UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~FORM~~

~~10-Q~~

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, ~~2021~~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.)

~~909 Lake Carolyn~~ 5830 Granite Parkway, ~~Suite 1550,~~
~~Irving,~~ Suite 400, Plano, Texas		~~75039~~
(Address of Principal Executive Offices)		75024 (Zip Code)

~~(972)~~

~~999-1833~~

(877) 202-2666

Registrant’s telephone number, including area code

909 Lake Carolyn Parkway

Suite 1550

Irving, Texas 75039

(Address of Former ~~name, former address and former fiscal year, if changed since last report)~~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~~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, or an emerging growth~~ company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting ~~company,”~~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 ~~16, 2021, 59,881,714~~5, 2022, there were 62,642,931 shares of the registrant’s Class A ~~common stock, par value $0.0001 per share, were~~Common Stock and 15 shares of the registrant’s Class B Common Stock issued and ~~outstanding~~

~~Table of Contents~~

~~Finance of America Companies Inc.~~

~~and Subsidiaries~~

outstanding.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Quarterly Report on Form 10-Q

Table of Contents


~~Table of Contents~~				Page
		PART I—Financial Information			3
~~Part I—Financial Information~~ Item 1.			3Financial Statements
	6
Item ~~1. Financial Statements~~ 2.			3

~~Consolidated Financial Statements~~			3

~~Consolidated Statements of Financial Condition~~			3

~~Consolidated Statements of Operations~~			5

~~Consolidated Statements of Comprehensive Income~~			6

~~Consolidated Statements of Changes in Equity~~			7

~~Consolidated Statements of Cash Flows~~			9

~~Notes to Consolidated Financial Statements~~			12

~~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					89 121

Table of Contents

Part I—Financial Information

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 ~~quarter~~period are not necessarily indicative of the results that may be 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. 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, among others; the effect of the COVID-19 pandemic on the Company’s business; changes in prevailing interest rates or U.S. monetary policies that affect interest rates that may have a detrimental effect on our business; 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;~~liabilities. If our estimates prove to be incorrect, we may be required to write down the ~~possibility~~value of ~~disruption~~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 ~~market;~~(“MBS”) market, could have a detrimental effect on our business;

Table of Contents

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 ~~“Risk~~“Item 1A. Risk Factors” ~~included in~~of our ~~Registration Statement~~Annual Report on Form ~~S-1~~10-K for the year ended December 31, 2021, originally filed with the ~~SEC~~Securities and Exchange Commission (the “SEC) on ~~May 25, 2021,~~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.

Table of Contents

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.

Item 1.

Financial Statements and Supplementary Data

Table of Contents

~~Part I—Financial Information~~

Condensed Consolidated Financial Statements (Unaudited)

Table of Contents

~~Item 1.~~

~~Financial Statements~~

Finance of America Companies Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition

(In thousands, except ~~for~~ share data)

June 30, 2021

December 31, 2020


Successor

Predecessor


(unaudited)

ASSETS

Cash and cash equivalents

$
157,336
   $ 233,101
Restricted cash


354,390
   306,262
Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value


10,316,027
   9,929,163
Mortgage loans held for investment, subject to nonrecourse debt, at fair value


5,424,621
   5,396,167
Mortgage loans held for investment, at fair value


1,225,090
   730,821
Mortgage loans held for sale, at fair value


2,057,542
   2,222,811
Debt securities


8,694
   10,773
Mortgage servicing rights, at fair value, $65,129 and $14,088, subject to nonrecourse MSR financing liability, respectively


290,938
   180,684
Derivative assets


61,811
   92,065
Fixed assets and leasehold improvements, net


28,669
   24,512
Goodwill


1,298,324
   121,233
Intangible assets, net


704,243
   16,931
Other assets, net


300,253
   300,632




TOTAL ASSETS

$
22,227,938
   $ 19,565,155




LIABILITIES, CONTINGENTLY REDEEMABLE NONCONTROLLING INTEREST (“CRNCI”) AND EQUITY

HMBS related obligation, at fair value

$
10,168,224
   $ 9,788,668
Nonrecourse debt, at fair value


5,425,732
   5,271,842
Other financing lines of credit


3,412,234
   2,973,743
Payables and other liabilities


488,735
   400,058
Notes payable, net


353,718
   336,573




TOTAL LIABILITIES


19,848,643
   18,770,884




Commitments and Contingencies (Note 23)

CRNCI (Note 25)


0

   166,231
EQUITY (Note 35)

FoA Equity Capital LLC member’s equity


0

   628,176
Class A Common Stock (Successor), $0.0001 par value; 6,000,000,000 shares authorized; 59,881,714 shares issued and outstanding at June 30, 2021


6
   —
Class B Common Stock (Successor), $0.0001 par value; 1,000,000 shares authorized, 7 shares issued and outstanding at June 30, 2021


0

   —
Additional
paid-in
capital (Successor)


807,521
   —
Accumulated deficit (Successor)


(69,548
)
   —
Accumulated other comprehensive (loss) income


(27
)
   9
Noncontrolling interest


1,641,343
   (145 )




TOTAL EQUITY


2,379,295
   628,040




TOTAL LIABILITIES, CRNCI AND EQUITY

$
22,227,938
   $ 19,565,155


	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)		0			0
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

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.

June 30, 2021

December 31, 2020


Successor

Predecessor


(unaudited)

ASSETS

Restricted cash

$
334,984
      $ 293,580
Mortgage loans held for investment, subject to nonrecourse debt, at fair value

2021 FASST HB1


506,482
      —
2020 RTL1 ANTLR


—

      137,989
2019 FASST JR2


437,641
      488,760
2020 FASST HB2


397,121
      398,480
2018 FASST JR1


395,716
      449,069
2019 FASST JR3


370,209
      450,703
2020 FASST JR3


341,385
      372,015
2019 FASST JR4


331,302
      377,265
2020 FASST S3


313,728
      316,774
2020 FASST JR2


312,160
      341,439
2019 FASST JR1


295,605
      331,244
2020 FASST S2


289,129
      311,721
2021 FASST JR1


562,333
      —
2018 FASST JR2


234,665
      264,622
2020 FASST JR4


228,248
      237,100
2020 FASST S1


173,955
      189,243
2020 FASST JR1


0

      263,266
2018 RTL1 ANTLR


0

      82,393
2019 RTL1 ANTLR


0

      118,161
2020 FASST HB1


0

      265,923
2021 RTL1 ANTLR


234,942
      —
Other assets


76,056
      79,528




TOTAL ASSETS

$
5,835,661
      $ 5,769,275




LIABILITIES

Nonrecourse debt, at fair value

2021 FASST HB1

$
537,618
      $ —
2021 FASST JR1


507,721
      —
2020 FASST HB2


445,758
      472,074
2019 FASST JR2


425,568
      463,568
2018 FASST JR1


405,161
      450,268
2019 FASST JR3


374,391
      423,406
2020 FASST JR3


316,738
      337,024
2019 FASST JR4


316,203
      350,514
2019 FASST JR1


301,889
      326,367
2020 FASST S2


287,139
      298,435
2020 FASST S3


286,549
      294,226
2020 FASST JR2


280,978
      297,046
2021 RTL1 ANTLR


266,461
      —
2018 FASST JR2


240,078
      265,695
2020 FASST JR4


198,582
      217,362
2020 FASST S1


169,769
      181,630
2020 FASST JR1


0

      238,438
2020 RTL1 ANTLR


0

      140,441
2018 RTL1 ANTLR


0

      80,767
2019 RTL1 ANTLR


0

      121,580
2020 FASST HB1


0

      298,913
Payables and other liabilities


117
      291




TOTAL LIABILITIES

$
5,360,720
      $ 5,258,045




Net fair value of assets subject to nonrecourse debt

$
474,941
      $ 511,230


	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		$	(443,613	)	$	(110	)		128,693,867		$	695,107		$	1,083,010
Net loss		—			—		—		—		—			(49,173	)		—			—			(182,645	)		(231,818	)
Noncontrolling interest contributions		—			—		—		—		—			—			—			—			42			42
Noncontrolling interest distributions		—			—		—		—		—			—			—			—			(192	)		(192	)
Equity based compensation, net		—			—		—		—		20,883			—			—			—			—			20,883
Conversion of LLC Units for Class A Common Stock (Note 22— Equity)		108,113			—		—		—		424			—			—			(108,113	)		(540	)		(116	)
Settlement of LTIP RSUs, net (Note 21—Earnings Per Share)		3,172,247			—		—		—		11,011			—			—			(3,172,247	)		(15,762	)		(4,751	)
Settlement of other RSUs (Note 21—Earnings Per Share)		93,455			—		—		—		—			—			—			—			—			—
Cancellation of shares to fund employee tax withholdings (Note 22—Equity)		(1,654,331	)		—		—		—		(3,706	)		—			—			—			—			(3,706	)
Foreign currency translation adjustment		—			—		—		—		—			—			(152	)		—			—			(152	)

Balance at June 30, 2022		62,474,553		$	6		15	$	—	$	860,232		$	(492,786	)	$	(262	)		125,413,507		$	496,010		$	863,200

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				Accumulated Deficit			Accumulated Other Comprehensive Loss			Class A LLC Units				Amount				Total Equity

Balance at March 31, 2022		60,815,569		$		6		15	$	—	$		845,002		$		(452,106	)	$	(99	)		128,633,367		$		639,292		$		1,032,095
Net loss		—				—		—		—			—				(40,680	)		—			—				(127,143	)			(167,823	)
Noncontrolling interest contributions		—				—		—		—			—				—			—			—				42				42
Noncontrolling interest distributions		—				—		—		—			—				—			—			—				(192	)			(192	)
Equity based compensation, net		—				—		—		—			7,779				—			—			—				—				7,779
Conversion of LLC Units for Class A Common Stock (Note 22 - Equity)		58,417				—		—		—			194				—			—			(58,417	)			(285	)			(91	)
Settlement of LTIP RSUs, net (Note 21—Earnings Per Share)		3,161,443				—		—		—			10,963				—			—			(3,161,443	)			(15,704	)			(4,741	)
Settlement of other RSUs (Note 21—Earnings Per Share)		93,455				—		—		—			—				—			—			—				—				—
Cancellation of shares to fund employee tax withholdings (Note 22—Equity)		(1,654,331	)			—		—		—			(3,706	)			—			—			—				—				(3,706	)
Foreign currency translation adjustment		—				—		—		—			—				—			(163	)		—				—				(163	)

Balance at June 30, 2022		62,474,553			$	6		15	$	—		$	860,232		$		(492,786	)	$	(262	)		125,413,507		$		496,010			$	863,200

See accompanying notes to unaudited condensed consolidated financial statements

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Condensed Consolidated Statements of ~~Operations~~Cash Flows (Unaudited)

(In ~~thousands, except share data)~~thousands)

~~(Unaudited)~~

April 1, 2021

to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

REVENUES

Gain on sale and other income from mortgage loans held for sale, net

$
187,577
   $ 291,334 $ 298,291 $ 428,975
Net fair value gains on mortgage loans and related obligations


131,151
   76,663 112,303 125,683
Fee income


90,864
   161,371 76,656 146,627
Net interest expense:

Interest income


13,151
   12,661 11,507 19,678
Interest expense


(33,626
)
   (34,366 ) (33,298 ) (67,230 )




Net interest expense


(20,475
)
   (21,705 ) (21,791 ) (47,552 )




TOTAL REVENUES


389,117
   507,663 465,459 653,733




EXPENSES

Salaries, benefits and related expenses


274,731
   238,530 230,275 374,653
Occupancy, equipment rentals and other office related expenses


6,720
   7,597 7,208 14,611
General and administrative expenses


119,301
   127,217 81,214 159,780




TOTAL EXPENSES


400,752
   373,344 318,697 549,044
OTHER, NET


(2,103
)
   (8,862 ) (28 ) (44 )




NET (LOSS) INCOME BEFORE INCOME TAXES


(13,738
)
   125,457 146,734 104,645
Provision for income taxes


1,086
   1,137 448 766




NET (LOSS) INCOME


(14,824
)
   124,320 146,286 103,879
CRNCI


0

   4,260 (2,620 ) (18,006 )
Noncontrolling interest


(17,089
)
   201 571 800




NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

$
2,265
   $ 119,859 $ 148,335 $ 121,085




EARNINGS PER SHARE (Note 33)

Basic weighted average shares outstanding


59,881,714

Basic net income per share

$
0.04

Diluted weighted average shares outstanding


191,200,000

Diluted net loss per share

$
(0.05
)


	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
Operating Activities
Net income (loss)	$	(231,818	)	$	(14,824	)	$	124,320
Adjustments to reconcile net income (loss) to net cash provided by operating activities:		986,478			5,172			(6,277	)

Net cash provided by (used in) operating activities		754,660			(9,652	)		118,043

Investing Activities
Purchases and originations of loans held for investment		(3,776,445	)		(1,241,085	)		(1,151,925	)
Proceeds/payments received on loans held for investment		1,278,493			689,215			677,777
Purchases and origination of loans held for investment, subject to nonrecourse debt		(58,549	)		(12,319	)		(12,247	)
Proceeds/payments on loans held for investment, subject to nonrecourse debt		1,160,149			251,152			217,452
Purchases of debt securities		(6,848	)		(1,449	)		(557	)
Proceeds/payments on debt securities		912			1,888			2,096
Purchases of MSRs		—			(61	)		(9,014	)
Proceeds on sale of MSRs		191,707			—			7,765
Acquisition of subsidiaries, net of cash acquired		—			(20,000	)		(749	)
Acquisition of fixed assets		(7,425	)		(4,915	)		(4,178	)
Payments on deferred purchase price liability		(8,000	)		(311	)		(657	)
Debtor in possession (“DIP”) Financing		—			—			(35,260	)
Other investing activities, net		88			—			(2,550	)

Net cash used in investing activities		(1,225,918	)		(337,885	)		(312,047	)

Financing Activities
Proceeds from issuance of HMBS related obligations		1,933,150			795,334			602,172
Payments of HMBS related obligations		(1,438,537	)		(597,892	)		(506,142	)
Proceeds from issuance of nonrecourse debt		1,929,163			600,595			579,518
Payments on nonrecourse debt		(1,082,466	)		(498,966	)		(658,300	)
Proceeds from other financing lines of credit		14,315,000			8,758,149			10,027,696
Payments on other financing lines of credit		(15,069,153	)		(8,620,873	)		(9,660,588	)
Debt issuance costs		(373	)		(580	)		(2,467	)
Payment of withholding taxes relating to equity based compensation		(5,029	)		—			—
Member distributions		—			—			(75,000	)
Settlement of CRNCI		—			(203,216	)		—
Other financing activities, net		(150	)		(114	)		806

Net cash provided by financing activities		581,605			232,437			307,695

Foreign currency translation adjustment		(152	)		(1	)		(7	)

Net increase (decrease) in cash and restricted cash		110,195			(115,101	)		113,684
Cash and restricted cash, beginning of period		463,641			626,827			539,363

Cash and restricted cash, end of period	$	573,836		$	511,726		$	653,047

Supplementary Cash Flows Information
Cash paid for interest	$	117,351		$	68,186		$	50,071
Cash paid for income taxes, net		25			1,521			63
Loans transferred to loans held for investment, at fair value, from loans held for investment, subject to nonrecourse debt, at fair value		488,649			242,650			283,428
Loans transferred to loans held for investment, subject to nonrecourse debt, at fair value, from loans held for investment, at fair value		2,540,338			505,378			272,098
Loans transferred to loans held for investment, subject to HMBS, at fair value, from loans held for investment, at fair value		1,646,710			701,375			42,909

See accompanying notes to unaudited condensed consolidated financial statements

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

Table of Contents

Finance of America Companies Inc. and Subsidiaries

~~Consolidated Statements of Comprehensive Income~~

~~(Dollars in thousands)~~

~~(Unaudited)~~

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

NET (LOSS) INCOME

$
(14,824
)
   $ 124,320 $ 146,286 $ 103,879
COMPREHENSIVE LOSS ITEM:

Impact of foreign currency translation adjustment


(27
)
   (11 ) 18 11




TOTAL COMPREHENSIVE LOSS


(14,851
)
   124,309 146,304 103,890
Less: Comprehensive loss attributable to the noncontrolling interest and CRNCI


(17,108
)
   4,461 (2,049 ) (17,206 )




COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

$
2,257
   $ 119,848 $ 148,353 $ 121,096

~~See accompanying notes to unaudited consolidated financial statements~~

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Consolidated Statements of Equity~~

~~(Dollars in thousands)~~

~~(Unaudited)~~

FoA Equity
Capital LLC
Member’s
Equity

Accumulated
Other
Comprehensive
(Loss) Income

Noncontrolling
Interest

Total

Predecessor:

Balance at December 31, 2019 (audited)

$
482,719
$ (51 ) $ 145 $ 482,813
Contributions from members


1,042
—   —   1,042
Net (loss) income


(27,249
)
—   229 (27,020 )
Foreign currency translation adjustment


—

(8 ) —   (8 )


Balance at March 31, 2020


456,512
(59 ) 374 456,827


Distributions to members


(578
)
—   —   (578 )
Noncontrolling interest distributions


—

—   (310 ) (310 )
Net income


148,335
—   571 148,906
Foreign currency translation adjustment


—

18 —   18


Balance at June 30, 2020

$
604,269
$ (41 ) $ 635 $ 604,863


Balance at December 31, 2020 (audited)

$
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 consolidated financial statements~~

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Consolidated Statements of Equity~~

~~(In thousands, except share data)~~

~~(Unaudited)~~

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 (loss) income

—

—

—

—

—

2,265

—

—

(17,089
)

(14,824
)
Noncontrolling interest contributions

—

—

—

—

—

—

—

—

24

24

Noncontrolling interest distributions

—

—

—

—

—

—

—

—

(137
)

(137
)
Vesting of restricted stock
units

—

—

—

—

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

~~See accompanying notes to unaudited consolidated financial statements~~

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Consolidated Statements of Cash Flows~~

~~(Dollars in thousands)~~

~~(Unaudited)~~

April 1, 2021

to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the six
months ended
June 30, 2020


Successor

Predecessor

Operating Activities

Net (loss) income

$
(14,824
)
   $ 124,320 $ 103,879
Adjustments to reconcile net (loss) income to net cash
(used in)
provided by operating activities:


5,172
   (6,277 ) (221,079 )




Net cash
(used in)
provided by operating activities


(9,652
)
   118,043 (117,200 )




Investing Activities

Purchases and originations of mortgage loans held for investment


(1,241,085
)
   (1,151,925 ) (2,056,834 )
Proceeds/payments received on mortgage loans held for investment


689,215
   677,777 681,376
Purchases and origination of mortgage loans held for investment, subject to nonrecourse debt


(12,319
)
   (12,247 ) (20,429 )
Proceeds/payments on mortgage loans held for investment, subject to nonrecourse debt


251,152
   217,452 511,615
Purchases of debt securities


(1,449
)
   (557 ) (9,044 )
Proceeds/payments on debt securities


1,888
   2,096 26,673
Purchases of mortgage servicing rights


(61
)
   (9,014 ) —
Proceeds on sale of mortgage servicing rights


—

   7,765 —
Acquisition of subsidiaries, net of cash acquired


(20,000
)
   (749 ) 364
Purchase of investments


—

   —   (2,250 )
Acquisition of fixed assets


(4,915
)
   (4,178 ) (4,129 )
Acquisition of deferred purchase price liability


—

   —   —
Payments on deferred purchase price liability


(311
)
   (657 ) (949 )
Issuance of convertible notes receivable


—

   (2,550 ) —
DIP Financing


—

   (35,260 ) —




Net cash used in investing activities


(337,885
)
   (312,047 ) (873,607 )




Financing Activities

Proceeds from securitizations of reverse mortgage loans, subject to HMBS related obligations


795,334
   602,172 898,118
Payments of HMBS related obligations


(597,892
)
   (506,142 ) (1,002,412 )
Proceeds from issuance of nonrecourse debt, net


600,595
   579,518 1,645,039
Payments on nonrecourse debt


(498,966
)
   (658,300 ) (512,689 )
Proceeds from other financing lines of credit


8,758,149
   10,027,696 15,347,541
Payments on other financing lines of credit


(8,620,873
)
   (9,660,588 ) (15,354,635 )
Debt issuance costs


(580
)
   (2,467 ) (2,828 )
Payments on notes payable


—

   —   (10,000 )
Principal payments under capital lease obligation


—

   —   (415 )
Member contributions


—

   1,426 502
Member distributions


—

   (75,000 ) —
Settlement of CRNCI


(203,216
)
   —   —
Noncontrolling interest contributions


023
   —   16
Noncontrolling interest distributions


(137
)
   (620 ) (310 )




Net cash provided by financing activities


232,437
   307,695 1,007,927




Foreign currency translation adjustment


(1
)
   (7 ) 5




Net (decrease) increase in cash and restricted cash


(115,101
)
   113,684 17,125

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Consolidated Statements of Cash Flows~~

~~(Dollars in thousands)~~

~~(Unaudited)~~

April 1, 2021

to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the six
months ended
June 30, 2020


Successor

Predecessor

Cash and restricted cash, beginning of period


626,827
      539,363    382,664






Cash and restricted cash, end of period

$
511,726
      $ 653,047    $ 399,789






Supplementary Cash Flows Information

Cash paid for interest

$
68,186
      $ 50,071    $ 206,536
Cash paid for taxes, net


1,521
      63    276
Loans transferred to mortgage loans held for investment, at fair value, from mortgage loans held for investment, subject to nonrecourse debt, at fair value


242,650
      283,428    238,811
Loans transferred to mortgage loans held for sale, at fair value, from mortgage loans held for investment, at fair value


03,084
      —      777,256
Loans transferred to government guaranteed receivables from mortgage loans held for investment, at fair value, and mortgage loans held for investment, subject to nonrecourse debt, at fair value


79
      71    72,469
Loans transferred to mortgage loans held for investment, subject to nonrecourse debt, at fair value, from mortgage loans held for investment, at fair value


505,378
      272,098    1,885,291
Loans transferred to mortgage loans held for investment, subject to HMBS, at fair value, from mortgage loans held for investment, at fair value


701,375
      42,909    —

~~See accompanying notes to unaudited consolidated financial statements~~

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Consolidated Statements of Cash Flows~~

~~(Dollars in thousands)~~

~~(Unaudited)~~

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the six
months ended
June 30, 2020


Successor

Predecessor

Consideration Transferred

Total cash consideration

$
342,270

Blocker rollover equity

221,811

Seller earnout contingent consideration

160,272

Tax receivable agreement obligations to the seller

31,950




Total consideration transferred

756,303

Noncontrolling interest

1,658,545




Total equity value

$
2,414,848

Acquisition Related Activity

Assets Acquired

Cash and cash equivalents

$
336,075

Restricted cash

305,292

Non-cash assets acquired:

Reverse mortgage loans held for investment, subject to HMBS related obligations at fair value

10,071,192

Mortgage loans held for investment, subject to nonrecourse debt at fair value

5,291,443

Mortgage loans held for investment, at fair value

1,100,544

Mortgage loans held for sale, at fair value

2,140,361

Debt securities

9,230

Mortgage servicing rights, at fair value

267,364

Derivative assets

116,479

Fixed assets and leasehold improvements, net

26,079

Intangible assets, net

717,700

Other assets, net

279,155




Total assets acquired

$
20,660,914




Liabilities assumed

HMBS related obligations, at fair value

9,926,131

Nonrecourse debt, at fair value

5,227,942

Other financing lines of credit

3,340,345

Payables and other liabilities

669,048

Notes payable, net

353,924




Total liabilities assumed

19,517,390




Tangible net assets acquired

1,143,524




Goodwill

$
1,271,324

~~See accompanying notes to unaudited consolidated financial statements~~

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements

(Unaudited)

1.	Organization and Description of Business

Finance of America Companies Inc. (“FoA”, “Company”, or “Successor”) was incorporated in Delaware on October 9, 2020. FoA is a financial services holding company which, through its operating subsidiaries, is a leading originator and servicer of residential mortgage loans and provider of complementary financial services.

FoA has a controlling financial interest in Finance of America Equity Capital LLC (“FoA Equity” or “Predecessor”). FoA Equity owns all of the outstanding equity interests ~~or has a controlling financial interest~~ in Finance of America Funding LLC (“FOAF”). FOAF wholly owns Finance of America Holdings LLC (“FAH”) and Incenter LLC (“Incenter” and collectively, with FoA Equity, FOAF and FAH, known as “holding company subsidiaries”).

The Company, through its FAH holding company subsidiary, ~~FAH,~~ operates ~~three~~two lending companies, ~~Finance of America Mortgage LLC (“FAM”~~FAM and FAR (collectively, the “operating lending subsidiaries”)~~, Finance of America Reverse LLC (“FAR”), and~~. Effective January 1, 2022, the Company’s operating lending subsidiary Finance of America Commercial LLC (“FACo”) ~~(collectively,~~, which previously operated as a separate operating lending subsidiary under FAH, merged with FAM, with FAM being the ~~“operating~~surviving operating lending ~~subsidiaries”).~~subsidiary. Through FAM and FAR, the Company originates, purchases, sells, and securitizes conventional (conforming to the underwriting standards of Fannie Mae (“FNMA”) or Freddie ~~Mac;~~Mac (“FHLMC”); collectively referred to as government sponsored entities (“GSEs”)), government-insured ~~(Federal Housing Administration (“FHA”))~~(FHA), government guaranteed ~~(Department of Veteran Affairs)~~(VA), and proprietary

non-agency

residential and reverse mortgages. ~~FACo serves as a specialty finance company which~~FAM (prior to January 1, 2022 through FACo) also originates or acquires a variety of commercial mortgage loans made to owners and investors of single and multi-family residential rental ~~properties.~~properties, as well as government-insured agricultural loans made to farmers to fund their inputs and operating expenses for the upcoming growing season. Additionally, FAM originates or acquires secured and unsecured home improvement loans or receivables. The Company, through its ~~other~~Incenter holding company subsidiary, ~~Incenter,~~ has operating service companies (the “operating service subsidiaries” and together with the operating lending subsidiaries, the “operating subsidiaries”) which provide lender services, title services, secondary markets advisory services, mortgage trade brokerage, appraisal, and capital management services to customers in the residential mortgage, student lending, and commercial lending industries. Incenter operates a foreign branch in the Philippines for fulfillment transactional support.

~~Impact of the~~

~~COVID-19~~

~~Pandemic~~

~~The~~

~~COVID-19~~

pandemic has adversely impacted global financial markets and contributed to significant volatility in market liquidity and yields required by market investors in the type of financial instruments originated by the Company’s primary operating subsidiaries. The full impact of the

~~COVID-19~~

pandemic continues to evolve as of the date of this report. The Company’s management is actively monitoring the global situation and its effect on the Company’s financial condition, liquidity, operations, industry, and workforce. Further, the Company cannot estimate the length or gravity of the impact that the

~~COVID-19~~

pandemic will have on the residential mortgage and commercial lending industries. As of June 30, 2021 (Successor), 551 clients, or 0.57% of the total serviced portfolio, have entered into a forbearance plan as a result of the economic impacts caused by

~~COVID-19.~~

As the pandemic continues, it has the potential to cause additional volatility in the financial markets and may have an adverse effect on the Company’s results of future operations, financial position, intangible assets and liquidity in fiscal year 2021.

2.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements comprise the financial statements of FoA and its controlled subsidiaries for the Successor ~~period from April 1, 2021 to~~three and six months ended June 30, 2022, three months ended June 30, 2021, and the financial statements of FoA Equity and its controlled subsidiaries for the Predecessor ~~periods from January 1, 2021 to March 31, 2021 and for the~~ three months ended ~~and six months ended June 30, 2020.~~March 31, 2021. The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The ~~Consolidated Statement of Financial Condition as of December 31, 2020 has been derived from the audited consolidated~~accompanying financial statements contain all adjustments, consisting only of ~~the Predecessor as of and for the year ended December 31, 2020. In the opinion of management, such financial information reflects all~~ normal ~~and~~ recurring adjustments, necessary for a fair ~~presentation~~statement of ~~the~~its financial ~~position~~condition as of June 30, 2022 and ~~the~~its results of operations and cash flows for ~~such interim periods in accordance with GAAP.~~the Successor three and six months ended June 30, 2022, three months ended June 30, 2021, and the Predecessor three months ended March 31, 2021. The Condensed Consolidated Statement of Financial Condition at December 31, 2021 was derived from audited financial statements but does not contain all of the footnote disclosures from the annual financial statements. Operating results for the interim period are not necessarily indicative of the results that may be expected for any future period or for the full year. The condensed consolidated ~~interim~~ financial statements, including the significant accounting policies, should be read in conjunction with the ~~audited~~ consolidated financial statements ~~of FoA Equity~~ and notes ~~thereto~~ for the ~~year~~period ended December 31, ~~2020 (Predecessor).~~2021 within the Company’s Annual Report Form 10-K. There have not been any material changes to our critical accounting policies and estimates as disclosed in the Annual Report on Form 10-K.

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Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

On October 12, 2020, the Company, Replay Acquisition Corp. (“Replay”) and FoA Equity entered into the Transaction Agreement pursuant to which Replay agreed to combine with FoA Equity in a series of transactions that resulted in the formation of the Company as a publicly traded company on the New York Stock Exchange (“NYSE”), and the Company controlling FoA Equity in an

~~“UP-C”~~

structure (collectively, the “Business Combination”). At the closing of the Business Combination (the “Closing”) on April 1, 2021 (the “Closing Date”), Replay domesticated into a Delaware corporation and the Company was formed. See Note 4—Acquisitions for additional information.

The consolidated financial statements include the accounts of the Predecessor, prior to the Business Combination, which was determined to be FoA Equity, a limited liability company that was formed in July 2020. Prior to the Business Combination, FoA Equity was a wholly owned subsidiary of UFG Holdings LLC (“UFG”). FoA Equity owned all of the outstanding equity interests or had a controlling financial interest in FOAF. FAH and Incenter LLC, which were wholly owned subsidiaries of FOAF, as well as their consolidated operating lending subsidiaries and operating service subsidiaries. See Note 1—Organization and Description of Business for additional information.

The significant accounting policies, ~~described below,~~ together with the other notes that follow, are an integral part of the condensed consolidated financial statements.

~~Principles~~Use of ~~Consolidation~~Estimates

The preparation of condensed consolidated financial statements include the accounts of the Company and its controlled subsidiaries and certain variable interest entities (“VIEs”) where the Company is the primary beneficiary. The Company is deemed to be the primary beneficiary of a VIE when it has both (1) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (2) exposure to benefits and/or losses that could potentially be significant to the entity. Assets and liabilities of VIEs and their respective results of operations are consolidated from the date that the Company became the primary beneficiary through the date that the Company ceases to be the primary beneficiary.

FoA Equity consolidates the accounts of Finance of America Commercial Holdings LLC (“FACo Holdings”), which is a direct subsidiary of FAH and an indirect parent company of FACo. Through the date of the Business Combination, the noncontrolling interests of FACo Holdings met the definition of contingently redeemable financial instruments for which the ability to redeem was outside the control of the consolidating entity. The Contingently Redeemable Noncontrolling Interest (“CRNCI”) in this subsidiary was shown as a separate caption between liabilities and equity. Any income or losses attributable to the CRNCI were shown as an addition to or deduction from CRNCI in the Consolidated Statements of Financial Condition. All significant intercompany balances and transactions were eliminated. See Note 25—Changes in CRNCI for further discussion of the CRNCI and additions to or deductions from the CRNCI balance.

~~Business Combinations~~

The Company applies the acquisition method to all transactions and other events in which the entity obtains control over one or more other businesses. Assets acquired and liabilities assumed are measured at fair value as of the acquisition date. Liabilities related to contingent consideration are recognized at the acquisition date and

~~re-measured~~

~~at fair value in each subsequent reporting period. Goodwill is recognized if the consideration transferred exceeds the fair value of the net assets acquired.~~

Under ASC 805 there is an option to apply push-down accounting, which establishes a new basis for the assets and liabilities of the acquired company based on a “push down” of the acquirer’s stepped-up basis. The push-down accounting election is made in the reporting period in which the change-in-control event occurs. FoA has elected push-down accounting for the Business Combination, and will record the push-down entries at FoA Equity.

~~Goodwill~~

Goodwill is the excess of the purchase price over the fair value of the net assets acquired. Goodwill is not amortized, but is reviewed for impairment annually as of October 1 and monitored for interim triggering events on an ongoing basis. If certain events occur, which indicate goodwill might be impaired between annual tests, goodwill must be tested when such events occur. In making this assessment, the Company considers a number of factors including operating results, business plans, economic projections, anticipated future cash flows, etc. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. Changes

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~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

in economic and operating conditions could result in goodwill impairment in future periods. In testing goodwill for impairment, the Company performs a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill. If the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value including goodwill, the Company will compare the fair value of that reporting unitconformity with its carrying value including goodwill. If the carrying value of a reporting unit exceeds its fair value, goodwill is considered impaired with the impairment loss equal to the amount by which the carrying value of the goodwill exceeds the implied fair value of that goodwill.

~~Intangible Assets, Net~~

Intangible assets, net, primarily consist of trade names, customer lists, and broker relationships acquired through various acquisitions. Intangible assets are amortized on a straight line basis over their estimated useful lives. Amortization expense of intangibles is included in general and administrative expenses on the Consolidated Statements of Operations. The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

~~Warrant Liability~~

The Company accounts for warrants for the Company’s Class A Common Stock as liabilities at fair value within payables and other liabilities on the Consolidated Statements of Financial Condition because the warrants do not meet the criteria for classification within equity. The warrants are subject to remeasurement at each statement of financial condition date and any change in fair value is recognized within other, net in the Consolidated Statements of Operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants.

~~Tax Receivable Agreement Obligation~~

In connection with the Business Combination, concurrently with the Closing, the Company entered into Tax Receivable Agreements (“TRA”) with certain owners of FoA Equity prior to the Business Combination (the “TRA Parties”). The TRAs generally provide for the payment byGAAP requires the Company to make estimates and assumptions that affect the ~~TRA Parties~~reported amounts of ~~85% of the cash tax benefits, if any, that the Company is deemed to realize (calculated using certain simplifying assumptions) as a result of (i) tax basis adjustments as a result of sales~~assets and exchanges of units in connection with or following the Business Combination and certain distributions with respect to units, (ii) the Company’s utilization of certain tax attributes attributable to Blackstone Tactical Opportunities Associates—NQ L.L.C., a Delaware limited partnership, shareholders (“Blocker GP”), and (iii) certain other tax benefits related to entering into the TRAs, including tax benefits attributable to making payments under the TRAs. These tax basis adjustments generated over time may increase (for tax purposes) the depreciation and amortization deductions available to the Company and, therefore, may reduce the amount of U.S. federal, state and local tax that the Company would otherwise be required to pay in the future, although the IRS may challenge all or part of the validity of that tax basis, and a court could sustain such challenge. The tax basis adjustments upon sales or exchanges of units for shares of Class A Common Stock and certain distributions with respect to Class A LLC Units may also decrease gains (or increase losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets. Actual tax benefits realized by the Company may differ from tax benefits calculated under the Tax Receivable Agreements as a result of the use of certain assumptions in the TRAs, including the use of an assumed weighted average state and local income tax rate to calculate tax benefits.

The payments that FoA may make under the TRAs are expected to be substantial. The payments under the TRAs are not conditioned upon continued ownership of FoA or FoA Equity by the Continuing Unitholders.

~~The Company accounts for the effects of these increases in tax basis and associated payments under the TRAs arising from exchanges in connection with the Business Combination as follows:~~

~~records an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates~~liabilities at the date of the ~~exchange;~~

~~Table~~condensed consolidated financial statements and the reported amounts of ~~Contents~~

~~Finance of America Companies Inc.~~revenues and ~~Subsidiaries~~

~~Notes~~expenses during the reporting period. Actual results may differ from those estimates and assumptions due to ~~Unaudited Consolidated Financial Statements~~

factors such as changes in the economy, uncertainties due to the extent we estimate that the Company will not realize the full benefit represented by the deferred tax asset, based on an analysis that will consider, among other things, our expectation of future earnings, the Company reduces the deferred tax asset with a valuation allowance;COVID-19 pandemic, interest rates, secondary market pricing, prepayment assumptions, home prices or discrete events affecting specific borrowers, and

~~initial measurement of the obligations is at fair value on the acquisition date. Subsequently, the liability will~~ such differences could be ~~remeasured at fair value each reporting period, with any changes in fair value recognized through earnings.~~

The Company records obligations under the TRAs resulting from future exchanges at the gross undiscounted amount of the expected future payments as an increase to the liability along with the deferred tax asset and valuation allowance (if any) with an offset to additional

~~paid-in~~

~~capital.~~

As of June 30, 2021 (Successor), the Company had a liability of $32.8 million related to its projected obligations under the TRA, which is included in deferred purchase price liabilities within payables and other liabilities on the Consolidated Statements of Financial Condition.

~~Income Taxes~~

Prior to the Business Combination, a portion of the Company’s earnings were subject to certain U.S. Federal and foreign taxes. Subsequent to the Transaction, the portion of earnings allocable to the Registrant is subject to corporate level tax rates at the federal, state and local levels. Therefore, the amount of income taxes recorded prior to the Business Combination are not representative of the expenses expected in the future.

The computation of the effective tax rate and provision at each interim period requires the use of certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income that is subject to tax, permanent differences between the Company’s GAAP earnings and taxable income, and the likelihood of recovering deferred tax assets existing as of the balance sheet date. The estimates used to compute the provision for income taxes may change throughout the year as new events occur, additional information is obtained or as tax laws and regulations change. Accordingly, the effective tax rate for future interim periods may vary materially.

The Company accounts for income taxes pursuant to the asset and liability method which requires it to recognize current tax liabilities or receivables for the amount of taxes it estimates are payable or refundable for the current year, deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period enacted. A valuation allowance is provided when it is more likely than not that a portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible.

The benefit of tax positions taken or expected to be taken in the Company’s income tax returns is recognized in the financial statements if such positions are more likely than not of being sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carryover or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents a potential future obligation to the taxing authority for a tax position that was not recognized. Interest costs and related penalties related to unrecognized tax benefits are required to be calculated, if applicable and are recognized as general and administrative expenses.

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~~Notes to Unaudited Consolidated Financial Statements~~

~~Seller Earnout~~

The equity owners of FoA Equity prior to the Closing are entitled to receive an earnout exchangeable for Class A Common Stock if, at any time during the six years following Closing, the volume weighted average price (the “VWAP”) of Class A Common Stock with respect to a trading day is greater than or equal to $12.50 for any 20 trading days within a consecutive

~~30-trading-day~~

period, 50% of the earnout units issued to sellers (in conjunction with the Sponsor shares defined below, the “Earnout Securities”) will be issued; and if, at any time during the six years following Closing, the VWAP is greater than or equal to $15.00 for any 20 trading days within a consecutive

~~30-trading-day~~

~~period, the remaining 50% of the Earnout Securities will be issued.~~

The seller earnout is accounted for as contingent consideration and classified as equity. The seller earnout was measured at fair value upon the consummation of the Business Combination, the date of issuance, and will not be subsequently remeasured. The settlement of the seller earnout will be accounted for within equity, if and when, the First or Second Achievement Date occurs.material.

~~Sponsor Earnout~~

The Company classified the Sponsor Earnout Agreement as an equity transaction measured at fair value upon the consummation of the Business Combination, the date of issuance, and will not be subsequently remeasured. Additionally, the settlement of the Sponsor Earnout Agreement will be accounted for within equity, if and when the First or Second Earnout Achievement Date occurs. See Note 34—Sponsor Earnout for additional information

~~Noncontrolling Interest~~

Noncontrolling interest represents the Company’s noncontrolling interest in consolidated subsidiaries which are not attributable, directly or indirectly, to the controlling Class A Common Stock ownership of the Company. Net (loss) income is reduced by the portion of net (loss) income that is attributable to noncontrolling interests as well as special allocations related to the Amended and Restated Long-Term Incentive Plan (“A&R MLTIP”) as defined in the FoA Equity LLC Agreement.

~~Equity-Based Compensation~~

Equity-based compensation with service conditions made to employees is measured based on the grant date fair value of the awards and recognized as compensation expense over the period during which the recipient is required to perform services in exchange for the award (the requisite service period). The Company has elected to use a straight-line attribution method for recognizing compensation costs relating to awards that have service conditions only. Forfeitures are recorded as they occur.

For equity-based compensation where there are market conditions as well as service conditions to vesting, the grant date fair value of the awards is recognized as compensation expense using the graded-vesting method over the requisite service period for each separately vesting tranche of the award as if they were multiple awards.

~~Earnings Per Share~~

Basic net income per share is based on the weighted average number of shares of Class A Common Stock issued and outstanding during the Successor period. Diluted net income per share is based on the weighted average number of shares of Class A Common Stock issued and outstanding and the effect of all dilutive common stock equivalents and potentially dilutive share based compensation awards outstanding during the Successor period.

For the Predecessor periods, FoA Equity’s capital structure consisted of a single class of outstanding membership units which were held by one member, UFG. Therefore, the Company omitted earnings per unit for the Predecessor periods presented due to the limited number of LLC unit holders.

~~Reclassifications~~

~~Certain amounts from the prior period consolidated financial statements have been reclassified to conform to the current period financial presentation.~~

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~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

Recently Adopted Accounting Guidance


Standard	Description	Effective Date	~~Effect on Consolidated~~ ~~Financial Statements~~
~~ASU~~ ~~2016-13~~ ~~, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, ASU~~ ~~2019-04,~~ ~~Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU~~ ~~2019-05,~~ ~~Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, ASU~~ ~~2019-10,~~ ~~Financial Instruments—Credit Losses (Topic 326), ASU~~ ~~2019-11,~~ ~~Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU~~ ~~2020-03,~~ ~~Codification Improvements to Financial Instruments~~	Requires use of the current expected credit loss model that is based on expected losses (net of expected recoveries), rather than incurred losses, to determine our allowance for credit losses on financial assets measured at amortized cost, certain net investments in leases and certain ~~off-balance~~ ~~sheet arrangements.~~ ~~Replaces current accounting for purchased credit impaired (“PCI”) and impaired loans.~~ Amends the other-than-temporary impairment model for available for sale debt securities. The new guidance requires that credit losses be recorded through an allowance approach, rather than through permanent write-downs for credit losses and subsequent accretion of positive changes through interest income over time.	~~January 2020~~	~~The Company determined that certain servicer advances and other receivables, net of reserves included in other assets are within the scope of ASU~~ ~~2016-13.~~ The Company determined that these receivables have limited expected credit-related losses due to the contractual servicing agreements with agencies and loan product guarantees. Furthermore, the Company determined that for outstanding servicer and other advances, the majority of estimated losses are attributable to losses due to operational servicing defects and credit-related losses are not significant because of the contractual relationship with the agencies. The adoption of ASU ~~2016-13~~ ~~did not have a material impact on the Company’s consolidated financial statements.~~

~~ASU~~ ~~2018-17~~ ~~, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities~~	The amendments in this Update require that indirect interests held through related parties under common control be considered on a proportional basis when determining whether fees paid to decision makers or service providers are variable interests. These amendments align with the determination of whether a reporting entity within a related party group is the primary beneficiary of a VIE.	~~January 2020~~	~~The Company adopted this guidance using the prospective method of adoption.~~ ~~Adoption of this standard did not have a material impact on the consolidated financial statements.~~

~~ASU~~ ~~No. 2017-04,~~ ~~Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~	Historical guidance for goodwill impairment testing prescribed that the Company must compare each reporting unit’s carrying value to its fair value. If the carrying value exceeds fair value, an entity performs the second step, which assigns the reporting unit’s fair value to its assets and liabilities, including unrecognized assets and liabilities, in the same manner as required in purchase accounting and then records an impairment. This ASU eliminates the second step. Under the new guidance, an impairment of a reporting unit’s goodwill is determined based on the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the amount of goodwill allocated to the reporting unit.	~~January 2020~~	~~The Company adopted this guidance using the prospective method of adoption.~~ ~~Adoption of this standard did not have a material impact on the consolidated financial statements.~~

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~~Notes to Unaudited Consolidated Financial Statements~~


~~Standard~~	~~Description~~	~~Effective Date~~	Effect on Condensed Consolidated Financial Statements
~~ASU~~ ~~2018-13~~ ~~, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement~~	The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurements, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. Certain disclosure requirements were either removed, modified, or added. This guidance removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 fair value measurement methodologies, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. It also adds a requirement to for the disclosure of a) changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and b) the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. For certain unobservable inputs, entities may disclose other quantitative information in lieu of the weighted average if the other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.	~~January 2020~~	~~The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.~~

~~ASU~~ ~~2018-15~~ ~~, Intangibles—Goodwill and Other—Internal- Use Software (Subtopic~~ ~~350-40):~~ ~~Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~	The amendments in this Update align the requirements for capitalizing implementation costs incurred in a service-contract hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain ~~internal-use~~ ~~software (and hosting arrangements that include an~~ ~~internal-use~~ ~~software license).~~	~~January 2020~~	~~The Company adopted this guidance using the prospective method of adoption.~~ ~~Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.~~

~~ASU~~ ~~No. 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~	~~This amendment simplifies various aspects of the guidance on accounting for income taxes.~~	~~January 2021~~	~~The Company adopted this guidance using the prospective method of adoption.~~ ~~Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.~~

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~~Notes to Unaudited Consolidated Financial Statements~~

~~Recently Issued Accounting Guidance, Not Yet Adopted as of June 30, 2021~~


~~Standard~~	~~Description~~	Date of Planned Adoption	~~Effect on Consolidated~~ ~~Financial Statements~~
~~ASU~~ ~~2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ ~~ASU~~ ~~2021-01,~~ ~~Reference Rate Reform (Topic 848): Codification Clarification~~	The amendments in this Update provide temporary optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Inter-Bank Offered Rate (“LIBOR”) or other interbank offered rates expected to be discontinued. ~~In January 2021,~~ ~~FASB issued an Update which refines the scope of~~ ASU Topic 848 and clarifies the guidance issued to facilitate the effects of reference rate reform on financial reporting. The amendment permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements and calculating price alignment interest in connection with reference rate reform activities.	~~TBD~~	~~This ASU is effective from March 12, 2020 through December 31, 2022.~~ If LIBOR ceases to exist or if the methods of calculating LIBOR change from the current methods for any reasons, interest rates on our floating rate loans, obligation derivatives, and other financial instruments tied to LIBOR rates, may be affected and need renegotiation with its lenders. ~~The Company continues to assess the potential impact that the adoption of this ASU will have on the Company’s consolidated financial statements and related disclosures.~~

~~ASU~~ 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation(Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding ~~Equity-Classified~~Equity—Classified Written Call Options	The amendments in this Update affect all entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in Topic 260, Earnings Per Share.	~~January 2022~~	~~This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.~~ January 1, 2022	The adoption of this standard isdid not ~~expected to~~ have ~~any~~a material impact on the Company’s condensed consolidated financial statements and related disclosures, as ~~it currently~~the Company does not ~~apply.~~currently issue freestanding written call options.

1918

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Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

Recently Issued Accounting Guidance, Not Yet Adopted as of June 30, 2022


Standard	Description	Date of Planned Adoption	Effect on Condensed Consolidated Financial Statements
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ASU 2021-01, Reference Rate Reform (Topic 848): Codification Clarification	The amendments in this Update provide temporary optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Inter-Bank Offered Rate (“LIBOR”) or other interbank offered rates expected to be discontinued. In January 2021, FASB issued an Update which refines the scope of ASU Topic 848 and clarifies the guidance issued to facilitate the effects of reference rate reform on financial reporting. The amendment permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements and calculating price alignment interest in connection with reference rate reform activities. In April 2022, FASB released a proposed ASU that would amend the guidance on reference rate reform in ASC Topic 848 and ASC 815. Specifically, the proposal would defer the effective date of the guidance’s sunset date provision to December 31, 2024 (originally December 31, 2022), thereby extending the period over which entities can apply the guidance in ASU 2020-04,8 which provides “optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.” In addition, the proposal would amend the definition of the secured overnight financing rate (“SOFR”), as used in ASU 2018-16,9 to “include other versions of SOFR, such as SOFR term, as a benchmark interest rate under Topic 815.”	TBD	This ASU is effective from March 12, 2020 through December 31, 2022. The Company continues to monitor the impact associated with reference rate reform, and will apply the amendments in this update to account for contract modifications due to changes in reference rates once those occur. The adoption of this standard is not expected to have a material impact on our condensed consolidated financial statements and related disclosures.

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Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)


Standard	Description	Date of Planned Adoption	Effect on Condensed Consolidated Financial Statements
ASU 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers	In October 2021, the FASB issued ASU 2021-08 to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the following: (1) Recognition of an acquired contract liability and (2) Payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this ASU require that an entity (acquirer) recognize, and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The amendments in this ASU do not affect the accounting for other assets or liabilities that may arise from revenue contracts with customers in accordance with Topic 606, such as refund liabilities, or in a business combination, such as customer-related intangible assets and contract-based intangible assets.	January 1, 2023	This ASU is effective for all business combinations occurring after January 1, 2023. The adoption of this standard is not expected to have a material impact on our condensed consolidated financial statements and related disclosures.

ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions	The amendments in this Update clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendments in this Update also require the following disclosures for equity securities subject to contractual sale restrictions: 1. The fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet 2. The nature and remaining duration of the restriction(s) 3. The circumstances that could cause a lapse in the restriction(s).	January 1, 2024	This ASU is effective for fiscal years beginning after December 15, 2023. The adoption of this standard is not expected to have a material impact on our condensed consolidated financial statements and related disclosures.

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Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

3.	Variable Interest Entities and Securitizations

The Company determined that the ~~SPEs~~special purpose entities (“SPEs”) created in connection with its securitizations are VIEs. A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary, which is the entity that, through its variable interests has both the power to direct the activities that significantly impact the VIE’s economic performance and the obligations to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

~~FACo~~Consolidated VIEs

FACo securitizes certain of its interests in fix & flip mortgages. The transactions provide debt security holders the ability to invest in a pool of performing loans secured by an investment in real estate. The transactions provide FACo with access to liquidity for the loans and ongoing management fees. The principal and interest on the outstanding debt securities are paid using the cash flows from the underlying loans, which serve as collateral for the debt.

In April 2021, FACo executed its optional redemption of outstanding securitized notes related to the 2018, 2019, and 2020 ANTLR securitizations. As part of the optional redemption, FACo paid off notes with an outstanding principal balance of $175.3 million. The notes were paid off at par.

FAR

FAR securitizes certain of its interests in

~~non-performing~~

nonperforming reverse mortgages and

non-agency

reverse mortgage loans. The transactions provide investors with the ability to invest in a pool of reverse mortgage loans secured by

one-to-four-family

residential properties. The transactions provide FAR with access to liquidity for these assets, ongoing servicing fees, and potential residual returns. The principal and interest on the outstanding certificates are paid using the cash flows from the underlying reverse mortgage loans, which serve as collateral for the debt. The securitizations are callable at or following the optional redemption date as defined in the respective indenture agreements.

In February ~~2021,~~2022, FAR executed its optional redemption of outstanding securitized notes related to outstanding nonperforming ~~HECM~~home equity conversion mortgage (“HECM”) securitizations. As part of the optional redemption, FAR paid off notes with an outstanding principal balance of ~~$294.2~~

$488.2

million. The notes were paid off at par.

~~In April 2021, FAR executed its optional redemption of outstanding securitized notes related to outstanding~~

~~non-agency~~

~~reverse mortgage securitizations.~~ As ~~part~~a result of the optional redemption, FAR ~~paid off notes~~is no longer required to consolidate this securitization trust and the outstanding loans with ~~an outstanding~~unpaid principal balance of ~~$239.8~~

$506.6

million ~~accrued~~were included in loans held for investment, at fair value, in the Condensed Consolidated Statements of Financial Condition unless included in a subsequent securitization.

FAM

FAM (prior to January 1, 2022, through FACo) securitizes certain of its interests in fix & flip mortgages. The transactions provide debt security holders the ability to invest in a pool of loans secured by an investment in real estate. The transactions provide the Company with access to liquidity for the loans and ongoing management fees. The principal and interest ~~of $6.3 million and discount of $3.7 million.~~on the outstanding debt securities are paid using the cash flows from the underlying loans, which serve as collateral for the debt.

