Organization and Basis of Presentation	9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Basis of Presentation	1. Organization and Basis of Presentation Front Yard Residential Corporation (“we,” “our,” “us,” or the “Company”) is a Maryland real estate investment trust (“REIT”) focused on acquiring, owning and managing single-family rental (“SFR”) properties throughout the United States. We conduct substantially all of our activities through our wholly owned subsidiary, Front Yard Residential, L.P., and its subsidiaries. On August 8, 2018, we acquired a property management firm and commenced the internalization of our property management function. During the first quarter of 2019, we completed the transition of property management for our SFR properties that were previously externally managed to our internal property management platform. We anticipate that all SFR properties acquired in the future will also be managed internally. As of September 30, 2020, we had a core rental portfolio of 14,494 homes. In addition, we had 104 rental homes that are identified for future sale, and we had a small portfolio of non-rental real estate owned (“REO”) properties remaining from our previous mortgage loan portfolio acquisitions. We have engaged third-party service providers to manage REO and certain other properties identified for sale. We are currently preparing these non-core assets for future disposition in order to create additional liquidity and purchasing power to continue building our core rental portfolio. Asset Management Agreements and Termination Agreement with AAMC Since December 2012, we have been managed by Altisource Asset Management Corporation (“AAMC” or our “Manager”). AAMC has provided us with dedicated personnel to administer certain aspects of our business and perform certain of our corporate governance functions. AAMC has also provided oversight of our acquisition and management of SFR properties and the ongoing management of our remaining REO properties. On March 31, 2015, we entered into an asset management agreement (the “Former AMA”) with AAMC. The Former AMA, which became effective on April 1, 2015. The Former AMA provided for a fee structure in which AAMC was entitled to a base management fee, an incentive management fee and a conversion fee for mortgage loans and real estate owned (“REO”) properties that became rental properties for the first time during each quarter. Front Yard and AAMC entered into an amended and restated asset management agreement (the “Amended AMA”) on May 7, 2019 (the “Effective Date”). The Amended AMA amended and restated, in its entirety, the Former AMA. The Amended AMA has an initial term of five years and could renew automatically each year thereafter for an additional one-year term, subject in each case to certain termination provisions. The Amended AMA provides for a fee structure in which AAMC has been entitled to a Base Management Fee and a potential Incentive Fee. For further information on the Former AMA and the Amended AMA, please see Note 8. On August 13, 2020, Front Yard and AAMC entered into a Termination and Transition Agreement (the “Termination Agreement”), pursuant to which they have agreed to effectively internalize the asset management function of Front Yard. The Termination Agreement provides that the Amended AMA will terminate following a transition period to enable the internalization of Front Yard’s asset management function, allow for the assignment of certain vendor contracts and implement the transfer of certain employees to Front Yard and the training of required replacement employees at each company. The transition period will end at the time that Front Yard and AAMC mutually agree that all required transition activities have been successfully completed (the “Termination Date”), which will occur no later than February 9, 2021. On the Termination Date, the Amended AMA will terminate, and AAMC will no longer provide services to Front Yard under the Amended AMA. Below are the material terms of the Termination Agreement: •Front Yard will pay AAMC an aggregate termination fee of $46.0 million (the “Termination Fee”), consisting of the following payments: ◦$15.0 million paid in cash to AAMC on August 17, 2020, ◦$15.0 million payable in cash on the Termination Date, and ◦$16.0 million payable in cash or Front Yard common stock, at the option of Front Yard and subject to certain conditions, restrictions, and limitations, on the Termination Date. •Front Yard will acquire the equity interests of AAMC's Indian subsidiary, the equity interests of AAMC's Cayman Islands subsidiary, the right to solicit and hire designated AAMC employees that currently oversee the management of Front Yard's business and other assets of AAMC that are used in connection with the operation of Front Yard's business (the “Transferred Assets”) for an aggregate purchase price of $8.2 million ($3.2 million of which was paid to AAMC on August 17, 2020), of which all or a portion of the remaining $5.0 million may be paid in Front Yard common stock, at Front Yard’s option and subject to certain conditions, restrictions, and limitations. •Front Yard will continue to pay Base Management Fees to AAMC under the Amended AMA in the amount of $3.6 million per quarter through the date that Front Yard delivers written notice to AAMC that the transition has been satisfactorily completed, subject to proration for partial quarters. •AAMC has agreed to vote any shares of Front Yard common stock that it receives in connection with the Termination Agreement in accordance with recommendations of the Front Yard board of directors for a period of one year following the Termination Date, including regarding the approval of the Pretium Merger Agreement (described below) and related transactions, which may be presented to Front Yard’s stockholders. We