UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K/A
(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
or
  ¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________                   
Commission file number: 001-13417
Walter Investment Management Corp.
(Exact name of registrant as specified in its charter)
 
Maryland
 
13-3950486
State or other jurisdiction of
incorporation or organization
 
(I.R.S. Employer
Identification No.)
 
 
1100 Virginia Drive, Suite 100
Fort Washington, PA
 
19034
(Address of principal executive offices)
 
(Zip Code)
Registrant's telephone number, including area code (844) 714-8603
Securities registered pursuant to Section 12(b) of the Act:
Title of Class
 
Name of Exchange on Which Registered
Common Stock, $0.01 Par Value per Share
 
NYSE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ¨         No   þ  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ¨         No   þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   þ         No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   þ         No   ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III or this Form 10-K or any amendment to this Form 10-K   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "non-accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer    ¨  
 
Accelerated filer     þ  
Non-accelerated filer    ¨ (Do not check if a smaller reporting company)
 
Smaller reporting company     ¨  
 
 
Emerging growth company     ¨  
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ¨         No   þ
The aggregate market value of the registrant's stock held by non-affiliates as of June 30, 2016 , the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $50.5 million , based on the closing sale price of the registrant’s common stock as reported on the New York Stock Exchange on such date. For purposes of this calculation the registrant has considered all Schedule 13G filers as of such date to be non-affiliates.
The registrant had 36,416,395  shares of common stock outstanding as of March 9, 2017 .
Documents Incorporated by Reference
Portions of the registrant's definitive Proxy Statement that was filed with the Securities and Exchange Commission under Regulation 14A on April 5, 2017 are incorporated by reference into Part III.


EXPLANATORY NOTE
Certain acronyms and terms used throughout this Form 10-K/A are defined in the Glossary of Terms located at the end of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Walter Investment Management Corp. is amending its Annual Report on Form 10-K for the year ended December 31, 2016 (hereinafter referred to as the Original Filing and, as amended, the Amended Filing), and separately amending its Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2016, September 30, 2016, and March 31, 2017, in each case, to reflect a correction to the net deferred tax assets balance as described in further detail below as well as in Note 2 to the Consolidated Financial Statements. The Company reported that these previously issued financial statements contained in the Original Filings could no longer be relied upon in its Current Report on Form 8-K filed with the SEC on May 26, 2017.
The Company records a tax provision for the anticipated tax consequences of the reported results of operations. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates in each jurisdiction that applies to taxable income in effect for the years in which those tax assets are expected to be realized or settled.
The Company is required to establish a valuation allowance for deferred tax assets and record a charge to income if it is determined, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on the evaluation of the realizability of the Company's deferred tax assets for the year ended December 31, 2016 performed in connection with the Original Filing, management concluded that a partial valuation allowance was necessary, and included such allowance in the Original Filing. Subsequent to the Original Filing, management discovered an error in the calculation of the valuation allowance on the deferred tax assets, which is discussed in further detail in Note 2 to the Consolidated Financial Statements. As a result of this error, it was determined that the valuation allowance should have been $304.7 million higher than what was originally recorded which resulted in a deferred tax liability of $4.8 million at December 31, 2016 .
As explained in Note 2 to the Consolidated Financial Statements included within this Amended Filing, the Company is amending its Original Filing and restating the Consolidated Financial Statements contained in the Original Filing to correct the error noted above regarding the calculation of the valuation allowance on the deferred tax assets. This Amended Filing and the restated Consolidated Financial Statements contained herein reflect the corrected estimated net amount of deferred tax assets that are considered by Company management to be recoverable.
The cumulative impact of the non-cash adjustment to correct the aforementioned error was a reduction in the net deferred tax assets balance of $299.9 million , an increase to deferred tax liabilities of $4.8 million and an increase in accumulated deficit of approximately $304.7 million as of December 31, 2016 . Net loss increased for the year ended December 31, 2016 by $304.7 million , which increased the loss per share by $8.47 .

As a result of the identification of the error that led to this Amended Filing, Company management determined that the Company did not maintain effective internal controls with respect to the operating effectiveness of the review of the tax calculations associated with the valuation allowance on the deferred tax asset balances and further determined that this control deficiency constitutes an additional material weakness in internal controls over financial reporting as of December 31, 2016. In the Original Filing, the Company identified an unrelated material weakness in internal controls over financial reporting related to operational processes within the transaction level processing of Ditech Financial default servicing activities. Refer to Item 9A in this Amended Filing for management's revised conclusions related to internal controls over financial reporting as of December 31, 2016.
The adjustment being made in this Amended Filing does not impact revenues, cash position or total cash flows from operating, investing or financing activities, or any metric considered by the Compensation and Human Resources Committee with respect to the determination of executive compensation for the year ended December 31, 2016.

Management is required to evaluate its ability to continue as a going concern as of the date of issuance of financial statements. Accordingly, based on recent developments as described in Note 3, the Company has concluded that there is substantial doubt as to its ability to continue as a going concern. Refer to Note 3 for a more detailed description of the factors that resulted in this conclusion.
Pursuant to the rules of the SEC, Item 15 of Part IV of the Original Filing has been amended to contain the currently-dated certifications from the Company's Chief Executive Officer and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications of the Company's Chief Executive Officer and Chief Financial Officer are attached to this Form 10-K/A as Exhibits 31.1, 31.2, and 32, respectively.




This Amended Filing reflects the restatement of (i) the Company’s consolidated balance sheet at December 31, 2016 , (ii) the consolidated statements of comprehensive loss; stockholders’ equity (deficit) and cash flows for the year then ended, and (iii) the notes related thereto. For a more detailed description of these matters, see Note 2 to the Consolidated Financial Statements. Except for certain of the information appearing in this Explanatory Note and Note 3 to the Consolidated Financial Statements, this Amended Filing sets forth the Original Filing in its entirety, only amends Items 1A of Part I, Items 6, 7, 8 and 9A of Part II, and Item 15 of Part IV of the Original Filing to the extent necessary to reflect the adjustments described above and described in Note 2 to the Consolidated Financial Statements and to reflect recent developments specifically described in Note 3 to the Financial Statements, does not reflect any events occurring after the filing date of the Original Filing and has not been updated or otherwise amended. Accordingly, the forward-looking statements included in this Amended Filing represent management’s views as of the date of the Original Filing and should not be assumed to be accurate as of any date thereafter.



WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES
FORM 10-K/A
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016
INDEX
 
 
 
 
 
 
 
 
PART I
 
 
Item 1.
 
 
Item 1A.
 
 
Item 1B.
 
 
Item 2.
 
 
Item 3.
 
 
Item 4.
 
 
 
 
 
 
 
 
 
PART II
 
 
Item 5.
 
 
Item 6.
 
 
Item 7.
 
 
Item 7A.
 
 
Item 8.
 
 
Item 9.
 
 
Item 9A.
 
 
Item 9B.
 
 
 
 
 
 
 
 
 
PART III
 
 
Item 10.
 
 
Item 11.
 
 
Item 12.
 
 
Item 13.
 
 
Item 14.
 
 
 
 
 
 
 
 
 
PART IV
 
 
Item 15.
 
 
Item 16.
 
 
 
 
 


Table of Contents

Certain acronyms and terms used throughout this Form 10-K/A are defined in the Glossary of Terms located at the end of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Certain statements in this report, including matters discussed under Item 1. Business, Item 3. Legal Proceedings and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and including matters discussed elsewhere in this report, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Statements that are not historical fact are forward-looking statements. Certain of these forward-looking statements can be identified by the use of words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,” “assumes,” “may,” “should,” “will,” “seeks,” “targets,” or other similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors, and our actual results, performance or achievements could differ materially from future results, performance or achievements expressed in these forward-looking statements. These forward-looking statements are based on our current beliefs, intentions and expectations. These statements are not guarantees or indicative of future performance, nor should any conclusions be drawn or assumptions be made as to any potential outcome of any strategic review we conduct. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements include, but are not limited to, those factors, risks and uncertainties described below and in more detail in Item 1A. Risk Factors and in our other filings with the SEC.
In particular (but not by way of limitation), the following important factors, risks and uncertainties could affect our future results, performance and achievements and could cause actual results, performance and achievements to differ materially from those expressed in the forward-looking statements:
•
risks and uncertainties relating to, or arising in connection with, the restatement of financial statements included in the amendments to our Annual Report on Form 10-K for the year ended December 31, 2016 and our Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2016, September 30, 2016 and March 31, 2017, including: reactions from the Company’s creditors, stockholders, or business partners; and the impact and result of any litigation or regulatory inquiries or investigations related to the findings of the Company’s assessment or the restatement;
•
risks and uncertainties relating to the Company's proposed financial restructuring, including: the ability of the Company to comply with the terms of the Restructuring Support Agreement described in Note 3 to the Consolidated Financial Statements, including completing various stages of the restructuring within the dates specified by the Restructuring Support Agreement; the ability of the Company to obtain requisite support of the restructuring from various stakeholders; and the effects of disruption from the proposed restructuring making it more difficult to maintain business, financing and operational relationships;
•
our ability to operate our business in compliance with existing and future laws, rules, regulations and contractual commitments affecting our business, including those relating to the origination and servicing of residential loans, default servicing and foreclosure practices, the management of third-party assets and the insurance industry, and changes to, and/or more stringent enforcement of, such laws, rules, regulations and contracts;
•
scrutiny of our industry by, and potential enforcement actions by, federal and state authorities;
•
the substantial resources (including senior management time and attention) we devote to, and the significant compliance costs we incur in connection with, regulatory compliance and regulatory examinations and inquiries, and any consumer redress, fines, penalties or similar payments we make in connection with resolving such matters;
•
uncertainties relating to interest curtailment obligations and any related financial and litigation exposure (including exposure relating to false claims);
•
potential costs and uncertainties, including the effect on future revenues, associated with and arising from litigation, regulatory investigations and other legal proceedings, and uncertainties relating to the reaction of our key counterparties to the announcement of any such matters;
•
our dependence on U.S. government-sponsored entities and agencies (especially Fannie Mae, Freddie Mac and Ginnie Mae) and their residential loan programs and our ability to maintain relationships with, and remain qualified to participate in programs sponsored by, such entities, our ability to satisfy various existing or future GSE, agency and other capital, net worth, liquidity and other financial requirements applicable to our business, and our ability to remain qualified as a GSE and agency approved seller, servicer or component servicer, including the ability to continue to comply with the GSEs’ and agencies' respective residential loan selling and servicing guides;

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•
uncertainties relating to the status and future role of GSEs and agencies, and the effects of any changes to the origination and/or servicing requirements of the GSEs, agencies or various regulatory authorities or the servicing compensation structure for mortgage servicers pursuant to programs of GSEs, agencies or various regulatory authorities;
•
our ability to maintain our loan servicing, loan origination or collection agency licenses, or any other licenses necessary to operate our businesses, or changes to, or our ability to comply with, our licensing requirements;
•
our ability to comply with the terms of the stipulated order resolving allegations arising from an FTC and CFPB investigation of Ditech Financial and a CFPB investigation of RMS;
•
operational risks inherent in the mortgage servicing and mortgage originations businesses, including our ability to comply with the various contracts to which we are a party, and reputational risks;
•
risks related to the significant amount of senior management turnover and employee reductions recently experienced by the Company;
•
risks related to our substantial levels of indebtedness, including our ability to comply with covenants contained in our debt agreements or obtain any necessary waivers or amendments, generate sufficient cash to service such indebtedness and refinance such indebtedness on favorable terms, or at all, as well as our ability to incur substantially more debt;
•
our ability to renew advance financing facilities or warehouse facilities on favorable terms, or at all, and maintain adequate borrowing capacity under such facilities;
•
our ability to maintain or grow our residential loan servicing or subservicing business and our mortgage loan originations business;
•
our ability to achieve our strategic initiatives, particularly our ability to: increase the mix of our fee-for-service business, including by entering into new subservicing arrangements; improve servicing performance; successfully develop our originations capabilities in the consumer and wholesale lending channels; reduce our debt; and execute and realize planned operational improvements and efficiencies, including those relating to our core and non-core framework;
•
the success of our business strategy in returning us to sustained profitability;
•
changes in prepayment rates and delinquency rates on the loans we service or subservice;
•
the ability of Fannie Mae, Freddie Mac and Ginnie Mae, as well as our other clients and credit owners, to transfer or otherwise terminate our servicing or subservicing rights, with or without cause;
•
a downgrade of, other adverse change relating to, or our inability to improve our servicer ratings or credit ratings;
•
our ability to collect reimbursements for servicing advances and earn and timely receive incentive payments and ancillary fees on our servicing portfolio;
•
our ability to collect indemnification payments and enforce repurchase obligations relating to mortgage loans we purchase from our correspondent clients and our ability to collect in a timely manner indemnification payments relating to servicing rights we purchase from prior servicers;
•
local, regional, national and global economic trends and developments in general, and local, regional and national real estate and residential mortgage market trends in particular, including the volume and pricing of home sales and uncertainty regarding the levels of mortgage originations and prepayments;
•
uncertainty as to the volume of originations activity we can achieve and the effects of the expiration of HARP, which is scheduled to occur on September 30, 2017, including uncertainty as to the number of "in-the-money" accounts we may be able to refinance and uncertainty as to what type of product or government program will be introduced, if any, to replace HARP;
•
risks associated with the reverse mortgage business, including changes to reverse mortgage programs operated by FHA, HUD or Ginnie Mae, our ability to accurately estimate interest curtailment liabilities, our ability to fund HECM repurchase obligations, our ability to fund principal additions on our HECM loans, and our ability to securitize our HECM loans and tails;
•
our ability to realize all anticipated benefits of past, pending or potential future acquisitions or joint venture investments;
•
the effects of competition on our existing and potential future business, including the impact of competitors with greater financial resources and broader scopes of operation;
•
changes in interest rates and the effectiveness of any hedge we may employ against such changes;

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•
risks and potential costs associated with technology and cybersecurity, including: the risks of technology failures and of cyber-attacks against us or our vendors; our ability to adequately respond to actual or alleged cyber-attacks; and our ability to implement adequate internal security measures and protect confidential borrower information;
•
risks and potential costs associated with the implementation of new or more current technology, such as MSP, the use of vendors (including offshore vendors) or the transfer of our servers or other infrastructure to new data center facilities;
•
our ability to comply with evolving and complex accounting rules, many of which involve significant judgment and assumptions;
•
risks related to our deferred tax assets, including the risk of an "ownership change" under Section 382 of the Code;
•

•
our ability to regain and maintain compliance with the continued listing requirements of the NYSE, and risks arising from the potential suspension of trading of our common stock on, and delisting of our common stock from, the NYSE;
•
our ability to continue as a going concern;
•
uncertainties regarding impairment charges relating to our goodwill or other intangible assets;
•
risks associated with one or more material weaknesses identified in our internal controls over financial reporting, including the timing, expense and effectiveness of our remediation plans;
•
our ability to implement and maintain effective internal controls over financial reporting and disclosure controls and procedures;
•
our ability to manage potential conflicts of interest relating to our relationship with WCO; and
•
risks related to our relationship with Walter Energy and uncertainties arising from or relating to its bankruptcy filings and liquidation proceedings, including potential liability for any taxes, interest and/or penalties owed by the Walter Energy consolidated group for the full or partial tax years during which certain of the Company's former subsidiaries were a part of such consolidated group and certain other tax risks allocated to us in connection with our spin-off from Walter Energy.
All of the above factors, risks and uncertainties are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors, risks and uncertainties emerge from time to time, and it is not possible for our management to predict all such factors, risks and uncertainties.
Although we believe that the assumptions underlying the forward-looking statements (including those relating to our outlook) contained herein are reasonable, any of the assumptions could be inaccurate, and therefore any of these statements included herein may prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made, except as otherwise required under the federal securities laws. If we were in any particular instance to update or correct a forward-looking statement, investors and others should not conclude that we would make additional updates or corrections thereafter except as otherwise required under the federal securities laws.
In addition, this report may contain statements of opinion or belief concerning market conditions and similar matters. In certain instances, those opinions and beliefs could be based upon general observations by members of our management, anecdotal evidence and/or our experience in the conduct of our business, without specific investigation or statistical analyses. Therefore, while such statements reflect our view of the industries and markets in which we are involved, they should not be viewed as reflecting verifiable views and such views may not be shared by all who are involved in those industries or markets.


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PART I
ITEM 1. BUSINESS
The Company
We are an independent servicer and originator of mortgage loans and servicer of reverse mortgage loans. We service a wide array of loans across the credit spectrum for our own portfolio and for GSEs, government agencies, third-party securitization trusts and other credit owners. Through our consumer, correspondent and wholesale lending channels, we originate and purchase residential mortgage loans that we predominantly sell to GSEs and government agencies. We also operate two supplementary businesses; asset receivables management and real estate owned property management and disposition. Our goal is to become a partner with our customers; assisting them with the originations process and through the life of their loan, with a highly regarded originations and servicing platform and quality customer service in an open, honest and straightforward manner.
We are a Maryland corporation incorporated in 1997 and operate throughout the U.S. Our business was established in 1958 and operated as the captive financing business of Walter Energy, originating and purchasing residential loans and servicing these loans to maturity. In April 2009, we were spun off from Walter Energy; merged with Hanover; qualified as a REIT; and began to operate our business as an independent, publicly-traded company. After the spin-off, in 2010 we acquired Marix, a high-touch specialty mortgage servicer, and in 2011 we acquired Green Tree, a leading independent mortgage loan servicer providing high-touch servicing of GSE, government agency and third-party mortgage loans. As a result of the Green Tree acquisition, we no longer qualified as a REIT. Since then, we have grown our servicing and originations businesses both organically and through a number of acquisitions, including the acquisitions of RMS and S1L in 2012, the acquisition of a national originations platform in 2013 from ResCap and significant bulk servicing right acquisitions in 2013 and 2014.
The terms “Walter Investment,” the “Company,” “we,” “us” and “our” as used throughout this report refer to Walter Investment Management Corp. and its consolidated subsidiaries.
At December 31, 2016 , we serviced 2.1 million residential loans with an unpaid principal balance of $246.4 billion . We originated $20.3 billion in mortgage loan volume in 2016 . We manage our Company in three reportable segments: Servicing; Originations; and Reverse Mortgage. A description of the business conducted by each of these segments is provided below:
Servicing - Our Servicing segment performs servicing for our own mortgage loan portfolio and on behalf of third-party credit owners of mortgage loans for a fee and also performs subservicing for third-party owners of MSR. The Servicing segment also operates complementary businesses including a collections agency that performs collections of post charge-off deficiency balances for third parties and us. In addition, the Servicing segment holds the assets and mortgage-backed debt of the Residual Trusts.
Our servicing and subservicing activities relating to our mortgage loan portfolio involve the management (e.g., calculation, collection and remittance) of mortgage payments, escrow accounts, and insurance claims. For certain accounts, we perform specialty servicing activities utilizing a “high-touch” model to establish and maintain borrower contact and facilitate loss-mitigation strategies in an attempt to keep defaulted borrowers in their homes. Borrower interactions rely on loss mitigation strategies that apply predictive analytics to identify risk factors and severity grades to determine appropriate loss mitigation options and strategies. We assign a single point of contact to accounts experiencing difficulties in order to make collection calls and coordinate loss mitigation efforts. The single point of contact allows us to build one-on-one relationships with our consumers. We generally follow GSE and agency servicing guidelines (as well as other credit-owner guidelines) to implement a standardized loss mitigation process, which may include loan modification programs for borrowers experiencing temporary hardships. Our loan modification offerings include short-term interest rate reductions and/or payment deferrals and, until recently, also included loan modifications through HAMP, a federally sponsored loan modification program established to assist eligible home owners with loan modifications on their home mortgage debt. When loan modification and other efforts are unable to cure a default, we pursue alternative property resolutions prior to pursuing foreclosure, including short sales (in which the borrower agrees to sell the property for less than the loan balance and the difference is forgiven) and deeds-in-lieu of foreclosure (in which the borrower agrees to convey the property deed outside of foreclosure proceedings).
With respect to mortgage loans for which we own the MSR, we perform mortgage servicing primarily in accordance with Fannie Mae, Freddie Mac and Ginnie Mae servicing guidelines, as applicable. In 2016, we earned approximately 46% , 9% and 9% of our total revenues from servicing Fannie Mae, Freddie Mac and Ginnie Mae residential loans, respectively. Under our numerous master servicing agreements and subservicing contracts, we agree to service loans in accordance with servicing standards that the credit owners and/or subservicing clients may change from time to time. These agreements and contracts can typically be terminated by the counterparties thereto, with or without cause. Refer to Item 1A. Risk Factors for a discussion of certain risks relating to our master servicing agreements and subservicing contracts.

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We have acquired servicing rights in bulk transactions, pursuant to co-issue arrangements and in connection with business acquisitions, and by retaining servicing rights relating to mortgage loans we originate. As the owner of servicing rights, we act on behalf of loan owners and have the contractual right to receive a stream of cash flows (expressed as a percentage of unpaid principal balance) in exchange for performing specified servicing functions and temporarily advancing funds to meet contractual payment requirements for loan owners and to pay taxes, insurance and foreclosure costs on delinquent or defaulted mortgages. As a subservicer, we earn a contractual fee on a per-loan basis and we are reimbursed for servicing advances we make on delinquent or defaulted mortgages, generally in the following month. We can earn incentive fees based on the performance of certain loan pools serviced by us and also have the ability, under certain circumstances, to earn modification fees and other program-specific incentives, and ancillary fees, such as late fees. Our specialty servicing fees typically include a base servicing fee and activity-based fees for the successful completion of default-related services.
The value of a servicing right asset is based on the present value of the stream of expected servicing-related cash flows from a loan and is largely dependent on market interest rates, prepayment speeds and delinquency performance. Generally, a rising interest rate environment drives a decline in prepayment speeds and thus increases the value of servicing rights, while a declining interest rate environment drives increases in prepayment speeds and thus reduces the value of servicing rights.

Our Servicing segment procured voluntary insurance for residential loan borrowers, lender-placed hazard insurance for residential loan borrowers and credit owners and other ancillary products through our principal insurance agency until the sale of such agency and substantially all of our insurance agency business on February 1, 2017. This agency earned commissions on insurance sales, and commissions were earned on lender-placed insurance in certain circumstances and if permitted under applicable laws and regulations. Mortgage loans require borrowers to maintain insurance coverage to protect the collateral securing the loan. To the extent a borrower fails to maintain the necessary coverage, we are generally contractually required to add the borrower’s property to our own hazard insurance policy and charge the borrower his/her allocated premium amount. Though we were licensed nationwide to sell insurance products on behalf of third-party insurance carriers, we neither underwrote insurance policies nor adjudicated claims.

Insurance revenues were historically aligned with the size of our servicing portfolio. However, due to Fannie Mae and Freddie Mac restrictions that became effective on June 1, 2014, as well as other regulatory and litigation developments with respect to lender-placed insurance, our insurance commissions related to lender-placed insurance policies began to decrease materially beginning in 2014. On February 1, 2017, we completed the sale of our principal insurance agency and substantially all of our insurance agency business. As a result of this sale, we will no longer receive any insurance commissions on lender-placed insurance policies. Commencing February 1, 2017, another insurance agency owned by us (and retained by us following the aforementioned sale) began to provide insurance marketing services to third-party insurance agencies and carriers with respect to voluntary insurance policies, including hazard insurance. This insurance agency receives premium-based commissions for its insurance marketing services.
Our Servicing segment performs collections of post charge-off or foreclosure deficiency balances for itself and on behalf of third-party securitization trusts and other asset owners. The third-party fee we earn is based on a percentage of our collections or a percentage of the unpaid principal balance. We recognize revenues associated with our on-balance sheet charged-off loan portfolio through its change in fair value.
Subservicing
As of December 31, 2016, we were the subservicer for 0.9 million accounts with an unpaid principal loan balance of $120.8 billion . These subserviced accounts represented approximately 49% of our total servicing portfolio based on unpaid principal loan balance at that date. Our largest subservicing customer, NRM, represented approximately 56% of our total subservicing portfolio based on unpaid principal loan balance on December 31, 2016. Our next largest subservicing customer represented approximately 23% of our total subservicing portfolio based on unpaid principal loan balance on December 31, 2016.
The subservicing contracts pursuant to which we are retained to subservice mortgage loans generally provide that our customer, the owner of the MSR that we subservice, can terminate us as subservicer with or without cause, and each such contract has unique terms establishing the fees we will be paid for our work under the contract or upon the termination of the contract, if any, and the standards of performance we are required to meet in servicing the relevant mortgage loans, such that the profitability of our subservicing activity may vary among different contracts. We believe that our subservicing customers consider various factors from time to time in determining whether to retain or change subservicers, including the financial strength and servicer ratings of the subservicer, the subservicer's record of compliance with regulatory and contractual obligations (including any enhanced, "high touch" processes required by the contract) and the success of the subservicer in limiting the delinquency rate of the relevant portfolio. The termination of one or more of our subservicing contracts could have a material adverse effect on us, including on our business, financial condition, liquidity and results of operations. Refer to Item 1A. Risk Factors for a discussion of certain additional risks and uncertainties relating to our subservicing contracts.

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Originations - Our Originations segment originates and purchases mortgage loans through the following channels:
•
consumer originations, which is comprised of:
◦
consumer retention - originates mortgage loans primarily through the use of a centralized call center that utilizes leads generated through solicitations of consumers in our existing servicing portfolio and through referrals from our servicing call centers; and
◦
consumer direct - originates mortgage loans primarily through the use of a centralized call center that utilizes origination leads generated through direct mail, internet, telephone and general advertising campaign solicitations of consumers, some of whom who are not currently in our existing servicing portfolio;
•
correspondent lending - purchases closed mortgage loans from a network of lenders in the marketplace; and
•
wholesale lending - originates mortgage loans through a network of approved brokers. During the third quarter of 2016 we re-entered the wholesale channel in an effort to expand our customer base.
Beginning in 2016, we combined our consumer retention and consumer direct call centers to pursue a more streamlined consumer lending process. In January 2016, we exited activities associated with our consumer retail channel, which originated mortgage loans through loan officers. Our consumer retail channel originated $551.3 million in mortgage loans during the year ended December 31, 2015.
Our consumer originations operations offer a range of home purchase and refinance mortgage loan options, including fixed and adjustable rate conventional conforming, Ginnie Mae, FHA, VA, USDA and jumbo products. A conventional conforming loan is a mortgage loan that conforms to GSE guidelines, which include, but are not limited to, limits on loan amount, loan-to-value ratios, debt-to-income ratios, and minimum credit scores. Our product offerings include special financing programs such as HARP, which has expanded loan-to-value limits for qualified applicants as compared to conventional conforming loans. The mortgage loans we fund are generally eligible for sale to GSEs or insured by government agencies.
We underwrite the mortgage loans we originate generally to secondary market standards, including the standards set by Fannie Mae, Freddie Mac, Ginnie Mae, the FHA, the USDA, the VA, and jumbo loan investor programs. Loans are reviewed by our underwriters in an attempt to ensure each mortgage loan is documented according to, and its terms comply with, the applicable secondary market standard. Our underwriters determine loan eligibility based on specific loan product requirements, such as loan-to-value, FICO, or maximum loan amount. Third-party diligence tools are utilized by our underwriters to validate data supplied by the potential borrower and to uncover potential discrepancies. We conduct audits on our underwriters to confirm proper adherence to our internal guidelines and polices, which audits are in addition to our standard quality control review. These audits are designed to provide an additional layer of internal review in an attempt to further mitigate quality defects and repurchase risk in the originations process.
Within our correspondent lending channel, we generally purchase the same types of loans that we originate in our consumer originations channel, although the mix varies among these channels. Correspondent lenders with which we do business agree to comply with our client guide, which sets forth the terms and conditions for selling loans to us and generally governs the business relationship. We monitor and attempt to mitigate counterparty risk related to loans that we acquire through our correspondent lending channel by conducting quality control reviews of correspondent lenders, reviewing compliance by correspondent lenders with applicable underwriting standards and our client guide, and evaluating the credit worthiness of correspondent lenders on a periodic basis. In 2016 , our correspondent lending channel purchased loans from 502 lenders in the marketplace, of which 45 were associated with approximately half of our purchases.
Within our wholesale lending channel, we originate loans through mortgage brokers. Loans sourced by mortgage brokers are underwritten and funded by us and generally close in our name. Through the wholesale channel, we generally originate the same types of loans that we originate in our consumer originations channel, although the mix varies among these channels. We underwrite and process all loan applications submitted by the mortgage brokers in a manner consistent with that described above for the consumer originations channel. Mortgage brokers with whom we do business agree to comply with our client guide, which sets forth the terms and conditions for brokering loans to us and generally governs the business relationship. We monitor and attempt to mitigate counterparty risk related to loans that we originate through our wholesale lending channel by conducting quality control reviews of mortgage brokers, reviewing compliance by brokers with applicable underwriting standards and our client guide, and evaluating the credit worthiness of brokers on a periodic basis.
Our capital markets group is responsible for pricing loans and managing the interest rate risk through the time a loan is sold to third parties and managing the risk (which we call the “pull-through risk”) that loans we have locked will not be closed and funded in an attempt to maximize loan sale profitability through our various originations channels. The capital markets group uses models and hedging analysis in an attempt to maximize profitability while minimizing the risks inherent in the originations business.

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During 2015, the mix of mortgage loans sold by our Originations segment (which includes loans originated and purchased through all channels) shifted away from what had historically been substantially all Fannie Mae conventional conforming loans. In 2015, the mix of mortgage loans originated by our Originations segment, based on unpaid principal balance, consisted of (i) 56% Fannie Mae conventional conforming loans, (ii) 35% Ginnie Mae loans and (iii) 9% Freddie Mac conventional conforming loans. In 2016, the mix of mortgage loans originated by our Originations segment, based on unpaid principal balance, consisted of (i) 47% Fannie Mae conventional conforming loans, (ii) 39% Ginnie Mae loans and (iii) 14% Freddie Mac conventional conforming loans.
Our Originations segment revenue, which is primarily net gains on sales of loans, is impacted by interest rates and the volume of loans locked. The margins earned by our Originations segment are impacted by our cost to originate the loans including underwriting, fulfillment and lead costs. We have historically sold our originated and purchased mortgage loans to third parties while retaining the servicing rights. Our future strategy is to shift from retaining the servicing rights for mortgage loans sold to third parties in favor of subservicing.
Reverse Mortgage - Our Reverse Mortgage segment primarily focuses on the servicing of reverse loans. In December 2016, management decided to exit the reverse mortgage originations business, which occurred in January 2017. We intend to fulfill reverse loans in our originations pipeline consistent with our underwriting practices and to fund undrawn amounts available to borrowers, and we will continue to service reverse loans. Reverse loan originations were historically conducted through our consumer direct, consumer retail, wholesale and correspondent lending origination channels.
The consumer retail channel originated reverse loans in 47 states and the District of Columbia through loan officers located in approximately 20 licensed locations throughout the U.S. The consumer direct channel originated reverse loans through call centers with leads purchased from lead purveyors or generated via advertising campaigns. The wholesale channel sourced reverse loans from a network of brokers. The correspondent channel purchased reverse loans from a network of correspondents in the marketplace.
This segment receives cash proceeds at the time reverse loans are securitized. We securitize substantially all our reverse loans through the Ginnie Mae II MBS program into HMBS. Based upon the structure of the Ginnie Mae II MBS program, we determined that these securitizations do not meet all of the requirements for sale accounting, and as such, we account for these transfers as secured borrowings. Under this accounting treatment, the reverse loans remain on our consolidated balance sheets as residential loans. The segment earns net revenue on the net fair value gains on reverse loans and the related HMBS obligations.
This segment also performs subservicing for third-party credit owners of reverse loans, similar to our Servicing segment, and provides other complementary services for the reverse mortgage market, such as real estate owned property management and disposition, for a fee.
Other - As of December 31, 2016, our Other non-reportable segment holds the assets and liabilities of the Non-Residual Trusts and corporate debt. This segment also includes our asset management business, which we are in the process of winding down.
As previously reported, during the first quarter of 2015, we took steps to simplify our business and reorganized our reportable segments to align with our changes in the management reporting structure. As a result of this reorganization, we combined the ARM, Insurance, and Loans and Residuals businesses into the Servicing segment. Refer to Note 31 to the Consolidated Financial Statements for financial information relating to our segments.
Competition
We compete with a great number of institutions in the mortgage banking market for both the servicing and originations businesses as well as in our reverse mortgage and complementary businesses. In the servicing area, we compete with other servicers to acquire MSR and for the right to subservice mortgages for others. Competitive factors in the servicing business include: a servicer’s scale of operations and financial strength; a servicer’s access to capital to fund acquisitions of MSR; a servicer’s ability to meet contractual and regulatory obligations and to achieve favorable performance (e.g., in default management activity) relative to other servicers; a servicer’s ability to provide a favorable experience for the borrower; and a servicer’s cost to service or subservice. In the mortgage originations area, we compete to refinance or provide new mortgages to borrowers whose mortgages are in our existing servicing portfolio. In this area, the price and variety of our mortgage products are important factors of competition, as is the reputation of our servicing business and the quality of the experience the borrower may have had with our servicing business. Since mid-2015, our loan origination and servicing businesses have operated under a single “Ditech” brand. We also compete, principally on the basis of price and process efficiency, to acquire mortgages from correspondent lenders. In the future, as we attempt to grow the amount of purchase money (i.e., non-refinance) mortgages we originate, we expect we will also increasingly compete on the basis of brand awareness.
Across our servicing and originations businesses, technology is an important competitive factor. In particular, we believe it will be increasingly important to enable servicing and originations customers to access our services through our website and mobile devices. We face numerous competitors with greater financial resources, human resources and technology resources than ours, and there can be no assurance that we will be able to compete successfully.

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Technology
Our businesses employ technology by using third-party systems where standardization is key and proprietary systems where functionality, flexibility and time to market are critical to regulatory compliance, customer experience and credit performance. The majority of our proprietary systems are supported by a team of information technology professionals who seek to protect our systems and ensure they are effective. In-house developed proprietary systems are leveraged for customer service, default management, data modeling and reverse mortgage servicing.
On October 27, 2014, we signed a long-term Loan Servicing Agreement with Black Knight Financial Services, LLC for the use of MSP, a mortgage and consumer loan servicing platform. We also use our own proprietary systems for collections, customer service and default management. During the second quarter of 2016, we transitioned approximately 1.4 million loans, or greater than 60% of our mortgage loan servicing portfolio, to MSP, and now have greater than 75% of our mortgage loan servicing portfolio on MSP. Our private label loans, manufactured housing loans and second lien mortgage loans continue to be serviced on our proprietary systems.
Subsidiaries
For a listing of our subsidiaries, refer to Exhibit 21 of this Annual Report on Form 10-K/A.
Employees
We employed approximately 4,900  full-time equivalent employees at December 31, 2016 as compared to approximately 5,900 at December 31, 2015 , all of whom were located in the U.S. The decline in full-time equivalent employees was due primarily to distinct actions we took in 2016 in connection with our continued efforts to enhance efficiencies and streamline processes within the organization, which included various organizational changes to scale our leadership team and support functions to further align with our business needs. We believe we have been successful in our efforts to recruit and retain qualified employees. However, we experience significant turnover with respect to certain roles at the Company, and therefore maintain active and continuous new employee recruiting and training programs. None of our employees is a party to any collective bargaining agreements.
We outsource certain back-office functions that support our loan originations and servicing groups to third-party vendors located in the U.S. and offshore locations in an effort to improve efficiency and reduce cost. These back-office functions include loan set-up, escrow account set-up, claims filing, post-close audits, indexing and imaging. When we outsource a function, we retain a third-party vendor to perform such function as opposed to having our employees perform such function. From time to time we expect to outsource additional back-office and other functions. We have recently increased the number of functions we outsource, as well as our use of offshore vendors generally, especially with respect to certain of our technology functions, and we expect to outsource additional back-office and other functions in the future both domestically and abroad.
Transactions with NRM
On August 8, 2016, Ditech Financial and NRM executed the NRM Flow and Bulk Agreement whereby Ditech Financial agreed to sell to NRM all of Ditech Financial’s right, title and interest in mortgage servicing rights with respect to a pool of mortgage loans, with subservicing retained. The NRM Flow and Bulk Agreement provides that, from time to time, Ditech Financial may sell additional MSR to NRM in bulk or as originated or acquired on a flow basis, subject in each case to the parties agreeing on price and certain other terms.
During 2016, in various bulk sale transactions under the NRM Flow and Bulk Agreement, we sold NRM mortgage servicing rights relating to mortgage loans having an aggregate unpaid principal balance of $59.8 billion as of the applicable closing dates of such transactions, with subservicing retained. As of December 31, 2016, we had received $250.0 million in cash proceeds relating to such sales, which proceeds do not include certain holdback amounts relating to such sales that we expect to be paid to us over time. In addition, we have recently begun to sell NRM, on a flow basis and with subservicing retained, MSR relating to certain mortgage loans that we originate. NRM also acquired substantially all of WCO’s MSR portfolio in the fourth quarter of 2016, which consisted of MSR relating to mortgage loans having an aggregate unpaid principal balance of $9.8 billion as of the applicable closing dates. Ditech Financial subservices these MSR under the NRM Subservicing Agreement.
The initial term of the NRM Flow and Bulk Agreement will expire on the third anniversary of the effective date and shall be renewed for successive one-year terms thereafter unless either party provides written notice to the other party of its election not to renew. Each party to the NRM Flow and Bulk Agreement also has termination rights upon the occurrence of certain events and NRM can terminate this agreement at any time on 30 days' notice. In connection with Ditech Financial’s entry into the NRM Flow and Bulk Agreement, we entered into a performance and payment guaranty whereby the Parent Company guarantees performance of all obligations and all payments required by Ditech Financial under the NRM Flow and Bulk Agreement.

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In addition, on August 8, 2016, Ditech Financial and NRM entered into the NRM Subservicing Agreement whereby Ditech Financial acts as subservicer for the mortgage loans whose MSR are sold by Ditech Financial to NRM under the NRM Flow and Bulk Agreement and for other mortgage loans as may be agreed upon by Ditech Financial and NRM from time to time, in exchange for a subservicing fee. Under the NRM Subservicing Agreement and a related agreement, Ditech Financial will perform all daily servicing obligations on behalf of NRM with respect to the MSR that are serviced by Ditech Financial pursuant to the terms of the NRM Subservicing Agreement, including collecting payments from borrowers and offering refinancing options to borrowers for purposes of minimizing portfolio runoff.
With respect to Ditech Financial, the initial term of the NRM Subservicing Agreement will expire on the first anniversary of the effective date thereof and will be automatically renewed for successive one-year terms thereafter. Ditech Financial may terminate the NRM Subservicing Agreement without cause at the end of the initial one-year term or at the end of any subsequent one-year renewal term by providing notice to NRM at least 120 days prior to the end of the applicable term. If Ditech Financial elects to terminate the NRM Subservicing Agreement without cause, Ditech Financial will not be entitled to receive any deconversion fee, will be responsible for certain servicing transfer costs and will owe NRM a transfer fee if such termination occurs within five years from the effective date of the agreement. Ditech Financial may also terminate the NRM Subservicing Agreement immediately for cause upon the occurrence of certain events, including, without limitation, any failure by NRM to remit payments (subject to a cure period), certain bankruptcy or insolvency events of NRM, NRM ceasing to be an approved servicer in good standing with Fannie Mae or Freddie Mac (unless caused by Ditech Financial) and any failure by NRM to perform, in any material respect, its obligations under the agreement (subject to a cure period). Upon any termination of the NRM Subservicing Agreement by Ditech Financial for cause, NRM will owe Ditech Financial a deconversion fee and be responsible for certain servicing transfer costs.
With respect to NRM, the initial term of the NRM Subservicing Agreement will expire on the first anniversary of the effective date thereof and thereafter the agreement shall automatically terminate unless renewed by NRM on a monthly basis. If NRM fails to renew the agreement, it will owe Ditech Financial a deconversion fee. NRM may terminate the NRM Subservicing Agreement without cause at any time during the initial one-year term upon at least 90 days prior notice to Ditech Financial. If NRM elects to terminate the NRM Subservicing Agreement without cause, it will owe Ditech Financial a deconversion fee and be responsible for certain servicing transfer costs. NRM may also terminate the NRM Subservicing Agreement immediately for cause upon the occurrence of certain events, including, without limitation, any failure by Ditech Financial to remit payments (subject to a cure period), any failure by Ditech Financial to provide reports to NRM (subject to a cure period), a change of control of Ditech Financial or the Parent Company, the failure of Ditech Financial to satisfy certain portfolio performance measures relating to delinquency rates or advances, Ditech Financial ceasing to be an approved servicer in good standing with Fannie Mae or Freddie Mac, any failure by Ditech Financial or the Parent Company to satisfy certain financial metrics, certain bankruptcy or insolvency events of Ditech Financial or the Parent Company and any failure by Ditech Financial to perform, in any material respect, its obligations under the agreement (subject to a cure period). Upon any termination of the NRM Subservicing Agreement by NRM for cause, Ditech Financial will not be entitled to receive any deconversion fee, will be responsible for certain servicing transfer costs and will owe NRM a transfer fee if such termination occurs within five years from the effective date of the agreement.

With respect to both the NRM Flow and Bulk Agreement and the NRM Subservicing Agreement, Ditech Financial and Walter must satisfy a number of financial metrics, including financial metrics relating to Walter’s consolidated liquidity and consolidated leverage ratio of debt to EBITDA (calculated in accordance with our 2013 Secured Credit Facilities).  Failure to satisfy any of these financial metrics when required would allow termination of these agreements by NRM for cause, and we cannot assure you that, in such event, we would be able to negotiate an amendment, waiver or other arrangement to resolve the matter favorably to us.
Walter Capital Opportunity Corp.
In 2014, we established WCO, a company formed to invest in mortgage-related assets, including MSR and excess servicing spread related to MSR. We own approximately 10% of WCO; third-party investors own the remainder of WCO. Beginning in 2014 and continuing through 2016, WCO, in various transactions, acquired MSR, excess servicing spread and other mortgage-related assets in transactions with us and other market participants. Through our subsidiary investment advisor, we serve as investment manager for WCO and, until the sale of substantially all of its assets, WCO engaged us to subservice its MSR.
In November 2016, WCO entered into a series of agreements whereby it agreed to sell substantially all of its assets, including the sale of substantially all of its MSR portfolio to NRM. In connection with the December 2016 closing of the transactions relating thereto, WCO commenced liquidation activities and we do not expect to sell further assets to WCO.

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Rights Agreement
On November 11, 2016, we entered into an Amended and Restated Section 382 Rights Agreement with Computershare, which amends and restates the Rights Agreement between the Company and Computershare dated as of June 29, 2015, as previously amended. Our Board of Directors had previously authorized, and we declared, a dividend of one preferred stock purchase right for each outstanding share of our common stock. The dividend was payable on July 9, 2015 to stockholders of record as of the close of business on July 9, 2015 and entitled the registered holder thereof to purchase from us one one-thousandth of a fully paid non-assessable share of Junior Participating Preferred Stock, par value $0.01 per share, of the Company at a price of $74.16 , subject to adjustment as provided in the Rights Agreement. Any shares of common stock issued by us after such date also receive such a right. The terms of the preferred stock purchase rights are set forth in the Rights Agreement.
Subsequent to the initial adoption of the Rights Agreement, it was amended to, among other things, permit certain stockholders to acquire up to 25% of the outstanding shares of our common stock. The Company entered into the November 2016 amendment and restatement of the Rights Agreement to, among other things, lower the ownership thresholds permitted pursuant to the Rights Agreement such that if any person or group of persons, including persons who owned more than the threshold percentage of shares on the amendment date, but excluding certain exempted persons, acquires 4.99% or more of our outstanding common stock or any other interest that would be treated as “stock” for the purposes of Section 382, there would be a triggering event potentially resulting in significant dilution in the voting power and economic ownership of such acquiring person or group. The Rights Agreement provides that the rights issued thereunder will expire on November 11, 2017 or upon the earlier occurrence of certain events, subject to the extension of the Rights Agreement by our Board of Directors or the redemption or exchange of the rights by us, in each case as described in, and subject to the terms of, the Rights Agreement.
The November 2016 amendment to the Rights Agreement was intended to help protect our “built-in tax losses” and certain other tax benefits by acting as a deterrent to any person or group of persons acting in concert from becoming or obtaining the right to become the beneficial owner (including through constructive ownership of securities owned by others) of 4.99% or more of the shares of our common stock, or any other interest that would be treated as “stock” for the purposes of Section 382, then outstanding, without the approval of our Board of Directors, subject to certain exceptions.
Laws and Regulations
Our business is subject to extensive regulation by federal, state and local authorities, including the CFPB, HUD, VA, the SEC and various state agencies that license, audit and conduct examinations of our mortgage servicing and mortgage originations businesses. We are also subject to a variety of regulatory and contractual obligations imposed by credit owners, investors, insurers and guarantors of the mortgages we originate and service, including, but not limited to, Fannie Mae, Freddie Mac, Ginnie Mae, FHFA, USDA and the VA/FHA. Furthermore, our industry has been under scrutiny by federal and state regulators over the past several years, and we expect this scrutiny to continue. Laws, rules, regulations and practices that have been in place for many years may be changed, and new laws, rules, regulations and administrative guidance have been, and may continue to be, introduced in order to address real and perceived problems in our industry. We expect to incur ongoing operational, legal and system costs in order to comply with these rules and regulations.
Federal Law
We are required to comply with numerous federal consumer protection and other laws, including, but not limited to:
•
the Gramm-Leach-Bliley Act and Regulation P, which requires initial and periodic communication with consumers on privacy matters and the maintenance of privacy regarding certain consumer data in our possession;
•
the Fair Debt Collection Practices Act, which regulates the timing and content of communications on debt collections;
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the TILA, including HOEPA, and Regulation Z, which regulate mortgage loan origination activities, require certain disclosures be made to mortgagors regarding terms of mortgage financing, regulate certain high-cost mortgages, mandate home ownership counseling for mortgage applicants and regulate certain mortgage servicing activities;
•
the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act and Regulation V, which collectively regulate the use and reporting of information related to the credit history of consumers;
•
the Equal Credit Opportunity Act and Regulation B, which prohibit discrimination on the basis of age, race and certain other characteristics in the extension of credit and requires certain disclosures to applicants for credit;
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the Homeowners Protection Act, which requires the cancellation of mortgage insurance once certain equity levels are reached;
•
the Home Mortgage Disclosure Act and Regulation C, which require reporting of certain public loan data;

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•
the Fair Housing Act and its implementing regulations, which prohibit discrimination in housing on the basis of race, sex, national origin, and certain other characteristics;
•
the Servicemembers Civil Relief Act, as amended, which provides certain legal protections and relief to members of the military;
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the RESPA and Regulation X, which governs certain mortgage loan origination activities and practices and related disclosures and the actions of servicers related to various items, including escrow accounts, servicing transfers, lender-placed insurance, loss mitigation, error resolution, and other customer communications;
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Regulation AB under the Securities Act, which requires registration, reporting and disclosure for mortgage-backed securities;
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certain provisions of the Dodd-Frank Act, including the Consumer Financial Protection Act, which among other things, created the CFPB and prohibits unfair, deceptive or abusive acts or practices;
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the Federal Trade Commission Act, the FTC Credit Practices Rules and the FTC Telemarketing Sales Rule, which prohibit unfair and deceptive acts and practices and certain related practices;
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the TCPA, which restricts telephone solicitations and automatic telephone equipment;
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Regulation N, which prohibits certain unfair and deceptive acts and practices related to mortgage advertising;
•
the Bankruptcy Code and bankruptcy injunctions and stays, which can restrict collection of debts;
•
the Secure and Fair Enforcement for Mortgage Licensing Act; and
•
various federal flood insurance laws that require the lender and servicer to provide notice and ensure appropriate flood insurance is maintained when required.
The Dodd-Frank Act, enacted in 2010, constituted a sweeping reform of the regulation and supervision of financial institutions, as well as the regulation of derivatives, capital market activities and consumer financial services. Among other things, the Dodd-Frank Act created the CFPB, a new federal entity responsible for regulating consumer financial services. The CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage servicers and originators, including TILA, RESPA and the FDCPA. The CFPB also has supervision, examination and enforcement authority over consumer financial products and services offered by certain non-depository institutions and large insured depository institutions. The CFPB's jurisdiction includes persons (such as us) originating, brokering or servicing residential mortgage loans, those persons performing loan modification or foreclosure relief services in connection with such loans and certain entities involved in the transfer of MSR.
Title XIV of the Dodd-Frank Act imposed a number of requirements on mortgage originators and servicers of residential mortgage loans, significantly increased the penalties for noncompliance with certain consumer protection laws and also established new standards and practices for mortgage originators and servicers. Subsequent to the enactment of the Dodd-Frank Act, the CFPB has issued, and is expected to continue to issue, various rules that impact mortgage servicing and originations, including: periodic billing statements; certain notices and acknowledgments; prompt crediting of borrowers’ accounts for payments received; additional notice, review and timing requirements with respect to delinquent borrowers; prompt investigation of complaints by borrowers; additional requirements before purchasing insurance to protect the lender’s interest in the property; certain customer service benchmarks for servicers; servicers’ obligations to establish reasonable policies and procedures; requirements to provide information about mortgage loss mitigation options to delinquent borrowers; rules governing the scope, timing, content and format of disclosures to consumers regarding the interest rate adjustments of their variable-rate transactions; establishing certain requirements relating to billing statements, payment crediting and the provision of payoff statements; preventing or limiting servicers of residential mortgage loans from taking certain actions (e.g. the charging of certain fees); requirements for determining prospective borrowers’ abilities to repay their mortgages; removing incentives for higher cost mortgages; prohibiting prepayment penalties for non-qualified mortgages; prohibiting mandatory arbitration clauses; requiring additional disclosures to potential borrowers; restricting the fees that mortgage originators may collect; requiring new mortgage loan disclosures that integrate the TILA disclosures with the RESPA disclosures for certain covered transactions; and other new requirements, in each case either increasing costs and risks related to servicing and originations or reducing revenues currently generated.