Servicing Securitized Loans

In their capacity as servicer of the securitized loans, ~~FACo~~FAM (prior to January 1, 2022, through FACo) and FAR retain the power to direct the VIE’s activities that most significantly impact the ~~VIEs~~VIE’s economic performance. ~~FACo~~FAM (prior to January 1, 2022, through FACo) and FAR also retain certain beneficial interests in these trusts which provide exposure to potential gains and losses based on the performance of the trust. As ~~FACo~~FAM (prior to January 1, 2022, through FACo) and FAR have both the power to direct the activities that significantly impact the VIE’s economic performance and the obligations to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the definition of primary beneficiary is met and the trusts are consolidated by the Company through its ~~FACo~~FAM (prior to January 1, 2022,

through

FACo) and FAR subsidiaries.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Certain obligations may arise from the agreements associated with transfers of loans. Under these agreements, the Company may be obligated to repurchase the loans, or otherwise indemnify or reimburse the investor for losses incurred due to material breach of contractual representations and warranties. There were 0 charge-offs associated with these transferred mortgage loans related to the standard securitization representations and warranties obligations for the Successor ~~period from April 1, 2021 to~~three and six months ended June 30, 2022, three months ended June 30, 2021 or the Predecessor period ~~from January 1, 2021 to~~three months ended March 31, 2021. ~~There were also 0 charge-offs associated with these transferred mortgage loans for the Predecessor periods for the three months ended June 30, 2020 or for the six months ended June 30, 2020.~~

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

The following table presents the assets and liabilities of the Company’s consolidated VIEs, which are included in the Condensed Consolidated Statements of Financial Condition, and excludes intercompany balances, except for retained bonds and beneficial interests (in thousands):

June 30,
2021

December 31, 2020


Successor

Predecessor

ASSETS
   ��
Restricted cash

$
334,984
   $ 293,580
Mortgage loans held for investment, subject to nonrecourse debt, at fair value

2021 FASST JR1


562,333
   —
2021 FASST HB1


506,482
   —
2019 FASST JR2


437,641
   488,760
2020 FASST HB2


397,121
   398,480
2018 FASST JR1


395,716
   449,069
2019 FASST JR3


370,209
   450,703
2020 FASST JR3


341,385
   372,015
2019 FASST JR4


331,302
   377,265
2020 FASST S3


313,728
   316,774
2020 FASST JR2


312,160
   341,439
2019 FASST JR1


295,605
   331,244
2020 FASST S2


289,129
   311,721
2021 RTL1 ANTLR


234,942
   —
2018 FASST JR2


234,665
   264,622
2020 FASST JR4


228,248
   237,100
2020 FASST S1


173,955
   189,243
2020 FASST JR1


—

   263,266
2020 RTL1 ANTLR


—

   137,989
2018 RTL1 ANTLR


—

   82,393
2019 RTL1 ANTLR


—

   118,161
2020 FASST HB1


—

   265,923
Other assets


76,056
   79,528




TOTAL ASSETS

$
5,835,661
   $ 5,769,275




LIABILITIES

Nonrecourse debt, at fair value

2021 FASST HB1

$
537,618
   $ —
2021 FASST JR1


534,444
   —
2020 FASST HB2


448,333
   474,599
2019 FASST JR2


447,966
   487,966
2018 FASST JR1


412,370
   458,279
2019 FASST JR3


394,096
   445,691
2020 FASST JR3


333,373
   354,762
2019 FASST JR4


332,846
   368,963
2019 FASST JR1


317,778
   343,544
2020 FASST S2


302,253
   314,144
2020 FASST S3


301,631
   309,713
2020 FASST JR2


296,093
   313,057
2021 RTL1 ANTLR


268,428
   —
2018 FASST JR2


243,734
   269,741
2020 FASST JR4


209,035
   228,804
2020 FASST S1


178,704
   191,189
2020 FASST JR1


—

   250,988
2020 RTL1 ANTLR


—

   140,839
2018 RTL1 ANTLR


—

   80,767
2019 RTL1 ANTLR


—

   127,981
2020 FASST HB1


—

   298,914
Payables and other liabilities


117
   291




TOTAL VIE LIABILITIES


5,558,819
   5,460,232




Retained bonds and beneficial interests eliminated in consolidation


(198,099
)
   (202,187 )




TOTAL CONSOLIDATED LIABILITIES

$
5,360,720
   $ 5,258,045


	June 30, 2022			December 31, 2021
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	$	6,717,649		$	6,088,298
Payables and other liabilities		598			428

TOTAL VIE LIABILITIES		6,718,247			6,088,726

Retained bonds and beneficial interests eliminated in consolidation		(270,412	)		(231,229	)

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

21Unconsolidated VIEs

~~Table of Contents~~

FAM

Hundred Acre Wood Trust (“HAWT”)

FAM securitizes certain of its interests in agency-eligible residential mortgage loans. The ~~transaction provides~~transactions provide investors with the ability to invest in a pool of mortgage loans secured by

one-to-four-family

residential properties and ~~provides~~provide FAM with access to liquidity for these assets and ongoing servicing fees. The principal and interest on the outstanding certificates are paid using the cash flows from the underlying mortgage loans, which serve as collateral for the debt.

In ~~May 2021, FAM established the Hundred Acre Wood Trust 2021-INV1 (“HAWT 2021-INV1”) trust for the sole purpose of acquiring mortgage loans for securitization. In June~~ 2021, FAM executed ~~the HAWT 2021-INV1 securitization,~~certain

securitizations, where FAM’s beneficial interest in the securitization is limited to its U.S. Risk Retention Certificates,

% 5% eligible vertical interest in the Trust. The Company determined that the securitization ~~structure~~structures meets the definition of a VIE and concluded that the Company does not hold a significant variable interest in the ~~securitization~~securitizations and that the contractual role as servicer is not a variable ~~interest and does not give the Company the power to direct the activities that most significantly affect the economic performance of the VIE.~~interest. The transfer of the loans to the ~~VIE~~VIEs was determined to be a sale. The Company derecognized the mortgage loans and did not consolidate the ~~trust.~~trusts.

FAM’s continuing involvement with and exposure to loss from the VIE includes the carrying value of the retained bond, the servicing asset recognized in the sale of the loans, servicing advances in the role as servicer, and obligations under representations and warranties contained in the loan sale agreements. Creditors of the VIE have no recourse to FAM’s assets or general credit. The underlying performance of the mortgage loans transferred has a direct impact on the fair values and cash flows of the beneficial interests held and the servicing asset recognized.

Table of ~~June 30, 2021 (Successor), the interests retained upon transfer~~Contents

Finance of ~~the mortgage loans consisted of an interest in each class of securities issued by the VIE~~America Companies Inc. and ~~had an initial fair value of $15.7 million. The servicing asset recognized upon sale of the mortgage loans~~Subsidiaries

Notes to ~~the VIE had an initial fair value of $1.1 million. Cash proceeds from the securitization were $299.0 million. The Company recorded a gain on sale on the securitization of $12.5 million.~~Condensed Consolidated Financial Statements (Unaudited)

The following table presents a summary of the outstanding collateral and certificate balances for securitization trusts for which the Company was the transferor and that were not consolidated by the ~~Company:~~Company (in thousands):

June 30, 2021

December 31, 2020


Successor

Predecessor

Unconsolidated Securitization Trusts:

Total collateral balances – UPB
   $ 300,318       $0




Total certificate balances
   $ 300,047       $0


	June 30, 2022		December 31, 2021
Unconsolidated securitization trusts:
Total collateral balances— Unpaid Principal Balance (“ UPB ”)	$	1,031,095	$	1,085,340

Total certificate balances	$	1,031,095	$	1,085,340

As of June 30, ~~2021 (Successor)~~2022 and December 31, ~~2020 (Predecessor),~~2021, there were ~~$0.1~~$1.1 million and $0.4 million, respectively, of mortgage loans transferred by the Company to unconsolidated securitization trusts that are 6090 days or ~~less~~more past due.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~Cavatica Asset Participation Trust (“CAPT”)

In December 2021,

~~Notes~~CAPT was

established for the purpose of securitizing agricultural loans, where its beneficial interest in the securitization is limited to ~~Unaudited Consolidated Financial Statements~~its Issuer Residual Interest Certificates, a 5% eligible

vertical interest in the trust. The Company determined that the securitization structure meets the definition of a VIE and concluded that the Company does not hold a significant variable interest in the securitizations and the Company does not have the power to direct the activities that most significantly affect the economic performance of the VIEs. However, the transfer of the loans to the VIEs was determined not to be a sale. As such, the Company continues to recognize and consolidate the loans and the related nonrecourse liability, with the retained bonds being eliminated against the nonrecourse liability in consolidation. The Company’s continuing involvement with and exposure to loss from the VIE includes the carrying value of the retained bond, the retained loans, debt servicing of the related nonrecourse liability, servicing advances in the role as servicer, and obligations under representations and warranties contained in the loan sale agreements. Creditors of the VIE have no recourse to the Company’s assets or general credit. The underlying performance of the mortgage loans held has a direct impact on the fair values and cash flows of the beneficial interests held.

As of June 30, 2022, the consolidated balance of the agricultural loans transferred to the VIE and the related nonrecourse liability had a fair value of $167.1 million and $162.5 million, respectively.

As of December 31, 2021, the consolidated balance of the agricultural loans transferred to the VIE and the related nonrecourse liability had a fair value of $118.6 million and $111.7 million, respectively.

4.	~~Acquisitions~~Fair Value

On October 12, 2020, the Company, Replay and FoA Equity entered into a Transaction Agreement (the “Transaction Agreement”) pursuant to which Replay agreed to combine with FoA Equity in a series of transactions that resulted in the Company becoming a publicly-traded company on the New York Stock Exchange (“NYSE”) and controlling FoA Equity in an

~~“UP-C”~~

structure. At the Closing on April 1, 2021, Replay domesticated into a Delaware corporation, and the Company was formed. Following the Closing, the public investors hold Class A Common Stock representing approximately a 31.3% economic interest, and BTO Urban Holdings L.L.C., a Delaware limited liability company (“BTO Urban”), Blackstone Family Tactical Opportunities Investment Partnership – NQ – ESC L.P., a Delaware limited partnership (“ESC”), Libman Family Holdings LLC, a Connecticut limited liability company (“Family Holdings”), The Mortgage Opportunity Group LLC, a Connecticut limited liability company (“TMO”), L and TF, LLC, a North Carolina limited liability company (“L&TF”), UFG Management Holdings LLC, a Delaware limited liability company (“Management Holdings”), and Joe Cayre (each of BTO Urban, ESC, Family Holdings, TMO, L&TF, Management Holdings and Joe Cayre, a “Seller” and, collectively, the “Sellers” or the “Continuing Unitholders”) retain a 68.7%

economic interest in FoA Equity in the form of Class A LLC Units. Additionally, the Company issued to the Continuing Unitholders shares of Class B Common Stock, which have no economic rights but entitle each holder to a number of votes that is equal to the aggregate number of Class A LLC Units held by such holder on all matters on which shareholders of the Company are entitled to vote generally. Subsequent to the Closing, the Company controls FoA Equity as the sole appointer of the board of managers and is a holding company with no assets or operations other than its equity interest in FoA Equity.

The Business Combination was accounted for using the acquisition method with the Company as the accounting acquirer. Under the acquisition method of accounting, the Company’s assets and liabilities were recorded at carrying value, and the assets and liabilities associated with FoA Equity were recorded at estimated fair value as of the Closing Date. The excess of the purchase price over the estimated fair values of the net assets acquired was recognized as goodwill. For accounting purposes, the acquirer is the entity that has obtained control of another entity and, thus, consummated a business combination. The determination of whether control has been obtained begins with the evaluation of whether control should be evaluated based on the variable interest or voting interest model. If the acquiree is a variable interest entity, the primary beneficiary would be the accounting acquirer. FoA Equity met the definition of a variable interest entity, and the Company was determined to be the primary beneficiary.

As a result of the Business Combination, the Company’s financial statement presentation distinguishes FoA Equity as the “Predecessor” through the Closing Date. FoA is the “Successor” for periods after the Closing Date. As a result of the application of the acquisition method of accounting in the Successor period, the consolidated financial statements for the Successor period are presented on a full

~~step-up~~

~~basis, and are therefore not comparable to the consolidated financial statements of the Predecessor period that are not presented on the same full~~

~~step-up~~

~~basis.~~

The consolidated financial statements will not be retrospectively adjusted for any provisional amount changes that occur in subsequent periods. Rather, any provisional amount adjustments will be recognized during the reporting period in which the adjustments are determined. The Company will also be required to record, in the same period’s consolidated financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of any change to the provisional amounts, calculated as if the accounting had been completed at the Closing Date. The purchase price allocation, while provisional, has been substantially completed. The allocation will be finalized as soon as practicable, but no later than one year from the Closing Date.

The following table summarizes the provisional estimated fair value of consideration transferred, noncontrolling interest equity value, assets acquired and liabilities assumed in conjunction with the Business Combination (in thousands):

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

Consideration transferred:

Total cash consideration
   $ 342,270
Blocker rollover equity
   221,811
Seller earnout contingent consideration
(1)
   160,272
Tax receivable agreement obligations to the seller
   31,950


Total consideration transferred
   756,303
Noncontrolling interest
   1,658,545


Total equity value
   $ 2,414,848


Assets acquired:

Cash and cash equivalents
   $ 336,075
Restricted cash
   305,292
Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value
   10,071,192
Mortgage loans held for investment, subject to nonrecourse debt, at fair value
   5,291,443
Mortgage loans held for investment, at fair value
   1,100,544
Mortgage loans held for sale, at fair value
   2,140,361
Debt securities
   9,230
Mortgage servicing rights, at fair value
   267,364
Derivative assets
   116,479
Fixed assets and leasehold improvements, net
   26,079
Intangible assets, net
(2)
   717,700
Other assets, net
   279,155


Total assets acquired
   $ 20,660,914


Liabilities assumed:

HMBS related obligations, at fair value
   $ 9,926,131
Nonrecourse debt, at fair value
   5,227,942
Other financing lines of credit
   3,340,345
Payables and other liabilities
   669,048
Notes payable, net
   353,924


Total liabilities assumed
   $ 19,517,390


Net identifiable assets acquired
   1,143,524


Goodwill
(3)
   $ 1,271,324

~~(1)~~

Represents the estimated fair market value of earnout shares issued to Sellers, which will be settled with shares of Class A Common Stock and is accounted for as equity classified contingent consideration. These estimated fair values are preliminary and subject to adjustments in subsequent periods.

~~(2)~~

Intangible assets were identified that met either the separability criterion or contractual legal criterion. The evaluations of the facts and circumstances available as of April 1, 2021, to assign provisional fair values to assets acquired and liabilities assumed are ongoing, including the assessments of the economic characteristics of intangible assets. These evaluations may result in changes to the provisional amounts recorded based on third-party valuations performed. The indefinite lived trade names and definite lived trade names intangible assets represent the values of all the Company’s trade names. The broker/customer relationships intangible asset represents the existing broker/customer relationships.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

Identifiable intangible assets

Provisional
Fair value

(in thousands)

Provisional
Useful life

(in years)

Indefinite lived trade names
   $ 178,000    N/A
Definite lived trade names
   8,800    10
Broker/customer relationships
   530,900    8-15



Total
   $ 717,700

~~(3)~~

Goodwill represents the excess of the gross consideration transferred over the provisional fair value of the underlying net tangible and identifiable intangible assets acquired. Goodwill represents future economic benefits arising from acquiring FoA Equity, primarily due to its strong market position and its assembled workforce that are not individually identified and separately recognized as intangible assets. Approximately

~~85.2~~

~~million of the goodwill recognized is expected to be deductible for income tax purposes.~~

~~There were certain transaction expenses contingent on the Closing (i.e. the~~

~~change-in-control~~

~~event). Given these expenses were triggered by the successful Closing of the Business Combination, the payment of $~~

~~5.0~~

~~million is considered to have been incurred “on the line”, i.e., these expenses are not presented in either the predecessor or successor periods.~~

The following unaudited pro forma financial information presents the results of operations as if the Business Combination had occurred on January 1, 2020. The unaudited pro forma results may not necessarily reflect the actual results of operations that would have been achieved nor are they necessarily indicative of future results of operations.

(in thousands)

For the three months ended

June 30,

For the six months ended

June 30,


2021

2020

2021

2020

Pro forma revenues
   $ 387,014    $ 454,249    $ 895,203    $ 639,377
Pro forma net income
   19,672    100,413    111,055    7,121
Pro forma net income attributable to controlling interest
   6,748    27,492    37,734    12,985
Pro forma net income (loss) attributable to noncontrolling interest
   12,924    72,921    73,321    (5,864 )

~~Renovate America Inc.~~

On March 26, 2021, in order to expand it’s product base to home improvement loans, the Company acquired certain assets and operations of Renovate America Inc. (“RAI”), that constitute a business for purposes of ASC 805, in a business combination for

~~43.5~~

~~million predominantly paid in cash at closing. A fair value estimate of~~

~~36.0~~

~~million in net assets were acquired with the purchase, consisting primarily of purchased loans, with the remaining~~

~~7.5~~

~~million of the purchase price being allocated to goodwill.~~

~~Parkside~~

On May 14, 2021, in order to further strengthen its position in the wholesale mortgage originations, the Company acquired certain assets and operations of Parkside Lending, LLC (“Parkside”), that constitute a business for purposes of ASC 805, in a business combination for

~~20.0~~

million cash paid at closing. The Company acquired certain key contracts and real property leases, as well as proprietary materials, intellectual property, and workforce. In addition to the initial cash purchase price, an earnout liability of $7.0 million was recorded for future contingent consideration payments that are tied to Parkside achieving certain specified profitability metrics, with the offset allocated to goodwill. The total amount of cash consideration and earnout liability of $27.0 million have been allocated to goodwill.

The RAI and Parkside transactions will be accounted for using the acquisition method. Under the acquisition method of accounting, RAI and Parkside’s assets and liabilities will be recorded at estimated fair value as of the acquisition dates with the excess of the purchase prices over the estimated fair values of the net assets acquired, if applicable, recognized as goodwill. Additional disclosures required by ASC 805 with respect to the RAI and Parkside acquisitions have been omitted because the information is immaterial to the financial statements.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

5.	~~Fair Value~~

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is based on the assumptions market participants would use when pricing an asset or liability and follows a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

All aspects of nonperformance risk, including the Company’s own credit standing, are considered when measuring the fair value of a liability.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Following is a description of the three ~~levels:~~levels of the fair value hierarchy:

Level 1 Inputs: Quoted prices for identical instruments in active markets.

Level 2 Inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs: Instruments with unobservable inputs that are significant to the fair value measurement.

The Company classifies assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy for the Successor ~~period from April 1, 2021 to~~three and six months ended June 30, 2022, three months ended June 30, 2021, or for the Predecessor ~~period from January 1, 2021 to~~three months ended March 31, 2021. ~~There were no transfers for the Predecessor for the three months ended and six months ended June 30, 2020.~~

Following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and the details of the valuation models, key inputs to those models and significant assumptions utilized. Within the assumption tables presented, not meaningful (“NM”) refers to a range of inputs that is too broad to provide meaningful information to the user or to an input that has no range and consists of a single data point.

~~Reverse Mortgage~~ Loans Held for Investment, Subject to HMBS Related Obligations, at Fair Value

HECM loans securitized into Ginnie Mae ~~(“GNMA”)~~ HMBS are not actively traded in open markets with readily observable market prices.

The Company values HECM loans securitized into ~~GNMA~~Ginnie Mae HMBS utilizing a present value methodology that discounts estimated projected cash flows over the life of the loan portfolio using prepayment, loss frequency and severity, borrower mortality, borrower draw, and ~~discounts~~discount rate assumptions management believes a market participant would use in estimating fair value. ~~The significant unobservable inputs used in the measurement include:~~

Conditional Repayment Rate—The Company projects borrower prepayment rates which considers borrower age and gender and is based on historical termination rates. The outputs of borrower prepayment rates, which include both voluntary and involuntary prepayments, are utilized to anticipate future terminations.

Loss Frequency and Severity—Termination proceeds are adjusted for expected loss frequencies and severities to arrive at net proceeds that will be provided upon final resolution. Loss frequency and severity represent the frequency of losses and the losses associated with loans that are liquidated through a foreclosure sale, net of claim proceeds. Historical experience is utilized to estimate the loss rates resulting from scenarios where FHA insurance proceeds are not expected to cover all principal and interest outstanding and, as servicer, the Company is exposed to losses upon resolution of the loan. Loss frequency and severity are based upon the historical experience with specific loan resolution waterfalls.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Due and Payable Triggers—The input for terminations not attributable to an FHA assignment is based on historical foreclosure and liquidation experience.~~

Discount Rate—derived based upon reference to yields required by market participants for recent transactions in the HECM loan bulk market adjusted based upon weighted average life of the loan portfolio. This rate reflects what the Company believes to be a market participant’s required yield on HECM loans of similar weighted average lives. The yield spread is applied over an interpolated benchmark curve or as a spread over a collateral forward curve.

~~Average Draw Rates—The draw curve is estimated based upon the historical experience with the specific product type contemplating the borrower’s age and loan age.~~

Changes to any of these assumptions could result in significantly different valuation results. The Company classifies reverse mortgage loans held for investment as Level 3 assets within the GAAP hierarchy, as they are dependent on unobservable inputs.

The following table presents the weighted average significant unobservable ~~inputs~~assumptions used in the fair value measurement of ~~reverse mortgage~~ loans held for investment, subject to HMBS related obligations, for the periods indicated:

June 30, 2021

December 31, 2020


Predecessor

Successor


Range of Input

Weighted Average of
Input

Range of Input

Weighted Average of
Input

Conditional repayment rate


NM

20.3
%
   NM 20.0 %
Loss frequency


NM

4.3
%
   NM 4.4 %
Loss severity


4.9% - 11.7%

5.2
%
   5.1% - 13.3% 5.4 %
Discount rate


NM

1.9
%
   NM 1.6 %
Average draw rate


NM

1.1
%
   NM 1.1 %


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Conditional repayment rate		NM			23.0	%		NM			20.8	%
Loss frequency		NM			3.9	%		NM			4.5	%
Loss severity		2.4% - 6.9	%		2.6	%		3.1% - 7.7	%		3.3	%
Discount rate		NM			4.2	%		NM			2.4	%
Average draw rate		NM			1.2	%		NM			1.1	%

The Company aggregates loan portfolios based upon the underlying securitization trust and values these loans using these aggregated pools. The range of inputs provided above are based upon the range of inputs utilized for each securitization trust.

Table of Contents

~~Mortgage~~

Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Loans Held for Investment, Subject to Nonrecourse Debt, at Fair Value

Reverse Mortgage Loans

Reverse mortgage loans held for investment, subject to nonrecourse debt,

at fair value,

include HECM loans previously purchased out of ~~GNMA~~Ginnie Mae HMBS pools and non

FHA-insured

jumbo reverse mortgages, which have been subsequently securitized and serve as collateral for the issued debt. These loans are not traded in active and open markets with readily observable market prices. The Company classifies reverse mortgage loans held for investment, subject to nonrecourse debt as Level 3 assets within the GAAP hierarchy.

~~HECM Buyouts—Securitized (Nonperforming)~~

The Company values nonperforming securitized HECM buyouts, performing securitized HECM buyouts, and securitized

non-agency

reverse mortgage loans utilizing a present value methodology that discounts estimated projected cash flows over the life of the ~~portfolio using conditional repayment, loss frequency and severity, borrower mortality, and discount rate assumptions management believes a market participant would use in estimating fair value.~~portfolio.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~The following table presents the weighted average significant unobservable inputs used in the fair value measurement of nonperforming securitized HECM buyouts for the periods indicated:~~

June 30, 2021

December 31, 2020


Successor

Predecessor


Range of Input

Weighted Average of
Input

Range of Input

Weighted Average of
Input

Conditional repayment rate


NM

40.6
%
   NM 42.9 %
Loss frequency


25.0% - 100.0%

52.5
%
   25.0% - 100.0% 54.8 %
Loss severity


    4.9% - 11.7%

7.0
%
       5.1% - 13.3% 7.5 %
Discount rate


NM

3.6
%
   NM 4.1 %

The Company aggregates loan portfolios based upon the underlying securitization trust and values these loans using these aggregated pools. The range of inputs provided ~~above~~ are based upon the range of inputs utilized for each securitization trust.

HECM Buyouts—Securitized ~~(Performing)~~

The Company values performing securitized HECM buyouts utilizing a present value methodology that discounts estimated projected cash flows over the life of the portfolio using conditional repayment, loss frequency and severity, borrower mortality, and discount rate assumptions management believes a market participant would use in estimating fair value.(Nonperforming)

The following table presents the weighted average significant unobservable ~~inputs~~assumptions used in the fair value measurement of nonperforming securitized HECM buyouts for the periods indicated:


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Conditional repayment rate		NM			39.7	%		NM			41.2	%
Loss frequency		23.1% - 100.0	%		51.4	%		25.0% - 100	%		59.5	%
Loss severity		2.4% - 6.9	%		3.7	%		3.1% - 7.7	%		4.3	%
Discount rate		NM			7.7	%		NM			4.1	%

HECM Buyouts—Securitized (Performing)

The following table presents the weighted average significant unobservable assumptions used in the fair value measurement of performing securitized HECM buyouts for the periods indicated:

June 30, 2021

December 31, 2020


Successor

Predecessor


Range of Input

Weighted Average of
Input

Range of Input

Weighted Average of
Input

Weighted average remaining life in years


NM

8.7
   NM 8.5
Conditional repayment rate


NM

13.7
%
   NM 14.7 %
Loss severity


4.9% - 11.7%

8.6
%
   5.1% - 13.3% 7.7 %
Discount rate


NM

3.4
%
   NM 3.5 %

~~Non-Agency~~

~~Reverse Mortgage—Securitized~~

~~The Company values securitized~~

~~non-agency~~

reverse mortgage loans utilizing a present value methodology that discounts estimated projected cash flows over the life of the loan portfolio using loan to value, repayment, pool-level losses, home price appreciation, and discount rate assumptions. The following table presents the significant unobservable inputs used in the fair value measurements of

~~non-agency~~

~~reverse mortgage loans for the periods indicated:~~


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Weighted average remaining life (in years)		NM			9.0			NM			9.0
Conditional repayment rate		NM			13.4	%		NM			13.3	%
Loss severity		2.4% - 6.9	%		5.7	%		3.1% - 7.7	%		7.7	%
Discount rate		NM			6.8	%		NM			3.7	%

2825

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

Non-Agency

Reverse Mortgage—Securitized

The following table presents the significant unobservable assumptions used in the fair value measurements of securitized

non-agency

reverse mortgage loans for the periods indicated:


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Weighted average remaining life (in years)		NM			9.3			NM			7.5
Loan to value		0.1% - 73.0	%		42.9	%		0.1% - 64.7	%		43.4	%
Conditional repayment rate		NM			14.7	%		NM			18.6	%
Loss severity		NM			10.0	%		NM			10.0	%
Home price appreciation		-10.1% - 11.0	%		4.9	%		-4.6% - 14	%		4.7	%
Discount rate		NM			6.2	%		NM			3.6	%

June 30, 2021

December 31, 2020


Successor

Predecessor


Range of Input

Weighted Average of
Input

Range of Input

Weighted Average of
Input

Weighted-average remaining life in years


NM

7.1
   NM 6.9
Loan to value


0.1% - 75.7%

50.0
%

   9.0% - 73.1% 48.2 %
Conditional repayment rate


NM

19.2
%
   NM 18.7 %
Loss severity


NM

10.0
%
   NM 10.0 %
Home price appreciation


3.9% - 8.8%

5.9
%
   1.1% - 8.9% 5.6 %
Discount rate


NM

3.7
%
   NM 3.6 %

Commercial Mortgage Loans

Fix & Flip—Securitized

The securitized Fix & Flip loans are short-term loans for individual real estate investors, with terms ranging from

~~9-18~~

9 - 24 months. This product is valued using a discounted cash flow (“DCF”) model. The Company classifies these mortgage loans as Level 3 assets within the GAAP hierarchy.

The Company utilized the following weighted average assumptions in estimating the fair value of securitized Fix & Flip mortgage loans for the periods indicated:

June 30, 2021

December 31, 2020


Successor

Predecessor


Range of Input

Weighted Average of
Input


Range of Input

Weighted Average of
Input

Prepayment rate (SMM)


NM

15.3
%
   NM 17.1 %
Discount rate


5.1% - 10.0%

5.1
%
   6.7% - 10.0% 6.7 %
Loss frequency


0.3% - 77.2%

0.7
%
   0.2% - 44.0% 0.6 %


	June 30, 2022					December 31, 2021
Unobservable Assumptions	Range		Weighted Average			Range			Weighted Average
Prepayment rate (SMM)		NM		10.6	%		NM			14.1	%
Discount rate		NM		8.9	%		NM			5.7	%
Loss frequency		NM		0.5	%		0.3% - 69.0	%		0.6	%

~~Mortgage~~ Loans Held for Investment, at Fair Value

Reverse Mortgage Loans

Reverse mortgage loans held for investment, at fair value, consists of originated or purchased HECM and

non-agency

reverse mortgage loans not yet securitized, unsecuritized tails, and certain HECMs purchased out of ~~GNMA~~Ginnie Mae HMBS (“Inventory Buyouts”) that the Company intends ~~to securitize for purposes of serving as collateral~~ for future securitization transfers.

Originated or purchased HECM loans held for investment are valued predominantly by utilizing forward HMBS prices for similar pool characteristics and based on observable market data. These amounts are further adjusted to include future cash flows that would be earned for servicing the HECM loan over the life of the asset.

Unsecuritized tails consists of performing and nonperforming repurchased loans. The fair value of performing unsecuritized tails are valued at current pricing levels for similar ~~GNMA~~Ginnie Mae HMBS. The fair value of nonperforming unsecuritized tails is based on expected claim proceeds from the U.S Department of Housing and Urban Development (“HUD”) upon assignment of the loans.

2926

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

The fair value of repurchased loans is based on expected cash proceeds of the liquidation of the underlying properties and expected claim proceeds from HUD. The primary assumptions utilized in valuing nonperforming repurchased loans include loss frequency and loss severity. Termination proceeds are adjusted for expected loss frequencies and severities to arrive at net proceeds that will be provided upon final resolution, including assignments to FHA. Historical experience is utilized to estimate the loss rates resulting from scenarios where FHA insurance proceeds are not expected to cover all principal and interest outstanding and, as servicer, the Company is exposed to losses upon resolution of the loan.

The Company classifies reverse mortgage loans held for investment, at fair value as Level 3 assets within the GAAP hierarchy.

Inventory Buyouts

The fair value of Inventory Buyouts is based on the expected cash proceeds of the liquidation of the underlying properties and expected claim proceeds from HUD. The primary assumptions utilized in valuing Inventory Buyouts include loss frequency and loss severity. Termination proceeds are adjusted for expected loss frequencies and severities to arrive at net proceeds that will be provided upon final resolution, including assignments to FHA. Historical experience is utilized to estimate the loss rates resulting from scenarios where FHA insurance proceeds are not expected to cover all principal and interest outstanding and as servicer, the Company is exposed to losses upon resolution of the loan.

The Company values Inventory Buyouts utilizing a present value methodology that discounts estimated projected cash flows over the life of the ~~portfolio using conditional repayment, loss frequency and severity, borrower mortality, and discount rate assumptions management believes a market participant would use in estimating fair value.~~portfolio.

The following table presents the weighted average significant unobservable ~~inputs~~assumptions used in the fair value measurement of Inventory Buyouts classified as ~~reverse mortgage~~ loans held for investment, at fair value for the periods indicated:


	June 30, 2021					December 31, 2020					June 30, 2022						December 31, 2021
	Successor					Predecessor
	Range of Input		Weighted Average of Input			Range of Input		Weighted Average of Input
Unobservable Assumptions											Range			Weighted Average			Range			Weighted Average
Conditional repayment rate		NM		45.8	%		NM		44.0	%		NM			41.2	%		NM			43.2	%
Loss frequency		NM		53.6	%		NM		46.9	%		23.1% - 100.0	%		47.4	%		NM			59.4	%
Loss severity		NM		9.4	%		NM		10.5	%		2.4% - 6.9	%		4.7	%		3.1% - 7.7	%		3.8	%
Discount rate		NM		3.6	%		NM		4.1	%		NM			7.7	%		NM			4.1	%

Non-Agency

Reverse Mortgage Loans

The fair value of

non-agency

reverse mortgage loans is based on values for investments with similar investment grade ratings and the value the Company would expect to receive if the whole loans were sold to an investor.

The Company values

non-agency

reverse mortgage loans utilizing a present value methodology that discounts estimated projected cash flows over the life of the loan ~~portfolio using prepayment, home price appreciation, pool-level losses, cost to service, and discount rates.~~portfolio.

The following table presents the weighted average significant unobservable assumptions used in the fair value measurement of non-agency reverse mortgage loans classified as loans held for investment, at fair value for the periods indicated:


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Weighted average remaining life (in years)		NM			10.8			NM			9.2
Loan to value		2.9% - 68.9	%		47.3	%		0.2% - 68.7	%		47.8	%
Conditional repayment rate		NM			13.1	%		NM			14.8	%
Loss severity		NM			10.0	%		NM			10.0	%
Home price appreciation		-10.1% - 11.0	%		4.6	%		-4.6% - 14.0	%		4.4	%
Discount rate		NM			6.2	%		NM			3.6	%

3027

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

~~The following table presents the weighted average significant unobservable inputs used in the fair value measurement of~~

~~non-agency~~

~~reverse mortgage loans classified as reverse mortgage loans held for investment for the periods indicated:~~

June 30, 2021

December 31, 2020


Successor

Predecessor


Range of Input

Weighted Average of
Input

Range of Input

Weighted Average of
Input

Weighted-average remaining life in years


NM

8.0
   NM 8.0
Loan to value


0.4% - 62.8%

44.6
%
   0.1% - 62.1% 44.0 %
Conditional repayment rate


NM

16.9
%

   NM 16.8 %
Loss severity


NM

10.0
%
   NM 10.0 %
Home price appreciation


3.9% - 8.8%

5.9
%
   1.1% - 8.9% 5.5 %
Discount rate


NM

3.7
%
   NM 3.6 %

Commercial Mortgage Loans

Fix & Flip

The Fix & Flip loans are short-term loans for individual real estate investors, with terms ranging from ~~9—18~~9 - 24 months. This product is valued using a ~~discounted cash flow~~DCF model. The Company classifies these mortgage loans as Level 3 assets within the GAAP hierarchy.

The Company utilized the following weighted average assumptions in estimating the fair value of Fix & Flip ~~mortgage~~ loans for the periods indicated:


	~~June 30, 2021~~
	~~Successor~~
	~~Range of Input~~		Weighted Average of Input
~~Prepayment rate (SMM)~~		NM		~~12.5~~	%
~~Discount rate~~		NM		~~5.4~~	%
~~Loss frequency~~		NM		~~0.4~~	%

~~As of March 2021, management made the decision to change the classification of fix & flip loans from mortgage loans held for sale, at fair value, to mortgage loans held for investment, at fair value.~~


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Prepayment rate (SMM)		NM			11.6	%		NM			11.9	%
Discount rate		8.9% - 13.5	%		9.0	%		5.7% - 10.0	%		5.9	%
Loss frequency		NM			0.3	%		NM			0.4	%

Agricultural Loans

The agricultural loans are government-insured loans made to farmers to fund their inputs and operating expenses for the upcoming growing season with terms ranging from 7—7 - 17 months. The product is valued using a ~~discounted cash flow~~DCF model. The Company classifies these ~~mortgage~~ loans as Level 3 assets within the GAAP hierarchy.

The Company utilized the following assumptions in estimating the fair value of agricultural loans for the periods indicated:

June 30, 2021

December 31, 2020


Successor

Predecessor


Range of Input

Weighted Average of
Input


Range of Input

Weighted Average of
Input

Discount rate


NM

4.7
%
   NM 6.4 %
Prepayment rate (SMM)


10.0% - 100.0%

28.3
%
   0% - 1.0% 0.7 %
Default rate (CDR)


NM

1.0
%
   0% - 2.0% 0.4 %

~~Table of Contents~~


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Discount rate		NM			8.1	%		NM			4.8	%
Prepayment rate (SMM)		NM			23.1	%		9.0% - 100.0	%		22.1	%
Default rate (CDR)		0.0% - 1.0	%		1.0	%		0.0% - 0.7	%		0.9	%

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Mortgage~~ Loans Held for Sale, at Fair Value

~~Reverse Mortgage Loans~~

Reverse mortgage loans held for sale, at fair value, consists of unpoolable loans that the Company intends to sell to third party investors. Reverse mortgage loans held for sale consists primarily of performing repurchased loans. The fair value of performing unpoolable loans is based on expected claim proceeds from HUD upon assignment of the loans. In certain instances the loan balance may exceed the maximum claim amount (“MCA”). In these instances, the fair value is based on expected proceeds from sale of the underlying property and any additional HUD claim proceeds. The Company classifies reverse mortgage loans held for sale as Level 3 assets within the GAAP hierarchy.

Residential and Commercial Mortgage Loans

Mortgage loans held for sale include residential and commercial mortgage loans originated by the Company and held until sold to secondary market investors. The Company primarily originates conventional GSEs and government (FHA and Department of Veterans Affairs) residential mortgage loans (collectively “residential mortgage loans held for sale”) and recourse and nonrecourse commercial mortgage loans to owners and investors of single and multi-family residential rental properties (“commercial loans held for sale”).

Residential Mortgage Loans

The Company originates or purchases mortgage loans in the U.S. that it intends to sell to FNMA, FHLMC, and ~~GNMA~~Ginnie Mae (collectively “the Agencies”). Additionally, the Company originates or purchases mortgage loans in the U.S. that it intends to sell into the secondary markets via whole loan sales. Mortgage loans held for sale are typically pooled and sold into certain exit markets, depending upon underlying attributes of the loan, such as agency eligibility, product type, interest rate, and credit quality. In addition, the Company may originate loans that do not meet specific underwriting criteria and are not eligible to be sold to the Agencies. Two valuation methodologies are used to determine the fair value of mortgage loans held for sale. The methodology used depends on the exit market as described below:

Loans valued using observable market prices for identical or similar assets

—- This includes all mortgage loans that can be sold to the Agencies, which are valued predominantly by published forward agency prices.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

This will also include all

non-agency

loans where recently negotiated market prices for the loan pool exist with a counterparty (which approximates fair value), or quoted market prices for similar loans are available. ~~As these valuations are derived from quoted market prices, the~~The Company ~~classified~~classifies these valuations as Level 2 inassets within the ~~fair value disclosures.~~GAAP hierarchy. During periods of illiquidity of the mortgage marketplace, it may be necessary to look for alternative sources of value, including the whole loan purchase market for similar loans, and place more reliance on the valuations using internal models. Due to limited sales activity and periodically unobservable prices in certain of the Company’s markets, certain mortgage loans held for sale portfolios may transfer from Level 2 to Level 3 in future periods.

Loans valued using internal models

–

To the extent observable market prices are not available, the Company will determine the fair value of mortgage loans held for sale using a collateral based valuation model, which approximates expected cash proceeds on liquidation. For loans where bid prices or commitment prices are unavailable, these valuation models estimate the exit price the Company expects to receive in the loan’s principal market and are based on a combination of recent appraisal values, adjusted for certain loss factors. The Company classifies these ~~valuations~~loans as Level 3 inassets within the ~~fair value disclosures.~~GAAP hierarchy.

Commercial Mortgage Loans

The Company primarily originates two separate commercial loan products that it classifies as held for sale: Single Rental Loan (“SRL”) and Portfolio Lending.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

SRL

The SRL product is designed for small/individual real estate investors looking to purchase and then

~~rent-out~~

rent out a single property. ~~These are~~

~~30-year~~

~~loans with fixed interest rates typically between 5.0%—8.0%.~~ This product is valued using a ~~discounted cash flow~~DCF model. The Company classifies these mortgage loans as Level 3 assets within the GAAP hierarchy.

The Company utilized the following weighted average assumptions in estimating the fair value of SRL mortgage loans held for sale for the periods indicated:

June 30, 2021

December 31, 2020


Successor

Predecessor


Range of Input

Weighted Average of
Input


Range of Input

Weighted Average of
Input

Prepayment rate (CPR)


1.0% - 17.0%

14.0
%
   1.0% - 17.1% 15.4 %
Discount rate


NM

3.3
%
   NM 5.0 %
Default rate (CDR)


1.0% - 54.0%

2.4
%
   1.0% - 64.9% 3.6 %


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Prepayment rate (CPR)		18.1% - 25.0	%		18.6	%		1.0% - 17.1	%		14.2	%
Discount rate		NM			6.5	%		NM			3.3	%
Default rate (CDR)		NM			1.0	%		1.0% - 57.2	%		2.2	%

Portfolio Lending

The Portfolio Lending product is designed for larger investors with multiple properties. Specifically, these loans are useful for consolidating multiple rental property mortgages into a single loan. These loans have fixed coupons, ~~that typically range from 5.0%—6.2%,~~ with 5 and

10-year

balloon structures, as well as a ~~30 year~~

30-year

structure. This product is valued using a ~~discounted cash flow~~DCF model. The Company classifies these mortgage loans as Level 3 assets within the GAAP hierarchy.

The Company utilized the following weighted average assumptions in estimating the fair value of Portfolio Lending mortgage loans held for sale for the periods indicated:


	June 30, 2021					December 31, 2020					June 30, 2022						December 31, 2021
	Successor					Predecessor
	Range of Input		Weighted Average of Input			Range of Input		Weighted Average of Input
Unobservable Assumptions											Range			Weighted Average			Range			Weighted Average
Prepayment rate (CPR)		0.0% - 14.8%		8.1	%		0% - 15.0%		9.3	%		0.0% - 22.1	%		14.5	%		0.0% - 14.5	%		8.7	%
Discount rate		NM		3.8	%		NM		4.9	%		NM			6.8	%		NM			3.9	%
Default rate (CDR)		1.0% - 27.1%		1.7	%		1.0% - 42.7%		2.0	%		NM			1.0	%		1.0% - 54.0	%		3.2	%

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Fix & Flip

The Fix & Flip loans are short-term loans for individual real estate investors, with terms ranging from

~~9-18~~9-24

months. This product is valued using a ~~discounted cash flow~~DCF model. The Company classifies these mortgage loans as Level 3 assets within the GAAP hierarchy.

~~The Company utilized the following weighted average assumptions in estimating the fair value of fix & flip mortgage loans for the periods indicated:~~

MSRs


	~~December 31, 2020~~
	~~Predecessor~~
	~~Range of Input~~		Weighted Average of Input
~~Prepayment rate (SMM)~~		NM		~~12.4~~	%
~~Discount rate~~		~~6.7% - 10.0%~~		~~7.2~~	%
~~Loss frequency~~		NM		~~0.8~~	%

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Mortgage Servicing Rights (FAM)~~

As of June 30, ~~2021 (Successor)~~2022 and December 31, ~~2020 (Predecessor),~~2021, the Company valued ~~mortgage servicing rights~~MSRs internally. The significant assumptions utilized to determine fair value are projected prepayments using the Public Securities Association Standard Prepayment Model, discount rates, and projected servicing costs that vary based on the loan type and delinquency. The Company classifies these valuations as Level 3 assets within the GAAP hierarchy since they are dependent on unobservable inputs.

Fair value is derived through a ~~discounted cash flow~~DCF analysis and calculated using a computer pricing model. This computer valuation is based on the objective characteristics of the portfolio (loan amount, note rate, etc.) and commonly used industry assumptions ~~(PSAs,~~(Prepayment speed assumptions (“PSA”), discount rate, etc.). The assumptions taken into account by the pricing model are those which many active purchasers of servicing employ in their evaluations of portfolios for sale in the secondary market. The unique characteristics of the secondary servicing market often dictate adjustments to parameters over short periods of time.

Subjective factors are also considered in the derivation of fair values, including levels of supply and demand for servicing, interest rate trends, and perception of risk not incorporated into prepayment assumptions.

Fair value is defined as the estimated price at which the servicing rights would change hands in the marketplace between a willing buyer and seller. The valuation assumes that neither party would be under any compulsion to buy or sell and that each has reasonably complete and accurate knowledge of all relevant aspects of the offered servicing. The fair values represented in this analysis have been derived under the assumptions that sufficient time would be available to market the portfolio.

The following tables summarize certain information regarding the servicing portfolio of retained MSRs for the periods indicated:

June 30, 2021

December 31, 2020


Successor

Predecessor

Capitalization servicing rate


1.0
%

   0.8 %
Capitalization servicing multiple


3.8

   3.2
Weighted-average servicing fee (in basis points)


25

   25


	June 30, 2022			December 31, 2021
Capitalization servicing rate		1.2	%		1.1	%
Capitalization servicing multiple		4.9			4.4
Weighted average servicing fee (in basis points)		25			25

The ~~significant~~Company utilized the following weighted average assumptions ~~used~~ in estimating the fair value of ~~MSRs were as follows (in annual rates):~~MSRs:

June 30, 2021

December 31, 2020


Successor

Predecessor


Range of Input

Weighted Average
of Input


Range of Input

Weighted Average
of Input

Weighted average prepayment speed (CPR)


5.7% - 19.9%

10.1
%
   6.6% - 24.9% 12.1 %
Discount rate


NM

10.4
%
   NM 12.1 %
Weighted average delinquency rate


1.2% - 9.1%

1.3
%
   1.2% - 9.2% 1.3 %


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Weighted average prepayment speed (CPR)		0.1% - 12.3	%		6.8	%		0.0% - 12.8	%		8.3	%
Discount rate		NM			9.6	%		NM			8.5	%
Weighted average delinquency rate		0.8% - 4.6	%		1.4	%		0.8% - 14.3	%		1.3	%

The following table summarizes the estimated change in the fair value of MSRs from adverse changes in the significant assumptions (in thousands):


	June 30, 2022
	Weighted Average Prepayment Speed			Discount Rate			Weighted Average Delinquency Rate
Impact on fair value of 10% adverse change	$	(8,958	)	$	(15,042	)	$	(467	)
Impact on fair value of 20% adverse change	$	(17,439	)	$	(28,909	)	$	(934	)

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

June 30, 2021


Successor


Weighted Average
Prepayment Speed

Discount
Rate

Weighted Average
Delinquency Rate

Impact on fair value of 10% adverse change

$
(10,734
)

$
(10,921
)

$
(138
)
Impact on fair value of 20% adverse change


(20,763
)


(21,093
)


(348
)

These sensitivities are hypothetical and should be evaluated with care. The effect on fair value of a 10% variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.

Investments, at Fair Value

The Company invests in the equity of other companies in the form of common stock, preferred stock, or other

in-substance

equity interests. To the extent market prices are not observable, the Company engages ~~third-party~~third party valuation experts to assist in determining the fair value of these investments. The values are determined utilizing a market approach which estimates fair value based on what other participants in the market have paid for reasonably similar assets that have been sold within a reasonable period from the valuation date. The Company classifies these valuations as Level 3 in the fair value disclosures.

Derivative Assets and Liabilities

Some of the derivatives held by the Company are exchange-traded or traded within highly active dealer markets. In order to determine the fair value of these instruments, the Company utilizes the exchange price or dealer market price for the particular derivative ~~contract;~~contract, therefore, these contracts are classified as Level 1. 1 in the fair value hierarchy. The Company executes derivative contracts, including forward MBS commitments, To Be Announced Securities (“TBAs”), interest rate swaps, futures contracts, and loan purchase commitments (“LPCs”) as part of its overall risk management strategy related to its mortgage, reverse mortgage and commercial loan portfolios. The value of the LPCs is estimated using current market prices for HMBS and are considered Level 2 in the fair value hierarchy. TBAs are valued based on forward dealer marks from the Company’s approved counterparties and are considered Level 2 in the fair value hierarchy. The value of interest rate swaps and futures contracts is based on the exchange price or dealer market prices. The Company classifies interest rate swaps as Level 2 in the fair value hierarchy. The Company classifies futures contracts as Level 1 in the fair value hierarchy. The value of the forward MBS is based on forward prices with dealers in such securities or internally-developed third party models utilizing observable market inputs. The Company classifies forward MBS as Level 2 in the fair value hierarchy.

In addition, the Company enters into ~~IRLCs~~Interest Rate Lock Commitments (“IRLCs”) with prospective borrowers. Commitments to fund residential mortgage loans with potential borrowers are a binding agreement to lend funds ~~to these potential borrowers~~ at a specified interest rate within a specified period of time. The fair value of IRLCs is derived from the fair value of similar mortgage loans or bonds, which is based on observable market data. Changes to the fair value of IRLCs are recognized based on changes in interest rates, changes in the probability that the commitment will be exercised (pull through factor), and the passage of time. The expected net future cash flows related to the associated servicing of the loan are included in the fair value measurement of IRLCs. The Company adjusts the outstanding IRLCs with prospective borrowers based on an expectation that it will be exercised and the loan will be funded. Given the unobservable nature of the pull through factor, IRLCs are classified as Level 3.

In addition, the Company executes derivative contracts, including forward commitments, TBAs, interest rate swaps, and interest rate swap futures, as part of its overall risk management strategy related to its reverse mortgage and commercial loan portfolios. The value of the forward commitments is estimated using current market prices for HMBS and are considered Level 3 in the fair value hierarchy. ~~TBAs are valued based on forward dealer marks from the Company’s approved counterparties and are~~The pull through factor is considered Level 2 in the fair value hierarchy. The value of interest rate swaps and interest rate swap futures is based on the exchange price or dealer market prices. The Company classifies interest rate swaps as Level 2 in the fair value hierarchy. The Company classifies interest rate swap futures as Level 1 in the fair value hierarchy. The value of the forward MBS is based on forward prices with dealers in such securities or internally-developed third party models utilizing observable market inputs. The Company classifies forward MBS as Level 2 in the fair value hierarchy.to be a significant unobservable assumption.

HMBS Related Obligations, at Fair Value

The HMBS related obligation valuation considers the obligation to pass FHA insured cash flows through to the beneficial interest holders (repayment of secured borrowing) of the HMBS securities and the servicer and issuer obligations of the Company.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

The valuation of the obligation to repay the secured borrowing is estimated using Level 3 unobservable market inputs. The estimated fair value is based on the net present value of projected cash flows over the estimated life of the liability. The estimated fair value of the HMBS related obligations also includes the consideration required by a market participant to transfer the HECM and HMBS servicing obligations, including exposure resulting from shortfalls in FHA insurance proceeds.

The Company’s valuation considers assumptions that it believes a market participant would consider in valuing the liability, including, but not limited to, assumptions for repayment, costs to transfer servicing obligations, shortfalls in FHA insurance proceeds, and discount rates. The significant unobservable inputs used in the measurement ~~include:~~

~~Borrower Repayment Rates—the conditional~~include weighted average remaining life, borrower repayment ~~rate curve considers borrower age~~rates, and ~~gender is based on historical termination~~discount rates.

Discount Rate—derived based on an assessment of current market yields and spreads that a market participant would consider for entering into an obligation to pass FHA insured cash flows through to holders of the HMBS beneficial interests. Yield spread applied over interpolated benchmark curve or as a spread over collateral forward curve.

The following table presents the weighted average significant unobservable inputs used in the fair value measurement of HMBS related obligations for the periods indicated:

June 30, 2021

December 31, 2020

June 30, 2022

December 31, 2021

Successor

Predecessor

Range of Input

Weighted Average
of Input

Range of Input

Weighted Average
of Input

Unobservable Assumptions

Range

Weighted Average

Range

Weighted Average

Conditional repayment rate

20.2

19.9

23.1

20.8

Discount rate

1.7

1.4

4.1

2.3

Nonrecourse Debt, at Fair Value

Reverse Mortgage Loans

Outstanding notes issued that are securitized by nonrecourse debt are paid using the cash flows from the underlying reverse mortgage loans, which serve as collateral for the debt. ~~Nonrecourse~~The fair value of nonrecourse debt is estimated using Level 3 unobservable market inputs. The estimated fair value is based on the net present value of projected cash flows over the estimated life of the liability. The significant unobservable inputs used in the measurement ~~include:~~

~~Weighted Average Remaining Life—The projected remaining life is based on the expected conditional prepayment rate, which is utilized to determine future terminations.~~

~~Borrower Repayment Rates—The conditional~~include borrower repayment ~~rate curve considers borrower age~~rates and ~~gender is based on historical termination~~discount rates.

The Company’s valuation considers assumptions that it believes a market participant would consider in valuing the liability, including, but not limited to, assumptions for prepayment and discount rates. The following table presents the weighted average significant unobservable ~~inputs~~assumptions used in the fair value measurements of nonrecourse debt for the periods indicated:


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Performing/Nonperforming HECM securitizations
Weighted average remaining life (in years)		0.3 - 0.6			0.5			0.2 - 0.8			0.5
Conditional repayment rate		20.5% - 36.2	%		26.3	%		30.8% - 54.4	%		43.5	%
Discount rate		NM			6.3	%		NM			2.3	%
Securitized Non-Agency Reverse
Weighted average remaining life (in years)		0.6 - 10.5			4.0			1.0 - 2.3			1.6
Conditional repayment rate		7.6% - 37.4	%		17.2	%		18.4% - 35.9	%		28.2	%
Discount rate		NM			5.9	%		NM			2.2	%

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

June 30, 2021

December 31, 2020


Successor

Predecessor


Range of Input

Weighted
Average of
Input

Range of Input

Weighted
Average of
Input

Performing/Nonperforming HECM securitizations

Weighted-average remaining life (in years)


0.6 - 1.2



0.9
   0.2 - 1.5    1.0
Conditional repayment rate


19.6% - 29.1%



23.9
%
   34.3% - 56.3%    42.8 %
Discount rate


NM



2.1
%
   NM    3.1 %
Securitized
Non-Agency
Reverse

Weighted-average remaining life (in years)


1.3 - 2.1



1.9
   0.3 - 2.7    2.1
Conditional repayment rate


20.6% - 31.2%



25.6
%
   19.6% - 35.8%    23.9 %
Discount rate


NM



2.0
%
   NM    2.2 %

Commercial Mortgage Loans

Outstanding nonrecourse notes issued that are securitized by loans held for investment, subject to nonrecourse debt, are paid using the cash flows from the underlying mortgage loans. The fair value of nonrecourse debt is estimated using Level 3 unobservable market inputs. The estimated fair value is based on the net present value of projected cash flows over the estimated life of the liability.

The Company’s valuation considers assumptions that it believes a market participant would consider in valuing the liability, including, but not limited to, assumptions for prepayment and discount rates. The Company estimates prepayment speeds giving consideration that the Company may in the future transfer additional loans to the trust, subject to the availability of funds provided for within the trust. The following table presents the significant unobservable ~~inputs~~assumptions used in the fair value measurements of nonrecourse debt for the periods indicated:

June 30, 2021

December 31, 2020


Successor

Predecessor


Range of Input

Weighted
Average of Input

Range of Input

Weighted
Average of Input

Nonrecourse debt

Weighted-average remaining life (in months)


NM



3.8

1.9

- 4.1
   3.4
Weighted-average prepayment speed (SMM)


NM



17.1
%
   17.7% - 32.0%    21.4 %
Discount rate


NM



2.5
%
   NM    5.8 %

June 30, 2022

December 31, 2021

Unobservable Assumptions

Range

Weighted Average

Range

Weighted Average

Weighted average remaining life (in months)

5.3

4.0

Weighted average prepayment speed (SMM)

13.9

14.0

Discount rate

6.3

3.1

Deferred Purchase Price Liabilities

Deferred purchase price liabilities are measured using a present value of future payments which considers various assumptions, including future loan origination volumes, projected earnings and discount rates. The significant unobservable assumption is the discount rate. As of June 30, ~~2021 (Successor)~~2022 and December 31, ~~2020 (Predecessor),~~2021, the Company utilized a discount ~~rates ranging from 12% to 30%~~rate of

35% to value the deferred purchase price liabilities. The liabilities as of June 30, 2021 (Successor) include provisional estimates for the seller earnout provision related to the Parkside asset purchase agreement that were based on the information that was available as of the acquisition date. Refer to Note 4—Acquisitions for additional details regarding these acquisitions. As this value is largely based on unobservable inputs, the Company classifies this liability as Level 3 in the fair value hierarchy.

Tax Receivable Agreements (“TRA”) Obligation

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Tax Receivable Agreement~~

~~As a result of the Business Combination, the Company is a party to the tax receivable agreements (“TRAs”) with the Sellers.~~ The fair value of the TRA obligation resulting from the exchanges at the Business Combination Closing Date is derived through the use of a DCF model. The significant unobservable assumptions used in the DCF include the ability to utilize tax attributes based on current tax forecasts, a constant U.S. federal income tax rate, an assumed weighted average state and local income tax rate, and

20.4% and

13.5% discount rate at June 30, 2022 and December 31, 2021

, respectively,

applied to future payments under the Tax Receivable Agreements. The Company classifies the TRA obligation as Level 3 in the fair value hierarchy.

