Finance of America Companies Inc.
03/13/2026 | Press release | Distributed by Public on 03/13/2026 14:13
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements and related notes. This discussion and analysis contains forward-looking statements that involve risk, uncertainties, and assumptions. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors. Also, see "Cautionary Note Regarding Forward-Looking Statements and Risk Factory Summary" in Part I of this Form 10-K. Unless the context otherwise requires, all references in this section to "we," "us," "our," "FOA," or the "Company" refer to Finance of America Companies Inc. and its consolidated subsidiaries. References to "FOA Equity" are to Finance of America Equity Capital LLC, a Delaware limited liability company, that the Company controls in an "UP-C" structure.
Overview
Finance of America Companies Inc. is a financial services holding company which, through its operating subsidiaries, is a leading provider of home equity-based financing solutions for a modern retirement. In addition, FOA offers capital markets and portfolio management capabilities primarily to optimize the distribution of its originated loans to investors.
FOA was incorporated in Delaware on October 9, 2020 and became a publicly-traded company on the NYSE in April 2021, with trading beginning on April 5, 2021. On August 15, 2025, FOA's Class A Common Stock also began trading on NYSE Texas. FOA continues to maintain its primary listing on the NYSE and trades under the same "FOA" ticker symbol on both exchanges.
FOA has a controlling financial interest in FOA Equity. FOA Equity owns all of the outstanding equity interests in FOAF. FOAF wholly owns FAH and Incenter. FAH is the parent of a lending company, FAR, while Incenter is the parent of operating service companies that provide capital markets and portfolio management capabilities.
We are a leading provider of home equity-based financing solutions for a modern retirement, offering innovative financing tools to help homeowners aged 55 and over make the most of their housing wealth and achieve a more secure retirement. We are principally focused on offering reverse mortgage loan products and certain traditional home equity loan products throughout the U.S. We believe the U.S. home equity-based lending market opportunity is strong and that home equity-based financing solutions are a key component in addressing an existing underserved market of seniors in the U.S.
Our strategy and long-term growth initiatives are built upon a few key fundamental factors:
•We are focused on growing our core retirement solutions business in order to capitalize on the U.S. home equity-based lending market opportunity. We believe we can continue to enhance, expand, and more effectively dispatch our innovative suite of home equity-based financing solutions to help senior homeowners achieve their retirement goals.
•We distribute our products through multiple channels and utilize flexible technology platforms in order to scale our business and manage costs efficiently.
•We connect borrowers with investors. Our consumer-facing business leaders interface directly with the investor-facing professionals in our Portfolio Management segment, facilitating the development of attractive lending solutions for our customers with the confidence that the loans we generate can be efficiently and profitably monetized through sale or securitization to a deep pool of investors, which minimizes capital at risk, with the Company often retaining a future performance-based participation interest in the underlying cash flows of our monetized loans.
Through FAR, the Company originates, acquires, and services (in partnership with third-party subservicers) HECM loans, which are originated pursuant to the FHA HECM program and are insured by the FHA, and non-agency reverse mortgage loans, which are not insured by the FHA. We have launched several non-agency reverse mortgage loan products to serve the U.S. senior population. At the same time, we continuously look to develop and launch new products to satisfy this vast and largely underserved market. For example, we previously launched a non-agency second lien reverse mortgage loan product, second in priority behind the first lien of an existing traditional mortgage loan or home equity line of credit collateralized by the same mortgaged property. This second lien product has enabled us to serve borrowers who already have and desire to maintain a low-rate primary mortgage but want the convenience of a flexible second lien loan with no required monthly principal and interest payments. We anticipate pursuing partnerships with mortgage servicers in the future to make our second lien reverse mortgage loan product available to their eligible traditional mortgage customers with a streamlined approval process, which we expect to broaden the reach of, and raise originations volumes for, the second lien product. Additionally, in October 2025 we
announced that we will begin to originate certain traditional home equity loan products. This marks the first time that we will originate traditional home equity loans and enables us to serve potential borrowers who need higher loan-to-value solutions than those provided by our suite of reverse mortgage loan products. Further, in December 2025, we 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 opportunity throughout their retirement. These efforts exemplify our commitment to meet and serve new kinds of borrowers. We are a leader in this market and we are focused on developing and offering products for borrowers with interest in using home equity-based financing solutions as retirement planning tools, which we believe will continue to increase our addressable customer base and ultimately raise our origination volumes.
We originate reverse mortgage loans through a retail channel (consisting primarily of a centralized retail platform) and a TPO channel (consisting primarily of a network of mortgage brokers). In 2026, we have also begun originating traditional home equity loans initially through an AI platform provided by Better. In 2025, we continued to take steps to enhance our 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, we launched and transitioned to our 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. This represents a shift in marketing strategy designed to enhance brand visibility and connect with a new generation of customers through modernized messaging that reflects the real-life goals and aspirations of today's senior homeowners. We have also continued to enhance our digital capabilities by leveraging automated digital tools to improve efficiency and the overall ease of transacting. For example, in June 2025, we launched a digital pre-qualification tool for certain products that can deliver a three-minute pre-qualification experience, setting a new benchmark for speed and customer engagement in the industry. In the fourth quarter of 2025, we launched "Joy," our AI-powered customer ambassador 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. We believe that these efforts will (i) increase brand and product recognition among customers and mortgage brokers, (ii) improve overall customer experience, and (iii) ultimately raise our origination volumes.
We are engaging in strategic partnerships in an effort to expand the reach of our products. In October 2025 we announced a strategic partnership with Better, pursuant to which we will originate traditional home equity loans through Better's AI platform and serve as Better's reverse mortgage origination partner, including both HECM loans and non-agency reverse mortgage loans. Better will initially leverage traditional platforms to offer these products; however our goal for this collaboration is to allow us to integrate our reverse mortgage products into a unified digital experience. Additionally, in November 2025 we announced that FAR and PHH, a subsidiary of Onity Group Inc., entered into an agreement pursuant to which FAR will acquire PHH's HECM loan servicing portfolio and certain other reverse mortgage assets. In connection with the transaction, FAR will also acquire PHH's pipeline of reverse mortgage loans, bring select members of PHH's experienced origination team onto FAR's platform, and enter into a subservicing arrangement with PHH. Following the transaction, we will engage with PHH to make our non-agency second lien reverse mortgage loan product available to PHH's eligible traditional mortgage customers with a streamlined approval process. We anticipate pursuing partnerships with additional mortgage servicers in the future to make our non-agency second lien reverse mortgage loan product available to their eligible traditional mortgage customers with a streamlined approval process. We believe that these efforts will significantly broaden the reach of our products and ultimately raise our origination volumes.
Our Portfolio Management segment provides structuring and product development expertise as well as broker/dealer and institutional asset management capabilities, which facilitates innovation and the successful monetization of our loans. We securitize HECM loans into HMBS, which Ginnie Mae guarantees, and sell 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, we convey the HECM loans to HUD or liquidate them in accordance with program requirements, securitize them into privately placed MBS, or hold them for investment. In November 2024, Ginnie Mae announced the finalized term sheet for its HMBS 2.0 program. If implemented, the HMBS 2.0 program will 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 or otherwise not eligible for securitization pursuant to Ginnie Mae's existing HMBS program (subject to expanded eligibility parameters applicable to the HMBS 2.0 program), increasing the HECM
loans that we are able to securitize into HMBS. We either securitize non-agency reverse mortgage loans into MBS sold to investors or sell them as whole loans to investors, while retaining the right to service the loans. We may also decide to strategically hold certain non-agency reverse mortgage loans for investment. We expect to sell traditional home equity loans as whole loans to investors on a servicing released basis. The capabilities provided by the Portfolio Management segment allowed us to complete several sales and issuances of MBS backed by our loan products in 2025, including a nearly $2 billion securitization of non-agency reverse mortgage loans in September 2025, the largest in Company history. This demonstrates the high quality and liquidity of the loan products we originate, the deep relationships we have with our investors, and the resilience of our business model in many economic environments.
Repurchase Agreement
On August 4, 2025, the Company entered into a repurchase agreement (the "Repurchase Agreement") with FOA Equity, Blackstone Tactical Opportunities Associates - NQ L.L.C., BTO Urban Holdings L.L.C., Blackstone Family Tactical Opportunities Investment Partnership - NQ ESC L.P., and BTO Urban Holdings II L.P. (collectively, the "Blackstone Investor"), which were deemed affiliates of the Company. Pursuant to the Repurchase Agreement, the Company was to purchase (the "Repurchase") all of the Blackstone Investor's shares of Class A Common Stock of the Company, Class B Common Stock of the Company, Class A LLC Units, and rights to receive shares of Class A Common Stock and Class A LLC Units pursuant to the Transaction Agreement, dated as of October 12, 2020 (the "Earnout Rights" and, together with such shares of Class A Common Stock, shares of Class B Common Stock, and Class A LLC Units, the "Sold Equity"), and the Tax Receivable Agreement, dated April 1, 2021 (the "Blackstone Tax Receivable Agreement"), between the Company and the Blackstone Investor was to be terminated. Each share of Class A Common Stock and each Class A LLC Unit was to be purchased for $10.00 per share or Class A LLC Unit, and the shares of Class B Common Stock and Earnout Rights were to be purchased for no additional consideration, for total consideration of $80,298,170.
On November 13, 2025, the Company entered into an amended and restated version of the Repurchase Agreement with FOA Equity and the Blackstone Investor (the "Amended and Restated Repurchase Agreement"). Pursuant to the Amended and Restated Repurchase Agreement, the consummation of the Repurchase was expected to occur across two closings, referred to as the "First Closing" and the "Second Closing" (each, a "Closing"). The First Closing occurred on December 4, 2025, when the Company repurchased $40.1 million of the Sold Equity, or 1,596,142 shares of Class A Common Stock and 2,418,767 Class A LLC Units, in accordance with the Amended and Restated Repurchase Agreement. The Second Closing occurred on February 27, 2026, when the Company repurchased the remaining Sold Equity not repurchased at the First Closing (the "Second Closing Sold Equity"). Each share of Class A Common Stock and each Class A LLC Unit was purchased at the Second Closing for $10.00 per share or Class A LLC Unit, and the shares of Class B Common Stock and Earnout Rights were purchased for no additional consideration, as was contemplated in the Repurchase Agreement. However, such price for the Class A Common Stock and the Class A LLC Units was, for the Second Closing Sold Equity, increased by a fixed per annum rate equal to 15.00% accruing monthly. Each Closing was subject to customary conditions and the First Closing was subject to the receipt of a customary opinion. Upon the completion of the Second Closing, the Blackstone Tax Receivable Agreement was terminated.
