
) | $ | |||||||||||||||||||||||
| Net fair value gains |
— | — | ||||||||||||||||||||||||||||||||||
| Fee income |
||||||||||||||||||||||||||||||||||||
| Net interest expense |
— | — | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total revenues |
( |
) | ||||||||||||||||||||||||||||||||||
| Total expenses |
||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Other, net |
— | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net income (loss) before taxes |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | — | $ | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Depreciation and amortization |
$ | $ | $ | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||||||
| Total assets |
( |
) | $ | |||||||||||||||||||||||||||||||||
25. |
Liquidity and Capital Requirements |
26. |
Related Party Transactions |
27. |
Income Taxes |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Net income before income taxes |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
| Provision for income taxes |
||||||||||||||||||||
| Effective tax provision rate |
% |
% |
% | % | % | |||||||||||||||
28. |
Earnings Per Share |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
|||||||
Successor |
||||||||
| Basic net income per share: |
||||||||
| Numerator |
||||||||
| Net income |
$ |
$ |
||||||
| Less: income attributable to noncontrolling interests (1) |
||||||||
| |
|
|
|
|||||
| Net income attributable to holders of Class A Common Stock - basic |
$ |
$ |
||||||
| |
|
|
|
|||||
| Denominator |
||||||||
| Weighted average shares of Class A Common Stock outstanding - basic |
||||||||
| |
|
|
|
|||||
| Basic net income per share |
$ |
$ |
||||||
| |
|
|
|
|||||
(1) |
The Class A LLC Units of FoA Equity, held by the Continuing Unitholders, which comprise the noncontrolling interest in FoA, represents a participating security. Therefore, the numerator was adjusted to reduce net income by the amount of net income attributable to noncontrolling interests. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
|||||||
Successor |
||||||||
| Diluted net income per share: |
||||||||
| Numerator |
||||||||
| Net income attributable to holders of Class A Common Stock |
$ |
$ |
||||||
| Reallocation of net income assuming exchange of Class A LLC Units (2) |
||||||||
| |
|
|
|
|||||
| Net income attributable to holders of Class A Common Stock - diluted |
$ |
$ |
||||||
| |
|
|
|
|||||
| Denominator |
||||||||
| Weighted average shares of Class A Common Stock outstanding - |
||||||||
| Effect of dilutive securities: |
||||||||
| Assumed exchange of Class A LLC Units for shares of Class A Common Stock (3) |
||||||||
| |
|
|
|
|||||
| Weighted average shares of Class A Common Stock outstanding - diluted |
||||||||
| |
|
|
|
|||||
| Diluted net income per share |
$ |
$ |
||||||
| |
|
|
|
|||||
(2) |
This adjustment assumes the after-tax elimination of noncontrolling interest due to the assumed exchange of all Class A LLC Units outstanding for shares of Class A Common Stock in FoA as of the beginning of the period following the if-converted method for calculating diluted net income per share. |
(3) |
The diluted weighted average shares outstanding of Class A Common Stock includes the effects of the if-converted method to reflect the provisions of the Exchange Agreement and assume the Class A LLC unitholders of FoA Equity, representing the noncontrolling interest, exchange their units on a one-for-one basis for shares of Class A Common Stock in FoA. |
29. |
Sponsor Earnout |
30. |
Equity |
31. |
Subsequent Events |
| • | We operate in a diverse set of lending markets that benefit from strong, secular tailwinds and are each influenced by different demand drivers. We believe this diversification results in stable and growing earnings with lower volatility and lower mortgage market correlation than a traditional mortgage company. |
| • | We seamlessly connect borrowers with investors. Our consumer-facing business leaders interact 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. 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, and utilize flexible technology platforms and a distributed workforce in order to scale our businesses and manage costs efficiently. Our businesses are supported by a centralized business excellence office (“BXO”), providing all corporate support, including IT, Finance and Accounting, Treasury, Human Resources, Legal, Risk and Compliance. This platform enables us to focus our resources as the opportunity set evolves while not being overly reliant on any individual product. As borrower demands for lending products change, we are able to change with them and continue to offer desirable lending solutions. |
| • | Distributed Retail - Our distributed retail lending channel relies on mortgage advisors in retail branch locations across the country to acquire, interact with, and serve customers. Our distributed retail network controls all of the loan origination process, including sourcing the borrower, processing the application, setting the interest rate, ordering appraisal and underwriting, processing, closing and funding the loan. |
| • | Direct-to-Consumer - Our direct-to-consumer lending channel relies on our call centers, website and mobile apps to interact with customers. Our primary focus is to assist our customers with a refinance or home purchase by providing them with a needs-based approach to understanding their current mortgage options. |
| • | TPO - Our third party-originator (“TPO”) lending channel works with mortgage brokers to source loans which are then underwritten and funded by us, as FoA. Counterparty risk is mitigated through quality and compliance monitoring, and all brokers are subject to our eligibility requirements coupled with an annual recertification process. |
| • | Home Improvement - Our home improvement channel is our newest distribution channel and was created through the acquisition of the operations of Renovate America during the first quarter of 2021. This channel assists homeowners in the financing of short-term home improvement projects, such as windows, HVAC, or remodeling and relies on a network of partner contractors across the country to acquire, interact with, and serve these customers. |
| • | Retail - Our retail channel consists of a centralized retail platform, which includes a telephone based platform with multiple loan officers in one location. Our retail network controls all of the loan origination process, including sourcing the borrower, processing the application, setting the interest rate, ordering appraisal and underwriting, processing, closing and funding the loan. |
| • | TPO - Our TPO lending channel works with mortgage brokers to source loans which are then underwritten and funded by us, as FoA. Counterparty risk is mitigated through quality and compliance monitoring, and all brokers are subject to our eligibility requirements coupled with an annual recertification process. |
| • | Retail - Our retail channel consists of sales team members located throughout the United States with concentrations in Charlotte, NC, Chicago, IL, and Irvine, CA. Our retail network controls all of the loan origination process, including sourcing the borrower, processing the application, setting the interest rate, ordering appraisal and underwriting, processing, closing and funding the loan. |
| • | TPO - Our TPO lending channel works with mortgage brokers to source loans which are then underwritten and funded by us, as FoA. Counterparty risk is mitigated through quality and compliance monitoring, and all brokers are subject to our eligibility requirements coupled with an annual recertification process. |
| • | 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 the volume; |
| • | 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; |
| • | increases in loan modifications, delinquency rates, delinquency status and prepayment speeds; and |
| • | broad economic factors such as the strength and stability of the overall economy, including the unemployment level and real estate values which have been substantially affected by the COVID-19 pandemic, further discussed below. The COVID-19 outbreak poses unique challenges to our business and the effects of the pandemic could adversely impact our ability to originate and service mortgages, manage our portfolio of assets and provide lender services and could also adversely impact our counterparties, liquidity and employees. |
| • | As a result of the Business Combination, the Company was required to record the acquired assets of FoA Equity to fair value at the time of the transaction. This created a substantial amount of goodwill and intangibles. The Company performs an annual goodwill impairment test as of October 1, or more frequently if events occur that indicate it is more likely than not that the fair value of a reporting unit’s goodwill was less than its carrying value (e.g., a triggering event). During the quarter, the company’s share price traded at a substantial discount to its book value. As a result, the Company performed an analysis to determine if a triggering event occurred. The analysis resulted in the determination that no triggering event occurred. Management considered several structural and timing factors in the analysis, including trading activity by PIPE shareholders following the Business Combination, the Company’s comparatively low stock trading volume, and the limited amount of time since the Business Combination which included only one quarter of results which were heavily impacted by non-recurring, merger-related transactions. These factors all put downward pressure on the price of the publicly traded shares and were deemed to be unrelated to the ongoing operations, underlying performance and financial results of the Company. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Gain on sale and other income from mortgage loans held for sale, net |
$ |
210,095 |
$ |
397,672 |
$ | 291,334 | $ | 407,926 | $ | 836,901 | ||||||||||
| Net fair value gains on mortgage loans and related obligations |
122,509 |
253,660 |
76,663 | 95,955 | 221,638 | |||||||||||||||
| Fee income |
145,725 |
236,589 |
161,371 | 119,375 | 266,002 | |||||||||||||||
| Net interest expense |
(21,829 |
) |
(42,304 |
) |
(21,705 | ) | (15,998 | ) | (63,550 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
456,500 |
845,617 |
507,663 | 607,258 | 1,260,991 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
411,878 |
812,630 |
373,344 | 362,369 | 911,413 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Other, net |
9,928 |
7,825 |