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Recently, the only reverse mortgage loan product we have originated is the HECM, an FHA-insured loan that must comply with FHA and other regulatory requirements. Accordingly, many of the recent federal legal changes affecting our reverse mortgage business relate to the HECM. On September 3, 2013, the FHA announced changes to the HECM program, pursuant to authority under the Reverse Mortgage Stabilization Act, signed into law on August 9, 2013. The changes impact initial mortgage insurance premiums and principal limit factors, impose restrictions on the amount of funds that senior borrowers may draw down at closing and during the first 12 months after closing, and require a financial assessment for all HECM borrowers to ensure they have the capacity and willingness to meet their financial obligations and the terms of the reverse mortgage. Key components of the financial assessment include a credit history and property charge payment history analysis, a cash flow/residual income analysis, and an analysis of compensating factors and extenuating circumstances to determine if the applicant is eligible for a HECM loan. In addition, the changes require borrowers to set aside a portion of the loan proceeds they receive at closing (or withhold a portion of monthly loan disbursements) for the payment of property taxes and homeowners insurance based on the results of the financial assessment. The new HECM requirements generally became effective on September 30, 2013, with the new financial assessment requirements and funding requirements for the payment of property charges taking effect on April 27, 2015.
State Law
We are also subject to extensive state licensing, statutory and regulatory requirements as a mortgage servicer, loan originator and debt collector throughout the U.S. We are subject to ongoing supervision, audits and examinations conducted by state regulators, including periodic requests from state and other agencies for records, documents and information regarding our policies, procedures and business practices.
State laws affecting our businesses have also been evolving. Some changes have occurred on a nationwide basis at the state level due to the establishment and/or amendment of minimum standards under federal law, such as state licensing requirements. Some states may seek to incorporate federal requirements as a requirement imposed on a state licensed entity, while other states may seek to impose their own additional requirements to the extent not preempted under federal law. Additionally, there have been growing trends in state lawmaking focusing on the servicing of mortgage loans related to, for example, data privacy, loan modifications and anti-foreclosure measures.
Recent Regulatory Developments
Servicing Segment
On August 4, 2016, the CFPB announced a final rule addressing changes to existing mortgage servicing rules under Regulation X of RESPA and Regulation Z of TILA. The new final rule clarifies, revises and amends provisions regarding, among other things, force-placed insurance, early intervention and loss mitigation requirements under Regulation X and prompt crediting and periodic statement requirements under Regulation Z. The final rule also addresses proper compliance regarding certain servicing requirements when a person is a potential or confirmed successor in interest, is a debtor in bankruptcy, or sends a cease communication request under the FDCPA. The final rule also makes technical corrections to several provisions of Regulation X and Regulation Z. The majority of the requirements under the final rule are expected to take effect on October 19, 2017.
The CFPB also issued an interpretive rule under the FDCPA relating to servicers' compliance with certain mortgage servicing rules. Most of the provisions of the final rule are expected to take effect on October 19, 2017, and the provisions relating to successors in interest and the provisions relating to periodic statements for borrowers in bankruptcy are expected to take effect April 19, 2018.

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There have been various legal and regulatory developments in Nevada regarding liens asserted by homeowner’s associations for unpaid assessments. In September 2014, the Nevada Supreme Court held that an HOA non-judicial foreclosure sale can extinguish a mortgage lender’s previously-recorded first deed of trust on a property if that foreclosure is to recover assessments categorized as super-priority amounts. In June 2015, the U.S. District Court for the District of Nevada issued an opinion holding that federal law prohibits an HOA foreclosure proceeding from extinguishing a first deed of trust assigned to Fannie Mae. A Nevada state court subsequently reached the same conclusion. The Nevada Supreme Court also reversed a lower court summary judgment decision invalidating an HOA foreclosure sale on the basis that the HOA refused the lienholder’s tender of the super-priority portion of the lien and that the HOA sale was commercially unreasonable. The Nevada Supreme Court ruled that these were issues of fact and remanded for further proceedings. Additional litigation in both state and federal courts and appellate courts is pending with respect to these issues. Also, new legislation in Nevada, which became effective on October 1, 2015, requires HOAs to provide notice to lienholders relating to the default and foreclosure sale and also to provide creditors with a right to redeem the property for up to 60 days following an HOA foreclosure sale. In January 2017, the Nevada Supreme Court ruled that the state’s non-judicial HOA foreclosure statutes in effect prior to the 2015 amendments do not unconstitutionally violate due process and are not a government taking. This opinion conflicts with a 2016 decision of the Ninth Circuit, holding that the statute was unconstitutional. Credit owners may assert claims against servicers for failure to advance sufficient funds to cover unpaid HOA assessments and protect the credit owner’s interest in the subject property. We service numerous loans in Nevada and are involved in litigation and other legal proceedings affected by, or related to, these HOA matters.
On February 16, 2017, the NY DFS issued its final Cybersecurity Requirements for Financial Services Companies, which regulation sets forth certain minimum standards designed to promote the protection of customer information as well as the information technology systems of regulated entities. This regulation, which took effect on March 1, 2017, requires banks, insurance companies and other entities regulated by the NY DFS, including us, to design a cybersecurity program that addresses their specific risk profile, ensures the safety and soundness of the institution and protects its customers. Except in certain specified instances providing for longer compliance periods or reliance on the use of effective alternative compensating controls, entities subject to the rule generally have 180 days from the effective date to comply with its requirements. We currently expect to comply with such requirements within the specified time periods or rely on the use of alternative compensating controls as permitted by the regulation.
Originations Segment
On October 3, 2015, the CFPB's “Know Before You Owe” mortgage disclosure rule, which amended Regulation X of RESPA and Regulation Z of TILA to integrate certain mortgage loan disclosure forms and requirements, became effective. On July 29, 2016, the CFPB announced a proposed rule that would amend such mortgage disclosure rule in order to formalize guidance about the rule, provide greater clarity and certainty and help facilitate compliance within the mortgage industry. In addition to various clarifications, minor changes, and technical corrections, the proposal makes four substantive changes to the rule: (i) creates tolerances for the total of payments disclosure; (ii) provides for an adjustment of the current partial exemption for certain housing assistance loans to clarify that recording fees and transfer taxes are excluded from the exemption's limitation on costs; (iii) includes all cooperatives under the rule regardless of whether the cooperative is classified as real property under state law; and (iv) incorporates and expands upon previous CFPB webinar guidance concerning the sharing of disclosures with sellers and various other parties.
On October 15, 2015, the CFPB issued a final rule that will expand the scope of the Home Mortgage Disclosure Act data reporting requirements while seeking to streamline certain existing requirements. The final rule implements certain changes expressly required by the Dodd-Frank Act as well as additional changes based on the CFPB’s discretionary rulemaking authority, which the CFPB believes will assist in carrying out HMDA's purposes. The amended rule adds new data points for applicant or borrower age, credit score, automated underwriting system information, unique loan identifier, property value, application channel, points and fees, borrower-paid origination charges, discount points, lender credits, loan term, prepayment penalty, non-amortizing loan features, interest rate and loan originator identifier, as well as other data points. The rule also modifies several existing data points. As for types of transactions to be reported, the HMDA rule adopts a dwelling secured standard for transactional coverage, including most closed-end loans and open-end lines of credit secured by a dwelling. The expanded data-collection under the revised rule is expected to begin on January 1, 2018, with reporting expected to begin in 2019.
Reverse Mortgage Segment
On January 19, 2017, HUD published the “Final HECM Rule, FHA: Strengthening the Home Equity Conversion Mortgage Program.” The primary purpose of the Final HECM Rule was to codify into regulation prior guidance issued by HUD under mortgagee letters authorized by the Reverse Mortgage Stabilization Act of 2013 and the Housing and Economic Recovery Act of 2008. The Final HECM Rule addresses a wide range of reverse mortgage origination and servicing issues, and in certain areas, amends prior guidance and rules. The Final HECM Rule has an effective date of September 19, 2017, and confirms that all existing policies and requirements implemented by HUD mortgagee letters will remain in effect until then.

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Federal Regulatory Freeze and Uncertainty
Following the November 2016 Presidential and Congressional elections, a level of heightened uncertainty exists with respect to the future of regulation of mortgage lending and servicing, including the future of the Dodd Frank Act and the CFPB. For example, in January 2017, President Trump issued a Presidential Memorandum and an Executive Order designed to decrease the number of federal regulations. The memorandum directed executive departments and agencies to freeze new or pending regulations, and the order directed agencies to eliminate at least two existing regulations for every proposed regulation. The Office of Management and Budget subsequently clarified that the Executive Order does not apply to independent agencies such as the CFPB, and the applicability of the Presidential Memorandum to such independent agencies is less clear. These events create uncertainty with regard to final regulations already published in the Federal Register but not yet in effect, such as the CFPB’s amendments to the mortgage servicing rules expected to take effect in October 2017 and the Final HECM Rule expected to take effect in September 2017, and also with regard to proposed rules such as the proposal to amend the CFPB's “Know Before You Owe” mortgage disclosure rule. We cannot predict when these rules will take effect, if at all, nor can we predict the specific legislative or executive actions that may follow or what actions federal and state regulators may take in response to potential changes to the Dodd Frank Act or to the regulatory environment generally.
Company Website and Availability of SEC Filings
Our website can be found at www.walterinvestment.com . We make available free of charge on our website or provide a link on our website to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after those reports are electronically filed with, or furnished to, the SEC. To access these filings, go to our website, click on “Investor Relations” and then click on "SEC Filings." We also make available through our website other reports filed with or furnished to the SEC under the Exchange Act, including our proxy statements and reports filed by officers and directors under Section 16(a) of the Exchange Act, as well as our Code of Conduct and Ethics, our Corporate Governance Guidelines, and charters for our Audit Committee, Compensation and Human Resources Committee, Nominating and Corporate Governance Committee, Finance Committee and Compliance Committee. In addition, our website may include disclosure relating to certain non-GAAP financial measures that we may make public orally, telephonically, by webcast, by broadcast, or by similar means from time to time.
From time to time, we may use our website as a channel of distribution of material company information. Financial and other material information regarding the Company is routinely posted on and accessible at http://investor.walterinvestment.com .
Any information on our website or obtained through our website is not part of this Annual Report on Form 10-K/A.
Our Investor Relations Department can be contacted at 3000 Bayport Drive, Suite 1100, Tampa, Florida 33607, Attn: Investor Relations, telephone (813) 421-7694.
ITEM 1A. RISK FACTORS (AS RESTATED)
You should carefully review and consider the risks and uncertainties described below, which are risks and uncertainties that could materially adversely affect our business, prospects, financial condition, cash flows, liquidity and results of operations, our ability to pay dividends to our stockholders and/or our stock price. In addition, to the extent that any of the information contained in this Annual Report on Form 10-K/A constitutes forward-looking information, the risk factors set forth below are cautionary statements identifying important factors that could cause our actual results for various financial reporting periods to differ materially from those expressed in any forward-looking statements made by or on our behalf.
If we fail to operate our business in compliance with both existing and future statutory, regulatory and other requirements, our business, financial condition, liquidity and/or results of operations could be materially and adversely affected.
Our business is subject to extensive regulation by federal, state and local governmental and regulatory authorities, including the CFPB, the FTC, HUD, the VA, the SEC and various state agencies that license, audit, investigate and conduct examinations of our mortgage servicing, origination, insurance, collection, reverse mortgage and other activities. Further, in recent years the policies, laws, rules and regulations applicable to our business have been rapidly evolving. Though we cannot predict how the November 2016 election will impact future regulation, it is likely that federal, state or local governmental authorities will continue to enact laws, rules or regulations that will result in changes in our business practices and increased costs of compliance. However, we are unable to predict whether any such changes will adversely affect our business.

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In addition, the GSEs, Ginnie Mae and other business counterparties also subject us to periodic examinations, reviews and audits, and we routinely conduct our own internal examinations, reviews and audits. These various audits, reviews and examinations of our business and related activities have uncovered, and may in the future uncover, deficiencies in our compliance with our policies and other requirements to which we are subject. While we strive to investigate and remediate such deficiencies, there can be no assurance that any remedial measures we implement, which could involve material expense, will ensure compliance with applicable policies, laws, regulations and other requirements or be deemed sufficient by the GSEs, governmental authorities or other interested parties.
We devote substantial resources (including senior management time and attention) to regulatory compliance and regulatory inquiries, and we incur, and expect to continue to incur, significant costs in connection therewith. Our business, financial condition, liquidity and/or results of operations could be materially and adversely affected by the substantial resources (including senior management time and attention) we devote to, and the significant compliance costs we incur in connection with, regulatory compliance and regulatory inquiries, and any fines, penalties, restitution or similar payments we make in connection with resolving such matters.
Furthermore, our actual or alleged failure to comply with applicable federal, state and local laws and regulations and GSE, Ginnie Mae and other business counterparty requirements, or to implement and adhere to adequate remedial measures designed to address any identified compliance deficiencies, could lead to:
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the loss or suspension of licenses and approvals necessary to operate our business;
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limitations, restrictions or complete bans on our business or various segments of our business;
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disqualification from participation in governmental programs, including GSE programs;
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damage to our reputation;
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governmental investigations and enforcement actions;
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administrative fines and financial penalties;
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litigation, including class action lawsuits;
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civil and criminal liability;
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termination of our servicing and subservicing agreements or other contracts;
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demands for us to repurchase loans;
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loss of personnel who are targeted by prosecutions, investigations, enforcement actions or litigation;
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a significant increase in compliance costs;
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a significant increase in the resources (including senior management time and attention) we devote to regulatory compliance and regulatory inquiries;
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an inability to access new, or a default under or other loss of current, liquidity and funding sources necessary to operate our business;
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restrictions on mergers and acquisitions;
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impairment of assets;
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conservatorship or receivership by order of a court or regulator; and
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an inability to execute on our business strategy.
Any of these outcomes could materially and adversely affect our reputation, business, financial condition, prospects, liquidity and/or results of operations.
The mortgage servicing industry has been and remains under a higher degree of scrutiny from state and federal regulators and other authorities, with particular attention directed at larger non-bank servicing organizations such as Walter Investment. We cannot guarantee that any such scrutiny and investigations will not materially adversely affect us.

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Our failure to comply with existing and future rules and regulations relating to the origination and servicing of residential loans, and/or more stringent enforcement of such rules and regulations by the CFPB, HUD and other federal and state agencies could result in enforcement actions, fines, penalties and reputational damage.
On July 21, 2010, the Dodd-Frank Act was signed into law for the express purpose of further regulating the financial services industry, including mortgage origination, sales, servicing and securitization. The CFPB, a federal agency established pursuant to the Dodd-Frank Act, officially began operation on July 21, 2011. The CFPB is charged, in part, with enforcing laws involving consumer financial products and services, including mortgage finance and servicing and reverse mortgages, and is empowered with examination, enforcement and rulemaking authority.
The Dodd-Frank Act established new standards and practices for mortgage originators and servicers, including determining prospective borrowers’ abilities to repay their mortgages, removing incentives for higher cost mortgages, prohibiting prepayment penalties for non-qualified mortgages, prohibiting mandatory arbitration clauses, requiring additional disclosures to potential borrowers, restricting the fees that mortgage originators may collect, new mortgage loan disclosures that integrate TILA and RESPA disclosures for certain covered transactions and other new requirements.
In recent years, HUD and the DOJ have pursued actions against FHA-approved lenders, including RMS, under the False Claims Act, which imposes liability on any person who knowingly makes a false or fraudulent claim for payment to the U.S. government. Potential penalties are significant as these actions may result in treble damages and several large settlements have been entered into by HUD-approved mortgagees who have allegedly violated the False Claims Act. RMS received a subpoena dated June 16, 2016 from the Office of Inspector General of HUD requiring RMS to produce documents and other materials relating to, among other things, the origination, underwriting and appraisal of reverse mortgages for the time period since January 1, 2005. RMS also received a subpoena from the Office of Inspector General of HUD dated January 12, 2017 requesting certain documents and information relating to the origination and underwriting of certain specified loans. This investigation, which is being conducted in coordination with the U.S. Department of Justice, Civil Division, could lead to a demand or claim under the False Claims Act, which allows for penalties and treble damages, or other statutes. See Item 3. Legal Proceedings for additional information.
In addition, the DOJ could take the position that it could initiate actions against Fannie Mae- and Freddie Mac-approved lenders and servicers for alleged violations of the False Claims Act as a result of noncompliance with the GSE’s underwriting and other guidelines, given the FHFA conservatorship.
Regulations under the Dodd-Frank Act, bulletins issued by the CFPB pursuant to its authority, and other actions by the CFPB, HUD, the VA and other federal agencies could materially and adversely affect the manner in which we conduct our businesses, and have and could continue to result in heightened federal regulation and oversight of our business activities and in increased costs and potential litigation associated with our business activities.
We are subject to state licensing requirements and incur related substantial compliance costs, and our business would be adversely affected if we encountered a suspension or termination of our licenses.
Our operations are subject to regulation, supervision and licensing under various federal, state and local statutes, ordinances and regulations. Although we are not a bank or bank holding company, in most states in which we operate, one or more regulatory agencies regulate and enforce laws relating to non-bank mortgage servicing companies and/or mortgage origination companies such as Ditech Financial and RMS. These rules and regulations generally provide for licensing as a mortgage servicing company, mortgage origination company, debt collection agency and/or third-party default specialist, as applicable, requirements as to the documentation, individual licensing of our employees and employee hiring background checks, licensing of independent contractors with whom we contract, restrictions on collection practices, disclosure and record-keeping requirements and enforcement of borrowers' rights. In certain states, we are subject to periodic examination by state regulatory authorities. Some states in which we operate require special licensing or provide extensive regulation of our business, and state regulators may have broad discretion to restrict our activities or to suspend approval or withdraw our licenses for non-compliance with applicable requirements. The failure to respond appropriately to regulatory inquiries and investigations or to satisfy state regulatory requirements could result in our ability to operate in the state being terminated, cause a default under our servicing agreements, impact our ability to originate new loans or service loans and have a material adverse effect on our financial condition and operations.
Regulatory changes could increase our costs through additional or stricter licensing laws, disclosure laws or other regulatory requirements and could impose conditions to licensing that we or our personnel are unable to meet. Future legislation and changes in regulation may significantly increase the compliance costs on our operations or impact overall profitability of our business. This could make our business cost-prohibitive in the affected state or states and could materially affect our business.

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Legal proceedings and related costs may increase and could adversely affect our financial results.
We are involved in various legal proceedings, including numerous litigations that arise in the ordinary course of our business (including numerous putative class actions). Like other participants in our industry, we have been and may continue to be the subject of class action and other lawsuits and of regulatory actions by state attorneys general and federal and state regulators and enforcement agencies.
Litigation and other proceedings have required, and may require in the future, that we pay attorneys' fees, settlement costs, damages (including punitive damages), penalties or other charges, which could materially adversely affect our financial results and condition and damage our reputation.
Governmental and regulatory investigations, both state and federal, have increased in all areas of our business over the last several years. The costs of responding to the investigations can be substantial. In addition, government-mandated changes, resulting from investigations or otherwise, to our loan origination and servicing practices have led, and may continue to lead, to higher costs and additional administrative burdens, such as record retention and informational obligations.
From time to time, we have entered into agreements or orders to settle investigations, potential litigations or other enforcement actions against us by governmental and regulatory authorities. Complying with settlements can be costly, and if we fail to comply we could be subject to sanctions, including actions for contempt, actions for additional fines or actions alleging violations of law. The announcement and terms of such settlements could adversely affect our reputation and, if the settlements involve findings that we have breached the law, could cause a breach of or default under our financing agreements, our servicing or subservicing contracts or other contractual obligations. Such settlements, our efforts to comply with settlements and our failure to comply with settlements could have a material adverse effect on our business, business practices, prospects, results of operations, liquidity and financial condition.
We establish reserves for pending or threatened litigation and regulatory matters when it is probable that a loss has been incurred and the amount of such loss can be reasonably estimated. Litigation and regulatory matters involve considerable inherent uncertainties, and our estimates of loss are based on judgments and information available at the time. Our estimates may change from time to time for various reasons, including developments in the matters. There cannot be any assurance that the ultimate resolution of our litigation and regulatory matters will not involve losses, which may be material, in excess of our recorded accruals or estimates of reasonably possible losses. See Note 33. Commitments and Contingencies to our Consolidated Financial Statements and Item 3. Legal Proceedings for additional information.
Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations.
We have substantial levels of indebtedness. As of December 31, 2016 , we had approximately $4.2 billion of total indebtedness outstanding, the majority of which was secured, including:
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$1.4 billion of indebtedness under our 2013 Term Loan;
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$538.7 million aggregate principal amount of Senior Notes;
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$242.5 million aggregate principal amount of Convertible Notes;
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$783.2 million , in the aggregate, of indebtedness under various servicing advance financing structures and the Early Advance Reimbursement Agreement; and
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$1.2 billion , in the aggregate, of indebtedness under various master repurchase agreements.
All of these amounts of indebtedness exclude (i) intercompany indebtedness, (ii) guarantees of affiliate debt and (iii) certain mortgage-backed debt and HMBS-related obligations (which are non-recourse to us and our subsidiaries).
Our high level of indebtedness could have important consequences, including:
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increasing our vulnerability to downturns or adverse changes in general economic, industry or competitive conditions and adverse changes in government regulations;
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requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;
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exposing us to the risk of increased interest rates as certain of our unhedged obligations are at a variable rate of interest;
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limiting our ability to make strategic acquisitions or causing us to make non-strategic divestitures;

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limiting our ability to pursue strategic and operational goals;
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exposing us to the risk of not being able to refinance our indebtedness on terms that are commercially acceptable to us, or at all;
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limiting our ability to obtain additional financing for working capital, capital expenditures, product or service line development, debt service requirements, acquisitions and general corporate or other purposes; and
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limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors with lower debt levels.
We have engaged legal and financial debt restructuring advisors, and we have been reviewing a number of potential alternatives to reduce leverage.
We are a highly leveraged company, in relation to our ability to service our debt and on a relative basis in comparison to our peers. We depend upon ongoing access to the loan markets and the capital markets on commercially satisfactory terms to finance our business on a daily basis, and we would also need access to those markets to refinance our corporate debt, of which $242.5 million becomes due in 2019, $1.4 billion becomes due in 2020 and $538.7 million becomes due in 2021. We have engaged legal and financial debt restructuring advisors, and we have been reviewing a number of potential actions we may take to reduce our leverage. There can be no assurance as to when or whether we will determine to implement any action as a result of this review, whether the implementation of one or more of such actions will be successful, or the effects the failure to take action may have on our business, our ability to achieve our operational and strategic goals or our ability to finance our business or refinance our indebtedness. The failure to develop and implement steps to address our level of corporate leverage may have a material adverse effect on our business, prospects, results of operations, liquidity and financial condition, and our ability to refinance our corporate level indebtedness as it becomes due in future years.
We may not be able to generate sufficient cash to meet all of our obligations or service all of our indebtedness and may not be able to extend or refinance our indebtedness. If we are unable to do so, we may be forced to take other actions to satisfy our obligations, which may not be successful.
Our ability to make required payments on our debt and other obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control, including the risk factors set forth herein. We have recorded significant losses in 2014, 2015 and 2016. We cannot assure you we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness or to meet our other obligations such as our obligations to repurchase HECM loans or our mandatory clean-up call obligations related to our Non-Residual Trusts.
In addition, we conduct a substantial part of our operations through our subsidiaries. Accordingly, our ability to repay our indebtedness depends on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, debt repayment or otherwise. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness.
Much of our debt is short-term and some of our facilities not committed, so we regularly seek to extend or refinance our existing indebtedness. Our ability to extend, renew or refinance our indebtedness on favorable terms, or at all, is uncertain and may be affected by global economic and financial conditions and other factors outside our control. In addition, our ability to incur secured indebtedness (which would generally enable us to achieve better pricing than the incurrence of unsecured indebtedness) depends in part on the value of our assets, which depends, in turn, on the strength of our cash flows and results of operations, and on economic and market conditions and other factors. From time to time in the recent past, we have obtained waivers or amendments of covenants in our debt agreements. If we are unable to obtain needed waivers or amendments in the future, we could experience material adverse consequences.
If our cash flows and capital resources are insufficient to fund our debt service and other obligations or we are unable to extend or refinance our indebtedness, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations, and we could be forced to seek relief under the U.S. Bankruptcy Code.

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Despite our current debt levels, we may still incur substantially more debt or take other actions which would intensify the risks discussed above.
Despite our current consolidated debt levels, we and our subsidiaries are permitted to and may incur substantial additional debt in the future (including in connection with additional acquisitions), some of which may be secured, subject to the restrictions contained in our debt instruments. Although the 2013 Secured Credit Facilities and the Senior Notes Indenture contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. Any such indebtedness could increase our leverage and the risks we face from indebtedness. We may also be permitted to take a number of other actions that could have the effect of diminishing our ability to make payments on our indebtedness when due.
Our debt agreements contain covenants that restrict our operations and may inhibit flexibility in operating our business and increasing revenues.
Our 2013 Secured Credit Facilities and the Senior Notes Indenture contain various covenants that limit our ability to engage in specified types of transactions. These covenants limit our and certain of our subsidiaries' ability to, among other things:
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incur additional indebtedness or issue certain preferred shares;
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pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments;
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make certain investments;
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sell or transfer assets;
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create liens;
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consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and
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enter into certain transactions with our affiliates.
Certain of these covenants are subject to varying interpretation, making it possible that we and our creditors disagree as to whether we have complied with our obligations under our debt agreements. A breach, or alleged breach, of any of these covenants could result in a default and our lenders could elect to declare all amounts outstanding to be immediately due and payable and to terminate all commitments to extend further credit. If we were unable to repay those amounts, the secured lenders could proceed against the collateral granted to them to secure such indebtedness. There can be no assurance that we will have sufficient assets to repay amounts due under our 2013 Secured Credit Facilities and our other indebtedness.
Our failure to renew one or more of our advance financing facilities or warehouse facilities, or any loss of a material amount of borrowing capacity under such facilities, could have a material adverse effect on our business, financial condition, liquidity or results of operations.
We have financing facilities that we depend upon to finance, on a short-term basis, our servicer advances (excluding advances made on loans we subservice which we finance, on a short-term basis, with available cash) and our residential loan originations and repurchase activities or obligations, including the repurchase of HECMs out of Ginnie Mae securitization pools. Each of these facilities is typically subject to renewal every year and contains provisions that could prevent us from utilizing any unused capacity under such facility and/or that could accelerate our repayment of amounts outstanding under such facility. Only servicing advances and residential loans (including repurchased residential loans) that meet certain eligibility requirements as defined in the relevant financing facility agreements are eligible to be financed using such facilities. The financing facilities require us to maintain a good standing relationship with the GSEs and/or Ginnie Mae, and if any contract governing such relationship were terminated, it would limit or eliminate our ability to fund our borrowing needs. In addition, amounts borrowed under our servicing advance facilities are due on a fixed date (unless extended) and, in certain circumstances, we may be required to repay such amounts before we have been reimbursed for the related advances.
Our failure to renew one or more of these financing facilities on terms acceptable to us, the acceleration of amounts due under such facilities or our loss of a material amount of borrowing capacity under such facilities, could have a material adverse effect on our business, financial condition, liquidity or results of operations.

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Certain of these financing arrangements contain restrictions, covenants, and representations and warranties that, among other conditions, require us to satisfy specified financial and asset quality tests and may restrict our ability to engage in mergers or consolidations. In the past, including recently, we have obtained waivers or amendments from certain of our lenders in order to maintain compliance with certain covenants and other terms of our financing facilities, and we expect to seek waivers or amendments in the future if necessary. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources for a discussion of certain recent amendments and waivers. There is no assurance our lenders would consent to a waiver or amendment in the event of potential noncompliance, and in the past such consent has been, and in the future it may be, conditioned upon the receipt of a cash payment, increased interest rates or other revised terms. If we fail to meet or satisfy any covenants or representations and warranties contained in our financing agreements, including the failure to maintain or satisfy requirements imposed by the GSEs or Ginnie Mae, or the failure to comply with applicable law, we could be in default under these agreements and our lenders could elect to declare any and all amounts outstanding under the agreements immediately due and payable, enforce their respective interests against collateral pledged under such agreements, and restrict our ability to make additional borrowings. Many of our financing agreements contain cross-default provisions, such that if a default occurs under any one agreement, the lenders under our other agreements also could declare a default.
Our business strategy may not be successful in returning us to profitability.
We recorded significant net losses in each of 2016, 2015 and 2014. During those years, despite our efforts to reduce our expenses, dispose of certain businesses, eliminate certain activities and improve operations we were not successful in meeting key business goals and generating profits. Our current strategy contemplates further cost reductions, operational enhancements and streamlining of our businesses and reduction of leverage. We have also engaged debt restructuring advisors and have been reviewing a number of potential actions we may take to reduce our leverage. We cannot control all of the factors that affect our ability to achieve our goals, and some elements of our strategy, such as our goal of improving operational performance, may require expenditures and investments that adversely affect our financial results.
Our business plan also assumes that we will be able to sell the majority of the MSR we originate to third parties who retain us to subservice such MSR. Although we have arrangements pursuant to which we may from time to time sell MSR to NRM, and although we are in discussions with other parties about the possibility of selling MSR to them, we have no firm commitments pursuant to which we can sell MSR and we may be unable to find buyers for MSR in adequate volume or at suitable prices. If we are unable to sell enough MSR in accordance with our plans, we could experience a variety of material adverse consequences, including the failure to achieve our plan goals, liquidity shortages, and a need to reduce origination volumes.
We may be unsuccessful in implementing our strategy and returning the Company to profitability. Failure to become profitable could result in material adverse consequences for us, including defaults under credit agreements that have minimum profitability covenants, related cross defaults in other credit agreements, a reduction in the number of counterparties that are willing to do business with us (including GSEs, agencies and primary servicers), a loss of key personnel and other significant adverse consequences.
Our business is highly dependent on U.S. government-sponsored entities or agencies, and any changes in these entities or agencies or their current roles, or any failure by us to maintain our relationships with such entities or agencies, could materially and adversely affect our business, liquidity, financial position and/or results of operations.
The U.S. residential mortgage industry in general and our business in particular are highly dependent on Fannie Mae, Freddie Mac and Ginnie Mae. We receive compensation for servicing loans, most of which are Fannie Mae, Freddie Mac or Ginnie Mae residential loans. In addition, Ditech Financial sells mortgage loans to GSEs, which include mortgage loans in GSE guaranteed securitizations, and is an issuer of MBS guaranteed by Ginnie Mae and collateralized by Ginnie Mae mortgage loans. RMS is an issuer of HMBS, which are guaranteed by Ginnie Mae and collateralized by participation interests in HECMs, which are insured by the FHA.
Ditech Financial is: (i) a Fannie Mae approved seller/servicer pursuant to a Mortgage Selling and Servicing Contract between Ditech Financial and Fannie Mae, dated March 23, 2005, as amended; (ii) a Freddie Mac approved seller/servicer pursuant to a Master Commitment between Ditech Financial and Freddie Mac, dated September 29, 2016, as amended; and (iii) a Ginnie Mae approved issuer/servicer pursuant to (a) an approval letter from Ginnie Mae to Ditech Financial, dated February 26, 2010, as amended, and (b) a Master Servicing Agreement between Ditech Financial and Ginnie Mae, dated October 9, 2015, as amended. Ditech Financial is also a HUD/FHA approved mortgagee, a VA approved non-supervised lender and a USDA approved participant in the USDA Rural Development Single Family Housing Guaranteed Loan Program.
RMS is: (i) a Ginnie Mae approved issuer/servicer pursuant to (a) an approval letter from Ginnie Mae to RMS, dated January 29, 2008, as amended, and (b) a Master Servicing Agreement between Ginnie Mae and RMS, dated May 19, 2008, as amended; (ii) a Fannie Mae approved servicer of reverse mortgages pursuant to a Mortgage Selling and Servicing Contract between RMS and Fannie Mae, dated September 10, 2007, as amended; and (iii) an approved Title I and Title II FHA mortgagee pursuant to Origination Approval Agreements, dated May 8, 2007, as amended.

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Our ability to originate and sell mortgage loans under the GSE and Ginnie Mae programs reduces our credit exposure and mortgage inventory financing costs. Our status as a Fannie Mae and Freddie Mac approved seller/servicer is subject to compliance with each GSE’s respective selling and servicing guidelines and failure to adhere to such guidelines could result in the unilateral termination or suspension of our status as an approved seller/servicer. Our status as a Ginnie Mae approved issuer/servicer is subject to compliance with Ginnie Mae’s issuer and servicing guidelines and failure to adhere to such guidelines could result in the unilateral termination or suspension of our status as an approved issuer/servicer. Our failure to maintain each of our various residential loan origination, servicing, issuer and related approvals with the GSEs and Ginnie Mae could materially and adversely affect our business, liquidity, financial position and results of operations.
In 2016, we earned approximately 46% of our total revenues from servicing Fannie Mae residential loans and approximately 9% each from servicing Freddie Mac and Ginnie Mae residential loans. Our ability to generate revenues in our mortgage originations business is highly dependent on programs administered by Fannie Mae, Freddie Mac and Ginnie Mae; during 2016, approximately 47% , 14% and 39% of the mortgage loans our Originations segment sold or securitized based on unpaid principal balance were Fannie Mae, Freddie Mac and Ginnie Mae residential loans, respectively. Our failure to maintain our relationships with Fannie Mae, Freddie Mac or Ginnie Mae could materially and adversely affect our business, liquidity, financial position and results of operations.
There is significant uncertainty regarding the future of Fannie Mae and Freddie Mac, including with respect to how long they will continue to be in existence, the extent of their roles in the market and what forms they will have. On September 7, 2008, the FHFA placed Fannie Mae and Freddie Mac into conservatorship. As the conservator of Fannie Mae and Freddie Mac, the FHFA controls and directs the operations of Fannie Mae and Freddie Mac. The roles of Fannie Mae and Freddie Mac could be significantly reduced or eliminated and the nature of the guarantees provided by such GSEs could be considerably limited relative to historical practice. Any adverse change in the traditional roles of Fannie Mae, Freddie Mac or Ginnie Mae in the U.S. mortgage market, any discontinuation of, or significant reduction in, the operations or level of activity of Fannie Mae, Freddie Mac or Ginnie Mae in the primary or secondary U.S. mortgage market, or any adverse change in the underwriting guidelines utilized by, and mortgage loan programs supported by, Fannie Mae, Freddie Mac or Ginnie Mae could materially adversely affect our business, liquidity, financial position and results of operations. Additionally, the FHFA has in the past increased guarantee fees that the GSEs charge lenders for guaranteeing the timely payment of principal and interest on their mortgage-backed securities and we cannot assure you that they will not increase such fees in the future. If there is any increase in guarantee fees or changes to their structure this may generally raise lending costs, restrict the availability of credit, particularly to higher risk borrowers, and negatively affect our ability to grow, and the performance of, both our servicing and lending businesses.
Our mortgage servicing business involves significant operational risks.
Our mortgage servicing business involves, among other things, complex record-keeping, the handling of numerous payments each month, a significant amount of consumer contact, reporting to credit agencies, managing servicing advances and participation in foreclosure and bankruptcy proceedings, all of which are subject to detailed, prescriptive, changing and sometimes unclear regulation, contracts and client requirements, including the requirements of the GSEs, Ginnie Mae and our subservicing clients. Performing all of the tasks involved in mortgage servicing in a compliant, timely and profitable manner involves significant operational risk. Operational risks include poor management oversight and decisions, human error by our servicing employees, weak processes and procedures, inadequate resources devoted to key processes, problems with the numerous systems and technologies that comprise our servicing platform and poor records or data inputs by us or prior servicers from whom we have acquired servicing rights or responsibilities. For these and other reasons, we have experienced and may in the future experience significant operational deficiencies and compliance failures across various parts of our servicing operations. We have incurred and expect to continue to incur significant expenses associated with the identification and remediation of operational deficiencies and compliance failures and the reduction of operational risk. These cost increases have not been matched by increases in the compensation structure for owners of, or subservicers of, MSR. Operational deficiencies and compliance failures could materially adversely affect our business in many ways, including by damaging our customer relationships, causing us to breach our contractual servicing or subservicing obligations and our obligations under our warehouse, advance financing and other credit facilities and putting us in breach of law or regulation. Such deficiencies and failures have adversely affected our past results of operations and could, in the future, cause a material adverse effect on our business, prospects, results of operations, liquidity and financial condition.

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Operational risks could cause us to fail to meet the performance standards required by counterparties such as the GSEs, Ginnie Mae and our subservicing clients, which could in turn lead to a termination of our servicing rights and subservicing contracts. By some measures, such as delinquency rates for our loan servicing portfolio, during 2016 our servicing performance deteriorated significantly relative to our past performance and to that of other servicers, following the introduction of new servicing technology, changes in servicing practices, site consolidation and other developments. While we are taking steps intended to improve our servicing performance, we cannot be certain that our efforts will have sufficient or timely results. If we are unable to improve our servicing performance, we could face various material adverse consequences, including a material increase in compensatory fees we are charged by the GSEs (based on performance against benchmarks for various servicing metrics), competitive disadvantage, the inability to win new subservicing business and the termination (potentially for cause and without payment to us of any termination fee or other compensation) of our servicing rights or subservicing contracts.
When we acquire the rights to service mortgages, particularly GSE mortgages, we have in the past, and may in the future, incur liability that is the result of errors or violations of law attributable to prior originators and servicers of such mortgages to the extent applicable law or our contractual arrangements expose us to such liability, which is normally the case absent additional contractual arrangements that are negotiated on a transaction by transaction basis. In certain circumstances, we have obtained contractual arrangements meant to minimize our exposure to such liabilities. Such contractual arrangements can take the form of, for example, liability bifurcation agreements with the GSEs pursuant to which such liabilities are not assumed by us, or an indemnification pursuant to which we are indemnified for such liabilities by the former owners of the MSR. There is no assurance that any such arrangements, even if obtainable, enforceable and collectible, will be sufficient in amount, scope or duration to fully offset the possible liabilities arising from a particular acquisition. Furthermore, there is no assurance that any such indemnification will cover losses resulting from claims that may be asserted against us by a GSE or others with respect to errors or violations that occurred prior to a particular acquisition by us.
A downgrade in our servicer ratings could have an adverse effect on our business, financial condition or results of operations.
Standard & Poor's and Moody's rate us as a residential loan servicer. Certain of these ratings have been downgraded in the past, and any of these ratings may be downgraded in the future. Any such downgrade could adversely affect our business, financial condition or results of operations, as well as our ability to finance servicing advances and maintain our status as an approved servicer by Fannie Mae, Freddie Mac and Ginnie Mae. In particular, the Servicing Guide: Fannie Mae Single Family, published February 15, 2017, and the Selling Guide: Fannie Mae Single Family, published January 31, 2017, contain certain requirements with respect to an approved Fannie Mae servicer’s maintenance of minimum servicer ratings. Our failure to maintain favorable or specified ratings may cause our termination as servicer and further impair our ability to consummate future servicing transactions, which could have an adverse effect on our business, financial condition or results of operations. Refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Ratings for additional information relating to our servicer ratings.
An increase in delinquency rates could have a material adverse effect on our business, financial position, results of operations and cash flows.
The delinquency rate associated with our servicing portfolio increased at December 31, 2016 as compared to December 31, 2015. Delinquency rates can have a significant impact on our revenues and expenses and the value of our MSR. For example, an increase in delinquencies may result in lower revenues because, for some GSE and other business, we may only collect servicing fees for performing loans. Additionally, while increased delinquencies may generate higher ancillary fees, including late fees, these fees are not likely to be recoverable in the event that the related loan is liquidated and are generally only recognized as revenue upon collection. In addition, an increase in delinquencies lowers the interest income we receive on cash held in collection and other accounts. Delinquencies can also increase our liability for servicing advances, as we may be required to advance certain payments early in a delinquency, which could impact our liquidity. An increase in delinquencies has resulted, and will result in a higher cost to service due to the increased time and effort required to collect payments from delinquent borrowers. Further, increases in delinquencies could result in lower servicer ratings, the termination of our subservicing contracts or the transfer of servicing away from us, which in turn could have a material adverse effect on our business, prospects, results of operations, liquidity and financial condition.

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Fannie Mae, with respect to Fannie Mae loans that we service, and Freddie Mac, with respect to Freddie Mac loans that we service, may terminate Ditech Financial as servicer of such loans, with or without cause, and in connection therewith transfer the related servicing rights to a third party.
Under the terms of Ditech Financial's master servicing agreements (including any amendments and addendums thereto) with each of Fannie Mae and Freddie Mac, Fannie Mae, with respect to Fannie Mae loans that Ditech Financial services, and Freddie Mac, with respect to Freddie Mac loans that Ditech Financial services, may terminate us as servicer of such loans, with or without cause, transfer the servicing rights relating to such loans to a third party and, under certain circumstances, cause such a transfer to occur without payment to us of any consideration in connection therewith. Some provisions of these agreements are open to subjective interpretation or depend upon the judgment or determination of Fannie Mae or Freddie Mac, so we may not be able to determine in advance whether these are grounds for terminating us as servicer or transferring servicing rights away from us.
For example, Freddie Mac may disqualify or suspend Ditech Financial as servicer of some or all of the Freddie Mac loans it services, with or without cause. In connection with any such termination by Freddie Mac without cause, we would have a right to a specified termination fee; however, in connection with any such termination by Freddie Mac for cause, we would not have any right to a termination fee or other consideration in connection with such termination and the related transfer of servicing rights to another servicer. Events that could allow Freddie Mac to terminate Ditech Financial for cause as servicer of some or all of the Freddie Mac loans we service include, without limitation, the impending or actual insolvency of Ditech Financial or an affiliate thereof; the filing of a voluntary petition by Ditech Financial or an affiliate thereof under federal bankruptcy or state insolvency laws; Ditech Financial’s failure to maintain qualified staff and/or adequate facilities to assure the adequacy of servicing of Freddie Mac loans; any weakness or notable change in the financial or organizational status or management of Ditech Financial or an affiliate thereof, including any adverse change in profitability or liquidity that, in the opinion of Freddie Mac, could adversely affect Freddie Mac; Ditech Financial’s failure to meet any eligibility requirement, including failure to maintain acceptable net worth; Ditech Financial having delinquency rates or REO rates higher than certain averages; and Freddie Mac’s determination that Ditech Financial’s overall performance is unacceptable (taking into account, among other things, scorecard results that rate absolute and comparative performance with respect to various measures such as loss mitigation, workout effectiveness, default timeline management, data integrity, investor reporting and alternatives to foreclosure).
Similarly, Fannie Mae has the ability to terminate Ditech Financial as servicer for some or all of the Fannie Mae loans it services, with or without cause. In connection with any such termination by Fannie Mae without cause, we would have a right to a specified termination fee; however, in connection with any such termination by Fannie Mae for cause, we would not have any right to a termination fee or other consideration in connection with such termination and the related transfer of servicing rights to another servicer. Events that could allow Fannie Mae to terminate us for cause as servicer of some or all of the Fannie Mae loans we service include, without limitation, a breach of the mortgage selling and servicing contract by Ditech Financial; unacceptable performance as determined by Fannie Mae with regard to Ditech Financial’s compliance with, among other things, servicer performance measurements and any written performance improvement plan; Ditech Financial’s insolvency, the adjudication of Ditech Financial as bankrupt or the execution by Ditech Financial of a general assignment for the benefit of its creditors; any change in Ditech Financial’s financial status that, in Fannie Mae’s opinion, materially and adversely affects Ditech Financial’s ability to provide satisfactory servicing of mortgages; the sale of a majority interest in Ditech Financial without Fannie Mae’s prior written consent; a change in Ditech Financial’s financial or business condition, or in its operations, which, in Fannie Mae’s sole judgment, is material and adverse; Ditech Financial has certain delinquency rates or REO rates more than 50% higher than the average of such rates for certain specified Fannie Mae portfolios; and any judgment, order, finding or regulatory action to which Ditech Financial is subject that would materially and adversely affect Ditech Financial’s ability to comply with the terms or conditions of its Fannie Mae contract.
If Fannie Mae or Freddie Mac were to transfer or otherwise terminate a material portion of our servicing rights, this could materially and adversely affect our business, financial condition, liquidity and results of operations.

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Ginnie Mae, with respect to GMBS for which we are the issuer and the servicer of the underlying mortgage loans, may terminate Ditech Financial as the issuer of such mortgage-backed securities and as servicer of such loans, with cause, and in connection therewith transfer the related servicing rights to a third party.
Under the terms of the Ginnie MBS Guide and the required Ginnie Mae Guaranty Agreement that is executed in connection with each GMBS we issue (together with related documents, the Ginnie Mae Guaranty Agreement), Ginnie Mae may terminate Ditech Financial for cause as the issuer of GMBS and as servicer of the underlying mortgage loans, and transfer all of our rights as issuer and servicer, including the servicing rights relating to the mortgage loans underlying the GMBS issued by us, to a third party without payment to us of any consideration in connection therewith. Events that could allow Ginnie Mae to terminate us as issuer and servicer include, without limitation, the impending or actual insolvency of Ditech Financial; any withdrawal or suspension of Ditech Financial’s status as an approved mortgagee by FHA or an approved seller/servicer by Fannie Mae or Freddie Mac; or any change to Ditech Financial’s business condition which materially and adversely affects its ability to carry out its obligations as an approved Ginnie Mae issuer. A default by Ditech Financial’s affiliate, RMS, under RMS’s Ginnie Mae Guaranty Agreements may also result in an event of default under Ditech Financial’s Ginnie Mae Guaranty Agreement under a cross-default agreement among Ginnie Mae, Ditech Financial and RMS, which could result in our termination as issuer and servicer of all GMBS and HMBS. If we were to have our Ginnie Mae issuer and servicing rights transferred or otherwise terminated, this could materially and adversely affect our business, financial condition, liquidity and results of operations.
Our subservicing clients can typically terminate our subservicing contracts with or without cause.
As of December 31, 2016, we were the subservicer for 0.9 million accounts with an unpaid principal loan balance of $120.8 billion . These subserviced accounts represented approximately 49% of our total servicing portfolio based on unpaid principal loan balance at that date. Our largest subservicing customer, NRM, represented approximately 56% of our total subservicing portfolio based on unpaid principal loan balance on December 31, 2016. Our next largest subservicing customer represented approximately 23% of our total subservicing portfolio based on unpaid principal loan balance on December 31, 2016. Under our subservicing contracts, the primary servicers for whom we conduct subservicing activities have the right to terminate such contracts, with or without cause, with generally 60 to 90 days’ notice to us. In some instances, our subservicing contracts require payment to us of deboarding, deconversion or other fees in connection with any termination thereof, while in other instances there is little to no consideration owed to us in connection with the termination of a subservicing contract.
For example, under the NRM Subservicing Agreement, with respect to NRM, the initial term of the NRM Subservicing Agreement will expire on the first anniversary of the effective date thereof and thereafter shall automatically terminate unless renewed by NRM on a monthly basis. If NRM fails to renew the agreement, it will owe Ditech Financial a deconversion fee. NRM may terminate the NRM Subservicing Agreement without cause at any time during the initial one year term upon at least 90 days prior notice to Ditech Financial. If NRM elects to terminate the NRM Subservicing Agreement without cause, it will owe Ditech Financial a deconversion fee and be responsible for certain servicing transfer costs. NRM may also terminate the NRM Subservicing Agreement immediately for cause upon the occurrence of certain events, including, without limitation, any failure by Ditech Financial to remit payments (subject to a cure period), any failure by Ditech Financial to provide reports to NRM (subject to a cure period), a change of control of Ditech Financial or the Parent Company, the failure of Ditech Financial to satisfy certain portfolio performance measures relating to delinquency rates or advances, Ditech Financial ceasing to be an approved servicer in good standing with Fannie Mae or Freddie Mac, any failure by Ditech Financial or the Parent Company to satisfy certain financial metrics, certain bankruptcy or insolvency events of Ditech Financial or the Parent Company and any failure by Ditech Financial to perform, in any material respect, its obligations under the agreement (subject to a cure period). Upon any termination of the NRM Subservicing Agreement by NRM for cause, Ditech Financial will not be entitled to receive any deconversion fee, will be responsible for certain servicing transfer costs and will owe NRM a transfer fee if such termination occurs within five years from the effective date of the agreement.
Additionally, from time to time, clients for whom we conduct subservicing activities could sell the mortgage servicing rights relating to some or all of the loans we subservice for such client, which could lead to a termination of our subservicing engagement with respect to such mortgage servicing rights and a decrease in our subservicing revenue.
If subservicing agreements relating to a material portion of our servicing portfolio were to be terminated, this could materially and adversely affect our business, financial condition, liquidity and results of operations. We expect to continue to seek additional subservicing opportunities, which could exacerbate these risks.

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We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances.
During any period in which a mortgage loan borrower is not making payments, we are required under some of our mortgage servicing and subservicing agreements to advance our own funds to meet contractual principal and interest remittance requirements for credit and/or MSR owners. In addition, we must pay property taxes, insurance premiums, legal expenses and make other protective advances on behalf of the borrower. We also advance funds to maintain, repair and market real estate properties on behalf of credit owners. Our obligation to make such advances may increase in connection with any future acquisitions of servicing portfolios and any additional subservicing contracts. In certain situations, our contractual obligations may require us to make certain advances for which we may not be reimbursed.
Servicing advances are generally recovered when a mortgage loan delinquency is resolved, the loan is repaid or refinanced, a liquidation occurs, or through the agency claim process. In addition, recovery of advances we make as subservicer are subject to our compliance with procedures and limitations set forth in the applicable subservicing agreement, and we typically depend upon the MSR owner that has engaged us as subservicer to reimburse us for such advances. Regulatory or other actions that lengthen the foreclosure process may increase the amount of servicing advances we are required to make, lengthen the time it takes for us to be reimbursed for such advances and increase the costs incurred by us in connection with such advances. We have been, and we may in the future be, unable to collect reimbursement for advances because we have failed to meet the applicable requirements for reimbursement, including making timely requests for such reimbursement, providing documentation to support the advance, and seeking required approval before making an advance. We have experienced delays in the collection of reimbursements for advances in the past. Additional or significant delays in our ability to collect advances could adversely affect our liquidity, and our inability to be reimbursed for advances would adversely affect our business, financial condition or results of operations.
When we purchase MSR from prior servicers, we may also acquire outstanding servicer and protective advances related to those rights. In our agreements under which we have acquired MSR, the prior servicer generally represents that the related advances are eligible for reimbursement by the credit owner and indemnifies us for any breach of this representation. However, the prior servicer’s indemnification obligation with respect to advances generally expires at a specified date, and in order to claim indemnification we may have to satisfy other conditions precedent. Our ability to file indemnity claims with the prior servicer before the expiration date and to meet other conditions precedent may be affected by factors outside our control. For example, if we submit claims for advance reimbursement from the credit owner and such credit owner fails to resolve such claims before the expiration date elapses, we may be unable to seek indemnity for such claims. In early 2017, we submitted a significant number and value of claims for advance reimbursement to a prior servicer from which we made a significant MSR acquisition in 2013. When we submit a claim for reimbursement from the prior servicer, that servicer may dispute whether and to what extent the indemnity applies, and resolving such disputes or otherwise establishing the validity of our claim could be time consuming and costly, and delays in recovering advances could have a material adverse effect on our liquidity. As a result of the foregoing, despite the indemnification arrangements, we may experience losses relating to advances that we have acquired from prior servicers.  
We maintain an allowance for uncollectible advances based on our analysis of the underlying loans, their historical loss experience, and recoverability of the advances pursuant to the terms of the underlying servicing or subservicing agreements. If for any reason we are required to increase our allowance in any period, this could have a material adverse effect on our financial condition and results of operation, and the failure to collect advances could materially adversely affect our cash flows.
Our failure to maintain or grow our servicing business could have a material adverse effect on our business, financial position, results of operations and cash flows.
Our servicing portfolio is subject to runoff, meaning that mortgage loans serviced by us may be repaid at maturity, prepaid prior to maturity, or liquidated through foreclosure, deed-in-lieu of foreclosure or other liquidation process. While we seek to replenish our servicing portfolio through the addition of subservicing contracts, through our own MSR originations and from acquisitions of MSR from third parties, we cannot assure you that we will continue to seek to replenish our servicing portfolio utilizing each of these methods or that we will be successful in maintaining the size of our servicing portfolio.
Our ability to maintain or grow our servicing business may depend, in part, on our ability to acquire servicing rights from, and/or enter into subservicing contracts with, third parties. This depends on many factors, including the willingness and ability of the current owners of servicing rights to transfer such servicing rights or enter into subservicing agreements with respect to such servicing rights, and in most cases GSEs and/or government authorities granting consent for such servicing transfers. In considering whether to sell servicing rights to us or to engage us as a subservicer (or to approve such matters), commercial counterparties, GSEs and government authorities may consider various factors, including our financial condition, our ability to meet contractual servicing obligations, the performance of portfolios we service relative to absolute standards or to the performance of portfolios serviced by others, our record of compliance with legal and regulatory requirements, and our reputation.

