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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q/A

(Amendment No. 1)

10-Q
(Mark One)

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

For the quarterly period ended September 30, 2020

2021

OR

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

For the transition period from                    to                    

Commission File Number: 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.)
of incorporation or organization) Identification No.)

Street Address 909 Lake Carolyn Parkway,
Suite 1550,

Irving Texas
 
75039

Irving, Texas

75039
(Address of Principal Executive Offices)
 
(Zip Code)

(972) 865-8114

(

999-1833
Registrant’s telephone number, including area code)

Not Applicable

code

N/A
(Former name, former address and former fiscal year, if changed since last report)

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,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 registrantregistrant: (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 and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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,”filer” and “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.

(Check one):
Large accelerated filer   Accelerated filer 
Non-accelerated
filer
   Smaller reporting company 
 
  Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  ☒

As of November 12, 2020, 35,937,500 ordinary shares,2021, 58,936,744 of the registrant’s Class A common stock, par value $0.0001 per share, were issued and outstanding.

Finance of America Companies Inc.) were issued
and outstanding.

Subsidiaries


EXPLANATORY NOTE

As previously disclosed, on April 1, 2021, Finance of America Equity Capital LLC (“FoA”) and Replay Acquisition Corp. (“Replay”), a publicly traded special purpose acquisition company (“SPAC”), completed their previously announced business combination whereby Replay combined with FoA in a series of transactions (collectively, the “Business Combination”) that resulted in Finance of America Companies Inc. (the “Company”) becoming a publicly-traded company on the New York Stock Exchange. As a result of the Business Combination and by operation of Rule 12g-3(a) promulgated under the Securities Exchange Act of 1934, as amended, the Company became the successor issuer to Replay, and the Company is filing this Amendment No. 1 (this “Amendment”) to Replay’s

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Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q for includes “forward-looking statements” within the quarterly period ended September 30, 2020, originally filed with the Securities and Exchange Commission (the “SEC”) on November 12, 2020 (the “Original Filing” and, as amended by this Amendment, this “Report”), to restate Replay’s financial statements and related footnote disclosures for the quarter ended September 30, 2020. The Company separately amended Replay’s Annual Report on Form 10-K for the year ended December 31, 2020 on May 17, 2021, wherein it restated Replay’s financial statements and related footnote disclosures for the years ended December 31, 2020 and 2019, and the interim periods ended June 30, 2019, September 30, 2019, March 31, 2020, June 30, 2020 and September 30, 2020 (collectively, the “Affected Periods”).

Background of Restatement

Following the Business Combination, on April 12, 2021, the SEC released a public statement (the “Public Statement”) informing market participants that warrants issued by SPACs may require classification as liabilities rather than equity, with changes in the fair valuemeaning of the warrants reported in earnings each period, due to certain common“safe harbor” provisions in SPAC warrant agreements providing for cash settlement in certain circumstances. Prior to the Business Combination, Replay classified the outstanding warrants as equity. For a full description of Replay’s warrants, please refer to Replay’s final prospectus, dated April 3, 2019, filed with the SEC in connection with its initial public offering.

On May 5, 2021, management of the CompanyU.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 the Audit Committeeoutside of the Board of Directors ofCompany’s control. It is possible that our actual results, financial condition and liquidity may differ, possibly materially, from the Company determined that Replay’s auditedanticipated results, financial statements for the Affected Periods should no longer be relied upon due to guidancecondition and liquidity in the SEC’s Public Statement indicating that Replay’s warrants should have been classified as liabilities on Replay’s Balance Sheets rather than equity.

Following consideration of the guidance in the SEC’s Public Statement, the Company concluded the warrants did not meet the conditions to be classified as equitythese forward-looking statements. The Company’s actual results may differ from its expectations, estimates, and instead the warrant agreement governing Replay’s warrants includes a tender offerprojections and, make-whole provision that would require both the public warrants and private placement warrants issued in connection with Replay’s initial public offering to be classified as a liability measured at fair value, with changes in fair value reported each period in earnings, and following such guidance, the warrants should have been classified as equity in the previously issued financial statements. In addition, management has identified errors made in the historical financial statements related to its shareholders’ equity where on the date of issuance of the units, Replay improperly allocated the net proceeds among the ordinary shares subject to possible redemption and public warrants. Additionally, the ordinary shares issued during the initial public offering can be redeemed or become redeemable subject to the occurrence of future events considered outside Company control. Therefore, management concluded that Replay should have classified the redeemable shares in temporary equity and remeasured these to their redemption value (i.e., $10.00 per share) as of the end of the first reporting period after the date of the Replay initial public offering. Management has also noted a reclassifications error related to temporary equity and permanent equity.

As all material restatement information will be included in this Report and in Replay’s amended Annual Report on Form 10-K/A for the year ended December 31, 2020 and amended Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2020 (such reports, together with this Report, the “Amended Reports”), we do not intend to amend Replay’s Annual Report on Form 10-K for the year ended December 31, 2019 or any of our previously filed Quarterly Reports on Form 10-Q for the periods ended June 30, 2019, September 30, 2019 or March 31, 2020. Accordingly, investors and others should rely only on the financial information and other disclosures regarding the periods described above in the Amended Reports and in future filings with the SEC (as applicable) andconsequently, you should not rely on any previously issued or filed reports, press releases, corporate presentations or similar communications relating to the Affected Periods.


Internal Control Considerations

In connection with the restatement, management has re-evaluated the effectiveness of Replay’s disclosure controls and procedures and internal control over financial reporting. As a result of that assessment and in light of the Public Statement, management has concluded that Replay’s disclosure controls and procedures and internal controls over financial reporting were not effective as of September 30, 2020, due to a material weakness in Replay’s internal control over financial reporting related to the accounting for equity instruments. For a discussion of management’s consideration of Replay’s disclosure controls and procedures, internal controls over financial reporting, and the material weaknesses identified, see Part I, Item 4, “Controls and Procedures” of this Report

Items Amended

Each of the following items are amended and restated in their entirety in this Report: (i) Part I, Item 1. Financial Statements; (ii) Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations; and (iii) Part I, Item 4. Controls and Procedures. Additionally, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Company is including with this Amendment currently dated certifications from our Principal Executive Officer and Principal Financial Officer. These certifications are filed or furnished, as applicable, in Part II, Item 6. as Exhibits 31.1, 31.2, 32.1 and 32.2.

Except for the foregoing amended and/or restated information required to reflect the effects of the restatement of the financial statements, and applicable cross-references within this Report, this Amendment does not amend, update or change any other items or disclosures contained in the Original Filing. This Report continues to describe conditions as of the date of the Original Filing, and the disclosures herein have not been updated to reflect events, results or developments that have occurred after the date of the Original Filing, or to modify or update those disclosures affected by subsequent events, including the closing of the Business Combination. Accordingly, forward looking statements included in this Report represent management’s views as of the date of the Original Filing and should not be assumed to be accurate as of any date thereafter. This Amendment should be read in conjunction with the Original Filing and our filings made with the SEC subsequent to the Original Filing date.

Forward-Looking Statements

Certain statements in this Amendment may constitute “forward-looking statements” for purposes of the federal securities laws. The Company’sthese forward-looking statements include, but are not limited to, statements regarding its or its management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizationsas predictions of future events or circumstances, including any underlying assumptions, are forward-looking statements. The wordsevents. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “appear,“intend,“approximate,“plan,“believe,“may,“continue,“will,” “could,” “estimate,“should,“expect,“believes,“foresee,” “intends,” “may,” “might,” “plan,” “possible,“predicts,” “potential,” “predict,“continue, “project,” “seek,” “should,” “would” and similar expressions (or the negative versionversions of such words or expressions) mayare intended to identify such forward-looking statements. The Company cautions readers not to place undue reliance upon any forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Amendment may include, for example, statements about:

the expected benefits of the Business Combination;

the Company’s financial performance following the Business Combination;

changes in the Company’s strategy, future operations, financial position, estimated revenues and losses, projected costs, margins, cash flows, prospects and plans;


the impact of health epidemics, including the COVID-19 pandemic, on the Company’s business and the actions the Company may take in response thereto;

expansion plans and opportunities; and

the outcome of any known and unknown litigation and regulatory proceedings.

These forward-looking statementswhich are based on information availablecurrent only as of the date of this Amendment, and current expectations, forecasts and assumptions, and involve a numberreport. Results for any specified quarter are not necessarily indicative of judgments, risks and uncertainties. Accordingly, forward-looking statements should notthe results that may be relied upon as representingexpected for the Company’s views as offull year or any subsequent date, and thefuture period. The Company does not undertake or accept any obligation or undertaking to updaterelease 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 after the date they were made, whether as a result of new information, future events or otherwise,on which any such statement is based, except as may be required under applicable securities laws.

As a result of a number of known and unknownby law. Such forward-looking statements are subject to various risks and uncertainties the Company’s actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

the risk that the recently consummated Business Combination disrupts current plans and operations of the Company;

the ability to recognize the anticipated benefits of the Business Combination, which may be affected by,including, among other things, competition and the ability of the combined business to grow and manage growth profitably;

costs related to the Business Combination;

changes in applicable laws or regulations;

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; the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors;

factors in our markets; our ability to obtain sufficient capital to meet the inability to maintainfinancing requirements of our business; the listinguse estimates in measuring or determining the fair value of the Company’s sharesmajority of Class A Common Stock onour assets and liabilities; the NYSE;possibility of disruption in the secondary home loan market, including the mortgage-backed securities market; and

other risks and uncertainties set forth in the section entitled “Risk Factors” included in this Report and in the Company’s Reportour Registration Statement on Form 8-K/A,S-1 originally filed with the SEC on May 17, 2021.

25, 2021, 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.

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.

PART I—FINANCIAL INFORMATION

Table of Contents

Part I - Financial Information
Item 1. Financial Statements

REPLAY ACQUISITION CORP.

BALANCE SHEETS

   September 30, 2020  December 31, 2019 
   

(Unaudited)

As Restated

  As Restated 

Assets:

   

Current assets:

   

Cash

  $974,317  $1,589,795 

Prepaid expenses

   47,084   62,738 
  

 

 

  

 

 

 

Total current assets

   1,021,401   1,652,533 

Investments held in Trust Account

   293,255,540   292,054,158 
  

 

 

  

 

 

 

Total assets

  $294,276,941  $293,706,691 
  

 

 

  

 

 

 

Liabilities and Shareholders’ Equity:

   

Current liabilities:

   

Accounts payable

  $371,225  $86,595 

Accrued expenses

   414,571   8,860 
  

 

 

  

 

 

 

Total current liabilities

   785,796   95,455 

Warrant liability

   21,096,250   18,817,500 

Deferred underwriting commissions

   9,187,500   9,187,500 
  

 

 

  

 

 

 

Total liabilities

   31,069,546   28,100,455 
  

 

 

  

 

 

 

Commitments and contingencies (Note 5)

   

Ordinary shares, $0.0001 par value; 28,750,000 shares subject to possible redemption at $10.00 per share at September 30, 2020 and December 31, 2019

   287,500,000   287,500,000 

Shareholders’ Equity:

   

Preference shares, $0.0001 par value; 2,000,000 shares authorized; none issued and outstanding

   —     —   

Ordinary shares, $0.0001 par value; 200,000,000 shares authorized; 7,187,500 shares issued and outstanding (excluding 28,750,000 shares subject to possible redemption) at September 30, 2020 and December 31, 2019

   719   719 

Accumulated deficit

   (24,293,324  (21,894,483
  

 

 

  

 

 

 

Total shareholders’ equity

   (24,292,605  (21,893,764
  

 

 

  

 

 

 

Total Liabilities and Shareholders’ Equity

  $294,276,941  $293,706,691 
  

 

 

  

 

 

 

The

Finance of America Companies Inc. and Subsidiaries
Consolidated Statements of Financial Condition
(In thousands, except share data)
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
   
(unaudited)
    
ASSETS
         
Cash and cash equivalents
  
$
191,736
  $233,101 
Restricted cash
  
 
325,226
   306,262 
Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value
  
 
10,347,459
   9,929,163 
Mortgage loans held for investment, subject to nonrecourse debt, at fair value
  
 
5,939,651
   5,396,167 
Mortgage loans held for investment, at fair value
  
 
1,077,670
   730,821 
Mortgage loans held for sale, at fair value
  
 
2,047,015
   2,222,811 
Debt securities
  
 
7,317
   10,773 
Mortgage servicing rights, at fair value, $96,073 and $14,088, subject to nonrecourse MSR financing liability, respectively
  
 
340,949
   180,684 
Derivative assets
  
 
54,993
   92,065 
Fixed assets and leasehold improvements, net
  
 
29,503
   24,512 
Goodwill
  
 
1,298,796
   121,233 
Intangible assets, net
  
 
692,676
   16,931 
Other assets, net
  
 
315,102
   300,632 
   
 
 
  
 
 
 
TOTAL ASSETS
  
$
22,668,093
  $19,565,155 
   
 
 
  
 
 
 
LIABILITIES, CONTINGENTLY REDEEMABLE NONCONTROLLING INTEREST (“CRNCI”) AND EQUITY
         
HMBS related obligation, at fair value
  
$
10,216,310
  $9,788,668 
Nonrecourse debt, at fair value
  
 
5,831,083
   5,271,842 
Other financing lines of credit
  
 
3,325,156
   2,973,743 
Payables and other liabilities
  
 
509,803
   400,058 
Notes payable, net
  
 
353,567
   336,573 
   
 
 
  
 
 
 
TOTAL LIABILITIES
  
 
20,235,919
   18,770,884 
   
 
 
  
 
 
 
Commitments and Contingencies (Note 21)
       
CRNCI
  
 
0  
 
  166,231 
EQUITY (Note 30)
         
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; 58,936,744 shares issued and outstanding at September 30, 2021
  
 
6
   —   
Class B Common Stock (Successor), $0.0001 par value; 1,000,000 shares authorized, 6 shares issued and outstanding at September 30, 2021
  
 
0
 
 
  —   
Additional
paid-in
capital (Successor)
  
 
821,316
   —   
Accumulated deficit (Successor)
  
 
(48,164
  —   
Accumulated other comprehensive (loss) income
  
 
(92
  9 
Noncontrolling interest
  
 
1,659,108
   (145
   
 
 
  
 
 
 
TOTAL EQUITY
  
 
2,432,174
   628,040 
   
 
 
  
 
 
 
TOTAL LIABILITIES, CRNCI AND EQUITY
  
$
22,668,093
  $19,565,155 
   
 
 
  
 
 
 
See accompanying notes to unaudited consolidated financial statements
1

Finance of America Companies Inc. and Subsidiaries
Consolidated Statements of Financial Condition
(In thousands)
The following table presents the assets and liabilities of the Company’s consolidated variable interest entities, which are an integral partincluded on the Consolidated Statements of these unaudited financial statements.

Financial Condition above, and excludes intercompany balances, retained bonds and beneficial interests that eliminate in consolidation.


REPLAY ACQUISITION CORP.

UNAUDITED STATEMENTS OF OPERATIONS

   For the three months ended
September 30,
  For the nine months ended
September 30,
 
   2020  2019  2020  2019 
   As Restated  As Restated  As Restated  As Restated 

General and administrative expenses

  $1,058,292  $111,750  $1,321,473  $245,980 
  

 

 

  

 

 

  

 

 

  

 

 

 

Loss from operations

   (1,058,292  (111,750  (1,321,473  (245,980

Issuance costs allocated to the public warrants

   —     —     —     (648,239

(Loss) gain on revaluation of warrant liability

   (1,106,250  (951,250  (2,278,750  2,666,250 

Gain on marketable securities, dividends and interest held in Trust Account

   86,803   1,561,854   1,201,382   3,322,448 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income

  $(2,077,739 $498,854  $(2,398,841 $5,094,479 
  

 

 

  

 

 

  

 

 

  

 

 

 

Basic and diluted weighted average shares outstanding of Public Shares

   28,750,000   28,750,000   28,750,000   28,750,000 
  

 

 

  

 

 

  

 

 

  

 

 

 

Basic and diluted net (loss) income per share, Public Shares

  $(0.06 $0.02  $(0.06 $0.35 
  

 

 

  

 

 

  

 

 

  

 

 

 

Basic and diluted weighted average shares outstanding of Founder Shares

   7,187,500   7,187,500   7,187,500   7,187,500 
  

 

 

  

 

 

  

 

 

  

 

 

 

Basic and diluted net loss per share, Founder Shares

  $(0.06 $(0.03 $(0.10 $(0.70
  

 

 

  

 

 

  

 

 

  

 

 

 

The

   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
   
(unaudited)
     
ASSETS
          
Restricted cash
  
$
306,615
   $293,580 
Mortgage loans held for investment, subject to nonrecourse debt, at fair value
  
 
5,939,651
    5,396,167 
Other assets
  
 
69,947
    79,528 
   
 
 
   
 
 
 
TOTAL ASSETS
  
$
6,316,213
   $5,769,275 
   
 
 
   
 
 
 
LIABILITIES
          
Nonrecourse debt, at fair value
  
$
5,735,010
   $5,257,754 
Payables and other liabilities
  
 
117
    291 
   
 
 
   
 
 
 
TOTAL LIABILITIES
  
$
5,735,127
   $5,258,045 
   
 
 
   
 
 
 
Net fair value of assets subject to nonrecourse debt
  
$
581,086
   $511,230 
   
 
 
   
 
 
 
See accompanying notes are an integral partto unaudited consolidated financial statements
2

Table of these unaudited financial statements.

Contents


REPLAY ACQUISITION CORP.

UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

   For the nine months ended September 30, 2020 
   Ordinary Shares   Additional Paid-   Accumulated  Total Shareholders’ 
   Shares   Amounts   In Capital   Deficit  Equity 

Balance - December 31, 2019, as restated

   7,187,500   $719   $—     $(21,894,483)  $(21,893,764) 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Net income, as restated

   —      —      —      6,725,368   6,725,368 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Balance - March 31, 2020, as restated (unaudited)

   7,187,500    719   $—      (15,169,115)   (15,168,396) 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Net loss, as restated

   —      —      —      (7,046,470  (7,046,470
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Balance - June 30, 2020, as restated (unaudited)

   7,187,500    719   $—      (22,215,585)   (22,214,866) 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Net loss, as restated

   —      —      —      (2,077,739  (2,077,739
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Balance - September 30, 2020, as restated (unaudited)

   7,187,500   $719   $     $(24,293,324)  $(24,292,605) 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

   For the nine months ended September 30, 2019 
   Ordinary Shares   Additional Paid-  Accumulated  Total Shareholders’ 
   Shares   Amounts   In Capital  Deficit  Equity 

Balance - December 31, 2018, as previously reported

   7,187,500   $719   $24,281  $(2,694)  $22,306 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net loss, as previously reported

   —      —      —     (13,739  (13,739
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Balance - March 31, 2019, as previously reported (unaudited)

   7,187,500    719    24,281   (16,433)   8,567 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Proceeds from sale of private warrants in excess of fair value, as restated

   —      —      775,000   —     775,000 

Remeasurement of ordinary shares subject to possible redemption

   —      —      (799,281  (25,990,309  (26,789,590

Net income, as restated

   —      —      —     4,609,364   4,609,364 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Balance - June 30, 2019, as restated (unaudited)

   7,187,500    719   $—     (21,397,378)   (21,396,659) 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net income, as restated

   —      —      —     498,854   498,854 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Balance - September 30, 2019, as restated (unaudited)

   7,187,500   $719   $    $(20,898,524)  $(20,897,805) 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

The

Finance of America Companies Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share data)
(Unaudited)
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to
September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
                 
   
Successor
  
Predecessor
 
REVENUES
                     
Gain on sale and other income from mortgage loans held for sale, net
  
$
210,095
  
$
397,672
  $291,334  $407,926  $836,901 
Net fair value gains on mortgage loans and related obligations
  
 
122,509
  
 
253,660
   76,663   95,955   221,638 
Fee income
  
 
145,725
  
 
236,589
   161,371   119,375   266,002 
Net interest expense:
                     
Interest income
  
 
15,862
  
 
29,013
   12,661   9,937   29,615 
Interest expense
  
 
(37,691
 
 
(71,317
  (34,366  (25,935  (93,165
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net interest expense
   
(21,829
)
 
 
 
(42,304
  (21,705  (15,998  (63,550
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
TOTAL REVENUES
  
 
456,500
  
 
845,617
   507,663   607,258   1,260,991 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
EXPENSES
                     
Salaries, benefits and related expenses
  
 
262,000
  
 
536,731
   238,530   240,381   615,034 
Occupancy, equipment rentals and other office related expenses
  
 
8,283
  
 
15,003
   7,597   8,184   22,795 
General and administrative expenses
  
 
141,595
  
 
260,896
   127,217   113,804   273,584 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
TOTAL EXPENSES
  
 
411,878
  
 
812,630
   373,344   362,369   911,413 
OTHER, NET
  
 
9,928
  
 
7,825
   (8,862  (2,470  (2,514
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
NET INCOME BEFORE INCOME TAXES
  
 
54,550
  
 
40,812
   125,457   242,419   347,064 
Provision for income taxes
  
 
4,440
  
 
5,526
   1,137   808   1,574 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
NET INCOME
  
 
50,110
  
 
35,286
   124,320   241,611   345,490 
CRNCI
  
 
0  
 
 
 
0  
 
  4,260   (4,953  (22,959
Noncontrolling interest
  
 
28,726
  
 
11,637
   201   276   1,076 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
  
$
21,384
  
$
23,649
  $119,859  $246,288  $367,373 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
EARNINGS PER SHARE (Note 28)
                     
Basic weighted average shares outstanding
  
 
59,861,171
  
 
59,871,386
             
Basic net income per share
  
$
0.36
  
$
0.39
             
Diluted weighted average shares outstanding
  
 
191,161,431
  
 
191,180,610
             
Diluted net income per share
  
$
0.22
  
$
0.17
             
See accompanying notes are an integral partto unaudited consolidated financial statements
3


REPLAY ACQUISITION CORP.

UNAUDITED STATEMENTS OF CASH FLOWS

   For the nine months ended September 30, 
   2020  2019 
   As Restated  As Restated 

Cash Flows from Operating Activities:

   

Net (loss) income

  $(2,398,841 $5,094,479 

Adjustments to reconcile net (loss) income to net cash used in operating activities:

   

General and administrative expenses paid by related party

   —     2,206 

Gain on marketable securities, dividends and interest held in Trust Account

   (1,201,382  (3,322,448

Loss (gain) on revaluation of warrant liability

   2,278,750   (2,666,250

Changes in operating assets and liabilities:

   

Prepaid expenses

   15,654   (101,988

Accounts payable

   284,630   79,620 

Accrued expenses

   405,711   (87,694
  

 

 

  

 

 

 

Net cash used in operating activities

   (615,478  (1,002,075
  

 

 

  

 

 

 

Cash Flows from Investing Activities:

   

Cash deposited in Trust Account

   —     (287,500,000
  

 

 

  

 

 

 

Net cash used in investing activities

   —     (287,500,000
  

 

 

  

 

 

 

Cash Flows from Financing Activities:

   

Proceeds from note payable to related party

   —     250,000 

Repayment of note payable and advances from related party

   —     (252,206

Proceeds received from initial public offering

   —     287,500,000 

Proceeds from private placement

   —     7,750,000 

Offering costs paid

   —     (5,151,990
  

 

 

  

 

 

 

Net cash provided by financing activities

   —     290,095,804 
  

 

 

  

 

 

 

Net change in cash

   (615,478  1,593,729 

Cash - beginning of period

   1,589,795   25,000 
  

 

 

  

 

 

 

Cash - end of period

  $974,317   $1,618,729 
  

 

 

  

 

 

 

Supplemental disclosure of noncash activities:

   

Offering costs included in accrued expenses

  $—    $85,000 

Offering costs included in accounts payable

  $—    $2,600 

Remeasurement of ordinary shares subject to possible redemption

  $—    $26,789,590 

Deferred underwritting commissions

  $—    $9,187,500 

The

Finance of America Companies Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
(Unaudited)
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
                 
   
Successor
  
Predecessor
 
NET INCOME
  
$
50,110
  
$
35,286
  $124,320  $241,611  $345,490 
COMPREHENSIVE LOSS ITEM:
                     
Impact of foreign currency translation adjustment
  
 
(65
 
 
(92
  (11  26   37 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
TOTAL COMPREHENSIVE INCOME
  
 
50,045
  
 
35,194
   124,309   241,637   345,527 
Less: Comprehensive income (loss) attributable to the noncontrolling interest and CRNCI
  
 
28,681
  
 
11,573
   4,461   (4,677  (21,883
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
  
$
21,364
  
$
23,621
  $119,848  $246,314  $367,410 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
See accompanying notes are an integral partto unaudited consolidated financial statements
4

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 
Distributions to members
   (1,781  —     —     (1,781
Noncontrolling interest contributions
   —     —     16   16 
Noncontrolling interest distributions
   —     —     (702  (702
Net income
   246,288   —     276   246,564 
Foreign currency translation adjustment
   —     27   —     27 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balance at September 30, 2020
  $848,776  $(14 $225  $848,987 
   
 
 
  
 
 
  
 
 
  
 
 
 
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.

statements

5

REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 1—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
   
Retained
Earnings /
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
Equity
 
based
compensation -
Restricted Stock
Units (“RSUs”)
   —     —      —     —      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
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income
  
 
—  
 
 
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
—  
 
  
 
21,384
  
 
—  
 
 
 
—  
 
 
 
28,726
  
 
50,110
 
Noncontrolling
 
interest
distributions
  
 
—  
 
 
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
(418
 
 
(418
Equity based
compensation
 
-
 
RSUs
  
 
—  
 
 
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
12,036
   
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
12,036
 
Net surrender to settle
RSUs
  
 
(944,970
 
 
—  
 
  
 
(1
 
 
—  
 
  
 
1,759
   
 
—  
 
 
 
—  
 
 
 
(829,222
 
 
(10,543
 
 
(8,784
Foreign currency
translation
adjustment
  
 
—  
 
 
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
(65
 
 
—  
 
 
 
0  
 
 
 
(65
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance at September 30, 2021
  
 
58,936,744
  
$
6
   
 
6
  
$
0  
 
  
$
821,316
   
$
(48,164
 
$
(92
 
 
130,489,064
  
$
1,659,108
  
$
2,432,174
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
See accompanying notes to unaudited consolidated financial statements
6

Finance of America Companies Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
   
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the nine
months ended
September 30,
2020
 
           
   
Successor
  
Predecessor
 
Operating Activities
             
Net income
  
$
35,286
  $124,320  $345,490 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
  
 
(107,899
  (6,277  (722,262
   
 
 
  
 
 
  
 
 
 
Net cash (used in) provided by operating activities
  
 
(72,613
  118,043   (376,772
   
 
 
  
 
 
  
 
 
 
Investing Activities
             
Purchases and originations of mortgage loans held for investment
  
 
(2,658,540
  (1,151,925  (2,974,275
Proceeds/payments received on mortgage loans held for investment
  
 
1,446,930
   677,777   1,373,034 
Purchases and origination of mortgage loans held for investment, subject to nonrecourse debt
  
 
(25,081
  (12,247  (31,730
Proceeds/payments on mortgage loans held for investment, subject to nonrecourse debt
  
 
556,466
   217,452   548,901 
Purchases of debt securities
  
 
(1,449
  (557  (38,749
Proceeds/payments on debt securities, net
  
 
3,238
   2,096   138,320 
Purchases of mortgage servicing rights
  
 
(2,352
  (9,014  —   
Proceeds on sale of mortgage servicing rights
  
 
2,501
   7,765   —   
Acquisition of subsidiaries, net of cash acquired
  
 
(22,838
  (749  351 
Purchase of investments
  
 
—  
 
  —     (3,938
Acquisition of fixed assets
  
 
(8,636
  (4,178  (5,611
Payments on deferred purchase price liability
  
 
(311
  (657  (1,504
Issuance of convertible notes receivable
  
 
—  
 
  (2,550  —   
DIP Financing
  
 
—  
 
  (35,260  —   
   
 
 
  
 
 
  
 
 
 
Net cash used in investing activities
  
 
(710,072
  (312,047  (995,201
   
 
 
  
 
 
  
 
 
 
Financing Activities
             
Proceeds from securitizations of reverse mortgage loans, subject to HMBS related obligations
  
 
1,587,902
   602,172   1,433,324 
Payments of HMBS related obligations
  
 
(1,221,327
  (506,142  (1,495,917
Proceeds from issuance of nonrecourse debt, net
  
 
1,270,334
   579,518   2,554,115 
Payments on nonrecourse debt
  
 
(809,184
  (658,300  (1,132,984
Proceeds from other financing lines of credit
  
 
18,451,706
   10,027,696   25,119,693 
Payments on other financing lines of credit
  
 
(18,401,507
  (9,660,588  (24,942,223
Debt issuance costs
  
 
(1,342
  (2,467  (3,191
Payments on notes payable
  
 
—  
 
  —     (26,771
Principal payments under capital lease obligation
  
 
—  
 
  —     (680
Member contributions
  
 
0  
 
  1,426   234 
Member distributions
  
 
0  
 
  (75,000  (1,552
Settlement of CRNCI
  
 
(203,216
  —     —   
Noncontrolling interest contributions
  
 
24
   —     16 
Noncontrolling interest distributions
  
 
(555
  (620  (1,012
   
 
 
  
 
 
  
 
 
 
Net cash provided by financing activities
  
 
672,835
   307,695   1,503,052 
   
 
 
  
 
 
  
 
 
 
Foreign currency translation adjustment
  
 
(15
  (7  12 
   
 
 
  
 
 
  
 
 
 
Net (decrease) increase in cash and restricted cash
  
 
(109,865
  113,684   131,091 
Cash and restricted cash, beginning of period
  
 
626,827
   539,363   382,664 
   
 
 
  
 
 
  
 
 
 
7

Finance of America Companies Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
   
April 1, 2021 to

September 30,
2021
   
January 1, 2021

to

March 31, 2021
   
For the nine
months ended
September 30,
2020
 
             
   
Successor
   
Predecessor
 
Cash and restricted cash, end of period
  
$
516,962
   $653,047   $513,755 
   
 
 
   
 
 
   
 
 
 
Supplementary Cash Flows Information
               
Cash paid for interest
  
$
124,312
   $50,071   $103,578 
Cash paid for taxes, net
  
 
1,882
    63    1,026 
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    444,238 
Loans transferred to mortgage loans held for sale, at fair value, from mortgage loans held for investment, at fair value
  
 
48,759
    —      167,590 
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
  
 
343
    71    57,554 
Loans transferred to mortgage loans held for investment, subject to nonrecourse debt, at fair value, from mortgage loans held for investment, at fair value
  
 
1,309,669
    272,098    2,591,455 
Loans transferred to mortgage loans held for investment, subject to HMBS, at fair value, from mortgage loans held for investment, at fair value
  
 
1,393,897
    42,909    —   
See accompanying notes to unaudited consolidated financial statements
8


Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
1. Organization and Description of Organization and Business Operations

Replay Acquisition Corp. (the

Finance of America Companies Inc. (“FoA”, “Company”, or “Successor”) was incorporated asin Delaware on October 9, 2020. FoA is a Cayman Islands exempted company on November 6, 2018. The Company was formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). Although the Company is not limited to a particular business, industry or geographical location for purposes of consummating a Business Combination, the Company intends to focus its search for a target in Argentina and/or Brazil focused on industries that the Company believes have favorable prospects and a high likelihood of generating strong risk-adjusted returns for its shareholders. These industries include, but are not limited to, the consumer, telecommunications and technology, energy, financial services holding company which, through its operating subsidiaries, is a leading originator and real estate sectors. The Company is an emerging growth companyservicer of residential mortgage loans and as such, the Company is subject toprovider 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 risks associatedoutstanding 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 emerging growth companies.

FoA Equity, FOAF and FAH, known as “holding company subsidiaries”).

The Company, through its holding company subsidiary, FAH, operates three lending companies, Finance of America Mortgage LLC (“FAM”), Finance of America Reverse LLC (“FAR”), and Finance of America Commercial LLC (“FACo”) (collectively, the “operating lending subsidiaries”). Through FAM and FAR, the Company originates, purchases, sells and securitizes conventional (conforming to the underwriting standards of Fannie Mae or Freddie Mac; collectively referred to as government sponsored entities (“GSEs”)), government-insured (Federal Housing Administration (“FHA”)), government guaranteed (Department of Veterans Affairs), and proprietary
non-agency
residential and reverse mortgages. FACo serves as a specialty finance company which originates a variety of commercial mortgage loans to owners and investors of single and multi-family residential rental properties. The Company, through one of its other holding company subsidiaries, 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, 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
work-from-home
environment is anticipated to continue until at least January 2022, with certain exceptions for employees whose job functions or other considerations require them to be in a physical office from time to time. The Company’s management is actively monitoring the global situation relating to
COVID-19
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 September 30, 2020,2021, approximately 0.40% of
U
nits and 0.42% of unpaid principal balance of the Company had not commenced any operations. All activity for the period from November 6, 2018 (inception) through September 30, 2020 relates to the Company’s formation, the Company’s initial public offering (the “Initial Public Offering”) described below, and since the Initial Public Offering, the search for a potential target. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating incomecompanies total residential mortgage servicing portfolio is in the form of investment income on cash and cash equivalents from the proceeds derived from the Initial Public Offering.

The Company’s sponsor is Replay Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The Company’s ability to commence operations is contingent upon obtaining adequate financial resources. The registration statement for the Company’s Initial Public Offering was declared effective on April 3, 2019. On April 8, 2019, the Company consummated its Initial Public Offering of 28,750,000 units (“Units”), including the issuance of 3,750,000 Unitsforbearance as a result of the underwriters’ full exercise of their over-allotment option, at $10.00 per Unit, generating gross proceeds of $287.5 million,economic impacts caused by

COVID-19.
As the pandemic continues, it has the potential to cause additional volatility in the financial markets and incurring offering costs of approximately $15.0 million, inclusive of approximately $9.2 million in deferred underwriting commissions (Note 5).

Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 7,750,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant to the Sponsor, generating gross proceeds of $7.75 million (Note 4).

On August 15, 2019, the Company received a written notice (the “Notice”) from the staff of NYSE Regulation of the New York Stock Exchange (“NYSE”) indicating that the Company is not currently in compliance with Section 802.01B of the NYSE Listed Company Manual (the “Manual”), which requires the Company to maintain a minimum of 300 public shareholdersmay have an adverse effect on a continuous basis.

Pursuant to the Notice, the Company was subject to the procedures set forth in Sections 801 and 802 of the Manual. The Company submitted a business plan that demonstrates how the Company expects to return to compliance with the minimum public shareholders requirement within 18 months of receipt of the Notice. The Company anticipates that it will satisfy this listing requirement within such time period once it consummates an initial Business Combination.

On October 24, 2019, the Company was notified by the staff of NYSE Regulation that the NYSE’s Listings Operations Committee has agreed to accept the Company’s business plan. results of future operations, financial position, intangible assets and liquidity in fiscal year 2021.

2. Summary of Significant Accounting Policies
Basis of Presentation
The Company will be subjectaccompanying unaudited consolidated financial statements comprise the financial statements of FoA and its controlled subsidiaries for the Successor three months ended September 30, 2021, the Successor period from April 1, 2021 to quarterly monitoring for compliance with such plan.

The Company’s ordinary shares, warrants and Units, which trade under the symbols “RPLA,” “RPLA WS” and “RPLA.U,” respectively, will continue to be listed and traded on the NYSE during the cure period, subject to the Company’s compliance with the NYSE’s other applicable continued listing standards, and will bear the indicator “.BC” on the consolidated tape to indicate noncompliance with the NYSE’s continued listing standards.


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Trust Account

Upon the closing of the Initial Public Offering and Private Placement, $287.5 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public OfferingSeptember 30, 2021, and the Private Placement was placed in a trust account (the “Trust Account”), located infinancial statements of FoA Equity and its controlled subsidiaries for the United States at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee,Predecessor periods from January 1, 2021 to March 31, 2021 and invested only in U.S. government securities, withinfor the meaning set forth in Section 2(a)(16) of the Investment Company Act 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3)three months and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

Initial Business Combination

nine months ended September 30, 2020. The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.

The Company will provide its holders (the “Public Shareholders”) of its ordinary shares, par value $0.0001 per share, sold in the Initial Public Offering (the “Public Shares”), with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share). The per-share amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). These Public Shares were classified as temporary equity upon the completion of the Initial Public Offeringconsolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board’sU.S. generally accepted accounting principles (“FASB”GAAP”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combinationfor interim financial statements and a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by law and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association (the “Amended and Restated Memorandum and Articles of Association”), conduct the redemptions pursuant to the tender offeraccounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval. The Consolidated Statement of the transactions is required by law, or the Company decides to obtain shareholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Shareholder may elect to redeem their Public Shares irrespectiveFinancial Condition as of whether they vote for or against the proposed transaction. If the Company seeks shareholder approval in connection with a Business Combination, the initial shareholders (as defined below) agreed to vote their Founder Shares (as defined below in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. Subsequent to the consummation of the Initial Public Offering, the Company will adopt an insider trading policy which will require insiders to: (i) refrain from purchasing shares during certain blackout periods and when they are in possession of any material non-public information and (ii) to clear all trades with the Company’s legal counsel prior to execution. In addition, the initial shareholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Notwithstanding the foregoing, the Amended and Restated Memorandum and Articles of Association provide that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the ordinary shares sold in the Initial Public Offering, without the prior consent of the Company.

The Company’s Sponsor, officers and directors (the “initial shareholders”) agreed not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (a) that would modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination within 24 monthsDecember 31, 2020 has been derived from the closingaudited consolidated financial

9

Table of the Initial Public Offering, or April 8, 2021, (the “Combination Period”) or (b) with respectContents
Finance of America Companies Inc. and Subsidiaries
Notes to any other provision relating to shareholders’ rights or pre-initial Business Combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their ordinary shares in conjunction with any such amendment.