(8,862 | ) | (2,470 | ) | (2,514 | ) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCOME BEFORE TAXES |
$ |
54,550 |
$ |
40,812 |
$ | 125,457 | $ | 242,419 | $ | 347,064 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Interest income on loans |
$ |
160,683 |
$ |
334,623 |
$ | 160,568 | $ | 150,276 | $ | 492,066 | ||||||||||
| Change in fair value of loans |
(119,690 |
) |
(34,707 |
) |
(51,346 | ) | 160,480 | 302,541 | ||||||||||||
| Change in fair value of mortgage-backed securities |
— |
— |
— | 1,621 | 2,438 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Fair value gains on mortgage loans |
40,993 |
299,916 |
109,222 | 312,377 | 797,045 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Interest expense on related obligations |
(107,593 |
) |
(221,067 |
) |
(119,201 | ) | (121,777 | ) | (383,622 | ) | ||||||||||
| Change in fair value of derivatives |
6,841 |
(39,637 |
) |
43,972 | 149 | (5,594 | ) | |||||||||||||
| Change in fair value of related obligations |
182,268 |
214,448 |
42,670 | (94,794 | ) | (186,191 | ) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Fair value losses on related obligations |
81,516 |
(46,256 |
) |
(32,559 | ) | (216,422 | ) | (575,407 | ) | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net fair value gains on mortgage loans and related obligations |
$ |
122,509 |
$ |
253,660 |
$ | 76,663 | $ | 95,955 | $ | 221,638 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Interest income on commercial and reverse loans |
$ |
160,683 |
$ |
334,623 |
$ | 160,568 | $ | 150,276 | $ | 492,066 | ||||||||||
| Interest expense on HMBS and nonrecourse obligations |
(107,593 |
) |
(221,067 |
) |
(119,201 | ) | (121,777 | ) | (383,622 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net interest margin included in net fair value gains on mortgage loans (1) |
53,090 |
113,556 |
41,367 | 28,499 | 108,444 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Interest income on mortgage loans held for sale |
15,742 |
28,766 |
12,621 | 10,408 | 29,969 | |||||||||||||||
| Interest expense on warehouse lines of credit |
(30,735 |
) |
(57,643 |
) |
(26,546 | ) | (25,973 | ) | (88,837 | ) | ||||||||||
| Non-funding debt interest expense |
(6,842 |
) |
(13,486 |
) |
(7,756 | ) | (385 | ) | (4,605 | ) | ||||||||||
| Other interest income |
120 |
246 |
40 | 27 | 144 | |||||||||||||||
| Other interest expense |
(114 |
) |
(187 |
) |
(64 | ) | (75 | ) | (221 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net interest expense |
(21,829 |
) |
(42,304 |
) |
(21,705 | ) | (15,998 | ) | (63,550 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INTEREST MARGIN |
$ |
31,261 |
$ |
71,252 |
$ | 19,662 | $ | 12,501 | $ | 44,894 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
(1) |
Net interest margin included in fair value gains on mortgage loans includes interest income and expense on all commercial and reverse loans and their related nonrecourse obligations. Interest income on mortgage loans and 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. |
| • | Gain on sale and other income from mortgage loans held for sale, net, decreased $197.8 million or 48.5% due to lower margin on originated mortgage loans and lower origination volume during the three months ended September 30, 2021 as a result of increased interest rates and competitive pressure on margin. Our Mortgage Originations segment had $7,679.1 million in net rate lock volume related to mortgage loans for the three months ended September 30, 2021 compared to $9,285.6 million for the comparable 2020 period. Additionally, our margin on originated mortgage loans decreased to 2.61% for the three months ended September 30, 2021 compared to 4.39% for the comparable 2020 period. |
| • | |
| September 30, 2021 compared to $626.7 million for the comparable 2020 period. The Commercial Originations segment originated $447.3 million in loans for the three months ended September 30, 2021 compared to $89.9 million, as the comparable 2020 period saw the production ramp up for the commercial originations segment following the temporary deferment of production activity in Q2 2020 as a result of the COVID-19 outbreak. The increase was partially offset by net $28.8 million in fair value losses from assumption changes to our loans held for investment compared to a gain of $16.8 million in the comparable 2020 period. |
| • | Fee income increased $26.4 million or 22.1% primarily due to growth in Reverse and Commercial loan originations, as well as our Lender Services segments, partially offset by a reduction in fee income within the Mortgage Origination segment. Within our Lender Services segment, we experienced growth of 61.1% in loan closings in which we acted as title agent and growth of 137.8% in our underwriting activity for the three months ended September 30, 2021 compared to the comparable 2020 period. |
| • | Net interest expense increased $5.8 million or 36.4% in 2021 due primarily to an increase in non-funding debt interest expense, partially offset by a lower average cost of funds on our financing lines of credit and increases in interest income on mortgage loans held for sale for the three months ended September 30, 2021 compared to the comparable 2020 period. |
| • | Total expenses increased $49.5 million or 13.7% due to higher salaries, benefits and related expenses combined with increased general and administrative expenses during the three months ended September 30, 2021. The increase is primarily related to on-going expenses as a result of the Business Combination, such as RSUs and amortization of intangibles. During the third quarter of 2021, additional on-going expenses of $10.6 million for the RSUs and $13.5 million of amortization of intangibles were recognized as a result of the Business Combination. |
| • | Gain on sale and other income from mortgage loans held for sale, net, decreased $147.9 million or 17.7% as a result of lower Mortgage Originations segment revenue margin. Our Mortgage Originations segment had $22,753.2 million in net rate lock volume for the nine months ended September 30, 2021 compared to $22,302.7 million for the comparable 2020 period. Our margin on originated mortgage loans decreased slightly to 2.69% for the nine months ended September 30, 2021 compared to 3.73% for the comparable 2020 period. |
| • | Net fair value gains on mortgage loans and related obligations increased by $108.7 million or 49.0% primarily as a result of growth in our Reverse and Commercial Originations segments and lower fair value losses from assumption changes. The Reverse Originations segment originated $2,939.3 million of reverse mortgage loans for the nine months ended September 30, 2021 compared to $2,052.3 million for the comparable 2020 period. The Commercial Originations segment originated $1,188.7 million in loans for the nine months ended September 30, 2021 compared to $548.4 million during the comparable 2020 period. Fair value losses from assumption changes were $50.8 million for the nine months ended September 30, 2021 primarily due to fair value adjustments related predominantly to increases in modeled prepayment speeds on securitized mortgage assets and MSR. This compares to $53.9 million in fair value losses from assumption changes for the nine months ended September 30, 2020 driven largely by unfavorable shocks to fair value during the early months of the COVID-19 outbreak. See Note 5 - Fair Value within the consolidated financial statements for additional information on assumptions impacting the value of our loans held for investment. |
| • | Fee income increased $132.0 million or 49.6% primarily due to growth in Mortgage, Reverse and Commercial loan originations, as well as our Lender Services segments. Within our Lender Services segment, we experienced growth of 78.3% in loan closings in which we acted as title agent and growth of 203.1% in our underwriting activity for the three months ended September 30, 2021 compared to the comparable 2020 period. |
| • | Total expenses increased $274.6 million or 30.1% due to higher salaries, benefits and related expenses combined with increased general and administrative expenses primarily as a result of our higher loan origination volumes during the nine months ended September 30, 2021, overall enterprise growth, and |
| expenses related to the Business Combination. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $38.6 million was recognized. Additional on-going expenses of $23.4 million for the RSUs and $26.9 million of amortization of intangibles relating to the Business Combination were recognized. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Gain on sale and other income from mortgage loans held for sale, net |
$ |
200,294 |
$ |
385,680 |
$ | 286,481 | $ | 407,248 | $ | 832,872 | ||||||||||
| Net fair value gains on mortgage loans |
1,145 |
1,145 |
— | — | — | |||||||||||||||
| Fee income |
30,827 |
61,172 |
32,731 | 36,080 | 90,402 | |||||||||||||||
| Net interest income |
2,807 |
4,783 |
891 | 451 | 1,715 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
235,073 |
452,780 |
320,103 | 443,779 | 924,989 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
220,331 |
444,522 |
224,246 | 239,847 | 593,996 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCOME BEFORE TAXES |
$ |
14,742 |
$ |
8,258 |
$ | 95,857 | $ | 203,932 | $ | 330,993 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Loan origination volume (dollars) |
||||||||||||||||||||
| Conforming |
$ |
4,698,538 |
$ |
9,000,708 |
$ | 5,397,708 | $ | 5,773,072 | $ | 13,749,364 | ||||||||||
| Government |
987,074 |
1,982,731 |
1,068,650 | 1,204,360 | 3,237,231 | |||||||||||||||
| Non-conforming |
1,632,513 |
3,204,408 |
1,937,860 | 1,476,952 | 3,270,125 | |||||||||||||||
| Home improvement |
64,566 |
123,494 |
— | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume |
$ |
7,382,691 |
$ |
14,311,341 |
$ | 8,404,218 | $ | 8,454,384 | $ | 20,256,720 | ||||||||||
| Loan origination volume by type (dollars) |
||||||||||||||||||||
| Agency |
$ |
6,324,230 |
$ |
12,398,694 |
$ | 7,367,044 | 8,160,931 | $ | 19,465,514 | |||||||||||
| Non-agency |
993,895 |
1,789,153 |
1,037,174 | 293,453 | 791,206 | |||||||||||||||
| Home improvement |
64,566 |
123,494 |
— | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume by type |
$ |
7,382,691 |
$ |
14,311,341 |
$ | 8,404,218 | $ | 8,454,384 | $ | 20,256,720 | ||||||||||
| Loan origination volume by channel (dollars) |
||||||||||||||||||||
| Retail |
$ |
4,838,128 |
$ |
9,708,682 |
$ | 5,622,487 | 6,207,165 | $ | 15,191,608 | |||||||||||
| Wholesale/Correspondent |
1,786,304 |
2,987,807 |
1,706,365 | 1,303,448 | 2,882,650 | |||||||||||||||
