Finance of America Companies Inc

Previous wording

FoA was incorporated in Delaware on October 9, 2020 and became a publicly-traded company on the New York Stock Exchange in April 2021, with trading beginning on April 5, 2021 under the ticker symbol “FOA.” FoA has a controlling financial interest in FoA Equity. FoA Equity owns all of the outstanding equity interests in Finance of America Funding LLC (“FOAF”). FOAF wholly owns Finance of America Holdings LLC (“FAH”) and Incenter LLC (“Incenter” and collectively, with FoA Equity, FOAF, and FAH, known as “holding company subsidiaries”). FAH is the parent of a lending company, Finance of America Reverse LLC (“FAR”), while Incenter is the parent of operating service companies (together with FAR, the “operating subsidiaries”) that provide capital markets and portfolio management capabilities such as secondary markets advisory services, mortgage trade brokerage, and capital management services.

Current wording

FoA was incorporated in Delaware on October 9, 2020 and became a publicly-traded company on the New York Stock Exchange in April 2021, with trading beginning on April 5, 2021 under the ticker symbol “FOA.” FoA has a controlling financial interest in FoA Equity. FoA Equity owns all of the outstanding equity interests in Finance of America Funding LLC (“FOAF”). FOAF wholly owns Finance of America Holdings LLC (“FAH”) and Incenter LLC (“Incenter” and collectively, with FoA Equity, FOAF, and FAH, known as “holding company subsidiaries”). FAH is the parent of a lending company, Finance of America Reverse LLC (“FAR”), while Incenter is the parent of operating service companies (together with FAR, the “operating subsidiaries”) that provide capital markets and portfolio management capabilities.

Previous wording

Through FAR, the Company originates, acquires, and services home equity conversion mortgages (“HECM”), which are originated pursuant to the Federal Housing Administration (the “FHA”) HECM program and are insured by the FHA, and non-agency reverse mortgage loans and hybrid mortgage loans (which combine features of both traditional residential mortgage loans and reverse mortgage loans), which are not insured by the FHA. We originate loans through a retail channel (consisting primarily of a centralized retail platform) and a third-party originator (“TPO”) channel (consisting primarily of a network of mortgage brokers). We have launched several non-agency reverse mortgage loan products (including our hybrid mortgage loan product) to serve the U.S. senior population and have plans for additional innovative products to satisfy this vast and largely underserved market. We also service the loans that we originate, contracting with various third-party subservicers for the subservicing of our loans. We are a leader in this market and we are focused on developing and offering products for borrowers with interest in using the reverse mortgage loan product as a retirement planning tool.

Current wording

Through FAR, the Company originates, acquires, and services home equity conversion mortgages (“HECM”), which are originated pursuant to the Federal Housing Administration (the “FHA”) HECM program and are insured by the FHA, and non-agency reverse mortgage loans, which are not insured by the FHA. We originate loans through a retail channel (consisting primarily of a centralized retail platform) and a third-party originator (“TPO”) channel (consisting primarily of a network of mortgage brokers). We have launched several non-agency reverse mortgage loan products to serve the U.S. senior population and have plans for additional innovative products to satisfy this vast and largely underserved market. We also service the loans that we originate, contracting with various third-party subservicers for the subservicing of our loans. We are a leader in this market and we are focused on developing and offering products for borrowers with interest in using the reverse mortgage loan product as a retirement planning tool.

Previous wording

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 into Home Equity Conversion Mortgage-Backed Securities (“HMBS”), which the Government National Mortgage Association (“Ginnie Mae”) guarantees, and sell the HMBS in the secondary market while retaining the rights to service the HECM. When HECM are not eligible for securitization into HMBS or are required to be bought out of a pool of HECM previously securitized into an HMBS, we securitize them into privately placed mortgage-backed securities or hold them for investment. We both securitize non-agency reverse mortgage loans into mortgage-backed securities sold to investors and sell them as whole loans to investors. We may also decide to strategically hold certain non-agency reverse mortgage loans for investment. The capabilities provided by the Portfolio Management segment allowed us to complete issuances and sales of mortgage-backed securities backed by our loan products in 2023 and the first quarter of 2024, demonstrating 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.

