Form 10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number

001-40308

FINANCE OF AMERICA COMPANIES INC.

(Exact name of registrant as specified in its charter)


Delaware		85-3474065
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


5830 Granite Parkway, Suite 400, Plano, Texas		75024
(Address of Principal Executive Offices)		(Zip Code)

(877)

202-2666

Registrant’s telephone number, including area code

909 Lake Carolyn Parkway

Suite 1550

Irving, Texas 75039

(Address of Former Principal Executive Offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	FOA	The New York Stock Exchange
Warrants to purchase shares of Class A Common Stock	FOA.WS	The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Act). Yes ☐ No

☒

As of May 9, 2022, there were

62,322,681

shares of the registrant’s Class A Common Stock and 15 shares of the registrant’s Class B

Common Stock issued and outstanding.

Table of Contents

Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary

This Quarterly Report on Form

10-Q

includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts or statements of current conditions, but instead represent only management’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control. It is possible that our actual results, financial condition and liquidity may differ, possibly materially, from the anticipated results, financial condition and liquidity in these forward-looking statements. The Company’s actual results may differ from its expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions (or the negative versions of such words or expressions) are intended to identify such forward-looking statements. The Company cautions readers not to place undue reliance upon any forward-looking statements, which are current only as of the date of this report. Results for any specified period are not necessarily indicative of the results that may be expected for any future period. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions, or circumstances on which any such statement is based, except as required by law. Such forward-looking statements are subject to various risks and uncertainties including, but not limited to:

•

the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors in our markets;

•

our ability to obtain sufficient capital to meet the financing requirements of our business;

•

our ability to finance and recover costs of our reverse servicing operations;

•

changes in our business relationships or changes in servicing guidelines with Fannie Mae, Freddie Mac and Ginnie Mae;

•

The

COVID-19

pandemic 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.

•

Our business is significantly impacted by interest rates. Changes in prevailing interest rates or U.S. monetary policies that affect interest rates may have a detrimental effect on our business.

•

Our geographic concentration could materially and adversely affect us if the economic conditions in our current markets should decline or we could face losses in concentrated areas due to natural disasters.

•

We use estimates in measuring or determining the fair value of the majority of our assets and liabilities. If our estimates prove to be incorrect, we may be required to write down the value of these assets or write up the value of these liabilities, which could adversely affect our business, financial condition and results of operations.

•

If we are unable to obtain sufficient capital to meet the financing requirements of our business, or if we fail to comply with our debt agreements, our business, financing activities, financial condition and results of operations will be adversely affected.

•

A disruption in the secondary home loan market, including the mortgage-backed securities (“MBS”) market, could have a detrimental effect on our business.

•

Finance of America Reverse LLC (“FAR”) status as an approved

non-supervised

Federal Housing Administration (“FHA”) mortgage and an approved Government National Mortgage Association (“Ginnie Mae” or “GNMA”) issuer, and Finance of America Mortgage LLC (“FAM”) status as an approved seller-servicer for Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corp. (“Freddie Mac”), an approved Ginnie Mae issuer and an approved

non-supervised

FHA and U.S. Department of Veterans Affairs (“VA”) mortgage, are subject to compliance with each of their respective guidelines and other conditions they may impose, and the failure to meet such guidelines and conditions could have a material adverse effect on our overall business and our financial position, results of operations and cash flows.

•

The engagement of our Lender Services business by our loan originator businesses may give appearance of a conflict of interest.

•

Third party customers of our Lender Services Businesses may be concerned about conflicts of interest within our Lender Services Businesses, due to their affiliation with the Company.

•

Our Lender Services business has operations in the Philippines that could be adversely affected by changes in political or economic stability or by government policies.

•

We operate in heavily regulated industries, and our mortgage loan origination and servicing activities (including lender services) expose us to risks of noncompliance with an increasing and inconsistent body of complex laws and regulations at the U.S. federal, state and local levels.

•

We are subject to legal proceedings, federal or state governmental examinations and enforcement investigations from time to time. Some of these matters are highly complex and slow to develop, and results are difficult to predict or estimate.

•

Unlike competitors that are national banks, our lending subsidiaries are subject to state licensing and operational requirements that result in substantial compliance costs.

•

Our substantial leverage could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry or our ability to pay our debts, and could divert our cash flow from operations to debt payments.

•

The Company is a holding company and its only material asset is its interest in FoA Equity, and it is accordingly dependent upon distributions from FoA Equity to pay taxes, make payments under the Tax Receivable Agreements (as defined below) and pay dividends.