| Consumer direct |
693,693 |
1,491,358 |
1,075,366 | 943,771 | 2,182,462 | |||||||||||||||
| Home improvement |
64,566 |
123,494 |
— | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume by channel |
$ |
7,382,691 |
$ |
14,311,341 |
$ | 8,404,218 | $ | 8,454,384 | $ | 20,256,720 | ||||||||||
| Loan origination volume by type (dollars) |
||||||||||||||||||||
| Purchase |
$ |
3,759,059 |
$ |
7,253,521 |
2,664,493 | 3,022,815 | 6,780,670 | |||||||||||||
| Refinance |
3,559,066 |
6,934,326 |
5,739,725 | 5,431,569 | 13,476,050 | |||||||||||||||
| Home improvement |
64,566 |
123,494 |
— | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume by type |
$ |
7,382,691 |
$ |
14,311,341 |
$ | 8,404,218 | $ | 8,454,384 | $ | 20,256,720 | ||||||||||
| Loan origination volume (units) |
||||||||||||||||||||
| Conforming |
14,522 |
28,658 |
18,090 | 19,294 | 46,570 | |||||||||||||||
| Government |
3,041 |
6,182 |
3,426 | 4,106 | 11,120 | |||||||||||||||
| Non-conforming |
2,032 |
4,004 |
2,472 | 2,170 | 4,818 | |||||||||||||||
| Home improvement |
5,935 |
11,457 |
— | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume |
25,530 |
50,301 |
23,988 | 25,570 | 62,508 | |||||||||||||||
| Loan origination volume by type (units) |
||||||||||||||||||||
| Agency |
18,400 |
36,678 |
22,763 | 25,113 | 61,296 | |||||||||||||||
| Non-agency |
1,195 |
2,166 |
1,225 | 457 | 1,212 | |||||||||||||||
| Home improvement |
5,935 |
11,457 |
— | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume by type |
25,530 |
50,301 |
23,988 | 25,570 | 62,508 | |||||||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Loan origination volume by channel (units) |
||||||||||||||||||||
| Retail |
13,353 |
27,090 |
16,123 | 19,064 | 47,998 | |||||||||||||||
| Wholesale/Correspondent |
4,210 |
7,215 |
4,745 | 3,940 | 8,396 | |||||||||||||||
| Consumer direct |
2,032 |
4,539 |
3,120 | 2,566 | 6,114 | |||||||||||||||
| Home improvement |
5,935 |
11,457 |
— | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume by channel |
25,530 |
50,301 |
23,988 | 25,570 | 62,508 | |||||||||||||||
| Loan origination volume by type (units) |
||||||||||||||||||||
| Purchase |
9,801 |
19,129 |
7,534 | 9,325 | 22,286 | |||||||||||||||
| Refinance |
9,794 |
19,715 |
16,454 | 16,245 | 40,222 | |||||||||||||||
| Home improvement |
5,935 |
11,457 |
— | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume by type |
25,530 |
50,301 |
23,988 | 25,570 | 62,508 | |||||||||||||||
| Loan sales by investor (dollars) |
||||||||||||||||||||
| Agency |
$ |
5,733,609 |
$ |
11,541,450 |
$ | 7,246,418 | $ | 7,818,882 | $ | 18,026,245 | ||||||||||
| Private |
1,574,710 |
2,787,028 |
1,152,810 | 256,456 | 1,447,680 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan sales by investor |
$ |
7,308,319 |
$ |
14,328,478 |
$ | 8,399,228 | $ | 8,075,338 | $ | 19,473,925 | ||||||||||
| Loan sales by type (dollars) |
||||||||||||||||||||
| Servicing released |
$ |
3,313,801 |
$ |
5,497,385 |
$ | 2,086,550 | $ | 760,215 | $ | 5,168,265 | ||||||||||
| Servicing retained |
3,994,518 |
8,831,093 |
6,312,678 | 7,315,123 | 14,305,660 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan sales by type |
$ |
7,308,319 |
$ |
14,328,478 |
$ | 8,399,228 | $ | 8,075,338 | $ | 19,473,925 | ||||||||||
| Net rate lock volume |
$ |
7,679,106 |
$ |
14,347,929 |
$ | 8,405,313 | $ | 9,285,616 | 22,302,731 | |||||||||||
| Mortgage originations margin (including servicing margin) (1) |
2.61 |
% |
2.69 |
% |
3.41 | % | 4.39 | % | 3.73 | % | ||||||||||
| Capitalized servicing rate (in bps) |
102.6 |
103.1 |
89.1 | 73.1 | 68.7 | |||||||||||||||
(1) |
Calculated for each period as Gain on sale and other income from mortgage loans held for sale, net, divided by Net rate lock volume. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Gain on sale, net |
$ |
221,680 |
$ |
390,501 |
$ | 200,874 | $ | 396,346 | $ | 853,204 | ||||||||||
| Provision for repurchases |
(1,970 |
) |
(3,783 |
) |
(2,258 | ) | (4,277 | ) | (16,256 | ) | ||||||||||
| Realized hedge gains (losses) |
(22,982 |
) |
(39,995 |
) |
74,823 | (33,796 | ) | (141,280 | ) | |||||||||||
| Changes in fair value of loans held for sale |
(5,561 |
) |
6,041 |
(41,485 | ) | 11,538 | 44,948 | |||||||||||||
| Changes in fair value of interest rate locks |
(5,472 |
) |
(8,456 |
) |
(49,946 | ) | 34,937 | 98,988 | ||||||||||||
| Changes in fair value of derivatives/hedges |
14,599 |
41,372 |
104,473 | 2,500 | (6,732 | ) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Gain on sale and other income from mortgage loans held for sale, net |
200,294 |
385,680 |
286,481 | 407,248 | 832,872 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net fair value gains on mortgage loans |
1,145 |
1,145 |
— | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Origination related fee income |
30,827 |
61,172 |
32,731 | 36,080 | 90,402 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net interest income |
2,807 |
4,783 |
891 | 451 | 1,715 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
$ |
235,073 |
$ |
452,780 |
$ | 320,103 | $ | 443,779 | $ | 924,989 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Interest income |
$ |
15,363 |
$ |
28,200 |
$ | 12,483 | $ | 10,273 | $ | 29,351 | ||||||||||
| Interest expense |
(12,556 |
) |
(23,417 |
) |
(11,592 | ) | (9,822 | ) | (27,636 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net interest income |
$ |
2,807 |
$ |
4,783 |
$ | 891 | $ | 451 | $ | 1,715 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| WAC - loans held for sale |
3.0 |
% |
3.0 |
% |
2.9 | % | 3.0 | % | 3.0 | % | ||||||||||
| WAC - warehouse lines of credit |
3.3 |
% |
3.1 |
% |
3.0 | % | 3.3 | % | 3.0 | % | ||||||||||
| • | Gain on sale, net decreased $174.7 million or 44.1% as a result of lower margin and lower mortgage loans sold due to lower inventory of originated loans during the three months ended September 30, 2021. We sold $7,308.3 million in mortgage loans for the three months ended September 30, 2021 compared to $8,075.3 million for the comparable 2020 period. Weighted average gain on sale margins on sold loans was 3.00% for the three months ended September 30, 2021 compared to 4.90% for the comparable 2020 period. Gain on sale margins decreased primarily due to rate volatility during both periods and competitive pressure on margins in the 2021 period. |
| • | Provision for repurchases decreased $2.3 million or 53.9% due to a drop in funded volume for the three months ended September 30, 2021 compared to the comparable 2020 period. |
| • | Changes in fair value of loans held for sale decreased $17.1 million or 148.2% as a result of lower net change in the end-of-period fair value of our outstanding originated loan production not yet sold or securitized. The unsold pipeline decreased slightly from $1,831.0 million with a weighted average margin of 2.8% at June 30, 2021 to $1,802.1 million and 2.6% at September 30, 2021. Comparatively, the unsold pipeline increased from $1,355.7 million with a weighted average margin of 4.8% at June 30, 2020 to $1,723.1 million and 4.5% at September 30, 2020. |
| • | Changes in fair value of interest rate locks similarly decreased $40.4 million or 115.7% as a result of lower net change in our interest rate lock pipeline driven by an overall decrease in refinance activity in the market. The fair value of the interest rate lock pipeline decreased from $33.5 million at June 30, 2021 to $28.5 million at September 30, 2021. Comparatively, the fair value of the interest rate lock pipeline increased from $78.0 million at June 30, 2020 to $112.9 million at September 30, 2020. |
| • | Origination related fee income decreased $5.3 million or 14.6% as a result of lower loan origination volume during the three months ended September 30, 2021. |
| • | During the three months ended September 30, 2021, net realized and unrealized hedge losses were $8.4 million compared to hedge losses of $31.3 million in the comparable 2020 period, partially offsetting the fair value impact to loans and interest rate locks in the pipeline by increases in average market interest rates. |
| • | Gain on sale, net, decreased $261.8 million or 30.7% as a result of decreased gain on sale margins on sold volume, offset slightly by higher sales volume in dollars during the nine months ended September 30, 2021. We sold $22.7 billion in mortgage loans for the nine months ended September 30, 2021 compared to $19.5 billion for the comparable 2020 period. Weighted average gain on sale margins on sold loans were 2.6% for the nine months ended September 30, 2021 compared to 4.4% for the comparable 2020 period. Gain on sale margins decreased primarily due to rate volatility during both periods and competitive pressure on margins in the 2021 period. |
| • | Provision for repurchases decreased $10.2 million or 62.8% due to an adjustment of the provision for the nine months ended September 30, 2021 compared to additional provision being booked in the early months of the COVID 19 outbreak during the comparable 2020 period. |
| • | Changes in fair value of loans held for sale decreased $80.4 million or 178.9% as a result of lower net change in the end-of-period fair value of our higher outstanding originated loan production not yet sold or securitized. The unsold pipeline decreased from $2.0 billion with a weighted average margin of 4.2% at December 31, 2020 to $1.8 billion and 2.6% at September 30, 2021. Comparatively, the unsold pipeline increased from $1.0 billion with a weighted average margin of 2.9% at January 1, 2020 to $1.7 billion and 4.5% at September 30, 2020. |
| • | Changes in fair value of interest rate locks similarly decreased $157.4 million or 159.0% as a result of lower net change in our interest rate lock pipeline driven by an overall decrease in refinance activity in the market. The fair value of the interest rate lock pipeline decreased from $87.6 million million at December 31, 2020 to $28.5 million at September 30, 2021. Comparatively, the fair value of the interest rate lock pipeline increased from $13.9 million million at January 1, 2020 to $112.9 million at September 30, 2020. |
| • | Origination related fee income increased $3.5 million or 3.9% as a result of higher loan origination volume during the nine months ended September 30, 2021. |
| • | During the nine months ended September 30, 2021, net realized and unrealized hedge gains were $180.7 million compared to hedge losses of $148.0 million in the comparable 2020 period, partially offsetting the fair value impact to loans in the pipeline by increases in average market interest rates. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Commissions and bonus |