Current wording

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 into Home Equity Conversion Mortgage-Backed Securities (“HMBS”), which the Government National Mortgage Association (“Ginnie Mae”) guarantees, and sell the HMBS in the secondary market while retaining the rights to service the HECM. When HECM are not eligible for securitization into HMBS or are required to be bought out of a pool of HECM previously securitized into an HMBS, we securitize them into privately placed mortgage-backed securities or hold them for investment. We both securitize non-agency reverse mortgage loans into mortgage-backed securities sold to investors and sell them as whole loans to investors. We may also decide to strategically hold certain non-agency reverse mortgage loans for investment. The capabilities provided by the Portfolio Management segment allowed us to complete several issuances and sales of mortgage-backed securities backed by our loan products in 2023 and the first half of 2024, demonstrating 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.

Previous wording

See Note 1 - Organization and Description of Business in the Notes to Condensed Consolidated Financial Statements for discussion of recent actions affecting the overall go-forward business operations, including details regarding the series of transactions entered into in order to transform our business from a vertically integrated, diversified lending and complementary services platform to a modern retirement solutions platform.

Current wording

See Note 1 - Organization and Description of Business in the Notes to Condensed Consolidated Financial Statements for discussion of recent actions affecting the overall go-forward business operations, including details regarding the series of transactions entered into in order to transform our business from a vertically integrated lending and complementary services platform to a modern retirement solutions platform.

Previous wording

In connection with the transformation of our business from a vertically integrated, diversified lending and complementary services platform to a modern retirement solutions platform, we realigned our business to operate through two reportable segments: Retirement Solutions and Portfolio Management. See Note 1 - Organization and Description of Business in the Notes to Condensed Consolidated Financial Statements for more information about the realignment of our reportable segments.

Current wording

In connection with the transformation of our business from a vertically integrated lending and complementary services platform to a modern retirement solutions platform, we realigned our business to operate through two reportable segments: Retirement Solutions and Portfolio Management. See Note 1 - Organization and Description of Business in the Notes to Condensed Consolidated Financial Statements for more information about the realignment of our reportable segments.

Previous wording

The mission of our Retirement Solutions segment is to help senior homeowners achieve their financial goals in retirement. This segment includes all loan origination activity for the Company, including the origination of HECM, non-agency reverse mortgage loans, and hybrid mortgage loans through both the retail and wholesale/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.

Current wording

The mission of our Retirement Solutions segment is to help senior homeowners achieve their financial goals in retirement. This segment includes all loan origination activity for the Company, including the origination of HECM and non-agency reverse mortgage loans through both the retail and wholesale/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.

Previous wording

While Finance of America Mortgage LLC (“FAM”), an indirect subsidiary of the Company, has sold certain operational assets of its home improvement lending business and has substantially completed the process of winding down the operations of the home improvement lending business as of March 31, 2024, the operations of the home improvement lending business are reported as part of the Company’s Retirement Solutions segment rather than as discontinued operations. This is because the wind-down of the home improvement lending business is not considered by the Company to be a strategic shift that has or will have a major effect on our operations and financial results.

Current wording

Finance of America Mortgage LLC (“FAM”), an indirect subsidiary of the Company, has sold the operational assets of its home improvement lending business and substantially completed the process of winding down the operations of the home improvement lending business as of March 31, 2024. However, the previous operations of the home improvement lending business are reported as part of the Company’s Retirement Solutions segment rather than as discontinued operations. This is because the wind-down of the home improvement lending business was not considered by the Company to be a strategic shift that has or will have a major effect on our operations and financial results.

