Item 1A. Risk Factors
You should carefully consider the following risk factors together with all of the other information included in this report, including the financial statements and related notes, when deciding to invest in us. The risks and uncertainties described below could materially adversely affect our business, financial condition, and results of operations in future periods and are not the only risks facing the Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and results of operations in future periods.
Risks Related to the Business of the Company
The Company’s success will depend upon its ability to (1) expand its customer base and acquire and originate loans efficiently while maintaining loan origination quality, (2) finance its loan portfolio, and (3) profitably securitize or otherwise monetize its loan portfolio, all of which will in turn depend upon its ability to manage the unique challenges presented by operating as a business focused on providing home equity-based financing solutions for a modern retirement.
The Company is principally focused on acquiring, originating, and servicing two types of reverse mortgage loans: FHA-insured HECM loans and non-agency reverse mortgage loans, along with certain traditional home
equity loan products. Generally, the Company securitizes HECM loans into HMBS guaranteed by Ginnie Mae and sells HMBS in the secondary market while retaining the rights to service the HECM loans. When HECM loans are not eligible for securitization into HMBS or are required to be bought out of a pool of HECM loans previously securitized into HMBS, the Company securitizes them into privately placed MBS or holds them for investment. The Company either securitizes non-agency reverse mortgage loans into MBS sold to investors or sells them as whole loans to investors. The Company may also decide to strategically hold certain non-agency reverse mortgage loans for investment. The Company expects to sell traditional home equity loans as whole loans to investors on a servicing released basis. It follows that the Company’s success is driven by the Company’s ability to (1) expand its customer base and acquire and originate loans efficiently while maintaining loan origination quality, (2) finance its loan portfolio, and (3) profitably securitize or otherwise monetize its loan portfolio. In order to do so, the Company will need to be able to manage the challenges presented by operating as a business focused on providing home equity-based financing solutions for a modern retirement.
The Company’s ability to expand its customer base and acquire and originate loans efficiently depends in part upon its ability to develop and offer innovative products to satisfy the needs of the vast and largely underserved U.S. senior population. This will depend upon the Company’s ability to successfully identify the needs of the U.S. senior population and develop attractive products that successfully address those needs. This will also depend upon the Company’s ability to identify and enter into partnerships that enable the Company to develop or otherwise offer additional products to address the needs of the U.S. senior population. Further, before offering a new non-agency product in a state, the Company is required to obtain regulatory approvals required in such state. Currently certain of the Company’s non-agency products are only available in a limited number of states due to the time necessary to obtain regulatory approvals. In certain states, there may be statutory impediments to being able to offer certain products. If the Company experiences in obtaining regulatory approvals for non-agency products or is not to obtain regulatory approvals in certain states, particularly larger states or states with a larger proportional share of seniors, then the Company’s origination volumes for non-agency products, and ultimately its , may be impacted.
The Company’s ability to expand its customer base and to acquire and originate loans efficiently also depends in part upon its ability to communicate its product offerings to the U.S. senior population and mortgage broker partners and its ability to engage and transact with interested customers and mortgage broker partners. The Company will need to continue to successfully develop and implement sales and marketing strategies to communicate the “Finance of America” brand and available offerings. The Company will also need to further develop and leverage digital tools to engage with customers and mortgage broker partners in a modern and user friendly way that improves efficiency and the overall ease of transacting. See “—We may fail to realize the anticipated benefits of the efforts we have undertaken to enhance our marketing and digital capabilities.” This will also depend upon the Company’s ability to identify and enter into partnerships that expand the reach of the Company’s product offerings. See “—We may fail to capitalize on strategic partnerships and our strategic partnerships present additional risks to us.”
As a business principally focused on the home equity-based lending market, the Company will need to be able to successfully manage its liquidity and securitize or otherwise monetize its originated loans profitably. Reverse mortgage loan origination is a “cash-light” business because reverse mortgage borrowers are generally not required to make principal and interest payments until loan maturity, while traditional home equity loan product borrowers are in some cases only required to make interest (but not principal) payments for an initial period. Therefore, there are limited interim cash flows paid to the originator prior to the loans being monetized via a securitization or whole-loan sale. In order to maintain sufficient liquidity to continue to originate new loans and operate our business, the Company relies on the availability of warehouse financings as well as an active secondary market for its loans. Should the Company not be able to maintain sufficient access to warehouse financings or not be able to sell its loans, or MBS backed by its loans, into the secondary market, it could have a material adverse effect on our liquidity, financial condition, performance, and business. See “—Risks Related to Our Lending Business—If we are to obtain sufficient capital to meet the financing requirements of our business, or if we to comply with our debt agreements, our business, financing activities, financial condition, and results of operations will be affected.” Additionally, in circumstances where the principal balance (“UPB”) of a HECM loan securitized into HMBS issued pursuant to Ginnie Mae’s existing HMBS program reaches 98% of the maximum claim amount (which is the maximum FHA insurance amount available for a HECM loan), the Company is required under Ginnie Mae guidelines to repurchase such HECM loan from the securitization, which requires the Company to
maintain additional liquidity or access to capital (in the form of financing capacity or otherwise). The volume of HECM loans that the Company is required to repurchase is expected to increase following the closing of the Company’s acquisition of PHH’s HECM loan servicing portfolio. The Company may also be required to satisfy repurchase demands pursuant to its non-agency loan securitizations and purchase and sale agreements with investors from time to time. If the Company is required to satisfy significant repurchase requirements in excess of its anticipated forecasts, the Company may not have sufficient liquidity or access to capital available to satisfy such demands, which would have a material adverse effect on our business, financial condition, and results of operations. The Company will also need to manage its liquidity and maintain sufficient access to capital to enable the Company to service its existing indebtedness, including to pay amounts due in 2026 with respect to certain debt facilities, and to make dividend payments to the holders of its Series A Preferred Stock. See “—Risks Related to Our Indebtedness—Our substantial leverage could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry, or our ability to pay our debts, and could our cash flow from operations to debt payments,” “—Risks Related to Our Indebtedness —We are required to repay certain debt facilities in whole or in part in 2026 and such payments will require access to capital, which may not be available from cash flows resulting from our subsidiaries’ operations or from third-party sources on terms, or at all, at the time of repayment, especially in light of current market conditions, which could affect our financial position,” and “—Risks Related to Ownership of our Class A Common Stock—The terms of the Company’s Series A Preferred Stock may materially affect the value and rights of the Company’s Class A Common Stock.”
We may fail to realize the anticipated benefits of the efforts we have undertaken to enhance our marketing and digital capabilities .
The Company continues to take steps to enhance its marketing and digital capabilities. In the first quarter of 2025, we completed the migration of our telephony platform, and we continued to enhance its performance throughout the year. In the second quarter of 2025, the Company launched and transitioned to its new brand platform, “A Better Way with FOA,” alongside the launch of a national advertising campaign, which integrates a mix of traditional and online mediums. In June 2025, the Company launched a digital pre-qualification tool for certain products that can deliver a three-minute pre-qualification experience. In the fourth quarter of 2025, the Company launched “Joy,” an AI-powered customer ambassador chatbot, to provide consumer support over the telephone. The Company is working to expand Joy’s capabilities, including to enable Joy to provide consumer support via the exchange of online instant messages, and has also been working on SMS engagement tools for sales teams. Additionally, in 2025 the Company engaged in efforts to refine the systems used by its mortgage broker partners to improve the efficiency and ease of originations via the TPO channel. The Company anticipates that these efforts to enhance its marketing and digital capabilities will result in certain benefits, including (i) increasing brand and product recognition among customers and mortgage brokers, (ii) overall customer experience, and (iii) ultimately raising the Company’s origination volumes. However, the Company may to realize the anticipated benefits of these efforts for a variety of reasons, including the following:
• failure to effectively coordinate sales and marketing efforts to communicate the “Finance of America” brand and available offerings to potential customers and the market generally;
• failure to develop and expand reverse mortgage and other product customers, particularly as consumers continue to spend more of their time online and become more technologically savvy;
• failure to connect with potential customers over the telephone due to increasingly aggressive call screening technologies being implemented by telephony providers and telephone manufacturers;
• failure to reach potential customers with marketing initiatives such as online advertising, website presentation, social media campaigns, television commercials, and/or direct mail;
• failure to efficiently allocate marketing resources, including balancing spend for real-time impressions with efforts to provide continuing consumer education in order to develop customer relationships;
• failure to identify opportunities for technology and system improvements;
• failure to successfully develop and/or implement innovative technologies and technological and system improvements in a cost-efficient and time-efficient manner;
• failure to effectively utilize enhanced technological and system capabilities;
• failure to adequately monitor, test, supervise, and maintain newly integrated technologies;
• failure of AI-powered borrower engagement tools to accurately understand, interpret, or appropriately respond to borrower inquiries;
• failure to maintain an appropriate balance between automated and human-assisted customer interactions, which could adversely affect borrower trust, relationship development, and customer retention; and
• failure to mitigate expanded risks that may be presented by new technologies.
See “—Our capital investments in technology may not achieve anticipated returns” and “—We are incorporating AI technologies into our processes. These technologies may present business, compliance, and reputational risks.”
We may fail to capitalize on strategic partnerships and our strategic partnerships present additional risks to us.
The Company is pursuing strategic partnerships to enhance and expand the reach of its product offerings. In October 2025, the Company announced a strategic partnership with Better, which includes the Company offering certain traditional home equity loan products through Better’s AI platform and serving as Better’s reverse mortgage origination partner, with the goal of ultimately allowing the Company to integrate its reverse mortgage products into a unified digital experience. In November 2025, the Company announced an agreement between FAR and PHH for FAR to acquire PHH’s HECM loan servicing portfolio, pipeline of reverse mortgage loans, and certain other reverse mortgage assets and bring select members of PHH’s experienced origination team onto FAR’s platform. Following the transaction, the Company will engage with PHH to make its non-agency second lien reverse mortgage loan product available to PHH’s eligible traditional mortgage customers. The Company anticipates pursuing partnerships with additional mortgage servicers in the future to make its non-agency second lien reverse mortgage loan product available to their eligible traditional mortgage customers. In December 2025, the Company announced a strategic partnership with funds managed by Blue Owl, which includes a joint innovation and product-development initiative focused on the continuous rollout of new, differentiated financial products tailored for people looking to maximize freedom, security, and throughout their retirement. The Company anticipates that strategic partnerships of this nature will the Company to offer new and products to serve its customer base, more effectively communicate its product offerings within the addressable market of U.S. seniors, significantly broaden the reach of the Company’s products, and ultimately raise the Company’s origination volumes. However, the Company may to realize the anticipated benefits of these efforts for a variety of reasons, including the following:
• failure to identify and accurately assess the opportunities and risks presented by potential partners to determine which potential partnerships to pursue;
• failure to efficiently negotiate the terms of and ultimately enter into agreements with new partners;
• failure to successfully coordinate and manage relationships with partners to effect initial development and launch of products and strategies and ensure continued effectiveness of such products and strategies;
• failure to utilize resources and capitalize on opportunities that become available due to new partnerships;
• failure to integrate and successfully offer new products that the Company does not have prior experience offering, such as traditional home equity loan products; and
• failure to effectively communicate available offerings to and engage with potential customers introduced via new partnerships.
Further, strategic partnerships present additional counterparty risk to us. A partner may experience financial distress, strategic changes, or other adverse developments that could limit their ability or willingness to perform under our agreements, reduce the anticipated benefits of such partnerships, or require us to incur additional costs to replace or restructure such arrangements. Further, a partner may engage in conduct, either in connection with our partnership or separate from our partnership, that is inconsistent with applicable law, our policies, or generally accepted standards for customer treatment. Such conduct could result in regulatory scrutiny, litigation, customer complaints, or reputational harm to us, even if we are not directly responsible for such conduct. In addition, our partners may experience data security incidents, system intrusions, or unauthorized access to sensitive customer information, which could expose us to legal, regulatory, financial, and reputational risks. See “—A security or a cyber-attack could affect our results of operations and financial condition.”
While we generated net profits in 2025 and 2024, we have a recent history of net losses and we may not maintain profitability in the future due to the risks and uncertainties associated with operating as a business focused on providing home equity-based financing solutions for a modern retirement .
We generated net profits of $103.0 million and $35.7 million for the years ended December 31, 2025 and 2024, respectively. However, we generated net losses in each of the three preceding years and our accumulated deficit was $653.7 million as of December 31, 2025.
Our ability to maintain profitability will depend on our future expenses and our ability to generate revenue, which are difficult to predict due to the risks and uncertainties associated with operating as a business focused on providing home equity-based financing solutions for a modern retirement, as outlined herein. Operating our business may be more costly than we anticipate and may not result in the revenue growth that we expect. If we incur losses again in the future, such future losses will have an adverse effect on our stockholders’ equity and liquidity. If we are unable to sustain profitability, the market price of our Class A Common Stock may significantly decrease and our ability to raise capital, expand our business, or continue our operations may be impaired.
Our business is significantly impacted by changes in interest rates. Changes in prevailing interest rates due to U.S. monetary policies or other macroeconomic conditions that affect interest rates may have a detrimental effect on our operations, financial performance, and earnings.
Our operations, financial performance, and earnings are significantly impacted by prevailing interest rates, which are in turn affected by U.S. monetary policies and macroeconomic conditions such as inflation fluctuations, recessions, consumer confidence, and demand. Inflation rates increased significantly during the course of 2022 and remained relatively high compared to historical averages in 2023 and, to a lesser extent, 2024, though inflation rates in the second half of 2024 and in 2025 were lower relative to those experienced in prior recent periods. In response to these high inflation rates, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) increased interest rates eleven times over the course of 2022 and 2023, which negatively impacted the demand for mortgage financing, our loan production volume, and our overall revenues. The Federal Reserve did subsequently decrease interest rates three times during the final four months of 2024 and an additional three times during the final four months of 2025, but there can be no assurance as to whether there will be additional interest rate reductions in 2026, particularly in light of recent geopolitical events such as the recently escalating attacks between the U.S. and Iran. Our revenues were $394 million in fiscal year 2024 and $497 million in fiscal year 2025. Our revenues specific to the Retirement Solutions segment were $206 million in fiscal year 2024 and $253 million in fiscal year 2025. Inflation rates may remain relatively high for an extended period of time, which may in turn result in a sustained period of higher interest rates. In addition, interest rates and the liquidity of the MBS (including the HMBS) market may be impacted by the Federal Reserve increasing the federal funds rate, tapering MBS purchases, or selling MBS or by other governmental actions such as President Trump’s January 2026 directive to the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation to purchase $200 billion in MBS.
Our financial performance and profitability is directly affected by changes in prevailing interest rates. An increase in prevailing interest rates could:
• adversely affect our loan production volume, as taking out a new loan or refinancing an existing loan would be less attractive and qualifying for a loan may be more difficult;
• increase the cost of servicing our outstanding debt, including debt related to servicing assets and financing our loan production, and make it more challenging to refinance existing debt on favorable terms;
• make new securitizations or re-securitizations less economically feasible; and
• reduce the value of the assets on our balance sheet due to higher costs of financing.
A decrease in prevailing interest rates could:
• cause an increase in the expected volume of new loans and loan refinancings, which would negatively impact the fair value of our mortgage servicing rights (“MSR”) and residual securities; and
• reduce our earnings from our custodial deposit accounts.
Furthermore, borrowings under our warehouse lines of credit and MSR and servicing advance facilities are at variable rates of interest, which also expose us to interest rate risk. When interest rates increase, our debt service obligations on this variable rate indebtedness increase, even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, correspondingly decreases.
Any of the increases or decreases discussed above could have a material adverse effect on our business, financial condition, liquidity, and results of operations.
Our geographic concentration could materially and adversely affect us if the economic conditions in our current markets should decline or if our current markets are impacted by natural disasters.
As of December 31, 2025, 44% of our reverse mortgage loans (by unpaid principal balance) were secured by properties in the state of California. As a result of this geographic concentration, the size and quality of our loan portfolio, which impacts our ability to collect origination fees, monetize our originated loans, and collect on the loans we hold, are largely dependent on economic conditions in California. Adverse changes in the California economy may be caused by inflation, recession, unemployment, state or local real estate laws and regulations, or other factors beyond our control. Such adverse changes could disproportionately impact the demand for our products and services as compared to other lenders with more geographically diversified operations, impacting the size of our loan portfolio and, accordingly, negatively affecting the results of our operations. Adverse changes in the California economy could also result in decreases in real estate values in California, adversely impacting the value of the properties used as collateral for loans to our borrowers. If the value of such properties decreased, it may in turn make the related loans less to investors and therefore more to monetize. Due to the non-recourse nature of reverse mortgage loans, we may ultimately incur on any such reverse mortgage loans that we hold to maturity if the decreased value results in the property being sold for less than the loan balance at maturity, though such risk is mitigated in the case of HECM loans due to our ability to assign HECM loans to HUD or collect proceeds from FHA . Further, such economic changes may impact the ability of our borrowers to make timely payments in respect of home maintenance costs such as taxes and insurance and otherwise comply with the conditions of their loans, which could result in an increase in and in turn faster maturities and increased risk of on such loans.
In addition, properties located in California may be more susceptible to certain natural disasters, such as wildfires, earthquakes, and mudslides. For example, in January 2025 a series of wildfires started in the Los Angeles, California metropolitan area and spread quickly, causing damage to and/or destroying a significant number of properties. We require borrowers to have standard hazard insurance policies in place that generally cover damages caused by fires in an amount not less than one hundred percent (100%) of the insurable value of the mortgaged property, but in no event less than the minimum amount necessary to fully compensate for any damage or loss on a replacement cost basis. However, with respect to mortgaged properties in California, if the related insurer determines there is a heightened risk of property damage due to wildfires, such insurer may elect not to renew the related hazard policies or may charge higher premiums. This may result in an increase in policies or coverage and an increase in expenses for our Company as servicer, as we generally -place insurance, with coverage retroactive to the date of last known coverage to avoid a gap in coverage for any time period. We, in conjunction with our Subservicer, actively monitor with respect to properties impacted by natural to ensure customer and that properties are restored to pre- condition, with flexibility to assist with alternative resolution paths. However, no assurance can be given as to whether the Company will be in its servicing strategy and minimizing in respect of loans impacted by natural . Further, certain natural are not covered by standard insurance, such as earthquakes. Even for properties located in an earthquake area, we and other lenders in the market area may not require earthquake insurance as a condition of making a loan. If there is a major earthquake, fire, mudslide, or other natural , we face the risk that many of our borrowers may experience property and other economic consequences, which could in turn have a material and impact on our business, as further described under “—Our business is subject to the risks of earthquakes, fires, floods, and other natural events, which may increase in frequency or as a result of global climate change, and to by man-made issues such as strikes, wars, and civil .”
Our capital investments in technology may not achieve anticipated returns.
Our business is becoming increasingly reliant on technology investments and the returns on these investments are not always predictable. We are currently making, and will continue to make, significant technology investments to support our service offerings and to implement improvements to our customer-facing and mortgage broker-facing technology and information processes in order to more efficiently operate our business, improve the experience of our customers and mortgage broker partners, and ultimately remain competitive and relevant to our customers and mortgage broker partners. For example, in June 2025 we launched a digital pre-qualification tool for certain products and in the fourth quarter of 2025 we launched “Joy,” our AI-powered customer ambassador telephone chatbot, to provide consumer support over the telephone. We are working to expand Joy’s capabilities, including to enable Joy to provide consumer support via the exchange of online instant messages, and have also been working on SMS engagement tools for sales teams. Additionally, in 2025 we engaged in efforts to refine the systems used by our mortgage broker partners to improve the efficiency and ease of originations via our TPO channel. These technology initiatives might not provide the anticipated benefits or may provide them on a schedule or at a higher cost. Selecting the technology, to support development and implementation, or to oversee third-party service providers could result in to our competitive position and impact our business, financial condition, and results of operations.
We are incorporating AI technologies into our processes. These technologies may present business, compliance, and reputational risks.
Recent technological advances in AI and machine-learning technology both present opportunities and pose risks to us. If we fail to keep pace with rapidly evolving technological developments in AI, our competitive position and business results may suffer. At the same time, use of AI has recently become the source of significant media attention and political debate. The introduction of these technologies, particularly generative AI, into new or existing offerings may result in new or expanded risks and liabilities, including due to enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality or security risks, as well as other factors that could adversely affect our business, reputation, and financial results. Some states, such as Colorado, have enacted comprehensive laws relating to the deployment and development of certain AI systems. Additional states may adopt laws relating to AI in the future. The CFPB and HUD have also provided commentary regarding the use of AI and may take further actions in relation to the regulation of the use and development of AI in the future. We will need to ensure that our use of AI is in compliance with applicable regulatory requirements as they develop. See “—Risks Related to Laws and Regulations—We operate in a heavily regulated industry, and our loan origination and servicing activities us to risks of with an increasing and body of complex laws and regulations at the U.S. federal, state, and local levels.” In addition, our personnel could, unbeknownst to us, utilize AI and machine learning-technology while carrying out their responsibilities. The use of AI can lead to consequences, including generating content that appears correct but is factually , or otherwise , or that results in biases and discriminatory outcomes, which could our reputation and business and us to risks related to or in the output of such technologies and the risk that using such technologies could result in leakage of our confidential information.