$ |
106,316 |
$ |
209,916 |
$ | 111,766 | $ | 140,122 | $ | 325,366 | ||||||||||
| Salaries |
48,565 |
104,121 |
46,232 | 41,896 | 108,719 | |||||||||||||||
| Other salary related expenses |
11,073 |
24,225 |
18,451 | 12,052 | 37,857 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total salaries, benefits and related expenses |
165,954 |
338,262 |
176,449 | 194,070 | 471,942 | |||||||||||||||
| Loan origination fees |
17,539 |
32,320 |
14,003 | 13,375 | 34,362 | |||||||||||||||
| Loan processing expenses |
5,119 |
10,544 |
5,462 | 2,408 | 7,008 | |||||||||||||||
| Other general and administrative expenses |
26,918 |
54,506 |
23,112 | 23,936 | 63,974 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total general and administrative expenses |
49,576 |
97,370 |
42,577 | 39,719 | 105,344 | |||||||||||||||
| Occupancy, equipment rentals and other office related expenses |
4,801 |
8,890 |
5,220 | 6,058 | 16,710 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
$ |
220,331 |
$ |
444,522 |
$ | 224,246 | $ | 239,847 | $ | 593,996 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| • | Salaries, benefits and related expenses decreased $28.1 million or 14.5%, primarily due to a $33.8 million decrease in commissions and bonus expense as a result of the 12.7% decrease in origination volume during the three months ended September 30, 2021. These decreases were offset by additional on-going expenses for the RSUs of $2.8 million that are recognized as a result of the Business Combination. Salaries increased an additional $3.9 million as result of increased headcount, further offsetting these decreases. Our average headcount increased from 2,845 for the three months ended September 30, 2020 to 3,046 for the 2021 period due to acquisitions and in order to accommodate the demands of the business. |
| • | General and administrative expenses increased $9.9 million or 24.8% primarily due to an increase in loan origination fees as a result of securitization expenses of $5.2 million. During the three months ended September 30, 2021, $1.6 million of amortization of intangibles relating to the Business Combination was recognized. |
| • | Salaries, benefits and related expenses increased $42.8 million or 9.1%, primarily due to a $41.6 million increase in salaries expense as a result of the 12.1% increase in origination volume during the nine months ended September 30, 2021. Our average headcount increased from 2,675 for the nine months ended September 30, 2020 to 3,063 for the 2021 period due to acquisitions and in order to accommodate the demands of the business. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $7.7 million was recognized. Additional on-going expenses of $5.1 million were recognized for the RSUs issued at the time of the Business Combination. |
| • | General and administrative expenses increased $34.6 million or 32.8% primarily due to an increase in loan origination and loan processing fees as a result of higher origination volume in units, securitization expenses and allocated costs associated with the Business Combination. During the nine months ended September 30, 2021, $8.5 million of securitization expenses were incurred. During the same period, $5.7 million of amortization of intangibles relating to the Business Combination was recognized. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Net origination gains |
$ |
109,408 |
$ |
203,944 |
$ | 68,449 | $ | 48,251 | $ | 137,529 | ||||||||||
| Fee income |
1,022 |
1,976 |
524 | 366 | 1,478 | |||||||||||||||
| Net interest expense |
— |
(9 |
) |
— | — | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
110,430 |
205,911 |
68,973 | 48,617 | 139,007 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
41,354 |
83,600 |
23,693 | 24,634 | 65,374 | |||||||||||||||
| Other, net |
221 |
325 |
34 | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCOME BEFORE TAXES |
$ |
69,297 |
$ |
122,636 |
$ | 45,314 | $ | 23,983 | $ | 73,633 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Loan origination volume |
||||||||||||||||||||
| Total loan origination volume - New originations - dollars (1) |
$ |
1,157,212 |
$ |
2,170,535 |
$ | 768,795 | $ | 626,706 | $ | 2,052,332 | ||||||||||
| Total loan origination volume - Tails - dollars (2) |
135,164 |
257,126 |
120,775 | 116,131 | 352,295 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume - dollars |
$ |
1,292,376 |
$ |
2,427,661 |
$ | 889,570 | $ | 742,837 | $ | 2,404,627 | ||||||||||
| Total loan origination volume - units |
3,382 |
6,640 |
2,864 | 2,347 | 7,104 | |||||||||||||||
| Loan origination volume by channel (dollars) (3) |
||||||||||||||||||||
| Retail |
$ |
195,797 |
$ |
368,769 |
$ | 127,679 | $ | 105,307 | $ | 278,997 | ||||||||||
| TPO |
961,415 |
1,801,766 |
641,116 | 521,399 | 1,773,335 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume by channel |
$ |
1,157,212 |
$ |
2,170,535 |
$ | 768,795 | $ | 626,706 | $ | 2,052,332 | ||||||||||
(1) |
New loan origination volumes consist of initial reverse mortgage loan borrowing amounts. |
(2) |
Tails consist of subsequent borrower draws, mortgage insurance premiums, service fees and other advances that we are able to subsequently pool into a security. |
(3) |
Loan origination volumes by channel consist of initial reverse mortgage loan borrowing amounts, exclusive of subsequent borrower draws, mortgage insurance premiums, service fees and other advances that we are able to subsequently pool into a security. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Net origination gains |
||||||||||||||||||||
| Retail |
$ |
30,061 |
$ |
47,281 |
$ | 16,913 | $ | 13,168 | $ | 28,887 | ||||||||||
| TPO |
144,049 |
285,435 |
99,678 | 72,768 | 220,305 | |||||||||||||||
| Acquisition costs |
(64,702 |
) |
(128,772 |
) |
(48,142 | ) | (37,685 | ) | (111,663 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total net origination gains |
109,408 |
203,944 |
68,449 | 48,251 | 137,529 | |||||||||||||||
| Fee income |
1,022 |
1,976 |
524 | 366 | 1,478 | |||||||||||||||
| Net interest income |
— |
(9 |
) |
— | — | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
$ |
110,430 |
$ |
205,911 |
$ | 68,973 | $ | 48,617 | $ | 139,007 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| • | Net origination gains increased $61.2 million or 126.7% as a result of higher loan origination volume during the three months ended September 30, 2021 combined with increased margins on this origination volume. The higher origination volume is attributable to home price appreciation and improved interest rates on the HECM loan products leading to an increase in market size, more equity available to seniors, and increased refinance volumes in 2021. We originated $1,157.2 million of reverse mortgage loans for the three months ended September 30, 2021, an increase of 84.6%, compared to $626.7 million million for the comparable 2020 period. During the three months ended September 30, 2021, the weighted average margin on production was 9.45% compared to 7.70% in 2020, an increase of 22.7%. |
| • | Net origination gains increased $134.9 million or 98.1% as a result of higher loan origination volume during the nine months ended September 30, 2021 combined with increased margins on this origination volume. The higher origination volume is attributable to home price appreciation and improved interest rates on the HECM loan products leading to an increase in market size, more equity available to seniors, and increased refinance volumes in 2021. We originated $2,939.3 million of reverse mortgage loans for the nine months ended September 30, 2021, an increase of 43.2%, compared to $2,052.3 million for the comparable 2020 period. During the nine months ended September 30, 2021, the weighted average margin on production was 8.21% compared to 6.70% in 2020, an increase of 37.2%. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Salaries and bonuses |
$ |
18,761 |
$ |
38,606 |
$ | 11,692 | $ | 12,072 | $ | 32,368 | ||||||||||
| Other salary related expenses |
1,605 |
3,613 |
1,395 | 898 | 3,240 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total salaries, benefits and related expenses |
20,366 |
42,219 |
13,087 | 12,970 | 35,608 | |||||||||||||||
| Loan origination fees |
2,120 |
4,881 |
3,258 | 3,587 | 9,323 | |||||||||||||||
| Professional fees |
2,444 |
5,120 |
2,079 | 2,711 | 4,933 | |||||||||||||||
| Other general and administrative expenses |
15,954 |
30,445 |
4,958 | 4,920 | 14,286 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total general and administrative expenses |
20,518 |
40,446 |
10,295 | 11,218 | 28,542 | |||||||||||||||
| Occupancy, equipment rentals and other office related expenses |
470 |
935 |
311 | 446 | 1,224 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
$ |
41,354 |
$ |
83,600 |
$ | 23,693 | $ | 24,634 | $ | 65,374 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| • | Salaries, benefits and related expenses increased $7.4 million or 57.0% primarily due to an increase in average headcount and production related compensation to support the increased origination volume. Average headcount for the three months ended September 30, 2021 was 399 compared to 281 for the 2020 period. Additional on-going expenses of $1.2 million were recognized for the RSUs issued at the time of the Business Combination. |
| • | General and administrative expenses increased $9.3 million or 82.9% primarily due to amortization costs associated with intangible assets. During the three months ended September 30, 2021, $9.3 million of amortization of intangibles relating to the Business Combination was recognized. |
| • | Salaries, benefits and related expenses increased $19.7 million or 55.3% primarily due to an increase in average headcount, production related compensation to support the increased origination volume, and share based compensation associated with the Business Combination. Average headcount for the nine months ended September 30, 2021 was 363 compared to 273 for the 2020 period. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $4.0 million was recognized. Additional on-going expenses of $2.1 million were recognized for the RSUs issued at the time of the Business Combination. |
| • | General and administrative expenses increased $22.2 million or 77.8% primarily due to allocated costs and higher professional fees associated with the Business Combination. During the nine months ended September 30, 2021, $18.6 million of amortization of intangibles relating to the Business Combination was recognized. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Net origination gains |