Previous wording

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 by our Financial Industry Regulatory Authority registered broker-dealer, allows us to innovate and manage risk through better price and product discovery. Given our scale, we are able to work directly with investors and, where appropriate, retain assets on the balance sheet for attractive return opportunities. These retained investments are a source of growing and recurring interest and servicing income categorized within its net fair value gains. The Portfolio Management segment primarily generates revenue from the sale or securitization of loans and the fair value gains on portfolio assets.

Current wording

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 by our Financial Industry Regulatory Authority registered broker-dealer, allows us to innovate and manage risk through better price and product discovery. Given our scale, we are able to work directly with investors and, where appropriate, retain assets on 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.

Previous wording

During the fourth quarter of 2022 and calendar year 2023, the Company entered into a series of transactions, discontinuing certain business lines while enhancing our reverse mortgage loan business, in order to transform our business from a vertically integrated, diversified lending and complementary services platform to a modern retirement solutions platform. This transformation included the wind-down of the previously reported Mortgage Originations segment, other than the home improvement lending business, and sale of the previously reported Commercial Originations and Lender Services segments, with the exception of its Incenter Solutions LLC operating service subsidiary. This constitutes a strategic shift that has or will have a major effect on our operations and financial results. As such, starting with the first fiscal quarter of 2023, results of our previously reported Mortgage Originations, Commercial Originations, and Lender Services segments, excluding the home improvement lending business and Incenter Solutions LLC, are reported as discontinued operations for all periods presented in accordance with Accounting Standards Codification 205, Presentation of Financial Statements. During the third fiscal quarter of 2023, the Company sold certain operational assets of the home improvement lending business and began the process of winding down the operations of the home improvement lending business, which was substantially complete as of March 31, 2024. Also during the third fiscal quarter of 2023, the Company ceased the operations of Incenter Solutions LLC. The wind-down of Incenter Solutions LLC was substantially complete by the end of December 2023. The Company’s wind-down of the home improvement lending business and Incenter Solutions LLC is not considered by the Company to be a strategic shift that has or will have a major effect on our operations and financial results. Therefore, the operations of the home improvement lending business and Incenter Solutions LLC are not reported as discontinued operations. Refer to Note 1 - Organization and Description of Business and Note 4 - Discontinued Operationsin the Notes to Condensed Consolidated Financial Statements for additional information.

Current wording

During the fourth quarter of 2022 and calendar year 2023, the Company entered into a series of transactions, discontinuing certain business lines while enhancing our reverse mortgage loan business, in order to transform our business from a vertically integrated lending and complementary services platform to a modern retirement solutions platform. This transformation included the wind-down of the previously reported Mortgage Originations segment, other than the home improvement lending business, and sale of the previously reported Commercial Originations and Lender Services segments, with the exception of its Incenter Solutions LLC operating service subsidiary. This constitutes a strategic shift that has or will have a major effect on our operations and financial results. As such, starting with the first fiscal quarter of 2023, results of our previously reported Mortgage Originations, Commercial Originations, and Lender Services segments, excluding the home improvement lending business and Incenter Solutions LLC, are reported as discontinued operations for all periods presented in accordance with Accounting Standards Codification 205, Presentation of Financial Statements. During the third fiscal quarter of 2023, the Company sold the operational assets of the home improvement lending business and began the process of winding down the operations of the home improvement lending business, which was substantially complete as of March 31, 2024. Also during the third fiscal quarter of 2023, the Company ceased the operations of Incenter Solutions LLC. The wind-down of Incenter Solutions LLC was substantially complete by the end of December 2023. The Company’s wind-down of the home improvement lending business and Incenter Solutions LLC was not considered by the Company to be a strategic shift that has or will have a major effect on our operations and financial results. Therefore, the previous operations of the home improvement lending business and Incenter Solutions LLC are not reported as discontinued operations. Refer to Note 1 - Organization and Description of Business and Note 4 - Discontinued Operationsin the Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

•Gain (loss) on sale and other income from loans held for sale, net, improved $12.5 million primarily as a result of minimal activity for the three months ended March 31, 2024 compared to fair value losses on commercial loans held for sale in the 2023 period.

