foa-20220930

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 September 30, 2022


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

For the transition period from to

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

_________________________

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 x No o

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 x No o

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.


Large accelerated filer	☐	Accelerated filer	x
Non-accelerated filer	☐	Smaller reporting company	x
		Emerging growth company	☐

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 o No x

As of November 7, 2022, there were issued and outstanding 62,962,573 shares of the registrant’s Class A Common Stock, par value $0.0001, and 15 shares of the registrant's Class B Common Stock, par value $0.0001.


			Finance of America Companies Inc. and Subsidiaries Quarterly Report on Form 10-Q Table of Contents


		Page
	PART I - Financial Information
Item 1.	Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	74
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	118
Item 4.	Controls and Procedures	120

	PART II - Other Information
Item 1.	Legal Proceedings	123
Item 1A.	Risk Factors	123
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	123
Item 3.	Defaults Upon Senior Securities	123
Item 4.	Mine Safety Disclosures	124
Item 5.	Other Information	124
Item 6.	Exhibits and Financial Statement Schedules	125

Signatures		127

Part I - Financial Information

Forward-Looking Statements

This report 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 quarter are not necessarily indicative of the results that maybe expected for the full year or 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. All subsequent written and oral forward-looking statements concerning the Company or other matters and attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. A number of important factors exist that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to:

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

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

•our ability to obtain sufficient capital and liquidity to meet the financing and operational requirements of our business; our ability to comply with our debt agreements and pay down our substantial debt;

•our Resource Optimization Plan and its expected benefits, anticipated cost savings, financial and accounting impact, and timing;

•our ability to manage disruptions in the secondary home loan market, including the mortgage-backed securities market;

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

•our ability to manage changes in our licensing status, business relationships, or servicing guidelines with Fannie Mae, Freddie Mac and Ginnie Mae or other governmental entities;

•economic, finance and public health disruptions caused by the COVID-19 pandemic and its unique challenges to our business, which 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 ability to respond to significant changes in prevailing interest rates; our geographic market concentration if the economic conditions in our current markets should decline or as a result of natural disasters;

•our use of estimates in measuring or determining the fair value of the majority of our assets and liabilities, which may require us to write down the value of these assets or write up the value of these liabilities if they prove to be incorrect;

•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 and concerns regarding 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; our ability to operate in heavily regulated

industries, including our mortgage loan origination and servicing activities (including lender services), 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 ability to manage various legal proceedings, federal or state governmental examinations and enforcement investigations we are subject to from time to time, which may be highly complex and slow to develop, and results are difficult to predict or estimate; our ability to prevent cyber intrusions and mitigate cyber risks;

•our ability to compete with national banks, which are not subject to state licensing and operational requirements; our holding company status and dependency on distributions from Finance of America Equity Capital LLC;

•our “controlled company” status under New York Stock Exchange rules, which exempts us from certain corporate governance requirements and affords stockholders fewer protections;

•our substantial number of shares of Class A common stock issuable upon conversion of Finance of America Equity Capital LLC Units, which may dilute your investment, and the sale of which could cause significant downward pricing pressure on our stock; and

•our brief common stock trading history 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 are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for our management to predict all such factors or to assess the effect of each such new factor on our business. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and any of these statements included herein may prove to be inaccurate. Given the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements, or our objectives and plans will be achieved. Please refer to Item 1A Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in this report and in 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, for further information on these and other risk factors affecting us, as such factors may be amended and updated from time to time in the Company’s subsequent periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov.

Item 1. Financial Statements and Supplementary Data

Condensed Consolidated Financial Statements (Unaudited)


			Finance of America Companies Inc. and Subsidiaries Condensed Consolidated Statements of Financial Condition (In thousands, except share data)


	September 30, 2022		December 31, 2021
	(unaudited)
ASSETS
Cash and cash equivalents	$	169,072	$	141,238
Restricted cash	210,147		322,403
Loans held for investment, subject to Home Equity Conversion Mortgage-Backed Securities ("HMBS") related obligations, at fair value	10,916,551		10,556,054
Loans held for investment, subject to nonrecourse debt, at fair value	6,741,391		6,218,194
Loans held for investment, at fair value	1,307,413		1,031,328
Loans held for sale, at fair value	859,650		2,052,378
Mortgage servicing rights ("MSRs"), at fair value, $59,800 and $142,435 subject to nonrecourse MSRs financing liability, respectively	103,069		427,942
Derivative assets	89,899		48,870
Fixed assets and leasehold improvements, net	19,828		29,256

Intangible assets, net	438,300		602,900
Other assets, net	334,577		358,383
TOTAL ASSETS	$	21,189,897	$	21,788,946

LIABILITIES AND EQUITY
HMBS related obligations, at fair value	$	10,784,841	$	10,422,358
Nonrecourse debt, at fair value (includes amounts due to related parties of $0 and $142,435, respectively)	6,745,526		6,111,242
Other financing lines of credit	2,305,999		3,347,442
Payables and other liabilities	395,635		471,511
Notes payable, net (includes amounts due to related parties of $30,000 and $0, respectively)	382,810		353,383
TOTAL LIABILITIES	20,614,811		20,705,936
Commitments and Contingencies (Note 20)
EQUITY (Note 26)