$ |
13,604 |
$ |
24,425 |
$ | 5,431 | $ | 1,357 | $ | 9,939 | ||||||||||
| Fee income |
14,252 |
26,376 |
8,930 | 3,369 | 14,555 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
27,856 |
50,801 |
14,361 | 4,726 | 24,494 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
21,678 |
41,727 |
13,391 | 7,064 | 29,506 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Other, net |
133 |
273 |
149 | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCOME (LOSS) BEFORE TAXES |
$ |
6,311 |
$ |
9,347 |
$ | 1,119 | $ | (2,338 | ) | $ | (5,012 | ) | ||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Loan origination volume (dollars) (1) |
||||||||||||||||||||
| Portfolio |
$ |
78,547 |
$ |
148,574 |
$ | 59,458 | $ | 9,244 | $ | 48,939 | ||||||||||
| SRL |
197,864 |
368,306 |
104,992 | 11,144 | 100,331 | |||||||||||||||
| Fix & flip |
112,312 |
208,366 |
90,018 | 68,049 | 225,765 | |||||||||||||||
| New construction |
15,376 |
33,014 |
3,422 | — | 93,454 | |||||||||||||||
| Agricultural |
43,216 |
89,525 |
83,013 | 1,450 | 79,947 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume |
$ |
447,315 |
$ |
847,785 |
$ | 340,903 | $ | 89,887 | $ | 548,436 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Loan origination volume (units) (1) |
||||||||||||||||||||
| Portfolio |
99 |
173 |
71 | 12 | 34 | |||||||||||||||
| SRL |
1,082 |
2,041 |
643 | 75 | 618 | |||||||||||||||
| Fix & flip |
472 |
917 |
430 | 318 | 1,070 | |||||||||||||||
| New construction |
53 |
109 |
13 | (1 | ) | 275 | ||||||||||||||
| Agricultural |
8 |
32 |
27 | 1 | 39 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total loan origination volume |
1,714 |
3,272 |
1,184 | 405 | 2,036 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
(1) |
Loan origination volume and units consist of approved total borrower commitments. These amounts include amounts available to our borrowers but have not yet been drawn upon. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Net origination gains |
$ |
13,604 |
$ |
24,425 |
$ | 5,431 | $ | 1,357 | $ | 9,939 | ||||||||||
| Fee income |
14,252 |
26,376 |
8,930 | 3,369 | 14,555 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
$ |
27,856 |
$ |
50,801 |
$ | 14,361 | $ | 4,726 | $ | 24,494 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| • | Net origination gains increased by $12.2 million or 902.5%, primarily as a result of the increase in loan origination volume. We originated $447.3 million in commercial loans for the three months ended September 30, 2021 compared to $89.9 million during the comparable 2020 period. The three months ended September 30, 2020 saw the production ramp up for the commercial originations segment following the temporary deferment of production activity in Q2 2020 a result of the COVID-19 outbreak. |
| • | Fee income increased $10.9 million or 323.0% primarily as a result of a significant increase in loan origination volume during the three months ended September 30, 2021. |
| • | Net origination gains increased by $19.9 million or 200.4%, primarily as a result of the increase in loan origination volume. We originated $1,188.7 million in commercial loans for the nine months ended September 30, 2021 compared to $548.4 million during the comparable 2020 period. In March of 2020, there was a temporary deferment of commercial production and a decrease in capital markets demand for non-GSE or government loan products, which continued through the third quarter, due to the COVID-19 outbreak. |
| • | Fee income increased $20.8 million or 142.6% primarily as a result of a 116.7% increase in loan origination volume during the nine months ended September 30, 2021. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Salaries |
$ |
7,693 |
$ |
15,336 |
$ | 4,769 | $ | 1,914 | $ | 9,018 | ||||||||||
| Commissions and bonus |
3,577 |
6,458 |
2,092 | 1,227 | 4,918 | |||||||||||||||
| Other salary related expenses |
1,064 |
2,044 |
797 | 424 | 1,823 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total salaries, benefits and related expenses |
12,334 |
23,838 |
7,658 | 3,565 | 15,759 | |||||||||||||||
| Loan origination fees |
5,216 |
10,155 |
3,140 | 2,306 | 7,618 | |||||||||||||||
| Professional fees |
1,148 |
2,480 |
891 | 683 | 3,097 | |||||||||||||||
| Other general and administrative expenses |
2,636 |
4,607 |
1,164 | 430 | 2,620 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total general and administrative expenses |
9,000 |
17,242 |
5,195 | 3,419 | 13,335 | |||||||||||||||
| Occupancy, equipment rentals and other office related expenses |
344 |
647 |
538 | 80 | 412 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
$ |
21,678 |
$ |
41,727 |
$ | 13,391 | $ | 7,064 | $ | 29,506 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| • | Salaries, benefits and related expenses increased $8.8 million or 246.0% primarily due to the increase in average headcount and production related compensation to support the increased origination volume and allocation of share based compensation associated with the Business Combination. Average headcount for the three months ended September 30, 2021 was 261 compared to 112 for the 2020 period. During the three months ended September 30, 2021, additional on-going expenses of $0.4 million were recognized for the RSUs issued at the time of the Business Combination. |
| • | General and administrative expenses increased $5.6 million or 163.2% primarily due to the increase in loan origination fees and allocated costs associated with the Business Combination. Loan origination volume increased 397.6% during the three months ended September 30, 2021 compared to the comparable 2020 period. During the three months ended September 30, 2021, $0.5 million of amortization of intangibles relating to the Business Combination was recognized. |
| • | |
| • | General and administrative expenses increased $9.1 million or 68.3% primarily due to the increase in loan origination fees and allocated costs associated with the Business Combination. Loan origination volume increased 116.7% during the nine months ended September 30, 2021 compared to the comparable 2020 period. During the nine months ended September 30, 2021, $1.0 million of amortization of intangibles relating to the Business Combination was recognized. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Fee income |
$ |
87,592 |
$ |
168,722 |
$ | 76,383 | $ | 53,249 | $ | 138,819 | ||||||||||
| Net interest expense |
(77 |
) |
(92 |
) |
(36 | ) | (48 | ) | (81 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
87,515 |
168,630 |
76,347 | 53,201 | 138,738 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
78,688 |
151,962 |
62,970 | 45,304 | 123,453 | |||||||||||||||
| Other, net |
22 |
105 |
2 | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCOME BEFORE TAXES |
$ |
8,849 |
$ |
16,773 |
$ |
13,379 |
$ |
7,897 |
$ |
15,285 |
||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Incenter title agent orders |
59,429 |
114,864 |
54,960 | 45,102 | 122,331 | |||||||||||||||
| Incenter title agent closings |
48,694 |
92,252 |
46,991 | 30,228 | 78,088 | |||||||||||||||
| Total appraisals |
12,600 |
22,951 |
7,427 | 6,033 | 15,767 | |||||||||||||||
| Title insurance underwriter policies |
57,185 |
113,366 |
48,814 | 24,050 | 53,509 | |||||||||||||||
| FTE count for fulfillment revenue |
986 |
986 |
858 | 41 | 756 | |||||||||||||||
| Total MSR valuations performed |
137 |
274 |
124 | 135 | 391 | |||||||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Title agent and closing services |
$ |
24,988 |
$ |
58,866 |
$ | 31,750 | $ | 24,797 | $ | 68,727 | ||||||||||
| Insurance underwriting services |
42,717 |
77,629 |
33,322 | 17,768 | 40,943 | |||||||||||||||
| Student and consumer loan origination services |
3,512 |
5,012 |
2,012 | 3,616 | 9,316 | |||||||||||||||
| Fulfillment services |
7,337 |
14,160 |
6,779 | 4,492 | 12,030 | |||||||||||||||
| MSR trade brokerage, valuation and other services |
8,306 |
12,156 |
2,462 | 2,562 | 7,747 | |||||||||||||||
| Other income |
732 |
899 |
58 | 14 | 56 | |||||||||||||||
| Net interest expense |
(77 |
) |
(92 |
) |
(36 | ) | (48 | ) | (81 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
$ |
87,515 |
$ |
168,630 |
$ | 76,347 | $ | 53,201 | $ | 138,738 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| • | For the three months ended September 30, 2021, we acted as title agent on 48,694 loan closings, compared to 30,228 loan closings for the comparable 2020 period, an increase of 61.1%. We underwrote 57,185 policies during the three months ended September 30, 2021, compared to 24,050 underwritten policies for the comparable 2020 period, an increase of 137.8%. These increases were primarily the result of continued strong refinance volumes and client acquisition. |
| • | For the nine months ended September 30, 2021, we acted as title agent on 139,243 loan closings, compared to 78,088 loan closings for the 2020 period, an increase of 78.3%. We underwrote 162,180 policies during the nine months ended September 30, 2021, compared to 53,509 underwritten policies for the 2020 period, an increase of 203.1%. These increases were primarily the result of continued strong refinance volumes and client acquisition. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Salaries |
$ |
18,129 |
$ |
36,480 |
$ | 16,715 | $ | 10,099 | $ | 29,830 | ||||||||||
| Commissions and bonus |
9,755 |
18,445 |
7,045 | 8,017 | 18,570 | |||||||||||||||
| Other salary related expenses |
5,183 |
11,445 |
4,001 | 2,805 | 8,200 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total salaries, benefits and related expenses |
33,067 |
66,370 |
27,761 | 20,921 | 56,600 | |||||||||||||||
| Title and closing |
31,358 |
56,548 |
25,062 | 15,835 | 44,512 | |||||||||||||||
| Communication and data processing |
3,760 |
6,885 |
2,960 | 2,949 | 7,361 | |||||||||||||||
| Fair value change in deferred purchase price liability |
238 |
1,988 |
— | 87 | 250 | |||||||||||||||
| Other general and administrative expenses |
9,060 |
17,951 |
6,040 | 4,492 | 12,083 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total general and administrative expenses |
44,416 |
83,372 |
34,062 | 23,363 | 64,206 | |||||||||||||||
| Occupancy, equipment rentals and other office related expenses |
1,205 |
2,220 |
1,147 | 1,020 | 2,647 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
$ |
78,688 |
$ |
151,962 |