We account for the majority of our assets and liabilities at fair value, which is determined using financial models that are based on market inputs and model assumptions. If market inputs or model assumptions change, we may be required to write down the value of these assets or write up the value of these liabilities, which could adversely affect our business, financial condition, and results of operations.
The fair value inputs of many of our assets and liabilities in our portfolio are not readily observable. To determine the fair value of certain of our assets and liabilities, including warrants, our mortgage loans held for sale, MSR, derivative assets and liabilities, HMBS related obligations, and nonrecourse debt for purposes of financial reporting, we use financial models that utilize, wherever possible, market participant data. We also use models to estimate the change in value of loans held for investment due to market or model input assumptions as an add back to calculate Adjusted Net Income and Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”). These models are complex and use asset-specific collateral data and market inputs for interest and discount rates. In addition, the models are complex because of the high number of variables that drive cash flows in each of the respective assets and related liabilities.
Our ability to measure and report our financial position and operating results is influenced by the need to estimate the impact or outcome of future events based on information available at the time of our financial statements. Further, some of our loans and financial assets held for investment do not trade in an active market with readily observable prices and therefore, their fair value is determined using valuation models that calculate the present value of estimated net future cash flows using estimates of draws or advances, prepayment speeds, home price appreciation, forward interest rates, loss rates, discount rates, cost to service, interest from collected deposits, contractual servicing fee income, and ancillary income.
Fair value determinations require many assumptions and complex analyses, especially to the extent there are not active markets for identical assets. Even if the general accuracy of our valuation models is validated, valuations are highly dependent upon the reasonableness of our assumptions and the predictability of the relationships that drive the results of the models. In particular, models are less dependable when the economic environment is outside of historical experience, as was the case from 2008-2010 and during the COVID-19 pandemic.
As a result of the foregoing, valuations are inherently uncertain and may fluctuate over short periods of time, especially during periods of elevated market volatility. This is particularly the case with respect to the fair values of the Company’s assets and liabilities that are classified as Level 3 in the fair value hierarchy used by the Company due to the fact that unobservable inputs are significant to their fair value measurement. See Note 5 - Fair Value in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. Our determination of fair value with respect to these assets and liabilities may differ from the fair value that would have been determined if a readily observable market for these types of assets and liabilities existed. If the assumptions we use in our models prove to be inaccurate, if market conditions change, or if errors are found in our models or weaknesses in our model governance, we may be required to write down the value of certain of our assets or we may be required to write up the value of certain of our liabilities, which could adversely affect our business, financial condition, and results of operations. The fair value of the assets and liabilities related to our securitizations rely on forward rates of interest. Further, the durations of assets and liabilities may not match, resulting in sensitivities to specific portions of the forward curve for interest rates. If these assumptions prove to be or the market for interest rates changes, we may be required to write down the net value of our assets related to our securitizations.
We continue to monitor the markets and make necessary adjustments to our models and apply appropriate management judgment in the interpretation and adjustment of the results produced by our models. This process takes into account updated information while maintaining controlled processes for model updates, including model development, testing, independent validation, and implementation. As a result of the time and resources, including technical and staffing resources, that are required to perform these processes effectively, it may not be possible to replace existing models quickly enough to ensure that they will always properly account for the impacts of recent information and actions.
Our business could suffer if we fail to attract, or retain, highly skilled employees. In addition, our success depends on the continuing efforts of our founder and chairman, executive management team, and key personnel.
Our future success will depend on our ability to identify, hire, develop, motivate, and retain highly qualified and skilled personnel for all areas of our organization. Trained and experienced personnel in the mortgage industry are in high demand and may be in short supply, particularly those with training and experience specific to home equity-based financial products such as reverse mortgages. Companies with which we compete may be able to offer more attractive terms of employment. In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. We may not be able to attract, develop, and maintain the skilled workforce necessary to operate our businesses, and labor expenses may increase as a result of a shortage in the supply of qualified personnel.
Additionally, the experience of our founder and chairman and members of our executive management team is a valuable asset to us. Our key personnel have significant experience in the financial services industry and would be difficult to replace. Disruptions in management continuity could result in operational or administrative inefficiencies and added costs, which could adversely impact our business, financial condition, and results of operations, and may make recruiting for future management positions more difficult or costly. We cannot assure you that we will be able to attract and retain key personnel or members of our executive management team, which may
impede our ability to implement our current strategy or take advantage of strategic acquisitions or other growth opportunities that may be presented to us, which could materially affect our business, financial condition, and results of operations.
Finally, effective succession planning is also important to our future success. If we fail to ensure the effective transfer of knowledge and smooth transitions involving members of our executive management team and key personnel, our ability to execute short and long term strategic, financial, and operating goals, as well as our business, financial condition, and results of operations generally, could be materially adversely affected.
Our failure to implement and maintain effective internal controls over financial reporting could require us to restate financial statements and cause investors to lose confidence in our reported financial information.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of the NYSE and NYSE Texas. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs; make some activities more difficult, time-consuming, and costly; and place significant strain on our personnel, systems, and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting.
In order to develop, maintain, and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related and audit-related costs and significant management oversight. Our internal controls, including any new controls that we develop, may become inadequate because of changes in conditions in our business. Weaknesses in our disclosure controls and internal controls over financial reporting may be discovered in the future. Any failure to maintain effective disclosure controls and internal controls over financial reporting could have a material and adverse effect on our business, results of operations, and financial condition; investor confidence in our reported financial information; and the trading price of our securities. See “—Risks Related to Ownership of our Class A Common Stock—The Company incurs significant expenses and administrative burdens as a public company, which could have a material adverse effect on our business, financial condition, and results of operations,” “—Risks Related to Ownership of our Class A Common Stock—The Company may not be to effectively continue to implement and maintain controls and procedures required by the Sarbanes-Oxley Act that are applicable to us,” and “—Risks Related to Ownership of our Class A Common Stock—If we experience material or in the future or otherwise to maintain an system of internal controls, we may not be to accurately or timely report our financial results, in which case our business may be , investors may confidence in the accuracy and completeness of our financial reports, and the price of our securities may .”
We may fail to identify or adequately assess the magnitude of certain liabilities, shortcomings, or other circumstances prior to acquiring or investing in a company or business, including potential exposure to regulatory sanctions or liabilities resulting from an acquisition target’s previous activities, internal controls, and security environment.
We may from time to time identify opportunities to acquire another company or business. The risks associated with acquisitions include, among others:
• failing to identify or adequately assess the magnitude of certain liabilities, shortcomings, or other circumstances prior to acquiring or investing in a company, including potential exposure to regulatory sanctions or liabilities resulting from an acquisition target’s previous activities, internal controls, and information security environment;
• significant costs and expenses, including those related to retention payments, equity compensation, severance pay, intangible asset amortization and asset impairment charges, assumed litigation, and other liabilities, and legal, accounting, and financial advisory fees;
• unanticipated issues in integrating information, management style, controls and procedures, servicing practices, communications, and other systems including information technology systems;
• unanticipated incompatibility of purchasing, logistics, marketing, and administration methods;
• failing to retain key employees or clients;
• inaccuracy of valuation and/or operating assumptions supporting our purchase price; and
• representation and warranty liability relating to a target’s previous lending activities.
Before making acquisitions, we conduct due diligence that we deem reasonable and appropriate based on the known facts and circumstances applicable to each acquisition, and we negotiate purchase agreements which we believe adequately protect us from undisclosed—and frequently, disclosed—existing liabilities. Nevertheless, we cannot be certain that the due diligence investigation that we carry out with respect to any acquisition opportunity will reveal or highlight all relevant facts that may be necessary or helpful in evaluating the target. As a result, we may fail to identify or adequately assess the magnitude of certain liabilities, shortcomings, or other circumstances prior to acquiring, investing in, or partnering with a company, including potential exposure to regulatory sanctions or liabilities resulting from an acquisition target’s previous activities, internal controls, and security environment.
The success of our acquisitions is dependent, in part, on our ability to integrate, grow, and scale the newly acquired business into our Company efficiently, which poses substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity.
A security breach or a cyber-attack could adversely affect our results of operations and financial condition.
We collect and store certain personal and financial information from customers, employees, and other third parties. Security breaches or cyber-attacks involving our systems or facilities, or the systems or facilities of our service providers, could expose us to a risk of loss of personally identifiable information of customers, employees, and third parties or other confidential, proprietary, or competitively sensitive information, which could potentially have an adverse impact on our future business with current and potential customers, results of operations, and financial condition. A breach involving personally identifiable information of consumers could in particular be detrimental to the Company’s reputation and subject the Company to regulatory and consumer-facing obligations, which could have a material adverse effect on the Company. We could also be subjected to cyber-attacks, such as ransomware, that could result in slow performance and loss or temporary unavailability of our information systems, affecting our operational and ultimately our results of operations and financial condition. Other mortgage lenders and servicers and other mortgage industry participants have in the past been the subject of cyber-attacks resulting in data and temporary of information systems. For example, in November 2025, Situs AMC Holdings Corporation (“SitusAMC”), a third-party vendor, announced that a data had occurred, affecting accounting records, legal agreements, and customer records relating to SitusAMC’s clients, including records associated with due diligence activities in the residential mortgage sector. The Company uses certain of SitusAMC’s services and received notice from SitusAMC that it is possible that Company data was involved in the data . While SitusAMC subsequently informed the Company that no consumer personally identifiable information or sensitive confidential information attributable to the Company was involved in the data , the scope of the data and whether any Company data was involved is still being assessed. At this time, the Company has not been informed of, and is not otherwise aware of, any data relating to it or its loans that has been affected by the data . Mortgage lenders, servicers, and other mortgage industry participants may continue to be targeted in such attacks in the future. Globally, cyber-attacks are expected to continue accelerating in both frequency and sophistication with increasing use by actors of tools and techniques that could our ability to identify, , and recover from . Such attacks may also increase as a result of by members of foreign countries in response to actions taken by the U.S. in connection with geopolitical in many parts of the world, such as the ongoing Ukraine-Russia war and the in the Middle East, including the recently attacks between the U.S. and Iran. Furthermore, our employees operate under a hybrid workforce model and such model may be more to security .
We rely on encryption and other information security technologies licensed from third parties to provide security controls necessary to help in securing online transmission of confidential information pertaining to customers, employees, and other aspects of our business. A failure in our information security technologies may result in a compromise or breach of the technology that we use to protect sensitive data. A party who is able to circumvent our security measures by methods such as hacking, fraud, trickery, or other forms of deception could access sensitive personal and financial information or cause interruption in our operations. We are required to expend capital and other resources to protect against such security breaches or cyber-attacks or to remediate problems caused by such breaches or attacks. Our security measures are reasonably designed to protect against
security breaches and cyber-attacks, but our failure to prevent such security breaches and cyber-attacks could subject us to liability, regulatory action, decrease our profitability, and damage our reputation. Even if a failure of, or interruption in, our systems or facilities is resolved timely or an attempted cyber incident or other security breach is successfully avoided or thwarted, it may require us to expend substantial resources or to take actions that could adversely affect customer satisfaction or behavior and expose us to reputational harm.
Information security risks have increased because of the increasing industry-wide reliance on technologies, including mobile devices, that are connected over the internet and used to process data and conduct financial and other business transactions, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists, and others. We may not be able to anticipate or implement effective preventative measures against all security breaches of these types, especially because new vulnerabilities emerge daily, uses change frequently, and attacks can originate from a wide variety of sources. The occurrence of any of these events could adversely affect our business, results of operations, and financial condition.
Technology disruptions or failures, including a failure in our operational or security systems or infrastructure, or those of third parties with whom we do business, could disrupt our business, cause legal or reputational harm, and adversely impact our results of operations and financial condition.
We are dependent on the secure, efficient, and uninterrupted operation of our technology infrastructure, including computer systems, related software applications, and data centers, as well as those of certain third parties and affiliates. Our websites and computer/telecommunication networks must accommodate a high volume of traffic and deliver frequently updated information, the accuracy and timeliness of which is critical to our business. Our technology must be able to facilitate a loan application experience that equals or exceeds the experience provided by our competitors. Further, we leverage automated digital tools to improve efficiency and the overall ease of transacting. We have or may in the future experience service disruptions and failures caused by system or software failure, fire, power loss, telecommunications failures, team member misconduct, human error, computer hackers, computer viruses and disabling devices, or code, of service or information, as well as natural , terrorism, war, health pandemics, and other similar events, and our recovery planning may not be sufficient for all situations. This is especially applicable post the COVID-19 pandemic and the shift we have experienced in having most of our employees work from their homes, as our employees access our secure networks through their home networks. The implementation of technology changes and upgrades to maintain current and integrate new technology systems may also cause service . Any such could or our ability to provide services to our clients and loan applicants, and could also the ability of third parties to provide services to us.
Reputational harm, including as a result of our actual or alleged conduct or public opinion, could adversely affect our business, results of operations, and financial condition.
Reputational risk is inherent in our business. Negative public opinion can result from our actual or alleged conduct in any number of activities, including marketing, loan origination, loan servicing, debt collection practices, corporate governance, and other activities. Negative public opinion can also result from actions taken by government regulators and community organizations in response to our activities, from adverse actions taken by rating agencies, from adverse reports published by analysts, from consumer complaints, including in the CFPB complaints database, from litigation filed against us, from media coverage, whether accurate or not, and from action or inaction on the part of third parties with whom we partner or otherwise do business. See “—Risks Related to Laws and Regulations—We are subject to legal proceedings, federal or state governmental examinations, and enforcement investigations from time to time. Some of these matters are highly complex and to develop, and results are to predict or estimate.” The reverse mortgage origination business as a whole had reputational issues arise after 2007, when home values were decreasing nationwide, and the only products available to consumers were HECM loan products. Prior to 2015, HECM loan products were not underwritten to confirm the ability of borrowers to pay taxes and insurance; while the proceeds provided initial cash benefits to the borrowers, if they ultimately were or to pay property taxes and insurance, for would result, and eventually the reverse mortgage borrowers would be . In addition, for various reasons, borrowers would sometimes not have their spouses as co-borrowers on the reverse mortgage loan, with the result that when the borrower died, the non-borrowing spouse would be facing a due and payable balance, which they often were not to refinance. Because absent an event of , reverse mortgage loans only become due and payable upon the
death of the borrower, and the estate or heirs may not be engaged in the post-termination resolution of the reverse mortgage, reverse mortgages end with foreclosure more often than traditional mortgages. Those public filings are aggregated and come under scrutiny by agenda-driven groups who may not understand that the borrower is not being evicted and simply believe they have spotted a pattern of foreclosure for this type of loan. These issues led to adverse publicity in the reverse mortgage industry.
The issuance of specific regulations and guidance requiring that borrowers be clearly informed regarding their obligations to pay taxes and insurance during the application process and the requirement of “financial assessment” by HUD starting in 2015 have greatly decreased the risks of default due to failure to pay taxes and insurance. HUD also provided clear guidance regarding both underwriting and servicing of loans involving non-borrower spouses, significantly decreasing the risks of those situations. Borrower counseling by a HUD-approved counseling agency is required on HECM loans. FAR also requires pre-application counseling by a HUD-approved counseling agency for its non-agency reverse mortgages, and also underwrites these loans for the borrower’s willingness and ability to pay property taxes and hazard insurance premiums. For its non-agency second lien product, FAR also reviews the borrower’s payment history with respect to the first lien mortgage loan on the related mortgaged property as part of its underwriting process. For its non-agency reverse mortgages, FAR has more latitude to employ a variety of loss mitigation solutions to avoid foreclosure when the borrower is still living in the home and to address circumstances where the borrower has passed away while the non-borrowing spouse continues to live in the home (though unlike the HECM program FAR does not provide for a lifetime lease to non-borrowing spouses in connection with its non-agency reverse mortgage loans). Nevertheless, there may be situations where is the only resolution to the loan. Further, with respect to the non-agency second lien reverse mortgage product, FAR may be limited in being to offer mitigation solutions if the borrower has under their first lien mortgage loan, as the first lien mortgage loan lender typically manages the resolution and process in such circumstances. where the reverse mortgage borrower or their non-borrowing spouse is still living in the home—or even when they are no longer occupying the home—may lead to increased reputational risk. publicity due to actions by other reverse mortgage lenders could cause regulatory focus on our business as well. In addition, the CFPB has historically closely reverse mortgage marketing practices, publishing a 2015 study on this topic and entering into a number of public consent orders with reverse mortgage lenders over their marketing practices.
Large-scale natural or man-made disasters may lead to further reputational risk in the servicing area. Mortgaged properties are generally required to be covered by hazard insurance in an amount sufficient to cover repairs to or replacement of the residence. However, when a large scale disaster occurs, the demand for inspectors, appraisers, contractors, and building supplies may exceed availability, insurers and mortgage servicers may be overwhelmed with inquiries, mail service and other communications channels may be disrupted, borrowers may suffer loss of employment and unexpected expenses which cause them to default on payments and/or render them unable to pay deductibles required under the insurance policies, and widespread casualties may also affect the ability of borrowers or others who are needed to effect the process of repair or reconstruction or to execute documents. Loan originations may also be disrupted, as lenders are required to reinspect properties that may have been affected by the prior to funding. In these situations, borrowers and others in the community may believe that servicers and originators are them for being the of the initial and making it harder for them to recover, potentially causing reputational to us. Further, if there are significant in the mortgage portfolio that we service as a result of natural or man-made , there are likely to be increased numbers of loans upon which we will be required to . Larger numbers of will increase reputational risk in the mortgage area.
Moreover, the proliferation of social media websites as well as the personal use of social media by our employees and others, including personal blogs and social network profiles, also may increase the risk that negative, inappropriate, or unauthorized information may be posted or released publicly that could harm our reputation or have other negative consequences, including as a result of our employees interacting with our customers in an unauthorized manner in various social media outlets.
In addition, our ability to attract and retain clients is highly dependent upon the external perceptions of our level of service, trustworthiness, business practices, financial condition, and other subjective qualities. Negative perceptions or publicity regarding these matters—even if related to seemingly isolated incidents, or even if related to practices not specific to the origination or servicing of loans, such as debt collection—could erode trust and
confidence and damage our reputation among existing and potential clients. In turn, this could decrease the demand for our products, increase regulatory scrutiny, and detrimentally affect our business, financial condition, and results of operations.
Climate change, climate change-related regulation, and focus on environmental, social, and governance (“ESG”) issues may adversely affect our business and financial results and damage our reputation.
Recently, there has been growing concern from advocacy groups, government agencies, and the general public over the effects of climate change on the environment. Transition risks, such as government restrictions, standards, or regulations intended to reduce greenhouse gas emissions and potential climate change impacts, are emerging and may increase in the future. Evolving ESG rules, regulations, and stakeholder expectations have resulted in increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. Developing and acting on initiatives within the scope of ESG, and collecting, measuring, and reporting ESG related information and metrics can be costly, difficult, and time consuming and is subject to evolving reporting standards, including climate-related reporting requirements that the SEC may pursue, new climate disclosure rules adopted by the state of California, and similar proposals by other U.S. regulatory bodies. Such restrictions and requirements could increase our costs or require additional technology and capital investment, which could adversely affect our results of operations.
Additionally, ESG and other sustainability matters and the adequacy of our response and disclosures relating to these matters could harm our business, including in areas such as diversity, equity, and inclusion, human rights, climate change and environmental stewardship, support for local communities, corporate governance, and transparency. Increasing governmental, investor, and societal attention to ESG matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor, and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. Further, various third-party organizations have developed ratings processes or second party opinions (“SPOs”) for evaluating companies on their approach to ESG matters. FAR has received an SPO in connection with certain of its non-agency loan securitizations. These third-party ESG ratings may be used by some investors to assist with their investment and voting decisions. Any unfavorable ESG ratings or SPOs may lead to reputational damage and negative sentiment among our investors and other stakeholders. These factors may alter the environment in which we do business and may increase the ongoing costs of compliance and adversely impact our results of operations and cash flows. Conversely, anti-ESG sentiment has some momentum across the U.S. to manage divergent ESG-related expectations across stakeholders could stakeholder trust, impact our reputation, and affect our business. If we are to address such ESG matters or we or are perceived to to comply with all laws, regulations, policies, and related interpretations, it could impact our reputation and our business results.
Our business is subject to the risks of earthquakes, fires, floods, and other natural catastrophic events, which may increase in frequency or severity as a result of global climate change, and to interruption by man-made issues such as strikes, wars, and civil unrest as well as health pandemics and epidemics.