•

Due to the listing of the Company’s Class A Common Stock on the NYSE, the Company is a “controlled company” within the meaning of NYSE rules and, as a result, qualifies for exemptions from certain corporate governance requirements. The stockholders of the Company do not have the same protections afforded to stockholders of companies that are subject to such requirements.

•

We have a substantial number of shares of common stock issuable upon conversion of FoA Units, which may dilute your investment, and the sale of which could cause significant downward pricing pressure on our stock.

•

The brief trading history of our common stock has been characterized by low trading volume, which may result in an inability to sell your shares at a desired price, if at all.

All of these factors as well as other risks and uncertainties set forth in the section entitled “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021, as such factors may be further updated from time to time in the Company’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in the Company’s other filings with the SEC.

Website Disclosure

The Company may use its website as a distribution channel of material company information. Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s investor relations website at https://www.financeofamerica.com/investors. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting “Email Alerts” under the “News & Events” tab of our investor relations website. Information on the Company’s website is not incorporated by reference herein and is not a part of this Form

10-Q.

Finance of America Companies Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition

(In thousands, except share data)


	March 31, 2022			December 31, 2021
	(unaudited)
ASSETS
Cash and cash equivalents	$	226,846		$	141,238
Restricted cash		315,980			322,403
Loans held for investment, subject to Home Equity Conversion Mortgage-Backed Securities (“HMBS”) related obligations, at fair value		10,672,152			10,556,054
Loans held for investment, subject to nonrecourse debt, at fair value		6,235,990			6,218,194
Loans held for investment, at fair value		1,218,990			1,031,328
Loans held for sale, at fair value		1,709,357			2,052,378
Mortgage servicing rights (“MSRs”), at fair value, $163,981 and $142,435, subject to nonrecourse MSRs financing liability, respectively		426,102			427,942
Derivative assets		281,205			48,870
Fixed assets and leasehold improvements, net		29,933			29,256
Intangible assets, net		589,092			602,900
Other assets, net		372,260			358,383

TOTAL ASSETS	$	22,077,907		$	21,788,946

LIABILITIES AND EQUITY
HMBS related obligations, at fair value	$	10,548,131		$	10,422,358
Nonrecourse debt, at fair value		6,323,777			6,111,242
Other financing lines of credit		3,189,756			3,347,442
Payables and other liabilities		630,952			471,511
Notes payable, net		353,196			353,383

TOTAL LIABILITIES		21,045,812			20,705,936

Commitments and Contingencies (Note 20)
EQUITY (Note 27)
Class A Common Stock, $0.0001 par value; 6,000,000,000 shares authorized; 60,815,569 shares issued and outstanding at March 31, 2022		6			6
Class B Common Stock, $0.0001 par value; 1,000,000 shares authorized, 15 shares issued and outstanding at March 31, 2022		—			—
Additional paid-in capital		845,002			831,620
Accumulated deficit		(452,106	)		(443,613	)
Accumulated other comprehensive loss		(99	)		(110	)
Noncontrolling interest		639,292			695,107

TOTAL EQUITY		1,032,095			1,083,010

TOTAL LIABILITIES AND EQUITY	$	22,077,907		$	21,788,946

See accompanying notes to unaudited condensed consolidated financial statements

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition

(In thousands)

The following table presents the assets and liabilities of the Company’s consolidated variable interest entities (“VIEs”), which are included on the Condensed Consolidated Statements of Financial Condition above, and excludes intercompany balances, retained bonds and beneficial interests that eliminate in consolidation.


	March 31, 2022		December 31, 2021
	(unaudited)
ASSETS
Restricted cash	$	303,232	$	311,652
Loans held for investment, subject to nonrecourse debt, at fair value		6,103,454		6,099,607
Other assets		73,701		67,593

TOTAL ASSETS	$	6,480,387	$	6,478,852

LIABILITIES
Nonrecourse debt, at fair value	$	6,032,156	$	5,857,069
Payables and other liabilities		633		428

TOTAL LIABILITIES	$	6,032,789	$	5,857,497

Net carrying value of assets subject to nonrecourse debt	$	447,598	$	621,355

See accompanying notes to unaudited condensed consolidated financial statements

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except share data)


	For the three months ended March 31, 2022			January 1, 2021 to March 31, 2021
	Successor			Predecessor
REVENUES
Gain on sale and other income from loans held for sale, net	$	118,352		$	291,334
Net fair value gains on loans and related obligations		10,435			76,663
Fee income		157,604			161,371
Net interest expense:
Interest income		13,873			12,661
Interest expense		(32,830	)		(34,366	)

Net interest expense		(18,957	)		(21,705	)