have recognized the entire Termination Fee under generally accepted accounting principles as an operating expense in our condensed consolidated statements of operations for the three and nine months ended September 30, 2020. We have also included the unpaid portion of the Termination Fee of $31.0 million within our payable to AAMC in our condensed consolidated balance sheet as of September 30, 2020. During the third quarter of 2020, we made an upfront payment of $3.2 million of the $8.2 million aggregate purchase price of the Transferred Assets. We have included this $3.2 million upfront payment within prepaid expenses and other assets in our condensed consolidated balance sheet. Amherst Merger Agreement and Subsequent Termination and Settlement Agreement On February 17, 2020, we entered into an Agreement and Plan of Merger (the “Amherst Merger Agreement”) with BAF Holdings, LLC, a Delaware limited liability company (“Parent”), and BAF Sub, LLC, a Maryland limited liability company (“Merger Sub”), each affiliates of Amherst Single Family Residential Partners VI, LP (collectively, “Amherst”), providing for the acquisition of the Company by Parent. Following the approval of the merger, the parties ultimately determined that it was not feasible to proceed with the transaction, and on May 4, 2020, we entered into a Termination and Settlement Agreement to terminate the Merger Agreement. Pursuant to the Termination and Settlement Agreement, Amherst agreed to pay the Company a $25.0 million cash termination fee, purchase from the Company 4.4 million shares of Front Yard common stock for an aggregate cash purchase price of $55.0 million ($12.50 per share) pursuant to an Investment Agreement and provide the Company with a $20.0 million committed Non-Negotiable Promissory Note. We have included the $25.0 million termination fee received from Amherst within other income in our condensed consolidated statements of operations for the nine months ended September 30, 2020. Since the termination of the Amherst Merger Agreement, we have continued to operate our business in the ordinary course as a stand-alone company. Pretium Merger Agreement On October 19, 2020, we entered into an Agreement and Plan of Merger (the “Pretium Merger Agreement”) with a partnership led by Pretium Midway Holdco, LP, a Delaware limited partnership (“Pretium”), and Midway AcquisitionCo REIT, a Maryland real estate investment trust (“Merger Sub”), and including funds managed by the real estate equity and alternative credit strategies of Ares Management Corporation, providing for the merger of Front Yard into Merger Sub, with Merger Sub surviving the merger and becoming a wholly-owned subsidiary of Pretium (the “Merger Transaction”). Under the terms of the Pretium Merger Agreement, Front Yard stockholders will receive $13.50 in cash per share upon consummation of the Merger Transaction. The Front Yard Board of Directors has unanimously approved the Pretium Merger Agreement and related transactions and intends to recommend that Front Yard stockholders vote in favor of it at a Special Meeting of Stockholders, to be scheduled as soon as practicable. The Merger Transaction is expected to close in the first quarter of 2021, subject to the approval by the holders of a majority of Front Yard’s outstanding shares and the satisfaction of customary closing conditions. For further details of the Pretium Merger Agreement, refer to Note 14. Basis of presentation and use of estimates The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). All wholly owned subsidiaries are included, and all intercompany accounts and transactions have been eliminated. The unaudited interim condensed consolidated financial statements and accompanying unaudited condensed consolidated financial information, in our opinion, contain all adjustments that are of a normal recurring nature and are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. The interim results are not necessarily indicative of results for a full year. We have omitted certain notes and other information from the interim condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q as permitted by Securities and Exchange Commission (“SEC”) rules and regulations. These condensed consolidated financial statements should be read in conjunction with our annual consolidated financial statements included within our 2019 Annual Report on Form 10-K, which was filed with the SEC on February 28, 2020. Use of estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates. Recently issued accounting standards Adoption of recent accounting standards In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which amends the guidance on measuring credit losses on financial assets held at amortized cost. The amendment is intended to address the issue that the previous “incurred loss” methodology was restrictive for an entity's ability to record credit losses based on not yet meeting the “probable” threshold. The new language requires these assets to be valued at amortized cost presented at the net amount expected to be collected with a valuation provision. This ASU is effective for fiscal years beginning after December 15, 2019. The amendments in ASU 2016-13 should be applied on a modified retrospective transition basis. We adopted this standard on January 1, 2020, and our adoption of this standard did not have a material impact on our consolidated financial statements because the standard, as amended, excludes receivables arising from operating leases, which represent the majority of our receivables. Recently issued accounting standards not yet adopted In December 2019, the FASB issued ASU 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. While we are currently evaluating the impact of the adoption of this standard, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