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There is significant competition in the non-bank servicing sector for servicing portfolios made available for purchase or subservicing. This and other factors could increase the price we pay for such portfolios or reduce subservicing margins, which could have a material adverse effect on our business, financial condition and results of operations. In determining the purchase price we are willing to pay for servicing rights and the fee for which we are willing to accept subservicing engagements, management makes certain assumptions regarding various factors, many of which are beyond our control, including, among other things:
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origination vintage and geography;
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loan-to-value ratio;
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stratification of FICO scores;
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the rates of prepayment and repayment within the underlying pools of mortgage loans;
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projected rates of delinquencies, defaults and liquidations;
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future interest rates;
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our cost to service the loans;
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incentive and ancillary fee income; and
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amounts of future servicing advances.
The methodology we use to determine the purchase price we are willing to pay for servicing rights and the fee for which we are willing to accept subservicing engagements is complex and management’s assumptions about matters affecting pricing may prove to be inaccurate. As a result, we may not be successful in completing acquisitions or subservicing arrangements on favorable terms or at all or we may overpay or not realize anticipated benefits of acquisitions or subservicing arrangements in our business development pipeline.
Although we are currently planning to increase the proportion of subservicing in our servicing portfolio, we may not be successful in achieving this goal. If we fail to do so, our servicing portfolio could decline or we may be required to invest more of our capital in servicing rights than anticipated.
Changes in prepayment rates on loans we service due to changes in interest rates, government mortgage programs or other factors could result in reduced earnings or losses.
Changes in prepayment rates on loans we service could result in reduced earnings or losses. Many factors beyond our control affect prepayment rates, including changes in interest rates and government mortgage programs. Many borrowers can prepay their mortgage loans through refinancings when mortgage rates decrease. Any increase in prepayments could reduce our servicing portfolio and have a significant impact on our net servicing revenue and fees. For example:
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If prepayment speeds increase, our net servicing revenue and fees will decline more rapidly than anticipated because of the greater than expected decrease in the number of loans or unpaid principal balance on which those fees are based.
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Amortization of servicing rights carried at amortized cost is a significant reduction to net servicing revenue and fees. Since we amortize servicing rights in proportion to total expected income over the life of a portfolio, an increase in prepayment speeds leads to increased amortization as we revise downward our estimate of total expected income. Faster prepayment speeds will also result in higher compensating interest expense.
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The change in fair value of servicing rights carried at fair value can have a significant impact on net servicing revenue and fees. We base the price we pay for servicing rights and assess the value of our servicing rights on, among other things, our projection of servicing-related cash flows from the related pool of mortgage loans. Our expectation of prepayment speeds is a significant assumption underlying those cash flow projections. If prepayment speeds increase more than expected, we may be required to write down the value of our servicing rights, which would have a negative impact on our net servicing revenue and fees.

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We cannot accurately predict the amount of incentive payments and ancillary fees we will earn on our servicing portfolio.
We earn incentive payments and ancillary fees in connection with servicing our residential loan portfolio. The amount of such payments and fees, and the timing of our receipt of such payments and fees, is dependent upon many factors, some of which are not in our control. For example, some of our servicing contracts contain periodic performance payments that are determined by formulas and/or are tied to the performance of our competitors. We also earn certain ancillary fees, such as, for example, late fees, the amount of which can vary significantly from period to period, in most instances due to circumstances over which we have no control. In certain circumstances, incentive payments and ancillary fees can be, and have been, modified or eliminated by a credit owner with little or no notice to us. If certain of our assumptions relating to the amount of incentive payments or ancillary fees we expect to earn and collect in a given period prove to be materially inaccurate, due to the reduction or elimination of any of these fees or otherwise, or if regulators challenge the legitimacy of any of these fees, this could adversely affect our business, financial condition, liquidity and results of operations.
Lender-placed insurance is under increased scrutiny by regulators and, as a result of the recent sale of substantially all of our insurance agency business, income from sales commissions for lender-placed insurance has been eliminated; however, we remain subject to liability for the period of time during which we received such commissions.
Under certain circumstances, when borrowers fail to maintain hazard insurance on their residences, the owner or servicer of the loan may procure such insurance to protect the loan owner's collateral and pass the premium cost for such insurance on to the borrower. Prior to February 1, 2017, the date we sold our principal insurance agency and substantially all of our insurance agency business, this agency acted as an agent for this purpose, placing the insurance coverage with a third-party carrier for which this agency, in certain circumstances, earned a commission.
Our insurance revenues were historically aligned with the size of our servicing portfolio. However, due to Fannie Mae and Freddie Mac restrictions that became effective on June 1, 2014, as well as other regulatory and litigation developments with respect to lender-placed insurance, our lender-placed insurance commissions began to decrease materially beginning in 2014. On February 1, 2017, we completed the sale of our principal insurance agency and substantially all of our insurance agency business. As a result of this sale, we will no longer receive any insurance commissions on lender-placed insurance policies. Commencing February 1, 2017, another insurance agency owned by us (and retained by us following the aforementioned sale) began to provide insurance marketing services to third-party insurance agencies and carriers with respect to voluntary insurance policies, including hazard insurance. This insurance agency receives premium-based commissions for its insurance marketing services.
Notwithstanding the fact that we no longer receive sales commissions on lender-placed insurance, we remain subject to liability for the period of time during which we received such commissions. Under the agreements we entered into in connection with the sale of our principal insurance agency and substantially all of our insurance agency business, we undertook certain ongoing obligations related to the lender-placed and voluntary hazard business, including obligations relating to the provision of services, the continued conduct of our servicing business and certain referral activities. If we fail to perform these obligations, we could have potentially significant liabilities under these agreements.
We may not be able to grow our loan originations business, which could adversely affect our business, financial condition and results of operations.
Our strategy contemplates that, over the next several years, we will capture significant market share and increase revenue in our originations business, driven primarily from increased wholesale lending, increased outbound contact efforts and improved retention. We face many challenges in seeking to implement that strategy. For example, during the next several years we expect the overall size of the national mortgage market will shrink, reflecting the end of key government refinancing programs (such as HARP) and potentially rising interest rates. To achieve our goals, we will need to reorient our originations group to have a greater focus on purchase money mortgages, whereas historically we have emphasized refinancings and have originated relatively few purchase money mortgages, except through our correspondent channel. We are still developing our marketing plans, including digital marketing, to build the purchase money business. In addition, we will need to attract new customers who are not customers of the Company’s servicing operations, and to do that we will need to develop new marketing approaches and outbound calling and contact methods and may need to introduce new technologies, such as mobile technologies and the ability to take mortgage applications through our website. We will need to hire and train significant numbers of new loan officers and other employees to support our outbound efforts. We also plan to expand our wholesale mortgage channel, which will require us to establish relationships with brokers and to maintain strong and efficient mortgage underwriting processes to fulfill loan opportunities referred to us by those brokers. We expect to maintain or expand our correspondent channel, and will continue to face intense competition and margin pressure in that area. Many of the elements of the origination strategy require us to do things we have not done in the past, and our efforts may not be successful or may be more expensive and time consuming than we expect. Our implementation efforts will also be dependent upon third parties, such as technology and marketing vendors. If we are unsuccessful in expanding our originations business according to our plans, this could have a material adverse effect on our business, financial position, results of operations and cash flows.

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We may be subject to liability for potential violations of predatory lending, antidiscrimination and/or other laws applicable to our mortgage loan originations and servicing businesses, which could adversely impact our results of operations, financial condition and business.
Various federal, state and local laws are designed to discourage predatory lending, discrimination based on certain characteristics and other practices. For example, loans that meet HOEPA’s high-cost coverage tests are subject to special disclosure requirements and restrictions on loan terms. Some states have enacted, or may enact, similar laws or regulations, which in some cases impose restrictions and requirements greater than those in HOEPA. Failure of mortgage loan originators such as Ditech Financial to comply with these laws could subject such originators, including us, to monetary penalties and could result in borrowers rescinding the affected loans. Lawsuits have been brought in various states making claims against originators, servicers, assignees and purchasers of “high-cost” loans for violations of state law. Named defendants in these cases have included numerous participants within the mortgage market. If our mortgage loans are found to have been originated in violation of such laws, we could incur losses, which could materially and adversely impact our results of operations, financial condition and business.
Antidiscrimination statutes, such as the Fair Housing Act and the ECOA, prohibit creditors from discriminating against loan applicants and borrowers based on certain characteristics, such as race, religion and national origin. Various federal regulatory agencies and departments, including the DOJ and CFPB, take the position that these laws apply not only to intentional discrimination, but also to neutral practices that have a “disparate impact” on protected classes. These regulatory agencies, as well as consumer advocacy groups and plaintiffs’ attorneys, are becoming more aggressive in asserting claims that the practices of lenders and loan servicers result in a “disparate impact” on protected classes. While the U.S. Supreme Court has held that the “disparate impact” theory applies to cases brought under the Fair Housing Act, the Court was not presented with, and did not decide, the question of whether the theory applies under the ECOA. Thus, it remains unclear whether and to what extent the “disparate impact” theory applies under the ECOA and, as a result, we and the residential mortgage industry must attempt to comply with shifting and potentially conflicting interpretations as to such application, and we could be exposed to potential liability for any failure to comply.
The expiration of, or changes to, government mortgage modification, refinancing or other programs could adversely affect future revenues.
Under HAMP, HARP and similar government programs, a participating servicer may be entitled to receive financial incentives in connection with any mortgage refinancing or modification plans it enters into with eligible borrowers and subsequent success fees to the extent that a borrower remains current in any agreed upon loan modification. We participate in and have dedicated numerous resources to HAMP and HARP, benefiting from fees and from significant loan originations volumes. The HAMP application deadline was December 31, 2016 and the HARP program is currently scheduled to expire on September 30, 2017. As a result of the termination or expiration of these programs, we expect our refinancing and modification volumes, revenues and margins to decline in 2017. Further changes in the legislation or regulations relating to these or other loan modification programs, including changes to borrower qualification requirements, could have a material adverse effect on our business, financial condition and results of operations. Termination or expiration of the HAMP or HARP programs could have a significant adverse effect on our originations volumes, revenues and margins.
We depend on the accuracy and completeness of information about borrowers and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations.
In deciding whether to extend credit to borrowers or to enter into other transactions with counterparties, we rely on information furnished to us by or on behalf of borrowers and counterparties, including income and credit history, financial statements and other financial information. We also rely on representations of borrowers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. If any of this information is intentionally or negligently misrepresented and such misrepresentation is not detected prior to loan funding, which has occurred from time to time, the value of the loan has been, and may be, significantly lower than expected. Whether a misrepresentation is made by the loan applicant, the mortgage broker, correspondent lender, another third party or one of our employees, we generally bear the risk of loss associated with the misrepresentation. We, however, may not have detected or may not detect all misrepresented information in our loan originations or from our business clients. Therefore, any such misrepresented information could adversely affect our business, financial condition and results of operations.

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Within our correspondent channel, the correspondent lenders with whom we do business underwrite and fund mortgage loans, then sell the closed mortgage loans to us. During the third quarter of 2016, we re-entered the wholesale originations channel. Within the wholesale channel we originate mortgage loans for borrowers referred to us by mortgage brokers. These loans are underwritten and funded by us and generally close in our name, and we bear the underwriting risk with respect to such loans from a regulatory perspective, but we typically rely upon the mortgage brokers with whom we do business to interact with the borrowers in order to gather the information necessary for us to underwrite and fund such loans. Our correspondent and wholesale counterparties are generally obligated to repurchase any loans we originated through such counterparties for which a misrepresentation has been made, and/or agree to indemnify us for certain losses we may incur in connection with any such misrepresentation. However, such counterparties may not have sufficient resources to repurchase loans from us or make indemnification payments to us, and any failure by such counterparties to satisfy any applicable repurchase or indemnification requirements could adversely affect our business, financial condition and results of operations.
We may be required to make indemnification payments relating to, and/or repurchase, mortgage loans we sold or securitized, or will sell or securitize, if our representations and warranties relating to these mortgage loans are inaccurate at the time the loan is sold or securitized, or under other circumstances.
To finance our future operations, we generally sell or securitize the loans that we originate or purchase through our correspondent and other channels. Our contracts relating to the sale or securitization of such loans contain provisions that require us, under certain circumstances, to make indemnification payments relating to, and/or repurchase, such loans. Our indemnification and repurchase obligations vary contract by contract, but such contracts typically require us to either make an indemnification payment and/or repurchase a loan if, among other things:
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our representations and warranties relating to the loan are materially inaccurate, including but not limited to representations concerning loan underwriting, regulatory compliance or property appraisals;
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we fail to secure adequate mortgage insurance within a certain period after closing; or
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the borrower fails to make certain initial loan payments due to the purchaser.
We believe that our maximum repurchase exposure under such contracts is the origination UPB of all mortgage loans we have sold or securitized. At December 31, 2016 , our maximum exposure to repurchases due to potential breaches of representations and warranties was $62.3 billion and was based on the original UPB of loans sold from the beginning of 2013 through the year ended December 31, 2016, adjusted for voluntary payments made by the borrower on loans for which we perform servicing. To recognize the potential mortgage loan repurchase or indemnification losses, we have recorded a reserve of $22.1 million at December 31, 2016 . In 2016 , we incurred losses of $0.7 million related to such indemnification and repurchase activity. If our mortgage loan originations increase in the future, our indemnification and repurchase requests may also increase. During periods of elevated mortgage payment delinquency rates and declining housing prices, originators have experienced, and may in the future continue to experience, an increase in loan repurchase and indemnification claims due to actual or alleged breaches of representations and warranties in connection with the sale or servicing of mortgage loans. The estimate of our loan repurchase and indemnification liability is subjective and based upon our projections of the future incidence of loan repurchase and indemnification claims, as well as loss severities. Losses incurred in connection with loan repurchase and indemnification claims may be in excess of our estimates (including our estimate of liabilities we will assume in an acquisition and factor into our purchase price). Our reserve for indemnification and repurchase obligations may increase in the future. If we are required to make indemnification payments with respect to, and/or repurchase, mortgage loans that we originate and sell or securitize in amounts that result in losses that exceed our reserve, this could adversely affect our business, financial condition and results of operations.
From time to time, the FHFA proposes revisions to the GSEs' standard representation and warranty framework, under which the GSEs require lenders to repurchase mortgage loans under certain circumstances. For example, in January 2013, the FHFA sought to relieve lenders of obligations to repurchase loans that had clean payment histories for 36 months. In May 2014, the FHFA and the GSEs announced additional clarifications. We cannot predict how recent or future changes to the GSEs' representation and warranty framework will impact our business, liquidity, financial condition and results of operations.

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We service and securitize reverse loans and, until early 2017, originated reverse loans, which subjects us to risks and could have a material adverse effect on our business, liquidity, financial condition and results of operations.
The principal reverse loan product we originated and currently service is the HECM, an FHA-insured loan that must comply with FHA and other regulatory requirements. The reverse loan business is subject to substantial risks, including market, credit, interest rate, liquidity, operational, reputational and legal risks. A reverse loan (e.g., a HECM) is a loan available to seniors aged 62 or older that allows homeowners to borrow money against the value of their home. We depend on our ability to securitize reverse loans, subsequent draws, mortgage insurance premiums and servicing fees, and our liquidity and profitability would be adversely affected if our ability to access the securitization market were to be limited or if the margins we earn in connection with such securitizations were to be reduced. Defaults on reverse loans leading to foreclosures may occur if borrowers fail to meet maintenance obligations, fail to pay taxes or home insurance premiums, fail to meet occupancy requirements or the last remaining borrower passes away. An increase in foreclosure rates may increase our cost of servicing. We may become subject to negative publicity in the event that defaults on reverse mortgages lead to foreclosures or evictions of homeowners.
As a reverse loan servicer, we are responsible for funding any credit drawdowns by borrowers in a timely manner, remitting to credit owners interest accrued, paying for interest shortfalls, and funding advances such as taxes and home insurance premiums. During any period in which a borrower is not making required real estate tax and property insurance premium payments, we may be required under servicing agreements to advance our own funds to pay property taxes, insurance premiums, legal expenses and other protective advances. We also may be required to advance funds to maintain, repair and market real estate properties. In certain situations, our contractual obligations may require us to make certain advances for which we may not be reimbursed. In addition, in the event a reverse loan serviced by us defaults or becomes delinquent, the repayment to us of the advance may be delayed until the reverse loan is repaid or refinanced or liquidation occurs. A delay in our ability to collect advances may adversely affect our liquidity, and our inability to be reimbursed for advances could adversely affect our business, financial condition or results of operations. Advances are typically recovered upon weekly or monthly reimbursement or from securitization in the market. We could receive requests for advances in excess of amounts we are able to fund, which could materially and adversely affect our liquidity. All of the above factors could have a material adverse effect on our business, liquidity, financial condition and results of operations.
Our reverse mortgage business has been unprofitable and we expect losses to continue in this segment.
Our reverse mortgage business generated significant losses before income tax in each of 2014, 2015 and 2016. We expect to continue to generate losses in that segment. We service a substantial portfolio of reverse loans and expect to incur continued losses on that servicing activity. We expect these losses will be driven by the costs of servicing defaulted reverse loans that are a part of our securitized portfolio, including appraisal-based claims, shortfalls between the debenture rate we receive on defaulted loans and the note rate we must continue to pay, property preservation expenses, curtailment costs and other servicing costs. To mitigate the expected losses in the reverse segment, we recently ceased originating new reverse mortgages, having concluded that the cost of expanding the originations business was no longer justified based on probabilities of successfully growing that business to scale. We will continue to fulfill reverse loans in our originations pipeline and will also fund undrawn amounts available to borrowers of reverse loans we have made. We expect our results to continue to include meaningful revenues from HECM IDL funding activity for the next two years however such amounts will be lower in the following years due to our decision to exit the originations business. 
We have been evaluating options for our reverse mortgage business, including the possibility of selling some or all of its assets or pursuing alternative solutions for the business in collaboration with other parties. We cannot be certain whether or on what terms we will be able to consummate any transaction involving our reverse business or whether any such transaction would reduce our expected reverse mortgage losses. As of December 31, 2016, the net carrying value of our Reverse Mortgage segment securitized loan book was a net liability of approximately $75.6 million.
If our estimated liability with respect to interest curtailment obligations arising out of servicing errors is inaccurate, or additional errors are found, and we are required to record additional material amounts, there may be an adverse impact on our results of operations or financial condition.
Subsequent to the completion of our acquisition of RMS, we discovered a failure by RMS to record certain liabilities to HUD, FHA and/or credit owners related to servicing errors by RMS. FHA regulations provide that servicers meet a series of event-specific timeframes during the default, foreclosure, conveyance, and mortgage insurance claim cycles. Failure to timely meet any processing deadline may stop the accrual of debenture interest otherwise payable in satisfaction of a claim under the FHA mortgage insurance contract and the servicer may be responsible to HUD for debenture interest that is not self-curtailed by the servicer, or for making the credit owner whole for any interest curtailed by FHA due to not meeting the required event-specific timeframes.

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We had a curtailment obligation liability of $103.1 million at December 31, 2016 related to the foregoing which reflects management’s best estimate of the probable incurred claim. The curtailment liability is recorded in payables and accrued liabilities on the consolidated balance sheets. The Company assumed $46.0 million of this liability through the acquisition of RMS, which resulted in a corresponding offset to goodwill and deferred tax assets. During the year ended December 31, 2016 , the Company recorded a provision, net of expected third-party recoveries, related to the curtailment liability of $16.0 million . The Company has potential estimated maximum financial statement exposure for an additional $142.6 million related to similar claims, which are reasonably possible, but which the Company believes are primarily the responsibility of third parties (e.g., prior servicers and/or credit owners). The Company’s potential exposure to a substantial portion of this additional risk relates to the possibility that such third parties may claim that the Company is responsible for the servicing liability or that the Company exacerbated an existing failure by the third party. The actual amount, if any, of this exposure is difficult to estimate and requires significant management judgment as curtailment obligations continue to be an industry issue. While we are pursuing, and will continue to pursue, mitigation efforts to reduce both the direct exposure and the reasonably possible third-party-related exposure, we cannot assure you that any such efforts will be successful.
We had a curtailment obligation liability of $18.2 million at December 31, 2016 related to Ditech Financial's mortgage loan servicing, which we assumed through an acquisition of servicing rights. We are obligated to service the related mortgage loans in accordance with Ginnie Mae requirements, including repayment to credit owners for advances and interest curtailment. The curtailment liability is recorded in payables and accrued liabilities on the consolidated balance sheets.
We cannot assure you that we will not discover additional facts resulting in changes to our estimated liability. To the extent we are required to record additional amounts as liabilities, there may be an adverse impact on our results of operations or financial condition.
See Item 3. Legal Proceedings and Note 33. Commitments and Contingencies to our Consolidated Financial Statements for additional information.
We may be unable to fund our HECM repurchase obligations, and/or face delays in our ability to make such repurchases, or we may be unable to convey repurchased HECM loans to the FHA, which could have a material adverse effect on our business, liquidity, financial condition and results of operations.
We issue HMBS collateralized by HECM loans we originate and HECM tails. Under the Ginnie Mae HMBS program, we are required to repurchase a HECM loan from an HMBS pool we have issued when the outstanding principal balance of the HECM loan is equal to or greater than 98% of the maximum claim amount. There can be no assurance that we will have access to the funding necessary to satisfy our repurchase obligations, particularly if our actual repurchase obligations materially exceed our estimated repurchase obligations. See the Liquidity and Capital Resources section of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
When we repurchase a HECM loan that is not in default from an HMBS pool, we must fund such repurchase until we convey the repurchased HECM loan to and receive reimbursement from the FHA, which generally occurs within 60 days of repurchase (assuming the repurchased loan continues to perform during such time and there are not other factors that cause a delay in conveying the repurchased HECM loan to the FHA). If a repurchased HECM loan goes into default (e.g., if the borrower has failed to pay real estate taxes or property insurance premiums) following our repurchase of such loan from an HMBS pool but prior to our conveyance of such loan to the FHA, or is in default at the time we repurchase such loan from an HMBS pool, the FHA will not accept such loan and we must continue to service such loan until the default is cured or we otherwise satisfy FHA requirements relating to foreclosure of the loan and sell the underlying property. Thus, we are exposed to financing risk when we must repurchase a HECM loan from an HMBS pool, which risk is exacerbated if such loan is in default at the time of repurchase or goes into default prior to our conveyance of such loan to the FHA. In addition, we may be exposed to risk of loss of principal when a HECM loan goes into default, which risk is exacerbated for defaulted loans we seek to foreclose upon. Foreclosure of a HECM loan can be an expensive and lengthy process which could have a substantial negative effect on our anticipated return on the foreclosed HECM loan, especially in circumstances where we make an appraisal-based claim to the FHA with respect to a HECM loan because we have not been able to liquidate the underlying property for an acceptable price within the timeframe established by the FHA. The number of appraisal-based claims we make to the FHA is impacted by a variety of factors, including real estate market conditions and the geographic composition of our HECM loan portfolio. If we make a significant number of appraisal-based claims to the FHA this could have a material adverse effect on our business, liquidity, financial condition and results of operations.

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During 2016 , our HECM repurchases amounted to approximately $671.4 million , with a balance of approximately $419.5 million at the end of 2016 , an increase from approximately $233.6 million at the end of 2015. We expect our repurchase obligations to increase through 2017 and in subsequent years, but the amount of repurchase obligations we will incur in any specific period in the future is uncertain, as it will be affected by, among other things, the rate at which borrowers draw down on amounts available under their HECM loans. In addition, the balance of funds we must commit to repurchases (and the related cost of such funding) will depend in part on how long we must hold and service such loans after repurchasing them. As our funding needs increase for repurchased HECMs, we will seek to enter into new, or increase the capacity of existing, lending facilities to provide a portion of such funds; however, we cannot be certain such new facilities will be available or that our existing facilities will be extended or increased.
When we securitize HECM loans into HMBS, we are required to covenant and warrant to Ginnie Mae, among other things, that the HECM loans related to each participation included in the HMBS are eligible under the requirements of the National Housing Act and the Ginnie Mae Mortgage-Backed Securities Guide, and that we will take all actions necessary to continue to ensure the HECM loans continued eligibility. The Ginnie Mae HMBS program requires that we repurchase the participation related to any HECM loan that does not meet the requirements of the Ginnie Mae Mortgage-Backed Securities Guide. Significant repurchase requirements could materially adversely affect our business, financial condition, liquidity and results of operations.
If we are unable to fund our HECM repurchase obligations, for example because new or increased lending facilities are not available or in the event that our repurchase obligations in any period significantly exceed our expectations, face delays in our ability to make such repurchases, or are unable to convey repurchased HECM loans to the FHA, our business, liquidity, financial condition and results of operations could be materially adversely affected.
We may suffer operating losses as a result of not being fully reimbursed for certain costs and interest expenses on our HECM loans, or if we fail to originate or service such loans in conformity with the FHA’s guidelines.
The FHA will reimburse us for most HECM loan losses incurred by us, up to the maximum claim amount, if, upon disposition of the collateral a deficit exists between the value of the collateral and the loan balance. However, there are certain costs and expenses that the FHA will not reimburse. Additionally, the FHA pays the FHA debenture rate instead of the loan interest rate from the date the loan becomes due and payable to the date of disposition of the property or final appraisal. In the event the note rate we are required to pay to an HMBS investor exceeds the FHA debenture rate, we will suffer an interest rate loss.
To obtain such reimbursement from the FHA, we must file a claim under the FHA mortgage insurance contract. Under certain circumstances, if we file a reimbursement claim that is inaccurate, we could be the subject of a claim under the False Claims Act, which imposes liability on any person who knowingly makes a false or fraudulent claim for payment to the U.S. government. Potential penalties are significant, as these actions may result in treble damages.
Additionally, if we fail to service HECM loans in conformity with the FHA’s guidelines, we could lose our right to service the portfolio or be subject to financial penalties that could affect our ability to receive loss claims or result in the curtailment of FHA debenture rate reimbursement. The FHA may also at its discretion request indemnification from a lender on a possible loss on a HECM loan if it determines that the loan was not originated or serviced in conformity with its rules or regulations.
A loss of RMS' approved status under reverse loan programs operated by FHA, HUD or Ginnie Mae could adversely affect our business.
In order to originate and service HECM loans, RMS must maintain its status as an approved FHA mortgagee and an approved Ginnie Mae issuer and servicer. RMS must comply with FHA’s and Ginnie Mae’s respective regulations, guides, handbooks, mortgagee letters and all participants’ memoranda. If RMS defaults under its program obligations to Ginnie Mae, Ginnie Mae has a right to terminate the approved status of RMS, seize the MSR of RMS without compensation (which includes the right to be reimbursed for outstanding advances from the FHA), demand indemnification for its losses, and impose administrative sanctions, which may include civil money penalties. 
Each subsidiary of the Company that is a Ginnie Mae issuer (i.e. Ditech Financial and RMS) has also entered into a cross default agreement with Ginnie Mae which provides that, upon the default by a subsidiary under an applicable Ginnie Mae program agreement, Ginnie Mae will have the right to (i) declare a default on all other pools and loan packages of that subsidiary and all pools and loan packages of any affiliated Ginnie Mae issuer that executed the cross default agreement and (ii) exercise any other remedies available under applicable law against each of the affiliated Ginnie Mae issuers. As a result, a default by RMS under its obligations to Ginnie Mae could lead to Ginnie Mae declaring a default by Ditech Financial in relation to its obligations to Ginnie Mae.
Any discontinuation of, or significant reduction or material change in, the operation of the FHA, HUD or government entities like Ginnie Mae, or the loss of RMS' approved FHA mortgagee or Ginnie Mae issuer or servicer status, could have a material adverse effect on our overall business and our financial position, results of operations and cash flows.

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If we are unable to fund our tail commitments or securitize our HECM loans (including tails), this could have a material adverse effect on our business, financial condition, liquidity and results of operations.
We have originated and continue to service HECM loans under which the borrower has additional undrawn borrowing capacity in the form of undrawn lines of credit. We are obligated to fund future borrowings drawn on that capacity. As of December 31, 2016, our commitment to fund additional borrowing capacity was $1.3 billion . In addition, we are required to make interest payments on HMBS issued in respect of HECM loans and to pay mortgage insurance premiums on behalf of HECM borrowers. We normally fund these obligations on a short-term basis using our cash resources, and from time to time securitize these amounts (along with our servicing fees) through the issuance of tails. If our cash resources are insufficient to fund these amounts and we are unable to fund them through the securitization of such tails, this could have a material adverse effect on our business, financial condition, liquidity and results of operations.
A downgrade in our credit ratings could negatively affect our cost of, and ability to access, capital.
Our ability to obtain adequate and cost effective financing depends in part on our credit ratings. Our credit ratings have been downgraded in the past, and are subject to revision, including downgrade, or withdrawal at any time by the assigning rating agency. A negative change in our ratings outlook or any downgrade in our current credit ratings by the rating agencies that provide such ratings could adversely affect our cost of borrowing and/or access to sources of liquidity and capital. Such a downgrade could adversely affect our access to the public and private credit markets and increase the costs of borrowing under available credit lines, which could adversely affect our business, financial condition, results of operations and cash flows. Refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Ratings for additional information relating to our credit ratings.
Changes in interest rates could materially and adversely affect our volume of mortgage loan originations or reduce the value of our MSR, either of which could have a material adverse effect on our business, financial position, results of operations or cash flows.
Historically, rising interest rates have generally been associated with a lower volume of loan originations and lower pricing margins due to a disincentive for borrowers to refinance at a higher interest rate, while falling interest rates have generally been associated with higher loan originations and higher pricing margins, due to an incentive for borrowers to refinance at a lower interest rate. Accordingly, increases in interest rates could materially and adversely affect our mortgage loan origination volume, which could have a material and adverse effect on our overall business, consolidated financial position, results of operations or cash flows. In addition, changes in interest rates may require us to post additional collateral under certain of our financing arrangements and derivative agreements, which could impact our liquidity.
Changes in interest rates are also a key driver of the performance of our Servicing segment as the values of our MSR are highly sensitive to changes in interest rates. Historically, the value of our MSR has increased when interest rates rise, as higher interest rates lead to decreased prepayment rates, and has decreased when interest rates decline, as lower interest rates lead to increased prepayment rates. As a result, substantial volatility in interest rates materially affects our mortgage servicing business, as well as our consolidated financial position, results of operations and cash flows.
In addition, rising interest rates could (i) require us to post additional collateral under certain of our financing arrangements, which could adversely impact our liquidity, (ii) negatively impact our reverse loan business, (iii) negatively impact our mortgage loan origination volumes, and (iv) have other material and adverse effects on our business, consolidated financial position, results of operations or cash flows, such as, for example, generally making it more expensive for us to fund our various businesses. In a declining interest rate environment, we have been, and could in the future be, required to post additional collateral under certain of our derivative arrangements, which could adversely impact our liquidity.
Failure to hedge effectively against interest rate changes may adversely affect results of operations.
We currently use derivative financial instruments, primarily forward sales commitments, to manage exposure to interest rate risk and changes in the fair value of IRLCs and mortgage loans held for sale. We may also enter into commitments to purchase MBS as part of our overall hedging strategy. In the future, we may seek to manage our exposure to interest rate changes by using interest rate hedging agreements, such as interest swaps and options. The nature and timing of hedging transactions may influence the effectiveness of a given hedging strategy, and no hedging strategy is consistently effective. Poorly designed strategies, improperly executed and documented transactions or inaccurate assumptions could actually increase our risks and losses. In addition, hedging strategies involve transaction and other costs. Our hedging strategies and the derivatives that we use may not offset the risks of interest rate volatility and our hedging transactions may result in or magnify losses. Furthermore, interest rate derivatives may not be available at all, or at favorable terms, particularly during economic downturns. Any of the foregoing risks could adversely affect our business, financial condition or results of operations.

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Additional risks related to hedging include:
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interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;
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available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought;
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the duration of the hedge may not match the duration of the related liability;
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the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;
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the party owing money in the hedging transaction may default on its obligation to pay; and
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a court could rule that such an agreement is not legally enforceable.
Technology failures or cyber-attacks against us or our vendors could damage our business operations and reputation, increase our costs, and result in significant third-party liability.
The financial services industry as a whole is characterized by rapidly changing technologies. System disruptions and failures caused by fire, power loss, telecommunications failures, unauthorized intrusion (e.g., cyber-attack), computer viruses and disabling devices, natural disasters and other similar events, may interrupt or delay our ability to provide services to our borrowers. Security breaches (which we have experienced), and may in the future experience, acts of vandalism and developments in computer intrusion capabilities could result in a compromise or breach of the technology that we use to protect our borrowers' personal information and transaction data. Systems failures could result in reputational damage to our business and cause us to incur significant costs and third-party liability, and this could adversely affect our business, financial condition or results of operations. See the Cybersecurity section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information relating to cybersecurity.
We recently transitioned a significant portion of our mortgage servicing business to MSP, a mortgage and consumer loan servicing platform, and problems relating to the transition to, and implementation of, MSP have interfered with, and could continue to interfere with, our business and operations.
On April 1, 2016, we transitioned the Fannie Mae loans that we service to MSP, a mortgage and consumer loan servicing platform. We have invested significant capital and human resources in connection with the transition to and implementation of MSP, and we expect that we will continue to invest significant capital and human resources in refining our use of MSP with the goal of maximizing efficiencies available to us following such transition. We have experienced decreases in productivity and increased costs as our employees implement and become familiar with the new system, and there can be no assurance that we will not continue to do so in the future. Any disruptions, delays or deficiencies in our implementation or refinement efforts, particularly any disruptions, delays or deficiencies that impact our operations, including loss of customer data, could have a material adverse effect on our business and operations. Furthermore, the transition to and implementation of MSP was more costly than we initially anticipated and our current estimates for the remaining cost and time required to completely transition to and refine MSP may be wrong. The cost of maintaining other servicing platforms alongside MSP is significant, and our plans to become a more efficient mortgage servicer depend in part upon us achieving significant cost reductions and efficiencies in relation to our servicing platforms. If we are unable to achieve these goals, our financial position, results of operations and cash flows could be adversely impacted.
We may be unable to protect our technology or keep up with the technology of our competitors.
We rely on proprietary and licensed software, and other technology, proprietary information and intellectual property to operate our business and to provide us with a competitive advantage. However, we may be unable to maintain and protect, or prevent others from misappropriating or otherwise violating, our rights in such software, technology, proprietary information and intellectual property. In addition, some competitors may have software and technologies that are as good as or better than our software and technology, which could put us at a disadvantage. Some of our systems are based on old technologies that are no longer in common use, and it may become increasingly difficult and expensive to maintain those systems. Our failure to maintain, protect and continue to develop our software, technology, proprietary information and intellectual property could adversely affect our business, financial condition or results of operations.

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Any failure of our internal security measures or those of our vendors, or breach of our privacy protections, could cause harm to our reputation and subject us to liability.
In the ordinary course of our business, we receive and store certain confidential nonpublic information concerning borrowers including names, addresses, social security numbers and other confidential information. Additionally, we enter into third-party relationships to assist with various aspects of our business, some of which require the exchange of confidential borrower information. Breaches of security may occur through intentional or unintentional acts by those having authorized or unauthorized access to our systems or our clients' or counterparties' confidential information, including employees and customers, as well as hackers, and through electronic, physical or other means. If such a compromise or breach of our security measures or those of our vendors occurs, and confidential information is misappropriated, it could cause interruptions in our operations and/or expose us to significant liabilities, reporting obligations, remediation costs and damage to our reputation. Significant damage to our reputation or the reputation of our clients could negatively impact our ability to attract or retain clients. Any of the foregoing risks could adversely affect our business, financial condition or results of operations.
While we have obtained insurance to cover us against certain cybersecurity risks and information theft, there can be no guarantee that all losses will be covered or that the insurance limits will be sufficient to cover such losses.
We have obtained insurance coverage that protects us against losses from unauthorized penetration of company technology systems, employee theft of customer and/or company private information, and company liability for third-party vendors who mishandle company information. This insurance includes coverage for third-party losses as well as costs incidental to a breach of company systems such as notification, credit monitoring and identity theft resolution services. However, there can be no guarantee that every potential loss due to cyber-attack or theft of information has been insured against, nor that the limits of the insurance we have acquired will be sufficient to cover all such losses.
Our vendor relationships subject us to a variety of risks.
We have vendors that, among other things, provide us with financial, technology and other services to support our businesses. With respect to vendors engaged to perform activities required by servicing or originations criteria or regulatory requirements, we are required to take responsibility for assessing compliance with the applicable servicing or originations criteria or regulatory requirements for the applicable vendor and are required to have procedures in place to provide reasonable assurance that the vendor’s activities comply in all material respects with servicing or originations criteria or regulatory requirements applicable to the vendor. We have taken steps to strengthen our vendor oversight program, but there can be no assurance that our program is sufficient. In the event that a vendor’s activities do not comply with the servicing or originations criteria or regulatory requirements, it could materially negatively impact our business.
In addition, we rely on third-party vendors for certain services important or critical to our business, such as Black Knight Financial Services, LLC, with whom we have signed a long-term Loan Servicing Agreement for the use of MSP. If our current vendors, particularly the vendors that provide important or critical services to us, were to stop providing such services to us on acceptable terms, or if there is any other material disruption in the provision of such services, we may be unable to procure such services from other vendors in a timely and efficient manner and on acceptable terms, or at all. Further, we may incur significant costs to resolve any such disruptions in service and this could adversely affect our business, financial condition and results of operations.
We have also recently increased the use of offshore vendors generally, especially with respect to certain of our technology functions. Our reliance on third-party vendors in other countries exposes us to disruptions in the political and economic environment in those countries and regions. Further, any changes to existing laws or the enactment of new legislation restricting offshore outsourcing by companies based in the U.S. may adversely affect our ability to outsource functions to third-party offshore service providers. Our ability to manage any such difficulties would be largely outside of our control, and our inability to utilize offshore service providers could have a material adverse effect on our business, financial condition, results of operations, cash flows and securities.
Negative public opinion could damage our reputation and adversely affect our earnings.
Reputational risk, or the risk to our business, earnings and capital from negative public opinion, is inherent in our business. Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending, loan servicing, debt collection practices, and corporate governance, and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can also result from complaints filed with regulators, social media and traditional news media coverage, whether accurate or not. Negative public opinion can adversely affect our ability to attract and retain customers, counterparties and employees and can expose us to litigation and regulatory action. Although we take steps to minimize reputation risk in dealing with our customers and communities, this risk will always be present in our organization.

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By combining our servicing and originations businesses under the single "Ditech" brand, we may have increased the risk that adverse publicity in one area of the business could hurt the performance of other parts of the business. In particular, our ability to grow our originations business (which is a key part of our business strategy) could be limited by negative publicity arising from our servicing business, which now operates under the same Ditech brand. Our servicing business has generated a significant number of complaints filed with regulators such as the CFPB and also negative publicity in the press and social media. Further, the reverse mortgage business generally has generated adverse publicity, in part because reverse mortgage borrowers are relatively elderly and are perceived as vulnerable. Although the terms and requirements of the HECM product have been changed from time to time to address perceived origination abuses, we continue to service older HECM loans originated under different requirements. As the servicer of HECM loans, from time to time we are required to foreclose on and evict delinquent borrowers, who are likely to be elderly. This has attracted, and may continue to attract, adverse publicity.
The industry in which we operate is highly competitive, and, to the extent we fail to meet these competitive challenges or otherwise do not achieve our strategic initiatives, it could have a material adverse effect on our business, financial position, results of operations or cash flows.
We operate in a highly competitive industry that could become even more competitive as a result of economic, legislative, regulatory or technological changes. We compete with a great number of competitors in the mortgage banking market for both the servicing and originations businesses as well as in our reverse mortgage and complementary businesses. Key competitors include financial institutions and non-bank servicers and originators. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources, and typically have access to greater financial resources and lower funding costs. All of these factors place us at a competitive disadvantage. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more favorable relationships than we can. Competition to service mortgage loans may result in lower margins. Because of the relatively limited number of servicing customers, our competitive position is impacted by our ability to differentiate ourselves from our competitors through our servicing platform and our failure to meet the performance standards or other expectations of any one of such customers could materially impact our business. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition or results of operations.
From time to time, we embark upon various strategic initiatives for our business, including without limitation initiatives relating to acquisitions and dispositions of MSR and other assets, changes in the mix of our fee-for-service business including by entering into new subservicing arrangements, reducing our debt, improving our servicing performance, developing and growing certain portions of our business such as our mortgage originations capabilities, the use of capital partners, cost savings and operational efficiencies, and other matters. Our ability to achieve such initiatives is dependent upon numerous factors, many of which are not in our control. Our failure to achieve some or all of our strategic initiatives in a timely and efficient manner, or at all, could have a material adverse effect on our business, financial condition, liquidity and results of operations.
We may not realize all of the anticipated benefits of past, pending or potential future acquisitions or joint venture investments, which could adversely affect our business, financial condition and results of operations.
Our ability to realize the anticipated benefits of past, pending or potential future acquisitions will depend, in part, on our ability to integrate these acquisitions into our business and is subject to certain risks, including:
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our ability to successfully combine the acquired businesses with ours;
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whether the combined businesses will perform as expected;
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the possibility that we inaccurately value assets or businesses we acquire, that we pay more than the value we will derive from the acquisitions, or that the value declines after the acquisition;
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the reduction of our cash available for operations and other uses;
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the disruption to our operations inherent in making numerous acquisitions over a relatively short period of time;
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the disruption to the ongoing operations at the acquired businesses;
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the incurrence of significant indebtedness to finance our acquisitions;
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the assumption of certain known and unknown liabilities of the acquired businesses;
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uncoordinated market functions;
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unanticipated issues and delays in integrating the acquired business or any information, communications or other systems;
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unanticipated incompatibility of purchasing, logistics, marketing and administration methods;
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unanticipated liabilities associated with the acquired business, assets or joint venture;

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additional costs or capital requirements beyond forecasted amounts;
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delays in the completion of acquisitions, including due to delays in or the failure to obtain approvals from governmental or regulatory entities;
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lack of expected synergies, failure to realize the anticipated benefits we expect to realize from the acquisition or joint venture, or failure of the assets or businesses we acquire to perform at levels meeting our expectations;
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not retaining key employees; and
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the diversion of management's attention from ongoing business concerns.
Our current business plan contemplates that we will accelerate the integration and centralization of the Company, many parts of which we acquired in transactions over several years. We believe that such integration will enable us to achieve considerable cost savings and increases in efficiency and operational oversight. However, there are costs associated with implementing integration changes and there are considerable risks involved in such integration efforts, including the risks of operational breakdowns and unwanted personnel losses during the period of transition. We may be unsuccessful in implementing our integration plan on time or at all, and the integration efforts could be more costly than expected and could yield lower savings and efficiency benefits than planned. If we are not able to successfully combine the acquired businesses and assets with ours within the anticipated time frame, or at all, the anticipated benefits of the acquisitions may not be realized fully, or at all, or may take longer to realize than expected, the combined businesses and assets may not perform as expected, and the value of our common stock may be adversely affected.
Further, prices at which acquisitions can be made fluctuate with market conditions. We have experienced times during which acquisitions could not be made in specific markets at prices we considered acceptable, and we expect that we will experience this condition in the future. In addition, in order to finance an acquisition we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or raise additional capital, which could dilute the interests of our existing shareholders. Also, it is possible that we will expend considerable resources in the pursuit of an acquisition that, ultimately, either does not close or is terminated. If we incur additional indebtedness to finance an acquisition, the acquired business may not be able to generate sufficient cash flow to service that additional indebtedness.
We cannot assure you that future acquisitions or joint ventures will not adversely affect our results of operations and financial condition, or that we will realize all of the anticipated benefits of any future acquisitions or joint ventures.
We use, and will continue to use, analytical models and data in connection with, among other things, developing our strategy, pricing new business and the valuation of certain investments we make, and any incorrect, misleading or incomplete information used in connection therewith may subject us to potential risks.
Due to the complexity of our business, we rely on, and will continue to rely on, various analytical models, information and data, some of which is supplied by third parties, in connection with, among other things, developing our strategy, pricing new business and the valuation of certain investments we make. Should our models or such data prove to be incorrect or misleading, any decision made in reliance thereon exposes us to potential risks. Some of the analytical models that we use or will be used by us are predictive in nature. The use of predictive models has inherent risks and may incorrectly forecast future behavior, leading to potential losses. We also use and will continue to use valuation models that rely on market data inputs. If incorrect market data is input into a valuation model, even a tested and well-respected valuation model, it may provide incorrect valuations and, as a result, could provide adverse actual results as compared to the predictive results.
We use estimates in determining the fair value of certain assets. If our estimates prove to be incorrect, we may be required to write down the value of these assets, which could adversely affect our earnings.
We estimate the fair value for certain assets (including MSR) and liabilities by calculating the present value of expected future cash flows utilizing assumptions that we believe are used by market participants. The methodology used to estimate these values is complex and uses asset-specific collateral data and market inputs for interest and discount rates and liquidity dates.
Valuations are highly dependent upon the reasonableness of our assumptions and the predictability of the relationships that drive the results of our valuation methodologies. If prepayment speeds increase more than estimated, delinquency and default levels are higher than anticipated or other events occur, we may be required to write down the value of certain assets, which could adversely affect our earnings.

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Accounting rules for our business continue to evolve, are highly complex, and involve significant judgments and assumptions. Changes in accounting interpretations or assumptions could impact our financial statements.
Accounting rules for our business, such as the rules for determining the fair value measurement and disclosure of financial instruments, are highly complex and involve significant judgment and assumptions. These complexities could lead to a delay in the preparation of financial information and the delivery of this information to our stockholders. Changes in accounting interpretations or assumptions related to fair value could impact our financial statements and our ability to timely prepare our financial statements.
Impairment charges relating to our goodwill or other intangible assets could adversely affect our financial performance.
At December 31, 2016 , we had $47.7 million of goodwill and $11.3 million of other intangible assets. We evaluate goodwill for impairment at the reporting unit level as of October 1 of each year, or whenever events or circumstances indicate potential impairment. A significant decline in our reporting unit performance, increases in equity capital requirements, increases in the estimated cost of debt or equity, a significant adverse change in the business climate or a sustained decline in the price of our common stock may necessitate our taking charges in the future related to the impairment of our goodwill. We incurred impairment charges of $326.3 million , $207.6 million and $82.3 million during 2016, 2015 and 2014, respectively. If we determine that our goodwill or another intangible asset is impaired, we may be required to record additional significant charges to earnings that could adversely affect our financial condition and operating results.
We identified a material weakness in our internal controls over financial reporting in our Original Filing, and in connection with this Amended Filing, we have identified an additional material weakness. If we do not adequately address these material weaknesses, if we have other material weaknesses or significant deficiencies in our internal controls over financial reporting in the future, or if we otherwise do not maintain effective internal controls over financial reporting, we could fail to accurately report our financial results, which may materially adversely affect our business and financial condition.
Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal controls over financial reporting and have our independent auditors issue their own opinion on our internal controls over financial reporting. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. A material weakness is defined by the standards issued by the Public Company Accounting Oversight Board as a deficiency or a combination of deficiencies in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
In our Original Filing, we concluded at December 31, 2016 that there was a material weakness in internal controls over financial reporting related to operational processes associated with Ditech Financial default servicing activities. Further, in connection with the identification of the error in the calculation of the valuation allowance on our deferred tax assets that resulted in preparing this Amended Filing, we have identified an additional material weakness in internal controls over financial reporting related to the technical review of such calculation. We have initiated steps to remediate both of these material weaknesses. While we believe these steps will improve the effectiveness of our internal controls over financial reporting and remediate the material weaknesses, if our remediation efforts are insufficient to address the material weaknesses, or if additional material weaknesses in our internal controls are discovered in the future, they may adversely affect our ability to record, process, summarize and report financial information timely and accurately and, as a result, our financial statements may contain material misstatements or omissions. Refer to Part II, Item 9A. Controls and Procedures for further information regarding these material weaknesses and our related remediation plans.
It is possible that additional material weaknesses and/or significant deficiencies could be identified by our management or by our independent auditing firm in the future, or may occur without being identified. The existence of any additional material weakness or significant deficiency could require management to devote significant additional time and incur significant additional expense to remediate such weakness or deficiency and management may not be able to remediate the same in a timely manner. Any additional weakness or deficiency, even if remediated quickly, could result in regulatory scrutiny or lead to a default under our indebtedness. Furthermore, any additional material weakness requiring disclosure could cause investors to further lose confidence in our reported financial condition, materially affect the market price and trading liquidity of our debt instruments, reduce the market value of our common stock and otherwise materially adversely affect our business and financial condition.

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The restatement of our financial statements may lead to additional risks and uncertainties, including loss of investor and counterparty confidence and negative impacts on our stock price.
We have restated our Consolidated Financial Statements as of and for the periods ended June 30, 2016, September 30, 2016, December 31, 2016 and March 31, 2017 to correct an error in our calculation of the valuation allowance on our deferred tax assets. For a discussion of this error and the related adjustment, see Note 2 to the Consolidated Financial Statements included in this report and the Explanatory Note immediately preceding the Index. In connection with this restatement of our prior financial statements, we have identified a material weakness in our internal controls over financial reporting in addition to the material weakness that was identified in connection with the preparation of the Original Filing. Management has concluded that our internal control over financial reporting and disclosure controls and procedures were ineffective as of December 31, 2016. For a description of these material weaknesses, refer to Part II, Item 9A. Controls and Procedures.

In connection with the restatement, including the evaluation of the valuation allowance on our deferred tax asset balance, preparation of the Amended Filings, obtaining necessary waivers and/or amendments from our warehouse and advance facility lenders and remediation of our ineffective disclosure controls and procedures and material weakness in internal control over financial reporting, we have incurred significant additional costs consisting of additional accounting and legal fees, diversion of management’s time and attention and reductions in our advance rates and/or other changes to the terms of our warehouse and advance facilities. We may also become subject to regulatory investigations, stockholder demands or other legal actions in connection with the restatement, which would, regardless of the outcome, consume substantial resources (including management’s time and attention) and result in additional legal, accounting, insurance and other costs. The restatement and related matters could also impair our reputation and cause our lenders and other counterparties to lose confidence in us. Our ability to comply with certain continued listing standards of the NYSE may be impacted following this Amended Filing. Each of these occurrences, individually or in the aggregate, could have a material adverse effect on our business, results of operations, financial condition, liquidity and stock price.
If we fail to regain and maintain compliance with the continued listing standards of the NYSE, it may result in the delisting of our common stock from the NYSE and have other negative implications under our material agreements with lenders and counterparties.
Our common shares are currently and have been listed for trading on the NYSE, and the continued listing of our common shares on the NYSE is subject to our compliance with a number of listing standards. To maintain compliance with these continued listing standards, the Company is required, among other things, to maintain an average closing price per share of $1.00 or more over a consecutive 30 trading-day period. On July 13, 2017, we received written notification from the NYSE that the average closing price of our common stock had fallen below $1.00 per share over a consecutive 30 trading-day period as of July 10, 2017, and, as a result, the average closing price per share of our common stock was below the minimum average closing price required to maintain listing on the NYSE. We have notified the NYSE of our intent to cure this noncompliance and are considering various options we may take in an effort to cure this deficiency and regain compliance. Additionally, as of the date we file this report, we will be considered to be below compliance with another NYSE continued listing standard because the Company's average global market capitalization over a consecutive 30 trading-day period has fallen below $50.0 million at the same time our stockholders' equity is less than $50.0 million.
In addition, our common stock could be delisted if the trading price of our common stock on the NYSE is abnormally low, which has generally been interpreted to mean at levels below $0.16 per share, or if our average market capitalization over a consecutive 30 day-trading period is less than $15 million. In these events, we would not have an opportunity to cure the deficiency, and our shares would be delisted immediately and suspended from trading on the NYSE.
If we are unable to cure any event of noncompliance with any continued listing standard of the NYSE within the applicable timeframe and other parameters set forth by the NYSE, or if we fail to maintain compliance with certain continued listing standards that do not provide for a cure period, it will result in the delisting of our common stock from the NYSE, which could negatively impact the trading price, trading volume and liquidity of, and have other material adverse effects on, our common stock. If our common stock is delisted from the NYSE, this could also have negative implications on our business relationships under our material agreements with lenders and other counterparties. If our common stock is delisted from the NYSE, it would constitute a fundamental change as that term is defined under the terms of the Convertible Notes, and require, among other things, that we take steps to make an offer to repay the Convertible Notes at 100% of the principal amount thereof. We currently are not permitted to make such an offer pursuant to the terms of certain of our debt facilities and agreements. If our common stock is delisted from the NYSE and we are not able to satisfy this repurchase obligation, it would constitute an event of default under the indenture governing the Convertible Notes and result in a cross default under certain of our other debt agreements. In such event, the holders of 25% in aggregate principal amount outstanding of the Convertible Notes will have the right to accelerate such indebtedness. Lenders under the 2013 Credit Agreement and under the warehouse facilities would similarly be able to accelerate the indebtedness thereunder if we are unable to fulfill such obligations and if indebtedness in excess of $75.0 million in the aggregate were so accelerated, holders of the Senior Notes could similarly accelerate the Senior Notes indebtedness. Each of these occurrences, individually or in the aggregate, could have a material adverse effect on our business, results of operations, financial condition, liquidity and stock price.