If the Company is unable to complete a Business Combination within the Combination Period, the Company will (1) cease all operations except for the purpose of winding up, (2) as promptly as reasonably possible but no more than 10 business days thereafter, subject to lawfully available funds therefor, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (3) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining shareholders and its board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

The initial shareholders agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial shareholders should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to their deferred underwriting commissions (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the $10.00 per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent auditors) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account below (1) $10.00 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent auditors), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Going Concern Consideration

As of September 30, 2020, the Company had approximately $1.02 million outside of the Trust Account, approximately $5.8 million of investment income available in the Trust Account to pay for tax obligations (less up to $100,000 of interest to pay dissolution expenses), and working capital of approximately $236,000.

Through September 30, 2020, the Company’s liquidity needs have been satisfied through receipt of a $25,000 capital contribution from the Sponsor in exchange for the issuance of the Founder Shares (Note 4) to the Sponsor, $250,000 in note payable to the Sponsor and approximately $2,000 of general and administrative expenses paid by a related party on behalf of the Company. Subsequent to the consummation of the Initial Public Offering, the Company received the net proceeds from the consummation of the Private Placement not held in the Trust Account of $2.0 million. The Company fully repaid the note and the advances to the Sponsor and the related party in May 2019.

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company Working Capital Loans (Note 4). Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. To date, the Company has no borrowings under the Working Capital Loans.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (COVID-19). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic (the “COVID-19 pandemic”), based on the rapid increase in exposure globally. The full impact of the COVID-19 pandemic continues to evolve. The impact of the COVID-19 pandemic on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the pandemic and related advisories and restrictions. These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results of operations, financial position and cash flows may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination, may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 pandemic or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 pandemic and the resulting market downturn.

In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that in light of the upcoming Business Combination, whereby the Company became a wholly owned subsidiary of New Pubco, Replay will continue to operate as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after April 8, 2021. Refer to Note 9 - Subsequent Events for further detail on the upcoming Business Combination.

Restatement of Previously IssuedUnaudited Consolidated Financial Statements

The Company has restated its unaudited financial statements as of September 30, 2020 and December 31, 2019, as well as the unaudited financial statements for the three and nine month periods ended September 30, 2020 and 2019, to correct misstatements in those prior periods primarily related to misstatements identified in improperly applying accounting guidance on certain warrants, recognizing them as equity instead of a warrant liability, under the guidance of ASC 815-40, Contracts in Entity’s Own Equity, and not properly accounting for the entire amount of redeemable ordinary shares as temporary equity carried at redemption value in accordance with the guidance in ASC 480.

See Note 8 - Restatement of Previously Issued Financial Statements for additional information regarding the errors identified and the restatement adjustments made to the financial statements.

Note 2—Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited financial

statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”)Predecessor as of and for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP.year ended December 31, 2020. In the opinion of management, such financial information reflects all normal and recurring adjustments (consisting of normal accruals) considerednecessary for a fair presentation have been included.of the financial position and the results of operations for such interim periods in accordance with GAAP. Operating results for the nine months ended September 30, 2020interim period are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2020.

full year. The accompanying unauditedconsolidated 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 included on Form 10-K/A filed byfor the year ended December 31, 2020 (Predecessor).

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 FoA as a publicly traded company on the New York Stock Exchange (“NYSE”), and FoA 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 FoA 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 were wholly owned subsidiaries of FOAF, and are included in the consolidated financial statements along with 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 U.S. Securities and Exchange Commission (the “SEC”) on May 17, 2021.

Emerging Growth Company

Section 102(b)(1)other notes that follow, are an integral part of the Jumpstart Ourconsolidated financial statements.

Principles of Consolidation
The consolidated financial statements include the accounts of the Company, 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 Startups ActCombination, the noncontrolling interests of 2012 (the “JOBS Act”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”) exempts emerging growth companiesin 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 being requiredCRNCI in the Consolidated Statements of Financial Condition. All significant intercompany balances and transactions were eliminated. In connection with the closing of the Business Combination disclosed in Note 4 - Acquisitions, FoA caused Finance of America Holdings LLC to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registeredexercise its right under the Exchange Act) are requiredFACo Holdings Agreement to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt outpurchase all of the extended transition period and comply withoutstanding Class B Units held by Buy to Rent Platform Holdings, L.P. (“B2R”) for a redemption price of $203.2 million in satisfaction of the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. applicable Hurdle Amount under the FACo Holdings Agreement. 
Business Combinations
The Company has elected notapplies the acquisition method to opt out of such extended transition period,all transactions and other events in which means that when a standard is issuedthe entity obtains control over one or revisedmore other businesses. Assets acquired and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash and investments held in the Trust Account. Cash is maintained in accounts with financial institutions, which, at times may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on its cash accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. The Company’s investments held in the Trust Account consists entirely of U.S. government securities with an original maturity of 180 days or less.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Investments Held in Trust Account

The Company’s portfolio of investments held in the Trust Accountliabilities assumed are comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less, classified as trading securities. Trading securities are presented on the Balance Sheetsmeasured at fair value as of the acquisition date. Liabilities related to contingent consideration are recognized at the end ofacquisition date and

re-measured
at fair value in each subsequent reporting period. GainsGoodwill is recognized if the consideration transferred exceeds the fair value of the net assets acquired.
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Table of Contents
Finance of America Companies Inc. and losses resulting fromSubsidiaries
Notes to Unaudited Consolidated Financial Statements
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 recorded 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 triggering events occur, which indicate goodwill might be impaired between annual tests, goodwill will be tested when such events occur. In making this assessment, the Company considers a number of factors including, but not limited to, operating results, business plans, economic projections,
share price
and anticipated future cash flows. There are inherent uncertainties related to these securitiesfactors and management’s judgment in applying them to the analysis of goodwill impairment. Changes 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 unit 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 and broker/customer relationships acquired through various acquisitions and recorded at their estimated fair value on the date of acquisition. Intangible assets are amortized on a straight line basis over their estimated useful lives. Amortization expense of intangibles is included in gaingeneral and administrative expenses on marketable securities, dividends and interest held in the Trust Account in the accompanyingConsolidated Statements of Operations. The fair valueCompany reviews intangible assets for trading securities is determined using quoted market pricesimpairment whenever events or changes in active markets.

circumstances indicate that the related carrying amounts may not be recoverable. 

Warrant Liability

The Company accounts for warrants for the Company’s ordinary shares as liabilitiesClass A Common Stock at fair value within payables and other liabilities on the Balance SheetsConsolidated Statements of Financial Condition because the warrants do not meet the criteria for classification within equity. Offering costs were allocated to the Ordinary Shares and Public Warrants, and the amounts allocated to the Public Warrants were expensed immediately. The warrants are subject to remeasurement at each balance sheetstatement 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. Atwarrants.
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1

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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 payment by the Company to the TRA Parties 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 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 (as defined in Note 4 - Acquisitions).
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 U.S. federal and state tax rates at the date of the exchange;
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; and
initial measurement of the obligations is at fair value on the acquisition date. Subsequently, the liability will 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 exchanges subsequent to the Business Combination, as they occur, 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 September 30, 2021 (Successor), the Company had a liability of $35.1
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 FoA Equity’s earnings were subject to certain U.S. federal and foreign taxes. Subsequent to the Business Combination, the portion of earnings allocable to FoA is subject to corporate level tax rates at the warrant liability relatedfederal, state and local levels. Therefore, the amount of income taxes recorded prior to the Warrants will be reclassifiedBusiness Combination are not representative of the expenses expected subsequent to additional paid-in capital.

Fair Value Measurements

ASC 820, Fair Value Measurement, defines fair valuethe Business Combination.

The computation of the effective tax rate and provision at each interim period requires disclosures about fair value measurements. Fair valuethe use of certain estimates and significant judgments including, but not limited to, the expected operating income for the year, projections of the proportion of income that is defined assubject to tax, permanent differences between the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date.Company’s GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)earnings and taxable income, and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

Level 1, definedlikelihood of recovering deferred tax assets existing as observable inputs such as quoted prices for identical instruments in active markets;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

ASC 825, Financial Instruments, requires all entities to discloseof the fair valuestatement of financial instruments, bothposition date. The

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Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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 practicablemore 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 estimatebe 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.
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 (“First Earnout Achievement Date”), 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 (“Second Earnout Achievement Date”).
The seller earnout is accounted for as contingent consideration and classified as equity. The seller earnout was measured at fair value. Asvalue upon the consummation of September 30, 2020the Business Combination, the date of issuance, and December 31, 2019,will not be subsequently remeasured. The settlement of the seller earnout will be accounted for within equity, if and when, the First or Second Earnout Achievement Date occurs. See Note 22 - Incentive Compensation for additional information.
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 Sponsor Earnout Achievement Date occurs. See Note 29 - 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 income (loss) is reduced by the portion of net income (loss) 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.
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Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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 valuesas they occur.
For equity based compensation where there are market conditions as well as service conditions to vesting, the grant date fair value of cash, prepaid expenses, accounts payable,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 accrued expenses approximateoutstanding during the fair valuesSuccessor periods. 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 periods.
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 short-term naturelimited number of the instruments. The Company’s investments held in the Trust Account are comprised of investments in U.S. government securities with an original maturity of 180 days or less. The fair value for trading securities is determined using quoted market prices in active markets.

LLC unit holders.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company’s managementCompany to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosureat the date of contingent assets and liabilities at the consolidated financial statements and the reported amounts of revenuerevenues and expenses during the reporting period. Actual results couldmay differ from those estimates.

Offering Costs Associated withestimates and assumptions due to factors such as changes in the Initial Public Offering

Offeringeconomy, interest rates, secondary market pricing, prepayment assumptions, home prices or discrete events affecting specific borrowers, and such differences could be material.

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 2020The 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 EntitiesThe 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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Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Standard
Description
Effective Date
Effect on 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 requirements 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 2020The 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 ContractThe 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 TaxesThis 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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Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Standard
Description
Effective Date
Effect on Consolidated
Financial Statements
ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946): Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants
In August 2021, the FASB issued ASU 2021-06 to align the SEC paragraphs in the codification with the new SEC rules issued in May 2020 relating to changes to the disclosure requirements for acquisitions and dispositions. ASU No. 2021-06 amends and supersedes various SEC paragraphs in FASB’s Topic 205, Presentation of Financial Statements, and Topic 946, Investment Companies.
In May 2020, the SEC issued Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, to update the financial disclosure requirements in Regulation S-X for acquisitions and dispositions of businesses. In addition, to address the unique attributes of investment companies and business development companies, the SEC adopted new requirements regarding fund acquisitions specific to registered investment companies and business development companies.
Regulation S-X Rule 3-05 generally requires a registrant to provide separate audited annual and unaudited interim pre-acquisition financial statements of the business if it is significant to the registrant using the investment, asset, and income tests. The amendments in this Update include changes to the investment and income tests when measuring significance, and raising the significance threshold for reporting the disposition of a business on Form 8-K from 10% to 20% to conform to requirements for reporting business acquisitions.
January 2021
This ASU is effective for all acquisitions and disposals occurring after January 1, 2021.
The Company adopted this guidance using the retrospective method of adoption.
The Company evaluated the significance of all material acquisitions and disposals using the final amendments and determined it was in compliance.
Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
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Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Recently Issued Accounting Guidance, Not Yet Adopted as of September 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 Written Call OptionsThe 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.
The adoption of this standard is not expected to have any material impact on the Company’s consolidated financial statements as it currently does not apply.
3. Variable Interest Entities and Securitizations
The Company determined that the SPEs created in connection with preparationits 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 Initial Public Offering,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
FACo securitizes certain of approximately $15.1 million consisted principallyits interests in fix & flip mortgages. The transactions provide debt security holders the ability to invest in a pool of underwriter discountsperforming 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.
18

Finance of which payment is deferred)America Companies Inc. and approximately $638,000Subsidiaries
Notes to Unaudited Consolidated Financial Statements
In
April 2021, FACo executed its optional redemption of professional, printing, filing, regulatoryoutstanding securitized notes related to the 2018, 2019, and other costs. These expenses, together2020 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 nonperforming reverse mortgages and
non-agency
reverse mortgage loans. The transactions provide investors with the underwriting discountsability 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 commissions,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, FAR executed its optional redemption of outstanding securitized notes related to outstanding nonperforming HECM securitizations. As part of the optional redemption, FAR paid off notes with an outstanding principal balance of $294.2 million. The notes were allocatedpaid 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 of the optional redemption, FAR paid off notes with an outstanding principal balance of $239.8 million, accrued interest of $6.3 million and discount of $3.7 million.
In their capacity as servicer of the securitized loans, FACo and FAR retain the power to direct the VIE’s activities that most significantly impact the VIEs economic performance. 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 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 ordinary sharesVIE 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 public warrants. Amounts allocatedtrusts are consolidated by the Company through its FACo and FAR subsidiaries.
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 ordinary sharesstandard securitization representations and warranties obligations for the Successor three months ended September 30, 2021, for the Successor period from April 1, 2021 to September 30, 2021, or the Predecessor period from January 1, 2021 to March 31, 2021. There were recognized as a reduction toalso 0 charge-offs associated with these transferred mortgage loans for the ordinary shares carrying value, and the amounts allocated to the public warrants were expensed immediately.

Ordinary Shares Subject to Possible Redemption

The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in ASC 840. Ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at redemption value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, atPredecessor three months ended September 30, 2020 and December 31, 2019, 28,750,000 ordinary shares subject to possible redemption are presented as temporary equity outside of the shareholders’ equity section of the Company’s Balance Sheets.

The ordinary shares subject to possible redemption are subject to the subsequent measurement guidance in ASC 480. Under such guidance, the Company must subsequently measure the shares to their redemption amount because, as a result of the allocation of net proceeds to the Public Warrants, the initial carrying amount of the Ordinary Shares is less than $10.00 per share. In accordance with the guidance, the Company has elected to measure the Ordinary Shares subject to possible redemption to their redemption amount (i.e., $10.00 per share) immediately as if the end of the first reporting period after the IPO, June 30, 2019, was the redemption date.


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Net Income (Loss) Per Ordinary Share

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, Earnings Per Share.The Statements of Operations include a presentation of (loss) income per Public Shares and loss per Founder Shares following the two-class method of income per share. In order to determine the net (loss) income attributable to both the Public and Founder Shares, the Company first considered the total (loss) income allocable to both classes of shares. This is calculated using the total net (loss) income less any dividends paid. For purposes of calculating net (loss) income per share, any remeasurement of the ordinary shares subject to possible redemption was considered to be dividends paid to the public shareholders. Subsequent to calculating the total (loss) income allocable to both classes of shares, the Company allocated the amount using a ratio reflective of the respective participation rights of each class of shares. This resulted in an allocation of 80%or for the Public Shares and 20% for the Founder Shares.

For the nine months ended September 30, 2020, basic2020.

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Table of Contents
Finance of America Companies Inc. and diluted net loss per share of Public Shares were calculated by dividing 80%Subsidiaries
Notes to Unaudited Consolidated Financial Statements
The following table presents the assets and liabilities of the total loss allocableCompany’s consolidated VIEs, which are included in the Consolidated Statements of Financial Condition and excludes intercompany balances, except for retained bonds and beneficial interests (in thousands):
   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
ASSETS
          
Restricted cash
  
$
306,615
   $293,580 
Mortgage loans held for investment, subject to nonrecourse debt, at fair value
  
 
5,939,651
    5,396,167 
Other assets
  
 
69,947
    79,528 
   
 
 
   
 
 
 
TOTAL ASSETS
  
$
6,316,213
   $5,769,275 
   
 
 
   
 
 
 
LIABILITIES
          
Nonrecourse debt, at fair value
  
$
5,956,832
   $5,459,941 
Payables and other liabilities
  
 
117
    291 
   
 
 
   
 
 
 
TOTAL VIE LIABILITIES
  
 
5,956,949
    5,460,232 
   
 
 
   
 
 
 
Retained bonds and beneficial interests eliminated in consolidation
  
 
(221,822
   (202,187
   
 
 
   
 
 
 
TOTAL CONSOLIDATED LIABILITIES
  
$
5,735,127
   $5,258,045 
   
 
 
   
 
 
 
FAM
FAM securitizes certain of its interests in agency-eligible residential mortgage loans. The transaction provides investors with the ability to all shares,invest in a pool of approximately $3.6 million,mortgage loans secured by 28,750,000,
one-to-four-family
residential properties and provides FAM with access to liquidity for these assets and ongoing servicing fees. The principal and interest on the weighted average number of Public Shares outstanding certificates are paid using the cash flows from the underlying mortgage loans, which serve as collateral for the period. Fordebt. In May 2021, FAM established the nine months ended September 30, 2020, basicHundred Acre Wood (“HAWT”) trust for the sole purpose of acquiring mortgage loans for securitization. In 2021, FAM executed the HAWT 2021-INV1 and diluted net loss per shareHAWT 2021-INV2 securitizations, where FAM’s beneficial interest in the securitization is limited to its U.S. Risk Retention Certificates, a 5% eligible vertical interest in the Trust. The Company determined that the securitization structures meets the definition of Founder Shares were calculated by dividing 20%a VIE and concluded that the Company does not hold a significant variable interest in the 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 total loss allocable to all shares, of approximately $3.6 million, by 7,187,500, the weighted average number of Founder Shares outstanding for the period.

For the nine months ended September 30, 2019, basic and diluted net loss per share of Public Shares were calculated by dividing 80%VIEs. The transfer of the totalloans to the VIEs was determined to be a sale. The Company derecognized the mortgage loans and did not consolidate the trusts.

FAM’s continuing involvement with and exposure to loss allocable to all shares of approximately $25.0 million, plusfrom the remeasurementVIE includes the carrying value of the ordinary shares subject to possible redemption, of approximately $30.1 million, by 28,750,000,retained bond, the weighted average number of Public Shares outstanding forservicing asset recognized in the period. For the nine months ended September 30, 2019, basic and diluted net loss per share of Founder Shares were calculated by dividing 20%sale of the total loss allocable to all shares of approximately $25.0 million, by 7,187,500,loans, servicing advances in the weighted average number of Founder Shares outstanding forrole as servicer, and obligations under representations and warranties contained in the period.

For the three months ended September 30, 2020, basic and diluted net loss per share of Public Shares were calculated by dividing 80%loan sale agreements. Creditors of the total loss allocableVIE have no recourse to all shares, of approximately $2.2 million, by 28,750,000, the weighted average number of Public Shares outstanding for the period. For the three months ended September 30, 2020, basic and diluted net loss per share of Founder Shares were calculated by dividing 20%FAM’s assets or general credit. The underlying performance of the total loss allocable to all shares of approximately $2.2 million, by 7,187,500,mortgage loans transferred has a direct impact on the weighted average number of Founder Shares outstanding for the period.

For the three months ended September 30, 2019, basicfair values and diluted net income per share of Public Shares were calculated by dividing 80%cash flows of the total loss allocable to all shares, of approximately $1.1 million, by 28,750,000,beneficial interests held and the weighted average number of Public Shares outstanding for the period. For the three months ended September 30, 2019, basic and diluted net loss per share of Founder Shares were calculated by dividing 20% of the total loss allocable to all shares, of approximately $1.1 million, by 7,187,500, the weighted average number of Founder Shares outstanding for the period.

At September 30, 2020 and September 30, 2019, we did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in our earnings. servicing asset recognized.

As a result, diluted loss per share is the same as basic loss per share for the periods presented.

Income Taxes

FASB ASC 740, Income Taxes, prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2020 and December 31, 2019. The Company’s management determined that2021 (Successor), the Cayman Islands isinterests retained upon transfer of the Company’s only major tax jurisdiction. The Company recognizes accruedmortgage loans consisted of an interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the paymentin each class of interest and penalties at September 30, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. There is currently no taxation imposed on incomesecurities issued by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements.

There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements.

RisksVIE and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited financial statements. The unaudited financial statements do not include any adjustments that might result from the outcome of this uncertainty.


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

Note 3—Initial Public Offering

On April 8, 2019, the Company sold 28,750,000 Units, including the issuance of 3,750,000 Units as a result of the underwriters’ full exercise of their over-allotment option, at a purchase price of $10.00 per Unit in the Initial Public Offering. Of these, an aggregate of 2,500,000 Units in the Initial Public Offering (“Affiliate Units”) were purchased by certain affiliates of the Sponsor for gross proceeds of $25.0 million.

Each Unit consists of one ordinary share and one-half of one redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the holder to purchase one ordinary share at a price of $11.50 per share, subject to adjustment (see Note 6).

Note 4—Related Party Transactions

Founder Shares and Private Placement Warrants

In December 2018, the Sponsor purchased 7,187,500 ordinary shares, par value $0.0001 per share (the “Founder Shares”), for an aggregate price of $25,000. In March 2019, the Sponsor transferred to the Company’s independent directors an aggregate of 90,000 Founder Shares for an aggregate purchase price of $313. The Sponsor agreed to forfeit up to 937,500 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. The forfeiture was to be adjusted to the extent that the over-allotment option was not exercised in full by the underwriters so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. On April 5, 2019, the underwriters fully exercised their over-allotment option which closed simultaneously with the Initial Public Offering; thus, the 937,500 Founder Shares were no longer subject to forfeiture.

The initial shareholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last reported sale price of the ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, amalgamation, share exchange, reorganization or other similar transaction that results in all of the Company’s shareholders having the right to exchange their ordinary shares for cash, securities or other property.

Simultaneously with the closing of the Initial Public Offering on April 8, 2019, the Company sold 7,750,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $7.75 million. Each Private Placement Warrant is exercisable for one ordinary share at a price of $11.50 per share. The Private Placement Warrants have been accounted for as liabilities, withhad an initial fair value of $6,975,000.$42.0

million. The difference betweenservicing asset recognized upon sale of the proceeds received andmortgage loans to the VIE had an initial fair value was recognized as a capital contribution in additional paid-in capital on the Statements of Changes in Shareholders’ Equity. A portion of the net$3.2
million. Cash proceeds from the Private Placement Warrants was addedsecuritizations were $795.6
million. The Company recorded a gain on sale on the securitizations of $32.9
million.
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Table of Contents
Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
The following table presents a summary of the proceeds from the Initial Public Offering held in the Trust Account. Ifoutstanding collateral and certificate balances for securitization trusts for which the Company doeswas the transferor and that were not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are heldconsolidated by the Sponsor or its permitted transferees.

The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.

Company:


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

PIPE Agreements

Concurrently with the execution of the Transaction Agreement, the Company entered into the Replay PIPE Agreements (as defined below) with various investors, including an affiliate of the Sponsor, pursuant to which such investors agreed to purchase ordinary shares (which ordinary shares will be converted into Replay LLC Units pursuant to the Domestication and then will be converted into the right to receive shares of Class A Common Stock pursuant to the Replay Merger (as defined below)). In the aggregate, the PIPE Investors (as defined below) have committed to purchase $250.0 million of PIPE Shares (as defined below), at a purchase price of $10.00 per PIPE Share, including $10.0 million of PIPE Shares to be purchased by an affiliate of the Sponsor.

Related Party Loans

On December 1, 2018, the Sponsor agreed to loan the Company an aggregate of up to $250,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable on the earlier of June 30, 2019 or the completion of the Initial Public Offering. The Company borrowed $250,000 under the Note, and fully repaid on May 6, 2019.

In addition to the Note, the Company borrowed approximately $2,000 from a related party for general and administrative expenses. The Company repaid this amount on May 7, 2019.

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. To date, the Company had no borrowings under the Working Capital Loans.

Reimbursement

The Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. The Company’s Audit Committee will review on a quarterly basis all payments that were made to the Sponsor, officers, directors or the Company’s or any of their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on the Company’s behalf.


   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
Unconsolidated securitization trusts:
          
Total collateral balances – UPB
  
$
795,077
   $0   
   
 
 
   
 
 
 
Total certificate balances
  
$
795,077
   $0   
   
 
 
   
 
 
 

REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 5—Commitments and Contingencies

Registration Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, and any ordinary shares underlying such securities, are entitled to registration rights pursuant to a Registration Rights Agreement entered into on April 3, 2019. These holders will be entitled to certain demand and “piggyback” registration rights. However, the Registration Rights Agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The Company granted the underwriters a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 3,750,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On April 5, 2019, the underwriters fully exercised their over-allotment option which closed simultaneously with the Initial Public Offering.

Except on the Affiliate Units, the underwriters were entitled to an underwriting discount of $0.20 per Unit, or $5.25 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per Unit, or approximately $9.19 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

Note 6—Shareholders’ Equity

Ordinary Shares—The Company is currently authorized to issue 200,000,000 ordinary shares with a par value of $0.0001 per share. Holders of ordinary shares are entitled to one vote for each share. The Company sold 28,750,000 Units in the Initial Public Offering, and 7,187,500 ordinary shares to the Sponsor (Founders Shares). As a result, as of September 30, 2020 and December 31, 2019, there were 35,937,500 ordinary shares issued and outstanding, including 28,750,000 ordinary shares subject to possible redemption.

Preference Shares—The Company is authorized to issue 2,000,000 preference shares with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.

As of September 30, 2020 and December 31, 2019,2021 (Successor), there were no preference shares issued or outstanding.

Warrants—Public Warrants may only be exercised for a whole number$1.6

million of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering, or April 8, 2020; provided in each case that the Company has an effective registration statement under the Securities Act covering the ordinary shares issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the ordinary shares issuable upon exercise of the Public Warrants. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, the Company will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if the


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Company’s ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemablemortgage loans transferred by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Company may call the Public Warrants for redemption (except with respect to the Private Placement Warrants):

in whole and not in part;

at a price of $0.01 per warrant;

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

if, and only if, the last reported closing price of the ordinary shares 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.

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

The exercise price and number of ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation. In addition, if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price. Additionally, in no event will the Company be required to net cash settle the warrant shares. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.

The Company accounts for the Public Warrants and Private Placement Warrants as liabilities in accordance with the guidance contained in ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity. Because the Company does not control the occurrence of events, such as a tender offer or exchange, that may trigger cash settlement of the warrants where not all of the shareholders also receive cash, the warrants do not meet the criteria for equity treatment thereunder, as such, the warrants must be recorded as derivative liability.

Additionally, certain adjustments to the settlement amount of the Private Placement Warrants are based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815-40, and thus the Private Placement Warrants are not considered indexed to the Company’s own stock and not eligible for an exception from derivative accounting.

The Company recorded a derivative liability upon the issuance of the warrants. Accordingly, the Company classified each warrant as a liability at its fair value. The Public Warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value determined by the Monte Carlo simulation. The warrant liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s Statements of Operations. The Company will reassess the classification of the warrants at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 7 — Fair Value Measurements

The following tables present information about the Company’s financial assetsunconsolidated securitization trusts that are measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 by level within the fair value hierarchy:

September 30, 2020

Description

  Quoted
Prices in
Active Markets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Other
Unobservable
Inputs
(Level 3)
 

Assets:

      

Investments held in Trust Account

  $293,255,540   $—     $—   
      

Liabilities:

      

Warrants

  $—     $21,096,250   $—   

December 31, 2019

Description

  Quoted
Prices in
Active Markets
(Level 1)
   Significant
Other
Observable
Inputs

(Level 2)
   Significant
Other
Unobservable
Inputs
(Level 3)
 

Assets:

      

Investments held in Trust Account

  $292,054,158   $—     $—   
      

Liabilities:

      

Warrants

  $—     $18,817,500   $—   

The Company has determined that the Warrants are subject to treatment as a liability.90 days or less past due. As the transfer of the Private Placement Warrants to anyone other than the purchasers or their permitted transferees would result in the Private Placement Warrants having substantially the same terms as the Public Warrants issued in the Offering. The Company has determined that the fair value of each Warrant issued as part of the Private Placement Warrants is the same as that of a Warrant issued in the Offering, with an insignificant adjustment for short-term marketability restrictions. Accordingly, the Warrants are classified as Level 2 financial instruments.

Note 8 — Restatement of Previously Issued Financial Statements

The Company has restated previously issued financial statements after considering newly released guidance by the SEC regarding the accounting and reporting for warrants.

On April 12, 2021, the Staff of the Securities and Exchange Commission issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). The errors that caused the Company to conclude that its financial statements should be restated are the result of a misapplication of the guidance on accounting for certain of its issued warrants, which came to light when the SEC issued the SEC Statement. The SEC Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to those issued by the Company at the time of its initial public offering on April 8, 2021. Based on ASC 815-40 warrant instruments that do not meet the criteria to be considered indexed to an entity’s own stock shall be initially classified as liabilities at their estimated fair values. In periods subsequent to issuance, changes in the estimated fair value of the derivative instruments should be reported in the statement of operations. Refer to Note 6 - Shareholders’ Equity for further detail on the Warrants.

The Company’s management and the audit committee of the Company’s Board of Directors concluded that it is appropriate to restate (i) the Company’s previously issued audited financial statements as of December 31, 2020, and December 31, 2019, as previously reported in its Form 10-K and (ii) quarterly unaudited financial statements for the quarterly periods ended June 30, 2019, September 30, 2019, March 31, 2020, June 30, 2020 and September 30, 2020. there were no unconsolidated securitization trusts.

4. Acquisitions
The restated classification and reported values of the Warrants as accounted for under ASC 815-40 are included in the financial statements herein.

In addition, management has identified errors made in the historical financial statements related to its shareholders’ equity where, on the date of issuance of the units, Replay improperly allocated the net proceeds among the ordinary shares subject to possible redemption and public warrants. Additionally, due to the redemption features tied to the ordinary shares subject to possible redemption, such shares will be redeemed or become redeemable. As a result, Replay should have remeasured the ordinary shares subject to possible redemption to their redemption amount (i.e., $10.00 per share) immediately as of the end of the first reporting period after the IPO (June 30, 2019) were the redemption date. Management also noted a reclassifications error related to temporary equity and permanent equity.

The following presents the restated financial statements as of September 30, 2020 and December 31, 2019, as well as the statements for the three and nine month period ended September 30, 2020 and 2019.

Business Combination


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

The following presents a reconciliation of the Balance Sheets, Statements of Operations, and Statements of Cash Flows from the prior periods as previously reported to the restated amounts as of September 30, 2020 and December 31, 2019. The Statements of Shareholders’ Equity for the three and nine month period ended September 30, 2020 and 2019 have been restated respectively, for the restatement impact to net (loss) income and common stock subject to possible redemption. See the Statement of Operations reconciliation tables below for additional information on the restatement and impact to net (loss) income.

   September 30, 2020 
   As Reported   Restatement
Adjustments
  As Restated 

Assets:

     

Current assets:

     

Cash

  $974,317  $—    $974,317

Prepaid expenses

   47,084   —     47,084
  

 

 

   

 

 

  

 

 

 

Total current assets

   1,021,401   —     1,021,401

Investments held in Trust Account

   293,255,540   —     293,255,540
  

 

 

   

 

 

  

 

 

 

Total assets

  $294,276,941  $—    $294,276,941
  

 

 

   

 

 

  

 

 

 

Liabilities and Shareholders’ Equity:

     

Current liabilities:

     

Accounts payable

  $371,225  $—    $371,225

Accrued expenses

   414,571   —     414,571
  

 

 

   

 

 

  

 

 

 

Total current liabilities

   785,796   —     785,796

Warrant liability

   —      21,096,250(a)   21,096,250

Deferred underwriting commissions

   9,187,500   —     9,187,500
  

 

 

   

 

 

  

 

 

 

Total liabilities

   9,973,296   21,096,250   31,069,546
  

 

 

   

 

 

  

 

 

 

Commitments and contingencies

     

Ordinary shares, $0.0001 par value; 28,750,000 shares subject to possible redemption at $10.00 per share at September 30, 2020

   279,303,640   8,196,360(a)   287,500,000

Shareholders’ Equity:

     

Preference shares, $0.0001 par value; 2,000,000 shares authorized; none issued and outstanding

   —      —     —   

Ordinary shares, $0.0001 par value; 200,000,000 shares authorized; 7,187,500 shares issued and outstanding (excluding 28,750,000 shares subject to possible redemption) at September 30, 2020

   801   (82)(a)   719

Additional paid-in capital

   895,230   (895,230)(a)   —   

Retained earnings / (Accumulated deficit)

   4,103,974   (28,397,298)(a)   (24,293,324
  

 

 

   

 

 

  

 

 

 

Total shareholders’ equity

   5,000,005   (29,292,610  (24,292,605
  

 

 

   

 

 

  

 

 

 

Total Liabilities and Shareholders’ Equity

  $294,276,941  $—    $294,276,941
  

 

 

   

 

 

  

 

 

 


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

   December 31, 2019 
   As Reported   Restatement
Adjustments
  As Restated 

Assets:

     

Current assets:

     

Cash

  $1,589,795  $—    $1,589,795

Prepaid expenses

   62,738   —     62,738
  

 

 

   

 

 

  

 

 

 

Total current assets

   1,652,533   —     1,652,533

Investments held in Trust Account

   292,054,158   —     292,054,158
  

 

 

   

 

 

  

 

 

 

Total assets

  $293,706,691  $—    $293,706,691
  

 

 

   

 

 

  

 

 

 

Liabilities and Shareholders’ Equity:

     

Current liabilities:

     

Accounts payable

  $86,595  $—    $86,595

Accrued expenses

   8,860   —     8,860
  

 

 

   

 

 

  

 

 

 

Total current liabilities

   95,455   —     95,455

Warrant liability

   —      18,817,500(a)   18,817,500

Deferred underwriting commissions

   9,187,500   —     9,187,500
  

 

 

   

 

 

  

 

 

 

Total liabilities

   9,282,955   18,817,500   28,100,455
  

 

 

   

 

 

  

 

 

 

Commitments and contingencies

     

Ordinary shares, $0.0001 par value; 28,750,000 shares subject to possible redemption at $10.00 per share at December 31, 2019

   279,423,730   8,076,270(a)   287,500,000

Shareholders’ Equity:

     

Preference shares, $0.0001 par value; 2,000,000 shares authorized; none issued and outstanding

   —      —     —   

Ordinary shares, $0.0001 par value; 200,000,000 shares authorized; 7,187,500 shares issued and outstanding (excluding 28,750,000 and shares subject to possible redemption) at December 31, 2019

   800   (81)(a)   719

Additional paid-in capital

   775,141   (775,141)(a)   —   

Retained earnings / (Accumulated deficit)

   4,224,065   (26,118,548)(a)   (21,894,483
  

 

 

   

 

 

  

 

 

 

Total shareholders’ equity

   5,000,006   (26,893,770  (21,893,764
  

 

 

   

 

 

  

 

 

 

Total Liabilities and Shareholders’ Equity

  $293,706,691  $—    $293,706,691
  

 

 

   

 

 

  

 

 

 


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

The following tables contain the restatement of previously reported unaudited Statements of Operations for the three and nine month periods ended September 30, 2020 and 2019.

   For the three months ended September 30, 2020 
   As Reported  Restatement
Adjustments
  As Restated 

General and administrative expenses

  $1,058,292 $—    $1,058,292
  

 

 

  

 

 

  

 

 

 

Loss from operations

   (1,058,292  —     (1,058,292

Loss on revaluation of warrant liability

   —     (1,106,250)(a)   (1,106,250

Loss on marketable securities, dividends and interest held in Trust Account

   86,803  —     86,803
  

 

 

  

 

 

  

 

 

 

Net loss

  $(971,489 $(1,106,250 $(2,077,739
  

 

 

  

 

 

  

 

 

 

Basic and diluted weighted average shares outstanding of Public Shares

   28,750,000  —     28,750,000
  

 

 

  

 

 

  

 

 

 

Basic and diluted net loss per share, Public Shares

  $—    $(0.06)(a)  $(0.06
  

 

 

  

 

 

  

 

 

 

Basic and diluted weighted average shares outstanding of Founder Shares

   7,187,500  —     7,187,500
  

 

 

  

 

 

  

 

 

 

Basic and diluted net loss per share, Founder Shares

  $(0.15 $0.09(a)  $(0.06
  

 

 

  

 

 

  

 

 

 

   For the three months ended September 30, 2019 
   As Reported  Restatement
Adjustments
  As Restated 

General and administrative expenses

  $111,750 $—    $111,750
  

 

 

  

 

 

  

 

 

 

Loss from operations

   (111,750  —     (111,750

Issuance costs allocated to the public warrants

   —     —     —   

Loss on revaluation of warrant liability

   —     (951,250)(a)   (951,250

Gain on marketable securities, dividends and interest held in Trust Account

   1,561,854  —     1,561,854
  

 

 

  

 

 

  

 

 

 

Net income

  $1,450,104 $(951,250 $498,854
  

 

 

  

 

 

  

 

 

 

Basic and diluted weighted average shares outstanding of Public Shares

   28,750,000  —     28,750,000
  

 

 

  

 

 

  

 

 

 

Basic and diluted net income (loss) per share, Public Shares

  $0.05 $(0.03)(a)  $0.02 
  

 

 

  

 

 

  

 

 

 

Basic and diluted weighted average shares outstanding of Founder Shares

   7,187,500  —     7,187,500
  

 

 

  

 

 

  

 

 

 

Basic and diluted net loss per share, Founder Shares

  $(0.02 $(0.01)(a)  $(0.03
  

 

 

  

 

 

  

 

 

 


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

   For the nine months ended September 30, 2020 
   As Reported  Restatement
Adjustments
  As Restated 

General and administrative expenses

  $1,321,473 $—    $1,321,473
  

 

 

  

 

 

  

 

 

 

Loss from operations

   (1,321,473  —     (1,321,473

Loss on revaluation of warrant liability

   —     (2,278,750)(a)   (2,278,750

Gain on marketable securities, dividends and interest held in Trust Account

   1,201,382  —     1,201,382
  

 

 

  

 

 

  

 

 

 

Net loss

  $(120,091 $(2,278,750 $(2,398,841
  

 

 

  

 

 

  

 

 

 

Basic and diluted weighted average shares outstanding of Public Shares

   28,750,000  —     28,750,000
  

 

 

  

 

 

  

 

 

 

Basic and diluted net income (loss) per share, Public Shares

  $0.04 $(0.10)(a)  $(0.06
  

 

 

  

 

 

  

 

 

 

Basic and diluted weighted average shares outstanding of Founder Shares

   7,187,500  —     7,187,500
  

 

 

  

 

 

  

 

 

 

Basic and diluted net loss per share, Founder Shares

  $(0.18 $0.08(a)  $(0.10
  

 

 

  

 

 

  

 

 

 
   For the nine months ended September 30, 2019 
   As Reported  Restatement
Adjustments
  As Restated 

General and administrative expenses

  $245,980 $—    $245,980
  

 

 

  

 

 

  

 

 

 

Loss from operations

   (245,980  —     (245,980

Issuance costs allocated to the public warrants

   —     (648,239)(a)   (648,239

Gain on revaluation of warrant liability

   —     2,666,250(a)   2,666,250

Gain on marketable securities, dividends and interest held in Trust Account

   3,322,448  —     3,322,448
  

 

 

  

 

 

  

 

 

 

Net income

  $3,076,468 $2,018,011  $5,094,479
  

 

 

  

 

 

  

 

 

 

Basic and diluted weighted average shares outstanding of Public Shares

   28,750,000  —     28,750,000
  

 

 

  

 

 

  

 

 

 

Basic and diluted net income per share, Public Shares

  $0.12 $0.23(a)  $0.35 
  

 

 

  

 

 

  

 

 

 

Basic and diluted weighted average shares outstanding of Founder Shares

   7,187,500  —     7,187,500
  

 

 

  

 

 

  

 

 

 

Basic and diluted net loss per share, Founder Shares

  $(0.03 $(0.67)(a)  $(0.70
  

 

 

  

 

 

  

 

 

 


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

The following tables contain the restatement of previously reported unaudited Statements of Cash Flows for the three and nine month periods ended September 30, 2020 and 2019.