$ | 62,970 | $ | 45,304 | $ | 123,453 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| • | Salaries, benefits and related expenses increased $12.1 million or 58.1%, primarily due to the staffing required to support the 137.8% increase in title insurance underwriting policies and 61.1% increase in title agent closings. Commissions and bonus expense increased $1.7 million in conjunction with the increase in revenue. During the three months ended September 30, 2021, additional on-going expenses for the RSUs of $0.9 million were recognized for the RSUs issued at the time of the Business Combination. |
| • | General and administrative expenses increased $21.1 million or 90.1% primarily due to higher title and closing expenses incurred associated with the 137.8% increase in title insurance underwriting policies volume and 61.1% increase in title agent closing volume. During the three months ended September 30, 2021, $1.7 million of amortization of intangibles relating to the Business Combination was recognized. |
| • | |
| • | General and administrative expenses increased $53.2 million or 82.9% primarily due to higher title and closing expenses incurred associated with the 203.1% increase in title insurance underwriting policies volume and 78.3% increase in title agent closing volume. During the nine months ended September 30, 2021, $2.9 million of amortization of intangibles relating to the Business Combination were recognized. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Gain on sale and other income from mortgage loans held for sale, net |
$ |
13,664 |
$ |
21,412 |
$ | 5,065 | $ | 706 | $ | 6,323 | ||||||||||
| Net fair value (losses) gains |
(448 |
) |
10,776 |
2,750 | 46,261 | 72,142 | ||||||||||||||
| Net interest expense |
(17,799 |
) |
(33,650 |
) |
(14,816 | ) | (15,999 | ) | (60,480 | ) | ||||||||||
| Fee income |
14,937 |
18,514 |
36,191 | 10,965 | 13,357 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
10,354 |
17,052 |
29,190 | 41,933 | 31,342 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
30,068 |
63,325 |
24,406 | 22,989 | 61,735 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Other, net |
252 |
8 |
895 | — | — | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET (LOSS) INCOME BEFORE TAXES |
$ |
(19,462 |
) |
$ |
(46,265 |
) |
$ | 5,679 | $ | 18,944 | $ | (30,393 | ) | |||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| • | 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) |
| • | HMBS liabilities, at fair value; and |
| • | Nonrecourse debt, at fair value. |
(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. |
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Cash and cash equivalents |
$ |
45,401 |
$ | 47,024 | ||||
| Restricted cash |
$ |
322,887 |
$ | 303,925 | ||||
| Reverse mortgage loans held for investment, subject to HMBS liabilities, at fair value |
10,347,459 |
9,929,163 | ||||||
| Mortgage loans held for investment, subject to nonrecourse debt, at fair value |
5,939,651 |
5,396,167 | ||||||
| Mortgage loans held for investment, at fair value |
1,077,670 |
730,821 | ||||||
| Mortgage servicing rights, at fair value |
340,949 |
180,684 | ||||||
| Other assets, net |
185,898 |
165,810 | ||||||
| |
|
|
|
|||||
| Total long-term investment assets |
18,259,915 |
16,753,594 | ||||||
| |
|
|
|
|||||
| Mortgage loans held for sale, at fair value |
142,906 |
142,226 | ||||||
| |
|
|
|
|||||
| Total earning assets |
18,402,821 |
16,895,820 | ||||||
| HMBS related obligations, at fair value |
10,216,310 |
$ | 9,788,668 | |||||
| Nonrecourse debt, at fair value |
5,831,083 |
5,271,842 | ||||||
| Other financing lines of credit |
1,508,916 |
1,010,669 | ||||||
| Payables and other liabilities |
66,698 |
96,762 | ||||||
| |
|
|
|
|||||
| Total financing of portfolio |
17,623,007 |
16,167,941 | ||||||
| |
|
|
|
|||||
| |
||||||||
| |
|
|
|
|||||
| Net equity in earning assets |
$ |
779,814 |
$ | 727,879 | ||||
| |
|
|
|
|||||
September 30, 2021 |
December 31, 2020 |
|||||||
Successor |
Predecessor |
|||||||
| Mortgage Servicing Rights Portfolio |
||||||||
| Loan count |
103,422 |
69,301 | ||||||
| Ending unpaid principal balance (“UPB”) |
$ |
33,301,683 |
$ | 22,269,362 | ||||
| Average unpaid principal balance |
$ |
322 |
$ | 321 | ||||
| Weighted average coupon |
3.02 |
% |
3.15 | % | ||||
| Weighted average age (in months) |
9 |
4 | ||||||
| Weighted average FICO credit score |
758 |
760 | ||||||
| 90+ day delinquency rate |
0.1 |
% |
0.1 | % | ||||
| Total prepayment speed |
9.5 |
% |
12.1 | % | ||||
| Reverse Mortgages |
||||||||
| Loan count |
59,556 |
58,230 | ||||||
| Active UPB |
$ |
14,352,606 |
$ | 13,355,570 | ||||
| Due and payable |
279,268 |
484,233 | ||||||
| Foreclosure |
689,749 |
348,768 | ||||||
| Claims pending |
65,352 |
76,346 | ||||||
| |
|
|
|
|||||
| Ending unpaid principal balance |
$ |
15,386,975 |
$ | 14,264,917 | ||||
| Average unpaid principal balance |
$ |
258 |
$ | 245 | ||||
| Weighted average coupon |
3.94 |
% |
4.30 | % | ||||
| Weighted average age (in months) |
44 |
44 | ||||||
| Percentage in foreclosure |
4.5 |
% |
2.4 | % | ||||
| Commercial (SRL/Portfolio/Fix & Flip) |
||||||||
| Loan count |
2,147 |
1,993 | ||||||
| Ending unpaid principal balance |
$ |
453,372 |
$ | 493,817 | ||||
| Average unpaid principal balance |
$ |
211 |
$ | 248 | ||||
| Weighted average coupon |
7.52 |
% |
8.50 | % | ||||
| Weighted average loan age (in months) |
9 |
12 | ||||||
| SRL conditional prepayment rate |
1.9 |
% |
2.9 | % | ||||
| SRL non-performing (60+ DPD) |
1.4 |
% |
2.2 | % | ||||
| F&F single month mortality |
8.5 |
% |
8.8 | % | ||||
| F&F non-performing (60+ DPD) |
14.9 |
% |
6.5 | % | ||||
| Agricultural Loans |
||||||||
| Loan count |
72 |
42 | ||||||
| Ending unpaid principal balance |
$ |
186,177 |
$ | 69,127 | ||||
| Average unpaid principal balance |
$ |
2,586 |
$ | 1,646 | ||||
| Weighted average coupon |
7.34 |
% |
7.70 | % | ||||
| Weighted average loan age (in months) |
7 |
5 | ||||||
| Conditional prepayment rate |
1.0 |
% |
1.0 | % | ||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Investment and Capital Markets |
||||||||||||||||||||
| Number of structured deals |
4 |
7 |
1 | 2 | 8 | |||||||||||||||
| Structured deals (size in notes) |
$ |
1,443,121 |
$ |
2,575,653 |
$ | 571,448 | $ | 954,884 | $ | 2,715,236 | ||||||||||
| Number of whole loan trades |
11 |
21 |
8 | 1 | 3 | |||||||||||||||
| UPB of whole loan trades |
$ |
294,898 |
$ |
512,966 |
$ | 195,929 | $ | 44,704 | $ | 168,869 | ||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| REVENUE |
||||||||||||||||||||
| Gain on sale and other income from mortgage loans held for sale, net |
$ |
13,664 |
$ |
21,412 |
$ | 5,065 | $ | 706 | $ | 6,323 | ||||||||||
| Net fair value gains: |
||||||||||||||||||||
| Interest income |
152,641 |
300,587 |
149,875 | 171,731 | 532,725 | |||||||||||||||
| Interest expense (nonrecourse) |
(109,766 |
) |
(221,107 |
) |
(114,910 | ) | (126,426 | ) | (388,904 | ) | ||||||||||
| Net fair value (losses) gains on portfolio assets |
(43,323 |
) |
(68,704 |
) |
(32,215 | ) | 956 | (71,679 | ) | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total net fair value (losses) gains |
(448 |
) |
10,776 |
2,750 | 46,261 | 72,142 | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net interest expense |
(17,799 |
) |
(33,650 |
) |
(14,816 | ) | (15,999 | ) | (60,480 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Fee income: |
||||||||||||||||||||
| Servicing income (MSR) |
6,060 |
6,360 |
33,698 | 8,060 | 9,846 | |||||||||||||||
| Underwriting, advisory and valuation fees |
5,127 |
7,028 |
997 | — | 180 | |||||||||||||||
| Asset management fees |
— |
— |
9 | 366 | 1,319 | |||||||||||||||
| Other fees |
3,750 |
5,126 |
1,487 | 2,539 | 2,012 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total fee income |
14,937 |
18,514 |
36,191 | 10,965 | 13,357 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
$ |
10,354 |
$ |
17,052 |
$ | 29,190 | $ | 41,933 | $ | 31,342 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Interest income on commercial and reverse loans |
$ |
152,641 |
$ |
300,585 |
$ | 149,875 | $ | 171,244 | $ | 532,725 | ||||||||||
| Interest expense on HMBS and nonrecourse obligations |
(109,766 |
) |
(221,107 |
) |
(114,910 | ) | (126,426 | ) | (388,904 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net interest margin included in net fair value gains and losses on mortgage loans (1) |
42,875 |
79,478 |
34,965 | 44,818 | 143,821 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Interest income on mortgage loans held for sale |
296 |
483 |
138 | 136 | 619 | |||||||||||||||
| Interest expense on warehouse lines of credit |
(18,178 |
) |
(34,216 |
) |
(14,954 | ) | (15,636 | ) | (60,604 | ) | ||||||||||
| Other interest income (expense) |
83 |
83 |
— | (499 | ) | (495 | ) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Net interest expense |
(17,799 |
) |
(33,650 |
) |
(14,816 | ) | (15,999 | ) | (60,480 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INTEREST MARGIN |
$ |
25,076 |
$ |
45,828 |
$ | 20,149 | $ | 28,819 | $ | 83,341 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
(1) |
Net interest margin included in net fair value gains and losses on mortgage loans includes interest income and expense on all commercial and reverse loans and their related nonrecourse obligations. Interest income on mortgage loans and warehouse lines of credit are classified in net interest expense. See Note 2 - Summary of Significant Accounting Policies within the interim unaudited consolidated financial statements for additional information on the Company’s accounting related to commercial and reverse mortgage loans. |
| • | Interest income decreased $19.1 million due to competitive pressure on margins in 2021 resulting in a decrease in weighted average coupon on our portfolio of loans for the three months ended September 30, 2021 compared to the comparable 2020 period. |
| • | Interest expense on nonrecourse debt decreased $16.7 million due to issuances of nonrecourse debt in a favorable interest rate environment during the three months ended September 30, 2021 and retirement of nonrecourse debt issued in prior periods. |
| • | Net fair value losses on portfolio assets increased $44.3 million primarily due to fair value adjustments related predominantly to increases in modeled prepayment speeds on securitized mortgage assets and MSR. |
| • | Fee income increased $4.0 million primarily due to increases in underwriting, advisory and valuation fees, offset slightly by decreases in servicing fee income. |
| • | Interest income decreased $82.3 million due to competitive pressure on margins in 2021 resulting in a decrease in weighted average coupon on our portfolio of loans for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. |