The remaining obligation as of December 31, 2025, related to the Second Closing Sold Equity, is recorded as Repurchase agreement obligation in the Consolidated Statements of Financial Condition, and equity is reduced as presented in the Consolidated Statements of Equity. In connection with the First Closing, the Company retired the repurchased Class A Common Stock by December 31, 2025.
Business Trends and Conditions
There are several key factors and trends affecting our results of operations. A summary of key factors impacting our revenues include:
•prevailing interest rates which impact loan origination volume, with declining interest rates generally leading to increases in volume, and an increasing interest rate environment generally leading to decreases in volume;
•housing market trends which also impact loan origination volume, with an appreciating housing market typically leading to higher loan origination volume, and a housing market with decreasing values typically leading to lower loan origination volume;
•demographic and housing stock trends which impact the addressable market size;
•movement of market interest rates and yields required by investors, with the increasing of market interest rates and yields generally having negative impacts on the fair value of our financial assets, and the decreasing of market interest rates and yields generally having positive impacts on the fair value of our financial assets;
•increases or decreases in default status of loans and prepayment speeds; and
•broad economic factors such as the strength and stability of the overall economy, including sustained higher or lower interest rates, inflation, the unemployment level, real estate values, and trade and tax policies.
Other factors that may affect our cost base include trends in salaries and benefits costs, sales commissions, loan production and servicing costs, marketing and advertising, technology, rent, legal, compliance, and other general and administrative costs. Management continually monitors these costs through operating plans.
Other Recent Events
The U.S. Federal Reserve's monetary policies and the federal government's recent tariff policies may have an impact on economic conditions relevant to our business, including real estate values and prevailing mortgage rates, however, the extent of the impact remains uncertain. Higher interest rates generally lead to lower mortgage transaction volumes, increased competition, and lower profit margins. Volatility in market conditions resulting from the foregoing policies may cause credit spreads to widen, which reduces, among other things, availability of credit to our Company on favorable terms, liquidity in the market, the fair value of assets on our balance sheet, and price transparency of real estate-related or asset-backed assets.
Our Company is actively monitoring these events and their effects on the Company's financial condition, liquidity, operations, industry, and workforce. These continuing economic impacts may cause additional volatility in the financial markets and may have an adverse effect on the Company's results of future operations, financial condition, and liquidity in 2026 and beyond. See the Results of Operations section below.
For further discussion on the potential impacts of the Federal Reserve's monetary policies and macroeconomic conditions, see "Risks Related to the Business of the Company" and "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," as well as "Risks Related to Our Lending Business" and "Our loan origination and servicing revenues are highly dependent on macroeconomic and U.S. residential real estate market conditions" under the section entitled "Item 1A. Risk Factors." Such risk factors may be amended or updated in our subsequent periodic reports filed with the SEC.
Components of Our Results of Operations
Revenues
Interest income
We earn interest income on our mortgage loans. Refer to Note 17 - Interest Income and Interest Expense in the Notes to Consolidated Financial Statements for additional information.
Interest expense
We incur interest expense on our HMBS related obligations, nonrecourse debt, and financing lines of credit. Interest expense also includes gains or losses on extinguishment of debt related to the purchase of securities that were previously issued by consolidated trusts. Refer to Note 17 - Interest Income and Interest Expense in the Notes to Consolidated Financial Statements for additional information.
Net origination gains
Net origination gains are the difference between the cost basis of loans and their estimated fair value recognized at the time of origination.
Gains on securitization of HECM tails, net
Gains on securitization of HECM tails, net, are the fair value gains we recognize from tail securitizations, net of Ginnie Mae guarantee fees.
Fair value changes from model amortization
Fair value changes from model amortization are from portfolio runoff and realization of modeled income and expenses.
Fair value changes from market inputs or model assumptions
Fair value changes from market inputs or model assumptions represent changes to the fair value of portfolio-related assets and liabilities that are not related to new originations, portfolio runoff, or realization of modeled income and expenses. These changes are driven primarily by updates to market inputs or changes in model assumptions. Refer to Note 5 - Fair Value in the Notes to Consolidated Financial Statements for additional information regarding the key inputs, assumptions, and valuation techniques utilized to measure fair value.
Fee income
We earn origination fees from our customers for processing mortgage loan applications. Revenue is recognized upon the successful funding of the loan.
Non-funding interest income (expense), net
Non-funding interest income (expense), net, includes our non-portfolio interest income, the interest expense associated with the Company's non-funding debt, and a gain on the exchange of our senior notes. Refer to Note 17 - Interest Income and Interest Expense in the Notes to Consolidated Financial Statements for additional information.
Expenses
Salaries, benefits, and related expenses
Salaries, benefits, and related expenses include salaries, bonuses, commissions, and other payroll related expenses.
Loan production and portfolio related expenses
Loan production and portfolio related expenses include loan origination costs and portfolio expenses associated with our securitizations.
Loan servicing expenses
Loan servicing expenses include costs related to the servicing and sub-servicing of loans.
Marketing and advertising expenses
Marketing and advertising expenses relate to our brand marketing, digital innovation strategy, and loan product information provided to our customers.
Amortization and depreciation
Amortization and depreciation include amortization of definite-lived intangible assets and depreciation of fixed assets.
General and administrative expenses
General and administrative expenses include communications and data processing costs, professional and consulting fees, occupancy, equipment rentals, office related expenses, and other expenses. Refer to Note 18 - General and Administrative Expenses in the Notes to Consolidated Financial Statements for additional information.
Impairment of Other Assets
Impairment of other assets includes charges recognized for the impairment of long-lived assets.
Other, Net
Other, net, primarily includes gains or losses on non-operating assets and liabilities.
Results of Operations
Consolidated Results
The following table presents our consolidated operating results from continuing operations (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Portfolio interest income: | |||||||||||
| Interest income | $ | 1,919,970 | $ | 1,905,214 | |||||||
| Interest expense | (1,659,210) | (1,637,286) | |||||||||
| Net portfolio interest income | 260,760 | 267,928 | |||||||||
| Other income (expense): | |||||||||||
| Net origination gains | 226,068 | 179,837 | |||||||||
|
Gains on securitization of HECM tails, net
|
45,365 | 45,535 | |||||||||
| Fair value changes from model amortization | (153,656) | (201,101) | |||||||||
| Fair value changes from market inputs or model assumptions | 146,963 | 55,924 | |||||||||
| Net fair value changes on loans and related obligations | 264,740 | 80,195 | |||||||||
| Fee income | 29,494 | 29,546 | |||||||||
| Non-funding interest income (expense), net | (57,562) | 16,695 | |||||||||
| Net other income (expense) | 236,672 | 126,436 | |||||||||
| Total revenues | 497,432 | 394,364 | |||||||||
| Expenses | |||||||||||
| Salaries, benefits, and related expenses | 145,770 | 138,360 | |||||||||
| Loan production and portfolio related expenses | 54,303 | 36,205 | |||||||||
| Loan servicing expenses | 31,162 | 31,323 | |||||||||
| Marketing and advertising expenses | 48,608 | 39,429 | |||||||||
| Amortization and depreciation | 38,595 | 38,947 | |||||||||
| General and administrative expenses | 51,093 | 59,462 | |||||||||
| Total expenses | 369,531 | 343,726 | |||||||||
| Impairment of other assets | - | (891) | |||||||||
| Other, net | (14,804) | (6,931) | |||||||||
| NET INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | $ | 113,097 | $ | 42,816 | |||||||
Net interest income
All of our financial instruments, with the exception of certain notes payable, are either recorded at fair value or the carrying value approximated fair value. The interest recognized on these financial instruments is recorded in Interest income or Interest expense in the Consolidated Statements of Operations. The interest on our notes payable is recorded in Non-funding interest income (expense), net, in the Consolidated Statements of Operations. We evaluate net interest income through an evaluation of all components of interest income and interest expense.
The following table presents the components of net interest income (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Interest income: | |||||||||||
| Interest income on mortgage loans | $ | 1,902,352 | $ | 1,890,700 | |||||||
| Other interest income | 17,618 | 14,514 | |||||||||
| Total portfolio interest income | 1,919,970 | 1,905,214 | |||||||||
| Interest expense: | |||||||||||
|
Interest expense on HMBS and nonrecourse obligations(1)
|
(1,575,252) | (1,559,341) | |||||||||
| Interest expense on other financing lines of credit | (83,958) | (77,945) | |||||||||
| Total portfolio interest expense | (1,659,210) | (1,637,286) | |||||||||
| Net portfolio interest income | 260,760 | 267,928 | |||||||||
|
Non-funding interest income (expense), net(2)
|
(57,562) | 16,695 | |||||||||
| Net interest income | $ | 203,198 | $ | 284,623 | |||||||
(1) Interest expense on HMBS and nonrecourse obligations includes gains or losses on extinguishment of debt related to the purchase of securities that were previously issued by consolidated trusts.
(2) For the year ended December 31, 2024, non-funding interest income (expense), net, included a $56.2 million gain on the exchange of our senior notes, which resulted in increased discount amortization expense for the year ended December 31, 2025. Refer to Note 13 - Notes Payable in the Notes to Consolidated Financial Statements for additional information.