   For the nine months ended September 30, 2020 
   As Reported  Restatement
Adjustments
  As Restated 

Cash Flows from Operating Activities:

    

Net loss

  $(120,091 $(2,278,750)(a)  $(2,398,841

Adjustments to reconcile net loss to net cash used in operating activities:

    

Gain on marketable securities, dividends and interest held in Trust Account

   (1,201,382  —     (1,201,382

Loss on revaluation of warrant liability

   —     2,278,750(a)   2,278,750

Changes in operating assets and liabilities:

    

Prepaid expenses

   15,654  —     15,654

Accounts payable

   284,630  —     284,630

Accrued expenses

   405,711  —     405,711
  

 

 

  

 

 

  

 

 

 

Net cash used in operating activities

   (615,478  —     (615,478
  

 

 

  

 

 

  

 

 

 

Net change in cash

   (615,478  —     (615,478

Cash - beginning of period

   1,589,795  —     1,589,795
  

 

 

  

 

 

  

 

 

 

Cash - end of period

  $974,317 $—    $974,317
  

 

 

  

 

 

  

 

 

 

Supplemental disclosure of noncash activities:

    

Remeasurement of ordinary shares subject to possible redemption

  $(120,090 $120,090(a)  $—  


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

   For the nine months ended September 30, 2019 
   As Reported  Restatement
Adjustments
  As Restated 

Cash Flows from Operating Activities:

    

Net income

  $3,076,468 $2,018,011(a)  $5,094,479

Adjustments to reconcile net income to net cash used in operating activities:

 

General and administrative expenses paid by related party

   2,206  —     2,206

Gain on marketable securities, dividends and interest held in Trust Account

   (3,322,448  —     (3,322,448

Gain on revaluation of warrant liability

   —     (2,666,250)(a)   (2,666,250

Changes in operating assets and liabilities:

    

Prepaid expenses

   (101,988  —     (101,988

Accounts payable

   79,620   —     79,620 

Accrued expenses

   (87,694  —     (87,694
  

 

 

  

 

 

  

 

 

 

Net cash used in operating activities

   (353,836  (648,239  (1,002,075
  

 

 

  

 

 

  

 

 

 

Cash Flows from Investing Activities:

    

Cash deposited in Trust Account

   (287,500,000  —     (287,500,000
  

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

   (287,500,000  —     (287,500,000
  

 

 

  

 

 

  

 

 

 

Cash Flows from Financing Activities:

    

Proceeds from note payable to related party

   250,000  —     250,000

Repayment of note payable and advances from related party

   (252,206  —     (252,206

Proceeds received from initial public offering

   287,500,000  —     287,500,000

Proceeds from private placement

   7,750,000  —     7,750,000

Offering costs paid

   (5,800,229  648,239(a)   (5,151,990
  

 

 

  

 

 

  

 

 

 

Net cash provided by financing activities

   289,447,565  648,239   290,095,804
  

 

 

  

 

 

  

 

 

 

Net change in cash

   1,593,729  —     1,593,729

Cash - beginning of period

   25,000  —     25,000
  

 

 

  

 

 

  

 

 

 

Cash - end of period

  $1,618,729 $—    $1,618,729
  

 

 

  

 

 

  

 

 

 

Supplemental disclosure of noncash activities:

    

Offering costs included in accrued expenses

  $85,000 $—    $85,000

Offering costs included in accounts payable

  $2,600 $—    $2,600

Remeasurement of ordinary shares subject to possible redemption

  $278,273,440 $(251,483,850)(a)  $26,789,590

Deferred underwritting commissions

  $—    $ 9,187,500 (a)  $9,187,500 

(a)

The Restatement Adjustments reflect the entries to record the initial liability for the Public and Private Warrants issued as part of Replay’s initial public offering and private placement, respectively, and to account for the adjustment to fair value of this liability at the end of each period presented. The initial fair value of the Public and Private Warrants of $19.3 million was recorded in April 2019 as a warrant liability with an offset to additional paid-in capital. In addition, the initial adjusting entry was also to expense approximately $648 thousand of costs directly associated with the issuance of the Public Warrants. The proceeds received from the sale of private warrants in excess of their fair value of $775 thousand was recognized as additional paid-in capital. For each subsequent quarter end, starting with June 30, 2019, the liability was revalued and the change in fair value reflected in “Gain/loss on revaluation of warrant liability” in the Statements of Operations. The Restatement Adjustment also reflect the impact of the remeasurement as of June 30, 2019 of the redeemable shares classified in temporary equity to align with the expected redemption amount of $287.5 million, the impact of the remeasurement of approximately $26.8 million was recognized as increase to the temporary equity balance with the offset to additional paid in capital and accumulated deficit. Additionally, the redemption amount was increased by the gains on marketable securities, dividends and interest held in the trust account, which is also subject to redemption by the ordinary shareholders. Lastly, the earning per share for both the Public and Founder shares was adjusted to account for the measurement adjustment to the temporary equity in accordance with the two classes of shares method and the guidance in ASC 480-10-S99-3A.


REPLAY ACQUISITION CORP.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 9 — Subsequent Events

In accordance with ASC Topic 855, Subsequent Events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company evaluated subsequent events and transactions that occurred after September 30, 2020, the balance sheet date, up to the date that the financial statements were available to be issued. As a result, the following transactions were identified as subsequent events as of May 28, 2021.

On October 12, 2020, the Company, Replay and FoA New Pubco, Replay Merger Sub, Blocker Merger Sub, Blocker, Blocker GP, the Sellers and BTO Urban and Family Holdings, solely in their joint capacity as the Seller Representative,Equity entered into thea Transaction Agreement (the “Transaction Agreement”) pursuant to which the CompanyReplay agreed to combine with FoA Equity in a series of transactions that resulted in the Proposed Business Combination that will result in New PubcoCompany becoming a publicly-traded company on the NYSENew York Stock Exchange (“NYSE”) and controlling FoA Equity in an “UP-C”

“UP-C”
structure.

The Proposed Business Combination encompasses At the Closing on April 1, 2021, Replay domesticated into a series of transactions to effect an “UP-C” structure, pursuant to which, among other things: (i)Delaware corporation, and the Company will change its jurisdiction of incorporation fromwas formed. Following the Cayman Islands toClosing, the State ofpublic investors held Class A Common Stock representing approximately a 31.3% economic interest, and BTO Urban Holdings L.L.C., a Delaware by deregistering as an exempted company in the Cayman Islands and continuing and domesticating as Finance of America Companies, Inc. a limited liability company formed under(“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 laws“Sellers” or the “Continuing Unitholders”) retained 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 State of Delaware (the “Domestication”).

On April 1,Company are entitled to vote generally. Subsequent to the Closing, the Company consummatedcontrols FoA Equity as the Proposed Business Combinationsole appointer of the board of managers and is a holding company with New Pubco resultingno assets or operations other than its equity interest in the Domestication, whereby the Company became a wholly owned consolidated subsidiary of New Pubco. FoA Equity.

The Business Combination will bewas accounted for using the acquisition method with New Pubcothe Company as the accounting acquirer. Under the acquisition method of accounting, the Company’s assets and liabilities will bewere recorded at carrying value, and the assets and liabilities associated with FoA will beEquity were recorded at estimated fair value as of the acquisition date.Closing Date. The excess of the purchase price over the estimated fair values of FoA’sthe net assets acquired if applicable, 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 pursuant to ASC Topic 810, Consolidation.model. If the acquiree is a variable interest entity, the primary beneficiary would be the accounting acquirer. FoA meetsEquity met the definition of a variable interest entity, and the New PubcoCompany was determined to be the primary beneficiary.

Additional disclosures

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.
2
1

Table of Contents
Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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):
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
2

Table of Contents
Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(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.
(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.
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

September 30,
   
For the nine months ended

September 30,
 
   
2021
   
2020
   
2021
   
2020
 
                 
Pro forma revenues
  $456,500   $600,540   $1,354,046   $1,240,824 
Pro forma net income
   50,797    188,723    161,614    193,622 
Pro forma net income attributable to controlling interest
   21,424    45,300    50,406    53,958 
Pro forma net income (loss) attributable to noncontrolling interest
   29,373    143,423    111,208    139,664 
Renovate America Inc.
On March 26, 2021, in order to expand its product base to home improvement loans, the Company acquired certain assets and operations of Renovate America, Inc. (“RAI”) (the “RAI Transaction”).
The RAI Transaction met the requirements to be considered a business combination under ASC 805. The assets purchased and liabilities assumed from the RAI Transaction have been recorded at fair market value and included in the Company’s consolidated financial statements from the date of the RAI Transaction. The Company has allocated the purchase price to the tangible and identifiable intangible assets based on their estimated fair market values at the date of the RAI Transaction as required under ASC 805. The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets was recorded as goodwill. The goodwill generated by the RAI Transaction is expected to be deductible for U.S. federal income tax purposes.
As a result of the RAI Transaction, for accounting purposes, FAM was deemed to be the accounting acquirer and RAI was deemed to be the accounting acquiree.
The RAI Transaction was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred was $43.5 
million, including cash and the relief of obligations owed to FAM by the debtor in possession of RAI. There
was 0 contingent consideration as part of the RAI Transaction.
2
3

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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 sets forth the provisional fair values of the assets acquired in connection with the RAI Transaction (in thousands): 
   
Acquisition Date
Fair Value
 
L
oans held for sale, at fair
value
(1)
  $35,226 
Intangible assets
   1,890 
Goodwill
   5,627 
Other assets, net
   753 
   
 
 
 
Net assets acquired
  $43,496 
   
 
 
 
(1)
These loans held for sale, at fair value are included as a component of mortgage loans held for sale, at fair value on the Consolidated Statements of Financial Condition.
Goodwill is comprised of expected future benefits for the Company and the assembled workforce acquired in the RAI Transaction, which do not qualify as separately recognized intangible assets. Goodwill associated with the RAI Transaction is assigned to the Company’s Mortgage Originations reportable segment, which represents the Company’s reporting unit that is expected to benefit from the assembled workforce acquired in the RAI Transaction.
Below is a summary of the identifiable intangible asset acquired in the RAI Transaction:
   
Provisional Fair
Value

(in thousands)
   
Provisional Useful
Life

(in years)
 
Technology
  $1,890    5 
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.
Following is a description of the three levels:
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 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 for the three months ended September 30, 2021, the Successor period from April 1, 2021 to September 30, 2021 or for the Predecessor period from January 1, 2021 to March 31, 2021. There were no transfers for the Predecessor three months ended and nine months ended September 30, 2020.
2
4

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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 HMBS are not actively traded in open markets with readily observable market prices.
The Company values HECM loans securitized into Ginnie Mae HMBS utilizing a present value methodology that discounts estimated projected cash flows over the life of the loan portfolio using prepayment, borrower mortality, borrower draw and discounts 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.
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 ASC 805, Business Combinationsmarket 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.
2
5

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 reverse mortgage loans held for investment, subject to HMBS related obligations, for the periods indicated:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
                
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
Conditional repayment rate
  
 
NM
 
  
 
20.8
  NM    20.0
Loss frequency
  
 
NM
 
  
 
4.8
  NM    4.4
Loss severity
  
 
4.1% - 11.8%
 
  
 
4.4
  5.1% - 13.3%    5.4
Discount rate
  
 
NM
 
  
 
2.2
  NM    1.6
Average draw rate
  
 
NM
 
  
 
1.1
  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.
Mortgage Loans Held for Investment, Subject to Nonrecourse Debt, at Fair Value
Reverse Mortgage Loans
Reverse mortgage loans held for investment, subject to nonrecourse debt, include HECM loans previously purchased out of 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 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.
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:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
                
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
Conditional repayment rate
  
 
NM
 
  
 
41.2
  NM    42.9
Loss frequency
  
 
25.0% - 100.0%
 
  
 
59.9
  25.0% - 100.0%    54.8
Loss severity
  
 
4.1% - 11.8%
 
  
 
6.1
  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.
2
6

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 performing securitized HECM buyouts for the periods indicated:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
                
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
Weighted average remaining life (in years)
  
 
NM
 
  
 
9.3
   NM    8.5 
Conditional repayment rate
  
 
NM
 
  
 
12.8
  NM    14.7
Loss severity
  
 
4.1% - 11.8%
 
  
 
8.6
  5.1% - 13.3%    7.7
Discount rate
  
 
NM
 
  
 
3.6
  NM    3.5
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.
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:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
                
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
Weighted-average remaining life (in years)
  
 
NM
 
  
 
7.2
   NM    6.9 
Loan to value
  
 
0.1% - 63.1%
 
  
 
42.9
  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
  
 
3.4% - 9.6%
 
  
 
4.7
  1.1% - 8.9%    5.6
Discount rate
  
 
NM
 
  
 
3.4
  NM    3.6
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.
Commercial Mortgage Loans
Fix & Flip - Securitized
The securitized Fix & Flip loans are short-term loans for individual real estate investors, with terms ranging from
9-24
months. This product is valued using a discounted cash flow model. The Company classifies these mortgage loans as Level 3 assets within the GAAP hierarchy.
2
7

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
The Company utilized the following weighted average assumptions in estimating the fair value of securitized Fix & Flip mortgage loans for the periods indicated:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
                
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
Prepayment rate (SMM)
  
 
NM
 
  
 
14.3
  NM    17.1
Discount rate
  
 
NM
 
  
 
5.2
  6.7% - 10.0%    6.7
Loss frequency
  
 
0.3% - 74.3%
 
  
 
0.5
  0.2% - 44.0%    0.6
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.
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 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 Ginnie Mae HMBS. The fair value of nonperforming unsecuritized tails is based on expected claim proceeds from the Department of Housing and Urban Development (“HUD”) upon assignment of the loans.
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.
28

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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.
The following table presents the weighted average significant unobservable inputs used in the fair value measurement of Inventory Buyouts classified as reverse mortgage loans held for investment for the periods indicated:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
                
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
Conditional repayment rate
  
 
NM
 
  
 
44.0
  NM    44.0
Loss frequency
  
 
NM
 
  
 
59.1
  NM    46.9
Loss severity
   NM   
 
5.5
  NM    10.5
Discount rate
  
 
NM
 
  
 
3.6
  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.
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:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
                
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
Weighted average remaining life (in years)
  
 
NM
 
  
 
7.8
   NM    8.0 
Loan to value
  
 
7.4% - 68.3%
 
  
 
47.9
  0.1% - 62.1%    44.0
Conditional repayment rate
  
 
NM
 
  
 
16.5
  NM    16.8
Loss severity
  
 
NM
 
  
 
10.0
  NM    10.0
Home price appreciation
  
 
3.4% - 9.6%
 
  
 
4.7
  1.1% - 8.9%    5.5
Discount rate
  
 
NM
 
  
 
3.4
  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 - 24 months. This product is valued using a discounted cash flow model. The Company classifies these mortgage loans as Level 3 assets within the GAAP hierarchy.
29

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
The Company utilized the following weighted average assumptions in estimating the fair value of Fix & Flip mortgage loans for the periods indicated:
September 30, 2021
Successor
Inputs
Range
Weighted Average
Prepayment rate (SMM)
NM
12.2
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.
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—17 months. The product is valued using a discounted cash flow 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:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
                
Discount rate
  
 
NM
 
  
 
4.8
  NM    6.4
Prepayment rate (SMM)
  
 
9.2% - 100.0%
 
  
 
26.2
  0% - 1.0%    0.7
Default rate (CDR)
  
 
NM
 
  
 
0.9
  0% - 2.0%    0.4
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 Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”), and Government National Mortgage Association (“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
3
0

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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. 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 Company classified these valuations as Level 2 in the fair value disclosures. 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 as Level 3 in the fair value disclosures.
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.
SRL
The SRL product is designed for small/individual real estate investors looking to purchase and then 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 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:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
                
Prepayment rate (CPR)
  
 
1.0% - 17.1%
 
  
 
14.0
  1.0% - 17.1%    15.4
Discount rate
  
 
NM
 
  
 
3.1
  NM    5.0
Default rate (CDR)
  
 
1.0% - 54.0%
 
  
 
2.4
  1.0% - 64.9%    3.6
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 respect5 and
10-year
balloon structures, as well as a
30-year
structure. This product is valued using a discounted cash flow model. The Company classifies these mortgage loans as Level 3 assets within the GAAP hierarchy.
3
1

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
                
Prepayment rate (CPR)
  
 
0% - 14.8%
 
  
 
5.9
  0% - 15.0%    9.3
Discount rate
  
 
NM
 
  
 
3.8
  NM    4.9
Default rate (CDR)
  
 
1.0% - 45.4%
 
  
 
2.9
  1.0% - 42.7%    2.0
Fix & Flip
The Fix & Flip loans are short-term loans for individual real estate investors, with terms ranging from
9-24
months. This product is valued using a discounted cash flow 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:
December 31, 2020
Predecessor
Inputs
Range
Weighted Average
Prepayment rate (SMM)
NM12.4
Discount rate
6.7% - 10.0%7.2
Loss frequency
NM0.8
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.
Mortgage Servicing Rights (FAM)
As of September 30, 2021 (Successor) and December 31, 2020 (Predecessor), the Company valued mortgage servicing rights 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 since they are dependent on unobservable inputs.
Fair value is derived through a discounted cash flow 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 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.
3
2

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
The following tables summarize certain information regarding the servicing portfolio of retained MSRs for the periods indicated:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
        
Capitalization servicing rate
  
 
1.0
  0.8
Capitalization servicing multiple
  
 
4.0
 
  3.2 
Weighted average servicing fee (in basis points)
  
 
25
 
  25 
The significant assumptions used in estimating the fair value of MSRs were as follows (in annual rates):
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
                
Weighted average prepayment speed (CPR)
  
 
7.0% - 18.3%
 
  
 
9.5
  6.6% - 24.9%    12.1
Discount rate
  
 
NM
 
  
 
9.7
  NM    12.1
Weighted average delinquency rate
  
 
1.2% - 8.9%
 
  
 
1.2
  1.2% - 9.2%    1.3
The following table summarizes the estimated change in the fair value of MSRs from adverse changes in the significant assumptions (in thousands):
   
September 30, 2021
 
   
Successor
 
   
Weighted Average
Prepayment
Speed
   
Discount
Rate
   
Weighted Average
Delinquency Rate
 
             
Impact on fair value of 10% adverse change
  
$
(12,591
  
$
(12,721
  
$
(393
Impact on fair value of 20% adverse change  
 
(24,163
  
 
(24,393
  
 
(643
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 acquisitionfair 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 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 omittedsold 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; therefore, these contracts are classified as Level 1. In addition, the Company enters into 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
3
3

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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 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.
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.
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 repayment rate curve considers borrower age and gender is based on historical termination 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:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
                
Conditional repayment rate
  
 
NM
 
  
 
20.9
  NM    19.9
Discount rate
  
 
NM
 
  
 
2.1
  NM    1.4
3
4

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Nonrecourse Debt
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 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 repayment rate curve considers borrower age and gender based on historical termination 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 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 used in the fair value measurements of nonrecourse debt for the periods indicated:
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
Performing/Nonperforming
HECM securitizations
         
 
         
Weighted average remaining life (in years)
  
 
0.4
 - 
1.0
 
  
 
0.7
   
0.2
 
-
 1.5
    1.0 
Conditional repayment rate
  
 
24.7% - 28.4%
 
  
 
26.4
  34.3% - 56.3%    42.8
Discount rate
  
 
NM
 
  
 
2.1
  NM    3.1
Securitized
Non-Agency
Reverse
                   
Weighted average remaining life (in years)
  
 
1.1 - 2.4
 
  
 
1.7
   0.3 - 2.7    2.1 
Conditional repayment rate
  
 
18.2% - 36.3%
 
  
 
27.0
  19.6% - 35.8%    23.9
Discount rate
  
 
NM
 
  
 
1.7
  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 used in the fair value measurements of nonrecourse debt for the periods indicated:
3
5

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
Weighted average remaining life (in months)
  
 
NM
 
  
 
4.0
 
  1.9 - 4.1    3.4 
Weighted average prepayment speed (SMM)
  
 
NM
 
  
 
14.0
  17.7% - 32.0%    21.4
Discount rate
  
 
NM
 
  
 
2.6
  NM    5.8
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. As of September 30, 2021 (Successor) and December 31, 2020 (Predecessor), the Company utilized discount rates ranging from 12% to 30% to value the deferred purchase price liabilities. The liabilities as of September 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.
TRA Obligation
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 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 and an assumed weighted-average state and local income tax rate, and a 12% discount rate 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 to certain third parties the right to receive all excess servicing and ancillary fees related to identified mortgage servicing rights in exchange for an upfront payment equal to the entire purchase price of the identified mortgage servicing rights.
The Company has elected to account for the servicing liability using the fair value option. Consistent with the underlying mortgage servicing rights, fair value is derived through a discounted cash flow 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.
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.
The Company classifies the valuations of the nonrecourse MSR financing liability as Level 3 in the fair value disclosures.
The significant assumptions used in estimating the fair value of the outstanding nonrecourse MSR financing liability were as follows (in annual rates):
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
Inputs
  
Range
   
Weighted Average
  
Range
   
Weighted Average
 
Weighted average prepayment speed (CPR)
  
 
7.7% - 10.2%
 
  
 
8.7
  6.9% - 12.7%    11.6
Discount rate
  
 
10.1% - 10.4%
 
  
 
10.3
  11.7% - 12.0%    12.0
Weighted average delinquency rate
  
 
NM
 
  
 
1.0
  NM    1.8
3
6

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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):
   
September 30, 2021
 
   
Successor
 
   
Weighted Average
Prepayment Speed
   
Discount
Rate
   
Weighted Average
Delinquency Rate
 
Impact on fair value of 10% adverse change
  
$
(2,249
  
$
(3,329
  
$
(93
Impact on fair value of 20% adverse change  
 
(5,023
  
 
(7,062
  
 
(152
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 information needed forrelationship of the disclosureschange 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 not currently availablecalculated 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.
Retained Bonds
The retained bonds represents the U.S. Risk Retention Certificates, a 5% eligible vertical interest in the Company’s unconsolidated VIEs, HAWT 2021-INV1 and HAWT 2021-INV2. The beneficial interests retained consisted of an interest in each class of securities issued by the Trust. Because of the nature of the valuation inputs and due to the close proximitylack of closingobservable market prices or data the Company classifies retained bonds as Level 3 assets within the GAAP hierarchy. Quarterly, management obtains third party valuations to assess the reasonableness of this transaction with the date these financial statements are being issued.


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been amended and restated to give effect tofair value calculations provided by the restatement of Replay’s financial statements, as more fully described in Note 8 tointernal valuation model. The following table presents the financial statements entitled “Restatement of Previously Issued Financial Statements”. For further detail regarding the restatement, see “Explanatory Note” and Part I, Item 4. “Controls and Procedures.”

Asweighted average significant unobservable inputs used in this Part I. Item 2. Management’s Discussion and Analysisthe fair value measurement of Financial Condition and Results of Operations, “we” and “our” shall mean Replay or Replay’s management, asretained bonds for the context may require, if relating to a statement made prior toperiod indicated:

September 30, 2021
Successor
Inputs
Range
Weighted Average
Weighted average remaining life (in years)
2.6 - 25.2
5.1
Discount rate
1.5% - 8.3
%
2.5
%
Warrants
The Company has determined that the warrants acquired with the Business Combination or and shall mean the Company (as successor registrant to Replay) or the Company’s management, as the context may require, if relating to a statement made after the consummation of the Business Combination. References to the “Sponsor” shall mean Replay Sponsor, LLC. The following discussion should be read in conjunction with our unaudited financial statements and related notes thereto included elsewhere in this Report.

Cautionary Note Regarding Forward-Looking Statements

This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of historical fact included in this Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, including the impact of the recent coronavirus (COVID-19) pandemic on our search for a Business Combination (as defined below), are forward-looking statements. These forward-looking statements are subject to knowntreatment as a liability. The warrants issued are exercisable for shares of Class A Common Stock of FoA at an exercise price of $11.50 per share. The warrants are publicly traded and unknown risks, uncertaintiesare valued based on the closing market price of the applicable date of the Consolidated Statements of Financial Condition. Accordingly, the warrants are classified as Level 1 financial instruments.

3
7

Finance of America Companies Inc. and assumptions about usSubsidiaries
Notes to Unaudited Consolidated Financial Statements
Fair Value of Assets and Liabilities
The following table provides a summary of the recognized assets and liabilities that may cause our actual results, levelsare measured at fair value on a recurring basis (in thousands):
   
September 30, 2021
 
   
Successor
 
   
Total Fair
Value
   
Level 1
   
Level 2
   
Level 3
 
Assets
                    
Reverse mortgage loans held for investment, subject to HMBS related obligations
  
$
10,347,459
   
$
0  
 
  
$
0  
 
  
$
10,347,459
 
Mortgage loans held for investment, subject to nonrecourse debt:
                    
Reverse mortgage loans
  
 
5,665,424
   
 
0  
 
  
 
0  
 
  
 
5,665,424
 
Fix & flip mortgage loans
  
 
274,227
   
 
0  
 
  
 
0  
 
  
 
274,227
 
Mortgage loans held for investment:
                    
Reverse mortgage loans
  
 
842,268
   
 
0  
 
  
 
0  
 
  
 
842,268
 
Fix & flip mortgage loans
  
 
48,076
   
 
0  
 
  
 
0  
 
  
 
48,076
 
Agricultural loans
  
 
187,326
   
 
0  
 
  
 
0  
 
  
 
187,326
 
Mortgage loans held for sale:
                    
Residential mortgage loans
  
 
1,904,109
   
 
0  
 
  
 
1,888,208
   
 
15,901
 
SRL
  
 
96,665
   
 
0  
 
  
 
0  
 
  
 
96,665
 
Portfolio
  
 
46,241
   
 
0  
 
  
 
0  
 
  
 
46,241
 
Mortgage servicing rights
  
 
340,949
   
 
0  
 
  
 
0  
 
  
 
340,949
 
Derivative assets:
                    
Forward commitments, TBAs, and Treasury Futures
  
 
974
   
 
44
   
 
930
   
 
0  
 
IRLCs
  
 
29,175
   
 
0  
 
  
 
0  
 
  
 
29,175
 
Forward MBS
  
 
12,237
   
 
0  
 
  
 
12,237
   
 
0  
 
Interest rate swap futures
  
 
12,607
   
 
12,607
   
 
0  
 
  
 
0  
 
Other assets:
                    
Investments
  
 
6,000
   
 
0  
 
  
 
0  
 
  
 
6,000
 
Retained bonds
  
 
41,250
   
 
0  
 
  
 
0  
 
  
 
41,250
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total assets
  
$
19,854,987
   
$
12,651
   
$
1,901,375
   
$
17,940,961
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Liabilities
                    
HMBS related obligation
  
$
10,216,310
   
$
0  
 
  
$
0  
 
  
$
10,216,310
 
Nonrecourse debt:
                    
Nonrecourse debt in VIE trusts
  
 
5,735,010
   
 
0  
 
  
 
0  
 
  
 
5,735,010
 
Nonrecourse MSR financing liability
  
 
96,073
   
 
0  
 
  
 
0  
 
  
 
96,073
 
Deferred purchase price liabilities:
                    
Deferred purchase price liabilities
  
 
12,175
   
 
0  
 
  
 
0  
 
  
 
12,175
 
TRA obligation
  
 
35,142
   
 
0  
 
  
 
0
   
 
35,142
 
Derivative liabilities:
                    
Forward MBS
  
 
1,061
   
 
0  
 
  
 
1,061
   
 
0  
 
Forward commitments, TBAs, and Treasury Futures
  
 
105
   
 
44
   
 
61
   
 
0  
 
Interest rate swap futures
  
 
10,617
   
 
10,617
   
 
0  
 
  
 
0  
 
Warrants
  
 
9,342
   
 
9,342
   
 
0  
 
  
 
0  
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities
  
$
16,115,835
   
$
20,003
   
$
1,122
   
$
16,094,710
 
   
 
 
   
 
 
   
 
 
   
 
 
 
38

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
   
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 
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    —   
Other assets:
                    
Investments
   18,934    —      —      18,934 
   
 
 
   
 
 
   
 
 
   
 
 
 
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
   18,635    —      18,635    —   
Forward commitments and TBAs
   1,332    —      248    1,084 
Interest rate swaps and interest rate swap futures
   755    186    569    —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities
  $15,085,074   $186   $19,452   $15,065,436 
   
 
 
   
 
 
   
 
 
   
 
 
 
39

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3, in thousands):
   
Successor
 
   
Assets
 
September 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
  
$
0—  
  
$
9,470
 
Total gain or losses included in earnings
  
 
143,362
  
 
120,763
  
 
2,202
  
 
(8,264
 
 
(28,567
 
 
1,505
  
 
(3,470
Purchases, settlements and transfers:
                             
Purchases and additions, net
  
 
2,831,336
  
 
49,898
  
 
541,088
  
 
—  
 
 
 
104,653
  
 
39,840
  
 
—  
 
Sales and settlements
  
 
(1,354,871
 
 
(888,318
 
 
(526,014
 
 
(1,135
 
 
(2,501
 
 
(095
 
 
—  
 
Transfers in/(out) between categories
  
 
(1,366,434
) 
 
1,365,864
  
 
5,850
  
 
—  
 
 
 
—  
 
 
 
0—  
 
 
 
—  
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance, September 30, 2021
  
$
11,425,129
  
$
5,939,651
  
$
158,807
  
$
29,175
  
$
340,949
  
$
041,250
  
$
6,000
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   
Successor
 
   
Liabilities
 
September 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
 
$
0—  
 
Total gains or losses included in earnings
  
 
76,397
  
 
98
  
 
(1,997
 
 
(77,717
 
 
3,411
  
 
(1,896
Purchases, settlements and transfers:
                         
Purchases and additions, net
  
 
(1,587,902
 
 
—  
 
 
 
(7,275
 
 
(1,260,585
 
 
(77,433
 
 
(33,246
Settlements
  
 
1,221,327
  
 
838
  
 
311
  
 
809,184
  
 
—  
 
 
 
0—  
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance, September 30, 2021
  
$
(10,216,310
 
$
0  
  
$
(12,175
 
$
(5,735,010
 
$
(96,073
 
$
(035,142
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   
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 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
4
0

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
   
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
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
4
1

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Fair Value Option
Presented in the tables below are the fair value and unpaid principal balance (“UPB”) at September 30, 2021 (Successor) and December 31, 2020 (Predecessor), of assets and liabilities for which the Company has elected the fair value option (in thousands):
Successor:
        
September 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
  
$
10,347,459
   
$
9,617,079
 
Mortgage loans held for investment, subject to nonrecourse debt:
          
Reverse mortgage loans
  
 
5,665,424
   
 
4,986,876
 
Commercial mortgage loans
  
 
274,227
   
 
268,288
 
Mortgage loans held for investment:
          
Reverse mortgage loans
  
 
842,268
   
 
721,012
 
Commercial mortgage loans
  
 
235,402
   
 
233,101
 
Mortgage loans held for sale:
          
Residential mortgage loans
  
 
1,904,109
   
 
1,859,842
 
Commercial mortgage loans
  
 
142,906
   
 
138,101
 
Liabilities at fair value under the fair value option
          
HMBS related obligations
  
 
10,216,310
   
 
9,617,079
 
Nonrecourse debt:
          
Nonrecourse debt in VIE trusts
  
 
5,735,010
   
 
5,654,826
 
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 
4
2

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Net Fair Value Gains on Mortgage Loans and 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):
   
For the three
months ended
September 30,
2021
  
April 1, 2021

to
September 30,
2021
  
January 1,
 

2021

to

March 31,
2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Net fair value gains on mortgage loans and related obligations:
                     
Interest income on mortgage loans
  
$
160,683
  
$
334,623
  $160,568  $150,276  $492,066 
Change in fair value of mortgage loans
  
 
(119,690
 
 
(34,707
  (51,346  160,480   302,541 
Change in fair value of mortgage-backed securities
  
 
—  
 
 
 
—  
 
  —     1,621   2,438 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net fair value gains on mortgage loans
  
 
40,993
  
 
299,916
   109,222   312,377   797,045 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Interest expense on related obligations
  
 
(107,593
 
 
(221,067
  (119,201  (121,777  (383,622
Change in fair value of derivatives
  
 
6,841
  
 
(39,637
  43,972   149   (5,594
Change in fair value of related obligations
  
 
182,268
  
 
214,448
   42,670   (94,794  (186,191
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net fair value gains (losses) on related obligations
  
 
81,516
  
 
(46,256
  (32,559  (216,422  (575,407
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net fair value gains on mortgage loans and related obligations
  
$
122,509
  
$
253,660
  $76,663  $95,955  $221,638 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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 September 30, 2021 (Successor) and December 31, 2020 (Predecessor), all financial instruments were either recorded at fair value or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminologythe carrying value approximated fair value. For financial instruments that were not recorded at fair value, such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” orcash and cash equivalents including restricted cash, servicer advances and other financing lines of credit, the negativecarrying value approximates fair value due to the short-term nature of such termsinstruments.
4
3

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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):
   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
Reverse mortgage loans:
          
Reverse mortgage loans held for investment, subject to HMBS related obligations
  
$
9,617,079
   $9,045,104 
Reverse mortgage loans held for investment:
          
Non-agency
reverse mortgages
  
 
346,705
    215,688 
Loans not securitized
(1)
  
 
270,273
    168,292 
Unpoolable loans
(2)
  
 
93,459
    197,395 
Unpoolable tails
  
 
10,575
    8,054 
   
 
 
   
 
 
 
Total reverse mortgage loans held for investment
  
 
721,012
    589,429 
Reverse mortgage loans held for investment, subject to nonrecourse debt:
          
Performing HECM buyouts
  
 
276,351
    141,691 
Nonperforming HECM buyouts
  
 
614,824
    538,768 
Non-agency
reverse mortgages
  
 
4,095,701
    3,777,346 
   
 
 
   
 
 
 
Total reverse mortgage loans held for investment, subject to nonrecourse debt
  
 
4,986,876
    4,457,805 
   
 
 
   
 
 
 
Total owned reverse mortgage portfolio
  
 
15,324,967
    14,092,338 
Loans reclassified as government guaranteed receivable
  
 
44,333
    49,255 
Loans serviced for others
  
 
18,281
    123,324 
   
 
 
   
 
 
 
Total serviced reverse mortgage loan portfolio
  
$
15,387,581
   $14,264,917 
   
 
 
   
 
 
 
(1)
Loans not securitized represent primarily newly originated loans.
(2)
Unpoolable loans represent primarily loans that have reached 98% of their MCA.
The table below summarizes the owned reverse mortgage portfolio by product type (in thousands):
   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
Fixed rate loans
  
$
5,266,718
   $5,010,659 
Adjustable rate loans
  
 
10,058,249
    9,081,679 
   
 
 
��  
 
 
 
Total owned reverse mortgage portfolio
  
$
15,324,967
   $14,092,338 
   
 
 
   
 
 
 
4
4

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
7.
Reverse Mortgage Loans Held for Investment, Subject to HMBS Related Obligations, at Fair Value
Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value, consisted of the following for the dates indicated (in thousands):
   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
Reverse mortgage loans held for investment, subject to HMBS related obligations - UPB
  
$
9,617,079
   $9,045,104 
Fair value adjustments
   
730,380
    884,059 
   
 
 
   
 
 
 
Total reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value
  
$
10,347,459
   $9,929,163 
   
 
 
   
 
 
 
8.
Mortgage Loans Held for Investment, Subject to Nonrecourse Debt, at Fair Value
Mortgage loans held for investment, subject to nonrecourse debt, at fair value, consisted of the following for the dates indicated (in thousands):
   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
Mortgage loans held for investment, subject to nonrecourse debt - UPB:
          
Reverse mortgage loans
  
$
4,986,876
   $4,457,805 
Commercial mortgage loans
   
268,288
    333,344 
Fair value adjustments
   
684,487
    605,018 
   
 
 
   
 
 
 
Total mortgage loans held for investment, subject to nonrecourse debt, at fair value
  
$
5,939,651
   $5,396,167 
   
 
 
   
 
 
 
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):
   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
Loans 90 days or more past due and on
non-accrual
status
          
Fair value:
          
Commercial mortgage loans
  
$
30,720
   $32,377 
   
 
 
   
 
 
 
Total fair value
  
 
30,720
    32,377 
   
 
 
   
 
 
 
Aggregate UPB:
          
Commercial mortgage loans
   
30,871
    33,888 
Total aggregate UPB
  
 
30,871
    33,888 
   
 
 
   
 
 
 
Difference
  
$
(151
  $(1,511
   
 
 
   
 
 
 
4
5

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
9.
Mortgage Loans Held for Investment, at Fair Value
Mortgage loans held for investment, at fair value, consisted of the following for the dates indicated (in thousands):
   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
Mortgage loans held for investment - UPB:
          
Reverse mortgage loans
  
$
721,012
   $589,429 
Commercial mortgage loans
  
 
233,101
    69,127 
Fair value adjustments
   
123,557
    72,265 
   
 
 
   
 
 
 
Total mortgage loans held for investment, at fair value
  
$
1,077,670
   $730,821 
   
 
 
   
 
 
 
10.
Mortgage Loans Held for Sale, at Fair Value
Mortgage loans held for sale, at fair value, consisted of the following for the dates indicated (in thousands):
   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
Mortgage loans held for sale - UPB:
          
Residential mortgage loans
  
$
1,859,842
   $2,000,795 
Commercial mortgage loans
  
 
138,101
    140,693 
Fair value adjustments
   
49,072
    81,323 
   
 
 
   
 
 
 
Total mortgage loans held for sale, at fair value
  
$
2,047,015
   $2,222,811 
   
 
 
   
 
 
 
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):
   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
Loans 90 days or more past due and on
non-accrual
status
          
Fair value:
          
Residential mortgage loans
  
$
3,256
   $10,628 
Commercial mortgage loans
   
2,952
    5,051 
   
 
 
   
 
 
 
Total fair value
   
6,208
    15,679 
   
 
 
   
 
 
 
Aggregate UPB:
          
Residential mortgage loans
  
 
3,905
    13,236 
Commercial mortgage loans
   
3,141
    5,317 
   
 
 
   
 
 
 
Total aggregate UPB
  
 
7,046
    18,553 
   
 
 
   
 
 
 
Difference
  
$
(838
  $(2,874
   
 
 
   
 
 
 
The Company originates or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those describedpurchases and sells mortgage loans in Part II, Item 1A of this Report and in other filingsthe secondary mortgage market without recourse for credit losses. However, the Company at times maintains continuing involvement with the U.S. Securitiesloans in the form of servicing arrangements and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K/A filed with the SEC on May 17, 2021. The Company’s securities filings can be accessed on the EDGAR sectionliability under representations and warranties it makes to purchasers and insurers of the SEC’s website at www.sec.gov.