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Our business could suffer if we fail to attract, or retain, highly skilled senior managers and other employees.
Our future success will depend on our ability to identify, hire, develop, motivate and retain highly qualified personnel for all areas of our organization, in particular skilled managers, loan servicers, debt default specialists, loan officers and underwriters. Trained and experienced personnel are in high demand and may be in short supply in some areas. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. We may not be able to attract, develop and maintain an adequate skilled workforce necessary to operate our businesses and labor expenses may increase as a result of a shortage in the supply of qualified personnel. If we are unable to attract and retain such personnel, we may not be able to take advantage of acquisitions and other growth opportunities that may be presented to us and this could materially affect our business, financial condition and results of operations.
We have been reducing our workforce size and reducing the number of sites at which we operate, and as a result of these changes we have lost experienced personnel, including senior managers, have incurred transition costs and have had impaired efficiency in certain parts of our business during periods of change. We expect to continue to make further changes in our site footprint and to seek further personnel efficiencies, which could adversely affect our operations and results in future periods. As a result of the uncertainty these changes generate, it may be harder for us to retain or attract skilled employees in the future.
The experience of our senior managers is a valuable asset to us. While our senior management team has significant experience in the residential loan originations and servicing industry, we have recently experienced significant senior management turnover. The loss of the services of our senior managers, or our recent, or any future, turnover at the senior management level, as well as risks associated with integrating a significant number of senior level employees into our operations and potential disruptions if one or more of the new employees are not successful, could adversely affect our business.
Our reputation, business and operations could be adversely affected if there are regulatory compliance failures related to our investment adviser activities.
One of our subsidiaries, GTIM, is a registered investment adviser under the Advisers Act. GTIM provides investment advisory and related services to investment advisory clients. A failure by GTIM to comply with the requirements of the Advisers Act, including record-keeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities, could result in investigations, sanctions and reputational damage.
Our failure to deal appropriately with potential conflicts of interest relating to our relationship with WCO could damage our reputation, expose us to regulatory and other risks, and adversely affect our business.
Certain of our current and former officers, employees and/or Board members have served, or currently serve, as officers and/or Board members of WCO, which could create the perception of conflicts of interest between such persons’ duties to us and their duties to WCO. In addition, potential conflicts of interest could develop regarding various other matters in connection with the recently completed sale of substantially of WCO’s assets and WCO’s subsequent, ongoing liquidation. We attempt to manage such potential conflicts through our practices, our internal compliance policies and procedures, and the policies and agreements we negotiated with WCO, although no assurance can be given that conflicts have not, and will not in the future, nevertheless arise.
Appropriately dealing with conflicts of interest is complex and difficult and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or perceived conflicts of interest. It is possible that potential or perceived conflicts could give rise to disagreements with WCO or regulatory enforcement actions as a result of GTIM’s obligations as the investment advisor to WCO, or result in a breach of the restrictive covenants contained in our debt agreements. Regulatory scrutiny of, or litigation in connection with, conflicts of interest or other matters relating to our relationship with WCO could have a material adverse effect on our reputation, hamper our ability to raise additional funds or to achieve certain of our strategic objectives, discourage counterparties to do business with us, and damage our investment in WCO, and could have a material adverse effect on our business, financial condition, liquidity and results of operations.
Additionally, WCO’s qualification as a REIT through the time of its liquidation for tax purposes, which occurred in December 2016, involved the application of highly technical and complex Internal Revenue Code provisions for which only limited judicial and administrative authorities exist, and even a technical or inadvertent violation could have jeopardized WCO’s REIT qualification in applicable tax years (thereby causing, among other consequences, WCO to be subject to corporate-level U.S. federal income taxes in such years) and could adversely affect our relationship with WCO and expose us to liability. Although we believe WCO qualified as a REIT through its liquidation for tax purposes, no assurance can be given in that regard.

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Risks Related to Our Organization and Structure
Certain provisions of Maryland law and our stockholder rights plan could inhibit a change in our control.
Certain provisions of the MGCL may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change in our control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then prevailing market price of such shares. We are subject to the "business combination" provisions of the MGCL that, subject to limitations, prohibit certain business combinations between us and an "interested stockholder" (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of our then outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of our then outstanding stock) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder and, thereafter, imposes special appraisal rights and supermajority stockholder voting requirements on these combinations. These provisions of the MGCL do not apply to business combinations that are approved or exempted by the board of directors of a corporation prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our Board of Directors has by resolution exempted business combinations between us and any other person, provided that the business combination is first approved by our Board of Directors. This resolution may be altered or repealed in whole or in part at any time. If this resolution is repealed, or our Board of Directors does not otherwise approve a business combination, this statute may discourage others from trying to acquire control of us and may increase the difficulty of consummating any offer.
The "control share" provisions of the MGCL provide that "control shares" of a Maryland corporation (defined as shares which, when aggregated with all other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in the election of directors) acquired in a "control share acquisition" (defined as the acquisition of issued and outstanding "control shares," subject to certain exceptions) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and our employees who are also our directors. Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our shares of stock. There can be no assurance that this provision will not be amended or eliminated at any time in the future.
The "unsolicited takeover" provisions of the MGCL permit our Board of Directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain provisions if we have a class of equity securities registered under the Exchange Act and at least three independent directors. These provisions may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in our control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then current market price.
On June 29, 2015, our Board of Directors adopted a stockholder rights plan, commonly referred to as a "poison pill," in response to accumulations of our common stock in the market. The stockholder rights plan was initially adopted to deter the acquisition by a person or group of persons acting in concert of beneficial ownership of more than 20% of the outstanding shares of our common stock without negotiation with, and the approval of, our Board of Directors by making such an acquisition prohibitively expensive for the acquirer(s). Subsequent to the initial adoption of the stockholder rights plan, it was amended to, among other things, permit certain stockholders to acquire up to 25% of the outstanding shares of our common stock and to extend the expiration date of the rights issued thereunder. Following these amendments, on November 11, 2016 we entered into an amendment and restatement of the stockholder rights plan intended to, among other things, help protect our “built-in tax losses” and certain other tax benefits by acting as a deterrent to any person or group of persons acting in concert acquiring beneficial ownership of 4.99% or more of the outstanding shares of our common stock without the approval of our Board of Directors, subject to certain limited exceptions. The amended and restated stockholder rights plan provides that the rights issued thereunder will expire on November 11, 2017 or upon the earlier occurrence of certain events, subject to the extension of the amended and restated rights plan by our Board of Directors or the redemption or exchange of the rights by us, in each case as described in, and subject to the terms of, the amended and restated rights plan. The amended and restated rights plan applies equally to all current and future stockholders. The amended and restated rights plan is not intended to deter offers that our Board of Directors determines are in the best interests of our stockholders; however, it may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which our stockholders might receive a premium for their shares.

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Our common stock price may experience substantial volatility which may affect your ability to sell our common stock at an advantageous price.
The market price of our common stock has been and may continue to be volatile. For example, the closing market price of our common stock on the New York Stock Exchange fluctuated between $2.24 per share and $16.00 per share during 2016 and may continue to fluctuate. The volatility may affect your ability to sell our common stock at an advantageous price. Market price fluctuations in our common stock may be due to reduced liquidity resulting from industry and regulatory matters, highly concentrated ownership of our common stock, acquisitions, dispositions or other material public announcements, along with a variety of additional factors including, without limitation, those set forth under these “Risk Factors.”
We may issue shares of preferred stock with greater rights than our common stock.
Our charter authorizes our Board of Directors to issue one or more classes or series of preferred stock and set the terms of the preferred stock without seeking any further approval from our stockholders. Any preferred stock that is issued may rank ahead of our common stock in terms of dividends, liquidation rights, or voting rights. If we issue preferred stock, it may adversely affect the market price of our common stock, decrease the amount of earnings and assets available for distribution to holders of our common stock or adversely affect the rights and powers, including voting rights, of the holders of our common stock.
Our authorized but unissued shares of common and preferred stock may prevent a change in our control.
Our charter authorizes us to issue additional authorized but unissued shares of common or preferred stock. In addition, our Board of Directors may, without stockholder approval, classify or reclassify any unissued shares of common or preferred stock into other classes or series of stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our Board of Directors may establish a class or series of shares of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for our shares of common stock or otherwise be in the best interest of our stockholders.
Our deferred tax assets may be impaired if we have a significant change in our stockholder base and this could inhibit certain acquisitions of our stock.
We, and certain of our subsidiaries, have deferred tax assets, including a significant amount of tax loss carryforwards and unrealized tax losses for U.S. federal income tax purposes that may potentially provide valuable tax benefits to the Company. In the event that an “ownership change” occurs for purposes of Section 382, our ability to use pre-ownership change losses to offset future taxable income could be significantly limited, which could have a material adverse effect on our financial results, liquidity and market value. In general, an ownership change occurs if there is a change in ownership of more than 50% during any cumulative three-year period. Under Section 382, ownership changes are generally determined by reference to the shares acquired and disposed of by stockholders deemed to own 5% or more of our common stock. Whether an ownership change occurs by reason of trading in our stock or otherwise is largely outside our control. The determination of whether an ownership change has occurred is complex. Although we monitor our ownership change under Section 382 based on publicly available information and, as of December 31, 2016, estimate that our ownership change during the applicable look back period under Section 382 was approximately 38%, we cannot provide any assurance that our ownership change estimate is accurate. Thus, no assurance can be given that we have not experienced, or will not in the future experience, an ownership change. In addition, the possibility of triggering an ownership change may inhibit a party from acquiring our shares or making a proposal to acquire our shares.

Risks Related to our Proposed Restructuring

The Restructuring Support Agreement is subject to significant conditions and milestones that may be beyond our control and may be difficult for us to satisfy. If the Restructuring Support Agreement is terminated, our ability to consummate a restructuring of our debt could be materially and adversely affected.

The Restructuring Support Agreement sets forth certain conditions we must satisfy, including seeking to negotiate a restructuring support agreement with at least 66 2/3% of the Senior Noteholders and the timely satisfaction of conditions and milestones to consummate the restructuring. Our ability to timely satisfy such conditions and milestones is subject to risks and uncertainties that, in certain instances, are beyond our control, including whether we receive the requisite level of participation from each of the holders of the 2013 Term Loan, Senior Notes and Convertible Notes to consummate the transactions contemplated by the Restructuring Support Agreement. The Restructuring Support Agreement gives the Consenting Term Lenders the ability to terminate the Restructuring Support Agreement under certain circumstances, including the failure of certain conditions or milestones to be satisfied. Should the Restructuring Support Agreement be terminated, all obligations of the parties to the Restructuring Support Agreement will terminate (except as expressly provided in the Restructuring Support Agreement). A termination of the Restructuring Support Agreement may

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result in the loss of support for a restructuring and our ability to effect a restructuring in the future could be materially and adversely affected.

In the event we pursue the in-court restructuring and file for relief under the Bankruptcy Code, we may be subject to the risks and uncertainties associated with Chapter 11 proceedings.

The terms of the Restructuring Support Agreement provide that in the absence of sufficient stakeholder support for the out-of-court restructuring and subject to certain other conditions, the parties thereto will implement the proposed financial restructuring through a prepackaged plan of reorganization under Chapter 11 of the Bankruptcy Code. In the event we pursue the in-court restructuring and file for relief under the Bankruptcy Code, our operations, our ability to develop and execute our business plan and our continuation as a going concern will be subject to the risks and uncertainties associated with bankruptcy proceedings, including, among others: the high costs of bankruptcy proceedings and related fees; our ability to obtain sufficient financing to allow us to emerge from bankruptcy and execute our business plan post-emergence, and our ability to comply with terms and conditions of that financing; our ability to maintain our relationships with our lenders, counterparties, employees and other third parties; our ability to maintain contracts that are critical to our operations on reasonably acceptable terms and conditions; the ability of third parties to use certain limited safe harbor provisions of the Bankruptcy Code to terminate contracts without first seeking bankruptcy court approval; and the actions and decisions of our creditors and other third parties who have interests in our Chapter 11 proceedings that may be inconsistent with our operational and strategic plans.

The Consolidated Financial Statements included herein contain disclosures that express substantial doubt about our ability to continue as a going concern due to the possibility that we may implement a prepackaged plan of reorganization under Chapter 11 of the Bankruptcy Code.

As set forth in the Restructuring Support Agreement, the parties thereto have agreed to, among other things, the principal terms of a proposed financial restructuring of the Company, which will be implemented through an out-of-court restructuring and, in the absence of sufficient stakeholder support for an out-of-court restructuring, a prepackaged plan of reorganization under Chapter 11 of the Bankruptcy Code. The potential for a prepackaged Chapter 11 filing raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements have been prepared assuming the Company will continue as a going concern, and management has concluded that while there can be no assurance that the Company’s recent and future actions will be successful in mitigating the various risks and uncertainties to which the Company is currently subject, the Company’s current plans provide enough liquidity to meet its obligations over the next twelve months from the date of issuance of the Consolidated Financial Statements. The Company will continue to monitor progress on its debt restructuring initiatives and the impact on its ongoing assessment of going concern in future periods.

We may not be able to obtain sufficient stakeholder support for the transactions contemplated by the Restructuring Support Agreement.

There can be no assurance that the proposed financial restructuring of the Company as contemplated in the Restructuring Support Agreement will receive the necessary level of support to be implemented either through an out-of-court restructuring or an in-court-restructuring. The success of any restructuring will depend on the willingness of existing creditors to agree to the exchange or modification of their claims, and if applicable, approval by the bankruptcy court, and there can be no guarantee of success with respect to those matters. We may receive objections to the terms of the transactions contemplated by the Restructuring Support Agreement, including objection to the confirmation of any plan of reorganization from various stakeholders in any Chapter 11 proceedings. We cannot predict the impact that any objection or third party motion may have on a bankruptcy court’s decision to confirm a plan of reorganization or our ability to complete an in-court restructuring as contemplated by the Restructuring Support Agreement or otherwise. Any objection may cause us to devote significant resources in response which could materially and adversely affect our business, financial condition and results of operations.

The pursuit of the Restructuring Support Agreement has consumed, and compliance with the terms thereof will consume, a substantial portion of the time and attention of our management, which may have an adverse effect on our business and results of operations.

It is impossible to predict with certainty the amount of time and resources necessary to successfully implement the restructuring contemplated by the Restructuring Support Agreement, particularly if we must proceed with an in-court restructuring. Compliance with the terms of the Restructuring Support Agreement will involve additional expense and our management will be required to spend a significant amount of time and effort focusing on the proposed transactions. This diversion of attention may materially adversely affect the conduct of our business, and, as a result, our financial condition and results of operations.

Furthermore, loss of key personnel, significant employee attrition or material erosion of employee morale has negatively impacted and could have a material adverse effect on our ability to effectively conduct our business, and could impair our ability to execute our

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strategy and implement operational initiatives, thereby having a material adverse effect on our business and on our financial condition and results of operations.
If we are unable to effectuate a satisfactory debt restructuring transaction this could have a material adverse effect on the Company.
If the Company is unable to effectuate a satisfactory debt restructuring transaction, the adverse pressures the Company has recently experienced with respect to its:
•
relationships with counterparties and key stakeholders who are critical to its business;
•
ability to access the capital markets;
•
ability to execute on its operational and strategic goals;
•
ability to recruit and/or retain key personnel; and
•
business, prospects, results of operations and liquidity generally,

are expected to continue and potentially intensify, and could have a material adverse effect on the Company’s business, prospects, results of operations, liquidity and financial condition.
Even if the restructuring is consummated, we may not be able to achieve our stated goals and continue as a going concern.

Even if the debt restructuring is consummated, whether by means of the out-of-court restructuring or in-court restructuring, we will continue to face a number of risks, including our ability to reduce expenses, return our servicing and originations businesses to sustained profitability, implement our strategic initiatives, including those related to our “core” and “non-core” framework and generally maintain favorable relationships with and secure the confidence of our counterparties. Accordingly, we cannot guarantee that the proposed financial restructuring will achieve our stated goals nor can we give any assurance of our ability to continue as a going concern.
Risks Related to Our Relationship with Walter Energy
We may become liable for U.S. federal income taxes allegedly owed by the Walter Energy consolidated group for 2009 and prior tax years. We cannot predict how Walter Energy’s recent bankruptcy filing in Alabama may affect the outcome of these matters.
We may become liable for U.S. federal income taxes allegedly owed by the Walter Energy consolidated group for 2009 and prior tax years. Under federal law, each member of a consolidated group for U.S. federal income tax purposes is severally liable for the federal income tax liability of each other member of the consolidated group for any year in which it was a member of the consolidated group at any time during such year. Certain former subsidiaries of the Company (which were subsequently merged or otherwise consolidated with certain current subsidiaries of the Company) were members of the Walter Energy consolidated tax group prior to our spin-off from Walter Energy on April 17, 2009. As a result, to the extent the Walter Energy consolidated group’s federal income taxes (including penalties and interest) for such tax years are not favorably resolved on the merits or otherwise paid, we could be liable for such amounts.
Walter Energy Tax Matters. According to Walter Energy’s Form 10-Q, or the Walter Energy Form 10-Q, for the quarter ended September 30, 2015 (filed with the SEC on November 5, 2015) and certain other public filings made by Walter Energy in its bankruptcy proceedings currently pending in Alabama, described below, as of the date of such filing, certain tax matters with respect to certain tax years prior to and including the year of our spin-off from Walter Energy remained unresolved, including certain tax matters relating to: (i) a “proof of claim” for a substantial amount of taxes, interest and penalties with respect to Walter Energy’s fiscal years ended August 31, 1983 through May 31, 1994, which was filed by the IRS in connection with Walter Energy’s bankruptcy filing on December 27, 1989 in the U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division; (ii) an IRS audit of Walter Energy’s federal income tax returns for the years ended May 31, 2000 through December 31, 2008; and (iii) an IRS audit of Walter Energy’s federal income tax returns for the 2009 through 2013 tax years.
Walter Energy 2015 Bankruptcy Filing. On July 15, 2015, Walter Energy filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Northern District of Alabama. On August 18, 2015, Walter Energy filed a motion with the Florida bankruptcy court requesting that the court transfer venue of its disputes with the IRS to the Alabama bankruptcy court. In that motion, Walter Energy asserted that it believed the liability for the years at issue "will be materially, if not completely, offset by the [r]efunds" asserted by Walter Energy against the IRS. The Florida bankruptcy court transferred venue of the matter to the Alabama bankruptcy court, where it remains pending.

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On November 5, 2015, Walter Energy, together with certain of its subsidiaries, entered into the Walter Energy Asset Purchase Agreement with Coal Acquisition, a Delaware limited liability company formed by members of Walter Energy’s senior lender group, pursuant to which, among other things, Coal Acquisition agreed to acquire substantially all of Walter Energy’s assets and assume certain liabilities, subject to, among other things, a number of closing conditions set forth therein. On January 8, 2016, after conducting a hearing, the Bankruptcy Court entered an order approving the sale of Walter Energy's assets to Coal Acquisition free and clear of all liens, claims, interests and encumbrances of the debtors. The sale of such assets pursuant to the Walter Energy Asset Purchase Agreement was completed on March 31, 2016 and was conducted under the provisions of Sections 105, 363 and 365 of the Bankruptcy Code. Based on developments in the Alabama bankruptcy proceedings following completion of this asset sale, such asset sale appears to have resulted in (i) limited value remaining in Walter Energy’s bankruptcy estate and (ii) to date, limited recovery for certain of Walter Energy’s unsecured creditors, including the IRS.
On January 9, 2017, Walter Energy filed with the Alabama Bankruptcy Court a motion to convert its Chapter 11 bankruptcy case to a Chapter 7 liquidation. In that motion, Walter Energy stated that, other than with respect to 1% of the equity of the acquirer of Walter Energy's core assets, no prospect of payment of unsecured claims exists. On January 23, 2017, the IRS filed an objection to Walter Energy's motion to convert, in which the IRS requested that a judgment be entered against Walter Energy in connection with the tax matters described above. The IRS further asserted that entry of a final judgment was necessary so that it could pursue collection of tax liabilities from former members of Walter Energy's consolidated group that are not debtors.
On January 30, 2017, the Bankruptcy Court held a hearing at which it denied the IRS's request for entry of a judgment and announced its intent to grant Walter Energy's motion to convert. The Bankruptcy Court entered an order on February 2, 2017 converting Walter Energy's Chapter 11 bankruptcy to a Chapter 7 liquidation. During February 2017, Andre Toffel was appointed Chapter 7 trustee of Walter Energy's bankruptcy estate .
We cannot predict whether or to what extent we may become liable for federal income taxes of the Walter Energy consolidated tax group during the tax years in which we were a part of such group, in part because we believe, based on publicly available information, that: (i) the amount of taxes owed by the Walter Energy consolidated tax group for the periods from 1983 through 2009 remains unresolved; and (ii) in light of Walter Energy’s conversion from a Chapter 11 bankruptcy to a Chapter 7 bankruptcy, it is unclear whether the IRS will seek to make a direct claim against us for such taxes. Further, because we cannot currently estimate our liability, if any, relating to the federal income tax liability of Walter Energy’s consolidated tax group during the tax years in which we were a part of such group, we cannot determine whether such liabilities, if any, could have a material adverse effect on our business, financial condition, liquidity and/or results of operations.
Tax Separation Agreement. In connection with our spin-off from Walter Energy, we and Walter Energy entered into a Tax Separation Agreement, dated April 17, 2009. Notwithstanding any several liability we may have under federal tax law described above, under the Tax Separation Agreement, Walter Energy agreed to retain full liability for all U.S. federal income or state combined income taxes of the Walter Energy consolidated group for 2009 and prior tax years (including any interest, additional taxes or penalties applicable thereto), subject to limited exceptions. We therefore filed proofs of claim in the Alabama bankruptcy proceedings asserting claims for any such amounts to the extent we are ultimately held liable for the same. However, we expect to receive little or no recovery from Walter Energy for any filed proofs of claim for indemnification.
It is unclear whether claims made by us under the Tax Separation Agreement would be enforceable against Walter Energy in connection with, or following the conclusion of, the various Walter Energy bankruptcy proceedings described above, or if such claims would be rejected or disallowed under bankruptcy law. It is also unclear whether we would be able to recover some or all of any such claims given Walter Energy’s limited assets and limited recoveries for unsecured creditors in the Walter Energy bankruptcy proceedings described above.
Furthermore, the Tax Separation Agreement provides that Walter Energy has, in its sole discretion, the exclusive right to represent the interests of the consolidated group in any audit, court proceeding or settlement of a claim with the IRS for the tax years in which certain of our former subsidiaries were members of the Walter Energy consolidated tax group. However, in light of the conversion of Walter Energy’s bankruptcy proceeding from a Chapter 11 proceeding to a Chapter 7 proceeding, the Company may choose to take a direct role in proceedings involving the IRS’s claim for tax years in which the Company was a member of the Walter Energy consolidated tax group. Moreover, the Tax Separation Agreement obligates us to take certain tax positions that are consistent with those taken historically by Walter Energy. In the event we do not take such positions, we could be liable to Walter Energy to the extent our failure to do so results in an increased tax liability or the reduction of any tax asset of Walter Energy. These arrangements may result in conflicts of interests between us and Walter Energy, particularly with regard to the Walter Energy bankruptcy proceedings described above.
Lastly, according to its public filings, Walter Energy’s 2009 tax year is currently under audit. Accordingly, if it is determined that certain distribution taxes and other amounts are owed related to our spin-off from Walter Energy in 2009, we may be liable under the Tax Separation Agreement for all or a portion of such amounts.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
Our executive and principal administrative office is located in Tampa, Florida in a 29,000 square foot facility, which is leased under a long-term lease. Our administrative and corporate operations and other activities included in our Other non-reportable segment are conducted at our Tampa location. Our Servicing segment has centralized servicing operations located in Saint Paul, Minnesota; Tempe, Arizona; Rapid City, South Dakota; Irving, Texas; and Jacksonville, Florida in leased office space ranging between 58,000 and 171,000 square feet. Our Reverse Mortgage segment operations centers lease office space ranging from 14,000 to 68,000 square feet in San Diego, California; Charlotte, North Carolina; Palm Beach Gardens, Florida; and Houston, Texas. Our Originations segment is headquartered in approximately 162,000 square feet of leased office space in Fort Washington, Pennsylvania. In addition, our field servicing and regional operations lease approximately 40 smaller offices located throughout the U.S. Our lease agreements have terms that expire through 2026 , exclusive of renewal option periods. We believe that our leased facilities are adequate for our current requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is, and expects that, from time to time, it will continue to be, involved in litigation, arbitration, examinations, inquiries, investigations and claims. These include pending examinations, inquiries and investigations by governmental and regulatory agencies, including but not limited to the SEC, state attorneys general and other state regulators, Offices of the U.S. Trustees and the CFPB, into whether certain of the Company's residential loan servicing and originations practices, bankruptcy practices and other aspects of its business comply with applicable laws and regulatory requirements.
From time to time, the Company has received and may in the future receive subpoenas and other information requests from federal and state governmental and regulatory agencies that are examining or investigating the Company. The Company and certain current and former Company officers have received subpoenas from the SEC requesting documents, testimony and/or other information in connection with an investigation concerning trading in the Company’s securities. The Company has cooperated with the investigation. The Company cannot provide any assurance as to the outcome of the aforementioned investigations or that such outcomes will not have a material adverse effect on its reputation, business, prospects, results of operations, liquidity or financial condition.
RMS received a subpoena dated June 16, 2016 from the Office of Inspector General of HUD requiring RMS to produce documents and other materials relating to, among other things, the origination, underwriting and appraisal of reverse mortgages for the time period since January 1, 2005. RMS also received a subpoena from the Office of Inspector General of HUD dated January 12, 2017 requesting certain documents and information relating to the origination and underwriting of certain specified loans. This investigation, which is being conducted in coordination with the U.S. Department of Justice, Civil Division, could lead to a demand or claim under the False Claims Act, which allows for penalties and treble damages, or other statutes. On July 27, 2016, RMS also received a letter from the New York Department of Financial Services requesting information on RMS's reverse mortgage servicing business in New York. We are cooperating with these and other inquiries relating to our reverse mortgage business.

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We have received various subpoenas for testimony and documents, motions for examinations pursuant to Federal Rule of Bankruptcy Procedure 2004, and other information requests from certain Offices of the U.S. Trustees, acting through trial counsel in various federal judicial districts, seeking information regarding an array of our policies, procedures and practices in servicing loans to borrowers who are in bankruptcy and our compliance with bankruptcy laws and rules. We have provided information in response to these subpoenas and requests and have met with representatives of certain Offices of the U.S. Trustees to discuss various issues that have arisen in the course of these inquiries, including our compliance with bankruptcy laws and rules. We cannot predict the outcome of the aforementioned proceedings and inquiries, which could result in requests for damages, fines, sanctions, or other remediation. We could face further legal proceedings in connection with these matters. We may seek to enter into one or more agreements to resolve these matters. Any such agreement may require us to pay fines or other amounts for alleged breaches of law and to change or otherwise remediate our business practices. Legal proceedings relating to these matters and the terms of any settlement agreement could have a material adverse effect on our reputation, business, prospects, results of operations, liquidity and financial condition.
Since mid-2014, we have received subpoenas for documents and other information requests from the offices of various state attorneys general who have, as a group and individually, been investigating our mortgage servicing practices. We have provided information in response to these subpoenas and requests and have had discussions with representatives of the states involved in the investigations to explain our practices. We may seek to reach an agreement to resolve these matters with one or more states. Any such agreement may include, among other things, enhanced servicing standards, monitoring and testing obligations, injunctive relief and payments for remediation, consumer relief, penalties and other amounts. We cannot predict whether litigation or other legal proceedings will be commenced by one or more states in relation to these investigations. Any legal proceedings and any agreement resolving these matters could have a material adverse effect on the Company’s reputation, business, prospects, results of operation, liquidity and financial condition.
The Company is involved in litigation, including putative class actions, and other legal proceedings concerning, among other things, lender-placed insurance, private mortgage insurance, bankruptcy practices, employment practices, the Consumer Financial Protection Act, the Fair Debt Collection Practices Act, the TCPA, the Fair Credit Reporting Act, TILA, RESPA, EFTA, the ECOA, and other federal and state laws and statutes. In Sanford Buckles v. Green Tree Servicing LLC and Walter Investment Management Corporation , filed on August 18, 2015 in the U.S. District Court for the District of Nevada, Ditech Financial (the Parent Company has since been dismissed) is subject to a putative class action suit alleging that Ditech Financial, within the three years prior to the filing of the complaint, improperly recorded phone calls received from, and/or made to, persons in Nevada at the time of the call, and did so without their prior consent in violation of Nevada state law. The plaintiff in this suit, on behalf of himself and others similarly situated, seeks punitive damages, statutory penalties and attorneys’ fees. Ditech Financial moved to dismiss the complaint, and the court determined that the relevant issue is a question of Nevada law to be decided by the Nevada Supreme Court. Accordingly, further proceedings in the U.S. District Court are stayed pending a decision by the Nevada Supreme Court.
In Kamimura, Lee C. v. Green Tree Servicing LLC , filed on April 8, 2016 in the U.S. District Court for the District of Nevada, Ditech Financial is subject to a putative nationwide class action suit alleging FCRA violations by obtaining credit bureau information without a permissible purpose after the discharge of debt owed to Ditech Financial pursuant to Chapter 13 of the Bankruptcy Code. The plaintiff in this suit, on behalf of himself and others similarly situated, seeks actual and punitive damages, statutory penalties, and attorneys’ fees and litigation costs.
Ditech Financial is also subject to several putative class action suits alleging violations of the TCPA for placing phone calls to plaintiffs’ cell phones using an automatic telephone dialing system without their prior consent. The plaintiffs in these suits, on behalf of themselves and others similarly situated, seek statutory damages for both negligent and knowing or willful violations of the TCPA.
On December 7, 2016, RMS agreed to the terms of a consent order that settled the matters arising from a CFPB investigation relating to RMS’s marketing and provision of reverse mortgage products and services. Under the order, RMS, without admitting or denying the allegations detailed in the order, agreed to pay a $325,000 civil money penalty, which the Company fully accrued at December 31, 2016. RMS also agreed to injunctions against future violations of certain consumer protection statutes and regulations and agreed to establish and maintain a comprehensive compliance plan designed to ensure RMS’s compliance with applicable consumer financial protection law and the full terms of the consent order. If RMS fails to comply with the order, it could be subject to additional sanctions, including actions for contempt, actions seeking additional fines, or new actions alleging violations of consumer protection statutes. The failure to comply with the order could have a material adverse effect on RMS’s reputation, business, prospects, results of operation, liquidity, and financial condition.

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The Board of Directors of the Company received a letter dated June 15, 2016 from counsel to a stockholder demanding that the Board assert legal claims against certain current and former directors and officers of the Company. The stockholder alleged that these directors and officers breached their fiduciary duties by failing to oversee the Company's operations and internal controls regarding its loan servicing, loan origination, reverse mortgage and financial reporting practices. On June 27, 2016, the Board formed an Evaluation Committee to consider and make a recommendation to the Board concerning the stockholder demand. On November 11, 2016, the Evaluation Committee recommended that the Board refuse the demand, and the Board adopted the Evaluation Committee’s recommendation. The demanding stockholder’s counsel has been informed of the Board’s determination.
The outcome of all of the Company's regulatory matters, litigations and other legal proceedings (including putative class actions) is uncertain, and it is possible that adverse results in such proceedings (which could include restitution, penalties, punitive damages and injunctive relief affecting the Company's business practices) and the terms of any settlements of such proceedings could, individually or in the aggregate, have a material adverse effect on the Company's reputation, business, prospects, results of operations, liquidity or financial condition. In addition, governmental and regulatory agency examinations, inquiries and investigations may result in the commencement of lawsuits or other proceedings against us or our personnel. Although the Company has historically been able to resolve the preponderance of its ordinary course litigations on terms it considered acceptable and individually not material, this pattern may not continue and, in any event, individual cases could have unexpected materially adverse outcomes, requiring payments or other expenses in excess of amounts already accrued. Certain of the litigations against the Company include claims for substantial compensatory, punitive and/or statutory damages, and in many cases the claims involve indeterminate damages. In some cases, including in some putative class actions, there could be fines or other damages for each separate instance in which a violation occurred. Certification of a class, particularly in such cases, could substantially increase the Company's exposure to damages. The Company cannot predict whether or how any legal proceeding will affect the Company's business relationship with actual or potential customers, the Company's creditors, rating agencies and others. In addition, cooperating in, defending and resolving these legal proceedings consume significant amounts of management time and attention and could cause the Company to incur substantial legal, consulting and other expenses and to change the Company's business practices, even in cases where there is no determination that the Company's conduct failed to meet applicable legal or regulatory requirements.
For a description of certain legal proceedings, refer to Note 33 to the Consolidated Financial Statements included in this report, which is incorporated by reference herein.

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ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on the NYSE under the symbol "WAC." As of March 9, 2017 , there were 133 record holders of our common stock.
The following table sets forth certain high and low sales prices of our common stock. There were no cash dividends declared on our common stock for the periods indicated.
 
 
Stock Prices
 
 
High
 
Low
2016
 
 
 
 
First Quarter ended March 31
 
$
16.00

 
$
6.31

Second Quarter ended June 30
 
8.51

 
2.70

Third Quarter ended September 30
 
4.06

 
2.24

Fourth Quarter ended December 31
 
8.11

 
3.77

 
 
 
 
 
2015
 
 
 
 
First Quarter ended March 31
 
$
24.35

 
$
14.16

Second Quarter ended June 30
 
23.70

 
15.92

Third Quarter ended September 30
 
23.38

 
14.39

Fourth Quarter ended December 31
 
17.80

 
9.63

We did not pay any cash dividends on our common stock during the fiscal years ended December 31, 2016 and 2015, and we have no current plans to pay any cash dividends on our common stock and instead may retain earnings, if any, for future operations, reinvestment in our business, debt repayment or other purposes. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board of Directors may deem relevant. In addition, our ability to pay dividends is limited by covenants in our 2013 Credit Agreement and Senior Notes Indenture. These restrictions on dividends are described in greater detail in the Liquidity and Capital Resources section under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Refer to Note 29 to the Consolidated Financial Statements for additional information regarding dividend restrictions.
Issuer Purchases of Equity Securities
None.

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Shareholder Return Performance Chart
The following graph shows a five-year comparison of the cumulative total shareholder return on our common stock with the cumulative total returns of the Russell 2000 Index and the S&P SmallCap 600 Financials Index as of December 31st of each year presented. The graph assumes that $100 was invested on December 31, 2011 and that all dividends and distributions were reinvested. The comparisons in the chart are provided in accordance with SEC requirements and are not intended to forecast or be indicative of possible future performance of our common stock.
WACFY201610_CHART-29240A01.JPG
 
2011
 
2012
 
2013
 
2014
 
2015
 
2016
Walter Investment
$
100.00

 
$
209.75

 
$
172.40

 
$
80.50

 
$
69.33

 
$
23.16

Russell 2000 Index
$
100.00

 
$
114.63

 
$
157.05

 
$
162.60

 
$
153.31

 
$
183.17

S&P SmallCap 600 Financials Index
$
100.00

 
$
117.53

 
$
154.90

 
$
167.75

 
$
168.36

 
$
234.48

The foregoing performance graph and related information shall not be deemed “soliciting material” nor to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act or the Exchange Act except to the extent we specifically incorporate it by reference into such filing.

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ITEM 6. SELECTED FINANCIAL DATA (AS RESTATED)
T he following table sets forth certain selected historical consolidated financial information of the Company, which information has been derived from our audited Consolidated Financial Statements. As discussed in the Explanatory Note to this Amended Filing and in Note 2 to the Consolidated Financial Statements, we have restated our audited Consolidated Financial Statements and related disclosures as of and for the year ended December 31, 2016 to correct the estimated valuation allowance recorded on our deferred tax assets.
Our historical annual consolidated financial results presented herein are not necessarily indicative of the results that may be expected for any future period and should be read in conjunction with Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements and notes thereto included in this report. Refer to the Liquidity and Capital Resources section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for a description of our financing transactions.
 
 
(in thousands, except per share data)
 
 
For the Years Ended December 31,
 
 
2016 (1)
 
2015  (2)
 
2014  (3)
 
2013  (4)
 
2012 (5)
 
 
(Restated)
 
 
 
 
 
 
 
 
Revenues
 
$
995,717

 
$
1,274,259

 
$
1,487,153

 
$
1,802,499

 
$
623,807

Expenses
 
1,792,152

 
1,711,756

 
1,625,029

 
1,383,253

 
617,900

Other gains (losses)
 
6,617

 
33,071

 
18,536

 
(6,428
)
 
(41,358
)
Income (loss) before income taxes
 
(789,818
)
 
(404,426
)
 
(119,340
)
 
412,818

 
(35,451
)
Income tax expense (benefit)
 
44,040

 
(141,236
)
 
(9,012
)
 
159,351

 
(13,317
)
Net income (loss)
 
$
(833,858
)
 
$
(263,190
)
 
$
(110,328
)
 
$
253,467

 
$
(22,134
)
 
 
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per common and common equivalent share
 
$
(23.18
)
 
$
(7.00
)
 
$
(2.93
)
 
$
6.75

 
$
(0.73
)
Diluted earnings (loss) per common and common equivalent share
 
(23.18
)
 
(7.00
)
 
(2.93
)
 
6.63

 
(0.73
)
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31,
 
 
2016 (1)
 
2015 (2)
 
2014 (3)
 
2013 (4)
 
2012 (5)
 
 
(Restated)
 
 
 
 
 
 
 
 
Total assets
 
$
16,458,970

 
$
18,549,447

 
$
18,902,595

 
$
17,291,283

 
$
10,891,441

Residential loans at fair value
 
12,416,542

 
12,673,439

 
11,832,630

 
10,341,375

 
6,710,211

Servicer and protective advances, net
 
1,195,380

 
1,631,065

 
1,798,127

 
1,420,398

 
218,427

Servicing rights, net
 
1,029,719

 
1,788,576

 
1,730,216

 
1,304,900

 
242,712

Debt and other obligations:
 
 
 
 
 
 
 
 
 
 
Servicing advance liabilities
 
$
783,229

 
$
1,229,280

 
$
1,365,885

 
$
971,286

 
$
100,164

Warehouse borrowings
 
1,203,355

 
1,340,388

 
1,176,956

 
1,085,563

 
255,385

Servicing rights related liabilities
 
1,902

 
117,000

 
66,311

 
—

 
—

Corporate debt
 
2,129,000

 
2,157,424

 
2,237,037

 
2,237,535

 
867,662

Mortgage-backed debt
 
943,956

 
1,051,679

 
1,739,827

 
1,874,314

 
2,056,286

HMBS related obligations
 
10,509,449

 
10,647,382

 
9,951,895

 
8,652,746

 
5,874,552

Total debt and other obligations
 
$
15,570,891

 
$
16,543,153

 
$
16,537,911

 
$
14,821,444

 
$
9,154,049

Total stockholders' equity
 
$
(24,440
)
 
$
804,676

 
$
1,076,659

 
$
1,167,016

 
$
894,928

__________
(1)
During 2016, we recorded $237.3 million in losses resulting from changes in valuation inputs and other assumptions used in the fair value of assets and liabilities carried at fair value and $326.3 million in goodwill and intangible assets impairment charges related to our Servicing, ARM and Reverse Mortgage reporting units. Additionally, during 2016, we sold mortgage servicing rights with a carrying value of $458.9 million . Further, a valuation allowance was recorded on our net deferred tax assets totaling $343.2 million , of which $304.7 million resulted from the restatement as discussed in Note 2 to the Consolidated Financial Statements.

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(2)
During 2015, we recorded $143.3 million in losses resulting from changes in valuation inputs and other assumptions used in the fair value of assets and liabilities carried at fair value, $207.6 million in goodwill impairment charges related to our Servicing and Reverse Mortgage reporting units and $56.4 million r elated to regulatory developments in 2015 that led to additional charges related to curtailable events and to accruals associated with legal and regulatory matters outside of the normal course of business.
(3)
During 2014, we recorded $100.8 million in costs for legal and regulatory matters outside of normal course of business, $77.9 million in losses resulting from changes in valuation inputs and other assumptions used in the fair value of assets and liabilities carried at fair value, a $75.7 million provision for uncollectible advances, and an $82.3 million goodwill impairment charge related to our Reverse Mortgage reporting unit. We recorded $36.8 million in asset management performance fees collected and earned by our Other non-reportable segment in connection with the asset management of a fund. We recorded $223.7 million in assets, mostly consisting of servicing rights and advances, in connection with the acquisition of the EverBank net assets and $319.8 million in servicing rights in connection with the acquisition of a pool of Fannie Mae MSR.
(4)
During 2013, we recorded $137.7 million in gains resulting from changes in valuation inputs and other assumptions used in the fair value of assets and liabilities carried at fair value and $12.5 million of loss on extinguishment of debt in connection with the refinancing of our corporate debt. We recorded $491.4 million in assets, mostly consisting of servicing rights and advances, in connection with the acquisition of the ResCap net assets and $503.0 million in servicing rights in connection with the BOA asset purchase. Further, in connection with the BOA asset purchase, we disbursed $740.7 million in servicer and protective advances with funds from our servicing advance facilities.
(5)
During 2012, we recorded $48.6 million of losses on extinguishment of debt in connection with the repayment and termination of our 2011 Second Lien Term Loan and the refinancing of our 2011 First Lien Term Loan and $90.0 million revolver. We recorded $5.6 billion in assets, which mostly consisted of residential loans, and assumed $5.3 billion in HMBS related obligations in connection with the acquisition of RMS, and recorded $128.4 million in total assets in connection with the acquisition of S1L.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (AS RESTATED)
The following discussion should be read in conjunction with our Consolidated Financial Statements and notes thereto included in this report. This discussion contains a number of forward-looking statements, all of which are based on our current expectations and all of which could be affected by uncertainties and risks. Our actual results may differ materially from the results contemplated in these forward-looking statements as a result of many factors including, but not limited to, those described in Part I, Item 1A. Risk Factors. Historical results and trends that might appear should not be taken as indicative of future operations, particularly in light of our recent acquisitions and regulatory developments discussed throughout this report. Refer to the Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 section located in the forepart in this report for a discussion regarding forward-looking statements.
As discussed in the Explanatory Note to this Amended Filing and in Note 2 to the Consolidated Financial Statements, we have restated our Consolidated Financial Statements and related disclosures as of and for the year ended December 31, 2016 to correct the estimated valuation allowance recorded on our deferred tax assets. The impact of the restatement is reflected in Management’s Discussion and Analysis of Financial Condition and Results of Operations below. Other than as disclosed in the Explanatory Note, no other information in this Item 7 has been amended and this Item 7 does not reflect any events occurring after the Original Filing. The Company is filing its Form 10-Q for the quarterly period ended June 30, 2017 on our about the date of the filing of this amended report.
Defined terms used in this Annual Report on Form 10-K/A are defined in the Glossary of Terms.
Executive Summary
The Company
We are an independent servicer and originator of mortgage loans and servicer of reverse mortgage loans. We service a wide array of loans across the credit spectrum for our own portfolio and for GSEs, government agencies, third-party securitization trusts and other credit owners. Through our consumer, correspondent and wholesale lending channels, we originate and purchase residential mortgage loans that we predominantly sell to GSEs and government agencies. We also operate two supplementary businesses; asset receivables management and real estate owned property management and disposition. Our goal is to become a partner with our customers; assisting them with the originations process and through the life of their loan, with a highly regarded originations and servicing platform and quality customer service in an open, honest and straightforward manner.
At December 31, 2016 , we serviced 2.1 million residential loans with a total unpaid principal balance of $246.4 billion . We originated $20.3 billion in mortgage loan volume in 2016 .

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Part of our strategy is to move towards more of a fee-for-service model in our servicing business by increasing the proportion of subservicing activity in our business mix. For example, in 2016, we entered into several transactions with NRM pursuant to which we sold MSR to NRM and were retained by NRM to subservice these and other MSR. Largely as a result of these transactions, and based on unpaid principal loan balance, the portion of our servicing portfolio represented by subservicing rose from 21% (or $56.8 billion in unpaid principal loan balance) at the end of 2015 to 49% (or $120.8 billion in unpaid principal loan balance) at the end of 2016.  Our subservicing fees vary considerably from contract to contract, and in general subservicing fees are lower than the servicing fee associated with owning the MSR and servicing the related loans. Therefore, our servicing revenues have been and are expected to continue to be negatively affected by the sale of our MSR, even in situations where we are engaged to subservice the loans relating to such MSR following their sale. However, as the portion of our servicing portfolio represented by subservicing increases, we generally expect to benefit from lower advance funding costs and from the elimination of amortization charges associated with the MSR we have sold.
During 2016 , we added to the unpaid principal balance of our third-party mortgage loan servicing portfolio with $13.9 billion relating to servicing rights capitalized upon the sale of mortgage loans, $11.1 billion relating to subservicing contracts and $5.2 billion relating to acquired servicing rights, which was more than offset by $51.0 billion of payoffs and sales, net of recapture activities. In addition, we added to the unpaid principal balance to our third-party reverse loan servicing portfolio with $2.6 billion in new business and tails, which was partially offset by $2.1 billion in payoffs, sales and curtailments. Also in 2016 , we originated and purchased $872.2 million in reverse mortgage volume and issued $868.0 million in HMBS.
Our mortgage loan originations business diversifies our revenue base and helps us replenish our servicing portfolio. During 2016 , we originated $6.8 billion of mortgage loans, the majority of which resulted from retention activities associated with our existing servicing portfolio. In addition, we purchased $13.5 billion of mortgage loans through our correspondent channel during 2016 . Substantially all of these purchased and originated mortgage loans were added to our servicing portfolio upon loan sale.
We manage our Company in three reportable segments: Servicing, Originations, and Reverse Mortgage. A description of the business conducted by each of these segments is provided below:
Servicing - Our Servicing segment performs servicing for our own mortgage loan portfolio and on behalf of third-party credit owners of mortgage loans for a fee and also performs subservicing for third-party owners of MSR. The Servicing segment also operates complementary businesses including a collections agency that performs collections of post charge-off deficiency balances for third parties and us. In addition, the Servicing segment holds the assets and mortgage-backed debt of the Residual Trusts.
Originations — Our Originations segment originates and purchases mortgage loans that are intended for sale to third parties. In 2016, the mix of mortgage loans sold by our Originations segment, based on unpaid principal balance, consisted of (i) 47% Fannie Mae conventional conforming loans, (ii) 39% Ginnie Mae loans and (iii) 14% Freddie Mac conventional conforming loans.
Reverse Mortgage - Our Reverse Mortgage segment primarily focuses on the servicing of reverse loans. In December 2016, management decided to exit the reverse mortgage originations business, which occurred in January 2017. We intend to fulfill reverse loans in our originations pipeline consistent with our underwriting practices and to fund undrawn amounts available to borrowers, and we will continue to service reverse loans. Reverse loan originations were historically conducted through our consumer direct, consumer retail, wholesale and correspondent lending origination channels.
Other - As of December 31, 2016, our Other non-reportable segment holds the assets and liabilities of the Non-Residual Trusts and corporate debt. This segment also includes our asset management business, which we are in the process of winding down.
Overview
Our Servicing segment revenue is primarily impacted by the size and mix of our capitalized servicing and subservicing portfolios and is generated through servicing of mortgage loans for clients and/or credit owners. Net servicing revenue and fees include the change in fair value of servicing rights carried at fair value and the amortization of all other servicing rights. Our servicing fee income generation is influenced by the volume and timing of entrance into subservicing contracts and purchases and sales of servicing rights. The fair value of our servicing rights is largely dependent on the size of the related portfolio, discount rates, and prepayment and default speeds. Our Originations segment revenue, which is primarily comprised of net gains on sales of loans, is impacted by interest rates and the volume of loans locked as well as the margins earned in our various origination channels. Net gains on sales of loans include the cost of additions to the representations and warranties reserve. Our Reverse Mortgage segment has historically been impacted by new origination reverse loan volume, draws on existing reverse loans, subservicing contracts and the fair value of reverse loans and HMBS.

