Finance of America panies (FOA) - 2021 Q2 - Quarterly Report

Financial Performance and Risk Management - The company reported a significant increase in total assets, with a change of $115,519 thousand when interest rates decreased by 25 basis points [674]. - The company anticipates that an increase in interest rates could lead to higher delinquency, default, and foreclosure rates, resulting in increased servicing costs and interest expenses [666]. - The company actively manages Interest Rate Lock Commitments (IRLCs) and loans held for sale, entering into forward sales of mortgage-backed securities (MBS) to mitigate interest rate risk [662]. - The company estimates reserves for losses on repurchased loans based on historical data and other relevant factors, indicating proactive risk management [667]. - The company’s earnings on held-for-investment assets are largely dependent on the interest rate spread between interest-earning assets and interest-bearing liabilities [663]. - The company’s market risk is influenced by various factors, including market spreads and liquidity, with sensitivity analyses conducted to assess potential impacts of interest rate changes [671]. Financial Reporting and Internal Controls - The fair value of certain outstanding mortgage loans and related liabilities is assessed using a discounted cash flow analysis, with key assumptions including prepayment speeds and market discount rates [670]. - The company has implemented changes to improve internal controls over financial reporting, addressing previously identified material weaknesses related to the accounting for complex financial instruments [678]. - The company has enhanced its processes to evaluate accounting technical pronouncements for significant transactions, ensuring compliance with complex accounting standards [679]. - The company does not expect its disclosure controls and procedures to prevent all errors or fraud, acknowledging inherent limitations [676].