Overview

We are a blank check company incorporated as a Cayman Islands exempted company on November loans.

4
6 2018

Finance of America Companies Inc. and formed forSubsidiaries
Notes to Unaudited Consolidated Financial Statements
The following table summarizes cash flows between the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (“Business Combination”). Although we are not limited to a particular business, industry or geographical location for purposes of consummating a Business Combination, we have initially focused our search for a target in Argentina and/or Brazil focused on industries that we believe have favorable prospectsCompany and a high likelihood of generating strong risk-adjusted returns for our shareholders. These industries include, but are not limited to, the consumer, telecommunications and technology, energy, financial services and real estate sectors.

The registration statement for our initial public offering (“Initial Public Offering”) was declared effective on April 3, 2019. On April 8, 2019, we consummated our Initial Public Offering of 28,750,000 units (“Units”) at an offering price of $10.00 per Unit, including the issuance of 3,750,000 Unitstransferees as a result of the underwriters’ full exercisesale of mortgage loans in transactions where the Company maintains continuing involvement with the mortgage loans (in thousands):

   
For the three
months ended
September 30,
2021
  
April 1, 2021
to
September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Cash flows:
                     
Sales proceeds
  
$
5,529,393
  
$
10,710,950
  $6,387,933  $2,464,412  $5,333,372 
Fair value of retained beneficial interest
(1)
  
 
51,747
  
 
101,055
   66,400   53,401   98,256 
Gross servicing fees received
  
 
14,878
  
 
29,156
   13,877   5,677   7,501 
Repurchases
  
 
(5,320
 
 
(12,138
  (4,144  (10,169  (18,716
Gain
  
 
200,758
  
 
397,887
   284,948   369,473   661,144 
(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.
Mortgage Servicing Rights, at Fair Value
The servicing portfolio associated with capitalized servicing rights consists of the following (in thousands):
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
Fannie Mae/Freddie Mac  
$
33,034,877
  $20,501,504 
Ginnie Mae  
 
235,279
   1,727,831 
Private investors  
 
820,959
   40,027 
   
 
 
  
 
 
 
Total UPB
  
$
34,091,115
  $22,269,362 
   
 
 
  
 
 
 
Weighted average interest rate
  
 
3.0
  3.1
The activity in the loan servicing portfolio associated with capitalized servicing rights consisted of the following (in thousands):
   
For the three
months ended
September 30,
2021
  
April 1, 2021
to
September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Beginning UPB  
$
30,592,187
  
$
26,675,358
  $22,269,362  $7,211,843  $288,057 
Originated MSR  
 
5,380,307
  
 
10,520,166
   6,312,227   7,308,891   14,295,128 
Purchased MSR  
 
228,470
  
 
234,007
   866,806   —     —   
Payoffs, sales and curtailments
  
 
(2,109,849
 
 
(3,338,416
  (2,773,037  (243,225  (305,676
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending UPB
  
$
34,091,115
  
$
34,091,115
  $26,675,358  $14,277,509  $14,277,509 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
4
7

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
The activity in the mortgage servicing rights asset consisted of the following (in thousands):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to
September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Beginning balance
  
$
290,938
  
$
267,364
  $180,684  $42,684  $2,600 
Originations
  
 
52,252
  
 
102,301
   65,964   53,401   98,256 
Purchases
  
 
2,291
  
 
2,352
   9,014   
 
 
   
 
 
 
Sales
  
 
(2,501
 
 
(2,501
  (8,647  
 
 
   
 
 
 
Changes in fair value due to:
                     
Changes in market inputs or assumptions used in valuation model
  
 
13,165
  
 
(2,886
  35,109   8,170   4,746 
Changes in fair value due to portfolio runoff and other
  
 
(15,196
 
 
(25,681
  (14,760  (3,716  (5,063
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance
  
$
340,949
  
$
340,949
  $267,364  $100,539  $100,539 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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 $14.4 million for the Successor three months ended September 30, 2021, $28.1 million for the Successor period from April 1, 2021 to September 30, 2021, and $13.0 million for the Predecessor period from January 1, 2021 to March 31, 2021. Fees for the Predecessor were $5.8 million and $7.6 million for the three months ended and nine months ended September 30, 2020, respectively. These fees and changes in fair value of the MSRs are recorded within fee income on the Consolidated Statements of Operations.
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 of the portfolio:
   
September 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
12.
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 over-allotment option, generating gross proceedsimpact 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 $287,500,000. Each Unit consistscredit. Various financial instruments are used to manage and reduce this risk, including forward delivery commitments on mortgage-backed securities or whole loans and interest rate swaps.
48

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
The Company did not have any derivative instruments designated as hedging instruments or subject to master netting and collateral agreements as of September 30, 2021 (Successor) and December 31, 2020 (Predecessor), for the Successor three months ended September 30, 2021, the Successor period from April 1, 2021 to September 30, 2021, and the Predecessor period from January 1, 2021 to March 31, 2021. The Company also had no derivative instruments designated as hedging instruments or subject to master netting
a
nd collateral agreements for the
Predecessor for the three months ended and nine months ended September 30, 2020.
The following tables summarize
the fair value, notional amount, and unrealized gains (losses) of derivative instruments for the periods indicated (in thousands):
   
September 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
  
$
29,175
   
$
2,865,203
   
$
(58,401
 
$
0  
   
$
0  
   
$
0  
 
Forward commitments, TBAs securities and treasury futures
  
 
974
   
 
2,872,378
   
 
(832
 
 
105
   
 
2,880,000
   
 
1,227
 
Interest rate swaps and futures contracts
  
 
12,607
   
 
1,260,400
   
 
9,924
  
 
10,617
   
 
1,108,700
   
 
(9,862
Forward MBS
  
 
12,237
   
 
2,391,000
   
 
12,238
  
 
1,061
   
 
458,500
   
 
17,574
 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
   
 
 
 
Net fair value of derivative financial instruments
  
$
54,993
   
$
9,388,981
   
$
(37,071
 
$
11,783
   
$
4,447,200
   
$
8,939
 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
   
 
 
 
   
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 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 to the extent the relative value of its derivatives are above or below their initial strike price. The Company pledged deposits of $8.4 million and $12.0 million as of September 30, 2021 (Successor) and December 31, 2020 (Predecessor), respectively. Total margin collateral is included in other assets, net, in the Company’s Consolidated Statements of Financial Condition.
49

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements 
13.
Goodwill
Goodwill consisted of the following (in thousands):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to
September 30,
2021
   
January 1, 2021

to

March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
   
Successor
   
Predecessor
 
Beginning balance
  
$
1,298,324
   
$
—  
   $121,233   $121,754   $121,137 
Additions from
 
acquisitions
  
 
472
   
 
1,298,796
    7,517    0      617 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance
  
$
1,298,796
   
$
1,298,796
   $128,750   $121,754   $121,754 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
For the Successor period, additions include goodwill recognized from the Business Combination and additional acquisitions or adjustments to provisional amounts within the measurement period. Refer to Note 4 -
Acquisitions for additional details regarding these acquisitions. The Company did
0
t identify any impairment for the Successor three months ended September 
30
,
2021
, the Successor period from April 
1
,
2021
to September 
30
,
2021
, or the Predecessor period from January 
1
,
2021
to March 
31
,
2021
. There was also
0
impairment identified for the Predecessor periods for the three months ended and nine months ended September 
30
,
2020
. Goodwill is reviewed for impairment utilizing a qualitative assessment or a quantitative goodwill impairment test, and management determined that it was more likely than not that no impairment of goodwill existed as of September 
30
,
2021
.
Significant factors in the consideration of goodwill and intangible assets for impairment include expectations of future cash flows, market capitalization relative to book value, and expected growth rates. The declining share price of the Company’s stock has caused the market capitalization to fall below book value as of September 30, 2021. As a result of the decrease in share price, we performed an analysis to determine if a triggering event occurred that indicated it was more likely than not that the fair value of one or more of our reporting units was less than its carrying value. The analysis resulted in the determination that no triggering event occurred. Management considered the structural and timing factors, including de-SPAC trading activity following the Business Combination, comparatively low stock trading volume, and limited historical operating results that include only one quarter of results that were heavily impacted by nonrecurring merger-related transactions, have put downward pressure on the stock price of our publicly traded shares unrelated to the ongoing operations of the Company.
The Company will perform an annual goodwill impairment test as of October 1, 2021.
The amount of goodwill allocated to each reporting unit consisted of the following (in thousands):
   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
Reporting units:
          
Mortgage Originations
  
$
712,524
   $44,429 
Reverse Originations
  
 
405,445
    —   
Commercial Originations
  
 
75,768
    43,113 
Lender Services
  
 
102,250
    25,247 
Portfolio Management
  
 
2,809
    8,444 
   
 
 
   
 
 
 
Total goodwill
  
$
1,298,796
   
$
121,233
 
   
 
 
   
 
 
 
5
0

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements 
14.
Intangible Assets, Net
Intangible assets, net, consisted of the following (in thousands):
September 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
   
$
(26,474
  
$
504,426
 
Trade names
 and other
  
 
5 - 10
 
  
 
10,690
   
 
(440
  
 
10,250
 
        
 
 
   
 
 
   
 
 
 
Total amortizing intangibles
       
$
541,590
   
$
(26,914
  
$
514,676
 
        
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total intangibles
       
$
719,590
   
$
(26,914
  
$
692,676
 
        
 
 
   
 
 
   
 
 
 
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 three months ended September 30, 2021, $26.9 million, for the Successor period from April 1, 2021 to September 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 $1.9
million for the three months ended and nine months ended September 30, 2020, respectively.
5
1

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
The estimated amortization expense for each of the five succeeding fiscal years and thereafter as of September 30, 2021 (Successor) is as follows (in thousands):
Year Ending December 31,
  
Amount
 
2021
  $13,552 
2022
   54,206 
2023
   54,206 
2024
   54,206 
2025
   54,206 
Thereafter
   284,300 
   
 
 
 
Total future amortization expense
  $514,676 
   
 
 
 
15.
HMBS Related Obligations, at Fair Value
HMBS related obligations, at fair value, consisted of the following (in thousands):
   
September 30, 2021
  
December 31, 2020
 
   
Successor
  
Predecessor
 
Ginnie Mae loan pools - UPB
  
$
9,617,079
  $9,045,104 
Fair value adjustments
  
 
599,231
   743,564 
   
 
 
  
 
 
 
Total HMBS related obligations, at fair value
  
$
10,216,310
  $9,788,668 
   
 
 
  
 
 
 
   
Weighted average remaining life
  
 
4.4
   4.5 
Weighted average interest rate
  
 
2.5
  3.0
HMBS related obligations represent the issuance of pools of HMBS, which are guaranteed by Ginnie Mae, to 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 Consolidated Statements of Financial Condition as reverse mortgage loans held for investment, subject to HMBS related obligations, and recording the pooled HMBS as HMBS related obligations. Monthly cash flows generated from the HECM loans are used to service the outstanding HMBS.
The Company was servicing 1,810 and 1,693 Ginnie Mae loan pools at September 30, 2021 (Successor) and December 31, 2020 (Predecessor), respectively.
16.
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
   
September 30,
2021
   
December 31,
2020
 
                   
Successor
   
Predecessor
 
Securitization of nonperforming HECM loans
  February
2020 -
February
2021
  A, M1, M2,
M3, M4,
M5
  February
2030 -
February
2031
   0.88
9.00
% - 
 $1,539,531   
$
951,251
   $775,030 
Securitization of
non-agency
reverse loans
  May
2018 -
September
2021
  A, A1, A1A,
A1B, A2
  April
2023 -
November
2069
   1.25
4.50
% - 
  5,744,467   
 
4,435,064
    4,037,184 
Securitization of Fix & Flip loans
  September
2018 -
April
2021
  A1, A2,
A-VFN,
M
  May 2022
- May
2025
   2.10
8.00
% - 
  1,002,424   
 
268,511
    342,793 
   
 
  
 
  
 
  
 
 
  
 
 
   
 
 
   
 
 
 
5
2

Finance 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
   
September 30,
2021
   
December 31,
2020
 
                      
Successor
   
Predecessor
 
Total nonrecourse debt
                         
 
5,654,826
    5,155,007 
Nonrecourse MSR financing liability, at fair value
                         
 
96,073
    14,088 
Fair value adjustments
                         
 
80,184
    102,747 
                          
 
 
   
 
 
 
Total nonrecourse debt, at fair value
                         
$
5,831,083
   $5,271,842 
                          
 
 
   
 
 
 
17.
Other Financing Lines of Credit
The following summarizes the components of other financing lines of credit (dollars in thousands):
              
Outstanding Borrowings at
 
              
September 30,
2021
   
December 31,
2020
 
Maturity Date
  
Interest Rate
  
Collateral Pledged
   
Total
Capacity
(1)
   
Successor
   
Predecessor
 
Mortgage Lines:
       
 
  
October 2021 - June 2023
(2)
   LIBOR +
applicable margin
 
 
  First Lien
Mortgages
 
 
  $3,575,000   
$
1,783,544
   $1,997,464 
March 2026   LIBOR +
applicable margin
 
 
  MSRs    150,000   
 
117,736
    0   
December 2021 - November 2022   LIBOR +
applicable margin
 
 
  Mortgage Related
Assets
 
 
   87,106   
 
69,877
    0   
            
 
 
   
 
 
   
 
 
 
Subtotal mortgage lines of credit
 
      $3,812,106   
$
1,971,157
   $1,997,464 
            
 
 
   
 
 
   
 
 
 
Reverse Lines:
                        
October 2021 - August 2022
(2)
   LIBOR +
applicable margin
 
 
  First Lien
Mortgages
 
 
  $1,200,000   
$
620,418
   $477,637 
April 2022 - September 2023   
 
Bond accrual rate
+ applicable
margin
 
 
 
  Mortgage Related
Assets
 
 
   398,719   
 
278,924
    252,880 
February 2024   LIBOR +
applicable margin
 
 
  MSRs    90,000   
 
88,072
    0   
April 2022   Prime + .50%;
6% floor
 
 
  Unsecuritized
Tails
 
 
   50,000   
 
40,954
    37,442 
            
 
 
   
 
 
   
 
 
 
Subtotal reverse lines of credit
 
      $1,738,719   
$
1,028,368
   $767,959 
            
 
 
   
 
 
   
 
 
 
Commercial Lines:
                        
February 2022 - November 2023   LIBOR +
applicable margin
 
 
  First Lien
Mortgages
 
 
  $510,000   
$
149,787
   $128,134 
August 2022 - September 2022   LIBOR +
applicable margin
 
 
  
 
Encumbered
Agricultural
Loans
 
 
 
   225,000   
 
152,634
    52,300 
August 2022   10%   Second Lien
Mortgages
 
 
   25,000   
 
21,701
    21,475 
N/A   LIBOR +
applicable margin
 
 
  Mortgage Related
Assets
 
 
   1,509   
 
1,509
    6,411 
            
 
 
   
 
 
   
 
 
 
Subtotal commercial lines of credit
 
      $761,509   
$
325,631
   $208,320 
            
 
 
   
 
 
   
 
 
 
Total other financing lines of credit
 
      $6,312,334   
$
3,325,156
   $2,973,743 
            
 
 
   
 
 
   
 
 
 
5
3

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(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 September 30, 2021.
(2)
See Note 31 - Subsequent Events for additional information on f
a
cility amendments.
As of September 30, 2021 (Successor) and December 31, 2020 (Predecessor), the weighted average outstanding interest rates on outstanding debt of the Company were 3.06% and 3.15%, respectively.
The Company’s borrowing arrangements and credit facilities contain various financial covenants which primarily relate to required tangible net worth amounts, liquidity reserves, leverage requirements, and profitability requirements. As a result of market disruptions and fair value accounting adjustments taken in March 2020 resulting from the
COVID-19
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 second quarter 2021 lender adjusted tangible net worth quarterly requirement and the second and third quarter 2021
two-consecutive
quarter requirements by FNMA. The Company received a waiver for the covenant violations from FNMA. As of September 30, 2021 (Successor), the Company had obtained waivers for these covenant violations and was in compliance with all other 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 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.
5
4

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
As of September 30, 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
   
September 30, 2021
   
Maximum Allowable
Distribution
(1)
 
FAM
               
Adjusted Tangible Net Worth
  
$
150,000
   
$
200,718
   
$
50,718
 
Liquidity
  
 
40,000
   
 
67,053
   
$
27,053
 
Leverage Ratio
  
 
15:1
 
  
 
12.6:1
 
  
 
32,538
 
Material Decline in Lender Adjusted Net Worth:
               
Lender Adjusted Tangible Net Worth (Quarterly requirement)
  
$
143,538
   
$
200,719
   
$
57,181
 
Lender Adjusted Tangible Net Worth
(Two-Consecutive
Quarterly requirement)
  
 
235,832
   
 
200,719
   
$
(35,113
)
FACo
               
Adjusted Tangible Net Worth
  
$
85,000
   
$
101,942
   
$
16,942
 
Liquidity
  
 
20,000
   
 
37,294
   
$
17,294
 
Leverage Ratio
  
 
6:1
 
  
 
3.7:1
 
  
 
39,855
 
FAR
               
Adjusted Tangible Net Worth
  
$
450,000
   
$
501,822
   
$
51,822
 
Liquidity
  
 
20,000
   
 
33,480
   
$
 
13,480
 
Leverage Ratio
  
 
6:1
 
  
 
2.9:1
 
  
$
 
242,109
 
Material Decline in Lender Adjusted Net Worth:
               
Lender Adjusted Tangible Net Worth (Quarterly requirement)
  
$
336,035
   
$
476,133
   
$
140,098
 
Lender Adjusted Tangible Net Worth
(Two-Consecutive
Quarterly requirement)
  
 
235,832
   
 
476,133
   
$
 
240,301
 
(1)
The Maximum Allowable Distribution for any of the originations subsidiaries is the lowest of the amounts shown for the particular originations subsidiary.
5
5

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)
The Maximum Allowable Distribution for any of the originations subsidiaries is the lowest of the amounts shown for the particular originations subsidiary.
5
6

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
18.
Payables and Other Liabilities
Payables and other liabilities consisted of the following (in thousands):
   
September 30, 2021
   
December 31, 2020
 
   
Successor
   
Predecessor
 
Accrued compensation expense
  
$
150,821
   $150,214 
Accrued liabilities
  
 
135,747
    83,427 
Lease liabilities
  
 
61,846
    48,250 
Deferred purchase price liabilities
  
 
47,317
    3,842 
Ginnie Mae reverse mortgage
buy-out
payable
  
 
36,574
    32,317 
Deferred tax liability, net
  
 
27,213
    —   
Estimate of claim losses
  
 
14,015
    8,609 
Derivative liabilities
  
 
11,783
    20,722 
Warrant liability
  
 
9,342
    —   
Repurchase reserves
  
 
7,879
    10,529 
Liability for loans eligible for repurchase from Ginnie Mae
  
 
7,266
    42,148 
   
 
 
   
 
 
 
Total payables and other liabilities
  
$
509,803
   $400,058 
   
 
 
   
 
 
 
Warrants
Prior to the Business Combination, Replay issued 28,750,000 units, consisting of one ordinary share par value $0.0001and
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 September 30, 2021 (Successor), there were 14,375,000 Public Warrants outstanding.
The Warrants will expire April 1, 2026, five years after the completion of the Business Combination. The Company may call the Warrants 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 and one-halffor 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 oneredemption to the warrant each whole warrant entitlingholders; and
Each Warrant entitles the holder thereof to purchase one ordinary share at a price of $11.50 per share, subject to adjustment. An aggregateadjustment 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.
The Company has determined that the Warrants are subject to treatment as a liability. As of 2,500,000 Unitsthe Closing of the Business Combination on April 1, 2021 and as of September 30, 2021 (Successor), the Warrants had a fair value of $18.0 million and $9.3 million, respectively. These liability-classified Public Warrants are out of the money and thus have no impact on diluted EPS.
5
7

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
19.
Notes Payable, Net
A summary of the outstanding notes payable, net, is presented in the table below (in thousands):
Description
  
Maturity Date
   
Interest Rate
  
September 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)
 
   
 
3,567
    0  
Less: Debt issuance costs
 
 
 
0  
    (13,436
 
 
 
   
 
 
 
Total notes payable, net
 
 
$
353,567
   $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 $7.6 million for the Successor three months ended September 30, 2021, $15.1 million for the Successor period from April 1, 2021 to September 30, 2021, and $7.7 million for the Predecessor period from January 1, 2021 to March 31, 2021. Interest expense for the Predecessor was $0.0 million and $0.7 million for the three months ended and nine months ended September 30, 2020, respectively. The Company was in compliance with all required covenants related to the Notes as of September 30, 2021 (Successor).
20.
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 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 an accrued liability and record 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.
As of September 30, 2021 (Successor), there were purchasedno 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 in discovery. 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 presently be determined. 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. 
58

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Legal expenses, which includes, among other things, settlements and the fees paid to external legal service providers, were $3.9 million for the Successor three months ended September 30, 2021, $7.5 million for the Successor period from April 1, 2021 to September 30, 2021, and $4.2 million for the Predecessor period from January 1, 2021 to March 31, 2021. Legal expenses for the Predecessor were $5.0 million and $12.5 million for the three months ended and nine months ended September 30, 2020, respectively. These expenses are included in general and administrative expenses in the Consolidated Statements of Operations.
21.
Commitments and Contingencies
Servicing of Mortgage Loans
The Company has contracted with third party providers to perform specified servicing functions on its behalf. These services include maintaining borrower contact, facilitating borrower advances, generating borrower statements, 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 responsible for remitting payments to investors, including interest accrued, 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 Consolidated Statements of Operations.
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 fix & flip loan proceeds available), and fund the payment of the borrower’s obligation to pay FHA monthly insurance premiums.
The outstanding unfunded commitments available to borrowers related to HECM loans were approximately $2.5 billion as of September 30, 2021 (Successor), compared to $2.1 billion as of December 31, 2020 (Predecessor). The outstanding unfunded commitments available to borrowers related to fix & flip loans were approximately $10.2 million and $18.8 million as of September 30, 2021 (Successor) and December 31, 2020 (Predecessor), respectively. This additional borrowing capacity is primarily in the form of undrawn lines of credit.
The Company also has commitments to purchase and sell loans totaling $18.4 million and $153.6 million, respectively, at September 30, 2021 (Successor), compared to $10.2 million and $54.3 million, respectively, at December 31, 2020 (Predecessor).
Mandatory Repurchase Obligation
The Company is required to repurchase reverse loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of the 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 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. 
59

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 Ginnie Mae securitization pools without prior approval from Ginnie Mae in certain affiliatesinstances. These situations include the borrower requesting an additional advance that causes the outstanding principal balance to be equal to or greater than 98% of our Sponsorthe 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 our Initial Public Offering for gross proceeds of $25,000,000 (“Affiliate Units”).

Simultaneouslyaccordance with the consummationterms of our Initial Public Offeringthe loan.

For each HECM loan that the Company securitizes into Agency HMBS, the Company is required to covenant and warrant to 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 full over-allotment option, we consummatedGinnie Mae Mortgage-backed Securities Guide, and that the Company will take all actions necessary to ensure the HECM loan’s continued eligibility. The Ginnie Mae HMBS program requires that the Company removes the participation related to any HECM loan that does not meet the requirements of the Ginnie Mae Mortgage-backed Securities 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 private placementloan 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.
22.
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 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 vested on the Replacement RSU grant date, and the remaining 75% 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.
6
0

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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 “Private Placement”date when the foregoing is first satisfied, the “First Earnout Achievement Date”). The second tranche of 7,750,000 warrants (“Private Placement Warrants”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 for the periods indicated 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, July 1, 2021
   10,753,414   4,066,069   14,819,483  $9.48   $140,489 
Vested
   (154,788  154,788   —     —      —   
Forfeited
   (20,640     (20,640  9.48    (196
Settled
   —     (4,220,857  (4,220,857  9.48    (40,014
   
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Outstanding, September 30, 2021
   10,577,986   0     10,577,986  $9.48   $100,279 
   
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
            
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  $0     $0   
Granted
   14,819,483      14,819,483   9.48    140,489 
Vested
   (4,220,857)
 
 
 4,220,857   —     —      —   
Forfeited
   (20,640     (20,640  9.48    (196
Settled
   —     (4,220,857)
 
  (4,220,857)
 
  9.48    (40,014
   
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
Outstanding, September 30, 2021
   10,577,986   0   10,577,986  $9.48   $100,279 
   
 
 
  
 
 
  
 
 
  
 
 
   
 
 
 
No Replacement RSUs are scheduled to vest from October 1, 2021 to December 31, 2021. Equity based compensation expense for the Replacement RSUs totaled $9.6 million for the Successor three months ended September 30, 2021,
61

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
$
56.7
 million for the Successor period from April 1, 2021 to September 30, 2021 and $
0.0
 million for the Predecessor period from January 1, 2021 to March 31, 2021. Unrecognized equity based compensation expense
for the Replacement RSUs
totaled $
83.6
 million as of September 30, 2021. There were
0
Replacement RSUs outstanding as of December 31, 2020.
             
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, July 1, 2021
   1,550,880   0      1,550,880  $8.91   $13,811 
Forfeited
   (2,160  —      (2,160  8.91    (19
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Outstanding, September 30, 2021
   1,548,720   0      1,548,720  $8.91   $13,792 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
             
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  
 
 $
0  
 
  $
0  
 
Granted
   1,550,880   —      1,550,880   8.91    13,811 
Forfeited
   (2,160  —      (2,160  8.91    (19
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Outstanding, September 30, 2021
   1,548,720   
  
    1,548,720  
$
8.91   $13,792 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
No Earnout Right RSUs are scheduled to vest from October 1, 2021 to December 31, 2021. Equity based compensation expense for the Earnout Right RSUs totaled
$2.4 million for the Successor three months ended September 30, 2021, $4.6 million for the Successor period from April 1, 2021 to September 30, 2021, and $0.0 million for the Predecessor period from January 1, 2021 to March 31, 2021. Unrecognized equity based compensation expense
for the Earnout Right RSUs
totaled $9.2 million as of September 30, 2021. There were 0 Earnout Right RSUs outstanding as of December 31, 2020
.
Long-Term Incentive Plan
On January 1, 2015, the Company established a long-term incentive plan (the “Plan”) to our Sponsor atcompensate 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 $1.00 per Private Placement Warrant, generating total proceedsUFG common units.
In connection with the Closing of $7,750,000. Following our Initial Public Offering and the Private Placement, and after deducting offering expenses, $287,500,000 (including $9,187,500Business Combination, which occurred on April 1, 2021, the holders of deferred underwriting commissions) were placed in a trust account establishedPhantom 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 our public shareholders (the “Trust Account”).

If we are unablethe Company and not for ongoing services to complete an initialbe 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.

6
2

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
23.
General and Administrative Expenses
General and administrative expenses consisted of the following (in thousands):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to

September 30,
2021
      
January 1, 2021

to

March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
   
Successor
      
Predecessor
 
Title and closing
  
$
31,358
   
$
56,549
       $25,061   $15,835   $44,512 
Loan origination expenses
  
 
20,983
   
 
38,708
        20,503    19,771    54,344 
Depreciation and amortization
  
 
16,492
   
 
32,953
        3,484    3,367    10,324 
Loan portfolio expenses
  
 
15,297
   
 
30,730
        15,200    10,520    29,123 
Communications and data processing
  
 
14,670
   
 
27,238
        11,324    8,726    23,053 
Securitization expenses
  
 
13,237
   
 
24,068
        6,944    5,243    13,592 
Business development
  
 
10,492
   
 
20,139
        10,607    8,247    25,837 
Licensing and insurance
  
 
2,906
   
 
6,363
        2,487    1,411    4,677 
Fair value change in deferred purchase price liability
  
 
237
   
 
1,997
        30    0      0   
Other expenses
  
 
15,923
   
 
22,151
        31,577    40,684    68,122 
   
 
 
   
 
 
       
 
 
   
 
 
   
 
 
 
Total general and administrative expenses
  
$
141,595
   
$
260,896
       $127,217   $113,804   $273,584 
   
 
 
   
 
 
       
 
 
   
 
 
   
 
 
 
24.
Business Segment Reporting
The Company has identified six reportable segments: Mortgage Originations, Reverse Originations, Commercial Originations, Lender Services, Portfolio Management and Corporate/Other.
6
3

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 September 30, 2021
 
   
Successor
 
   
Mortgage
Originations
   
Reverse
Originations
   
Commercial
Originations
   
Lender
Services
  
Portfolio
Managemen
t
  
Total
Operating
Segments
  
Corporate
and Other
  
Elim
  
Total
 
REVENUES
                                        
Gain on sale of loans, net
  $200,294   $—     $—     $0  $
13,664
  $213,958  $—    $(3,863 $210,095 
Net fair value gains (losses)
   1,145    109,408    13,604    0   
(448
  123,709   —     (1,200  122,509 
Fee income
   30,827    1,022    14,252    87,592   14,937   148,630   0     (2,905)  145,725 
Net interest income (expense)
   2,807    —      —      (77  (17,799  (15,069  (6,720  (40  (21,829
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenues
   235,073    110,430    27,856    87,515   10,354   471,228   (6,720  (8,008  456,500 
Total expenses
   220,331    41,354    21,678    78,688   30,068   392,119   28,672   (8,913  411,878 
Other, net
   —      221    133    22   252   628   10,205   (905  9,928 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss) 
before taxes
  $14,742   $69,297   $6,311   $8,849  $(19,462) $79,737  $(25,187 $—    $54,550 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Depreciation and amortization
  $2,822   $9,970   $638   $2,892  $18  $16,340  $152  $0  $16,492 
Total assets
   2,978,565    789,351    120,116    358,684   18,429,429   22,676,145   964,815   (972,867  22,668,093 
   
April 1, 2021 to September 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 of loans, net
  $385,680   $—    $—     $0  $
21,412
  $407,092  $—    $(9,420 $397,672 
Net fair value gains
   1,145    203,944   24,425    0   
10,776
   240,290   —     13,370   253,660 
Fee income
   61,172    1,976   26,376    168,722   18,514   276,760   0     (40,171  236,589 
Net interest income (expense)
   4,783    (9  —      (92  (33,650  (28,968  (13,287  (49  (42,304
   
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenues
   452,780    205,911   50,801    168,630   17,052   895,174   (13,287  (36,270  845,617 
Total expenses
   444,522    83,600   41,727    151,962   63,325   785,136   64,669   (37,175  812,630 
Other, net
   —      325   273    105   8   711   8,019   (905  7,825 
   
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss) before taxes
  $8,258   $122,636  $9,347   $16,773  $(46,265) $110,749  $(69,937 $—    $40,812 
   
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Depreciation and amortization
  $4,255   $9,819  $1,059   $5,710  $(89) $20,754  $12,199  $0  $32,953 
Total assets
   2,978,565    789,351   120,116    358,684   18,429,429   22,676,145   964,815   (972,867  22,668,093 
6
4

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
   
January 1, 2021 to 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 of loans,
net
  $286,481   $—     $—     $0  $5,065  $291,546  $—    $(212 $291,334 
Net fair value gains
   —      68,449    5,431    0   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 expense
   891    —      —      (36  (14,816  (13,961  (7,744  —     (21,705
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenues
   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   5,955   373,344 
Other, net
   —      34    149    2   895   1,080   (9,464  (478  (8,862
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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 
   
For the three months ended September 30, 2020
 
   
Predecessor
 
   
Mortgage
Originations
   
Reverse
Originations
   
Commercial
Originations
  
Lender
Services
  
Portfolio
Management
  
Total
Operating
Segments
  
Corporate
and Other
  
Elim
  
Total
 
REVENUES
                      
 
           
 
    
Gain on sale of loans,
net
  $407,248   $—     $—    $0  $706  $407,954  $—    $(28 $407,926 
Net fair value gains
   —      48,251    1,357   0   46,261   95,869   —     86   95,955 
Fee income
   36,080    366    3,369   53,249   10,965   104,029   2,471   12,875   119,375 
Net interest expense
   451    —      —     (48  (15,999  (15,596  (385  (17  (15,998
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenues
   443,779    48,617    4,726   53,201   41,933   592,256   2,086   12,916   607,258 
Total expenses
   239,847    24,634    7,064   45,304   22,989   339,838   9,615   12,916   362,369 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Other, net
   —      —      —     —     —     —     (2,470  —     (2,470
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss)
before taxes
  $203,932   $23,983   $(2,338 $7,897  $18,944  $252,418  $(9,999 $—    $242,419 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Depreciation and amortization
  $1,440   $269   $143  $1,067  $12  $2,931  $436  $—    $3,367 
Total assets
   2,170,342    15,163    57,432   103,755   16,639,324   18,986,016   351,841   (315,842  19,022,015 
6
5

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
   
For the nine months ended September 30, 2020
 
   
Predecessor
 
   
Mortgage
Originations
   
Reverse
Originations
   
Commercial
Originations
  
Lender
Services
  
Portfolio
Management
  
Total
Operating
Segments
  
Corporate
and Other
  
Elim
  
Total
 
REVENUES
                                       
Gain on sale of loans, net
  $832,872   $—     $—    $0  $6,323   839,195  $—    $(2,294 $836,901 
Net fair value gains
   —      137,529    9,939   0   72,142   219,610   —     2,028   221,638 
Fee income
   90,402    1,478    14,555   138,819   13,357   258,611   2,514   4,877   266,002 
Net interest expense
   1,715    —      —     (81  (60,480  (58,846  (4,605  (99  (63,550
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenues
   924,989    139,007    24,494   138,738   31,342   1,258,570   (2,091  4,512   1,260,991 
Total expenses
   593,996    65,374    29,506   123,453   61,735   874,064   32,837   4,512   911,413 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Other, net
   —      —      —     —     —     —     (2,514  —     (2,514
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss) before taxes
  $330,993   $73,633   $(5,012 $15,285  $(30,393) $384,506  $(37,442 $—    $347,064 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Depreciation and amortization
  $4,527   $724   $449  $3,172  $35   8,907  $1,417  $—    $10,324 
Total assets
   2,170,342    15,163    57,432   103,755   16,639,324   18,986,016   351,841   (315,842 $19,022,015 
25.
Liquidity and Capital Requirements
FAM
In addition to the covenant requirements of FAM mentioned in Note 17 - 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 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.
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 $154.2
million as of September 30, 2021 (Successor). FAM’s adjusted net worth was $200.7
million as of September 30, 2021 (Successor). 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, FAM was not in compliance with the second quarter 2021 lender adjusted tangible net worth quarterly requirement and the second and third quarter 2021 two-consecutive quarter requirements by FNMA. The Company received a waiver for the covenant violation from FNMA as of September 30, 2021 (Successor).
6
6

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
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 September 30, 2021 (Successor), FAM was in compliance with applicable requirements.
FAR
As an issuer of HMBS, FAR is required by 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 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.
At September 30, 2021 (Successor), FAR was in compliance with the minimum net worth, liquidity and insurance requirements of Ginnie Mae and had received a permanent waiver for its capital requirement. The minimum tangible net worth required of FAR by Ginnie Mae was $102.6
million at September 30, 2021 (Successor). FAR’s actual net worth calculated based on Ginnie Mae guidance was $466.9
million at September 30, 2021 (Successor). The Company was therefore in compliance with all net worth requirements.
In addition, FAR is required to maintain both fidelity bond and errors and omissions insurance coverage at tiered levels based on the aggregate UPB of the loans serviced by FAR throughout the year. FAR is required to conduct compliance testing at least quarterly to ensure compliance with the foregoing requirements. As of September 30, 2021 (Successor), 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. At September 30, 2021 (Successor), ISG met the minimum net capital requirement amounts and was therefore in compliance.
Additionally, 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 introduces and clears its customers’ transactions through a third party on a fully-disclosed basis.
Agents National Title Insurance Company (“Agents”), 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 
m
illion 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 entered into a capital maintenance agreement in conjunction with the approval for the certificate of authority for California. This agreement requires Agents to maintain a minimum of $8.0
million in policyholder surplus. If Agents falls below this requirement in any given quarter, Incenter must contribute cash, cash equivalents securities or other instruments to bring Agents in compliance. The Company’s insurance company subsidiaries met the existing minimum statutory capital and surplus requirements as of September 30, 2021 (Successor).
The Company is also required to maintain bonds, certificates of deposit and interest bearing accounts in accordance with applicable state regulatory requirements. The total requirement was $3.8
million across all states as of September 30, 2021 (Successor). The Company was in compliance with these requirements as of September 30, 2021 (Successor).
6
7