Front Yard Residential Corporation (“we,” “our,” “us,” or the “Company”) is a Maryland real estate investment trust (“REIT”) focused on acquiring, owning and managing single-family rental (“SFR”) properties throughout the United States. We conduct substantially all of our activities through our wholly owned subsidiary, Front Yard Residential, L.P., and its subsidiaries.

On August 8, 2018, we acquired a property management firm and commenced the internalization of our property management function. During the first quarter of 2019, we completed the transition of property management for our SFR properties that were previously externally managed to our internal property management platform. We anticipate that all SFR properties acquired in the future will also be managed internally.

As of September 30, 2020, we had a core rental portfolio of 14,494 homes. In addition, we had 104 rental homes that are identified for future sale, and we had a small portfolio of non-rental real estate owned (“REO”) properties remaining from our previous mortgage loan portfolio acquisitions. We have engaged third-party service providers to manage REO and certain other properties identified for sale. We are currently preparing these non-core assets for future disposition in order to create additional liquidity and purchasing power to continue building our core rental portfolio.

Since December 2012, we have been managed by Altisource Asset Management Corporation (“AAMC” or our “Manager”). AAMC has provided us with dedicated personnel to administer certain aspects of our business and perform certain of our corporate governance functions. AAMC has also provided oversight of our acquisition and management of SFR properties and the ongoing management of our remaining REO properties.

On March 31, 2015, we entered into an asset management agreement (the “Former AMA”) with AAMC. The Former AMA, which became effective on April 1, 2015. The Former AMA provided for a fee structure in which AAMC was entitled to a base management fee, an incentive management fee and a conversion fee for mortgage loans and real estate owned (“REO”) properties that became rental properties for the first time during each quarter.

Front Yard and AAMC entered into an amended and restated asset management agreement (the “Amended AMA”) on May 7, 2019 (the “Effective Date”). The Amended AMA amended and restated, in its entirety, the Former AMA. The Amended AMA has an initial term of five years and could renew automatically each year thereafter for an additional one-year term, subject in each case to certain termination provisions. The Amended AMA provides for a fee structure in which AAMC has been entitled to a Base Management Fee and a potential Incentive Fee.

On August 13, 2020, Front Yard and AAMC entered into a Termination and Transition Agreement (the “Termination Agreement”), pursuant to which they have agreed to effectively internalize the asset management function of Front Yard. The Termination Agreement provides that the Amended AMA will terminate following a transition period to enable the internalization of Front Yard’s asset management function, allow for the assignment of certain vendor contracts and implement the transfer of certain employees to Front Yard and the training of required replacement employees at each company. The transition period will end at the time that Front Yard and AAMC mutually agree that all required transition activities have been successfully completed (the “Termination Date”), which will occur no later than February 9, 2021. On the Termination Date, the Amended AMA will terminate, and AAMC will no longer provide services to Front Yard under the Amended AMA. Below are the material terms of the Termination Agreement:

•Front Yard will acquire the equity interests of AAMC's Indian subsidiary, the equity interests of AAMC's Cayman Islands subsidiary, the right to solicit and hire designated AAMC employees that currently oversee the management of Front Yard's business and other assets of AAMC that are used in connection with the operation of Front Yard's business (the “Transferred Assets”) for an aggregate purchase price of $8.2 million ($3.2 million of which was paid to AAMC on August 17, 2020), of which all or a portion of the remaining $5.0 million may be paid in Front Yard common stock, at Front Yard’s option and subject to certain conditions, restrictions, and limitations.

•Front Yard will continue to pay Base Management Fees to AAMC under the Amended AMA in the amount of $3.6 million per quarter through the date that Front Yard delivers written notice to AAMC that the transition has been satisfactorily completed, subject to proration for partial quarters.