| • | Interest expense on nonrecourse debt decreased $52.9 million due to issuances of nonrecourse debt in a favorable interest rate environment during the nine months ended September 30, 2021 and retirement of nonrecourse debt issued in prior periods. |
| • | Net interest expense on our warehouse lines decreased $12.0 million due primarily to a lower average cost of funds on our financing lines of credit. |
| • | Net fair value losses on portfolio assets increased $29.2 million primarily due to the growth of the assets held and the recognized amortization for the nine months ended September 30, 2021 compared to the comparable 2020 period. |
| • | Fee income increased $41.3 million primarily related to the increase in servicing fee income for the nine months ended September 30, 2021 compared to the comparable 2020 period. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Salaries and bonuses |
$ |
9,080 |
$ |
24,621 |
$ | 5,650 | $ | 6,043 | $ | 15,835 | ||||||||||
| Other salary related expenses |
380 |
827 |
497 | 917 | 1,613 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total salaries, benefits and related expenses |
9,460 |
25,448 |
6,147 | 6,960 | 17,448 | |||||||||||||||
| Securitization expenses |
9,877 |
14,610 |
4,459 | 5,242 | 13,592 | |||||||||||||||
| Servicing related expenses |
9,093 |
17,918 |
8,651 | 6,723 | 19,143 | |||||||||||||||
| Other general and administrative expenses |
1,441 |
5,026 |
4,887 | 3,918 | 11,092 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total general and administrative expenses |
20,411 |
37,554 |
17,997 | 15,883 | 43,827 | |||||||||||||||
| Occupancy and equipment rentals |
197 |
323 |
262 | 146 | 460 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
$ |
30,068 |
$ |
63,325 |
$ | 24,406 | $ | 22,989 | $ | 61,735 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| • | Salaries, benefits and related expenses increased $2.5 million or 36.0%, primarily due to increase in bonus compensation. Additional on-going expenses of $0.9 million were recognized for the RSUs issued at the time of the Business Combination. |
| • | General and administrative expenses increased $4.5 million or 28.5% primarily due to increased loan portfolio expenses related to the increase in subservicing expense on the retained MSR portfolio, which are included in servicing related expenses above, along with increases in fees related to the securitization of assets into nonrecourse securitizations, slightly offset by a decrease in other general and administrative expenses. |
| • | Salaries, benefits and related expenses increased $14.1 million or 81.1%, primarily due to allocated costs associated with the Business Combination and an increase in bonus compensation. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $7.2 million was recognized. Additional on-going expenses of $1.9 million were recognized for the RSUs issued at the time of the Business Combination. |
| • | General and administrative expenses increased $11.7 million or 26.8% primarily due to increased loan portfolio expenses related to the increase in subservicing expense on the retained MSR portfolio, which are included in servicing related expenses above, along with increases in fees related to the securitization of assets into nonrecourse securitizations, slightly offset by a decrease in other general and administrative expenses. |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Fee income |
$ |
— |
$ |
— |
$ | — | $ | 2,471 | $ | 2,514 | ||||||||||
| Net interest expense |
(6,720 |
) |
(13,287 |
) |
(7,744 | ) | (385 | ) | (4,605 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total interest and other expense |
(6,720 |
) |
(13,287 |
) |
(7,744 | ) | 2,086 | (2,091 | ) | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
28,672 |
64,669 |
18,683 | 9,615 | 32,837 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Other, net |
10,205 |
8,019 |
(9,464 | ) | (2,470 | ) | (2,514 | ) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET LOSS |
$ |
(25,187 |
) |
$ |
(69,937 |
) |
$ | (35,891 | ) | $ | (9,999 | ) | $ | (37,442 | ) | |||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Salaries and bonuses |
$ |
35,944 |
$ |
82,973 |
$ | 22,779 | $ | 16,566 | $ | 44,022 | ||||||||||
| Other salary related expenses |
3,379 |
5,611 |
3,306 | 1,196 | 3,011 | |||||||||||||||
| Shared services - payroll allocations |
(19,520 |
) |
(43,954 |
) |
(18,657 | ) | (15,867 | ) | (29,356 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total salaries, benefits and related expenses |
19,803 |
44,630 |
7,428 | 1,895 | 17,677 | |||||||||||||||
| Communication and data processing |
4,368 |
8,208 |
3,015 | 1,300 | 4,141 | |||||||||||||||
| Professional fees |
488 |
8,905 |
10,334 | 8,515 | 15,440 | |||||||||||||||
| Other general and administrative expenses |
8,141 |
11,621 |
1,481 | 873 | 3,317 | |||||||||||||||
| Shared services - general and administrative allocations |
(5,404 |
) |
(10,669 |
) |
(3,694 | ) | (3,402 | ) | (9,080 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total general and administrative expenses |
7,593 |
18,065 |
11,136 | 7,286 | 13,818 | |||||||||||||||
| Occupancy, equipment rentals and other office related expenses |
1,276 |
1,974 |
119 | 434 | 1,342 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
$ |
28,672 |
$ |
64,669 |
$ | 18,683 | $ | 9,615 | $ | 32,837 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| • | Total interest and other expense increased $8.8 million or 422.1% primarily as a result of interest expense related to the senior unsecured notes issued in November 2020. |
| • | Salaries, benefits, and related expenses, net of allocations, increased $17.9 million or 945.0% primarily due to an increase in average headcount, bonus compensation, and cost allocations related to the Business Combination, offset partially by an increase in shared services allocations. Average headcount for the three months ended September 30, 2021 was 470 compared to 289 for the comparable 2020 period. During the three months ended September 30, 2021, additional on-going expenses of $6.0 million were recognized for the RSUs issued at the time of the Business Combination. These increases were partially offset by an increase in allocations, as a portion of the Business Combination expenses were allocated to each segment. |
| • | Total interest and other expense increased $18.9 million or 905.8% as a result of interest expense related to the senior unsecured notes issued in November 2020. |
| • | |
| for the 2020 period. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $15.3 million was recognized. Additional on-going expenses of $9.2 million were recognized for the RSUs issued at the time of the Business Combination. These increases were partially offset by an increase in allocations, as a portion of the Business Combination expenses were allocated to each segment. |
| • | General and administrative expenses, net of shared services allocations, increased $15.4 million or 111.3% due to an increase in communications and data processing, higher professional fees, including legal and accounting advisory fees, related to the Business Combination, offset slightly by an increase in shared services allocations. |
| • | cash expenditures for future contractual commitments; |
| • | cash requirements for working capital needs; |
| • | cash requirements for certain tax payments; and |
| • | all non-cash income/expense items reflected in the Consolidated Statements of Cash Flows. |
| 1. | Change in fair value of loans and securities held for investment due to assumption changes |
| 2. | Amortization and other impairments of intangible assets |
| 3. | Share based compensation |
| 4. | Change in fair value of deferred purchase price obligations (including earnouts and TRA obligations), warrant liability, and minority investments |
| 5. | Certain non-recurring costs |
| 6. | Pro-forma tax provision attributable to noncontrolling interest |
| 7. | Pro-forma tax effects of adjustments |
| 1. | Taxes |
| 2. | Interest on non-funding debt |
| 3. | Depreciation |
| 4. | Change in fair value of loans and securities held for investment due to assumption changes |
| 5. | Amortization and other impairments of intangible assets |
| 6. | Equity based compensation |
| 7. | Change in fair value of deferred purchase price obligations (including earnouts and TRA obligations), warrant liability and minority investments |
| 8. | Certain non-recurring costs |
For the three months ended September 30, 2021 |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the three months ended September 30, 2020 |
For the nine months ended September 30, 2020 |
||||||||||||||||
Successor |
Predecessor |
|||||||||||||||||||
| Reconciliation of Net income to Adjusted Net Income and Adjusted EBITDA |
||||||||||||||||||||
| Net income |
$ |
50,110 |
$ |
35,286 |
$ | 124,320 | $ | 241,611 | $ | 345,490 | ||||||||||
| Adjustments for: |
||||||||||||||||||||
| Change in fair value of loans and securities held for investment due to assumption changes (1) |
28,760 |
48,803 |
2,042 | (16,753 | ) | 53,908 | ||||||||||||||
| Amortization and impairment of intangibles |
13,457 |
26,914 |
629 | 601 | 1,889 | |||||||||||||||
| Change in fair value of deferred purchase price liabilities (2) |
1,273 |
3,893 |
30 | (258 | ) | (111 | ) | |||||||||||||
| Change in fair value of warrant liability |
(9,919 |
) |
(8,627 |
) |
— | — | — | |||||||||||||
| Equity based compensation |
10,626 |
21,268 |
— | — | — | |||||||||||||||
| Change in fair value of minority investments (3) |
(401 |
) |
(274 |
) |
9,464 | — | — | |||||||||||||
| Certain non-recurring costs (4) |
2,602 |
46,080 |
6,719 | 7,893 | 12,547 | |||||||||||||||
| Tax effect on net income attributable to noncontrolling interest (5)(6) |
(7,257 |
) |
(2,984 |
) |
(31,482 | ) | (62,221 | ) | (88,663 | ) | ||||||||||
| Tax effect of adjustments attributable to noncontrolling interest (5) |
(10,585 |
) |
(29,113 |
) |
(4,910 | ) | 2,214 | (17,741 | ) | |||||||||||
| Tax effect of adjustments attributable to controlling interest (5) |
(4,057 |
) |
(9,360 |
) |
N/A | N/A | N/A | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted Net Income |
$ |
74,609 |
$ |
131,886 |
$ | 106,812 | $ | 173,087 | $ | 307,319 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Effective income taxes |
26,339 |
46,983 |
37,529 | 60,815 | 107,978 | |||||||||||||||
| Depreciation |
2,519 |
4,800 |
2,163 | 1,776 | 5,342 | |||||||||||||||
| Interest expense on non-funding debt |
6,842 |
13,536 |
7,706 | 7 | 3,515 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ |
110,309 |
$ |
197,205 |