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
26.
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 September 30
, 2021 (Successor) and December 31, 2020 (Predecessor), respectively.
Promissory Notes
In June 2019, the Company executed two Revolving Working Capital Promissory Note Agreements (the “2019 Promissory Notes”) with BTO Urban Holdings and Libman Family Holdings, LLC, which are deemed affiliates of the Company. The 2019 Promissory Notes accrued interest monthly at a rate of 10.0% per annum and matured and were paid in full in June 2020. The Company paid interest of $0.2 million and $3.1 million for the Predecessor three months ended and nine months ended September 30, 2020, respectively, 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 purchased agricultural loans and had total funded draw amounts of $43.2 million and $41.2 million, respectively, for the Successor three months ended September 30, 2021, $89.5 million and $94.6 million, respectively, for the Successor period from April 8,1, 2021 weto September 30, 2021, and $83.0 million and $82.1 million, respectively, for the Predecessor period from January 1, 2021 to March 31, 2021. The Predecessor purchased agricultural loans which had total funded draw amounts of $13.8 million and $80.9 million, for a purchase price of $3.2 million and $79.9 million, for the three months ended and nine months ended September 30, 2020, respectively.
The Company had promissory notes outstanding with FarmOps of $3.3 million and $0.8 million as of September 30, 2021 (Successor) and December 31, 2020 (Predecessor), respectively.
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%.
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 (1) ceasebe amortized over a 12 month period from the date placed in service. Professional fees paid to Cloudvirga, in exchange for the technology services, were $0.6 million for the Predecessor period from January 1, 2021 to March 31, 2021, $0.0 for the Predecessor three months ended September 30, 2020, and $0.8 million for the Predecessor nine months ended September 30, 2020.
68

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Nonrecourse MSR Financing Liability, at Fair Value
In 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 September 30, 2021 (Successor) and December 31, 2020 (Predecessor), the Company had an outstanding advance of $24.4 million and $14.9 million, respectively, against this commitment for the purchase of MSRs with a fair value of $20.3 million and $14.1 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 three months ended September 30, 2021, $0.1 million for the Successor period from April 1, 2021 to September 30, 2021, and $0.1 million for the Predecessor period from January 1, 2021 to March 31, 2021. There were 0 management fees paid for the Predecessor three months ended or nine months ended September 30, 2020, as the nonrevolving facility commitment did not exist 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.
27.
Income Taxes
The components of income tax expense were as follows:
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to
September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Net income before income taxes
  
$
54,550
 
 
$
40,812
 
 $125,457  $242,419  $347,064 
Provision for income taxes
  
 
4,440
 
 
 
5,526
 
  1,137   808   1,574 
Effective tax provision rate
  
 
8.14
 
 
13.54
  0.91  0.33  0.45
The Company’s income tax expense varies from the expense that would be expected based on statutory rates due principally to its organizational structure. Prior to the Business Combination, FoA Equity operated as a U.S. Partnership which, generally, are not subject to 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.
FoA is taxed as a corporation and is subject to corporate 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 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.
69

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
FoA Equity wholly owns Campus Door Inc., BNT Title Company of California, ANTIC Inc. and Silvernest Inc., which are regarded corporate subsidiaries for tax purposes. FoA Equity’s regarded corporate subsidiaries are subject to corporate federal, state and local taxes on income they generate. As such, the consolidated tax provision of FoA addresses corporate taxes that it incurs based on its flow-through income from FoA Equity as well as 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 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 operationsavailable 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 September 30, 2021 (Successor), the Company has recognized uncertain tax positions related to positions taken at the lower tier regarded corporate subsidiaries named above. The Company accrues interest and penalties related to uncertain tax positions as a component of the income tax provision.NaN interest or penalties were recognized in income tax expense for the Successor for the three months ended September 30, 2021, the Successor period from April 1, 2021 to September 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 nine months ended September 30, 2020. 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 or prior.
28.
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 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 are held by one member, UFG. Therefore, the Company has omitted earnings per unit for the Predecessor periods presented due to the limited number of LLC unit holders.
7
0

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
The following tables reconcile the numerators and denominators used in the computations of both basic and diluted earnings per share for the Successor periods (in thousands, except for share amounts):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to

September 30,
2021
 
   
Successor
 
Basic net income per share:
          
Numerator
          
Net income
  
$
50,110
   
$
35,286
 
Less: income attributable to noncontrolling interests
(1)
  
 
28,726
   
 
11,637
 
   
 
 
   
 
 
 
Net income attributable to holders of Class A Common Stock - basic
  
$
21,384
   
$
23,649
 
   
 
 
   
 
 
 
Denominator
          
Weighted average shares of Class A Common Stock outstanding -
basic
  
 
59,861,171
   
 
59,871,386
 
   
 
 
   
 
 
 
Basic net income per share
  
$
0.36
   
$
0.39
 
   
 
 
   
 
 
 
(1)
The Class A LLC Units of FoA Equity, held by the Continuing Unitholders, which comprise the noncontrolling interest in FoA, represents a participating security. Therefore, the numerator was adjusted to reduce net income by the amount of net income attributable to noncontrolling interests.
Additionally, the purposeClass B Common Stock does not participate in earnings or losses of winding up, (2) as promptly as reasonably possible butthe 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.
Income attributable to noncontrolling interest includes special allocations of recognized expense related to the A&R MLTIP. See Note 22 - Incentive Compensation for additional details.
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to

September 30,
2021
 
   
Successor
 
Diluted net income per share:
          
Numerator
          
Net income attributable to holders of Class A Common Stock
  
$
21,384
   
$
23,649
 
Reallocation of net income assuming exchange of Class A LLC Units
(2)
  
 
21,475
   
 
9,476
 
   
 
 
   
 
 
 
Net income attributable to holders of Class A Common Stock - diluted
  
$
42,859
   
$
33,125
 
   
 
 
   
 
 
 
Denominator
          
Weighted average shares of Class A Common Stock outstanding
-
 
basic
  
 
59,861,171
   
 
59,871,386
 
Effect of dilutive securities:
          
Assumed exchange of Class A LLC Units for shares of Class A Common Stock
(3)
  
 
131,300,259
   
 
131,309,223
 
   
 
 
   
 
 
 
Weighted average shares of Class A Common Stock outstanding - diluted
  
 
191,161,430
   
 
191,180,609
 
   
 
 
   
 
 
 
Diluted net income per share
  
$
0.22
   
$
0.17
 
   
 
 
   
 
 
 
7
1

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(2) 
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 per share.
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 the Class A LLC unitholders of FoA Equity, representing the noncontrolling interest, exchange their units on a one-for-one basis for shares of Class A Common Stock in FoA.
I
n addition to the Class A LLC Units, the Company also had Replacement RSUs outstanding during the Successor three months ended September 30, 2021 and the Successor period from April 1, 2021 to September 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 than 10 business days thereafter,dilutive.
7
2

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
29.
Sponsor Earnout
Contemporaneously with the execution of the Transaction Agreement, the initial shareholders entered into an amendment and restatement of the existing Sponsor Agreement (as amended and restated, the “Sponsor Agreement”) with FoA, Replay and FoA Equity, pursuant 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, 40% 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 60% 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 lawfully available funds therefor, redeemvesting and forfeiture in accordance with certain terms and conditions, as laid out below.
If at any time during the publicsix 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 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 per-sharefair 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 payableper 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.
30.
Equity
Class A Common Stock
As of September 30, 2021 (Successor), there were 63,195,244 shares of Class A Common Stock outstanding, consisting of 58,936,744 vested shares 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 cash,Note 29. 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 58,936,744 vested shares of Class A Common Stock represent the controlling interest of the company. Refer to Note 29 - Sponsor Earnout for additional details regarding the unvested shares.
7
3

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Pursuant
 to the A&R MLTIP, certain equity holders of FoA and FoA Equity are obligated to deliver a number of shares of Class A Common Stock and Class A LLC units for restricted stock unit awards granted by the Company. On September 
29
,
2021
, in 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 offset by the net award of Class A Common Stock resulted in a net surrender of
944,970
shares of Class A Common Stock and
829,222
Class A LLC units.
Class B Common Stock
Upon the Closing of the Business Combination, the Company issued 7 shares of 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. On September 28, 2021, Management Holdings was liquidated by its managing member, FoA Equity. As of September 30, 2021 (Successor), there are 6 shares of Class B Common Stock outstanding.
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”). 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 Consolidated Statements of Financial Condition. As of September 30, 2021 (Successor), there were 189,425,808 Class A LLC Units outstanding. Of the 189,425,808 Class A LLC Units outstanding, 58,936,744 are held by the Class A Common Stock shareholders and 130,489,064 are held by the noncontrolling interest of the Company.
31.
Subsequent Events
The Company has evaluated subsequent events from the date of the Consolidated Financial Statements of September 30, 2021 through November 12, 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 September 30, 2021 (Successor) as reported herein. However, management of the Company believes disclosure of the following events is appropriate.
Parkside
On May 14, 2021, in order to further strengthen its position in 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 then on depositof cash consideration and earnout liability of $27.0 million have been allocated to goodwill.
Subsequent to September 30, 2021 the Company entered into an amendment to the Asset Purchase Agreement (“APA”) with Parkside to revise the earnout provision. The Parkside transaction is being accounted for using the acquisition method. Under the acquisition method of accounting, Parkside’s assets and liabilities will be recorded at estimated fair value as of the acquisition dates with the excess of the purchase price over the estimated fair value of the net assets acquired, if applicable, recognized as goodwill. Management is finalizing the valuation for the amended APA and, once completed, will record an adjustment to goodwill, intangible assets, and overall purchase consideration. These adjustments to the provisional entry are not expected to be material to the overall financial statements. 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.
74

Finance of America Companies Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Financing Lines of Credit
The October 2021 $200.0 million facility was amended in October 2021. Under the terms of the new amended agreement, the maturity date was extended to October 2022.
The October 2021 $250.0 million facility was amended in October 2021. Under the terms of the new amended agreement, the maturity date was extended to October 2022.
The November 2023 $65.0 million facility was amended in October 2021. Under the terms of the new amended agreement, the borrowing capacity was increased from $
65.0
million to $100.0 million.
7
5

Item 2. 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 Trust Account, including interest (less up to $100,000forward-looking statements as a result of interest to pay dissolution expenses and which interest shall be netmany factors. Except where the context otherwise requires, the terms “Finance of taxes payable), divided by the numberAmerica Companies,” “Finance of then issued and outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (3) as promptly as reasonably possible following such redemption, subjectAmerica,”“FoA,” “we,” “us,” or “our” refer to the approvalbusiness of Finance of America Companies Inc. and its consolidated subsidiaries.
Overview
Finance of America Companies Inc. is a vertically integrated, diversified 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 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 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. 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 remaining shareholdersloan products, we seek to programmatically and profitably monetize most of our boardloan products through a variety of directors, dissolveinvestor channels, which minimizes capital at risk.
We distribute our products through multiple channels, and liquidate, subjectutilize flexible technology platforms and a distributed workforce in each caseorder to scale our obligations under Cayman Islands lawbusinesses 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 providefocus our resources as the opportunity set evolves while not being overly reliant on any individual product. As borrower demands for claimslending 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, 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 creditorsfinancial 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 and consumer loans. In addition to creating recurring 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 broker/dealer and institutional asset management capabilities. These capabilities allow us to complete profitable securitization of our originated loans, including 1 securitization
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Table of Contents
during the Predecessor period from January 1, 2021 to March 31, 2021, 7 securitizations during the Successor period from April 1, 2021 to September 30, 2021 and 3 securitizations during the Successor three months ended September 30, 2021. During an otherwise volatile 2020, 10 securitizations were completed, demonstrating the high quality and liquidity of the loan products we originate, the deep relationships we have with our investors and the requirementsresilience of other applicable law.

our business model in any market environment.


The Business Combination
On August 15, 2019, we receivedOctober 12, 2020, FoA, a written noticeDelaware 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 “Notice”“Seller Representative”), entered into a Transaction Agreement (the “Transaction Agreement”) frompursuant to which Replay agreed to combine with FoA Equity in a series of transactions (collectively, the staff of NYSE Regulation of“Business Combination”) that resulted in FoA becoming a publicly-traded company on the New York Stock Exchange (“NYSE”) indicating that we are not currentlyas of April 1, 2021, with trading beginning on April 5, 2021 under the ticker symbol ‘FOA’ and controlling FoA in compliance with Section 802.01Ban “UP-C” structure. For a description of the NYSE ListedBusiness 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 Manual (the “Manual”), which requires us to maintain a minimum of 300 public shareholders on a continuous basis. Pursuant to the Notice, we were subject to the procedures set forth in Sections 801five reportable segments: Mortgage Originations, Reverse Originations, Commercial Originations, Portfolio Management, and 802Lender Services. A description of the Manual.business conducted by each of these segments is provided below:
Mortgage Originations
Our Mortgage Originations segment originates residential mortgage loans through our Finance of America Mortgage LLC (“FAM”) subsidiary. This segment generates revenue through fee-based mortgage loan origination services and the origination and sale of mortgage loans into the secondary market. We submitted a business plan that demonstrates how we expectgenerally sell originated mortgage loans into the secondary market within 30 days of origination and elect whether to returnsell or retain the rights to compliance withservice the minimum public shareholders requirement within 18 months of receiptunderlying 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 Notice. We anticipate that we will satisfy this listing requirementmortgage servicing rights in gain on sale and other income from mortgage loans held for sale, net until the date of loan sale. Subsequent fair value changes of the retained mortgage servicing rights are accounted for within such time period once we consummatefee income in the Portfolio Management segment results.
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The Mortgage Originations segment includes four channels:
Distributed 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 direct-to-consumer lending channel relies on our initial Business Combination. On October 24, 2019, we were notifiedcall centers, website and mobile apps to interact with customers. Our primary focus is to assist our customers with a refinance or home purchase by the staff of NYSE Regulation that the NYSE’s Listings Operations Committee agreedproviding them with a needs-based approach to accept our business plan,understanding their current mortgage options.
TPO - Our third party-originator (“TPO”) lending channel works with mortgage brokers to source loans which are then underwritten and wefunded by us, as FoA. Counterparty risk is mitigated through quality and compliance monitoring, and all brokers are currently subject to quarterly monitoring for compliance with such plan. Our ordinary shares, warrants and Units, which trade under the symbols “RPLA,” “RPLA WS” and “RPLA.U,” respectively, will continue to be listed and traded on the NYSE during the cure period, subject to our complianceeligibility requirements coupled with an annual recertification process.
Home Improvement - Our home improvement channel is our newest distribution channel and was created through the NYSE’s other applicable continued listing standards,acquisition of 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 will bearrelies on a network of partner contractors across the indicator “.BC”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”), including Federal National Mortgage Association (“Fannie Mae” or “FNMA”), Federal Home Loan Mortgage Corporation (“Freddie Mac” or “FHLMC”), 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 gains on sale of loans, fair value gains, interest income, servicing income, and fees earned on the consolidated tapesuccessful origination of mortgage loans.
Reverse Originations
Our Reverse Originations segment originates or acquires reverse mortgage loans through our Finance of America Reverse LLC (“FAR”) subsidiary. This segment originates HECM and non-agency reverse mortgages.
We securitize HECMs into Home Equity Conversion Mortgage-Backed Securities (“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”) 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.
We originate reverse mortgage loans through the following channels:
Retail - Our retail channel consists of 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 - Our TPO lending channel works with mortgage brokers to source loans which are then underwritten and funded by us, 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.
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. The segment provides business purpose lending solutions for
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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 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 - 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.
TPO - Our TPO lending channel works with mortgage brokers to source loans which are then underwritten and funded by us, 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.
The Commercial 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 commercial mortgage loans.
Lender Services
Our Lender Services segment provides ancillary business services, title agency and title insurance services, mortgage servicing rights (“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 transactional fulfillment and administrative support.
Our Lender Services segment generates revenue and earnings in the form of fee-for-service revenue and 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. 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.
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 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.
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, interest income, and fee income related to underwriting, advisory, valuation, and other ancillary services.
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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 volume, and an increasing interest rate environment leading to decreases in the 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;
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 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.
Evaluation of recorded value of goodwill and intangibles
As a result of the Business Combination, the Company was required to record the acquired assets of FoA Equity to fair value at the time of the transaction. This created a substantial amount of goodwill and intangibles. The Company performs an annual goodwill impairment test as of October 1, or more frequently if events occur that indicate noncompliance withit is more likely than not that the NYSE’s continued listing standards.

fair value of a reporting unit’s goodwill was less than its carrying value (e.g., a triggering event). During the quarter, the company’s share price traded at a substantial discount to its book value. As a result, the Company performed an analysis to determine if a triggering event occurred. The analysis resulted in the determination that no triggering event occurred. Management considered several structural and timing factors in the analysis, including trading activity by PIPE shareholders following the Business Combination, the Company’s comparatively low stock trading volume, and the limited amount of time since the Business Combination which included only one quarter of results which were heavily impacted by non-recurring, merger-related transactions. These factors all put downward pressure on the price of the publicly traded shares and were deemed to be unrelated to the ongoing operations, underlying performance and financial results of the Company.


Covid-19

The process of determining whether a triggering event exists and estimating the fair value of goodwill and intangible assets requires the use of estimates and significant judgements that are based on several factors. These estimates and judgements are complex and based on assumptions that may change in future periods. It is possible that any such future changes in assumptions, estimates and judgements may have a material impact on the financial statements. As such, it is possible that goodwill or intangible assets may be impaired in future reporting periods; however, any impairment to goodwill or intangible assets would not have a negative impact on tangible equity (defined as book equity less goodwill and intangible assets).
The Company will perform an annual goodwill impairment test as of October 1, 2021, which may lead to the Company recognizing an impairment of one or more of its reporting units during the fourth quarter of 2021, if it is ultimately determined that the fair value of one or more of the reporting units is less than such unit’s carrying value.
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
On January 30, 2020, the World Health Organization or WHO,(“WHO”) announced a global health emergency because of a new strain of coronavirus or COVID-19.(the “COVID-19 outbreak”) 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 rapid increase in exposure globally.
During the first half of 2020, the COVID-19 pandemic 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. 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,
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and have supported the economic recovery which began in 2020 and continues into 2021. 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 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 and the provision of liquidity to financial institutions and credit markets. In addition, housing measures, such as forbearance on mortgages and suspension of foreclosures and evictions, and various executive orders have helped to provide relief. However, many of the forbearance on mortgages, foreclosure and eviction measures have lapsed or are set to lapse in the fourth quarter of 2021 or in early 2022. Further, certain moratoria have been successfully challenged in lawsuits. In response to the expiration of certain of these measures, on June 28, 2021 the Consumer Financial Protection Bureau issued a final rule, which went into effect on August 31, 2021, amending certain provisions in Regulation X regarding additional assistance for borrowers on mortgage loans secured by their principal residence experiencing a COVID-19-related hardship. This rule includes temporary provisions imposing further restrictions on foreclosure and providing for streamlined loan modification, among other features. Given the scheduled expiration of, and legal challenges to, relief measures, there can be no assurance as to the extent to which relief will continue to be granted in the future.
The full impact of the COVID-19 pandemic continues to evolve.evolve as of the date of this report. The Company’s work-from-home environment is anticipated to continue until January 2022, with certain exceptions for employees whose job functions or other considerations require them to be in a physical office from time to time. The Company’s management is actively monitoring the global situation relating to COVID-19 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 on the residential mortgage and commercial lending industries. As of September 30, 2021, the COVID-19 pandemic continues to impact the economic environment in which the Company conducts business. As of September 30, 2021, approximately 0.40% of units and 0.42% of unpaid principal balance of the Company’s total residential mortgage servicing portfolio is in forbearance as a result of the economic impacts caused by COVID-19.
The economic impacts of the COVID-19 pandemic have continued during 2021. These continuing economic impacts, and the continuation of the pandemic 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. See Results of Operations.
For further discussion on the potential impacts of the COVID-19 pandemic reference “Risk Factors--Risks Related to the Business of the Company — Risks Related to COVID-19” in our Prospectus filed with the SEC on June 4, 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.
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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 not 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 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, entity level taxes at FoA Equity are not and have not been significant. Accordingly, provision for income taxes consists of tax expense primarily related 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.
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 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.
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 will depend on future developments, includingflows. For example, increased tangible and intangible assets resulting from adjusting the durationbasis of tangible and spreadintangible assets to their fair value have resulted in increased depreciation and amortization expense in the periods following the consummation of the pandemicBusiness Combination, and in the future FoA may need to recognize impairment charges related advisoriesto goodwill and restrictions. These developments andidentified intangible assets that are adjusted to fair value.
Additionally, in connection with the impactBusiness Combination, FoA entered into TRAs with the TRA Parties that provide for the payment by FoA to such owners of 85% of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, our results of operations, financial position and cash flows may be materially adversely affected. Additionally, our abilitybenefits that FoA is deemed to complete an initial business combination, may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 pandemic or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit our ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial business combination in a timely manner. Our ability to consummate an initial business combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 pandemic and the resulting market downturn.

Results of Operations

Our entire activity since November 6, 2018 (inception) through April 8, 2019 was in preparation for our Initial Public Offering, and since our Initial Public Offering, our activity has been limited to the search for a prospective initial Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination. We generate non-operating income in the form of investment income on investments held in the Trust Account after our Initial Public Offering. We are incurring expensesrealize as a result of being(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 (forcompany. These costs include additional personnel, legal, financial reporting,consulting, regulatory, insurance, accounting, investor relations and auditing compliance),other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, as well as rules adopted by the SEC and national securities exchanges, requires public companies to implement specified corporate governance practices that are not applicable to a private company. These additional rules and regulations increased our legal, regulatory and financial compliance costs and will make some activities more time-consuming and costly.
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Components of Our Results of Operations
Revenue
Gain on sale and other income from mortgage loans held for sale, net
Gain on sale and other income from mortgage loans held for sale, net includes realized and unrealized gains and losses on loans held for sale, interest rate lock commitments, hedging derivatives, and originated mortgage servicing rights. 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 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, 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 of net fair value gains on mortgage loans and related obligations. See Note 5 - 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.
Net interest income (expense)
We earn interest income on mortgage, reverse and commercial loans held for sale, and incur interest expense on our warehouse lines of credit and non-funding debt. Interest income and interest expense also accrues to loans held for investment, including securitized loans subject to HMBS and other nonrecourse debt. Such interest is included as a component of net fair value gains on mortgage loans and related obligations.
Operating Expenses
Salaries, benefits and related expenses
Salaries, benefits and related expenses includes commissions, bonuses, RSUs, 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 costs.
General and administrative expenses
General and administrative expenses primarily include loan origination expenses, loan portfolio expenses, professional fees, business development costs, communications and data processing costs, title and closing costs, depreciation and amortization and other expenses.
Other, net
Other, net, primarily includes gains or losses on assets, revaluation of the warrant liability, and remeasurement of the TRA obligations.
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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 for income taxes consists of tax expense primarily related 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.
FoA (together with certain corporate subsidiaries through which it owns its interest in FoA Equity) is treated as a 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, FoA also incurs expenses related to its operations, as well as payments under the TRAs, which are significant. FoA Equity may distribute amounts sufficient to allow FoA to pay its tax obligations and operating expenses, including distributions to fund any payments due diligence expensesunder the TRAs. See “Certain Agreements Related to the Business Combination—Tax Receivable Agreements.” However, the ability of FoA Equity to make such distributions may be limited due to, among other things, restrictive covenants in connectionits financing lines of credit and senior notes.
Results of Operations
Overview
The following tables present selected financial data for the Successor three months ended September 30, 2021 and six months from April 1, 2021 to September 30, 2021, and the three months of the Predecessor from January 1, 2021 to March 31, 2021. Additionally, we have presented the Predecessor periods for the three and nine months ended September 30, 2020.
We have prepared our discussion of the results of operations by comparing the results of the Successor period for the three months ended September 30, 2021 with completing athe results of the Predecessor three months ended September 30, 2020. Additionally, we compared the results of the combined Successor period from April 1, 2021 to September 30, 2021 and Predecessor period from January 1, 2021 to March 31, 2021 with the Predecessor nine months ended September 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 September 30, 2021 and the Predecessor period from January 1, 2021 to March 31, 2021 are comparable to the nine months ended September 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.

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Consolidated Results
The following table summarizes our consolidated operating results for the periods indicated (in thousands):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
                 
   
Successor
  
Predecessor
 
Gain on sale and other income from mortgage loans held for sale, net
  
$
210,095
  
$
397,672
  $291,334 $407,926 $836,901
Net fair value gains on mortgage loans and related obligations
  
 
122,509
  
 
253,660
   76,663  95,955  221,638
Fee income
  
 
145,725
  
 
236,589
   161,371  119,375  266,002
Net interest expense
  
 
(21,829
 
 
(42,304
  (21,705  (15,998  (63,550
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenue
  
 
456,500
  
 
845,617
   507,663  607,258  1,260,991
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total expenses
  
 
411,878
  
 
812,630
   373,344  362,369  911,413
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Other, net
  
 
9,928
  
 
7,825
   (8,862  (2,470  (2,514
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
NET INCOME BEFORE TAXES
  
$
54,550
  
$
40,812
  $125,457 $242,419 $347,064
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net fair value gains on mortgage loans and related obligations
The following table summarizes the components of net fair value gains on mortgage loans and related obligations for the periods indicated (in thousands):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
                 
   
Successor
  
Predecessor
 
Interest income on loans
  
$
160,683
  
$
334,623
  $160,568 $150,276 $492,066
Change in fair value of loans
  
 
(119,690
 
 
(34,707
  (51,346  160,480  302,541
Change in fair value of mortgage-backed securities
  
 
—  
 
 
 
—  
 
  —     1,621  2,438
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Fair value gains on mortgage loans
  
 
40,993
  
 
299,916
   109,222  312,377  797,045
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Interest expense on related obligations
  
 
(107,593
 
 
(221,067
  (119,201  (121,777  (383,622
Change in fair value of derivatives
  
 
6,841
  
 
(39,637
  43,972  149  (5,594
Change in fair value of related obligations
  
 
182,268
  
 
214,448
   42,670  (94,794  (186,191
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Fair value losses on related obligations
  
 
81,516
  
 
(46,256
  (32,559  (216,422  (575,407
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net fair value gains on mortgage loans and related obligations
  
$
122,509
  
$
253,660
  $76,663 $95,955 $221,638
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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. Further, interest income on collateralized loans may be reflected in net fair value gains on mortgage loans and related obligations on the
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Consolidated Statements of Operations, 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
September 30,
2021
  
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
                 
   
Successor
  
Predecessor
 
Interest income on commercial and reverse loans
  
$
160,683
  
$
334,623
  $160,568 $150,276 $492,066
Interest expense on HMBS and nonrecourse obligations
  
 
(107,593
 
 
(221,067
  (119,201  (121,777  (383,622
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net interest margin included in net fair value gains on mortgage loans
(1)
  
 
53,090
  
 
113,556
   41,367  28,499  108,444
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Interest income on mortgage loans held for sale
  
 
15,742
  
 
28,766
   12,621  10,408  29,969
Interest expense on warehouse lines of credit
  
 
(30,735
 
 
(57,643
  (26,546  (25,973  (88,837
Non-funding debt interest expense
  
 
(6,842
 
 
(13,486
  (7,756  (385  (4,605
Other interest income
  
 
120
  
 
246
   40  27  144
Other interest expense
  
 
(114
 
 
(187
  (64  (75  (221
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net interest expense
  
 
(21,829
 
 
(42,304
  (21,705  (15,998  (63,550
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
NET INTEREST MARGIN
  
$
31,261
  
$
71,252
  $19,662 $12,501 $44,894
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(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 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 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 mortgage loans and related obligations on the Consolidated Statements of Operations.
For the three months ended September 30, 2021 (Successor) versus the three months ended September 30, 2020 we had net loss of approximately $2.1(Predecessor)
Net income before taxes decreased $187.9 million which consisted ofor 77.5% primarily as a loss of approximately $1.1 million on revaluationresult of the warrant liability,following:
Gain on sale and approximately $1.1other income from mortgage loans held for sale, net, decreased $197.8 million or 48.5% due to lower margin on originated mortgage loans and lower origination volume during the three months ended September 30, 2021 as a result of increased interest rates and competitive pressure on margin. Our Mortgage Originations segment had $7,679.1 million in net rate lock volume related to mortgage loans for the three months ended September 30, 2021 compared to $9,285.6 million for the comparable 2020 period. Additionally, our margin on originated mortgage loans decreased to 2.61% for the three months ended September 30, 2021 compared to 4.39% for the comparable 2020 period.
Net fair value gains on mortgage loans and related obligations increased $26.6 million or 27.7% primarily as a result of origination growth within our Reverse and Commercial Originations segments. The Reverse Originations segment originated $1,157.2 million of reverse mortgage loans for the three months ended
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September 30, 2021 compared to $626.7 million for the comparable 2020 period. The Commercial Originations segment originated $447.3 million in loans for the three months ended September 30, 2021 compared to $89.9 million, as the comparable 2020 period saw the production ramp up for the commercial originations segment following the temporary deferment of production activity in Q2 2020 as a result of the COVID-19 outbreak. The increase was partially offset by net $28.8 million in fair value losses from assumption changes to our loans held for investment compared to a gain of $16.8 million in the comparable 2020 period.
Fee income increased $26.4 million or 22.1% primarily due to growth in Reverse and Commercial loan originations, as well as our Lender Services segments, partially offset by a reduction in fee income within the Mortgage Origination segment. Within our Lender Services segment, we experienced growth of 61.1% in loan closings in which we acted as title agent and growth of 137.8% in our underwriting activity for the three months ended September 30, 2021 compared to the comparable 2020 period.
Net interest expense increased $5.8 million or 36.4% in 2021 due primarily to an increase in non-funding debt interest expense, partially offset by a lower average cost of funds on our financing lines of credit and increases in interest income on mortgage loans held for sale for the three months ended September 30, 2021 compared to the comparable 2020 period.
Total expenses increased $49.5 million or 13.7% due to higher salaries, benefits and related expenses combined with increased general and administrative expenses.

expenses during the three months ended September 30, 2021. The increase is primarily related to on-going expenses as a result of the Business Combination, such as RSUs and amortization of intangibles. During the third quarter of 2021, additional on-going expenses of $10.6 million for the RSUs and $13.5 million of amortization of intangibles were recognized as a result of the Business Combination.

For the nine months ended September 30, 2021 (Successor and Predecessor) versus the nine months ended September 30, 2020 (Predecessor)
Net income before taxes decreased $180.8 million or 52.1% primarily as a result of the following:
Gain on sale and other income from mortgage loans held for sale, net, decreased $147.9 million or 17.7% as a result of lower Mortgage Originations segment revenue margin. Our Mortgage Originations segment had $22,753.2 million in net rate lock volume for the nine months ended September 30, 2021 compared to $22,302.7 million for the comparable 2020 period. Our margin on originated mortgage loans decreased slightly to 2.69% for the nine months ended September 30, 2021 compared to 3.73% for the comparable 2020 period.
Net fair value gains on mortgage loans and related obligations increased by $108.7 million or 49.0% 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 $2,939.3 million of reverse mortgage loans for the nine months ended September 30, 2021 compared to $2,052.3 million for the comparable 2020 period. The Commercial Originations segment originated $1,188.7 million in loans for the nine months ended September 30, 2021 compared to $548.4 million during the comparable 2020 period. Fair value losses from assumption changes were $50.8 million for the nine months ended September 30, 2021 primarily due to fair value adjustments related predominantly to increases in modeled prepayment speeds on securitized mortgage assets and MSR. This compares to $53.9 million in fair value losses from assumption changes for the nine months ended September 30, 2020 driven largely by unfavorable shocks to fair value during the early months of the COVID-19 outbreak. See Note 5 - Fair Value within the consolidated financial statements for additional information on assumptions impacting the value of our loans held for investment.
Fee income increased $132.0 million or 49.6% primarily due to growth in Mortgage, Reverse and Commercial loan originations, as well as our Lender Services segments. Within our Lender Services segment, we experienced growth of 78.3% in loan closings in which we acted as title agent and growth of 203.1% in our underwriting activity for the three months ended September 30, 2021 compared to the comparable 2020 period.
Total expenses increased $274.6 million or 30.1% due to higher salaries, benefits and related expenses combined with increased general and administrative expenses primarily as a result of our higher loan origination volumes during the nine months ended September 30, 2021, overall enterprise growth, and
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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 $23.4 million for the RSUs and $26.9 million of amortization of intangibles relating to the Business Combination were recognized.
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. Expenses for enterprise-level general overhead, such as executive administration, are not allocated to the business segments.
Mortgage Originations Segment
The following table summarizes our Mortgage Origination segment’s results for the periods indicated (in thousands):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to

September 30,
2021
   
January 1, 2021

to

March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
   
Successor
   
Predecessor
 
Gain on sale and other income from mortgage loans held for sale, net
  
$
200,294
   
$
385,680
   $286,481  $407,248  $832,872
Net fair value gains on mortgage loans
  
 
1,145
   
 
1,145
    —     —     —  
Fee income
  
 
30,827
   
 
61,172
    32,731   36,080   90,402
Net interest income
  
 
2,807
   
 
4,783
    891   451   1,715
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenue
  
 
235,073
   
 
452,780
    320,103   443,779   924,989
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total expenses
  
 
220,331
   
 
444,522
    224,246   239,847   593,996
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
NET INCOME BEFORE TAXES
  
$
14,742
   
$
8,258
   $95,857  $203,932  $330,993
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Our Mortgage Originations segment generates its revenues 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, and closed-end second mortgages 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.
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KEY METRICS
The following table provides a summary of some of our Mortgage Origination segment’s key metrics (dollars in thousands):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to

September 30,
2021
   
January 1, 2021

to

March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
   
Successor
   
Predecessor
 
Loan origination volume (dollars)
           
Conforming
  
$
4,698,538
 
  
$
9,000,708
   $5,397,708   $5,773,072   $13,749,364 
Government
  
 
987,074
 
  
 
1,982,731
    1,068,650    1,204,360    3,237,231 
Non-conforming
  
 
1,632,513
 
  
 
3,204,408
    1,937,860    1,476,952    3,270,125 
Home improvement
  
 
64,566
 
  
 
123,494
    —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loan origination volume
  
$
7,382,691
 
  
$
14,311,341
 
  $8,404,218   $8,454,384   $20,256,720 
 
Loan origination volume by type (dollars)
           
Agency
  
$
6,324,230
 
  
$
12,398,694
   $7,367,044    8,160,931  $19,465,514 
Non-agency
  
 
993,895
 
  
 
1,789,153
    1,037,174    293,453   791,206 
Home improvement
  
 
64,566
 
  
 
123,494
    —      —     —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loan origination volume by type
  
$
7,382,691
 
  
$
14,311,341
   $8,404,218  $8,454,384  $20,256,720
 
Loan origination volume by channel (dollars)
           
Retail
  
$
4,838,128
 
  
$
9,708,682
   $5,622,487    6,207,165  $15,191,608 
Wholesale/Correspondent
  
 
1,786,304
 
  
 
2,987,807
    1,706,365    1,303,448   2,882,650 
Consumer direct
  
 
693,693
 
  
 
1,491,358
    1,075,366    943,771   2,182,462 
Home improvement
  
 
64,566
 
  
 
123,494
    —      —     —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loan origination volume by channel
  
$
7,382,691
 
  
$
14,311,341
   $8,404,218  $8,454,384  $20,256,720
 
Loan origination volume by type (dollars)
           
Purchase
  
$
3,759,059
 
  
$
7,253,521
    2,664,493    3,022,815   6,780,670 
Refinance
  
 
3,559,066
 
  
 
6,934,326
    5,739,725    5,431,569   13,476,050 
Home improvement
  
 
64,566
 
  
 
123,494
    —      —     —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loan origination volume by type
  
$
7,382,691
 
  
$
14,311,341
   $8,404,218  $8,454,384  $20,256,720
 
Loan origination volume (units)
           
Conforming
  
 
14,522
 
  
 
28,658
    18,090    19,294   46,570 
Government
  
 
3,041
 
  
 
6,182
    3,426    4,106   11,120 
Non-conforming
  
 
2,032
 
  
 
4,004
    2,472    2,170   4,818 
Home improvement
  
 
5,935
 
  
 
11,457
    —      —     —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loan origination volume
  
 
25,530
 
  
 
50,301
 
   23,988    25,570   62,508 
 
Loan origination volume by type (units)
           
Agency
  
 
18,400
 
  
 
36,678
    22,763    25,113   61,296 
Non-agency
  
 
1,195
 
  
 
2,166
    1,225    457   1,212 
Home improvement
  
 
5,935
 
  
 
11,457
    —      —     —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loan origination volume by type
  
 
25,530
 
  
 
50,301
 
   23,988    25,570   62,508 
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For the three
months ended
September 30,
2021
  
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Loan origination volume by channel (units)
       
Retail
  
 
13,353
 
 
 
27,090
   16,123   19,064  47,998 
Wholesale/Correspondent
  
 
4,210
 
 
 
7,215
   4,745   3,940  8,396 
Consumer direct
  
 
2,032
 
 
 
4,539
   3,120   2,566  6,114 
Home improvement
  
 
5,935
 
 
 
11,457
   —     —    —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total loan origination volume by channel
  
 
25,530
 
 
 
50,301
   23,988   25,570  62,508 
 
Loan origination volume by type (units)
       
Purchase
  
 
9,801
 
 
 
19,129
 
  7,534   9,325   22,286 
Refinance
  
 
9,794
 
 
 
19,715
 
  16,454   16,245   40,222 
Home improvement
  
 
5,935
 
 
 
11,457
 
  —     —     —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total loan origination volume by type
  
 
25,530
 
 
 
50,301
 
  23,988   25,570   62,508 
 
Loan sales by investor (dollars)
       
Agency
  
$
5,733,609
 
 
$
11,541,450
 
 $7,246,418  $7,818,882  $18,026,245 
Private
  
 
1,574,710
 
 
 
2,787,028
 
  1,152,810   256,456   1,447,680 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total loan sales by investor
  
$
7,308,319
 
 
$
14,328,478
 
 $8,399,228  $8,075,338  $19,473,925 
 
Loan sales by type (dollars)
       
Servicing released
  
$
3,313,801
 
 
$
5,497,385
 
 $2,086,550  $760,215  $5,168,265 
Servicing retained
  
 
3,994,518
 
 
 
8,831,093
 
  6,312,678   7,315,123   14,305,660 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total loan sales by type
  
$
7,308,319
 
 
$
14,328,478
 
 $8,399,228  $8,075,338  $19,473,925 
 
Net rate lock volume
  
$
7,679,106
 
 
$
14,347,929
 
 $8,405,313  $9,285,616   22,302,731 
Mortgage originations margin (including servicing margin)
(1)
  
 
2.61
 
 
2.69
  3.41  4.39  3.73
Capitalized servicing rate (in bps)
  
 
102.6
 
 
 
103.1
 
  89.1   73.1   68.7 
(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.
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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):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Gain on sale, net
  
$
221,680
  
$
390,501
  $200,874 $396,346 $853,204
Provision for repurchases
  
 
(1,970
 
 
(3,783
  (2,258  (4,277  (16,256
Realized hedge gains (losses)
  
 
(22,982
 
 
(39,995
  74,823  (33,796  (141,280
Changes in fair value of loans held for sale
  
 
(5,561
 
 
6,041
   (41,485  11,538  44,948
Changes in fair value of interest rate locks
  
 
(5,472
 
 
(8,456
  (49,946  34,937  98,988
Changes in fair value of derivatives/hedges
  
 
14,599
  
 
41,372
   104,473  2,500  (6,732
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Gain on sale and other income from mortgage loans held for sale, net
  
 
200,294
  
 
385,680
   286,481  407,248  832,872
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net fair value gains on mortgage loans
  
 
1,145
  
 
1,145
   —    —    —  
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Origination related fee income
  
 
30,827
  
 
61,172
   32,731  36,080  90,402
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net interest income
  
 
2,807
  
 
4,783
   891  451  1,715
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenue
  
$
235,073
  
$
452,780
  $320,103 $443,779 $924,989
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net interest income was comprised of the following (in thousands):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Interest income
  
$
15,363
  
$
28,200
  $12,483 $10,273 $29,351
Interest expense
  
 
(12,556
 
 
(23,417
  (11,592  (9,822  (27,636
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net interest income
  
$
2,807
  
$
4,783
  $891 $451 $1,715
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
WAC - loans held for sale
  
 
3.0 
 
 
3.0 
  2.9   3.0   3.0 
WAC - warehouse lines of credit
  
 
3.3 
 
 
3.1 
  3.0   3.3   3.0 
For the three months ended September 30, 2019, we had2021 (Successor) versus the three months ended September 30, 2020 (Predecessor)
Total revenue decreased $208.7 million or 47.0%, primarily as a result of the following:
Gain on sale, net decreased $174.7 million or 44.1% as a result of lower margin and lower mortgage loans sold due to lower inventory of originated loans during the three months ended September 30, 2021. We sold $7,308.3 million in mortgage loans for the three months ended September 30, 2021 compared to $8,075.3 million for the comparable 2020 period. Weighted average gain on sale margins on sold loans was 3.00% for the three months ended September 30, 2021 compared to 4.90% for the comparable 2020 period. Gain on sale margins decreased primarily due to rate volatility during both periods and competitive pressure on margins in the 2021 period.
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Provision for repurchases decreased $2.3 million or 53.9% due to a drop in funded volume for the three months ended September 30, 2021 compared to the comparable 2020 period.
Changes in fair value of loans held for sale decreased $17.1 million or 148.2% as a result of lower net change in the end-of-period fair value of our outstanding originated loan production not yet sold or securitized. The unsold pipeline decreased slightly from $1,831.0 million with a weighted average margin of 2.8% at June 30, 2021 to $1,802.1 million and 2.6% at September 30, 2021. Comparatively, the unsold pipeline increased from $1,355.7 million with a weighted average margin of 4.8% at June 30, 2020 to $1,723.1 million and 4.5% at September 30, 2020.
Changes in fair value of interest rate locks similarly decreased $40.4 million or 115.7% as a result of lower net change in our interest rate lock pipeline driven by an overall decrease in refinance activity in the market. The fair value of the interest rate lock pipeline decreased from $33.5 million at June 30, 2021 to $28.5 million at September 30, 2021. Comparatively, the fair value of the interest rate lock pipeline increased from $78.0 million at June 30, 2020 to $112.9 million at September 30, 2020.
Origination related fee income decreased $5.3 million or 14.6% as a result of $498,854, which consistedlower loan origination volume during the three months ended September 30, 2021.
During the three months ended September 30, 2021, net realized and unrealized hedge losses were $8.4 million compared to hedge losses of a gain of approximately $1.6$31.3 million on marketable securities, dividendsin the comparable 2020 period, partially offsetting the fair value impact to loans and interest heldrate locks in the Trust Account, offsetpipeline by a $951,250 loss on revaluation of the warrant liability expenses.

increases in average market interest rates.