Our business is subject to the risks of earthquakes, fires, floods, and other natural catastrophic events. As the effects of climate change increase, we expect the frequency and impact of weather and climate related events and conditions to increase as well. Such events may cause damage to our systems or operations if they were to impact areas where a significant number of our employees are located. We believe such risk is somewhat mitigated due to the lack of concentration of our employees or business in one building or metro area; however, this geographic diversity may make us more vulnerable to disruptions in technology. See “—Technology disruptions or failures, including a failure in our operational or security systems or infrastructure, or those of third parties with whom we do business, could disrupt our business, cause legal or reputational harm, and adversely impact our results of operations and financial condition.”
Further, natural catastrophic events could result in damage to the properties of our borrowers collateralizing our loans. While the geographic distribution of our borrowers somewhat limits our physical climate risk, the impact of such events would be exacerbated if such events were to occur in areas where a significant number of our borrowers are located. See “—Our geographic concentration could materially and adversely affect us if the economic conditions in our current markets should decline or if our current markets are impacted by natural
disasters.” Mortgaged properties securing the loans that we originate are required to be covered by hazard insurance customary to the area in which the property is located, however, there could be circumstances where insurance premiums have not been timely paid or the insurance coverage otherwise fails or is insufficient (for example, the National Flood Insurance Program has a cap of $250,000). Further, in certain areas, such as California, earthquake insurance is not required by HUD or other lenders generally. Additionally, as the risk and severity of weather-related natural disasters potentially increases due to climate change, it may become more difficult for borrowers to obtain affordable insurance. If a property relating to a loan held by us were to incur uninsured damage, it may be difficult to effectively monetize such loan via a sale or securitization. Due to the non-recourse nature of reverse mortgage loans, we may ultimately incur losses on a reverse mortgage loan if results in the property being sold for less than the loan balance at loan maturity. In the case of a HECM loan, we may also incur when a loan matures prior to the completion of repairs following a natural , because we are required to reduce our claim to the FHA by the unrepaired amount. If properties relating to loans we have already sold or securitized were , we would be to such generally only if we had a representation or warranty under the related purchase and sale agreement. However, in cases where we have retained some credit risk, we could . In addition, natural events often lead to increased and increased servicing , which create additional risk for us. Natural events may also result in longer timelines to loans at maturity or to assign HECM loans to HUD.
In addition, strikes, war, and other geopolitical unrest as well as health pandemics and epidemics, such as the COVID-19 pandemic, could cause disruptions in our business and lead to interruptions, delays, or loss of critical data. We may not have sufficient protection or recovery plans in certain circumstances, and our business interruption insurance may be insufficient to compensate us for losses that may occur. These types of catastrophic events may also affect loans pending origination that have been rate-locked and loans that we are holding for sale or investment. For example, our gains in connection with securitizations and loans sales, the cost of capital to our Company, and the value of our assets may be adversely affected due to economic or industry sector downturns, geopolitical tensions arising out of wars such as Russia’s ongoing war with Ukraine or the ongoing in the Middle East (including the recently attacks between the U.S. and Iran), and any occurrence of infectious disease or other public health developments. Restrictions and regulations that result from and public health events may be complex and frequently changing, and they may impose additional legal compliance costs or business risks associated with our operations. Any escalation in such or events could lead to , , and in global markets and industries that could impact our business, results of operations, and financial condition.
Our risk management efforts may not be effective.
We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor, and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk, and other market-related risks, as well as operational and legal risks related to our business, assets, and liabilities. We are also subject to various laws, regulations, and rules that are not industry specific, including employment laws related to employee hiring, termination, and pay practices; health and safety laws; environmental laws; and other federal, state, and local laws, regulations, and rules in the jurisdictions in which we operate. The Company maintains policies and procedures for compliance with various laws and risk management efforts. Our risk management policies, procedures, techniques, and any updates thereof may not be sufficient to identify all of the risks to which we are exposed, mitigate the risks we have identified, or identify additional risks to which we may become subject in the future.
As a result of the application of the acquisition method of accounting in connection with business combinations, the historical consolidated financial statements of the Company are not necessarily indicative of the Company’s future results of operations, financial position, and cash flows, and the Company has recognized, and may recognize in the future, impairment charges related to goodwill, identified intangible assets, and fixed assets.
In accordance with Accounting Standards Codification 350, Intangibles-Goodwill and Other, to the extent goodwill and intangible assets are recorded on the statement of financial condition, 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 indefinite and definite-lived 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 indefinite and definite-lived assets decreases, the Company may determine that one or more of its indefinite and definite-lived assets is impaired. An impairment charge would be determined based on the estimated fair value of the assets. In prior years, the Company has recognized impairment charges and may in the future be required to recognize additional impairment charges. Any such impairment charge could have a material adverse effect on the Company’s business, financial condition, and results of operations.
Risks Related to Our Lending Business
Our loan origination and servicing revenues are highly dependent on macroeconomic and U.S. residential real estate market conditions.
Our success depends largely on the health of the U.S. residential real estate market, which is seasonal, cyclical, and affected by changes in general economic conditions impacted by national and global events and governmental policy initiatives that are beyond our control. The election of a new U.S. president for a term that commenced in 2025, coupled with a consolidation of party control of both chambers of Congress, led to new legislative and regulatory initiatives and the roll-back of certain initiatives of the previous presidential administration, which may impact our business in unpredictable ways. For example, the federal government has altered its approach to international trade policy and in some cases has taken action to renegotiate, or terminate, certain previously existing bilateral or multi-lateral trade agreements and treaties with foreign countries. The federal government has also imposed tariffs on certain foreign goods, including steel and aluminum, and on many countries, including Canada, China, and Mexico, and such policies have triggered reciprocal tariffs against the U.S. The federal government may impose additional tariffs in the future and/or reduce or remove previously imposed tariffs. Litigation related to these actions may create additional uncertainty. For example, on February 20, 2026, the U.S. Supreme Court struck down certain tariffs that had been imposed by the administration. Rapid changes in laws with uncertain interpretation and implementation may occur. Recent geopolitical events, such as the recently attacks between the U.S. and Iran, may also have economic impacts, including potentially to increased inflation rates. These changes may have a direct impact on economic conditions relevant to our business, including real estate values and prevailing mortgage rates, however, the extent of the impact remains uncertain. Economic factors such as increased interest rates, economic growth or conditions, the pace of home price appreciation or the of it, changes in household debt levels, inflationary pressures that limit surplus cash, and increased or or wages affect demand for loans, borrowers’ ability to qualify for and comply with the terms of loans, and our ability to monetize and collect on loans.
Adverse economic conditions may make a loan product less attractive to a borrower due to higher associated costs, particularly in higher interest rate environments, as well lower limits on the funds a borrower is eligible to receive, particularly in environments where property values have been stagnant or are declining. This in turn decreases demand from borrowers and adversely impacts our origination volumes. Further, adverse economic conditions may make it more difficult for borrowers to qualify for a loan product due to difficulties meeting requirements with respect to assets and/or income, particularly in slow economic growth and/or high inflation environments where potential borrowers may have limited surplus cash or income, also adversely impacting our origination volumes. Similar conditions resulting in limitations on cash and/or income may also make it more difficult for a borrower to comply with the ongoing requirements associated with their loan, which in turn can result in increased obligations in our role as servicer and higher rates of . Higher rates of will result in lower revenue for loans we service for Ginnie Mae in particular because we collect servicing fees from them only for performing loans, and may collection of servicing fees from some securitizations. Further, may ultimately result in , particularly if property values are and it becomes to recover the outstanding loan balance via and sale of the mortgaged property. Additionally, uncertainty or in mortgage market conditions could lead to a of the credit markets, higher interest rates, and widening credit spreads, which will result in lower net proceeds in connection with loans sold or securitized in the secondary market. This can particularly be the case because higher interest rates lead to lower loan origination volumes, which generally place pressure on margins, thus compounding the effect of the market conditions. Such events could be to our business.
Actual events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, transactional counterparties, or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. Although we maintain multiple banking relationships with both national and regional banks and actively monitor the financial stability of such institutions, a failure at any institution where we maintain a banking relationship could constrain our liquidity and result in a loss of funds, especially where deposited amounts exceed any insured maximum level, and result in significant market volatility. Additionally, if any parties with whom we conduct business are unable to access deposits with a financial institution, funds pursuant to certain instruments, or lending arrangements with such a financial institution, the credit quality of our counterparties may be impacted and limited access to funds could compromise the ability of our customers to pay their obligations to us, or to enter into new commercial arrangements with us.
Any of the circumstances described above, alone or in combination, may lead to volatility in or disruption of the credit markets at any time and may have a detrimental effect on our business.
We are subject to the risk of fraudulent activity by loan applicants and other participants in the loan origination process.
As a mortgage loan originator, we are subject to the risk of fraudulent activity by loan applicants and other participants in the loan origination process, including schemes in which perpetrators impersonate consumers or otherwise misrepresent their identity or authority in connection with a loan application. Mortgage loan origination fraud risk has increased in recent years and may continue to increase, particularly due to the availability of AI technologies that may be used by bad actors to produce high quality fraudulent content. We have controls in place designed to detect and prevent fraud and consistently work to enhance our fraud detection and prevention capabilities. However, we may be unable to prevent every instance of fraud that may be engaged in by a loan applicant, broker, appraiser, title agent, settlement agent, or other participant in the loan origination process.
A failure to detect and prevent fraud can lead to the use of inaccurate information in determining whether and under what terms to approve a loan. We may therefore originate a loan in circumstances where the loan would not have been approved if we had accurate information or may offer different terms for a loan than we would have offered if we had accurate information. This increases the risk of a default by the borrower due to failure to perform ongoing obligations during the life of the loan (particularly if the financial assessment is performed based on inaccurate information), additional costs in servicing and ultimately recovering on the loan, and failure to recover the full amount due on the loan (particularly if inaccurate information is used to determine the value of the mortgaged property). Fraudulent activity in relation to the loan origination process can also lead to regulatory scrutiny, litigation, reputational , and requirements for us to repurchase the loan from a securitization or third-party purchaser or to otherwise indemnify the securitization or third party purchaser for on such loan. As a result, in connection with the loan origination process could have a material effect on our overall business and our financial position, results of operations, and cash flows.
FAR’s status as an approved non-supervised FHA mortgagee and an approved Ginnie Mae issuer is subject to compliance with each of their respective guidelines and other conditions they may impose, and the failure to meet such guidelines and conditions could have a material adverse effect on our overall business and our financial position, results of operations, and cash flows.
FAR is an approved non-supervised FHA mortgagee and an approved Ginnie Mae issuer. In connection with these approvals, FAR is subject to compliance with each of the FHA’s and Ginnie Mae’s respective regulations, guides, handbooks, mortgagee letters, and all participants’ memoranda. For example, as a Ginnie Mae issuer, FAR must meet certain minimum capital requirements, which may increase over time as a result of FAR’s activities, such as the anticipated closing of FAR’s previously announced acquisition of PHH’s HECM loan servicing portfolio. These requirements include, but are not limited to, Ginnie Mae’s requirement that non-depository institutions hold equity capital in the amount of at least 6% of total assets. Ginnie Mae has provided a waiver to FAR in connection with its equity capital requirements, which is necessary in large part due to the consolidation of the HMBS and other non-recourse transactions onto FAR’s balance sheet. Any failure by FAR to maintain the Ginnie Mae equity capital waiver or any loss of FAR’s status as an approved non-supervised FHA
mortgagee or an approved Ginnie Mae issuer, could have a material adverse effect on our overall business and our financial position, results of operations, and cash flows. See “—Risks Related to Laws and Regulations—There may be material changes to the laws, regulations, rules, or practices applicable to the FHA, HUD, or Ginnie Mae that could materially adversely affect the reverse mortgage industry as a whole, including our business.”
We are subject to risks arising from conditions in the real estate and mortgage markets, in particular, the reverse mortgage market; we rely on the initiatives of HUD and Ginnie Mae to support the HECM program.
The success of our business strategies and our results of operations are materially affected by current or future conditions in the real estate and mortgage markets, in particular, the reverse mortgage market and the regulatory landscape applicable to the reverse mortgage market. FAR originates and acquires non-agency reverse mortgage loans as well as HECM loans in accordance with the FHA’s HECM program. HECM loans are insured by the FHA. As an approved non-supervised FHA mortgagee and an approved Ginnie Mae issuer, FAR pools interests in HECM loans (also known as participations) into HMBS. The Ginnie Mae HMBS guide imposes a mandatory repurchase requirement on a HECM loan issuer to repurchase a pooled HECM loan when such HECM loan reaches 98% of its maximum claim amount (which is the maximum FHA insurance amount available for a HECM loan). In December 2022, Reverse Mortgage Funding LLC (“RMF”), one of the nation’s largest reverse mortgage lenders, filed for Chapter 11 bankruptcy primarily due to its inability to secure adequate financing relating to its Ginnie Mae HECM loan repurchase obligations. RMF’s bankruptcy filing initially created disruption in the reverse mortgage market and adversely impacted the liquidity of reverse MBS as well as the cost of and availability of credit to reverse mortgage financial participants.
Following RMF’s bankruptcy filing, each of HUD and Ginnie Mae took several steps to support the reverse mortgage market. Among other things, HUD issued a mortgagee letter that streamlined certain processes relating to assignment of mortgage loans to HUD, thereby creating efficiency in the assignment process for mortgagees and easing the financial burden relating to assignments. In addition, HUD changed the determination of the debenture interest rate (the interest earned on loss claims between the due and payable date and the date of the loss claim) to be as of the date the loan becomes due and payable rather than the initial date the loan was endorsed by the FHA. Further, Ginnie Mae issued a memorandum relating to its HMBS program that allows issuers to pool draws relating to line of credit mortgage loans multiple times in a calendar month. In November 2024, Ginnie Mae announced the finalized term sheet for its HMBS 2.0 program. Pursuant to the HMBS 2.0 program, HECM loans with UPBs ranging from 98% to 148% of the maximum claim amount are expected to be eligible for securitization into HMBS. This would therefore enable us to securitize into HMBS additional HECM loans that are required to be bought out of pools of HECM loans securitized pursuant to Ginnie Mae’s existing HMBS program. Our Company has welcomed these changes from HUD and Ginnie Mae. However, the HMBS 2.0 program has not yet been enacted. If the HMBS 2.0 program is not enacted or if the final terms of the HMBS 2.0 program do not provide the anticipated financial relief, it may affect the reverse mortgage market as well as the Company and its future strategies and results of operations. In addition, given our Company’s prominent position in the reverse mortgage industry, from time to time, our Company has and, in the future, will, approach applicable state and/or federal regulators to advocate for certain to the regulatory framework applicable to reverse mortgage origination and as well as HECM program requirements. No assurance can be given as to whether we will be in our efforts to obtain such for our Company as well as other reverse mortgage market participants.
See “—Our loan origination and servicing revenues are highly dependent on macroeconomic and U.S. residential real estate market conditions.”
We face competition that could adversely affect us and we may not be able to maintain or grow the volume of our loan originations.
We compete with other third-party businesses in originating reverse mortgage loans and traditional home equity loan products. Some of our competitors may have more name recognition and greater financial and other resources than we have, including better access to capital. Competitors who originate loans to retain for investment may have greater flexibility in having variations in their loan-to-value requirements, underwriting guidelines, and/or approving loans.
We operate at a competitive disadvantage to federally chartered depository institutions because they enjoy federal preemption. As a result, they conduct their business under relatively uniform U.S. federal rules and standards and are not subject to licensing and certain consumer protection laws of the states in which they do business. Unlike our federally chartered competitors, we are generally subject to all state and local laws applicable to lenders in each jurisdiction in which we originate and service loans (though we do benefit from federal interest-rate preemption for certain first-lien, dwelling-secured loans under the Depository Institutions Deregulation and Monetary Control Act). See “—Risks Related to Laws and Regulations—Unlike competitors that are national banks, we are subject to state licensing and operational requirements that result in substantial compliance costs and risks.” Depository institutions also enjoy regular access to very inexpensive capital. To compete effectively, we must maintain a high level of operational, technological, and managerial expertise, as well as access to capital at a competitive cost.
We cannot assure you that we will remain competitive with other originators in the future, a number of whom also compete with us in obtaining financing. In addition, other competitors with similar objectives to our own may be organized in the future and may compete with us. These competitors may be significantly larger than us, may have access to greater capital and other resources, or may have other advantages. Furthermore, some competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition, and results of operations.
If we are unable to obtain sufficient capital to meet the financing requirements of our business, or if we fail to comply with our debt agreements, our business, financing activities, financial condition, and results of operations will be adversely affected.
We require significant leverage in order to fund mortgage originations, make servicing advances, and finance our investments. Accordingly, our ability to fund our mortgage originations, to make servicing advances, and to continue investments depends on our ability to secure financing on acceptable terms, to comply with the conditions of our existing financings, and to renew and/or replace existing financings as they expire. These financings may not be available on acceptable terms or at all. If we are unable to obtain these financings, we may need to raise the funds we require in the capital markets or through other means, any of which may increase our cost of funds.
As of December 31, 2025 , we have ent ered into 15 warehouse facilities and other lines of credit, with an aggregate of $1.7 b illion in borrowing capacity. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Su mmary of Certain Indebtedness.” These financings require us to comply with various covenants, including financial covenants, and in the past we have had difficulties complying with certain financial covenants and have had to obtain waivers or amendments to the terms of the affected covenants or, in a few instances, have elected to terminate the applicable financing arrangements. See “—Risks Related to Our Indebtedness—The agreements that govern our senior notes, warehouse facilities, and lines of credit impose significant operating and financial restrictions on the Company and its restricted subsidiaries, which may prevent us from capitalizing on business opportunities” and “—Risks Related to Our Indebtedness—The agreements that govern our warehouse facilities and lines of credit typically contain covenants relating to our financial condition and we may experience difficulties in complying with such financial covenants.” If we were to experience difficulties in complying with covenants in the future and we were not able to secure a waiver or amendment or the applicable financing arrangement, we could such a covenant and an event of could occur. Upon the occurrence and during the continuance of an event of , the holders of our indebtedness could elect to declare all the funds borrowed to be due and payable. See “—Risks Related to Our Indebtedness—Our to comply with the requirements of our outstanding indebtedness could result in an event of that could materially and affect our financial condition and ultimately us into or .”
Our financings also have fair value risk pursuant to which our lending counterparties have the right to value the related collateral. In the event the market value of the collateral decreases (typically as determined by the related lender) and a borrowing base deficiency exists, the related lender can require us to prepay the debt or require us to post additional margin as collateral at any time during the term of the related agreement. Such an event could have an adverse impact on our liquidity and financial condition and could also present a risk of a covenant default and related consequences as referenced in the prior paragraph.
We are generally required to renew a significant portion of our debt financing arrangements each year and in cases of certain securities repurchase agreements, the terms are shorter such as biweekly or monthly rolling periods, which exposes us to refinancing and interest rate risks. Furthermore, our counterparties are not required to renew or extend our repurchase agreements or other financing agreements upon the expiration of their stated terms (which term may be as short as two weeks in the case of certain securities repurchase agreements). Our ability to refinance existing debt (including refinancing existing securitization debt) and borrow additional funds is affected by a variety of factors:
• the available liquidity in the credit markets and in particular, the availability of credit in the market for asset-backed lending;
• prevailing interest rates;
• an event of default, a negative ratings action by a rating agency, and limitations imposed on us under the agreements governing our current debt that contain restrictive covenants and borrowing conditions that may limit our ability to raise additional debt;
• our financial condition and our ability to comply with our financial covenants;
• the strength of the lenders from which we borrow and the amount of borrowing such lenders will or may legally permit to us; and
• limitations on borrowings imposed by the amount of eligible collateral pledged, which may be less than the borrowing capacity of the facility.
In the event that any of our warehouse facilities or other lines of credit is terminated or is not renewed, or if the principal amount that may be drawn under our funding agreements that provide for immediate funding at closing were to significantly decrease, we may be unable to find replacement financing on commercially favorable terms, or at all. This could have a material adverse effect on our business, liquidity, financial condition, cash flows, and results of operations. Further, if we are unable to refinance or obtain additional funds for borrowing (including through the securitization markets), our ability to maintain or grow our business could be limited.
We currently only hedge a subset of our assets and our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates and valuations; our Company is exposed to other credit risk.
Our profitability is directly affected by changes in interest rates. The market value of closed loans held for sale and interest rate locks generally change along with interest rates. The value of such assets moves opposite of interest rate changes. For example, as interest rates rise, the value of existing mortgage assets falls. Further, a portion of our assets consist of MSR and the residual fair value of reverse mortgage loans above their related obligations, which may fluctuate in value.