$ | 154,210 | $ | 235,685 | $ | 424,154 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| GAAP PER SHARE MEASURES |
||||||||||||||||||||
| Net income attributable to controlling interest |
$ |
21,384 |
$ |
23,649 |
N/A | N/A | N/A | |||||||||||||
| Weighted average shares outstanding |
59,861,171 |
59,871,386 |
N/A | N/A | N/A | |||||||||||||||
| Basic earnings per share |
0.36 |
0.39 |
N/A | N/A | N/A | |||||||||||||||
| If-converted method net income |
$ |
42,861 |
$ |
33,125 |
$ | 119,859 | $ | 246,288 | $ | 367,373 | ||||||||||
| Weighted average diluted shares |
191,161,431 |
191,180,610 |
191,200,000 | 191,200,000 | 191,200,000 | |||||||||||||||
| Diluted earnings per share |
$ |
0.22 |
$ |
0.17 |
$ | 0.63 | $ | 1.29 | $ | 1.92 | ||||||||||
| NON-GAAP PER SHARE MEASURES |
||||||||||||||||||||
| Adjusted Net Income |
$ |
74,609 |
$ |
131,886 |
$ | 106,812 | $ | 173,087 | $ | 307,319 | ||||||||||
| Weighted average diluted shares |
191,161,431 |
191,180,610 |
191,200,000 | 191,200,000 | 191,200,000 | |||||||||||||||
| Adjusted Diluted Earnings per Share |
$ |
0.39 |
$ |
0.69 |
$ | 0.56 | $ | 0.91 | $ | 1.61 | ||||||||||
| Book equity |
$ |
2,432,174 |
$ |
2,432,174 |
$ | 844,386 | $ | 1,014,007 | $ | 1,014,007 | ||||||||||
| Ending diluted shares |
189,425,808 |
189,425,808 |
191,200,000 | 191,200,000 | 191,200,000 | |||||||||||||||
| Book Equity per Diluted Share |
$ |
12.84 |
$ |
12.84 |
$ | 4.42 | $ | 5.30 | $ | 5.30 |
(1) |
Change in Fair Value of Loans and Securities Held for Investment due to Assumption Changes - |
| 1. | 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; |
| 5. | Mortgage servicing rights, at fair value; |
| 6. | HMBS related obligations, at fair value; and |
| 7. | Nonrecourse debt, at fair value. |
(2) |
Change in Fair Value of Deferred Purchase Price Obligations |
(3) |
Change in Fair Value of Minority Investments |
(4) |
Certain non-recurring costs relate to various one-time expenses and adjustments that management believes should be excluded as these do not relate to a recurring part of the core business operations. These items include certain one-time charges including estimated settlements for legal and regulatory matters, acquisition related expenses, share based compensation associated with the Business Combination, and other one-time charges. The Successor period of April 1, 2021 to September 30, 2021 include $38.6 million of non-recurring share based compensation primarily resulting from the immediate vesting portion of the Replacement RSU awards. |
(5) |
We applied a 26% effective tax rate to pre-tax income and adjustments (excluding change in fair value of warrant liability, which is a permanent book/tax difference) for the respective period to determine the tax effect of net income (loss) and adjustments attributable to the noncontrolling interests and adjustments. |
(6) |
This is a component in the numerator of diluted net loss per share. See Note 33 - Earnings Per Share. |
| • | records an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates at the date of the exchange; |
| • | to the extent we estimate that the Company will not realize the full benefit represented by the deferred tax asset, based on an analysis that will consider, among other things, our expectation of future earnings, the Company reduces the deferred tax asset with a valuation allowance; and |
| • | initial measurement of the obligations is at fair value on the acquisition date. Subsequently, the liability will be remeasured at fair value each reporting period, with any changes in fair value recognized through earnings. |
April 1, 2021 to September 30, 2021 |
January 1, 2021 to March 31, 2021 |
For the nine months ended September 30, 2020 |
||||||||||
Successor |
Predecessor |
|||||||||||
| Net cash (used in) provided by operating activities |
(72,613 |
) |
118,043 | (376,772 | ) | |||||||
| Net cash used in investing activities |
(710,072 |
) |
(312,047 | ) | (995,201 | ) | ||||||
| Net cash provided by financing activities |
672,835 |
307,695 | 1,503,052 | |||||||||
| • | Base of $2.5 million plus 25 basis points of outstanding UPB for total loans serviced. |
| • | Tangible Net Worth comprises of total equity less goodwill, intangible assets, affiliate receivables and certain pledged assets. |
| • | 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. Effective for fiscal year 2020, under the Ginnie Mae MBS Guide, the issuers will no longer be permitted to include deferred tax assets when computing the minimum net worth requirement. |
| • | In addition to the minimum net worth requirement, we are also required to hold a ratio of Tangible Net Worth to Total Assets (excluding HMBS securitizations) greater than 6%. |
| • | FAR received a permanent waiver for the minimum outstanding capital requirements from Ginnie Mae. |
| • | 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, US Treasury Obligations); and unused/available portion of committed servicing advance lines. |
| • | Maintain liquid assets equal to the greater of $1.0 million or 10 basis points of our outstanding single-family MBS. |
| • | Maintain liquid assets equal to at least 20% of our net worth requirement for HECM MBS. |
| Mortgage Warehouse Facilities |
Maturity Date |
Total Capacity |
September 30, 2021 |
|||||||
| Committed |
October 2021 - August 2022 |
$ | 975,000 | $ |
694,765 |
|||||
| Uncommitted |
October 2021 - March 2022 | 2,600,000 | 1,088,778 |
|||||||
| |
|
|
|
|||||||
| Total mortgage warehouse facilities |
$ | 3,575,000 | $ |
1,783,543 |
||||||
| |
|
|
|
|||||||
| Reverse Warehouse Facilities |
Maturity Date |
Total Capacity |
September 30, 2021 |
|||||||
| Committed |
October 2021 - June 2022 |
$ | 475,000 | $ |
242,170 |
|||||
| Uncommitted |
December 2021 - August 2022 |
725,000 | 378,247 |
|||||||
| |
|
|
|
|||||||
| Total reverse warehouse facilities |
$ | 1,200,000 | $ |
620,417 |
||||||
| |
|
|
|
|||||||
| Commercial Warehouse Facilities |
Maturity Date |
Total Capacity |
September 30, 2021 |
|||||||
| Committed |
February 2022 - August 2022 |
$ | 360,000 | $ |
148,166 |
|||||
| Uncommitted |
February 2022 - November 2023 |
150,000 | 1,621 |
|||||||
| |
|
|
|
|||||||
| Total commercial warehouse facilities |
$ | 510,000 | $ |
149,787 |
||||||
| |
|
|
|
|||||||
| • | 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. |
| Other Secured Lines of Credit |
Maturity Date |
Total Capacity |
September 30, 2021 |
|||||||
| Committed |
December 2021 - N/A |
$ | 912,500 | $ |
706,069 |
|||||
| Uncommitted |
April 2022 - N/A | 114,834 | 65,338 |
|||||||
| |
|
|
|
|||||||
| Total other secured lines of credit (2) |
$ | 1,027,334 | $ |
771,407 |
||||||
| |
|
|
|
|||||||
Total |
Less than 1 year |
1- 3 years |
3 - 5 years |
More than 5 years |
||||||||||||||||
| Contractual cash obligations: |
||||||||||||||||||||
| Warehouse lines of credit |
$ | 2,553,749 | $ | 2,338,277 | $ | 215,472 | $ | — | $ | — | ||||||||||
| MSR line of credit |
205,808 | — | 88,072 | — | 117,736 | |||||||||||||||
| Other secured lines of credit |
565,599 | 309,632 | 52,500 | — | 203,467 | |||||||||||||||
| Nonrecourse debt (1) |
5,654,826 | 451,941 | 5,202,885 | — | — | |||||||||||||||
| Notes payable |
353,567 | — | — | 353,567 | — | |||||||||||||||
| Operating leases |
79,450 | 5,014 | 39,991 | 9,710 | 24,735 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 9,412,999 | $ | 3,104,864 | $ | 5,598,920 | $ | 363,277 | $ | 345,938 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
(1) |
Nonrecourse MSR financing liability is excluded from this balance. See below for additional details. |
| • | 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. |
| • | 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. |
| • | 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. |
September 30, 2021 |
||||||||
Down 25 bps |
Up 25 bps |
|||||||
(in thousands) |
||||||||
| Increase (decrease) in assets |
||||||||
| Reverse mortgage loans held for investment, subject to HMBS related obligations |
$ |
28,291 |
$ |
(28,571 |
) | |||
| Mortgage loans held for investment, subject to nonrecourse debt: |
||||||||
| Reverse mortgage loans |
66,599 |
(63,586 |
) | |||||
| Fix & flip mortgage loans |
475 |
(473 |
) | |||||
| Mortgage loans held for investment: |
||||||||
| Reverse mortgage loans |
6,645 |
(6,229 |
) | |||||
| Fix & flip mortgage loans |
121 |
(120 |
) | |||||
| Agricultural loans |
248 |
(247 |
) | |||||
| Mortgage loans held for sale: |
||||||||
| Residential mortgage loans |
16,555 |
(22,901 |
) | |||||
| SRL |
1,305 |
(873 |
) | |||||
| Portfolio |
571 |
(560 |
) | |||||
| Mortgage servicing rights |
(17,998 |
) |
14,916 |
|||||
| Other assets |
477 |
(477 |
) | |||||
| Derivative assets: |
||||||||
| Forward commitments and TBAs |
500 |
(370 |
) | |||||
| Forward MBS |
(28,001 |
) |
36,999 |
|||||
| IRLCs |
10,524 |
(14,558 |
) | |||||
| |
|
|
|
|||||
| Total assets |
$ |
86,312 |
$ |
(87,050 |
) | |||
| |
|
|
|
|||||
| Increase (decrease) in liabilities |
||||||||
| HMBS related obligation |
$ |
25,782 |
$ |
(26,039 |
) | |||
| Nonrecourse debt |
18,016 |
(18,613 |
) | |||||
| Derivative liabilities: |
||||||||
| Forward MBS |
1,974 |
(2,609 |
) | |||||
| Interest rate swaps and futures contracts |
18,808 |
(18,808 |
) | |||||
| |
|
|
|
|||||
| Total liabilities |
$ |
64,580 |
$ |
(66,069 |
) | |||
| |
|
|
|
|||||
| a. | While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have enhanced these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards. We require the formalized consideration of obtaining additional technical guidance prior to concluding on all significant or unusual transactions. |
| b. | We expanded and clarified our understanding of the Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) issued by the SEC on April 12, 2021 (the “Staff Statement”) and designed and implemented a control over the calculations of the impact of the issued warrants subject to the Staff statement on our financial statements. |
| c. | We acquired enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third party professionals with whom we consult regarding the application of temporary and permanent equity and complex accounting transactions. |
| 101.PRE*** | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
| * | Filed herewith. | |
| ** | Furnished herewith. | |
| *** | XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. | |
Finance of America Companies Inc. | ||||||
| Dated: November 12, 2021 | By: | /s/ Johan Gericke | ||||
| Johan Gericke | ||||||
| Executive Vice President, Chief Financial Officer (Authorized Signatory and Principal Financial Officer) | ||||||