For the nine months ended September 30, 2021 (Successor and Predecessor) versus the nine months ended September 30, 2020 we had net loss of approximately $2.4(Predecessor)
Total revenue decreased $152.1 million which consisted ofor 16.4% as a loss of approximately $2.3 million on revaluationresult of the warrant liabilityfollowing:
Gain on sale, net, decreased $261.8 million or 30.7% as a result of decreased gain on sale margins on sold volume, offset slightly by higher sales volume in dollars during the nine months ended September 30, 2021. We sold $22.7 billion in mortgage loans for the nine months ended September 30, 2021 compared to $19.5 billion for the comparable 2020 period. Weighted average gain on sale margins on sold loans were 2.6% for the nine months ended September 30, 2021 compared to 4.4% for the comparable 2020 period. Gain on sale margins decreased primarily due to rate volatility during both periods and $1.3competitive pressure on margins in the 2021 period.
Provision for repurchases decreased $10.2 million or 62.8% due to an adjustment of the provision for the nine months ended September 30, 2021 compared to additional provision being booked in the early months of the COVID 19 outbreak during the comparable 2020 period.
Changes in fair value of loans held for sale decreased $80.4 million or 178.9% 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 2.6% at September 30, 2021. Comparatively, the unsold pipeline increased from $1.0 billion with a weighted average margin of 2.9% at January 1, 2020 to $1.7 billion and 4.5% at September 30, 2020.
Changes in fair value of interest rate locks similarly decreased $157.4 million or 159.0% as a result of lower net change in our interest rate lock pipeline driven by an overall decrease in refinance activity in the market. The fair value of the interest rate lock pipeline decreased from $87.6 million million at December 31, 2020 to $28.5 million at September 30, 2021. Comparatively, the fair value of the interest rate lock pipeline increased from $13.9 million million at January 1, 2020 to $112.9 million at September 30, 2020.
Origination related fee income increased $3.5 million or 3.9% as a result of higher loan origination volume during the nine months ended September 30, 2021.
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During the nine months ended September 30, 2021, net realized and unrealized hedge gains were $180.7 million compared to hedge losses of $148.0 million in generalthe comparable 2020 period, partially offsetting the fair value impact to loans in the pipeline by increases in average 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):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to

September 30,
2021
   
January 1, 2021

to

March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
   
Successor
   
Predecessor
 
Commissions and bonus
  
$
106,316
   
$
209,916
   $111,766  $140,122  $325,366
Salaries
  
 
48,565
   
 
104,121
    46,232   41,896   108,719
Other salary related expenses
  
 
11,073
   
 
24,225
    18,451   12,052   37,857
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total salaries, benefits and related expenses
  
 
165,954
   
 
338,262
    176,449   194,070   471,942
 
Loan origination fees
  
 
17,539
   
 
32,320
    14,003   13,375   34,362
Loan processing expenses
  
 
5,119
   
 
10,544
    5,462   2,408   7,008
Other general and administrative expenses
  
 
26,918
   
 
54,506
    23,112   23,936   63,974
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total general and administrative expenses
  
 
49,576
   
 
97,370
    42,577   39,719   105,344
 
Occupancy, equipment rentals and other office related expenses
  
 
4,801
   
 
8,890
    5,220   6,058   16,710
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total expenses
  
$
220,331
   
$
444,522
   $224,246  $239,847  $593,996
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
For the three months ended September 30, 2021 (Successor) versus the three months ended September 30, 2020 (Predecessor)
Total expenses decreased $19.5 million or 8.1% as a result of the following:
Salaries, benefits and related expenses decreased $28.1 million or 14.5%, primarily due to a $33.8 million decrease in commissions and bonus expense as a result of the 12.7% decrease in origination volume during the three months ended September 30, 2021. These decreases were offset by additional on-going expenses for the RSUs of $2.8 million that are recognized as a result of the Business Combination. Salaries increased an additional $3.9 million as result of increased headcount, further offsetting these decreases. Our average headcount increased from 2,845 for the three months ended September 30, 2020 to 3,046 for the 2021 period due to acquisitions and in order to accommodate the demands of the business.
General and administrative expenses offset byincreased $9.9 million or 24.8% primarily due to an increase in loan origination fees as a gainresult of $1.2securitization expenses of $5.2 million. During the three months ended September 30, 2021, $1.6 million on marketable securities, dividends and interest held inof amortization of intangibles relating to the Trust Account.

Business Combination was recognized.

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For the nine months ended September 30, 2019, we had net income of approximately $5.1 million, which consisted of a gain of approximately $3.3 million on marketable securities, dividends2021 (Successor and interest held inPredecessor) versus the Trust Account, and a gain of approximately $2.7 million on revaluation of the warrant liability, offset by approximately $648,000 in issuance costs allocated to public warrants.

Going Concern Consideration

As ofnine months ended September 30, 2020 we had approximately $1.02(Predecessor)

Total expenses increased $74.8 million outsideor 12.6% as a result of the Trust Account, approximately $5.8following:
Salaries, benefits and related expenses increased $42.8 million or 9.1%, primarily due to a $41.6 million increase in salaries expense as a result of investment income availablethe 12.1% increase in origination volume during the Trust Account to paynine months ended September 30, 2021. Our average headcount increased from 2,675 for tax obligations (less up to $100,000 of interest to pay dissolution expenses), and a working capital surplus of approximately $236,000.

Throughthe nine months ended September 30, 2020 to 3,063 for the 2021 period due to acquisitions and in order to accommodate the demands of the business. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $7.7 million was recognized. Additional on-going expenses of $5.1 million were recognized for the RSUs issued at the time of the Business Combination.

General and administrative expenses increased $34.6 million or 32.8% primarily due to an increase in loan origination and loan processing fees as a result of higher origination volume in units, securitization expenses and allocated costs associated with the Business Combination. During the nine months ended September 30, 2021, $8.5 million of securitization expenses were incurred. During the same period, $5.7 million of amortization of intangibles relating to the Business Combination was recognized.
Reverse Originations Segment
The following table summarizes our liquidity needs have been satisfied through receiptReverse Originations segment’s results for the periods indicated (in thousands):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Net origination gains
  
$
109,408
   
$
203,944
  $68,449  $48,251  $137,529
Fee income
  
 
1,022
   
 
1,976
   524   366   1,478
Net interest expense
  
 
—  
   
 
(9
  —     —     —  
  
 
 
   
 
 
  
 
 
   
 
 
   
 
 
 
Total revenue
  
 
110,430
   
 
205,911
   68,973   48,617   139,007
  
 
 
   
 
 
  
 
 
   
 
 
   
 
 
 
Total expenses
  
 
41,354
   
 
83,600
   23,693   24,634   65,374
Other, net
  
 
221
   
 
325
   34   —     —  
  
 
 
   
 
 
  
 
 
   
 
 
   
 
 
 
NET INCOME BEFORE TAXES
  
$
69,297
   
$
122,636
  $45,314  $23,983  $73,633
  
 
 
   
 
 
  
 
 
   
 
 
   
 
 
 
Our Reverse Originations segment generates its revenues primarily from the origination of a $25,000 capital contributionreverse mortgage loans, including loans insured by FHA, and non-agency reverse mortgage loans. Revenue from our SponsorReverse 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 exchange foraddition to fees earned at the issuancetime of origination of the Founder Shares (defined below)associated loans. We elect to account for all originated loans at fair value. The loans are immediately transferred to our Sponsor, $250,000 in loans from our Sponsor under an unsecured promissory notePortfolio Management segment, and approximately $2,000 in advances from a related party. Subsequent to the consummation of our Initial Public Offering, we received the net proceeds from the consummation of the Private Placement not held in the Trust Account of $2.0 million. We fully repaid the note and the advances to our Sponsor and the related party in May 2019.

Following our Initial Public Offering and the Private Placement, $287.5 million was placed in the Trust Account,any future fair value adjustments, including approximately $9.2 million of deferred underwriting commissions. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing 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):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to

September 30,
2021
   
January 1, 2021

to

March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
   
Successor
   
Predecessor
 
Loan origination volume
           
Total loan origination volume - New originations - dollars
(1)
  
$
1,157,212
   
$
2,170,535
   $768,795  $626,706  $2,052,332
Total loan origination volume - Tails - dollars
(2)
  
 
135,164
   
 
257,126
    120,775   116,131   352,295
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loan origination volume - dollars
  
$
1,292,376
   
$
2,427,661
   $889,570  $742,837  $2,404,627
Total loan origination volume - units
  
 
3,382
   
 
6,640
    2,864   2,347   7,104
 
Loan origination volume by channel (dollars)
(3)
           
Retail
  
$
195,797
   
$
368,769
   $127,679  $105,307  $278,997
TPO
  
 
961,415
   
 
1,801,766
    641,116   521,399   1,773,335
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loan origination volume by channel
  
$
1,157,212
   
$
2,170,535
   $768,795  $626,706  $2,052,332
(1)
New loan origination volumes consist of initial reverse mortgage loan borrowing amounts.
(2)
Tails consist of subsequent borrower draws, mortgage insurance premiums, service fees and other advances that 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 draws, mortgage insurance premiums, service fees and other advances that we are able to subsequently pool into a security.
Revenue
In the Trust Account (whichtable below is a summary of the components of our Reverse Originations segment’s total revenue for the periods indicated (in thousands):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Net origination gains
       
Retail
  
$
30,061
 
 
$
47,281
 
 $16,913 $13,168 $28,887
TPO
  
 
144,049
  
 
285,435
   99,678  72,768  220,305
Acquisition costs
  
 
(64,702
 
 
(128,772
  (48,142  (37,685  (111,663
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total net origination gains
  
 
109,408
  
 
203,944
   68,449  48,251  137,529
Fee income
  
 
1,022
  
 
1,976
   524  366  1,478
Net interest income
  
 
—  
  
 
(9
  —    —    —  
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenue
  
$
110,430
  
$
205,911
  $68,973 $48,617 $139,007
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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For the three months ended September 30, 2021 (Successor) versus the three months ended September 30, 2020 (Predecessor)
Total revenue increased $61.8 million or 127.1% as a result of the following:
Net origination gains increased $61.2 million or 126.7% as a result of higher loan origination volume during the three months ended September 30, 2021 combined with increased margins on this origination volume. The higher origination volume is attributable to home price appreciation and improved interest shallrates 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 $1,157.2 million of reverse mortgage loans for the three months ended September 30, 2021, an increase of 84.6%, compared to $626.7 million million for the comparable 2020 period. During the three months ended September 30, 2021, the weighted average margin on production was 9.45% compared to 7.70% in 2020, an increase of 22.7%.
For the nine months ended September 30, 2021 (Successor and Predecessor) versus the nine months ended September 30, 2020 (Predecessor)
Total revenue increased $135.9 million or 97.8% as a result of the following:
Net origination gains increased $134.9 million or 98.1% as a result of higher loan origination volume during the nine months ended September 30, 2021 combined with increased margins on this origination volume. The higher origination 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 $2,939.3 million of reverse mortgage loans for the nine months ended September 30, 2021, an increase of 43.2%, compared to $2,052.3 million for the comparable 2020 period. During the nine months ended September 30, 2021, the weighted average margin on production was 8.21% compared to 6.70% in 2020, an increase of 37.2%.
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):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to

September 30,
2021
   
January 1, 2021

to

March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
   
Successor
   
Predecessor
 
Salaries and bonuses
  
$
18,761
   
$
38,606
   $11,692  $12,072  $32,368
Other salary related expenses
  
 
1,605
   
 
3,613
    1,395   898   3,240
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total salaries, benefits and related expenses
  
 
20,366
   
 
42,219
    13,087   12,970   35,608
 
Loan origination fees
  
 
2,120
   
 
4,881
    3,258   3,587   9,323
Professional fees
  
 
2,444
   
 
5,120
    2,079   2,711   4,933
Other general and administrative expenses
  
 
15,954
   
 
30,445
    4,958   4,920   14,286
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total general and administrative expenses
  
 
20,518
   
 
40,446
    10,295   11,218   28,542
 
Occupancy, equipment rentals and other office related expenses
  
 
470
   
 
935
    311   446   1,224
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total expenses
  
$
41,354
   
$
83,600
   $23,693  $24,634  $65,374
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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For the three months ended September 30, 2021 (Successor) versus the three months ended September 30, 2020 (Predecessor)
Total expenses increased $16.7 million or 67.9% as a result of the following:
Salaries, benefits and related expenses increased $7.4 million or 57.0% primarily due to an increase in average headcount and production related compensation to support the increased origination volume. Average headcount for the three months ended September 30, 2021 was 399 compared to 281 for the 2020 period. Additional on-going expenses of $1.2 million were recognized for the RSUs issued at the time of the Business Combination.
General and administrative expenses increased $9.3 million or 82.9% primarily due to amortization costs associated with intangible assets. During the three months ended September 30, 2021, $9.3 million of amortization of intangibles relating to the Business Combination was recognized.
For the nine months ended September 30, 2021 (Successor and Predecessor) versus the nine months ended September 30, 2020 (Predecessor)
Total expenses increased $41.9 million or 64.1% as a result of the following:
Salaries, benefits and related expenses increased $19.7 million or 55.3% 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 nine months ended September 30, 2021 was 363 compared to 273 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 $2.1 million were recognized for the RSUs issued at the time of the Business Combination.
General and administrative expenses increased $22.2 million or 77.8% primarily due to allocated costs and higher professional fees associated with the Business Combination. During the nine months ended September 30, 2021, $18.6 million of amortization of intangibles relating to the Business Combination was recognized.
Commercial Originations Segment
The following table summarizes our Commercial Originations segment’s results for the periods indicated (in thousands):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to

September 30,
2021
   
January 1, 2021
to
March 31, 2021
   
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
   
Predecessor
 
Net origination gains
  
$
13,604
   
$
24,425
   $5,431  $1,357 $9,939
Fee income
  
 
14,252
   
 
26,376
    8,930   3,369  14,555
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Total revenue
  
 
27,856
   
 
50,801
    14,361   4,726  24,494
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Total expenses
  
 
21,678
   
 
41,727
    13,391   7,064  29,506
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Other, net
  
 
133
   
 
273
    149   —    —  
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
NET INCOME (LOSS) BEFORE TAXES
  
$
6,311
   
$
9,347
   $1,119  $(2,338 $(5,012
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
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”) or “fix and flip” properties which 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
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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.
KEY METRICS
The following table provides a summary of some of our Commercial Originations segment’s key metrics (dollars in thousands):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to
September 30,
2021
   
January 1, 2021
to
March 31, 2021
   
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
                    
   
Successor
   
Predecessor
 
Loan origination volume (dollars)
(1)
          
Portfolio
  
$
78,547
   
$
148,574
   $59,458  $9,244 $48,939
SRL
  
 
197,864
   
 
368,306
    104,992   11,144  100,331
Fix & flip
  
 
112,312
   
 
208,366
    90,018   68,049  225,765
New construction
  
 
15,376
   
 
33,014
    3,422   —     93,454
Agricultural
  
 
43,216
   
 
89,525
    83,013   1,450  79,947
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Total loan origination volume
  
$
447,315
   
$
847,785
   $340,903  $89,887 $548,436
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Loan origination volume (units)
(1)
          
Portfolio
  
 
99
   
 
173
    71   12  34
SRL
  
 
1,082
   
 
2,041
    643   75  618
Fix & flip
  
 
472
   
 
917
    430   318  1,070
New construction
  
 
53
   
 
109
    13   (1  275
Agricultural
  
 
8
   
 
32
    27   1  39
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Total loan origination volume
  
 
1,714
   
 
3,272
    1,184   405  2,036
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
(1)
Loan 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.
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):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to
September 30,
2021
   
January 1, 2021
to
March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
                     
   
Successor
   
Predecessor
 
Net origination gains
  
$
13,604
   
$
24,425
   $5,431  $1,357  $9,939
Fee income
  
 
14,252
   
 
26,376
    8,930   3,369   14,555
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenue
  
$
27,856
   
$
50,801
   $14,361  $4,726  $24,494
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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For the three months ended September 30, 2021 (Successor) versus the three months ended September 30, 2020 (Predecessor)
Total revenue increased $23.1 million or 489.4% as result of:
Net origination gains increased by $12.2 million or 902.5%, primarily as a result of the increase in loan origination volume. We originated $447.3 million in commercial loans for the three months ended September 30, 2021 compared to $89.9 million during the comparable 2020 period. The three months ended September 30, 2020 saw the production ramp up for the commercial originations segment following the temporary deferment of production activity in Q2 2020 a result of the COVID-19 outbreak.
Fee income increased $10.9 million or 323.0% primarily as a result of a significant increase in loan origination volume during the three months ended September 30, 2021.
For the nine months ended September 30, 2021 (Successor and Predecessor) versus the nine months ended September 30, 2020 (Predecessor)
Total revenue increased $40.7 million or 166.0% as result of:
Net origination gains increased by $19.9 million or 200.4%, primarily as a result of the increase in loan origination volume. We originated $1,188.7 million in commercial loans for the nine months ended September 30, 2021 compared to $548.4 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 or government loan products, which continued through the third quarter, due to the COVID-19 outbreak.
Fee income increased $20.8 million or 142.6% primarily as a result of a 116.7% increase in loan origination volume during the nine months ended September 30, 2021.
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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):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to
September 30,
2021
   
January 1, 2021
to
March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
                     
   
Successor
   
Predecessor
 
Salaries
  
$
7,693
   
$
15,336
   $4,769  $1,914  $9,018
Commissions and bonus
  
 
3,577
   
 
6,458
    2,092   1,227   4,918
Other salary related expenses
  
 
1,064
   
 
2,044
    797   424   1,823
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total salaries, benefits and related expenses
  
 
12,334
   
 
23,838
    7,658   3,565   15,759
 
Loan origination fees
  
 
5,216
   
 
10,155
    3,140   2,306   7,618
Professional fees
  
 
1,148
   
 
2,480
    891   683   3,097
Other general and administrative expenses
  
 
2,636
   
 
4,607
    1,164   430   2,620
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total general and administrative expenses
  
 
9,000
   
 
17,242
    5,195   3,419   13,335
 
Occupancy, equipment rentals and other office related expenses
  
 
344
   
 
647
    538   80   412
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total expenses
  
$
21,678
   
$
41,727
   $13,391  $7,064  $29,506
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
For the three months from three months ended September 30, 2021 (Successor) versus the three months ended September 30, 2020 (Predecessor)
Total expenses increased $14.6 million or 206.9% primarily as a result of:
Salaries, benefits and related expenses increased $8.8 million or 246.0% primarily due to the increase in average headcount and production related compensation to support the increased origination volume and allocation of share based compensation associated with the Business Combination. Average headcount for the three months ended September 30, 2021 was 261 compared to 112 for the 2020 period. During the three months ended September 30, 2021, additional on-going expenses of $0.4 million were recognized for the RSUs issued at the time of the Business Combination.
General and administrative expenses increased $5.6 million or 163.2% primarily due to the increase in loan origination fees and allocated costs associated with the Business Combination. Loan origination volume increased 397.6% during the three months ended September 30, 2021 compared to the comparable 2020 period. During the three months ended September 30, 2021, $0.5 million of amortization of intangibles relating to the Business Combination was recognized.
For the nine months ended September 30, 2021 (Successor and Predecessor) versus the nine months ended September 30, 2020 (Predecessor)
Total expenses increased $25.6 million or 86.8% as a result of:
Salaries, benefits and related expenses increased $15.7 million or 99.9% primarily due to the increase in average headcount and production related compensation to support the increased origination volume and allocation of share based compensation associated with the Business Combination. Average headcount for the nine months ended September 30, 2021 was 219 compared to 130 for the 2020 period. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $1.4 million was recognized. Additional on-going expenses of $0.8 million were recognized for the RSUs issued at the time of the Business Combination.
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General and administrative expenses increased $9.1 million or 68.3% primarily due to the increase in loan origination fees and allocated costs associated with the Business Combination. Loan origination volume increased 116.7% during the nine months ended September 30, 2021 compared to the comparable 2020 period. During the nine months ended September 30, 2021, $1.0 million of amortization of intangibles relating to the Business Combination was recognized.
Lender Services Segment
The following table summarizes our Lender Services segment’s results for the periods indicated (in thousands):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to
September 30,
2021
  
January 1, 2021
to
March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
                 
   
Successor
  
Predecessor
 
Fee income
  
$
87,592
  
$
168,722
  $76,383 $53,249 $138,819
Net interest expense
  
 
(77
 
 
(92
  (36  (48  (81
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenue
  
 
87,515
  
 
168,630
   76,347  53,201  138,738
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total expenses
  
 
78,688
  
 
151,962
   62,970  45,304  123,453
Other, net
  
 
22
  
 
105
   2  —     —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
NET INCOME BEFORE TAXES
  
$
8,849
  
$
16,773
  
$
13,379
  
$
7,897
  
$
15,285
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
KEY METRICS
The following table provides a summary of some of our Lender Services segment’s key metrics:
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to
September 30,
2021
   
January 1, 2021
to
March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
                     
   
Successor
   
Predecessor
 
Incenter title agent orders
  
 
59,429
   
 
114,864
    54,960   45,102   122,331
Incenter title agent closings
  
 
48,694
   
 
92,252
    46,991   30,228   78,088
Total appraisals
  
 
12,600
   
 
22,951
    7,427   6,033   15,767
Title insurance underwriter policies
  
 
57,185
   
 
113,366
    48,814   24,050   53,509
FTE count for fulfillment revenue
  
 
986
   
 
986
    858   41   756
Total MSR valuations performed
  
 
137
   
 
274
    124   135   391
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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):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to
September 30,
2021
  
January 1, 2021
to
March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
                 
   
Successor
  
Predecessor
 
Title agent and closing services
  
$
24,988
  
$
58,866
  $31,750 $24,797 $68,727
Insurance underwriting services
  
 
42,717
  
 
77,629
   33,322  17,768  40,943
Student and consumer loan origination services
  
 
3,512
  
 
5,012
   2,012  3,616  9,316
Fulfillment services
  
 
7,337
  
 
14,160
   6,779  4,492  12,030
MSR trade brokerage, valuation and other services
  
 
8,306
  
 
12,156
   2,462  2,562  7,747
Other income
  
 
732
  
 
899
   58  14  56
Net interest expense
  
 
(77
 
 
(92
  (36  (48  (81
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenue
  
$
87,515
  
$
168,630
  $76,347 $53,201 $138,738
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
For three months ended September 30, 2021 (Successor) versus the three months ended September 30, 2020 (Predecessor)
Total revenue increased $34.3 million or 64.5% as a result of the following:
For the three months ended September 30, 2021, we acted as title agent on 48,694 loan closings, compared to 30,228 loan closings for the comparable 2020 period, an increase of 61.1%. We underwrote 57,185 policies during the three months ended September 30, 2021, compared to 24,050 underwritten policies for the comparable 2020 period, an increase of 137.8%. These increases were primarily the result of continued strong refinance volumes and client acquisition.
For the nine months ended September 30, 2021 (Successor and Predecessor) versus the nine months ended September 30, 2020 (Predecessor)
Total revenue increased $106.2 million or 76.6% as a result of the following:
For the nine months ended September 30, 2021, we acted as title agent on 139,243 loan closings, compared to 78,088 loan closings for the 2020 period, an increase of 78.3%. We underwrote 162,180 policies during the nine months ended September 30, 2021, compared to 53,509 underwritten policies for the 2020 period, an increase of 203.1%. These increases were primarily the result of continued strong refinance volumes and client acquisition.
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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):
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to
September 30,
2021
   
January 1, 2021
to
March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
                     
   
Successor
   
Predecessor
 
Salaries
  
$
18,129
   
$
36,480
   $16,715  $10,099  $29,830
Commissions and bonus
  
 
9,755
   
 
18,445
    7,045   8,017   18,570
Other salary related expenses
  
 
5,183
   
 
11,445
    4,001   2,805   8,200
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total salaries, benefits and related expenses
  
 
33,067
   
 
66,370
    27,761   20,921   56,600
 
Title and closing
  
 
31,358
   
 
56,548
    25,062   15,835   44,512
Communication and data processing
  
 
3,760
   
 
6,885
    2,960   2,949   7,361
Fair value change in deferred purchase price liability
  
 
238
   
 
1,988
    —      87   250
Other general and administrative expenses
  
 
9,060
   
 
17,951
    6,040   4,492   12,083
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total general and administrative expenses
  
 
44,416
   
 
83,372
    34,062   23,363   64,206
 
Occupancy, equipment rentals and other office related expenses
  
 
1,205
   
 
2,220
    1,147   1,020   2,647
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total expenses
  
$
78,688
   
$
151,962
   $62,970  $45,304  $123,453
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
For three months ended September 30, 2021 (Successor) versus the three months ended September 30, 2020 (Predecessor)
Total expenses increased $33.4 million or 73.7% as a result of the following:
Salaries, benefits and related expenses increased $12.1 million or 58.1%, primarily due to the staffing required to support the 137.8% increase in title insurance underwriting policies and 61.1% increase in title agent closings. Commissions and bonus expense increased $1.7 million in conjunction with the increase in revenue. During the three months ended September 30, 2021, additional on-going expenses for the RSUs of $0.9 million were recognized for the RSUs issued at the time of the Business Combination.
General and administrative expenses increased $21.1 million or 90.1% primarily due to higher title and closing expenses incurred associated with the 137.8% increase in title insurance underwriting policies volume and 61.1% increase in title agent closing volume. During the three months ended September 30, 2021, $1.7 million of amortization of intangibles relating to the Business Combination was recognized.
For the nine months ended September 30, 2021 (Successor and Predecessor) versus the nine months ended September 30, 2020 (Predecessor)
Total expenses increased $91.5 million or 74.1% as a result of the following:
Salaries, benefits and related expenses increased $37.5 million or 66.3%, primarily due to the staffing required to support the 203.1% increase in title insurance underwriting policies and 78.3% increase in title agent closings. Commissions and bonus expense increased $6.9 million in conjunction with the increase in revenue. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $3.2 million was recognized. Additional on-going expenses of $1.9 million were recognized for the RSUs issued at the time of the Business Combination.
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General and administrative expenses increased $53.2 million or 82.9% primarily due to higher title and closing expenses incurred associated with the 203.1% increase in title insurance underwriting policies volume and 78.3% increase in title agent closing volume. During the nine months ended September 30, 2021, $2.9 million of amortization of intangibles relating to the Business Combination were recognized.
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Portfolio Management Segment
The following table summarizes our Portfolio Management segment results for the periods indicated (in thousands):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Gain on sale and other income from mortgage loans held for sale, net
  
$
13,664
  
$
21,412
  $5,065 $706 $6,323
Net fair value (losses) gains
  
 
(448
 
 
10,776
   2,750  46,261  72,142
Net interest expense
  
 
(17,799
 
 
(33,650
  (14,816  (15,999  (60,480
Fee income
  
 
14,937
  
 
18,514
   36,191  10,965  13,357
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenue
  
 
10,354
  
 
17,052
   29,190  41,933  31,342
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total expenses
  
 
30,068
  
 
63,325
   24,406  22,989  61,735
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Other, net
  
 
252
  
 
8
   895  —    —  
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
NET (LOSS) INCOME BEFORE TAXES
  
$
(19,462
 
$
(46,265
 $5,679 $18,944 $(30,393
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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 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):
   
September 30,
2021
   
December 31,
2020
 
   
Successor
   
Predecessor
 
Cash and cash equivalents
  
$
45,401
   $47,024
Restricted cash
  
$
322,887
   $303,925
Reverse mortgage loans held for investment, subject to HMBS liabilities, at fair value
  
 
10,347,459
    9,929,163
Mortgage loans held for investment, subject to nonrecourse debt, at fair value
  
 
5,939,651
    5,396,167
Mortgage loans held for investment, at fair value
  
 
1,077,670
    730,821
Mortgage servicing rights, at fair value
  
 
340,949
    180,684
Other assets, net
  
 
185,898
    165,810
  
 
 
   
 
 
 
Total long-term investment assets
  
 
18,259,915
    16,753,594
  
 
 
   
 
 
 
Mortgage loans held for sale, at fair value
  
 
142,906
    142,226
  
 
 
   
 
 
 
Total earning assets
  
 
18,402,821
    16,895,820
 
HMBS related obligations, at fair value
  
 
10,216,310
   $9,788,668
Nonrecourse debt, at fair value
  
 
5,831,083
    5,271,842
Other financing lines of credit
  
 
1,508,916
    1,010,669
Payables and other liabilities
  
 
66,698
    96,762
  
 
 
   
 
 
 
Total financing of portfolio
  
 
17,623,007
    16,167,941
  
 
 
   
 
 
 
    
     
  
 
 
   
 
 
 
Net equity in earning assets
  
$
779,814
   $727,879
  
 
 
   
 
 
 
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Table of Contents
The following table provides a summary of some of our Portfolio Management segment’s key metrics (dollars in thousands):
   
September 30,
2021
  
December 31,
2020
 
   
Successor
  
Predecessor
 
Mortgage Servicing Rights Portfolio
    
Loan count
  
 
103,422
 
  69,301 
Ending unpaid principal balance (“UPB”)
  
$
33,301,683
 
 $22,269,362 
Average unpaid principal balance
  
$
322
 
 $321 
Weighted average coupon
  
 
3.02
  3.15
Weighted average age (in months)
  
 
9
 
  4 
Weighted average FICO credit score
  
 
758
 
  760 
90+ day delinquency rate
  
 
0.1
  0.1
Total prepayment speed
  
 
9.5
  12.1
 
Reverse Mortgages
    
Loan count
  
 
59,556
 
  58,230 
Active UPB
  
$
14,352,606
 
 $13,355,570 
Due and payable
  
 
279,268
 
  484,233 
Foreclosure
  
 
689,749
 
  348,768 
Claims pending
  
 
65,352
 
  76,346 
  
 
 
  
 
 
 
Ending unpaid principal balance
  
$
15,386,975
 
 $14,264,917 
Average unpaid principal balance
  
$
258
 
 $245 
Weighted average coupon
  
 
3.94
  4.30
Weighted average age (in months)
  
 
44
 
  44 
Percentage in foreclosure
  
 
4.5
  2.4
 
Commercial (SRL/Portfolio/Fix & Flip)
    
Loan count
  
 
2,147
 
  1,993 
Ending unpaid principal balance
  
$
453,372
 
 $493,817 
Average unpaid principal balance
  
$
211
 
 $248 
Weighted average coupon
  
 
7.52
  8.50
Weighted average loan age (in months)
  
 
9
 
  12 
SRL conditional prepayment rate
  
 
1.9
  2.9
SRL non-performing (60+ DPD)
  
 
1.4
  2.2
F&F single month mortality
  
 
8.5
  8.8
F&F non-performing (60+ DPD)
  
 
14.9
  6.5
 
Agricultural Loans
    
Loan count
  
 
72
 
  42 
Ending unpaid principal balance
  
$
186,177
 
 $69,127 
Average unpaid principal balance
  
$
2,586
 
 $1,646 
Weighted average coupon
  
 
7.34
  7.70
Weighted average loan age (in months)
  
 
7
 
  5 
Conditional prepayment rate
  
 
1.0
  1.0
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Table of Contents
   
For the three
months ended
September 30,
2021
   
April 1, 2021 to

September 30,
2021
   
January 1, 2021

to

March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
   
Successor
   
Predecessor
 
Investment and Capital Markets
           
Number of structured deals
  
 
4
 
  
 
7
 
   1    2    8 
Structured deals (size in notes)
  
$
1,443,121
   
$
2,575,653
   $571,448  $954,884  $2,715,236
 
Number of whole loan trades
  
 
11
 
  
 
21
 
   8    1    3 
UPB of whole loan trades
  
$
294,898
   
$
512,966
   $195,929  $44,704  $168,869
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
September 30,
2021
  
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
REVENUE
       
Gain on sale and other income from mortgage loans held for sale, net
  
$
13,664
  
$
21,412
  $5,065 $706 $6,323
Net fair value gains:
       
Interest income
  
 
152,641
  
 
300,587
   149,875  171,731  532,725
Interest expense (nonrecourse)
  
 
(109,766
 
 
(221,107
  (114,910  (126,426  (388,904
Net fair value (losses) gains on portfolio assets
  
 
(43,323
 
 
(68,704
  (32,215  956  (71,679
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total net fair value (losses) gains
  
 
(448
 
 
10,776
   2,750  46,261  72,142
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net interest expense
  
 
(17,799
 
 
(33,650
  (14,816  (15,999  (60,480
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Fee income:
       
Servicing income (MSR)
  