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Our results of operations are also affected by expenses such as salaries and benefits, information technology, occupancy, legal and professional fees, the provision for advances, curtailment, interest expense and other operating expenses. In addition, during 2016, 2015 and 2014, our expenses were impacted by non-cash goodwill and intangible assets impairment charges of $326.3 million , $207.6 million and $82.3 million , respectively. Refer to the Financial Highlights, Results of Operations and Business Segment Results sections below for further information.
Our profitability for the Reverse segment has been and will continue to be negatively impacted by the level of defaults we are experiencing with HECM loans originated pre-2014, before the product was changed to introduce financial assessment requirements and to limit initial draws. When a HECM loan is in default, we earn interest at the debenture rate, which is generally lower than the note rate we must pay. Additionally, if we miss HUD prescribed milestones in the foreclosure and claims filing process, HUD curtails the debenture interest being earned on loans in default. During late 2015 and early 2016 we experienced an acceleration in the number of reverse loans in default, in part because of new HUD regulations that required servicers to foreclose more quickly on delinquent reverse loans. This increase in default levels was somewhat mitigated during the latter part of 2016 when HUD allowed for a de minimis amount for non-payment of taxes and insurance. As a result of this change, there were defaults that were cured. For loans in default, servicing costs generally increase as a result of foreclosure related activities such as legal costs, property preservation expense and other costs that arise on loans in default, which may also include bankruptcy related activities. In addition, after a foreclosure sale occurs and title to the property is obtained, we become responsible for the sale of the REO property. If we are unable to sell the property underlying a defaulted reverse loan for an acceptable price within the timeframe established by HUD, we are required to make an appraisal-based claims to HUD. In such case, HUD will reimburse us for the loan balance, eligible expenses and debenture interest, less the appraised value of the underlying property, and thereafter all the risk and cost associated with maintaining and liquidating the property remains with us. The Reverse segment has sold approximately 23.7% of its REO property through appraisal based claims, with a loss severity rate of approximately 13.5%. During 2016, the Reverse segment incurred approximately $5.7 million in losses resulting from REO sold through appraisal based claims filed during 2016 or in prior years. The Company may incur additional losses on these REO properties as they progress through the claims and liquidation processes. The significance of future losses associated with appraisal-based claims is dependent upon the volume of defaulted loans, condition of foreclosed properties and the general real estate market environment.
Our principal sources of liquidity are the cash flows generated from our business segments and funds available from our master repurchase agreements, mortgage loan servicing advance facilities, the 2013 Revolver and issuance of GMBS and HMBS to fund our tail commitments. We may generate additional liquidity through sales of MSR, any portion thereof, or other assets. Refer to the Liquidity and Capital Resources section below for additional information.
Financial Highlights
2016 Compared to 2015
Total revenues for 2016 were $1.0 billion , which represented a decline of $278.5 million , or 22% , as compared to 2015 . The decline in revenue reflects a $153.3 million decrease in net servicing revenue and fees driven by $78.5 million in higher fair value losses on servicing rights, $47.4 million in lower incentive and performance fees and $28.5 million in lower servicing fees; $44.4 million in lower net gains on sales of loans; and $28.7 million in lower interest income on loans.
During 2016, we recorded higher fair value losses on our servicing rights carried at fair value as a result of decreasing interest rates and forward projections of the interest rate curve during the first half of 2016. We recognized lower incentive and performance fees due primarily to lower real estate management fees resulting from the phase out of one of our larger arrangements for the management of real estate owned, and lower HAMP fees earned for continued performance of modified loans as fewer loans were eligible for these fees leading up to the expiration of HAMP. We recognized lower servicing fees due primarily to a combination of runoff of our third-party servicing portfolio, a shift in the portfolio from servicing to subservicing resulting from the sale of servicing rights to NRM, and an overall increase in delinquencies. We had lower net gains on sales of loans due primarily to a lower volume of locked loans, offset partially by a shift in mix from the lower margin correspondent channel to the higher margin consumer channel. We had lower interest income on loans primarily due to the sale of our residual interests in seven of the Residual Trusts in April 2015, or the sale of our residual interests.
Total expenses for 2016 were $1.8 billion , which represented an increase of $80.4 million , or 5% , as compared to 2015 , which reflects $118.7 million in higher goodwill and intangible assets impairment and $45.7 million in higher general and administrative expenses, offset in part by $56.5 million in lower salaries and benefits and $17.8 million in lower interest expense.
We recorded $326.3 million , $207.6 million and $82.3 million in goodwill and intangible assets impairment charges during 2016, 2015 and 2014, respectively. These impairment charges were the result of certain market, industry and company-specific matters as discussed in more detail in Note 16 to the Consolidated Financial Statements.

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During 2016 , we had higher general and administrative expenses due in part to support efficiency and technology-related initiatives, higher severance and transformation costs, and elevated advance provisions and other costs resulting from operational challenges within default servicing, partially offset by savings from cost reduction efforts. We had lower salaries and benefits primarily due to a decrease in compensation, benefits and incentives resulting from a lower average headcount driven by site closures and reorganization, a decrease in commissions and incentives due to lower originations volume, and a decrease in share-based compensation due to higher forfeitures, partially offset by an increase in severance. We had lower interest expense related primarily to mortgage-backed debt as a result of the sale of our residual interests, which required the deconsolidation of the related mortgage-backed debt.
Net gains on extinguishment of debt of $14.7 million during 2016 were primarily attributable to the repurchase of a portion of our Convertible Notes with a carrying value of $39.3 million , which resulted in a gain of $14.5 million .
Income tax expense for 2016 was impacted by the recording of a valuation allowance on the deferred tax assets balance in the amount of $343.2 million , of which $304.7 million was recorded in connection with the restatement as discussed in Note 2 to the Consolidated Financial Statements.
In our Original Filing, we identified a material weakness in internal controls over operational processes within the transaction level processing of Ditech Financial default servicing activities as of December 31, 2016. Specifically, we did not design and maintain effective controls related to our ability to identify foreclosure tax liens and resolve such liens timely, foreclosure related advances, and the processing and oversight of loans in bankruptcy status. This resulted in several adjustments to reserves during the fourth quarter of 2016 totaling $16.3 million for exposures related to deficient processes within the operating control environment for default servicing. Further, subsequent to the Original Filing, an additional material weakness was identified related to the technical review of the deferred tax valuation allowance, which is reflected in this Amended Filing. This resulted in a reduction in the net deferred tax assets balance of $299.9 million , an increase to deferred tax liabilities of $4.8 million and an increase in accumulated deficit of approximately $304.7 million as of December 31, 2016 . See Note 2 to the Consolidated Financial Statements for further information.
During the second quarter of 2016, Ditech Financial transitioned approximately 1.4 million loans, or greater than 60% of our mortgage loan servicing portfolio, to MSP, the industry-standard loan servicing platform. The conversion resulted in a reduction to servicer payables and related restricted cash balances as a result of changes in the structure and timing of the flow of funds. The conversion also had an indirect impact on other balances included in the Servicing segment, which is discussed in further detail under the Business Segment Results section below.
Our cash flows provided by operating activities were $452.0 million during 2016 and we ended the year with $224.6 million in cash and cash equivalents. Cash provided by operating activities increased by $500.0 million during 2016 as compared to net cash used in operating activities in 2015 . The increase in cash provided by operating activities was primarily a result of an increase in cash provided by origination activities resulting from a higher volume of loans sold in relation to loans originated for 2016 as compared to 2015 and a decrease in servicer and protective advances resulting largely from advance reimbursements received in connection with Fannie Mae and Freddie Mac loan sales and NRM MSR sales as well as increased collections.
2015 Compared to 2014
Total revenues for 2015 were $1.3 billion, which represented a decline of $212.9 million, or 14%, as compared to 2014. The decrease in revenue reflects a $107.2 million decrease in net servicing revenue and fees, primarily driven by $128.5 million in higher fair value losses on servicing rights; $60.2 million in lower interest income on loans; $11.7 million in lower net fair value gains on reverse loans and related HMBS obligations; and $8.3 million in lower net gains on sales of loans.
We recorded fair value losses on our servicing rights carried at fair value primarily as a result of higher discount rates used to value our servicing rights and higher realization of expected cash flows. We had lower interest income on loans primarily due to the sale of our residual interests. We had lower net fair value gains on reverse loans and related HMBS obligations primarily due to the widening of spreads resulting from changes in market pricing for HECMs and HMBS and a lower reduction of LIBOR in 2015 as compared to 2014, offset partially by an increase in cash generated by origination, purchase and securitization of HECMs. We had lower net gains on sales of loans due primarily to a shift in volume from the higher margin retention channel to the lower margin correspondent channel, even though average interest rates were lower during 2015 as compared to 2014 and these lower rates gave rise to a higher total volume of locked loans.
Total expenses for 2015 were $1.7 billion, which represented an increase of $86.7 million, or 5%, as compared to 2014. We incurred $56.5 million and $82.3 million in impairment charges in the Reverse Mortgage reporting unit during the years ended December 31, 2015 and 2014, respectively, and $151.0 million in impairment charges in our Servicing reporting unit during the year ended December 31, 2015. As a result of the goodwill impairment charges in the Reverse Mortgage reporting unit, this reporting unit no longer has goodwill. In addition, we had $33.5 million in lower interest expense related to mortgage-backed debt primarily due to the aforementioned sale of our residual interests, which required the deconsolidation of the related mortgage-backed debt.

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We recognized total other gains of $33.1 million in 2015, which were primarily attributable to an $11.8 million gain recognized on the sale of an equity-method investment, an $8.9 million gain realized on the sale of a trading security, and a $7.3 million net fair value gain relating to the Non-Residual Trusts.
Our cash flows used in operating activities were $48.1 million during 2015 and we ended the year with $202.8 million in cash and cash equivalents. Cash used in operating activities decreased by $156.2 million during 2015 as compared to 2014. The decrease in cash used in operating activities was primarily a result of an increase in cash related to changes in assets and liabilities, including higher collections of servicer and protective advances and an increase in accrued expenses related to uncertain tax positions, partially offset by higher settlements of payables relating to servicer and protective advances acquired in conjunction with the acquisition of servicing rights and a decrease in accrued expenses related to legal and regulatory matters. In addition, cash increased due to proceeds received from the sale of a trading security received as consideration for the sale of the excess servicing spread associated with certain servicing rights. These increases were partially offset by a decrease in cash related to a lower volume of loans sold in relation to originated loans.
Refer to the Results of Operations and Business Segment Results sections below for further information on the changes addressed above. Also included in the Business Segment Results section is a discussion of changes in our non-GAAP financial measures. A description of our non-GAAP financial measures is included in the Non-GAAP Financial Measures section below.
Regulatory Developments
For a summary of the regulatory framework under which we operate and recent regulatory developments, refer to the Laws and Regulations section of Part I, Item 1. Business.
Strategy
During the fourth quarter of 2016, after the appointment of Anthony Renzi as the Company’s Chief Executive Officer, the Company made extensive changes to its leadership team, installing among other things new heads of compliance, default servicing, performing servicing, reverse mortgage, and human resources. In conjunction with the Board, this new leadership team has developed a strategy and business plan for 2017 that is focused on the company’s core mortgage servicing and origination businesses, with a view to improving both financial and operating performance significantly during the year.
In servicing, we expect to execute numerous initiatives to improve the efficiency of our operations, through such measures as better processes, site consolidation and improved use of technology. We are also concentrating on improving the performance of our servicing business, customer service, and reversing the recent increase in delinquency rates and improving standards and compliance. We plan to prioritize these initiatives over the pursuit of significant new servicing or subservicing opportunities, though over time as we improve operations we aim to be able to compete effectively and profitably for opportunities to subservice for others.
In originations, our goal is to achieve significant revenue growth over time, primarily from increased wholesale lending, increased outbound contact efforts and improved retention. As we endeavor to expand our originations business, we expect that we will need to increase significantly the amount of purchase money loans we originate, particularly in our consumer direct and wholesale channels. This will require us to enhance our brand awareness among potential customers, and we are working on plans to develop a digital marketing presence. In addition, we believe that to achieve our originations goals we need to enable consumers to apply for mortgages through our website. We recently abandoned a software project we had been supporting to develop a website-based application system, and we are now considering vendors who could assist with re-initiating this project. Further, our strategy will require us to hire a considerable number of new loan officers and other employees.
In the reverse segment, having exited the originations business, we are working to improve the efficiency of our servicing activities in order to reduce expected future losses. We have also been evaluating options for our reverse mortgage business, including the possibility of selling some or all of its assets or pursuing alternative solutions for the business that include collaboration with other parties.
Improving the effectiveness and efficiency of our information technology group is an important element of our strategy across all of our operations. We use numerous systems and incur considerable expense to support our lending, servicing, reverse and other business activities. We have initiated measures to reduce the complexity and cost of our information technology operations and are continuing our review of this function to identify further areas of opportunity.

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Investments in MSR
From time to time over the past five years, to support our servicing business, we have bought or sold MSR. With a view to using our capital efficiently, in 2016 we began to limit our investment in MSR. We plan to continue that approach in the future and to move towards more of a fee-for-service model in the servicing business. Accordingly, we expect that from time to time we will sell MSR we now own or those we create in connection with our mortgage origination activities. See the Subservicing section under Part I, Item 1. Business. We expect that normally we will retain the right to subservice such MSR sold by us, but we may also sell MSR with servicing released. We may also engage in other transactions to limit or reduce our investment in MSR, including sales of excess servicing spread.
In 2016, we executed a number of transactions that helped us reduce our investment in MSR. In particular, we entered into a several transactions with NRM pursuant to which we sold MSR to NRM and were retained by NRM to subservice these and other MSR. Refer to Note 6 to the Consolidated Financial Statements for additional information on transactions with NRM. We may seek to sell additional MSR to NRM in the future and may also seek to enter into arrangements to sell MSR to other buyers.
In November 2016, NRM also entered into a mortgage servicing right purchase and sale agreement with WCO. In connection with the completion of this transaction and the other transactions relating to the sale of substantially all of WCO's assets in December 2016, WCO commenced liquidation activities and we do not expect to sell further assets to WCO.
Non-Core Assets
Since early 2015, we have sold various assets we considered to be “non-core” or “legacy” assets. These transactions included the sale of an equity method investment in the first quarter of 2015 and the sale in April 2015 of the residual interests in seven of our Residual Trusts. Most recently, in December 2016 we executed a stock purchase agreement to sell our insurance business for a cash purchase price of $125.0 million , subject to adjustment, with potential earnout payments of up to $25.0 million in cash. This transaction was completed in February 2017. During the year ended December 31, 2016, the insurance business generated income before taxes of $24.6 million .
We are actively reviewing our assets and activities to determine those that should be considered "core" or “non-core” in relation to our strategic goals. Assets and activities that we identify as “non-core” will include non-strategic operations, locations and portfolios. These may in the future may be sold, wound down or otherwise managed in a manner designed to limit the investment, costs and attention we are required to devote to them. 
Debt Restructuring Initiative
We are a highly leveraged company, in relation to our ability to service our debt and on a relative basis in comparison to our peers. We depend upon ongoing access to the loan markets and the capital markets on commercially satisfactory terms to finance our business on a daily basis, and we would also need access to those markets to refinance our corporate debt. We have engaged legal and financial debt restructuring advisors and have been reviewing a number of potential actions we may take to reduce our leverage. There can be no assurance as to when or whether we will determine to implement any action as a result of this review, whether the implementation of one or more such actions will be successful, or the effects the failure to take action may have on our business, our ability to achieve our operational and strategic goals or our ability to finance our business or refinance our indebtedness. The failure to develop and implement steps to address our level of corporate leverage may have a material adverse effect on our business, prospects, results of operations, liquidity and financial condition, and our ability to refinance our corporate debt as it becomes due in future years.
Operating Improvements
During 2016, we continued our efforts to improve our financial performance through increasing efficiency and cost reductions, and we plan to intensify these efforts in 2017. During 2016 we initiated actions in connection with our continued efforts to enhance efficiencies and streamline processes, which included various organizational changes to the scale and proficiency of our leadership team and support functions to further align with our business needs. Further, during December 2016, a decision was made by management to exit the reverse mortgage origination business, while maintaining our reverse mortgage servicing operations. Although we were successful in reducing certain costs during 2016 as compared to 2015, such as salaries and benefits, we also experienced increases in various other costs, including among other things severance expenses, fees paid to advisors assisting us with our efforts to improve company performance and charges resulting from operational issues. While our goals for 2017 include further expense reductions, there can be no assurance that we will be successful in reducing costs. In 2017, we expect to continue to incur advisory, severance and other expenses associated with the improvement of our business, and we may incur unexpected expenses, including expenses arising from unanticipated operational problems, legal and regulatory matters, and other matters that are beyond our control. If we are not successful in reducing our expenses, our results of operations, financial condition and liquidity could be materially adversely affected.    

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In addition to improving the financial performance of our operations, we are focused on ensuring that our servicing operations meet legal and regulatory requirements and our contractual servicing obligations and that we improve our servicing performance, as measured by the owners of the loans we service (such as GSEs) and by customers for whom we subservice. By some measures, such as delinquency rates for our mortgage loan servicing portfolio, during 2016 our servicing performance has deteriorated significantly relative to our past performance and to that of other servicers, following the introduction of new servicing technology, changes in servicing practices, site consolidation, and other developments. The GSEs and other parties for whom we service or subservice regularly monitor our performance and communicate their observations and expectations to us. Several important such counterparties have noted our recent performance deterioration and have requested that we improve various aspects of our performance, which we are endeavoring to do. With a view to improving our performance, we have been enhancing our processes and have made management changes and introduced new procedures to track key performance metrics. We may need to make further enhancements to our people, processes or technologies to achieve acceptable levels of servicing performance. In addition, these enhancements could require significant unplanned expenditures that could adversely affect our financial results. We cannot be certain that our efforts to improve our servicing performance will have sufficient or timely results. If we are unable to improve our servicing performance metrics, we could face various material adverse consequences, including competitive disadvantage, the inability to win new subservicing business and the termination of servicing rights or subservicing contracts.
While we plan to continue to take actions across our businesses to improve efficiency, identify revenue opportunities, and reduce expense, certain other costs have risen or are expected to arise. For example, we have been making investments and taking other measures to enhance the structure and effectiveness of our compliance and risk processes and associated programs across the Company, with a view to improving our customers’ experience, our compliance results and our performance and ratings under our subservicing contracts and our obligations to GSEs and loan investors. We believe additional investments and process improvements in these areas will be required. The mortgage industry generally, including our Company, is subject to extensive and evolving regulation and continues to be under scrutiny from federal and state regulators, enforcement agencies and other government entities. This oversight has led, in our case, to ongoing investigations and examinations of several of our business areas, and we have been and will be required to dedicate internal and external resources to providing information to and otherwise cooperating with such government entities. In addition, we have incurred, and expect that in the future we will incur, significant expenses (i) associated with the remediation or other resolution of breaches, findings or concerns raised by regulators, enforcement agencies, other government entities, customers or ourselves, (ii) to enhance the effectiveness of our risk and compliance program and (iii) to address operational issues and other events of noncompliance we have discovered, or may in the future discover, through our compliance program or otherwise. Investments to enhance our operational, compliance and risk processes may also result in an improved customer experience and competitive advantage for our business.
Financing Transactions
Refer to the Liquidity and Capital Resources section below for a description of our financing transactions.

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Results of Operations — Comparison of Consolidated Results of Operations (dollars in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
 
2016 vs. 2015
 
2015 vs. 2014
 
 
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
 
 
(Restated)
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net servicing revenue and fees
 
$
340,991

 
$
494,267

 
$
601,510

 
$
(153,276
)
 
(31
)%
 
$
(107,243
)
 
(18
)%
Net gains on sales of loans
 
409,448

 
453,840

 
462,172

 
(44,392
)
 
(10
)%
 
(8,332
)
 
(2
)%
Net fair value gains on reverse loans and related HMBS obligations
 
59,022

 
98,265

 
109,972

 
(39,243
)
 
(40
)%
 
(11,707
)
 
(11
)%
Interest income on loans
 
45,700

 
74,365

 
134,555

 
(28,665
)
 
(39
)%
 
(60,190
)
 
(45
)%
Insurance revenue
 
41,968

 
47,201

 
71,010

 
(5,233
)
 
(11
)%
 
(23,809
)
 
(34
)%
Other revenues
 
98,588

 
106,321

 
107,934

 
(7,733
)
 
(7
)%
 
(1,613
)
 
(1
)%
Total revenues
 
995,717

 
1,274,259

 
1,487,153

 
(278,542
)
 
(22
)%
 
(212,894
)
 
(14
)%
 
 
 
 
 
 
 
 
 
 


 

 


EXPENSES
 
 
 
 
 
 
 
 
 


 

 


General and administrative
 
619,772

 
574,091

 
577,506

 
45,681

 
8
 %
 
(3,415
)
 
(1
)%
Salaries and benefits
 
520,357

 
576,817

 
578,627

 
(56,460
)
 
(10
)%
 
(1,810
)
 
—
 %
Goodwill and intangible assets impairment
 
326,286

 
207,557

 
82,269

 
118,729

 
57
 %
 
125,288

 
152
 %
Interest expense
 
255,781

 
273,606

 
303,103

 
(17,825
)
 
(7
)%
 
(29,497
)
 
(10
)%
Depreciation and amortization
 
59,426

 
69,128

 
72,721

 
(9,702
)
 
(14
)%
 
(3,593
)
 
(5
)%
Other expenses, net
 
10,530

 
10,557

 
10,803

 
(27
)
 
—
 %
 
(246
)
 
(2
)%
Total expenses
 
1,792,152

 
1,711,756

 
1,625,029

 
80,396

 
5
 %
 
86,727

 
5
 %
 
 
 
 
 
 
 
 
 
 


 

 


OTHER GAINS (LOSSES)
 
 
 
 
 
 
 
 
 


 

 


Net gains on extinguishment
 
14,662

 
4,660

 
—

 
10,002

 
215
 %
 
4,660

 
n/m

Other net fair value gains (losses)
 
(4,234
)
 
7,398

 
19,280

 
(11,632
)
 
(157
)%
 
(11,882
)
 
(62
)%
Other
 
(3,811
)
 
21,013

 
(744
)
 
(24,824
)
 
(118
)%
 
21,757

 
n/m

Total other gains
 
6,617

 
33,071

 
18,536

 
(26,454
)
 
(80
)%
 
14,535

 
78
 %
 
 
 
 
 
 
 
 
 
 


 

 


Loss before income taxes
 
(789,818
)
 
(404,426
)
 
(119,340
)
 
(385,392
)
 
95
 %
 
(285,086
)
 
239
 %
Income tax expense (benefit)
 
44,040

 
(141,236
)
 
(9,012
)
 
185,276

 
(131
)%
 
(132,224
)
 
n/m

Net loss
 
$
(833,858
)
 
$
(263,190
)
 
$
(110,328
)
 
$
(570,668
)
 
217
 %
 
$
(152,862
)
 
139
 %

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Table of Contents

Net Servicing Revenue and Fees
A summary of net servicing revenue and fees is provided below (dollars in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
 
2016 vs. 2015
 
2015 vs. 2014
 
 
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Servicing fees
 
$
680,002

 
$
708,491

 
$
675,335

 
$
(28,489
)
 
(4
)%
 
$
33,156

 
5
 %
Incentive and performance fees
 
70,197

 
117,586

 
157,148

 
(47,389
)
 
(40
)%
 
(39,562
)
 
(25
)%
Ancillary and other fees
 
98,055

 
104,750

 
88,430

 
(6,695
)
 
(6
)%
 
16,320

 
18
 %
Servicing revenue and fees
 
848,254

 
930,827

 
920,913

 
(82,573
)
 
(9
)%
 
9,914

 
1
 %
Changes in valuation inputs or other assumptions (1)
 
(243,645
)
 
(157,262
)
 
(124,471
)
 
(86,383
)
 
55
 %
 
(32,791
)
 
26
 %
Other changes in fair value (2)
 
(236,831
)
 
(244,730
)
 
(149,031
)
 
7,899

 
(3
)%
 
(95,699
)
 
64
 %
Change in fair value of servicing rights
 
(480,476
)
 
(401,992
)
 
(273,502
)
 
(78,484
)
 
20
 %
 
(128,490
)
 
47
 %
Amortization of servicing rights
 
(21,801
)
 
(26,827
)
 
(43,101
)
 
5,026

 
(19
)%
 
16,274

 
(38
)%
Change in fair value of servicing rights related liabilities
 
(4,986
)
 
(7,741
)
 
(2,800
)
 
2,755

 
(36
)%
 
(4,941
)
 
176
 %
Net servicing revenue and fees
 
$
340,991

 
$
494,267

 
$
601,510

 
$
(153,276
)
 
(31
)%
 
$
(107,243
)
 
(18
)%
__________
(1)
Represents the net change in servicing rights carried at fair value resulting primarily from market-driven changes in interest rates and prepayment speeds.
(2)
Represents the realization of expected cash flows over time.
We recognize servicing revenue and fees for servicing performed on behalf of third parties for which we either own the servicing right or act as subservicer. This revenue includes contractual fees earned on the serviced loans; incentive and performance fees, including those earned based on the performance of certain loans or loan portfolios serviced by us, loan modification fees and asset recovery income; and ancillary fees such as late fees and expedited payment fees. Servicing revenue and fees are adjusted for amortization, the change in fair value of servicing rights and the change in fair value of servicing rights related liabilities.
Servicing fees decreased $28.5 million in 2016 as compared to 2015 primarily due to a combination of runoff of our third-party servicing portfolio, a shift in the portfolio from servicing to subservicing resulting from the sale of servicing rights to NRM, and an overall increase in delinquencies. We expect servicing fees to continue to decline as a result of the shift in our portfolio towards subservicing as we earn a lower fee for subservicing accounts in relation to servicing accounts. Incentive and performance fees decreased $47.4 million in 2016 as compared to 2015 due primarily to lower real estate management fees resulting from the phase out of one of our larger arrangements for the management of real estate owned, and lower HAMP fees earned for continued performance of modified loans as fewer loans were eligible for these fees leading up to the expiration of HAMP. Ancillary and other fees decreased $6.7 million in 2016 as compared to 2015 due primarily to a decrease in convenience and expedited payment fees driven by a change in our process and pricing for such services, offset in part by an increase in late fee income resulting from a significant number of payments subject to late fees and efforts to ensure collection.
Servicing fees increased $33.2 million in 2015 as compared to 2014 due primarily to growth in the third-party servicing portfolio resulting from portfolio acquisitions and servicing rights capitalized as a result of our loan origination activities, partially offset by runoff of the servicing portfolio. Incentive and performance fees decreased $39.6 million for 2015 as compared to 2014 due primarily to lower modification fees, fees earned under HAMP and asset recovery income, partially offset by higher real estate owned management fees. Ancillary and other fees increased $16.3 million for 2015 as compared to 2014 due primarily to growth in the mortgage loan servicing portfolio. Refer to the Servicing segment section under our Business Segment Results section below for additional information on the changes in fair value relating to servicing rights and servicing rights related liabilities.
Net Gains on Sales of Loans
Net gains on sales of loans include realized and unrealized gains and losses on loans held for sale, fair value adjustments on IRLCs and other related freestanding derivatives, values of the initial capitalized servicing rights, and a provision for the repurchase of loans. Net gains on sales of loans decreased $44.4 million in 2016 as compared to 2015 primarily due to a lower volume of locked loans, offset partially by a shift in mix from the lower margin correspondent channel to the higher margin consumer channel. Net gains on sales of loans decreased $8.3 million in 2015 as compared to 2014 primarily as a result of a shift in volume from the higher margin consumer channel to the lower margin correspondent channel, partially offset by a higher volume of locked loans.

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Net Fair Value Gains on Reverse Loans and Related HMBS Obligations
Net fair value gains on reverse loans and related HMBS obligations include the contractual interest income earned on reverse loans, including those not yet securitized or bought out of securitization pools, net of interest expense on HMBS related obligations, and the change in fair value of these assets and liabilities. Refer to the Reverse Mortgage segment discussion under our Business Segment Results section below for additional information including a detailed breakout of the components of net fair value gains on reverse loans and related HMBS obligations.
Net fair value gains on reverse loans and related HMBS obligations decreased $39.2 million in 2016 as compared to 2015 due primarily to lower origination volumes and higher LIBOR rates in 2016 as compared to 2015, partially offset by a shift in mix from lower margin new originations to higher margin tails.
Net fair value gains on reverse loans and related HMBS obligations decreased $11.7 million during 2015 as compared to 2014 due primarily to the widening of spreads resulting from changes in market pricing for HECMs and HMBS and a lower reduction of LIBOR in 2015 as compared to 2014, offset partially by an increase in cash generated by origination, purchase and securitization of HECMs.
Interest Income on Loans
We earn interest income on the residential loans held in the Residual Trusts and on our unencumbered mortgage loans, both of which are accounted for at amortized cost. During April 2015, we sold our residual interests in seven of the Residual Trusts, or the sale of our residual interests, and deconsolidated the assets and liabilities of these trusts. Interest income decreased $28.7 million in 2016 as compared to 2015 and decreased $60.2 million in 2015 as compared to 2014 primarily due to the sale of our residual interests, runoff of the overall mortgage loan portfolio and a lower average yield on loans due to an increase in delinquencies that are 90 days or more past due.
Provided below is a summary of the average balances of residential loans carried at amortized cost and the related interest income and average yields (dollars in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
Residential loans at amortized cost
 
 
 
 
 
 
 
 
 
 
Interest income
 
$
45,700

 
$
74,365

 
$
134,555

 
$
(28,665
)
 
$
(60,190
)
Average balance (1) (2)
 
507,712

 
794,571

 
1,372,507

 
(286,859
)
 
(577,936
)
Average yield
 
9.00
%
 
9.36
%
 
9.80
%
 
(0.36
)%
 
(0.44
)%
__________
(1)
Average balance is calculated as the average recorded investment in the loans at the beginning of each month during the year.
(2)
Average balance excludes delinquent mortgage loans that we are required to record on our consolidated balance sheets as a result of our unilateral right to repurchase such loans from Ginnie Mae as we do not own these mortgage loans and, therefore, are not entitled to any interest income they generate. Refer to Note 11 to the Consolidated Financial Statements for further information regarding these loans.
Insurance Revenue
Insurance revenue consists of commission income and fees earned on voluntary and lender-placed insurance policies issued and other products sold to borrowers, net of estimated future policy cancellations. Commission income is based on a percentage of the premium of the insurance policy issued, which varies based on the type of policy. Insurance revenue decreased $5.2 million in 2016 as compared to 2015 and $23.8 million in 2015 as compared to 2014 due primarily to Fannie Mae and Freddie Mac restrictions that became effective on June 1, 2014, as well as other regulatory and litigation developments with respect to lender-placed insurance. On February 1, 2017, we completed the sale of our principal insurance agency and substantially all of our insurance agency business. As a result of this sale, we will no longer receive any insurance commissions on lender-placed insurance policies. During the year ended December 31, 2016, the insurance business generated income before taxes of $24.6 million . Commencing February 1, 2017, another insurance agency owned by us (and retained by us following the aforementioned sale) began to provide insurance marketing services to third-party insurance agencies and carriers with respect to voluntary insurance policies, including hazard insurance. This insurance agency receives premium-based commissions for its insurance marketing services. Refer to Note 18 to the Consolidated Financial Statements for additional information on the sale of our insurance business.

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Table of Contents

Other Revenues
Other revenues consist primarily of the change in fair value of charged-off loans, origination fee income, other interest income and investment income. Other revenues decreased $7.7 million in 2016 as compared to 2015 due primarily to $3.0 million in lower origination fee income resulting from lower originations volume during 2016 and $2.8 million in higher losses on our equity-method investment in WCO.
Other revenues decreased $1.6 million in 2015 as compared to 2014 due primarily to $36.8 million in asset management performance fees collected and earned by our Other non-reportable segment in connection with the investment management of a fund during 2014 and $7.5 million in lower income from our beneficial interest in a servicing asset. The performance fees were earned in connection with the liquidation of the fund’s investments during 2014 and were based on the fund exceeding pre-defined thresholds. These fees are recorded when the fund is terminated or when the likelihood of claw-back is improbable. The decrease in these revenues was partially offset by $19.3 million in higher fair value gains relating to charged-off loans as a result of twelve months of collection activity in 2015 compared to eight months in 2014 and an increase in expected collections, $17.7 million in higher origination fee income resulting from the refinancing of mortgage loans partially offset by lower fees charged to new reverse loan borrowers, and $6.2 million in higher other interest income.
General and Administrative
General and administrative expenses increased $45.7 million in 2016 as compared to 2015 resulting primarily from $28.4 million in additional costs to support efficiency and technology-related initiatives including the MSP conversion in the second quarter of 2016, $21.8 million in higher consulting costs associated with process improvement initiatives, $12.1 million in higher provisions for advance losses, $12.0 million in higher legal accruals for loss contingencies and legal expenses primarily related to the cost of defending and resolving legal proceedings, $9.5 million in costs related to NRM transactions during 2016, $11.8 million in higher loan servicing expense associated with servicing errors resulting in non-recoverable expenses and loan repurchases or indemnifications, and $7.1 million in asset impairment charges, partially offset by savings from cost reduction efforts of $24.6 million driven by the closure of our retail originations channel and lower advertising costs due to a strategy shift in lead acquisition, $23.0 million in lower curtailment-related accruals due primarily to certain regulatory developments for our reverse segment during 2015, which led to additional charges around curtailable events, an $8.9 million reduction in our representations and warranties reserve related to a change in estimate as described in further detail in the Originations segment results, and $5.5 million in lower loan origination expenses due to a decreased volume of funded loans.
General and administrative expenses decreased $3.4 million in 2015 as compared to 2014 resulting primarily from $30.5 million in lower legal related costs largely due to lower accruals for legal and regulatory matters outside of the normal course of business and $22.7 million in lower provisions for uncollectible receivables and advances due to a decrease in advance balances and improved collections experience, offset in part by $17.3 million in higher advertising expenses related to increased mail solicitations and internet lead generation and re-branding our mortgage loan business, $12.8 million in additional costs in 2015 to support efficiency and technology-related initiatives, $8.8 million in higher default and other loan servicing costs resulting from growth in the servicing portfolio, and $6.8 million increase in curtailment due primarily to an increase in missed timelines.
Salaries and Benefits
Salaries and benefits decreased $56.5 million in 2016 as compared to 2015 primarily due to a $33.9 million decrease in compensation, benefits and incentives resulting from a lower average headcount driven by site closures and reorganization, a $20.6 million decrease in commissions and incentives due to lower originations volume, and a $14.4 million decrease in share-based compensation due to higher forfeitures, partially offset by a $21.2 million increase in severance. Headcount decreased by approximately 1,000 full-time employees from approximately 5,900 at December 31, 2015 to approximately 4,900 at December 31, 2016 .
Salaries and benefits decreased $1.8 million in 2015 as compared to 2014 primarily due to a $12.7 million decrease in compensation and benefits resulting from a lower average headcount during 2015, partially offset by a $6.4 million increase in share-based compensation due largely to a higher number of awards granted and the acceleration of expense associated with a former employee's unvested awards, a $5.0 million increase in bonuses, and a $2.5 million increase in severance. Headcount decreased by approximately 800 full-time employees from approximately 6,700 at December 31, 2014 to approximately 5,900 at December 31, 2015.
Goodwill and Intangible Assets Impairment
We recorded $326.3 million , $207.6 million and $82.3 million in goodwill and intangible assets impairment charges during 2016, 2015 and 2014, respectively. These impairment charges were the result of certain market, industry and company-specific matters as discussed in more detail in Note 16 to the Consolidated Financial Statements.

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Table of Contents

Interest Expense
We incur interest expense on our corporate debt, servicing advance liabilities, master repurchase agreements, and mortgage-backed debt issued by the Residual Trusts, all of which are accounted for at amortized cost. Interest expense decreased $17.8 million in 2016 as compared to 2015 driven by decreases in interest expense related to mortgage-backed debt and corporate debt, partially offset by an increase in interest expense related to master repurchase agreements. Interest expense related to mortgage-backed debt decreased primarily as a result of the sale of our residual interests, which required the deconsolidation of the related mortgage-backed debt, and the overall runoff of the related mortgage loan portfolio. Interest expense related to corporate debt decreased as a result of a lower average outstanding balance due to a voluntary prepayment and repurchases of a portion of our corporate debt near the end of 2015 and during 2016. Interest expense related to master repurchase agreements increased primarily as a result of a higher average interest rate. Refer to the Liquidity and Capital Resources section below for additional information on our debt.
Interest expense decreased $29.5 million in 2015 as compared to 2014 due primarily to decreases in interest expense related to mortgage-backed debt and servicing advance liabilities, partially offset by an increase in interest expense related to master repurchase agreements. Interest expense related to mortgage-backed debt decreased primarily as a result of the sale of our residual interests, and the runoff of the overall related mortgage loan portfolio. Interest expense related to servicing advance liabilities decreased due primarily to a lower average interest rate, offset partially by a higher average balance outstanding. Interest expense related to master repurchase agreements, which are utilized to fund purchases and originations of mortgage loans and reverse loans, increased primarily as a result of a higher average outstanding balance, which is due largely to a higher volume of funded mortgage loans, partially offset by a lower average interest rate.
Provided below is a summary of the average balances of our corporate debt, servicing advance liabilities, master repurchase agreements, and mortgage-backed debt of the Residual Trusts, as well as the related interest expense and average rates (dollars in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
Corporate debt (1)
 
 
 
 
 
 
 
 
 
 
Interest expense
 
$
144,171

 
$
147,789

 
$
147,747

 
$
(3,618
)
 
$
42

Average balance (4)
 
2,170,296

 
2,251,700

 
2,271,551

 
(81,404
)
 
(19,851
)
Average rate
 
6.64
%
 
6.56
%
 
6.50
%
 
0.08
 %
 
0.06
 %
 
 
 
 
 
 
 
 
 
 

Servicing advance liabilities (2)
 
 
 
 
 
 
 
 
 

Interest expense
 
$
40,038

 
$
40,987

 
$
43,909

 
$
(949
)
 
$
(2,922
)
Average balance (4)
 
1,084,171

 
1,259,686

 
1,021,727

 
(175,515
)
 
237,959

Average rate
 
3.69
%
 
3.25
%
 
4.30
%
 
0.44
 %
 
(1.05
)%
 
 
 
 
 
 
 
 
 
 

Master repurchase agreements (3)
 
 
 
 
 
 
 
 
 

Interest expense
 
$
43,263

 
$
40,462

 
$
33,589

 
$
2,801

 
$
6,873

Average balance (4)
 
1,243,547

 
1,381,911

 
1,007,593

 
(138,364
)
 
374,318

Average rate
 
3.48
%
 
2.93
%
 
3.33
%
 
0.55
 %
 
(0.40
)%
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed debt of the Residual Trusts (2)
 
 
 
 
 
 
 
 
 
 
Interest expense
 
$
28,309

 
$
44,368

 
$
77,858

 
$
(16,059
)
 
$
(33,490
)
Average balance (5)
 
454,467

 
685,105

 
1,154,126

 
(230,638
)
 
(469,021
)
Average rate
 
6.23
%
 
6.48
%
 
6.75
%
 
(0.25
)%
 
(0.27
)%
__________
(1)
Corporate debt includes our 2013 Term Loan, Senior Notes and Convertible Notes. Corporate debt activities are included in the Other non-reportable segment.
(2)
Servicing advance liabilities and mortgage-backed debt of the Residual Trusts are held by our Servicing segment.
(3)
Master repurchase agreements are held by the Originations and Reverse Mortgage segments.
(4)
Average balance for corporate debt, servicing advance liabilities and master repurchase agreements is calculated as the average daily carrying value.
(5)
Average balance for mortgage-backed debt of the Residual Trusts is calculated as the average carrying value at the beginning of each month during the year.

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Table of Contents

Depreciation and Amortization
Depreciation and amortization decreased $9.7 million in 2016 as compared to 2015 primarily due to lower amortization resulting from certain intangible assets having reached the end of their estimated useful lives.
Net Gains on Extinguishment
Net gains on extinguishment of $14.7 million during 2016 were primarily attributable to the repurchase of a portion of our Convertible Notes with a carrying value of $39.3 million , which resulted in a gain of $14.5 million .
Net gains on extinguishment of $4.7 million during 2015 resulted from a $5.7 million gain related to the repurchase of Senior Notes with a carrying value of $35.7 million offset by a $1.0 million loss related to the write-off of issue costs resulting from a $50.0 million voluntary payment on the 2013 Term Loan.
Other Net Fair Value Gains (Losses)
Other net fair value gains (losses) consist primarily of fair value gains and losses on the assets and liabilities of the Non-Residual Trusts and fluctuates generally based on changes in prepayment speeds, default rates, loss severity, LIBOR rates and discount rates. Other net fair value gains (losses) decreased $11.6 million in 2016 as compared to 2015 due to net fair value losses in 2016 as compared to gains in 2015 related to the assets and liabilities of the Non-Residual Trusts resulting from the impact of increases in the conditional default rates and loss severity rates. Other net fair value gains decreased $11.9 million in 2015 as compared to 2014 primarily as a result of the reduction of discount rates utilized in the valuations of the assets and liabilities of the Non-Residual Trusts in 2014 resulting from tightening of yields in the market.
Other Gains (Losses)
Other gains of $21.0 million for 2015 include an $11.8 million gain recognized on the sale of an equity-method investment; an $8.9 million gain realized on the sale of a trading security received as consideration for the sale of the excess servicing spread associated with certain servicing rights; a $3.1 million gain recognized in connection with the contribution of Marix to WCO; offset by a $2.8 million loss recognized on the sale of our residual interests.
Income Tax Expense (Benefit)
Our effective tax rate normally differs from the U.S. statutory tax rate of 35% due to state and local taxes and non-deductible expenses. For the year ended December 31, 2016 the effective tax rate was also impacted by the valuation allowance recorded on the deferred tax assets, and for the years ended December 31, 2015 and 2014, the effective tax rate was impacted by the impairment of non-deductible goodwill. Refer to Note 28 to the Consolidated Financial Statements for a reconciliation of our effective tax rate to the U.S. statutory tax rate.
Income tax expense was $44.0 million , representing a change of $185.3 million in 2016 as compared to a benefit in 2015 due primarily to a $343.2 million valuation allowance recorded against our deferred tax assets in 2016, of which $304.7 million relates to the additional valuation allowance recorded in connection with this Amended Filing, offset in part by an increase in loss before income taxes and the impact of non-deductible goodwill impairment related to the Reverse Mortgage reporting unit in 2015.
Income tax benefit increased $132.2 million in 2015 as compared to 2014 due primarily to the increase in loss before income taxes offset by the impact on income taxes for non-deductible expenses such as the impairment of non-deductible goodwill of the Reverse Mortgage reporting unit. These items were partially offset by a lower release of uncertain tax positions associated with state and local taxes due to a lapse in the statute of limitations from $3.6 million in 2014 to $2.1 million in 2015.
Financial Condition — Comparison of Consolidated Financial Condition at December 31, 2016 to December 31, 2015
Our total assets and total liabilities decreased by $2.1 billion and $1.3 billion , respectively, at December 31, 2016 as compared to December 31, 2015 . The most significant changes in assets and liabilities are described below.
Restricted cash and cash equivalents decreased $503.6 million and servicer payables decreased $457.4 million primarily as a result of our having transitioned greater than 60% of our mortgage loan servicing portfolio to MSP, which resulted in a reduction to these account balances as a result of changes in the structure and timing of the flow of funds to certain custodial accounts that are not reflected in our consolidated balance sheets.

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Table of Contents

Residential loans at amortized cost increased $123.8 million and payables and accrued liabilities increased $161.1 million primarily as a result of a $161.8 million increase in loans subject to repurchase from Ginnie Mae for which the delinquent loan and a corresponding liability are required to be recorded on the consolidated balance sheets regardless of our intention to repurchase these loans. The increase in residential loans at amortized cost was offset in part by portfolio runoff of the mortgage loans held by the Residual Trusts. Refer to Notes 11 and 20 to the Consolidated Financial Statements for additional information regarding the loans subject to repurchase from Ginnie Mae. As the amount of loans securitized with Ginnie Mae increases and the portfolio continues to season, the amount of these loans recorded on the consolidated balance sheets will continue to increase, offset by actual repurchases of, or payments received on, these loans.
Servicer and protective advances decreased $435.7 million and servicing advance liabilities, which are utilized to finance servicer and protective advances, decreased $446.1 million primarily as a result of advance reimbursements received in connection with Fannie Mae and Freddie Mac loan sales and NRM MSR sales as well as increased collections. Advances collected are then used to settle servicing advance liabilities balances outstanding.
Servicing rights decreased $758.9 million primarily as a result of fair value losses, runoff of the portfolio and the sale of MSR to WCO, NRM and other third parties during 2016. A significant amount of these MSR were sold with subservicing retained. Servicing rights related liabilities decreased $115.1 million as a result of the sale by WCO of substantially all of its assets, including servicing rights we previously sold to WCO and accounted for as secured borrowings, and our sale of the servicing rights relating to excess servicing spread we previously sold to WCO. The servicing rights and excess servicing spread qualified for sale accounting treatment as a result of these transactions, pursuant to which we derecognized the servicing rights related liabilities. Refer to Notes 6 and 23 to the Consolidated Financial Statements for additional information regarding these transactions.
Goodwill decreased $320.2 million due primarily to non-cash impairment charges recorded during the second, third and fourth quarters of 2016 . Goodwill impairment testing is performed on each of our reporting units on an annual basis, or more often if events or circumstances indicate that the assets may be impaired. These impairment charges were the result of certain market, industry and company-specific matters as discussed in more detail in Note 16 to the Consolidated Financial Statements.
Deferred tax assets, net decreased $108.1 million at December 31, 2016 primarily as a result of the valuation allowance recorded against our deferred tax assets, including the restatement adjustment as described in Note 2 to the Consolidated Financial Statements, partially offset by the current year operating loss, which increased the net operating loss carryforwards, and the impact of deductible goodwill impairment related to the Servicing and ARM reporting units.
On December 30, 2016, we executed a stock purchase agreement for the sale of substantially all of our insurance agency business. At December 31, 2016, the assets and liabilities related to the insurance business were reclassified to assets held for sale of $71.1 million and liabilities held for sale of $2.4 million . The sale was completed on February 1, 2017. Refer to Note 18 to the Consolidated Financial Statements for additional information on the sale of our insurance business.
Non-GAAP Financial Measures
We manage our Company in three reportable segments: Servicing, Originations and Reverse Mortgage. We evaluate the performance of our business segments through the following measures: income (loss) before income taxes, Adjusted Earnings (Loss), and Adjusted EBITDA. Management considers Adjusted Earnings (Loss) and Adjusted EBITDA, both non-GAAP financial measures, to be important in the evaluation of our business segments and of the Company as a whole, as well as for allocating capital resources to our segments. Adjusted Earnings (Loss) and Adjusted EBITDA are supplemental metrics utilized by management to assess the underlying key drivers and operational performance of the continuing operations of the business. In addition, analysts, investors, and creditors may use these measures when analyzing our operating performance. Adjusted Earnings (Loss) and Adjusted EBITDA are not presentations made in accordance with GAAP and our use of these measures and terms may vary from other companies in our industry.
Adjusted Earnings (Loss) is defined as income (loss) before income taxes, plus changes in fair value due to changes in valuation inputs and other assumptions; goodwill and intangible assets impairment, if any; a portion of the provision for curtailment expense, net of expected third-party recoveries, if applicable; share-based compensation expense; non-cash interest expense; exit costs; estimated settlements and costs for certain legal and regulatory matters; fair value to cash adjustments for reverse loans; and select other cash and non-cash adjustments primarily including severance; gain or loss on extinguishment of debt; the net impact of the Non-Residual Trusts; transaction and integration costs; and certain non-recurring costs. Adjusted Earnings (Loss) excludes unrealized changes in fair value of MSR that are based on projections of expected future cash flows and prepayments. Adjusted Earnings (Loss) includes both cash and non-cash gains from mortgage loan origination activities. Non-cash gains are net of non-cash charges or reserves provided. Adjusted Earnings (Loss) includes cash generated from reverse mortgage origination activities. Adjusted Earnings (Loss) may from time to time also include other adjustments, as applicable based upon facts and circumstances, consistent with the intent of providing investors with a supplemental means of evaluating our operating performance.

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The Company revised its method of calculating Adjusted Earnings (Loss) beginning with the Form 10-K for the fiscal year ended December 31, 2016 to eliminate adjustments for the step-up depreciation and amortization adjustment, which represents depreciation and amortization costs related to the increased basis in assets (including servicing rights and subservicing contracts) acquired within business combination transactions.
Adjusted EBITDA eliminates the effects of financing, income taxes and depreciation and amortization. Adjusted EBITDA is defined as income (loss) before income taxes plus: amortization of servicing rights and other fair value adjustments; interest expense on corporate debt; depreciation and amortization; goodwill and intangible assets impairment, if any; a portion of the provision for curtailment expense, net of expected third-party recoveries, if applicable; share-based compensation expense; exit costs; estimated settlements and costs for certain legal and regulatory matters; fair value to cash adjustments for reverse loans; and select other cash and non-cash adjustments primarily the net provision for the repurchase of loans sold; non-cash interest income; severance; gain or loss on extinguishment of debt; interest income on unrestricted cash and cash equivalents; the net impact of the Non-Residual Trusts; the provision for loan losses; Residual Trust cash flows; transaction and integration costs; servicing fee economics; and certain non-recurring costs. Adjusted EBITDA includes both cash and non-cash gains from mortgage loan origination activities. Adjusted EBITDA excludes the impact of fair value option accounting on certain assets and liabilities and includes cash generated from reverse mortgage origination activities. Adjusted EBITDA may also include other adjustments, as applicable based upon facts and circumstances, consistent with the intent of providing investors a supplemental means of evaluating our operating performance.
Adjusted Earnings (Loss) and Adjusted EBITDA should not be considered as alternatives to (i) net income (loss) or any other performance measures determined in accordance with GAAP or (ii) operating cash flows determined in accordance with GAAP. Adjusted Earnings (Loss) and Adjusted EBITDA have important limitations as analytical tools, and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. Some of the limitations of these metrics are:
•
Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect cash expenditures for long-term assets and other items that have been and will be incurred, future requirements for capital expenditures or contractual commitments;
•
Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
•
Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect certain tax payments that represent reductions in cash available to us;
•
Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future;
•
Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect non-cash compensation that is and will remain a key element of our overall long-term incentive compensation package;
•
Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect the change in fair value due to changes in valuation inputs and other assumptions;
•
Adjusted EBITDA does not reflect the change in fair value resulting from the realization of expected cash flows; and
•
Adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our servicing rights related liabilities and corporate debt, although it does reflect interest expense associated with our servicing advance liabilities, master repurchase agreements, mortgage-backed debt, and HMBS related obligations.
Because of these limitations, Adjusted Earnings (Loss) and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted Earnings (Loss) and Adjusted EBITDA only as supplements. Users of our financial statements are cautioned not to place undue reliance on Adjusted Earnings (Loss) and Adjusted EBITDA.

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The following tables reconcile Adjusted Loss and Adjusted EBITDA to net loss, which we consider to be the most directly comparable GAAP financial measure to Adjusted Loss and Adjusted EBITDA (in thousands):
Adjusted Loss
 
 
For the Year Ended 
 December 31, 2016
 
 
(Restated)
Net loss (1)
 
$
(833,858
)
Adjust for income tax expense
 
44,040

Loss before income taxes
 
(789,818
)
Adjustments to loss before income taxes
 
 
Goodwill and intangible assets impairment
 
326,286

Changes in fair value due to changes in valuation inputs and other assumptions (2)
 
209,412

Exit costs (3)  
 
25,758

Fair value to cash adjustment for reverse loans (4)
 
17,501

Non-cash interest expense
 
12,763

Legal and regulatory matters
 
7,196

Share-based compensation expense
 
6,568

Other  (5)
 
53,017

Subtotal
 
658,501

Adjusted Loss  (6)
 
$
(131,317
)
__________
(1)
Included in net loss is $197.0 million of revenue from capitalized servicing rights during the year ended December 31, 2016.
(2)
Consists of the change in fair value due to changes in valuation inputs and other assumptions relating to servicing rights, servicing rights related liabilities and charged-off loans.
(3)
E xit costs include expenses related to the closing of offices and the termination and replacement of certain employees as well as other expenses to institute efficiencies. Exit costs incurred in the year ended December 31, 2016 include those relating to our exit from the consumer retail channel of the Originations segment, our exit from the reverse mortgage originations business, and actions initiated in 2015 and 2016 in connection with our continued efforts to enhance efficiencies and streamline processes of the organization. Refer to Note 20 to the Consolidated Financial Statements for additional information regarding exit costs.
(4)
Represents the non-cash fair value adjustment to arrive at cash generated from reverse mortgage origination activities.
(5)
Includes severance, gain on extinguishment of debt, costs associated with transforming the business, the net impact of the Non-Residual Trusts, transaction and integration costs, and certain non-recurring costs.
(6)
We revised our method of calculating Adjusted Earnings (Loss) beginning with the Form 10-K for the fiscal year ended December 31, 2016 to eliminate adjustments for the step-up depreciation and amortization adjustment, which represents depreciation and amortization costs related to the increased basis in assets (including servicing rights and subservicing contracts) acquired within business combination transactions.