Current wording

Gain (loss) on sale and other income from loans held for sale, net

Previous wording

The following tables present selected financial data for the three months ended March 31, 2024 and 2023.

Current wording

The following tables present selected financial data for the three and six months ended June 30, 2024 and 2023.

Previous wording

The following table provides an analysis of all components of NIM (in thousands):

Current wording

The following table provides an analysis of all components of net interest income (in thousands):

Previous wording

Net income (loss) from continuing operations before income taxes decreased $73.8 million or 127.2% primarily as a result of the following:

Current wording

Net loss from continuing operations before income taxes decreased $220.1 million or 98.3% primarily as a result of the following:

Previous wording

•Fee income decreased $0.1 million or 1.8% primarily related to lower mortgage servicing rights (“MSR”) servicing fee income due to a much lower MSR portfolio balance for the three months ended March 31, 2024 compared to the 2023 period. This was mostly offset by higher loan origination fees through our retail platform acquired from AAG/Bloom.

Current wording

•Fee income decreased $5.9 million due to fees associated with the previous operations of the home improvement lending business, as well as lower mortgage servicing rights (“MSR”) servicing fee income due to a much lower MSR portfolio balance for the three months ended June 30, 2024 compared to the 2023 period.

Previous wording

•Net fair value gains on loans and related obligations decreased $98.9 million primarily as a result of lower net fair value gains from changes in market inputs or model assumptions compared to the 2023 period. The lower net fair value gains from changes in market inputs or model assumptions was primarily related to market interest rate and yield volatility, which generated lower net fair value gains during the three months ended March 31, 2024 compared to the 2023 period. See Note 6 - Fair Value within the Notes to Condensed Consolidated Financial Statements for additional information on assumptions impacting the value of our loans held for investment. The $1.2 million increase in net interest margin included in net fair value gains on mortgage loans and the $6.3 million increase in servicing related income, net, during the three months ended March 31, 2024 compared to the 2023 period was due to increased servicing portfolio size from the HECM portfolio acquired from AAG/Bloom, which was mostly offset by fair value changes from model amortization of $7.3 million.

Current wording

•Net fair value changes on loans and related obligations improved $108.9 million primarily as a result of improved fair value changes from market inputs or model assumptions compared to the 2023 period. The improvement in net fair value changes from market inputs or model assumptions was primarily related to market interest rate and yield volatility, which generated net fair value gains during the six months ended June 30, 2024 compared to losses during the 2023 period. See Note 6 - Fair Value within the Notes to Condensed Consolidated Financial Statements for additional information on assumptions impacting the value of our loans held for investment. The $11.8 million increase in gain on securitization of HECM tails, net, during the six months ended June 30, 2024 compared to the 2023 period was due to higher marks from our tail securitizations and our increased servicing portfolio size from the HECM portfolio acquired from AAG/Bloom.

Previous wording

The Retirement Solutions segment recognized $39.7 million in net origination gains on originations of $423.5 million of reverse mortgage loans for the three months ended March 31, 2024 compared to $24.5 million in net origination gains on originations of $311.4 million of reverse mortgage loans for the comparable 2023 period. The increase in net origination gains in the Retirement Solutions segment was due to higher reverse mortgage loan origination volumes, as well as higher margins associated with the increase in volumes from our retail platform acquired from AAG/Bloom.

Current wording

The Retirement Solutions segment recognized $79.9 million in net origination gains on loan originations of $870.0 million for the six months ended June 30, 2024 compared to $57.4 million in net origination gains on loan originations of $709.1 million for the comparable 2023 period. The increase in net origination gains in the Retirement Solutions segment was due both to higher loan origination volumes and higher margins associated with the increase in volumes from our retail platform acquired from AAG/Bloom.