For the year ended December 31, 2025 versus the year ended December 31, 2024
Net income from continuing operations before income taxes increased $70.3 million primarily as a result of the following:
•Fair value changes from market inputs or model assumptions increased $91.0 million primarily due to net changes in interest rates, yields, home price appreciation, and other inputs, which generated higher net fair value gains during the year ended December 31, 2025 compared to the 2024 period. Refer to Note 5 - Fair Value in the Notes to Consolidated Financial Statements for additional information regarding the key inputs, assumptions, and valuation techniques impacting the value of our loans and related obligations.
•Fair value changes from model amortization improved $47.4 million primarily due to modeled yield on a larger portfolio during the year ended December 31, 2025 compared to the 2024 period. Net portfolio interest income decreased $7.2 million due to a higher cost of funds within our securitized financing portfolio, which was partially offset by gains on extinguishment of debt related to the purchases of securities that were previously issued by consolidated trusts.
•Net origination gains increased $46.2 million as a result of higher reverse mortgage loan origination volumes. We recognized $226.1 million in net origination gains on loan originations of $2.4 billion for the year ended December 31, 2025 compared to $179.8 million in net origination gains on loan originations of $1.9 billion for the comparable 2024 period.
•Non-funding interest income (expense), net, changed $74.3 million during the year ended December 31, 2025 compared to the 2024 period primarily due to a $56.2 million gain recognized on the exchange of our senior notes in 2024, which resulted in increased amortization of debt discount and issuance costs of $16.0 million in 2025. This was partially offset by a lower cost of funds and outstanding balances on our working capital promissory notes during the year ended December 31, 2025 compared to the 2024 period. Refer to Note 13 - Notes Payable in the Notes to Consolidated Financial Statements for additional information.
•Total expenses increased $25.8 million primarily due to an increase in loan portfolio related expenses as a result of higher securitization expenses, an increase in marketing and advertising expenses related to brand marketing and our digital innovation strategy, and an increase in salaries, benefits, and related expenses as a result of higher compensation resulting from increased loan production. These increases were partially offset by decreases in average headcount and in general and administrative expenses primarily due to cost-
cutting measures implemented in 2024 and continued into 2025 to align expenses with our focus on providing home equity-based financingsolutions for a modern retirement.
•Other, net, decreased $7.9 million primarily due to valuation changes in certain non-operating assets, the convertible notes, and deferred purchase price liabilities.
Our Segments
Our business operates through two reportable segments: Retirement Solutions and Portfolio Management. A description of the business conducted by each of these segments is provided below.
Retirement Solutions
Our Retirement Solutions segment conducts all of our Company's loan origination activity, including the origination and acquisition of HECM loans and non-agency reverse mortgage loans through both the retail and TPO channels. The Retirement Solutions segment generates revenue from fees earned at the time of loan origination as well as from the initial estimate of net origination gains, with all originated loans accounted for at fair value. Once originated, the loans are transferred to our Portfolio Management segment, and any future fair value adjustments, including interest earned, on these originated loans are reflected in the revenues of our Portfolio Management segment until final disposition.
Portfolio Management
Our Portfolio Management segment provides product development, loan securitization, loan sales, risk management, servicing oversight, and asset management services to the Company. Our Portfolio Management team acts as the connector between borrowers and investors. The direct connections to investors, provided primarily by our FINRA registered broker-dealer, allow us to innovate and manage risk through better price and product discovery. Given our scale, we are able to work directly with investors and, where appropriate, retain assets on the balance sheet for attractive return opportunities. These retained investments are a source of growing and recurring interest and other servicing-related income. The Portfolio Management segment primarily generates revenue from the net interest income and fair value changes on portfolio assets, monetized through securitization, sale, or other financing of those assets.
See the Segment Results section below and Note 20 - Business Segment Reporting in the Notes to Consolidated Financial Statements for additional financial information about our segments.
Segment Results
Revenues and fees are directly attributed to their respective segments at the time services are performed. Revenues generated on inter-segment services performed are valued based on estimated market value. Expenses directly attributable to the operating segments are expensed as incurred. Other expenses are allocated to individual segments based on the estimated value of services performed, total revenue contributions, personnel headcount, or the equity invested in each segment based on the type of expense allocated. The allocation methodology is reviewed annually. There were no changes to methodology during the years ended December 31, 2025 and 2024.Expenses for enterprise-level general overhead, such as executive administration, are not allocated to the business segments.
Retirement Solutions Segment
The following table presents our Retirement Solutions segment's results (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net origination gains | $ | 226,068 | $ | 179,837 | |||||||
| Fee income | 26,914 | 26,477 | |||||||||
| Total revenues | 252,982 | 206,314 | |||||||||
| Total expenses | 206,771 | 194,944 | |||||||||
| Impairment of other assets | - | (291) | |||||||||
| Other, net | - | (174) | |||||||||
| NET INCOME BEFORE INCOME TAXES | $ | 46,211 | $ | 10,905 | |||||||
Key Metrics
The following table presents our Retirement Solutions segment's key metrics (in thousands, except units):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Reverse mortgage loan origination volume | |||||||||||
|
Loan origination volume(1)
|
$ | 2,384,559 | $ | 1,917,298 | |||||||
|
Loan origination volume - tails(2)
|
943,740 | 1,022,379 | |||||||||
| Total loan origination volume | $ | 3,328,299 | $ | 2,939,677 | |||||||
|
Total reverse mortgage loan origination volume - units(1)
|
9,619 | 8,995 | |||||||||
|
Reverse mortgage loan origination volume - by channel(1)
|
|||||||||||
| TPO | $ | 1,590,669 | $ | 1,159,382 | |||||||
| Retail | 793,890 | 757,916 | |||||||||
| Total reverse mortgage loan origination volume | $ | 2,384,559 | $ | 1,917,298 | |||||||
(1)Loan origination volumes consist of initial reverse mortgage loan borrowing amounts.
(2)Tails consist of subsequent borrower draws, mortgage insurance premiums, service fees, and other advances, which are added to the balance of the reverse mortgage loans and which we are able to subsequently securitize.
Revenues
The following table presents the components of our Retirement Solutions segment's total revenues (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net origination gains: | |||||||||||
| TPO | $ | 220,571 | $ | 147,961 | |||||||
| Retail | 80,606 | 81,026 | |||||||||
| Acquisition costs | (75,109) | (49,150) | |||||||||
| Total net origination gains | 226,068 | 179,837 | |||||||||
| Fee income | 26,914 | 26,477 | |||||||||
| Total revenues | $ | 252,982 | $ | 206,314 | |||||||
For the year ended December 31, 2025 versus the year ended December 31, 2024
Total revenues increased $46.7 million or 22.6% as a result of the following:
•Net origination gains increased $46.2 million or 25.7% as a result of higher reverse mortgage loan origination volumes. We originated $2.4 billion of reverse mortgage loans for the year ended December 31, 2025, an increase of 24.4%, compared to $1.9 billion for the comparable 2024 period. During the year ended December 31, 2025, the weighted average margin on reverse mortgage loan production was 9.48% compared to 9.38% in 2024, an increase of 0.10%.
Expenses
The following table presents the components of our Retirement Solutions segment's total expenses (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Salaries | $ | 59,993 | $ | 54,674 | |||||||
| Commissions and bonuses | 22,413 | 18,770 | |||||||||
| Other salary related expenses | 9,610 | 10,004 | |||||||||
| Total salaries, benefits, and related expenses | 92,016 | 83,448 | |||||||||
| Loan production expenses | 6,745 | 7,887 | |||||||||
| Marketing and advertising expenses | 48,572 | 39,337 | |||||||||
| Amortization and depreciation | 37,312 | 37,751 | |||||||||
| General and administrative expenses | 22,126 | 26,521 | |||||||||
| Total expenses | $ | 206,771 | $ | 194,944 | |||||||
For the year ended December 31, 2025 versus the year ended December 31, 2024
Total expenses increased $11.8 million or 6.1% as a result of the following:
•Marketing and advertising expenses increased $9.2 million or 23.5% related to brand marketing and our digital innovation strategy. This increase was partially offset by a $4.4 million decrease in General and administrative expenses during the year ended December 31, 2025 primarily due to cost-cutting measures implemented in 2024 and continued into 2025 to align expenses with our focus on providing home equity-based financingsolutions for a modern retirement.
•Total salaries, benefits, and related expenses increased $8.6 million or 10.3% primarily due to higher compensation resulting from increased loan production, partially offset by a decrease in average headcount during the year ended December 31, 2025 when compared to the 2024 period.