 
6,060
  
 
6,360
   33,698  8,060  9,846
Underwriting, advisory and valuation fees
  
 
5,127
  
 
7,028
   997  —    180
Asset management fees
  
 
—  
  
 
—  
   9  366  1,319
Other fees
  
 
3,750
  
 
5,126
   1,487  2,539  2,012
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total fee income
  
 
14,937
  
 
18,514
   36,191  10,965  13,357
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenue
  
$
10,354
  
$
17,052
  $29,190 $41,933 $31,342
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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 the fair value option. Accordingly, interest expense is presented separately on our Consolidated Statements of Operations. Further, interest income on collateralized loans may be reflected in net fair value gains on mortgage loans and related obligations on the Consolidated Statements of Operations, 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.
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The following table provides an analysis of all components of NIM for the periods indicated (in thousands):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to

September 30,
2021
  
January 1, 2021

to

March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Interest income on commercial and reverse loans
  
$
152,641
  
$
300,585
  $149,875 $171,244 $532,725
Interest expense on HMBS and nonrecourse obligations
  
 
(109,766
 
 
(221,107
  (114,910  (126,426  (388,904
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net interest margin included in net fair value gains and losses on mortgage loans
(1)
  
 
42,875
  
 
79,478
   34,965  44,818  143,821
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Interest income on mortgage loans held for sale
  
 
296
  
 
483
   138  136  619
Interest expense on warehouse lines of credit
  
 
(18,178
 
 
(34,216
  (14,954  (15,636  (60,604
Other interest income (expense)
  
 
83
  
 
83
   —    (499  (495
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net interest expense
  
 
(17,799
 
 
(33,650
  (14,816  (15,999  (60,480
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
NET INTEREST MARGIN
  
$
25,076
  
$
45,828
  $20,149 $28,819 $83,341
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(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 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 using a combination 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 financial 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 ended September 30, 2021 (Successor) versus the three months ended September 30, 2020 (Predecessor)
Total revenue decreased $31.6 million or 75.3% as a result of the following:
Interest income decreased $19.1 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 ended September 30, 2021 compared to the comparable 2020 period.
Interest expense on nonrecourse debt decreased $16.7 million due to issuances of nonrecourse debt in a favorable interest rate environment during the three months ended September 30, 2021 and retirement of nonrecourse debt issued in prior periods.
Net fair value losses on portfolio assets increased $44.3 million primarily due to fair value adjustments related predominantly to increases in modeled prepayment speeds on securitized mortgage assets and MSR.
Fee income increased $4.0 million primarily due to increases in underwriting, advisory and valuation fees, offset slightly by decreases in servicing fee income.
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For the nine months ended September 30, 2021 (Successor and Predecessor) versus the nine months ended September 30, 2020 (Predecessor)
Total revenue increased $14.9 million or 47.5% as a result of the following:
Interest income decreased $82.3 million due to competitive pressure on margins in 2021 resulting in a decrease in weighted average coupon on our portfolio of loans for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.
Interest expense on nonrecourse debt decreased $52.9 million due to issuances of nonrecourse debt in a favorable interest rate environment during the nine months ended September 30, 2021 and retirement of nonrecourse debt issued in prior periods.
Net interest expense on our warehouse lines decreased $12.0 million due primarily to a lower average cost of funds on our financing lines of credit.
Net fair value losses on portfolio assets increased $29.2 million primarily due to the growth of the assets held and the recognized amortization for the nine months ended September 30, 2021 compared to the comparable 2020 period.
Fee income increased $41.3 million primarily related to the increase in servicing fee income for the nine months ended September 30, 2021 compared to the comparable 2020 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
September 30,
2021
   
April 1, 2021 to

September 30,
2021
   
January 1, 2021

to

March 31, 2021
   
For the three
months ended
September 30,
2020
   
For the nine
months ended
September 30,
2020
 
   
Successor
   
Predecessor
 
Salaries and bonuses
  
$
9,080
   
$
24,621
   $5,650  $6,043  $15,835
Other salary related expenses
  
 
380
   
 
827
    497   917   1,613
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total salaries, benefits and related expenses
  
 
9,460
   
 
25,448
    6,147   6,960   17,448
 
Securitization expenses
  
 
9,877
   
 
14,610
    4,459   5,242   13,592
Servicing related expenses
  
 
9,093
   
 
17,918
    8,651   6,723   19,143
Other general and administrative expenses
  
 
1,441
   
 
5,026
    4,887   3,918   11,092
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total general and administrative expenses
  
 
20,411
   
 
37,554
    17,997   15,883   43,827
 
Occupancy and equipment rentals
  
 
197
   
 
323
    262   146   460
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total expenses
  
$
30,068
   
$
63,325
   $24,406  $22,989  $61,735
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
For three months ended September 30, 2021 (Successor) versus the three months ended September 30, 2020 (Predecessor)
Total expenses increased $7.1 million or 30.8% as a result of the following:
Salaries, benefits and related expenses increased $2.5 million or 36.0%, primarily due to increase in bonus compensation. Additional on-going expenses of $0.9 million were recognized for the RSUs issued at the time of the Business Combination.
General and administrative expenses increased $4.5 million or 28.5% 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, along with increases in fees related to the securitization of assets into nonrecourse securitizations, slightly offset by a decrease in other general and administrative expenses.
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For the nine months ended September 30, 2021 (Successor and Predecessor) versus the nine months ended September 30, 2020 (Predecessor)
Total expenses increased $26.0 million or 42.1% as a result of the following:
Salaries, benefits and related expenses increased $14.1 million or 81.1%, 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 $1.9 million were recognized for the RSUs issued at the time of the Business Combination.
General and administrative expenses increased $11.7 million or 26.8% 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, along with increases in fees related to the securitization of assets into nonrecourse securitizations, slightly offset by a decrease in other general and administrative expenses.
Corporate and Other
Our Corporate and Other segment consists of our BXO and other corporate services groups. These groups support our operating segments, and the cost of services directly supporting the operating segments are allocated to those operating segments on a cost of service basis. Enterprise-focused Corporate and Other expenses that are not incurred in direct support of the operating segments are kept unallocated within our Corporate and Other segment.
The following table summarizes our Corporate and Other segment’s results for the periods indicated (in thousands):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to
September 30,
2021
  
January 1, 2021
to
March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Fee income
  
$
—  
  
$
—  
  $—   $2,471 $2,514
Net interest expense
  
 
(6,720
 
 
(13,287
  (7,744  (385  (4,605
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest and other expense
  
 
(6,720
 
 
(13,287
  (7,744  2,086  (2,091
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total expenses
  
 
28,672
  
 
64,669
   18,683  9,615  32,837
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Other, net
  
 
10,205
  
 
8,019
   (9,464  (2,470  (2,514
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
NET LOSS
  
$
(25,187
 
$
(69,937
 $(35,891 $(9,999 $(37,442
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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In the table below is a summary of the components of our Corporate and Other segment’s total expenses for the periods indicated (in thousands):
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to
September 30,
2021
  
January 1, 2021
to
March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Salaries and bonuses
  
$
35,944
  
$
82,973
  $22,779 $16,566 $44,022
Other salary related expenses
  
 
3,379
  
 
5,611
   3,306  1,196  3,011
Shared services - payroll allocations
  
 
(19,520
 
 
(43,954
  (18,657  (15,867  (29,356
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total salaries, benefits and related expenses
  
 
19,803
  
 
44,630
   7,428  1,895  17,677
 
Communication and data processing
  
 
4,368
  
 
8,208
   3,015  1,300  4,141
Professional fees
  
 
488
  
 
8,905
   10,334  8,515  15,440
Other general and administrative expenses
  
 
8,141
  
 
11,621
   1,481  873  3,317
Shared services - general and administrative allocations
  
 
(5,404
 
 
(10,669
  (3,694  (3,402  (9,080
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total general and administrative expenses
  
 
7,593
  
 
18,065
   11,136  7,286  13,818
 
Occupancy, equipment rentals and other office related expenses
  
 
1,276
  
 
1,974
   119  434  1,342
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total expenses
  
$
28,672
  
$
64,669
  $18,683 $9,615 $32,837
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
For the three months ended September 30, 2021 (Successor) versus the three months ended September 30, 2020 (Predecessor)
Net loss increased $15.2 million or 151.9% as a result of the following:
Total interest and other expense increased $8.8 million or 422.1% primarily as a result of interest expense related to the senior unsecured notes issued in November 2020.
Salaries, benefits, and related expenses, net of taxes payableallocations, increased $17.9 million or 945.0% primarily due to an increase in average headcount, bonus compensation, and excluding deferred underwriting commissions)cost allocations related to complete our initialthe Business Combination, offset partially by an increase in shared services allocations. Average headcount for the three months ended September 30, 2021 was 470 compared to 289 for the comparable 2020 period. During the three months ended September 30, 2021, additional on-going expenses of $6.0 million were recognized for the RSUs issued at the time of the Business Combination. ToThese increases were partially offset by an increase in allocations, as a portion of the extent that our ordinary sharesBusiness Combination expenses were allocated to each segment.
For the nine months ended September 30, 2021 (Successor and Predecessor) versus the nine months ended September 30, 2020 (Predecessor)
Net loss increased $68.4 million or debt182.6% as a result of the following:
Total interest and other expense increased $18.9 million or 905.8% as a result of interest expense related to the senior unsecured notes issued in November 2020.
Salaries, benefits, and related expenses, net of allocations, increased $34.4 million or 194.5% primarily due to an increase in average headcount, bonus compensation and cost allocations related to the Business Combination. Average headcount for the nine months ended September 30, 2021 was 413 compared to 274
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for the 2020 period. During the second quarter of 2021, one-time initial and accelerated Replacement and Earnout Right RSU expense of $15.3 million was recognized. Additional on-going expenses of $9.2 million were recognized for the RSUs issued at the time of the Business Combination. These increases were partially offset by an increase in allocations, as a portion of the Business Combination expenses were allocated to each segment.
General and administrative expenses, net of shared services allocations, increased $15.4 million or 111.3% due to an increase in communications and data processing, higher professional fees, including legal and accounting advisory fees, related to the Business Combination, offset slightly by an increase in shared services allocations.
NON-GAAP FINANCIAL MEASURES
The Company’s management evaluates performance of the Company through the use of certain non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, Adjusted Diluted Earnings per Share and Tangible Book Equity per Diluted Share.
The presentation of non-GAAP measures is used to enhance the investors’ understanding of certain aspects of our financial performance. This discussion is not meant to be considered in wholeisolation, superior to, or as a substitute for the directly comparable financial measures prepared in part,accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). These key financial measures provide an additional view of our performance over the long-term and provide useful information that we use in order to maintain and grow our business.
These non-GAAP financial measures should not be considered as considerationan alternate to complete(i) net (loss) income or any other performance measures determined in accordance with GAAP or (ii) operating cash flows determined in accordance with GAAP. Adjusted Net Income and Adjusted EBITDA have important limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our initial Business Combination, the remaining proceeds heldresults as reported under GAAP. Some of these limitations of this metric are:
cash expenditures for future contractual commitments;
cash requirements for working capital needs;
cash requirements for certain tax payments; and
all non-cash income/expense items reflected in the Trust Account willConsolidated Statements of Cash Flows.
Because of these limitations, Adjusted Net Income and Adjusted EBITDA should not be usedconsidered as working capitalmeasures of discretionary cash available to financeus to invest in the growth of our business or distribute to shareholders. We compensate for these limitations by relying primarily on our GAAP results and using our non-GAAP financial measures only as a supplement. Users of our consolidated financial statements are cautioned not to place undue reliance on our non-GAAP financial measures.
Adjusted Net Income
We define Adjusted Net Income as consolidated net income adjusted for:
1.
Change in fair value of loans and securities held for investment due to assumption changes
2.
Amortization and other impairments of intangible assets
3.
Share based compensation
4.
Change in fair value of deferred purchase price obligations (including earnouts and TRA obligations), warrant liability, and minority investments
5.
Certain non-recurring costs
6.
Pro-forma tax provision attributable to noncontrolling interest
7.
Pro-forma tax effects of adjustments
Management considers Adjusted Net Income important in evaluating our Company as a whole. This supplemental metric is utilized by our management team to assess the underlying key drivers and operational performance of the
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continuing operations of the targetbusiness. In addition, analysts, investors, and creditors may use this measure when analyzing our operating performance and comparability to peers. Adjusted Net Income is not a presentation made in accordance with GAAP, and our definition and use of this measure may vary from other companies in our industry.
Adjusted Net Income provides visibility to the underlying operating performance by excluding the impact of certain items that management does not believe are representative of our core earnings. Adjusted Net Income may also include other adjustments, as applicable based upon facts and circumstances, consistent with our intent of providing a supplemental means of evaluating our operating performance.
Adjusted EBITDA
We define Adjusted EBITDA as net income adjusted for:
1.
Taxes
2.
Interest on non-funding debt
3.
Depreciation
4.
Change in fair value of loans and securities held for investment due to assumption changes
5.
Amortization and other impairments of intangible assets
6.
Equity based compensation
7.
Change in fair value of deferred purchase price obligations (including earnouts and TRA obligations), warrant liability and minority investments
8.
Certain non-recurring costs
We evaluate the performance of our company and segments through the use of Adjusted EBITDA as a non-GAAP measure. Management considers Adjusted EBITDA important in evaluating our business segments and the Company as a whole. Adjusted EBITDA is a supplemental metric utilized by our management team to assess the underlying key drivers and operational performance of the continuing operations of the business and our operating segments. In addition, analysts, investors, and creditors may use these measures when analyzing our operating performance. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of this measure and term may vary from other companies in our industry.
Adjusted EBITDA provides visibility to the underlying operating performance by excluding the impact of certain items that management does not believe are representative of our core earnings. Adjusted EBITDA may also include other adjustments, as applicable based upon facts and circumstances, consistent with our intent of providing a supplemental means of evaluating our operating performance.
Adjusted Diluted Earnings Per Share
We define Adjusted Diluted Earnings Per Share as Adjusted Net Income (defined above) divided by the weighted average diluted shares, which includes issued and outstanding Class A Common Stock plus the Class A LLC Units owned by the noncontrolling interest on an if-converted basis.
Analysts, investors, and creditors may use this measure when analyzing our operating performance and comparability to peers. Adjusted Net Income is not a presentation made in accordance with GAAP, and our definition and use of this measure may vary from other companies in our industry.
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The following table provides a reconciliation of net income to Adjusted Net Income and Adjusted EBITDA (in thousands, except for share data):
Reconciliation to GAAP
   
For the three
months ended
September 30,
2021
  
April 1, 2021 to
September 30,
2021
  
January 1, 2021
to
March 31, 2021
  
For the three
months ended
September 30,
2020
  
For the nine
months ended
September 30,
2020
 
   
Successor
  
Predecessor
 
Reconciliation of Net income to Adjusted Net Income and Adjusted EBITDA
       
Net income
  
$
50,110
  
$
35,286
  $124,320 $241,611 $345,490
Adjustments for:
       
Change in fair value of loans and securities held for investment due to assumption changes
(1)
  
 
28,760
  
 
48,803
   2,042  (16,753  53,908
Amortization and impairment of intangibles
  
 
13,457
  
 
26,914
   629  601  1,889
Change in fair value of deferred purchase price liabilities
(2)
  
 
1,273
  
 
3,893
   30  (258  (111
Change in fair value of warrant liability
  
 
(9,919
 
 
(8,627
  —     —     —   
Equity based compensation
  
 
10,626
  
 
21,268
   —     —     —   
Change in fair value of minority investments
(3)
  
 
(401
 
 
(274
  9,464  —     —   
Certain non-recurring costs
(4)
  
 
2,602
  
 
46,080
   6,719  7,893  12,547
Tax effect on net income attributable to noncontrolling interest
(5)(6)
  
 
(7,257
 
 
(2,984
  (31,482  (62,221  (88,663
Tax effect of adjustments attributable to noncontrolling interest
(5)
  
 
(10,585
 
 
(29,113
  (4,910  2,214  (17,741
Tax effect of adjustments attributable to controlling interest
(5)
  
 
(4,057
 
 
(9,360
  N/A   N/A   N/A 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Adjusted Net Income
  
$
74,609
  
$
131,886
  $106,812 $173,087 $307,319
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Effective income taxes
  
 
26,339
  
 
46,983
   37,529  60,815  107,978
Depreciation
  
 
2,519
  
 
4,800
   2,163  1,776  5,342
Interest expense on non-funding debt
  
 
6,842
  
 
13,536
   7,706  7  3,515
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Adjusted EBITDA
  
$
110,309
  
$
197,205
  $154,210 $235,685 $424,154
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
GAAP PER SHARE MEASURES
       
Net income attributable to controlling interest
  
$
21,384
  
$
23,649
   N/A   N/A   N/A 
Weighted average shares outstanding
  
 
59,861,171
  
 
59,871,386
   N/A   N/A   N/A 
Basic earnings per share
  
 
0.36
  
 
0.39
   N/A   N/A   N/A 
If-converted method net income
  
$
42,861
  
$
33,125
 
 $119,859 $246,288 $367,373
Weighted average diluted shares
  
 
191,161,431
  
 
191,180,610
   191,200,000  191,200,000  191,200,000
Diluted earnings per share
  
$
0.22
  
$
0.17
  $0.63 $1.29 $1.92
 
NON-GAAP PER SHARE MEASURES
       
Adjusted Net Income
  
$
74,609
  
$
131,886
  $106,812 $173,087 $307,319
Weighted average diluted shares
  
 
191,161,431
  
 
191,180,610
   191,200,000  191,200,000  191,200,000
Adjusted Diluted Earnings per Share
  
$
0.39
  
$
0.69
  $0.56 $0.91 $1.61
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Book equity
  
$
2,432,174
   
$
2,432,174
   $844,386  $1,014,007  $1,014,007
Ending diluted shares
  
 
189,425,808
   
 
189,425,808
    191,200,000   191,200,000   191,200,000
Book Equity per Diluted Share
  
$
12.84
   
$
12.84
   $4.42  $5.30  $5.30
(1)
Change in Fair Value of Loans and Securities Held for Investment due to Assumption Changes -
This adjustment relates to changes in the significant market or model input components of the fair value for loans and securities which are held for investment, net of related liabilities. We include an adjustment for the significant market or model input components of the change in fair value because, while based on real observable and/or predicted changes in drivers of the valuation of assets, they may be mismatched in any given period with the actual change in the underlying economics or when they will be realized in actual cash flows. We do not record this change as a separate component in our financial records, but have generated this information based on modeling and certain assumptions. Changes in Fair Value of Loans and Securities Held for Investment due to Assumption Changes includes changes in fair value for the following mortgage servicing rights, loans held for investment, and related liabilities:
1.
Reverse mortgage loans held for investment, subject to HMBS related obligations, at fair value;
2.
Mortgage loans held for investment, subject to nonrecourse debt, at fair value;
3.
Mortgage loans held for investment, at fair value;
4.
Debt Securities;
5.
Mortgage servicing rights, at fair value;
6.
HMBS related obligations, at fair value; and
7.
Nonrecourse debt, at fair value.
The adjustment for changes in fair value of loans and securities held for investment due to assumption changes is calculated based on changes in fair value associated with the above assets and liabilities calculated in accordance with GAAP, excluding the period-to-date estimated impact of the change in fair value attributable to current period additions and the change in fair value attributable to portfolio run-off, net of hedge gains and losses and any securitization expenses incurred in securitizing our mortgage loans held for investment, subject to nonrecourse debt. This adjustment represents changes in accounting estimates that are measured in accordance with US GAAP. Actual results may differ from those estimates and assumptions due to factors such as changes in the economy, interest rates, secondary market pricing, prepayment assumptions, home prices or businesses, make other acquisitionsdiscrete events affecting specific borrowers, and pursuesuch differences could be material. Accordingly, this number should be understood as an estimate and the actual adjustment could vary if our growth strategies.

We intend to usemodeling is incorrect.

(2)
Change in Fair Value of Deferred Purchase Price Obligations
- We are obligated to pay contingent consideration to sellers of acquired businesses based on future performance of acquired business (Earnouts) as well as realization of tax benefits from the Business Combination (TRA Obligation). Change in fair value of deferred purchase price obligations represents impacts to revenue or expense due to changes in the estimated fair value of expected payouts as a result of changes in various assumptions, including future performance, timing and realization of tax benefits and discount rates.
(3)
Change in Fair Value of Minority Investments
- The adjustment to minority equity investments and debt investments is based on the change in fair value, which is an item that management believes should be excluded when discussing our ongoing and future operations. Although the change in fair value of minority equity investments and debt investments is a recurring part of our business, we believe the adjustment is appropriate as the fair value fluctuations from period to period make it difficult to analyze core-operating trends.
(4)
Certain non-recurring costs relate to various one-time expenses and adjustments that management believes should be excluded as these do not relate to a recurring part of the core business operations. These items include certain one-time charges including estimated settlements for legal and regulatory matters, acquisition related expenses, share based compensation associated with the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination, and other one-time charges. The Successor period of April 1, 2021 to September 30, 2021 include $38.6 million of non-recurring share based compensation primarily resulting from the immediate vesting portion of the Replacement RSU awards.
(5)
We applied a 26% effective tax rate to pre-tax income and adjustments (excluding change in fair value of warrant liability, which is a permanent book/tax difference) for the respective period to determine the tax effect of net income (loss) and adjustments attributable to the noncontrolling interests and adjustments.
(6)
This is a component in the numerator of diluted net loss per share. See Note 33 - Earnings Per Share.
Liquidity and Capital Resources
Impact of the Business Combination
FoA is a holding company and has no material assets other than its direct and indirect ownership of Class A LLC Units. FoA has no independent means of generating revenue. FoA Equity may make distributions to its holders of Class A LLC Units, including FoA and the Continuing Unitholders, in an amount sufficient to cover all applicable taxes at assumed tax rates, payments under the TRAs and dividends, if any, declared by it. Deterioration in the financial condition, earnings or cash flow of FoA Equity and its subsidiaries for any reason could limit or impair their ability to pay taxes to the extent the interest earned on the Trust Account is not sufficient to pay our taxes.

In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). Except for the foregoing,such distributions. Additionally, the terms of our financing arrangements, including financing lines of credit and senior notes, contain covenants that may restrict FoA Equity and its subsidiaries from paying such Working Capital Loans, if any, have not been determineddistributions,

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subject to certain exceptions. In addition, one of our subsidiaries, FAM, is subject to various regulatory capital and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. To date, we had no borrowings under the Working Capital Loans.


In connection with our assessment of going concern considerations in accordance with Financial Accounting Standards Board (the “FASB”) Accounting Standards Update 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continueminimum net worth requirements as a Going Concern,” management has determined that in lightresult of the upcoming Business Combination, whereby the Company becametheir mortgage origination and servicing activities. Further, FoA Equity is generally prohibited under Delaware law from making a wholly owned subsidiary of New Pubco, Replay will continuedistribution to operate as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after April 8, 2021. Refer to Note 9 - Subsequent Events for further detail on the upcoming Business Combination.

Related Party Transactions

Founder Shares and Private Placement Warrants

In December 2018, our Sponsor purchased 7,187,500 ordinary shares, par value $0.0001 per share (“Founder Shares”), for an aggregate price of $25,000. In March 2019, our Sponsor transferred to our independent directors an aggregate of 90,000 Founder Shares at the same price originally paid for such shares. Our Sponsor agreed to forfeit up to 937,500 Founder Sharesmember to the extent that, at the over-allotment option wastime of the distribution, after giving effect to the distribution, liabilities of FoA Equity (with certain exceptions) exceed the fair value of its assets. Subsidiaries of FoA Equity are generally subject to similar legal limitations on their ability to make distributions to FoA Equity.

Our cash flows from operations, borrowing availability and overall liquidity are subject to risks and uncertainties. We may not exercisedbe able to obtain additional liquidity on reasonable terms, or at all. Additionally, our liquidity and our ability to meet our obligations and to fund our capital requirements are dependent on our future financial performance, which is subject to general economic, financial, and other factors that are beyond our control. Accordingly, our business may not generate sufficient cash flow from operations and future borrowings may not be available from additional indebtedness or otherwise to meet our liquidity needs. Although we have no specific current plans to do so, if we decide to pursue one or more significant acquisitions, we may incur additional debt or sell additional equity to finance such acquisitions, which would result in fulladditional expenses or dilution.
Tax Receivable Agreements
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 by the underwriters.Company to the TRA Parties 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 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 forfeiture wastax basis adjustments upon sales or exchanges of units for shares of Class A Common Stock and certain distributions with respect to be adjustedClass A LLC Units may also decrease gains (or increase losses) on future dispositions of certain assets to the extent that the over-allotment option was not exercised in fulltax basis is allocated to those assets. Actual tax benefits realized by the underwriters so thatCompany may differ from tax benefits calculated under the Founder Shares would represent 20.0% of our issued and outstanding shares after our Initial Public Offering. On April 5, 2019, the underwriters fully exercised their over-allotment option which closed simultaneously with our Initial Public Offering; thus, the 937,500 Founder Shares were no longer subject to forfeiture.

Our Sponsor and our officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of our initial Business Combination or (B) subsequent to our initial Business Combination, (x) if the last reported sale priceTax Receivable Agreements as a result of the ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial Business Combination, or (y) the date on which we complete a liquidation, merger, amalgamation, share exchange, reorganization or other similar transaction that results in alluse of our shareholders having the right to exchange their ordinary shares for cash, securities or other property.

Simultaneously with the closing of our Initial Public Offering on April 8, 2019, we sold 7,750,000 Private Placement Warrants to our Sponsor at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $7.75 million. Each Private Placement Warrant is exercisable for one ordinary share at a price of $11.50 per share. A portion of the net proceeds from the Private Placement was added to the proceeds from our Initial Public Offering heldcertain assumptions in the Trust Account. If we do not complete our initial Business Combination by April 8, 2021,TRAs, including the Private Placement Warrants will expire worthless. use of an assumed weighted average state and local income tax rate to calculate tax benefits.

The Private Placement Warrants are non-redeemable and exercisable on a cashless basis so long as they are held by our Sponsor or its permitted transferees.

Our Sponsor and our officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of our initial Business Combination.


Related Party Loans

On December 1, 2018, our Sponsor agreed to loan us an aggregate of up to $250,000 to cover expenses related to our Initial Public Offering pursuant to an unsecured promissory note. This loan was non-interest bearing and payable on the earlier of June 30, 2019 or the completion of our Initial Public Offering. We borrowed $250,000payments that FoA may make under the note, and fully repaid on May 6, 2019.

In additionTRAs are expected to be substantial. The payments under the promissory note, we borrowed approximately $2,000 from a related party for general and administrative expenses. We repaid this amount on May 7, 2019.

In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, butTRAs are not obligated to, loan us Working Capital Loans. If we complete a Business Combination, we would repayconditioned upon continued ownership of FoA or FoA Equity by the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. ExceptContinuing Unitholders.

The Company accounts for the foregoing, the termseffects of such Working Capital Loans, if any, have not been determinedthese increases in tax basis and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. To date, we had no borrowingsassociated payments under the Working Capital Loans.

Reimbursement

Our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or our or any of their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.

Commitments and Contingencies

Registration Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, and any ordinary shares underlying such securities, are entitled to registration rights pursuant to a registration rights agreement entered into on April 3, 2019. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. We will bear the expenses incurredTRAs arising from exchanges in connection with the filing of any such registration statements.


Underwriting Agreement

We granted the underwriters a 45-day option from April 3, 2019 to purchase up to 3,750,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On April 5, 2019, the underwriters fully exercised their over-allotment option which closed simultaneously with our Initial Public Offering.

Except on the 2,500,000 Affiliate Units sold in our Initial Public Offering, the underwriters were entitled to an underwriting discount of $0.20 per Unit, or $5.25 million in the aggregate, paid upon the closing of our Initial Public Offering. In addition, $0.35 per Unit, or approximately $9.2 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination subject toas follows:

records an increase in deferred tax assets for the termsestimated income tax effects of the underwriting agreement.

Critical Accounting Policiesincreases in tax basis based on enacted federal and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilitiesstate tax rates at the date of the financial statements,exchange;

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; and income
initial measurement of the obligations is at fair value on the acquisition date. Subsequently, the liability will 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 exchanges subsequent to the Business Combination, as they occur, 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.
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As of September 30, 2021, the Company had a liability of $35.1 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.
Sources and Uses of Cash
Our primary sources of funds for liquidity include: (i) payments received from sale or securitization of loans; (ii) payments from the liquidation or securitization of our outstanding participating interests in loans; and (iii) advance and warehouse facilities, other secured borrowings and the unsecured senior notes.
Our primary uses of funds for liquidity include: (i) funding of borrower advances and draws on outstanding loans; (ii) originations of loans; (iii) payment of operating expenses; (iv) repayment of borrowings and repurchases or redemptions of outstanding indebtedness, and (v) distributions to shareholders for the estimated taxes on pass-through taxable income.
Our cash flows from operating activities, as well as capacity through existing facilities, provide adequate resources to fund our anticipated ongoing cash requirements. We rely on these facilities to fund operating activities. As the facilities mature, we anticipate renewal of these facilities will be achieved. Future debt maturities will be funded with cash and cash equivalents, cash flow from operating activities and, if necessary, future access to capital markets. We continue to optimize the use of balance sheet cash to avoid unnecessary interest carrying costs.
Cash Flows
As a result of the Business Combination, certain compensation expenses were considered to have been incurred “on the line”. These “on the line” expenses resulted in a decrease in cash on the opening balance sheet as of April 1, 2021 when compared to the ending balance as of March 31, 2021. For the Successor period from April 1, 2021 to September 30, 2021, the beginning cash balance reflects the decrease in cash due to these expenses and, as such, these expenses have been appropriately excluded from the reconciliation to the ending cash balance.
The following table presents net cash provided by operating activities, investing activities and financing activities for the period from April 1, 2021 to September 30, 2021 (Successor), January 1, 2021 to March 31, 2021 (Predecessor), and for the nine months ended September 30, 2020 (Predecessor):
   
April 1, 2021 to

September 30,
2021
   
January 1, 2021

to

March 31, 2021
   
For the nine
months ended
September 30,
2020
 
   
Successor
   
Predecessor
 
Net cash (used in) provided by operating activities
  
 
(72,613
   118,043   (376,772
Net cash used in investing activities
  
 
(710,072
   (312,047   (995,201
Net cash provided by financing activities
  
 
672,835
    307,695   1,503,052
Our cash decreased $109.9 million for the six months from April 1, 2021 to September 30, 2021 (Successor), increased $113.7 million for the three months from January 1, 2021 to March 31, 2021 and increased $131.1 million for the nine months ended September 30, 2020 (Predecessor). The decrease in cash flows for the nine months ended September 30, 2021 (Successor and Predecessor) period was primarily driven by Business Combination related expenses, payments on our outstanding HMBS liabilities, net of new HMBS issuances, and purchases and originations of mortgage loans held for investment, net of proceeds and payments received on mortgage loans held for investment. These cash outflows were partially offset by proceeds on sales of mortgage loans held for sale, net of origination activity and net proceeds from other financing lines of credit.
Operating Cash Flow
Net cash (used in) provided by operating activities totaled $(72.6) million for the six months from April 1, 2021 to September 30, 2021 (Successor), $118.0 million for the three months from January 1, 2021 to March 31, 2021 and $(376.8) million for the nine months ended September 30, 2020 (Predecessor).
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Cash flows from operating activities improved $422.1 million for the nine months ended September 30, 2021 (Successor and Predecessor) compared to the nine months ended September 30, 2020 (Predecessor). The improvement was primarily attributable to higher proceeds from sale of mortgage loans held for sale, net of cash used for originations. Proceeds from the sale of mortgage loans held for sale were $22,727.7 million and $19,473.9 million during the periods reported. Actual resultsnine months ended September 30, 2021 (Successor and Predecessor) and for the nine months ended September 30, 2020 (Predecessor), respectively. Cash used for originations of residential mortgage loans was $22,715.6 million and $20,256.7 million as of the nine months ended September 30, 2021 (Successor and Predecessor) and for the nine months ended September 30, 2020 (Predecessor), respectively.
Investing Cash Flow
Net cash used in investing activities totaled $710.1 million for the six months from April 1, 2021 to September 30, 2021 (Successor), $312.0 million for the three months from January 1, 2021 to March 31, 2021 and $995.2 million for the nine months ended September 30, 2020 (Predecessor).
The increase of $26.8 million in cash used in our investing activities during the nine months ended September 30, 2021 (Successor and Predecessor), compared to the nine months ended September 30, 2020 (Predecessor), was primarily attributable to lower proceeds from the sale of debt securities and higher investments in acquisitions, offset partially by lower purchases/advances net of proceeds/payments on loans held for investment. We originated $3,317.2 million and $2,404.6 million of reverse mortgage loans for the nine months ended September 30, 2021 (Successor and Predecessor) and for the nine months ended September 30, 2020 (Predecessor), respectively. These amounts were partially offset by higher proceeds and payments received on mortgage loans held for investment and mortgage loans held for investment, subject to nonrecourse debt. Reverse mortgage loans originated consist of initial reverse mortgage loan borrowing amounts, and additional participations and accretions of reverse mortgage loans, including subsequent borrower draws, mortgage insurance premiums, service fees and other advances that we are able to subsequently pool into a security.
Financing Cash Flow
Net cash provided by financing activities totaled $672.8 million for the six months from April 1, 2021 to September 30, 2021 (Successor), $307.7 million for the three months from January 1, 2021 to March 31, 2021 and $1,503.1 million for the nine months ended September 30, 2020 (Predecessor).
The decrease of $522.5 million in cash provided by our financing activities during the nine months ended September 30, 2021 (Successor and Predecessor) compared to the nine months ended September 30, 2020 (Predecessor) period was primarily driven by a $513.6 million decrease in proceeds from issuance, net of payments on nonrecourse debt, including HMBS obligations. In addition, proceeds net of payments on other lines of credit and notes payable of $266.7 million were mostly offset by net distributions and redemption of the CRNCI in the amount of $275.6 million.
Financial Covenants
Our credit facilities contain various financial covenants, which primarily relate to required tangible net worth amounts, liquidity reserves, leverage ratio requirements, and profitability requirements. These covenants are measured at our operating subsidiaries. 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 September 30, 2021, the Company had obtained waivers for these covenant violations and was in compliance with all other financial covenants.
Seller/Servicer Financial Requirements
We are also subject to net worth, capital ratio and liquidity requirements established by the Federal Housing Finance Agency (“FHA”) for Fannie Mae and Freddie Mac Seller/Servicers, and Ginnie Mae for single family issuers. In both cases, these requirements apply to our operating subsidiaries, FAM and FAR, which are licensed sellers/servicers of the respective GSEs. As of September 30, 2021, we were in compliance with or had received waivers for all of our seller/servicer financial requirements for FHA and Ginnie Mae. For additional information see Note 25 - Liquidity and Capital Requirements within the interim unaudited consolidated financial statements.
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Minimum Net Worth
The minimum net worth requirement for Fannie Mae and Freddie Mac is defined as follows:
Base of $2.5 million plus 25 basis points of outstanding UPB for total loans serviced.
Tangible Net Worth comprises of total equity less goodwill, intangible assets, affiliate receivables and certain pledged assets.
The minimum net worth requirement for Ginnie Mae is defined as follows:
The sum of (i) base of $2.5 million plus 35 basis points of the issuer’s total single-family effective outstanding obligations, and (ii) base of $5 million plus 1% of the total effective HMBS outstanding obligations.
Tangible Net Worth is defined as total equity less goodwill, intangible assets, affiliate receivables and certain pledged assets. Effective for fiscal year 2020, under the Ginnie Mae MBS Guide, the issuers will no longer be permitted to include deferred tax assets when computing the minimum net worth requirement.
Minimum Capital Ratio
In addition to the minimum net worth requirement, we are also required to hold a ratio of Tangible Net Worth to Total Assets (excluding HMBS securitizations) greater than 6%.
FAR received a permanent waiver for the minimum outstanding capital requirements from Ginnie Mae.
Minimum Liquidity
The minimum liquidity requirement for Fannie Mae and Freddie Mac is defined as follows:
3.5 basis points of total Agency Mortgage Servicing, plus
Incremental 200 basis points times the sum of the following:
The total UPB of nonperforming (90 or more days delinquent) Agency Mortgage Servicing that is not in forbearance, plus
The total UPB of nonperforming (90 or more days delinquent) Agency Mortgage Servicing that is in forbearance and which were delinquent at the time it entered forbearance, plus
30% of the UPB of nonperforming (90 or more days delinquent) Agency Mortgage Servicing that is in forbearance and which were current at the time it entered forbearance
This liquidity must only be maintained to the extent this sum exceeds 6% of the total Agency Mortgage Servicing UPB.
Allowable assets for liquidity may include: cash and cash equivalents (unrestricted), available for sale or held for trading investment grade securities (e.g., Agency MBS, Obligations of GSEs, US Treasury Obligations); and unused/available portion of committed servicing advance lines.
The minimum liquidity requirement for Ginnie Mae is defined as follows:
Maintain liquid assets equal to the greater of $1.0 million or 10 basis points of our outstanding single-family MBS.
Maintain liquid assets equal to at least 20% of our net worth requirement for HECM MBS.
Summary of Certain Indebtedness
The following description is a summary of certain material provisions of our outstanding indebtedness. As of September 30, 2021, our debt obligations were approximately $16.4 billion. This summary does not restate the terms of our outstanding indebtedness in its entirety, nor does it describe all of the material terms of our indebtedness.
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Warehouse Lines of Credit
Mortgage facilities
As of September 30, 2021, our Mortgage Originations segment had $3.6 billion in warehouse lines of credit collateralized by first lien mortgages with $1.8 billion aggregate principal amount drawn through 14 funding facility arrangements with 13 active lenders. These facilities are generally structured as master repurchase agreements under which ownership of the related eligible loans is temporarily transferred to a lender or as participation arrangements pursuant to which the lender acquires a participation interest in the related eligible loans. The funds advanced to us are generally repaid using the proceeds from the sale or securitization of the loans to, or pursuant to, programs sponsored by Fannie Mae, Freddie Mac, and Ginnie Mae or to private secondary market investors, although prior payment may be required based on, among other things, certain breaches of representations and warranties or other events of default.
When we draw on these facilities, we generally must transfer and pledge eligible loans to the lender, and comply with various financial and other covenants. The facilities generally have one-year terms and expire at various times during 2021 through 2023. Under our facilities, we generally transfer the loans at an advance rate less than the principal balance or fair value of the loans (the “haircut”), which serves as the primary credit enhancement for the lender. Since the advances to us are generally for less than 100% of the principal balance of the loans, we are required to use working capital to fund the remaining portion of the principal balance of the loans. The amount of the advance that is provided under the various facilities ranges from 86% to 100% of the market value or principal balance of the loans. Upon expiration, management believes it will either renew its existing warehouse facilities or obtain sufficient additional lines of credit. The interest rate on all outstanding facilities is LIBOR plus applicable margin.
The following table presents additional information about our Mortgage Originations segment’s warehouse facilities as of September 30, 2021 (in thousands):
Mortgage Warehouse Facilities
  