Previous wording

•Total expenses increased $7.5 million or 9.0% primarily due to an increase in marketing and advertising expenses within our retail platform acquired from AAG/Bloom. This was partially offset by a decrease in salaries, benefits, and related expenses due to our lower average onshore headcount and cost-cutting measures associated with the restructuring of the business.

Current wording

•Total expenses decreased $17.4 million or 9.0% primarily due to decreases in salaries, benefits, and related expenses as well as decreases in general and administrative expenses due to a reduction in average headcount and continued cost-cutting measures associated with the restructuring of the business. This was partially offset by an increase in marketing and advertising expenses within our retail loan originations platform acquired from AAG/Bloom.

Previous wording

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 three months ended March 31, 2024 and 2023. Expenses for enterprise-level general overhead, such as executive administration, are not allocated to the business segments.

Current wording

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 three and six months ended June 30, 2024 and 2023. Expenses for enterprise-level general overhead, such as executive administration, are not allocated to the business segments.

Previous wording

Our Retirement Solutions segment generates its revenues primarily from the origination of reverse mortgage loans, including HECM insured by FHA and non-agency reverse mortgage loans. Revenues from our Retirement Solutions segment include both our initial estimate of net origination gains from reverse mortgage loans, which is determined by utilizing quoted prices on similar securities or internally-developed models utilizing observable market inputs, in addition to fees earned at the time of origination of the associated loans. We elect to account for all originated loans at fair value. The loans are immediately transferred to our Portfolio Management segment, and any future fair value adjustments, including interest earned, on these originated loans are reflected in revenues of our Portfolio Management segment until final disposition.

Current wording

Our Retirement Solutions segment generates its revenues primarily from the origination of reverse mortgage loans, including HECM insured by FHA and non-agency reverse mortgage loans. Revenues from our Retirement Solutions segment include both our initial estimate of net origination gains from originated loans, which is determined by utilizing quoted prices on similar securities or internally-developed models utilizing observable market inputs, in addition to fees earned at the time of origination of the associated loans. We elect to account for all originated loans at fair value. The loans are immediately transferred to our Portfolio Management segment, and any future fair value adjustments, including interest earned, on these originated loans are reflected in revenues of our Portfolio Management segment until final disposition.

Previous wording

On August 31, 2023, FAM entered into an agreement to sell certain operational assets of the home improvement lending business. This transaction closed on September 15, 2023. In connection with such transaction, the Company began the process of winding down the operations of the home improvement lending business, which was substantially complete as of March 31, 2024. As of March 31, 2024, there were no loans in the home improvement lending pipeline. As such, there will be no home improvement funding going forward. The wind-down of the home improvement lending business is not considered by the Company to be a strategic shift that has or will have a major effect on our operations and financial results. Therefore, the operations of the home improvement lending business are reported as part of the Company’s Retirement Solutions segment rather than as discontinued operations.

Current wording

On August 31, 2023, FAM entered into an agreement to sell the operational assets of the home improvement lending business. This transaction closed on September 15, 2023. In connection with such transaction, the Company began the process of winding down the operations of the home improvement lending business, which was substantially complete as of March 31, 2024. As of March 31, 2024, there were no loans in the home improvement lending pipeline. The wind-down of the home improvement lending business was not considered by the Company to be a strategic shift that has or will have a major effect on our operations and financial results. Therefore, the previous operations of the home improvement lending business are reported as part of the Company’s Retirement Solutions segment rather than as discontinued operations.

Previous wording

•Net origination gains increased $15.2 million or 62.0% as a result of higher reverse mortgage loan origination volumes, as well as higher margins associated with the increase in volumes from our retail platform acquired from AAG/Bloom. We originated $423.5 million of reverse mortgage loans for the three months ended March 31, 2024, an increase of 36.0%, compared to $311.4 million for the comparable 2023 period. During the three months ended March 31, 2024, the weighted average margin on reverse mortgage loan production was 9.37% compared to 7.86% in 2023, an increase of 1.51% due primarily to the increase in retail production mix associated with the onboarding of our retail platform acquired from AAG/Bloom.