Nonrecourse MSR Financing Liability ~~at Fair Value~~

The Company has ~~agreed to sell~~sold to certain third parties the right to receive all excess servicing and ancillary fees related to identified ~~mortgage servicing rights~~MSRs in exchange for an upfront payment equal to the entire purchase price of the identified ~~mortgage servicing rights.~~MSRs.

The Company has elected to account for the servicing liability using the fair value option. Consistent with the underlying ~~mortgage servicing rights,~~MSRs, fair value is derived through a ~~discounted cash flow~~DCF analysis and calculated using a computer pricing model. This computer valuation is based on the objective characteristics of the portfolio (loan amount, note rate, etc.) and commonly used industry assumptions (PSAs, etc.). The assumptions taken into account by the pricing model are those which many active purchasers of servicing rights employ in their evaluations of portfolios for sale in the secondary market. The unique characteristics of the secondary servicing market often dictate adjustments to parameters over short periods of time.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company classifies the valuations of the nonrecourse MSR financing liability as Level 3 in the fair value disclosures.

The ~~significant~~Company utilized the following weighted average assumptions ~~used~~ in estimating the fair value of the outstanding nonrecourse MSR financing ~~liability were as follows (in annual rates):~~liability:

June 30, 2021

December 31, 2020


Successor

Predecessor


Range of Input

Weighted Average
of Input

Range of
Input

Weighted Average
of Input

Weighted average prepayment speed (CPR)


6.0% - 16.0%

9.2
%
   6.9% - 12.7% 11.6 %
Discount rate


10.9% - 11.0%

11.0
%
   11.7% - 12.0% 12.0 %
Weighted average delinquency rate


NM

1.0
%
   NM 1.8 %

~~The following table summarizes the estimated change in the fair value of the nonrecourse MSR financing liability, at fair value from adverse changes in the significant assumptions (in thousands):~~

June 30, 2021


Successor


Weighted
Average
Prepayment
Speed

Discount
Rate

Weighted
Average
Delinquency
Rate

Impact on fair value of 10% adverse change
   $ (1,231 )    $ (2,112 )    $ (23 )
Impact on fair value of 20% adverse change
   (2,889 )    (4,552 )    (58 )

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Weighted average prepayment speed (CPR)		1.0% - 7.2	%		5.6	%		2.0% - 11.0	%		7.7	%
Discount rate		9.6% - 11.6	%		9.7	%		8.1% - 10.1	%		9.1	%
Weighted average delinquency rate		NM			1.3	%		NM			1.3	%

Retained ~~Bond~~

Bonds, at Fair Value

The retained bonds, at fair value, represents the U.S. Risk Retention Certificates, a 5% eligible

vertical interest in the Company’s unconsolidated ~~VIE,~~VIEs: HAWT

~~2021-INV1.~~

2021-INV1, HAWT 2021-INV2, and HAWT 2021-INV3. The beneficial interests retained ~~consisted~~consist of an interest in each class of securities issued by the Trust. Because of the nature of the valuation inputs and due to the lack of observable market prices or data the Company classifies retained bonds as Level 3 assets within the GAAP hierarchy. Quarterly, management obtains ~~third-party~~third party valuations to assess the reasonableness of the fair value calculations provided by the internal valuation model. The following table presents the weighted average significant unobservable assumptions used in the fair value measurement of retained bonds for the period indicated:


	June 30, 2022						December 31, 2021
Unobservable Assumptions	Range			Weighted Average			Range			Weighted Average
Weighted average remaining life (in years)		2.5 - 24.5			5.0			2.6 - 25.0			5.1
Discount rate		-10.0% - 11.7	%		5.7	%		1.9% - 8.2	%		2.7	%

Warrants

The Company has determined that the FoA warrants ~~acquired with the Business Combination~~ are subject to treatment as a liability. The warrants issued are exercisable for shares of Class A Common Stock of FoA at ~~the share~~an exercise price ~~on the date~~ of ~~exercise.~~$11.50 per share. The warrants are publicly traded and are valued based on the closing market price of the applicable date of the Condensed Consolidated Statements of Financial Condition. Accordingly, the warrants are classified as Level 1 financial instruments.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

Fair Value of Assets and Liabilities

The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis (in thousands):

June 30, 2021


Successor


Total Fair
Value

Level 1

Level 2

Level 3

Assets

Reverse mortgage loans held for investment, subject to HMBS related obligations

$
10,316,027

$
—


$
—


$
10,316,027

Mortgage loans held for investment, subject to nonrecourse debt:

Reverse mortgage loans


5,189,679


—



—



5,189,679

Fix & flip mortgage loans


234,942


—



—



234,942

Mortgage loans held for investment:

Reverse mortgage loans


1,020,143


—



—



1,020,143

Fix & flip mortgage loans


44,578


—



—



44,578

Agricultural loans


160,369


—



—



160,369

Mortgage loans held for sale:

Residential mortgage loans


1,908,107


—



1,896,654


11,453

SRL


96,569


—



—



96,569

Portfolio


52,866


—



—



52,866

Mortgage servicing rights


290,938


—



—



290,938

Investments


6,000


—



—



6,000

Derivative assets:

Forward commitments, TBAs, and Treasury Futures


1,187


32


319


836

IRLCs


34,647


—



—



34,647

Forward MBS


996


—



996


—

Interest rate swap futures


24,981


24,981


—



—

Other assets:

Retained bonds


15,671


—



—



15,671









Total assets

$
19,397,700

$
25,013

$
1,897,969

$
17,474,718









Liabilities

HMBS related obligation

$
10,168,224

$
—


$
—


$
10,168,224

Nonrecourse debt:

Nonrecourse debt in VIE trusts


5,360,603


—



—



5,360,603

Nonrecourse MSR financing liability


65,129


—



—



65,129

Deferred purchase price liabilities:

Deferred purchase price liabilities


11,663


—



—



11,663

TRA obligation


32,810


—



—



32,810

Derivative liabilities:

Forward MBS


4,364


—



4,364


—

Forward commitments, TBAs, and Treasury Futures


1,176


31


34


1,111

Interest rate swap futures


13,789


13,789


—



—

Warrants


19,261


19,261


—



—









Total liabilities

$
15,677,019

$
33,081

$
4,398

$
15,639,540


	June 30, 2022
	Total Fair Value		Level 1		Level 2		Level 3
Assets
Loans held for investment, subject to HMBS related obligations	$	10,882,441	$	—	$	—	$	10,882,441
Loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans		6,149,706		—		—		6,149,706
Fix & flip mortgage loans		451,056		—		—		451,056
Loans held for investment:
Reverse mortgage loans		949,551		—		—		949,551
Fix & flip mortgage loans		77,544		—		—		77,544
Agricultural loans		31,315		—		—		31,315
Loans held for sale:
Residential mortgage loans		996,345		—		959,472		36,873
SRL		195,615		—		—		195,615
Portfolio		37,634		—		—		37,634
MSRs		359,006		—		—		359,006
Derivative assets:
IRLCs and LPCs		14,126		—		129		13,997
Forward MBS and TBAs		4,258		—		4,258		—
Interest rate swaps and futures contracts		36,802		36,802		—		—
Other assets:
Investments		1,000		—		—		1,000
Retained bonds		46,593		—		—		46,593

Total assets	$	20,232,992	$	36,802	$	963,859	$	19,232,331

Liabilities
HMBS related obligations	$	10,745,879	$	—	$	—	$	10,745,879
Nonrecourse debt:
Nonrecourse debt in consolidated VIE trusts		6,447,238		—		—		6,447,238
Nonrecourse commercial loan financing liability		162,464		—		—		162,464
Nonrecourse MSR financing liability		142,382		—		—		142,382
Deferred purchase price liabilities:
Deferred purchase price liabilities		4,852		—		—		4,852
TRA obligation		13,925		—		—		13,925
Derivative liabilities:
Forward MBS and TBAs		7,530		—		7,530		—
Interest rate swaps and futures contracts		2,183		2,183		—		—
Warrant liability		2,301		2,301		—		—

Total liabilities	$	17,528,754	$	4,484	$	7,530	$	17,516,740

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

December 31, 2020


Predecessor


Total Fair
Value

Level 1

Level 2

Level 3

Assets

Reverse mortgage loans held for investment, subject to HMBS related obligations
   $ 9,929,163    $ —      $ —      $ 9,929,163
Mortgage loans held for investment, subject to nonrecourse debt:

Reverse mortgage loans
   5,057,624    —      —      5,057,624
Fix & flip mortgage loans
   338,543    —      —      338,543
Mortgage loans held for investment:

Reverse mortgage loans
   661,790    —      —      661,790
Agricultural loans
   69,031    —      —      69,031
Mortgage loans held for sale:

Residential mortgage loans
   2,080,585    —      2,069,957    10,628
SRL
   60,467    —      —      60,467
Portfolio
   38,850    —      —      38,850
Fix & flip mortgage loans
   42,909    —      —      42,909
Mortgage servicing rights
   180,684    —      —      180,684
Investments
   18,934    —      —      18,934
Derivative assets:

Forward commitments and TBAs
   1,806    —      722    1,084
IRLCs
   87,576    —      —      87,576
Interest rate swaps and interest rate swap futures
   2,683    186    2,497    —








Total assets
   $ 18,570,645    $ 186    $ 2,073,176    $ 16,497,283








Liabilities

HMBS related obligation
   $ 9,788,668    $ —      $ —      $ 9,788,668
Nonrecourse debt:

Nonrecourse debt in VIE trusts
   5,257,754    —      —      5,257,754
Nonrecourse MSR financing liability
   14,088    —      —      14,088
Deferred purchase price liabilities
   3,842    —      —      3,842
Derivative liabilities:

Forward MBS
   18,634    —      18,634    —
Forward commitments and TBAs
   1,332    —      248    1,084
Interest rate swaps and interest rate swap futures
   755    186    569    —








Total liabilities
   $ 15,085,073    $ 186    $ 19,451    $ 15,065,436


	December 31, 2021
	Total Fair Value		Level 1		Level 2		Level 3
Assets
Loans held for investment, subject to HMBS related obligations	$	10,556,054	$	—	$	—	$	10,556,054
Loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans		5,823,301		—		—		5,823,301
Fix & flip mortgage loans		394,893		—		—		394,893
Loans held for investment:
Reverse mortgage loans		940,604		—		—		940,604
Fix & flip mortgage loans		62,933		—		—		62,933
Agricultural loans		27,791		—		—		27,791
Loans held for sale:
Residential mortgage loans		1,902,952		—		1,885,627		17,325
SRL		98,852		—		—		98,852
Portfolio		50,574		—		—		50,574
MSRs		427,942		—		—		427,942
Derivative assets:
IRLCs and LPCs		24,786		—		1,564		23,222
Forward MBS and TBAs		1,250		—		1,250		—
Interest rate swaps and futures contracts		22,834		22,834		—		—
Other assets:
Investments		6,000		—		—		6,000
Retained bonds		55,614		—		—		55,614

Total assets	$	20,396,380	$	22,834	$	1,888,441	$	18,485,105

Liabilities
HMBS related obligations	$	10,422,358	$	—	$	—	$	10,422,358
Nonrecourse debt:
Nonrecourse debt in consolidated VIE trusts		5,857,069		—		—		5,857,069
Nonrecourse commercial loan financing liability		111,738		—		—		111,738
Nonrecourse MSR financing liability		142,435		—		—		142,435
Deferred purchase price liabilities:
Deferred purchase price liabilities		12,852		—		—		12,852
TRA obligation		29,380		—		—		29,380
Derivative liabilities:
Forward MBS and TBAs		1,685		—		1,685		—
Interest rate swaps and futures contracts		24,993		24,993		—		—
Warrant liability		5,497		5,497		—		—

Total liabilities	$	16,608,007	$	30,490	$	1,685	$	16,575,832

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

Assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3, in thousands):

Successor


Assets

June 30, 2021

Mortgage
loans held for
investment

Mortgage
loans held for
investment,
subject to
nonrecourse
debt

Mortgage
loans held
for sale

Derivative
assets

Mortgage
servicing
rights

Retained
Bonds

Investments

Beginning balance, April 1, 2021

$
11,171,736

$
5,291,444

$
135,681

$
38,574

$
267,364

$
—

$
9,470

Total gain or losses included in earnings


153,690

80,408

1,816

(3,066
)

(26,536
)

666

(3,470
)
Purchases, settlements and transfers:

Purchases and additions, net


1,428,976

22,041

256,438

—

50,110

15,078

—

Sales and settlements


(615,958
)

(522,141
)

(275,956
)

(25
)

—

(73
)

—

Transfers in/(out) between categories


(597,327
)

552,869

42,909

—

—

—

—



Ending balance, June 30, 2021

$
11,541,117

$
5,424,621

$
160,888

$
35,483

$
290,938

$
15,671

$
6,000


	Successor
	Assets
June 30, 2022	Loans held for investment			Loans held for investment, subject to nonrecourse debt			Loans held for sale			Derivative assets		MSRs			Retained bonds			Investments

Beginning balance, March 31 , 2022	$	11,891,142		$	6,235,990		$	229,045		$	2,736	$	426,102		$	50,875		$	6,000
Total gain or losses included in earnings		(34,147	)		(257,874	)		(4,163	)		11,261		(12,671	)		(3,020	)		(5,000	)
Purchases, settlements and transfers:
Purchases and additions, net		1,928,290			28,206			395,502			—		41,218			—			—
Sales and settlements		(671,743	)		(573,913	)		(353,460	)		—		(95,643	)		(1,262	)		—
Transfers in/(out) between categories		(1,172,691	)		1,168,353			3,198			—		—			—			—

Ending balance, June 30, 2022	$	11,940,851		$	6,600,762		$	270,122		$	13,997	$	359,006		$	46,593		$	1,000

Successor


Liabilities

June 30, 2021

HMBS related
obligations

Derivative
liabilities

Deferred
purchase
price
liabilities

Nonrecourse
debt in VIE
trusts

Nonrecourse
MSR
financing
liability

TRA
Liability

Beginning balance, April 1, 2021

$
(9,926,132
)

$
(936
)

$
(3,214
)

$
(5,205,892
)

$
(22,051
)

$
—

Total gains or losses included in earnings


(44,651
)

$
—

(1,760
)

(32,601
)

4,123

(860
)
Purchases, settlements and transfers:

Purchases and additions, net


(795,333
)

—

(7,000
)

(796,376
)

(47,201
)

(31,950
)
Settlements


597,892

(175
)

311

674,266

—

—



Ending balance, June 30, 2021

$
(10,168,224
)

$
(1,111
)

$
(11,663
)

$
(5,360,603
)

$
(65,129
)

$
(32,810
)

Predecessor


Assets

March 31, 2021

Mortgage
loans held for
investment

Mortgage
loans held for
investment,
subject to
nonrecourse
debt

Mortgage
loans held
for sale

Derivative
assets

Mortgage
servicing
rights

Investments

Beginning balance, January 1, 2021

$
10,659,984

$
5,396,167

$
152,854

$
88,660

$
180,684

$
18,934

Total gain or losses included in earnings


132,499

(37,757
)

2,764

(50,040
)

20,349

(9,464
)
Purchases, settlements and transfers:

Purchases and additions, net


1,143,109

21,064

175,551

—

74,978

—

Sales and settlements


(534,738
)

(360,128
)

(152,579
)

(46
)

(8,647
)

—

Transfers in/(out) between categories


(229,118
)

272,098

(42,909
)

—

—

—



Ending balance, March 31, 2021

$
11,171,736

$
5,291,444

$
135,681

$
38,574

$
267,364

$
9,470


	Successor
	Liabilities
June 30, 2022	HMBS related obligations			Deferred purchase price liabilities			Nonrecourse debt in consolidated VIE trusts			Nonrecourse commercial loan financing liability			Nonrecourse MSR financing liability			TRA Liability

Beginning balance, March 31 , 2022	$	(10,548,131	)	$	(7,852	)	$	(6,032,156	)	$	(127,640	)	$	(163,981	)	$	(29,380	)
Total gains or losses included in earnings		93,095			—			116,701			(66	)		(337	)		15,455
Purchases, settlements and transfers:
Purchases and additions, net		(992,053	)		—			(756,058	)		(57,157	)		(1,050	)		—
Sales and settlements		701,210			3,000			224,275			22,399			22,986			—
Transfers in/(out) between categories		—			—			—			—			—			—

Ending balance, June 30, 2022	$	(10,745,879	)	$	(4,852	)	$	(6,447,238	)	$	(162,464	)	$	(142,382	)	$	(13,925	)


	Successor
	Assets
June 30, 2022	Loans held for investment			Loans held for investment, subject to nonrecourse debt			Loans held for sale			Derivative assets			MSRs			Retained bonds			Investments

Beginning balance, December 31, 2021	$	11,587,382		$	6,218,194		$	166,750		$	23,222		$	427,942		$	55,614		$	6,000
Total gain or losses included in earnings		(70,042	)		(571,594	)		(11,203	)		(9,225	)		39,697			(6,309	)		(5,000	)
Purchases, settlements and transfers:
Purchases and additions, net		3,776,445			58,548			791,522			—			94,662			—			—
Sales and settlements		(1,284,367	)		(1,160,189	)		(683,050	)		—			(203,295	)		(2,712	)		—
Transfers in/(out) between categories		(2,068,567	)		2,055,803			6,103			—			—			—			—

Ending balance, June 30, 2022	$	11,940,851		$	6,600,762		$	270,122		$	13,997		$	359,006		$	46,593		$	1,000

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

Predecessor


Liabilities

March 31, 2021

HMBS
related
obligations

Derivative
liabilities

Deferred
purchase
price
liability

Nonrecourse
debt in VIE
trusts

Nonrecourse
MSR
financing
liability

Beginning balance, January 1, 2021

$
(9,788,668
)

$
(1,084
)

$
(3,842
)

$
(5,257,754
)

$
(14,088
)
Total gain or losses included in earnings


(41,434
)

$
—

(29
)

(30,770
)

390

Purchases, settlements and transfers:

Purchases and additions, net


(602,172
)

—

—

(575,668
)

(8,353
)
Sales and settlements


506,142

148

657

658,300



Ending balance, March 31, 2021

$
(9,926,132
)

$
(936
)

$
(3,214
)

$
(5,205,892
)

$
(22,051
)

Predecessor


Assets

December 31, 2020

Mortgage
loans held for
investment

Mortgage
loans held for
investment,
subject to
nonrecourse
debt

Mortgage
loans held
for sale

Derivative
assets

Mortgage
servicing
rights

Debt
securities

Investments

Beginning balance, January 1, 2020
   $ 10,894,577 $ 3,511,212 $ 182,973 $ 14,008    $ 2,600    $ 102,260 $ 20,508
Total gain or losses included in earnings
   627,251 304,663 (2,158 ) 74,470    4,562    2,288 (5,512 )
Purchases, settlements and transfers:

Purchases and additions, net
   3,616,667 136,838 409,467 182    173,522    24,489 3,938
Sales and settlements
   (1,536,977 ) (1,285,902 ) (605,018 ) —      —      (129,037 ) —
Transfers in/(out) between categories
   (2,941,534 ) 2,729,356 167,590 —      —      —   —






Ending balance, December 31, 2020
   $ 10,659,984 $ 5,396,167 $ 152,854 $ 88,660    $ 180,684    $ —   $ 18,934

Predecessor


Liabilities

December 31, 2020

HMBS
related
obligations

Derivative
liabilities

Deferred
purchase
price
liabilities

Nonrecourse
debt in VIE
trusts

Nonrecourse
MSR
Financing
Liability

Beginning balance, January 1, 2020
   $ (9,320,209 ) $ (68 ) $ (4,300 ) $ (3,490,196 ) $ —
Total gain or losses included in earnings
   (359,951 ) (834 ) (3,014 ) (294,802 ) 798
Purchases, settlements and transfers:

Purchases and additions, net
   (2,051,953 ) (182 ) (138 ) (3,110,368 ) (15,101 )
Sales and settlements
   1,943,445 —   3,610 1,637,612 215


Ending balance, December 31, 2020
   $ (9,788,668 ) $ (1,084 ) $ (3,842 ) $ (5,257,754 ) $ (14,088 )


	Successor
	Liabilities
June 30, 2022	HMBS related obligations			Deferred purchase price liabilities			Nonrecourse debt in consolidated VIE trusts			Nonrecourse commercial loan financing liability			Nonrecourse MSR financing liability			TRA Liability

Beginning balance, December 31, 2021	$	(10,422,358	)	$	(12,852	)	$	(5,857,069	)	$	(111,738	)	$	(142,435	)	$	(29,380	)
Total gain or losses included in earnings		178,677			—			222,041			188			(16,375	)		15,455
Purchases, settlements and transfers:
Purchases and additions, net		(1,940,735	)		—			(1,804,557	)		(117,815	)		(6,792	)		—
Sales and settlements		1,438,537			8,000			992,347			66,901			23,220			—
Transfers in/(out) between categories		—			—			—			—			—			—

Ending balance, June 30, 2022	$	(10,745,879	)	$	(4,852	)	$	(6,447,238	)	$	(162,464	)	$	(142,382	)	$	(13,925	)


	Successor
	Assets
June 30, 2021	Loans held for investment			Loans held for investment, subject to nonrecourse debt			Loans held for sale			Derivative assets			MSRs			Retained Bonds			Investments

Beginning balance, March 31, 2021	$	11,171,736		$	5,291,444		$	135,681		$	38,574		$	267,364		$	—		$	9,470
Total gain or losses included in earnings		153,690			80,408			1,816			(3,066	)		(26,536	)		666			(3,470	)
Purchases, settlements and transfers:
Purchases and additions, net		1,428,976			22,041			256,438			—			50,110			15,078			—
Sales and settlements		(615,958	)		(522,141	)		(275,956	)		(25	)		—			(73	)		—
Transfers in/(out) between categories		(597,327	)		552,869			42,909			—			—			—			—

Ending balance, June 30, 2021	$	11,541,117		$	5,424,621		$	160,888		$	35,483		$	290,938		$	15,671		$	6,000


	Successor
	Liabilities
June 30, 2021	HMBS related obligations			Derivative liabilities			Deferred purchase price liabilities			Nonrecourse debt in VIE trusts			Nonrecourse MSR financing liability			TRA Liability

Beginning balance, March 31, 2021	$	(9,926,132	)	$	(936	)	$	(3,214	)	$	(5,205,892	)	$	(22,051	)	$	—
Total gains or losses included in earnings		(44,651	)	$	—			(1,760	)		(32,601	)		4,123			(860	)
Purchases, settlements and transfers:
Purchases and additions, net		(795,333	)		—			(7,000	)		(796,376	)		(47,201	)		(31,950	)
Settlements		597,892			(175	)		311			674,266			—			—

Ending balance, June 30, 2021	$	(10,168,224	)	$	(1,111	)	$	(11,663	)	$	(5,360,603	)	$	(65,129	)	$	(32,810	)

4338

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)


	Predecessor
	Assets
March 31, 2021	Loans held for investment			Loans held for investment, subject to nonrecourse debt			Loans held for sale			Derivative assets			MSRs			Investments

Beginning balance, December 31, 2020	$	10,659,984		$	5,396,167		$	152,854		$	88,660		$	180,684		$	18,934
Total gain or losses included in earnings		132,499			(37,757	)		2,764			(50,040	)		20,349			(9,464	)
Purchases, settlements and transfers:
Purchases and additions, net		1,143,109			21,064			175,551			—			74,978			—
Sales and settlements		(534,738	)		(360,128	)		(152,579	)		(46	)		(8,647	)		—
Transfers in/(out) between categories		(229,118	)		272,098			(42,909	)		—			—			—

Ending balance, March 31, 2021	$	11,171,736		$	5,291,444		$	135,681		$	38,574		$	267,364		$	9,470


	Predecessor
	Liabilities
March 31, 2021	HMBS related obligations			Derivative liabilities			Deferred purchase price liability			Nonrecourse debt in VIE trusts			Nonrecourse MSR financing liability

Beginning balance, December 31, 2020	$	(9,788,668	)	$	(1,084	)	$	(3,842	)	$	(5,257,754	)	$	(14,088	)
Total gain or losses included in earnings		(41,434	)		—			(29	)		(30,770	)		390
Purchases, settlements and transfers:
Purchases and additions, net		(602,172	)		—			—			(575,668	)		(8,353	)
Sales and settlements		506,142			148			657			658,300

Ending balance, March 31, 2021	$	(9,926,132	)	$	(936	)	$	(3,214	)	$	(5,205,892	)	$	(22,051	)

Fair Value Option

The Company has elected to measure substantially all of its loans held for investment, loans held for sale, HMBS related obligations, and non-recourse debt at fair value under the fair value option provided for by ASC 825-10,

Financial Instruments-Overall.

The Company elected to apply the provisions of the fair value option to these assets and liabilities in order to align financial reporting presentation with the Company’s operational and risk management strategies. Presented in the tables below are the fair value and ~~unpaid principal balance (“UPB”)~~UPB, at June 30, ~~2021 (Successor)~~2022 and December 31, ~~2020 (Predecessor),~~2021, of financial assets and liabilities for which the Company has elected the fair value option (in thousands):

Successor:


June 30, 2021

Estimated
Fair Value

Unpaid Principal
Balance

Assets at fair value under the fair value option

Reverse mortgage loans held for investment, subject to HMBS related obligations

$
10,316,027

$
9,406,924

Mortgage loans held for investment, subject to nonrecourse debt:

Reverse mortgage loans


5,189,680


4,615,128

Commercial mortgage loans


234,941


229,858

Mortgage loans held for investment:

Reverse mortgage loans


1,020,143


879,794

Commercial mortgage loans


204,947


202,195

Mortgage loans held for sale:

Residential mortgage loans


1,908,107


1,858,087

Commercial mortgage loans


149,435


144,789

Liabilities at fair value under the fair value option

HMBS related obligations


10,168,224


9,406,924

Nonrecourse debt:

Nonrecourse debt in VIE trusts


5,360,603


5,276,781

Nonrecourse MSR financing liability


65,129


65,129

Predecessor:


December 31, 2020

Estimated
Fair Value

Unpaid Principal
Balance

Assets at fair value under the fair value option

Reverse mortgage loans held for investment, subject to HMBS related obligations
   $ 9,929,163    $ 9,045,104
Mortgage loans held for investment, subject to nonrecourse debt:

Reverse mortgage loans
   5,057,624    4,457,805
Commercial mortgage loans
   338,543    333,344
Mortgage loans held for investment:

Reverse mortgage loans
   661,790    589,429
Commercial mortgage loans
   69,031    69,127
Mortgage loans held for sale:

Residential mortgage loans
   2,080,585    2,000,795
Commercial mortgage loans
   142,226    140,693
Liabilities at fair value under the fair value option

HMBS related obligations
   9,788,668    9,045,104
Nonrecourse debt:

Nonrecourse debt in VIE trusts
   5,257,754    5,155,017
Nonrecourse MSR financing liability
   14,088    14,088


June 30, 2022	Estimated Fair Value		Unpaid Principal Balance
Assets at fair value under the fair value option
Loans held for investment, subject to HMBS related obligations	$	10,882,441	$	10,468,472
Loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans		6,149,706		6,053,167
Commercial mortgage loans		451,056		451,981
Loans held for investment:
Reverse mortgage loans		949,551		871,671
Commercial mortgage loans		108,859		108,322
Loans held for sale:
Residential mortgage loans		996,345		988,361
Commercial mortgage loans		233,249		239,108

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)


June 30, 2022	Estimated Fair Value		Unpaid Principal Balance
Liabilities at fair value under the fair value option
HMBS related obligations		10,745,879		10,445,730
Nonrecourse debt:
Nonrecourse debt in consolidated VIE trusts		6,447,238		6,773,313
Nonrecourse MSR financing liability		142,382		142,382
Nonrecourse commercial loan financing liability		162,464		158,659


December 31, 2021	Estimated Fair Value		Unpaid Principal Balance
Assets at fair value under the fair value option
Loans held for investment, subject to HMBS related obligations	$	10,556,054	$	9,849,835
Loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans		5,823,301		5,165,479
Commercial mortgage loans		394,893		388,788
Loans held for investment:
Reverse mortgage loans		940,604		815,426
Commercial mortgage loans		90,724		89,267
Loans held for sale:
Residential mortgage loans		1,902,952		1,859,788
Commercial mortgage loans		149,426		145,463
Liabilities at fair value under the fair value option
HMBS related obligations		10,422,358		9,849,835
Nonrecourse debt:
Nonrecourse debt in consolidated VIE trusts		5,857,069		5,709,946
Nonrecourse MSR financing liability		142,435		142,435
Nonrecourse commercial loan financing liability		111,738		107,744

Net ~~Fair Value Gains~~fair value gains on ~~Mortgage Loans~~loans and ~~Related Obligations~~related obligations

Provided in the table below is a summary of the components of net fair value gains on ~~mortgage~~ loans and related obligations (in thousands):

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Net fair value gains (losses) on mortgage loans and related obligations:

Interest income on mortgage loans

$
173,940
$ 160,568    $ 217,841    $ 401,513
Change in fair value of mortgage loans


84,983
(51,346 )    180,904    82,338
Change in fair value of mortgage backed securities


—

—      (1,470 )    817






Fair value gains on mortgage loans


258,923
109,222    397,275    484,668






Interest expense on related obligations


(113,474
)
(119,201 )    (127,488 )    (261,845 )
Change in fair value of derivatives


(46,478
)
43,972    8,567    (5,743 )
Change in fair value of related obligations


32,180
42,670    (166,051 )    (91,397 )






Fair value losses on related obligations


(127,772
)
(32,559 )    (284,972 )    (358,985 )






Net fair value gains on mortgage loans and related obligations

$
131,151
$ 76,663    $ 112,303    $ 125,683


	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 fair value gains (losses) on loans and related obligations:
Interest income on commercial and reverse loans	$	189,760		$	353,454		$	173,940	$	160,568
Change in fair value of loans		(469,818	)		(977,145	)		84,983		(51,346	)

Net fair value gains (losses) on loans		(280,058	)		(623,691	)		258,923		109,222

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)


	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
Interest expense on HMBS and nonrecourse obligations		(124,603	)		(231,246	)		(113,474	)		(119,201	)
Change in fair value of derivatives		99,928			265,507			(46,478	)		43,972
Change in fair value of related obligations		306,346			601,478			32,180			42,670

Net fair value gains (losses) on related obligations		281,671			635,739			(127,772	)		(32,559	)

Net fair value gains (losses) on loans and related obligations	$	1,613		$	12,048		$	131,151		$	76,663

As the cash flows on the underlying mortgage loans will be utilized to settle the outstanding obligations, the Company’s own credit risk would not impact the fair value on the outstanding HMBS liabilities and nonrecourse debt.

Fair Value of Other Financial Instruments

As of June 30, ~~2021 (Successor)~~2022 and December 31, ~~2020 (Predecessor),~~2021, all financial instruments were either recorded at fair value or the carrying value approximated fair value. For financial instruments that were not recorded at fair value, such as cash and cash equivalents including restricted cash, servicer advances, and other financing lines of credit, the carrying value approximates fair value due to the short-term nature of such instruments. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 3 inputs, with the exception of cash and cash equivalents including restricted cash, which are Level 1 inputs.

5.	Reverse Mortgage Portfolio Composition

45The table below summarizes the composition and the remaining UPB (in thousands) of the reverse mortgage loan portfolio serviced by the Company:


	June 30, 2022		December 31, 2021
Reverse mortgage loans:
Reverse mortgage loans held for investment, subject to HMBS related obligations	$	10,468,472	$	9,849,835

Reverse mortgage loans held for investment:
Non-agency reverse mortgages		534,866		432,144
Loans not securitized (1)		230,346		266,723
Unpoolable loans (2)		97,939		104,551
Unpoolable tails		8,520		12,008

Total reverse mortgage loans held for investment		871,671		815,426

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements


	June 30, 2022		December 31, 2021
Reverse mortgage loans held for investment, subject to nonrecourse debt:
Performing HECM buyouts		291,633		289,089
Nonperforming HECM buyouts		603,189		590,729
Non-agency reverse mortgages		5,158,345		4,285,661

Total reverse mortgage loans held for investment, subject to nonrecourse debt		6,053,167		5,165,479

Total owned reverse mortgage portfolio		17,393,310		15,830,740
Loans reclassified as government guaranteed receivable		63,402		48,625
Loans serviced for others		13,569		17,840

Total serviced reverse mortgage loan portfolio	$	17,470,281	$	15,897,205

6.	~~Reverse Mortgages Portfolio Composition~~

~~The table below summarizes the Company’s serviced reverse mortgage portfolio composition and the remaining UPBs of the reverse mortgage loan portfolio (in thousands):~~

June 30, 2021

December 31, 2020


Successor

Predecessor

Reverse mortgage loans:

Reverse mortgage loans held for investment, subject to HMBS related obligations

$
9,406,924
   $ 9,045,104

Reverse mortgage loans held for investment:

Non-agency
reverse mortgages


536,739
   215,688
Loans not securitized
(1)


254,004
   168,292
Unpoolable loans
(2)


80,487
   197,395
Unpoolable tails


8,564
   8,054




Total reverse mortgage loans held for investment


879,794
   589,429

Reverse mortgage loans held for investment, subject to nonrecourse debt:

Performing HECM buyouts


276,177
   141,691
Nonperforming HECM buyouts


634,342
   538,768
Non-agency
reverse mortgages


3,704,609
   3,777,346




Total reverse mortgage loans held for investment, subject to nonrecourse debt


4,615,128
   4,457,805




Total owned reverse mortgage portfolio


14,901,846
   14,092,338
Loans reclassified as government guaranteed receivable


49,813
   49,255
Loans serviced for others


18,099
   123,324




Total serviced reverse mortgage loan portfolio

$
14,969,758
   $ 14,264,917

(1)	Loans not securitized represent primarily newly originated ~~loans.~~loans .

(2)	Unpoolable loans represent primarily loans that have reached 98% of their ~~MCA.~~MCA .

The table below summarizes the ~~owned~~ reverse mortgage portfolio owned by the Company by product type (in thousands):

June 30, 2021

December 31, 2020


Successor

Predecessor

Fixed rate loans

$
5,181,814
   $ 5,010,659
Adjustable rate loans


9,720,032
   9,081,679




Total owned reverse mortgage portfolio

$
14,901,846
   $ 14,092,338


	June 30, 2022		December 31, 2021
Fixed rate loans	$	5,891,343	$	5,384,865
Adjustable rate loans		11,501,967		10,445,875

Total owned reverse mortgage portfolio	$	17,393,310	$	15,830,740

~~Table~~As of ~~Contents~~

~~Finance~~June 30, 2022 and December 31, 2021, there were $546.9 million and $599.1 million, respectively, of ~~America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited~~foreclosure proceedings in process, which are included in loans held for investment, at fair value, on the Condensed Consolidated Statements of Financial ~~Statements~~

Condition.

7.6.	~~Reverse Mortgage~~ Loans Held for Investment, Subject to HMBS Related Obligations, at Fair Value

~~Reverse mortgage loans~~

Loans held for investment, subject to HMBS related obligations, at fair value, consisted of the following for the dates indicated (in thousands):

June 30, 2021

December 31, 2020


Successor

Predecessor

Reverse mortgage loans held for investment, subject to HMBS related obligations—UPB

$
9,406,924
   $ 9,045,104
Fair value adjustments


909,103
   884,059




Total reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value

$
10,316,027
   $ 9,929,163


	June 30, 2022		December 31, 2021
Loans held for investment, subject to HMBS related obligations—UPB	$	10,468,472	$	9,849,835
Fair value adjustments		413,969		706,219

Total loans held for investment, subject to HMBS related obligations, at fair value	$	10,882,441	$	10,556,054

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~Mortgage~~

Loans Held for Investment, Subject to Nonrecourse Debt, at Fair Value

~~Mortgage loans~~

Loans held for investment, subject to nonrecourse debt, at fair value, consisted of the following for the dates indicated (in thousands):

June 30, 2021

December 31, 2020


Successor

Predecessor

Mortgage loans held for investment, subject to nonrecourse debt—UPB:

Reverse mortgage loans

$
4,615,128
   $ 4,457,805
Commercial mortgage loans


229,858
   333,344
Fair value adjustments


579,635
   605,018




Total mortgage loans held for investment, subject to nonrecourse debt, at fair value

$
5,424,621
   $ 5,396,167


	June 30, 2022		December 31, 2021
Loans held for investment, subject to nonrecourse debt—UPB:
Reverse mortgage loans	$	6,053,167	$	5,165,479
Commercial mortgage loans		451,981		388,788
Fair value adjustments		95,614		663,927

Total loans held for investment, subject to nonrecourse debt, at fair value	$	6,600,762	$	6,218,194

The table below shows the total amount of ~~mortgage~~ loans held for investment, subject to nonrecourse debt, that were greater than 90 days past due and on

non-accrual

status (in thousands):


	June 30, 2021			December 31, 2020
	Successor			Predecessor			June 30, 2022			December 31, 2021
Loans 90 days or more past due and on non-accrual status
Mortgage loans held for investment:
Fair value:
Commercial mortgage loans	$	33,764		$	32,377		$	17,998		$	26,081

Total fair value		33,764			32,377			17,998			26,081

Aggregate UPB:
Commercial mortgage loans	$	34,159			33,888			18,442			26,472

Total aggregate UPB		34,159			33,888			18,442			26,472

Difference	$	(395	)	$	(1,511	)	$	(444	)	$	(391	)

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Mortgage~~

Loans Held for Investment, at Fair Value

~~Mortgage loans~~Loans held for investment, at fair value, consisted of the following for the dates indicated (in ~~thousands)~~

thousands


	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
	Successor		Predecessor
Mortgage loans held for investment—UPB:
Loans held for investment—UPB:
Reverse mortgage loans	$	879,794	$	589,429	$	871,671	$	815,426
Commercial mortgage loans		202,195		69,127		108,322		89,267
Fair value adjustments		143,101		72,265		78,417		126,635

Total mortgage loans held for investment, at fair value	$	1,225,090	$	730,821
Total loans held for investment, at fair value					$	1,058,410	$	1,031,328

As of June 30, 2022 and December 31, 2021, there were $2.5 million and $2.3 million, respectively, of commercial loans that were greater than 90 days past due.

As of June 30, 2022 and December 31, 2021, there were $857.8 million and $810.6 million, respectively, in loans held for investment, at fair value, pledged as collateral for financing lines of credit.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~10.~~

~~Mortgage~~

Loans Held for Sale, at Fair Value

~~Mortgage loans~~

Loans held for sale, at fair value, consisted of the following for the dates indicated (in thousands):

June 30, 2021

December 31, 2020


Successor

Predecessor

Mortgage loans held for sale—UPB:

Residential mortgage loans

$
1,858,087
   $ 2,000,795
Commercial mortgage loans


144,789
   140,693
Fair value adjustments


54,666
   81,323




Total mortgage loans held for sale, at fair value

$
2,057,542
   $ 2,222,811


	June 30, 2022		December 31, 2021
Loans held for sale—UPB:
Residential mortgage and home improvement loans	$	988,361	$	1,859,788
Commercial mortgage loans		239,108		145,463
Fair value adjustments		2,125		47,127

Total loans held for sale, at fair value	$	1,229,594	$	2,052,378

The table below shows the total amount of ~~mortgage~~ loans held for sale that were greater than 90 days past due and on

non-accrual

status (in thousands):


	June 30, 2021			December 31, 2020
	Successor			Predecessor			June 30, 2022			December 31, 2021
Loans 90 days or more past due and on non-accrual status
Mortgage loans held for sale:
Fair value:
Residential mortgage loans	$	11,453		$	10,628
Residential mortgage and home improvement loans							$	3,386		$	3,195
Commercial mortgage loans		3,203			5,051			1,365			3,163

Total fair value		14,656			15,679			4,751			6,358

Aggregate UPB:
Residential mortgage loans		12,594			13,236			3,771			3,753
Commercial mortgage loans		3,360			5,317			1,361			3,323

Total aggregate UPB		15,954			18,553			5,132			7,076

Difference	$	(1,298	)	$	(2,874	)	$	(381	)	$	(718	)

The Company originates or purchases and sells ~~mortgage~~ loans in the secondary mortgage market without recourse for credit losses. However, the Company at times maintains continuing involvement with the loans in the form of servicing arrangements and the liability under representations and warranties it makes to purchasers and insurers of the loans.

48The table below shows a reconciliation of the changes in loans held for sale for the respective periods presented below (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
Beginning balance	$	1,709,357		$	2,052,378		$	2,140,361		$	2,222,811
Originations/purchases/repurchases		4,598,116			10,087,003			7,109,958			8,569,575
Proceeds from sales		(5,139,542	)		(11,012,321	)		(7,405,296	)		(8,878,131	)
Loans acquired through business combinations		—			—			—			35,226
Net transfers from loans held for investment		(2,905	)		—			17,494			—
Gain on loans held for sale, net		67,482			112,354			194,228			188,564
Net fair value gain (loss) on loans held for sale		(2,914	)		(9,820	)		797			2,316

Ending balance	$	1,229,594		$	1,229,594		$	2,057,542		$	2,140,361

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes cash flows between the Company and transferees as a result of the sale of mortgage loans in transactions where the Company maintains continuing involvement with the mortgage loans (in thousands):

As of June 30, 2022 and December 31, 2021, there were $1.1

billion

and $2.0

billion

, respectively, in loans held for sale, at fair value pledged as collateral for financing lines of credit.

April 1, 2021
to
June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Cash flows:

Sales proceeds

$
5,181,557
   $ 6,387,933    $ 2,631,554    $ 2,868,960
Fair value of retained beneficial interest
(1)


49,308
   66,400    43,500    44,855
Gross servicing fees received


14,278
   13,877    1,544    1,824
Repurchases


(6,818
)
   (4,144 )    (3,380 )    (8,547 )
Gain


197,129
   284,948    282,424    291,671

~~(1)~~

~~Fair value of retained beneficial interest includes retained servicing rights and other beneficial interests retained as of the statement of financial condition date.~~

~~11.~~10.

Mortgage Servicing Rights, at Fair Value

The servicing portfolio associated with capitalized servicing rights consists of the following (in thousands):

June 30, 2021

December 31, 2020


Successor

Predecessor

Fannie Mae/Freddie Mac

$
29,705,985
   $ 20,501,504
Ginnie Mae


553,800
   1,727,831
Private investors


332,402
   40,027




Total UPB

$
30,592,187
   $ 22,269,362




Weighted average interest rate


3.0
%
   3.1 %


	June 30, 2022			December 31, 2021
Fannie Mae/Freddie Mac	$	27,446,915		$	37,079,995
Ginnie Mae		995,944			1,109,962
Private investors		1,051,790			1,109,459

Total UPB	$	29,494,649		$	39,299,416

Weighted average interest rate		3.32	%		3.03	%

The activity in the loan servicing portfolio associated with capitalized servicing rights consisted of the following (in thousands):

April 1, 2021
to
June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Beginning UPB

$
26,675,358
   $ 22,269,362    $ 402,852    $ 288,057
Originated MSR


5,139,859
   6,312,227    6,849,850    6,986,237
Purchased MSR


5,537
   866,806    —      —
Payoffs, sales and curtailments


(1,228,567
)
   (2,773,037 )    (40,859 )    (62,451 )








Ending UPB

$
30,592,187
   $ 26,675,358    $ 7,211,843    $ 7,211,843


	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
Beginning UPB	$	34,058,558		$	39,299,416		$	26,675,358		$	22,269,362
Originated MSRs		3,375,623			7,632,904			5,139,859			6,312,227
Purchased MSRs		—			—			5,537			866,806
Sold MSRs		(7,123,286	)		(15,492,020	)		—			(1,090,267	)
Portfolio runoff		(524,107	)		(1,329,775	)		(987,056	)		(1,488,977	)
Other		(292,139	)		(615,876	)		(241,511	)		(193,793	)

Ending UPB	$	29,494,649		$	29,494,649		$	30,592,187		$	26,675,358

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

The activity in the ~~mortgage servicing rights~~MSRs asset consisted of the following (in thousands):

April 1, 2021
to
June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Beginning balance

$
267,364
   $ 180,684    3,119    $ 2,600
Originations


50,049
   65,964    43,561    44,855
Purchases


61
   9,014    —      —
Sales


—

   (8,647 )    —      —
Changes in fair value due to:

Changes in market inputs or assumptions used in valuation model


(16,051
)
   35,109    (2,749 )    (3,424 )
Changes in fair value due to portfolio runoff and other


(10,485
)
   (14,760 )    (1,247 )    (1,347 )








Ending balance

$
290,938
   $ 267,364    $ 42,684    $ 42,684


	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
Beginning balance	$	426,102		$	427,942		$	267,364		$	180,684
Originations		41,218			94,662			50,049			65,964
Purchases		—			—			61			9,014
Sales		(95,643	)		(203,295	)		—			(8,647	)
Changes in fair value due to:
Changes in market inputs or assumptions used in valuation model		(2,570	)		61,320			(16,051	)		35,109
Changes in fair value due to portfolio runoff and other		(10,101	)		(21,623	)		(10,485	)		(14,760	)

Ending balance	$	359,006		$	359,006		$	290,938		$	267,364

The value of MSRs is driven by the net cash flows associated with servicing activities. The cash flows include contractually specified servicing fees, late fees, and other ancillary servicing revenue. The fees were $13.1 million, $27.4 million, and $13.7 million for the Successor ~~period from April 1, 2021~~three months ended June 30, 2022, six months

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

ended June 30, 2022, and three months ended June 30, 2021, respectively; and

$13.0

million for the Predecessor ~~period of January 1, 2021 to~~three months ended March 31, 2021. ~~Fees for the Predecessor were $1.7 million and $1.8 million for the three months ended and six months ended June 30, 2020, respectively.~~ These fees and ~~changes~~chan

ges in fair value of the MSRs are recorded within fee income on the Condensed Consolidated Statements of ~~Operations.~~Operations (Unaudited). As of June 30, 2022 and

December 31

, 2

021, there were

$143.4 million and $142.4

million, respectively, in MSRs, at fair value, pledged as collateral for nonrecourse debt.

The following table provides a summary of the loan servicing portfolio delinquencies as a percentage of the total number of loans and the total ~~unpaid balance~~UPB of the portfolio:

June 30, 2021

December 31, 2020


Successor

Predecessor


Number of
Loans

Unpaid
Balance

Number of
Loans

Unpaid
Balance

Portfolio delinquency

30 days


0.4
%

0.4
%
   0.5 % 0.5 %
60 days


0.0
%

0.0
%
   0.1 % 0.1 %
90 or more days


0.1
%

0.1
%
   0.2 % 0.1 %




Total


0.5
%

0.5
%
   0.8 % 0.7 %




Foreclosure/real estate owned


0.0
%

0.0
%
   0.0 % 0.0 %


	June 30, 2022						December 31, 2021
	Number of Loans			Unpaid Balance			Number of Loans			Unpaid Balance
Portfolio delinquency
30 days		0.5	%		0.5	%		0.4	%		0.3	%
60 days		0.1	%		0.1	%		0.1	%		0.0	%
90 or more days		0.3	%		0.3	%		0.1	%		0.1	%

Total		0.9	%		0.9	%		0.6	%		0.4	%

Foreclosure/real estate owned		0.0	%		0.0	%		0.0	%		0.0	%

~~12.~~11.

Derivative and Risk Management Activities

The Company’s principal market exposure is to interest rate risk, specifically long-term U.S. Treasury and mortgage interest rates, due to their impact on mortgage-related assets and commitments. The Company is also subject to changes in short-term interest rates, such as LIBOR, due to their impact on certain variable rate asset-backed debt such as warehouse lines of credit. Various financial instruments are used to manage and reduce this risk, including forward delivery commitments on ~~mortgage-backed securities~~MBS or whole loans and interest rate swaps.

The Company did not have any derivative instruments designated as hedging instruments or subject to master netting and collateral agreements as of June 30, ~~2021 (Successor)~~2022 and December 31, ~~2020 (Predecessor), for~~2021.

The following tables summarize the ~~Successor period from April 1, 2021 to June 30, 2021~~fair value and ~~the Predecessor period from January 1, 2021 to March 31, 2021. The Company also had no~~notional amount of derivative instruments ~~designated as hedging instruments or subject to master netting and collateral agreements for the Predecessor period for the three months ended and six months ended June 30, 2020.~~(in thousands):


	June 30, 2022
	Derivative assets				Derivative liabilities
	Fair value		Notional amount		Fair value		Notional amount
IRLCs and LPCs	$	14,126	$	1,315,810	$	—	$	—
Forward MBS and TBAs		4,258		696,000		7,530		694,500
Interest rate swaps and futures contracts		36,802		1,369,300		2,183		504,300

Total fair value and notional amount	$	55,186	$	3,381,110	$	9,713	$	1,198,800

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)


	December 31, 2021
	Derivative assets				Derivative liabilities
	Fair value		Notional amount		Fair value		Notional amount
IRLCs and LPCs	$	24,786	$	2,095,238	$	—	$	—
Forward MBS and TBAs		1,250		948,000		1,685		1,515,000
Interest rate swaps and futures contracts		22,834		11,977,300		24,993		12,193,100

Total fair value and notional amount	$	48,870	$	15,020,538	$	26,678	$	13,708,100

The ~~following tables summarize~~follow table details the ~~amounts recorded in~~gains/(losses) on derivative ~~assets and payables and other liabilities, related to derivative liabilities, in the Consolidated Statements of Financial Condition for the periods indicated~~instruments (in thousands):

June 30, 2021


Successor


Derivative assets

Derivative liabilities


Fair
value

Notional
amount

Unrealized
gains
(losses)

Fair
value

Notional
amount

Unrealized
gains
(losses)

Interest rate lock commitments

$
34,647

$
2,539,030

$
(52,929
)

$
—


$
—


$
—

Forward commitments, TBAs securities, and treasury futures


1,187


895,807


(619
)

1,176


954,493


156

Interest rate swaps and futures contracts


24,981


4,616,698


22,298

13,789


1,082,600


(13,034
)
Forward MBS


996


802,500


996

4,364


1,988,500


14,271











Net fair value of derivative financial instruments

$
61,811

$
8,854,035

$
(30,254
)

$
19,329

$
4,025,593

$
1,393


	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
Derivative activity	Successor								Predecessor
IRLCs and LPCs	$	10,017	$	(10,660	)	$	(3,536	)	$	(49,557	)
Forward MBS and TBAs		94,350		210,967			(40,289	)		113,331
Interest rate swaps and futures contracts		67,814		239,543			(37,383	)		43,935

December 31, 2020


Predecessor


Derivative assets

Derivative liabilities


Fair
value

Notional
amount

Unrealized
gains
(losses)

Fair
value

Notional
amount

Unrealized
gains
(losses)

Interest rate lock commitments
   $ 87,576    $ 2,897,479    $ 73,568 $ ��      $ 13,822    $ 68
Forward commitments, TBAs securities, and treasury futures
   1,806    399,612    968 1,332    389,422    (1,248 )
Interest rate swaps and futures contracts
   2,683    1,386,400    2,324 755    744,500    (617 )
Forward MBS
   —      —      (348 ) 18,635    3,187,000    (16,587 )










Net fair value of derivative financial instruments
   $ 92,065    $ 4,683,491    $ 76,512 $ 20,722    $ 4,334,744    $ (18,384 )

The Company is exposed to risk in the event of

~~non-performance~~

nonperformance by counterparties in their derivative contracts. In general, the Company manages such risk by evaluating the financial position and creditworthiness of counterparties, monitoring the amount of exposure and/or dispersing the risk among multiple counterparties. While the Company does not presently have master netting arrangements with its derivative counterparties, it does either maintain or deposit cash as margin collateral with its ~~clearing broker~~counterparties to the extent the relative value of its derivatives are above or below their initial strike price. The Company ~~pledged deposits~~held collateral from its counterparties of ~~$4.1 million and $12.0~~$67.1 million as of June 30, ~~2021 (Successor)~~2022 and had provided collateral to its counterparties of $23.2 million as of December 31, ~~2020 (Predecessor), respectively. Total margin~~2021. Margin collateral is included in other assets, net, when in a receivable position or in payables and other liabilities when in a payable position in the Company’s Condensed Consolidated Statements of Financial

Condition.

~~13.~~12.

~~Goodwill~~HMBS Related Obligations, at Fair Value

~~Goodwill~~HMBS related obligations, at fair value, consisted of the following (in thousands):

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

For the Successor period, the goodwill beginning balance was established as a result of the Business Combination and changes during the period are attributable to additional acquisitions. Refer to Note 4—Acquisitions for additional details regarding these acquisitions. The Company did 0t identify any impairment for the Successor period from April 1, 2021 to June 30, 2021, the Predecessor period of January 1, 2021 to March 31, 2021 nor the Predecessor periods for the three months ended and six months ended June 30, 2020. Goodwill is reviewed for impairment utilizing a qualitative assessment or a quantitative goodwill impairment test and determined that it was more likely than not that no impairment of goodwill existed as of the evaluation date.

~~The amount of goodwill allocated to each reporting unit consisted of the following (in thousands):~~

June 30, 2021

December 31, 2020


Successor

Predecessor

Reporting units:

Mortgage Originations

$
711,306
   $ 44,429
Reverse Originations


404,441
   —
Commercial Originations


75,350
   43,113
Lender Services


100,128
   25,247
Portfolio Management


7,099
   8,444




Total goodwill

$
1,298,324
   $ 121,233

~~14.~~

~~Intangible Assets, Net~~

~~Intangible assets, net, consisted of the following (in thousands):~~

June 30, 2021

Amortization
Period
(Years)

Cost

Accumulated
Amortization

Net

Successor:

Non-amortizing
Intangibles

Trade name


N/A


$
178,000

$
—


$
178,000







Total
non-amortizing
intangibles

$
178,000

$
—


$
178,000







Amortizing Intangibles

Broker/customer relationships


8 - 15


$
530,900

$
(13,237
)

$
517,663

Trade names


10



8,800


(220
)


8,580







Total amortizing intangibles

$
539,700

$
(13,457
)

$
526,243







Total intangibles

$
717,700

$
(13,457
)

$
704,243

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

December 31, 2020

Amortization
Period
(Years)

Cost

Accumulated
Amortization

Net

Predecessor:

Non-amortizing
Intangibles

Domain name
   N/A    $ 5,422    $ —      $ 5,422






Total
non-amortizing
intangibles
      $ 5,422    $ —      $ 5,422






Amortizing Intangibles

Customer list
   5 - 12    $ 12,754    $ (5,100 )    $ 7,654
Broker relationships
   10    7,627    (5,429 )    2,198
Trade names
   5 - 20    2,495    (1,487 )    1,008
Technology assets
   5    805    (156 )    649






Total amortizing intangibles
      $ 23,681    $ (12,172 )    $ 11,509






Total intangibles
      $ 29,103    $ (12,172 )    $ 16,931

Amortization expense was $13.5 million for the Successor period from April 1, 2021 to June 30, 2021 and $0.6 million for the Predecessor period from January 1, 2021 to March 31, 2021. Amortization expense for the Predecessor was $0.6 million and $1.3 million for the three months ended and six months ended June 30, 2020, respectively.