Maturity Date
  
Total Capacity
   
September 30, 2021
 
Committed
  October 2021 - August 2022  $975,000  
$
694,765
 
Uncommitted
  October 2021 - March 2022   2,600,000   
 
1,088,778
 
    
 
 
   
 
 
 
Total mortgage warehouse facilities
  $3,575,000  
$
1,783,543
 
    
 
 
   
 
 
 
Reverse mortgage facilities
As of September 30, 2021, our Reverse Originations segment had $1.2 billion in warehouse lines of credit collateralized by first lien mortgages with $0.6 billion million aggregate principal amount drawn through 7 funding facility arrangements with 7 active lenders. These facilities are generally structured as master repurchase agreements under which ownership of the related eligible loans is temporarily transferred to a lender, or as participation arrangements pursuant to which the lender acquires a participation interest in the related eligible loans. The funds advanced to us are generally repaid using the proceeds from the sale or securitization of the loans to, or pursuant to, programs sponsored by Ginnie Mae or private secondary market investors, although prior payment may be required based on, among other things, certain breaches of representations and warranties or other events of default.
When we draw on these warehouse lines of credit, we generally must transfer and pledge eligible loans, and comply with various financial and other covenants. The facilities generally have one-year terms and expire at various times during 2021 through 2022. Under our facilities, we generally transfer the loans at a haircut which serves as the primary credit enhancement for the lender. Since the advances to us are generally for less than the acquisition cost of the loans, we are required to use working capital to fund the remaining portion of the funding required for the loan. The amount of the advance that is provided under the various facilities ranges from 90 to 104% of the market value or principal balance of the loans. Upon expiration, management believes it will either renew its existing facilities or obtain sufficient additional lines of credit. The interest rate on all outstanding facilities is LIBOR plus applicable margin.
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The following table presents additional information about our Reverse Origination segment’s warehouse facilities as of September 30, 2021 (in thousands):
Reverse Warehouse Facilities
  
Maturity Date
  
Total Capacity
   
September 30, 2021
 
Committed
  October 2021 - June 2022  $475,000  
$
242,170
 
Uncommitted
  December 2021 - August 2022   725,000  
 
378,247
 
    
 
 
   
 
 
 
Total reverse warehouse facilities
  $1,200,000  
$
620,417
 
    
 
 
   
 
 
 
Commercial loan facilities
As of September 30, 2021, our Commercial Originations segment had $0.5 billion in warehouse lines of credit collateralized by first lien mortgages and encumbered agricultural loans with $0.1 billion aggregate principal amount drawn through 4 funding facility arrangements with 4 active lenders. These facilities are either structured as master repurchase agreements under which ownership of the related eligible loans is temporarily transferred to a lender, as loan and security agreements pursuant to which the related eligible assets are pledged as collateral for the loan from the related lender or are collateralized by first lien loans or crop loans. The funds advanced to us are generally repaid using the proceeds from the sale or securitization of the loans to private secondary market investors, although prior payment may be required based on, among other things, certain breaches of representations and warranties or other events of default.
When we draw on these facilities, we must transfer and pledge eligible loan collateral, and comply with various financial and other covenants. The facilities generally have one-year terms and expire at various times during 2022 through 2023. Under our facilities, we generally transfer the loans at a haircut, which serves as the primary credit enhancement for the lender. One of our warehouse lines of credit is also guaranteed by our wholly-owned subsidiary, Finance of America Holdings LLC (“FAH”), the parent holding company to the commercial lending business. Since the advances to us are generally for less than 100% of the principal balance of the loans, we are required to use working capital to fund the remaining portion of the principal balance of the loans. The amount of the advance that is provided under the various facilities generally ranges from 70% to 85% of the principal balance of the loans. Upon expiration, management believes it will either renew its existing facilities or obtain sufficient additional lines of credit. The interest rate on all outstanding facilities is LIBOR plus applicable margin.
The following table presents additional information about our Commercial Origination segment’s warehouse facilities as of September 30, 2021 (in thousands):
Commercial Warehouse Facilities
  
Maturity Date
  
Total Capacity
   
September 30, 2021
 
Committed
  February 2022 - August 2022  $360,000  
$
148,166
 
Uncommitted
  February 2022 - November 2023   150,000   
 
1,621
 
    
 
 
   
 
 
 
Total commercial warehouse facilities
  $510,000  
$
149,787
 
    
 
 
   
 
 
 
General
With respect to each of our warehouse facilities, we pay certain up-front and/or ongoing fees which can be based on our utilization of the facility. In some instances, loans held by a lender for a contractual period exceeding 45 to 60 calendar days after we originate such loans are subject to additional fees and interest rates.
Certain of our warehouse facilities contain sub-limits for “wet” loans, which allow us to finance loans for a minimal period of time prior to delivery of the note collateral to the lender. “Wet” loans are loans for which the collateral custodian has not yet received the related loan documentation. “Dry” loans are loans for which all the sale documentation has been completed at the time of funding. Wet loans are held by a lender for a contractual period, typically between five and ten business days and are subject to a reduction in the advance amount.
Interest is generally payable at the time the loan is settled off the line or monthly in arrears and principal is payable upon receipt of loan sale proceeds or transfer of a loan to another line of credit. The facilities may also require the outstanding principal to be repaid if a loan remains on the line longer than a contractual period of time, which ranges from 45 to 365 calendar days.
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Interest on our warehouse facilities vary by facility and may depend on the type of asset that is being financed. Interest is based on an applicable margin over the LIBOR or the prime rate as illustrated in the tables in this section above.
Loans financed under certain of our warehouse facilities are subject to changes in market valuation and margin calls. The market value of our loans depends on a variety of economic conditions, including interest rates and market demand for loans. Under certain facilities, if the market value of the underlying loans declines below the outstanding asset balance on such loans or if the UPB of such loans falls below a threshold related to the repurchase price for such loans, we could materially differbe required to (i) repay cash in an amount that cures the margin deficit or (ii) supply additional eligible assets or rights as collateral for the underlying loans to compensate for the margin deficit. Certain warehouse facilities allow for the remittance of cash back to us if the value of the loan exceeds the principal balance.
Our warehouse facilities require each of our borrowing subsidiaries to comply with various customary operating and financial covenants, including, without limitation, the following tests:
minimum tangible or adjusted tangible net worth;
maximum leverage ratio of total liabilities (which may include off-balance sheet liabilities) or indebtedness to tangible or adjusted tangible net worth;
minimum liquidity or minimum liquid assets; and
minimum net income or pre-tax net income.
In the event we fail to comply with the covenants contained in any of our warehouse lines of credit, or otherwise were to default under the terms of such agreements, we may be restricted from paying dividends, reducing or retiring our equity interests, making investments or incurring more debt. As a result of market disruptions and fair value accounting adjustments taken in March 2020 resulting from the COVID-19 outbreak, our commercial loan origination subsidiary was in violation of its first, second, and third quarter 2020 profitability covenants with two of its warehouse lenders. We received waivers of the covenant violations from both lenders as well as amendments to profitability covenants for the remaining quarter of 2020.
As a result of impacts from the Business Combination, FAM was not in compliance with the second quarter 2021 lender adjusted tangible net worth quarterly requirement and the second and third quarter 2021 two-consecutive quarter requirements by FNMA. The Company received a waiver for the covenant violations from FNMA for both Q2 and Q3 2021. As of September 30, 2021 (Successor), the Company had obtained waivers for these covenant violations and was in compliance with all other financial covenants.
Other Secured Lines of Credits
As of September 30, 2021, our Mortgage, Reverse, and Commercial Originations segments collectively had $1.0 billion in additional secured facilities with $0.8 billion aggregate principal amount drawn through credit agreements or master repurchase agreements with 13 active lenders. These facilities are secured by, among other things, eligible asset-backed securities, MSRs, and HECM tails. In certain instances, these assets are subject to existing first lien warehouse financing, in which case these facilities (i.e., mezzanine facilities) are secured by the equity in these assets exceeding first lien warehouse financing. One of our facilities was with Podium Mortgage Capital, LLC, who acts as a lender to us and is an affiliate of one of our shareholders, Blackstone. These facilities are generally structured as master repurchase agreements under which ownership of the related eligible assets are temporarily transferred to a lender. The funds advanced to us are generally repaid using 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.
When we draw on these facilities, we generally must transfer and pledge eligible assets to the lender, and comply with various financial and other covenants. Under our facilities, we generally transfer the assets at a haircut which serves as the primary credit enhancement for the lender. Three of these facilities are guaranteed by our wholly-owned subsidiary, FAH, the parent holding company to the mortgage, reverse mortgage and commercial lending businesses, and one of these also benefits from a pledge of equity of our wholly-owned subsidiary, FAR. Upon expiration, management believes it will either renew these facilities or obtain sufficient additional lines of credit.
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The following table presents additional information about our other secured lines of credit for our Mortgage, Reverse and Commercial Originations segments as of September 30, 2021 (in thousands):
Other Secured Lines of Credit
  
Maturity Date
  
Total Capacity
   
September 30, 2021
 
Committed
  December 2021 - N/A  $912,500  
$
706,069
 
Uncommitted
  April 2022 - N/A   114,834   
 
65,338
 
    
 
 
   
 
 
 
Total other secured lines of credit
(2)
  $1,027,334  
$
771,407
 
    
 
 
   
 
 
 
We pay certain up-front and ongoing fees based on our utilization with respect to many of these facilities. We pay commitment fees based upon the limit of the facility and unused fees are paid if utilization falls below a certain amount.
Interest is payable either at the time the loan or securities are settled off the line or monthly in arrears and principal is payable upon receipt of asset sale proceeds, principal distributions on the underlying pledged securities or transfer of assets to another line of credit and upon the maturity of the facility.
Under these facilities, we are generally required to comply with various customary operating and financial covenants. The financial covenants are similar to those estimates.under the warehouse lines of credit. We were in compliance with all of these covenants as of September 30, 2021.
HMBS related obligations
FAR is an approved issuer of HMBS securities that are guaranteed by Ginnie Mae and collateralized by participation interests in HECMs insured by the FHA. We originate HECMs insured by the FHA. Participations in the HECMs are pooled into HMBS securities which are sold into the secondary market with servicing rights retained. We have determined that loan transfers in the HMBS program do not meet the accounting definition of a participating interest because of the servicing requirements in the product that require the issuer/servicer to absorb some level of interest rate risk, cash flow timing risk and incidental credit risk due to the buyout of HECM assets as discussed below. As a result, the transfers of the HECMs do not qualify for sale accounting, and we, therefore, account for these transfers as financings. Holders of participating interests in the HMBS have no recourse against assets other than the underlying HECM loans, remittances, or collateral on those loans while they are in the securitization pools, except for standard representations and warranties and our contractual obligation to service the HECMs and the HMBS.
Remittances received on the reverse loans, if any, and proceeds received from the sale of real estate owned and our funds used to repurchase reverse loans are used to reduce the HMBS related obligations by making payments to the securitization pools, which then remit the payments to the beneficial interest holders of the HMBS. The maturity of the HMBS related obligations is directly affected by the liquidation of the reverse loans or liquidation of real estate owned and events of default as stipulated in the reverse loan agreements with borrowers. As an HMBS issuer, FAR assumes certain obligations related to each security it issues. The most significant obligation is the requirement to purchase loans out of the Ginnie Mae securitization pools once they reach certain limits set at loan origination for the maximum UPB allowed. Performing repurchased loans are generally conveyed to HUD and nonperforming repurchased loans are generally liquidated in accordance with program requirements.
As of September 30, 2021, we had HMBS-related borrowings of $10.2 billion and HECMs pledged as collateral to the pools of $10.3 billion, both carried at fair value.
Additionally, as the servicer of reverse loans, we are obligated to fund additional borrowing capacity primarily in the form of undrawn lines of credit on floating rate reverse loans. We rely upon our operating cash flows to fund these additional borrowings on a short-term basis prior to securitization. The additional borrowings are generally securitized within 30 days after funding. The obligation to fund these additional borrowings could have a significant impact on our liquidity.
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Nonrecourse Debt
We securitize and issue interests in pools of loans that are not eligible for the Ginnie Mae securitization program. These include reverse mortgage loans that were previously repurchased out of an HMBS pool (“HECM Buyouts”), fix & flip securitized loans, and non FHA-insured non-agency reverse mortgages (“non-agency reverse mortgages-Securitized”). The transactions provide investors with the ability to invest in these pools of assets. The transactions provide us with access to liquidity for these assets, ongoing servicing fees, and potential residual returns for the residual securities we retain at the time of securitization. The transactions are structured as secured borrowings with the loan assets and liabilities, respectively, included in the interim unaudited Consolidated Statements of Financial Condition as mortgage loans held for investment, subject to nonrecourse debt, at fair value, and nonrecourse debt, at fair value. As of September 30, 2021, we had nonrecourse debt-related borrowings of $5.8 billion.
Nonrecourse MSR Financing Liability, at Fair Value
The Company entered into nonrevolving facility commitments with various investors to pay an amount based on monthly cashflows received in respect of servicing fees generated from certain of the Company’s originated or acquired MSRs. Under these agreements, the Company has agreed to pay an amount to these parties equal to excess servicing and ancillary fees related to the identified MSRs in exchange for an upfront payment equal to the entire purchase price of the identified acquired or originated MSRs. These transactions are accounted for as financings under ASC 470,
Debt
.
As of September 30, 2021, the Company had an outstanding advance against this commitment of $99.1 million, with a fair value of $96.1 million, for the purchase of MSRs. The Company accrued for excess servicing and ancillary fees against the outstanding advances in the amount of $5.9 million and $13.5 million, respectively, to these investors for the three months ended and nine months ended September 30, 2021.
Senior Unsecured Notes
On November 5, 2020, Finance of America Funding LLC, a consolidated subsidiary of the Company, issued $350.0 million aggregate principal amount of senior unsecured notes due November 15, 2025. The senior unsecured notes bear interest at a rate of 7.875% per year, payable semi-annually in arrears on May 15 and November 15 beginning on May 15, 2021. The 7.875% senior unsecured notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by FoA and each of FoA’s material existing and future wholly-owned domestic subsidiaries (other than Finance of America Funding LLC and subsidiaries that cannot guarantee the notes for tax, contractual or regulatory reasons).
At any time prior to November 15, 2022, Finance of America Funding LLC may redeem some or all of the 7.875% senior unsecured 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, Finance of America Funding LLC 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 7.875% senior unsecured notes will have the right to require Finance of America Funding LLC to make an offer to repurchase each holder’s 7.875% senior unsecured notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest. The consummation of the Business Combination did not result in a change of control for purposes of Finance of America Funding LLC’s 7.875% senior unsecured notes.
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The 7.875% senior unsecured notes contain covenants limiting, among other things, Finance of America Funding LLC’s and its restricted subsidiaries’ ability to incur certain types of additional debt or issue certain preferred shares, incur liens, make certain distributions, investments and other 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 Finance of America Funding LLC’s assets. These incurrence based covenants are subject to important exceptions and qualifications (including any relevant exceptions for the Business Combination). Many of these covenants will cease to apply with respect to the 7.875% senior unsecured notes during any time that the 7.875% senior unsecured notes have investment grade ratings from either Moody’s Investors Service, Inc. or Fitch Ratings Inc. and no default with respect to the 7.875% senior unsecured notes has occurred and is continuing.
FoA’s existing owners or their affiliated entities, including Blackstone and Brian L. Libman, FoA’s founder and chairman, purchased notes in the offering in an aggregate principal amount of $135.0 million.
Contractual Obligations and Commitments
The following table provides a summary of obligations and commitments outstanding as of September 30, 2021 (in thousands). The information below does not give effect to the Business Combination or the use of proceeds therefrom.
   
Total
   
Less than 1
year
   
1- 3

years
   
3 - 5

years
   
More than
5 years
 
Contractual cash obligations:
          
Warehouse lines of credit
  $2,553,749  $2,338,277  $215,472  $—     $—   
MSR line of credit
   205,808   —      88,072   —      117,736
Other secured lines of credit
   565,599   309,632   52,500   —      203,467
Nonrecourse debt
(1)
   5,654,826   451,941   5,202,885   —      —   
Notes payable
   353,567   —      —      353,567   —   
Operating leases
   79,450   5,014   39,991   9,710   24,735
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $9,412,999  $3,104,864  $5,598,920  $363,277  $345,938
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
(1)
Nonrecourse MSR financing liability is excluded from this balance. See below for additional details.
In addition to the above contractual obligations, we have also been involved with several securitizations of HECM loans, which were structured as secured borrowings. These structures resulted in us carrying the securitized loans on the interim unaudited Consolidated Statements of Financial Condition and recognizing the asset-backed certificates acquired by third parties as HMBS obligations. The timing of the principal payments on this nonrecourse debt is dependent on the payments received on the underlying mortgage loans and liquidation of real estate owned REO. The outstanding principal balance of loans held for investment, subject to HMBS related obligations was $9,617.1 million as of September 30, 2021.
In addition to the above contractual obligations, we have also been involved in the sale of a portion of the excess servicing and/or an agreement to pay certain amounts based on excess servicing cashflows generated on our owned mortgage servicing rights. These transactions are treated as structured financings in the interim unaudited Consolidated Statements of Financial Condition with the recognized proceeds being recorded as nonrecourse MSR financing liability. The timing of the payments of the nonrecourse MSR financing liability is dependent on the payments received on the underlying mortgage servicing rights.
The payments that we will be required to make under the TRAs that was entered into in connection with the Business Combination may be significant and are not reflected in the contractual obligations tables set forth above.
Off Balance Sheet Arrangements
In the ordinary course of business, we may engage in certain activities that are not reflected on the interim unaudited Consolidated Statements of Financial Condition, generally referred to as off-balance sheet arrangements. These activities typically involve transactions with unconsolidated variable interest entities (“VIEs”).
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For all VIEs in which we are involved, we assess whether we are the primary beneficiary of the VIE on an ongoing basis. In circumstances where we have both the power to direct the activities that most significantly impact the VIEs’ performance and the obligation to absorb losses or the right to receive the benefits of the VIE that could be significant, we would conclude that we are the primary beneficiary of the VIE, and would consolidate the VIE (also referred to as on-balance sheet). In situations where we are not deemed to be the primary beneficiary of the VIE, we do not consolidate the VIE and only recognize our interests in the VIE (also referred to as off-balance sheet).
We do not have any other off-balance sheet arrangements with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes as of September 30, 2021.
CRITICAL ACCOUNTING POLICIES
For a description of our critical accounting policies, in Note 2 - Summary of Significant Accounting Policies in the notes to financial statements of our Form 10-K/Asee FoA’s Super 8-K filed with the SEC on May 17,April 7, 2021.


Recent Accounting Pronouncements

See Note 2 - Summary of Significant Accounting Policies in the notes to unaudited financial statements.

Off-Balance Sheet Arrangements and Contractual Obligations

As of September 30, 2020 and December 31, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities.

JOBS Act

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our principal market risk is to interest rate risk, primarily to changes in long-term Treasury rates and mortgage interest rates due to their impact on mortgage-related assets and commitments. Changes in short-term interest rates will also have an impact on our warehouse financing lines of credit.
Interest Rate Risk
Changes in interest rates will impact our operating segments as follows:
Portfolio Management
an increase in interest rates could generate an increase in delinquency, default and foreclosure rates resulting in an increase in both higher servicing costs and interest expense on our outstanding debt.
an increase in interest rates and market spreads may cause a reduction in the fair value of our long-term assets.
a decrease in interest rates may generally increase prepayment speeds of our long-term assets which would lead a reduction in the fair value of our long-term assets.
Originations (Mortgage, Reverse and Commercial)
an increase in prevailing interest rates could adversely affect our loan origination volume as refinancing activity will be less attractive to existing borrowers.
an increase in interest rates will lead to a higher cost of funds on our outstanding warehouse lines of credit.
Lender Services
an increase in interest rates will lead to lower origination volumes which would negatively impact the amount of title and insurance clients we are able to service and the number of title policies that we are able to underwrite.
lower origination volumes from an increase in interest rates may lead to a reduction in our fulfillment services as we process fewer loans for our clients.
an increase in interest rates may lead to fewer student loan applications that we are asked to process for our clients.
We actively manage the risk profile of Interest Rate Lock Commitments (“IRLCs”) and loans held for sale on a daily basis and enter into forward sales of MBS in an amount equal to IRLCs expected to close assuming no change in mortgage interest rates.
Earnings on our held for investment assets depend largely on our interest rate spread, represented by the relationship between the yield on our interest-earning assets, primarily securitized assets, and the cost of our interest-bearing liabilities, primarily securitized borrowings. Interest rate spreads are impacted by several factors, including forward interest rates, general economic factors, and the quality of the loans in our portfolio.
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Consumer Credit Risk
We are exposed to credit risk in the event that certain of our borrowers are unable to pay their outstanding mortgage balances. We manage this credit risk by actively managing delinquencies and defaults through our servicers. We provide servicing oversight of our servicers to ensure they perform loss mitigation, foreclosure and collection functions according to standard acceptable servicing practices and in accordance with our various pooling and servicing agreements. We estimate the fair values on our outstanding mortgage loans using a smaller reporting company as defined by Rule 12b-2combination of historical loss frequency and loss experience.
We principally sell our mortgage loans on a nonrecourse basis. We provide representations and warranties to purchasers of the Exchange Actloans sold over the life of the loan. Whenever there is a breach of these representation and are notwarranties we will be required to providerepurchase the information otherwise required under this item.

loan or indemnify the purchaser, and any subsequent loss on the loan will be borne by us. If there is no breach of the representation and warranty provision, we have no obligation to indemnify or repurchase the investor against loss. The outstanding UPB plus any premiums on the purchased loans represent the maximum potential exposure on outstanding representation and warranties that we are exposed to.

We estimate a reserve for losses on repurchased loans and indemnifications for future breaches of representation and warranties on any sold loans. This estimate is based on historical data on loan repurchase and indemnity activity, actual losses on repurchase loans and other factors.
Counterparty Credit Risk
We are exposed to counterparty credit risk in the event of nonperformance by counterparties to various agreements. We monitor the credit ratings of counterparties and do not anticipate material losses due to counterparty nonperformance.
Sensitivity Analysis
We utilize a sensitivity analysis to assess our market risk associated with changes in interest rates. This sensitivity analysis attempts to assess the potential impact to earnings based on hypothetical changes in interest rates.
The fair value of certain of our outstanding mortgage loans and related liabilities, MSRs, and certain investments are valued utilizing a discounted cash flow analysis. The primary assumptions we utilize in these models include prepayment speeds, market discount rates, and credit default rates.
Our total market risk is impacted by a variety of other factors including market spreads and the liquidity of the markets. There are certain limitations inherent in the sensitivity analysis presented, including the necessity to conduct the analysis based on a single point in time.
The sensitivities presented are hypothetical and should be evaluated with care. The effect on fair value of a 25 bps 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.
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September 30, 2021
 
   
Down 25 bps
   
Up 25 bps
 
   
(in thousands)
 
Increase (decrease) in assets
    
Reverse mortgage loans held for investment, subject to HMBS related obligations
  
$
28,291
   
$
(28,571
Mortgage loans held for investment, subject to nonrecourse debt:
    
Reverse mortgage loans
  
 
66,599
   
 
(63,586
Fix & flip mortgage loans
  
 
475
   
 
(473
Mortgage loans held for investment:
    
Reverse mortgage loans
  
 
6,645
   
 
(6,229
Fix & flip mortgage loans
  
 
121
   
 
(120
Agricultural loans
  
 
248
   
 
(247
Mortgage loans held for sale:
    
Residential mortgage loans
  
 
16,555
 
  
 
(22,901
SRL
  
 
1,305
   
 
(873
Portfolio
  
 
571
   
 
(560
Mortgage servicing rights
  
 
(17,998
  
 
14,916
 
Other assets
  
 
477
   
 
(477
Derivative assets:
    
Forward commitments and TBAs
  
 
500
 
  
 
(370
Forward MBS
  
 
(28,001
  
 
36,999
 
IRLCs
  
 
10,524
   
 
(14,558
  
 
 
   
 
 
 
Total assets
  
$
86,312
   
$
(87,050
  
 
 
   
 
 
 
Increase (decrease) in liabilities
    
HMBS related obligation
  
$
25,782
   
$
(26,039
Nonrecourse debt
  
 
18,016
 
  
 
(18,613
Derivative liabilities:
    
Forward MBS
  
 
1,974
 
  
 
(2,609
Interest rate swaps and futures contracts
  
 
18,808
 
  
 
(18,808
  
 
 
   
 
 
 
Total liabilities
  
$
64,580
   
$
(66,069
  
 
 
   
 
 
 
Item 4. Controls and Procedures

The disclosure in Part I. Item 4. Controls and Procedures in the Original Filing is hereby amended by the following. As used in this Item 4. Controls and Procedures, “we” and “our” shall mean Replay or Replay’s management, as the context may require, if relating to a statement made prior to the Business Combination and shall mean the Company (as successor registrant to Replay) or the Company’s management, as the context may require, if relating to a statement made after the consummation of the Business Combination. Any material weakness described herein with respect to an Affected Period means the material weakness of Replay.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.


We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

129

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15

Our management, with the participation of our chief executive officer and 15d-15 under the Exchange Act, the Co-Chief Executive Officers and Chief Financial Officer of Replay carried out an evaluation ofchief financial officer, has evaluated the effectiveness of the design and operation of Replay’sour disclosure controls and procedures as of September 30, 2020. On November 12, 2020, Replay filed its originalthe end of the period covered by this Quarterly Report on Form 10-Q for10-Q. Based on this evaluation, and the quarter endedinformation described above in this Item 4, our chief executive officer and chief financial officer concluded that, as of September 30, 2020 (the “Original Report”). Based upon the evaluation at that earlier time, Replay’s Co-Chief Executive Officers and Chief Financial Officer had concluded that Replay’s2021, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective. Subsequently, in light of the SEC’s Public Statement and as a result of the material weakness in Replay’s internal control over financial reporting as described below, as a successor registrant to Replay, the Chief Executive Officer and Chief Financial Officer of the Company concluded that the disclosure controls and procedures of Replay were not effective at the reasonable assurance level, as of September 30, 2020, to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in rules and forms of the SEC.

level.

Remediation of the Material Weakness in Internal Control Over Financial Reporting

As previously reported, Replay’s internal control over financial reporting did not result in the proper classification of certain of the warrants Replay issued in April 2019 which, due to its impact on theReplay’s financial statements, waswe determined to be a material weakness. ASpecifically, we identified a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of the annual or interim financial statements could not be prevented or detected on a timely basis. A material weakness was identified in Replay’s controls over the accounting for temporary and permanent equity and complex financial instruments. The controls to evaluate the accounting for complex financial instruments, such as temporary and permanent equity and issued by a SPAC,warrants, did not operate effectively to appropriately apply the provisions of ASC 815-40. This material weakness resulted in the failure to prevent a material error in the accounting for temporary and permanent equity warrants and the resulting restatement of Replay’s previously issued financial statements. While processes exist to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, in light of the SEC’s Public Statement and the Business Combination, we are improving these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards. As successor to Replay, the remediation plan at this time includes acquiring enhanced access to accounting literature, research materials and documents and increased communication among personnel and third-party professionals with whom we consult regarding the application of complex accounting transactions, including the accounting for temporary and permanent equity. The remediation plan can only be accomplished over time and will be continually reviewed to determine that it is achieving its objectives. No assurance can be offered that these initiatives will ultimately have the intended effects.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2020, there was no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting as the circumstances that led to the restatement of Replay’s financial statements described in this Report had not yet been identified.


PART II—OTHER INFORMATION

Item 1A. Risk Factors

The disclosure in Part II. Item 1A. Risk Factors in the Original Filing is hereby amended to add the following risk factors. As used in this Item 1A. Risk Factors, “we” and “our” shall mean Replay or Replay’s management, as the context may require, if relating to a statement made prior to the Business Combination and shall mean the Company (as successor registrant to Replay) or the Company’s management, as the context may require, if relating to a statement made after the consummation of the Business Combination. Any material weakness described herein with respect to an Affected Period means the material weakness of Replay. Except for the additional risk factors below, this Amendment does not amend, update or change any other items or disclosures contained in Item 1A. Risk Factors in the Original Filing. This Amendment should be read in conjunction with the Original Filing.

Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.

On April 12, 2021, the Acting Chief Accountant and Acting Director of the Division of Corporation Finance of the SEC issued the Public Statement. The Public Statement sets forth the conclusion of the SEC’s Office of the Chief Accountant that certain provisions included in the warrant agreements entered into by many special purpose acquisition companies require such warrants to be accounted for as liabilities measured at fair value, rather than as equity securities, with changes in fair value during each financial reporting period reported in earnings. As a result of the Public Statement, we reevaluated the accounting treatment of our 14,375,000 warrants issued in connection with Replay’s IPO (the “Public Warrants”) and 7,750,000 private placement warrants (the “Private Warrants” and, together with the Public Warrants, the “Warrants”), and determined to classify the Warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.

As a result, included on our balance sheets as of September 30, 2020 and December 31, 2019 contained elsewhere in this Report are derivative liabilities related to embedded features contained within our Warrants. Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our Warrants each reporting period and that the amount of such gains or losses could be material.

We have identified a material weakness in Replay’s internal control over financial reporting as of September 30, 2020, and, as a result, we have determined that Replay’s disclosure controls and procedures were not effective as of September 30, 2020. If we are unable to develop and maintain an effective system of internal control over financial reporting and effective disclosure controls and procedures, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.

Following this issuance of the Public Statement, after consultation with our independent registered public accounting firm, our management and our audit committee concluded that, in light of the Public Statement, it was appropriate to restate Replay’s previously issued financial statements as of and for the Affected Periods (the “Restatement”). See “—Our warrants are accounted for as liabilities and the changes in value of our Warrants could have a material effect on our financial results.” As part of such process, we identified a material weakness in Replay’s internal controls over financial reporting. In addition, management, along with our principal executive and financial officers, have concluded that Replay’s disclosure controls and procedures were not effective as of September 30, 2020, in light of the material weakness identified in Replay’s internal control over financial reporting.


A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility exists that a material misstatement of our annual or interim financial statements willcould not be prevented or detected and corrected on a timely basis.

Effective

In the second quarter of fiscal 2021, we implemented the below changes to our processes to improve our internal controls are necessary for us to provide reliablecontrol over financial reports and prevent fraud. We continue to evaluate stepsreporting to remediate the control deficiency that gave rise to the material weakness. These remediation measures mayweakness:
a.
While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have enhanced these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards. We require the formalized consideration of obtaining additional technical guidance prior to concluding on all significant or unusual transactions.
b.
We expanded and clarified our understanding of the Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) issued by the SEC on April 12, 2021 (the “Staff Statement”) and designed and implemented a control over the calculations of the impact of the issued warrants subject to the Staff statement on our financial statements.
c.
We acquired enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third party professionals with whom we consult regarding the application of temporary and permanent equity and complex accounting transactions.
After completion of the above, our management believes the previously identified material weakness has been remediated, subject to continuous testing of the operating effectiveness of these internal controls throughout the year.
Changes in Internal Control Over Financial Reporting
Other than described above in this Item 4, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings
The information required with respect to this Part II, Item 1 can be time consumingfound under Note 20 - Litigation to our unaudited financial statements included in Part I, Item 1 of this Report.
Item 1A. Risk Factors
As a result of the application of the acquisition method of accounting in connection with the Business Combination, the historical consolidated financial statements of the Company are not necessarily indicative of the Company’s future results of operations, financial position and costlycash flows, and there is no assurance that these initiatives will ultimately have the intended effects.

If we identify any new material weaknesses in the future the Company may need to recognize impairment charges related to goodwill, identified intangible assets and fixed assets that are adjusted to fair value.

In accordance with ASC 350, Intangibles-Goodwill and Other, the Company is required to test goodwill and any other intangible assets with an indefinite life for possible impairment on an annual basis and on an interim basis if there are indicators of a possible impairment. The Company will also be required to evaluate amortizable intangible assets and fixed assets for impairment if there are indicators of a possible impairment. There is significant judgment required in the analysis of a potential impairment of goodwill, identified intangible assets and fixed assets. If, as a result of a general economic slowdown, deterioration in one or more of the markets in which the Company operates or impairment in the Company’s financial performance and/or future outlook, the estimated fair value of the Company’s long- lived assets decreases, the Company may determine that one or more of its long-lived assets is impaired. An impairment charge would be determined based on the estimated fair value of the assets and any such newly identifiedimpairment charge could have a material weakness could limit our ability to prevent or detect a misstatementadverse effect on the Company’s business, financial condition and results of operations.
The stock trading price and resulting market capitalization of our accountspublicly traded shares has decreased in the second and third quarters of 2021 compared to the share price at the time of the business combination. A sustained decrease in share price may indicate that the fair value for one or disclosures that could result in a material misstatementmore of our reporting units is below carrying value. The Company will perform an annual goodwill impairment test as of October 1, 2021. If, as a result of such testing, the fair value of one or interim financial statements. In such case,more of our reporting units is determined to be below carrying value, we may be unablerequired to maintain compliancetake an impairment charge in the fourth quarter of 2021, which could have a material adverse effect on the Company’s business, financial condition and results of operations.
Except as set forth above, we are not aware of any material changes from the risk factors set forth under “Risk Factors” included in the Registration Statement on Form S-1, originally filed with securities law requirements regarding timely filing of periodic reports inthe SEC on May 25, 2021 (No. 333-256453, the “Registration Statement”).
In addition to applicable stock exchange listing requirements, investors may lose confidencethe other information included in our financial reporting andthis Report, you should carefully consider the prices of our securities may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may takefactors discussed in “Risk Factors” included in the Registration Statement on Form S-1, originally filed with the SEC on May 25, 2021 (No. 333-256453, the “Registration Statement”), as well as the factors identified under “Cautionary Note Regarding Forward-Looking Statements” at the beginning of Part I, Item 1 of this Quarterly Report and as may be updated in subsequent filings with the SEC, which could materially affect the Company’s business, financial condition or future willresults. The risks described in the Registration Statement and this Quarterly Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be sufficient to avoid potential future material weaknesses.

immaterial may also materially adversely affect our business, financial condition or operating results.


Item 6 Exhibits.

2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit No.
 

Description
2.1Transaction Agreement, dated as of October 12, 2020, by and among Replay; FoA; the Company; Replay Merger Sub; Blocker Merger Sub; Blocker; Blocker GP; the Sellers; and the Seller Representative (incorporated by Reference to Exhibit

2.1 to the Company’s Current Report on Form 8-K filed on April 7, 2021).
2.2Letter Agreement, dated April 1, 2021, by and among Seller Representative and Replay (incorporated by Reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on April 7, 2021).
2.3Letter Agreement, dated April 5, 2021, by and among Seller Representative and Replay (incorporated by Reference to Exhibit 2.3 to the Company’s Current Report on Form 8-K filed on April 7, 2021).
2.4Letter Agreement, dated March 31, 2021, by and among Family Holdings; TMO; BTO Urban; BTO Urban Holdings II L.P.; and ESC (incorporated by Reference to Exhibit 2.4 to the Company’s Current Report on Form 8-K filed on April 7, 2021).
3.1Amended and Restated Memorandum and Articles of Association (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-38859), filed with the Securities and Exchange Commission on April 9, 2019).
3.2Amended and Restated Bylaws of Finance of America Companies Inc. (incorporated by Reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on April 7, 2021).
10.1*Amendment No. 4 to Master Repurchase Agreement, dated as of September 17, 2021, by and between FACo Crop Loans LLC as seller, National Founders LP as buyer, FACo Crop Loan Financing Trust C1 as trust subsidiary, and Finance of America Commercial LLC as guarantor.
31.1* Certificate of Patricia Cook, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certificate of Johan Gericke, Chief ExecutiveFinancial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1** Certificate of Patricia Cook, Chief Executive Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2** Certificate of Johan Gericke, Chief ExecutiveFinancial Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*** Inline XBRL Instance Document - this instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*** Inline XBRL Taxonomy Extension Schema Document.
101.CAL*** Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF***Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*** Inline XBRL Taxonomy Extension Label DocumentLinkbase Document.
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101.PRE*** Inline XBRL DefinitionTaxonomy Extension Presentation Linkbase DocumentDocument.
101.DEF***104 Cover Page Interactive Data File (embedded within the Inline XBRL Definition Linkbase Documentdocument).
* Filed herewith.
** Furnished herewith.
*** XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Certain agreements and other documents filed as exhibits to this Form 10-Q contain representations and warranties that the parties thereto made to each other. These representations and warranties have been made solely for the benefit of the other parties to such agreements and may have been qualified by certain information that has been disclosed to the other parties to such agreements and other documents and that may not be reflected in such agreements and other documents. In addition, these representations and warranties may be intended as a way of allocating risks among parties if the statements contained therein prove to be incorrect, rather than as actual statements of fact. Accordingly, there can be no reliance on any such representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter of any such representations and warranties may have changed since the date of such agreements and other documents.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

  
Finance of America Companies Inc.
Dated: May 28,November 12, 2021  By:  

/s/ Johan Gericke

    

Johan Gericke

Executive Vice President, and Chief Financial Officer
( (Authorized Signatory and Principal Financial Officer and Authorized Signatory)

Officer)

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