Current wording

•Net origination gains increased $22.5 million or 39.2% as a result of higher reverse mortgage loan origination volumes, as well as higher margins associated with the increase in volumes from our retail platform acquired from AAG/Bloom. We originated $870.0 million of reverse mortgage loans for the six months ended June 30, 2024, an increase of 22.7%, compared to $709.1 million for the comparable 2023 period. During the six months ended June 30, 2024, the weighted average margin on reverse mortgage loan production was 9.19% compared to 8.10% in 2023, an increase of 1.09% due primarily to the increase in retail production mix associated with the onboarding of our retail platform acquired from AAG/Bloom.

Previous wording

•Fee income increased $2.9 million due to loan origination fees generated through our retail platform acquired from AAG/Bloom.

Current wording

•Fee income decreased $0.2 million primarily due to fees associated with the previous operations of the home improvement lending business, partially offset by higher reverse loan origination fees generated through our retail platform acquired from AAG/Bloom.

Previous wording

•Marketing and advertising expenses increased $6.6 million or 359.5% primarily within our retail platform acquired from AAG/Bloom.

Current wording

•Marketing and advertising expenses increased $2.0 million or 23.0% primarily within our retail loan originations platform acquired from AAG/Bloom.

Previous wording

•Total salaries, benefits, and related expenses increased $3.4 million or 19.2% primarily due to an increase in average headcount for the three months ended March 31, 2024 at 535 compared to 364 for the 2023 period related to the onboarding of our retail platform acquired from AAG/Bloom, partially offset by cost-cutting measures associated with the restructuring of the business for the three months ended March 31, 2024 when compared to the 2023 period.

Current wording

•Total salaries, benefits, and related expenses decreased $2.0 million or 4.4% primarily due to a decrease in average headcount for the six months ended June 30, 2024 at 515 compared to 524 for the 2023 period related to continued cost-cutting measures associated with the restructuring of the business, partially offset by increased expenses associated with the onboarding of our retail loan originations platform acquired from AAG/Bloom in the 2023 period.

Previous wording

•General and administrative expenses increased $2.2 million or 44.0% primarily due to an increase in communications and data processing expenses and other general and administrative expenses from the onboarded infrastructure of our retail platform acquired from AAG/Bloom, partially offset by cost-cutting measures associated with the restructuring of the business for the three months ended March 31, 2024 when compared to the 2023 period.

Current wording

•General and administrative expenses decreased $0.4 million or 3.1% primarily due to continued cost-cutting measures associated with the restructuring of the business, partially offset by an increase in communications and data processing expenses and other general and administrative expenses from the onboarded infrastructure of our retail loan originations platform acquired from AAG/Bloom for the six months ended June 30, 2024 when compared to the 2023 period.

Previous wording

Net fair value gains and losses in our Portfolio Management segment include fair value adjustments primarily related to the following assets and liabilities:

Current wording

Net fair value changes in our Portfolio Management segment include fair value adjustments primarily related to the following assets and liabilities:

Previous wording

(1) Net fair value gains and losses in our Portfolio Management segment for loans held for sale only include fair value adjustments related to loans originated.

Current wording

(1) Net fair value changes in our Portfolio Management segment for loans held for sale only include fair value adjustments related to loans originated.

Previous wording

Certain 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. Any changes in fair value on these financial instruments are recorded as a gain or loss in net fair value gains on loans and related obligations in the Condensed Consolidated Statements of Operations.