We have currently entered into hedges with respect to a subset of our non-agency fixed rate loans that have yet to be securitized in order to reduce our exposure to the interest rate risk described in the prior paragraph. However, there can be no assurance that such hedges will adequately protect us from the aforementioned interest rate risk. We have not entered into hedges with respect to the remainder of our portfolio. In order to enter into hedges the Company needs sufficient liquidity to withstand the adverse impacts of hedging. The Company has determined that given its current position the risks that would come with entering into hedges on the rest of the Company’s portfolio outweigh the potential benefits. Therefore, currently the Company’s risks described in the prior paragraph are not mitigated by hedges for a significant portion of the Company’s portfolio. The Company may in the future decide to enter into hedges with respect to additional portions of the Company’s portfolio. However, there can be no assurance that such hedges would adequately protect us from the aforementioned interest rate and fair value risks, or that such a hedging strategy utilized by us would be well-designed or properly executed to adequately address such risks.
Our hedge instruments are accounted for as free-standing derivatives and included in our consolidated statements of financial condition at fair market value. Our operating results could be negatively affected because the losses on the hedge instruments we enter into may not be offset by a change in the fair value of the related hedged transaction. Our hedging strategies could also require us to provide cash margin to our hedging counterparties from time to time. In general, counterparties have a daily cash margin requirement. The collection of daily margin between us and our hedging counterparties could adversely affect our short-term liquidity and cash-on-hand.
Additionally, our hedge instruments may expose us to counterparty risk—the possibility that a loss may occur from the failure of another party to perform in accordance with the terms of the contract, which loss exceeds the value of existing collateral, if any.
Further, although our Company may hedge in order to mitigate interest rate risks, our Company’s assets are still exposed to market risks due to variations in prepayment speeds and credit spreads. Prepayment speed is the measurement of how quickly loans are repaid above the amortization schedule or, in the case of reverse mortgage loans, how far in advance of the expected maturity date the loans are repaid. Increasing prepayment speed may adversely affect the value of our MSR, loans, and our retained securities. Credit spreads measure the yield demanded on securities by the market based on their credit relative to a specific benchmark. Volatility in market conditions, resulting from events such as the unprecedented COVID-19 global pandemic and economic shutdown, or unstable geopolitical conditions such as the ongoing military action by Russia against Ukraine or the ongoing conflicts in the Middle East (including the recently escalating attacks between the U.S. and Iran), could cause credit spreads to widen, which reduces, among other things, availability of credit to our Company on favorable terms, liquidity in the market, and price of real estate-related or asset-backed assets. Such market conditions can be from time to time and can further as a result of a variety of factors beyond our control with effects to our financial condition. These events may , , or our ability to securitize or sell our assets, increase financing costs for our Company, and impact our ability to borrow capital generally. We generally do not hedge credit spreads.
A disruption in the secondary mortgage loan market, including the MBS market, could have a detrimental effect on our business.
Demand in the secondary market and our ability to complete the sale or securitization of our loans or other receivables depends on a number of factors, many of which are beyond our control, including general economic conditions, general conditions in the banking system, the willingness of lenders to provide financing for loans, the willingness of investors to purchase loans and MBS, and changes in regulatory requirements. Disruptions in the general MBS market may occur. Any significant disruption or period of illiquidity in the general MBS market could directly affect our liquidity because no existing alternative secondary market would likely be able to accommodate on a timely basis the volume of loans that we typically sell in any given period. Accordingly, if the MBS market experiences a period of illiquidity, we might be prevented from selling the loans that we produce into the secondary market in a timely manner or at favorable prices, which could be detrimental to our business, including, but not limited to, increasing our cost of funds due to extended dwell time on our warehouse lines, and a negative impact on our liquidity due to write-downs on the value of the loans held on our balance sheet and the application of large decreases in advance rates due to longer dwell times on our warehouse lines.
We have increased the volume of non-agency second lien reverse mortgage loan originations and are focused on further expanding this product offering to new customers. We either securitize non-agency second lien reverse mortgage loans into MBS sold to investors or sell them as whole loans to investors. Second lien mortgage loans are generally a riskier product than first lien mortgage loans given the subordinate lien position. See “—Risks with respect to our non-agency second lien reverse mortgage loan product could ultimately result in delays or shortfalls in recoveries of amounts due from borrowers.” As a result, the investor pool for second lien mortgage loans is generally more limited than the investor pool for first lien mortgage loans. If a market disruption occurs due to a lack of liquidity for residential non-agency mortgage loans or from an increase in credit losses on second lien mortgage loans, we may not be able to sell or securitize our non-agency second lien reverse mortgage loans, or we may be required to sell or securitize these loans at a significant loss. Additionally, the purchasers of these loans may experience their own financial and no longer be willing to invest in second lien mortgage loans. Any of these occurrences could materially and affect our business, liquidity, financial position, and results of operations.
We have third-party secondary market risks and counterparty risks (including mortgage loan brokers) that could have a material adverse effect on our business, liquidity, financial condition, and results of operations.
Secondary Market Risks: We provide representations and warranties to purchasers and insurers of our loans and in connection with our securitization transactions, as well as indemnification for losses resulting from breaches of representations and warranties. In the event of a breach, we may be required to repurchase a mortgage loan or
indemnify the purchaser, and any subsequent loss on the mortgage loan may be borne by us. While our contracts vary, they generally contain broad representations and warranties, including but not limited to representations regarding loan quality and underwriting (including compliant appraisals, financial assessment, and occupancy of the mortgaged property); securing of adequate insurance; and compliance with regulatory requirements. These obligations are affected by factors both internal and external in nature, including the volume of loan sales and securitizations, to whom the loans are sold and the terms of our purchase and sale agreements, the parties to whom our purchasers sell the loans subsequently and the terms of those agreements, actual losses on loans which have breached representations and warranties, our success rate at curing deficiencies or appealing repurchase demands, our ability to recover any losses from third parties, the overall economic condition in the housing market, the economic condition of borrowers, the political environment at investor agencies, and the overall U.S. and world economies. Many of the factors are beyond our control and may lead to judgments that are susceptible to change. For HECM loans, we, in our capacity as a Ginnie Mae issuer, also have an obligation to buy HECM loans out of the HECM loan pools securitized into HMBS when the UPB of a HECM loan reaches 98% of its maximum claim amount. Any significant increase in required loan repurchases could have a significant impact on our cash flows and could also have a effect on our business and financial condition.
When engaging in securitization transactions, we also prepare marketing and disclosure documentation, including term sheets, offering documents, and prospectuses, that include disclosures regarding the securitization transactions and the assets being securitized. If our marketing and disclosure documentation is alleged or found to contain material inaccuracies or omissions, we may be liable under federal and state securities laws (or under other laws) for damages to third parties that invest in these securitization transactions, including in circumstances where we relied on a third-party in preparing accurate disclosures, or we may incur other expenses and costs in connection with disputing these allegations or settling claims. We have also engaged in selling or contributing loans to third parties who, in turn, have securitized those loans. In these circumstances, we have in the past and may in the future also prepare marketing and disclosure documentation, including documentation that is included in term sheets, offering documents, and prospectuses relating to those securitization transactions. We could be liable under federal and state securities laws (or under other laws) or contractually for damages to third parties that invest in these securitization transactions, including liability for disclosures prepared by third parties or with respect to loans that we did not sell or contribute to the securitization.
Additionally, we typically retain various third-party service providers when we engage in securitization transactions, including underwriters or initial purchasers, trustees, administrative and paying agents, and custodians, among others. We frequently contractually agree to indemnify these service providers against various claims and losses they may suffer in connection with the provision of services to us and/or the securitization trust. To the extent any of these service providers are liable for damages to third parties that have invested in these securitization transactions, we may incur costs and expenses as a result of these indemnities.
Third-Party Loan Broker Risk: The brokers through whom we originate have parallel and separate legal obligations to which they are subject. While these laws may not explicitly hold the originating lenders responsible for the legal violations of such brokers, U.S. federal and state agencies could impose such liability and we may therefore be subject to claims for fines or other penalties based upon the conduct of the brokers with whom we do business. The U.S. Department of Justice (the “DOJ”), through its use of a disparate impact theory under the Fair Housing Act, is actively holding home loan lenders responsible for the pricing practices of independent third-party brokers, alleging that the lender is directly responsible for the total fees and charges paid by the borrower even if the lender neither dictated what the broker could charge nor kept the money for its own account. In addition, under TILA, we may be held responsible for improper disclosures made to clients by brokers.
Counterparty Credit Risks: We are exposed to counterparty credit risk in the event of non-performance by counterparties to various agreements, including our lenders, servicers, and hedge counterparties. Although certain warehouse and other financing facility lines are committed, we may experience a disruption in operations due to a lender withholding funding of a borrowing requested on the respective financing facility. Any of the above could adversely affect our business, liquidity, financial condition, and results of operations.
We have risks related to our Subservicers that could have a material adverse effect on our business, liquidity, financial condition, and results of operations.
FAR generally acts as named servicer with respect to loans that we originate and acquire (including as an issuer of HMBS) and in each such case, the related business contracts with various third parties (collectively, the “Subservicers”) for the subservicing of the loans. In addition, we engage Subservicers to service loans that we hold on our balance sheet. FAR has contracted with Compu-Link Corporation (d/b/a Celink), a Michigan corporation (“Celink”), as Subservicer to perform reverse mortgage servicing functions on our behalf, and with ServiceMac, LLC, a Delaware limited liability company (“ServiceMac”), as a Subservicer of non-agency hybrid mortgage loans originated prior to the discontinuation of the non-agency hybrid mortgage loan product. Upon closing the reverse mortgage asset acquisition with PHH, FAR will engage PHH as a Subservicer of the HECM loan servicing portfolio FAR acquires from PHH and may engage PHH as a Subservicer of additional assets in the future. While we have discontinued and wound down our traditional mortgage lending and commercial lending business lines, we still service certain traditional and commercial mortgage loans originated prior to the wind down. FAH’s subsidiary Finance of America Mortgage LLC (“FAM”) and FAR have contracted with LoanCare, LLC, a Virginia limited liability company (“LoanCare”), as Subservicer to perform traditional mortgage servicing functions on our behalf (LoanCare, in such capacity, referred to herein as the “Traditional Servicer”). FAM has contracted with Servis One, Inc. d/b/a BSI Financial Services, a Delaware corporation (the “Commercial Servicer”), as Subservicer to perform commercial mortgage servicing functions. These subservicing relationships present a number of risks to us.
We rely on Celink to subservice our reverse mortgage portfolio, including the HECM loan portfolio, other than the HECM loan servicing portfolio to be acquired from PHH and FAR’s discontinued non-agency hybrid mortgage loan product (subserviced by ServiceMac). We will rely on PHH to subservice the HECM loan servicing portfolio that we acquire from PHH and may engage PHH as a Subservicer of additional assets in the future. Failure by Celink or PHH, as applicable, to meet the requirements of the HUD servicing guidelines can result in the assessment of fines and loss of reimbursement of loan related advances, expenses, interest, and servicing fees. Moreover, if Celink or PHH, as applicable, is not vigilant in encouraging borrowers to make their real estate tax and property insurance premium payments, the borrowers may be less likely to make these payments, which could result in a higher frequency of default for failure to make these payments. If Celink or PHH, as applicable, misses HUD and Ginnie Mae timelines for non-performing assets, may be higher than originally anticipated, and we may be subject to by HUD and Ginnie Mae, including of interest. If or any amounts are not recovered from Celink or PHH, as applicable, such events frequently lead to the eventual realization of a by us. Further, Celink services our non-agency second lien reverse mortgage loan product, which presents unique . See “—Risks with respect to our non-agency second lien reverse mortgage loan product could ultimately result in or in recoveries of amounts due from borrowers.”
We rely on ServiceMac to subservice our discontinued non-agency hybrid mortgage loan product, which combines features of both traditional residential mortgages and reverse mortgages. Many of the risks specific to the subservicing of either traditional residential mortgages or reverse mortgages both apply to this product. Also, due to the unique nature of this product, issues or questions of first impression may arise from time to time, resulting in subservicing-related challenges and uncertainties.
In our reverse mortgage business, we believe the number of viable subservicers is limited, either due to the requisite Ginnie Mae authority and experience needed or, in the case of our non-agency second lien reserve mortgage loan product and our discontinued non-agency hybrid mortgage loan product, due to the unique nature of the products. Unless more subservicers enter this space, the quality of subservicing practices may deteriorate, and we could have limited options in the event of Subservicer failure. The failure of a Subservicer to effectively service our HECM loans, non-agency reverse mortgage loans, and/or discontinued non-agency hybrid mortgage loans could have a material and adverse effect on our business and our financial condition.
We have sold or transferred a substantial portion of our traditional mortgage and commercial mortgage MSR over the course of 2023, 2024, and 2025, which has reduced our exposure to the Traditional Servicer and the Commercial Servicer. However, while we continue to service traditional mortgages and commercial mortgages, we remain subject to risks resulting from the failure of such servicers to meet the requirements in their applicable servicing agreements, such as the risk of loss of reimbursement of loan related advances, expenses, interest, and servicing fees.
Our Subservicers may be required to be licensed under applicable state law, and they are subject to various federal and state laws and regulations, including regulation by the CFPB. See “—Risks Related to Laws and Regulations—Unlike competitors that are national banks, we are subject to state licensing and operational requirements that result in substantial compliance costs and risks.” Failure of the Subservicers to comply with applicable laws and regulations may expose them to fines, responsibility for refunds to borrowers, loss of licenses needed to conduct their business, and third-party litigation, all of which may adversely impact the Subservicers’ financial condition and ability to perform their responsibilities under the related subservicing agreement. In addition, regulators or third parties may take the position that we were responsible for the Subservicers’ actions or failures to act. In that event, we might be subject to regulatory action or litigation arising out of the actions of our Subservicers and therefore exposed to the same risks as the Subservicers. See “—Risks Related to Laws and Regulations—We are subject to legal proceedings, federal or state governmental examinations, and enforcement from time to time. Some of these matters are highly complex and to develop, and results are to predict or estimate.”
Our Subservicers may experience financial difficulties from time to time arising out of legal and regulatory issues as described in the prior paragraph or arising from other events. If any of our Subservicers experiences financial difficulties, including as a result of a bankruptcy, it may not be able to perform its subservicing and indemnification duties under the related subservicing agreement. There can be no assurance that each of our Subservicers will remain solvent or that such Subservicer will not file for bankruptcy at any time.
If any of our Subservicers or any of their respective vendors fails to perform its duties pursuant to its related subservicing agreement, whether due to legal and regulatory issues or financial difficulties as described in the two preceding paragraphs or for any other reason, our business acting as the named servicer (or for balance sheet loans, the owner of the loan) will be required to perform the servicing functions previously performed by such Subservicer or cause another subservicer to perform such duties, to the extent required pursuant to the related servicing agreement. The process of identifying and engaging a suitable successor subservicer and transitioning the functions performed by our Subservicer to such successor subservicer could result in delays in collections and other functions performed by our Subservicer and expose our business to breach of contract and indemnity claims relating to its servicing obligations. Such delays may also adversely affect the value of the residual interests that we own in our securitizations and loans.
If we do suffer a loss due to a Subservicer’s failure to perform, the recovery process against a Subservicer can be prolonged and may be subject to our meeting minimum loss deductibles under the indemnification provisions in our agreements with the Subservicer. The time may be extended as the Subservicer has the right to review underlying loss events and our request for indemnification. The amounts ultimately recovered from the Subservicers may differ from our estimated recoveries recorded based on the Subservicers’ interpretation of responsibility for loss, which could lead to our realization of additional losses. We are also subject to counterparty risk for collection of amounts which may be owed to us by a Subservicer. For example, Reverse Mortgage Solutions (“RMS”), who previously serviced a significant amount of loans for FAR, filed for Chapter 11 bankruptcy protection on February 11, 2019. RMS subsequently rejected its subservicing agreement with FAR. FAR filed a claim in the RMS for and potential future resulting from RMS’ to service loans in accordance with the terms of the subservicing agreement, and while FAR recovered certain amounts, it was less than the estimated current and future .
We also may suffer losses as a result of our agreement to indemnify our Subservicers for any losses resulting from their subservicing of the mortgage loans in accordance with the related subservicing agreement (so long as such loss does not result from the applicable Subservicer’s failure to act in accordance with standards specified under the related subservicing agreement), including losses that they may incur as a result of third-party litigation in certain circumstances. To the extent that we do not have a right to reimburse ourselves for the same amounts under our servicing agreements or if there are insufficient collections in respect of the mortgage loans for such reimbursements, we may face losses in our servicing business.
While our Subservicers are required to service in accordance with applicable legal and contractual requirements and, to the extent applicable, HUD servicing guidelines and Ginnie Mae requirements, such requirements do not address in detail every circumstance that could arise in the course of servicing a loan. As a
result, our Subservicers may need to exercise discretion in addressing unique scenarios that arise from time to time. Further, there may be additional servicing procedures that are not required in a given circumstance but that, if followed, would have the potential to enhance efficiency and lead to better outcomes. Our Subservicers may decide to limit their servicing activities to procedures that are strictly required in such a circumstance. The decisions made by our Subservicers in these types of scenarios may be different then the decisions we would make if we were directly servicing an applicable loan and may impact borrower satisfaction, resolution timelines, and ultimately the amount that we are able to collect with respect to a loan. However, we would not be entitled to indemnification from our Subservicers so long as they complied with all applicable requirements, even if an alternative course of action may have resulted in an improved outcome.
We are undertaking initiatives to enhance our internal servicing capabilities, which initiatives present operational and regulatory risks and may not result in the anticipated benefits.
We are undertaking initiatives to enhance our internal servicing capabilities. Certain of these initiatives are focused on providing additional oversight with respect to more complicated servicing processes, which may enable us to identify and resolve potential servicing issues more quickly. Other initiatives are designed to facilitate the more efficient resolution of loans at maturity while ensuring that we don’t ultimately incur losses on an applicable loan. These efforts include creating additional direct touchpoints with our borrowers or their heirs for the period between loan maturity and final resolution, particularly with respect to our non-agency reverse mortgage products, and developing the capability to complete more routine processes in-house. These initiatives are intended to improve customer experience, reduce resolution timelines, mitigate potential losses, and lower overall servicing-related expenses.
Even though we are enhancing our internal servicing capabilities, we plan to continue to utilize our Subservicers to subservice our loans. We will need to ensure that our internal servicing efforts are consistent with and complementary to the efforts of our Subservicers. This will require effective communication and coordination with our Subservicers so that there is a clear understanding of proper servicing protocols and which servicing responsibilities will be performed by which party. Otherwise, we and our Subservicers may engage in inconsistent or duplicative efforts and may provide inconsistent or duplicative information and instructions to borrowers and heirs. Alternatively, a necessary servicing function may inadvertently not be performed if each party thought the other had responsibility for that servicing function. We may not be able to identify a single point of contact for our customers. Any such event could result in borrower and heir confusion and dissatisfaction, complaints, regulatory scrutiny, , , increased costs, servicing , and and in loan resolution. Such events could also impact our reputation. See “—Risks Related to the Business of the Company—Reputational , including as a result of our actual or conduct or public opinion, could affect our business, results of operations, and financial condition.”
Further, in expanding our internal servicing oversight and activities, we must ensure that we obtain and maintain all required licenses, approvals, and registrations and comply with applicable federal, state, and local laws and regulations. Failure to do so could result in fines, penalties, enforcement actions, litigation, or restrictions on our ability to conduct servicing activities. See “—Risks Related to Laws and Regulations—We operate in a heavily regulated industry, and our loan origination and servicing activities expose us to risks of noncompliance with an increasing and inconsistent body of complex laws and regulations at the U.S. federal, state, and local levels.”
Developing these capabilities requires investments in personnel, training, technology, controls, monitoring systems, and governance frameworks. If these investments are greater than anticipated, if new oversight mechanisms are ineffective, or if the anticipated efficiencies, improvements, and cost savings are not realized, our operating expenses may increase without realizing the corresponding anticipated benefits, which could adversely affect our business, results of operations, and financial condition.
Risks with respect to our non-agency second lien reverse mortgage loan product could ultimately result in delays or shortfalls in recoveries of amounts due from borrowers.
With respect to our non-agency second lien reverse mortgage loan product, our lien is second in priority behind the first lien of a traditional mortgage loan or home equity line of credit collateralized by the same mortgaged property. The first lien mortgage loan lender and servicer are responsible for monitoring to ensure the borrower is
meeting their obligations under the first lien mortgage loan, including making required tax, insurance, and/or property charge payments and repairs that are also required to be made pursuant to the terms of our second lien mortgage loan. The first lien mortgage loan lender and servicer will typically be the first to address any instances of non-compliance with the borrower and to work with the borrower regarding loss mitigation opportunities and resolution processes. We will typically only intervene if the first lien mortgage loan lender and servicer have failed to cause the borrower to come into compliance or if the borrower is only non-compliant with the second lien mortgage loan but remains in compliance with the first lien mortgage loan. We therefore depend on the first lien mortgage loan lender and servicer to take appropriate steps with respect to non-compliance and loss mitigation. If they fail to do so, it could ultimately result in delays or shortfalls in collections with respect to our second lien mortgage loan.