Portfolio Management Segment
The following table presents our Portfolio Management segment's results (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Portfolio interest income: | |||||||||||
| Interest income | $ | 1,919,970 | $ | 1,905,214 | |||||||
| Interest expense | (1,659,210) | (1,637,286) | |||||||||
| Net portfolio interest income | 260,760 | 267,928 | |||||||||
| Other income (expense): | |||||||||||
| Gains on securitization of HECM tails, net | 45,365 | 45,535 | |||||||||
| Fair value changes from model amortization | (153,656) | (201,101) | |||||||||
| Fair value changes from market inputs or model assumptions | 146,963 | 55,924 | |||||||||
| Net fair value changes on loans and related obligations | 38,672 | (99,642) | |||||||||
| Fee income | 3,072 | 3,561 | |||||||||
| Net other income (expense) | 41,744 | (96,081) | |||||||||
| Total revenues | 302,504 | 171,847 | |||||||||
| Total expenses | 104,150 | 87,449 | |||||||||
| NET INCOME BEFORE INCOME TAXES | $ | 198,354 | $ | 84,398 | |||||||
The following table presents the assets and liabilities in our Portfolio Management segment (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Cash and cash equivalents | $ | 33,028 | $ | 29,355 | |||||||
| Restricted cash | 234,885 | 254,335 | |||||||||
| Loans held for investment, subject to HMBS related obligations, at fair value | 19,135,403 | 18,669,962 | |||||||||
| Loans held for investment, subject to nonrecourse debt, at fair value | 10,026,177 | 9,288,403 | |||||||||
| Loans held for investment, at fair value | 870,081 | 520,103 | |||||||||
| Other assets, net | 158,944 | 115,120 | |||||||||
| Total earning assets | 30,458,518 | 28,877,278 | |||||||||
| HMBS related obligations, at fair value | 18,912,226 | 18,444,370 | |||||||||
| Nonrecourse debt, at fair value | 9,736,493 | 8,954,068 | |||||||||
| Other financing lines of credit | 1,187,699 | 918,247 | |||||||||
| Payables and other liabilities | 55,524 | 55,746 | |||||||||
| Total financing of portfolio | 29,891,942 | 28,372,431 | |||||||||
| Net carrying value of earning assets | $ | 566,576 | $ | 504,847 | |||||||
Key Metrics
The following tables present our Portfolio Management segment's key metrics (dollars in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Reverse Mortgage Loans | |||||||||||
| Active UPB | $ | 27,833,679 | $ | 26,477,354 | |||||||
| Due and payable | 516,618 | 415,400 | |||||||||
| Foreclosure | 559,300 | 504,675 | |||||||||
| Claims pending | 98,477 | 79,138 | |||||||||
| Ending UPB | $ | 29,008,074 | $ | 27,476,567 | |||||||
| Loan count | 88,493 | 90,340 | |||||||||
| Average UPB | $ | 328 | $ | 304 | |||||||
| Weighted average coupon | 6.71 | % | 7.11 | % | |||||||
| Weighted average age (in months) | 50 | 45 | |||||||||
| Percentage of UPB in foreclosure | 1.9 | % | 1.8 | % | |||||||
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Capital Markets Transactions | |||||||||||
| Number of securitizations | 6 | 8 | |||||||||
| Notes issued | $ | 5,369,224 | $ | 3,617,495 | |||||||
Revenues
The following table presentsthe components of our Portfolio Management segment's total revenues (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Portfolio interest income: | |||||||||||
| Interest income | $ | 1,919,970 | $ | 1,905,214 | |||||||
| Interest expense | (1,659,210) | (1,637,286) | |||||||||
| Net portfolio interest income | 260,760 | 267,928 | |||||||||
| Other income (expense): | |||||||||||
| Gains on securitization of HECM tails, net | 45,365 | 45,535 | |||||||||
| Fair value changes from model amortization | (153,656) | (201,101) | |||||||||
| Fair value changes from market inputs or model assumptions | 146,963 | 55,924 | |||||||||
| Net fair value changes on loans and related obligations | 38,672 | (99,642) | |||||||||
| Fee income | 3,072 | 3,561 | |||||||||
| Net other income (expense) | 41,744 | (96,081) | |||||||||
| Total revenues | $ | 302,504 | $ | 171,847 | |||||||
The majority of our financial instruments are valued utilizing a process that combines the use of a discounted cash flow ("DCF") model and analysis of current market data to arrive at an estimate of fair value. The cash flow assumptions and prepayment and repayment assumptions used in the model are based on various factors, with the key assumptions being prepayment and repayment speeds, credit loss frequencies and severity, and discount rate assumptions. The changes in fair value due to portfolio runoff and realization of modeled income and expenses are recorded in Fair value changes from model amortization in the Consolidated Statements of Operations, and other fair
value changes are recorded in Fair value changes from market inputs or model assumptions in the Consolidated Statements of Operations. The interest recognized on these financial instruments is recorded in Interest income or Interest expense in the Consolidated Statements of Operations.
The following table presents the components of net portfolio interest income (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Interest income: | |||||||||||
| Interest income on mortgage loans | $ | 1,902,352 | $ | 1,890,700 | |||||||
| Other interest income | 17,618 | 14,514 | |||||||||
| Total portfolio interest income | 1,919,970 | 1,905,214 | |||||||||
| Interest expense: | |||||||||||
|
Interest expense on HMBS and nonrecourse obligations(1)
|
(1,575,252) | (1,559,341) | |||||||||
| Interest expense on other financing lines of credit | (83,958) | (77,945) | |||||||||
| Total portfolio interest expense | (1,659,210) | (1,637,286) | |||||||||
| Net portfolio interest income | $ | 260,760 | $ | 267,928 | |||||||
(1) Interest expense on HMBS and nonrecourse obligations includes gains or losses on extinguishment of debt related to the purchase of securities that were previously issued by consolidated trusts.
For the year ended December 31, 2025 versus the year ended December 31, 2024
Total revenues increased $130.7 million as a result of the following:
•Fair value changes from market inputs or model assumptions increased $91.0 million primarily due to net changes in interest rates, yields, home price appreciation, and other inputs, which generated higher net fair value gains during the year ended December 31, 2025 compared to the 2024 period. Refer to Note 5 - Fair Value in the Notes to Consolidated Financial Statements for additional information regarding the key inputs, assumptions, and valuation techniques impacting the value of our loans and related obligations.
•Fair value changes from model amortization improved $47.4 million primarily due to modeled yield on a larger portfolio during the year ended December 31, 2025 compared to the 2024 period. Net portfolio interest income decreased $7.2 million due to a higher cost of funds within our securitized financing portfolio, which was partially offset by gains on extinguishment of debt related to the purchases of securities that were previously issued by consolidated trusts.
Expenses
The following table presents the components of our Portfolio Management segment's total expenses (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Salaries | $ | 11,591 | $ | 11,299 | |||||||
| Commissions and bonuses | 1,910 | 2,188 | |||||||||
| Other salary related expenses | 1,518 | 2,026 | |||||||||
| Total salaries, benefits, and related expenses | 15,019 | 15,513 | |||||||||
| Loan portfolio related expenses | 47,558 | 28,318 | |||||||||
| Loan servicing expenses | 31,162 | 31,323 | |||||||||
| Marketing and advertising expenses | - | 41 | |||||||||
| Amortization and depreciation | 45 | 77 | |||||||||
| General and administrative expenses | 10,366 | 12,177 | |||||||||
| Total expenses | $ | 104,150 | $ | 87,449 | |||||||
For the year ended December 31, 2025 versus the year ended December 31, 2024
Total expenses increased $16.7 million or 19.1% as a result of the following:
•Loan portfolio related expenses increased $19.2 million or 68% due to higher securitization expenses during the year ended December 31, 2025 compared to the 2024 period. We issued $5.4 billion of notes during the year ended December 31, 2025 compared to $3.6 billion for the 2024 period.
•General and administrative expenses decreased $1.8 million or 14.9% during the year ended December 31, 2025 primarily due to cost-cutting measures implemented in 2024 and continued into 2025 to align expenses with our focus on providing home equity-based financingsolutions for a modern retirement.
Corporate and Other
Corporate and Other consists of our corporate services groups. These groups support our operating segments, and the cost of services directly supporting the operating segments are allocated to those operating segments on a cost-of-service basis. Enterprise-focused Corporate and Other expenses that are not incurred in direct support of the operating segments are kept unallocated within Corporate and Other.
The following table presents Corporate and Other results (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Non-funding interest income (expense), net | $ | (57,562) | $ | 16,695 | |||||||
| Total revenues | (57,562) | 16,695 | |||||||||
| Total expenses | 59,102 | 61,825 | |||||||||
| Impairment of other assets | - | (600) | |||||||||
| Other, net | (14,804) | (6,757) | |||||||||
| NET LOSS BEFORE INCOME TAXES | $ | (131,468) | $ | (52,487) | |||||||
The following table presents the components of Corporate and Other total expenses (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Salaries and bonuses | $ | 58,101 | $ | 52,539 | |||||||
| Other salary related expenses | 7,282 | 8,942 | |||||||||
| Shared services - payroll allocations | (26,648) | (22,082) | |||||||||
| Total salaries, benefits, and related expenses | 38,735 | 39,399 | |||||||||
| Marketing and advertising expenses | 36 | 51 | |||||||||
| Amortization and depreciation | 1,238 | 1,119 | |||||||||
| Communications and data processing and other expenses | 18,954 | 24,215 | |||||||||
| Professional and consulting fees | 12,679 | 11,795 | |||||||||
| Shared services - general and administrative allocations | (12,540) | (14,754) | |||||||||
| Total general and administrative expenses | 19,093 | 21,256 | |||||||||
| Total expenses | $ | 59,102 | $ | 61,825 | |||||||
For the year ended December 31, 2025 versus the year ended December 31, 2024
Total revenues decreased $74.3 million as a result of the following:
•Non-funding interest income (expense), net, changed $74.3 million during the year ended December 31, 2025 compared to the 2024 period primarily due to a $56.2 million gain recognized on the exchange of our senior notes in 2024, which resulted in increased amortization of debt discount and issuance costs of $16.0 million 2025. This was partially offset by a lower cost of funds and outstanding balances on our working capital promissory notes during the year ended December 31, 2025 compared to the 2024 period. Refer to Note 13 - Notes Payable in the Notes to Consolidated Financial Statements for additional information.
Total expenses decreased $2.7 million or 4.4% as a result of the following:
•General and administrative expenses, net of shared services allocations, decreased $2.2 million or 10.2% during the year ended December 31, 2025 primarily due to cost-cutting measures implemented in 2024 and continued into 2025 to align expenses with our focus on providing home equity-based financingsolutions for a modern retirement.
Other, net, decreased $8.0 million primarily due to valuation changes in certain non-operating assets, the convertible notes, and deferred purchase price liabilities.
Non-GAAP Financial Measures
The Company's management evaluates performance of the Company through the use of certain financial measures that are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), including adjusted net income, adjusted EBITDA, adjusted earnings per share, and tangible equity.
The presentation of non-GAAP measures is used to enhance investors' understanding of certain aspects of our financial performance. This discussion is not meant to be considered in isolation, superior to, or as a substitute for the directly comparable financial measures prepared in accordance with U.S. GAAP. Management believes these key financial measures provide an additional view of our performance over the long-term and provide useful information that we use in order to maintain and grow our business.
These non-GAAP financial measures should not be considered as an alternative to net income, operating cash flows, or any other performance measures determined in accordance with U.S. GAAP. Adjusted net income, adjusted EBITDA, adjusted earnings per share, and tangible equity have important limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of the limitations of these metrics are: (i) cash expenditures for future contractual commitments; (ii) cash requirements for working capital needs; (iii) cash requirements for certain tax payments; and (iv) all non-cash income/expense items.