Current wording

Certain 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. Any changes in fair value on these financial instruments are recorded in net fair value changes on loans and related obligations, with changes in fair value due to portfolio runoff and realization of modeled income and expenses being recorded in fair value changes from model amortization in the Condensed Consolidated Statements of Operations, and other fair value changes being recorded in fair value changes from market inputs or model assumptions in the Condensed Consolidated Statements of Operations. The interest recognized on these financial instruments are recorded in interest income or interest expense in the Condensed Consolidated Statements of Operations.

Previous wording

The following table provides an analysis of all components of portfolio NIM (in thousands):

Current wording

The following table provides an analysis of all components of net portfolio interest income (in thousands):

Previous wording

•Net fair value gains on loans and related obligations decreased $83.8 million primarily as a result of lower net fair value gains from changes in market inputs or model assumptions compared to the 2023 period, partially offset by higher net origination gains due to increased funded volume and improved margins in our Retirement Solutions segment. The lower net fair value gains from changes in market inputs or model assumptions was primarily related to market interest rate and yield volatility, which generated lower net fair value gains during the three months ended March 31, 2024 compared to the 2023 period. See Note 6 - Fair Value within the Notes to Condensed Consolidated Financial Statements for additional information on assumptions impacting the value of our loans held for investment. The $1.2 million increase in net interest margin included in net fair value gains on mortgage loans and the $6.3 million increase in servicing related income, net, during the three months ended March 31, 2024 compared to the 2023 period was due to increased servicing portfolio size from the HECM portfolio acquired from AAG/Bloom, which was mostly offset by fair value changes from model amortization of $7.3 million.

Current wording

•Net fair value changes on loans and related obligations improved $86.4 million primarily as a result of improved fair value changes from market inputs or model assumptions compared to the 2023 period. The improvement in fair value changes from market inputs or model assumptions was primarily related to market interest rate and yield volatility, which generated net fair value gains during the six months ended June 30, 2024 compared to losses during the 2023 period. See Note 6 - Fair Value within the Notes to Condensed Consolidated Financial Statements for additional information on assumptions impacting the value of our loans held for investment. The $11.8 million increase in gain on securitization of HECM tails, net, during the six months ended June 30, 2024 compared to the 2023 period was due to higher marks from our tail securitizations and our increased servicing portfolio size from the HECM portfolio acquired from AAG/Bloom.

Previous wording

•Salaries, benefits, and related expenses decreased $3.1 million primarily due to a decrease in average headcount and cost-cutting measures associated with the restructuring of the businessfor the three months ended March 31, 2024 compared to the 2023 period. Average headcount was 69 for the three months ended March 31, 2024 compared to 80 for the 2023 period.

Current wording

•Salaries, benefits, and related expenses decreased $1.6 million or 29.0%primarily due to adecrease in average headcount and continued cost-cutting measures associated with the restructuring of the business during the three months ended June 30, 2024 compared to the 2023 period. Average headcount was 66 for the three months ended June 30, 2024 compared to 73 for the 2023 period.

Previous wording

•Loan servicing expenses increased $1.6 million due to the increase in size of our HECM portfolio acquired from AAG/Bloom.

Current wording

•Loan servicing expenses increased $0.6 million for the six months ended June 30, 2024 compared to the 2023 period due to the increase in average size of our HECM portfolio after the acquisition of the AAG/Bloom HECM portfolio on March 31, 2023, partially offset by the wind-down of business lines that are not part of our modern retirement solutions platform.

Previous wording

•Fee income decreased $3.0 million related to the decline in services provided by the Company’s operational fulfillment services team. As of September 30, 2023, the Company ceased the operations of the offshore fulfillment services team.

Current wording

•Fee income decreased $2.0 million related to the decline in services provided by the Company’s operational fulfillment services team. As of September 30, 2023, the Company ceased the operations of the offshore fulfillment services team.