The Company, in conjunction with its Subservicer, also monitors the status of the first lien mortgage loan in addition to the status of the second lien mortgage loan. However, the information the Company has regarding the status of the first lien mortgage loan may be inaccurate, unavailable, incomplete, or delayed. This may in particular be the case because our second lien mortgage loan does not require monthly principal or interest payments. Lenders and servicers with respect to other types of second lien products that do require monthly principal and interest payments may be more quickly alerted to a potential issue with respect to the status of a related first lien loan due to the borrower’s failure to make a required monthly principal or interest payment on their second lien loan. Further, the Company’s Subservicer, Celink, is a reverse mortgage servicer. Given that the second lien product is new in the reverse mortgage market, Celink does not have substantial experience with subservicing second lien mortgage loans. While the Company has deployed resources into servicing practices for reverse mortgage loans in a second lien position, including implementing monitoring services to enhance its oversight capabilities to protect our lien position, no assurance can be given that we will be in obtaining accurate, complete, and timely information regarding the first lien mortgage loan.
If an event of default occurs with respect to the first lien mortgage loan, the first lien mortgage loan lender may foreclose on the mortgaged property without our consent. If the first lien mortgage loan lender initiates foreclosure processes, the first lien mortgage loan lender and servicer will control the timing, method, and procedure of the foreclosure action. In such circumstances, we will rely on the first lien mortgage loan lender and servicer to manage the foreclosure and sale process in a skillful and efficient manner. However, the proceeds of the ultimate foreclosure sale will be allocated first to the first lien mortgage loan lender until the first lien mortgage loan is paid in full, and only then to the holder of the second lien mortgage loan. The primary incentive of the holder of the first lien mortgage loan will therefore be to recover the amounts due with respect to the first lien mortgage loan, not the second lien mortgage loan. The Company will need to timely assess the related mortgaged property to determine if it is in the Company’s best interest to submit a bid to purchase the mortgaged property at the sale to the Company and its Subservicer to preserve the equity in the mortgaged property. Purchasing the mortgaged property at sale the Company and its Subservicer to manage the ultimate of the mortgaged property with the goal of recovering amounts sufficient to recoup the amount paid to purchase the mortgaged property at sale as well as the amounts due with respect to the second lien mortgage loan. Alternatively, we may initiate processes if an event of occurs with respect to our second lien reverse mortgage loan that either (i) constitutes an event of under the first lien mortgage loan for which the first lien mortgage loan lender and its servicer have not taken action or (ii) does not constitute an event of under the first lien mortgage loan. In such case, we in conjunction with our Subservicer will need to manage the and sale process in a skillful and manner in an effort to recover all amounts due under both mortgage loans, including any costs. If and disposition processes are not conducted by the first lien mortgage loan lender, the first lien mortgage loan servicer, the Company, and/or the Company’s Subservicer in a manner that results in sufficient funds to all amounts due under both mortgage loans, including any costs, any portion of the second lien mortgage loan balance in excess of proceeds available to the second lien mortgage loan lender will be charged off.
We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances.
During any period in which a borrower is not making payments in respect of property taxes, insurance premiums, or homeowners association dues, we are generally required under most of our reverse mortgage servicing agreements to advance our own funds to meet contractual requirements to preserve the related mortgaged property
by paying such property taxes, insurance premiums, and homeowners association dues, as well as legal expenses and other protective advances. With respect to any loan in foreclosure, prior to liquidation or sale of the related property, we also advance funds to maintain, repair, and market the property. As home values change, we may have to reconsider certain of the assumptions underlying our decisions to make advances, and in certain situations our contractual obligations may require us to make certain advances for which we may not be reimbursed. A delay in our ability to collect an advance may adversely affect our liquidity, and our inability to be reimbursed for an advance could be detrimental to our business. As our servicing portfolio continues to age, defaults could increase, which may increase our costs of servicing and could be detrimental to our business. Any significant increase in required servicing could have a significant impact on our cash flows, even if they are reimbursable, and could also have a effect on our business and financial condition.
Our counterparties may terminate subservicing contracts under which we conduct servicing activities.
A substantial portion of the mortgage loans we service are serviced on behalf of Ginnie Mae. With respect to HECM loans securitized into HMBS, Ginnie Mae requirements prescribe the related base service fee to compensate us for servicing loans as well as the assessment of fines and penalties that may be imposed upon us for failing to meet servicing standards. As is standard in the industry, under the terms of our master servicing agreements with Ginnie Mae, Ginnie Mae has the right to terminate us as servicer of the loans we service on their behalf at any time and also has the right to cause us to transfer the MSR to a third-party. If Ginnie Mae were to terminate us as a servicer, or increase our costs related to such servicing by way of additional fees, fines or penalties, such changes could have a material adverse effect on the revenue we derive from servicing activity, as well as the value of the related MSR. These agreements, and other servicing agreements under which we service mortgage loans for loan purchasers or in connection with securitizations, also require that we service in accordance with certain prescribed servicing guidelines and in some cases contain financial covenants. to such requirements could result in our as servicer under the applicable servicing agreement. If we were to have our servicing or subservicing rights on a material portion of our servicing portfolio, this could affect our business.
Risks Related to Laws and Regulations
We operate in a heavily regulated industry, and our loan origination and servicing activities expose us to risks of noncompliance with an increasing and inconsistent body of complex laws and regulations at the U.S. federal, state, and local levels.
Due to the heavily regulated nature of the financial services industry, we are required to comply with a wide array of U.S. federal, state, and local laws, rules, and regulations that regulate, among other things, the manner in which we conduct our loan origination and servicing business and the fees that we may charge, how we compensate our loan officers, and the collection, use, retention, protection, disclosure, transfer, and other processing of personal information. Governmental authorities and various U.S. federal and state agencies have broad oversight and supervisory and enforcement authority over our business. From time to time, we may also receive requests (including requests in the form of subpoenas and civil investigative demands) from federal, state, and local agencies for records, documents, and information relating to our servicing and lending activities. Ginnie Mae, the United States Department of the Treasury, various investors, securitization trustees, and others also subject us to periodic reviews and audits. These laws, regulations, and oversight can significantly affect the way that we do business, restrict the scope of our existing business, limit our ability to expand our product offerings or to pursue acquisitions, or make our costs to service or originate loans higher, which could impact our financial results. Failure to comply with applicable laws and regulatory requirements may result in, among other things, revocation of or inability to renew required licenses or registrations, of approval status, of contracts without compensation, administrative enforcement actions and , private lawsuits, including those styled as class actions, and desist orders, and civil and liability.
We must comply with a large number of federal, state, and local consumer protection laws including, among others, TILA, as amended, together with its implementing regulations (Regulation Z), the FDCPA, RESPA, as amended, together with its implementing regulations (Regulation X), ECOA, as amended, together with its implementing regulations (Regulation B), FCRA, as amended, together with its implementing regulations (Regulation V), the Fair Housing Act, the Telephone Consumer Protection Act, as amended, GLBA, together with
its implementing regulations (Regulation P), the Mortgage Advertising Practices Rules (Regulation N), the Electronic Funds Transfer Act, as amended, together with its implementing regulations (Regulation E), the Servicemembers’ Civil Relief Act, as amended, HMDA, together with its implementing regulations (Regulation C), the Secure and Fair Enforcement for Mortgage Licensing Act, as amended, the Federal Trade Commission Act, the Dodd-Frank Act, as amended, together with its implementing regulations, U.S. federal and state laws prohibiting unfair, deceptive, or abusive acts or practices, and state foreclosure laws.
Antidiscrimination statutes, such as the Fair Housing Act and ECOA, prohibit creditors from discriminating against loan applicants and borrowers based on certain characteristics, such as race, religion, and national origin. Various federal regulatory agencies and departments, including the DOJ and the CFPB, take the position that these laws apply not only to intentional discrimination, but also to neutral practices that have a disparate impact on a group that shares a characteristic that a creditor may not consider in making credit decisions (i.e., creditor or servicing practices that have a disproportionate negative effect on a protected class of individuals). This interpretation may increase the risk of an allegation of noncompliance. These statutes apply to loan origination, servicing practices, marketing, the amount and nature of fees that may be charged for transactions and incentives, such as rebates, use of credit reports, safeguarding of non-public, personally identifiable information about our clients, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features, and required disclosures and notices to clients.
RESPA, among other things, prohibits the payment of fees or other things of value in exchange for referrals of real estate settlement services, which would include residential mortgage loans. However, RESPA expressly permits the payment of reasonable value for non-referral services and facilities actually performed and provided. When a lender seeks to rely on this exception, it must be prepared to demonstrate that the services or facilities for which compensation is paid are separate and distinct from any referral and the amount paid is reasonable. If the amount paid exceeds the reasonable value, the excess could be attributable to the referral. The Company, like many originating lenders, uses “marketing services agreements” with sources of potential loan leads, such as organizations that serve financial professionals. A “marketing services agreement” is an agreement under which a lender compensates a service provider for performing actual marketing services directed to the general public. The Company also has relationships with lead providers and digital consumer review websites and marketing providers, some of which may be considered “digital marketing review platforms” under the CFPB’s February 2023 Advisory Opinion titled “Digital Mortgage Comparison-Shopping Platforms and Related Payments to Operators.” The Company also has relationships with third-party mortgage brokers that place loans with the Company. Further, the Company previously engaged in “desk rental” agreements, which provide for the lease of office space, furniture, and equipment and use of common areas and other services, like utilities, internet, and shared receptionist and janitorial services. In connection with the wind down of FAM, the Company no longer has any desk rental agreements, but could still be subject to an of a RESPA related to these past practices. From a RESPA perspective, the analysis focuses on whether the general marketing services are separate and distinct from any referrals that may occur, whether the services actually are being performed or provided, and whether the amounts paid by the lender do not exceed the fair market value for such services. In addition to administrative enforcement, RESPA provides a private right of action for consumers and third-party . Thus, while the Company has controls in place to ensure that its relationships with lead traffic sources comply with RESPA regulations, there can be no assurance that the CFPB or any other governmental entity with authority to enforce RESPA, or a court, will share this view. If the CFPB or a court determined that the Company’s existing program was not in compliance with RESPA regulations, or otherwise asserted a new basis for non-compliance with any similar regulations, it could have a effect on our business, financial condition, and results of operations.
We are also subject to the regulatory, supervisory, and examination authority of the CFPB, which has oversight of federal and state non-depository lending and servicing institutions, including mortgage loan originators and mortgage loan servicers. The CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, including TILA, Section 8 of RESPA, HMDA, ECOA, FCRA, GLBA, and the FDCPA. In connection with the closing of the Company’s acquisition of operational assets of American Advisors Group, now known as Bloom Retirement Holdings Inc. (“AAG/Bloom”), in March 2023, the Company agreed with AAG/Bloom to comply with the terms of two separate CFPB enforcement matters (the “Orders”) that AAG/Bloom was subject to prior to the acquisition. While the Company has been assured by the CFPB that the Company does not have any remaining obligations under the Orders, the Company has not received any formal release from its obligations to comply with the terms of the Orders. There can be no assurance that the
CFPB will not take action against the Company if the Company does not maintain sufficient compliance with such Orders going forward, or that the CFPB will not find the Company in violation of the Orders and their related requirements or other applicable consumer protection laws. If the Company is found to have violated the Orders or to have violated other consumer protection laws, such regulatory violations could have a detrimental impact on our ability to operate our business, our reputation, and our financial condition. Further, in the CFPB’s Fall 2022 Supervisory Highlights, the CFPB indicated that its supervisory division had created a Repeat Offender Unit to increase its focus on repeat offenders who violate agency or court orders. In 2024, the CFPB created a repository to track and mitigate risks posed by repeat offenders, requiring nonbank financial companies to register with the CFPB when they become subject to certain local, state, or federal consumer financial protection agency or court orders. On February 27, 2023 the CFPB entered into a consent order ordering a mortgage lender to operations after it engaged in marketing practices in of a prior consent order. While the Company has been by the CFPB that the CFPB does not consider the Company to be a repeat , that can be no assurance that the CFPB will not change its position in the future.
The scope of the laws and regulations and the intensity of the supervision to which our business is subject have increased over time, in response to the financial crisis in 2008 and other factors such as technological and market changes, and may continue to increase in the future. The Trump administration may implement changes to reduce the scale of CFPB enforcement efforts and regulatory oversight at the federal level, however, the extent of such changes and their impact on current regulatory processes is uncertain, and states may respond to such changes by enhancing their regulatory oversight efforts. Regulators continue to be active in the reverse mortgage space, including due to the perceived susceptibility of older borrowers to be influenced by deceptive or misleading marketing activities. Regulators have also focused on appraisal practices because reverse mortgages are largely dependent on collateral valuation. Additionally, as we develop and/or utilize new technologies and digital capabilities, we may become subject to additional and new laws relating to such activities. New applicable laws will likely continue to go into effect. Further, the U.S. federal, state, and local laws and regulations that we are subject to are amended from time to time. While we have processes and systems in place to identify and interpret such new or amended laws and regulations and to implement them, we may not identify every application of law, regulation, or ordinance, interpret them accurately, train our employees effectively with respect to these laws and regulations, or supervise our service providers and vendors, including outside counsel, with respect to their compliance with these laws and regulations. The complexity and continuously changing nature of these legal requirements increases our exposure to the risk of . These changes also result in an increase in our regulatory compliance and associated costs and place restrictions on our origination and servicing operations.
The laws and regulations applicable to us are subject to administrative or judicial interpretation, but some laws and regulations may not yet have been interpreted or may be clarified infrequently. Ambiguities in applicable laws and regulations may leave uncertainty with respect to permitted or restricted conduct and may make compliance with laws, and risk assessment decisions with respect to compliance with laws, difficult and uncertain. In addition, ambiguities make it difficult, in certain circumstances, to determine if, and how, compliance violations may be cured. The adoption by industry participants of different interpretations of these statutes and regulations has added uncertainty and complexity to compliance. We may fail to comply with applicable statutes and regulations even if acting in good faith due to a lack of clarity regarding the interpretation of such statutes and regulations, which may, and at times does, lead to regulatory investigations, governmental enforcement actions, or private causes of action with respect to our compliance.
Regulatory enforcement and fines have increased across the banking and financial services sector. Regulatory authorities and private plaintiffs may allege that we failed to comply with applicable laws, rules, and regulations where we believe we have complied. We have been, and expect to continue to be, subject to regulatory enforcement actions and private causes of action from time to time with respect to our compliance with applicable laws and regulations. Allegations may relate to past conduct and/or past business operations, such as the prior activity of acquired entities, and certain legislative actions and judicial decisions can give rise to the initiation of lawsuits against us for activities we conducted in the past. Furthermore, provisions in our loan product documentation, including but not limited to the mortgage and promissory notes we use in loan originations, could be challenged in and construed as unenforceable by a court. To resolve issues raised in examinations, investigations, or other governmental actions, we may be required to take various corrective actions, including changing certain business practices, making refunds, or taking other actions that could be financially or competitively to us. Even unproven that our activities have not complied or do not comply with all applicable laws and
regulations may have a material adverse effect on our business, financial condition, and results of operations. See “—We are subject to legal proceedings, federal or state governmental examinations, and enforcement investigations from time to time. Some of these matters are highly complex and slow to develop, and results are difficult to predict or estimate.”
Our failure to comply with applicable U.S. federal, state, and local consumer protection and data privacy and information security laws could lead to:
• reduced payments by clients;
• modification of the original terms of loans;
• permanent forgiveness of debt owed to us;
• delays in the foreclosure process;
• increased servicing advance obligations;
• loss of our licenses and approvals to engage in our servicing and lending business;
• damage to our reputation in the industry and with consumers;
• governmental investigations and enforcement actions;
• administrative fines and penalties and litigation;
• civil and criminal liability, including class action lawsuits;
• diminished ability to finance loans that we originate or purchase, requirements to finance such loans at reduced advance rates compared to other financed loans or to remove financed loans from financing facilities;
• diminished ability to sell or securitize loans that we originate or purchase, requirements to sell such loans at a discount compared to other loans or to repurchase or address indemnification claims from purchasers of such loans or in connection with securitizations of such loans;
• inability to raise capital; and
• inability to execute on our business strategy.
We are currently subject to, and may in the future become subject to additional, U.S. and state laws and regulations imposing obligations on how we collect, store, process, and share personal information. Our actual or perceived failure to comply with such obligations could harm our business and reputation. Ensuring compliance with such laws could also impair our efforts to maintain and expand our consumer and customer base, and thereby decrease our revenue.
We are, and may increasingly become, subject to various laws and regulations, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate. The regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to increase but remain uncertain for the foreseeable future. These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our business, financial condition, results of operations, and prospects.
In the U.S., various federal and state regulators, including governmental agencies like the CFPB, the Federal Trade Commission, and the California Privacy Protection Agency, have adopted, or are considering adopting, laws and regulations concerning personal information and data security. Certain state laws may be more stringent or broader in scope, or offer greater individual rights with respect to personal information, than federal or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act (“CCPA”), both increases privacy rights for California residents and imposes obligations on companies that process and share personal information. Among other things, the CCPA requires covered companies to provide new disclosures to California residents, including consumers, employees, and contractors, provide such individuals new data protection and privacy rights, including the ability to opt-out of the sale of personal information or the sharing of personal information for cross-context behavioral advertising, and create additional requirements to limit the retention of personal information. The CCPA also established the California Privacy Protection Agency, an agency charged with data privacy enforcement and issuing clarifying privacy regulations. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data that result in the of personal information. The private right of action may increase the likelihood of, and risks associated with, data . In
addition, laws in all 50 U.S. states and territories require businesses to provide notice to consumers whose personal information has been disclosed as a result of a data breach. State laws are changing rapidly, including the passage of new privacy laws in several states, and there have been discussions in the U.S. Congress of a comprehensive federal data privacy law to which we would become subject if such a law was enacted. Related laws imposing requirements in areas such as cybersecurity impose further requirements enhancing compliance obligations with respect to data privacy and security.
All of these evolving compliance and operational requirements, as well as changing consumer expectations around privacy, impose significant costs. Such costs include those related to organizational changes, implementing additional protection technologies and processes, training employees, and engaging consultants, which are likely to increase over time. In addition, such requirements are likely to require us to modify our data processing practices and policies, distract management, or divert resources from other initiatives and projects, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Any failure or perceived failure by us to comply with any applicable federal, state, or similar foreign laws and regulations relating to data privacy and security could result in damage to our reputation, as well as regulatory proceedings or litigation by governmental agencies or other third parties, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, , or judgments, all of which could have a material effect on our business, financial condition, and operating results.
Unlike competitors that are national banks, we are subject to state licensing and operational requirements that result in substantial compliance costs and risks.
Because we are not a depository institution, we do not benefit from a federal exemption to state mortgage banking, loan servicing, or debt collection licensing and regulatory requirements (though we do benefit from federal interest-rate preemption for certain first-lien, dwelling-secured loans under the Depository Institutions Deregulation and Monetary Control Act). Accordingly, we must comply with state licensing requirements and varying compliance requirements in all 50 states and the District of Columbia, and we are sensitive to regulatory changes that may increase our costs through stricter licensing laws, disclosure laws, or increased fees or that may impose conditions to licensing that we or our personnel are unable to meet. In addition, if we enter new markets, we may be required to comply with new laws, regulations, and licensing requirements. Future state legislation and changes in existing regulation may significantly increase our compliance costs or reduce the amount of ancillary revenues, including late fees that we may charge to borrowers. This could make our business cost-prohibitive in the affected state or states and could materially affect our business. Further, we are subject to periodic examinations by state regulators, which can result in refunds to borrowers of certain fees earned by us, and we may be required to pay substantial penalties imposed by state regulators due to compliance . States may their regulatory oversight efforts in the future, particularly if the scale of CFPB enforcement efforts and regulatory oversight at the federal level is reduced due to changes implemented by the Trump administration.
We and our licensed Subservicers are required to comply with applicable jurisdictional licensing requirements and laws. Licensed entities are required to renew their licenses, typically on an annual basis, and to do so they must satisfy the license requirements of each jurisdiction, which generally include financial requirements such as providing audited financial statements or satisfying minimum net worth requirements and non-financial requirements such as satisfactorily completing examinations as to the licensee’s compliance with applicable laws and regulations. Further, we and our licensed Subservicers are subject to periodic examination by state regulatory authorities and we may be subject to various reporting and other requirements to maintain licenses. Most state licensing laws require that before a “change of control” can occur, including in connection with a merger, acquisition, or initial public offering, applicable state banking departments must approve the change. Most of these “change of control” statutes require that, if there is an acquisition, merger, or initial public offering, the acquiring company or companies being merged or going public must notify the state regulatory agency and receive agency approval before the acquisition, merger, or initial public offering is finalized. Applicable state mortgage- or loan-related laws may also impose requirements as to the form and content of contracts and other documentation, licensing of our employees and employee hiring background checks, licensing of independent contractors with which we contract, restrictions on certain practices, disclosure and record-keeping requirements, and enforcement of borrowers’ rights. These licensing and other requirements may impact our ability to operate our business and impose compliance costs that may affect our financial performance.
