Annual report pursuant to Section 13 and 15(d)

Other Financing Lines of Credit

v3.22.4
Other Financing Lines of Credit
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
Other Financing Lines Of Credit
18. Other Financing Lines of Credit
Mortgage facilities
These facilities are generally structured as master repurchase agreements under which ownership of the related eligible loans is temporarily transferred to a lender or as participation arrangements pursuant to which the lender acquires a participation interest in the related eligible loans. The funds advanced are generally repaid using the proceeds from the sale or securitization of the loans to, or pursuant to, programs sponsored by FNMA, FHLMC, and
Ginnie Mae or to private secondary market investors, although prior payment may be required based on, among other things, certain breaches of representations and warranties or other events of default.
When these facilities are drawn on, the Company generally must transfer and pledge eligible loans to the lender and comply with various financial and other covenants. For facilities that have a maturity date, they expire at various times during 2023 through 2026. Under the facilities, loans are generally transferred at an advance rate less than the principal balance or fair value of the loans, which serves as the primary credit enhancement for the lender. Six of the warehouse lines of credit are also guaranteed by FAH, a wholly-owned subsidiary and the parent holding company to the mortgage business. Since the advances are generally for less than 100% of the principal balance of the loans, working capital is required to fund the remaining portion of the principal balance of the loans. The amount of the advance that is provided under the various facilities ranges from 65% to 100% of the market value or principal balance of the loans. Upon expiration, the warehouse facilities will either be closed or combined with other facilities.
Reverse mortgage facilities
These facilities are generally structured as master repurchase agreements under which ownership of the related eligible loans is temporarily transferred to a lender or as participation arrangements pursuant to which the lender acquires a participation interest in the related eligible loans. The funds advanced are generally repaid using the proceeds from the sale or securitization of the loans to, or pursuant to, programs sponsored by Ginnie Mae or to private secondary market investors, although prior payment may be required based on, among other things, certain breaches of representations and warranties or other events of default.
When these facilities are drawn on, the Company generally must transfer and pledge eligible loans to the lender and comply with various financial and other covenants. The facilities expire at various times during 2023 through 2027. Under the facilities, loans are generally transferred at an advance rate less than the principal balance or fair value of the loans, which serves as the primary credit enhancement for the lender. Six of the warehouse lines of credit are also guaranteed by FAH, a wholly-owned subsidiary and the parent holding company to the reverse mortgage business. Since the advances are generally for less than 100% of the principal balance of the loans, working capital is required to fund the remaining portion of the principal balance of the loans. The amount of the advance that is provided under the various facilities ranges from 30% to 104% of the market value or principal balance of the loans. Upon expiration, management believes it will either renew its existing facilities or obtain sufficient additional lines of credit.
Commercial loan facilities
These facilities are either structured as master repurchase agreements under which ownership of the related eligible loans is temporarily transferred to a lender or are collateralized by first or second lien loans or crop loans. The funds advanced are generally repaid using the proceeds from the sale or securitization of the loans to private secondary market investors, although prior payment may be required based on, among other things, certain breaches of representations and warranties or other events of default.
When these facilities are drawn on, the Company generally must transfer and pledge eligible loan collateral and comply with various financial and other covenants. The facilities expire at various times during 2023 and 2024. Under the facilities, loans are generally transferred at an advance rate less than the principal balance or fair value of the loans, which serves as the primary credit enhancement for the lender. Five of the warehouse lines of credit are also guaranteed by FAH, a wholly-owned subsidiary and the parent holding company to the commercial lending business. Since the advances are generally for less than 100% of the principal balance of the loans, working capital is required to fund the remaining portion of the principal balance of the loans. The amount of the advance that is provided under the various facilities generally ranges from 70% to 90% of the market value or principal balance of the loans. Upon expiration, the warehouse facilities will either be closed or combined with other facilities.
The following summarizes the components of other financing lines of credit (in thousands):
Outstanding borrowings at
Maturity Date Interest Rate Collateral Pledged
Total Capacity(1)
December 31, 2022 December 31, 2021
Mortgage Lines:
January 2023 - October 2023 SOFR/Bloomberg short-term bank yield index + applicable margin First Lien Mortgages $ 475,000  $ 127,735  $ 1,802,348 
November 2023 SOFR + applicable margin Home Improvement Consumer Loans 50,000  7,495  5,107 
March 2026 Ameribor + applicable margin MSR 15,600  10,312  138,524 
N/A Bond accrual rate + applicable margin Mortgage Related Assets 37,604  37,604  50,559 
Subtotal mortgage lines of credit $ 578,204  $ 183,146  $ 1,996,538 
Reverse Lines:
April 2023 - November 2023 LIBOR/SOFR + applicable margin First Lien Mortgages $ 1,375,000  $ 584,658  $ 714,013 
N/A LIBOR/Bond accrual rate + applicable margin Mortgage Related Assets 320,715  320,715  297,893 
October 2027 SOFR + applicable margin MSR 70,000  33,036  78,952 
May 2023
Prime + .50%; 6% floor
 Unsecuritized Tails 50,000  45,001  38,544 
Subtotal reverse lines of credit $ 1,815,715  $ 983,410  $ 1,129,402 
Commercial Lines:
August 2023
2.50% / 3.25%
 Encumbered Agricultural Loans $ 75,000  $ 7,561  $ 25,127 
April 2023 - November 2023 LIBOR/SOFR/Ameribor + applicable margin First Lien Mortgages 291,151  243,752  167,159 
February 2023 15% Second Lien Mortgages 25,000  25,000  24,175 
January 2024 SOFR + applicable margin Mortgage Related Assets 12,500  12,500  5,041 
Subtotal commercial lines of credit $ 403,651  $ 288,813  $ 221,502 
Total other financing lines of credit $ 2,797,570  $ 1,455,369  $ 3,347,442 
(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 December 31, 2022.