Because of these limitations, adjusted net income, adjusted EBITDA, adjusted earnings per share, and tangible equity should not be considered as measures of discretionary cash available to us to invest in the growth of our business or distribute to shareholders. We compensate for these limitations by relying primarily on our U.S. GAAP results and using our non-GAAP financial measures only as a supplement. Users of our consolidated financial statements are cautioned not to place undue reliance on our non-GAAP financial measures.
Adjusted Net Income
We define adjusted net income as net income from continuing operations adjusted for:
1.Income taxes
2.Changes in fair value of loans, retained bonds, and related obligations due to market inputs or model assumptions, deferred purchase price liabilities, warrant liability, convertible notes, and the exchange of our senior notes.
3.Amortization or impairment of intangibles and impairment of certain other long-lived assets.
4.Equity-based compensation, excluding forfeitures and accelerations associated with restructuring activities, which are included in certain non-recurring costs.
5.Certain non-recurring costs and adjustments that management believes should be excluded as these do not relate to a recurring part of the core business operations. These items include amounts recognized for settlement of legal and regulatory matters, acquisition or divestiture-related expenses, and other one-time charges.
6.Income tax provision adjustments to apply an effective combined federal and state corporate tax rate to adjusted net income before income taxes.
Management considers adjusted net income important in evaluating our Company as a whole. This supplemental metric is utilized by our management team to assess the underlying key drivers and operational performance of the continuing operations of the business. In addition, analysts, investors, and creditors may use this measure when analyzing our operating performance and comparability to peers. Adjusted net income is not a presentation made in accordance with U.S. GAAP, and our definition and use of this measure may vary from other companies in our industry.
Adjusted net income provides visibility to the underlying operating performance by excluding the impact of certain items that management does not believe are representative of our core earnings. Adjusted net income may also include other adjustments, as applicable, based upon facts and circumstances, consistent with our intent of providing a supplemental means of evaluating our operating performance.
Adjusted EBITDA
We define adjusted EBITDA as net income from continuing operations adjusted for:
1.Income taxes
2.Changes in fair value of loans, retained bonds, and related obligations due to market inputs or model assumptions, deferred purchase price liabilities, warrant liability, convertible notes, and the exchange of our senior notes.
3.Amortization or impairment of intangibles and impairment of certain other long-lived assets.
4.Equity-based compensation, excluding forfeitures and accelerations associated with restructuring activities, which are included in certain non-recurring costs.
5.Certain non-recurring costs and adjustments that management believes should be excluded as these do not relate to a recurring part of the core business operations. These items include amounts recognized for settlement of legal and regulatory matters, acquisition or divestiture-related expenses, and other one-time charges.
6.Depreciation
7.Interest expense on non-funding debt, excluding amortization of the discount related to our senior notes.
Management considers adjusted EBITDA important in evaluating the Company as a whole. This supplemental metric is utilized by our management team to assess the underlying key drivers and operational performance of the continuing operations of the business. In addition, analysts, investors, and creditors may use this measure when analyzing our operating performance and comparability to peers. Adjusted EBITDA is not a presentation made in accordance with U.S. GAAP, and our definition and use of this measure may vary from other companies in our industry.
Adjusted EBITDA provides visibility to the underlying operating performance by excluding the impact of certain items that management does not believe are representative of our core earnings. Adjusted EBITDA may also include other adjustments, as applicable, based upon facts and circumstances, consistent with our intent of providing a supplemental means of evaluating our operating performance.
Adjusted Earnings Per Share
We define adjusted earnings per share as adjusted net income (defined above) plus interest expense on the exchangeable senior secured notes, net of a tax effect, if dilutive for adjusted earnings per share, divided by the weighted average shares outstanding, which includes outstanding Class A Common Stock plus the Class A LLC Units owned by the noncontrolling interest on an if-converted basis, the exchange of the exchangeable senior secured notes on an if-converted basis if they are dilutive for adjusted earnings per share, the conversion of the convertible notes on an if-converted basis, the conversion of the preferred stock on an if-converted basis, and any shares under the treasury stock method.
Management considers adjusted earnings per share important in evaluating the Company as a whole. This supplemental metric is utilized by our management team to assess the underlying key drivers and operational performance of the continuing operations of the business. In addition, analysts, investors, and creditors may use this measure when analyzing our operating performance and comparability to peers. Adjusted earnings per share is not a
presentation made in accordance with U.S. GAAP, and our definition and use of this measure may vary from other companies in our industry.
Tangible Equity
We define tangible equity as total equity less intangible assets, net. Management uses this metric to evaluate the Company's capital strength exclusive of intangible assets. We believe this measure is useful to analysts, investors, and creditors as it provides additional insight into the underlying equity position of the business. Tangible equity is not a presentation made in accordance with U.S. GAAP, and our definition and use of this measure may vary from other companies in our industry.
Tangible equity provides visibility to the underlying capital position by excluding the impact of certain items that management does not believe are representative of our core equity base. Tangible equity may also include other adjustments, as applicable, based upon facts and circumstances, consistent with our intent of providing a supplemental means of evaluating our financial strength.
Reconciliation to GAAP
The following table presents a reconciliation of net income from continuing operations to adjusted net income and adjusted EBITDA, as well as adjusted earnings per share and tangible equity (in thousands, except for share data):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
|
Reconciliation of net income from continuing operations to adjusted net income and adjusted EBITDA
|
|||||||||||
|
Net income from continuing operations
|
$ | 109,578 | $ | 40,418 | |||||||
| Add back: Provision for income taxes | (3,519) | (2,398) | |||||||||
|
Net income from continuing operations before income taxes
|
113,097 | 42,816 | |||||||||
| Adjustments for: | |||||||||||
|
Changes in fair value(1)
|
(62,410) | (75,018) | |||||||||
| Amortization or impairment of intangibles and impairment of other assets | 37,189 | 38,080 | |||||||||
| Equity-based compensation | 10,161 | 9,024 | |||||||||
| Certain non-recurring costs | 2,878 | 4,366 | |||||||||
|
Adjusted net income before income taxes
|
100,915 | 19,268 | |||||||||
| Provision for income taxes | (26,728) | (5,181) | |||||||||
|
Adjusted net income
|
74,187 | 14,087 | |||||||||
| Provision for income taxes | 26,728 | 5,181 | |||||||||
| Depreciation | 1,406 | 1,758 | |||||||||
| Interest expense on non-funding debt | 40,369 | 38,669 | |||||||||
| Adjusted EBITDA | $ | 142,690 | $ | 59,695 | |||||||
| GAAP PER SHARE MEASURES | |||||||||||
|
Net income from continuing operations attributable to holders of Class A Common Stock
|
$ | 48,027 | $ | 17,496 | |||||||
| Basic weighted average shares outstanding | 9,537,237 | 9,850,903 | |||||||||
|
Basic earnings per share from continuing operations
|
$ | 5.04 | $ | 1.78 | |||||||
| If-converted method net income from continuing operations | $ | 106,179 | $ | 31,756 | |||||||
| Diluted weighted average shares outstanding | 26,930,745 | 23,406,233 | |||||||||
|
Diluted earnings per share from continuing operations
|
$ | 3.94 | $ | 1.36 | |||||||
| NON-GAAP PER SHARE MEASURES | |||||||||||
|
Adjusted net income
|
$ | 74,187 | $ | 14,087 | |||||||
|
Exchangeable senior secured notes interest expense(2)
|
10,581 | - | |||||||||
| Total | $ | 84,768 | $ | 14,087 | |||||||
| Weighted average shares outstanding | 27,910,523 | 23,406,233 | |||||||||
|
Adjusted earnings per share
|
$ | 3.04 | $ | 0.60 | |||||||
| December 31, 2025 | December 31, 2024 | ||||||||||
| Total equity | $ | 395,627 | $ | 315,664 | |||||||
| Less: Intangible assets, net | 179,615 | 216,342 | |||||||||
| Tangible equity | $ | 216,012 | $ | 99,322 | |||||||
(1)Changes in fair value - The adjustment for changes in fair value includes changes in fair value of loans, retained bonds, and related obligations due to market inputs or model assumptions, deferred purchase price liabilities, warrant liability, convertible notes, and the exchange of our senior notes.
Changes in fair value of loans, retained bonds, and related obligations due to market inputs or model assumptions - This adjustment relates to changes in the significant market or model input components of the fair value for loans, retained bonds, and related obligations. We include an adjustment for the significant market or model input components of the change in fair value because, while based on real observable and/or predicted changes in drivers of the valuation of assets or liabilities, they may be mismatched in any given period with the actual change in the underlying economics or when they will be realized in actual cash flows. Changes in fair value of loans, retained bonds, and related obligations include changes in fair value and related hedge gains and losses for the following:
1.Loans held for investment, subject to HMBS related obligations, at fair value;
2.Loans held for investment, subject to nonrecourse debt, at fair value;
3.Loans held for investment, at fair value;
4.Loans held for sale, at fair value;
5.Retained bonds, at fair value;
6.HMBS related obligations, at fair value; and
7.Nonrecourse debt, at fair value.
The adjustment for changes in fair value of loans, retained bonds, and related obligations due to market inputs or model assumptions is calculated based on changes in fair value associated with the above assets and liabilities calculated in accordance with U.S. GAAP, excluding the estimated impact of the change in fair value attributable to net origination gains and the change in fair value attributable to post-origination loan advances, accretion, and model amortization (i.e., portfolio run-off), net of hedge gains and losses, and any securitization expenses incurred in securitizing our mortgage loans held for investment, subject to nonrecourse debt. This adjustment represents changes in accounting estimates that are measured in accordance with U.S. GAAP. Actual results may differ from those estimates and assumptions due to factors such as changes in the economy, interest rates, secondary market pricing, prepayment assumptions, home prices, or discrete events affecting specific borrowers, and such differences could be material. Accordingly, this number should be understood as an estimate, and the actual adjustment could vary if our modeling is incorrect.