~~The estimated amortization expense for each of the five succeeding fiscal years and thereafter as of June 30, 2021 (Successor) is as follows (in thousands):~~

Year Ending December 31,

Amount

2021
   $ 26,914
2022
   53,828
2023
   53,828
2024
   53,828
2025
   53,828
Thereafter
   284,017


Total future amortization expense
   $ 526,243

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~15.~~

~~Other Assets, Net~~

~~Other assets, net, consisted of the following (in thousands):~~

June 30, 2021

December 31, 2020


Successor

Predecessor

Right-of-use
assets

$
62,835
   $ 46,609
Government guaranteed receivables


48,087
   46,481
Receivables, net of allowance of $1,452 and $788, respectively


48,666
   67,011
Loan subject to repurchase from GNMA


30,027
   42,148
Prepaid expenses


26,070
   17,536
Retained bonds


15,671
   —
Investments, at fair value


6,554
   18,934
Servicer advances, net of allowance of $2,002 and $1,661, respectively


6,318
   5,795
Deposits


2,438
   14,188
Receivable from clearing organization


2,041
   2,043
Other


51,546
   39,887




Total other assets, net

$
300,253
   $ 300,632

As of June 30, 2021 (Successor) and December 31, 2020 (Predecessor), there were $368.6 million and $380.3 million, respectively, of foreclosure proceedings in process, which are included in mortgage loans held for investment, at fair value, on the Consolidated Statements of Financial Condition.

~~16.~~

~~HMBS Related Obligations, at Fair Value~~


	June 30, 2022			December 31, 2021
Ginnie Mae loan pools—UPB	$	10,445,730		$	9,849,835
Fair value adjustments		300,149			572,523

Total HMBS related obligations, at fair value	$	10,745,879		$	10,422,358

Weighted average remaining life (in years)		4.1			4.6
Weighted average interest rate		3.3	%		2.5	%

HMBS related obligations represent the issuance of pools of HMBS, which are guaranteed by GNMA, to ~~third-party~~third party security holders. The Company accounts for the transfers of these advances in the related HECM loans as secured borrowings, retaining the initial HECM loans in ~~its~~the Condensed Consolidated Statements of Financial Condition as ~~reverse mortgage~~ loans held for investment, subject to HMBS related obligations, at fair value, and recording the pooled HMBS as HMBS related ~~obligations.~~obligations, at fair value. Monthly cash flows generated from the HECM loans are used to service the outstanding HMBS.

~~HMBS related obligations, at fair value, consisted of the following (in thousands):~~

June 30, 2021

December 31, 2020


Successor

Predecessor

GNMA loan pools—UPB

$
9,406,924
   $ 9,045,104
Fair value adjustments


761,300
   743,564




Total HMBS related obligations, at fair value

$
10,168,224
   $ 9,788,668




Weighted average remaining life


4.4
   4.5
Weighted average interest rate


2.6
%
   3.0 %

~~The Company was servicing 1,765 and 1,693 GNMA loan pools at June 30, 2021 (Successor) and December 31, 2020 (Predecessor), respectively.~~

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

The Company was servicing 1,941 and 1,849 Ginnie Mae loan pools at June 30, 2022 and December 31, 2021, respectively.

~~17.~~13.

Nonrecourse Debt, at Fair Value

Nonrecourse debt, at fair value, consisted of the following (in thousands):

Issue Date

Class of Note

Final
Maturity Date

Interest Rate

Original
Issue
Amount

June 30,
2021

December 31,
2020


Successor

Predecessor

Securitization of nonperforming HECM loans:

2021 FASST HB1
   February 2021    A, M1, M2, M3, M4, M5    February 2031    0.9%—9.0%    $ 571,448
$
537,299
   $ —
2020 FASST HB2
   July 2020    A, M1, M2, M3, M4, M5    July 2030    1.71%—7.75%    594,171

446,413
   476,147
2020 FASST HB1
   February 2020    A, M1, M2, M3, M4, M5    February 2030    2.0%—6.0%    373,912

0

   298,883

Securitization of
non-agency
reverse loans:

2021 FASST JR 1
   April 2021    A1, A2    April 2026    1.5%—2.0%    562,512

512,794
   —
2019 FASST JR2
   June 2019    A, A2    June 2069    2.0%    499,000

406,709
   440,141
2018 FASST JR1
   May 2018    A    May 2068    4.3%    559,197

386,548
   428,671
2019 FASST JR3
   September 2019    A    September 2069    2.0%    450,104

359,772
   404,057
2020 FASST JR3
   August 2020    A, A2    August 2025    2.0%—3.0%    360,713

315,570
   337,099
2019 FASST JR4
   November 2019    A    November 2069    2.0%    365,685

305,097
   335,945
2019 FASST JR1
   March 2019    A    March 2069    2.0%    347,000

288,654
   309,840
2020 FASST S3
   December 2020    A1, A2    December 2025    1.5%—2.5%    313,357

288,383
   297,871
2020 FASST S2
   June 2020    A1, A2    March 2025    2.0%    320,460

286,734
   299,401
2020 FASST JR2
   May 2020    A1A, A1B, A2    May 2023    0.0%—2.0%    305,658

277,694
   291,827
2018 FASST JR2
   December 2018    A    December 2068    4.5%    280,400

229,872
   253,325
2020 FASST JR4
   October 2020    A, A2    August 2025    2.0%—3.0%    241,664

197,970
   217,385
2020 FASST S1
   March 2020    A1, A2    March 2025    2.0%—3.7%    199,000

168,761
   181,059
2020 FASST JR1
   April 2020    A, A2    April 2023    2.0%    254,805

0

   240,563


	Issue Date	Final Maturity Date	Interest Rate		Original Issue Amount		June 30, 2022			December 31, 2021
Securitization of performing / nonperforming HECM loans	July 2020 - February 2022	July 2030 - February 2032		0.88% - 9.32%	$	1,805,528	$	929,541		$	922,970
Securitization of non-agency reverse loans	May 2018 - February 2022	May 2023 - November 2069		1.25% - 4.50%		7,205,543		5,575,261			4,630,203
Securitization of Fix & Flip loans	April 2021	November 2024 - May 2025		2.10% - 5.40%	$	268,511		268,511			268,511

Total consolidated VIE nonrecourse debt UPB								6,773,313			5,821,684
Nonrecourse MSR financing liability, at fair value								142,382			142,435
Nonrecourse commercial loan financing liability (1)								158,659			107,744
Fair value adjustments								(322,270	)		39,379

Total nonrecourse debt, at fair value							$	6,752,084		$	6,111,242

(1)

Nonrecourse commercial loan financing liability is comprised of the balance of the nonrecourse debt for the applicable period associated with the CAPT securitization. As the CAPT securitization was determined to be an unconsolidated VIE and failed sale treatment, the associated nonrecourse debt is accounted for by FoA and presented separately from the other nonrecourse debts. Refer to Note 3 - Variable Interest Entities and Securitizations for additional information.

~~Table~~Future repayment of ~~Contents~~

~~Finance~~nonrecourse debt issued by securitization trusts is dependent on the receipt of ~~America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

Issue Date

Class of Note

Final
Maturity Date

Interest Rate

Original
Issue
Amount

June 30,
2021

December 31,
2020


Successor

Predecessor

Securitization of Fix & Flip loans:

2021 RTL1 ANTLR
   April 2021    A1, A2, M    November 2024 (A1); January 2025 (A2); May 2025 (M) 2.1%—5.4%    268,511

268,511
   —
2020 RTL1 ANTLR
   May 2020    A1, A2    May 2022 (A1, A2)    6.9%—8.0%    306,517

—

   140,072
2018 RTL1 ANTLR
   September 2018
A1, A2,
A-VFN,
M
   July 2022 (A1, A2); March 2023 (M)    4.3%—7.4%    210,296

—

   80,949
2019 RTL1 ANTLR
   March 2019    A1, A2, A-VFN, M    June 2022 (A1, A2); January 2023 (M)    4.5%—6.9%    217,100

—

   121,772




Total nonrecourse debt



5,276,781
   5,155,007




Nonrecourse MSR financing liability, at fair value



65,129
   14,088
Fair value adjustments



83,822
   102,747




Total nonrecourse debt, at fair value


$
5,425,732
   $ 5,271,842

~~Nonrecourse MSR Financing Liability, at Fair Value~~

~~The Company has agreements with third parties to sell beneficial interests in~~cash flows from the ~~servicing fees generated from certain~~corresponding encumbered loans receivable. As of its originated or acquired mortgage servicing rights. Under these agreements, the Company has agreed to sell to the third parties the right to receive all excess servicing and ancillary fees related to the identified MSRs in exchangeJune 30, 2022, estimated maturities for ~~an upfront payment equal to the entire purchase price of the identified mortgage servicing rights. These transactions are accounted for as financings under ASC 470~~

~~, Debt~~

~~and included in~~ nonrecourse debt, at fair value, infor the ~~Consolidated Statements of Financial Condition.~~

~~The Company elected to measure the outstanding financings related to the nonrecourse MSR financing liability, at fair value,~~next five years and thereafter are as ~~permitted under ASC 825~~

~~, Financial Instruments~~follows (in thousands):

, with all changes in fair value recorded as a charge or credit to fee income in the Consolidated Statements of Operations. The fair value on the nonrecourse MSR financing liability is based on the present value of expected future cash flows to be paid to the third parties with the discount rate approximating current market value for similar financial instruments. See Note 30—Related Party Transactions for additional information regarding the nonrecourse MSR financing liability.


Year Ending December 31,	Estimated Maturities (1)
2022	$	851,396
2023		2,925,814
2024		2,440,206
2025		714,556
Thereafter		0—

Total payments on nonrecourse debt	$	6,931,972

(1)	Nonrecourse MSR financing liability is excluded from this balance, because the timing of the payments of the nonrecourse MSR financing liability is dependent on the payments received on the underlying MSRs, and no contractual maturity date is applicable.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

~~18.~~

14.

Other Financing Lines of Credit

The following summarizes the components of other financing lines of credit ~~(dollars in~~(in thousands)

Outstanding Borrowings at


June 30,
2021

December 31,
2020

Facility

Maturity Date

Interest Rate

Collateral
Pledged

Total
Capacity
(1)

Successor


Predecessor

Mortgage Lines:



March 2022 $300M Facility
   March 2022    LIBOR + applicable margin First Lien Mortgages    $ 300,000
$
192,417
   $ 182,015
March 2022 $200M Facility
   March 2022    LIBOR + applicable margin N/A    200,000

189,464
   302,877
May 2022 $200M Facility
   May 2022    LIBOR + applicable margin First Lien Mortgages    200,000

189,050
   109,463
February 2022 $300M Facility
   February 2022    LIBOR + applicable margin First Lien Mortgages    300,000

186,754
   0
July 2021 $200M Facility
(2)
   July 2021    LIBOR + applicable margin First Lien Mortgages    200,000

167,207
   122,075
October 2021 $200M Facility
   October 2021    LIBOR + applicable margin First Lien Mortgages    200,000

166,564
   158,114
March 2022 $225M Facility
   March 2022    LIBOR + applicable margin First Lien Mortgages    225,000

163,678
   154,097
March 2022 $200M Facility
   March 2022    LIBOR + applicable margin First Lien Mortgages    200,000

155,468
   97,225
March 2026 $150M Facility - MSR
   March 2026    LIBOR + applicable margin MSRs    150,000

125,113
   0
April 2022 $250M Facility
   April 2022    LIBOR + applicable margin First Lien Mortgages    250,000

122,412
   225,837
May 2022 $350M Facility
   May 2022    LIBOR + applicable margin First Lien Mortgages    350,000

102,332
   283,821
October 2021 $250M Facility
   October 2021    LIBOR + applicable margin First Lien Mortgages    250,000

65,541
   170,174
August 2021 $200M Facility
   August 2021    LIBOR + applicable margin First Lien Mortgages    200,000

59,663
   126,047
August 2021 $300M Facility
(2)
   August 2021    LIBOR + applicable margin First Lien Mortgages    300,000

40,562
   15,719
Securities Repo Line
   N/A    LIBOR + applicable margin Mortgage
Related
Asset    13,951

13,951
   —
February 2021 $50M Facility - MSR
(3)
   February 2021    Prime +
applicable margin;
5.00% floor
MSRs    50,000

—

   50,000
June 2023 $300M Facility
   June 2023    LIBOR + applicable margin First Lien Mortgages    300,000

—

   —






Subtotal mortgage lines of credit
      $ 3,688,951
$
1,940,176
   $ 1,997,464






Reverse Lines:

October 2021 $400M Facility
   October 2021    LIBOR + applicable margin First Lien Mortgages    $ 400,000
$
257,257
   $ 84,124
April 2022 $250M Facility
   April 2022    LIBOR + applicable margin First Lien Mortgages    250,000

214,245
   173,484
$200M Repo Facility
   N/A    Bond accrual rate
+ applicable
margin Mortgage
Related
Assets    200,000

176,549
   174,578
February 2024 $90M Facility
   February 2024    LIBOR + applicable margin MSRs    90,000

89,497
   0
December 2021 $100M Facility
   December 2021    LIBOR + applicable margin First Lien Mortgages    100,000

89,226
   61,220
March 2022 $100M Facility
   March 2022    LIBOR + applicable margin First Lien Mortgages    100,000

87,936
   15,803


					Outstanding borrowings at
Maturity Date	Interest Rate	Collateral Pledged	Total Capacity (1)		June 30, 2022		December 31, 2021
Mortgage Lines:
August 2022 - June 2023	LIBOR / SOFR + applicable margin	First Lien Mortgages	$	2,875,000	$	945,532	$	1,802,348
March 2026	Ameribor + applicable margin	MSRs		150,000		120,209		138,524
August 2022 - September 2022	SOFR + applicable margin	Mortgage Related Assets		40,821		40,821		55,666

Subtotal mortgage lines of credit			$	3,065,821	$	1,106,562	$	1,996,538

Reverse Lines:
August 2022 - June 2023	LIBOR / SOFR + applicable margin	First Lien Mortgages	$	1,450,000	$	773,871	$	714,013
July 2022 - September 2022	Bond accrual rate + applicable margin	Mortgage Related Assets		330,000		293,345		297,893
September 2022	LIBOR + applicable margin	MSRs		90,000		42,325		78,952
May 2023	Prime + .50%; 6% floor	Unsecuritized Tails		51,877		43,376		38,544

Subtotal reverse lines of credit			$	1,921,877	$	1,152,917	$	1,129,402

Commercial Lines:
August 2022	LIBOR + applicable margin	Encumbered Agricultural Loans	$	75,000	$	22,221	$	25,127

April 2023 - January 2024	LIBOR / SOFR + applicable margin	First Lien Mortgages		407,500		272,690		167,159
August 2022	10%	Second Lien Mortgages		45,000		38,900		24,175
N/A	LIBOR + applicable margin	Mortgage Related Assets		—		—		5,041

Subtotal commercial lines of credit			$	527,500	$	333,811	$	221,502

Total other financing lines of credit			$	5,515,198	$	2,593,290	$	3,347,442

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

Outstanding Borrowings at


June 30,
2021

December 31,
2020

Facility

Maturity Date

Interest Rate

Collateral
Pledged

Total
Capacity
(1)

Successor

Predecessor

June 2022 $75M Facility
   June 2022    LIBOR + applicable margin
First Lien Mortgages
   75,000

72,479

   11,423
April 2022 $52.5M Facility
   April 2022    LIBOR + applicable margin

Mortgage
Related
Assets

   52,500

52,500
   50,239
April 2022 $50M Facility
   April 2022

Prime +
applicable
margin; 6.00%
floor

Unsecuritized Tails
   50,000

38,757
   37,442
April 2022 $45M Facility
   April 2022    9.00%
Mortgage
Related
Assets

   45,000

28,220
   26,875
June 2022 $200M Facility
(2)
   June 2022    LIBOR + applicable margin
First Lien Mortgages
   200,000

26,883
   128,723
August 2021 $50M Facility
   August 2021    LIBOR + applicable margin
First Lien Mortgages
   50,000

24,329
   2,860
$1.2M Repo Facility
   N/A    LIBOR + applicable margin

Mortgage
Related
Assets

   1,215

1,215
   1,188






Subtotal reverse lines of credit

   $ 1,613,715
$
1,159,093
   $ 767,959






Commercial Lines:

September 2022 $150M Facility
   September 2022    LIBOR + applicable margin

Encumbered
Agricultural
Loans

   $ 150,000
$
112,229
   $ 52,300
April 2023 $145M Facility
   April 2023    LIBOR + applicable margin
First Lien Mortgages
   145,000

86,055
   100,070
February 2022 $150M Facility
   February 2022    LIBOR + applicable margin
First Lien Mortgages
   150,000

33,768
   —
November 2023 $65M Facility
   November 2023    LIBOR + applicable margin
First Lien Mortgages
   65,000

30,528
   28,064
August 2022 $75M
   August 2022    2.50% - 3.25%
Encumbered
Agricultural
Loans

   75,000

24,746
   —
August 202
2
$25M Facility
   August 2022    10.00% Second Lien Mortgages
   25,000

20,900
   21,475
$4M Securities Repo Line
   N/A    LIBOR + applicable margin

Mortgage
Related
Assets

   4,024

4,024
   —
February 2022 $150M Facility
   February 2022    LIBOR + applicable margin
First Lien Mortgages
   150,000

715
   —
$2M Securities Repo Line
   N/A    Distributed Bond Interest + 50 bps

Mortgage
Related
Assets

   —

—

   6,411






Subtotal commercial lines of credit

   $ 764,024
$
312,965
   $ 208,320






Total other financing lines of credit
      $ 6,066,690
$
3,412,234
   $ 2,973,743

(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 June 30, ~~2021.~~2022.

~~(2)~~

~~See Note 36 - Subsequent Events for additional information on facility amendments.~~

~~(3)~~

~~The February 2021 $50M facility - MSR was paid off and terminated in February 2021.~~

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

As of June 30, ~~2021 (Successor)~~2022 and December 31, ~~2020 (Predecessor),~~2021, the weighted average outstanding interest rates on outstanding ~~debt~~financing lines of credit of the Company were ~~2.57%~~3.03% and ~~3.15%~~2.75%, respectively.

The Company’s ~~borrowing~~financing arrangements and credit facilities contain various financial covenants, which primarily relate to required tangible net worth amounts, liquidity reserves, leverage ~~requirements,~~ratios, and ~~profitability requirements. As a result of market disruptions and fair value accounting adjustments taken in March 2020 resulting from the~~

~~COVID-19~~profitability.

pandemic, FACo was in violation of its first, second, and third quarter 2020 profitability covenants with two of its warehouse lenders. The Company received waivers of these covenant violations from both lenders as well as amendments to profitability covenants for the remaining quarters of 2020.

~~As a result of impacts from the Business Combination, FAM was not in compliance with the lender adjusted tangible net worth quarterly and~~

~~two-consecutive~~

~~quarter requirements by FNMA as detailed below. The Company received a waiver for the covenant violations from FNMA.~~

As of June 30, ~~2021 (Successor),~~2022, the Company ~~had obtained waivers for these covenant violations and~~ was in compliance with ~~all other~~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 or amendments to such financial covenants effective as of June 30, 2022 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 June 30, 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		June 30, 2022		Maximum Allowable Distribution (1)

FAM
Adjusted Tangible Net Worth (2)	$	225,000	$	227,279	$	2,279
Liquidity		55,000		60,080		5,080
Leverage Ratio		13:1		8.7:1		75,388

Material Decline in Lender Adjusted Net Worth:
Lender Adjusted Tangible Net Worth (Quarterly requirement) (3 )	$	225,805	$	227,278	$	1,473
Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) (3)		128,988		227,278		98,290
FAR
Adjusted Tangible Net Worth (2)	$	300,000	$	361,029	$	61,029
Liquidity		64,423		122,674		58,251
Leverage Ratio		6:1		4.2:1		106,461

(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.

(3)	This amount is the covenant calculation specific to FNMA.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

As of ~~June 30,~~December 31, 2021, ~~(Successor),~~ 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):


Successor
Financial Covenants	Requirement		June 30, 2021		Maximum Allowable Distribution (1)			Requirement		December 31, 2021		Maximum Allowable Distribution (1)
FAM
Adjusted Tangible Net Worth	$	150,000	$	191,383	$	41,383
Adjusted Tangible Net Worth (2)								$	150,000	$	180,032	$	30,032
Liquidity		40,000		60,697		20,697			40,000		43,734		3,734
Leverage Ratio		15:1		13.3:1		21,591			15:1		13.9:1		12,154
Material Decline in Lender Adjusted Net Worth:
Lender Adjusted Tangible Net Worth (Quarterly requirement)	$	294,790	$	191,383	$	(103,406	)
Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement)		215,803		191,383		(24,419	)
Lender Adjusted Tangible Net Worth (Quarterly requirement) (3)								$	150,539	$	214,979	$	64,440
Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement) (3)									114,830		214,979		100,149
FACo
Adjusted Tangible Net Worth	$	85,000	$	93,411	$	8,411		$	85,000	$	87,350	$	2,350
Liquidity		20,000		28,579		8,579			20,000		32,728		12,728
Leverage Ratio		6:1		3.6:1		37,192			6:1		2.8:1		46,895
FAR
Adjusted Tangible Net Worth	$	398,288	$	449,271	$	50,983		$	417,826	$	527,443	$	109,617
Liquidity		20,000		25,120		5,120			20,000		23,845		3,845
Leverage Ratio		6:1		3.6:1		180,788			6:1		2.9:1		264,134
Material Decline in Lender Adjusted Net Worth:
Lender Adjusted Tangible Net Worth (Quarterly requirement)	$	302,921	$	448,047	$	145,126
Lender Adjusted Tangible Net Worth (Two-Consecutive Quarterly requirement)		354,344		448,047		93,703

(1)

The Maximum Allowable Distribution for any of the originations subsidiaries is the lowest of the amounts shown for the particular originations subsidiary.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

As of December 31, 2020 (Predecessor), 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):

Predecessor

Financial Covenants

Requirement

December 31, 2020

Maximum Allowable
Distribution
(1)

FAM

Adjusted Tangible Net Worth
   $ 125,000    $ 289,163    $ 164,163
Liquidity
   40,000    56,775    16,775
Leverage Ratio
   15:1    9.3:1    110,267
Material Decline in Lender Adjusted Net Worth:

Lender Adjusted Tangible Net Worth (Quarterly requirement)
   $ 210,428    $ 282,062    $ 71,634
Lender Adjusted Tangible Net Worth
(Two-Consecutive
Quarterly requirement)
   93,763    282,062    188,299
FACo

Adjusted Tangible Net Worth
   $ 85,000    $ 126,672    $ 41,672
Liquidity
   20,000    46,385    26,385
Leverage Ratio
   6:1    1.7:1    90,782
FAR

Adjusted Tangible Net Worth
   $ 300,000    $ 474,128    $ 174,128
Liquidity
   20,000    36,425    16,425
Leverage Ratio
   5.5:1    2.5:1    258,615
Material Decline in Lender Adjusted Net Worth:

Lender Adjusted Tangible Net Worth (Quarterly requirement)
   $ 314,091    $ 472,458    $ 158,367
Lender Adjusted Tangible Net Worth
(Two-Consecutive
Quarterly requirement)
   205,619    472,458    266,839

~~(1)~~

(2)

~~The Maximum Allowable Distribution for any~~This amount is based on the most restrictive financing line of ~~the originations subsidiaries~~credit covenant.

(3)	This amount is the ~~lowest of the amounts shown for the particular originations subsidiary.~~covenant calculation specific to FNMA.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~19.~~

~~Payables and Other Liabilities~~

~~Payables and other liabilities consisted of the following (in thousands):~~

June 30, 2021

December 31, 2020


Successor

Predecessor

Accrued compensation expense

$
131,831
   $ 150,214
Accrued liabilities


97,902
   83,427
Lease liabilities


64,496
   48,250
Deferred tax liability, net


28,455
   —
GNMA reverse mortgage
buy-out
payable


32,607
   32,317
Liability for loans eligible for repurchase from GNMA


30,027
   42,148
Derivative liabilities


19,329
   20,722
Warrant liability


19,261
   —
Estimate of claim losses


11,839
   8,609
Deferred purchase price liabilities


44,473
   3,842
Repurchase reserves


8,515
   10,529




Total payables and other liabilities

$
488,735
   $ 400,058

~~Warrants~~

~~Prior to the Business Combination, Replay issued 28,750,000~~

~~units, consisting of one ordinary share and~~

~~one-half~~

~~of one redeemable warrant (each, a “Public Warrant” or “Warrant”), resulting in 14,375,000 Public Warrants.~~

~~Each Warrant is now exercisable for a share of FoA Class A Common Stock. As of June 30, 2021 (Successor), there were~~

~~14,375,000~~

~~Public Warrants outstanding.~~

~~The~~

~~arrants will expire April 1, 2026, five years after the completion of the Business Combination. The Company may call the~~

~~arrants for redemption:~~

~~in whole and note in part;~~

~~at a price of $0.01 per warrant;~~

~~upon a minimum of 30 days’ prior written notice of redemption;~~

~~if, and only if, the last reported closing price of the Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a~~

~~30-trading~~

~~day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; and~~

Each Warrant entitles the holder to purchase one ordinary share at a price of $11.50 per share, subject to adjustment for reorganization and/or extraordinary dividends event, as described in the warrant agreement.

If the Company calls the Warrants for redemption, management will have the option to require all holders that wish to exercise the warrants to do so on a “cashless basis,” as described in the warrant agreement.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

The Company has determined that the Warrants are subject to treatment as a liability. As of the Closing of the Business Combination on April 1, 2021 and as of June 30, 2021 (Successor), the Warrants had a fair value of $18.0 million and $19.3 million,

~~respectively. These liability-classified Public Warrants are out of the money and thus have no impact on diluted EPS.~~

~~20.~~

~~Leases~~

The Company’s lease portfolio is comprised primarily of real estate and equipment agreements. Operating leases in which the Company is the lessee are recorded as operating lease ROU assets and operating lease liabilities, included in other assets, net, and payables and other liabilities, respectively, on the Consolidated Statements of Financial Condition, as of June 30, 2021 (Successor) and December 31, 2020 (Predecessor). The Company does not currently have any finance leases in which it is the lessee. Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

For operating leases, the lease liabilities are initially recognized based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. This incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment and given similar credit risk. The lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease. The Company includes these options in the lease term when it is reasonably certain of exercising them.

ROU assets are further adjusted for lease incentives. Operating lease expense is recognized on a straight-line basis over the lease term and is recorded in general and administrative expenses in the Consolidated Statements of Operations. The Company recognizes variable lease payments associated with the Company’s leases when the variability is resolved. Variable lease payments are recorded in general and administrative expenses in the Consolidated Statements of Operations along with expenses arising from fixed lease payments.

~~The table below summarizes the Company’s operating lease portfolio (in thousands):~~

June 30, 2021

December 31, 2020


Successor

Predecessor

Right-of-use
assets

$
62,835
   $ 46,609
Lease liabilities

$
64,496
   $ 48,250
Weighted-average remaining lease term (in years)


6.61
   3.61
Weighted-average discount rate


7.08
%
   7.42 %

~~The table below summarizes the Company’s net operating lease cost:~~

April 1, 2021
to
June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Operating lease cost

$
5,591
   $ 5,490
$
7,046
$ 13,658
Short-term lease cost


888
   1,035

(593
)
1,438




Total operating and short term lease cost


6,479
   6,525

6,453
15,096




Variable lease cost


1,997
   1,808

718
1,422
Sublease income


(516
)
   (464 )

(574
)
(1,270 )




Net lease cost

$
7,960
   $ 7,869
$
6,597
$ 15,248

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~The table below summarizes other information related to the Company’s operating leases:~~

April 1, 2021
to
June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the
six months
ended
June 30, 2020


Successor


Predecessor

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$
5,291
   $ 5,423    $ 6,255    $ 12,540
Leased assets obtained in exchange for new operating lease liabilities


22,752
   701    1,134    4,598

~~The following table presents a maturity analysis of operating leases and a reconciliation of the undiscounted cash flows to lease liabilities as of June 30, 2021 (Successor):~~

2021

$
10,083

2022


16,846

2023


13,104

2024


9,025

2025


6,045

2026


3,585

Thereafter


24,742



Total undiscounted lease payments


83,430

Less: amounts representing interest


(18,934
)


Total lease liabilities

$
64,496

~~21.~~

~~Notes Payable, Net~~

~~Senior Unsecured Notes~~

In November 2020, FOAF issued $350.0 million aggregate principal amount of senior unsecured notes (the “Notes”). Interest is payable semi-annually in arrears on May 15 and November 15 beginning on May 15, 2021. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by FoA Equity and each of FoA Equity’s material existing and future wholly-owned domestic subsidiaries, excluding certain subsidiaries who are not able to guarantee due to tax, contractual or regulatory reasons.

At any time prior to November 15, 2022, FOAF may redeem some or all of the Notes at a redemption price equal to 100% of the principal amount thereof, plus the applicable premium as of the redemption date under the terms of the indenture and accrued and unpaid interest. The redemption price during each of the twelve-month periods following November 15, 2022, November 15, 2023 and at any time after November 15, 2024 is 103.938%, 101.969% and 100.000%, respectively, of the principal amount plus accrued and unpaid interest thereon. At any time prior to November 15, 2022, FOAF may also redeem up to 40% of the aggregate principal amount of the notes at a redemption price equal to 107.875% of the aggregate principal amount of the senior unsecured notes redeemed, with an amount equal to or less than the net cash proceeds from certain equity offerings, plus accrued and unpaid interest.

Upon the occurrence of a change of control, the holders of the Notes will have the right to require FOAF to make an offer to repurchase each holder’s Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest.

The Notes contain covenants limiting, among other things, FOAF and its restricted subsidiaries’ ability to incur additional debt or issue certain preferred shares, incur liens, make certain distributions, investments and other

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

restricted payments, engage in certain transactions with affiliates, and merge or consolidate or sell, transfer, lease or otherwise dispose of all or substantially all of FOAF’s assets. These incurrence based covenants are subject to exceptions and qualifications. Many of these covenants will cease to apply during any time that the Notes have investment grade ratings and no default has occurred and continuing. The Company was in compliance with all required covenants related to the Notes as of June 30, 2021 (Successor).

~~Financing Agreements~~

As a part of the Company’s acquisitions of certain subsidiaries, the Company entered into various note agreements with the sellers. In addition, in 2017, the Company entered into an agreement for the purchase of computer hardware and equipment which was financed by notes payable to the seller with monthly payments through January 2021.

~~A summary of the outstanding notes payable, net, is presented in the table below (in thousands):~~

Description

Maturity Date

Interest
Rate

June 30,
2021

December 31,
2020


Successor

Predecessor

Senior Unsecured Notes
   November 2025    7.9 %
$
350,000
   $ 350,000
Financing Agreement
   January 2021    5.5 %

0

   9




Total aggregate principle amount

350,000
   350,009
Fair value adjustment, net of amortization
(1)

3,718
   0
Less: Debt issuance costs

—

   (13,436 )



Total notes payable, net

$
353,718
   $ 336,573

~~(1)~~

In conjunction with the Business Combination discussed in Note 4, the Company was required to adjust the liabilities assumed to fair value, resulting in a premium on the Notes and the elimination of the previously recognized debt issuance costs.

Interest expense was $7.5 million for the Successor period from April 1, 2021 to June 30, 2021 and $7.7 million for the Predecessor period from January 1, 2021 to March 31, 2021. Interest expense for the Predecessor was $0.2 million and $0.6 million for the three months ended and six months ended June 30, 2020, respectively.

~~22.~~15.

Litigation

The Company’s business is subject to legal proceedings, examinations, investigations and reviews by various federal, state and local regulatory and enforcement agencies as well as private litigants such as the Company’s borrowers or former employees. At any point in time, the Company may have open investigations with regulators or enforcement agencies, including examinations and inquiries related to its loan servicing and origination practices. These matters and other pending or potential future investigations, examinations, inquiries or lawsuits may lead to administrative or legal proceedings, and possibly result in remedies, including fines, penalties, restitution, or alterations in business practices, ~~and in~~or additional expenses and collateral costs.

As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency is not both probable and reasonably estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and reasonably estimable. Once the matter is deemed to be both probable and reasonably estimable, the Company ~~will establish~~establishes an accrued liability and ~~record~~records a corresponding amount to litigation related expense. The Company will continue to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established. For certain matters, the Company may consider a loss to be probable but cannot calculate a precise estimate of losses. For these matters, the Company may be able to estimate a range of possible loss. In determining whether it is possible to provide an estimate of loss or range of possible loss, the Company reviews and evaluates its material litigation and regulatory matters on an ongoing basis, in conjunction with any outside counsel handling the matter.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)

As of June 30, ~~2021 (Successor),~~2022, there were no matters that the Company considered to be ~~both~~ probable or reasonably possible for which they could estimate losses or a reasonable range of estimated losses.

The Company is a defendant in four representative lawsuits alleging violations of the California Labor Code and brought pursuant to the California Private Attorneys General Act (“PAGA”). The cases have been coordinated and ~~currently are~~were stayed pending a ruling by the Supreme Court of the United States in ~~discovery.~~Viking River Cruises, Inc. v. Moriana (“the Moriana opinion”). Since the Moriana opinion was issued, the court lifted the stay to allow the Company to file Motions to Compel Arbitration. On July 15, 2022, one of the four plaintiffs requested to voluntarily dismiss her lawsuit. Due to the unpredictable nature of litigation, generally, and the wide discretion afforded the Court in awarding civil penalties in PAGA actions, the outcome of these matters cannot be presently determined, and a range of possible losses cannot be ~~determined.~~reasonably estimated. Although the actions are being vigorously defended, the Company could, in the future, incur judgments or enter into settlements of claims that could have a negative effect on its results of operations in any particular period.

Legal expenses, which ~~includes,~~include, among other things, settlements and the fees paid to external legal service providers, were

$1.7 million,

$2.6 million, and $3.6 million for the

Successor ~~period from April 1, 2021 to June 30, 2021~~ three

and ~~$4.2 million for the Predecessor period from January 1, 2021 to March 31, 2021. Legal expenses for the Predecessor were $4.0 million and $7.5 million for the three months ended and~~

six months ended June 30, ~~2020, respectively.~~2022 and three months ended June 30, 2021, respectively; and $4.2

million for the Predecessor three months ended March 31, 2021. These expenses are included in general and administrative expenses in the Condensed Consolidated Statements of ~~Operations.~~Operations (Unaudited).

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

~~23.~~16.

Commitments and Contingencies

Servicing of Mortgage Loans

The Company has contracted with ~~third-party~~third party providers to perform specified servicing functions on its behalf. These services include maintaining borrower contact, facilitating borrower advances, generating borrower statements, collecting and processing payments of interest and principal and facilitating loss-mitigation strategies in an attempt to keep defaulted borrowers in their homes.

For reverse mortgages, defaults on loans leading to foreclosures may occur if borrowers fail to meet maintenance obligations, such as payment of taxes or home insurance premiums. When a default cannot be cured, the

sub-servicers

manage the foreclosure process and the filing of any insurance claims with HUD. The

sub-servicers

have responsibility for remitting timely advances and statements to borrowers and timely and accurate claims to HUD, including compliance with local, state and federal regulatory requirements. Although the Company has outsourced its servicing function, as the issuer, the Company has responsibility for all aspects of servicing of the HECM loans and related HMBS beneficial interests under the terms of the servicing contracts, state laws and regulations.

Additionally, the

sub-servicers

are ~~also~~ responsible for remitting payments to investors, including interest accrued, ~~and~~ interest shortfalls and funding advances such as taxes and home insurance premiums. Advances are typically remitted by the Company to the

sub-servicers

on a daily basis.

Contractual

sub-servicing

fees related to

sub-servicer

arrangements are generally based on a fixed dollar amount per loan and are included in general and administrative expenses in the Condensed Consolidated Statements of ~~Operations.~~

Operations (Unaudited).

Unfunded Commitments

The Company is required to fund further borrower advances (where the borrower has not fully drawn down the HECM, ~~HomeSafe Flex and Select, or~~non-agency reverse mortgage, fix & flip, or agricultural loan proceeds ~~available to them),~~available) and ~~to additionally~~ fund the payment of the borrower’s obligation to pay ~~the~~ FHA ~~their~~ monthly insurance ~~premium.~~premiums.

The outstanding unfunded commitments available to borrowers related to ~~HECM~~agency and

non-agency

reverse mortgage loans were approximately ~~$2.4~~$2.9 billion as of June 30, ~~2021 (Successor),~~2022, compared to ~~$2.1 million~~$2.6 billion as of December 31, ~~2020 (Predecessor).~~2021. The outstanding unfunded commitments available to borrowers related to fix & flip loans were approximately ~~$10.7~~$123.2 million and ~~$18.8~~$94.9 million ~~respectively,~~ as of June 30, ~~2021 (Successor)~~2022 and December 31, ~~2020 (Predecessor).~~2021, respectively. This additional borrowing capacity is primarily in the form of undrawn lines of credit.

The outstanding unfunded commitments available to borrowers related to agricultural loans were approximately $56.5 million and $78.5 million as of June 30, 2022 and December 31, 2021, respectively.

The Company also has commitments to purchase and sell loans totaling ~~$12.3~~$4.0 million and ~~$163.9~~$112.3 million, respectively, atas of June 30, ~~2021 (Successor),~~2022, compared to ~~$10.2~~$47.3 million and ~~$54.3 million,~~$0, respectively, atas of December 31, ~~2020 (Predecessor).~~

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

2021.

Mandatory Repurchase Obligation

The Company is required to repurchase reverse loans out of the ~~GNMA~~Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of

the ~~MCA.~~Maximum Claim Amount (“MCA”). Performing repurchased loans are conveyed to HUD and nonperforming repurchased loans are generally liquidated in accordance with program requirements. Loans are considered nonperforming upon events ~~such as,~~including, but not limited to, the death of the mortgagor, the mortgagor no longer occupying the property as their principal residence, or the property taxes or insurance are not being paid.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

As an issuer of HMBS, the Company also has the option to repurchase reverse loans out of the ~~GNMA~~Ginnie Mae securitization pools without ~~GNMA~~ prior approval from Ginnie Mae in certain instances. These situations include the borrower requesting an additional advance that causes the outstanding principal balance to be equal to or greater than 98% of the MCA; the borrower’s loan becoming due and payable under certain circumstances; the borrower not occupying the home for greater than twelve consecutive months for physical or mental illness, and the home is not the residence of another borrower; or the borrower failing to perform in accordance with the terms of the loan.

For each HECM loan that the Company securitizes into Agency HMBS, the Company is required to covenant and warrant to ~~GNMA,~~Ginnie Mae, among other things, that the HECM loans related to each participation included in the Agency HMBS are eligible under the requirements of the National Housing Act and the ~~GNMA Mortgage-backed Securities~~Ginnie Mae MBS Guide, and that the Company will take all actions necessary to ensure the HECM loan’s continued eligibility. The ~~GNMA~~Ginnie Mae HMBS program requires that the Company removes the participation related to any HECM loan that does not meet the requirements of the ~~GNMA Mortgage-backed Securities~~Ginnie Mae MBS Guide. In addition to securitizing HECM loans into Agency HMBS, the Company may sell HECM loans to third parties, and the agreements with such third parties include standard representations and warranties related to such loans, which if breached, may require the Company to repurchase the HECM loan and/or indemnify the purchaser for losses related to such HECM loans. In the case where the Company repurchases the loan, the Company bears any subsequent credit loss on the loan. To the extent that the Company is required to remove a loan from an Agency HMBS, purchase a loan from a third party or indemnify a third party, the potential losses suffered by the Company may be reduced by any recourse the Company has to the originating broker and/or correspondent lender, if applicable, to the extent such entity breached similar or other representations and warranties. Under most circumstances, the Company has the right to require the originating broker/correspondent to repurchase the related loan from the Company and/or indemnify the Company for losses incurred. The Company seeks to manage the risk of repurchase and associated credit exposure through the Company’s underwriting and quality assurance practices.

~~24.~~

~~Incentive Compensation~~

~~Equity-Based Compensation~~

Pursuant to the terms of the A&R MLTIP, FoA has two major types of equity-based compensation granted to employees, henceforth referred to as Replacement Restricted Stock Units (“Replacement RSUs”) and Earnout Right Restricted Stock Units (“Earnout Right RSUs”). The issuance of the Replacement RSUs and Earnout Right RSUs to employees under the A&R MLTIP will be funded by the exchange of

Table of Contents

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

current Class A Common Stock and Class A LLC Units held by the unitholders of FoA Equity prior to the closing of the Business Combination. Therefore, the shares issued to employees under the A&R MLTIP will not result in incremental share ownership in the Company, and the total compensation costs associated with the vesting of the Replacement RSUs and Earnout Right RSUs will be directly allocated to the noncontrolling interest and, with respect to Blocker GP, to FoA in proportion to their sharing percentages of exchanged units.

~~Replacement RSUs~~

Pursuant to the terms of the A&R MLTIP executed on October 28, 2020, the Company granted each employee who held Phantom Units in FoA Equity and remained employed as of the Replacement RSU grant date, April 1, 2021, in consideration for the cancellation of a portion of their Phantom Units, Replacement RSUs that will vest into shares of Class A Common Stock.

Following the terms of the A&R MLTIP, 25% of the Replacement RSUs will vest on the Replacement RSU grant date, and the remaining 75% will vest in equal installments on each of the first three anniversaries of the closing of the Business Combination, subject to each holder’s continued employment.

~~Earnout Right RSUs~~

In addition to the Replacement RSUs, participants in the A&R MLTIP are entitled to receive additional Earnout Right RSUs depending on whether the Company achieves certain market-based conditions. The market-based vesting conditions have been factored into the grant date fair value measurement of the Earnout Right RSUs using a Monte Carlo simulation. The assumptions used in the Monte Carlo simulation model included a volatility rate of 60%, risk free rate of 1.14% and a weighted average expected term of 1.06 years for the first tranche of Earnout Right RSUs and 1.52 years for the second tranche of Earnout Right RSUs.

Earnout Right RSUs have the same service-based vesting conditions listed above for the Replacement RSUs along with market-based vesting conditions. The first tranche of Earnout Right RSUs vest upon satisfaction of the service-based vesting conditions and if, at any time during the six years following the Closing, the VWAP of FoA’s Class A Common Stock is greater than or equal to $12.50 for any ~~twenty~~ ~~Trading Days within a period of~~ ~~thirty~~ consecutive Trading Days (the date when the foregoing is first satisfied, the “First Earnout Achievement Date”). The second tranche of Earnout Right RSUs vest upon satisfaction of the service-based vesting conditions and if, at any time during the six years following the Closing, the VWAP of FoA’s Class A Common Stock is greater than or equal to $15.00 for any ~~twenty~~ ~~Trading Days within a period of~~ ~~thirty~~ ~~consecutive Trading Days (the date when the foregoing is first satisfied, the “Second Earnout Achievement Date”).~~

The Replacement RSUs and the Earnout Right RSUs are classified as equity and FoA accounts for the RSUs following the fair value method. Both the Replacement RSUs’ and Earnout Right RSUs’ fair values are fixed on the grant date and not remeasured unless the award is subsequently modified.

~~A summary of the Replacement RSU and Earnout Right RSU activity from grant until June 30, 2021 is presented below in thousands, except for share information:~~

Grant Date Fair Value

Replacement RSUs

Number of
Units
Unvested

Number of
Units
Vested

Total
Number of
Units

Weighted
Average
Price Per
Unit

Total Fair
Value

Outstanding, April 1, 2021
   0—   0—      0—
Granted
   14,819,483 0—      14,819,483    $ 9.48    $ 140,489
Vested
   (4,066,069 ) 4,066,069    —      $ 9.48    $ 38,546





Outstanding, June 30, 2021
   10,753,414 4,066,069    14,819,483

~~Table of Contents~~

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

~~No Replacement RSUs are expected to vest from July 1, 2021 to December 31, 2021. Share~~

~~based compensation expense for the Replacement RSUs totaled $47.1 million for the period from April 1, 2021 to June 30, 2021. Unrecognized share~~

~~based compensation expense totaled $93.4 million as of June 30, 2021 (Successor).~~

Grant Date Fair
Value

Earnout Right RSUs

Number of
Units
Unvested

Number
of Units
Vested

Total
Number of
Units

Weighted
Average
Price Per
Unit

Total
Fair
Value

Outstanding, April 1, 2021
   0—      0—      0—
Granted
   1,550,880    0—      1,550,880    $ 8.91    $ 13,811







Outstanding, June 30, 2021
   1,550,880    0—      1,550,880

~~No Earnout Right RSUs are expected to vest from July 1, 2021 to December 31, 2021. Share~~

~~based compensation expense for the Earnout Right RSUs totaled $2.2 million for the period from April 1, 2021 to June 30, 2021. Unrecognized share~~

~~based compensation expense totaled $11.6 million as of June 30, 2021 (Successor).~~

~~Long-Term Incentive Plan~~

On January 1, 2015, the Company established a long-term incentive plan (the “Plan”) to compensate key employees. Any distributions are based on distributions received by equity holders of the Company in excess of the contributed equity capital, plus a designated return on contributed equity capital (the “Hurdle”).

~~The phantom units are accounted for as a profit-sharing arrangement, as they do not represent a substantive form of equity and were not indexed to the price of UFG common units.~~

~~In connection with the Closing of the Business Combination, which occurred on April 1, 2021, the holders of Phantom Units (1,077 units outstanding) received~~

~~one-time~~

~~lump sum cash payments totaling $24.0 million as it relates to the achievement of the Hurdle being met under the original terms of the Plan.~~

The cash payment of $24.0 million relates to prior services provided solely for the benefit of the Company and not for ongoing services to be provided in the future that would benefit the post-combination entity. Given that the payment was triggered by the distributions made in connection with the successful closing of the Business Combination, the payment of $24.0 million is considered to have been incurred “on the line.” The balance of the Company’s obligation under the Plan was replaced by the issuance of equity-based compensation described above as governed by the Amended and Restated Management Long-Term Incentive Plan.

~~25.~~

~~Changes in Contingently Redeemable Noncontrolling Interest~~

FoA Equity determined that the Class B interests of FACo Holdings issued to Buy to Rent Platform Holdings, L.P. (“B2R”) meet the definition of CRNCI. Under the FACo Holdings Agreement, the Class B Units may be redeemed upon sale of FACo by FACo Holdings, sale of FAH, or sale of UFG Holdings LLC, which would require FAH to purchase the outstanding Class B Units. FoA Equity determined that the legal provisions in the FACo Holdings Agreement in which there is a noncontrolling interest represent a substantive profit-sharing arrangement, where the allocation to the members differs from the stated ownership percentages. FoA Equity utilized the hypothetical liquidation at book value, or HLBV, method for the allocation of profits and losses each period. Under the HLBV method, the amount of income and loss attributed to the noncontrolling interests in the Consolidated Statements of Operations reflects changes in the amounts each member would hypothetically receive at each Consolidated Statement of Financial Condition date under the liquidation provisions of the FACo Holdings Agreement, assuming the net assets of the FACo Holdings were liquidated at their respective recorded amounts. Allocations of profits and losses in the Consolidated Statements of Operations is determined based on the hypothetical amounts that would be distributed to members after taking into account any capital transactions between FACo Holdings and its members as follows:

~~Distributions up to Hurdle Amount of $202.0 million (subject to certain adjustments defined in the FACo Holdings Agreement)—100% to Class B Members;~~

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Distributions of the next $150.0 million—95% to Class A Members and 5% to Class B Members, and;~~

~~Thereafter—75% to Class A Members and 25% to Class B Members.~~

In connection with the closing of the Business Combination disclosed in Note 4—Acquisitions, FoA caused Finance of America Holdings LLC to exercise its right under the FACo Holdings Agreement to purchase all of the outstanding Class B Units held by B2R for a redemption price of $203.2 million in satisfaction of the applicable Hurdle Amount under the FACo Holdings Agreement. The changes in CRNCI are as follows (in thousands):

Predecessor:

Balance at December 31, 2019 (audited)
   $ 187,981
Net loss
   (15,386 )


Balance at March 31, 2020
   172,595
Net loss
   (2,620 )


Balance at June 30, 2020
   $ 169,975


Balance at December 31, 2020 (audited)
   $ 166,231
Net income
   4,260
Accretion to redemption price
   32,725


Balance at March 31, 2021
   203,216


Successor:

Balance at April 1, 2021
   $ 203,216
Settlement of CRNCI in connection with the Business Combination
   (203,216 )


Balance at June 30, 2021
   $ 0—

~~26.~~

~~General and Administrative Expenses~~

~~General and administrative expenses consisted of the following (in thousands):~~

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the
three months
ended
June 30, 2020

For the six
months
ended
June 30, 2020


Successor

Predecessor

Title and closing

$
25,191

   $ 25,061    $ 12,682    $ 28,677
Loan origination expenses


17,725
   20,503    14,126    34,573
Depreciation and amortization


16,462
   3,484    3,488    6,957
Loan portfolio expenses


15,433
   15,200    9,426    18,603
Communications and data processing


12,568
   11,324    8,025    14,327
Securitization expenses


10,831
   6,944    8,349    8,349
Business development


9,647
   10,607    9,321    17,590
Licensing and insurance


3,457
   2,487    1,474    3,266
Fair value change in deferred purchase price liability


1,760
   30    (62 )    0
Other expenses


6,227
   31,577    14,385    27,438








Total general and administrative expenses

$
119,301
   $ 127,217    $ 81,214    $ 159,780

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~27.~~17.

Business Segment Reporting

~~The Company has identified six reportable segments: Mortgage Originations, Reverse Originations, Commercial Originations, Portfolio Management, Lender Services and Corporate/Other.~~

~~Mortgage Originations~~

~~The Mortgage Originations segment originates mortgage loans through FAM. This segment generates revenue through~~

~~fee-based~~

~~mortgage loan origination services and the origination and sale of mortgage loans into the secondary market. The Mortgage Originations segment includes four channels: distributed retail lending,~~

~~direct-to-consumer~~

~~lending, third-party-originator lending, and home improvement.~~

~~Reverse Originations~~

~~The Reverse Originations segment originates or acquires reverse mortgage loans through FAR. This segment originates HECMs which are insured by the FHA, and~~

~~non-agency~~

reverse mortgages. The segment originates reverse mortgage loans through the following channels: retail and third-party-originator. Reverse mortgage lending activities primarily consist of the origination and securitization of mortgage loans to GNMA and other private investors.

~~Commercial Originations~~

The Commercial Originations segment originates or acquires commercial mortgage loans through FACo. The segment provides business purpose lending solutions for residential real estate investors in two principal ways: short-term loans to provide rehab and construction of investment properties meant to be sold upon completion, and investor rental loans collateralized by either a single property or portfolio of properties. The segment originates commercial mortgage loans through the following channels: retail and third-party-originator. Commercial mortgage lending activities primarily consist of the origination and securitization of commercial mortgages to private investors.

~~Portfolio Management~~

The Portfolio Management segment provides product development, loan securitization, loan sales, risk management, asset management and servicing oversight services to the enterprise and third-party funds.

~~Lender Services~~

The Lender Services segment provides ancillary business services, title agency and title insurance services, MSR valuation and trade brokerage, and appraisal management services to customers in the residential mortgage, student lending, and commercial lending industries. The segment also operates a foreign branch in the Philippines for fulfillment transactional and administrative support.

~~Corporate and Other~~

~~Corporate and other consists of the Business Excellence Office (“BXO”) and other corporate services groups.~~

The Company’s segments are based upon the Company’s organizational structure which focuses primarily on the services offered. Corporate functional expenses are allocated to individual segments based on actual cost of services performed based on a direct resource utilization, estimate of percentage use for shared services or headcount percentage for certain functions.