•AAMC has agreed to vote any shares of Front Yard common stock that it receives in connection with the Termination Agreement in accordance with recommendations of the Front Yard board of directors for a period of one year following the Termination Date, including regarding the approval of the Pretium Merger Agreement (described below) and related transactions, which may be presented to Front Yard’s stockholders.

We have recognized the entire Termination Fee under generally accepted accounting principles as an operating expense in our condensed consolidated statements of operations for the three and nine months ended September 30, 2020. We have also included the unpaid portion of the Termination Fee of $31.0 million within our payable to AAMC in our condensed consolidated balance sheet as of September 30, 2020.

During the third quarter of 2020, we made an upfront payment of $3.2 million of the $8.2 million aggregate purchase price of the Transferred Assets. We have included this $3.2 million upfront payment within prepaid expenses and other assets in our condensed consolidated balance sheet.

On February 17, 2020, we entered into an Agreement and Plan of Merger (the “Amherst Merger Agreement”) with BAF Holdings, LLC, a Delaware limited liability company (“Parent”), and BAF Sub, LLC, a Maryland limited liability company (“Merger Sub”), each affiliates of Amherst Single Family Residential Partners VI, LP (collectively, “Amherst”), providing for the acquisition of the Company by Parent. Following the approval of the merger, the parties ultimately determined that it was not feasible to proceed with the transaction, and on May 4, 2020, we entered into a Termination and Settlement Agreement to terminate the Merger Agreement. Pursuant to the Termination and Settlement Agreement, Amherst agreed to pay the Company a $25.0 million cash termination fee, purchase from the Company 4.4 million shares of Front Yard common stock for an aggregate cash purchase price of $55.0 million ($12.50 per share) pursuant to an Investment Agreement and provide the Company with a $20.0 million committed Non-Negotiable Promissory Note.

On October 19, 2020, we entered into an Agreement and Plan of Merger (the “Pretium Merger Agreement”) with a partnership led by Pretium Midway Holdco, LP, a Delaware limited partnership (“Pretium”), and Midway AcquisitionCo REIT, a Maryland real estate investment trust (“Merger Sub”), and including funds managed by the real estate equity and alternative credit strategies of Ares Management Corporation, providing for the merger of Front Yard into Merger Sub, with Merger Sub surviving the merger and becoming a wholly-owned subsidiary of Pretium (the “Merger Transaction”).

Under the terms of the Pretium Merger Agreement, Front Yard stockholders will receive $13.50 in cash per share upon consummation of the Merger Transaction. The Front Yard Board of Directors has unanimously approved the Pretium Merger Agreement and related transactions and intends to recommend that Front Yard stockholders vote in favor of it at a Special Meeting of Stockholders, to be scheduled as soon as practicable. The Merger Transaction is expected to close in the first quarter of 2021, subject to the approval by the holders of a majority of Front Yard’s outstanding shares and the satisfaction of customary closing conditions.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). All wholly owned subsidiaries are included, and all intercompany accounts and transactions have been eliminated.

The unaudited interim condensed consolidated financial statements and accompanying unaudited condensed consolidated financial information, in our opinion, contain all adjustments that are of a normal recurring nature and are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. The interim results are not necessarily indicative of results for a full year. We have omitted certain notes and other information from the interim condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q as permitted by Securities and Exchange Commission (“SEC”) rules and regulations. These condensed consolidated financial statements should be read in conjunction with our annual consolidated financial statements included within our 2019 Annual Report on Form 10-K, which was filed with the SEC on February 28, 2020.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which amends the guidance on measuring credit losses on financial assets held at amortized cost. The amendment is intended to address the issue that the previous “incurred loss” methodology was restrictive for an entity's ability to record credit losses based on not yet meeting the “probable” threshold. The new language requires these assets to be valued at amortized cost presented at the net amount expected to be collected with a valuation provision. This ASU is effective for fiscal years beginning after December 15, 2019. The amendments in ASU 2016-13 should be applied on a modified retrospective transition basis. We adopted this standard on January 1, 2020, and our adoption of this standard did not have a material impact on our consolidated financial statements because the standard, as amended, excludes receivables arising from operating leases, which represent the majority of our receivables.

In December 2019, the FASB issued ASU 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. While we are currently evaluating the impact of the adoption of this standard, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.