Change in fair value of deferred purchase price liabilities - We are obligated to pay contingent consideration to sellers of acquired businesses based on future performance of acquired businesses, as well as realization of tax benefits from certain exchanges of Class A LLC Units into Class A Common Stock (TRA obligation). The change in fair value of deferred purchase price liabilities represents gains or losses as a result of changes in various assumptions, including future performance, FOA stock price, timing and realization of tax benefits, and discount rates.
Change in fair value of the warrant liability- The adjustment to the warrant liability is based on the change in its measured fair value. Although the change in fair value of the warrant liability is a recurring part of our business, the change in fair value is unrealized, and we believe the adjustment is appropriate as the fair value fluctuations from period to period may make it difficult to analyze core-operating trends.
Change in fair value of convertible notes - We elected to account for the convertible notes at fair value under the fair value option. The change in fair value of convertible notes represents gains or losses as a result of changes in FOA stock price compared to the conversion price of the notes.
Change in fair value related to the exchange of our senior notes - We accounted for the exchange of our senior notes as an extinguishment of the senior unsecured notes and the issuance of the senior secured notes and exchangeable senior secured notes (collectively, the "Secured Notes"). The Secured Notes were initially recorded at fair value. The gain recognized on the exchange of the senior notes and the amortization of the Secured Notes discount are both included in this adjustment.
(2) Exchangeable senior secured notes interest expense - The adjustment for exchangeable senior secured notes interest expense includes interest expense on our exchangeable senior secured notes, excluding amortization of the discount related to the notes, net of an income tax benefit adjustment to apply an effective combined federal and state corporate tax rate to the expense, if dilutive for adjusted earnings per share.
Liquidity and Capital Resources
FOA is a holding company and generally has no material assets other than its direct and indirect ownership of Class A LLC Units. FOA has no independent means of generating revenue. FOA Equity may make distributions to its holders of Class A LLC Units, including FOA, in an amount sufficient to cover all applicable taxes at assumed tax rates, payments under the TRA obligation, and dividends, if any, declared by FOA. 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 limitations 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 FOA.
Our cash flows from operations, borrowing availability, and overall liquidity are subject to risks and uncertainties. We may not be able to obtain additional liquidity on reasonable terms, or at all. Additionally, our liquidity and our ability to meet our obligations and fund our capital requirements are dependent on our future financial performance, which is subject to general economic, financial, and other factors that are beyond our control. Accordingly, our business may not generate sufficient cash flow from operations and future borrowings may not be available from additional indebtedness or otherwise to meet our liquidity needs. If we decide to pursue one or more significant acquisitions, we may incur additional debt or sell additional equity to finance such acquisitions, which could result in additional expenses or dilution.
Sources and Uses of Cash
Our primary sources of funds for liquidity include: (i) payments received from the sale or securitization of loans; (ii) proceeds from payments on our outstanding participating interests in loans; and (iii) advances on warehouse facilities, other secured borrowings, our various notes, and other financing transactions.
Our primary uses of funds for liquidity include: (i) originations of loans; (ii) funding of borrower advances and draws on outstanding loans; (iii) payment of operating expenses; and (iv) repayment of borrowings and repurchases or redemptions of outstanding indebtedness.
Our cash flow from operating activities when combined with net proceeds from our portfolio financing activities, as well as capacity through existing facilities, provide adequate resources to fund our anticipated ongoing cash requirements. We rely on these facilities to fund operating activities. As the facilities mature, management believes it will either renew existing facilities or obtain sufficient additional lines of credit. Future debt maturities will be funded with cash and cash equivalents, cash flow from operating activities including portfolio investing and financing activities, and, if necessary, future access to capital markets. We continue to optimize the use of balance sheet cash to avoid unnecessary interest carrying costs.
Cash Flows
The following table presents amounts from our Consolidated Statements of Cash Flows (in thousands):
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | (429,746) | $ | (423,815) | |||||||
| Investing activities | 854,887 | 340,912 | |||||||||
| Financing activities | (402,454) | 160,097 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (9) | (27) | |||||||||
| Net increase in cash and cash equivalents and restricted cash | $ | 22,678 | $ | 77,167 | |||||||
| Net increase in cash and cash equivalents | $ | 42,120 | $ | 901 | |||||||
| Net increase (decrease) in restricted cash | (19,442) | 76,266 | |||||||||
Our cash and cash equivalents and restricted cash increased by $22.7 million for the year ended December 31, 2025 compared to an increase of $77.2 million during the comparable period in 2024. Our cash and cash equivalents,
excluding restricted cash, increased $42.1 million for the year ended December 31, 2025 compared to an increase of $0.9 million during the comparable period in 2024.
Operating Cash Flow
Cash flows from operating activities decreased by $5.9 million for the year ended December 31, 2025 compared to the corresponding 2024 period, which was primarily attributable to an increase in cash used for originations of loans held for sale, net of proceeds on sale.
Investing Cash Flow
The increase of $514.0 million in cash flows from our investing activities during the year ended December 31, 2025 compared to the 2024 period was primarily attributable to a $413.8 million increase in proceeds/payments on loans held for investment, net of cash used for purchases and originations, and a $113.5 million increase in proceeds/payments on loans held for investment, subject to nonrecourse debt, net of cash used for purchases and originations. This was partially offset by a decrease of $5.5 million in proceeds on the sale of MSR.
Financing Cash Flow
The decrease of $562.6 million in cash flows from our financing activities during the year ended December 31, 2025 compared to the 2024 period was primarily driven by a $398.0 million increase in payments on HMBS related obligations, net of proceeds, a $356.2 million increase in payments on nonrecourse debt, net of proceeds, a $103.2 million increase in payments on notes payable, net of proceeds, and $40.1 million of cash used for the repurchase of Class A Common Stock and Class A LLC Units. This was partially offset by a $279.7 million decrease in payments on other financing lines of credit, net of proceeds, and a $49.3 million increase in proceeds from issuance of the Series A Preferred Stock.
Financial Covenants
Our credit facilities contain various financial covenants, which primarily relate to required tangible net worth amounts, liquidity reserves, leverage ratios, and profitability. These covenants are measured at FAH or FAR. The Company was in compliance with the financial covenants as of December 31, 2025. Refer to Note 10 - Other Financing Lines of Credit in the Notes to Consolidated Financial Statements for additional information.
Compliance Requirements
As an issuer of HMBS, FAR is subject to minimum net worth, liquidity, and leverage requirements as well as minimum insurance coverage established and defined by Ginnie Mae as follows:
Minimum Net Worth
•$5.0 million plus 1% of FAR's outstanding HMBS and unused commitment authority from Ginnie Mae.
•Adjusted net worth is defined as total equity less certain unacceptable assets, including affiliate receivables.
Minimum Liquidity
•Maintain liquid assets equal to at least 20% of the minimum net worth required for a HMBS issuer.
Minimum Leverage Ratio
•Maintain a ratio of adjusted net worth to total assets of at least 6%.
As of December 31, 2025, FAR was in compliance with the minimum net worth, liquidity, capitalization levels, and insurance requirements of Ginnie Mae. FAR's actual ratio of adjusted net worth to total assets was below the Ginnie Mae requirement due to the Company's determination that HECM loans transferred into HMBS as well as its HECM buyout and non-agency reverse mortgage loan securitizations do not meet the requirements of sale accounting and are not derecognized upon date of transfer. As a result, the Company accounts for HECM loans transferred into HMBS as well as its HECM buyout and non-agency reverse mortgage loan securitizations as secured borrowings and continues to recognize the loans as held for investment, subject to HMBS related obligations or nonrecourse debt, along with the corresponding liability for the HMBS related obligations or nonrecourse debt. Based on this, FAR requested and received a waiver for the minimum outstanding capital requirements from Ginnie Mae. Therefore, FAR was in compliance with all Ginnie Mae requirements.
In addition, FAR is required to maintain both fidelity bond and errors and omissions insurance coverage at tiered levels based on the aggregate UPB of the loans serviced by FAR throughout the year. FAR is required to conduct
compliance testing at least quarterly to ensure compliance with the foregoing requirements. As of December 31, 2025, FAR was in compliance with applicable requirements.
Refer to Note 21 - Liquidity and Capital Requirements in the Notes to Consolidated Financial Statements for additional information.
Summary of Certain Indebtedness
The following description is a summary of certain material provisions of our outstanding indebtedness. As of December 31, 2025, our total debt obligations were $30.2 billion. This summary does not restate the terms of our outstanding indebtedness in its entirety, nor does it describe all of the material terms of our indebtedness.
HMBS Related Obligations
FAR is an approved issuer of HMBS that are guaranteed by Ginnie Mae and collateralized by participation interests in HECM loans insured by the FHA. We originate HECM loans insured by the FHA. Participations in the HECM loans are pooled into HMBS, which are sold into the secondary market with servicing rights retained. We have determined that loan transfers in the HMBS program do not meet the participating interest requirements because of the servicing requirements in the product that require the issuer/servicer to absorb some level of interest rate risk, cash flow timing risk, and incidental credit risk due to the buyout of HECM assets as discussed below. As a result, the transfers of the HECM loans do not qualify for sale accounting, and therefore, we account for these transfers as secured financings. Holders of participating interests in the HMBS have no recourse against assets other than the underlying HECM loans, remittances, or collateral on those loans while they are in the securitization pools, except for standard representations and warranties and our contractual obligation to service the HECM loans and the HMBS.
Remittances received on the reverse mortgage loans, proceeds received from the sale of real estate owned, and our funds used to repurchase reverse mortgage loans are used to reduce the HMBS related obligations by making payments to the securitization pools, which then remit the payments to the beneficial interest holders of the HMBS. The maturity of the HMBS related obligations is directly affected by the liquidation of the reverse mortgage loans and real estate owned properties, as well as by events of default stipulated in the reverse mortgage loan agreements with borrowers. As an HMBS issuer, FAR assumes certain obligations related to each security it issues. The most significant obligation is the requirement to purchase loans out of the Ginnie Mae securitization pools once they reach the maximum UPB limits that were established at loan origination. Performing repurchased loans are generally conveyed to HUD, and nonperforming repurchased loans are generally liquidated in accordance with program requirements.
