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 June 30, 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 (Address of Principal Executive Offices)		75024 (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 August 5, 2022, there were 62,642,931 shares of the registrant’s Class A Common Stock and 15 shares of the registrant’s Class B Common Stock issued and outstanding.

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. Unless the context otherwise requires, all references to “we,” “us,” “our,” “Finance of America,” “FoA,” or the “Company” refer to Finance of America Companies Inc. and its consolidated subsidiaries. References to “FoA Equity” are to Finance of America Equity Capital LLC, a Delaware limited liability company, that the Company controls in an “UP-C” structure. 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 and its 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, and 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, which 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;

•

our inability 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;

•

disruptions 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’s (“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’s (“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, continued compliance with each of their respective guidelines and other conditions such agencies may impose, the failure of which 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 the appearance of a conflict of interest;

•

third party customers of our Lender Services Businesses concerns about conflicts of interest within our Lender Services Businesses, due to their affiliation with the Company;

•

our Lender Services business operations in the Philippines, that could be adversely affected by changes in political or economic stability or by government policies;

•

our mortgage loan origination and servicing activities (including lender services) operating in heavily regulated industries, which 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;

•

our being subject to legal proceedings, federal or state governmental examinations and enforcement investigations from time to time, some of which matters are highly complex and slow to develop, with results that are difficult to predict or estimate;

•

unlike competitors that are national banks, our lending subsidiaries being subject to state licensing and operational requirements that result in substantial additional compliance costs;

•

our substantial leverage, which 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, which could divert our cash flow from operations to debt payments;

•

the Company’s holding company structure, with its only material asset being its interest in FoA Equity, which makes it dependent upon distributions from FoA Equity to pay taxes, make payments under the Tax Receivable Agreements (as defined below) and pay dividends;

•

the Company status on the NYSE as a “controlled company” within the meaning of NYSE rules, which qualifies it for exemptions from certain corporate governance requirements, which means that the stockholders of the Company do not have the same protections afforded to stockholders of companies that are subject to such requirements;

•

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

•

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, originally filed with the Securities and Exchange Commission (the “SEC) on March 15, 2022, 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.

Finance of America Companies Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition

(In thousands, except share data)


	June 30, 2022			December 31, 2021
	(unaudited)
ASSETS
Cash and cash equivalents	$	219,033		$	141,238
Restricted cash		354,803			322,403
Loans held for investment, subject to Home Equity Conversion Mortgage-Backed Securities (“HMBS”) related obligations, at fair value		10,882,441			10,556,054
Loans held for investment, subject to nonrecourse debt, at fair value		6,600,762			6,218,194
Loans held for investment, at fair value		1,058,410			1,031,328
Loans held for sale, at fair value		1,229,594			2,052,378
Mortgage servicing rights (“MSRs”), at fair value, $143,382 and $142,435, subject to nonrecourse MSRs financing liability, respectively		359,006			427,942
Derivative assets		55,186			48,870
Fixed assets and leasehold improvements, net		29,805			29,256
Intangible assets, net		575,284			602,900
Other assets, net		371,902			358,383

TOTAL ASSETS	$	21,736,226		$	21,788,946

LIABILITIES AND EQUITY
HMBS related obligations, at fair value	$	10,745,879		$	10,422,358
Nonrecourse debt, at fair value		6,752,084			6,111,242
Other financing lines of credit		2,593,290			3,347,442
Payables and other liabilities		428,768			471,511
Notes payable, net		353,005			353,383

TOTAL LIABILITIES		20,873,026			20,705,936

Commitments and Contingencies (Note 16)
EQUITY (Note 22)
Class A Common Stock, $0.0001 par value; 6,000,000,000 shares authorized; 62,474,553 shares issued and outstanding at June 30, 2022		6			6
Class B Common Stock, $0.0001 par value; 1,000,000 shares authorized, 15 shares issued and outstanding at June 30, 2022		—			—
Additional paid-in capital		860,232			831,620
Accumulated deficit		(492,786	)		(443,613	)
Accumulated other comprehensive loss		(262	)		(110	)
Noncontrolling interest		496,010			695,107

TOTAL EQUITY		863,200			1,083,010

TOTAL LIABILITIES AND EQUITY	$	21,736,226		$	21,788,946

See accompanying notes to unaudited condensed consolidated financial statements

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.