We believe that we and our Subservicers maintain all material licenses and permits required for our current operations and are in substantial compliance with all applicable federal, state, and local laws, rules, regulations, and ordinances. However, we and our Subservicers may not be able to maintain all requisite licenses and permits. Further, states may adopt additional, or revise existing, rules and regulations, including the states that currently do not provide extensive regulation of our business, and in such event we may not be able to obtain or maintain all requisite licenses and permits that become required or comply with all new applicable laws, rules, regulations, and ordinances. Our or a Subservicer’s failure to satisfy licensing and other regulatory requirements could result in a default under our servicing or other agreements or result in state regulators requiring us to pay substantial penalties or issue borrower refunds or restitution, all of which could have a material adverse effect on our business, financial condition, and results of operations.
Compliance with federal, state, and local laws and regulations that govern employment practices and working conditions may be particularly burdensome to us due to the distributed nature of our workforce.
We have operations across the U.S., with a workforce of 782 full-time and two part-time employees operating in local markets across the U.S. as of December 31, 2025. In addition to complying with the Fair Labor Standards Act and the Equal Employment Opportunity Act, we are required to comply with similar state laws and regulations in each market where we have employees. Compliance with these laws and regulations requires a significant amount of administrative resources and management attention. Many of these laws and regulations provide for qui tam or similar private rights of action and we are routinely subject to litigation and regulatory proceedings related to these laws and regulations in the ordinary course of our business. For example, we are currently in litigation brought under the California Private Attorneys General Act related to alleged violations of the California Labor Code. Regardless of the outcome or whether the claims are meritorious, we may need to devote substantial time and expense to defend against claims related to the California Private Attorneys General Act or other similar federal, state, and local laws and regulations in the ordinary course of business. rulings could result in impacts on our business, financial condition, or results of operations.
Conducting our business in a manner so that we are exempt from registration under, and in compliance with, the Investment Company Act, may reduce our flexibility and could limit our ability to pursue certain opportunities. At the same time, failure to continue to qualify for exemption from the Investment Company Act could adversely affect us.
Under the Investment Company Act, an investment company is required to register with the SEC and is subject to extensive restrictive and potentially adverse regulations relating to, among other things, operating methods, management, capital structure, dividends, and transactions with affiliates. We expect that one or more of our subsidiaries will qualify for an exclusion from registration as an investment company under the Investment Company Act pursuant to Section 3(c)(5)(C) of the Investment Company Act, which is available for entities that do not issue redeemable securities, face-amount certificates of the installment type, or periodic payment plan certificates and are primarily engaged in the business of “purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” We believe that we conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company Act. We are organized as a holding company and conduct our businesses primarily through our majority and wholly-owned subsidiaries. We conduct our operations so that we and our subsidiaries do not come within the definition of an investment company. In order to continue to do so, however, we and each of our subsidiaries must either operate so as to fall outside the definition of an investment company under the Investment Company Act or satisfy its own exclusion under the Investment Company Act. For example, to avoid being defined as an investment company, an entity may limit its ownership or holdings of investment securities to less than 40% of its total assets. In order to an exclusion from being defined as an investment company, other entities, among other things, maintain at least 55% of their assets in certain qualifying real estate assets (the “55% Requirement”) and also maintain an additional 25% of their assets in such qualifying real estate assets or certain other types of real estate-related assets (the “25% Requirement”). Rapid changes in the values of assets we own, however, can prior efforts to conduct our business to meet these requirements and in turn, we may have to make investment decisions that we otherwise would not make absent the Investment Company Act considerations.
If we or one of our subsidiaries fell within the definition of an investment company under the Investment Company Act and failed to qualify for an exclusion or exemption, including, for example, if it was required to and
failed to meet the 55% Requirement or the 25% Requirement, it could, among other things, be required either (i) to change the manner in which it conducts operations to avoid being required to register as an investment company or (ii) to register as an investment company, either of which could adversely affect us by, among other things, requiring us to dispose of certain assets or to change the structure of our business in ways that we may not believe to be in our best interests. Legislative or regulatory changes relating to the Investment Company Act or which affect our efforts to qualify for exclusions or exemptions, including our ability to comply with the 55% Requirement and the 25% Requirement, could also result in these adverse effects on us.
To the extent that we or any of our subsidiaries rely on Section 3(c)(5)(C) of the Investment Company Act, we expect to rely on guidance published by the SEC staff or on our analyses of such guidance to determine which assets are qualifying real estate assets for purposes of the 55% Requirement and real estate-related assets for purposes of the 25% Requirement. However, the SEC’s guidance was issued in accordance with factual situations that may be different from the factual situations we face, and much of the guidance was issued more than 25 years ago. No assurance can be given that the SEC staff will concur with our classification of our assets. In addition, the SEC staff may, in the future, issue further guidance that may require us to re-classify our assets for purposes of qualifying for an exemption from registration under the Investment Company Act. If we are required to re-classify our assets, we may no longer be in compliance with the exclusion from the definition of an “investment company” provided by Section 3(c)(5)(C) of the Investment Company Act. To the extent that the SEC staff publishes new or different guidance with respect to any assets we have determined to be qualifying real estate assets, we may be required to adjust our strategy accordingly. In addition, we may be limited in our ability to make certain investments, and these limitations could result in a subsidiary holding assets we might wish to sell or selling assets we might wish to hold.
As a consequence of our seeking to avoid registration under the Investment Company Act on an ongoing basis, we and/or our subsidiaries may be restricted from making certain investments or may structure investments in a manner that would be less advantageous to us than would be the case in the absence of such requirements. In particular, a change in the value of any of our assets could negatively affect our ability to avoid registration under the Investment Company Act and cause the need for a restructuring of our investment portfolio. For example, these restrictions may limit our and our subsidiaries’ ability to invest directly in MBS that represent less than the entire ownership in a pool of senior loans, debt and equity tranches of securitizations and certain asset-backed securities, non-controlling equity interests in real estate companies, or in assets not related to real estate. In addition, seeking to avoid registration under the Investment Company Act may cause us and/or our subsidiaries to acquire or hold additional assets that we might not otherwise have acquired or held or dispose of investments that we and/or our subsidiaries might not have otherwise disposed of, which could result in higher costs or lower proceeds to us than we would have paid or received if we were not seeking to comply with such requirements. Thus, avoiding registration under the Investment Company Act may our ability to operate solely on the basis of maximizing profits.
There can be no assurance that we and our subsidiaries will be able to successfully avoid operating as an unregistered investment company. If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that we would be unable to enforce contracts with third parties, that third parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company, and that we would be subject to limitations on corporate leverage that would have an adverse impact on our investment returns.
If we were required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use borrowings), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), and portfolio composition, including disclosure requirements and restrictions with respect to diversification and industry concentration and other matters. Compliance with the Investment Company Act would, accordingly, limit our ability to make certain investments and require us to significantly restructure our business plan, which could materially adversely affect our ability to pay distributions to our stockholders. For additional information, see “Business—Investment Company Act Considerations.”
There may be material changes to the laws, regulations, rules, or practices applicable to the FHA, HUD, or Ginnie Mae that could materially adversely affect the reverse mortgage industry as a whole, including our business.
The reverse mortgage industry is largely dependent upon the FHA, HUD, and government agencies like Ginnie Mae. There can be no guarantee that HUD/the FHA will retain Congressional authorization to continue the HECM program, which provides FHA government insurance for qualifying HECM loans, that any or all of these entities will continue to participate in the reverse mortgage industry, or that they will not make material changes to the laws, regulations, rules, or practices applicable to reverse mortgage programs. For example, HUD previously implemented certain lending limits for the HECM program, and added credit-based underwriting criteria designed to assess a borrower’s ability and willingness to satisfy future tax and insurance obligations. Further, the Trump administration has generally indicated an intent to scrutinize and reduce the scale of government agencies, programs, and spending. Changes that may be implemented as a result of the Trump administration’s initiatives and the resulting impact on the FHA, HUD, Ginnie Mae, and the HECM program remain uncertain.
Changes in the nature or extent of the insurance provided by the FHA in connection with the HECM program could have broad adverse market implications. Additionally, any future increases in the premiums FAR is required to pay to the FHA for upfront and/or annual mortgage insurance would increase insurance premiums for our borrowers and may negatively impact origination volumes. Industry changes of this nature would negatively affect demand for FAR’s mortgage services and consequently its origination volume, which could be detrimental to our business.
In addition, Ginnie Mae’s participation in the reverse mortgage industry may be subject to economic and political changes that cannot be predicted. If participation by Ginnie Mae in the reverse mortgage market were reduced or eliminated, or its structure were to change (e.g., limitation or removal of the guarantee obligation), our ability to originate HECM loans and issue HMBS could be adversely affected. These developments could materially and adversely impact our portfolio.
We are subject to legal proceedings, federal or state governmental examinations, and enforcement investigations from time to time. Some of these matters are highly complex and slow to develop, and results are difficult to predict or estimate.
We are currently and routinely involved in legal proceedings concerning matters that arise in the ordinary course of our business. These proceedings are generally based on alleged violations of consumer protection, employment, foreclosure, contract, tort, fraud, and other laws. Additionally, we may be named in litigation arising out of the servicing practices of our Subservicers from time to time, including class or mass actions. For example, FAR is currently named as a defendant in a class action case in which the plaintiffs (borrowers and heirs) are alleging that FAR, acting through its Subservicer, charged foreclosure related attorney’s fees as well as certain other foreclosure costs and expenses in violation of HUD regulations and applicable law. The matter is in very early stages of litigation and as a result, it is not possible to determine whether a is reasonably possible or estimable. Even if we are not a named in arising out of the servicing practices of our Subservicer, we may ultimately be required to indemnify our Subservicer for their costs associated with arising out of the servicing practices of our Subservicer in certain circumstances. As another example, we are subject to labor laws such as the California Labor Code, pursuant to which a has filed a representative action under the California Private Attorney General Act (the “PAGA” and such , the “PAGA ”) seeking statutory for related to the calculation of overtime pay, in wage statements, and meal and rest , among other things. Due to the nature of generally, and the wide discretion afforded the Court in awarding civil in PAGA actions, the outcome of this matter cannot be presently determined, and a range of possible cannot be reasonably estimated. Additionally, along with others in our industry, we are subject to (and many continue to receive in the future) repurchase and indemnification regarding, among other things, of representations and warranties relating to the sale of mortgage loans, the placement of mortgage loans into securitization trusts, or the servicing of mortgage loans. We are subject to certain legal from time to time from third parties including transaction counterparties, prior vendors or contract counterparties, and current and former employees, in each case, of the Company (including its operations) or another transaction counterparty or legacy seller or company. We are also subject to legal actions or proceedings resulting from actions to have occurred prior to our acquisition of a company or a business.
When the claims occurred as a result of actions taken before the Company purchased the related business, we generally have indemnification claims against the sellers; however, if they do not or cannot pay, we may suffer losses. Further, because we originate and service a significant number of HECM loans insured by the FHA, there is the possibility that we could be subject to litigation brought by HUD pursuant to the False Claims Act. The number of legal proceedings we are involved in may increase in the future, including certified class or mass actions. Litigation and other proceedings may require that we pay settlement costs, legal fees, damages, including punitive damages, penalties, or other charges, or be subject to injunctive relief affecting our business practices, any or all of which could affect our financial results. Certain pending or legal proceedings (including the PAGA as well as other employment cases) may include for substantial compensatory, , and/or statutory or for an indeterminate amount of . Legal proceedings brought under federal or state consumer protection statutes may result in a separate fine for each of the statute, which, particularly in the case of representative or class action lawsuits, could result in substantially in excess of the amounts we earned from the underlying activities and that could have a material effect on our liquidity, financial position, and results of operations. While our Company handles legal proceedings in the ordinary course, the volume of and the amount of associated expenses, costs, , , and that we could incur in connection with these could have an effect on our financial condition and results of our operations and could cause reputational to us or otherwise result in management .
Our business is also subject to extensive examinations, investigations, and reviews by various federal, state, and local governmental, regulatory, and enforcement agencies. We have historically had, continue to have, and may in the future have a number of open investigations, subpoenas, examinations, and inquiries by these agencies related to our origination practices, violations of the FHA’s requirements, our financial reporting, and other aspects of our business. These matters may include investigations by, among others, the DOJ, HUD, and various state agencies, which can result in the payment of fines and penalties, changes to business practices, and the entry of consent decrees or settlements. The costs of responding to inquiries, examinations, and investigations can be substantial.
Responding to examinations, investigations, and reviews by various federal, state, and local governmental, regulatory, and enforcement agencies requires us to devote substantial legal and regulatory resources, resulting in higher costs and lower net cash flows. Adverse results in any of these matters could further increase our operating expenses and reduce our revenues, require us to change business practices, limit our ability to grow, and otherwise materially and adversely affect our business, reputation, financial condition, or results of operations. To the extent that an examination or other regulatory engagement reveals a failure by us to comply with applicable law, regulations, or licensing requirements, this could lead to (i) loss of our licenses and approvals to engage in our business, (ii) damage to our reputation in the industry and loss of client relationships, (iii) governmental investigations and enforcement actions resulting in administrative fines and penalties, (iv) litigation, (v) civil and liability, including class action lawsuits, and actions to recover incentive and other payments made by governmental entities, (vi) compliance requirements, (vii) of covenants and representations under our servicing, debt, or other agreements, (viii) to raise capital, and (ix) to execute on our business strategy. Any of these occurrences could further increase our operating expenses and reduce our revenues, require us to change business practices and procedures, and limit our ability to grow or otherwise materially and affect our business, reputation, financial condition, or results of operations.
Moreover, regulatory changes resulting from the Dodd-Frank Act and other regulatory changes such as the CFPB’s examination and enforcement authority, the “whistleblower” provisions of the Dodd-Frank Act, and guidance on whistleblowing programs issued by the New York State Department of Financial Services could increase the number of legal and regulatory enforcement proceedings against us. The CFPB has broad enforcement powers and has been active in investigations and enforcement actions and, when necessary, has issued civil money penalties to parties the CFPB determines have violated the laws and regulations it enforces. In addition, while we take numerous steps to prevent and detect employee misconduct, such as fraud, employee misconduct cannot always be deterred or prevented and could subject us to additional liability.
We establish reserves for pending or threatened legal proceedings when it is probable that a liability has been incurred and the amount of such loss can be reasonably estimated. Legal proceedings are inherently uncertain, and our estimates of loss are based on judgments and information available at that time. Our estimates may change from time to time for various reasons, including factual or legal developments in these matters. There cannot be any
assurance that the ultimate resolution of our litigation and regulatory matters will not involve losses, which may be material, in excess of our recorded accruals or estimates of reasonably probable losses.
Risks Related to Our Indebtedness
Our substantial leverage could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry, or our ability to pay our debts, and could divert our cash flow from operations to debt payments.
As of December 31, 2025, we had $30.2 billion in total indebtedness outstanding, $10.9 billion of which was senior secured indebtedness under our nonrecourse debt, warehouse facilities, and other lines of credit, and $329.9 million of which was corporate indebtedness, consisting of $256.1 million of secured notes, net of unamortized debt discount and issuance costs, $53.8 million of Convertible Notes, and $20.0 million of an unsecured working capital note. As of December 31, 2025, we also had $18.9 billion of HMBS related obligations that are recorded on our balance sheet. We also have other significant contractual obligations, including our obligations to make payments under the Tax Receivable Agreement (the “Tax Receivable Agreement” or “TRA”) entered into by the Company and certain owners of FOA Equity (the “TRA Parties”). Our high level of debt could have important consequences, including the following:
• making it more difficult for us to satisfy our obligations with respect to our debt;
• limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, or other general corporate requirements;
• requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions, and other general corporate purposes;
• increasing our vulnerability to general adverse economic and industry conditions;
• exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;
• limiting our flexibility in planning for and reacting to changes in the industry in which we compete;
• placing us at a disadvantage compared to other, less leveraged competitors; and
• increasing our cost of borrowing.
Our ability to service our indebtedness is dependent on cash flow generated and made available by our subsidiaries, which may be subject to limitations beyond our control.
The Company is a holding company, and its consolidated assets are owned by, and its business is conducted through, its subsidiaries. Accordingly, our ability to make scheduled payments on and to refinance our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to the applicable entity required to make an applicable debt service payment.
Our subsidiaries’ ability to generate cash flow is subject to their financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business, and other factors, many of which are beyond our control, including the availability of financing in the international banking and capital markets. For example, one of the strategies that our Company utilizes to repay and service its debt is to monetize equity in its outstanding securitizations of non-agency reverse mortgage loans. This strategy entails exercising optional redemption rights in connection with outstanding securitization transactions backed by non-agency reverse mortgage loans and reissuing MBS backed by such non-agency reverse mortgage loans (along with available newly originated non-agency reverse mortgage loans). The success of any such securitization transaction is highly dependent on the condition of the securitization markets and, in particular, the MBS market. No assurance can be given as to whether any such transaction can be executed as contemplated by the Company. Further, lower revenues generally will reduce available cash flow. We cannot assure you that our subsidiaries will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to service our debt, to refinance our debt, or to fund our other liquidity needs.
Further, even if a subsidiary does generate cash flow, our ability to use such cash to service our indebtedness depends on their ability to make such cash available to the applicable entity required to make an
applicable debt service payment. Each subsidiary is a distinct legal entity and under certain circumstances may not be able to, or may not be permitted due to legal or contractual restrictions to, make distributions or repay intercompany loans to enable the applicable entity in our corporate structure to make payments in respect of its indebtedness. For example, laws that require companies to maintain minimum amounts of capital and to make payments to shareholders only from profits may restrict the ability of a subsidiary to make a distribution, even if such subsidiary has cash. In the event that a subsidiary is unable to distribute cash, we may be unable to make required principal and interest payments on our indebtedness. See “—Risks Related to Our Organizational Structure—The Company is a holding company and its only material asset is its interest in FOA Equity. It is accordingly dependent upon distributions from FOA Equity to pay taxes, make payments under the Tax Receivable Agreement, and pay dividends.”
If we are unable to meet our debt service obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a portion of our debt, which could cause us to default on our debt obligations and impair our liquidity. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations. Moreover, in the event of a default, the holders of our indebtedness could elect to declare all the funds borrowed to be due and payable. See “—Our failure to comply with the requirements of our outstanding indebtedness could result in an event of default that could materially and adversely affect our financial condition and ultimately force us into or .”
We are required to repay certain debt facilities in whole or in part in 2026 and such payments will require access to capital, which may not be available from cash flows resulting from our subsidiaries’ operations or from third-party sources on favorable terms, or at all, at the time of repayment, especially in light of current market conditions, which could adversely affect our financial position.
FAR’s warehouse facility backed by HECM loan mortgage servicing rights (the “HMSR Financing”) entered its scheduled amortization period in the fourth quarter of 2025, during which FAR is required to repay the aggregate principal amount outstanding under the facility in equal monthly installments until the maturity date. As of December 31, 2025, the aggregate principal amount outstanding under the HMSR Financing was $63.5 million. The HMSR Financing accrues interest at the Secured Overnight Financing Rate plus an applicable margin and matures on October 31, 2027. Additionally, the Company’s subsidiary, FOAF, has senior secured notes outstanding (the “Senior Secured Notes”). As of December 31, 2025 , the aggregate principal amount outstanding pursuant to the Senior Secured Notes was $150.8 million. The Senior Secured Notes accrue interest at a rate of 8.875% per annum. $60.0 million of the principal amount of the Senior Secured Notes will mature on the stated maturity date of November 30, 2026. The remaining principal amount of the Senior Secured Notes in excess of $60.0 million is also scheduled to mature on the stated maturity date of November 30, 2026; however FOAF has the option to extend the maturity date for such remaining principal amount to November 30, 2027.
Our ability to repay the amounts due in 2026 with respect to the HMSR Financing and the Senior Secured Notes generally requires access to capital. One of the strategies that our Company utilizes to repay and service its debt is to monetize equity in its outstanding securitizations of non-agency reverse mortgage loans. However, there can be no assurance that the Company and its applicable subsidiaries will be able to enter into the transactions necessary to monetize equity in outstanding securitizations or that capital from cash flows resulting from our subsidiaries’ operations will otherwise be available to repay amounts due in 2026, as described in further detail above under “— Our ability to service our indebtedness is dependent on cash flow generated and made available by our subsidiaries, which may be subject to limitations beyond our control.” If capital from the monetization of equity in our outstanding securitizations and other cash flows resulting from our subsidiaries’ operations is insufficient to pay amounts due, we would need to obtain capital from third-party sources, which may include obtaining alternative financing for our HECM loan mortgage servicing rights to replace the HMSR Financing . Our access to additional third-party sources of capital at the time of repayment of such amounts will depend, in part, on:
• general market conditions;
• the market’s perception of our growth potential;
• our current debt levels;
• our ability to successfully refinance our current debt on favorable terms to the Company;
• our current and expected future earnings;
• our cash flow; and
• the market price per share of our common stock.
Further, restrictions in any future debt agreements could limit our growth and our ability to engage in certain activities. See “—The agreements that govern our senior notes, warehouse facilities, and lines of credit impose significant operating and financial restrictions on the Company and its restricted subsidiaries, which may prevent us from capitalizing on business opportunities.”
Despite our current level of indebtedness, we may be able to incur substantially more debt and enter into other transactions, which could further exacerbate the risks to our financial condition described above.
As of December 31, 2025, we had unused total borrowing capacity of $0.5 billion under our warehouse facilities and other lines of credit, all of which would be secured indebtedness, including $0.1 billion of unused committed borrowing capacity, pursuant to which we would be able to incur additional indebtedness. Further, subject to the limits contained in the agreements that govern our warehouse facilities and lines of credit, the indentures that govern the Senior Secured Notes and the Exchangeable Secured Notes, and the applicable agreements governing our other existing indebtedness, we may be able to enter into additional arrangements and incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. Although certain of the agreements governing our existing indebtedness contain restrictions on the incurrence of additional indebtedness and entering into certain types of other transactions, these restrictions are subject to a number of qualifications and exceptions. Additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also do not prevent us from incurring obligations, such as trade payables, that do not constitute indebtedness as defined under our debt instruments. To the extent new debt is added to our current debt levels, the substantial leverage risks described in “—Our substantial leverage could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry, or our ability to pay our debts, and could our cash flow from operations to debt payments” would increase.
The agreements that govern our senior notes, warehouse facilities, and lines of credit impose significant operating and financial restrictions on the Company and its restricted subsidiaries, which may prevent us from capitalizing on business opportunities.
The agreements that govern our senior notes, warehouse facilities, and lines of credit impose significant operating and financial restrictions on us. These restrictions in the applicable indenture or related loan agreement will limit the ability of the Company and its restricted subsidiaries to, among other things:
• incur or guarantee additional debt or issue disqualified stock or preferred stock;
• pay dividends and make other distributions on, or redeem or repurchase, capital stock;
• make certain investments;
• incur certain liens;
• enter into transactions with affiliates;
• merge or consolidate;
• enter into agreements that prohibit the ability of restricted subsidiaries to make dividends or other payments to the Company or other subsidiaries;
• designate restricted subsidiaries as unrestricted subsidiaries;
• prepay, redeem, or repurchase certain indebtedness; and
• transfer or sell assets.
The terms of any future indebtedness we may incur could include more restrictive covenants. As a result of the restrictions described above and any additional restrictions imposed by future indebtedness we may incur, we will be limited as to how we conduct our business and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities, which could in turn adversely affect our business, financial condition, and operating results. Additionally, if we failed to comply with these restrictions, an event of default could occur and the holders of our indebtedness could elect to declare all the funds borrowed to be due and payable. See “—Our failure to comply with the requirements of our outstanding indebtedness could result in
an event of default that could materially and adversely affect our financial condition and ultimately force us into liquidation or bankruptcy.”
The agreements that govern our warehouse facilities and lines of credit typically contain covenants relating to our financial condition and we may experience difficulties in complying with such financial covenants.
The agreements that govern our warehouse facilities and lines of credit typically contain, and we expect that other financing facilities that we may enter into in the future will typically contain, covenants that, among other things, impose requirements relating to 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. Our lenders may require that the thresholds set forth in these covenants be modified from time to time as conditions change or as a result of our business activity. See “—Risks Related to Our Lending Business—FAR’s status as an approved non-supervised FHA mortgagee and an approved Ginnie Mae issuer is subject to compliance with each of their respective guidelines and other conditions they may impose, and the failure to meet such guidelines and conditions could have a material adverse effect on our overall business and our financial position, results of operations, and cash flows.” We have at times had difficulties complying with certain financial covenants and have had to obtain waivers or amendments to the terms of the affected covenants. While we have been able to secure amendments or waivers with respect to, or to , all affected lending arrangements when needed in the past, there is no assurance that our lenders would provide waivers for or agree to amendments to address any future we encounter in complying with our financial covenants. Further, we may have to agree to other covenants in connection with securing waivers or amendments in the future. If we were to experience in complying with financial covenants in the future and we were not to secure a waiver or amendment or the applicable financing arrangement, we could such a financial covenant and an event of could occur. Upon the occurrence and during the continuance of an event of , the holders of our indebtedness could elect to declare all the funds borrowed to be due and payable. See “—Our to comply with the requirements of our outstanding indebtedness could result in an event of that could materially and affect our financial condition and ultimately us into or .”
Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.
As of December 31, 2025, $18.2 billion, or 60%, of our outstanding indebtedness had variable interest rates. When interest rates increase, our debt service obligations on this variable rate indebtedness increase, even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, correspondingly decreases. Interest rates have increased in the near term, causing our indebtedness service obligations on our variable rate indebtedness to increase. Interest rates may increase above current levels in the future, further increasing our debt service obligations on our variable rate indebtedness and adversely impacting our net income and cash flows, including cash available for servicing our indebtedness.
Our failure to comply with the requirements of our outstanding indebtedness could result in an event of default that could materially and adversely affect our financial condition and ultimately force us into liquidation or bankruptcy.
If we are unable to comply with the restrictions or the financial or other covenants contained in any of the agreements relating to our outstanding indebtedness obligations or are unable to make the payments required under any of our outstanding indebtedness obligations, it could result in an event of default under the agreements relating to the applicable indebtedness. If an event of default were to occur and be continuing, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. By reason of cross-acceleration or cross-default provisions, other indebtedness may then become immediately due and payable. Such an acceleration could materially and adversely affect our financial condition and we cannot assure you that our assets or cash flows would be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. Further, if we are unable to repay, refinance, or our indebtedness under our secured debt upon an event of , including our warehouse facilities, lines of credit, or senior secured notes, the holders of such debt could elect to their commitments thereunder, making loans, and
institute foreclosure proceedings against our assets. As a result of such events, we could ultimately be forced into bankruptcy or liquidation.
Risks Related to Our Organizational Structure
The Company is a holding company and its only material asset is its interest in FOA Equity. It is accordingly dependent upon distributions from FOA Equity to pay taxes, make payments under the Tax Receivable Agreement, and pay dividends.
The Company is a holding company and it has no material assets other than its direct and/or indirect ownership of Class A Units of FOA Equity (“Class A LLC Units”) and Series A Convertible Perpetual Preferred Units of FOA Equity (“Series A Preferred LLC Units”). The Company has no independent means of generating revenue. The Company intends to cause FOA Equity to make distributions to the holders of Class A LLC Units, including the Company, in an amount sufficient to cover all applicable taxes at assumed tax rates, payments under the Tax Receivable Agreement, and dividends, if any, declared by the Company with respect to its Class A Common Stock. The Company intends to cause FOA Equity to make distributions to the Company, as the sole holder of Series A Preferred LLC Units, in an amount sufficient to enable the Company to make dividend payments to the holders of the Series A Preferred Stock. Deterioration in the financial condition, earnings, or cash flow of FOA Equity and its subsidiaries for any reason could limit or impair FOA Equity’s ability to make such distributions. In addition, FOA Equity 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 FOA Equity (with certain exceptions) exceed the fair value of its assets. Subsidiaries of FOA Equity are generally subject to similar legal on their ability to make distributions to FOA Equity. Further, our existing financing arrangements include, and any financing arrangement that we enter into in the future may include, restrictions that impact FOA Equity’s ability to make distributions to the Company. To the extent that the Company needs funds and FOA Equity is to make distributions to the Company due to its financial condition, restrictions under applicable law or regulation, restrictions under the terms of our financing arrangements, or for any other reason, such to make distributions could materially affect our liquidity, financial condition, and ability to pay dividends to shareholders.
The Company will be required to pay income taxes on its allocable share of any net taxable income of FOA Equity.
FOA Equity is, and it is anticipated that FOA Equity will continue to be, treated as a partnership for U.S. federal income tax purposes. As such, FOA Equity will generally not be subject to any entity-level U.S. federal income tax. Instead, taxable income or loss will be allocated to holders of Class A LLC Units, including the Company. Accordingly, we will be required to pay income taxes on our allocable share of any net taxable income (offset by any allowable prior period taxable losses) of FOA Equity. Our allocable share of FOA Equity’s net taxable income or loss will increase over time as the FOA Equity unitholders exchange their Class A LLC Units for shares of the Company’s Class A Common Stock.
In addition, additional tax liability may be imputed for adjustments to a partnership’s tax return to the partnership itself in certain circumstances, absent an election to the contrary. FOA Equity may be subject to material additional tax liabilities pursuant to this legislation and related guidance if, for example, its calculations of taxable income are incorrect. Any such additional tax liabilities would be allocated to holders of Class A LLC Units, including the Company.
The Company is required to make payments under the Tax Receivable Agreement for certain tax benefits the Company may claim, and the amounts of such payments could be significant.
The Company entered into the Tax Receivable Agreement with the TRA Parties. The Tax Receivable Agreement generally provides for the 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 Class A LLC Units and certain distributions with respect to Class A LLC Units, and (ii) certain other tax benefits related to entering into the Tax Receivable Agreement,
including tax benefits attributable to making payments under the Tax Receivable Agreement. The Company will generally retain the benefit of the remaining 15% of these cash tax benefits.
Estimating the amount of payments that may be made under the Tax Receivable Agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. The anticipated tax basis adjustments, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of shares of the Company’s Class A Common Stock at the time of the exchanges, the extent to which such exchanges are taxable, the amount of tax attributes, changes in tax rates, and the amount and timing of the Company’s income. As a result of the size of the anticipated tax basis adjustment of the tangible and intangible assets of FOA Equity and the Company’s possible utilization of certain tax attributes, the payments that the Company may make under the Tax Receivable Agreement are expected to be substantial.
In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, the Company realizes in respect of the tax attributes subject to the Tax Receivable Agreement.
The Tax Receivable Agreement provides that if the Company exercises its right to terminate the Tax Receivable Agreement or if a change in control of the Company or a material breach of the Company’s obligations under the Tax Receivable Agreement occurs, all obligations under the Tax Receivable Agreement will be accelerated. The amount due and payable in those circumstances is determined based on certain assumptions, including an assumption that any Class A LLC Units that have not been exchanged are deemed exchanged for the market value of Class A Common Stock at the time of the termination or the change of control and an assumption that the Company would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.
As a result of these assumptions, the Company would be required to make a cash payment equal to the present value of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement. This could in turn result in (i) the Company being required to make cash payments to the TRA Parties that are greater than the specified percentage of the actual benefits the Company ultimately realizes in respect of the tax benefits that are subject to the Tax Receivable Agreement, and (ii) the Company being required to make payments in respect of tax benefits significantly in advance of the actual realization, if any, of such tax benefits. In these situations, the Company’s obligations under the Tax Receivable Agreement could have a substantial negative impact on its liquidity and could have the effect of delaying, deferring, or preventing certain mergers, asset sales, other forms of business combination, or other changes of control due to the additional transaction costs a potential acquirer may attribute to satisfying such obligations. The Company may need to incur additional debt to finance payments under the Tax Receivable Agreement to the extent its cash resources are insufficient to meet its obligations under the Tax Receivable Agreement as a result of timing or otherwise. There can be no assurance that the Company will be to finance its obligations under the Tax Receivable Agreement.
The Company will not be reimbursed for any payments made to the TRA Parties under the Tax Receivable Agreement in the event that any tax benefits are disallowed.
The U.S. federal income tax rules applicable to the Company are complex and factual in nature. There can be no assurance that the Internal Revenue Service or a court will agree with the Company’s tax reporting positions. As a result, it is possible that the Company could make cash payments under the Tax Receivable Agreement that are substantially greater than its actual cash tax savings. The Company will not be reimbursed for any cash payments previously made to the TRA Parties pursuant to the Tax Receivable Agreement if any tax benefits initially claimed by the Company are subsequently challenged by a taxing authority and are ultimately disallowed. Instead, any excess cash payments made by the Company to a TRA Party will be netted against any future cash payments that the Company might otherwise be required to make under the terms of the Tax Receivable Agreement. However, a challenge to any tax benefits initially claimed by the Company may not arise for a number of years following the initial time of such payment or, even if challenged early, such excess cash payment may be greater than the amount of future cash payments that the Company might otherwise be required to make under the terms of the Tax Receivable Agreement. As a result, there might not be sufficient future cash payments due from the Company to the TRA Parties under the Tax Receivable Agreement that the Company can net to fully account for earlier
payments made to the TRA Parties under the Tax Receivable Agreement in respect of tax benefits that were ultimately disallowed.
Certain of the TRA Parties have substantial control over the Company, and their interests, along with the interests of other TRA Parties, may conflict with your interests.
The TRA Parties may receive payments from the Company under the Tax Receivable Agreement upon any redemption or exchange of their Class A LLC Units, including the issuance of shares of Class A Common Stock upon any such redemption or exchange. As a result, the interests of the TRA Parties may conflict with the interests of holders of Class A Common Stock. For example, the TRA Parties may have different tax positions from the Company, which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, especially in light of the existence of the Tax Receivable Agreement, and whether and when the Company should terminate the Tax Receivable Agreement and accelerate its obligations thereunder. In addition, the structuring of future transactions may take into consideration tax or other considerations of TRA Parties even in situations where no similar considerations are relevant to the Company.
The Company is not required to distribute any excess tax distributions that it receives from FOA Equity to the Company’s stockholders.
Under the terms of the Second Amended and Restated Limited Liability Company Agreement of FOA Equity (the “Second A&R LLC Agreement”), FOA Equity is obligated to make tax distributions to holders of Class A LLC Units (including the Company) at certain assumed tax rates. These tax distributions may in certain periods exceed the Company’s tax liabilities and obligations to make payments under the Tax Receivable Agreement. The Board of Directors of the Company (the “Board”), in its sole discretion, will make any determination from time to time with respect to the use of any such excess cash so accumulated, which may include, among other uses, acquiring additional newly issued Class A LLC Units from FOA Equity at a per unit price determined by reference to the market value of the Class A Common Stock; paying dividends, which may include special dividends, on its Class A Common Stock; funding repurchases of Class A Common Stock; or any combination of the foregoing. The Company will have no obligation to distribute such cash (or other available cash other than any declared dividend) to its stockholders. To the extent that the Company does not distribute such excess cash as dividends on its Class A Common Stock or otherwise undertake ameliorative actions between Class A LLC Units and shares of Class A Common Stock and instead, for example, hold such cash balances, the FOA Equity unitholders may benefit from any value attributable to such cash balances as a result of their ownership of Class A Common Stock following a redemption or exchange of their Class A LLC Units, notwithstanding that the FOA Equity unitholders may previously have participated as holders of Class A LLC Units in distributions by FOA Equity that resulted in such excess cash balances at the Company.
Risks Related to Ownership of our Class A Common Stock
The market price of our securities may fluctuate or decline.
Fluctuations in the price of the Company’s securities could contribute to the loss of all or part of your investment. The trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. In 2022, 2023, and the first half of 2024, the price of our Class A Common Stock generally experienced significant decline as a result of challenging macroeconomic conditions and sustained higher inflation and interest rates. While our stock price increased in the second half of 2024, it fluctuated during the course of 2025 and overall experienced a decline as of December 31, 2025 when compared to December 31, 2024. Continued economic uncertainty, including, without limitation, higher inflation and interest rates, and any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.
Factors affecting the trading price of our securities may include, but are not limited to, the following:
• actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
• changes in the market’s expectations about our operating results;
• sustained increases in market interest rates that may lead purchasers of our shares to demand higher yield;
• success of competitors;
• our operating results failing to meet the expectation of securities analysts or investors in a particular period;
• changes in financial estimates and recommendations by securities analysts concerning the Company or the reverse mortgage industry or mortgage industry in general;
• a ratings action by a rating agency with respect to our Company;
• operating and share price performance of other companies that investors deem comparable to us;
• our ability to market new and enhanced products on a timely basis;
• changes in laws and regulations affecting our business;
• our ability to meet compliance requirements;
• commencement of, or involvement in, litigation involving us;
• changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
• the volume of shares of Class A Common Stock available for public sale;
• any major change in our Board or management;
• sales of substantial amounts of Class A Common Stock by our directors, executive officers, or significant shareholders or the perception that such sales could occur; and
• general economic and political conditions such as recessions, interest rate changes, continued inflation, and acts of war or terrorism.
Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general, and the NYSE in particular, has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies that investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial condition, or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
The trading history of our common stock has been characterized by low trading volume.
Our Class A Common Stock started trading on the NYSE on April 5, 2021 and on NYSE Texas on August 15, 2025. During 2025, the average daily trading volume of our Class A Common Stock was 117,124 shares. We cannot predict the extent to which investor interest in us will lead to a more active trading market in our securities or how much more liquid these markets might become. A public trading market having the desired characteristics of depth, liquidity, and orderliness depends upon the presence in the marketplace of willing buyers and sellers of our securities at any given time, which presence is dependent upon the individual decisions of investors, over which we have no control. Our low trading volume could result in increased share price volatility, downward pricing pressure, and inability to sell your shares at desired price levels, if at all.
If securities or industry analysts do not publish research or reports about the Company, or if they publish adverse recommendations regarding the Company's securities, then the Company's stock price and trading volume could decline.
The trading market for the Company’s securities will be influenced by the research and reports that industry or securities analysts may publish about the Company, its business, market, or competitors. No securities or industry analysts are currently covering the Company or regularly publishing reports on the Company. This may adversely impact Company visibility in the financial markets, which in turn could cause its share price or trading volume to decline. If securities or industry analysts do publish research or reports about the Company in the future, any adverse recommendation regarding the Company’s securities, or any more favorable relative recommendations about the Company’s competitors, may result in a decline in the price of the Company’s securities.
The terms of the Company’s Series A Preferred Stock may materially adversely affect the value and rights of the Company’s Class A Common Stock.
On December 15, 2025, the Company issued 50,000 shares of Series A Preferred Stock pursuant to a Certificate of Designations (the “Certificate of Designations”) and sold such shares at a price of $1,000 per share for an aggregate purchase price of $50.0 million. The Series A Preferred Stock ranks senior to the Company’s Class A Common Stock with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the Company. The holders of the Series A Preferred Stock are entitled to a dividend, payable in cash quarterly in arrears, at an initial annual rate of 9.0%, which rate increases to 12.0% on the seventh anniversary of the issuance date, and by 1.0% on each anniversary of the issuance date thereafter until reaching a maximum annual rate of 16.0%. As a result, for so long as the Series A Preferred Stock is outstanding, the Company will be required to use available cash to pay such quarterly dividends, which cash could have otherwise been used by the Company to enhance its operations, pay down its debt, take advantage of strategic opportunities, or pay dividends with respect to its Class A Common Stock. See “—Because we have no current plans to pay cash dividends on our shares of Class A Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your shares of Class A Common Stock for a price than that which you paid for it.” Further, the event of (i) any voluntary or , or winding up of the affairs of the Company, (ii) certain “change of control” transactions, or (iii) upon the occurrence of certain “events of ,” the Company may not make or set aside any distribution or payment out of the assets of the Company in respect of Class A Common Stock unless and until holders have received an amount per share of Series A Preferred Stock equal to $1,000, plus any accrued and dividends (subject to a make-whole amount per share reflecting a minimum return of 1.5x) or, if , the value of such share of Series A Preferred Stock on an as-converted basis.
Shares of the Series A Preferred Stock are convertible at the option of the holders thereof at any time, subject to certain limitations, into shares of Class A Common Stock at a rate equal to (i) $1,000 divided by (ii) the conversion price, and a cash payment for accrued and unpaid dividends, cash in lieu of fractional shares, and, in certain circumstances, dividend catch-up payments relating to dividends on other equity. The initial conversion price is $35.00, subject to certain anti-dilution adjustments and adjustments for Delayed Redemption Elections (as defined below). On each of the seventh, eighth, and tenth anniversaries of the issuance date, the conversion price then in effect will be reduced by 15%. Any such conversion would be dilutive to then-current holders of Class A Common Stock and may adversely affect the price of the Company’s Class A Common Stock. See “—You may be diluted by the future issuance of additional Class A Common Stock or Class A LLC Units in connection with the Company’s incentive plans, acquisitions, warrants, notes, Series A Preferred Stock, or otherwise.” Further, subsequent to conversion, such holders could sell all or a substantial portion of their resulting shares of Class A Common Stock, which may adversely affect the price of the Company’s Class A Common Stock. See “—There may be sales of a substantial amount of Class A Common Stock by certain of the Company’s shareholders and these sales could cause the price of the Company’s securities to fall.”
