Liquidity and Capital Requirements |
9 Months Ended |
|---|---|
Sep. 30, 2024 | |
| Regulatory Capital Requirements under Banking Regulations [Abstract] | |
| Liquidity and Capital Requirements |
18. Liquidity and Capital Requirements
Compliance Requirements
FAR
As an issuer of HMBS, FAR is subject to minimum net worth, liquidity, and leverage requirements as well as minimum insurance coverage established by Ginnie Mae.
The net worth required is $5.0 million plus 1% of FAR’s outstanding HMBS and unused commitment authority from Ginnie Mae. The liquidity requirement is for 20% of FAR’s required net worth to be in the form of cash or cash equivalent assets. The leverage requirement is to maintain a ratio of net worth to total assets of not less than 6%.
As of September 30, 2024, FAR was in compliance with the minimum net worth, liquidity, capitalization levels, and insurance requirements of Ginnie Mae. The minimum net worth required of FAR by Ginnie Mae was $180.9 million as of September 30, 2024. FAR’s actual net worth calculated based on Ginnie Mae guidance was $699.7 million as of September 30, 2024. The minimum liquidity required of FAR by Ginnie Mae was $36.2 million as of September 30, 2024. FAR’s actual cash and cash equivalents were $42.5 million as of September 30, 2024. FAR’s actual ratio of net worth to total assets was below the Ginnie Mae requirement; however, FAR received a waiver for the minimum outstanding capital requirements from Ginnie Mae. Therefore, FAR was in compliance with all Ginnie Mae requirements.
In addition, FAR is required to maintain both fidelity bond and errors and omissions insurance coverage at tiered levels based on the aggregate UPB of the loans serviced by FAR throughout the year. FAR is required to conduct compliance testing at least quarterly to ensure compliance with the foregoing requirements. As of September 30, 2024, FAR was in compliance with applicable requirements.
FoA Securities
Finance of America Securities LLC (“FoA Securities”), one of the operating service subsidiaries of Incenter, operates in a highly regulated environment and is subject to federal and state laws, SEC rules, and Financial Industry Regulatory Authority rules and guidance. Applicable laws and regulations restrict permissible activities and require compliance with a wide range of financial and customer-related protections. The consequences of noncompliance can include substantial monetary and nonmonetary sanctions. In addition, FoA Securities is subject to comprehensive examination by its regulators. These regulators have broad discretion to impose restrictions and limitations on the operations of the Company and to impose sanctions for noncompliance. FoA Securities is subject to the SEC’s Uniform Net Capital Rule (SEC Rule 15c3-1), which requires the maintenance of minimum net capital. FoA Securities computes net capital under the alternative method. Under this method, the required minimum net capital is equal to $250 thousand. As of September 30, 2024, FoA Securities was in compliance with the minimum net capital requirement.
Additionally, FoA Securities claims the exemption provision of Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 because FoA Securities’ other business activities are limited to (1) proprietary trading; (2) receiving transaction-based compensation for referring securities transactions to other broker-dealers; and (3) participating in distributions of securities (other than firm commitment underwritings) in accordance with the requirements of paragraphs (a) or (b)(2) of Rule 15c2-4.
FAM
In connection with the discontinued operations of the Company’s previously reported Mortgage Originations segment, FAM has surrendered all its GSE/agency mortgage origination licenses and approvals as of June 30, 2024 and is therefore no longer subject to the GSE/agency compliance requirements that were applicable to FAM prior to the surrender of its licenses and approvals.
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