	June 30, 2022		December 31, 2021
	(unaudited)
ASSETS
Restricted cash	$	342,575	$	311,652
Loans held for investment, subject to nonrecourse debt, at fair value		6,433,638		6,099,607
Other assets, net		68,239		67,593

TOTAL ASSETS	$	6,844,452	$	6,478,852

LIABILITIES
Nonrecourse debt, at fair value	$	6,447,237	$	5,857,069
Payables and other liabilities		598		428

TOTAL LIABILITIES	$	6,447,835	$	5,857,497

Net carrying value of assets subject to nonrecourse debt	$	396,617	$	621,355

See accompanying notes to unaudited condensed consolidated financial statements

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Finance of America Companies Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except share data)


	For the three months ended June 30, 2022			For the six months ended June 30, 2022			For the three months ended June 30, 2021			For the three months ended March 31, 2021
	Successor									Predecessor
REVENUES
Gain on sale and other income from loans held for sale, net	$	71,805		$	190,157		$	187,577		$	291,334
Net fair value gains on loans and related obligations		1,613			12,048			131,151			76,663
Fee income		88,681			246,286			90,864			161,371
Net interest expense:
Interest income		15,853			29,726			13,151			12,661
Interest expense		(36,834	)		(69,664	)		(33,626	)		(34,366	)

Net interest expense		(20,981	)		(39,938	)		(20,475	)		(21,705	)

TOTAL REVENUES		141,118			408,553			389,117			507,663

EXPENSES
Salaries, benefits and related expenses		194,294			403,370			274,731			238,530
Occupancy, equipment rentals and other office related expenses		7,262			15,100			6,720			7,597
General and administrative expenses		123,457			256,080			119,301			127,187

TOTAL EXPENSES		325,013			674,550			400,752			373,314
OTHER, NET		15,132			19,904			(2,103	)		(8,892	)

NET INCOME (LOSS) BEFORE INCOME TAXES		(168,763	)		(246,093	)		(13,738	)		125,457
Provision (benefit) for income taxes		(940	)		(14,275	)		1,086			1,137

NET INCOME (LOSS)		(167,823	)		(231,818	)		(14,824	)		124,320
Contingently Redeemable Noncontrolling Interest (“CRNCI”)		—			—			—			4,260
Noncontrolling interest		(127,143	)		(182,645	)		(17,089	)		201

NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST	$	(40,680	)	$	(49,173	)	$	2,265		$	119,859

EARNINGS PER SHARE (Note 21)
Basic weighted average shares outstanding		62,379,041			61,580,900			59,881,714			N/A
Basic net earnings (loss) per share	$	(0.65	)	$	(0.80	)	$	0.04			N/A
Diluted weighted average shares outstanding		187,818,225			188,629,076			191,200,000			N/A
Diluted net loss per share	$	(0.70	)	$	(1.00	)	$	(0.05	)		N/A

See accompanying notes to unaudited condensed consolidated financial statements

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Finance of America Companies Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)


	For the three months ended June 30, 2022			For the six months ended June 30, 2022			For the three months ended June 30, 2021			For the three months ended March 31, 2021
	Successor									Predecessor
NET INCOME (LOSS)	$	(167,823	)	$	(231,818	)	$	(14,824	)	$	124,320
COMPREHENSIVE INCOME (LOSS) ITEM:
Impact of foreign currency translation adjustment		(163	)		(152	)		(27	)		(11	)

TOTAL COMPREHENSIVE INCOME (LOSS)		(167,986	)		(231,970	)		(14,851	)		124,309
Less: Net income (loss) attributable to the noncontrolling interest and CRNCI		(127,253	)		(182,748	)		(17,108	)		4,461

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST	$	(40,733	)	$	(49,222	)	$	2,257		$	119,848

See accompanying notes to unaudited condensed consolidated financial statements

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Finance of America Companies Inc. and Subsidiaries

Condensed Consolidated Statements of Equity (Unaudited)

(In thousands)


	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

See accompanying notes to unaudited condensed consolidated financial statements

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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		Accumulated Deficit			Accumulated Other Comprehensive Loss			Class A LLC Units		Amount			Total Equity
Successor:
Balance at April 1, 2021		59,881,714	$	6		7	$	—	$	758,243	$	(71,813	)	$	—			131,318,286	$	1,658,545		$	2,344,981
Net income (loss)		—		—		—		—		—		2,265			—			—		(17,089	)		(14,824	)
Noncontrolling interest contributions		—		—		—		—		—		—			—			—		24			24
Noncontrolling interest distributions		—		—		—		—		—		—			—			—		(137	)		(137	)
Equity based compensation, net		—		—		—		—		49,278		—			—			—		—			49,278
Foreign currency translation adjustment		—		—		—		—		—		—			(27	)		—		—			(27	)

Balance at June 30, 2021		59,881,714	$	6		7	$	—	$	807,521	$	(69,548	)	$	(27	)		131,318,286	$	1,641,343		$	2,379,295

Balance at December 31, 2021		60,755,069	$	6		15	$	—	$	831,620	$	(


		Page
	PART I—Financial Information		3
Item 1.	Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		65
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		112
Item 4.	Controls and Procedures		115

	PART II—Other Information		118
Item 1.	Legal Proceedings		118
Item 1A.	Risk Factors		118
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		118
Item 3.	Defaults Upon Senior Securities		118
Item 4.	Mine Safety Disclosures		118
Item 5.	Other Information		118
Item 6.	Exhibits and Financial Statement Schedules		119

Signatures			121