Previous wording

•Salaries, benefits, and related expenses, net of allocations, decreased $2.1 million or 14.3% primarily due to a decrease in salaries and bonuses of $7.5 million for the three months ended March 31, 2024 compared to the 2023 period as the Company focused on cost-cutting initiatives related to the restructuring of the Company’s strategic vision. Compared to 2023, average onshore headcount declined by 40.5% from 467 for the three months ended March 31, 2023 to 278 for the three months ended March 31, 2024. The decrease in average onshore headcount was primarily related to groups supporting our operating segments. These reductions were partially offset by a $5.9 million decrease in shared services allocations due to the reduction in supported business in the three months ended March 31, 2024.

Current wording

•Salaries, benefits, and related expenses, net of shared services allocations, decreased $9.1 million or 47.2% due to decreases in salaries and bonuses and other salary related expenses of $8.1 million and $2.2 million, respectively, for the three months ended June 30, 2024 compared to the 2023 period as the Company continued our focus on cost-cutting initiatives related to the restructuring of the business. Compared to 2023, average onshore headcount declined by 38.8% from 420 for the three months ended June 30, 2023 to 257 for the three months ended June 30, 2024. These reductions were partially offset by a $1.2 million decrease in shared services allocations due to the reduction in supported business lines in the three months ended June 30, 2024.

Previous wording

•General and administrative expenses, net of shared services allocations, decreased $7.1 million or 53.1% due to a $7.6 million decrease in communications and data processing and other expenses and a $0.4 million decrease in professional and consulting fees. These reductions are due to general cost-cutting measures associated with the restructuring of the business. This was partially offset by a $0.9 million decrease in shared services allocations due to the reduction in supported business lines in the three months ended March 31, 2024.

Current wording

•General and administrative expenses, net of shared services allocations, decreased $11.5 million or 48.3% due to a $13.4 million decrease in communications and data processing and other expenses and a $1.3 million decrease in professional and consulting fees. These reductions are due to continued cost-cutting measures associated with the restructuring of the business. This was partially offset by a $3.2 million decrease in shared services allocations due to the reduction in supported business lines in the six months ended June 30, 2024.

Previous wording

These non-GAAP financial measures should not be considered as an alternative to net income (loss), operating cash flows, or any other performance measures determined in accordance with U.S. GAAP. Adjusted Net Loss, Adjusted EBITDA, and Adjusted Loss per Share 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.

Current wording

These non-GAAP financial measures should not be considered as an alternative to net loss, operating cash flows, or any other performance measures determined in accordance with U.S. GAAP. Adjusted Net Loss, Adjusted EBITDA, and Adjusted Loss per Share 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.

Previous wording

We define Adjusted Net Loss as consolidated net income (loss) from continuing operations adjusted for:

Current wording

We define Adjusted Net Loss as consolidated net loss from continuing operations adjusted for:

Previous wording

Changes in fair value of loans and securities held for investment and related obligations due to assumption changes, deferred purchase price obligations (including earnouts and Tax Receivable Agreements (“TRA”) obligation), contingent earnout, warrant liability, and minority investments

Current wording

Changes in fair value of loans and securities held for investment and related obligations due to market inputs or model assumptions, deferred purchase price obligations (including earnouts and Tax Receivable Agreements (“TRA”) obligation), contingent earnout, warrant liability, and minority investments

Previous wording

(2) Amortization of intangibles and impairment of other assets -Includes amortization of intangibles recognized from various business combinations and impairment of certain other long-lived assets.

Current wording

Amortization or impairment of intangibles and impairment of certain other long-lived assets

Previous wording

(3)Equity-based compensation -Includes equity-based compensation for Replacement Restricted Stock Units and Earnout Right Restricted Stock Units, which are funded 100% by existing non-controlling shareholders or outstanding Class A Common Stock.

Current wording

Equity-based compensation for Replacement Restricted Stock Units and Earnout Right Restricted Stock Units, which are funded 100% by existing non-controlling shareholders or outstanding Class A Common Stock. As of April 1, 2024, there is no further compensation cost associated with the Replacement Restricted Stock Units and Earnout Right Restricted Stock Units.