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Adjusted EBITDA
 
 
For the Year Ended 
 December 31, 2016
 
 
(Restated)
Net loss (1)
 
$
(833,858
)
Adjust for income tax expense
 
44,040

Loss before income taxes
 
(789,818
)
EBITDA adjustments
 
 
Amortization of servicing rights and other fair value adjustments (2)
 
468,045

Goodwill and intangible assets impairment
 
326,286

Interest expense
 
152,157

Depreciation and amortization
 
59,426

Exit costs (3)
 
25,758

Fair value to cash adjustment for reverse loans (4)
 
17,501

Legal and regulatory matters
 
7,196

Share-based compensation expense
 
6,568

Other (5)
 
49,806

Subtotal
 
1,112,743

Adjusted EBITDA
 
$
322,925

__________
(1)
Included in net loss is $197.0 million of revenue from capitalized servicing rights during the year ended December 31, 2016.
(2)
Consists of the change in fair value due to changes in valuation inputs and other assumptions relating to servicing rights, servicing rights related liabilities and charged-off loans as well as the amortization of servicing rights and the realization of expected cash flows relating to servicing rights carried at fair value.
(3)
Exit costs include expenses related to the closing of offices and the termination and replacement of certain employees as well as other expenses to institute efficiencies. Exit costs incurred in the year ended December 31, 2016 include those relating to our exit from the consumer retail channel of the Originations segment, our exit from the reverse mortgage originations business, and actions initiated in 2015 and 2016 in connection with our continued efforts to enhance efficiencies and streamline processes of the organization. Refer to Note 20 to the Consolidated Financial Statements for additional information regarding exit costs.
(4)
Represents the non-cash fair value adjustment to arrive at cash generated from reverse mortgage origination activities.
(5)
Includes the net provision for the repurchase of loans sold, non-cash interest income, severance, gain on extinguishment of debt, interest income on unrestricted cash and cash equivalents, costs associated with transforming the business, the net impact of the Non-Residual Trusts, the provision for loan losses, Residual Trust cash flows, transaction and integration costs, servicing fee economics, and certain non-recurring costs.
Business Segment Results
In calculating income (loss) before income taxes for our segments, we allocate indirect expenses to our business segments. Indirect expenses are allocated to our Servicing, Originations, Reverse Mortgage and certain non-reportable segments based on headcount.
We reconcile our income (loss) before income taxes for our business segments to our GAAP consolidated income (loss) before income taxes and report the financial results of our Non-Residual Trusts, other non-reportable operating segments and certain corporate expenses as other activity. Additional information regarding the results of operations for our Servicing, Originations and Reverse Mortgage segments is presented below. Refer to Note 31 to the Consolidated Financial Statements for a reconciliation of our income (loss) before income taxes for our business segments to our GAAP consolidated loss before income taxes.

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Reconciliation of GAAP Consolidated Income (Loss) Before Income Taxes to Adjusted Earnings (Loss) and Adjusted EBITDA (in thousands):
 
 
For the Year Ended December 31, 2016
 
 
Servicing
 
Originations
 
Reverse
Mortgage
 
Other
 
Total
Consolidated
Income (loss) before income taxes
 
$
(690,402
)
 
$
135,117

 
$
(84,545
)
 
$
(149,988
)
 
$
(789,818
)
 
 
 
 
 
 
 
 
 
 
 
Adjustments to income (loss) before income taxes
 
 
 
 
 
 
 
 
 
 
Goodwill and intangible assets impairment
 
319,551

 
—

 
6,735

 
—

 
326,286

Changes in fair value due to changes in valuation inputs and other assumptions
 
209,412

 
—

 
—

 
—

 
209,412

Exit costs
 
11,621

 
3,118

 
5,437

 
5,582

 
25,758

Fair value to cash adjustment for reverse loans
 
—

 
—

 
17,501

 
—

 
17,501

Non-cash interest expense
 
1,518

 
—

 
—

 
11,245

 
12,763

Legal and regulatory matters
 
7,196

 
—

 
—

 
—

 
7,196

Share-based compensation expense (benefit)
 
5,007

 
1,019

 
1,032

 
(490
)
 
6,568

Other  
 
40,854

 
14,531

 
3,971

 
(6,339
)
 
53,017

Total adjustments
 
595,159

 
18,668

 
34,676

 
9,998

 
658,501

Adjusted Earnings (Loss) (1)
 
(95,243
)
 
153,785

 
(49,869
)
 
(139,990
)
 
(131,317
)
 
 
 
 
 
 
 
 
 
 
 
EBITDA adjustments
 
 
 
 
 
 
 
 
 
 
Amortization of servicing rights and other fair value adjustments
 
256,880

 
—

 
1,753

 
—

 
258,633

Interest expense on debt
 
6,469

 
—

 
—

 
132,925

 
139,394

Depreciation and amortization
 
44,439

 
8,888

 
6,088

 
11

 
59,426

Other
 
(1,634
)
 
(1,924
)
 
151

 
196

 
(3,211
)
Total adjustments
 
306,154

 
6,964

 
7,992

 
133,132

 
454,242

Adjusted EBITDA
 
$
210,911

 
$
160,749

 
$
(41,877
)
 
$
(6,858
)
 
$
322,925

__________
(1)
We revised our method of calculating Adjusted Earnings (Loss) beginning with the Form 10-K for the fiscal year ended December 31, 2016 to eliminate adjustment for step-up depreciation and amortization, which represents depreciation and amortization costs related to the increased basis in assets (including servicing rights and subservicing contracts) acquired within business combination transactions. Prior period amounts have also been adjusted to reflect this revision.


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For the Year Ended December 31, 2015
 
 
Servicing
 
Originations
 
Reverse
Mortgage
 
Other
 
Total
Consolidated
Income (loss) before income taxes
 
$
(269,770
)
 
$
123,536

 
$
(112,337
)
 
$
(145,855
)
 
$
(404,426
)
 
 
 
 
 
 
 
 
 
 
 
Adjustments to income (loss) before income taxes
 
 
 
 
 
 
 
 
 
 
Goodwill impairment
 
151,018

 
—

 
56,539

 
—

 
207,557

Changes in fair value due to changes in valuation inputs and other assumptions
 
137,198

 
—

 
—

 
—

 
137,198

Exit costs
 
6,462

 
2,608

 
1,640

 
851

 
11,561

Fair value to cash adjustment for reverse loans
 
—

 
—

 
2,291

 
—

 
2,291

Non-cash interest expense
 
1,283

 
—

 
—

 
10,815

 
12,098

Legal and regulatory matters
 
20,445

 
—

 
5,575

 
—

 
26,020

Share-based compensation expense
 
12,700

 
5,557

 
2,395

 
285

 
20,937

Curtailment expense
 
—

 
—

 
30,419

 
—

 
30,419

Other
 
3,776

 
1,272

 
349

 
11,547

 
16,944

Total adjustments
 
332,882

 
9,437

 
99,208

 
23,498

 
465,025

Adjusted Earnings (Loss) (1)
 
63,112

 
132,973

 
(13,129
)
 
(122,357
)
 
60,599

 
 
 
 
 
 
 
 
 
 
 
EBITDA adjustments
 
 
 
 
 
 
 
 
 
 
Amortization of servicing rights and other fair value adjustments
 
269,504

 
—

 
2,053

 
—

 
271,557

Interest expense on debt
 
8,779

 
—

 
2

 
136,938

 
145,719

Depreciation and amortization
 
45,437

 
15,811

 
7,865

 
15

 
69,128

Other
 
(6,556
)
 
8,827

 
139

 
306

 
2,716

Total adjustments
 
317,164

 
24,638

 
10,059

 
137,259

 
489,120

Adjusted EBITDA
 
$
380,276

 
$
157,611

 
$
(3,070
)
 
$
14,902

 
$
549,719

__________
(1)
Consistent with the change in 2016 as discussed above, we revised our method of calculating Adjusted Earnings (Loss), which is reflected in the table above.


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For the Year Ended December 31, 2014
 
 
Servicing
 
Originations
 
Reverse
Mortgage
 
Other (1)
 
Total
Consolidated
Income (loss) before income taxes
 
$
(29,287
)
 
$
117,104

 
$
(101,168
)
 
$
(105,989
)
 
$
(119,340
)
 
 
 
 
 
 
 
 
 
 
 
Adjustments to income (loss) before income taxes
 
 
 
 
 
 
 
 
 
 
Goodwill impairment
 
—

 
—

 
82,269

 
—

 
82,269

Changes in fair value due to changes in valuation inputs and other assumptions
 
114,759

 
—

 
—

 
—

 
114,759

Exit costs
 
1,657

 
2,887

 
—

 
—

 
4,544

Fair value to cash adjustment for reverse loans
 
—

 
—

 
(24,602
)
 
—

 
(24,602
)
Non-cash interest expense
 
2,326

 
—

 
—

 
9,755

 
12,081

Legal and regulatory matters
 
75,564

 
907

 
24,297

 
—

 
100,768

Share-based compensation expense
 
8,942

 
3,445

 
2,185

 
(39
)
 
14,533

Curtailment expense
 
—

 
—

 
1,460

 
—

 
1,460

Other
 
963

 
4,049

 
4,485

 
(7,091
)
 
2,406

Total adjustments
 
204,211

 
11,288

 
90,094

 
2,625

 
308,218

Adjusted Earnings (Loss) (2)
 
174,924

 
128,392

 
(11,074
)
 
(103,364
)
 
188,878

 
 
 
 
 
 
 
 
 
 
 
EBITDA adjustments
 
 
 
 
 
 
 
 
 
 
Amortization of servicing rights and other fair value adjustments
 
189,448

 
—

 
2,683

 
—

 
192,131

Interest expense on debt
 
5,003

 
—

 
26

 
137,878

 
142,907

Depreciation and amortization
 
46,333

 
17,090

 
9,284

 
14

 
72,721

Other
 
8,741

 
(1,165
)
 
(73
)
 
44

 
7,547

Total adjustments
 
249,525

 
15,925

 
11,920

 
137,936

 
415,306

Adjusted EBITDA
 
$
424,449

 
$
144,317

 
$
846

 
$
34,572

 
$
604,184

__________
(1)
Our Other non-reportable segment includes $36.8 million in asset management performance fees collected and earned in connection with the asset management of a fund.
(2)
Consistent with the change in 2016 as discussed above, we revised our method of calculating Adjusted Earnings (Loss), which is reflected in the table above.


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Servicing
Provided below is a summary of results of operations, Adjusted Earnings (Loss) and Adjusted EBITDA for our Servicing segment (dollars in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
 
2016 vs. 2015
 
2015 vs. 2014
 
 
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Net servicing revenue and fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Third parties
 
$
309,960

 
$
453,325

 
$
566,064

 
$
(143,365
)
 
(32
)%
 
$
(112,739
)
 
(20
)%
Intercompany
 
11,952

 
9,219

 
9,897

 
2,733

 
30
 %
 
(678
)
 
(7
)%
Total net servicing revenue and fees
 
321,912

 
462,544

 
575,961

 
(140,632
)
 
(30
)%
 
(113,417
)
 
(20
)%
Interest income on loans
 
45,651

 
74,303

 
134,472

 
(28,652
)
 
(39
)%
 
(60,169
)
 
(45
)%
Insurance revenue
 
41,968

 
47,201

 
71,010

 
(5,233
)
 
(11
)%
 
(23,809
)
 
(34
)%
Intersegment retention revenue
 
37,630

 
30,751

 
40,546

 
6,879

 
22
 %
 
(9,795
)
 
(24
)%
Net gains (losses) on sales of loans
 
(4,931
)
 
3,699

 
—

 
(8,630
)
 
(233
)%
 
3,699

 
n/m

Other revenues
 
54,721

 
51,005

 
35,445

 
3,716

 
7
 %
 
15,560

 
44
 %
Total revenues
 
496,951

 
669,503

 
857,434

 
(172,552
)
 
(26
)%
 
(187,931
)
 
(22
)%
General and administrative and allocated indirect expenses
 
486,348

 
387,275

 
415,124

 
99,073

 
26
 %
 
(27,849
)
 
(7
)%
Goodwill impairment
 
319,551

 
151,018

 
—

 
168,533

 
112
 %
 
151,018

 
n/m

Salaries and benefits
 
261,227

 
270,190

 
293,686

 
(8,963
)
 
(3
)%
 
(23,496
)
 
(8
)%
Interest expense
 
68,529

 
85,482

 
121,856

 
(16,953
)
 
(20
)%
 
(36,374
)
 
(30
)%
Depreciation and amortization
 
44,439

 
45,437

 
46,333

 
(998
)
 
(2
)%
 
(896
)
 
(2
)%
Other expenses, net
 
5,146

 
6,080

 
8,182

 
(934
)
 
(15
)%
 
(2,102
)
 
(26
)%
Total expenses
 
1,185,240

 
945,482

 
885,181

 
239,758

 
25
 %
 
60,301

 
7
 %
Other net fair value gains (losses)
 
(945
)
 
75

 
(796
)
 
(1,020
)
 
n/m

 
871

 
(109
)%
Other gains (losses)
 
(1,168
)
 
6,134

 
(744
)
 
(7,302
)
 
(119
)%
 
6,878

 
n/m

Loss before income taxes
 
(690,402
)
 
(269,770
)
 
(29,287
)
 
(420,632
)
 
156
 %
 
(240,483
)
 
n/m

 
 
 
 
 
 
 
 
 
 


 

 


Adjustments to loss before income taxes
 
 
 
 
 
 
 
 
 


 

 


Goodwill impairment
 
319,551

 
151,018

 
—

 
168,533

 
112
 %
 
151,018

 
n/m

Changes in fair value due to changes in valuation inputs and other assumptions
 
209,412

 
137,198

 
114,759

 
72,214

 
53
 %
 
22,439

 
20
 %
Exit costs
 
11,621

 
6,462

 
1,657

 
5,159

 
80
 %
 
4,805

 
290
 %
Legal and regulatory matters
 
7,196

 
20,445

 
75,564

 
(13,249
)
 
(65
)%
 
(55,119
)
 
(73
)%
Share-based compensation expense
 
5,007

 
12,700

 
8,942

 
(7,693
)
 
(61
)%
 
3,758

 
42
 %
Non-cash interest expense
 
1,518

 
1,283

 
2,326

 
235

 
18
 %
 
(1,043
)
 
(45
)%
Other
 
40,854

 
3,776

 
963

 
37,078

 
n/m

 
2,813

 
292
 %
Total adjustments
 
595,159

 
332,882

 
204,211

 
262,277

 
79
 %
 
128,671

 
63
 %
Adjusted Earnings (Loss) (1)
 
(95,243
)
 
63,112

 
174,924

 
(158,355
)
 
(251
)%
 
(111,812
)
 
(64
)%
 
 
 
 
 
 
 
 
 
 


 

 


EBITDA Adjustments
 
 
 
 
 
 
 
 
 


 

 


Amortization of servicing rights and other fair value adjustments
 
256,880

 
269,504

 
189,448

 
(12,624
)
 
(5
)%
 
80,056

 
42
 %
Depreciation and amortization
 
44,439

 
45,437

 
46,333

 
(998
)
 
(2
)%
 
(896
)
 
(2
)%
Interest expense on debt
 
6,469

 
8,779

 
5,003

 
(2,310
)
 
(26
)%
 
3,776

 
75
 %
Other
 
(1,634
)
 
(6,556
)
 
8,741

 
4,922

 
(75
)%
 
(15,297
)
 
(175
)%
Total adjustments
 
306,154

 
317,164

 
249,525

 
(11,010
)
 
(3
)%
 
67,639

 
27
 %
Adjusted EBITDA
 
$
210,911

 
$
380,276

 
$
424,449

 
$
(169,365
)
 
(45
)%
 
$
(44,173
)
 
(10
)%
__________
(1)
The Company revised its method of calculating Adjusted Earnings (Loss) beginning with the Form 10-K for the fiscal year ended December 31, 2016 to eliminate adjustments for step-up depreciation and amortization, which represents depreciation and amortization costs related to the increased basis in assets (including servicing rights and subservicing contracts) acquired within business combination transactions. Prior period amounts have also been adjusted to reflect this revision.

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Table of Contents

Mortgage Loan Servicing Portfolio
Provided below is a summary of the activity in our mortgage loan servicing portfolio (dollars in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
 
Number
of Accounts
 
Unpaid Principal Balance
 
Number
of Accounts
 
Unpaid Principal Balance
Third-party servicing portfolio (1)
 
 
 
 
 
 
 
 
Balance at beginning of the year
 
2,087,618

 
$
244,124,312

 
2,142,689

 
$
234,905,729

Loan sales with servicing retained
 
65,122

 
13,915,277

 
84,368

 
18,578,484

Other new business added (2)
 
95,004

 
16,353,692

 
150,579

 
28,620,409

Sales
 
(36,953
)
 
(8,023,285
)
 
—

 
—

Payoffs and other adjustments, net (2) (3)
 
(300,186
)
 
(42,955,598
)
 
(290,018
)
 
(37,980,310
)
Balance at end of the year (4) (5)
 
1,910,605

 
223,414,398

 
2,087,618

 
244,124,312

On-balance sheet residential loans and real estate owned (6)
 
34,903

 
2,368,593

 
36,857

 
2,439,806

Total mortgage loan servicing portfolio
 
1,945,508

 
$
225,782,991

 
2,124,475

 
$
246,564,118

__________
(1)
Third-party servicing includes servicing rights capitalized, subservicing rights capitalized and subservicing rights not capitalized. Subservicing rights capitalized consist of contracts acquired through business combinations whereby the benefits from the contract are greater than adequate compensation for performing the servicing. Refer to Note 4 to the Consolidated Financial Statements for additional information regarding servicing rights.
(2)
Consists of activities associated with servicing and subservicing contracts.
(3)
Amounts presented are net of loan sales associated with servicing retained multi-channel recapture activities of $6.4 billion in 2016 and 2015 .
(4)
Excludes the impact of the sale of servicing rights associated with 1,497 accounts and $248.1 million in unpaid principal balance during 2016 as we continue to service these loans as subservicer until the expected release of servicing in the first quarter of 2017.
(5)
Includes $64.6 billion in unpaid principal balance of subservicing that relates to transactions with NRM that closed during the fourth quarter of 2016, whereby the Company sold servicing rights with respect to pools of mortgage loans with subservicing retained. Refer to Note 6 to the Consolidated Financial Statements for additional information relating to the sale of these servicing rights.
(6)
On-balance sheet residential loans and real estate owned primarily includes mortgage loans held for sale as well as assets of the Non-Residual Trusts and Residual Trusts.
The portfolio disappearance rate, consisting of contractual payments, voluntary prepayments, and defaults, net of recapture, of the total mortgage loan portfolio, was 15.72% and 14.23% in 2016 and 2015 , respectively.
Provided below is a summary of the composition of our mortgage loan servicing portfolio (dollars in thousands):
 
 
At December 31, 2016
 
 
Number
of Accounts
 
Unpaid Principal
Balance
 
Weighted- Average
Contractual Servicing Fee (1)
 
30 Days or
More Past Due (2)
Third-party servicing portfolio
 
 
 
 
 
 
 
 
First lien mortgages
 
1,565,300

 
$
212,990,240

 
0.22
%
 
11.11
%
Second lien mortgages
 
142,172

 
4,579,757

 
0.45
%
 
4.90
%
Manufactured housing and other
 
203,133

 
5,844,401

 
1.08
%
 
11.67
%
Total accounts serviced for third parties (3)
 
1,910,605

 
223,414,398

 
0.24
%
 
10.99
%
On-balance sheet residential loans and real estate owned (5)
 
34,903

 
2,368,593

 
 
 
14.52
%
Total mortgage loan servicing portfolio
 
1,945,508

 
$
225,782,991

 
 
 
11.03
%


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At December 31, 2015
 
 
Number
of Accounts
 
Unpaid Principal
Balance
 
Weighted- Average
Contractual Servicing Fee (1)
 
30 Days or
More Past Due (2)
Third-party servicing portfolio
 
 
 
 
 
 
 
 
First lien mortgages
 
1,676,307

 
$
231,637,730


0.27
%
 
9.09
%
Second lien mortgages
 
179,594

 
5,823,302

 
0.46
%
 
3.41
%
Manufactured housing and other
 
231,717

 
6,663,280

 
1.09
%
 
6.42
%
Total accounts serviced for third parties (3) (4)
 
2,087,618

 
244,124,312


0.30
%
 
8.88
%
On-balance sheet residential loans and real estate owned (5)
 
36,857

 
2,439,806

 
 
 
5.07
%
Total mortgage loan servicing portfolio
 
2,124,475

 
$
246,564,118

 
 
 
8.85
%
__________
(1)
The weighted average contractual servicing fee is calculated as the sum of the product of the contractual servicing fee and the ending unpaid principal balance divided by the total ending unpaid principal balance.
(2)
Past due status is measured based on either the MBA method or the OTS method as specified in the servicing agreement. Under the MBA method, a loan is considered past due if its monthly payment is not received by the end of the day immediately preceding the loan's next due date. Under the OTS method, a loan is considered past due if its monthly payment is not received by the loan's due date in the following month. Past due status is based on the current contractual due date of the loan, except in the case of an approved repayment plan, including a plan approved by the bankruptcy court, or a completed loan modification, in which case past due status is based on the modified due date or status of the loan.
(3)
Consists of $110.9 billion and $112.5 billion in unpaid principal balance associated with servicing and subservicing contracts, respectively, at December 31, 2016 and $194.8 billion and $49.3 billion, respectively, at December 31, 2015 .
(4)
Includes $6.6 billion in unpaid principal balance of subservicing performed for WCO and $1.7 billion in unpaid principal balance associated with servicing rights sold to WCO at December 31, 2015. Refer to Note 35 to the Consolidated Financial Statements for further information regarding transactions with WCO.
(5)
Includes residential loans and real estate owned held by the Servicing segment for which it does not recognize servicing fees. The Servicing segment receives intercompany servicing fees related to on-balance sheet assets of the Originations segment and the Other non-reportable segment.
The unpaid principal balance of our third-party servicing portfolio decreased $20.7 billion at December 31, 2016 as compared to December 31, 2015 primarily due to runoff of the portfolio and the sale of servicing rights for which we did not retain subservicing, partially offset by servicing and subservicing portfolio acquisitions and our originations with servicing retained. Subservicing portfolio acquisitions include servicing acquired through the RCS asset acquisition. The decrease in the unpaid principal balance of our on-balance sheet residential loans and real estate owned of $71.2 million can be attributed to a decrease in mortgage loans held for sale of $136.7 million due to lower originations volume, and portfolio runoff of the assets held by the Residual and Non-Residual Trusts, offset in part by an increase in delinquent mortgage loans that we are required to record on our consolidated balance sheets as a result of our unilateral right to repurchase such loans from Ginnie Mae.
The delinquencies associated with our third-party servicing portfolio increased at December 31, 2016 as compared to December 31, 2015 primarily due to an increase in loans that were 30 to 60 days past due following the introduction of new servicing technology, changes in servicing practices, site consolidation, and other developments. The delinquencies associated with our on-balance sheet residential loans and real estate owned have increased due to an increase in delinquent mortgage loans that we are required to record on our consolidated balance sheets as a result of our unilateral right to repurchase such loans from Ginnie Mae, combined with an increase in the 30 to 60 day past due loans as previously discussed.

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Net Servicing Revenue and Fees
A summary of net servicing revenue and fees for our Servicing segment is provided below (dollars in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
 
2016 vs. 2015
 
2015 vs. 2014
 
 
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Servicing fees
 
$
674,064

 
$
703,987

 
$
672,189

 
$
(29,923
)
 
(4
)%
 
$
31,798

 
5
 %
Incentive and performance fees
 
60,640

 
94,829

 
135,892

 
(34,189
)
 
(36
)%
 
(41,063
)
 
(30
)%
Ancillary and other fees
 
92,718

 
98,235

 
84,600

 
(5,517
)
 
(6
)%
 
13,635

 
16
 %
Servicing revenue and fees
 
827,422

 
897,051

 
892,681

 
(69,629
)
 
(8
)%
 
4,370

 
—
 %
Changes in valuation inputs or other assumptions (1)
 
(243,645
)
 
(157,262
)
 
(124,471
)
 
(86,383
)
 
55
 %
 
(32,791
)
 
26
 %
Other changes in fair value (2)
 
(236,831
)
 
(244,730
)
 
(149,031
)
 
7,899

 
(3
)%
 
(95,699
)
 
64
 %
Change in fair value of servicing rights
 
(480,476
)
 
(401,992
)
 
(273,502
)
 
(78,484
)
 
20
 %
 
(128,490
)
 
47
 %
Amortization of servicing rights
 
(20,048
)
 
(24,774
)
 
(40,418
)
 
4,726

 
(19
)%
 
15,644

 
(39
)%
Change in fair value of servicing rights related liabilities (3)
 
(4,986
)
 
(7,741
)
 
(2,800
)
 
2,755

 
(36
)%
 
(4,941
)
 
176
 %
Net servicing revenue and fees
 
$
321,912

 
$
462,544

 
$
575,961

 
$
(140,632
)
 
(30
)%
 
$
(113,417
)
 
(20
)%
__________
(1)
Represents the net change in servicing rights carried at fair value resulting primarily from market-driven changes in interest rates and prepayment speeds.
(2)
Represents the realization of expected cash flows over time.
(3)
Includes interest expense on servicing rights related liabilities, which represents the accretion of fair value, of $16.3 million , $9.3 million and $4.9 million during 2016, 2015 and 2014 , respectively.
2016 Compared to 2015
Servicing fees decreased $29.9 million in 2016 as compared to 2015 primarily due to a combination of runoff of our third-party servicing portfolio, a shift in the portfolio from servicing to subservicing resulting from the sale of servicing rights to NRM, and an overall increase in delinquencies. We expect servicing fees to continue to decline as a result of the shift in our portfolio towards subservicing as we earn a lower fee for subservicing accounts in relation to servicing accounts. Average loans serviced decreased by $588.2 million in 2016 as compared to 2015 .
Incentive and performance fees include modification fees, fees earned under HAMP, asset recovery income, and other incentives. Fees earned under HAMP decreased $12.5 million in 2016 as compared to 2015 due primarily to lower fees earned for continued performance of modified loans as fewer loans were eligible for these fees leading up to the expiration of HAMP. Fees earned under HAMP will continue to decrease as a result of the expiration of accepting new applications under HAMP on December 31, 2016. Other modification fees decreased $7.6 million for 2016 as compared to 2015 due primarily to a lower volume of completed modifications. Incentives relating to the performance of certain loan pools serviced by us decreased $7.7 million for 2016 as compared to 2015 due primarily to a change in incentive programs that resulted in a one-time incentive payment in the fourth quarter of 2015. We expect incentives relating to the performance of loan pools serviced by us to continue to decline as a result of market and other factors, including changes in incentive programs, runoff of the related loan portfolio and improving economic conditions, which may reduce the opportunity to earn these incentives. In addition, asset recovery income decreased $6.3 million for 2016 as compared to 2015 as a result of lower gross collections due primarily to the runoff and other reductions in the related loans managed for third parties.
Ancillary and other fees, which primarily include late fees and expedited payment fees, decreased $5.5 million in 2016 as compared to 2015 due primarily to a decrease in convenience and expedited payment fees driven by a change in our process and pricing for such services, offset in part by an increase in late fee income resulting from a significant number of payments subject to late fees and efforts to ensure collection.
2015 Compared to 2014
Servicing fees increased $31.8 million in 2015 as compared to 2014 primarily due to growth in the third-party servicing portfolio resulting from portfolio acquisitions and servicing rights capitalized as a result of our loan origination activities, partially offset by runoff of the servicing portfolio. Additionally there was a $13.1 million benefit recognized during 2014 from the settlement of differences in views between a prior servicer and the Company on how certain fees were recognized under a contract that was not recognized during 2015. Average loans serviced increased by $17.1 billion, or 8%, in 2015 as compared to 2014.

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Modification fees and fees earned under HAMP decreased $30.4 million in 2015 as compared to 2014 due primarily to a lower volume of completed modifications and lower fees for maintenance of performing modified loans no longer eligible for HAMP incentive fees. In addition, asset recovery income decreased $7.9 million for 2015 as compared to 2014 as a result of lower gross collections due primarily to the runoff of the related loans managed by the Servicing segment. Incentives relating to the performance of certain loan pools serviced by us decreased $2.8 million for 2015 as compared to 2014.
Ancillary and other fees increased $13.6 million in 2015 as compared to 2014 due primarily to growth in the servicing portfolio.
Provided below is a summary of the average unpaid principal balance of loans serviced and the related average servicing fee for our Servicing segment (dollars in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
Average unpaid principal balance of loans serviced (1)
 
$
244,147,919

 
$
244,736,114

 
$
227,589,645

 
$
(588,195
)
 
$
17,146,469

Average servicing fee  (2)
 
0.28
%
 
0.29
%
 
0.30
%
 
(0.01
)%
 
(0.01
)%
__________
(1)
Average unpaid principal balance of loans serviced is calculated as the average of the average monthly unpaid principal balances. The average unpaid principal balance presented above includes on-balance sheet loans owned by the Servicing segment for which it does not earn a servicing fee.
(2)
Average servicing fee is calculated by dividing gross servicing fees by the average unpaid principal balance of loans serviced.
The decrease in average servicing fee of one basis point for 2016 as compared to 2015 is related primarily to a shift in our third-party servicing portfolio from servicing to subservicing, combined with an overall increase in delinquencies. The decrease in average servicing fee of one basis point for 2015 as compared to 2014 related primarily to a benefit of $13.1 million recognized during 2014 from the settlement of differences in views between a prior servicer and the Company on how certain fees were recognized under a contract.
Servicing Rights Carried at Fair Value
Changes in the fair value of servicing rights, which reflect our quarterly valuation process, have a significant effect on net servicing revenue and fees. A summary of key economic inputs and assumptions used in estimating the fair value of servicing rights carried at fair value is presented below (dollars in thousands):
 
December 31,
 
Variance
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
Servicing rights at fair value
$
949,593

 
$
1,682,016

 
$
1,599,541

 
$
(732,423
)
 
$
82,475

Unpaid principal balance of accounts
101,387,913

 
183,506,006

 
168,832,342

 
(82,118,093
)
 
14,673,664

Inputs and assumptions
 
 
 
 
 
 
 
 
 
Weighted-average remaining life in years
6.0

 
6.3

 
6.6

 
(0.3
)
 
(0.3
)
Weighted-average stated borrower interest rate on underlying collateral
3.95
%
 
4.31
%
 
4.65
%
 
(0.36
)%
 
(0.34
)%
Weighted-average discount rate
11.56
%
 
10.88
%
 
9.55
%
 
0.68
 %
 
1.33
 %
Weighted-average conditional prepayment rate
9.09
%
 
9.94
%
 
7.87
%
 
(0.85
)%
 
2.07
 %
Weighted-average conditional default rate
0.88
%
 
1.06
%
 
2.36
%
 
(0.18
)%
 
(1.30
)%
Year Ended December 31, 2016
The decrease in servicing rights carried at fair value at December 31, 2016 as compared to December 31, 2015 related primarily to a reduction in fair value of $480.5 million and runoff of the portfolio and the sale of servicing rights of $458.5 million , partially offset by $223.2 million in servicing right portfolio acquisitions and servicing rights capitalized upon sales of loans. The reduction in fair value of these servicing rights in 2016 was attributed to a loss of $243.6 million in changes in valuation inputs or other assumptions and a loss of $236.8 million in other changes in fair value, which reflect the impact of the realization of expected cash flows resulting from both regularly scheduled and unscheduled payments and payoffs of loan principal.

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The loss resulting from changes in valuation inputs or other assumptions of $243.6 million in 2016 was driven by changes in interest rates and forward projections of the interest rate curve. We incurred significant losses during the first half of 2016 resulting from decreasing interest rates when we owned a much larger servicing portfolio, offset only partially by gains incurred during the fourth quarter as interest rates increased while the balance of our servicing portfolio had diminished.
The change in fair value of servicing rights resulting from the realization of expected cash flows decreased $7.9 million in 2016 as compared to 2015 due primarily to a smaller capitalized servicing portfolio resulting from sales of servicing rights and portfolio runoff.
Year Ended December 31, 2015
The increase in servicing rights carried at fair value at December 31, 2015 as compared to December 31, 2014 related primarily to $544.6 million in servicing right portfolio acquisitions and servicing rights capitalized upon sales of loans, partially offset by a reduction in fair value of $402.0 million and sales of servicing rights of $60.1 million. The reduction in fair value of these servicing rights in 2015 was attributed to a loss of $157.3 million in changes in valuation inputs or other assumptions and a loss of $244.7 million in other changes in fair value, which reflect the impact of the realization of expected cash flows.
The loss resulting from changes in valuation inputs or other assumptions of $157.3 million in 2015 was due primarily to a higher discount rate at December 31, 2015 as compared to December 31, 2014, an increase in the assumed conditional prepayment rate and an increase in FHFA's house pricing index. The higher assumed conditional prepayment rate was primarily due to actual interest rates being lower than what the interest rate curves had projected for future periods as of December 31, 2014. In addition, the assumed conditional prepayment rate was impacted by a change in mix with the growth of the Freddie Mac and Ginnie Mae servicing rights. The conditional default assumption was lower primarily as a result of the aforementioned refinement of our valuation model.
The increase in realization of expected cash flows of $95.7 million in 2015 as compared to 2014 was due primarily to faster prepayment speeds than anticipated and a larger servicing portfolio resulting from acquisitions of servicing rights, including those from loan origination activities.
Year Ended December 31, 2014
The loss resulting from changes in valuation inputs or other assumptions of $124.5 million in 2014 was due primarily to a higher assumed conditional prepayment rate at December 31, 2014 as compared to December 31, 2013, which was largely driven by a lower interest rate environment and an increase in the FHFA’s housing price index, partially offset by lower future HARP opportunities. There was a decline in the assumed conditional default rate, which was driven by portfolio acquisitions in 2014 that had lower risk profiles, and accordingly, lower assumed conditional default rates. Discount rates were reduced based on observable market rates.
Servicing Rights Related Liabilities
The net loss in fair value of servicing rights related liabilities decreased $2.8 million in 2016 as compared to 2015 driven by higher fair value gains related to changes in interest rates, partially offset by higher interest expense related to additional financing transactions completed in 2016.
The net loss in fair value of servicing rights related liabilities, which related primarily to excess servicing rights liabilities in 2014 and 2015, increased $4.9 million in 2015 as compared to 2014 due primarily to the change in interest expense that relates to the accretion of fair value. The higher interest expense was mainly due to having the 2014 excess servicing spread financing the entire twelve month period of 2015 as opposed to six months in 2014.
Interest Income on Loans
Interest income on loans decreased $28.7 million in 2016 as compared to 2015 and $60.2 million in 2015 as compared to 2014 primarily due to the sale of our residual interests in seven of the Residual Trusts in April 2015, or the sale of our residual interests, runoff of the overall mortgage loan portfolio and a lower yield on loans due to an increase in delinquencies that are 90 days or more past due.

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Insurance Revenue
Insurance revenue decreased $5.2 million in 2016 as compared to 2015 and $23.8 million in 2015 as compared to 2014 due primarily to a decrease in lender-placed insurance commissions due primarily to Fannie Mae and Freddie Mac restrictions that became effective on June 1, 2014, as well as other regulatory and litigation developments with respect to lender-placed insurance. On February 1, 2017, we completed the sale of our principal insurance agency and substantially all of our insurance agency business. As a result of this sale, we will no longer receive any insurance commissions on lender-placed insurance policies. During the year ended December 31, 2016, the insurance business generated income before taxes of $24.6 million . Commencing February 1, 2017, another insurance agency owned by us (and retained by us following the aforementioned sale) began to provide insurance marketing services to third-party insurance agencies and carriers with respect to voluntary insurance policies, including hazard insurance. This insurance agency receives premium-based commissions for its insurance marketing services. Refer to Note 18 to the Consolidated Financial Statements for additional information on the sale of our insurance business.
Intersegment Retention Revenue
Intersegment retention revenue relates to fees for Servicing segment charges to our Originations segment for loan originations completed that resulted from access to the Servicing segment’s servicing portfolio related to capitalized servicing rights. The increase in intersegment retention revenue of $6.9 million in 2016 as compared to 2015 was due primarily to a higher fee per origination charged by the Servicing segment beginning in 2016 to reflect current market pricing, offset in part by a decrease in funded retention volume related to capitalized servicing rights.
The decline in intersegment retention revenue of $9.8 million in 2015 as compared to 2014 was due primarily to the decline in funded retention volume related to capitalized servicing rights.
Net Gains (Losses) on Sales of Loans
Net gains or losses on sales of loans include realized and unrealized gains and losses on loans as well as the changes in fair value of our IRLCs and other freestanding derivatives. A substantial portion of the gain or loss on sales of loans is recognized at the time we commit to originate or purchase a loan at specified terms as we recognize the value of the IRLC at the time of commitment. The fair value of the IRLC includes an estimate of the fair value of the servicing right we expect to receive upon sale of the loan.
Beginning in 2015, the Originations segment recognizes the initial fair value of the entire commitment, including the servicing rights component, on the date of the commitment, while the Servicing segment recognizes the change in fair value of the servicing rights component of our IRLCs and loans held for sale that occurs subsequent to the date of our commitment through the sale of the loan. Net gains (losses) on sale of loans for the Servicing segment consist of this change in fair value as well as net gains or losses on sales of loans to third parties. Net gains (losses) on sales of loans decreased $8.6 million in 2016 as compared to 2015 primarily due to realized and unrealized losses on originated MSR associated with the mortgage loan pipeline and mortgage loans held for sale.
Other Revenues
Other revenues increased $3.7 million in 2016 as compared to 2015 due primarily to $4.2 million in higher other interest income. Other revenues increased $15.6 million in 2015 as compared to 2014 primarily as a result of $19.3 million higher fair value gains relating to charged-off loans resulting primarily from twelve months of collection activity in 2015 compared to eight months in 2014 and an increase in expected collections, and $4.3 million higher other interest income, partially offset by $7.5 million lower beneficial interest income related to a servicing asset.
General and Administrative and Allocated Indirect Expenses
General and administrative and allocated indirect expenses increased $99.1 million in 2016 as compared to 2015 resulting primarily from $28.1 million in additional costs to support efficiency and technology-related initiatives including the MSP conversion in the second quarter of 2016, $16.3 million in higher accruals for loss contingencies and legal expenses primarily related to the cost of defending and resolving legal proceedings, $14.4 million in higher consulting costs associated with process improvement initiatives, $12.1 million in higher advance loss provision related in part to additional reserves established on contested foreclosure and other legal costs, $9.5 million in costs related to NRM transactions during 2016, and $3.9 million in higher loan servicing expense associated with servicing errors resulting in non-recoverable expenses and loan repurchases or indemnifications.

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General and administrative and allocated indirect expenses decreased $27.8 million in 2015 as compared to 2014 resulting primarily from $40.7 million in lower legal related costs largely due to lower accruals for legal and regulatory matters outside of the ordinary course of business and $14.5 million in lower provision for uncollectible advances due to a decrease in advance balances and an improvement in collection experience, partially offset by $11.3 million in additional costs in 2015 to support efficiency and technology-related initiatives, $8.8 million in higher default and other loan servicing costs resulting from growth in the servicing portfolio, and $4.1 million in expenses relating to consolidating and re-branding our mortgage loan business.
Goodwill Impairment
We recorded goodwill impairment charges of $319.6 million and $151.0 million in 2016 and 2015, respectively. These impairment charges were the result of certain market, industry and company-specific matters as discussed in more detail in Note 16 to the Consolidated Financial Statements.
Salaries and Benefits
Salaries and benefits expense decreased $9.0 million in 2016 as compared to 2015 primarily due to a decrease in compensation, benefits and incentives resulting from a lower average headcount driven by site closures and reorganization, and a decrease in share-based compensation due to higher forfeitures, partially offset by an increase in severance. Headcount assigned directly to our Servicing segment decreased by approximately 700 full-time employees from 3,600 at December 31, 2015 to 2,900 at December 31, 2016.
Salaries and benefits expense decreased $23.5 million in 2015 as compared to 2014 primarily due to a lower average headcount as a result of restructuring measures within our mortgage loan servicing operations, offset in part by severance incurred in relation to this restructuring. Headcount assigned directly to our Servicing segment decreased by approximately 600 full-time employees from 4,200 at December 31, 2014 to 3,600 at December 31, 2015.
Interest Expense
Interest expense decreased $17.0 million in 2016 as compared to 2015 and $36.4 million in 2015 as compared to 2014 primarily as a result of the sale of our residual interests in April 2015, which required the deconsolidation of the related mortgage-backed debt, and the overall runoff of the related mortgage loan portfolio.
Other Gains (Losses)
Other gains of $6.1 million in 2015 include an $8.9 million gain realized on the sale of a trading security received as consideration for the sale of the excess servicing spread associated with certain servicing rights, partially offset by a $2.8 million loss recognized on the sale of our residual interests.
Adjusted Earnings (Loss) and Adjusted EBITDA
Provided below is a summary of our Servicing segment's margin (in basis points):
 
 
For the Years Ended December 31,
 
Variance
 
 
2016
 
2015
 
2014 (2)
 
2016 vs. 2015
 
2015 vs. 2014
Adjusted Earnings (Loss) margin (1)
 
(4
)
 
3

 
7

 
(7
)
 
(4
)
Adjusted EBITDA margin (1)
 
9

 
16

 
18

 
(7
)
 
(2
)
__________
(1)
Margins are calculated by dividing the applicable non-GAAP measure by the average unpaid principal balance of loans serviced during the year as set forth in the table above under Net Servicing Revenue and Fees.
(2)
The average principal balance of loans serviced utilized in the calculation of the Adjusted Earnings and Adjusted EBITDA margins for the year ended December 31, 2014 includes adjustments related to servicing fee economics to reflect servicing right acquisitions closed during certain quarters as though they were closed at the beginning of the quarter, as economics (cash flows) were actually recorded for the full quarter.
Adjusted Earnings (Loss) margin and Adjusted EBITDA margin decreased by seven basis points in 2016 as compared to 2015 primarily due to lower revenues (adjusted for the impact of the change in fair value) per loan serviced and higher expenses per loan serviced. The decrease in revenues per loan serviced was primarily due to the decline in servicing fees, incentive and performance fees, and interest income, generally in line with portfolio runoff. The increase in expenses per loan serviced was primarily due to higher general and administrative and allocated indirect expenses, offset in part by lower interest expense.

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Adjusted Earnings margin decreased four basis points in 2015 as compared to 2014 primarily due to lower revenues (adjusted for the impact of the change in fair value driven by changes in valuation inputs) per loan serviced, partially offset by lower expenses, primarily salaries and benefits, per loan serviced and a net gain resulting from the sale of a trading security and the sale of our residual interests. The decline in revenues per loan serviced is primarily due to the increase in realization of expected cash flows due mainly to faster prepayment speeds than anticipated and a larger servicing portfolio, and the decline in incentive and performance fees and insurance revenue.
Adjusted EBITDA margin decreased two basis points in 2015 as compared to 2014 primarily due to lower revenues (adjusted for the impact of the change in fair value) per loan serviced, partially offset by lower expenses, primarily salaries and benefits, per loan serviced and a net gain resulting from the sale of a trading security and the sale of our residual interests. The decline in revenues per loan serviced is primarily due to the decline in incentive and performance fees and insurance revenue.

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Originations
Provided below is a summary of results of operations, Adjusted Earnings and Adjusted EBITDA for our Originations segment (dollars in thousands):
 
 
 
 
Variance
 
 
For the Years Ended December 31,
 
2016 vs. 2015
 
2015 vs. 2014
 
 
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Net gains on sales of loans
 
$
410,544

 
$
448,533

 
$
462,172

 
$
(37,989
)
 
(8
)%
 
$
(13,639
)
 
(3
)%
Other revenues
 
38,886

 
45,312

 
19,650

 
(6,426
)
 
(14
)%
 
25,662

 
131
 %
Total revenues
 
449,430

 
493,845

 
481,822

 
(44,415
)
 
(9
)%
 
12,023

 
2
 %
Salaries and benefits
 
125,958

 
161,992

 
162,006

 
(36,034
)
 
(22
)%
 
(14
)
 
—
 %
General and administrative and allocated indirect expenses
 
107,825

 
125,285

 
115,235

 
(17,460
)
 
(14
)%
 
10,050

 
9
 %
Intersegment retention expense
 
37,630

 
30,751

 
40,546

 
6,879

 
22
 %
 
(9,795
)
 
(24
)%
Interest expense
 
34,012

 
36,470

 
29,841

 
(2,458
)
 
(7
)%
 
6,629

 
22
 %
Depreciation and amortization
 
8,888

 
15,811

 
17,090

 
(6,923
)
 
(44
)%
 
(1,279
)
 
(7
)%
Total expenses
 
314,313

 
370,309

 
364,718

 
(55,996
)
 
(15
)%
 
5,591

 
2
 %
Income before income taxes
 
135,117

 
123,536

 
117,104

 
11,581

 
9
 %
 
6,432

 
5
 %
 
 
 
 
 
 
 
 
 
 


 

 


Adjustments to income before income taxes
 
 
 
 
 
 
 
 
 


 

 


Exit costs
 
3,118

 
2,608

 
2,887

 
510

 
20
 %
 
(279
)
 
(10
)%
Share-based compensation expense
 
1,019

 
5,557

 
3,445

 
(4,538
)
 
(82
)%
 
2,112

 
61
 %
Legal and regulatory matters
 
—

 
—

 
907

 
—

 
—
 %
 
(907
)
 
(100
)%
Other
 
14,531

 
1,272

 
4,049

 
13,259

 
n/m

 
(2,777
)
 
(69
)%
Total adjustments
 
18,668

 
9,437

 
11,288

 
9,231

 
98
 %
 
(1,851
)
 
(16
)%
Adjusted Earnings (1)
 
153,785

 
132,973

 
128,392

 
20,812

 
16
 %
 
4,581

 
4
 %
 
 
 
 
 
 
 
 
 
 


 

 


EBITDA adjustments
 
 
 
 
 
 
 
 
 


 

 


Depreciation and amortization
 
8,888

 
15,811

 
17,090

 
(6,923
)
 
(44
)%
 
(1,279
)
 
(7
)%
Other
 
(1,924
)
 
8,827

 
(1,165
)
 
(10,751
)
 
(122
)%
 
9,992

 
n/m

Total adjustments
 
6,964

 
24,638

 
15,925

 
(17,674
)
 
(72
)%
 
8,713

 
55
 %
Adjusted EBITDA
 
$
160,749

 
$
157,611

 
$
144,317

 
$
3,138

 
2
 %
 
$
13,294

 
9
 %
__________
(1)
The Company revised its method of calculating Adjusted Earnings (Loss) beginning with the Form 10-K for the fiscal year ended December 31, 2016 to eliminate adjustments for step-up depreciation and amortization, which represents depreciation and amortization costs related to the increased basis in assets (including servicing rights and subservicing contracts) acquired within business combination transactions. Prior period amounts have also been adjusted to reflect this revision.


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The volume of our originations activity and changes in market rates primarily govern the fluctuations in revenues and expenses of our Originations segment. Provided below are summaries of our originations volume by channel (in thousands):
 
 
For the Year Ended December 31, 2016
 
 
Correspondent
 
Consumer
 
Wholesale (2)
 
Retail (3)
 
Total
Locked Volume (1)
 
 
 
 
 
 
 
 
 
 
Purchase
 
$
8,108,275

 
$
102,244

 
$
30,976

 
$
5,893

 
$
8,247,388

Refinance
 
5,271,061

 
6,914,462

 
115,260

 
5,030

 
12,305,813

Total
 
$
13,379,336

 
$
7,016,706

 
$
146,236

 
$
10,923

 
$
20,553,201

 
 
 
 
 
 
 
 
 
 
 
Funded Volume
 
 
 
 
 
 
 
 
 
 
Purchase
 
$
8,206,636

 
$
136,428

 
$
24,835

 
$
10,900

 
$
8,378,799

Refinance
 
5,280,502

 
6,576,683

 
105,531

 
3,983

 
11,966,699

Total
 
$
13,487,138

 
$
6,713,111

 
$
130,366

 
$
14,883

 
$
20,345,498

 
 
 
 
 
 
 
 
 
 
 
Sold Volume
 
 
 
 
 
 
 
 
 
 
Purchase
 
$
8,290,301

 
$
136,257

 
$
18,255

 
$
34,457

 
$
8,479,270

Refinance
 
5,283,536

 
6,578,608

 
86,012

 
30,210

 
11,978,366

Total
 
$
13,573,837

 
$
6,714,865

 
$
104,267

 
$
64,667

 
$
20,457,636

 
 
For the Year Ended December 31, 2015
 
 
Correspondent
 
Consumer
 
Retail
 
Total
Locked Volume (1)
 
 
 
 
 
 
 
 
Purchase
 
$
9,875,335

 
$
86,542

 
$
285,379

 
$
10,247,256

Refinance
 
7,761,215

 
6,801,614

 
309,752

 
14,872,581

Total
 
$
17,636,550

 
$
6,888,156

 
$
595,131

 
$
25,119,837

 
 
 
 
 
 
 
 
 
Funded Volume
 
 
 
 
 
 
 
 
Purchase
 
$
10,117,883

 
$
77,754

 
$
277,085

 
$
10,472,722

Refinance
 
7,668,939

 
6,713,690

 
274,211

 
14,656,840

Total
 
$
17,786,822

 
$
6,791,444

 
$
551,296

 
$
25,129,562

 
 
 
 
 
 
 
 
 
Sold Volume
 
 
 
 
 
 
 
 
Purchase
 
$
10,027,234

 
$
78,803

 
$
262,866

 
$
10,368,903

Refinance
 
7,709,254

 
6,563,076

 
260,323

 
14,532,653

Total
 
$
17,736,488

 
$
6,641,879

 
$
523,189

 
$
24,901,556


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Table of Contents

 
 
For the Year Ended December 31, 2014
 
 
Correspondent
 
Consumer
 
Wholesale (2)
 
Retail
 
Total
Locked Volume (1)
 
 
 
 
 
 
 
 
 
 
Purchase
 
$
6,116,448

 
$
39,403

 
$
49,536

 
$
71,505

 
$
6,276,892

Refinance
 
4,662,984

 
8,123,886

 
144,866

 
63,004

 
12,994,740

Total
 
$
10,779,432

 
$
8,163,289

 
$
194,402

 
$
134,509

 
$
19,271,632

 
 
 
 
 
 
 
 
 
 
 
Funded Volume
 
 
 
 
 
 
 
 
 
 
Purchase
 
$
5,798,037

 
$
28,280

 
$
76,860

 
$
79,861

 
$
5,983,038

Refinance
 
4,195,096

 
8,032,600

 
192,759

 
68,240

 
12,488,695

Total
 
$
9,993,133

 
$
8,060,880

 
$
269,619

 
$
148,101

 
$
18,471,733

 
 
 
 
 
 
 
 
 
 
 
Sold Volume
 
 
 
 
 
 
 
 
 
 
Purchase
 
$
5,580,869

 
$
20,693

 
$
109,399

 
$
78,360

 
$
5,789,321

Refinance
 
4,067,345

 
8,186,721

 
255,810

 
63,053

 
12,572,929

Total
 
$
9,648,214

 
$
8,207,414

 
$
365,209

 
$
141,413

 
$
18,362,250

__________
(1)
Volume has been adjusted by the percentage of mortgage loans not expected to close based on previous historical experience and changes in interest rates.
(2)
During the third quarter of 2016 we re-entered the wholesale channel in an effort to expand our customer base, after we had initially exited the wholesale channel in the first quarter of 2014.
(3)
We exited the consumer retail channel in January 2016.
Net Gains on Sales of Loans
Net gains on sales of loans include realized and unrealized gains and losses on loans, the initial fair value of the capitalized servicing rights upon loan sales with servicing retained, as well as the changes in fair value of our IRLCs and other freestanding derivatives. The amount of net gains on sales of loans is a function of the volume and margin of our originations activity and is impacted by fluctuations in interest rates. A substantial portion of our gains on sales of loans is recognized at the time we commit to originate or purchase a loan at specified terms, as we recognize the value of the IRLC at the time of commitment. The fair value of the IRLC includes our estimate of the fair value of the servicing right we expect to retain upon sale of the loan. We recognize loan origination costs as incurred, which typically align with the date of loan funding for consumer originations and the date of loan purchase for correspondent lending. These expenses are primarily included in general and administrative expenses and salaries and benefits on the consolidated statements of comprehensive loss. In addition, we record a provision for losses relating to representations and warranties made as part of the loan sale transaction at the time the loan is sold.
The volatility in the gain on sale spread is attributable to market pricing, which changes with demand, channel mix, and the general level of interest rates. While many factors may affect consumer demand for mortgages, generally, pricing competition on mortgage loans is lower in periods of low or declining interest rates, as consumer demand is greater. This provides opportunities for originators to increase volume and earn wider margins. Conversely, pricing competition increases when interest rates rise as consumer demand lessens. This reduces overall origination volume and may lead originators to reduce margins. The level and direction of interest rates are not the sole determinant of consumer demand for mortgages. Other factors such as secondary market conditions, home prices, credit spreads or legislative activity may impact consumer demand more significantly than interest rates in any given period.

