Company: FOACW
Filing Date: 2025-03-14
Form Type: 10-K
Source: 0001828937-25-000009
Chunk: 359

Company: Finance of America Companies Inc.
Filing Date: 2025-03-14
Form: 10-K
Item: Item 1A
Chunk 359
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 were to significantly decrease, we may be unable to find replacement financing on commercially favorable terms, or at all. This could have a material adverse effect on our business, liquidity, financial condition, cash flows, and results of operations. Further, if we are unable to refinance or obtain additional funds for borrowing (including through the securitization markets), our ability to maintain or grow our business could be limited.

We do not currently and may not in the future actively hedge our assets, and if we do hedge our assets, our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates and valuations; our Company is exposed to other credit risk.

Our profitability is directly affected by changes in interest rates. The market value of closed loans held for sale and interest rate locks generally change along with interest rates. The value of such assets moves opposite of interest rate changes. For example, as interest rates rise, the value of existing mortgage assets falls. Further, a portion of our assets consist of MSR and the residual fair value of reverse mortgage loans above their related obligations, which may fluctuate in value. 

We have not currently entered into hedges to reduce our exposure to the risks described in the prior paragraph. As described in further detail below, there are inherent risks that come with entering into hedges. In order to enter into hedges the Company needs sufficient liquidity to withstand the adverse impacts of hedging. The Company has determined that given its current position the risks that would come with entering into hedges outweigh the potential benefits. Therefore, currently the Company’s risks described in the prior paragraph are not mitigated by hedges. The Company may in the future decide to enter into hedges. However, there can be no assurance such hedges would adequately protect us from the aforementioned interest rate and fair value risks, or that a hedging strategy utilized by us would be well-designed or properly executed to adequately address such risks.

In the event we enter into hedges, our hedge instruments will be accounted for as free-standing derivatives and included on our consolidated statements of financial condition at fair market value. Our operating results could be negatively affected because the losses on the hedge instruments we enter into may not be offset by a change in the fair value of the related hedged transaction. Our hedging strategies could also require us to provide cash margin to our hedging counterparties from time to time. FINRA requires us to provide daily cash margin to (or receive daily cash margin from, depending on the daily value of related MBS