As of December 31, 2025, we had HMBS related obligations of $18.9 billion and HECM loans pledged as collateral to the pools of $19.1 billion, both recorded at fair value.
Additionally, as the servicer of reverse mortgage loans, we are obligated to fund additional borrowing capacity primarily in the form of undrawn lines of credit on floating rate reverse mortgage loans. We rely upon certain of our secured financing arrangements and our operating cash flows to fund these additional borrowings on a short-term basis prior to securitization. The additional borrowings are generally securitized within 30 days after funding. The obligation to fund these additional borrowings could have a significant impact on our liquidity.
Nonrecourse Debt
We securitize and issue interests in pools of loans that are not eligible for the Ginnie Mae securitization program, which include non-agency reverse mortgage loans and HECM buyouts. The transactions provide investors with the ability to invest in these pools of assets. The transactions provide us with access to liquidity for these assets, ongoing servicing fees, and potential residual returns for the residual securities we retain at the time of securitization. The transactions are structured as secured borrowings, with the loan assets and liabilities included in the Consolidated Statements of Financial Condition as Loans held for investment, subject to nonrecourse debt, at fair value, and Nonrecourse debt, at fair value, respectively. As of December 31, 2025, we had nonrecourse debt-related borrowings of $9.7 billion and loans held for investment pledged as collateral for the nonrecourse debt of $10.0 billion, both recorded at fair value.
Refer to Note 9 - Nonrecourse Debt, at Fair Value, in the Notes to Consolidated Financial Statements for additional information.
Other Financing Lines of Credit
Reverse Mortgage Warehouse Facilities
As of December 31, 2025, we had $1.2 billion in warehouse lines of credit capacity collateralized by first and second lien mortgages, with a $737.4 million aggregate principal amount drawn through nine funding facility arrangements with eight active lenders. These facilities are generally structured as master repurchase agreements under which ownership of the related eligible loans is temporarily transferred to a lender, as participation arrangements pursuant to which the lender acquires a participation interest in the related eligible loans, or as loan and security agreements under which eligible loans are pledged to the lender as collateral. The funds advanced to us are generally repaid using the proceeds from the sale or securitization of the loans to, or pursuant to, programs sponsored by Ginnie Mae or private secondary market investors, although prior payment may be required based on, among other things, certain breaches of representations and warranties or other events of default.
When we draw on these facilities, we generally must transfer and/or pledge eligible mortgage loans to the lender and comply with various financial and other covenants. The facilities generally have one-year maturity terms. Under the facilities, mortgage loans are generally transferred and/or pledged at an advance rate that is less than the principal balance of the loans (the "haircut"), which serves as the primary credit enhancement for the lender. Since the advances to us are generally for less than 100%of the principal balance of the mortgage loans, we are required to use working capital to fund the remaining portion of the principal balance of the loans. Upon expiration, management believes it will either renew its existing facilities or obtain sufficient additional lines of credit. The interest rate on all outstanding facilities is the Secured Overnight Financing Rate, plus applicable margin.
The following table presents additional information about our warehouse facilities as of December 31, 2025 (in thousands):
| Reverse Warehouse Facilities | Maturity Date | Total Capacity | Outstanding Balance | |||||||||||||||||
| Committed | June 2026 - October 2026 | $ | 545,000 | $ | 467,815 | |||||||||||||||
| Uncommitted | March 2026 - December 2026 | 640,000 | 269,620 | |||||||||||||||||
| Total reverse warehouse facilities | $ | 1,185,000 | $ | 737,435 | ||||||||||||||||
With respect to each of our warehouse facilities, we pay certain up-front and/or ongoing fees which can be based on our utilization of the facility. In some instances, loans held by a lender for a contractual period exceeding 45 to 60 calendar days after we originate such loans are subject to additional fees and interest rates.
Certain of our warehouse facilities contain sub-limits for "wet" loans, which allow us to finance loans for a minimal period of time prior to delivery of the note collateral to the lender. "Wet" loans are loans for which the collateral custodian has not yet received the related loan documentation. "Dry" loans are loans for which all the loan documentation has been delivered to the collateral custodian. "Wet" loans are held by a lender for a contractual period, typically between five and ten business days, and are subject to a reduction in the advance amount.
Interest is generally payable at the time the loan is settled off the line or monthly in arrears, and the principal is payable upon receipt of loan sale or securitization proceeds, upon transfer of a loan to another line of credit, or upon maturity of the facility. The facilities may also require the outstanding principal to be repaid if a loan remains on the line longer than a contractual period of time, which generally ranges from 45 to 365 calendar days.
Loans financed under certain of our warehouse facilities are subject to changes in fair value and margin calls. The fair value of our loans depends on a variety of economic conditions, including interest rates and market demand for loans. Under certain facilities, if the fair value of the underlying loans declines below the outstanding asset balance on such loans or if the UPB of such loans falls below a threshold related to the repurchase price for such loans, we could be required to (i) repay cash in an amount that cures the margin deficit or (ii) supply additional eligible assets or rights as collateral for the underlying loans to compensate for the margin deficit. Certain warehouse facilities allow for the remittance of cash back to us if the value of the loan exceeds the principal balance.
Our warehouse facilities require our borrowing subsidiaries to comply with various customary operating and financial covenants, including, without limitation, the following tests:
•minimum tangible or adjusted tangible net worth;
•minimum liquidity or minimum liquid assets;
•maximum leverage ratio of total liabilities (which may include off-balance sheet liabilities) or indebtedness to tangible or adjusted tangible net worth; and
•minimum profitability.
In the event we fail to comply with the covenants contained in any of our warehouse lines of credit, or otherwise were to default under the terms of such agreements, we may be restricted from paying dividends, reducing or retiring our equity interests, making investments, or incurring more debt.
Other Secured Lines of Credit
As of December 31, 2025, we collectively had $495.0 million in additional secured facilities with $450.3 million aggregate principal amount drawn through credit agreements or master repurchase agreements with six funding facility arrangements and five active lenders. These facilities are secured by, among other things, eligible asset-backed securities, HECM MSR, and unsecuritized tails. In certain instances, these assets are subject to existing first lien warehouse financing, in which case these facilities (i.e., mezzanine facilities) are secured by the equity in these assets exceeding first lien warehouse financing. These facilities are generally structured as master repurchase agreements under which ownership of the related eligible assets is temporarily transferred to a lender. The funds advanced to us are generally repaid using the proceeds from the sale or securitization of the underlying assets or distribution from underlying securities, although prior payment may be required based on, among other things, certain breaches of representations and warranties or other events of default.
When we draw on these facilities, we generally must transfer and pledge eligible assets to the lender and comply with various financial and other covenants. Under the facilities, we generally transfer the assets at a haircut, which serves as theprimary credit enhancement for the lender.
The following table presents additional information about our other secured lines of credit as of December 31, 2025 (in thousands):
| Other Secured Lines of Credit | Maturity Date | Total Capacity | Outstanding Balance | |||||||||||||||||
| Committed |
Various(1)
|
$ | 454,991 | $ | 429,995 | |||||||||||||||
| Uncommitted | October 2026 | 40,000 | 20,269 | |||||||||||||||||
| Total other secured lines of credit | $ | 494,991 | $ | 450,264 | ||||||||||||||||
(1)These lines of credit are tied to the maturity date of the underlying mortgage related assets or HECM MSR that have been pledged as collateral.
We pay certain up-front and ongoing fees based on our utilization with respect to many of these facilities. We pay commitment fees based upon the limit of the facility and unused fees are paid if utilization falls below a certain amount.
Interest is generally payable at the time the loan or securities are settled off the line or monthly in arrears, and the principal is payable upon receipt of asset sale or securitization proceeds, upon principal distributions on the underlying pledged securities, upon transfer of assets to another line of credit, or upon maturity of the facility.
Under these facilities, we are generally required to comply with various customary operating and financial covenants. The financial covenants are similar to those under the warehouse lines of credit. The Company was in compliance with all financial covenants as of December 31, 2025.
Refer to Note 10 - Other Financing Lines of Credit in the Notes to Consolidated Financial Statements for additional information.
Notes Payable
Senior Notes Exchange
On November 5, 2020, FOAF issued $350 million aggregate principal amount of senior unsecured notes due November 15, 2025 (the "2025 Unsecured Notes"). On October 31, 2024 (the "Issue Date"), FOAF completed an exchange with certain existing noteholders of the 2025 Unsecured Notes. Existing noteholders, representing 97.892% of the aggregate principal amount outstanding of the 2025 Unsecured Notes, exchanged their respective 2025 Unsecured Notes in consideration for (i) the issuance of (a) $195,783,947 of FOAF's new 7.875% Senior Secured Notes due November 30, 2026, with FOAF's option to extend until November 30, 2027 (subsequently
amended as described below), (b) $146,793,000 of FOAF's new 10.000% Exchangeable Senior Secured Notes due November 30, 2029, and (ii) cash consideration of $856,555.
Senior Secured Notes
In accordance with the amendments as described below, the Senior Secured Notes will mature on November 30, 2026 (the "Scheduled Maturity Date"), provided that such Scheduled Maturity Date may be extended at the election of FOAF until November 30, 2027 (the "Extended Maturity Date"). The Senior Secured Notes bore interest at a rate of 7.875% per year until the first anniversary of the Issue Date and bear interest at a rate of 8.875% per year from the first anniversary of the Issue Date to the Scheduled Maturity Date. If FOAF elects the extension, the Senior Secured Notes will bear interest at a rate of 9.875% per year from the Scheduled Maturity Date until the Extended Maturity Date. FOAF pays interest semi-annually in arrears on May 30 and November 30 of each year, beginning on November 30, 2024.