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Net gains on sales of loans for our Originations segment consists of the following (dollars in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
 
2016 vs. 2015
 
2015 vs. 2014
 
 
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Realized gains on sales of loans
 
$
224,796

 
$
167,660

 
$
367,314

 
$
57,136

 
34
 %
 
$
(199,654
)
 
(54
)%
Change in unrealized gains on loans held for sale
 
(14,117
)
 
(7,697
)
 
1,412

 
(6,420
)
 
83
 %
 
(9,109
)
 
n/m

Gains (losses) on interest rate lock commitments (1)
 
194

 
(9,464
)
 
21,061

 
9,658

 
(102
)%
 
(30,525
)
 
(145
)%
Losses on forward sales commitments (1)
 
(12,335
)
 
(19,747
)
 
(156,201
)
 
7,412

 
(38
)%
 
136,454

 
(87
)%
Losses on MBS purchase commitments (1)
 
(20,317
)
 
(24,250
)
 
(18,009
)
 
3,933

 
(16
)%
 
(6,241
)
 
35
 %
Capitalized servicing rights
 
205,365

 
305,838

 
214,285

 
(100,473
)
 
(33
)%
 
91,553

 
43
 %
Provision for repurchases
 
(15,331
)
 
(16,008
)
 
(7,741
)
 
677

 
(4
)%
 
(8,267
)
 
107
 %
Interest income
 
41,715

 
52,201

 
40,051

 
(10,486
)
 
(20
)%
 
12,150

 
30
 %
Other
 
574

 
—

 
—

 
574

 
n/m

 
—

 
—
 %
Net gains on sales of loans
 
$
410,544

 
$
448,533

 
$
462,172

 
$
(37,989
)
 
(8
)%
 
$
(13,639
)
 
(3
)%
__________
(1)
Realized losses on freestanding derivatives were $57.3 million , $67.0 million and $134.8 million during 2016, 2015 and 2014 , respectively.
The decrease in net gains on sales of loans in 2016 as compared to 2015 was primarily due to a lower volume of locked loans, partially offset by a slight shift in mix from the lower margin correspondent channel to the higher margin consumer channel. The decline in volume is largely due to an increase in market competition and lower HARP volume. We had lower capitalized servicing rights during 2016 as compared to 2015 due primarily to a lower volume of loans sold with servicing retained, coupled with a reduction in the fair value of servicing rights due primarily to lower mortgage rates during 2016.
The decrease in net gains on sales of loans in 2015 as compared to 2014 was primarily due to a shift in volume from the higher margin consumer channel to the lower margin correspondent channel, offset partially by a higher volume of locked loans. The higher volume of locked loans during 2015 was largely due to lower average interest rates in 2015. Additionally, we had higher capitalized servicing rights during 2015 as compared to 2014 due primarily to a higher volume of loans sold as well as a change in mix from substantially all Fannie Mae in 2014 to approximately 65% Fannie Mae and Freddie Mac loans and 35% Ginnie Mae guaranteed MBS in 2015. Ginnie Mae loans have a higher servicing fee than GSE loans.
The years ended December 31, 2016, 2015 and 2014 included the benefit of higher margins from HARP, which is scheduled to expire on September 30, 2017. HARP is a federal program of the U.S. that helps homeowners refinance their mortgage. Our strategy includes significant efforts to maintain retention volumes through traditional refinancing opportunities and HARP, although we believe peak HARP refinancing occurred in prior periods.
Provided below is a summary of origination economics for all channels (in basis points):
 
 
For the Years Ended December 31,
 
Variance
 
 
 
2016 vs. 2015
 
2015 vs. 2014
 
 
2016
 
2015
 
2014
 
Bps
 
%
 
Bps
 
%
Gain on sale of loans (1)
 
200

 
178

 
240

 
22

 
12
%
 
(62
)
 
(26
)%
Fee income  (2)
 
19

 
18

 
11

 
1

 
6
%
 
7

 
64
 %
Direct expenses (2)
 
(125
)
 
(110
)
 
(142
)
 
(15
)
 
14
%
 
32

 
(23
)%
Direct margin
 
94

 
86

 
109

 
8

 
9
%
 
(23
)
 
(21
)%
__________
(1)
Calculated on pull-through adjusted locked volume.
(2)
Calculated on funded volume.


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Table of Contents

The direct margin increased in 2016 as compared to 2015 primarily as a result of a slight shift in mix from lower margin correspondent channel to higher margin consumer channel. Our correspondent volume represented 65% of total pull-through adjusted locked volume for 2016 as compared to 70% for 2015 and 56% for 2014. Direct margin in the consumer channel was 194 bps in 2016 as compared to 226 bps in 2015, which was primarily driven by lower HARP volume in 2016 and lower interest income due to lower average balances and lower average interest rates. Direct margin in the correspondent channel was 42 bps during 2016, which was relatively consistent with 2015. Direct margin in the wholesale channel was (76) bps during 2016, and was nearly break-even by the end of the fourth quarter.
The decline in direct margin in 2015 as compared to 2014 was primarily due to a shift in volume from the higher margin consumer channel to the lower margin correspondent channel. This decline was partially offset by higher origination fees in 2015, the impact of lower direct expenses as a result of the exit from the wholesale business in February 2014, economies of scale as a result of higher loan volume and other cost cutting measures in 2014 and 2015.
Other Revenues
Other revenues, which consists primarily of origination fee income and interest on cash equivalents, decreased $6.4 million in 2016 as compared to 2015 resulting primarily from $3.0 million in lower origination fee income due to lower originations volume in the correspondent channel during 2016 and $2.3 million in lower other interest income.
Other revenues increased $25.7 million in 2015 as compared to 2014 primarily as a result of lower origination fees in 2014 due to our having waived certain fees charged to borrowers refinancing mortgage loans.
Salaries and Benefits
Salaries and benefits expense decreased $36.0 million in 2016 as compared to 2015 primarily due to a decrease in compensation, benefits and incentives resulting from lower average headcount, a decrease in share-based compensation due to higher forfeitures, and a decrease in commissions due to lower originations volume, partially offset by an increase in severance.
Salaries and benefits expense remained flat in 2015 as compared to 2014. Although level between both years, 2015 had a decrease in compensation and benefits primarily due to lower average headcount and lower severance due mainly to the exit from the wholesale business in February 2014 and an office closure in 2014. These lower expenses were offset by higher incentives in 2015 due to an increase in funded volume, partially offset by the impact from the change in mix from higher incentive paying retention originations to lower incentive paying correspondent originations.
General and Administrative and Allocated Indirect Expenses
General and administrative and allocated indirect expenses decreased $17.5 million in 2016 as compared to 2015 primarily due to $13.6 million in lower advertising costs resulting from a decrease in mail solicitations and internet lead generation due to a strategy shift in lead acquisition. Additionally, we recorded a reserve reduction in the second quarter of 2016 related to an $8.9 million change in estimate of the liability associated with our selling representations and warranties due to adjustments to certain assumptions based on recently observed trends as compared to historical expectations, primarily relating to loan defect rates and counterparty review probabilities. The remainder of the decrease is primarily due to $3.9 million in lower loan origination expenses due to a decreased volume of funded loans and $4.6 million in asset impairment charges. These reductions were offset in part by $4.8 million in higher consulting costs associated with process improvement initiatives.
General and administrative and allocated indirect expenses increased $10.1 million in 2015 as compared to 2014 primarily due to higher loan origination expenses due to an increased volume of funded loans and increased advertising resulting from additional mail solicitations and internet lead generations as well as re-branding for our mortgage loan business. In addition, we had a larger reduction in 2014 to our estimate of the liability associated with our representations and warranties for sales of mortgage loans due to the prior year including a reduction to our reserves as a result of timely payment history on loans originated under HARP and lower actual origination defects as compared to original expectations. Under HARP, after one year of timely payments by the borrower since the origination of the loan, our exposure to the liability associated with representations and warranties becomes limited in nature. In the prior year, we had more loans completing one year of timely payments and such loans had higher initial reserves established due to a higher initial estimate of defects. These higher expenses were partially offset by lower occupancy, printing and mailing costs in support of cost savings measures.

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Table of Contents

Intersegment Retention Expense
Intersegment retention expense relates to fees charged by our Servicing segment to the Originations segment in relation to loan originations completed that resulted from access to the Servicing segment’s servicing portfolio related to capitalized servicing rights. The increase in intersegment retention expense of $ 6.9 million in 2016 as compared to 2015 was due primarily to a higher fee per origination charged by the Servicing segment beginning in 2016 to reflect current market pricing, offset in part by a decrease in funded retention volume related to capitalized servicing rights.
The decline in intersegment retention expense of $ 9.8 million in 2015 as compared to 2014 was due primarily to the decline in funded retention volume related to capitalized servicing rights.
Interest Expense
Interest expense decreased $ 2.5 million in 2016 as compared to 2015 primarily due to lower average borrowings on master repurchase agreements due to a lower volume of funded loans, offset partially by higher average cost of debt.
Interest expense increased $6.6 million in 2015 as compared to 2014 primarily due to higher average borrowings on master repurchase agreements due to higher volumes of funded loans, partially offset by lower average costs of debt.
Depreciation and Amortization
Depreciation and amortization decreased $6.9 million in 2016 as compared to 2015 primarily due to $4.5 million impairment charge recorded in 2015 to fully impair the Ditech Mortgage Corp licensing intangible asset, as a result of the legal entity merger in 2015. In addition, depreciation expense decreased $2.3 million due to software development assets acquired as part of the ResCap acquisition reaching the end of its useful live during the year ended December 31, 2015.
Adjusted Earnings and Adjusted EBITDA
Adjusted Earnings and Adjusted EBITDA increased $20.8 million and $3.1 million , respectively, in 2016 as compared to 2015 due primarily to lower expenses as it relates to headcount and volume-related expenses, offset in part by lower revenues, which are mainly attributable to lower volumes.
Adjusted Earnings and Adjusted EBITDA increased $4.6 million and $13.3 million , respectively, in 2015 as compared to 2014 due primarily to higher origination fee income, offset partially by lower net gains on sales of loans and higher expenses. We had a higher net provision for the repurchase of loans due primarily to a shift in volume of originations from the consumer channel to the correspondent channel, which has a higher estimated defect rate.

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Table of Contents

Reverse Mortgage
Provided below is a summary of results of operations, Adjusted Loss and Adjusted EBITDA for our Reverse Mortgage segment (dollars in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
 
2016 vs. 2015
 
2015 vs. 2014
 
 
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Net fair value gains on reverse loans and related HMBS obligations
 
$
59,022

 
$
98,265

 
$
109,972

 
$
(39,243
)
 
(40
)%
 
$
(11,707
)
 
(11
)%
Net servicing revenue and fees
 
31,031

 
42,648

 
35,446

 
(11,617
)
 
(27
)%
 
7,202

 
20
 %
Net losses on sales of loans
 
—

 
(98
)
 
—

 
98

 
(100
)%
 
(98
)
 
n/m

Other revenues
 
5,742

 
6,794

 
11,743

 
(1,052
)
 
(15
)%
 
(4,949
)
 
(42
)%
Total revenues
 
95,795

 
147,609

 
157,161

 
(51,814
)
 
(35
)%
 
(9,552
)
 
(6
)%
General and administrative and allocated indirect expenses
 
83,250

 
98,629

 
83,623

 
(15,379
)
 
(16
)%
 
15,006

 
18
 %
Salaries and benefits
 
69,112

 
88,967

 
77,264

 
(19,855
)
 
(22
)%
 
11,703

 
15
 %
Interest expense
 
9,070

 
3,902

 
3,773

 
5,168

 
132
 %
 
129

 
3
 %
Goodwill and intangible assets impairment
 
6,735

 
56,539

 
82,269

 
(49,804
)
 
(88
)%
 
(25,730
)
 
(31
)%
Depreciation and amortization
 
6,088

 
7,865

 
9,284

 
(1,777
)
 
(23
)%
 
(1,419
)
 
(15
)%
Other expenses, net
 
4,421

 
4,044

 
2,116

 
377

 
9
 %
 
1,928

 
91
 %
Total expenses
 
178,676

 
259,946

 
258,329

 
(81,270
)
 
(31
)%
 
1,617

 
1
 %
Other losses
 
(1,664
)
 
—

 
—

 
(1,664
)
 
n/m

 
—

 
—
 %
Loss before income taxes
 
(84,545
)
 
(112,337
)
 
(101,168
)
 
27,792

 
(25
)%
 
(11,169
)
 
11
 %
 
 
 
 
 
 
 
 
 
 


 
 
 
 
Adjustments to loss before income taxes
 
 
 
 
 
 
 
 
 


 
 
 
 
Fair value to cash adjustment for reverse loans
 
17,501

 
2,291

 
(24,602
)
 
15,210

 
n/m

 
26,893

 
(109
)%
Goodwill and intangible assets impairment
 
6,735

 
56,539

 
82,269

 
(49,804
)
 
(88
)%
 
(25,730
)
 
(31
)%
Exit costs
 
5,437

 
1,640

 
—

 
3,797

 
232
 %
 
1,640

 
n/m

Share-based compensation expense
 
1,032

 
2,395

 
2,185

 
(1,363
)
 
(57
)%
 
210

 
10
 %
Curtailment expense
 
—

 
30,419

 
1,460

 
(30,419
)
 
(100
)%
 
28,959

 
n/m

Legal and regulatory matters
 
—

 
5,575

 
24,297

 
(5,575
)
 
(100
)%
 
(18,722
)
 
(77
)%
Other
 
3,971

 
349

 
4,485

 
3,622

 
n/m

 
(4,136
)
 
(92
)%
Total adjustments
 
34,676

 
99,208

 
90,094

 
(64,532
)
 
(65
)%
 
9,114

 
10
 %
Adjusted Loss (1)
 
(49,869
)
 
(13,129
)
 
(11,074
)
 
(36,740
)
 
280
 %
 
(2,055
)
 
19
 %
 
 
 
 
 
 
 
 
 
 


 
 
 
 
EBITDA adjustments
 
 
 
 
 
 
 
 
 


 
 
 
 
Depreciation and amortization
 
6,088

 
7,865

 
9,284

 
(1,777
)
 
(23
)%
 
(1,419
)
 
(15
)%
Amortization of servicing rights
 
1,753

 
2,053

 
2,683

 
(300
)
 
(15
)%
 
(630
)
 
(23
)%
Interest expense on debt
 
—

 
2

 
26

 
(2
)
 
(100
)%
 
(24
)
 
(92
)%
Other
 
151

 
139

 
(73
)
 
12

 
9
 %
 
212

 
(290
)%
Total adjustments
 
7,992

 
10,059

 
11,920

 
(2,067
)
 
(21
)%
 
(1,861
)
 
(16
)%
Adjusted EBITDA
 
$
(41,877
)
 
$
(3,070
)
 
$
846

 
$
(38,807
)
 
n/m

 
$
(3,916
)
 
n/m

__________
(1)
The Company revised its method of calculating Adjusted Earnings (Loss) beginning with the Form 10-K for the fiscal year ended December 31, 2016 to eliminate adjustments for step-up depreciation and amortization, which represents depreciation and amortization costs related to the increased basis in assets (including servicing rights and subservicing contracts) acquired within business combination transactions. Prior period amounts have also been adjusted to reflect this revision.

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Reverse Mortgage Servicing Portfolio
Provided below is a summary of the activity in our third-party servicing portfolio for our reverse mortgage business, which included accounts serviced for third parties for which we earn servicing revenue. It excludes servicing performed related to reverse mortgage loans and real estate owned recognized on our consolidated balance sheets, as the securitized loans are accounted for as a secured borrowing (dollars in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
 
Number
of Accounts
 
Unpaid Principal
Balance
 
Number
of Accounts
 
Unpaid Principal
Balance
Third-party servicing portfolio
 
 
 
 
 
 
 
 
Balance at beginning of the year
 
56,046

 
$
9,818,400

 
50,196

 
$
8,626,946

New business added
 
10,091

 
1,789,432

 
12,880

 
2,043,089

Other additions (1)
 
—

 
784,523

 
—

 
645,715

Payoffs and sales
 
(9,587
)
 
(2,051,628
)
 
(7,030
)
 
(1,497,350
)
Balance at end of the year
 
56,550

 
$
10,340,727

 
56,046

 
$
9,818,400

__________
(1)
Other additions include additions to the principal balance serviced related to draws on lines of credit, interest, servicing fees, mortgage insurance and advances owed by the existing borrower.
Provided below is a summary of our reverse loan servicing portfolio (dollars in thousands):
 
 
At December 31, 2016
 
At December 31, 2015
 
 
Number of
Accounts
 
Unpaid Principal
Balance
 
Number of
Accounts
 
Unpaid Principal
Balance
Third-party servicing portfolio (1)
 
56,550

 
$
10,340,727

 
56,046

 
$
9,818,400

On-balance sheet residential loans and real estate owned
 
62,485

 
10,321,425

 
65,187

 
10,265,726

Total reverse loan servicing portfolio
 
119,035

 
$
20,662,152

 
121,233

 
$
20,084,126

__________
(1)
We earn a fixed dollar amount per loan on a majority of our third-party reverse loan servicing portfolio. The weighted-average contractual servicing fee for our third-party servicing portfolio, which is calculated as the annual average servicing fee divided by the ending unpaid principal balance, was 0.13% and 0.14% at December 31, 2016 and 2015 , respectively. The decline in the average fee was primarily a result of lower loan servicing fees, combined with the impact of a higher average loan balance.
Net Fair Value Gains on Reverse Loans and Related HMBS Obligations
Provided in the table below is a summary of the components of net fair value gains on reverse loans and related HMBS obligations (dollars in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
 
2016 vs. 2015
 
2015 vs. 2014
 
 
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Interest income on reverse loans
 
$
450,008

 
$
435,585

 
$
398,925

 
$
14,423

 
3
 %
 
$
36,660

 
9
 %
Interest expense on HMBS related obligations
 
(412,090
)
 
(403,817
)
 
(372,346
)
 
(8,273
)
 
2
 %
 
(31,471
)
 
8
 %
Net interest income on reverse loans and HMBS related obligations
 
37,918

 
31,768

 
26,579

 
6,150

 
19
 %
 
5,189

 
20
 %
 
 
 
 
 
 
 
 
 
 


 


 


Change in fair value of reverse loans
 
(111,687
)
 
(232,993
)
 
35,272

 
121,306

 
(52
)%
 
(268,265
)
 
n/m

Change in fair value of HMBS related obligations
 
132,791

 
299,490

 
48,121

 
(166,699
)
 
(56
)%
 
251,369

 
n/m

Net change in fair value on reverse loans and HMBS related obligations
 
21,104

 
66,497

 
83,393

 
(45,393
)
 
(68
)%
 
(16,896
)
 
(20
)%
Net fair value gains on reverse loans and related HMBS obligations
 
$
59,022

 
$
98,265

 
$
109,972

 
$
(39,243
)
 
(40
)%
 
$
(11,707
)
 
(11
)%

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Net fair value gains on reverse loans and related HMBS obligations include the contractual interest income earned on reverse loans, including those not yet securitized or no longer in securitization pools, net of interest expense on HMBS related obligations, and the change in fair value of these assets and liabilities. Included in the change in fair value are gains due to loan originations that include tails. Tails are participations in previously securitized HECMs and are created by additions to principal for borrower draws on lines of credit, interest, servicing fees, and mortgage insurance premiums. Economic gains and losses result from the pricing of an aggregated pool of loans exceeding the cost of the origination or acquisition of the loan as well as the change in fair value resulting from changes to market pricing on HECMs and HMBS. No gain or loss is recognized as a result of the securitization of reverse loans as these transactions are accounted for as secured borrowings. However, HECMs and HMBS related obligations are marked to fair value, which can result in a net gain or loss related to changes in market pricing.
Net interest income on reverse loans and HMBS related obligations increased $6.2 million in 2016 as compared to 2015 primarily as a result of a decrease in HMBS related obligations as a result of an increase in buyouts, partially offset by an increase in nonperforming reverse loans, which have lower interest rates than performing loans. The net change in fair value on reverse loans and HMBS related obligations is comprised of cash generated by origination, purchase, and securitization of HECMs as well as non-cash fair value gains or losses. Cash generated by origination, purchase and securitization of HECMs decreased $30.2 million in 2016 as compared to 2015 primarily as a result of overall lower origination volumes, partially offset by a shift in mix from lower margin new originations to higher margin tails. Net non-cash fair value losses increased by $15.2 million in 2016 as compared to 2015 due primarily to higher LIBOR rates in 2016 as compared to 2015. Reverse loans and related HMBS obligations are generally subject to net fair value gains when interest rates decline primarily as a result of a longer duration of reverse loans as compared to HMBS related obligations. Our reverse loans have longer durations primarily as a result of our obligations as issuer of HMBS, which includes the requirement to purchase loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of the maximum claim amount. The conditional repayment rate utilized in the valuation of reverse loans and HMBS related obligations has increased from 25.59% and 24.70%, respectively, at December 31, 2015 to 28.48% and 27.74% respectively, at December 31, 2016 primarily due to the aging of the portfolio.
Net interest income increased $5.2 million in 2015 as compared to 2014 primarily as a result of the growth in both reverse loans and HMBS related obligations, offset partially by the increase in nonperforming reverse loans, which have lower interest rates than performing loans. Cash generated by origination, purchase and securitization of HECMs included in the change in fair value increased $10.0 million in 2015 as compared to 2014 primarily as a result of a shift in volume from lower margin new originations to higher margin tails. Net non-cash fair value adjustments included in the change in fair value fluctuated by $26.9 million from a gain in 2014 to a loss in 2015 due primarily to a lower reduction of LIBOR in 2015 as compared to 2014. In addition, in 2015 the impact of the reduction of LIBOR was offset by the widening of spreads between reverse loans and HMBS related obligations resulting from changes in market pricing for HECMs and HMBS. In 2014 there was a tightening of spreads. The conditional repayment rate utilized in the valuation of reverse loans and HMBS related obligations has increased from 21.68% and 21.21% at December 31, 2014, respectively, to 25.59% and 24.70% at December 31, 2015, respectively, as the portfolio ages and regulatory guidance surrounding due and payable policies resulted in shorter projected default servicing timelines.
Provided below is a summary of our funded volume, which represents purchases and originations of reverse loans, and volume of securitizations into HMBS (dollars in thousands):
 
 
 
 
 
 
 
 
Variance
 
 
For the Years Ended December 31,
 
2016 vs. 2015
 
2015 vs. 2014
 
 
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Funded volume
 
$
872,203

 
$
1,418,624

 
$
1,457,122

 
$
(546,421
)
 
(39
)%
 
$
(38,498
)
 
(3
)%
Securitized volume (1)
 
868,023

 
1,465,743

 
1,480,085

 
(597,720
)
 
(41
)%
 
(14,342
)
 
(1
)%
__________
(1)
Securitized volume includes $422.7 million, $404.0 million and $299.4 million of tails securitized for 2016, 2015 and 2014 , respectively. Tail draws associated with the HECM IDL product were $248.7 million, $199.9 million and $44.8 million for 2016, 2015 and 2014 , respectively.
Funded and securitized volumes decreased during 2016 as compared to 2015 primarily due to the negative impact of new financial assessment rules and other regulatory changes, and our decision to reduce participation in the correspondent market based on management's assessment of pricing levels in the marketplace. In addition, during December 2016 a decision was made by management to exit the reverse mortgage origination business. However, we intend to fulfill reverse loans in our originations pipeline consistent with our underwriting practices and to fund undrawn amounts available to borrowers in our servicing portfolio. Refer to Note 20 to Consolidated Financial Statements for additional information regarding exit activities.


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Net Servicing Revenue and Fees
A summary of net servicing revenue and fees for our Reverse Mortgage segment is provided below (dollars in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
 
2016 vs. 2015
 
2015 vs. 2014
 
 
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Servicing fees
 
$
14,055

 
$
13,723

 
$
13,043

 
$
332

 
2
 %
 
$
680

 
5
 %
Incentive and performance fees
 
9,557

 
22,757

 
21,256

 
(13,200
)
 
(58
)%
 
1,501

 
7
 %
Ancillary and other fees
 
9,172

 
8,221

 
3,830

 
951

 
12
 %
 
4,391

 
115
 %
Servicing revenue and fees
 
32,784

 
44,701

 
38,129

 
(11,917
)
 
(27
)%
 
6,572

 
17
 %
Amortization of servicing rights
 
(1,753
)
 
(2,053
)
 
(2,683
)
 
300

 
(15
)%
 
630

 
(23
)%
Net servicing revenue and fees
 
$
31,031

 
$
42,648

 
$
35,446

 
$
(11,617
)
 
(27
)%
 
$
7,202

 
20
 %
The decline in net servicing revenue and fees of $11.6 million in 2016 as compared to 2015 was due primarily to a decrease in incentive and performance fees for the management of real estate owned. The growth in net servicing revenue and fees of $7.2 million in 2015 as compared to 2014 was due primarily to an increase in incentive and performance fees for the management of real estate owned and termination fees relating to the agreement to manage such real estate owned. In March 2015, we entered into an agreement with a counterparty to phase out the management of real estate owned through October 1, 2015. Fees associated with this contract approximated 63% and 75% of incentive and performance fees during 2015 and 2014, respectively.
Other Revenues
Other revenues include originations fee income and other miscellaneous income. Other revenues remained relatively flat in 2016 as compared to 2015 , and declined $4.9 million in 2015 as compared to 2014 primarily as a result of the decline in origination fee income resulting from fewer originations. We also charged lower fees to new borrowers in 2015.
General and Administrative and Allocated Indirect Expenses
General and administrative and allocated indirect expenses decreased by $15.4 million in 2016 as compared to 2015 due primarily to a decrease in curtailment-related accruals of $23.0 million as a result of certain regulatory developments during 2015, which led to additional charges around curtailable events, $5.7 million in lower advertising costs and $3.0 million in lower accruals associated with certain legal and regulatory matters. This reduction was offset in part by higher provisions recorded on uncollectible receivables and advances in 2016 of $5.0 million , an increase in contingent losses of $4.7 million, $2.8 million in asset impairment charges and $1.3 million increase of outsourced foreclosure services.
General and administrative and allocated indirect expenses increased $ 15.0 million in 2015 as compared to 2014 due primarily to a $10.2 million increase in expenses related to regulatory developments in 2015, which led to additional charges around curtailable events and to accrual adjustments associated with legal and regulatory matters outside of the normal course of business. In addition, there was a $6.8 million increase in curtailment due primarily to an increase in missed timelines driven by an increase in volume resulting from the contraction of default servicing timeframes due to recent regulatory changes and an increase in the related exposure to incurred but not known deaths of the mortgagor and the mortgagor’s vacancy from their principal residence. Further, there was a $2.8 million increase in advertising and a $6.9 million net increase in various miscellaneous expenses including real estate owned management support services, equipment maintenance and occupancy expenses. These higher charges were partially offset by $8.2 million in lower provisions on uncollectible receivables and advances resulting from improved collections and recent historical experience, as well as transaction costs of $3.5 million recorded in 2014 related to an unsuccessful acquisition, with no similar charge in 2015.
Salaries and Benefits
Salaries and benefits expense decreased $ 19.9 million in 2016 as compared to 2015 due primarily to lower commissions and bonuses as a result of lower origination volume combined with a smaller average headcount. Headcount assigned directly to our Reverse segment decreased by approximately 100 full-time employees from 900 at December 31, 2015 to 800 at December 31, 2016.
Salaries and benefits expense increased $ 11.7 million in 2015 as compared to 2014 due primarily to a larger average headcount during 2015, higher incentives and higher severance. As a result of an increase in defaulted loans and recent regulatory guidance surrounding due and payable policies that have resulted in shorter projected default servicing timelines, we increased our headcount of employees dedicated to such servicing.

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Table of Contents

Interest Expense
Interest expense increased $5.2 million in 2016 as compared to 2015 due primarily to higher average borrowings on master repurchase agreements and higher average cost of debt.
Goodwill and Intangible Assets Impairment
We recorded $6.7 million in intangible assets impairment charges in 2016 and recorded $56.5 million and $82.3 million in goodwill impairment charges in 2015 and 2014, respectively. These impairment charges were the result of certain market, industry and company-specific matters as discussed in more detail in Note 16 to the Consolidated Financial Statements. As a result of these goodwill impairment charges in prior years, the Reverse Mortgage reporting unit no longer has goodwill.
Adjusted Loss and Adjusted EBITDA
Adjusted Loss increased $36.7 million and Adjusted EBITDA decreased by $ 38.8 million , respectively, in 2016 as compared to 2015 . The change in these non-GAAP financial measures was due primarily to the decline in cash generated from origination, purchase and securitization of HECMs combined with lower net servicing revenue and fees, plus an increase in general and administrative expenses, partially offset by a decrease in salaries and benefits, as described above.
Adjusted Loss increased $2.1 million and Adjusted EBITDA decreased $ 3.9 million , respectively, in 2015 as compared to 2014 . The change in these non-GAAP financial measures was due primarily to higher salaries and benefits, partially offset by an increase in cash generated from origination, purchase and securitization of HECMs combined with higher net servicing revenue and fees, as described above.
Other Non-Reportable
Other Revenues
Other revenues consist primarily of asset management advisory fees, investment income and other interest income. Other revenues decreased $5.0 million in 2016 as compared to 2015 primarily as a result of $2.2 million in losses incurred on our equity-method investment in WCO in 2016 and $2.7 million in revenues recognized in 2015 related to the settlement of a receivable that was repaid in conjunction with the sale of an equity-method investment.
Other revenues decreased $35.8 million in 2015 as compared to 2014 due primarily to $36.8 million in asset management performance fees collected and earned in connection with the asset management of a fund during 2014, partially offset by $2.7 million related to the settlement of a receivable in 2015 as discussed above.
Expenses
Expenses decreased $17.4 million in 2016 as compared to 2015 driven by the resolution of certain matters within the Investment Management business and $3.6 million in lower interest expense.
Expenses increased $10.8 million in 2015 as compared to 2014 due primarily to higher salaries and benefits expense relating to increases in share-based compensation expense due largely to a higher number of awards granted and higher bonuses.
Other Gains (Losses)
Net gains on extinguishment of debt of $14.7 million in 2016 primarily relate to the repurchase of a portion of our Convertible Notes with a carrying value of $39.3 million , which resulted in a gain of $14.5 million. Net gains on extinguishment of debt of $4.7 million in 2015 relate to the repurchase of a portion of our Senior Notes and a voluntary prepayment made on the 2013 Term Loan.
Net fair value gains (losses) decreased $10.6 million in 2016 as compared to 2015 due to net fair value losses in 2016 as compared to gains in 2015 related to the assets and liabilities of the Non-Residual Trusts resulting from the impact of increases in the conditional default rates and loss severity rates. Net fair value gains decreased $12.8 million in 2015 as compared to 2014 due primarily to lower net fair value gains on the assets and liabilities of the Non-Residual Trusts as 2014 included the impact of changes in assumptions related to the reduction of discount rates resulting from tightening of yields in the market.
Other gains of $14.9 million in 2015 were primarily due to an $11.8 million gain recognized on the sale of an equity-method investment and a $3.1 million gain recognized in connection with the contribution of Marix to WCO.

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Liquidity and Capital Resources
Overview
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay debt and meet the financial obligations of our operations including funding acquisitions; mortgage loan and reverse loan servicing advances; obligations associated with the repurchase of reverse loans from securitization pools; funding additional borrowing capacity on reverse loans; origination of mortgage loans; and other general business needs, including the cost of compliance with changing legislation and related rules. Our liquidity is measured as our consolidated cash and cash equivalents excluding subsidiary minimum cash requirement balances, which are typically associated with our servicer licensing or financing agreements with third parties. This measure also includes our borrowing capacity available under the 2013 Revolver.
As discussed further in the Corporate Debt section below, on August 5, 2016, we entered into an amendment to the 2013 Credit Agreement, which among other things, permanently reduced the aggregate commitments under the 2013 Revolver from $125.0 million to $100.0 million. Under the 2013 Credit Agreement, in order to borrow in excess of 20% of the committed amount under the 2013 Revolver, we must satisfy both a specified Interest Coverage Ratio and a specified Total Leverage Ratio on a pro forma basis after giving effect to the borrowing. As of December 31, 2016 , we did not satisfy these ratios, and as a result the maximum amount we would have been able to borrow on the 2013 Revolver was $20.0 million, of which $12.2 million remained available after reductions for issued letters of credit.
At December 31, 2016 , our liquidity was $186.8 million, including cash liquidity of $174.6 million and availability under the 2013 Revolver of $12.2 million. At December 31, 2016 , we had contractual obligations, subject to certain conditions and adjustments, to utilize approximately $1.9 million of our liquidity to fund acquisitions of servicing rights, including related servicer and protective advances.
We endeavor to maintain our liquidity at a level sufficient to fund certain known or expected payments and to fund our working capital needs.  Our principal sources of liquidity are the cash flows generated from our business segments and funds available from our master repurchase agreements, mortgage loan servicing advance facilities, the 2013 Revolver and issuance of GMBS and HMBS to fund our tail commitments. We may generate additional liquidity through sales of MSR, any portion thereof, or other assets. From time to time, we utilize our excess cash to reinvest in the business, including but not limited to investment in MSR and the repurchase of reverse loans from securitization pools.
During the year ended December 31, 2016, we repurchased $7.2 million in principal balance of 2013 Term Loan for $6.3 million and repurchased $47.5 million in principal balance of our Convertible Notes for $24.8 million as part of our efforts to reduce our leverage.
We believe that, based on current forecasts and anticipated market conditions, our current liquidity, along with the funds generated from our principal sources of liquidity discussed above, will allow us to meet anticipated cash requirements to fund operating needs and expenses, servicing advances, loan originations and repurchases of mortgage loans and HECMs, planned capital expenditures, business and asset acquisitions, cash taxes and cash requirements associated with mandatory clean-up call obligations on the Non-Residual trusts and all required debt service obligations for the next 12 months. We expect that significant acquisitions of servicing rights and other opportunities to grow by acquisition would need to be funded primarily through, or in collaboration with, external capital sources. Our operating cash flows and liquidity are significantly influenced by numerous factors, including interest rates and continued availability of financing. Our liquidity outlook assumes we are able to maintain or renew, replace, or resize our existing mortgage loan servicing advance facilities, mortgage loan master repurchase agreements and reverse loan master repurchase agreements to fund repurchases of HECMs with enough capacity to meet projected needs. However, there can be no assurance that these facilities will be available to us in the future. We continually monitor our cash flows and liquidity in order to be responsive to changing conditions. We have engaged legal and financial debt restructuring advisors, and we have been reviewing a number of potential alternatives to reduce our leverage. See "Debt Restructuring Initiative".
We have an effective universal shelf registration statement on file with the SEC. Under this universal shelf registration statement, we have the capacity to offer and sell from time to time an indeterminate number of our securities, including common stock, debt securities, preferred stock, warrants and units, having an aggregate initial offering price not to exceed $1.5 billion. This universal shelf registration statement expires on or about January 13, 2018. There is no assurance that we can issue securities under this shelf registration statement on terms that are commercially acceptable to us, or at all.

97


Share Repurchase Program
On May 6, 2015, the Board of Directors of the Company authorized us to repurchase up to $50.0 million of shares of our common stock, during the period beginning on May 11, 2015 and ending on May 31, 2016. We repurchased 2,382,733 shares of common stock pursuant to our share repurchase program, all of which were repurchased during the year ended December 31, 2015, at an aggregate cost of $28.1 million , or an average cost of $11.78 per share. Repurchased shares of common stock were canceled and returned to the status of authorized but unissued shares. We do not have any intention or authorization to repurchase any shares of our common stock at this time.
Mortgage Loan Servicing Business
Our servicing agreements impose on us various rights and obligations that affect our liquidity. Among the most significant of these obligations is the requirement that we advance our own funds to pay property taxes, insurance premiums and foreclosure costs and various other items, referred to as protective advances. Protective advances are required to preserve the collateral underlying the residential loans being serviced. In addition, we advance our own funds to meet contractual payment requirements for credit owners. As a result of bulk servicing rights acquisitions in 2013 and 2014, we experienced and continue to incur an elevated level of advance funding requirements. Subservicers are generally reimbursed for advances in the month following the advance, so our advance funding requirements may be reduced if we succeed in transitioning to a greater mix of subservicing in our portfolio. In the normal course of business, we borrow money from various counterparties who provide us with financing to fund a portion of our mortgage loan related servicing advances on a short-term basis or provide for reimbursement within an agreed-upon period. Our ability to fund servicing advances is a significant factor that affects our liquidity, and to operate and grow our servicing portfolio we depend upon our ability to secure these types of arrangements on acceptable terms and to renew, replace or resize existing financing facilities as they expire. However, there can be no assurance that these facilities will be available to us in the future. The servicing advance financing agreements that support our servicing operations are discussed below.
Servicing Advance Liabilities
Ditech Financial has four servicing advance facilities through several lenders and an Early Advance Reimbursement Agreement with Fannie Mae, which, in each case, are used to fund servicer and protective advances that are its responsibility under certain servicing agreements. The servicing advance facilities and the Early Advance Reimbursement Agreement had an aggregate capacity of $1.2 billion at December 31, 2016 , of which we had utilized approximately $0.8 billion as of such date. The interest rates for the servicing advance facilities and Early Advance Reimbursement Agreement are either fixed or are primarily based on LIBOR plus between 2.50% and 3.00% and have various expiration dates from March 2017 to October 2018. Payments on the amounts due under these agreements are paid from certain proceeds received (i) in connection with the liquidation of mortgaged properties, (ii) from repayments received from mortgagors, (iii) from reimbursements received from the owners of the mortgage loans, such as Fannie Mae, Freddie Mac and private label securitization trusts, or (iv) issuance of new notes or other refinancing transactions. Accordingly, repayment of the servicing advance liabilities is dependent on the proceeds that are received on the underlying advances associated with the agreements. Two of the servicing advance facilities, with total borrowing capacity of approximately $0.9 billion at December 31, 2016 , are non-recourse to us.
The servicing advance facilities contain customary events of default and covenants, including, in certain transactions, financial covenants. Financial covenants most sensitive to our operating results and financial position are the requirements that Ditech Financial maintain minimum tangible net worth, indebtedness to tangible net worth and minimum liquidity. Ditech Financial was in compliance with the financial covenants in these facilities at December 31, 2016 .
Subsequent to the Original Filing, Ditech Financial received waivers from each of its lenders to the extent necessary to waive any default, event of default, amortization event, termination event or similar event resulting from or arising from the restatement, as described in the Explanatory Note and Note 2 to the Consolidated Financial Statements.

98


GTAAFT Facility

Ditech Financial has a non-recourse servicer advance facility that provides funding for servicer and protective advances made in connection with its servicing of certain Fannie Mae and Freddie Mac mortgage loans. In connection with this facility, Ditech Financial sells and/or contributes the rights to reimbursement for servicer and protective advances to a depositor entity, which then sells and/or contributes such rights to reimbursement to an issuer entity. Each of the issuer and the depositor entities under this facility is structured as a bankruptcy remote special purpose entity and is the sole owner of its respective assets. On September 30, 2016, an additional $300.0 million of two-year term notes were issued under this facility. Subsequently, on October 5, 2016, the terms of the variable funding notes issued pursuant to this facility were amended to, among other things, (i) extend the applicable expected repayment date and revolving period for such variable funding notes from October 19, 2016 to October 4, 2017, (ii) decrease the applicable interest rate margins, and (iii) decrease the maximum permitted principal balance of the variable funding notes from $600.0 million in the aggregate to $400.0 million in the aggregate. Further, on October 17, 2016, $360.0 million of one-year term notes previously issued under this facility were fully redeemed.
After giving effect to the issuance of new term notes, the redemption of certain existing term notes and the amendment to the terms of the variable funding notes, each as described above, this facility consists of (i) previously issued Series 2015-T2 three-year term notes with an aggregate principal balance of $140.0 million and an expected repayment date of October 15, 2018, (ii) Series 2016-T1 two-year term notes issued September 30, 2016 with an aggregate principal balance of $300.0 million and an expected repayment date of October 15, 2018, and (iii) up to $400.0 million of previously issued Series 2014-VF2 variable funding notes with an expected repayment date of October 4, 2017. At December 31, 2016, an aggregate principal balance of $581.9 million of notes were outstanding under this facility: $140.0 million principal balance of 2015-T2 term notes; $300.0 million principal balance of 2016-T1 term notes; and $141.9 million principal balance of variable funding notes.
The collateral securing the term notes and the variable funding notes consists primarily of rights to reimbursement for servicer and protective advances in respect of certain mortgage loans serviced by Ditech Financial on behalf of Freddie Mac and Fannie Mae as well as cash.
Each series of term notes were issued in four classes. Interest on the term notes is based on a fixed rate per annum ranging from approximately 2.38% to 4.06% for the Series 2016-T1 term notes and 3.09% to 4.67% for the Series 2015-T2 term notes. If the Series 2016-T1 term notes or Series 2015-T2 term notes are not redeemed or refinanced on or prior to October 15, 2018, one-twelfth of the related note balances will be required to be repaid on October 15, 2018 and each monthly payment date thereafter. Failure to make any such one-twelfth payment will result in an event of default.
The interest on the variable funding notes is based on one-month LIBOR, (or, in certain circumstances, the higher of (i) the prime rate and (ii) the federal funds rate plus 0.50%) plus a per annum margin ranging from approximately 1.85% to 3.92%. The maximum permitted principal balance of the variable funding notes that can be drawn at any given time is dependent upon the amount of eligible collateral owned by the issuer of the notes and may not exceed $400.0 million in the aggregate. We may repay and redraw the variable funding notes issued for 364-days from and including October 5, 2016, subject to the satisfaction of various funding conditions including the Parent Company not being in default under warehouse, repurchase, credit or other similar agreements relating to indebtedness in certain amounts and there being no breaches or representations, warranties and covenants by the Company under the GTAAFT transaction agreements. If such 364-day period is not extended, the variable funding notes will become due and payable on October 4, 2017.

Under this facility, the holders of the term notes and variable funding notes (and other creditors of the issuer and depositor entities) have no recourse to any assets or revenues of Ditech Financial or the Parent Company other than to the extent of Ditech Financial’s or the Parent Company’s obligations with respect to various representations and warranties, covenants and indemnities under this facility and the Parent Company’s obligations as a guarantor of certain of Ditech Financial's representations, warranties, covenants and indemnities under the facility. These representations and warranties, covenants and indemnities include various representations and warranties as to the nature of the receivables, covenants to service and administer the collateral for the GTAAFT Facility and perform obligations under Ditech Financial’s servicing agreements with Freddie Mac and Fannie Mae, and covenants to make an indemnity payment for, or to repurchase, any receivable in respect of which the eligibility representations and warranties were not true as of the date the related receivable was transferred to the depositor entity. Creditors of the Parent Company and Ditech Financial do not have recourse to any assets or revenues of either the issuer or depositor entities under the facility.

99


The facility's base indenture and indenture supplements include facility events of default and target amortization events customary for financings of this type. The target amortization events include, among other events, events related to breaches of representations, covenants and certain tests related to the collection and performance of the receivables securing the notes issued pursuant to the base indenture and the applicable indenture supplement, and with respect to the variable funding notes, defaults under certain other material indebtedness, material judgments, certain financial tests, and change of control. Upon the occurrence of a target amortization event for any series of notes, such series of notes enter into a scheduled amortization period. In the case of the variable funding notes, one third of the outstanding principal balance of the variable funding notes at the time of the occurrence of the target amortization event is payable on the first three monthly payment dates occurring after the occurrence of such target amortization event. In the case of the term notes, one twelfth of the outstanding principal balance of the term notes at the time of the occurrence of the target amortization event is payable on the first twelve monthly payment dates occurring after the occurrence of such target amortization event. Failure to make requisite payments on the notes following the occurrence of a target amortization event could lead to an event of default. Upon the occurrence of an event of default, specified percentages of noteholders have the right to terminate all commitments and accelerate the notes under the base indenture, enforce their rights with respect to the collateral and take certain other actions. The events of default include, among other events, the occurrence of any failure to make payments (subject to certain cure periods and including balances due after the occurrence of a target amortization event), failure of Ditech Financial to satisfy various deposit and remittance obligations as servicer of certain mortgage loans, the requirement of the issuer to be registered as an “investment company” under the Investment Company Act of 1940, as amended, certain tests related to the collection and performance of the receivables securing the notes issued pursuant to the base indenture and applicable indenture supplement, removal of Ditech Financial’s status as an approved seller or servicer by either Fannie Mae or Freddie Mac and bankruptcy events.
In connection with this facility, we entered into an acknowledgment with Fannie Mae, dated as of December 19, 2014, and a fifth amended and restated consent agreement with Freddie Mac, dated as of September 30, 2016, which (i) in the case of Fannie Mae, waived or (ii) in the case of Freddie Mac, subordinated, their respective rights of set-off against rights to reimbursement for certain servicer advances and delinquency advances subject to this facility. The Fannie Mae acknowledgment agreement remains in effect unless Fannie Mae withdraws its consent (i) at each yearly anniversary of the agreement by providing 30 days' advance written notice or (ii) upon certain other specified events. The Freddie Mac consent agreement automatically renews for successive annual terms; however, Freddie Mac may terminate its consent on 30 days' written notice. If either Fannie Mae or Freddie Mac were to withdraw such waiver or subordination, as applicable, of its respective rights of set-off, our ability to increase the draws on the variable funding notes or maintain the drawn balances thereunder could be materially limited or eliminated.
Early Advance Reimbursement Agreement
Ditech Financial's Early Advance Reimbursement Agreement with Fannie Mae is used exclusively to fund certain principal and interest and servicer and protective advances that are the responsibility of Ditech Financial under its Fannie Mae servicing agreements. This agreement was renewed in March 2016 and expires on March 31, 2017. If not renewed in 2017, there will be no additional funding by Fannie Mae of new advances under the agreement. In addition, collections recovered during the 18 months following the expiration of the agreement are to be remitted to Fannie Mae to settle any remaining outstanding balance due under such agreement. Upon expiration of the 18 month period, any remaining balance would become due and payable. At December 31, 2016 , we had borrowings of $74.8 million under the Early Advance Reimbursement Agreement, which has a capacity of $200.0 million .
Other Servicing Advance Facilities
Ditech Financial has three additional servicing advance facilities through several lenders that are used to fund servicer and protective advances that are its responsibility under certain servicing agreements. These servicing advance facilities had an aggregate capacity amount of $180.0 million at December 31, 2016 . The interest rates are primarily based on LIBOR plus between 2.50% and 3.00% and have various expiration dates from August 2017 to July 2018. One of these servicing advance facilities, with total borrowing capacity of $75.0 million , is non-recourse to us. At December 31, 2016 , we had borrowings of $128.9 million under these facilities.

100


Mortgage Loan Originations Business
Master Repurchase Agreements
Ditech Financial utilizes master repurchase agreements to fund the origination and purchase of residential loans. These agreements were entered into by Ditech Financial and various warehouse lenders. Our five repurchase agreements had an aggregate capacity of $2.1 billion at December 31, 2016 . At December 31, 2016 , the interest rates under our repurchase agreements were primarily based on LIBOR plus between 2.10% and 3.00% and have various expiration dates from March 2017 to November 2017. These facilities provide creditors a security interest in the mortgage loans that meet the eligibility requirements under the terms of the particular facility in exchange for cash proceeds used to originate or purchase mortgage loans. We agree to repay borrowings under these facilities within a specified timeframe, and the source of repayment is typically from the sale or securitization of the underlying loans into the secondary mortgage market. We evaluate our needs under these facilities based on forecasted mortgage loan origination volume; however, there can be no assurance that these facilities will be available to us in the future. The aggregate capacity includes $0.9 billion of committed funds and $1.2 billion of uncommitted funds. To the extent uncommitted funds are requested to purchase or originate mortgage loans, the counterparties have no obligation to fulfill such request. All obligations of Ditech Financial under its master repurchase agreements are guaranteed by the Parent Company. We had $1.1 billion of short-term borrowings under these master repurchase agreements at December 31, 2016 , which included $166.9 million of borrowings utilizing uncommitted funds.

Based on our projected future funding needs, in February 2017 we entered into amendments with one of our lenders to, among other things, shift $100.0 million of uncommitted capacity under a Ditech Financial master repurchase agreement with such lender to a master repurchase agreement between RMS and such lender. After giving effect to the decrease in uncommitted capacity under such Ditech Financial master repurchase agreement, Ditech Financial has $2.0 billion of aggregate capacity available under its master repurchase agreements, of which $1.1 billion is uncommitted funds.