At any time on or following the fourth anniversary of the issuance date, the Company may redeem all of the Series A Preferred Stock for a per-share amount in cash equal to the sum of (i) $1,000 plus (ii) any accrued and unpaid dividends. Holders representing a majority of the Series A Preferred Stock may elect to extend (a “Delayed Redemption Election”) the applicable expiration of the non-call period for one year up to three times, provided that the non-call period cannot be extended past the seventh anniversary of the issuance date. In the event of such a valid Delayed Redemption Election, the applicable conversion price will be increased as set forth in the Certificate of Designations. Any such redemption would involve the payment of cash that could have otherwise been used by the Company to enhance its operations, pay down its debt, take advantage of strategic opportunities, or pay dividends with respect to its Class A Common Stock.
The holders of shares of the Series A Preferred Stock will be entitled to vote on an as-converted basis with the holders of shares of the Company’s Class A Common Stock and Class B Common Stock, par value $0.0001 per share (the “Class B Common Stock” and together with Class A Common Stock, “Common Stock”) as a single class, provided that no holder will be entitled to voting power greater than 4.9% of the aggregate total voting power of the outstanding shares of Common Stock. As a result, the voting power of the holders of the Company’s Class A Common Stock is diluted by the voting power of the holders of shares of the Series A Preferred Stock.
If any shares of Series A Preferred Stock remain outstanding as of the seventh year anniversary of issuance date, the holders of a majority of the then-outstanding shares of Series A Preferred Stock originally sold to the funds affiliated with Blue Owl will have the right to designate an individual to serve on the Board, or in their discretion, a non-voting board observer.
The Company may issue additional preferred stock in the future whose terms could materially adversely affect the value and rights of the Company’s Class A Common Stock .
In addition to the already issued Series A Preferred Stock, the Amended and Restated Certificate of Incorporation of the Company (the “A&R Charter”) authorizes the Company to issue, without the approval of its stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations, and relative rights, including preferences over the Company’s Class A Common Stock respecting dividends and distributions, as the Board may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of the Class A Common Stock. For example, the Company might grant holders of newly issued preferred stock the right to elect some number of the Company’s directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences the Company might assign to holders of newly issued preferred stock could affect the residual value of the Class A Common Stock.
Because we have no current plans to pay cash dividends on our shares of Class A Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your shares of Class A Common Stock for a price greater than that which you paid for it.
We expect to retain future earnings, if any, for future operations, expansion, debt repayment, and the payment of quarterly dividends on our Series A Preferred Stock and have no current plans to pay any cash dividends on our Class A Common Stock for the foreseeable future. Any decision to declare and pay dividends on our Class A Common Stock in the future will be made at the discretion of our Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions, and other factors that our Board may deem relevant. In addition, our ability to pay dividends on our Class A Common Stock may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur, by covenants set forth in the Certificate of Designations, and by covenants relating to any future series or class of preferred stock that we may issue. As a result, our stockholders may not receive any return on an investment in our shares of Class A Common Stock unless they sell our shares of Class A Common Stock for a price greater than that which they paid for it.
You may be diluted by the future issuance of additional Class A Common Stock or Class A LLC Units in connection with the Company’s incentive plans, acquisitions, warrants, notes, Series A Preferred Stock, or otherwise.
As of March 11, 2026, the Company had 8,551,931 shares of Class A Common Stock issued and vested, 425,850 shares of Class A Common Stock issued but unvested, and 5,991,022,219 shares of Class A Common Stock authorized but unissued, which authorized but unissued shares include 7,731,821 shares of Class A Common Stock issuable upon exchange of Class A LLC Units that are held by FOA Equity unitholders (other than the Company), 357,113 shares of Class A Common Stock issuable upon exchange of Class A LLC Units that are potentially issuable to AAG/Bloom in connection with our acquisition of operational assets from AAG/Bloom, 5,337,928 shares of Class A Common Stock issuable upon exchange of Exchangeable Secured Notes, 1,428,571 shares of Class A Common Stock issuable upon conversion of the Series A Preferred Stock (based on the conversion price as of March 11, 2026), 2,222,222 shares of Class A Common Stock issuable upon conversion of the Convertible Notes (based on the early conversion price of $18.00 per share applicable prior to the one year anniversary of the issuance date (on which the conversion price increases to $19.00 per share)), 720,000 shares of Class A Common Stock issuable upon exchange of Class A LLC Units that are issuable upon exercise of options granted to certain members of senior management, 770,000 shares of Class A Common Stock directly issuable upon exercise of options granted to certain members of senior management, 1,165,299 shares of Class A Common Stock issuable upon settlement of outstanding Non-LTIP Restricted Stock Units (“Non-LTIP RSUs”), 471,115 shares of Class A Common Stock issuable upon the occurrence of the First Earnout Achievement Date (or upon exchange of Class A LLC Units that are issuable upon the occurrence of the First Earnout Date) (38,161 of which would be exchanged to fund the settlement of the Earnout Right Restricted Stock Units (“Earnout Right RSUs”) that vest on the First
Earnout Achievement Date), 471,115 shares of Class A Common Stock issuable upon the occurrence of the Second Earnout Achievement Date (or upon exchange of Class A LLC Units that are issuable upon the occurrence of the Second Earnout Achievement Date) (38,161 of which would be exchanged to fund the settlement of the Earnout Right RSUs that vest on the Second Earnout Achievement Date), 1,437,500 shares of Class A Common Stock issuable upon exercise of certain warrants, and additional shares of Class A Common Stock issuable upon vesting (which occurs upon the consummation of a Change of Control (as defined in the Finance of America Companies Inc. 2021 Omnibus Incentive Plan)) of 2,000,000 Class B Units of FOA Equity (“Class B Units”) granted to certain of the Company’s executive officers, conversion of such Class B Units into a number of Class A LLC Units having a fair market value equal to the excess (if any) of the fair market value of the Company’s Class A Common Stock as of the vesting date over the closing price of the Company’s Class A Common Stock on the date of grant, and exchange of such resulting Class A LLC Units for shares of Class A Common Stock.
The A&R Charter authorizes the Company to issue these shares of Class A Common Stock and options, rights, warrants, preferred stock, and appreciation rights relating to Class A Common Stock for the consideration and on the terms and conditions established by the Board in its sole discretion, whether in connection with acquisitions or otherwise. Similarly, the Second A&R LLC Agreement permits FOA Equity to issue an unlimited number of additional limited liability company interests of FOA Equity with designations, preferences, rights, powers, and duties that are different from, and may be senior to, those applicable to the Class A LLC Units, and which may be exchangeable for shares of Class A Common Stock. Further, as of March 11, 2026, the Company has reserved an aggregate of 1,216,215 additional shares of Class A Common Stock and Class A LLC Units for issuance under the Finance of America Companies Inc. 2021 Omnibus Incentive Plan (excluding the reserve for the options and the Non-LTIP RSUs described earlier in this paragraph). Any Class A Common Stock that the Company issues, including under the Finance of America Companies Inc. 2021 Omnibus Incentive Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the investors who own shares of Class A Common Stock.
There may be sales of a substantial amount of Class A Common Stock by certain of the Company’s shareholders and these sales could cause the price of the Company’s securities to fall.
Pursuant to the Registration Rights Agreement, dated as of April 1, 2021, by and among FOA and the shareholders party thereto, certain shareholders were entitled to demand that the Company register the resale of their securities subject to certain minimum requirements. These shareholders also have certain “piggyback” registration rights with respect to previously filed registration statements.
On June 9, 2022,our post-effective amendment No.1 on Form S-1 to Form S-3 was declared effective by the SEC (the “Registration Statement”). Further, on August 18, 2023, we filed a registration statement on Form S-3 (such registration statement, the “AAG/Bloom Registration Statement”) relating to the registration for offer and sale of the up to 3,389,366 shares of Class A Common Stock (which number reflects the 10:1 reverse splits of Class A Common Stock and Class A LLC Units, each effective on July 25, 2024) exchangeable by AAG/Bloom pursuant to the Exchange Agreement, dated as of April 1, 2021, by and among FOA, FOA Equity, and the holders of Class A LLC Units from time to time. The AAG/Bloom Registration Statement was declared effective by the SEC on September 1, 2023.
On October 31, 2024, FOAF issued $146,793,000 of 10.000% Exchangeable Senior Secured Notes due 2029 (the “Exchangeable Secured Notes”). The Exchangeable Secured Notes are exchangeable into shares of Class A Common Stock. The exchange rate is initially 36.36364 shares of Class A Common Stock per $1,000 principal amount of Exchangeable Secured Notes, which is equivalent to an initial exchange price of $27.50 per share of Class A Common Stock, and is subject to adjustment as provided in the related indenture. On March 14, 2025, we filed a registration statement on Form S-3 relating to the registration for offer and sale of the up to 5,337,928 shares of Class A Common Stock deliverable upon exchange of the Exchangeable Secured Notes (the “Exchangeable Secured Note Registration Statement”). The Exchangeable Secured Note Registration Statement was declared effective by the SEC on April 7, 2025.
On December 15, 2025, the Company issued 50,000 shares of Series A Preferred Stock. On February 13, 2026, we filed a registration statement on Form S-3 relating to the registration for offer and sale of the up to 50,000 shares of Series A Preferred Stock and 2,326,190 shares of Class A Common Stock issuable upon the conversion of
the Series A Preferred Stock (the “Series A Preferred Stock Registration Statement” and together with the Registration Statement, the AAG/Bloom Registration Statement, and the Exchangeable Secured Note Registration Statement, the “Registration Statements”). The Series A Preferred Stock Registration Statement was declared effective by the SEC on February 25, 2026.
Under the Registration Statements, such applicable parties may sell large amounts of our Class A Common Stock in the open market or in privately negotiated transactions. Such sales could have the effect of increasing the volatility in the share price of our Class A Common Stock or putting significant downward pressure on the price of our Class A Common Stock.
Sales of substantial amounts of our Class A Common Stock in the public market, or the perception that such sales will occur, could adversely affect the market price of our Class A Common Stock and make it difficult for us to raise funds through securities offerings in the future.
There can be no assurance that we will be able to satisfy the continued listing standards that are required to be satisfied in order for our Class A Common Stock to continue to be listed on the NYSE and NYSE Texas.
The NYSE and NYSE Texas impose requirements that must be complied with in order for securities to remain listed on the NYSE and NYSE Texas, some of which are not completely within the Company’s control. In the past (prior to the dual listing of our Class A Common Stock on NYSE Texas), we have received notices of non-compliance with the NYSE’s continued listing standards with respect to our Class A Common Stock because the average closing price of our Class A Common Stock had been below $1.00 for a consecutive 30 trading-day period. We effected a 1-for-10 reverse stock split of our Class A Common Stock on July 25, 2024 to regain compliance within the required timeframe for our Class A Common Stock to remain listed on the NYSE. We have not subsequently received any further notices of noncompliance from the NYSE or NYSE Texas with respect to our Class A Common Stock. However, it is possible that we may not be able to comply with continued listing standards of the NYSE and NYSE Texas for our Class A Common Stock in the future. Any such instance of noncompliance may result in the receipt of additional notices of noncompliance from the NYSE and NYSE Texas and ultimately in our Class A Common Stock being .
The receipt of a notice of noncompliance from the NYSE and/or NYSE Texas can have adverse consequences for the Company, even if the Company is able to regain compliance and avoid delisting. Receipt of such a notice can have an adverse impact on investor sentiment and in turn result in a decrease in the share price of our Class A Common Stock. Further, receipt of such a notice can have an adverse impact on the sentiment of our debt investors and warehouse lenders and in turn make it more difficult to obtain and maintain these relationships in the future. Further, if the NYSE and/or NYSE Texas delists the Company’s Class A Common Stock from trading on its exchange for failure to meet the listing standards, the Company and its shareholders could face significant material adverse consequences including:
• a limited availability of market quotations for our securities;
• reduced liquidity for our securities;
• a determination that shares of the Class A Common Stock are a “penny stock” which will require brokers trading in the Class A Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
• a limited amount of news and analyst coverage; and
• a decreased ability to issue additional securities or obtain additional financing in the future.
The Company incurs significant expenses and administrative burdens as a public company, which could have a material adverse effect on our business, financial condition, and results of operations.
The Company faces legal, accounting, administrative, and other costs and expenses as a public company. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Act and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board, and the securities exchanges impose additional reporting and other obligations on public companies. Compliance with public company requirements is costly and time-consuming. For example, the Company has adopted corporate governance requirements and best practices as
well as internal controls and disclosure controls and procedures, all of which have expenses associated with them. In addition, expenses associated with SEC reporting requirements are incurred in the ordinary course of business. Furthermore, if any issues in complying with those requirements are identified (for example, if the Company’s auditors identify a material weakness or significant deficiency in the Company’s internal controls over financial reporting), the Company could incur additional costs rectifying those issues, and the existence of those issues could adversely affect the Company’s reputation or investor perceptions of it. It may also be more expensive to obtain director and officer liability insurance. Risks associated with the Company’s status as a public company may make it more difficult to attract and retain qualified persons to serve on the Board or as executive officers. The reporting and other obligations imposed by these rules and regulations result in legal and financial compliance costs and costs associated with related legal, accounting, and administrative activities. These costs require the Company to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by shareholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.
The Company may not be able to effectively continue to implement and maintain controls and procedures required by the Sarbanes-Oxley Act that are applicable to us.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal controls over financial reporting. To continue to comply with such requirements, we may need to undertake various actions from time to time, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. Management may not be able to effectively continue to implement and maintain controls and procedures that adequately respond to the regulatory compliance and reporting requirements that are applicable to the Company. If management is not able to do so, it may not be able to assess whether the Company’s internal controls over financial reporting are effective, which may subject the Company to adverse regulatory consequences and could harm investor confidence and the market price of our securities. In addition, our independent registered public accounting firm is required to issue a report on the effectiveness of our internal controls over financial reporting. In the future, our independent registered public accounting firm may issue a report that is in the event that it is not with the level at which the controls of the Company are documented, designed, or operating.
If we experience material weaknesses or deficiencies in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports, and the price of our securities may decline.
A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The identification of any new material weaknesses in the future could limit our ability to prevent or detect a misstatement of our accounts or disclosures and could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and the price of our securities may decline as a result.
The Company was previously a “controlled company” within the meaning of the NYSE rules and, as a result, qualified for exemptions from certain corporate governance requirements. While the Company is no longer a “controlled company,” it is not required to come fully into compliance with such corporate governance requirements until the end of the applicable status change period. Until the Company comes fully into compliance with such requirements, the stockholders of the Company do not have the same protections afforded to stockholders of companies that are fully compliant with such requirements.
Prior to February 27, 2026, the Company was a “controlled company” within the meaning of the NYSE corporate governance standards. Under these corporate governance standards, a company of which more than 50% of the voting power in the election of directors is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements. As a result, the Company’s
compensation committee and nominating and corporate governance committee have not historically been composed entirely of independent directors. By the 90th day following February 27, 2026, the Company will be required to cause its compensation committee and nominating and corporate governance committee to be composed of a majority of independent directors. By February 27, 2027, the Company will be required to cause its compensation committee and nominating and corporate governance committee to be composed entirely of independent directors. Until the Company comes fully into compliance with such requirements, the stockholders of the Company will not have the same protections afforded to stockholders of companies that are subject to and fully compliant with all of the corporate governance requirements of the NYSE.
The principal stockholder has substantial influence over the Company and its interests may conflict with the interests of the Company or its stockholders in the future.
The Company’s principal stockholder is party to a stockholders agreement (the “Stockholders Agreement”) and as of March 11, 2026, beneficially owned approximately 47.7% of the combined voting power of the Company’s Class A Common Stock, Class B Common Stock, and Series A Preferred Stock. Moreover, the Company agreed to nominate to our Board individuals designated by the principal stockholder in accordance with the Stockholders Agreement. The principal stockholder retains the right to designate directors subject to the maintenance of certain ownership requirements in us. As a result, for so long as the principal stockholder continues to own a significant percentage of the Company’s stock, it will be able to significantly influence the composition of the Board and the approval of actions requiring stockholder approval through their voting power. Accordingly, for such period of time, the principal stockholder will have significant influence with respect to the Company’s management, business plans, and policies, including the appointment and removal of the Company’s officers.
In particular, for so long as the principal stockholder continues to own a significant percentage of the Company’s stock, the principal stockholder will be able to exert significant influence over whether a change of control of the Company or a change in the composition of the Board occurs. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of Class A Common Stock as part of a sale of the Company and ultimately might affect the market price of the Class A Common Stock.
As of March 11, 2026, the principal stockholder owned approximately 42.7% of the Class A LLC Units. Because it holds ownership interests directly in FOA Equity, the principal stockholder may have conflicting interests with holders of shares of the Class A Common Stock. For example, if FOA Equity makes distributions to the Company, the principal stockholder will also be entitled to receive such distributions pro rata in accordance with the percentage of their membership interest in FOA Equity and their preferences as to the timing and amount of any such distributions may differ from those of the Company’s public stockholders. The principal stockholder may also have different tax positions from us which could influence their decisions regarding whether and when to dispose of assets, especially in light of the existence of the Tax Receivable Agreement, whether and when to incur new or refinance existing indebtedness, and whether and when the Company should terminate the Tax Receivable Agreement and accelerate its obligations thereunder. In addition, the structuring of future transactions may take into consideration the principal stockholder’s tax or other considerations even where no similar benefit would accrue to the Company.
Anti-takeover provisions under Delaware law could make an acquisition of the Company, which may be beneficial to the Company’s stockholders, more difficult and may prevent attempts by the Company’s stockholders to replace or remove the Company’s management.
The A&R Charter and the Amended and Restated Bylaws of the Company (the “A&R Bylaws”) contain provisions that may make the merger or acquisition of the Company more difficult without the approval of the Board. Among other things, these provisions:
• provide that subject to the rights of the holders of any preferred stock and the rights granted pursuant to the Stockholders Agreement, vacancies and newly created directorships may be filled only by the remaining directors at any time the principal stockholders beneficially own less than 30% of the total voting power of all then outstanding shares of the Company’s capital stock entitled to vote generally in the election of directors;
• allow the Company to authorize the issuance of shares of one or more series of preferred stock, including in connection with a stockholder rights plan, financing transactions, or otherwise, the terms of which series may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock;
• prohibit stockholder action by written consent from and after the date on which the principal stockholders beneficially own at least 30% of the total voting power of all then outstanding shares of the Company’s capital stock entitled to vote generally in the election of directors unless such action is recommended by all directors then in office;
• provide for certain limitations on convening special stockholder meetings; and
• establish advance notice requirements for nominations for elections to our Board or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Further, as a Delaware corporation, the Company is also subject to provisions of Delaware law, which may impede or discourage a takeover attempt that the Company’s stockholders may find beneficial. These anti-takeover provisions and other provisions under Delaware law may discourage, delay, or prevent a transaction involving a change in control of the Company, including actions that the Company’s stockholders may deem advantageous, or negatively affect the trading price of the Class A Common Stock. These provisions may also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause the Company to take other corporate actions you desire. For further discussion of these and other such anti-takeover provisions, see the section titled “Description of Securities—Certain Anti-Takeover Provisions of Our A&R Charter and A&R Bylaws.”
The A&R Charter designates the Court of Chancery of the State of Delaware or the federal district courts of the U.S., as applicable, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by the Company’s stockholders, which could limit the Company’s stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or the Company’s directors, officers, or other employees.
The A&R Charter provides that, unless the Company consents to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a breach of fiduciary duty owed by any current or former director, officer, stockholder, or employee of the Company to the Company or its stockholders; (iii) any action asserting a claim against the Company arising under the Delaware General Corporation Law (the “DGCL”), the A&R Charter, or the A&R Bylaws (together, the “Organizational Documents”) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or (iv) any action asserting a claim against the Company that is governed by the internal affairs doctrine.
The A&R Charter further provides that, unless the Company consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the U.S. will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the federal securities laws of the U.S., including the Securities Act and the Exchange Act and, in each case, the applicable rules and regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring any interest in any shares of the Company’s capital stock shall be deemed to have notice of and to have consented to the forum provision in the A&R Charter. This choice-of-forum provision may limit a stockholder’s ability to bring a claim in a different judicial forum, including one that it may find favorable or convenient for a specified class of disputes with the Company or the Company’s directors, officers, other stockholders, or employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of the A&R Charter inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, the Company may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect the Company’s business, financial condition, and results of operations and result in a diversion of the time and resources of the Company’s management and Board.