~~Non-allocated~~

corporate expenses include administrative costs of executive management and other corporate functions that are not directly attributable to the Company’s operating segments. Revenues generated on inter-segment services performed are valued based on similar services provided to external parties. To reconcile the Company’s consolidated results, certain inter-segment revenues and expenses are eliminated in the “Eliminations” column in the following tables.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

The following tables are a presentation of financial information by segment for the periods indicated (in thousands):


	For the three months ended June 30, 2022
	Successor
	Mortgage Originations			Reverse Originations		Commercial Originations			Lender Services			Portfolio Management			Total Operating Segments			Corporate and Other			Elim			Total

REVENUES
Gain on sale and other income from loans held for sale, net	$	81,199		$	—	$	—		$	(1,125	)	$	(4,740	)	$	75,334		$	—		$	(3,529	)	$	71,805
Net fair value gains on loans and related obligations		—			77,872		(3,980	)		—			(72,249	)		1,643			—			(30	)		1,613
Fee income		18,086			2,123		16,659			58,148			1,198			96,214			—			(7,533	)		88,681
Net interest income (expense)
Interest income		13,657			—		—			587			1,515			15,759			94			—			15,853
Interest expense		(9,758	)		—		—			(51	)		(20,287	)		(30,096	)		(6,738	)		—			(36,834	)

Net interest income (expense)		3,899			—		—			536			(18,772	)		(14,337	)		(6,644	)		—			(20,981	)

Total revenue		103,184			79,995		12,679			57,559			(94,563	)		158,854			(6,644	)		(11,092	)		141,118
Total expenses		138,183			44,171		24,587			63,667			34,554			305,162			30,787			(10,936	)		325,013
Other, net		—			38		164			814			37			1,053			13,923			156			15,132

Net (loss) income before taxes	$	(34,999	)	$	35,862	$	(11,744	)	$	(5,294	)	$	(129,080	)	$	(145,255	)	$	(23,508	)	$	—		$	(168,763	)

Depreciation and amortization	$	1,615		$	9,708	$	522		$	1,650		$	106		$	13,601		$	3,180		$	—		$	16,781
Total assets		1,185,899			415,678		28,670			212,574			19,880,825			21,723,646			1,741,180			(1,728,600	)		21,736,226

April 1, 2021 to June 30, 2021

Successor

Mortgage
Originations

Reverse
Originations

Commercial
Originations

Portfolio
Management

Lender
Services

Total
Operating
Segments

Corporate
and Other

Elim

Total

REVENUES

Gain on sale of loans, net
$ 185,386 $ —   $ —   $ 7,748 $ —   $ 193,134 $ —   $ (5,557 ) $ 187,577
Net fair value gains
—   94,536 10,822 11,223 —   116,581 —   14,570 131,151
Fee income
30,345 954 12,124 3,577 81,130 128,130 0   (37,266 ) 90,864
Net interest income (expense)
1,976 (9 ) —   (15,851 ) (15 ) (13,899 ) (6,567 ) (9 ) (20,475 )

Total revenues
217,707 95,481 22,946 6,697 81,115 423,946 (6,567 ) (28,262 ) 389,117
Total expenses
224,191 42,246 20,049 33,190 73,317 392,993 36,021 (28,262 ) 400,752
Other, net
—   104 140 (245 ) 83 82 (2,185 ) —   (2,103 )

Net (loss) income before taxes
$ (6,484 ) $ 53,339 $ 3,037 $ (26,738 ) $ 7,881 $ 31,035 $ (44,773 ) $ —   $ (13,738 )

Depreciation and amortization
$ 1,433 $ (151 ) $ 127 $ (107 ) $ 2,818 $ 4,120 $ 12,342 $ —   $ 16,462
Total assets
2,994,779 768,229 109,434 17,996,903 336,687 $ 22,206,032 2,115,780 (2,093,874 ) $ 22,227,938

January 1, 2021 to March 31, 2021

Predecessor

Mortgage
Originations

Reverse
Originations

Commercial
Originations

Portfolio
Management

Lender
Services

Total
Operating
Segments

Corporate
and Other

Elim

Total

REVENUES

Gain on sale of loans, net
$ 286,481 $ —   $ —   $ 5,065 $ —   $ 291,546 $ —   $ (212 ) $ 291,334
Net fair value gains
—   68,449 5,431 2,750 —   76,630 —   33 76,663
Fee income
32,731 524 8,930 36,191 76,383 154,759 0   6,612 161,371
Net interest expense
891 —   —   (14,816 ) (36 ) (13,961 ) (7,744 ) —   (21,705 )

Total revenues
320,103 68,973 14,361 29,190 76,347 508,974 (7,744 ) 6,433 507,663
Total expenses
224,246 23,693 13,391 24,406 62,970 348,706 18,683 5,955 373,344
Other, net
—   34 149 895 2 1,080 (9,464 ) (478 ) (8,862 )

Net income (loss) before taxes
$ 95,857 $ 45,314 $ 1,119 $ 5,679 $ 13,379 $ 161,348 $ (35,891 ) $ —   $ 125,457

Depreciation and amortization
$ 1,423 $ 151 $ 125 $ 146 $ 1,268 $ 3,113 $ 371 $ —   $ 3,484
Total assets
2,425,529 35,861 82,375 17,378,088 125,317 $ 20,047,170 379,562 (326,313 ) $ 20,100,419


	For the six months ended June 30, 2022
	Successor
	Mortgage Originations			Reverse Originations		Commercial Originations			Lender Services			Portfolio Management			Total Operating Segments			Corporate and Other			Elim			Total
REVENUES
Gain on sale and other income from loans held for sale, net	$	193,120		$	—	$	—		$	(914	)	$	6,187		$	198,393		$	—		$	(8,236	)	$	190,157
Net fair value gains on loans and related obligations		—			183,627		(505	)		—			(175,034	)		8,088			—			3,960			12,048
Fee income		38,235			3,939		33,817			134,301			57,665			267,957			—			(21,671	)		246,286
Net interest income (expense)																—
Interest income		26,229			—		—			747			2,562			29,538			188			—			29,726
Interest expense		(19,129	)		—		—			(84	)		(37,010	)		(56,223	)		(13,441	)		—			(69,664	)

Net interest income (expense)		7,100			—		—			663			(34,448	)		(26,685	)		(13,253	)		—			(39,938	)

Total revenue		238,455			187,566		33,312			134,050			(145,630	)		447,753			(13,253	)		(25,947	)		408,553
Total expenses		294,966			87,350		47,674			134,423			69,265			633,678			66,768			(25,896	)		674,550
Other, net		—			3,252		288			2,478			64			6,082			13,771			51			19,904

Net (loss) income before taxes	$	(56,511	)	$	103,468	$	(14,074	)	$	2,105		$	(214,831	)	$	(179,843	)	$	(66,250	)	$	—		$	(246,093	)

																									—
Depreciation and amortization	$	4,435		$	19,306	$	1,036		$	4,762		$	197		$	29,736		$	3,689		$	—		$	33,425
Total assets		1,185,899			415,678		28,670			212,574			19,880,825			21,723,646			1,741,180			(1,728,600	)		21,736,226

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements


	For the three months ended June 30, 2021
	Successor
	Mortgage Originations			Reverse Originations			Commercial Originations		Lender Services			Portfolio Management			Total Operating Segments			Corporate and Other			Elim			Total
REVENUES
Gain on sale and other income from loans held for sale, net		185,386			—			—		—			7,748		$	193,134		$	—		$	(5,557	)	$	187,577
Net fair value gains on loans and related obligations		—			94,536			10,822		—			11,223			116,581			—			14,570			131,151
Fee income		30,345			954			12,124		81,130			3,577			128,130			—			(37,266	)		90,864
Net interest income (expense)
Interest income		12,837			—			—		29			187			13,053			107			(9	)		13,151
Interest expense		(10,861	)		(9	)		—		(44	)		(16,038	)		(26,952	)		(6,674	)					(33,626	)
Net interest income (expense)		1,976			(9	)		—		(15	)		(15,851	)		(13,899	)		(6,567	)		(9	)		(20,475	)

Total revenue		217,707			95,481			22,946		81,115			6,697			423,946			(6,567	)		(28,262	)		389,117
Total expenses		224,191			42,246			20,049		73,317			33,190			392,993			36,021			(28,262	)		400,752
Other, net		—			104			140		83			(245	)		82			(2,185	)		—			(2,103	)

Net (loss) income before taxes	$	(6,484	)	$	53,339		$	3,037	$	7,881		$	(26,738	)	$	31,035		$	(44,773	)	$	—		$	(13,738	)

																									—
Depreciation and amortization	$	1,433		$	(151	)	$	127	$	2,818		$	(107	)	$	4,120		$	12,342		$	—		$	16,462
Total assets		2,994,779			768,229			109,434		336,687			17,996,903		$	22,206,032			2,115,780			(2,093,874	)	$	22,227,938

For the three months ended June 30, 2020

Predecessor

Mortgage
Originations

Reverse
Originations

Commercial
Originations

Portfolio
Management

Lender
Services

Total
Operating
Segments

Corporate
and Other

Elim

Total

REVENUES

Gain on sale of loans, net $ 298,333 $ —   $ —   $ —   $ —   $ 298,333 $ —   $ (42 ) $ 298,291
Net fair value gains —   54,689 21 57,237 —   111,947 —   356 112,303
Fee income 33,795 509 350 1,431 44,312 80,397 28 (3,769 ) 76,656
Net interest expense 778 —   —   (19,708 ) (42 ) (18,972 ) (2,804 ) (15 ) (21,791 )

Total revenues
332,906 55,198 371 38,960 44,270 471,705 (2,776 ) (3,470 ) 465,459
Total expenses
215,958 22,156 6,552 21,374 39,554 305,594 16,573 (3,470 ) 318,697

Other, net
—   —   —   —   —   —   (28 ) —   (28 )

Net income (loss) before taxes
$ 116,948 $ 33,042 $ (6,181 ) $ 17,586 $ 4,716 $ 166,111 $ (19,377 ) $ —   $ 146,734

Depreciation and amortization $ 1,520 $ 286 $ 142 $ 11 $ 1,050 $ 3,009 $ 479 $ —   $ 3,488
Total assets
$ 1,816,879 $ 86,335 $ 59,439 $ 16,194,177 $ 92,413 $ 18,249,243 $ 484,973 $ (638,216 ) $ 18,096,000

For the six months ended June 30, 2020

Predecessor

Mortgage
Originations

Reverse
Originations

Commercial
Originations

Portfolio
Management

Lender
Services

Total
Operating
Segments

Corporate
and Other

Elim

Total

REVENUES

Gain on sale of loans, net $ 425,624 $ —   $ —   $ 5,617 $ —   $ 431,241 $ —   $ (2,266 ) $ 428,975
Net fair value gains —   89,278 8,582 25,881 —   123,741 —   1,942 125,683
Fee income 54,322 1,112 11,185 2,392 85,570 154,581 44 (7,998 ) 146,627
Net interest expense 1,264 —   —   (44,481 ) (33 ) (43,250 ) (4,220 ) (82 ) (47,552 )

Total revenues
481,210 90,390 19,767 (10,591 ) 85,537 666,313 (4,176 ) (8,404 ) 653,733
Total expenses
354,149 40,740 22,442 38,746 78,149 534,226 23,222 (8,404 ) 549,044

Other, net
—   —   —   —   —   —   (44 ) —   (44 )

Net income (loss) before taxes
$ 127,061 $ 49,650 $ (2,675 ) $ (49,337 ) $ 7,388 $ 132,087 $ (27,442 ) $ —   $ 104,645

Depreciation and amortization $ 3,087 $ 455 $ 306 $ 23 $ 2,105 $ 5,976 $ 981 $ —   $ 6,957
Total assets
$ 1,816,879 $ 86,335 $ 59,439 $ 16,194,177 $ 92,413 $ 18,249,243 $ 484,973 $ (638,216 ) $ 18,096,000


	For the three months ended March 31, 2021
	Predecessor
	Mortgage Originations			Reverse Originations		Commercial Originations		Lender Services			Portfolio Management			Total Operating Segments			Corporate and Other			Elim			Total
REVENUES
Gain on sale and other income from loans held for sale, net	$	286,481		$	—	$	—	$	—		$	5,065		$	291,546		$	—		$	(212	)	$	291,334
Net fair value gains on loans and related obligations		—			68,449		5,431		—			2,750			76,630			—			33			76,663
Fee income		32,731			524		8,930		76,383			36,191			154,759			—			6,612			161,371
Net interest income (expense)
Interest income		12,483			—		—		28			138			12,649			12			—			12,661
Interest expense		(11,592	)		—		—		(64	)		(14,954	)		(26,610	)		(7,756	)		—			(34,366	)

Net interest income (expense)		891			—		—		(36	)		(14,816	)		(13,961	)		(7,744	)		—			(21,705	)

Total revenue		320,103			68,973		14,361		76,347			29,190			508,974			(7,744	)		6,433			507,663
Total expenses		224,246			23,693		13,391		62,970			24,406			348,706			18,683			5,925			373,314
Other, net		—			34		149		2			895			1,080			(9,464	)		(508	)		(8,892	)

Net income (loss) before taxes	$	95,857		$	45,314	$	1,119	$	13,379		$	5,679		$	161,348		$	(35,891	)	$	—		$	125,457

Depreciation and amortization	$	1,423		$	151	$	125	$	1,268		$	146		$	3,113		$	371		$	—		$	3,484
Total assets		2,425,529			35,861		82,375		125,317			17,378,088			20,047,170			379,562			(326,313	)		20,100,419

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

~~28.~~

18.

Liquidity and Capital Requirements

FAM

In addition to the covenant requirements of FAM mentioned in Note ~~18—~~14—Other Financing Lines of Credit, FAM is subject to various regulatory capital requirements administered by HUD as a result of their mortgage origination and servicing activities. HUD governs

non-supervised,

direct endorsement mortgagees, and ~~GNMA,~~Ginnie Mae, FNMA, and FHLMC, which sponsor programs that govern a significant portion of FAM’s mortgage loans sold and servicing activities. Additionally, FAM is required to maintain minimum net worth requirements for many of the states in which it sells and services loans. Each state has its own minimum net worth requirement; however, none of the state requirements are material to the Company’s ~~Consolidated Financial Statements.~~

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited~~Condensed Consolidated Financial Statements (Unaudited).

Failure to meet minimum capital requirements can result in certain mandatory remedial actions and potentially result in additional discretionary remedial actions by regulators that, if undertaken, could: (i) remove FAM’s ability to sell and service loans to or on behalf of the Agencies; and (ii) have a direct material effect on FAM’s financial statements, results of operations and cash flows.

In accordance with the regulatory capital guidelines, FAM must meet specific quantitative measures of cash, assets, liabilities, profitability and certain

off-balance

sheet items calculated under regulatory accounting practices. Further, changes in regulatory and accounting standards, as well as the impact of future events on FAM’s results, may significantly affect FAM’s net worth adequacy.

Among FAM’s

various capital requirements related to its outstanding mortgage origination and servicing agreements, the most restrictive of these requires FAM to maintain a minimum adjusted net worth balance as of the end of the most recent fiscal quarter of ~~$149.9~~$149.7 million as of June 30, ~~2021 (Successor).~~2022. FAM’s adjusted net worth was ~~$191.4~~$233.1 million as of June 30, ~~2021 (Successor).~~2022. FAM is also subject to requirements related to material declines in quarterly and two consecutive quarter tangible net worth. As ~~a result~~ of ~~impacts from the Business Combination,~~June 30, 2022, FAM was ~~not~~ in compliance with ~~the quarterly and two consecutive quarter tangible net worth requirements required by FNMA. The Company received a waiver for the covenant violation from FNMA as of June 30, 2021 (Successor).~~these covenants.

In addition, FAM 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 FAM throughout the year. FAM is required to conduct compliance testing at least quarterly to ensure compliance with the foregoing requirements. As of June 30, ~~2021 (Successor),~~2022, FAM was in compliance with applicable requirements.

FAR

As an issuer of HMBS, FAR is required by ~~GNMA~~Ginnie Mae to maintain minimum net worth, liquidity

and capitalization levels as well as minimum insurance levels.

The net worth required is $5.0 million plus 1% of FAR’s commitment authority from ~~GNMA.~~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. FAR is required to maintain a ratio of 6% of net worth to total assets.

AtAs of June 30, ~~2021 (Successor),~~2022, FAR was in compliance with the minimum net worth, liquidity, capitalization levels

and insurance requirements of ~~GNMA and had received a permanent waiver for its capital requirement.~~Ginnie Mae. The minimum ~~tangible~~ net worth required of FAR by ~~GNMA~~Ginnie Mae was ~~$101.3~~$110.5 million atas of June 30, ~~2021 (Successor).~~2022. FAR’s actual net worth calculated based on ~~GNMA~~Ginnie Mae guidance was ~~$438.3~~$342.8 million atas of June 30, ~~2021 (Successor).~~2022. The minimum liquidity required of FAR by Ginnie Mae was $22.1 million as of June 30, 2022. FAR’s actual cash and cash equivalents were $121.9

million as of June 30, 2022. FAR’s actual

Table of Contents

Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

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, the Company was ~~therefore~~ in compliance with all ~~net worth~~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 June 30, ~~2021 (Successor),~~2022, FAR was in compliance with applicable requirements.

Incenter

Incenter Securities Group LLC (“ISG”), one of the operating subsidiaries of Incenter, operates in a highly regulated environment and is subject to federal and state laws, SEC rules and Financial Industry Regulatory Authority (“FINRA”) rules and guidance. Applicable laws and regulations, among other things, 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, ISG 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. ISG is subject to the SEC’s Uniform Net Capital Rule (SEC Rule

15c3-1),

~~(“the Rule”),~~ which requires the maintenance of minimum net capital. ISG computes net capital under the alternative method. Under this method, the required minimum net capital is equal to $0.3 million. AtAs of June 30, ~~2021 (Successor),~~2022, ISG met the minimum net capital requirement amounts and was, therefore, in compliance.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

Additionally, the ISG claims the exemption provision of SEC Rule

15c3-3(k)(2)(ii).

ISG does not hold customer funds or safekeep customer securities. ~~The Company~~ISG introduces and clears its customers’ transactions through a ~~third-party~~third party on a fully-disclosed basis. ISG also 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 ISG’s 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.

Agents National Title Insurance Company (“~~Agents”~~ANTIC”), an operating subsidiary of Incenter, has additional capital requirements. The State of Missouri and State of Alabama require domestic title insurance underwriters maintain minimum capital and surplus of $1.6 million and $0.2 million, respectively. Failure to comply with these provisions may result in various actions up to and including surrender of the certificate of authority. Additionally, in October 2019, ~~Agents~~ANTIC entered into a capital maintenance agreement in conjunction with the approval for the certificate of authority for California. This agreement requires ~~Agents~~ANTIC to maintain a minimum of $8.0 million in policyholder surplus. If ~~Agents~~ANTIC falls below this requirement in any given quarter, Incenter must contribute cash, cash equivalents securities or other instruments to bring ~~Agents~~ANTIC in compliance. The Company’s insurance company subsidiaries met the existing minimum statutory capital and surplus requirements as of June 30, ~~2021 (Successor).~~2022.

~~The Company~~ANTIC is also required to maintain bonds, certificates of deposit and interest bearing accounts in accordance with applicable state regulatory requirements. The total requirement was ~~$3.5~~$4.0 million across all states as of June 30, ~~2021 (Successor).~~2022. The Company was in compliance with these requirements as of

June 30, ~~2021 (Successor).~~2022.

~~29.~~

~~Concentrations of Risk~~

The Company’s activities are subject to significant risks and uncertainties, including the ability of management to adequately develop its service lines, acquire adequate customer and revenue bases, and overall market demand for its services. In addition, the Company engages in various trading and brokerage activities in which counterparties primarily include broker-dealers, banks and other financial institutions. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is the Company’s policy to review, as necessary, the credit standing of each counterparty.

~~Financial instruments, which potentially subject the Company to credit risk, consist of cash and cash equivalents, derivatives, loans held for sale, and loans held for investment.~~

The Company invests its excess cash balances that may exceed federal insured limits with financial institutions evaluated as being creditworthy, primarily in money market accounts which are exposed to minimal interest rate and credit risk. The balances of these accounts are insured by the Federal Deposit Insurance Corporation, subject to certain limitations.

~~Credit risk is reduced by the Company’s underwriting standards, monitoring pledged collateral and other~~

~~in-house~~

monitoring procedures performed by management. The Company’s credit exposure for amounts due from investors and derivative related receivables is minimized since its policy is to sell mortgages only to highly reputable and financially sound financial institutions.

Mortgage loans are sold or financed through one of the following methods: (i) sales or financing securitizations to or pursuant to programs sponsored by FNMA, FHLMC, and GNMA, or (ii) sales or financing securitizations issued to private investors. The Company sold $6,421.2 million for the Successor period from April 1, 2021 to June 30, 2021 and $7,696.6 million for the Predecessor period from January 1, 2021 to March 31, 2021 in mortgage loans to FNMA, FHLMC and GNMA. The Company sold $7,274.4 million for the Predecessor three months ended June 30, 2020 and $10,850.6 million for the Predecessor six months ended June 30, 2020 in mortgage loans to FNMA, FHLMC and GNMA. The Company sold to or securitized with private investors $1,691.9 million for the Successor period from April 1, 2021 to June 30, 2021 and $1,724.3 million for the Predecessor period from January 1, 2021 to March 31, 2021 in mortgage loans. The Company sold to or securitized with private investors $1,883.3 million for the Predecessor three months ended June 30, 2020 and $3,384.1 million for the Predecessor six months ended June 30, 2020 in mortgage loans.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

For the Successor period, April 1, 2021 to June 30, 2021, the sale or financing securitizations issued to private investors consisted of 33.2% nonperforming loans and 66.8% other. For the Predecessor period from January 1, 2021 to March 31, 2021, the sales or financing securitizations issued to private investors consisted of 33.1% nonperforming repurchased loans and 66.9% other.

~~The Company’s sales or financing securitizations issued to private investors for the Predecessor three months ended June 30, 2020 consisted of 46.8%~~

~~non-agency~~

reverse mortgage loans, 23.5% commercial loans, 0.1% nonperforming repurchased loans, 3.3% third-party financial institutions, and 26.3% other. The Company’s sales or financing securitizations issued to private investors for the Predecessor six months ended June 30, 2020 consisted of 31.9%

~~non-agency~~

~~reverse mortgage loans, 13.1% commercial loans, 11.0% nonperforming repurchased loans, 6.9% third-party financial institutions, and 37.1% other.~~

~~The Company is partially owned by Libman Family Holdings, LLC, certain investment funds affiliated with Blackstone and other~~

~~co-investors.~~

~~In the ordinary course of conducting business, a portion of these mortgage loans sold or financed relate to certain commercial transactions that the Company enters into with a counterparty that is a~~

~~non-affiliated~~

company separately owned by certain other investment funds affiliated with Blackstone. The nature of its business interactions with this counterparty may allow the Company to negotiate preferential terms of commercial transactions that may not be available for other parties on an

~~arm’s-length~~

~~basis. These commercial transactions include the transfer of certain residential mortgage loans, in which the Company may receive an ongoing service fee. The Company sold mortgage loans to~~

~~non-affiliated~~

Blackstone portfolio companies of $33.4 million for the Successor period from April 1, 2021 to June 30, 2021 and $84.6 million for the Predecessor period from January 1, 2021 to March 31, 2021. The Company sold mortgage loans to

~~non-affiliated~~

~~Blackstone portfolio companies of $98.7 million for the Predecessor six months ended June 30, 2020. In addition, the Company is also contracted by certain~~

~~non-affiliated~~

~~Blackstone portfolio companies to provide~~

~~sub-advisor~~

services in areas such as asset management and administrative oversight, in which the Company receives an advisory fee. The Company has recognized gains on the sale of mortgages related to transactions with

~~non-affiliated~~

Blackstone portfolio companies of $0.9 million for the Successor period from April 1, 2021 to June 30, 2021 and $4.0 million for the Predecessor period from January 1, 2021 to March 31, 2021. The Company recognized gains on the sale of mortgages related to transactions with

~~non-affiliated~~

~~Blackstone portfolio companies of $4.7 million for the Predecessor six months ended June 30, 2020. There were 0sales of loans or gains recognized from sales to~~

~~non-affiliated~~

~~Blackstone portfolio companies for the Predecessor three months ended June 30, 2020.~~

~~In July 2017, the Company entered into a $45.0 million mezzanine financing agreement with a~~

~~non-affiliated~~

company, separately owned by other investment funds affiliated with Blackstone, secured by a junior lien in mortgage assets pledged to certain senior secured warehouse facilities. This facility was structured as a loan and security agreement. The funds advanced are generally repaid using collections from the underlying assets to the extent remaining after the payment of any senior debt or the proceeds from the sale or securitization of the underlying assets or distribution from underlying securities, although prior payment may be required based on, among other things, certain breaches of representations and warranties or other events of default. This financing agreement was amended in May 2021 from $45 million to $25 million. As of June 30, 2021 (Successor) and December 31, 2020 (Predecessor), the Company had outstanding borrowings of $20.9 million and $21.5 million, respectively.

~~Residential Mortgages~~

The mortgaged properties securing the residential loans that we service are geographically dispersed throughout the United States. Certain states may experience future weakened economic conditions or greater rates of decline in real estate values than the United States in general. In addition, certain states may change their licensing or other regulatory requirement to make servicing loans in these states cost-prohibitive.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

~~Notes to Unaudited Consolidated Financial Statements~~

The table below provides the percentage of residential mortgage loans serviced by the location in which the home securing the loan is located and is based on the outstanding UPB. “Other” consists of loans in states in which concentration individually represents less than 5% of total remaining UPB.

June 30, 2021

December 31, 2020


Successor

Predecessor

California


36
%
37 %
Oregon


8

7
Washington


8
8
Arizona


6
6
New Jersey


5
5
Other


37
37




100
%
100 %

~~Reverse Mortgages~~

FAR originates, buys and sells HECMs, commonly referred to as reverse mortgages, and securitizes and sells the HECMs as HMBS. FAR is subject to approval of, and is heavily regulated by, federal and state regulatory agencies as a mortgage lender, GNMA issuer, broker and servicer.

The secondary market for the FHA insured HECM loans is not assured; to the extent the program requires Congressional appropriations in future years, which are not forthcoming, the program could be jeopardized; and/or, consumer demand could be reduced if FHA actions result in a reduction of initial principal limit available to borrowers.

FAR depends on its ability to securitize reverse mortgages, subsequent draws, mortgage insurance premiums and servicing fees, and would be adversely affected if the ability to access the secondary market were to be limited.

Concentrations of credit risk associated with reverse mortgage loans are limited due to the large number of customers and their dispersion across many geographic areas. The table below provides the percentage of reverse loans in the Company’s Consolidated Statements of Financial Condition by the location in which the home securing the loan is located and is based on their remaining UPBs. “Other” consists of loans in states in which concentration individually represents less than 5% of total remaining UPB.

June 30, 2021

December 31, 2020


Successor

Predecessor

California


44
%
44 %
New York


8
8
Florida


5
5
Texas


5
5
Other


38
38




100
%
100 %

~~A significant portion of the Company’s~~

~~non-agency~~

~~reverse mortgage products are originated within the state of California. The Company’s~~

~~non-agency~~

reverse mortgage production concentration by location is presented in the following table. The Company’s total origination volume in any other states did not exceed 5% of the total origination volume, and were included in the “Other” balance.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

Notes to Unaudited Consolidated Financial Statements

June 30, 2021

December 31, 2020


Successor


Predecessor

California


79
%
   84 %
Other


21
   16






100
%
   100 %

Loans previously repurchased out of a HMBS pool (“HECM Buyouts”) that were subsequently securitized also contain concentrations of credit risk as they are limited due to the dispersion across many geographic areas. The table below provides the percentage of securitized nonperforming HECM buyouts in the Company’s Consolidated Statements of Financial Condition by the location in which the home securing the loan is located and is based on their remaining UPBs. “Other” consists of loans in states in which concentration individually represents less than 5% of total remaining UPB.

June 30, 2021

December 31, 2020


Successor

Predecessor

Puerto Rico


16
%
   21 %
New York


16
   15
California


10
   9
Texas


10
   9
Florida


6
   5
Other


42
   41






100
%
   100 %

Puerto Rico’s economy has been in a serious recession since the second quarter of 2006, and its economic downturn has been generally much worse than that of the United States. Further, Hurricane Maria in 2017 has further stressed the economy and infrastructure in Puerto Rico, resulting in extensive loss of water supplies and electricity.

Regulatory agencies require all properties in affected areas to be inspected for “acceptable” condition prior to any transaction occurring with or on behalf of the GSEs or HUD (including foreclosure sale, property conveyance, sale/funding/transfers of originated loans to third parties, etc.). This required inspection may cause delays in foreclosures and settlement of claims. Additionally, in certain circumstances when there are uninsured losses, the Company may be responsible for repairs to the properties if not done by the homeowner.

In its determination of fair value amounts for loans that are in disaster impacted areas, the Company has provided for increased expectations of loss severities due to delays in processing claims and uninsured losses. These estimates are based on management’s best estimates of anticipated losses. Actual results may differ from the estimates due to external factors.

~~Commercial Mortgages~~

The economies of states where mortgage properties are concentrated may be adversely affected to a greater degree than the economies of other areas of the country. The table below provides the percentage of loans on the Company’s Consolidated Statements of Financial Condition by the location in which the home securing the loan is located and is based on their remaining UPBs. “Other” consists of loans in states in which concentration individually represents less than 5% of total remaining UPB.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

June 30, 2021

December 31, 2020


Successor

Predecessor

Illinois


7
%

   7 %
Minnesota


8
   5
New Jersey


6
   9
New York


3
   7
California


4
   9
Connecticut


2
   5
Florida


5
   6
Texas


5
   5
New Mexico


13
   1
Other


47
   46






100
%
   100 %

~~Incenter~~

The Company’s title and closing revenue had two major referral partners accounting for approximately 23% of revenue for the Successor period from April 1, 2021 to June 30, 2021 and 21% of revenue for the Predecessor period from January 1, 2021 to March 31, 2021. The two major referral partners also made up a significant portion of revenue for the Predecessor periods with 25% of revenue for the three months ended June 30, 2020 and 23% of revenue for the six months ended June 30, 2020.

Ratings have always been an important factor in establishing the competitive position of insurance companies. Ratings reflect the opinion of a rating agency with regard to an insurance company’s or insurance holding company’s financial strength, operating performance and ability to meet its obligations to policyholders and are not evaluations directed to investors. The Company’s insurance subsidiary is rated by Demotech and, as of June 30, 2021 (Successor), the rating assigned was A (Exceptional). The Company is subject to continued periodic review by the rating agency and the continued retention of the rating cannot be assured. If the rating is reduced from the current level or the ratings of the Company’s insurance title underwriter are downgraded, the results of operations could be adversely affected.

~~30.~~19.

Related Party Transactions

~~The Company transacts with various related parties as a part of normal~~

~~day-to-day~~

~~operations. Outstanding receivables from related parties were $0.0 million and $2.6 million as of June 30, 2021 (Successor) and December 31, 2020 (Predecessor),~~

~~respectively.~~

Promissory Notes

~~In June 2019, the~~

The Company ~~executed~~had two Revolving Working Capital Promissory Note Agreements (the ~~“2019~~“2021 Promissory Notes”) outstanding with BTO Urban Holdings and Libman Family Holdings, LLC, which are deemed affiliates of the Company. ~~The 2019~~Amounts under the 2021 Promissory Notes ~~accrued~~may be re-borrowed and repaid from time to time until the related maturity date. The 2021 Promissory Notes accrue interest monthly at a rate

~~10.0~~

% 6.5% per annum

and ~~matured~~

mature in January 2023. There were 0

amounts outstanding and ~~were~~an immaterial amount of interest paid ~~in full in~~on these notes during the Successor three and six months ended June ~~2020. For the~~30, 2022, three months ended June 30, ~~2020 of the Predecessor, the Company paid interest of $~~

~~2.5~~

~~million related to the 2019 Promissory Notes. For the six months ended June 30, 2020 of the Predecessor, the Company paid interest of $~~

~~2.9~~

~~million related to the 2019 Promissory Notes. For the Predecessor period from January 1, 2021 to March 31,~~ 2021, and the ~~Successor period from April 1, 2021 to June 30, 2021, the Company paid~~Predecessor three months ended March 31, 2021.

~~interest related to the 2019 Promissory Notes.~~

Agricultural Loans

In 2019, the Company entered into an Amended and Restated Limited Liability Company Agreement with FarmOp Capital Holdings, LLC (“FarmOps”) in which the Company acquired an equity investment in FarmOps. Subsequent to this agreement, the Company agreed to purchase originated agricultural loans from FarmOps. The Company

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

purchased agricultural loans and had total funded draw amounts of ~~$46.3~~

$32.6 million and ~~$53.4~~ $44.8

million, respectively, for the Successor ~~period from April 1, 2021 to~~three months ended June 30, 2022, and $105.9 million and $133.5 million for the six months ended June 30, 2022. The Company purchased agricultural loans and had total funded draw amounts of

$46.3 million and $53.4

million, respectively, during the three months ended June 30, 2021, and $83.0 million and $82.1 million, ~~respectively,~~ for the Predecessor ~~period from January 1, 2021 to~~three months ended March 31, 2021. The Predecessor purchased agricultural loans and had total funded draw amounts of $12.0 million and $11.5 million, respectively, for the three months ended June 30, 2020 and $76.7 million and $67.1 million, respectively, for the six months ended June 30, 2020.

The Company had promissory notes outstanding with FarmOps of ~~$3.3~~$4.3 million and ~~$0.8~~$4.1 million, including accrued interest, as of June 30, ~~2021 (Successor)~~2022 and December 31, ~~2020 (Predecessor),~~2021, respectively.

~~Cloudvirga~~

In 2017 and 2019, the Company purchased preferred and common stock investments in Cloudvirga, Inc. (“Cloudvirga”). Subsequent to its investment, the Company entered into a software development arrangement in which Cloudvirga agreed to develop software in addition to providing certain technology services for the Company. In May 2021, Cloudvirga merged with an unaffiliated third party, causing the liquidation of all shares held by the Company. As such, the fair value assumptions used to determine the holding value of such preferred equity were updated by the Company and resulted in an impairment of the equity investment of $9.3 million in the Predecessor period from January 1, 2021 to March 31, 2021. As a result of this liquidation of the held shares of Cloudvirga by certain subsidiaries of the Company, the related party relationship was terminated.

For the Predecessor period from January 1, 2021 to March 31, 2021, $1.7 million was capitalized related to the development of the software and will be amortized over a 12 month period from the date placed in service. Professional fees paid to Cloudvirga, in exchange for the technology services, by the Predecessor were $0.6 million for the Predecessor period from January 1, 2021 to March 31, 2021, $0.3 million for the Predecessor three months ended June 30, 2020 and $0.8 million for the Predecessor six months ended June 30, 2020.

Nonrecourse MSR Financing Liability, at Fair Value

2020, the Company entered into a nonrevolving facility commitment with various related parties, to sell beneficial interests in the servicing fees generated from its originated or acquired MSRs. Under these agreements, the Company has agreed to sell excess servicing income or pay an amount equal to excess servicing income to third parties, in each case, taking into account cost of servicing and ancillary income related to the identified MSRs in exchange for an upfront payment equal to the purchase price or fair value of the identified MSRs. These transactions are accounted for as financings.

As of June 30, ~~2021 (Successor)~~2022 and December 31, ~~2020 (Predecessor),~~2021, the Company had an outstanding advance of ~~$22.1~~$153.1 million and ~~$14.9~~$115.4 million, respectively, against this commitment for the purchase of MSRs with a fair value of ~~$18.9~~$153.4 million and ~~$14.1~~$155.1 million, respectively.

The Company has also entered into Investment Management Agreements with these third parties to serve as the investment manager, in which the Company performs various advisory services to the investors in exchange for a management fees. Management fees amounted to $0.1 million for the Successor period from April 1, 2021 to June 30, 2021 and for the Predecessor period from January 1, 2021 to March 31, 2021. There were 0managements fees paid for the Predecessor three months ended June 30, 2020 or the Predecessor six months ended June 30, 2020,

~~as the nonrevolving facility commitment during these periods.~~

Senior Notes

Related parties of FoA purchased notes in the high-yield debt offering in November 2020 in an aggregate principal amount of $135.0

million.

Table of Contents

Finance of America Companies Inc. and Subsidiaries

~~Notes to Unaudited Consolidated Financial Statements~~

~~31.~~

~~Condensed Financial Information of Registrant (Parent Company Only)~~

~~Finance of America Companies Inc.~~

~~(Parent company only)~~

~~Condensed Statements of Financial Condition~~

~~(Dollars in thousands)~~

June 30, 2021

December 31, 2020


Successor

Predecessor

ASSETS

Fixed assets and leasehold improvements, net

$
—
   $ 23
Investment in subsidiaries


814,440

   639,011
Other assets, net


—

   2,184




TOTAL ASSETS

$
814,440
   $ 641,218




LIABILITIES AND EQUITY

Payables and other liabilities

$
76,469
   $ 13,033




TOTAL LIABILITIES

$
76,469
   $ 13,033




EQUITY

FoA Equity Capital LLC member’s equity


—

   628,176
Class A Common Stock (Successor), $0.0001 par value; 6,000,000,000 shares authorized; 59,881,714 shares issued and outstanding at June 30, 2021


6
   —
Additional
paid-in
capital (Successor)


807,521
   —
Accumulated deficit (Successor)


(69,548
)
   —
Accumulated other comprehensive (loss) income


(8
)
   9




TOTAL EQUITY


737,971
   628,185




TOTAL LIABILITIES AND EQUITY

$
814,440
   $ 641,218

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

Notes to Unaudited Consolidated Financial Statements

~~Finance of America Companies Inc.~~

~~(Parent Company Only)~~

~~Condensed Statements of Operations and Comprehensive Income~~

~~(Dollars in thousands)~~

April 1, 2021
to
June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

REVENUES

Interest expense

$
—
   $ (46 )    $ (2,477 )    $ (3,601 )








TOTAL REVENUES


—

   (46 )    (2,477 )    (3,601 )








EXPENSES

Salaries and benefits


—

   4,041    3,162    4,263
Occupancy and equipment rentals


—

   161    143    312
General and administrative


—

   357    215    736








TOTAL EXPENSES


—

   4,559    3,520    5,311
OTHER, NET


(2,152
)
   —      —      —








NET LOSS BEFORE INCOME TAXES


(2,152
)
   (4,605 )    (5,997 )    (8,912 )
Provision for income taxes applicable to parent


(99
)
   —      —      —








NET LOSS


(2,053
)
   (4,605 )    (5,997 )    (8,912 )
Equity in undistributed income from subsidiaries


4,318
   124,464    154,332    129,997








NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST


2,265
   119,859    148,335    121,085
Other comprehensive (loss) income


(8
)
   (11 )    18    11








COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

$
2,257
   $ 119,848    $ 148,353    $ 121,096

As disclosed in Note 2—Summary of Significant Accounting Policies, FoA is a holding company and has a controlling interest in FoA Equity. FoA did not have any cash as of June 30, 2021 (Successor), accordingly Condensed Statements of Cash Flows have 0t been presented. Management determined which assets and liabilities were to be used by the operating subsidiaries, and these amounts have been appropriately excluded from the parent company Condensed Statements of Financial Position of FoA presented above. Changes in these balances are reflected as additional contributions and distributions from FoA Equity in the period in which they occur, and had no impact on any cash balances that may have otherwise been maintained at FoA.

~~Basis of Presentation~~

The parent company financial statements should be read in conjunction with the Company’s Consolidated Financial Statements and the accompanying notes thereto. The parent company follows the same accounting policies as disclosed in Note 2—Summary of Significant Accounting Policies to the Company’s Consolidated Financial Statements. For purposes of this condensed financial information, the Company’s consolidated subsidiaries are recorded based upon its proportionate share of the subsidiaries net assets (similar to presenting them on the equity method).

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

Since restricted net assets of FoA and its subsidiaries exceed 25% of the consolidated net assets of the Company and its subsidiaries, the accompanying condensed parent company financial statements have been prepared in accordance with Rule

~~12-04~~

~~Schedule 1 of Regulation~~

~~S-X.~~

~~Dividends from Subsidiaries~~

There were 0cash dividends paid to the parent from the Company’s consolidated subsidiaries for the Successor period from April 1, 2021 to June 30, 2021 and $75.0 million for the Predecessor period from January 1, 2021 to March 31, 2021. There were 0cash dividends paid to parent from the Company’s consolidated subsidiaries for the three months ended June 30, 2020 or the six months ended June 30, 2020.

~~Table of Contents~~

~~Finance of America Companies Inc. and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~32.~~20.

Income Taxes

The components of income tax expense (benefit) were as follows:

April 1, 2021
to
June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Net (loss) income before income taxes

$
(13,738
)
   $ 125,457 $ 146,734 $ 104,645
Provision for income taxes


1,086

   1,137 448 766
Effective tax provision rate


(7.91
)%
   0.91 % 0.31 % 0.73 %


	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) before income taxes	$	(168,763	)	$	(246,093	)	$	(13,738	)	$	125,457
Provision (benefit) for income taxes		(940	)		(14,275	)		1,086			1,137
Effective tax provision rate		0.56	%		5.80	%		(7.91	)%		0.91	%

The Company’s effective tax rate for the three and six months ended June 30, 2022 differs from the U.S.’s statutory rate primarily due to anticipated state statutory income tax ~~expense varies from~~rates as well as the ~~expense that would be expected based on statutory rates due principally~~projected mix of earnings or loss attributable to ~~its organizational structure.~~the noncontrolling interest not allocable to FoA. Prior to the Business Combination, FoA Equity operated as a U.S. Partnership which, generally, are not subject to U.S. federal and state income taxes. Post transaction, FoA’s effective tax rate differs from the U.S.’s statutory rate primarily due to the noncontrolling interest associated with the portion of FoA Equity income not allocable to FoA and treatment of certain

~~non-recurring~~

transactions related to the Replacement RSUs, which are accounted for as discrete items in the interim period in which they occur rather than incorporated into the calculation of the estimated annual effective tax rate.

After the Business Combination, FoA is taxed as a corporation and is subject to ~~corporate~~U.S. federal, state and local taxes on the income allocated to it from FoA Equity, based upon FoA’s economic interest in FoA Equity, as well as any stand-alone income ~~or loss~~ it generates. FoA Equity and its disregarded subsidiaries are treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, FoA Equity is not subject to U.S. federal and certain state and local income taxes. FoA Equity’s members, including FoA, are liable for U.S. federal, state and local income taxes based on their allocable share of FoA Equity’s pass-through taxable ~~income, which includes income of FoA Equity’s subsidiaries that are treated as disregarded entities separate from FoA Equity for income tax purposes.~~income.

FoA Equity wholly owns ~~Campus Door Inc., BNT Title Company of California, ANTIC Inc. and Silvernest Inc., which are~~certain regarded corporate subsidiaries for tax purposes. FoA Equity’s regarded corporate subsidiaries are subject to ~~corporate~~U.S. federal, state and local taxes on income they generate. As such, the consolidated tax provision of FoA ~~addresses~~includes corporate taxes that it incurs based on its flow-through income from FoA Equity as well as its allocable portion of corporate taxes that are incurred by its regarded subsidiaries.

As a result of the Business Combination, the Company recognized a deferred tax liability (“DTL”) in the net amount of $24.5 million to account for the difference between the Company’s book and tax basis in its investment in FoA Equity. Furthermore, the

The Company recognizes deferred tax assets to the extent it believes these assets are

more-likely-than-not

to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and recent results of operations.

The Company recognizes uncertain income tax positions when it is not

more-likely-than-not

a tax position will be sustained upon examination. As of June 30, ~~2021 (Successor),~~2022, the Company has recognized uncertain tax positions related to positions taken at ~~the~~FoA and lower tier ~~regarded corporate subsidiaries named above. The~~subsidiaries. There were no significant changes to the Company’s uncertain tax positions for the current period. If necessary, the Company accrues interest and penalties related to uncertain tax positions as a component of the income tax

provision. ~~NaNinterest~~

NaN

interest or penalties were recognized in income tax expense for the Successor ~~period from April 1, 2021 to June 30, 2021 or for the Predecessor period from January 1, 2021 to March 31, 2021. NaN interest or penalties were recognized in income tax expense for the Predecessor~~ three ~~months ended~~ and six months ended June 30, ~~2020.~~2022, three months ended June 30, 2021, or the Predecessor three months ended March 31, 2021. Tax positions taken in tax years that remain open under the statute of limitations will be subject to examinations by tax authorities. With few exceptions, the Company is no longer subject to state or local examinations by tax authorities for tax years ended December 31, ~~2016~~ 2017

or prior.

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Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

~~33.~~

21.

Earnings Per Share

based compensation awards outstanding during the Successor period.

For the Predecessor periods, FoA Equity’s capital structure consisted of a single class of outstanding membership units which are held by one member, UFG. Therefore, the Company has omitted earnings per unit for the Predecessor ~~period~~periods presented due to the limited number of LLC unit ~~holders for the Predecessor periods presented.~~holders.

The following ~~table reconciles~~tables reconcile the numerators and denominators used in the computations of both basic and diluted earnings per share for the Successor ~~period~~periods (in thousands, except ~~for~~share data and per share amounts):

April 1, 2021
to

June 30, 2021


Successor

Basic net income (loss) per share:

Numerator

Net loss

$
(14,824
)
Less: loss attributable to noncontrolling interests
(1)


(17,089
)


Net income attributable to holders of Class A Common Stock—basic

$
2,265



Denominator

Weighted average shares of Class A Common Stock outstanding—basic


59,881,714



Basic net income per share

$
0.04


	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
Basic net earnings (loss) per share:
Numerator
Net loss	$	(167,823	)	$	(231,818	)	$	(14,824	)		N/A
Less: loss attributable to noncontrolling interest (1)		(127,143	)		(182,645	)		(17,089	)		N/A

Net income (loss) attributable to holders of Class A Common Stock—basic	$	(40,680	)	$	(49,173	)	$	2,265			N/A

Denominator
Weighted average shares of Class A Common Stock outstanding—basic		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

(1)	The Class A LLC Units of FoA Equity, held by the Continuing Unitholders, which comprise the noncontrolling interest in ~~FoA,~~the Company, represents a participating security. Therefore, the numerator was adjusted to reduce net income by the amount of net income attributable to noncontrolling ~~interests.~~interest.

Additionally, the Class B Common Stock does not participate in earnings or losses of the Company and therefore is not a participating security. The Class B Common Stock has not been included in either the basic or diluted net income per share calculations.

~~Loss attributable to noncontrolling interest includes special allocations of recognized expense related to the A&R MLTIP. See Note 24 - Incentive Compensation for additional details.~~

Additionally, the Class B Common Stock does not participate in earnings or losses of the Company and therefore is not a participating security. The Class B Common Stock has not been included in either the basic or diluted net income per share calculations.

Loss attributable to noncontrolling interest includes an allocation of expense related to the Amended and Restated Long-Term Incentive Plan (“A&R MLTIP”).

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Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements


	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
Diluted net loss per share:
Numerator
Net income (loss) attributable to holders of Class A Common Stock	$	(40,680	)	$	(49,173	)	$	2,265			N/A
Reallocation of net income (loss) assuming exchange of Class A LLC Units (1)		(90,293	)		(139,756	)		(12,001	)		N/A

Net loss attributable to holders of Class A Common Stock—diluted	$	(130,973	)	$	(188,929	)	$	(9,736	)		N/A

Denominator
Weighted average shares of Class A Common Stock outstanding—basic		62,379,041			61,580,900			59,881,714			N/A
Effect of dilutive securities:
Assumed exchange of weighted average Class A LLC Units for shares of Class A Common Stock (2)		125,439,184			127,048,176			131,318,286			N/A

Weighted average shares of Class A Common Stock outstanding—diluted		187,818,225			188,629,076			191,200,000			N/A

Diluted net loss per share	$	(0.70	)	$	(1.00	)	$	(0.05	)		N/A

April 1, 2021

to

June 30, 2021

(in thousands, except for share amounts)

Successor

Diluted net loss per share:

Numerator

Net income attributable to holders of Class A Common Stock

$
2,265

Reallocation of net loss assuming exchange of Class A LLC Units
(2)


(12,001
)


Net loss attributable to holders of Class A Common Stock—diluted

$
(9,736
)


Denominator

Weighted average shares of Class A Common Stock outstanding—basic


59,881,714

Effect of dilutive securities:

Assumed exchange of Class A LLC Units for shares of Class A Common Stock
(3)


131,318,286



Weighted average shares of Class A Common Stock outstanding—diluted


191,200,000





Diluted net loss per share

$
(0.05
)


~~(2)~~ (1)	This adjustment assumes the after-tax elimination of noncontrolling interest due to the assumed exchange of all Class A LLC Units outstanding for shares of Class A Common Stock in FoA as of the beginning of the period following the if-converted method for calculating diluted net income (loss) per share.

Following the terms of the A&R LLC Agreement, the Class A LLC unitholders will bear approximately 85% of the cost of any vesting associated with the Replacement RSUs and Earnout Right RSUs prior to any distribution by the Company to such Class A LLC unitholders. The remaining compensation cost associated with the Replacement RSUs and Earnout Right RSUs will be born by FoA for the share attributable to Blackstone Tactical Opportunities Fund (Urban Feeder) – NQ L.P., a Delaware limited partnership (“Blocker”). As a result of the application of the if-converted method in arriving at diluted net loss per share, the entirety of the compensation cost associated with vesting of the Replacement RSUs and Earnout Right RSUs is assumed to be included in the net loss attributable to holders of the Company’s Class A Common Stock.

(2)

Following the terms of the A&R LLC Agreement, the Class A LLC unitholders will initially bear approximately 85% of the cost of any vesting associated with the Replacement RSUs and Earnout Right RSUs prior to any distribution by FoA to such Class A LLC unitholders. The remaining compensation cost associated with the Replacement RSUs and Earnout Right RSUs will be shared by Blocker. As a result of the application of the

~~if-converted~~

method, in arriving at diluted net income per share, the entirety of the compensation cost associated with vesting of the Replacement RSUs and Earnout Right RSUs is assumed to be included in the net income attributable to holders of the Company’s Class A Common Stock.

~~(3)~~

The diluted weighted average shares outstanding of Class A Common Stock includes the effects of the

if-converted

method to reflect the provisions of the Exchange Agreement and ~~assume~~assumes the Class A LLC ~~unitholders of FoA Equity,~~Units held by Continuing Unitholders, representing the noncontrolling interest, exchange their units on a

one-for-one

basis for shares of Class A Common Stock in FoA.

In addition to the Class A LLC Units, the Company also had Replacement RSUs outstanding during the period from April 1, 2021 to June 30, 2021. The effects of the Replacement RSUs following the treasury stock method have been excluded from the computation of diluted net income per share given that the

~~if-converted~~

~~method was determined to be more dilutive.~~

~~34.~~

~~Sponsor Earnout~~

~~Contemporaneously with~~

In addition to the ~~execution~~Class A LLC Units, the Company also had RSUs outstanding during the Successor three and six months ended June 30, 2022. The effects of the ~~Transaction Agreement,~~RSUs following the ~~initial shareholders entered into an amendment and restatement~~treasury stock method have been excluded from the computation of diluted net loss per share given that the ~~existing Sponsor Agreement (as amended and restated, the “Sponsor Agreement”) with FoA, Replay and FoA Equity, pursuant~~if-converted method was determined to which, in connection with the Closing of the Business Combination, among other things, (i) immediately prior to the Domestication (as defined below), the 7,750,000 of private placement warrants (the “Private Warrants” and, together with the Public Warrants, the “Warrants”) owned by the Sponsor were exchanged for 775,000 ordinary shares which then converted into shares of Class A Common Stock and (ii) excluding the 90,000 Founder Shares held by Replay’s independent directors (unless transferred to any other initial shareholder or permitted transferee thereof) that were converted into shares of Class A Common Sock and immediately vested,

be more dilutive.

of the Founder Shares shares held by the Sponsor (2,839,000 shares) were converted into vested Class A Common Stock and became wholly owned by the Sponsor immediately prior to the Closing of the Business Combination and

of the Founder Shares held by the Sponsor (4,258,500 shares) were converted into unvested shares of Class A Common Stock and are subject to vesting and forfeiture in accordance with certain terms and conditions, as laid out below.

If at any time during the six years following the Closing, the VWAP of FoA’s Class A Common Stock is greater than or equal to $12.50 for any twenty (20) Trading Days within a period of thirty (30) consecutive Trading Days (“First

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Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

Sponsor Earnout Achievement Date”) then 35% of the total Founder Shares owned by each Sponsor Person shall vest. If the First Sponsor Earnout Achievement Date has not occurred within six years of the Closing Date the Founder Shares that were eligible to vest shall not vest and shall be forfeited.

If at any time during the six years following the Closing, the VWAP of FoA’s Class A Common Stock is greater than or equal to $15.00 for any twenty (20) Trading Days within a period of thirty (30) consecutive Trading Days (“Second Sponsor Earnout Achievement Date”) then 25% of the total Founder Shares owned by each Sponsor Person shall vest. If the Second Sponsor Earnout Achievement Date has not occurred within six years of the Closing Date the Founder Shares that were eligible to vest shall not vest and shall be forfeited.

~~Given that the Sponsor Agreement was issued to the acquirers of FoA Equity, and not to the sellers of FoA Equity, the~~

~~Pre-Closing~~

Equity Holders, the Sponsor Agreement was not accounted for as consideration transferred and did not impact the purchase price paid by Replay. Instead the Sponsor Agreement was accounted for separately from the other provisions of the Transaction Agreement. The Company classified the Sponsor Agreement as an equity transaction. Given the equity classification, the Sponsor shares were measured at a fair value of $38.1 million upon the consummation of the Transaction Agreement the date of issuance, and will not be subsequently remeasured. Additionally, the settlement of the Sponsor Agreement will be accounted for within equity, if and when the First or Second Earnout Achievement Date occurs.

~~The fair value was determined by using a Monte Carlo simulation to forecast the future daily price per share of Class A Common Stock over a~~

~~six-year~~

~~time period. The Sponsor Earnout will terminate if after six years following the Closing Date, neither the First nor Second Sponsor Earnout Achievement Dates are met; or FoA is sold.~~

~~35.~~22.

Equity

Class A Common Stock

As of June 30, ~~2021~~2022 (Successor), there were ~~64,140,214~~66,733,053 shares of Class A Common Stock outstanding, consisting of ~~59,881,714 vested~~62,474,553 shares issued and outstanding and 4,258,500 unvested shares that are subject to vesting and forfeiture. The 4,258,500 unvested shares of Class A Common Stock relate to the Sponsor ~~Earnout, further discussed in Note 34.~~Earnout. The 4,258,500 unvested shares of Class A Common Stock are not entitled to receive any dividends or other distributions, do not have any other economic rights until such shares are vested, and will not be entitled to receive back dividends or other distributions or any other form of economic

“catch-up”

once they become vested. The holders of the ~~59,881,714 vested~~62,474,553 issued and outstanding shares of Class A Common Stock represent the controlling interest of the ~~company. Refer~~Company.

Pursuant to ~~Note 34—Sponsor~~the Exchange Agreement, the Continuing Unitholders may elect to exchange their Class A LLC Units for shares of Class A Common Stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. For the three months ended June 30, 2022,

n connection with FoA’s settlement of restricted stock units into shares of Class A Common Stock and pursuant to the A&R MLTIP, these equity holders delivered shares of Class A Common Stock and Class A LLC Units to the Company in satisfaction of such settlement. This delivery of shares of Class A Common Stock and Class A LLC Units to the Company offset the gross award of RSUs settled. The Company elected to retire 1,654,331 shares received offsetting RSUs withheld to fund employee payroll taxes and instead funded those taxes with operating cash. The future settlement of the Replacement RSUs and Earnout ~~for additional details regarding~~Rights outstanding as of June 30, 2022, will also be funded by the ~~unvested shares.~~delivery of Class A Common Stock and Class A LLC Units from certain equity holders of FoA and FoA Equity pursuant to the A&R MLTIP.

Pursuant to the Exchange Agreement, the Continuing Unitholders may elect to exchange their Class A LLC Units for shares of Class A Common Stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. For the three months ended June 30, 2022, in connection with FoA’s settlement of the exchange of Class A LLC Units for shares of Class A Common Stock and pursuant to the Exchange Agreement, certain equity holders

delivered 3,219,860

Class A LLC Units to the Company in exchange fo

r 3,219,860

shares of Class A Common Stock in satisfaction of such settlement.

Class B Common Stock

~~Upon the Closing~~As of ~~the Business Combination, the Company issued 7~~June 30, 2022, there are 15 shares of Class B Common Stock outstanding, all holders of which are Class A LLC Unit holders. The Class B Common Stock, par value $0.0001 per share, ~~to holders of Class A LLC Units. The Class B Common Stock~~ has no economic rights but entitles each holder of at least one such share (regardless of the number of shares so held) to a number of votes that is equal to the aggregate number of Class A LLC Units held by such holder on all matters on which shareholders of the Company are entitled to vote generally.