In order to permit the transactions under the Repurchase Agreement, FOA Equity, FOAF, certain of their direct and indirect subsidiaries who act as guarantors, and a requisite majority of holders of FOAF's Secured Notes entered into certain amendments which provide that $60 million of the principal amount of the Senior Secured Notes will mature on the Scheduled Maturity Date, with FOAF retaining the option to extend the remaining principal balance to the Extended Maturity Date.
Pursuant to the Senior Secured Notes indenture, FOAF was required to partially prepay in cash, by means of a redemption, a portion of the outstanding principal amount of the Senior Secured Notes in November 2025, in an amount equal to $0.23 per $1.00 principal amount of Senior Secured Notes outstanding, or $45.0 million.
Exchangeable Secured Notes
The Exchangeable Secured Notes will mature on November 30, 2029 and bear interest at a rate of 10.000% per year, payable semi-annually in arrears on May 30 and November 30 of each year, beginning on November 30, 2024. The Exchangeable Secured Notes are exchangeable into shares of the Company's 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. Holders of the Exchangeable Secured Notes have the right to exchange all or any portion of their Exchangeable Secured Notes at their option, at any time prior to the close of business on the second scheduled trading day immediately preceding November 30, 2029. The Exchangeable Secured Notes will not be redeemable at FOAF's option at any time, except in certain limited circumstances.
2025 Unsecured Notes
The 2025 Unsecured Notes bore interest at a rate of 7.875% per year, payable semi-annually in arrears on May 15 and November 15. The 2025 Unsecured Notes were repaid and terminated in full in November 2025.
Convertible Notes
On August 4, 2025, the Company entered into convertible note purchase agreements with certain existing institutional investors, providing for the purchase of an aggregate of $40 million of a new series of unsecured convertible promissory notes. The Convertible Notes, funded and issued on August 4, 2025, mature on August 4, 2028, have a 0% coupon rate, and are convertible, in whole or in part, at the option of the Company or the holder into shares of Class A Common Stock at $18.00 per share for the first year following the issuance date or $19.00 per share starting one year from the issuance date, in each case, subject to customary adjustments. If neither the Company nor the holder elects to convert the Convertible Notes into shares of Class A Common Stock, the $40 million will be payable on the maturity date. The Company has elected to account for the Convertible Notes at fair value under the fair value option.
Other Promissory Notes
On August 4, 2025, the Company's two outstanding working capital promissory notes with BTO Urban Holdings L.L.C. and Libman Family Holdings, LLC ("LFH"), which are deemed affiliates of the Company, were repaid and terminated in full.
Additionally, on August 4, 2025, FAR entered into an unsecured revolving working capital promissory note with LFH (the "LFH Promissory Note"), which provides for an uncommitted revolving facility of up to $20.0 million. The LFH Promissory Note accrues interest monthly at a rate of 10% per annum and matures on August 4, 2026.
As of December 31, 2025, the Company was in compliance with all required covenants of our notes payable.
Refer to Note 13 - Notes Payable and Note 23 - Related Party Transactions in the Notes to Consolidated Financial Statements for additional information.
Contractual Obligations and Commitments
The following table presents our contractual obligations as of December 31, 2025 (in thousands):
| Total | Less than 1 year |
1 - 3 years |
3 - 5 years |
More than 5 years | |||||||||||||||||||||||||
| Contractual cash obligations: | |||||||||||||||||||||||||||||
| Nonrecourse debt | $ | 9,960,524 | $ | 2,716,708 | $ | 2,682,753 | $ | 936,031 | $ | 3,625,032 | |||||||||||||||||||
| Warehouse lines of credit | 737,435 | 737,435 | - | - | - | ||||||||||||||||||||||||
| Other secured lines of credit | 450,264 | 23,768 | 71,504 | - | 354,992 | ||||||||||||||||||||||||
|
Notes payable(1)
|
357,547 | 170,754 | 40,000 | 146,793 | - | ||||||||||||||||||||||||
| Repurchase Agreement | 40,595 | 40,595 | - | - | - | ||||||||||||||||||||||||
| Operating leases | 32,468 | 5,462 | 8,816 | 6,687 | 11,503 | ||||||||||||||||||||||||
| Total | $ | 11,578,833 | $ | 3,694,722 | $ | 2,803,073 | $ | 1,089,511 | $ | 3,991,527 | |||||||||||||||||||
(1) Amounts exclude the unamortized debt discount and issuance costs and the fair value adjustments related to the Convertible Notes. In addition, as discussed above and in Note 13 - Notes Payable in the Notes to Consolidated Financial Statements, the Company has the option to extend a portion of the $150.8 million principal balance of the Senior Secured Notes to November 30, 2027.
In addition to the contractual obligations above, we have also been involved in securitizations of HECM loans that were structured as secured borrowings. These structures resulted in us recording the securitized loans in the Consolidated Statementsof Financial Condition and recognizing the asset-backed certificates acquired by third parties as HMBS related obligations. The timing of the principal payments on this nonrecourse debt depends on the payments received on the underlying mortgage loans and the liquidation of real estate owned properties. The outstanding principal balance of loans held for investment, subject to HMBS related obligations, was $18.0 billion as of December 31, 2025.
The Company's TRA obligation will require payments to be made that may be significant and are not reflected in the contractual obligations table above.
We are also required to fund borrower draws on certain loans. These unfunded commitments are not included in the table above. Refer to Note 15 - Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information.
Critical Accounting Estimates
Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions, and other subjective assessments. In particular, we have identified several policies that, due to the judgments, estimates, and assumptions inherent in those policies, are critical to an understanding of the consolidated financial statements. These policies relate to fair value measurements, particularly those determined to be Level 3 as discussed in Note 5 - Fair Value in the Notes to Consolidated Financial Statements. We believe that the judgments, estimates, and assumptions used in the preparation of the consolidated financial statements are appropriate given the factual circumstances at the time. However, given the sensitivity of the consolidated financial statements to these critical accounting policies, the use of other judgments, estimates, and assumptions could result in material differences in our results of operations or financial condition. Fair value measurements considered to be Level 3, representing estimated values based on significant unobservable inputs, include (i) the valuation of loans held for investment, (ii) the valuation of HMBS related obligations, and (iii) the valuation of nonrecourse debt. For the impact of changes in estimates on these fair value measurements, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Fair Value Measurements
Loans Held for Investment, at Fair Value
The Company elected the fair value option for all loans held for investment. Loans held for investment, at fair value, include originated or purchased reverse mortgage loans that are expected to be securitized in the secondary market,
reverse mortgage loans that were previously securitized into either an HMBS or a private securitization, and reverse mortgage loans that were purchased out of Ginnie Mae securitization pools.
We have determined that HECM loans transferred under the current Ginnie Mae HMBS program do not meet the requirements for sale accounting and are not derecognized upon date of transfer. The Ginnie Mae HMBS program includes certain terms that do not meet the participating interest requirements and require or provide an option for the Company to reacquire the loans prior to maturity. Due to these terms, the transfer of the loans does not meet the requirements of sale accounting. As a result, the Company accounts for HECM loans transferred into HMBS as secured borrowings and continues to recognize the loans as held for investment, subject to HMBS related obligations, along with the corresponding liability for the HMBS related obligations.
We estimate the fair value of these loans using a process that combines the use of a DCF model and analysis of current market data. The cash flow assumptions and prepayment and repayment assumptions used in the model are based on various factors. Refer to Note 5 - Fair Value in the Notes to Consolidated Financial Statements for additional information regarding the key inputs, assumptions, and valuation techniques utilized to measure fair value.
HMBS Related Obligations, at Fair Value
The Company elected the fair value option for all HMBS related obligations. This liability includes the Company's obligation to repay the secured borrowing from the FHA-insured HECM cash flows and the obligations as issuer and servicer of the HECM loans and HMBS. Monthly cash flows generated from the HECM loans are used to service the outstanding HMBS.
As an issuer of HMBS, the Company is obligated to service the HECM loan and associated HMBS, which includes funding the repurchase of the HECM loans or pass through of cash due to the holder of the beneficial interests in the Ginnie Mae HMBS upon maturity events and certain funding obligations related to monthly guarantee fees, mortgage insurance proceeds, and partial month interest.
We estimate the fair value of these obligations using a process that combines the use of a DCF model and analysis of current market data. The cash flow assumptions and prepayment and repayment assumptions used in the model are based on various factors. Refer to Note 5 - Fair Value in the Notes to Consolidated Financial Statements for additional information regarding the key inputs, assumptions, and valuation techniques utilized to measure fair value.
Nonrecourse Debt, at Fair Value
The Company elected the fair value option for all nonrecourse debt. We securitize and issue interests in pools of loans that are not eligible for the Ginnie Mae securitization program. These securitizations primarily consist of non-agency reverse mortgage loans and HECM buyouts. The transactions provide investors with the ability to invest in a pool of reverse mortgage loans secured by residential properties. The transactions provide the Company with access to liquidity for these assets, ongoing servicing fees, and potential residual returns. The principal and interest on the outstanding debt is paid using the cash flows from the underlying reverse mortgage loans, which serve as collateral for the debt.
We estimate the fair value of this debt using a process that combines the use of a DCF model and analysis of current market data. The cash flow assumptions and prepayment and repayment assumptions used in the model are based on various factors. Refer to Note 5 - Fair Value in the Notes to Consolidated Financial Statements for additional information regarding the key inputs, assumptions, and valuation techniques utilized to measure fair value.
We use various internal financial models that use market participant data to value these loans. These models are complex and use asset specific collateral data and market inputs for interest and discount rates. In addition, the modeling requirements of loans are complex because of the high number of variables that drive cash flows associated with the loans. 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. On a quarterly basis, we obtain external market valuations from independent third-party valuation experts in order to validate the reasonableness of our internal valuation.
New Accounting Pronouncements
Refer to Note 2 - Summary of Significant Accounting Policies within the Notes to Consolidated Financial Statements for a summary of recently adopted and recently issued accounting standards and their related effects or anticipated effects in the consolidated financial statements.
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