Class A Common Stock, $0.0001 par value; 6,000,000,000 shares authorized; 62,959,276 shares issued and outstanding at September 30, 2022	6		6
Class B Common Stock, $0.0001 par value; 1,000,000 shares authorized, 15 shares issued and outstanding at September 30, 2022	—		—
Additional paid-in capital	876,140		831,620
Accumulated deficit	(577,272)		(443,613)
Accumulated other comprehensive loss	(367)		(110)
Noncontrolling interest	276,579		695,107
TOTAL EQUITY	575,086		1,083,010
TOTAL LIABILITIES AND EQUITY	$	21,189,897	$	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.


	September 30, 2022		December 31, 2021
	(unaudited)
ASSETS
Restricted cash	$	196,062	$	311,652
Loans held for investment, subject to nonrecourse debt, at fair value	6,577,569		6,099,607
Other assets, net	76,177		67,593
TOTAL ASSETS	$	6,849,808	$	6,478,852

LIABILITIES
Nonrecourse debt, at fair value	$	6,525,382	$	5,857,069
Payables and other liabilities	778		428
TOTAL LIABILITIES	$	6,526,160	$	5,857,497

NET CARRYING VALUE OF ASSETS SUBJECT TO NONRECOURSE DEBT	$	323,648	$	621,355

See accompanying notes to unaudited condensed consolidated financial statements


			Finance of America Companies Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except share data)


	For the three months ended September 30, 2022		For the nine months ended September 30, 2022		For the three months ended September 30, 2021		For the six months ended September 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	$	36,179	$	226,336	$	210,095	$	397,672	$	291,334
Net fair value gains (losses) on loans and related obligations	(6,376)		5,672		122,509		253,660		76,663
Fee income	70,512		316,798		145,725		236,589		161,371
Net interest expense:
Interest income	12,022		41,748		15,862		29,013		12,661
Interest expense	(41,236)		(110,900)		(37,691)		(71,317)		(34,366)
Net interest expense	(29,214)		(69,152)		(21,829)		(42,304)		(21,705)
TOTAL REVENUES	71,101		479,654		456,500		845,617		507,663

EXPENSES
Salaries, benefits, and related expenses	146,385		549,755		262,000		536,731		238,530
Occupancy, equipment rentals, and other office related expenses	7,003		22,103		8,283		15,003		7,597
General and administrative expenses	105,533		361,613		141,595		260,896		127,187
TOTAL EXPENSES	258,921		933,471		411,878		812,630		373,314
IMPAIRMENT OF INTANGIBLES AND OTHER ASSETS	(138,184)		(138,184)		—		—		—
OTHER, NET	21,330		41,234		9,928		7,825		(8,892)
NET INCOME (LOSS) BEFORE INCOME TAXES	(304,674)		(550,767)		54,550		40,812		125,457
Provision (benefit) for income taxes	(2,974)		(17,249)		4,440		5,526		1,137
NET INCOME (LOSS)	(301,700)		(533,518)		50,110		35,286		124,320
Contingently Redeemable Noncontrolling Interest ("CRNCI")	—		—		—		—		4,260
Noncontrolling interest	(217,214)		(399,859)		28,726		11,637		201
NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST	$	(84,486)	$	(133,659)	$	21,384	$	23,649	$	119,859

EARNINGS PER SHARE (Note 25)
Basic weighted average shares outstanding	62,804,809		61,993,353		59,861,171		59,871,386		N/A
Basic net earnings (loss) per share	$	(1.35)	$	(2.16)	$	0.36	$	0.39	N/A


			Finance of America Companies Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except share data)


Diluted weighted average shares outstanding	62,804,809		188,375,945		191,161,431		191,180,610		N/A
Diluted net earnings (loss) per share	$	(1.35)	$	(2.34)	$	0.22	$	0.17	N/A

See accompanying notes to unaudited condensed consolidated financial statements


			Finance of America Companies Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Unaudited) (In thousands)


	For the three months ended September 30, 2022		For the nine months ended September 30, 2022		For the three months ended September 30, 2021		For the six months ended September 30, 2021			For the three months ended March 31, 2021
	Successor								Predecessor
NET INCOME (LOSS)	$	(301,700)	$	(533,518)	$	50,110	$	35,286		$	124,320
COMPREHENSIVE INCOME (LOSS) ITEM:
Impact of foreign currency translation adjustment	(105)		(257)		(65)		(92)			(11)
TOTAL COMPREHENSIVE INCOME (LOSS)	(301,805)		(533,775)		50,045		35,194			124,309
Less: Comprehensive income (loss) attributable to the noncontrolling interest and CRNCI	(217,285)		(400,033)		28,681		11,573			4,461
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST	$	(84,520)	$	(133,742)	$	21,364	$	23,621		$	119,848

See accompanying notes to unaudited condensed consolidated financial statements


			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


			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

Amount

Additional Paid-in Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

Class A LLC Units

Amount

Total Equity

Successor: