Finance of America Companies (FOA) risk factors, FY2024 10-K

Risks Related to the Business of the Company

1. 01We may fail to realize the anticipated benefits of the efforts we have undertaken to transition to a unified lending platform and to streamline and enhance our marketing and originations operations and digital capabilities
2. 02While we generated a net profit in 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 unified modern retirement solutions platform
3. 03Our 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
4. 04Our capital investments in technology may not achieve anticipated returns
5. 05We are incorporating artificial intelligence technologies into our processes. These technologies may present business, compliance, and reputational risks
6. 06Our business could suffer if we fail to attract, or retain, highly skilled employees, and changes in our executive management team may be disruptive to our business
7. 07Our 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
8. 08A security breach or a cyber-attack could adversely affect our results of operations and financial condition
9. 09Technology 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
10. 10Reputational 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
11. 11have other negative consequences, including as a result of our employees interacting with our customers in an unauthorized manner in various social media outlets
12. 12Climate 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
13. 13Our 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
14. 14Our risk management efforts may not be effective

Risks Related to Our Lending Business

1. 15Our loan origination and servicing revenues are highly dependent on macroeconomic and U.S. residential real estate market conditions
2. 16Any 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
3. 17We 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
4. 18obligations. RMF’s bankruptcy filing initially created disruption in the reverse mortgage market and adversely impacted the liquidity of reverse mortgage-backed securities as well as the cost of and availability of credit to reverse mortgage financial participants
5. 19We face competition that could adversely affect us and we may not be able to maintain or grow the volume of our loan originations
6. 20If 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
7. 21We do not currently and may not in the future actively hedge our assets, and if we do hedge our assets, 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
8. 22A disruption in the secondary reverse mortgage loan market, including the MBS market, could have a detrimental effect on our business
9. 23We 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
10. 24We have risks related to our Subservicers that could have a material adverse effect on our business, liquidity, financial condition, and results of operations
11. 25Risks 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
12. 26We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances
13. 27Our counterparties may terminate subservicing contracts under which we conduct servicing activities

Risks Related to Laws and Regulations

1. 28We 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
2. 29Unlike competitors that are national banks, we are subject to state licensing and operational requirements that result in substantial compliance costs and risks
3. 30Compliance 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
4. 31There 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
5. 32We 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

Risks Related to Our Indebtedness

1. 33Our 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
2. 34Despite 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
3. 35The 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
4. 36The 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
5. 37Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly
6. 38Our 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

Risks Related to Our Organizational Structure

1. 39The 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 Agreements, and pay dividends
2. 40The Company will be required to pay income taxes on its allocable share of any net taxable income of FOA Equity
3. 41The Company is required to make payments under the Tax Receivable Agreements for certain tax benefits the Company may claim, and the amounts of such payments could be significant
4. 42In certain cases, payments under the Tax Receivable Agreements 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 Agreements
5. 43The Company will not be reimbursed for any payments made to the TRA Parties under the Tax Receivable Agreements in the event that any tax benefits are disallowed
6. 44Certain 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
7. 45The Company is not required to distribute any excess tax distributions that it receives from FOA Equity to the Company’s stockholders

Risks Related to Ownership of our Class A Common Stock

1. 46The NYSE imposes requirements that must be complied with in order for securities to remain listed on the NYSE, some of which are not completely within the Company’s control
2. 47Because 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
3. 48The market price of our securities may fluctuate or decline
4. 49Pursuant to the Registration Rights Agreement, 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
5. 50The trading history of our common stock has been characterized by low trading volume
6. 51If securities or industry analysts cease publishing research or reports about the Company, its business, or its market, or if they change their recommendations regarding the Company’s securities adversely, the price and trading volume of the Company’s securities could decline
7. 52The 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
8. 53The 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
9. 54The Company is a “controlled company” within the meaning of the NYSE rules and, as a result, qualifies for exemptions from certain corporate governance requirements. The stockholders of the Company do not have the same protections afforded to stockholders of companies that are subject to such requirements
10. 55The principal stockholders control the Company and their interests may conflict with the Company’s or yours in the future
11. 56The A&R Charter does not limit the ability of the principal stockholders to compete with the Company and they may have investments in businesses whose interests conflict with the Company
12. 57Anti-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
13. 58You 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, or otherwise
14. 59The Company may issue preferred stock whose terms could materially adversely affect the voting power or value of its Class A Common Stock