TOTAL REVENUES		267,434			507,663

EXPENSES
Salaries, benefits and related expenses		209,076			238,530
Occupancy, equipment rentals and other office related expenses		7,837			7,597
General and administrative expenses		132,623			127,187

TOTAL EXPENSES		349,536			373,314
OTHER, NET		4,772			(8,892	)

NET INCOME (LOSS) BEFORE INCOME TAXES		(77,330	)		125,457
Provision (benefit) for income taxes		(13,335	)		1,137

NET INCOME (LOSS)		(63,995	)		124,320
Contingently Redeemable Noncontrolling Interest (“CRNCI”)		—			4,260
Noncontrolling interest		(55,502	)		201

NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST	$	(8,493	)	$	119,859

EARNINGS PER SHARE (Note 26)
Basic weighted average shares outstanding		60,773,891			—
Basic net loss per share	$	(0.14	)	$	—
Diluted weighted average shares outstanding		189,448,936			—
Diluted net loss per share	$	(0.30	)	$	—

See accompanying notes to unaudited condensed consolidated financial statements

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Condensed Consolidated Statements of Equity (Unaudited)

(In thousands, except share data)


	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 at December 31, 2021		60,755,069	$	6		15	$	—	$	831,620	$	(443,613	)	$	(110	)		128,693,867		$	695,107		$	1,083,010
Net		—		—		—		—		—		(8,493	)		—			—			(55,502	)		(63,995	)
Equity based compensation, net		—		—		—		—		13,104		—			—			—			—			13,104
Conversion of LLC Units for Class A Common Stock (Note 27 - Equity)		49,696		—		—		—		230		—			—			(49,696	)		(255	)		(25	)
Settlement of long term incentive plan (“LTIP”) Restricted Stock Units (“RSUs”), net (Note 26 - Earnings Per Share)		10,804		—		—		—		48		—			—			(10,804	)		(58	)		(10	)
Foreign currency translation adjustment		—		—		—		—		—		—			11			—			—			11

Balance at March 31, 2022		60,815,569	$	6		15	$	—	$	845,002	$	(452,106	)	$	(99	)		128,633,367		$	639,292		$	1,032,095

See accompanying notes to unaudited condensed consolidated financial statements

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	For the three months ended March 31, 2022			January 1, 2021 to March 31, 2021
	Successor			Predecessor
Operating Activities
Net income (loss)	$	(63,995	)	$	124,320
Adjustments to reconcile net income (loss) to net cash provided by operating activities:		387,736			(6,277	)

Net cash provided by operating activities		323,741			118,043

Investing Activities
Purchases and originations of loans held for investment		(1,848,155	)		(1,151,925	)
Proceeds/payments received on loans held for investment		614,074			677,777
Purchases and origination of loans held for investment, subject to nonrecourse debt		(30,342	)		(12,247	)
Proceeds/payments on loans held for investment, subject to nonrecourse debt		585,148			217,452
Purchases of debt securities		(9,159	)		(557	)
Proceeds/payments on debt securities		519			2,096
Purchases of mortgage servicing rights		—


		Page

	PART I - Financial Information

Item 1.	Financial Statements		4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		64

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		109

Item 4.	Controls and Procedures		111

	PART II - Other Information

Item 1.	Legal Proceedings		114

Item 1A.	Risk Factors		114

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		114

Item 3.	Defaults Upon Senior Securities		114

Item 4.	Mine Safety Disclosures		114

Item 5.	Other Information		114

Item 6.	Exhibits and Financial Statement Schedules		115

Signatures			116


	For the three months ended March 31, 2022			January 1, 2021 to March 31, 2021
	Successor			Predecessor
NET INCOME (LOSS)	$	(63,995	)	$	124,320
COMPREHENSIVE INCOME (LOSS) ITEM:
Impact of foreign currency translation adjustment		11			(11	)

TOTAL COMPREHENSIVE INCOME (LOSS)		(63,984	)		124,309
Less: Net income (loss) attributable to the noncontrolling interest and CRNCI		(55,495	)		4,461

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST	$	(8,489	)	$	119,848


	FoA Equity Capital LLC Member’s Equity		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest		Total
Predecessor:
Balance at December 31, 2020	$	628,176	$	9	$	(145)	$	628,040
Contributions from members		1,426		—		—		1,426
Distributions to members		(75,000)		—		—		(75,000)
Noncontrolling interest distributions		—		—		(620)		(620)
Net income		119,859		—		201		120,060
Accretion of CRNCI to redemption price		(32,725)		—		—		(32,725)
Foreign currency translation adjustment		—		(11)		—		(11)

Balance at March 31, 2021	$	641,736	$	(2)	$	(564)	$	641,170