Class A LLC Units

In connection with the Business Combination, the Company, FoA Equity and the Continuing Unitholders entered into an Exchange ~~Agreement (the “Exchange Agreement”).~~Agreement. The Exchange Agreement sets forth the terms and conditions upon which holders of Class A LLC Units may exchange their Class A LLC Units for shares of Class A Common Stock on a

one-for-one

basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. The Continuing Unitholders’ ownership of Class A LLC Units represents the noncontrolling interest of the Company, which is accounted for as permanent equity on the Condensed Consolidated Statements of Financial Condition. As of June 30, ~~2021 (Successor),~~2022, there were ~~191,200,000~~187,888,060 Class A LLC Units outstanding. Of the ~~191,200,000~~187,888,060 Class A LLC Units outstanding, ~~59,881,714~~62,474,553 are held by the Class A Common Stock shareholders and ~~131,318,286~~125,413,507 are held by the noncontrolling interest of the Company.

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Finance of America Companies Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

As a result of the settlement of 93,455 Non-LTIP RSUs in the 2022 Successor period, the Company issued 93,455 shares of Class A Common Stock and issued the same amount of Class A LLC Units for the benefit of FoA.

~~36.~~

~~Subsequent Events~~

The Company has evaluated subsequent events from the date of the Consolidated Financial Statements of June 30, 2021 through August 16, 2021, the date these Consolidated Financial Statements were issued. No events or transactions were identified that would have an impact on the financial position or results of operations of the Company as of June 30, 2021 (Successor) as reported herein. However, management of the Company believes disclosure of the following events is appropriate.

~~Securitizations~~64

~~Reverse Loan Securitization~~

In July 2021, the Company securitized approximately $296.0 million of its reverse mortgage loans, through the issuance of approximately $331.9 million of mortgage backed notes, which accrue interest at an annual rate of 1.3% on a weighted average basis on the principal balance of the notes and have a scheduled final maturity date occurring in ~~July~~ 20

~~. The $331.9 million of mortgage backed notes were issued at a weighted average price of~~

~~98.3~~

%. The principal and interest on the outstanding notes will be paid using the cash flows from the related reverse mortgage loans, which serve as collateral for the debt. The securitization is callable by the Company with the optional redemption date being any date beginning with the payment date occurring in ~~July 2024~~.

~~This securitization will be accounted for as a secured financing in the Company’s Consolidated Statements of Financial Condition.~~

~~FarmOps~~

In July 2021, upon meeting the contractual exercise condition, the Company exercised its warrant for the purchase of 6,426,015 Series A-2 Convertible Preferred Units of FarmOp at the contractual cash exercise price of $0.0001 per unit. Following this exercise, FoA’s percentage of fully-diluted equity ownership of FarmOp is 36.4%.

~~Financing Lines of Credit~~

~~The July 2021 $200.0 million facility was amended in July 2021. Under the terms of the new amended agreement, the maturity date was extended to July 2022.~~

~~The August 2021 $300.0 million facility was amended in August 2021. Under the terms of the new amended agreement, the maturity date was extended to September 2021.~~

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Item 2.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations (“MD&A”) should be read together with our consolidated financial statements and related notes. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors. Except where the context otherwise requires, the terms “Finance of America Companies,” “Finance of America,”“FoA,” “we,” “us,” or “our” refer to the business of Finance of America Companies Inc. and its consolidated subsidiaries.

Overview

Finance of America Companies Inc. is a ~~vertically integrated, diversified~~customer focused, consumer and specialty lending platform that connects borrowers with investors. We offer a diverse set of high quality consumer loan products and distribute financial risk to investors for an

up-front

cash profit and ~~typically some~~often retain a future performance-based participation. We believe we have a differentiated, less volatile strategy than mono-line mortgage lenders who focus on originating interest rate sensitive traditional mortgages and retain significant portfolios of ~~mortgage servicing rights~~MSRs with large potential future advancing obligations. In addition to our profitable lending operations, we provide a variety of services to lenders through our Lender Services segment, which augments our lending profits with an attractive

fee-oriented

revenue stream. Our differentiated strategy is built upon a few key fundamental factors:

We operate in a diverse set of lending markets that benefit from strong, secular tailwinds and are each influenced by different demand ~~drivers, which we~~drivers. We believe this diversification results in stable and growing earnings with lower volatility and lower mortgage market correlation than a traditional mortgage company.

We seamlessly connect borrowers with investors. Our consumer-facing business leaders interact directly with the investor-facing professionals in our Portfolio Management segment, facilitating the development of attractive lending solutions for our customers with the confidence that the loans we generate can be efficiently and profitably sold to a deep pool of investors. While we often retain a future performance-based participation in the underlying cash flows of our loan products, we seek to programmatically and profitably monetize most of our loan products through a variety of investor channels, which minimizes capital at risk.

We distribute our products through multiple channels, and utilize flexible technology platforms and a distributed workforce in order to scale our businesses and manage costs efficiently. Our businesses are supported by a centralized business excellence office (“BXO”), providing all corporate support, including IT, Finance and Accounting, Treasury, Human Resources, Legal, Risk and Compliance. This platform enables us to ~~be product agnostic, with the ability to~~ focus our resources as the opportunity set evolves while not being overly reliant on any individual product. As borrower demands for lending products change, we are able to change with them and continue to offer desirable lending solutions.

Today, we are principally focused on (1) residential mortgage loan products throughout the U.S., offering traditional mortgage loans, reverse mortgage loans, home improvement loans, and (2) business purpose loans to real estate investors. We have built a distribution network that allows our customers to interact with us through their preferred method: in person, via a broker or digitally. Our product offering diversity makes us resilient in varying rate and origination environments, and differentiates us from traditional mortgage lenders. Our Lender Services segment supports a range of financial institutions, including our lending companies, with services such as title insurance and settlement services, appraisal management, valuation and brokerage services, fulfillment services, and technology platforms for student ~~loans~~ and consumer loans. In addition to creating recurring ~~third-party~~third party revenue streams, these service business lines allow us to better serve our lending customers and maximize our revenue per lending transaction. Furthermore, our Portfolio Management segment provides structuring and product development expertise, allowing innovation and improved visibility of execution for our originations, as well as a broker/dealer and institutional asset management capabilities. These capabilities ~~allowed~~allow us to complete profitable ~~sales~~securitizations of our ~~loan products via securitization,~~originated loans, including 12 securitizations during the Successor three months

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~~securitization during~~ended June 30, 2022 and 4 for the ~~Predecessor period from January 1,~~six months ended June 30, 2022. During 2021 ~~to March 31, 2021 and~~there were 3 securitizations ~~during~~for the Successor period ~~from April 1, 2021 to~~three months ended June 30, ~~2021. During an otherwise volatile 2020, there were 10 securitizations, demonstrating~~2021 and 1 for the ~~high quality and liquidity of the loan products we originate, the deep relationships we have with our investors and the resilience of our business model in any market environment.~~Predecessor three months ended March 31, 2021.

The Business Combination

On October 12, 2020, FoA, a Delaware corporation and wholly owned subsidiary of Replay, ~~Replay Acquisition Corp. (“Replay”),~~ a publicly traded special purpose acquisition company, and FoA Equity agreed to a business combination that would result in FoA becoming a publicly traded company. FoA Equity, Replay, FoA; RPLY Merger Sub LLC, a Delaware limited liability company and wholly owned subsidiary of FoA (“Replay Merger Sub”); RPLY BLKR Merger Sub LLC, a Delaware limited liability company and wholly owned subsidiary of FoA (“Blocker Merger Sub”); Blackstone Tactical Opportunities Fund (Urban Feeder) – NQ L.P., a Delaware limited partnership (“Blocker”); Blackstone Tactical Opportunities Associates – NQ L.L.C., a Delaware limited liability company (“Blocker GP”); BTO Urban Holdings L.L.C., a Delaware limited liability company (“BTO Urban”), Blackstone Family Tactical Opportunities Investment Partnership – NQ – ESC L.P., a Delaware limited partnership (“ESC”), Libman Family Holdings LLC, a Connecticut limited liability company (“Family Holdings”), The Mortgage Opportunity Group LLC, a Connecticut limited liability company (“TMO”), L and TF, LLC, a North Carolina limited liability company (“L&TF”), UFG Management Holdings LLC, a Delaware limited liability company (“Management Holdings”), and Joe Cayre (each of BTO Urban, ESC, Family Holdings, TMO, L&TF, Management Holdings and Joe Cayre, a “Seller” and, collectively, the “Sellers” or the “Continuing Unitholders”); and BTO Urban and Family Holdings, solely in their joint capacity as the representative of the Sellers pursuant to Section 12.18 of the Transaction Agreement (as defined below) (the “Seller Representative”), entered into a Transaction Agreement (the “Transaction Agreement”) pursuant to which Replay agreed to combine with FoA Equity in a series of transactions (collectively, the “Business Combination”) that resulted in FoA becoming a publicly-traded company on the New York Stock Exchange (“NYSE”) as of April 1, 2021, with trading beginning on April 5, 2021 under the ticker symbol ‘FOA’ and controlling FoA in an

~~“UP-C”~~

“UP-C” structure. ~~For a description of the Business Combination, see FoA’s Form~~

~~8-K~~

~~filed with the SEC on April 7, 2021 (the “Super~~

~~8-K”).~~

~~Capitalized terms used and not defined herein have the meanings assigned to them in the Super~~

~~8-K.~~

Our Segments

We manage our Company in five reportable segments: ~~Portfolio Management,~~ Mortgage Originations, Reverse Originations, Commercial Originations, Lender Services, and ~~Lender Services.~~Portfolio Management. A description of the business conducted by each of these segments is provided below:

~~Portfolio Management~~

Our Portfolio Management segment provides product development, loan securitization, loan sales, risk management, asset management and servicing oversight services to the enterprise and third-party funds. The team is primarily based in St. Paul, MN and New York, NY.

As part of the vertical integration of our business, our Portfolio Management team acts as the connector between borrowers and investors. The direct connections to investors complete the lending lifecycle in a way that allows us to innovate and manage risk through better price and product discovery. Given our scale, we are able to “do our own deals” and where appropriate, retain assets on balance sheet for attractive return opportunities. These retained investments are a source of growing and recurring earnings.

The retained asset portfolio generally consists of two classifications of assets: short-term investments and long-term investments. Short-term investments are primarily proprietary whole loans and securities that are held for sale and loans bought out from home equity conversion mortgages (“HECM”) securitizations prior to assignment to Government National Mortgage Association (“Ginnie Mae”). Long-term investments are primarily made up of mortgage servicing rights, securitized HECM loans, securitized proprietary whole loans (including retained securities and residual interests in securitization trusts), and whole loans not yet securitized.

~~Table of Contents~~

The retained assets are initially recorded to the portfolio at a designated fair-value-based transfer price, if originated by any of the Company’s origination segments (“Net origination gains” recognized by the origination segments), or at the price purchased from external parties. Retained financial assets are subsequently recorded at their current fair value on an ongoing basis.

The Portfolio Management segment generates revenue and earnings in the form of gain on sale of loans, fair value gains, interest income, servicing income, fees for underwriting, advisory and valuation services and other ancillary fees.

Mortgage Originations

Our Mortgage Originations segment originates residential mortgage loans through our ~~Finance of America Mortgage LLC (“FAM”)~~FAM subsidiary. This segment generates revenue through

fee-based

mortgage loan origination services and the origination and sale of agency and non-agency mortgage loans into the secondary market. We generally sell ~~all~~ originated mortgage loans into the secondary market within 30 days of origination and elect whether to sell or retain the rights to service the underlying mortgage loans based on the economics in the market and Company portfolio investment strategies. Whether the Company elects to sell or retain the rights to service the underlying loans, the Mortgage Originations segment realizes the fair value of the ~~mortgage servicing rights~~MSRs in gain on sale and other income from loans held for sale, net, until the date of loan sale. ~~Performance~~Subsequent fair value changes of the retained ~~mortgage servicing rights after origination~~MSRs are accounted for within fee income in the Portfolio Management segment results.

The Mortgage Originations segment includes four channels:

Distributed ~~Retail -~~ Retail—Our distributed retail lending channel relies on mortgage advisors in retail branch locations across the country to acquire, interact with, and serve customers. Our distributed retail network controls all of the loan origination process, including sourcing the borrower, processing the application, setting the interest rate, ordering appraisal and underwriting, processing, closing and funding the loan.

~~Direct to Consumer - Our~~

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Direct-to-Consumer—Our direct-to-consumer

lending channel relies on our call centers, website and mobile apps to interact with customers. Our primary focus is to assist our customers with a refinance or home purchase by providing them with a needs-based approach to understanding their current mortgage options.

~~TPO -~~ TPO—Our ~~third-party-originator~~third party-originator (“TPO”) lending channel works with mortgage brokers to source loans which are then underwritten and funded by us, ~~in our name.~~as FoA. Counterparty risk is mitigated through quality and compliance monitoring, and all brokers are subject to our eligibility requirements coupled with an annual recertification process.

Home ~~Improvement -~~ Improvement—Our home improvement channel is our newest distribution channel and was created through the acquisition of ~~certain assets~~the operations of Renovate America during the first quarter of 2021. This channel assists homeowners in the financing of short-term home improvement projects, such as windows, HVAC, or remodeling and relies on a network of partner contractors across the country to acquire, interact with, and serve these customers.

Our mortgage lending activities primarily consist of the origination and sale of residential mortgage loans to the ~~government sponsored entities (“GSEs”), Federal National Mortgage Association (“~~GSEs, including Fannie ~~Mae” or “FNMA”), Federal Home Loan Mortgage Corporation (“~~Mae, Freddie ~~Mac” or “FHLMC”),~~Mac, and Ginnie Mae, as well as the origination and sale of residential mortgage loans to private investors. The Mortgage Originations segment generates revenue and earnings in the form of ~~gain~~gains on sale of loans, fair value gains, interest income, ~~servicing income,~~ and ~~origination~~ fees earned on the successful origination of mortgage loans.

Reverse Originations

Our Reverse Originations segment originates or acquires reverse mortgage loans through our ~~Finance of America Reverse LLC (“FAR”)~~FAR subsidiary. This segment originates ~~HECMs,~~HECM and

non-agency

~~reverse mortgages, referred to as~~

~~“non-agency~~

reverse mortgages.”

We securitize HECMs into ~~Home Equity Conversion Mortgage-Backed Securities (“HMBS”),~~HMBS, which Ginnie Mae guarantees, and sell them in the secondary market while retaining the rights to service.

Non-agency

reverse mortgages, which complement the ~~Federal Housing Administration (“FHA”)~~FHA HECM for higher value homes, may be sold as whole loans to investors or held for investment and pledged as collateral to securitized nonrecourse debt obligations.

Non-agency

reverse mortgage loans are not insured by the FHA.

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We originate reverse mortgage loans through the following channels:

~~Retail -~~ Retail—Our retail channel consists of field offices and a centralized retail platform, which includes a telephone based platform with multiple loan officers in one location. Our retail network controls all of the loan origination process, including sourcing the borrower, processing the application, setting the interest rate, ordering appraisal and underwriting, processing, closing and funding the loan.

~~TPO -~~ TPO—Our TPO lending channel ~~originates through third-party~~works with mortgage brokers to source loans which are then underwritten and ~~correspondent lenders. Our wholesale channel reviews~~funded by us, as FoA. Counterparty risk is mitigated through quality and ~~underwrites the application submitted by~~compliance monitoring, and all brokers are subject to our ~~mortgage brokers and correspondent lenders and approves or denies the application and sets the interest rate.~~eligibility requirements coupled with an annual recertification process.

~~Our reverse mortgage lending activities primarily consist of the origination and securitization of mortgage loans to Ginnie Mae and other private investors.~~ The Reverse Originations segment generates revenue and earnings in the form of fair value gains at the time of origination (“Net origination gains”) and origination fees earned on the successful origination of reverse mortgage loans.

Commercial Originations

Our Commercial Originations segment originates or acquires commercial mortgage loans through our ~~Finance of America Commercial LLC (“FACo”) subsidiary.~~FAM subsidiary (prior to January 1, 2022 through FACo). The segment provides business purpose lending solutions for residential real estate investors in two principal ways: short-term loans to provide rehab and construction of investment properties meant to be sold upon completion, and investor rental loans collateralized by either a single property or portfolio of properties. The segment also provides government-insured agricultural lending

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solutions to farmers to fund their inputs and operating expenses for the upcoming growing season. The segment does not provide financing for consumer-purpose, owner occupied loans or

non-residential

purpose commercial lending.

We originate commercial mortgage loans through the following channels:

~~Retail -~~ Retail—Our retail channel consists of sales team members located throughout the United States with concentrations in Charlotte, NC, Chicago, IL, and Irvine, CA. Our retail network controls all of the loan origination process, including sourcing the borrower, processing the application, setting the interest rate, ordering appraisal and underwriting, processing, closing and funding the loan.

~~Our commercial mortgage lending activities primarily consist of the origination, sale or securitization of commercial mortgages to private investors.~~ The Commercial Originations segment generates revenue and earnings in the form of ~~fair value~~net origination gains ~~at the time of origination (“Net origination gains”)~~ and origination fees earned on the successful origination of commercial mortgage loans.

Lender Services

Our Lender Services segment provides ~~ancillary~~complementary business services ~~title agency and title insurance services, mortgage servicing rights (“MSR”) valuation and trade brokerage, and appraisal management services to customers in~~around the residential mortgage, student lending, and commercial lending industries. These complementary services include but are not limited to title agency and title insurance services, MSR valuation and trade brokerage, transactional fulfillment services and appraisal management services to our retail customers. The team is primarily based in St. Paul, MN and Charlotte, NC. The segment also operates a foreign branch in the Philippines for transactional fulfillment ~~transactional~~ and administrative support.

Title agency and title insurance services—Lender Services provides consumers with in house title agency and title insurance services, which contributes to a more efficient close process by eliminating the need to shop out necessary services to finalize the loan process.

MSR valuation and trade brokerage—Lender Services provides MSR valuation services through a wholly owned subsidiary for both internal and external parties. Additionally, lender services facilitates MSR trades through the same wholly owned subsidiary.

Our Lender Services ~~business typically~~segment generates revenue and earnings in the form of

fee-for-service

revenue orand commissions on successful MSR trades.

Portfolio Management

Our Portfolio Management segment provides product development, loan securitization, loan sales, risk management, servicing oversight, and asset management services to the enterprise and third party funds. The team is primarily based in St. Paul, MN and New York, NY.

As part of the vertical integration of our business, our Portfolio Management team acts as the connector between borrowers and investors. Our deep experience in product development and innovation allows us to assist borrowers in new and unique ways by connecting their needs with our proprietary products. The direct connections to investors, provided by our FINRA registered broker-dealer, complete the lending lifecycle in a way that allows us to innovate and manage risk through better price and product discovery. Given our scale, we are able to work directly with investors and where appropriate, retain assets on balance sheet for attractive return opportunities. These retained investments are a source of growing and recurring earnings.

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The retained asset portfolio generally consists of two classifications of assets: short-term investments and long-term investments. Short-term investments are primarily proprietary whole loans and securities that are held for sale and loans bought from HECM securitizations prior to assignment to Ginnie Mae. Long-term investments are primarily made up of MSRs, securitized HECM loans, securitized proprietary whole loans (including retained securities and residual interests in securitization trusts), and whole loans not yet securitized.

The retained assets are initially recorded to the portfolio at a designated fair-value-based transfer price, if originated by any of the Company’s origination segments (net origination gains recognized by the origination segments), or at the price purchased from external parties. Retained financial assets are adjusted to their current fair value on an ongoing basis.

The Portfolio Management segment generates revenue and earnings in the form of gains on sale of loans, fair value gains on portfolio assets, interest income, and fee income related to MSRs, underwriting, advisory, valuation, and other ancillary services.

Business Trends and Conditions

There are a number of key factors and trends affecting our results of operations. A summary of key factors impacting our revenue include:

prevailing interest rates which impact loan origination volume, with declining interest rates leading to increases in ~~refinance~~ volume, and an increasing interest rate environment leading to decreases in ~~the refinance~~ volume;

housing market trends which also impact loan origination volume, with a strong housing market leading to higher loan origination volume, and a weak housing market leading to lower loan origination volume;

demographic and housing stock trends which impact the addressable market size of mortgage, reverse and commercial loan originations;

movement of market yields required by investors, with widening of investor yields generally having negative impacts on fair value of our financial assets;

increases in loan modifications, delinquency rates, delinquency status and prepayment speeds; and

broad economic factors such as the strength and stability of the overall economy, including inflation, the unemployment level, and real estate values which have been substantially affected by the

COVID-19

pandemic, further discussed below. ~~The~~

~~COVID-19~~

outbreak 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.

Other factors that may affect our cost base include trends in salaries and benefits costs, sales commissions, technology, rent, legal, compliance and other general and administrative costs. Management continually monitors these costs through operating plans.

Impact of

COVID-19 and Other Recent Events

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus ~~(the~~

~~“COVID-19~~

~~outbreak”~~(“COVID-19”) and the risks to the international community as the virus spreads globally. In March 2020, the WHO classified the

COVID-19

outbreak as a pandemic ~~based on~~(the “COVID-19 pandemic”), which continues to evolve, including with respect to current and future variants of COVID-19.

The COVID-19 pandemic has materially impacted and continues to materially impact the ~~rapid increase~~markets in ~~exposure globally.~~

~~The~~

~~COVID-19~~

~~pandemic adversely impacted global financial markets and contributed to~~which the Company operates. It has caused significant volatility in market liquidity ~~and~~as well as fluctuations in yields required by market investors in the type of financial instruments originated by the Company’s primary operating subsidiaries. While vaccine availability and uptake has increased, the longer-term macro-economic effects of the pandemic on global supply chains, inflation, labor shortages and wage increases continue to impact many

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industries, including the industries in which our Company and its subsidiaries operate. Moreover, with the potential for new strains of COVID-19 to emerge, governments and businesses may re-impose aggressive measures to help slow its spread in the future. For this reason, among others, as the COVID-19 pandemic continues, the potential global impacts are uncertain and difficult to assess.

In the U.S., significant fiscal stimulus measures, monetary policy actions and other relief measures ~~have~~ helped to moderate the negative economic impacts of

~~COVID-19,~~

~~and have supported the economic recovery which began in 2020 and continues into 2021.~~ COVID-19. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into law. In March 2021, the U.S. federal government passed a $1.9 trillion American Rescue Plan Act (“ARPA”), which together with the CARES Act and other fiscal stimulus measures ~~put in place in 2020, provide~~enacted by the federal government, provided for, among other things, funding to state and local governments, direct payments to households, support for small businesses, renter assistance and funding for transport, airlines, healthcare and education. Monetary policy decisions ~~have~~ included quantitative easing (such as a decrease in the benchmark interest rates) and the provision of liquidity to financial institutions and credit markets. ~~In addition,~~Many of the federal, state and local government enacted measures which provided relief in the housing ~~measures,~~market, such as forbearance on mortgages and suspension of foreclosures and evictions, and various executive orders have helped to provide relief. However, no assurance can be made as to the continuation of any relief given that many of the forbearance on mortgages, foreclosure and eviction, however, such relief measures have since lapsed or are set to lapse in 2022.

Further, in the ~~second half~~recent months, the Board of ~~2021.~~

Governors of the Federal Reserve System (the “Federal Reserve”) has shifted its monetary policies and scaled back certain of the measures it had initially put in place in response to the COVID-19 pandemic in an effort to combat inflationary pressures in the U.S. The ~~full~~combined disruptive impact of the

COVID-19

pandemic ~~continues~~and the conflict between Russia and the Ukraine has, among other things, caused global supply chain issues and oil and other commodity price increases. These global macroeconomic events (among others) have in turn contributed to ~~evolve as~~significant increases in consumer prices in the U.S. The Consumer Price Index for All Urban Consumers (“CPI”), a widely followed inflation gauge published by the Bureau of Labor Statistics, increased 7.0% from December 2020 to December 2021, its highest rate in nearly forty (40) years. The CPI rose 9.1% in June 2022 compared with a year earlier. The general effects of inflation on the economy of the ~~date~~United States can be wide ranging, evidenced by rising wages and rising costs of ~~this report. The Company’s management~~consumer goods and necessities. On March 16, 2022, in an effort to tamp down inflationary pressures, the Federal Reserve increased interest rates for the first time since December 2018 and signaled future rate increases. Subsequently, the Federal Reserve increased rates again in May, June, and July 2022 to combat continued inflationary pressures. Additionally, the Federal Reserve has announced plans to decrease purchases of government and mortgage-related bonds. Volatility in market conditions, resulting from the foregoing events have caused and may continue to cause credit spreads to widen, which reduces, among other things, availability of credit to our Company on favorable terms, liquidity in the market and price transparency of real estate related or asset-backed assets.

Our Company is actively monitoring ~~the global situation~~these events and ~~its effect~~their effects on the Company’s financial condition, liquidity, operations, industry, and workforce. ~~Further,~~

These continuing economic impacts, and the ~~Company cannot estimate the length or gravity~~continuation of the ~~impact that the~~

~~COVID-19~~

pandemic ~~on the residential mortgage and commercial lending industries. As of June 30, 2021, the~~

~~COVID-19~~

pandemic continues to impact the economic environment in which the Company conducts business. As of June 30, 2021, 551 clients, or 0.57% of the total serviced portfolio, have entered into a forbearance plan as a result of the economic impacts caused by

~~COVID-19.~~

~~As the pandemic continues, it has the potential to~~itself, may cause additional volatility in the financial markets and may have an adverse effect on the Company’s results of future operations, financial position, intangible assets and liquidity in ~~fiscal year 2021.~~2022 and beyond. See “—Results of ~~Operations”~~Operations.

For further discussion on the potential impacts of the COVID-19 pandemic, the Ukraine-Russia conflict and the Federal Reserve’s monetary policies, see “Risks Related to the Business of the Company—Risks Related to COVID-19”, “—Our business is significantly impacted by interest rates. Changes in ~~this MD&A.~~prevailing interest rates or U.S. monetary policies that affect interest rates may have a detrimental effect on our business”, “—Our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates; our Company is exposed to other credit risk.” and “—Escalating global trade tensions, and the conflict between Russia and Ukraine, and the adoption or expansion of economic sanctions or trade restrictions could negatively impact us” under the section entitled “Item 1A.Risk Factors” in our Annual Report on 10-K filed with the SEC on March 15, 2022, as such risk factors may be amended or updated in our subsequent periodic reports.

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~~The economic impacts of the~~

~~COVID-19~~

pandemic have continued into 2021, including the implementation of the ARPA and the cessation of forbearance options and eviction moratoria. These continuing economic impacts, and the continuation of the pandemic itself, may have an adverse effect on the Company’s results of future operations, financial position, intangible assets and liquidity in fiscal year 2021.

~~For further discussion on the potential impacts of the~~

~~COVID-19~~

~~pandemic reference “Risk Factors—Risks Related to the Business of New Pubco — Risks Related to~~

~~COVID-19”~~

~~in our Super~~

~~8-K/A~~

~~filed with the SEC on May 17, 2021.~~

Reorganization Transactions

FoA was incorporated in October 2020 and is a financial services holding corporation, the principal asset of which is a controlling interest in FoA Equity. The business, property and affairs of FoA Equity are managed by a board of managers, appointed by FoA at its sole discretion. In periods subsequent to the April 1, 2021 closing of the Business Combination, FoA consolidates FoA Equity and reports a

non-controlling

interest related to the Class A LLC Units held by the Continuing Unitholders in FoA’s Consolidated Financial Statements.

In connection with the consummation of the Business Combination, we executed several reorganization transactions, as a result of which the limited liability company agreement of FoA Equity was amended and restated to, among other things, reclassify its outstanding limited liability company units into a single new class of units that are referred to as “Class A LLC Units.” ~~For a description of the reorganization transactions, see “Certain Agreements Related to the Business Combination,” in the Proxy Statement/Prospectus.~~

FoA, FoA Equity and the Continuing Unitholders entered into an exchange agreement (the “Exchange Agreement”) under which they (or certain permitted transferees) have the right (subject to the terms of the Exchange Agreement) to exchange their Class A LLC Units for shares of FoA Class A Common Stock on a

one-for-one

basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications.

The Continuing Unitholders hold all of the issued and outstanding shares of FoA’s Class B Common Stock. The shares of Class B Common Stock have no economic rights, but entitle each holder, without regard to the number of shares of Class B Common Stock held by such holder, to a number of votes that is equal to the aggregate number of Class A LLC Units held by such holder on all matters on which shareholders of FoA are entitled to vote generally. Holders of shares of FoA’s Class B Common Stock vote together with holders of FoA’s Class A Common Stock as a single class on all matters on which shareholders are entitled to vote generally, except as otherwise required by law.

Factors Affecting the Comparability of our Results of Operations

As a result of a number of factors, our historical results of operations ~~are~~may not be comparable from period to period and may not be comparable to our financial results of operations in future periods. Set forth below is a brief discussion of the key factors that may impact the comparability of our results of operations in future ~~operations.~~periods.

Impact of the Business Combination

FoA is a corporation for U.S. federal and state income tax purposes. FoA Equity was and is treated as a flow-through entity for U.S. federal income tax purposes, and as such, ~~has generally~~entity level taxes at FoA Equity are not and have not been ~~subject~~significant. Accordingly, provision for income taxes prior to ~~U.S. federal income~~the Business Combination consisted of tax atexpense related only to certain of the ~~entity level. Accordingly, other than for certain~~ consolidated subsidiaries of FoA Equity that are structured as corporations and ~~unless otherwise specified, the historical results of operations and other financial information presented does not include any provision for~~subject to U.S. federal income ~~tax.~~

taxes as well as state taxes. Subsequent to the Business Combinations, FoA (together with certain corporate subsidiaries through which it owns its interest in FoA Equity) pays U.S. federal and state income taxes as a corporation on its share of ~~our~~FoA Equity’s taxable income.

The Business Combination was accounted for as a business combination using the acquisition method of accounting. Accordingly, the assets and liabilities, including any identified intangible assets, of FoA Equity were recorded at their fair values at the date of the consummation of the Business Combination, with any excess of the purchase price over the estimated fair value recorded as goodwill. The application of business combination accounting required the use of significant estimates and assumptions.

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As a result of the application of business combination accounting, the historical Consolidated Financial Statements of FoA Equity are not necessarily indicative of FoA’s future results of operations, financial position and cash flows. For example, increased ~~tangible and~~ intangible assets resulting from adjusting the basis of ~~tangible and~~ intangible assets to their fair value ~~would result~~have resulted in increased ~~depreciation and~~ amortization expense in the periods following the consummation of the Business ~~Combination, and in the future FoA may need to recognize impairment charges related to goodwill and identified intangible assets that are adjusted to fair value.~~Combination.

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Additionally, in connection with the Business Combination, FoA entered into TRAs with the TRA Parties that provide for the payment by FoA to such owners of 85% of the benefits that FoA is deemed to realize as a result of (i) tax basis adjustments that will increase the tax basis of the tangible and intangible assets of FoA as a result of sales or exchanges of Class A LLC Units in connection with or after the Business Combination or distributions with respect to the Class A LLC Units prior to or in connection with the Business Combination, (ii) FoA’s utilization of certain tax attributes attributable to the Blocker or the Blocker Shareholders, and (iii) certain other tax benefits related to entering into the TRAs, including tax benefits attributable to payments under the TRAs.

Impact of Becoming a Public Company

We have incurred and expect to incur additional costs associated with operating as a public company. ~~We expect that these~~These costs ~~will~~ include additional personnel, legal, consulting, regulatory, insurance, accounting, investor relations and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules adopted by the SEC and national securities exchanges, ~~requires~~require public companies to implement ~~specified~~specific corporate governance and reporting practices that are not applicable to a private company. These additional rules and regulations ~~increased~~can significantly increase our legal, regulatory and financial compliance costs and ~~will~~ make some activities more time-consuming and costly.

Components of Our Results of Operations

Revenue

~~Our primary sources of revenue include gains~~

Gain on sale and other income from ~~mortgage~~ loans held for sale, net ~~net fair value gains on mortgage loans and related obligations, fee income and net interest income (expense).~~

Gain on sale and other income from ~~mortgage~~ loans held for sale, net,

~~Net gain on sale and other income from mortgage loans held for sale include~~ includes realized and unrealized gains and losses on loans held for sale, interest rate lock commitments, hedging derivatives, and originated ~~mortgage servicing rights.~~MSRs. The Company sells mortgage loans into the secondary market, including, but not limited to, sales to the GSEs on a servicing-released basis, where the loans are sold to an investor with the associated MSRs transferred to the investor or to a separate ~~third-party~~third party investor. In addition, the Company may opportunistically sell loans on a servicing-retained basis, where the loan is sold and the Company retains the rights to service that loan. Unrealized gains and losses include fair value gains and losses resulting from changes in fair value in the underlying mortgages, interest rate lock commitments, and hedging derivatives, ~~and originated MSRs,~~ from the time of origination to the ultimate sale of the loan or other settlement of those financial instruments.

Net fair value gains on ~~mortgage~~ loans and related obligations

The majority of our outstanding financial instruments are carried at fair value. The yield recognized on these financial instruments and any changes in estimated fair value are recorded as ~~a component~~components of net fair value gains on ~~mortgage~~ loans and related obligations. See Note 5—4—Fair Value within our ~~interim unaudited~~ consolidated financial statements for a discussion of fair value measurements.

Fee Income

We earn various fees from our customers during the process of origination and servicing of loans as well as providing services to third party customers. These fees include loan servicing and origination fees, title and closing service fees, title underwriting servicing fees, settlement fees, appraisal fees and broker fees. Revenue is recognized when the performance obligations have been satisfied, which is typically at the time of loan ~~origination.~~origination or when the service to the third-party has been provided.

In addition to the fees earned from customers, we recognize the changes in fair value of MSRs as current period income (loss). To hedge against volatility in the fair value of certain MSRs, we enter into various derivative agreements, which may include but are not limited to interest rate swap futures. Changes in the fair value of such derivative instruments and the related hedging gains and losses are also included as a component of fee income.

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Net interest income (expense)

We earn interest income on mortgage ~~reverse~~loans and ~~commercial loans held for sale. Interest~~incur interest expense ~~incurred~~ on our warehouse lines of credit and

non-funding

~~debt is included in net interest income (expense).~~ debt. Interest income and interest expense also accrues to loans held for investment, including securitized loans subject to HMBS and other nonrecourse debt. ~~Interest income and expense on loans held for investment and their related obligations are recorded to~~Such interest is included as a component of net fair value gains on ~~mortgage~~ loans and related obligations.

Operating Expenses

~~Our operating expenses include salaries, benefits and related expenses, occupancy, equipment rentals and other office related expenses, and general and administrative expenses.~~

Salaries, benefits and related expenses

Salaries, benefits and related expenses includes commissions, bonuses, equity based compensation, salaries, benefits, taxes and all payroll related expenses for our employees.

Occupancy, equipment rentals and other office related expenses

Occupancy, equipment rentals and other office related expenses includes rent expense on office space and equipment, and other occupancy related ~~occupancy~~ costs.

General and administrative expenses

General and administrative expenses primarily include loan origination ~~fees,~~expenses, loan portfolio expenses, professional ~~service~~ fees, business development costs, communications and data processing costs, ~~legal costs such as~~ title and closing costs, depreciation and amortization, and other expenses.

Other, ~~net~~Net

Other, net, primarily includes ~~primarily~~ gains or losses on non-operating assets, revaluation of the warrant liability, and remeasurement of the ~~the Company’s~~ TRA ~~obligation.~~obligations.

Income Taxes

FoA Equity was and is treated as a flow-through entity for U.S. federal income tax purposes. As a result, entity level taxes at FoA Equity are not significant. ~~Provision~~Prior to the Business Combination, provision for income taxes ~~consists~~consisted of tax expense ~~primarily~~ related only to certain of the consolidated subsidiaries of FoA Equity that are structured as corporations and subject to U.S. federal income taxes as well as state taxes.

Subsequent to the Business Combination, FoA (together with certain corporate subsidiaries through which it owns its interest in FoA Equity) is treated as a ~~U.S.~~ corporation for U.S. federal and state income tax purposes and is subject to U.S. federal income taxes with respect to its allocable share of any taxable income of FoA Equity and is taxed at the prevailing corporate tax rates. FoA is a holding company and its only material asset is its direct and indirect interest in FoA Equity. Accordingly, a provision for income taxes is recorded for the anticipated tax consequences of FoA’s allocable share of FoA Equity’s reported results of operations for federal income taxes. In addition to tax expenses, weFoA also ~~incur~~incurs expenses related to ~~our~~its operations, as well as payments under the TRAs, which are significant. FoA Equity ~~distributes an amount~~may distribute amounts sufficient to allow FoA to pay its tax obligations and operating expenses, including distributions to fund any payments due under the TRAs. See “Certain Agreements Related to the Business Combination—Tax Receivable Agreements.” However, ~~our~~the ability of FoA Equity to make such distributions may be limited due to, among other things, restrictive covenants in ~~our~~its financing lines of credit and senior notes. FoA is a holding company and its only material asset is its direct and indirect interest in FoA Equity. FoA accordingly is dependent upon distributions from FoA Equity to pay taxes, make payments under the TRAs and pay dividends.

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Results of Operations

Overview

The following tables present selected financial data for the ~~three month~~ Successor ~~period from April 1, 2021 to June 30, 2021, and the three month Predecessor period from January 1, 2021 to March 31, 2021. Additionally, we have presented the Predecessor periods for the~~ three and six months ended June 30, ~~2020.~~

We have prepared our discussion of the results of operations by comparing the results of the three month Successor period from April 1, 2021 to June 30, 2021 with the results of the Predecessor period for the2022, three months ended June 30, ~~2020. Additionally, we compared the results of the combined Successor period from April 1, 2021 to June 30,~~ 2021, and for the Predecessor ~~period from January 1, 2021 to~~three months ended March 31, 2021 with the Predecessor six months ended June 30, 2020. The core business operations of the Predecessor and Successor were not significantly impacted by the consummation of the Business Combination. Therefore, we believe the combined results for the Successor period from April 1, 2021 to June 30, 2021 and the Predecessor period from January 1, 2021 to March 31, 2021 are comparable to the six months ended June 30, 2020 and provide enhanced comparability to the reader about the current quarter’s results. We believe this approach provides the most meaningful basis of comparison and is useful in identifying current business trends for the periods presented. The combined results of operations included in our discussion below are not considered to be prepared in accordance with U.S. GAAP and have not been prepared as pro forma results under applicable regulations, may not reflect the actual results we would have achieved had the Business Combination occurred at the beginning of 2021, and should not be viewed as a substitute for the results of operations of the Predecessor and Successor periods presented in accordance with U.S. GAAP.2021.

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Consolidated Results

The following table summarizes our consolidated operating results for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021			January 1, 2021 to March 31, 2021			For the three months ended June 30, 2020			For the six months ended June 30, 2020			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									Successor										Predecessor
Gain on sale and other income from mortgage loans held for sale, net	$	187,577		$	291,334		$	298,291		$	428,975
Net fair value gains on mortgage loans and related obligations		131,151			76,663			112,303			125,683
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		90,864			161,371			76,656			146,627			88,681			246,286			90,864				161,371
Net interest expense		(20,475	)		(21,705	)		(21,791	)		(47,552	)		(20,981	)		(39,938	)		(20,475	)			(21,705	)

Total revenue		389,117			507,663			465,459			653,733			141,118			408,553			389,117				507,663
																						��
Total expenses		400,752			373,344			318,697			549,044			325,013			674,550			400,752				373,314

Other, net		(2,103	)		(8,862	)		(28	)		(44	)		15,132			19,904			(2,103	)			(8,892	)

NET (LOSS) INCOME BEFORE TAXES	$	(13,738	)	$	125,457		$	146,734		$	104,645
NET INCOME (LOSS) BEFORE TAXES													$	(168,763	)	$	(246,093	)	$	(13,738	)		$	125,457

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Net fair value gains on ~~mortgage~~ loans and related obligations

InCertain of our financial instruments are valued utilizing a process that combines the use of a DCF model and analysis of current market data to arrive at an estimate of fair value. The cash flow assumptions and prepayment and repayment assumptions used in the model are based on various factors, with the key assumptions being prepayment and repayment speeds, credit loss frequencies and severity, and discount rate assumptions. Any changes in fair value on these financial instruments is recorded as a gain or loss in net fair value gains on loans and related obligations on the Condensed Consolidated Statements of Operations (Unaudited).

The following table ~~below is a summary of~~summarizes the components of net fair value gains on ~~mortgage~~ loans and related obligations for the periods indicated (in thousands):

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Interest income on loans

$
173,940

   $ 160,568    $ 217,841    $ 401,513
Change in fair value of loans


84,983
   (51,346 )    180,904    82,338
Change in fair value of mortgage backed securities


—

   —      (1,470 )    817








Fair value gains on mortgage loans


258,923
   109,222    397,275    484,668








Interest expense on related obligations


(113,474
)
   (119,201 )    (127,488 )    (261,845 )
Change in fair value of derivatives


(46,478
)
   43,972    8,567    (5,743 )
Change in fair value of related obligations


32,180
   42,670    (166,051 )    (91,397 )








Fair value losses on related obligations


(127,772
)
   (32,559 )    (284,972 )    (358,985 )








Net fair value gains on mortgage loans and related obligations

$
131,151
   $ 76,663    $ 112,303    $ 125,683


	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 origination gains	$	73,892		$	183,122		$	105,358	$	73,880
Net fair value gains (losses) from portfolio activity (1)		39,947			78,815			24,371		32,386
Net fair value gains (losses) from changes in market inputs or model assumptions		(112,226	)		(249,889	)		1,422		(29,603	)

Net fair value gains (losses) on loans and related obligations	$	1,613		$	12,048		$	131,151	$	76,663

(1)	This line item includes realization of interest income and interest expense related to loans held for investment and securitization trusts, runoff, and portfolio amortization.

Principally, all of our outstanding financial instruments are carried at fair value. The yield recognized on these financial instruments and any changes in estimated fair value are recorded as a component of net fair value gains on ~~mortgage~~ loans and related obligations in the Condensed Consolidated Statements of ~~Operations.~~Operations (Unaudited). However, for certain of our outstanding financing lines of credit, we have not elected to account for these liabilities under the fair value option. Accordingly, interest expense is presented separately on our Condensed Consolidated Statements of ~~Operations. Accordingly,~~Operations (Unaudited). Further, interest income on collateralized loans may be reflected in net fair value gains on ~~mortgage~~ loans and related obligations on the Condensed Consolidated Statements of Operations (Unaudited), while the associated interest expense on the pledged loans will be included as a component of net

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interest expense. We evaluate net interest margin (“NIM”) for our outstanding investments through an evaluation of all components of interest income and interest expense.

The following table provides an analysis of all components of NIM for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021			January 1, 2021 to March 31, 2021			For the three months ended June 30, 2020			For the six months ended June 30, 2020			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									Successor									Predecessor
Interest income on commercial and reverse loans	$	173,940		$	160,568		$	217,841		$	401,513		$	189,760		$	353,454			173,940		$	160,568
Interest expense on HMBS and nonrecourse obligations		(113,474	)		(119,201	)		(127,488	)		(261,845	)		(124,603	)		(231,246	)		(113,474	)		(119,201	)

Net interest margin included in net fair value gains on mortgage loans (1)		60,466			41,367			90,353			139,668			65,157			122,208			60,466			41,367

Interest income on mortgage loans held for sale		13,024			12,621			11,468			19,561			14,011			26,957			13,024			12,621
Interest expense on warehouse lines of credit		(26,908	)		(26,546	)		(30,415	)		(62,864	)		(29,983	)		(56,048	)		(26,908	)		(26,546	)
Non-funding debt interest expense		(6,644	)		(7,756	)		(2,803	)		(4,220	)		(6,738	)		(13,441	)		(6,644	)		(7,756	)
Other interest income		126			40			39			117			1,841			2,768			126			40
Other interest expense		(73	)		(64	)		(80	)		(146	)		(112	)		(174	)		(73	)		(64	)

Net interest expense		(20,475	)		(21,705	)		(21,791	)		(47,552	)		(20,981	)		(39,938	)		(20,475	)		(21,705	)

NET INTEREST MARGIN	$	39,991		$	19,662		$	68,562		$	92,116		$	44,176		$	82,270		$	39,991		$	19,662

(1)

Net interest margin included in fair value gains on mortgage loans includes interest income and expense on all commercial and reverse loans and their related nonrecourse obligations. Interest income on mortgage loans and warehouse lines of credit are classified in net interest expense. See Note 2—Summary of Significant Accounting Policies, within the consolidated financial statements in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2022 for additional information on the Company’s accounting related to commercial and reverse mortgage loans.

~~Table of Contents~~

Certain of our financial instruments are valued utilizing a process that combines the use of a discounted cash flow model and analysis of current market data to arrive at an estimate of fair value. The cash flow assumptions and prepayment and repayment assumptions used in the model are based on various factors, with the key assumptions being prepayment and repayment speeds, credit loss frequencies and severity, and discount rate assumptions. Any changes in fair value on these financials instruments is recorded as a gain or loss in net fair value gains on mortgage loans and related obligations on the Consolidated Statements of Operations.

For the three months ~~from April~~

~~1, 2021 to~~ended June

30, ~~2021 (Successor)~~2022 versus the three months ended June

30, ~~2020 (Predecessor)~~2021

Net income (loss) before taxes decreased ~~$160.5~~$155.0 million or ~~109.4%~~1,128.4% primarily as a result of the following:

Gain on sale and other income from ~~mortgage~~ loans held for sale, net, decreased ~~$110.7~~$115.8 million or ~~37.1% due to lower margin on originated mortgage loans and lower origination volume during the three months from April 1, 2021 to June 30, 2021~~61.7% primarily as a result of ~~increased interest rates~~lower volume and ~~competitive pressure on margin.~~margin within our Mortgage Originations segment. Our Mortgage Originations segment had ~~$6,668.8 million~~$3.8 billion in net rate lock volume ~~related to mortgage loans~~ for the three months ~~from April 1, 2021 to~~ended June 30, ~~2021~~2022 compared to ~~$6,800.9 million~~$6.7 billion for the comparable ~~2020 period. Additionally, our~~2021 period, and mortgage origination margin ~~on originated mortgage loans decreased to 2.8%~~of 2.14% for the three months ~~from April 1, 2021 to~~ended June 30, ~~2021~~2022 compared to ~~4.4%~~2.78% for the comparable ~~2020~~2021 period. Gain on sale margins decreased primarily due to rate volatility and competitive pressure on margins in the 2022 period.

Net fair value gains on ~~mortgage~~ loans and related obligations ~~increased $18.8~~decreased by $129.5 million or ~~16.8%~~98.8% primarily as a result of fair value losses from market inputs or model assumptions and lower net origination ~~growth within~~gains from our Reverse and Commercial Originations ~~segments. The Reverse Originations segment originated $1,013.3~~segments, partially offset by increases to fair value gains from normal portfolio activity. Fair value losses from changes in market inputs or model assumptions were $112.2 million ~~of reverse mortgage loans~~ for the three months ~~from April 1, 2021 to~~ended June 30, ~~2021 compared~~2022 primarily due to ~~$769.3 million for the comparable 2020 period. The Commercial Originations segment originated $400.5~~fair value adjustments related to increases in market discount rate assumptions driven by increases in interest rates and market yield assumptions. This compares to $1.4 million in ~~loans~~fair value gains from changes in market inputs or model assumptions for the three months ~~from April 1, 2021 to~~ended June 30, ~~2021 compared to $14.3 million during~~2021. See Note 4 - Fair Value within the ~~comparable 2020 period. The increase was partially offset by net $20.0 million in fair~~condensed consolidated financial statements for additional information on assumptions impacting the value ~~losses from assumption changes to~~of our loans held for investment. The Reverse and Commercial Originations segments recognized $73.9 million in net origination gains on originations of $2.1 billion of reverse

~~Fee income increased $14.2 million or 18.5% as a result~~75

Table of ~~growth in fee income from our Lender Services segment.~~Contents

and commercial mortgage loans for the three months ended June 30, 2022 compared to $105.4 million of net origination gains on $1.4 billion for the comparable 2021 period. The net origination gains from higher origination volume in the Reverse and Commercial Originations segments were offset by lower margin due to market value volatility during the three months ended June 30, 2022 that the Company was not immediately able to pass on to its customers.

~~Net interest expense~~

Total expenses decreased ~~$1.3~~$75.7 million or ~~6.0% in 2021 due primarily to a lower average cost of funds on our financing lines of credit and increases in interest income on mortgage loans held for sale, partially offset by an increase in~~

~~non-funding~~

~~debt interest expense for the three months from April 1, 2021 to June 30, 2021 compared to the comparable 2020 period.~~

~~Total expenses increased $82.1 million or 25.7%~~18.9% due to ~~higher~~lower salaries, benefits and related expenses ~~combined with~~partially offset by increased general and administrative expenses. Salaries, benefits and related expenses decreased by $80.4 million or 29.3% primarily as a result of our lower loan origination volumes during the three months ended June 30, 2022, partially offset by increases in general and administrative expenses related to the Business ~~Combination during the three months from April 1, 2021 to June 30, 2021 and overall enterprise growth. During the second quarter of 2021,~~

~~one-time~~Combination.

~~initial and accelerated Replacement and Earnout Right RSU expense of $38.6 million was recognized. Additional~~

~~on-going~~

~~expenses of $10.6 million for the RSUs and $12.8 million of amortization of intangibles were recognized as a result of the Business Combination.~~

For the six months ended June

30, ~~2021 (Successor and Predecessor)~~2022 (Successor) versus the six months ended June

30, ~~2020 (Predecessor)~~2021 (Successor and Predecessor)

Net income (loss) before taxes ~~increased $7.1~~decreased $357.8 million or ~~6.8%~~320.3% primarily as a result of the following:

Gain on sale and other income from ~~mortgage~~ loans held for sale, net, ~~increased $49.9~~decreased $288.8 million or ~~11.6%~~60.3% primarily as a result of ~~higher~~lower Mortgage Originations segment ~~volume.~~revenue margin driven by lower origination volume and lower margins for the six months ended June 30, 2022 when compared to the 2021 period. Our margin on originated mortgage loans decreased to 2.12% for the six months ended June 30, 2022 compared to 3.13% for the comparable 2021 period. Our Mortgage Originations segment had ~~$15,074.1 million~~$9.1 billion in net rate lock volume for the six months ended June 30, ~~2021~~2022 compared to ~~$13,017.1 million~~$15.1 billion for the comparable ~~2020~~2021 period. ~~Our margin~~

Net fair value gains on ~~originated mortgage~~ loans and related obligations decreased ~~slightly to 3.1%~~$195.8 million or 94.2% primarily as a result of fair value losses from market inputs or model assumptions, partially offset by growth in net origination gains from our Reverse and Commercial Originations segments. Fair value losses from changes in market inputs or model assumptions were $249.9 million for the six months ended June 30, ~~2021 compared~~2022 primarily due to ~~3.3% for the comparable 2020 period.~~

~~Table of Contents~~

~~Net~~ fair value ~~gains~~adjustments related to increases in discount rates on securitized mortgage ~~loans and related obligations increased by $82.1~~assets. This compares to $28.2 million ~~or 65.3% primarily as a result of growth~~ in ~~our Reverse and Commercial Originations segments and lower~~ fair value losses from ~~assumption changes. The Reverse Originations segment originated $1,782.1 million of reverse mortgage loans~~changes in market inputs or model assumptions for the six months ended June 30, 2021 compared to $1,425.6 million for the comparable 2020 period. The Commercial Originations segment originated $741.4 million in loans for the six months ended June 30, 2021 compared to $457.9 million during the comparable 2020 period. Fair value losses from assumption changes taken in the first half of 2021 were $22.1 million. This compares to $70.7 million in fair value losses from assumption changes taken in the first half of 2020 driven largely by unfavorable shocks to fair value during the early months of the

~~COVID-19~~

~~outbreak.~~2021. See Note 5—4 - Fair Value within the consolidated financial statements for additional information on assumptions impacting the value of our loans held for investment.

~~Fee income increased $105.6~~ The Reverse and Commercial Originations segments recognized $183.1 million ~~or 72.0% as a result~~in net origination gains on originations of ~~our higher loan origination volumes~~$4.2 billion of reverse and ~~growth in fee income from our Lender Services segment.~~

~~Net interest expense decreased $5.4 million or 11.3% primarily due to a lower average cost of funds on our financing lines of credit and increases in interest income on~~commercial mortgage loans ~~held for sale, partially offset by an increase in~~

~~non-funding~~

~~debt interest expense~~ for the six months ended June 30, ~~2021~~2022 compared to $179.2 million in net origination gains on $2.5 billion for the comparable ~~2020~~2021 period. The net origination gains from higher origination volume in the Reverse and Commercial Originations segments were offset by lower margin due to market value volatility during the six months ended June 30, 2022 that the Company was not immediately able to pass on to its customers.

Total expenses ~~increased $225.1~~decreased $99.5 million or ~~41.0%~~12.9% due to ~~higher~~lower salaries, benefits and related expenses combined with increased general and administrative expenses primarily as a result of our ~~higher~~lower loan origination volumes during the six months ended June 30, ~~2021,~~2022, partially offset by overall enterprise growth and general and administrative expenses related to the Business Combination. ~~During the second quarter of 2021,~~

~~one-time~~

~~initial and accelerated Replacement and Earnout Right RSU expense of $38.6 million was recognized. Additional~~

~~on-going~~

~~expenses of $10.6 million for the RSUs and $12.8 million of amortization of intangibles were recognized as a result of the Business Combination.~~

SEGMENT RESULTS

Revenue generated on inter-segment services performed are valued based on estimated market value. Revenue and fees are directly allocated to their respective segments at the time services are performed. Expenses directly attributable to the operating segments are expensed as incurred. Other expenses are allocated to individual segments based on the estimated value of services performed, total revenue contributions, personnel headcount, or the equity invested in each segment based on the type of expense allocated. The allocation methodology is

Table of Contents

reviewed annually. There were no changes to methodology during the three and six months ended June 30, 2022. Expenses for enterprise-level general overhead, such as executive administration, are not allocated to the business segments.