As of December 31, 2022 and December 31, 2021, the weighted average outstanding interest rates on outstanding financing lines of credit of the Company were 8.14% and 2.75%, respectively.
The Company's financing arrangements and credit facilities contain various financial covenants, which primarily relate to required tangible net worth amounts, liquidity reserves, leverage ratios, and profitability.
As of December 31, 2022, the Company was in compliance with its financial covenants related to required liquidity reserves. With respect to certain financial covenants related to required profitability, debt service coverage ratio and tangible net worth amounts, the Company obtained financial covenant waivers, amendments to such financial covenants effective as of December 31, 2022, or paid off the line of credit, in order to avoid breaching such financial covenants.
The terms of the Company's financing arrangements and credit facilities contain covenants, and the terms of the Company's GSE/seller servicer contracts contain requirements that may restrict the Company and its subsidiaries from paying distributions to its members. These restrictions include restrictions on paying distributions whenever the payment of such distributions would cause FoA or its subsidiaries to no longer be in compliance with any of its financial covenants or GSE requirements. Further, the Company is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the
distribution, liabilities of the Company (with certain exceptions) exceed the fair value of its assets. Subsidiaries of the Company are generally subject to similar legal limitations on their ability to make distributions to FoA.
As of December 31, 2022, the maximum allowable distributions available to the Company based on the most restrictive of such financial covenant ratios is presented in the table below (in thousands, except for ratios):
Financial Covenants  Requirement December 31, 2022
Maximum Allowable Distribution(1)
FAM
Adjusted Tangible Net Worth(2)
$ 100,000  $ 100,907  $ 907 
Liquidity 20,000  23,368  3,368 
Leverage Ratio
13:1
9.30:1
 28,732 
FAR
Adjusted Tangible Net Worth(2)
$ 250,000  $ 267,067  $ 17,067 
Liquidity 24,724  28,718  3,994 
Leverage Ratio
6:1
5.29:1
 31,808 
FAH
Adjusted Tangible Net Worth(2)
$ 300,000  $ 310,850  $ 10,850 
Liquidity 45,000  52,270  7,270 
Leverage Ratio
10:1
6.55:1
 107,292 
(1) The Maximum Allowable Distribution for any of the originations subsidiaries is the lowest of the amounts shown for the particular originations subsidiary.
(2) This amount is based on the most restrictive financing line of credit covenant.

As of December 31, 2021, the maximum allowable distributions available to the Company based on the most restrictive of such financial covenant ratios is presented in the table below (in thousands, except for ratios):
Financial Covenants  Requirement December 31, 2021
Maximum Allowable Distribution(1)
FAM
Adjusted Tangible Net Worth(2)
$ 150,000  $ 180,032  $ 30,032 
Liquidity 40,000  43,734  3,734 
Leverage Ratio
15:1
13.9:1
 12,154 
FACo
Adjusted Tangible Net Worth(2)
$ 85,000  $ 87,350  $ 2,350 
Liquidity 20,000  32,728  12,728 
Leverage Ratio
6:1
2.8:1
 46,895 
FAR
Adjusted Tangible Net Worth(2)
$ 417,826  $ 527,443  $ 109,617 
Liquidity 20,000  23,845  3,845 
Leverage Ratio
6:1
2.9:1
 264,134 
(1) The Maximum Allowable Distribution for any of the originations subsidiaries is the lowest of the amounts shown for the particular originations subsidiary.
(2) This amount is based on the most restrictive financing line of credit covenant.