~~100~~

~~Table of Contents~~

~~Portfolio Management Segment~~

~~The following table summarizes our Portfolio Management segment results for the periods indicated (in thousands):~~

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Gain on sale and other income from mortgage loans held for sale, net

$
7,748

   $ 5,065    $ —      $ 5,617
Net fair value gains


11,223
   2,750    57,237    25,881
Net interest expense


(15,851
)
   (14,816 )    (19,708 )    (44,481 )
Fee income


3,577
   36,191    1,431    2,392








Total revenue


6,697
   29,190    38,960    (10,591 )








Total expenses


33,190
   24,406    21,374    38,746








Other, net


(245
)
   895    —      —








NET (LOSS) INCOME BEFORE TAXES

$
(26,738
)
   $ 5,679    $ 17,586    $ (49,337 )

Our Portfolio Management segment generates its revenues primarily from the sale and securitization of residential mortgages into the secondary market, fair value gains and losses on loans and MSRs that we hold to maturity, and mortgage advisory fees earned on various investment and trading activities we provide our internal and external customers. The fair value gains and losses include the yield we recognize on the contractual interest income that is expected to be collected based on the stated interest rates of the loans and related liabilities, and any contractual service fees earned while servicing these assets.

~~Fair value gains and losses in our Portfolio Management segment includes fair value adjustments related to the following assets and liabilities:~~

~~Loans held for investment, subject to HMBS liabilities, at fair value~~

~~Loans held for investment, subject to nonrecourse debt, at fair value~~

~~Loans held for investment, at fair value~~

~~Mortgage servicing rights, at fair value~~

~~Loans held for sale, at fair value~~

~~(1)~~

~~HMBS liabilities, at fair value; and~~

~~Nonrecourse debt, at fair value.~~

~~(1)~~

~~Fair value gains and losses in our Portfolio Management segment for loans held for sale only include fair value adjustments related to loans originated in the Commercial Originations segment.~~

~~101~~

~~Table of Contents~~

~~KEY METRICS~~

~~The following table provides a trend in the assets and liabilities under management by our Portfolio Management segment (in thousands):~~

June 30,

December 31,


2021

2020


Successor

Predecessor

Restricted cash

$
352,037
   $ 303,925
Loans held for investment, subject to HMBS liabilities, at fair value


10,316,027

   9,929,163
Loans held for investment, subject to nonrecourse debt, at fair value


5,424,621
   5,396,167
Loans held for investment, at fair value


1,225,090
   730,821
Goodwill


30,899
   —
Mortgage servicing rights, at fair value


290,938
   180,684
Other assets, net


158,375
   165,810




Total long-term investment assets


17,797,987
   16,706,570




Loans held for sale, at fair value


149,435
   142,226




Total earning assets


17,947,422
   16,848,796

HMBS liabilities, at fair value


10,168,224
   $ 9,788,668
Nonrecourse debt, at fair value


5,425,732
   5,271,842
Other secured financing


1,597,172
   1,010,669
Other liabilities


85,002
   96,762




Total financing of portfolio


17,276,130
   16,167,941




Net equity in earning assets

$
671,292
   $ 680,855

~~102~~

~~Table of Contents~~

~~The following table provides a summary of some of our Portfolio Management segment’s key metrics (dollars in thousands):~~

June 30,

December 31,


2021

2020


Successor

Predecessor

Mortgage Servicing Rights Portfolio

Loan count


94,520

   69,301
Ending unpaid principal balance (“UPB”)

$
30,294,127

   $ 22,269,362
Average unpaid principal balance

$
321

   $ 321
Weighted average coupon


3.04
%

   3.15 %
Weighted average age (in months)


7
   4
Weighted average FICO credit score


759
   760
90+ day delinquency rate


0.09
%
   0.1 %
Total prepayment speed


10.1
%
   12.1 %

Reverse Mortgages

Loan count


59,258

   58,230
Active UPB

$
13,973,882

   $ 13,355,570
Due and payable

$
585,656

   $ 484,233
Foreclosure

$
340,588

   $ 348,768
Claims pending

$
69,285

   $ 76,346




Ending unpaid principal balance

$
14,969,411

   $ 14,264,917
Average unpaid principal balance

$
253

   $ 245
Weighted average coupon


4.00
%
   4.30 %
Weighted average age (in months)


44

   44
Percentage in foreclosure


2.3
%
   2.4 %

Commercial (SRL/Portfolio/Fix & Flip)

Loan count


1,921

   1,993
Ending unpaid principal balance

$
417,813

   $ 493,817
Average unpaid principal balance

$
217

   $ 248
Weighted average coupon


7.52
%
   8.50 %
Weighted average loan age (in months)


9

   12
SRL conditional prepayment rate


2.4
%
   2.9 %
SRL
non-performing
(60+ DPD)


1.5
%
   2.2 %
F&F single month mortality


9.3
%
   8.8 %
F&F
non-performing
(60+ DPD)


17.4
%
   6.5 %

Agricultural Loans

Loan count


74

   42
Ending unpaid principal balance

$
159,029

   $ 69,127
Average unpaid principal balance

$
2,149

   $ 1,646
Weighted average coupon


7.20
%
   7.70 %
Weighted average loan age (in months)


4

   5
Conditional prepayment rate


50.3
%
   1.0 %

~~103~~

~~Table of Contents~~

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Investment and Capital Markets

Number of structured deals


3

   1    4    6
Structured deals (size in notes)

$
1,132,531
   $ 571,448    $ 1,187,440    $ 1,760,352
Number of whole loan trades


10

   8    0    2
UPB of whole loan trades

$
218,068
   $ 195,929    $ —      $ 124,165

~~Revenue~~

~~In the table below is a summary of the components of our Portfolio Management segment’s total revenue for the periods indicated (in thousands):~~

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

REVENUE

Gain on sale and other income from mortgage loans held for sale, net

$
7,748
   $ 5,065    $ —      $ 5,617
Interest income


147,945

   149,875    198,156    360,994
Interest expense (nonrecourse)


(111,341
)
   (114,910 )    (134,628 )    (262,478 )
Net fair value losses on portfolio assets


(25,381
)
   (32,215 )    (6,291 )    (72,635 )








Net fair value gains


11,223
   2,750    57,237    25,881








Net interest expense


(15,851
)
   (14,816 )    (19,708 )    (44,481 )








Servicing income (MSR)


300
   33,698    1,682    1,786
Underwriting, advisory and valuation fees


1,901
   997    90    180
Asset management fees


—

   9    442    953
Other fees


1,376
   1,487    (783 )    (527 )


��





Fee income


3,577
   36,191    1,431    2,392








Total revenue

$
6,697
   $ 29,190    $ 38,960    $ (10,591 )

Principally, all of our outstanding financial instruments are carried at fair value. The yield recognized on these financial instruments and any changes in estimated fair value are recorded as a component of net fair value gains on mortgage loans and related obligations in the Consolidated Statements of Operations. However, for certain of our outstanding financing lines of credit, we have not elected to account for these liabilities under the fair value option. Accordingly, interest expense is presented separately on our Consolidated Statements of Operations. We evaluate net interest margin (“NIM”) for our outstanding investments through an evaluation of all components of interest income and interest expense.

~~104~~

~~Table of Contents~~

~~The following table provides an analysis of all components of NIM for the periods indicated (in thousands):~~

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Interest income on commercial and reverse loans

$
147,944
$ 149,875    $ 198,643    $ 361,481
Interest expense on HMBS and nonrecourse obligations


(111,341
)
(114,910 )    (134,628 )    (262,478 )






Net interest margin included in net fair value gains on mortgage loans
(1)


36,603
34,965    64,015    99,003






Interest income on mortgage loans held for sale


187
138    309    483
Interest expense on warehouse lines of credit


(16,038
)
(14,954 )    (20,017 )    (44,968 )
Other interest income


—

—      —      4






Net interest expense


(15,851
)
(14,816 )    (19,708 )    (44,481 )






NET INTEREST MARGIN

$
20,752
$ 20,149    $ 44,307    $ 54,522

~~(1)~~

Net interest margin included in fair value gains on mortgage loans includes interest income and expense on all commercial and reverse loans and their related nonrecourse obligations. Interest income on mortgage loans and warehouse lines of credit are classified in net interest expense. See Note 2—Summary of Significant Accounting Policies within the interim unaudited consolidated financial statements for additional information on the Company’s accounting related to commercial and reverse mortgage loans.

Certain of our financial instruments are valued utilizing a process that combines the use of a discounted cash flow model and analysis of current market data to arrive at an estimate of fair value. The cash flow assumptions and prepayment and repayment assumptions used in the model are based on various factors, with the key assumptions being prepayment speeds, credit loss frequencies and severity, and discount rate assumptions. Any changes in fair value on these financials instruments is recorded as a gain or loss in net fair value gains on mortgage loans and related obligations on the Consolidated Statements of Operations.

~~For the three months from April~~

~~1, 2021 to June~~

~~30, 2021 (Successor) versus the three months ended June~~

~~30, 2020 (Predecessor)~~

~~Total revenue decreased $32.3 million or 82.8% as a result of the following:~~

Interest income decreased $50.2 million due to competitive pressure on margins in 2021 resulting in a decrease in weighted average coupon on our portfolio of loans for the three months from April 1, 2021 to June 30, 2021 compared to the comparable 2020 period.

Interest expense on nonrecourse debt decreased $23.3 million due to issuances of nonrecourse debt in a favorable interest rate environment during the three months from April 1, 2021 to June 30, 2021 and retirement of nonrecourse debt issued in prior periods.

~~Net interest expense on our warehouse lines decreased $3.9 million due primarily to a lower average cost of funds on our financing lines of credit.~~

~~Net fair value losses on portfolio assets increased $19.1 million primarily due to home price appreciation and increased prepayment speeds on our securitized reverse assets and MSR.~~

~~105~~

~~Table of Contents~~

~~For the six months ended June~~

~~30, 2021 (Successor and Predecessor) versus the six months ended June~~

~~30, 2020 (Predecessor)~~

~~Total revenue increased $46.5 million or 438.8% as a result of the following:~~

Interest income decreased $63.2 million due to competitive pressure on margins in 2021 resulting in a decrease in weighted average coupon on our portfolio of loans for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Interest expense on nonrecourse debt decreased $36.2 million due to issuances of nonrecourse debt in a favorable interest rate environment during the six months ended June 30, 2021 and retirement of nonrecourse debt issued in prior periods.

~~Net interest expense on our warehouse lines decreased $13.8 million due primarily to a lower average cost of funds on our financing lines of credit.~~

Net fair value losses on portfolio assets increased $15.0 million primarily as a result of lower negative fair value adjustments for the six months ended June 30, 2021 compared to the fair value losses incurred in the same period 2020. Financial markets were significantly disrupted resulting in significant negative fair value

~~mark-to-market~~

~~adjustments during 2020.~~

~~Expenses~~

~~In the table below is a summary of the components of our Portfolio Management segment’s total expenses for the periods indicated (in thousands):~~

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Salaries and bonuses

$
15,540
   $ 5,650    $ 5,061    $ 9,792
Other salary related expenses


405
   497    327    696








Total salaries, benefits and related expenses


15,945
   6,147    5,388    10,488

Securitization expenses


4,733
   4,459    5,017    8,350
Servicing related expenses


8,825
   8,651    7,028    12,420
Other general and administrative expenses


3,560

   4,887    3,781    7,174








Total general and administrative expenses


17,118

   17,997    15,826    27,944

Occupancy and equipment rentals


127

   262    160    314








Total expenses

$
33,190
   $ 24,406    $ 21,374    $ 38,746

~~For the three months from April~~

~~1, 2021 to June~~

~~30, 2021 (Successor) versus the three months ended June~~

~~30, 2020 (Predecessor)~~

~~Total expenses increased $11.8 million or 55.3% as a result of the following:~~

Salaries, benefits and related expenses increased $10.6 million or 196.0%, primarily due to allocated costs associated with the Business Combination and an increase in bonus compensation. During the second quarter of 2021,

~~one-time~~

~~initial and accelerated Replacement and Earnout Right RSU expense of $7.2 million was recognized. Additional~~

~~on-going~~

~~expenses of $1.0 million for the RSUs were recognized as a result of the Business Combination.~~

~~106~~

~~Table of Contents~~

General and administrative expenses increased $1.3 million or 8.2% primarily due to increased loan portfolio expenses related to the increase in subservicing expense on the retained MSR portfolio, which are included in servicing related expenses above, slightly offset by decreases in fees related to the securitization of assets into nonrecourse securitizations.

~~For the six months ended June~~

~~30, 2021 (Successor and Predecessor) versus the six months ended June~~

~~30, 2020 (Predecessor)~~

~~Total expenses increased $18.9 million or 48.7% as a result of the following:~~

Salaries, benefits and related expenses increased $11.6 million or 110.6%, primarily due to allocated costs associated with the Business Combination and an increase in bonus compensation. During the second quarter of 2021,

~~one-time~~

~~initial and accelerated Replacement and Earnout Right RSU expense of $7.2 million was recognized. Additional~~

~~on-going~~

~~expenses of $1.0 million for the RSUs were recognized as a result of the Business Combination.~~

General and administrative expenses increased $7.2 million or 25.7% primarily due to increased loan portfolio expenses related to the increase in subservicing expense on the retained MSR portfolio, which are included in servicing related expenses above and increases in fees related to the securitization of assets into nonrecourse securitizations.

Mortgage Originations Segment

The following table summarizes our Mortgage Origination segment’s results for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021			January 1, 2021 to March 31, 2021		For the three months ended June 30, 2020		For the six months ended June 30, 2020		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						Successor									Predecessor
Gain on sale and other income from mortgage loans held for sale, net	$	185,386		$	286,481	$	298,333	$	425,624
Gain on sale and other income from loans held for sale, net										$	81,199		$	193,120		$	185,386		$	286,481
Fee income		30,345			32,731		33,795		54,322		18,086			38,235			30,345			32,731
Net interest income		1,976			891		778		1,264		3,899			7,100			1,976			891

Total revenue		217,707			320,103		332,906		481,210		103,184			238,455			217,707			320,103

Total expenses		224,191			224,246		215,958		354,149		138,183			294,966			224,191			224,246

NET INCOME BEFORE TAXES	$	(6,484	)	$	95,857	$	116,948	$	127,061
NET INCOME (LOSS) BEFORE TAXES										$	(34,999	)	$	(56,511	)	$	(6,484	)	$	95,857

Our Mortgage Originations segment generates its ~~revenues~~revenue primarily from the origination and sale of residential mortgages, including conforming mortgages, government mortgages insured by the FHA, VA and USDA,

non-conforming

products such as jumbo mortgages,

non-qualified

mortgages, closed-end second mortgages, and

~~closed-end~~

~~second mortgages~~ home improvement loans into the secondary market. Revenue from our Mortgage Originations segment includes cash gains recognized on the sale of mortgages, net of any estimated repurchase obligations, realized hedge gains, and losses, fair value adjustments on loans held for sale, and any fair value adjustments on our outstanding interest rate lock pipeline and derivatives utilized to mitigate interest rate exposure on our outstanding mortgage pipeline. We also earn origination fees on the successful origination of mortgage loans, which are recorded at the time of origination of the associated loans.

We utilize forward loan sale commitments, TBAs, and other forward delivery securities to fix the forward sales price that we will realize in the secondary market and to mitigate the interest rate risk to loan prices that we may be exposed to from the date we enter into rate locks with our customers until the date the loan is sold. We realize hedge gains and losses based on the value of the change in price in the underlying securities. When the position is closed, these amounts are recorded as realized hedge gains and losses.

~~107~~

~~Table of Contents~~

KEY METRICS

The following table provides a summary of some of our Mortgage Origination segment’s key metrics ~~(dollars in~~(in thousands):

April 1, 2021
to

June 30, 2021

January 1,
2021 to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Loan origination volume (dollars)

Conforming

$
4,302,170
   $ 5,397,708    $ 5,377,252    $ 7,976,292
Government


995,657
   1,068,650    1,238,058    2,032,871
Non-conforming


1,571,895
   1,937,860    966,514    1,793,173
Home improvement


58,928
   —      —      —








Total loan origination volume

$
6,928,650
   $ 8,404,218    $ 7,581,824    $ 11,802,336

Loan origination volume by channel (dollars)

Retail

$
4,870,554
   $ 5,622,487    5,773,656    $ 8,984,443
Wholesale/Correspondent


1,201,503
   1,706,365    1,037,824    1,579,202
Consumer direct


797,665
   1,075,366    770,344    1,238,691
Home improvement


58,928
   —      —      —








Total loan origination volume by channel

$
6,928,650
   $ 8,404,218    $ 7,581,824    $ 11,802,336

Loan origination volume by type (dollars)

Purchase

$
3,494,462
   2,664,493    2,059,463    3,757,855
Refinance


3,375,260
   5,739,725    5,522,361    8,044,481
Home improvement


58,928
   —      —      —








Total loan origination volume by type

$
6,928,650

   $ 8,404,218    $ 7,581,824    $ 11,802,336

Loan origination volume (units)

Conforming


14,136
   18,090    17,910    27,276
Government


3,141
   3,426    4,145    7,014
Non-conforming


1,972
   2,472    1,466    2,648
Home improvement


5,522
   —      —      —








Total loan origination volume


24,771
   23,988    23,521    36,938

Loan origination volume by channel (units)

Retail


13,737
   16,123    18,349    28,934
Wholesale/Correspondent


3,005
   4,745    2,986    4,456
Consumer direct


2,507
   3,120    2,186    3,548
Home improvement


5,522
   —      —      —








Total loan origination volume by channel


24,771
   23,988    23,521    36,938

Loan origination volume by type (units)

Purchase


9,328
   7,534    6,890    12,961
Refinance


9,921
   16,454    16,631    23,977
Home improvement


5,522
   —      —      —








Total loan origination volume by type


24,771
   23,988    23,521    36,938

Loan sales by investor (dollars)

Agency

$
5,807,841

   $ 7,246,418        $ 6,946,820       $ 10,207,363


	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
Loan origination volume (dollars)
Conforming	$	2,461,253	$	5,791,718	$	4,302,170	$	5,397,708
Government		782,345		1,487,644		995,657		1,068,650
Non-conforming		917,578		1,940,169		1,571,895		1,937,860
Home improvement		67,177		115,080		58,928		—

Total loan origination volume	$	4,228,353	$	9,334,611	$	6,928,650	$	8,404,218

~~108~~

Table of Contents

April 1, 2021
to

June 30, 2021

January 1,
2021 to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Private


1,212,318
   1,152,810 433,121 1,191,224




Total loan sales by investor

$
7,020,159
   $ 8,399,228 $ 7,379,941 $ 11,398,587

Loan sales by type (dollars)

Servicing released

$
2,183,584
   $ 2,086,550 $ 525,085 $ 4,408,050
Servicing retained


4,836,575
   6,312,678 6,854,856 6,990,537




Total loan sales by type

$
7,020,159
   $ 8,399,228 $ 7,379,941 $ 11,398,587

Net rate lock volume

$
6,668,823
   $ 8,405,313 $ 6,800,861 13,017,115
Mortgage originations margin (including servicing margin)
(1)


2.8
%
   3.4 % 4.4 % 3.3 %
Capitalized servicing rate (in bps)


103.5
   89.1 63.6 64.2


	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
Loan origination volume by type (dollars)
Agency	$	3,215,668	$	7,155,363	$	6,074,464	$	7,367,044
Non-agency		945,508		2,064,168		795,258		1,037,174
Home improvement		67,177		115,080		58,928		—

Total loan origination volume by type	$	4,228,353	$	9,334,611	$	6,928,650	$	8,404,218

Loan origination volume by channel (dollars)
Retail	$	2,384,928	$	5,318,494	$	4,870,554	$	5,622,487
Wholesale/Correspondent		1,520,513		3,177,820		1,201,503		1,706,365
Consumer direct		255,735		723,217		797,665		1,075,366
Home improvement		67,177		115,080		58,928		—

Total loan origination volume by channel	$	4,228,353	$	9,334,611	$	6,928,650	$	8,404,218

Loan origination volume by type (dollars)
Purchase	$	3,335,956	$	6,102,075	$	3,494,462	$	2,664,493
Refinance		825,220		3,117,456		3,375,260		5,739,725
Home improvement		67,177		115,080		58,928		—

Total loan origination volume by type	$	4,228,353	$	9,334,611	$	6,928,650	$	8,404,218

Loan origination volume (units)
Conforming		6,870		16,112		14,136		18,090
Government		2,311		4,428		3,141		3,426
Non-conforming		942		2,044		1,972		2,472
Home improvement		5,750		9,757		5,522		—

Total loan origination volume		15,873		32,341		24,771		23,988

Loan origination volume by type (units)
Agency		8,890		19,892		18,278		22,763
Non-agency		1,233		2,692		971		1,225
Home improvement		5,750		9,757		5,522		—

Total loan origination volume by type		15,873		32,341		24,771		23,988

Loan origination volume by channel (units)
Retail		6,335		14,159		13,737		16,123
Wholesale/Correspondent		3,084		6,423		3,005		4,745
Consumer direct		704		2,002		2,507		3,120
Home improvement		5,750		9,757		5,522		—

Total loan origination volume by channel		15,873		32,341		24,771		23,988

Loan origination volume by type (units)
Purchase		7,849		14,574		9,328		7,534
Refinance		2,274		8,010		9,921		16,454
Home improvement		5,750		9,757		5,522		—

Total loan origination volume by type		15,873		32,341		24,771		23,988

Loan sales by investor (dollars)
Agency	$	3,376,879	$	7,639,614	$	5,807,841	$	7,246,418
Private		1,278,760		2,409,044		1,212,318		1,152,810

Total loan sales by investor	$	4,655,639	$	10,048,658	$	7,020,159	$	8,399,228

Table of Contents


	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
Loan sales by type (dollars)
Servicing released	$	1,275,491		$	2,758,426		$	2,183,584		$	2,086,550
Servicing retained		3,380,148			7,290,232			4,836,575			6,312,678

Total loan sales by type	$	4,655,639		$	10,048,658		$	7,020,159		$	8,399,228

Net rate lock volume	$	3,800,302		$	9,117,044		$	6,668,823		$	8,405,313
Mortgage originations margin (including servicing margin) (1)		2.14	%		2.12	%		2.78	%		3.41	%
Capitalized servicing rate (in bps)		124.9			124.1			103.5			89.1

(1)	Calculated for each period as Gain on sale and other income from ~~mortgage~~ loans held for sale, net, divided by Net rate lock volume.

Revenue

In the table below is a summary of the components of our Mortgage Origination segment’s total revenue for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021			January 1, 2021 to March 31, 2021			For the three months ended June 30, 2020			For the six months ended June 30, 2020			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									Successor									Predecessor
Gain on sale, net	$	168,821		$	200,874		$	319,444		$	456,858		$	15,360		$	81,520		$	168,821		$	200,874
Provision for repurchases		(1,813	)		(2,258	)		(9,854	)		(11,979	)		(4,673	)		(6,304	)		(1,813	)		(2,258	)
Realized hedge gains (losses)		(17,013	)		74,823			(57,922	)		(107,484	)
Net realized hedge gains (losses)														82,896			164,004			(17,013	)		74,823
Changes in fair value of loans held for sale		11,602			(41,485	)		11,109			33,410			8,802			(32,970	)		11,602			(41,485	)
Changes in fair value of interest rate locks		(2,984	)		(49,946	)		7,706			64,051			11,262			(9,224	)		(2,984	)		(49,946	)
Changes in fair value of derivatives/hedges		26,773			104,473			27,850			(9,232	)		(32,448	)		(3,906	)		26,773			104,473

Gain on sale and other income from mortgage loans held for sale, net		185,386			286,481			298,333			425,624
Gain on sale and other income from loans held for sale, net														81,199			193,120			185,386			286,481

Origination related fee income		30,345			32,731			33,795			54,322			18,086			38,235			30,345			32,731

Net interest income		1,976			891			778			1,264
Net interest income (expense)														3,899			7,100			1,976			891

Total revenue	$	217,707		$	320,103		$	332,906		$	481,210		$	103,184		$	238,455		$	217,707		$	320,103

Net interest income was comprised of the following (in thousands):

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Interest income

$
12,837
   $ 12,483 $ 11,160 $ 19,078
Interest expense


(10,861
)
   (11,592 ) (10,382 ) (17,814 )




Net interest income

$
1,976
   $ 891 $ 778 $ 1,264




WAC - loans held for sale


3.2
%
   2.9 % 3.2 % 3.2 %
WAC - warehouse lines of credit


3.2
%
   3.0 % 2.6 % 2.6 %


	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
Interest income	$	13,657		$	26,229		$	12,837		$	12,483
Interest expense		(9,758	)		(19,129	)		(10,861	)		(11,592	)

Net interest income (expense)	$	3,899		$	7,100		$	1,976		$	891

WAC—loans held for sale		5.2	%		4.6	%		3.2	%		2.9	%
WAC—warehouse lines of credit		4.7	%		4.1	%		3.2	%		3.0	%

~~109~~

Table of Contents

For the three months ~~from April~~

~~1, 2021 to~~ended June

30, ~~2021 (Successor)~~2022 versus the three months ended June

30, ~~2020 (Predecessor)~~2021

Total revenue decreased ~~$115.2~~$114.5 million or ~~34.6%, primarily~~52.6% as a result of the following:

Gain on sale, net, decreased ~~$150.6~~$153.5 million or ~~47.2%~~90.9% as a result of decreased gain on sale margins on lower ~~margin and lower originated mortgage loans~~volume during the three months ~~from April 1, 2021 to~~ended June 30, ~~2021.~~2022. We sold ~~$7,020.2 million~~$4.7 billion in mortgage loans for the three months ~~from April 1, 2021 to~~ended June 30, ~~2021~~2022 compared to ~~$7,379.9 million~~$7.0 billion for the comparable ~~2020~~2021 period. Weighted average gain on sale margins on sold loans were ~~2.4%~~0.3% for the three months ~~from April 1, 2021 to~~ended June 30, ~~2021~~2022 compared to ~~4.3%~~2.4% for the comparable ~~2020~~2021 period. Gain on sale margins decreased primarily due to rate volatility ~~during both periods~~while IRLCs and loans were in the pipeline and competitive pressure on margins in the ~~2021~~2022 period.

~~Provision for repurchases decreased $8.0 million or 81.6% due to a drop in refinance volume that drives premium recapture.~~

~~Changes~~During the three months ended June 30, 2022, net realized hedge gains and changes in fair value of ~~loans held for sale increased $0.5~~derivatives/hedges were $50.4 million ~~or 4.4% as a result of higher net change~~compared to $9.8 million in the

~~end-of-period~~

~~fair value of our lower outstanding originated loan production not yet sold or securitized. The unsold pipeline decreased from $1.9 billion with a weighted~~ comparable 2021 period, driven by increases in average ~~margin of 2.1% at March 31, 2021 to $1.8 billion~~market interest rates while IRLCs and ~~2.8% at June 30, 2021. Comparatively,~~loans were in the ~~unsold pipeline increased from $1.2 billion with a weighted average margin of 3.6% at March 31, 2020 to $1.4 billion and 4.8% at June 30, 2020.~~pipeline.

Changes in fair value of interest rate locks ~~similarly decreased $10.7~~improved $14.2 million or ~~138.7%~~477.4% as a result of ~~lower~~higher net change in our interest rate ~~pipeline.~~lock pipeline primarily due to the impact of rate fluctuations around the respective quarter ends. The fair value of the interest rate lock pipeline increased from $2.7 million at March 31, 2022 to $12.2 million at June 30, 2022. Comparatively, the fair value of the interest rate lock pipeline decreased from $37.6 million at March 31, 2021 to $33.5 million at June 30, 2021. ~~Comparatively, the fair value of the interest rate lock pipeline increased from $56.3 million at March 31, 2020 to $78.0 million at June 30, 2020.~~

Origination related fee income decreased ~~$3.5~~$12.3 million or ~~10.2%~~40.4% as a result of lower loan origination volume, and a reduction in ~~dollars~~fee income per loan due to channel mix with wholesale/correspondent comprising a larger percentage of funded volume during the three months ~~from April 1, 2021 to~~ended June 30, ~~2021.~~2022.

During the three months from April 1, 2021 to June 30, 2021, net realized and unrealized hedge gains were $9.7 million compared to hedge losses of $30.1 million in the comparable 2020 period, partially offsetting the fair value impact to loans in the pipeline by changes market interest rates.

For the six months ended June

30, ~~2021 (Successor and Predecessor)~~2022 (Successor) versus the six months ended June

30, ~~2020 (Predecessor)~~2021 (Successor and Predecessor)

Total revenue ~~increased $56.6~~decreased $299.4 million or ~~11.8%~~55.7% as a result of the following:

Gain on sale, net, decreased ~~$87.2~~$288.2 million or ~~19.1%~~77.9% as a result of decreased gain on sale margins on ~~sold~~lower volume ~~offset slightly by higher sales volume in dollars~~ during the six months ended June 30, ~~2021.~~2022. We sold ~~$15.4~~$10.0 billion in mortgage loans for the six months ended June 30, ~~2021~~2022 compared to ~~$11.4~~$15.3 billion for the comparable ~~2020~~2021 period. Weighted average gain on sale margins on sold loans were ~~2.4%~~0.8% for the six months ended June 30, ~~2021~~2022 compared to ~~4.0%~~2.4% for the comparable ~~2020~~2021 period. Gain on sale margins decreased primarily due to rate volatility while the related IRLCs and loans were in the pipeline during both periods and competitive pressure on margins in the ~~2021~~2022 period.

~~Provision for repurchases decreased $7.9 million or 66.0% due to a drop in refinance volume that drives premium recapture.~~

~~Changes in fair value of loans held for sale decreased $63.3 million or 189.4% as a result of lower net change in the~~

~~end-of-period~~

fair value of our higher outstanding originated loan production not yet sold or securitized. The unsold pipeline decreased from $2.0 billion with a weighted average margin of 4.2% at December 31, 2020 to $1.8 billion and 2.8% at June 30, 2021. Comparatively, the unsold pipeline increased from $1.0 billion with a weighted average margin of 2.9% at January 1, 2020 to $1.4 billion and 4.8% at June 30, 2020.

Changes in fair value of interest rate locks ~~similarly decreased $117.0~~improved $43.7 million or ~~182.6%~~82.6% as a result of lower net negative change in our interest rate ~~pipeline.~~lock pipeline primarily due to the impact of rate fluctuations around the respective quarter ends. The fair value of the interest rate lock pipeline decreased from $23.2 million at December 31, 2021 to $12.2 million at June 30, 2022. Comparatively, the fair value of the interest rate lock pipeline decreased from $87.6 million at December 31, 2020 to $33.5 million at June 30, ~~2020. Comparatively, the fair value of the interest rate lock pipeline increased from $13.9 million at January 1, 2020 to $78.0 million at June 30, 2020.~~2021.

~~110~~

Origination related fee income decreased $24.8 million or 39.4% as a result of lower loan origination volume and a change in channel mix with wholesale/correspondent comprising a larger percentage of funded volume during the six months ended June 30, 2022.

During the six months ended June 30, 2022, net realized hedge gains and changes in fair value of derivatives/hedges were $160.1 million compared to $189.1 million in the comparable 2021 period, driven by differences in relative pipeline size and changes in average market interest rates while the related IRLCs and loans were in the pipeline.

Table of Contents

~~Origination related fee income increased $8.8 million or 16.1% as a result of higher loan origination volume during the six months ended June 30, 2021.~~

During the six months ended June 30, 2021, net realized and unrealized hedge gains were $189.1 million compared to hedge losses of $116.7 million in the comparable 2020 period, partially offsetting the fair value impact to loans in the pipeline by changes market interest rates.

Expenses

In the table below is a summary of the components of our Mortgage Originations segment’s total expenses for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021		January 1, 2021 to March 31, 2021		For the three months ended June 30, 2020		For the six months ended June 30, 2020		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						Successor						Predecessor
Commissions and bonus	$	103,600	$	111,766	$	126,415	$	185,244
Commissions and bonuses									$	35,011	$	78,795	$	103,600	$	111,766
Salaries		55,556		46,232		36,116		66,823		44,282		92,111		55,556		46,232
Other salary related expenses		13,152		18,451		13,355		25,805		20,991		42,174		13,152		18,451

Total salaries, benefits and related expenses		172,308		176,449		175,886		277,872		100,284		213,080		172,308		176,449

Loan origination fees		14,781		14,003		11,862		20,987		7,655		17,843		14,781		14,003
Loan processing expenses		5,425		5,462		2,007		4,600		3,104		7,113		5,425		5,462
Other general and administrative expenses		27,588		23,112		20,929		40,038		22,409		47,589		27,588		23,112

Total general and administrative expenses		47,794		42,577		34,798		65,625		33,168		72,545		47,794		42,577

Occupancy, equipment rentals and other office related expenses		4,089		5,220		5,274		10,652		4,731		9,341		4,089		5,220

Total expenses	$	224,191	$	224,246	$	215,958	$	354,149	$	138,183	$	294,966	$	224,191	$	224,246

For the three months ~~from April~~

~~1, 2021 to~~ended June

30, ~~2021 (Successor)~~2022 versus the three months ended June

30, ~~2020 (Predecessor)~~2021

Total expenses ~~increased $8.2~~decreased $86.0 million or ~~3.8%~~38.4% as a result of the following:

Salaries, benefits and related expenses decreased ~~$3.6~~$72.0 million or ~~2.0%~~41.8%, primarily due to a ~~$22.8~~decrease of $68.6 million ~~decrease~~ in commissions and bonus ~~expense~~due to lower retail and consumer direct volume, as well as a ~~result~~decrease of ~~the 8.6% decrease~~$11.3 million in ~~origination volume~~salaries due to a reduction in ~~dollars~~average headcount. This was partially offset by increases in other salary related expenses related to increases in allocated corporate expenses and severance charges which were incurred during the three months ~~from April 1, 2021 to~~ended June 30, ~~2021. These decreases were offset by $7.7 million of~~

~~one-time~~

~~initial~~2022 Commissions and ~~accelerated Replacement and Earnout Right RSU expense recognized~~bonuses decreased due to lower volume during the ~~second quarter of~~three months ended June 30, 2022 when compared to the same period for 2021. ~~Additional~~

~~on-going~~

~~expenses for the RSUs of $2.3 million were recognized as a result of the Business Combination. Salaries increased an additional $9.4 million as result of increased~~Average headcount ~~further offsetting these decreases. Our average headcount increased from 2,639~~ for the three months ended June 30, ~~2020~~2022, was 2,591 compared to ~~3,086~~3,058 for the 2021 ~~period in order to originate and fulfill the increase in loan origination volume in units.~~period.

General and administrative expenses ~~increased $13.0~~decreased $14.6 million or ~~37.3%~~30.6% primarily due to ~~an increase~~lower origination volume and a change in channel mix with wholesale/correspondent comprising a larger percentage of funded volume which resulted in a decrease of $7.1 million in loan origination ~~fees as~~expenses and a ~~result~~decrease of ~~higher origination volumes~~$2.3 million in units. Additionally, other general and administrative expenses increased by $6.7 million, primarily attributable to increases in professional fees, depreciation and amortization expense and communications and dataloan processing ~~with a slight offset through a reduction in business development~~ expenses. ~~During the second quarter of 2021, $1.6 million of amortization of intangibles was recognized as a result of the Business Combination.~~

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For the six months ended June

30, ~~2021 (Successor and Predecessor)~~2022 (Successor) versus the six months ended June

30, ~~2020 (Predecessor)~~2021 (Successor and Predecessor)

Total expenses ~~increased $94.3~~decreased $153.5 million or ~~26.6%~~34.2% as a result of the following:

Salaries, benefits and related expenses ~~increased $70.9~~decreased $135.7 million or ~~25.5%~~38.9%, primarily due to a ~~$30.1~~decrease of $136.6 million ~~increase~~ in commissions and bonus ~~expense~~due to lower retail and consumer direct volume, as well as, a ~~result~~decrease of ~~the 29.9% increase~~$9.7 million in ~~origination volume~~salaries due to a reduction in average headcount. This was partially offset by increases in other salary related expenses related to increases in allocated corporate expenses and severance charges incurred during the six months ended June 30, ~~2021. Our average~~2022. Average headcount ~~increased from 2,590~~ for the six months ended June 30, ~~2020~~2022 was 2,739 compared to ~~3,072~~3,086 for the 2021 ~~period in order to service the increase in loan origination volume. During the second quarter of 2021,~~

~~one-time~~period.

~~initial and accelerated Replacement and Earnout Right RSU expense of $7.7 million was recognized. Additional~~

~~on-going~~

~~expenses of $2.3 million for the RSUs were recognized as a result of the Business Combination.~~

General and administrative expenses ~~increased $24.7~~decreased $17.8 million or ~~37.7%~~19.7% primarily due to lower origination volume and a ~~increase~~change in channel mix with wholesale/correspondent comprising a larger percentage of funded volume which resulted in a decreased of $10.9 million in loan origination fees, as a ~~result~~decrease of ~~higher origination volume~~$3.8 million in units and allocated costs associated with the Business Combination. During the second quarter of 2021, $1.6 million of amortization of intangibles was recognized as a result of the Business Combination.loan processing expenses.

Reverse Originations Segment

The following table summarizes our Reverse Originations segment’s results for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021			January 1, 2021 to March 31, 2021		For the three months ended June 30, 2020		For the six months ended June 30, 2020		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						Successor							Predecessor
Net origination gains	$	94,536		$	68,449	$	54,689	$	89,278	$	77,872	$	183,627	$	94,536		$	68,449
Fee income		954			524		509		1,112		2,123		3,939		954			524
Net interest expense		(9	)		—		—		—		—		—		(9	)		—

Total revenue		95,481			68,973		55,198		90,390		79,995		187,566		95,481			68,973

Total expenses		42,246			23,693		22,156		40,740		44,171		87,350		42,246			23,693
Other, net		104			34		—		—		38		3,252		104			34

NET INCOME BEFORE TAXES	$	53,339		$	45,314	$	33,042	$	49,650
NET INCOME (LOSS) BEFORE TAXES										$	35,862	$	103,468	$	53,339		$	45,314

Our Reverse Originations segment generates its revenues primarily from the origination of reverse mortgage loans, including loans insured by FHA and

non-agency

reverse mortgage loans. Revenue from our Reverse Originations segment include both our initial estimate of fair value gains on the date of origination (“Net origination gains”), which is determined by utilizing quoted prices on similar securities or internally-developed models utilizing observable market inputs, in addition to fees earned at the time of origination of the associated loans. We elect to account for all originated loans at fair value. The loans are immediately transferred to our Portfolio Management segment, and any future fair value adjustments, including interest earned, on these originated loans are reflected in revenues of our Portfolio Management segment until final disposition.

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KEY METRICS

The following table provides a summary of some of our Reverse Originations segment’s key metrics (dollars in thousands):

April 1, 2021
to

June 30, 2021

January 1, 2021
to

March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Loan origination volume

Total loan origination volume—New originations—dollars
(1)

$
1,013,323
   $ 768,795    $ 769,349    $ 1,425,626
Total loan origination volume—Tails—dollars
(2)


121,962
   120,775    106,179    236,164








Total loan origination volume—dollars

$
1,135,285
   $ 889,570    $ 875,528    $ 1,661,790
Total loan origination volume—units


3,258
   2,864    2,461    4,757
Loan origination volume by channel (dollars)
(3)

Retail

$
172,972
   $ 127,679    $ 101,066    $ 173,690
TPO


840,351
   641,116    668,283    1,251,936








Total loan origination volume by channel

$
1,013,323
   $ 768,795    $ 769,349    $ 1,425,626


	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
Loan origination volume
Total loan origination volume—new originations (1)	$	1,580,258	$	3,054,795	$	1,013,323	$	768,795
Total loan origination volume—tails (2)		160,157		317,450		121,962		120,775

Total loan origination volume	$	1,740,415	$	3,372,245	$	1,135,285	$	889,570

Total loan origination volume—units		4,172		8,546		3,258		2,864
Loan origination volume—new originations by channel (3)
Retail	$	240,987	$	447,185	$	172,972	$	127,679
TPO		1,339,271		2,607,610		840,351		641,116

Total loan origination volume—new originations by channel	$	1,580,258	$	3,054,795	$	1,013,323	$	768,795

(1)	New loan origination volumes consist of initial reverse mortgage loan borrowing amounts.

(2)	Tails consist of subsequent borrower ~~advances,~~draws, mortgage insurance premiums, service fees, and other advances, which we are able to subsequently pool into a security.

(3)	Loan origination volumes by channel consist of initial reverse mortgage loan borrowing amounts, exclusive of subsequent borrower ~~advances,~~draws, mortgage insurance premiums, service fees, and other advances ~~which~~that we are able to subsequently pool into a security.

Revenue

In the table below is a summary of the components of our Reverse Originations segment’s total revenue for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021			January 1, 2021 to March 31, 2021			For the three months ended June 30, 2020			For the six months ended June 30, 2020			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									Successor									Predecessor
Net origination gains
Net origination gains:
Retail	$	17,220		$	16,913		$	9,230		$	15,719		$	14,179		$	33,490		$	17,220		$	16,913
TPO		141,386			99,678			79,439			147,537			123,436			283,978			141,386			99,678
Acquisition costs		(64,070	)		(48,142	)		(33,980	)		(73,978	)		(59,743	)		(133,841	)		(64,070	)		(48,142	)

Total net origination gains		94,536			68,449			54,689			89,278			77,872		$	183,627		$	94,536			68,449
Fee income		954			524			509			1,112			2,123			3,939			954			524
Net interest income		(9	)		—			—			—			—			—			(9	)		—

Total revenue	$	95,481		$	68,973		$	55,198		$	90,390		$	79,995		$	187,566		$	95,481		$	68,973

For the three months ~~from April~~

~~1, 2021 to~~ended June

30, ~~2021 (Successor)~~2022 versus the three months ended June

30, ~~2020 (Predecessor)~~2021

Total revenue ~~increased $40.3~~decreased $15.5 million or ~~73.0%~~16.2% as a result of the following:

Net origination gains ~~increased $39.8~~decreased $16.7 million or ~~72.9%~~17.6% as a result of ~~higher loan origination volume~~lower margins due to rising yields during the three months ~~from April 1, 2021 to~~ended June 30, ~~2021 combined with increased margins on this origination~~2022, partially offset by higher volume. During the

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~~volume.~~three months ended June 30, 2022, the weighted average margin on production was 4.93% compared to 9.33% during the comparable 2021 period. We originated $1.6 billion of reverse mortgage loans for the three months ended June 30, 2022, an increase of 55.9%, compared to $1.0 billion for the comparable 2021 period. The higher origination ~~volumes~~volume is attributable to home price appreciation ~~and improved interest rates on the HECM loan products~~ leading to an increase in market size, more equity available to seniors, and increased refinance volumes in ~~2021. We originated $1,013.3 million of reverse mortgage loans for~~ the three months ~~from April 1, 2021 to~~ended June 30, 2021, an increase of 31.7%, compared to $769.3 million for the comparable 2020 period. During the three months from April 1, 2021 to June 30, 2021, the weighted average margin on production was 8.33% compared to 6.25% in 2020, an increase of 33.3%.2022.

Fee income increased $1.2 million or 122.5% as a result of higher volume and higher mix of government-insured reverse mortgage production during the three months ended June 30, 2022.

For the six months ended June

30, ~~2021 (Successor and Predecessor)~~2022 (Successor) versus the six months ended June

30, ~~2020 (Predecessor)~~2021 (Successor and Predecessor)

Total revenue increased ~~$74.1~~$23.1 million or ~~81.9%~~14.1% as a result of the following:

Net origination gains increased ~~$73.7~~$20.6 million or ~~82.6%~~12.7% as a result of higher loan origination volume partially offset by decreased margins on this origination volume during the six months ended June 30, 2022. We originated $3.1 billion of reverse mortgage loans for the six months ended June 30, 2022, an increase of 71.4%, compared to $1.8 billion for the comparable 2021 ~~combined with increased margins on this origination volume.~~period. The higher origination ~~volumes~~volume is attributable to home price appreciation and improved interest rates ~~on the HECM loan products~~ leading to an increase in market size, more equity available to seniors, and increased refinance volumes in 2021. ~~We originated $1,782.1 million of reverse mortgage loans for the six months ended June 30, 2021, an increase of 25.0%, compared to $1,425.6 million for the comparable 2020 period.~~ During the six months ended June 30, ~~2021,~~2022, the weighted average margin on production was ~~8.05%~~6.01% compared to ~~5.37%~~9.33% in ~~2020, an increase~~2021, a decrease of ~~49.9%.~~35.6% due to widening credit spreads during the three months ended June 30, 2022.

Fee income increased $2.5 million or 166.5% as a result of higher volume and higher mix of government-insured reverse mortgage production during the six months ended June 30, 2022.

Expenses

In the table below is a summary of the components of our Reverse Originations segment’s total expenses for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021		January 1, 2021 to March 31, 2021		For the three months ended June 30, 2020		For the six months ended June 30, 2020		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						Successor						Predecessor
Salaries and bonuses	$	19,845	$	11,692	$	10,593	$	20,296	$	21,427	$	41,562		19,845	$	11,692
Other salary related expenses		2,008		1,395		1,124		2,342		2,738		4,989		2,008		1,395

Total salaries, benefits and related expenses		21,853		13,087		11,717		22,638		24,165		46,551		21,853		13,087

Loan origination fees		2,761		3,258		3,117		5,736		1,846		4,509		2,761		3,258
Professional fees		2,676		2,079		116		2,222		1,535		1,665		2,676		2,079
Other general and administrative expenses		14,491		4,958		6,800		9,366		16,234		33,777		14,491		4,958

Total general and administrative expenses		19,928		10,295		10,033		17,324		19,615		39,951		19,928		10,295

Occupancy, equipment rentals and other office related expenses		465		311		406		778		391		848		465		311

Total expenses	$	42,246	$	23,693	$	22,156	$	40,740	$	44,171	$	87,350	$	42,246	$	23,693

For the three months ~~from April~~

~~1, 2021 to~~ended June

30, ~~2021 (Successor)~~2022 versus the three months ended June

30, ~~2020 (Predecessor)~~2021

Total expenses increased ~~$20.1~~$1.9 million or ~~90.7%~~4.6% as a result of ~~higher~~ the following:

Salaries ~~benefits~~ and bonuses and other salary related expenses increased ~~$10.1~~$2.3 million or ~~86.5%~~10.6% primarily due to an increase in average headcount and production related compensation to support the increased

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origination volume offset by one-time initial and accelerated Replacement and Earnout Right RSU expense of $4.0 million recognized in Q2 2021. Average headcount for the three months ended June 30, 2022 was 520 compared to 362 for the 2021 period.

For the six months ended June 30, 2022 (Successor) versus the six months ended June 30, 2021 (Successor and Predecessor)

Total expenses increased $21.4 million or 32.5% as a result of the following:

Salaries, benefits and related expenses increased $11.6 million or 33.2% primarily due to an increase in average headcount and production related compensation to support the increased origination ~~volume, and share based compensation associated with the Business Combination.~~volume. Average headcount for the ~~three~~six months ~~from April 1, 2021 to~~ended June 30, ~~2021~~2022 was ~~362~~507 compared to ~~272~~345 for the ~~2020~~2021 period. ~~During the second quarter of 2021,~~

~~one-time~~

~~initial and accelerated Replacement and Earnout Right RSU expense of $4.0 million was recognized. Additional~~

~~on-going~~

~~expenses of $1.2 million for the RSUs were recognized as a result of the Business Combination.~~

General and administrative expenses increased ~~$9.9~~$9.7 million or ~~98.6%~~32.2% primarily due to ~~allocated costs associated with~~ the ~~Business Combination. During~~amortization of intangibles that started being expensed in the second quarter of 2021 ~~$9.3 million of amortization of intangibles was recognized as a result of~~related to the Business Combination.

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~~For the six months ended June~~

~~30, 2021 (Successor and Predecessor) versus the six months ended June~~

~~30, 2020 (Predecessor)~~

~~Total expenses increased $25.2 million or 61.9% as a result of the following:~~

Salaries, benefits and related expenses increased $12.3 million or 54.3% primarily due to an increase in average headcount, production related compensation to support the increased origination volume, and share based compensation associated with the Business Combination. Average headcount for the six months ended June 30, 2021 was 345 compared to 269 for the 2020 period. During the second quarter of 2021,

~~one-time~~

~~initial and accelerated Replacement and Earnout Right RSU expense of $4.0 million was recognized. Additional~~

~~on-going~~

~~expenses of $1.2 million for the RSUs were recognized as a result of the Business Combination.~~

General and administrative expenses increased $12.9 million or 74.5% primarily due to allocated costs and higher professional fees associated with the Business Combination. During the second quarter of 2021, $9.3 million of amortization of intangibles was recognized as a result of the Business Combination.

Commercial Originations Segment

The following table summarizes our Commercial Originations segment’s results for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021		January 1, 2021 to March 31, 2021		For the three months ended June 30, 2020			For the six months ended June 30, 2020			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								Successor								Predecessor
Net origination gains	$	10,822	$	5,431	$	21		$	8,582		$	(3,980	)	$	(505	)	$	10,822	$	5,431
Fee income		12,124		8,930		350			11,185			16,659			33,817			12,124		8,930

Total revenue		22,946		14,361		371			19,767			12,679			33,312			22,946		14,361

Total expenses		20,049		13,391		6,552			22,442			24,587			47,674			20,049		13,391

Other, net		140		149		—			—			164			288			140		149

NET INCOME (LOSS) BEFORE TAXES	$	3,037	$	1,119	$	(6,181	)	$	(2,675	)	$	(11,744	)	$	(14,074	)	$	3,037	$	1,119

Our Commercial Originations segment generates its revenues primarily from the origination of loans secured by

1-8

family residential properties, which are owned for investment purposes as either long-term rentals (“~~SFR”~~SRL”) or “fix and flip” properties ~~which~~that are undergoing construction or renovation. Revenue from our Commercial Originations segment include both our initial estimate of fair value gains on the date of origination (“Net origination gains”), which is determined by utilizing quoted prices on similar securities or internally-developed models utilizing observable market inputs, in addition to fees earned at the time of origination of the associated loans. We elect to account for all originated loans at fair value. The loans are immediately transferred to our Portfolio Management segment, and any future fair value adjustments, including interest earned, on these originated loans are reflected in revenues of our Portfolio Management segment until final disposition.

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KEY METRICS

The following table provides a summary of some of our Commercial Originations segment’s key metrics ~~(dollars in~~(in thousands):


	April 1, 2021 to June 30, 2021		January 1, 2021 to March 31, 2021		For the three months ended June 30, 2020		For the six months ended June 30, 2020		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						Successor						Predecessor
Loan origination volume (dollars) (1)
Portfolio	$	70,027	$	59,458	$	—	$	39,695	$	89,626	$	203,627	$	70,027	$	59,458
SRL		170,442		104,992		—		89,187		271,676		539,849		170,442		104,992
Fix & flip		96,054		90,018		543		157,378		132,250		226,930		96,054		90,018
New construction		17,638		3,422		—		93,169		13,864		36,511		17,638		3,422
Agricultural		46,309		83,013		13,769		78,497
Agricultural (2)										32,551		105,900		46,309		83,013

Total loan origination volume	$	400,470	$	340,903	$	14,312	$	457,926	$	539,967	$	1,112,817	$	400,470	$	340,903

Loan origination volume (units) (1)
Portfolio		74		71		—		22		119		261		74		71
SRL		959		643		—		543		1,402		2,791		959		643
Fix & flip		445		430		3		752		596		1,026		445		430
New construction		56		13		—		276		31		80		56		13
Agricultural		24		27		10		38
Agricultural (2)										20		46		24		27

Total loan origination volume		1,558		1,184		13		1,631		2,168		4,204		1,558		1,184

(1)	Loan ~~originations~~origination volume and units consist of approved total borrower commitments. These amounts include amounts available to our borrowers but have not yet been drawn upon.

(2)	Revenue from origination and management of agricultural loans is recognized in our Portfolio Management segment.

Revenue

In the table below is a summary of the components of our Commercial Originations segment’s total revenue for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021		January 1, 2021 to March 31, 2021		For the three months ended June 30, 2020		For the six months ended June 30, 2020		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						Successor								Predecessor
Net origination gains	$	10,822	$	5,431	$	21	$	8,582	$	(3,980	)	$	(505	)	$	10,822	$	5,431
Fee income		12,124		8,930		350		11,185		16,659			33,817			12,124		8,930

Total revenue	$	22,946	$	14,361	$	371	$	19,767	$	12,679		$	33,312		$	22,946	$	14,361

For the three months ~~from April~~

~~1, 2021 to~~ended June

30, ~~2021 (Successor)~~2022 versus the three months ended June

30, ~~2020 (Predecessor)~~2021

Total revenue ~~increased $22.6~~decreased $10.3 million or ~~6,084.9%~~44.7% as result of the following:

~~We originated $400.5~~

Net origination gains decreased by $14.8 million or 136.8%, primarily as a result of a decrease in ~~commercial loans for~~margin. The decrease in margin was driven by volatility in market interest rates and increased investor yield requirements not passed through to borrowers during the three months ~~from April 1, 2021 to~~ended June 30, ~~2021 compared to $14.3 million during the comparable 2020 period. In March of 2020, there was a temporary deferment of commercial production and a decrease in capital markets demand for~~

~~non-GSE~~2022.

~~or government loan products, which continued through the second quarter, due to the~~

~~COVID-19~~

~~outbreak.~~

~~116~~

Fee income increased $4.5 million or 37.4% primarily as a result of a 34.8% increase in loan origination volume.

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~~Fee income increased $11.8 million primarily as a result of a significant increase in loan origination volume during the three months from April 1, 2021 to June 30, 2021.~~

For the six months ended June

30, ~~2021 (Successor and Predecessor)~~2022 (Successor) versus the six months ended June

30, ~~2020 (Predecessor)~~2021 (Successor and Predecessor)

Total revenue ~~increased $17.5~~decreased $4.0 million or ~~88.7%~~10.7% as result of the following:

Net origination gains decreased $16.8 million or 103.1%, primarily as a result of a decrease in margin. The decrease in margin was driven by volatility in market interest rates and increased investor yield requirements not passed through to borrowers during the six months ended June 30, 2022. We originated ~~$741.4~~$1,112.8 million in commercial loans for the six months ended June 30, ~~2021~~2022 compared to ~~$457.9~~$741.4 million during the comparable ~~2020~~2021 period. ~~In March of 2020, there was a temporary deferment of commercial production and a decrease in capital markets demand for~~

~~non-GSE~~

~~or government loan products, which continued through the second quarter, due to the~~

~~COVID-19~~

~~outbreak.~~

Fee income increased ~~$9.9~~$12.8 million or ~~88.2%~~60.6% primarily as a result of a ~~61.9%~~50.1% increase in loan origination volume and a 4.8% increase in fee income per originated loan during the six months ended June 30, ~~2021.~~2022 when compared to the 2021 period.

Expenses

In the table below is a summary of the components of our Commercial Originations segment’s total expenses for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021		January 1, 2021 to March 31, 2021		For the three months ended June 30, 2020		For the six months ended June 30, 2020		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						Successor						Predecessor
Salaries	$	7,643	$	4,769	$	2,977	$	7,104	$	10,297	$	16,929	$	7,643	$	4,769
Commissions and bonus		2,881		2,092		871		3,691		3,665		7,494		2,881		2,092
Other salary related expenses		980		797		452		1,399		1,001		4,030		980		797

Total salaries, benefits and related expenses		11,504		7,658		4,300		12,194		14,963		28,453		11,504		7,658

Loan origination fees		4,939		3,140		770		5,312		8,295		13,777		4,939		3,140
Professional fees		1,332		891		965		2,414		466		1,394		1,332		891
Other general and administrative expenses		1,971		1,164		357		2,190		508		3,326		1,971		1,164

Total general and administrative expenses		8,242		5,195		2,092		9,916		9,269		18,497		8,242		5,195

Occupancy, equipment rentals and other office related expenses		303		538		160		332		355		724		303		538

Total expenses	$	20,049	$	13,391	$	6,552	$	22,442	$	24,587	$	47,674	$	20,049	$	13,391

For the three months ~~from April~~

~~1, 2021 to~~ended June

30, ~~2021 (Successor)~~2022 versus the three months ended June

30, ~~2020 (Predecessor)~~2021

Total expenses increased ~~$13.5~~$4.5 million or ~~206.0% primarily~~22.6% as a result of the following:

Salaries, benefits and related expenses increased ~~$7.2~~$3.5 million or ~~167.5%~~30.1% primarily due to the increase in ~~loan~~average headcount and production related compensation to support the increased origination ~~volumes~~volume and allocation of share based compensation ~~associated with the Business Combination. During the second quarter of 2021,~~

offset by a one-time

initial and accelerated Replacement and Earnout Right RSU expense of $1.4 million ~~was recognized. Additional~~

~~on-going~~

~~expenses of $0.4 million for~~recognized during the ~~RSUs were recognized as a result of the Business Combination.~~

~~General~~2021 period. Salaries and ~~administrative~~other salary related expenses increased ~~$6.2~~$2.7 million or ~~294.0%~~31.0% primarily due to the increase in ~~loan origination fees~~average headcount for the three months ended June 30, 2022 of 337 compared to 216 for the 2021 period. Commissions and ~~allocated costs associated with the Business Combination. Fee income~~bonuses increased $0.8 million or 27.2% primarily as a result of ~~the significant~~a 34.8% increase in loan origination volume during the ~~the~~ three months ~~from April 1, 2021 to~~ended June 30, ~~2021~~2022 compared to the comparable ~~2020~~2021 period.

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General and administrative expenses increased $1.0 million or 12.5% primarily due to the increase in loan origination fees as a result of a 34.8% increase in loan origination volume during the three months ended June 30, 2022 compared to the comparable 2021 period.

For the six months ended June

30, ~~2021 (Successor and Predecessor)~~2022 (Successor) versus the six months ended June

30, ~~2020 (Predecessor)~~2021 (Successor and Predecessor)

Total expenses increased ~~$11.0~~$14.2 million or ~~49.0%~~42.6% as a result of the following:

Salaries, benefits and related expenses increased ~~$7.0~~$9.3 million or ~~57.1%~~48.5% primarily due to the increase in ~~loan~~average headcount and production related compensation to support the increased origination ~~volumes~~volume and allocation of share based compensation associated with the Business ~~Combination. During the second quarter of 2021,~~

Combination offset by a one-time

initial and accelerated Replacement and Earnout Right RSU expense of $1.4 million ~~was recognized. Additional~~

~~on-going~~

~~expenses of $0.4 million~~recognized during the 2021 period. Average headcount for the ~~RSUs were recognized as a result of~~six months ended June 30, 2022 was 331 compared to 198 for the ~~Business Combination.~~2021 period.

General and administrative expenses increased ~~$3.5~~$5.1 million or ~~35.5%~~37.7% primarily due to the increase in loan origination fees. Loan origination fees ~~and allocated costs associated with the Business Combination. Fee income~~ increased $5.7 million or 70.5% primarily as a result of ~~the 61.9%~~a 50.1% increase in loan origination volume during the six months ended June 30, ~~2021~~2022 compared to the comparable ~~2020~~2021 period.

Lender Services Segment

The following table summarizes our Lender Services segment’s results for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021			January 1, 2021 to March 31, 2021			For the three months ended June 30, 2020			For the six months ended June 30, 2020			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									Successor									Predecessor
Gain on sale and other income from loans held for sale, net													$	(1,125	)	$	(914	)	$	—		$	—
Fee income	$	81,130		$	76,383		$	44,312		$	85,570			58,148			134,301			81,130			76,383
Net interest expense		(15	)		(36	)		(42	)		(33	)
Net interest income (expense)														536			663			(15	)		(36	)

Total revenue		81,115			76,347			44,270			85,537			57,559			134,050			81,115			76,347

Total expenses		73,317			62,970			39,554			78,149			63,667			134,423			73,317			62,970
Other, net		83			2			—			—			814			2,478			83			2

NET INCOME BEFORE TAXES	$	7,881		$	13,379		$	4,716		$	7,388
NET INCOME (LOSS) BEFORE TAXES													$	(5,294	)	$	2,105		$	7,881		$	13,379

Our Lender Services segment generates its revenue primarily from fee income. Revenue from our Lender Services include both the title agent closing and underwriting services. These services are directly tied to the number of closings and orders that are processed throughout the period. In addition, student and consumer loan processing, fulfillment services, and MSR valuation services all contribute to our total revenue in the Lender Services segment.

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KEY METRICS

The following table provides a summary of some of our Lender Services segment’s key metrics:

April 1, 2021
to
June 30, 2021

January 1, 2021
to
March 31, 2021

For the three
months ended
June 30, 2020

For the six
months ended
June 30, 2020


Successor

Predecessor

Incenter Title Agent Orders


55,435
   54,960    42,614    77,229
Incenter Title Agent Closings


43,558
   46,991    26,310    47,860
Total appraisals


10,351
   7,427    5,713    9,734
Title Insurance Underwriter Policies


56,181
   48,814    16,367    29,459
FTE Count for Fulfillment Revenue


916
   858    690    715
Total MSR valuations performed


137
   124    122    256


	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
Title insurance underwriter policies		31,624		78,427		56,181		48,814
Incenter title agent orders		13,729		43,178		55,435		54,960
Incenter title agent closings		13,526		40,167		43,558		46,991
Total appraisals		11,416		22,209		10,351		7,427
Full-time employee average count for fulfillment revenue		860		925		916		858
Total MSR valuations performed		135		281		137		124

Revenue

In the table below is a summary of the components of our Lender Services segment’s total revenue for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021			January 1, 2021 to March 31, 2021			For the three months ended June 30, 2020			For the six months ended June 30, 2020			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									Successor								Predecessor
Insurance underwriting services													$	27,984		$	63,414	$	34,995		$	33,322
Title agent and closing services	$	33,878		$	31,750		$	20,399		$	43,930			16,467			40,343		33,878			31,750
Insurance underwriting services		34,995			33,322			14,153			23,175
Fulfillment services														6,807			14,473		6,823			6,779
MSR trade brokerage, valuation, and other services														4,584			10,284		3,850			2,462
Student and consumer loan origination services		1,500			2,012			2,778			5,700			1,608			4,065		1,500			2,012
Fulfillment services		6,823			6,779			3,732			7,538
MSR trade brokerage, valuation and other services		3,850			2,462			3,211			5,185
Other income		167			58			39			42
Net interest expense		(15	)		(36	)		(42	)		(33	)
Other income (loss), net														(427	)		808		84			58
Net interest income (expense)														536			663		(15	)		(36	)

Total revenue	$	81,115		$	76,347		$	44,270		$	85,537		$	57,559		$	134,050	$	81,115		$	76,347

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For the three months ~~from April~~

~~1, 2021 to~~ended June

30, ~~2021 (Successor)~~2022 versus the three months ended June

30, ~~2020 (Predecessor)~~2021

Total revenue ~~increased $36.8~~decreased $23.6 million or ~~83.2%~~29.0% as a result of the following:

For the three months ~~from April 1, 2021 to~~ended June 30, ~~2021, we~~2022, title agent and closing revenue decreased $17.4 million or 51.4%, as a result of lower volume. We acted as title agent on ~~43,558~~13,526 loan closings during the three months ended June 30, 2022, compared to ~~26,310~~43,558 loan closings for the ~~comparable 2020~~2021 period, ~~an increase~~a decrease of ~~65.6%~~68.9%. Insurance underwriting services revenue also decreased $7.0 million or 20.0%, as a result of lower volume. We underwrote ~~56,181~~31,624 policies during the three months ~~from April 1, 2021 to~~ended June 30, ~~2021,~~2022, compared to ~~16,367~~56,181 underwritten policies for the comparable ~~2020~~2021 period, ~~an increase~~a decrease of ~~243.3%~~43.7%. ~~These increases were~~The decrease in volume was primarily the result of ~~continued strong~~increasing interest rates resulting in a decline in refinance ~~volumes and client acquisition.~~volumes.

For the six months ended June

30, ~~2021 (Successor and Predecessor)~~2022 (Successor) versus the six months ended June

30, ~~2020 (Predecessor)~~2021 (Successor and Predecessor)

Total revenue ~~increased $71.9~~decreased $23.4 million or ~~84.1%~~14.9% as a result of the following:

For the six months ended June 30, ~~2021, we~~2022, title agent and closing revenue decreased $25.3 million or 38.5%, as a result of lower volume. We acted as title agent on ~~90,549~~40,167 loan closings ~~compared to 47,860 loan closings for the 2020 period, an increase of 89.2%. We underwrote 104,995 policies~~ during the six months ended June 30, ~~2021,~~2022, compared to ~~29,459 underwritten policies~~90,549 loan closings for the ~~2020~~2021 period, ~~an increase~~a decrease of ~~256.4%. These increases were primarily the result~~

Table of ~~continued strong refinance volumes and client acquisition.~~Contents

55.6%. Insurance underwriting services revenue also decreased $4.9 million or 7.2%, as a result of lower volume. We underwrote 78,427 policies during the six months ended June 30, 2022, compared to 104,995 underwritten policies for the 2021 period, a decrease of 25.3%. The decrease in volume was primarily the result of increasing interest rates resulting in a decline in refinance volumes. These decreases were partially offset by an increase of $4.0 million or 62.9% in MSR related revenues, as a result of increased activity in the MSR market.

Expenses

In the table below is a summary of the components of our Lender Services segment’s total expenses for the periods indicated (in thousands):


	April 1, 2021 to June 30, 2021		January 1, 2021 to March 31, 2021		For the three months ended June 30, 2020		For the six months ended June 30, 2020		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						Successor						Predecessor
Salaries	$	18,351	$	16,715	$	11,018	$	19,731	$	17,433	$	35,932	$	18,351	$	16,715
Commissions and bonus		8,690		7,045		6,601		10,553		5,280		11,033		8,690		7,045
Other salary related expenses		6,262		4,001		2,484		5,395		6,008		11,836		6,262		4,001

Total salaries, benefits and related expenses		33,303		27,761		20,103		35,679
Total salaries, benefits, and related expenses										28,721		58,801		33,303		27,761

Title and closing		25,190		25,062		12,682		28,677		23,017		49,660		25,190		25,062
Communication and data processing		3,125		2,960		2,483		4,412		2,913		6,008		3,125		2,960
Fair value change in deferred purchase price liability		1,750		—		94		163		—		—		1,750		—
Other general and administrative expenses		8,935		6,040		3,455		7,591		8,228		18,208		8,935		6,040

Total general and administrative expenses		39,000		34,062		18,714		40,843		34,158		73,876		39,000		34,062
Occupancy, equipment rentals and other office related expenses		1,014		1,147		737		1,627

Occupancy, equipment rentals, and other office related expenses										788		1,746		1,014		1,147

Total expenses	$	73,317	$	62,970	$	39,554	$	78,149	$	63,667	$	134,423	$	73,317	$	62,970

For the three months ended June 30, 2022 versus the three months ended June 30, 2021

Total expenses decreased $9.7 million or 13.2% as a result of the following:

Salaries, benefits and related expenses decreased $4.6 million or 13.8%, primarily due to commissions and bonus expense decreasing $3.4 million or 39.2%, in conjunction with the lower title agent and closing services revenue. Our average on-shore headcount also decreased 6.1% for the three months ended June 30, 2022 compared to the 2021 period due to lower demands of the business. On-shore headcount averaged 860 for the three months ended June 30, 2022, and 916 for the comparable 2021 period.

~~120~~

General and administrative expenses decreased $4.8 million or 12.4%, primarily due to lower title and closing expenses associated with the 43.7% decrease in title insurance underwriting policies and a 68.9% decrease in title agent closing volume.

Table of Contents

For the ~~three~~six months ~~from April~~

~~1, 2021 to~~ended June

30, ~~2021~~2022 (Successor) versus the ~~three~~six months ended June

30, ~~2020 (Predecessor)~~2021 (Successor and Predecessor)

Total expenses ~~increased $33.8~~decreased $1.9 million or ~~85.4%~~1.4% as a result of the following:

Salaries, benefits and related expenses ~~increased $13.2~~decreased $2.3 million or ~~65.7%~~3.7%, primarily due to commissions and bonus expense decreasing $4.7 million or 29.9%, in conjunction with the lower title agent and closing services revenue. This decrease was partially offset by an increase in other salary related expenses of $1.6 million or 15.3%.

General and administrative expenses increased $0.8 million or 1.1%, primarily due to the ~~staffing required to support the 243.3% increase~~amortization of intangibles that started being expensed in ~~title insurance underwriting policies and 65.6% increase in title agent closings. Commissions and bonus expense increased $2.1 million in conjunction with the increase in revenue. During~~ the second quarter of 2021 related to the Business Combination.

Portfolio Management Segment

The following table summarizes our Portfolio Management segment results for the periods indicated (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
Gain (loss) on sale and other income from loans held for sale, net	$	(4,740	)	$	6,187		$	7,748		$	5,065
Net fair value gains (losses)		(72,249	)		(175,034	)		11,223			2,750
Fee income		1,198			57,665			3,577			36,191
Net interest expense		(18,772	)		(34,448	)		(15,851	)		(14,816	)

Total revenue		(94,563	)		(145,630	)		6,697			29,190
Total expenses		34,554			69,265			33,190			24,406
Other, net		37			64			(245	)		895

NET INCOME (LOSS) BEFORE TAXES	$	(129,080	)	$	(214,831	)	$	(26,738	)	$	5,679

Our Portfolio Management segment generates its revenues primarily from the sale and securitization of residential mortgages into the secondary market, fair value gains and losses on loans and MSRs that we hold for investment, servicing fee income related to the MSRs, and mortgage advisory fees earned on various investment and capital markets services we provide to our internal and external customers. The fair value gains and losses include the yield we recognize on the contractual interest income that is expected to be collected based on the stated interest rates of the loans and related liabilities and any contractual service fees earned while servicing these assets.

Net fair value gains and losses in our Portfolio Management segment includes fair value adjustments related to the following assets and liabilities:

Loans held for investment, subject to HMBS liabilities, at fair value

Loans held for investment, subject to nonrecourse debt, at fair value

Loans held for investment, at fair value

Loans held for sale, at fair value

(1)

HMBS liabilities, at fair value; and

Nonrecourse debt, at fair value.

(1)	Net fair value gains and losses in our Portfolio Management segment for loans held for sale only include fair value adjustments related to loans originated in the Commercial Originations segment.

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KEY METRICS

The following table provides a trend in the assets and liabilities under management by our Portfolio Management segment (in thousands):


	June 30, 2022		December 31, 2021
Cash and cash equivalents	$	43,481	$	43,261
Restricted cash		352,504		320,116
Loans held for investment, subject to HMBS liabilities, 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
MSRs, at fair value		359,006		427,942
Other assets, net		302,549		228,069

Total long-term investment assets		19,599,153		18,824,964
Loans held for sale, at fair value		281,671		149,425

Total earning assets		19,880,824		18,974,389

HMBS related obligations, at fair value		10,768,621		10,422,358
Nonrecourse debt, at fair value		6,752,084		6,111,242
Other financing lines of credit		1,683,366		1,525,529
Payables and other liabilities		156,321		96,080

Total financing of portfolio		19,360,392		18,155,209

Net equity in earning assets	$	520,432	$	819,180

The following table provides a summary of some of our Portfolio Management segment’s key metrics (dollars in thousands):


	June 30, 2022			December 31, 2021
MSRs Portfolio
Loan count		89,195			118,939
Ending unpaid principal balance	$	28,468,645		$	38,219,162
Average unpaid principal balance	$	319		$	321
Weighted average coupon		3.32	%		3.01	%
Weighted average age (in months)		14			11
Weighted average FICO credit score		751			756
90+ day delinquency rate		0.3	%		0.1	%
Total prepayment speed		6.8	%		8.3	%

Reverse Mortgages
Loan count		61,591			59,480
Active unpaid principal balance	$	16,526,711		$	14,902,734
Due and payable		308,150			322,057
Foreclosure		546,924			599,087
Claims pending		88,496			73,327

Ending unpaid principal balance	$	17,470,281		$	15,897,205

Average unpaid principal balance	$	284		$	267
Weighted average coupon		4.56	%		3.92	%
Weighted average age (in months)		40			43
Percentage in foreclosure		3.1	%		3.8	%

Table of Contents


	June 30, 2022			December 31, 2021

Commercial (SRL/Portfolio/Fix & Flip)
Loan count		3,018			2,222
Ending unpaid principal balance	$	600,793		$	479,190
Average unpaid principal balance	$	216		$	216
Weighted average coupon		7.62	%		7.43	%
Weighted average loan age (in months)		7			8
SRL conditional prepayment rate		0.1	%		1.4	%
SRL non-performing (60+ days past due)		1.2	%		1.3	%
F&F single month mortality		9.3	%		8.9	%
F&F non-performing (60+ days past due)		8.7	%		13.6	%

Agricultural Loans
Loan count		91			80
Ending unpaid principal balance	$	198,617		$	144,328
Average unpaid principal balance	$	1,804		$	1,804
Weighted average coupon		7.08	%		7.14	%
Weighted average loan age (in months)		7			7


	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
Investment and Capital Markets
Number of structured deals		2		4		3		1
Structured deals (size in notes)	$	859,576	$	1,949,614	$	1,132,531	$	571,448
Number of whole loan trades		9		24		10		8
UPB of whole loan trades	$	319,713	$	638,437	$	218,068	$	195,929

Revenue

In the table below is a summary of the components of our Portfolio Management segment’s total revenue for the periods indicated (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
REVENUE
Gain on sale and other income from loans held for sale, net	$	(4,740	)	$	6,187		$	7,748		$	5,065
Net fair value gains:
Net fair value gains from portfolio activity		42,031			78,815			24,371			32,386
Net fair value losses from changes in market inputs or model assumptions		(120,467	)		(260,036	)		(13,148	)		(29,636	)

Total net fair value gains (losses)		(78,436	)		(181,221	)		11,223			2,750

Net interest expense		(18,772	)		(34,448	)		(15,851	)		(14,816	)

Fee income:
Servicing income (MSR)		(1,666	)		50,444			300			33,698
Underwriting, advisory and valuation fees		296			790			1,901			997
Asset management fees		—			—			—			9
Other fees		2,568			6,432			1,376			1,487

Total fee income		1,198			57,666			3,577			36,191

Total revenue	$	(100,750	)	$	(151,816	)	$	6,697		$	29,190

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Principally all of our outstanding financial instruments are carried at fair value. The yield recognized on these financial instruments and any changes in estimated fair value are recorded as a component of net fair value gains on loans and related obligations in the Condensed Consolidated Statements of Operations (Unaudited). However, for certain of our outstanding financing lines of credit, we have not elected the fair value option. Accordingly, interest expense is presented separately on our Condensed Consolidated Statements of Operations (Unaudited). Further, interest income on collateralized loans may be reflected in net fair value gains on loans and related obligations on the Condensed Consolidated Statements of Operations (Unaudited), while the associated interest expense on the pledged loans will be included as a component of net interest expense. We evaluate net interest margin (“NIM”) for our outstanding investments through an evaluation of all components of interest income and interest expense.

The following table provides an analysis of all components of NIM for the periods indicated (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
Interest income on commercial and reverse loans	$	189,760		$	353,454		$	173,940		$	160,568
Interest expense on HMBS and nonrecourse obligations		(124,603	)		(231,246	)		(113,474	)		(119,201	)

Net interest margin included in net fair value gains and losses on mortgage loans (1)		65,157			122,208			60,466			41,367

Interest income on mortgage loans held for sale		303			630			187			138
Interest expense on warehouse lines of credit		(19,075	)		(35,078	)		(16,038	)		(14,954	)

Net interest expense		(18,772	)		(34,448	)		(15,851	)		(14,816	)

NET INTEREST MARGIN	$	46,385		$	87,760		$	44,615		$	26,551

(1)

Net interest margin included in net fair value gains and losses on mortgage loans includes interest income and expense on all commercial and reverse loans and their related nonrecourse obligations. Interest income on mortgage loans and warehouse lines of credit are classified in net interest expense. See Note 2—Summary of Significant Accounting Policies within the consolidated financial statements in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2022, for additional information on the Company’s accounting related to commercial and reverse mortgage loans.

Certain of our financial instruments are valued using a combination of a DCF model and analysis of current market data to arrive at an estimate of fair value. The cash flow assumptions and prepayment and repayment assumptions used in the model are based on various factors, with the key assumptions being prepayment speeds, credit loss frequencies and severity, and discount rate assumptions. Any changes in fair value on these financial instruments is recorded as a gain or loss in net fair value gains on loans and related obligations on the Condensed Consolidated Statements of Operations (Unaudited).

For the three months ended June 30, 2022 versus the three months ended June 30, 2021

Total revenue decreased $107.4 million or 1604.4% as a result of the following:

Gain on sale and other income from loans held for sale, net, decreased $12.5 million primarily due to a decrease in margin on commercial loans sold during the three months ended June 30, 2022 compared to the 2021 period.

Net fair value losses from changes in market inputs or model assumptions increased $107.3 million due to fair value adjustments related predominantly to market discount rate assumptions on securitized

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mortgage assets for the three months ended June 30, 2022 compared to the 2021 period. These increased fair value losses were partially offset by a $17.7 million increase in fair value gains from normal portfolio activity for the three months ended June 30, 2022 compared to the 2021 period. The increased portfolio activity is driven by higher portfolio size and increased modeled yield.

Net interest expense on our warehouse lines increased $3.0 million due primarily to a higher average cost of funds on our financing lines of credit as a result of higher average interest rates during the three months ended June 30, 2022 compared to the 2021 period.

Fee income decreased $2.4 million primarily related to fair market value losses on the MSR portfolio due to downward pricing pressures in the MSR market, slightly offset by an increase in servicing fee income due to an increase of loans in the MSR portfolio for the three months ended June 30, 2022 compared to the 2021 period.

For the six months ended June 30, 2022 (Successor) versus the six months ended June 30, 2021 (Successor and Predecessor)

Total revenue decreased $187.7 million or 523.0% as a result of the following:

Gain on sale and other income from loans held for sale, net, decreased $6.6 million primarily due a decrease in margin on commercial loans sold during the six months ended June 30, 2022 compared to the 2021 period.

Net fair value losses from changes in market inputs or model assumptions increased $217.3 million due to fair value adjustments related predominantly to increases in discount rates on securitized mortgage assets for the six months ended June 30, 2022 compared to the 2021 period. These increased fair value losses were partially offset by a $22.1 million increase in fair value gains from normal portfolio activity for the six months ended June 30, 2022 compared to the 2021 period. The increased portfolio activity is driven by higher portfolio size and increased modeled yield.

Net interest expense on our warehouse lines increased $4.1 million due primarily to a higher average cost of funds on our financing lines of credit as a result of higher average interest rates during the six months ended June 30, 2022 compared to the 2021 period.

Fee income increased $17.9 million primarily related to the increase of $16.4 million in servicing fee income as result of the increase in the MSR portfolio for the six months ended June 30, 2022 compared to the 2021 period.

Expenses

In the table below is a summary of the components of our Portfolio Management segment’s total expenses for the periods indicated (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
Salaries and bonuses	$	10,962	$	21,685	$	15,540	$	5,650
Other salary related expenses		942		2,034		405		497

Total salaries, benefits and related expenses		11,904		23,719		15,945		6,147

Securitization expenses		6,245		13,039		4,733		4,459
Servicing related expenses		12,372		18,326		8,825		8,651
Other general and administrative expenses		3,843		13,794		3,560		4,887

Total general and administrative expenses		22,460		45,159		17,118		17,997

Occupancy, equipment rentals and other office related expenses		191		389		127		262

Total expenses	$	34,555	$	69,267	$	33,190	$	24,406

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For the three months ended June 30, 2022 versus the three months ended June 30, 2021

Total expenses increased $1.4 million or 4.1% as a result of the following:

Salaries, benefits and related expenses decreased $4.0 million or 25.3%, primarily due to one-time

initial and accelerated Replacement and Earnout Right RSU expense of ~~$3.2~~$7.2 million that was ~~recognized. Additional~~

~~on-going~~

recognized during the three months ended June 30, 2021, that did not recur in the three months ended June 30, 2022. This was offset by an increase in salaries, benefits and related expenses ~~of $1.0 million~~due to an increase in average headcount for the ~~RSUs were recognized as a result of~~three months ended June 30, 2022 compared to the ~~Business Combination.~~2021 period. Average headcount was 122 for three months ended June 30, 2022 and 106 for the comparable 2021 period.

General and administrative expenses increased ~~$20.3~~$5.3 million or ~~108.4%~~31.2% primarily due to ~~higher title and closing expenses incurred associated with the 243.3%~~an increase in ~~title insurance underwriting policies volume~~fees related to the securitization of assets into nonrecourse securitizations and ~~65.6%~~an increase in ~~title agent closing volume. During~~loan portfolio expenses related to the ~~second quarter of~~subservicing expense on the retained MSR portfolio, during the three months ended June 30, 2022 compared to the 2021 ~~$1.7 million of amortization of intangibles was recognized as a result of the Business Combination.~~period.

For the six months ended June

30, ~~2021 (Successor and Predecessor)~~2022 (Successor) versus the six months ended June

30, ~~2020 (Predecessor)~~2021 (Successor and Predecessor)

Total expenses increased ~~$58.1~~$11.7 million or ~~74.4%~~20.3% as a result of the following:

Salaries, benefits and related expenses increased ~~$25.4~~$1.6 million or ~~71.1%~~7.4%, primarily due to ~~the staffing required to support the 256.4%~~an increase in title insurance underwriting policies and 89.2% increase in title agent closings. Commissions and bonus expense increased $5.2 million in conjunction with the increase in revenue. During the second quarter of 2021,

average headcount offset by one-time

initial and accelerated Replacement and Earnout Right RSU expense of ~~$3.2~~$7.2 million that was ~~recognized. Additional~~

~~on-going~~

~~expenses of $1.0 million~~recognized during the three months ended June 30, 2021. Average headcount was 123 for six months ended June 30, 2022 and 99 for the ~~RSUs were recognized as a result of the Business Combination.~~comparable 2021 period.

General and administrative expenses increased ~~$32.2~~$10.0 million or ~~78.9%~~28.6% primarily due to ~~higher title~~increased servicing related expenses and ~~closing expenses incurred associated with the 256.4%~~an increase in ~~title insurance underwriting policies volume and 89.2% increase in title agent closing volume. During the second quarter of 2021, $1.7 million of amortization of intangibles was recognized~~securitization expenses. Servicing related expenses increased as a result of an increase in loan portfolio expenses related to the ~~Business Combination.~~subservicing expense on the retained MSR portfolio, during the six months ended June 30, 2022 compared to the 2021 period.


	April 1, 2021 to June 30, 2021			January 1, 2021 to March 31, 2021			For the three months ended June 30, 2020			For the six months ended June 30, 2020
	Successor			Predecessor
REVENUES
Gain on sale and other income from mortgage loans held for sale, net	$	187,577		$	291,334		$	298,291		$	428,975
Net fair value gains on mortgage loans and related obligations		131,151			76,663			112,303			125,683
Fee income		90,864			161,371			76,656			146,627
Net interest expense:
Interest income		13,151			12,661			11,507			19,678
Interest expense		(33,626	)		(34,366	)		(33,298	)		(67,230	)

Net interest expense		(20,475	)		(21,705	)		(21,791	)		(47,552	)

TOTAL REVENUES		389,117			507,663			465,459			653,733

EXPENSES
Salaries, benefits and related expenses		274,731			238,530			230,275			374,653
Occupancy, equipment rentals and other office related expenses		6,720			7,597			7,208			14,611
General and administrative expenses		119,301			127,217			81,214			159,780

TOTAL EXPENSES		400,752			373,344			318,697			549,044
OTHER, NET		(2,103	)		(8,862	)		(28	)		(44	)

NET (LOSS) INCOME BEFORE INCOME TAXES		(13,738	)		125,457			146,734			104,645
Provision for income taxes		1,086			1,137			448			766

NET (LOSS) INCOME		(14,824	)		124,320			146,286			103,879
CRNCI		0			4,260			(2,620	)		(18,006	)
Noncontrolling interest		(17,089	)		201			571			800

NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST	$	2,265		$	119,859		$	148,335		$	121,085

EARNINGS PER SHARE (Note 33)
Basic weighted average shares outstanding		59,881,714
Basic net income per share	$	0.04
Diluted weighted average shares outstanding		191,200,000
Diluted net loss per share	$	(0.05	)


	FoA Equity Capital LLC Member’s Equity			Accumulated Other Comprehensive (Loss) Income			Noncontrolling Interest			Total
Predecessor:
Balance at December 31, 2019 (audited)	$	482,719		$	(51	)	$	145		$	482,813
Contributions from members		1,042			—			—			1,042
Net (loss) income		(27,249	)		—			229			(27,020	)
Foreign currency translation adjustment		—			(8	)		—			(8	)

Balance at March 31, 2020		456,512			(59	)		374			456,827

Distributions to members		(578	)		—			—			(578	)
Noncontrolling interest distributions		—			—			(310	)		(310	)
Net income		148,335			—			571			148,906
Foreign currency translation adjustment		—			18			—			18

Balance at June 30, 2020	$	604,269		$	(41	)	$	635		$	604,863

Balance at December 31, 2020 (audited)	$	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


	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 (loss) income		—		—		—		—		—		2,265			—			—		(17,089	)		(14,824	)
Noncontrolling interest contributions		—		—		—		—		—		—			—			—		24			24
Noncontrolling interest distributions		—		—		—		—		—		—			—			—		(137	)		(137	)
Vesting of restricted stock units		—		—		—		—		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


	June 30, 2021			December 31, 2020
	Successor			Predecessor
ASSETS	��
Restricted cash	$	334,984		$	293,580
Mortgage loans held for investment, subject to nonrecourse debt, at fair value
2021 FASST JR1		562,333			—
2021 FASST HB1		506,482			—
2019 FASST JR2		437,641			488,760
2020 FASST HB2		397,121			398,480
2018 FASST JR1		395,716			449,069
2019 FASST JR3		370,209			450,703
2020 FASST JR3		341,385			372,015
2019 FASST JR4		331,302			377,265
2020 FASST S3		313,728			316,774
2020 FASST JR2		312,160			341,439
2019 FASST JR1		295,605			331,244
2020 FASST S2		289,129			311,721
2021 RTL1 ANTLR		234,942			—
2018 FASST JR2		234,665			264,622
2020 FASST JR4		228,248			237,100
2020 FASST S1		173,955			189,243
2020 FASST JR1		—			263,266
2020 RTL1 ANTLR		—			137,989
2018 RTL1 ANTLR		—			82,393
2019 RTL1 ANTLR		—			118,161
2020 FASST HB1		—			265,923
Other assets		76,056			79,528

TOTAL ASSETS	$	5,835,661		$	5,769,275

LIABILITIES
Nonrecourse debt, at fair value
2021 FASST HB1	$	537,618		$	—
2021 FASST JR1		534,444			—
2020 FASST HB2		448,333			474,599
2019 FASST JR2		447,966			487,966
2018 FASST JR1		412,370			458,279
2019 FASST JR3		394,096			445,691
2020 FASST JR3		333,373			354,762
2019 FASST JR4		332,846			368,963
2019 FASST JR1		317,778			343,544
2020 FASST S2		302,253			314,144
2020 FASST S3		301,631			309,713
2020 FASST JR2		296,093			313,057
2021 RTL1 ANTLR		268,428			—
2018 FASST JR2		243,734			269,741
2020 FASST JR4		209,035			228,804
2020 FASST S1		178,704			191,189
2020 FASST JR1		—			250,988
2020 RTL1 ANTLR		—			140,839
2018 RTL1 ANTLR		—			80,767
2019 RTL1 ANTLR		—			127,981
2020 FASST HB1		—			298,914
Payables and other liabilities		117			291

TOTAL VIE LIABILITIES		5,558,819			5,460,232

Retained bonds and beneficial interests eliminated in consolidation		(198,099	)		(202,187	)

TOTAL CONSOLIDATED LIABILITIES	$	5,360,720		$	5,258,045


Consideration transferred:
Total cash consideration	$	342,270
Blocker rollover equity		221,811
Seller earnout contingent consideration (1)		160,272
Tax receivable agreement obligations to the seller		31,950

Total consideration transferred		756,303
Noncontrolling interest		1,658,545

Total equity value	$	2,414,848

Assets acquired:
Cash and cash equivalents	$	336,075
Restricted cash		305,292
Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value		10,071,192
Mortgage loans held for investment, subject to nonrecourse debt, at fair value		5,291,443
Mortgage loans held for investment, at fair value		1,100,544
Mortgage loans held for sale, at fair value		2,140,361
Debt securities		9,230
Mortgage servicing rights, at fair value		267,364
Derivative assets		116,479
Fixed assets and leasehold improvements, net		26,079
Intangible assets, net (2)		717,700
Other assets, net		279,155

Total assets acquired	$	20,660,914

Liabilities assumed:
HMBS related obligations, at fair value	$	9,926,131
Nonrecourse debt, at fair value		5,227,942
Other financing lines of credit		3,340,345
Payables and other liabilities		669,048
Notes payable, net		353,924

Total liabilities assumed	$	19,517,390

Net identifiable assets acquired		1,143,524

Goodwill (3)	$	1,271,324


Identifiable intangible assets	Provisional Fair value (in thousands)		Provisional Useful life (in years)
Indefinite lived trade names	$	178,000		N/A
Definite lived trade names		8,800		10
Broker/customer relationships		530,900		8-15

Total	$	717,700


(in thousands)	For the three months ended June 30,				For the six months ended June 30,
	2021		2020		2021		2020
Pro forma revenues	$	387,014	$	454,249	$	895,203	$	639,377
Pro forma net income		19,672		100,413		111,055		7,121
Pro forma net income attributable to controlling interest		6,748		27,492		37,734		12,985
Pro forma net income (loss) attributable to noncontrolling interest		12,924		72,921		73,321		(5,864	)


	June 30, 2021
	Successor
	Weighted Average Prepayment Speed			Discount Rate			Weighted Average Delinquency Rate
Impact on fair value of 10% adverse change	$	(10,734	)	$	(10,921	)	$	(138	)
Impact on fair value of 20% adverse change		(20,763	)		(21,093	)		(348	)


	June 30, 2021
	Successor
	Weighted Average Prepayment Speed			Discount Rate			Weighted Average Delinquency Rate
Impact on fair value of 10% adverse change	$	(1,231	)	$	(2,112	)	$	(23	)
Impact on fair value of 20% adverse change		(2,889	)		(4,552	)		(58	)


	June 30, 2021
	Successor
	Total Fair Value		Level 1		Level 2		Level 3
Assets
Reverse mortgage loans held for investment, subject to HMBS related obligations	$	10,316,027	$	—	$	—	$	10,316,027
Mortgage loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans		5,189,679		—		—		5,189,679
Fix & flip mortgage loans		234,942		—		—		234,942
Mortgage loans held for investment:
Reverse mortgage loans		1,020,143		—		—		1,020,143
Fix & flip mortgage loans		44,578		—		—		44,578
Agricultural loans		160,369		—		—		160,369
Mortgage loans held for sale:
Residential mortgage loans		1,908,107		—		1,896,654		11,453
SRL		96,569		—		—		96,569
Portfolio		52,866		—		—		52,866
Mortgage servicing rights		290,938		—		—		290,938
Investments		6,000		—		—		6,000
Derivative assets:
Forward commitments, TBAs, and Treasury Futures		1,187		32		319		836
IRLCs		34,647		—		—		34,647
Forward MBS		996		—		996		—
Interest rate swap futures		24,981		24,981		—		—
Other assets:
Retained bonds		15,671		—		—		15,671

Total assets	$	19,397,700	$	25,013	$	1,897,969	$	17,474,718


Liabilities
HMBS related obligation	$	10,168,224	$	—	$	—	$	10,168,224
Nonrecourse debt:
Nonrecourse debt in VIE trusts		5,360,603		—		—		5,360,603
Nonrecourse MSR financing liability		65,129		—		—		65,129
Deferred purchase price liabilities:
Deferred purchase price liabilities		11,663		—		—		11,663
TRA obligation		32,810		—		—		32,810
Derivative liabilities:
Forward MBS		4,364		—		4,364		—
Forward commitments, TBAs, and Treasury Futures		1,176		31		34		1,111
Interest rate swap futures		13,789		13,789		—		—
Warrants		19,261		19,261		—		—

Total liabilities	$	15,677,019	$	33,081	$	4,398	$	15,639,540


Successor:

June 30, 2021	Estimated Fair Value		Unpaid Principal Balance
Assets at fair value under the fair value option
Reverse mortgage loans held for investment, subject to HMBS related obligations	$	10,316,027	$	9,406,924
Mortgage loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans		5,189,680		4,615,128
Commercial mortgage loans		234,941		229,858
Mortgage loans held for investment:
Reverse mortgage loans		1,020,143		879,794
Commercial mortgage loans		204,947		202,195
Mortgage loans held for sale:
Residential mortgage loans		1,908,107		1,858,087
Commercial mortgage loans		149,435		144,789
Liabilities at fair value under the fair value option
HMBS related obligations		10,168,224		9,406,924
Nonrecourse debt:
Nonrecourse debt in VIE trusts		5,360,603		5,276,781
Nonrecourse MSR financing liability		65,129		65,129

Predecessor:

December 31, 2020	Estimated Fair Value		Unpaid Principal Balance
Assets at fair value under the fair value option
Reverse mortgage loans held for investment, subject to HMBS related obligations	$	9,929,163	$	9,045,104
Mortgage loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans		5,057,624		4,457,805
Commercial mortgage loans		338,543		333,344
Mortgage loans held for investment:
Reverse mortgage loans		661,790		589,429
Commercial mortgage loans		69,031		69,127
Mortgage loans held for sale:
Residential mortgage loans		2,080,585		2,000,795
Commercial mortgage loans		142,226		140,693
Liabilities at fair value under the fair value option
HMBS related obligations		9,788,668		9,045,104
Nonrecourse debt:
Nonrecourse debt in VIE trusts		5,257,754		5,155,017
Nonrecourse MSR financing liability		14,088		14,088


June 30, 2021	Amortization Period (Years)		Cost		Accumulated Amortization			Net
Successor:
Non-amortizing Intangibles
Trade name		N/A	$	178,000	$	—		$	178,000

Total non-amortizing intangibles			$	178,000	$	—		$	178,000


Amortizing Intangibles
Broker/customer relationships		8 - 15	$	530,900	$	(13,237	)	$	517,663
Trade names		10		8,800		(220	)		8,580

Total amortizing intangibles			$	539,700	$	(13,457	)	$	526,243


Total intangibles			$	717,700	$	(13,457	)	$	704,243


	Issue Date	Class of Note	Final Maturity Date	Interest Rate		Original Issue Amount		June 30, 2021		December 31, 2020
								Successor		Predecessor
Securitization of nonperforming HECM loans:
2021 FASST HB1	February 2021	A, M1, M2, M3, M4, M5	February 2031		0.9%—9.0%	$	571,448	$	537,299	$	—
2020 FASST HB2	July 2020	A, M1, M2, M3, M4, M5	July 2030		1.71%—7.75%		594,171		446,413		476,147
2020 FASST HB1	February 2020	A, M1, M2, M3, M4, M5	February 2030		2.0%—6.0%		373,912		0		298,883

Securitization of non-agency reverse loans:
2021 FASST JR 1	April 2021	A1, A2	April 2026		1.5%—2.0%		562,512		512,794		—
2019 FASST JR2	June 2019	A, A2	June 2069		2.0%		499,000		406,709		440,141
2018 FASST JR1	May 2018	A	May 2068		4.3%		559,197		386,548		428,671
2019 FASST JR3	September 2019	A	September 2069		2.0%		450,104		359,772		404,057
2020 FASST JR3	August 2020	A, A2	August 2025		2.0%—3.0%		360,713		315,570		337,099
2019 FASST JR4	November 2019	A	November 2069		2.0%		365,685		305,097		335,945
2019 FASST JR1	March 2019	A	March 2069		2.0%		347,000		288,654		309,840
2020 FASST S3	December 2020	A1, A2	December 2025		1.5%—2.5%		313,357		288,383		297,871
2020 FASST S2	June 2020	A1, A2	March 2025		2.0%		320,460		286,734		299,401
2020 FASST JR2	May 2020	A1A, A1B, A2	May 2023		0.0%—2.0%		305,658		277,694		291,827
2018 FASST JR2	December 2018	A	December 2068		4.5%		280,400		229,872		253,325
2020 FASST JR4	October 2020	A, A2	August 2025		2.0%—3.0%		241,664		197,970		217,385
2020 FASST S1	March 2020	A1, A2	March 2025		2.0%—3.7%		199,000		168,761		181,059
2020 FASST JR1	April 2020	A, A2	April 2023		2.0%		254,805		0		240,563


2021	$	10,083
2022		16,846
2023		13,104
2024		9,025
2025		6,045
2026		3,585
Thereafter		24,742

Total undiscounted lease payments		83,430
Less: amounts representing interest		(18,934	)

Total lease liabilities	$	64,496


Description	Maturity Date	Interest Rate			June 30, 2021		December 31, 2020
					Successor		Predecessor
Senior Unsecured Notes	November 2025		7.9	%	$	350,000	$	350,000
Financing Agreement	January 2021		5.5	%		0		9

Total aggregate principle amount						350,000		350,009
Fair value adjustment, net of amortization (1)						3,718		0
Less: Debt issuance costs						—		(13,436	)

Total notes payable, net					$	353,718	$	336,573


								Grant Date Fair Value
Replacement RSUs	Number of Units Unvested			Number of Units Vested		Total Number of Units		Weighted Average Price Per Unit		Total Fair Value
Outstanding, April 1, 2021		0—			0—		0—
Granted		14,819,483			0—		14,819,483	$	9.48	$	140,489
Vested		(4,066,069	)		4,066,069		—	$	9.48	$	38,546

Outstanding, June 30, 2021		10,753,414			4,066,069		14,819,483


							Grant Date Fair Value
Earnout Right RSUs	Number of Units Unvested		Number of Units Vested		Total Number of Units		Weighted Average Price Per Unit		Total Fair Value
Outstanding, April 1, 2021		0—		0—		0—
Granted		1,550,880		0—		1,550,880	$	8.91	$	13,811

Outstanding, June 30, 2021		1,550,880		0—		1,550,880


Predecessor:
Balance at December 31, 2019 (audited)	$	187,981
Net loss		(15,386	)

Balance at March 31, 2020		172,595
Net loss		(2,620	)

Balance at June 30, 2020	$	169,975

Balance at December 31, 2020 (audited)	$	166,231
Net income		4,260
Accretion to redemption price		32,725

Balance at March 31, 2021		203,216

Successor:
Balance at April 1, 2021	$	203,216
Settlement of CRNCI in connection with the Business Combination		(203,216	)

Balance at June 30, 2021	$	0—


	April 1, 2021 to June 30, 2021		January 1, 2021 to March 31, 2021		For the three months ended June 30, 2020			For the six months ended June 30, 2020
	Successor		Predecessor
Title and closing	$	25,191	$	25,061	$	12,682		$	28,677
Loan origination expenses		17,725		20,503		14,126			34,573
Depreciation and amortization		16,462		3,484		3,488			6,957
Loan portfolio expenses		15,433		15,200		9,426			18,603
Communications and data processing		12,568		11,324		8,025			14,327
Securitization expenses		10,831		6,944		8,349			8,349
Business development		9,647		10,607		9,321			17,590
Licensing and insurance		3,457		2,487		1,474			3,266
Fair value change in deferred purchase price liability		1,760		30		(62	)		0
Other expenses		6,227		31,577		14,385			27,438

Total general and administrative expenses	$	119,301	$	127,217	$	81,214		$	159,780


	April 1, 2021 to June 30, 2021
	Successor
	Mortgage Originations			Reverse Originations			Commercial Originations		Portfolio Management			Lender Services			Total Operating Segments			Corporate and Other			Elim			Total
REVENUES
Gain on sale of loans, net	$	185,386		$	—		$	—	$	7,748		$	—		$	193,134		$	—		$	(5,557	)	$	187,577
Net fair value gains		—			94,536			10,822		11,223			—			116,581			—			14,570			131,151
Fee income		30,345			954			12,124		3,577			81,130			128,130			0			(37,266	)		90,864
Net interest income (expense)		1,976			(9	)		—		(15,851	)		(15	)		(13,899	)		(6,567	)		(9	)		(20,475	)

Total revenues		217,707			95,481			22,946		6,697			81,115			423,946			(6,567	)		(28,262	)		389,117
Total expenses		224,191			42,246			20,049		33,190			73,317			392,993			36,021			(28,262	)		400,752
Other, net		—			104			140		(245	)		83			82			(2,185	)		—			(2,103	)

Net (loss) income before taxes	$	(6,484	)	$	53,339		$	3,037	$	(26,738	)	$	7,881		$	31,035		$	(44,773	)	$	—		$	(13,738	)

Depreciation and amortization	$	1,433		$	(151	)	$	127	$	(107	)	$	2,818		$	4,120		$	12,342		$	—		$	16,462
Total assets		2,994,779			768,229			109,434		17,996,903			336,687		$	22,206,032			2,115,780			(2,093,874	)	$	22,227,938

	January 1, 2021 to March 31, 2021
	Predecessor
	Mortgage Originations			Reverse Originations			Commercial Originations		Portfolio Management			Lender Services			Total Operating Segments			Corporate and Other			Elim			Total
REVENUES
Gain on sale of loans, net	$	286,481		$	—		$	—	$	5,065		$	—		$	291,546		$	—		$	(212	)	$	291,334
Net fair value gains		—			68,449			5,431		2,750			—			76,630			—			33			76,663
Fee income		32,731			524			8,930		36,191			76,383			154,759			0			6,612			161,371
Net interest expense		891			—			—		(14,816	)		(36	)		(13,961	)		(7,744	)		—			(21,705	)

Total revenues		320,103			68,973			14,361		29,190			76,347			508,974			(7,744	)		6,433			507,663
Total expenses		224,246			23,693			13,391		24,406			62,970			348,706			18,683			5,955			373,344
Other, net		—			34			149		895			2			1,080			(9,464	)		(478	)		(8,862	)

Net income (loss) before taxes	$	95,857		$	45,314		$	1,119	$	5,679		$	13,379		$	161,348		$	(35,891	)	$	—		$	125,457

Depreciation and amortization	$	1,423		$	151		$	125	$	146		$	1,268		$	3,113		$	371		$	—		$	3,484
Total assets		2,425,529			35,861			82,375		17,378,088			125,317		$	20,047,170			379,562			(326,313	)	$	20,100,419


	April 1, 2021 to June 30, 2021
	Successor
Basic net income (loss) per share:
Numerator
Net loss	$	(14,824	)
Less: loss attributable to noncontrolling interests (1)		(17,089	)

Net income attributable to holders of Class A Common Stock—basic	$	2,265

Denominator
Weighted average shares of Class A Common Stock outstanding—basic		59,881,714

Basic net income per share	$	0.04


	April 1, 2021 to June 30, 2021
(in thousands, except for share amounts)	Successor
Diluted net loss per share:
Numerator
Net income attributable to holders of Class A Common Stock	$	2,265
Reallocation of net loss assuming exchange of Class A LLC Units (2)		(12,001	)

Net loss attributable to holders of Class A Common Stock—diluted	$	(9,736	)

Denominator
Weighted average shares of Class A Common Stock outstanding—basic		59,881,714
Effect of dilutive securities:
Assumed exchange of Class A LLC Units for shares of Class A Common Stock (3)		131,318,286

Weighted average shares of Class A Common Stock outstanding—diluted		191,200,000


Diluted net loss per share	$	(0.05	)


	June 30,		December 31,
	2021		2020
	Successor		Predecessor
Restricted cash	$	352,037	$	303,925
Loans held for investment, subject to HMBS liabilities, at fair value		10,316,027		9,929,163
Loans held for investment, subject to nonrecourse debt, at fair value		5,424,621		5,396,167
Loans held for investment, at fair value		1,225,090		730,821
Goodwill		30,899		—
Mortgage servicing rights, at fair value		290,938		180,684
Other assets, net		158,375		165,810

Total long-term investment assets		17,797,987		16,706,570


Loans held for sale, at fair value		149,435		142,226

Total earning assets		17,947,422		16,848,796

HMBS liabilities, at fair value		10,168,224	$	9,788,668
Nonrecourse debt, at fair value		5,425,732		5,271,842
Other secured financing		1,597,172		1,010,669
Other liabilities		85,002		96,762

Total financing of portfolio		17,276,130		16,167,941


Net equity in earning assets	$	671,292	$	680,855


	April 1, 2021 to June 30, 2021		January 1, 2021 to March 31, 2021		For the three months ended June 30, 2020		For the six months ended June 30, 2020
	Successor		Predecessor
Loan origination volume (dollars)
Conforming	$	4,302,170	$	5,397,708	$	5,377,252	$	7,976,292
Government		995,657		1,068,650		1,238,058		2,032,871
Non-conforming		1,571,895		1,937,860		966,514		1,793,173
Home improvement		58,928		—		—		—

Total loan origination volume	$	6,928,650	$	8,404,218	$	7,581,824	$	11,802,336

Loan origination volume by channel (dollars)
Retail	$	4,870,554	$	5,622,487		5,773,656	$	8,984,443
Wholesale/Correspondent		1,201,503		1,706,365		1,037,824		1,579,202
Consumer direct		797,665		1,075,366		770,344		1,238,691
Home improvement		58,928		—		—		—

Total loan origination volume by channel	$	6,928,650	$	8,404,218	$	7,581,824	$	11,802,336

Loan origination volume by type (dollars)
Purchase	$	3,494,462		2,664,493		2,059,463		3,757,855
Refinance		3,375,260		5,739,725		5,522,361		8,044,481
Home improvement		58,928		—		—		—

Total loan origination volume by type	$	6,928,650	$	8,404,218	$	7,581,824	$	11,802,336

Loan origination volume (units)
Conforming		14,136		18,090		17,910		27,276
Government		3,141		3,426		4,145		7,014
Non-conforming		1,972		2,472		1,466		2,648
Home improvement		5,522		—		—		—

Total loan origination volume		24,771		23,988		23,521		36,938

Loan origination volume by channel (units)
Retail		13,737		16,123		18,349		28,934
Wholesale/Correspondent		3,005		4,745		2,986		4,456
Consumer direct		2,507		3,120		2,186		3,548
Home improvement		5,522		—		—		—

Total loan origination volume by channel		24,771		23,988		23,521		36,938

Loan origination volume by type (units)
Purchase		9,328		7,534		6,890		12,961
Refinance		9,921		16,454		16,631		23,977
Home improvement		5,522		—		—		—

Total loan origination volume by type		24,771		23,988		23,521		36,938

Loan sales by investor (dollars)
Agency	$	5,807,841	$	7,246,418	$	6,946,820	$	10,207,363


	April 1, 2021 to June 30, 2021			January 1, 2021 to March 31, 2021			For the three months ended June 30, 2020			For the six months ended June 30, 2020			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									Successor									Predecessor
Fee income	$	—		$	—		$	28		$	44
Net interest expense		(6,567	)		(7,744	)		(2,804	)		(4,220	)	$	(6,644	)	$	(13,253	)	$	(6,567	)	$	(7,744	)

Total interest and other expense		(6,567	)		(7,744	)		(2,776	)		(4,176	)
Total interest expense														(6,644	)		(13,253	)		(6,567	)		(7,744	)

Total expenses		36,021			18,683			16,573			23,222			30,787			66,768			36,021			18,683

Other, net		(2,185	)		(9,464	)		(28	)		(44	)		13,923			13,771			(2,185	)		(9,464	)

NET LOSS	$	(44,773	)	$	(35,891	)	$	(19,377	)	$	(27,442	)
NET INCOME (LOSS) BEFORE TAXES													$	(23,508	)	$	(66,250	)	$	(44,773	)	$	(35,891	)


	April 1, 2021 to June 30, 2021			January 1, 2021 to March 31, 2021			For the three months ended June 30, 2020			For the six months ended June 30, 2020			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									Successor									Predecessor
Salaries and bonuses	$	47,029		$	22,779		$	16,955		$	27,456		$	36,143		$	74,843		$	47,029		$	22,779
Other salary related expenses		2,232			3,306			94			1,815			3,610			6,869			2,232			3,306
Shared services—payroll allocations		(24,434	)		(18,657	)		(4,168	)		(13,489	)		(25,436	)		(46,170	)		(24,434	)		(18,657	)

Total salaries, benefits and related expenses		24,827			7,428			12,881			15,782			14,317			35,542			24,827			7,428

Communication and data processing		3,840			3,015			1,507			2,841			4,945			9,561			3,840			3,015
Professional fees		8,417			10,334			5,510			6,925			6,631			14,478			8,417			10,334
Other general and administrative expenses		3,480			1,481			1,086			2,444			5,751			10,381			3,480			1,481
Shared services—general and administrative allocations		(5,265	)		(3,694	)		(4,882	)		(5,678	)		(1,663	)		(5,246	)		(5,265	)		(3,694	)

Total general and administrative expenses		10,472			11,136			3,221			6,532			15,664			29,174			10,472			11,136

Occupancy, equipment rentals and other office related expenses		722			119			471			908			806			2,052			722			119

Total expenses	$	36,021		$	18,683		$	16,573		$	23,222		$	30,787		$	66,768		$	36,021		$	18,683

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Emerging growth company