Our ability to utilize our master repurchase facilities from time to time depends, among other things, upon us being able to make representations and warranties as to our solvency, the accuracy of information we have furnished, no material adverse changes having occurred, maintenance of our approved seller/servicer status with GSEs, no notices of adverse actions having been received from GSEs or agencies, the adequacy of our control program, our ability to service loans in accordance with accepted servicing practices and our compliance with applicable laws. All of our master repurchase agreements contain customary events of default and covenants, the most significant of which are financial covenants. Financial covenants that are most sensitive to the operating results and resulting financial position are minimum tangible net worth requirements, indebtedness to tangible net worth ratio requirements, and minimum liquidity and profitability requirements. The three Ditech Financial master repurchase agreements that contain profitability covenants were amended to allow for a net loss under such covenants for the quarters ended December 31, 2016 and March 31, 2017. Without these amendments, Ditech Financial would not have been in compliance with these covenants for the quarter ended December 31, 2016. These amendments, among other things, also decrease our advance rate under certain facilities, and require us to maintain additional cash in a deposit account for one of the facilities. This cash is included in restricted cash on the consolidated balance sheets. Ditech Financial was in compliance with all financial covenants relating to master repurchase agreements at December 31, 2016 .
Subsequent to the Original Filing, Ditech Financial received waivers and/or amendments required as a result of the restatement and conclusions reached regarding the Company's ability to continue as a going concern, as described in the Explanatory Note and Notes 2 and 3 to the Consolidated Financial Statements. The Ditech Financial master repurchase agreements that contain profitability covenants were also amended to allow for a net loss under such covenants for the quarters ending September 30, 2017 and December 31, 2017 as applicable to the terms of each respective agreement.
We are dependent on the ability to secure warehouse facilities on acceptable terms and to renew, replace or resize existing facilities as they expire. If we fail to comply with the terms of an agreement that results in an event of default or breach of covenant without obtaining a waiver or amendment, we may be subject to termination of future funding, enforcement of liens against assets securing the respective facility, repurchase of assets pledged in a repurchase agreement, acceleration of outstanding obligations, or other adverse actions. We intend to renew, replace, or extend our facilities and may seek waivers or amendments in the future, if necessary. We have plans in place to strengthen our operating results under our new leadership team, including transformation of our originations business as well as cost reduction efforts and efficiency initiatives; however, there can be no assurance that these or others actions will be successful.

101


Representations and Warranties
In conjunction with our originations business, we provide representations and warranties on loan sales. We sell substantially all of our originated or purchased mortgage loans into the secondary market for securitization or to private investors as whole loans. We sell conventional-conforming and government-backed mortgage loans through GSE and agency-sponsored securitizations in which mortgage-backed securities are created and sold to third-party investors. We also sell non-conforming mortgage loans to private investors. In doing so, representations and warranties regarding certain attributes of the loans are made to the third-party investor. Subsequent to the sale, if it is determined that a loan sold is in breach of these representations or warranties, we generally have an obligation to cure such breach. In general, if we are unable to cure such breach, the purchaser of the loan may require us to repurchase such loan for the unpaid principal balance, accrued interest, and related advances, and in any event, we must indemnify such purchaser for certain losses and expenses incurred by such purchaser in connection with such breach. Our credit loss may be reduced by any recourse we have to correspondent lenders that, in turn, have sold such residential loans to us and breached similar or other representations and warranties.
Our representations and warranties are generally not subject to stated limits of exposure with the exception of certain loans originated under HARP, which limits exposure based on payment history of the loan. At December 31, 2016 , our maximum exposure to repurchases due to potential breaches of representations and warranties was $62.3 billion , and was based on the original unpaid principal balance of loans sold from the beginning of 2013 through December 31, 2016 adjusted for voluntary payments made by the borrower on loans for which we perform the servicing. A majority of our loan sales were servicing retained.
Rollforwards of the liability associated with representations and warranties are included below (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Balance at beginning of the year
 
$
23,145

 
$
10,959

 
$
9,134

Provision for new sales
 
15,331

 
16,008

 
7,741

Change in estimate of existing reserves (1) (2)
 
(15,660
)
 
(2,419
)
 
(5,068
)
Net realized losses on repurchases
 
(722
)
 
(1,403
)
 
(848
)
Balance at end of the year
 
$
22,094

 
$
23,145

 
$
10,959

__________
(1)
The change in estimate of existing reserves during the year ended December 31, 2016 is primarily due to adjustments to certain assumptions based on recently observed trends as compared to historical expectations, primarily relating to loan defect rates and counterparty review probabilities.
( 2 )
The change in estimate of existing reserves during the year ended December 31, 2014 is due primarily to timely payment history on loans originated under HARP and lower history of actual origination defects as compared to original expectation.
Rollforwards of loan repurchase requests based on the original unpaid principal balance are included below (dollars in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
 
 
No. of Loans
 
Unpaid Principal Balance
 
No. of Loans
 
Unpaid Principal Balance
 
No. of Loans
 
Unpaid Principal Balance
Balance at beginning of the year
 
30

 
$
6,225

 
48

 
$
11,509

 
10

 
$
2,324

Repurchases and indemnifications
 
(33
)
 
(7,144
)
 
(81
)
 
(14,568
)
 
(16
)
 
(3,607
)
Claims initiated
 
174

 
37,370

 
278

 
58,924

 
115

 
28,032

Rescinded
 
(142
)
 
(30,477
)
 
(215
)
 
(49,640
)
 
(61
)
 
(15,240
)
Balance at end of the year
 
29

 
$
5,974

 
30

 
$
6,225

 
48

 
$
11,509


102


The following table presents our maximum exposure to repurchases due to potential breaches of representations and warranties at December 31, 2016 based on the original unpaid principal balance of loans sold adjusted for voluntary payments made by the borrower on loans for which we perform the servicing by vintage year (in thousands):
 
 
Unpaid Principal Balance
2013
 
$
9,748,866

2014
 
12,663,174

2015
 
20,256,625

2016
 
19,611,316

Total
 
$
62,279,981

Reverse Mortgage Business
Master Repurchase Agreements
Through RMS's warehouse facilities under master repurchase agreements we finance the origination or purchase of reverse loans and repurchases of certain HECMs and real estate owned from Ginnie Mae securitization pools. At December 31, 2016 , the three facilities had an aggregate capacity of $425.0 million , which includes $300.0 million of capacity that could be used to repurchase HECMS and real estate owned from Ginnie Mae securitization pools. At December 31, 2016, the interest rates on the facilities were primarily based on LIBOR plus between 2.50% and 3.13% and have expiration dates from February 2017 to February 2018. These facilities are secured by the underlying assets and provide creditors a security interest in the assets that meet the eligibility requirements under the terms of the particular facility. We agree to repay the borrowings under these facilities within a specified timeframe, and the source of repayment is typically from proceeds received on the securitization of the underlying reverse loans, claim proceeds received from HUD or liquidation proceeds from the sale of real estate owned. We evaluate our needs under these facilities based on forecasted reverse loan origination volume and repurchases; however, there can be no assurance that these facilities will be available to us in the future. At December 31, 2016 , $225.0 million of the aggregate capacity has been provided on an uncommitted basis, and as such, to the extent these funds are requested to purchase or originate reverse loans or repurchase HECMs and real estate owned from Ginnie Mae securitization pools, the counterparties have no obligation to fulfill such request. At December 31, 2016 , we had $25.6 million of borrowings utilizing uncommitted funds. All obligations of RMS under the master repurchase agreements are guaranteed by the Parent Company. We had $136.4 million of borrowings under these master repurchase agreements at December 31, 2016 , which included $104.8 million of borrowings relating to repurchases of HECMs and real estate owned.
One of RMS's warehouse facilities, utilized to finance the origination of reverse loans, and which had total and uncommitted capacity of $125.0 million , matured on February 11, 2017. Borrowings under this facility were fully repaid on or prior to the maturity date. Effective January 17, 2017, we exited the reverse mortgage originations business, and as such we do not anticipate that the termination of this facility will have an adverse impact on liquidity. Following the maturity of this facility, our reverse warehouse facilities had an aggregate capacity of $300.0 million .
Based on our projected future funding needs, in February 2017 we entered into amendments with one of our lenders to, among other things, shift $100.0 million of uncommitted capacity under a Ditech Financial master repurchase agreement with such lender to a master repurchase agreement between RMS and such lender. The amendment to the RMS master repurchase agreement also served to, among other things, renew such warehouse facility for another approximately one-year term and lower the required adjusted EBITDA (as determined pursuant to this agreement). After giving effect to the increase in uncommitted capacity under such RMS warehouse facility, our reverse warehouse facilities had an aggregate capacity of $400.0 million .
All of RMS's master repurchase agreements contain customary events of default and covenants, the most significant of which are financial covenants relating to RMS. Financial covenants that are most sensitive to the operating results and resulting financial position are minimum tangible net worth requirements, indebtedness to tangible net worth ratio requirements, and minimum liquidity and profitability requirements.
During the quarter ended March 31, 2016, one of RMS’s master repurchase agreements was amended to allow for a lower adjusted EBITDA (as determined pursuant to this agreement) for each of the first quarter and second quarter of 2016 under such agreement’s profitability covenant. In August 2016, an additional amendment was executed to allow for a lower adjusted EBITDA for each of the third quarter and fourth quarter of 2016 under such agreement's profitability covenant. Without this amendment, RMS would have been required to have a higher adjusted EBITDA as defined in the agreement for the quarter ended December 31, 2016 under this covenant and, therefore, would not have been in compliance with such covenant for the current quarter.

103


Subsequent to the Original Filing, RMS received waivers and/or amendments on its master repurchase agreements required as a result of the restatement and conclusions reached regarding the Company's ability to continue as a going concern, as described in the Explanatory Note and Notes 2 and 3 to the Consolidated Financial Statements.
We are dependent on our ability to secure warehouse facilities on acceptable terms and to renew, replace or resize existing facilities as they expire. If we fail to comply with the terms of an agreement that results in an event of default or breach of covenant without obtaining a waiver or amendment, we may be subject to termination of future funding, enforcement of liens against assets securing the respective facility, repurchase of assets pledged in a repurchase agreement, acceleration of outstanding obligations, or other adverse actions. We intend to renew, replace, or extend our facilities and may seek waivers or amendments in the future, if necessary. We have plans in place to strengthen our operating results under our new leadership team, including transformation of our originations business as well as cost reduction efforts and efficiency initiatives; however, there can be no assurance that these or others actions will be successful.
Reverse Loan Securitizations
We transfer reverse loans that we have originated or purchased through the Ginnie Mae HMBS issuance process. The proceeds from the transfer of the HMBS are accounted for as a secured borrowing and are classified on the consolidated balance sheets as HMBS related obligations. The proceeds from the transfer are used to repay borrowings under our master repurchase agreements. At December 31, 2016 , we had $9.9 billion in unpaid principal balance outstanding on the HMBS related obligations. At December 31, 2016 , $9.9 billion in unpaid principal balance of reverse loans and real estate owned was pledged as collateral to the HMBS beneficial interest holders, and are not available to satisfy the claims of our creditors. Ginnie Mae, as guarantor of the HMBS, is obligated to the holders of the HMBS in an instance of RMS default on its servicing obligations, or when the proceeds realized on HECMs are insufficient to repay all outstanding HMBS related obligations. Ginnie Mae has recourse to RMS in connection with certain claims relating to the performance and obligations of RMS as both an issuer of HMBS and a servicer of HECMs underlying HMBS.
Borrower remittances received on the reverse loans, if any, proceeds received from the sale of real estate owned and our funds used to repurchase reverse loans are used to reduce the HMBS related obligations by making payments to Ginnie Mae, who will then remit the payments to the holders of the HMBS. The maturity of the HMBS related obligations is directly affected by the liquidation of the reverse loans or liquidation of real estate owned and events of default as stipulated in the reverse loan agreements with borrowers. Refer to the section below for additional information on repurchases of reverse loans.
HMBS Issuer Obligations
As an HMBS issuer, we assume certain obligations related to each security issued. The most significant obligation is the requirement to purchase loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of the maximum claim amount. Performing repurchased loans are conveyed to HUD and payment is received from HUD typically within 30 days of repurchase. Non-performing repurchased loans are generally liquidated through foreclosure and subsequent sale of real estate owned. Loans are considered non-performing upon events such as, but not limited to, the death of the mortgagor, the mortgagor no longer occupying the property as their principal residence, or the property taxes or insurance not being paid. We rely upon certain master repurchase agreements and operating cash flows, to the extent necessary, to repurchase loans. The timing and amount of our obligation to repurchase HECMs is uncertain as repurchase is predicated on certain factors such as whether or not a borrower event of default occurs prior to the HECM reaching the mandatory repurchase threshold under which we are obligated to repurchase the loan.
Rollforwards of reverse loan and real estate owned repurchase activity (by unpaid principal balance) are included below (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
Balance at beginning of the year
 
$
233,594

 
$
114,727

Repurchases and other additions (1)
 
671,438

 
333,229

Liquidations
 
(485,551
)
 
(214,362
)
Balance at end of the year
 
$
419,481

 
$
233,594

__________
(1)
Other additions include additions to the principal balance related to interest, servicing fees, mortgage insurance and advances.

104


Our repurchases of reverse loans and real estate owned have increased significantly during the year ended December 31, 2016 as compared to 2015. We expect a continued increase to repurchase requirements due to the increased flow of HECMs and real estate owned that are reaching 98% of their maximum claim amount. We have $175.1 million available under our master repurchase agreements as of December 31, 2016 for repurchases of loans. We expanded our existing lines and other financing structures by $100.0 million in February 2017 to accommodate future repurchase requirements, with a corresponding $100.0 million reduction in one of Ditech Financial's master repurchase agreements. There can be no assurance that the Company will be able to maintain or expand its borrowing capacity to fund loan repurchases.
Reverse Loan Servicer Obligations
Similar to our mortgage loan servicing business, our reverse mortgage servicing agreements impose on us obligations to advance our own funds to meet contractual payment requirements for customers and credit owners and to pay protective advances, which are required to preserve the collateral underlying the residential loans being serviced. We rely upon operating cash flows to fund these obligations.
As servicer of reverse loans, we are also obligated to fund additional borrowing capacity in the form of undrawn lines of credit on floating rate and fixed rate reverse loans. We rely upon our operating cash flows to fund these additional borrowings on a short-term basis prior to securitization (when performing services of both the issuer and servicer) or reimbursement by the issuer (when providing third-party servicing). The additional fundings made by us, as issuer and servicer, are generally securitized within 30 days after funding. Similarly the additional fundings made by us, as third-party servicer, are typically reimbursed by the issuer within 30 days after funding. Our commitment to fund additional borrowing capacity was $1.3 billion at December 31, 2016 , which includes $1.0 billion in capacity that was available to be drawn by borrowers at December 31, 2016 and $215.3 million in capacity that will become eligible to be drawn by borrowers throughout the twelve months ending December 31, 2017 assuming the loans remain performing. There is no termination date for these drawings so long as the loan remains performing. The obligation to fund these additional borrowings could have a significant impact on our liquidity.
Servicing Rights Related Liabilities
Excess Servicing Spread Liabilities
In July 2014, we completed an excess servicing spread transaction with WCO whereby we sold 70% of the excess servicing spread from a pool of servicing rights, with an unpaid principal balance of $25.2 billion, to WCO for a sales price of $75.4 million . In November 2015, we completed an additional excess servicing spread transaction with WCO whereby we sold 100% of excess servicing spread from a pool of servicing rights, with an unpaid principal balance of $7.5 billion , to WCO for a sales price of $46.8 million . We recognized the proceeds from the sales of the excess servicing spreads as financing arrangements.
During the fourth quarter of 2016, we sold to NRM the servicing rights relating to such excess servicing spread, with subservicing retained by the Company. In connection with this transaction, we derecognized the excess servicing spread liabilities. Refer to Note 6 for additional information on these transactions.
Servicing Rights Financing
In November 2015, we sold servicing rights, with an unpaid principal balance of $1.8 billion, to WCO for a sales price of $17.8 million. In May 2016, we sold additional servicing rights with an unpaid principal balance of $4.1 billion , to WCO for a sales price of $27.9 million . We recognized the proceeds from the sale of the servicing rights as a financing arrangement.
During the fourth quarter of 2016, in connection with the sale by WCO of substantially all of its assets, including servicing rights we had previously sold to WCO and accounted for as secured borrowings, we derecognized the servicing rights financing. Refer to Note 6 for additional information on these transactions.
Corporate Debt
As market conditions warrant, we may from time to time, subject to limitations in our debt facilities and securities and by our other contractual and regulatory obligations, repurchase debt securities issued by us, in privately negotiated or open market transactions, by tender offer or otherwise, or repay corporate or other debt, and we may engage in other transactions designed to reduce, extend, exchange or otherwise modify the terms or amount of our debt. We have retained advisors to assist in exploring certain of these opportunities.

105


Term Loans and Revolver
We have a 2013 Term Loan in the original principal amount of $1.5 billion and a $100.0 million 2013 Revolver. Our obligations under the 2013 Secured Credit Facilities are guaranteed by substantially all of our subsidiaries and secured by substantially all of our assets subject to certain exceptions, the most significant of which are the assets of the consolidated Residual and Non-Residual Trusts, the residential loans and real estate owned of the Ginnie Mae securitization pools, and advances of the consolidated financing entities. Refer to the Consolidated Variable Interest Entities section of Note 7 to the Consolidated Financial Statements for additional information.
The material terms of our 2013 Secured Credit Facilities are summarized in the table below:
Debt Agreement
 
Interest Rate
 
Amortization
 
Maturity/Expiration
2013 Term Loan
 
LIBOR plus 3.75%
LIBOR floor of 1.00%

 
1.00% per annum beginning 1st quarter of 2014; remainder at final maturity
 
December 18, 2020
2013 Revolver (1)
 
LIBOR plus 4.50% (2)
 
Bullet payment at maturity
 
December 19, 2018
__________
(1)
Under the 2013 Credit Agreement, in order to borrow in excess of 20% of the committed amount under the 2013 Revolver, we must satisfy both a specified Interest Coverage Ratio and a specified Total Leverage Ratio on a pro forma basis after giving effect to the borrowing. As of December 31, 2016 , we did not satisfy these ratios, and as a result the maximum amount we would have been able to borrow on the 2013 Revolver was $20.0 million, of which $12.2 million remained available afte r utilization for issued letters of credit.
(2)
Represents the rate through and including January 1, 2017. After this date, the rate reverted back to LIBOR plus 3.75%.
During the year ended December 31, 2016 , we repurchased $7.2 million in principal balance of the 2013 Term Loan for $6.3 million resulting in a gain on extinguishment of $0.9 million. The balance outstanding on the 2013 Term Loan was 1.4 billion at December 31, 2016.
On August 5, 2016, we entered into an amendment to the 2013 Credit Agreement, which among other things, permanently reduced the aggregate commitments under the 2013 Revolver from $125.0 million to $100.0 million, increased the interest rate on any drawn amounts under the 2013 Revolver from LIBOR plus 3.75% to LIBOR plus 4.50% for the period through and including January 1, 2017, and increased the specified Total Leverage Ratio test (which is tested on a pro forma basis in connection with any requested draw of, and following any draw of, any amounts greater than 20% of the revolving commitments) for the four-quarter periods ended June 30, 2016 and September 30, 2016. The amendment also, during the period following the amendment date and prior to January 1, 2017, (i) limits the permitted use of the 2013 Revolver to our and our subsidiaries' liquidity needs (which exclude voluntary prepayments, redemptions or repurchases of other indebtedness) and (ii) requires us to repay any outstanding loans under the 2013 Revolver if our liquidity exceeds $130.0 million. This amendment resulted in a loss on extinguishment of debt of $0.7 million.
An amount of up to $20.0 million under the 2013 Revolver is available to be used for the issuance of LOCs. Any amounts outstanding in issued LOCs reduce availability for cash borrowings under the 2013 Revolver. At December 31, 2016 , we had no borrowings under the 2013 Revolver and $7.8 million o utstanding in issued LOCs, and had remaining availability under the 2013 Revolver of $12.2 million . The commitment fee on the unused portion of the 2013 Revolver is 0.50% per year. The 2013 Secured Credit Facilities contain restrictive covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to incur or guarantee additional indebtedness, pay dividends on or redeem or repurchase our capital stock, make certain types of investments, create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries, incur certain liens, sell or otherwise dispose of certain assets, enter into transactions with affiliates, enter into sale and leaseback transactions, prepay certain indebtedness (including the Senior Notes and the Convertible Notes), and consolidate or merge with or into, or sell all or substantially all of our assets to, another person. These covenants are subject to a number of important limitations and exceptions. The 2013 Secured Credit Facilities also contain customary events of default, including the failure to make timely payments on the 2013 Term Loan and 2013 Revolver or other material indebtedness, the failure to satisfy certain covenants and specified events of bankruptcy and insolvency.
Under the 2013 Term Loan, we are required to make a principal payment based on Excess Cash Flow of the preceding year. Depending on the Total Net Leverage Ratio for the year, a principal payment of between zero and fifty percent of Excess Cash Flow is required to be made during the first quarter of the following year, and no later than the third business day subsequent to delivery of the financial statements. During the first quarter of 2017, we expect to make a principal payment of approximately $21 million on the 2013 Term Loan, relating to the 2016 Excess Cash Flow.

106


Subsequent to the Original Filing, we received waivers from each of the requisite holders of our term loans to the extent necessary to waive any default, event of default, amortization event, termination event or similar event resulting from or arising from the restatement and conclusions reached regarding the Company's ability to continue as a going concern, as described in the Explanatory Note and Notes 2 and 3 to the Consolidated Financial Statements.
Senior Notes
In December 2013, we completed the sale of $575.0 million aggregate principal amount of Senior Notes, which pay interest semi-annually at an interest rate of 7.875% and mature on December 15, 2021. The balance outstanding on the Senior Notes was $538.7 million at December 31, 2016 .
The Senior Notes were offered and sold in a transaction exempt from the registration requirements under the Securities Act, and resold to qualified institutional buyers in reliance on Rule 144A and Regulation S under the Securities Act. The Senior Notes were issued pursuant to an indenture, dated as of December 17, 2013, among us, the guarantor parties thereto and Wells Fargo Bank, National Association, as trustee. The Senior Notes are guaranteed on an unsecured senior basis by each of our current and future wholly-owned domestic subsidiaries that guarantee our obligations under our 2013 Term Loan. On October 14, 2014, we filed with the SEC a registration statement under the Securities Act so as to allow holders of the Senior Notes to exchange their Senior Notes for the same principal amount of a new issue of notes, or the Exchange Notes, with identical terms, except that the exchange notes are not subject to certain restrictions on transfer. The registration statement was declared effective by the SEC on October 27, 2014 and the exchange closed on December 2, 2014.
We may on any one or more occasions redeem some or all of the Senior Notes at a purchase price equal to 105.906% of the principal amount of the Senior Notes, plus accrued and unpaid interest, if any, as of the redemption date, such optional redemption prices decreasing to 103.938% on or after December 15, 2017, 101.969% on or after December 15, 2018 and 100.000% on or after December 15, 2019.
If a change of control, as defined under the Senior Notes Indenture, occurs, the holders of our Senior Notes may require that we purchase with cash all or a portion of these Senior Notes at a purchase price equal to 101% of the principal amount of the Senior Notes, plus accrued and unpaid interest to the redemption date.
The Senior Notes Indenture contains restrictive covenants that, among other things, limits our ability and the ability of our restricted subsidiaries to incur or guarantee additional indebtedness, pay dividends on or redeem or repurchase our capital stock, make certain types of investments, create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries, incur certain liens, sell or otherwise dispose of certain assets, enter into transactions with affiliates, enter into sale and leaseback transactions, prepay subordinated indebtedness (including the Convertible Notes), and consolidate or merge with or into, or sell all or substantially all of our assets to, another person. These covenants are subject to a number of important limitations and exceptions. The Senior Notes Indenture also contains customary events of default, including the failure to make timely payments on the Senior Notes or other material indebtedness, the failure to satisfy certain covenants and specified events of bankruptcy and insolvency. We were in compliance with all covenants contained in the Senior Notes Indenture at December 31, 2016 .
Subsequent to the Original Filing, the beneficial owners of the requisite principal amount of our Senior Notes agreed to waive any default or event of default arising from the restatement, as described in the Explanatory Note and Note 2 to the Consolidated Financial Statements.
Convertible Notes
In October 2012, we closed on a registered underwritten public offering of $290.0 million aggregate principal amount of Convertible Notes. The Convertible Notes pay interest semi-annually on May 1 and November 1, commencing on May 1, 2013, at a rate of 4.50%  per annum, and mature on November 1, 2019 . 
Prior to May 1, 2019, the Convertible Notes will be convertible only upon specified events including the satisfaction of a sales price condition, satisfaction of a trading price condition or specified corporate events and during specified periods, and, on or after May 1, 2019, at any time. The Convertible Notes will initially be convertible at a conversion rate of 17.0068 shares of our common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $58.80 per share, which is a 40% premium to the public offering price of the Company’s common stock in the 2012 Common Stock Offering of $42.00. Upon conversion, we may pay or deliver, at our option, cash, shares of our common stock, or a combination of cash and shares of common stock. It is our intent to settle all conversions through combination settlement, which involves repayment of an amount of cash equal to the principal amount and any excess of conversion value over the principal amount in shares of common stock.

107


During the year ended December 31, 2016 , we repurchased Convertible Notes with a carrying value of $39.3 million and unpaid principal balance of $47.5 million for $24.8 million resulting in a gain on extinguishment of $14.5 million . The balance outstanding on the Convertible Notes was $242.5 million at December 31, 2016 .
Mortgage-Backed Debt
We funded the residential loan portfolio in the consolidated Residual Trusts through the securitization market. We record on our consolidated balance sheets the assets and liabilities, including mortgage-backed debt, of the Non-Residual Trusts as a result of certain obligations to exercise mandatory clean-up calls for each of these trusts at their earliest exercisable dates. The total unpaid principal balance of mortgage-backed debt was $953.0 million at December 31, 2016 .
At December 31, 2016 , mortgage-backed debt was collateralized by $962.9 million of assets including residential loans, receivables related to the Non-Residual Trusts, real estate owned and restricted cash and cash equivalents. All of the mortgage-backed debt is non-recourse and not cross-collateralized and, therefore, must be satisfied exclusively with the proceeds from the residential loans and real estate owned held in each securitization trust and also from draws on the LOCs of certain Non-Residual Trusts.
Borrower remittances received on the residential loans of the Residual and Non-Residual Trusts collateralizing this debt and draws under LOCs issued by a third party and serving as credit enhancements to certain of the Non-Residual Trusts are used to make principal and interest payments due on the mortgage-backed debt. The maturity of the mortgage-backed debt is directly affected by the rate of principal prepayments on the collateral. As a result, the actual maturity of the mortgage-backed debt is likely to occur earlier than the stated maturity. Certain of our mortgage-backed debt issued by the Residual Trusts is subject to voluntary redemption according to the specific terms of the respective indenture agreements, including an option by us to exercise a clean-up call. Under the mortgage-backed debt issued by the Non-Residual Trusts, the Company has certain obligations to exercise mandatory clean-up calls for each of these trusts at their earliest exercisable date, which is the date the principal amount of each loan pool falls to 10% of the original principal amount. We expect to call these securitizations beginning in 2017 and continuing through 2019 based upon our current cash flow projections for the Non-Residual Trusts. The majority of the call obligations in 2017 are anticipated to occur during the second half of the year. At December 31, 2016 , the total estimated outstanding balance of the residential loans expected to be called at the respective call dates is $418.1 million . We estimate call obligations of $101.4 million , $253.5 million and $63.2 million during the years ending December 31, 2017, 2018 and 2019, respectively.
We expect to finance the capital required to exercise the mandatory clean-up call primarily through cash on hand, asset-backed financing or in partnership with a capital provider, or through any combination of the foregoing. However, there can be no assurance that we will be able to sell the loans or obtain financing when needed, and we have not arranged any financing facilities, capital provider or other external financing for the purpose of providing us cash in connection with our mandatory clean-up call obligations. Our obligation for the mandatory clean-up call could have a significant impact on our liquidity.

108


Contractual Obligations
The following table summarizes, by remaining maturity, our future cash obligations at December 31, 2016 (in thousands):
 
 
Less than
1 year
 
1 - 3 years
 
3 - 5 years
 
More than
5 years
 
Indeterminate
Maturity
 
Total
Corporate debt
 
 
 
 
 
 
 
 
 
 
 
 
Principal
 
$
—

 
$
256,218

 
$
1,941,412

 
$
—

 
$
—

 
$
2,197,630

Interest (1)
 
121,549

 
242,871

 
149,921

 
—

 
—

 
514,341

Total corporate debt
 
121,549

 
499,089

 
2,091,333

 
—

 
—

 
2,711,971

Warehouse borrowings (2)
 
1,203,355

 
—

 
—

 
—

 
—

 
1,203,355

Leases
 
18,370

 
25,439

 
18,889

 
25,391

 
—

 
88,089

Mandatory call obligation
 
101,400

 
316,709

 
—

 
—

 
—

 
418,109

HMBS related obligations (3)
 
—

 
—

 
—

 
—

 
9,916,383

 
9,916,383

Acquisitions of servicing rights and related advances (4)
 
1,932

 
—

 
—

 
—

 
—

 
1,932

Unfunded commitments associated with the Originations segment (5)
 
3,670,049

 
—

 
—

 
—

 
—

 
3,670,049

Unfunded commitments associated with the Reverse Mortgage segment  (5) (6)
 
29,862

 
—

 
—

 
—

 
1,283,299

 
1,313,161

Early Advance Reimbursement Agreement (7)
 
74,767

 
—

 
—

 
—

 
—

 
74,767

Servicing advance facilities (7)
 
30,494

 
27,403

 
—

 
—

 
—

 
57,897

Uncertain tax positions
 
—

 
—

 
—

 
—

 
9,414

 
9,414

Total
 
$
5,251,778

 
$
868,640

 
$
2,110,222

 
$
25,391

 
$
11,209,096

 
$
19,465,127

__________
(1)
Amounts relate to future cash payments for interest expense on our 2013 Term Loan, Convertible Notes and Senior Notes and are calculated by multiplying outstanding principal balances by the respective interest rate for each commitment at December 31, 2016 .
(2)
Our warehouse borrowings are repaid primarily with proceeds from sales or securitizations of mortgage loans and securitizations of reverse loans.
(3)
HMBS related obligations have no stated maturity. The maturity of HMBS related obligations is directly affected by the liquidation of the reverse loans or liquidation of real estate owned, including voluntary liquidation on behalf of the borrower, and events of default as stipulated in the reverse loan agreements with borrowers. Refer to the HMBS Issuer Obligations section above for HECM and real estate owned repurchase activity, which would exclude voluntary liquidations made on behalf of the borrower, during 2016, 2015 and 2014. There is no repurchase activity in instances where proceeds from voluntary liquidations are made on behalf of the borrower as such proceeds are used to settle the associated HMBS related obligation.
(4)
Contractual obligations associated with acquisitions of servicing rights and related advances for which the Company has executed an agreement.
(5)
Refer to Note 33 to the Consolidated Financial Statements for further information regarding unfunded commitments.
(6)
Unfunded commitments presented under indeterminate maturity above represents the aggregate unfunded borrowing capacity of borrowers under our reverse loans at December 31, 2016 . This amount includes $1.0 billion in capacity that was available to be drawn by borrowers at December 31, 2016 and $215.3 million in capacity that will become eligible to be drawn by borrowers throughout 2017 assuming the loans remain performing. There is no termination date for these drawings so long as the loan remains performing.
(7)
Our Early Advance Reimbursement Agreement and servicing advance facilities above are included in servicing advance liabilities on our consolidated balance sheets. Collections of advances that have been reimbursed under the Early Advance Reimbursement Agreement require remittance upon collection to settle the outstanding balance. We are required to remit 60% to 85% of advances reimbursed under the servicing advance facilities to settle the balance outstanding under the agreements.
We exclude from the table above the amounts due under the Receivables Loan Agreement and the GTAAFT Facility, which are included in servicing advance liabilities on our consolidated balance sheets. The Receivables Loan Agreement and the GTAAFT Facility are non-recourse to us. Payments under these facilities are required upon collection of the underlying advances that have been reimbursed under the agreement.
We exclude mortgage-backed debt from the contractual obligations disclosed in the table above as this debt is non-recourse and not cross-collateralized and, therefore, must be satisfied exclusively from the proceeds of the residential loans and real estate owned held in the securitization trusts and by the $254.1 million in LOCs available for certain Non-Residual Trusts.

109


Operating lease obligations include (i) a lease for our executive and principal administrative office in Tampa, Florida; (ii) leases for our centralized servicing operations in Saint Paul, Minnesota; Tempe, Arizona; Rapid City, South Dakota; Irving, Texas; and Jacksonville, Florida; (iii) leases related to our reverse mortgage operations located in San Diego, California; Charlotte, North Carolina; Palm Beach Gardens, Florida; and Houston, Texas; (iv) a lease for our originations operations located in Fort Washington, Pennsylvania; and (v) other regional servicing and originations operations.
Certain Capital Requirements and Guarantees
We, including our subsidiaries, are required to comply with requirements under federal and state laws and regulations, including requirements imposed in connection with certain licenses and approvals, as well as requirements of federal, state, GSE, Ginnie Mae and other business partner loan programs, some of which are financial covenants related to minimum levels of net worth and other financial requirements. If these mandatory imposed capital requirements are not met, our selling and servicing agreements could be terminated and lending and servicing licenses could be suspended or revoked. As a result of the restatement as described in Note 2 to the Consolidated Financial Statements, RMS was not in compliance with certain financial covenants required by Ginnie Mae and Fannie Mae as of December 31, 2016 and for the quarters ended June 30, 2016 and September 30, 2016. As of June 30, 2017, RMS was in compliance with such financial covenants. Refer to Note 32 to the Consolidated Financial Statements for further information relating to these requirements, including certain Ginnie Mae and Fannie Mae waivers and certain guarantees provided by the Parent Company.
Noncompliance with those requirements for which we have not received a waiver could have a negative impact on our company, which could include suspension or termination of the selling and servicing agreements, which would prohibit future origination or securitization of mortgage loans or being an approved seller or servicer for the applicable GSE.
We also have financial covenant requirements relating to our servicing advance facilities and master repurchase agreements. Refer to additional information at the Mortgage Loan Servicing Business, Mortgage Loan Originations Business and Reverse Mortgage Business sections above for further information.
Dividends
We have no current plans to pay any cash dividends on our common stock. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board of Directors may deem relevant. In addition, our ability to pay dividends is limited by covenants in our 2013 Credit Agreement and the Senior Notes Indenture. Refer to the Corporate Debt section above.
Sources and Uses of Cash
The following table sets forth selected consolidated cash flow information (in thousands):
 
 
For the Years Ended December 31,
 
Variance
 
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
Cash flows provided by (used in) operating activities:
 
 
 
 
 
 
 
 
 
 
Net loss adjusted for non-cash operating activities
 
$
(220,055
)
 
$
(249,042
)
 
$
(155,149
)
 
$
28,987

 
$
(93,893
)
Changes in assets and liabilities
 
315,940

 
177,196

 
(213,203
)
 
138,744

 
390,399

Net cash provided by (used in) originations activities (1)
 
356,065

 
(46,637
)
 
164,082

 
402,702

 
(210,719
)
Proceeds from sale of trading security
 
—

 
70,390

 
—

 
(70,390
)
 
70,390

Cash flows provided by (used in) operating activities
 
451,950

 
(48,093
)
 
(204,270
)
 
500,043

 
156,177

Cash flows provided by (used in) investing activities
 
699,809

 
(454,948
)
 
(1,244,111
)
 
1,154,757

 
789,163

Cash flows provided by (used in) financing activities
 
(1,129,989
)
 
385,694

 
1,276,671

 
(1,515,683
)
 
(890,977
)
Net increase (decrease) in cash and cash equivalents
 
$
21,770

 
$
(117,347
)
 
$
(171,710
)
 
$
139,117

 
$
54,363

__________
(1)
Represents purchases and originations of residential loans held for sale, net of proceeds from sales and payments.

110


Operating Activities
The primary sources and uses of cash for operating activities are purchases, originations and sales activity of residential loans held for sale, changes in assets and liabilities, or operating working capital, and net loss adjusted for non-cash items. Cash provided by operating activities increased $500.0 million in 2016 as compared to net cash used in operating activities in 2015 . The increase in cash provided by operating activities was primarily a result of an increase in cash provided by origination activities resulting from a higher volume of loans sold in relation to loans originated for 2016 as compared to 2015 and a decrease in servicer and protective advances resulting largely from advance reimbursements received in connection with Fannie Mae and Freddie Mac loan sales and NRM MSR sales as well as increased collections.
Cash used in operating activities decreased $156.2 million in 2015 as compared to 2014. The decrease in cash used in operating activities was primarily the result of an increase in cash related to changes in assets and liabilities, including higher collections of servicer and protective advances and an increase in accrued expenses related to uncertain tax positions, partially offset by higher settlements of payables relating to servicer and protective advances acquired in conjunction with the acquisition of servicing rights and a decrease in accrued expenses related to legal and regulatory matters. In addition, cash increased due to proceeds received from the sale of a trading security received as consideration for the sale of the excess servicing spread associated with certain servicing rights. These increases were partially offset by a decrease in cash related to a lower volume of loans sold in relation to originated loans.
Investing Activities
The primary sources and uses of cash for investing activities relate to purchases, originations and payment activity on reverse loans, payments received on mortgage loans held for investment, and payments made for business and servicing rights acquisitions. Cash provided by investing activities increased $1.2 billion in 2016 as compared to net cash used in investing activities in 2015 . Cash used for purchases and originations of reverse loans held for investment, net of payments received, decreased $824.8 million primarily as a result of a lower funded volume for reverse loans and higher principal repayments and payments received for loans conveyed to HUD. Cash proceeds from sales of servicing rights, net increased $281.0 million and cash paid for business acquisitions and purchases of servicing rights decreased $257.0 million in 2016 as compared to 2015 . These increases in cash described above were partially offset by cash proceeds of $203.9 million received in 2015 from the sale of our residual interests and the sale of an investment.
Cash used in investing activities decreased $789.2 million in 2015 as compared to 2014. Cash used for purchases and originations of reverse loans held for investment, net of payments received, decreased $357.1 million during 2015 as compared to 2014 primarily as a result of an increase in principal repayments on loans and payments received for loans conveyed to HUD. Cash paid for business acquisitions and purchases of servicing rights decreased $195.8 million in 2015 as compared to 2014. In addition, we received cash proceeds of $203.9 million from the sale of residual interests and the sale of an investment in 2015.
Financing Activities
The primary sources and uses of cash for financing activities relate to securing cash for our originations, reverse mortgage and servicing businesses, as well as for our corporate investing activities. Cash used in financing activities increased $1.5 billion in 2016 as compared to net cash provided by financing activities in 2015 . Cash generated from the securitization of reverse loans, net of payments on HMBS related obligations, decreased $1.0 billion primarily as a result of a lower volume of loan securitizations and an increase in the repurchase of certain HECMs and real estate owned from securitization pools. Net cash borrowings from servicing advance liabilities used to fund advances for our servicing business decreased $312.3 million due to the net pay down of our advance facilities resulting from advance reimbursements received in connection with Fannie Mae and Freddie Mac loan sales and NRM MSR sales as well as increased collections. Net cash borrowings from warehouse borrowings decreased $300.5 million as a result of a reduction in the purchase and origination of loans held for sale during 2016 as compared to 2015 .
Cash provided by financing activities decreased $891.0 million in 2015 as compared to 2014. Net cash borrowings from servicing advance liabilities used to fund advances for our servicing business decreased $528.3 million primarily as a result of less funding of advances principally driven by lower cash needed to fund servicer and protective advances as well as higher collections of advances, which are used to settle balances outstanding. Cash generated from the securitization of reverse loans, net of payments on HMBS related obligations, decreased $383.1 million primarily as a result of an increase in the repurchase of certain HECMs and real estate owned from securitization pools. Payments on corporate debt increased due to a $50.0 million voluntary debt payment made on the 2013 Term Loan and the repurchase of Senior Notes with a carrying value of $35.7 million and an unpaid principal balance of $36.3 million for $30.0 million. In addition, in 2015 we entered into an excess servicing spread transaction with, and sold servicing rights to, WCO, which provided $55.7 million in cash.
Credit Risk
Consumer Credit Risk
In conjunction with our originations business, we provide representations and warranties on loan sales. Subsequent to the sale, if it is determined that a loan sold is in breach of these representations or warranties, we generally have an obligation to cure such breach. In general, if we are unable to cure such breach, the purchaser of the loan may require us to repurchase such loan for the unpaid principal balance, accrued interest, and related advances, and in any event, we must indemnify such purchaser for certain losses and expenses incurred by such purchaser in connection with such breach. In the case we repurchase the loan, we bear any subsequent credit loss on the loan. Our credit loss may be reduced by any recourse we have to correspondent lenders that, in turn, have sold such residential loans to us and breached similar or other representations and warranties. We maintain a reserve for losses on our representations and warranties obligations. Refer to Notes 8 and 33 to the Consolidated Financial Statements and to the Liquidity and Capital Resources section for additional information regarding these transactions. At December 31, 2016 , we held $4.4 million in repurchased loans.
We are also subject to credit risk associated with mortgage loans that we purchase and originate during the period of time prior to the sale of these loans. We consider the credit risk associated with these loans to be insignificant as we hold the loans, on average, for approximately 20 days from the date of borrowing, and the market for these loans continues to be highly liquid.
Counterparty Credit Risk

We are exposed to counterparty credit risk in the event of non-performance by counterparties to various agreements we enter into from time to time, including but not limited to our subservicing agreements, our agreements with GSEs and government agencies relating to our residential loan servicing and originations businesses, our master repurchase agreements we use to fund our residential loan originations business and our HECM repurchase obligations, certain of our advance financing facility agreements, and other agreements relating to our mortgage loan sales and MBS purchase commitments. We are also exposed to counterparty credit risk with respect to wholesale and correspondent lenders with whom we do business, and counterparties from whom we have purchased MSR. We attempt to minimize our counterparty credit risk through, among other things, conducting quality control reviews of wholesale and correspondent lenders, reviewing compliance by wholesale and correspondent lenders with applicable underwriting standards and our client guide, our use of internal monitoring procedures, including monitoring of our counterparties’ credit ratings, reviewing of our counterparties' financial statements and general credit worthiness, and the establishment of collateral requirements. Counterparty credit risk, as well as our own credit risk, is taken into account when determining fair value, although its impact is diminished by any requisite margin posting and other collateral requirements.
Real Estate Market Risk
We include on our consolidated balance sheets assets secured by real property and property obtained directly as a result of foreclosures. Residential property values are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions (such as an oversupply of housing); changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could also cause us to suffer losses.

111


The following tables present the activity related to foreclosed property (dollars in thousands):
 
For the Year Ended December 31, 2016
 
Reverse Mortgage
 
Servicing
 
Non-Residual Trusts (1)
 
Units
 
Amount
 
Units
 
Amount
 
Units
 
Amount
Balance at beginning of year
542

 
$
66,458

 
199

 
$
10,367

 
59

 
$
558

Foreclosures and other additions, at fair value
1,109

 
128,798

 
334

 
18,554

 
289

 
3,925

Cost basis of financed sales
—

 
—

 
(247
)
 
(13,020
)
 
—

 
—

Cost basis of cash sales to third parties and other dispositions
(925
)
 
(100,168
)
 
(47
)
 
(2,681
)
 
(307
)
 
(3,171
)
Lower of cost or fair value adjustments
—

 
(4,421
)
 
—

 
(361
)
 
—

 
(284
)
Balance at end of year
726

 
$
90,667

 
239

 
$
12,859

 
41

 
$
1,028

 
 
 
 
 
 
 
 
 
 
 
 
 
For the Year Ended December 31, 2015
 
Reverse Mortgage
 
Servicing
 
Non-Residual Trusts (1)
 
Units
 
Amount
 
Units
 
Amount
 
Units
 
Amount
Balance at beginning of year
489

 
$
55,260

 
560

 
$
32,059

 
80

 
$
1,023

Foreclosures and other additions, at fair value
763

 
89,257

 
435

 
22,480

 
402

 
4,108

Cost basis of financed sales
—

 
—

 
(400
)
 
(21,588
)
 
—

 
—

Cost basis of cash sales to third parties and other dispositions (2)
(710
)
 
(74,020
)
 
(396
)
 
(22,103
)
 
(423
)
 
(3,602
)
Lower of cost or fair value adjustments
—

 
(4,039
)
 
—

 
(481
)
 
—

 
(971
)
Balance at end of year
542

 
$
66,458

 
199

 
$
10,367

 
59

 
$
558

__________
(1)
Foreclosed property held by the Non-Residual Trusts is included in our Other non-reportable segment.
(2)
The Servicing segment includes 327 units and $18.7 million related to the sale of our residual interests, which resulted in the deconsolidation of the related foreclosed property.
A non-performing reverse loan for which the maximum claim amount has not been met is generally foreclosed upon on behalf of Ginnie Mae with the real estate owned remaining in the securitization pool until liquidation. Although performing and non-performing loans are covered by FHA insurance, we may incur expenses and losses in the process of repurchasing and liquidating these loans that are not reimbursable by FHA in accordance with program guidelines. In addition, in certain circumstances, we may be subject to real estate price risk to the extent we are unable to liquidate real estate owned within the FHA program guidelines. We attempt to mitigate this risk by monitoring the aging of real estate owned and managing our marketing and sales program based on this aging. The growth in the real estate owned portfolio held by the Reverse Mortgage segment was due to the increased flow of HECMs that move through the foreclosure process.
Impact of Inflation and Changing Prices
Our Consolidated Financial Statements and notes thereto presented herein have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike most industrial companies, nearly all of our assets and liabilities are, or are based on, financial assets. As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

112


Ratings
We receive various credit and servicer ratings as set forth below. Our ratings may be subject to a revision or withdrawal at any time by the assigning rating agency, and each rating should be evaluated independently of any other rating. Rating agency ratings are not a recommendation to buy, sell or hold any security.
Credit Ratings
Credit ratings are intended to be an indicator of the creditworthiness of a particular company, security or obligation and are considered by lenders in connection with the setting of interest rates and terms for a company's borrowings. Our ability to obtain adequate and cost effective financing depends, in part, on our credit ratings. A downgrade in our credit ratings could negatively affect our cost of, and ability to access, capital. The following table summarizes our credit ratings and outlook as of the date of this report.
 
 
Moody's
 
S&P
Corporate / CCR
 
Caa1
 
B
Senior Secured Debt
 
B3
 
B
Senior Unsecured Debt
 
Caa2
 
CCC+
Outlook
 
Negative
 
Negative
Date of Last Action
 
September 2016
 
December 2016
Servicer Ratings
Residential loan and manufactured housing servicer ratings reflect the applicable rating agency's assessment of a servicer’s operational risk and how the quality and experience of the servicer affect loan performance. The following table summarizes the servicer ratings and outlook assigned to certain of our servicer subsidiaries as of the date of this report. Unless otherwise specified, these servicer ratings relate to Ditech Financial as a servicer of mortgage loans.
 
 
Moody's
 
S&P
Residential Prime Servicer
 
—
 
—
Residential Subprime Servicer
 
SQ3+
 
Above Average
Residential Special Servicer
 
—
 
Above Average
Residential Second/Subordinated Lien Servicer
 
SQ2-
 
Above Average
Manufactured Housing Servicer
 
SQ2-
 
Above Average
Residential HLTV Servicer
 
—
 
—
Residential HELOC Servicer
 
—
 
—
Residential Reverse Mortgage Servicer
 
—
 
Strong  (1)
Outlook
 
Not on review
 
Stable
Date of Last Action
 
December 2015
 
October 2015
__________
(1)
S&P last affirmed its rating for RMS as a residential reverse mortgage servicer in November 2015 with a stable outlook.
Following an internal review of our servicer ratings in 2015, including the servicer rating requirements contained in our contracts, we decided to no longer solicit servicer ratings from Fitch. On April 29, 2016, Fitch issued a press release stating it had withdrawn all, and will no longer provide, servicer ratings and outlooks for Ditech Financial.

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Cybersecurity
We devote significant resources to maintain and regularly update our systems and processes that are designed to protect the security of our computer systems, software, networks and other technology assets against attempts by unauthorized parties to obtain access to confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage. From time to time we, our vendors and other companies that store or process confidential borrower personal and transactional data are targeted by unauthorized parties using malicious code and viruses or otherwise attempting to breach the security of our or our vendors’ systems and data. We employ extensive layered security at all levels within our organization to help us detect malicious activity, both from within the organization and from external sources. It is company protocol to investigate the cause and extent of all instances of cyber-attack, potential or confirmed, and take any additional necessary actions including: conducting additional internal investigation; engaging third-party forensic experts; updating our defenses; and involving senior management. We have established, and continue to establish on an ongoing basis, defenses to identify and mitigate these cyber-attacks and, to date, we have not experienced any material disruption to our operations due to a cyber-attack. Cyber-attacks resulting in loss, unauthorized access to, or misuse of confidential or personal information could disrupt our operations, damage our reputation, and expose us to claims from customers, financial institutions, regulators, employees and other persons, any of which could have an adverse effect on our business, financial condition and results of operations.
In addition to our vendors, other third parties with whom we do business or that facilitate our business activities (e.g., GSEs, transaction counterparties and financial intermediaries) could also be sources of cybersecurity risk to us, including with respect to breakdowns or failures of their systems, misconduct by the employees of such parties, or cyber-attacks, which could affect their ability to deliver a product or service to us or result in lost or compromised information of us or our consumers. We work with our vendors and other third parties with whom we do business, to enhance our defenses and improve resiliency to cybersecurity threats. Systems failures could result in reputational damage to our business and cause us to incur significant costs and third-party liability, and this could adversely affect our business, financial condition and results of operations.
Off-Balance Sheet Arrangements
We have certain off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, revenues and expenses, results of operations, liquidity, capital expenditures or capital resources.
We have exposure to representations and warranties obligations as a result of our loan sales activities. If it is determined that loans sold are in breach of these representations or warranties and we are unable to cure such breach, we generally have an obligation to either repurchase the loan for the unpaid principal balance, accrued interest, and related advances, and in any event, we must indemnify the purchaser of the loans for certain losses and expenses incurred by such purchaser in connection with such breach. Our credit loss may be reduced by any recourse we have to correspondent lenders that, in turn, have sold such residential loans to us and breached similar or other representations and warranties. We record an estimate of the liability associated with our representations and warranties exposure on our consolidated balance sheets. Refer to Notes 8 and 33 to the Consolidated Financial Statements for the financial effect of these arrangements and to the Liquidity and Capital Resources section for additional information.
We have a variable interest in WCO, which has provided financing to us since 2014 through the sale of excess servicing spreads and servicing rights. The repayment of the excess servicing spread liabilities and servicing rights financing is based on future servicing fees received from the residential loans underlying the servicing rights. In addition, we performed subservicing for WCO through 2016. Refer to Notes 15 and 35 to the Consolidated Financial Statements for additional information on servicing activities and transactions with WCO. We also have other variable interests in other entities that we do not consolidate as we have determined we are not the primary beneficiary. Refer to Note 7 to the Consolidated Financial Statements for additional information related to variable interest entities.
Critical Accounting Estimates
Our ability to measure and report our financial position and operating results is influenced by the need to estimate the impact or outcome of future events on the basis of information available at the time of the financial statements. An accounting estimate is considered critical if it requires that management make assumptions about matters that were highly uncertain at the time the accounting estimate was made. If actual results differ from our judgments and assumptions, then it may have an adverse impact on the results of operations and cash flows. Our significant accounting policies are included in Note 4 to the Consolidated Financial Statements.

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Fair Value Measurements
We have an established and documented process for determining fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A three-tier fair value hierarchy is used to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities, or Level 1 inputs, and the lowest priority to unobservable inputs, or Level 3 inputs. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Refer to Note 9 to the Consolidated Financial Statements for a description of valuation methodologies used to measure assets and liabilities at fair value and details on the valuation models, key inputs to those models and significant assumptions utilized.
The following table summarizes the assets and liabilities measured at fair value on a recurring basis using Level 3 inputs (dollars in thousands):
 
 
December 31,
 
 
2016
 
2015
Assets
 
 
 
 
Reverse loans
 
$
10,742,922

 
$
10,763,816

Mortgage loans related to Non-Residual Trusts
 
450,377

 
526,016

Charged-off loans
 
46,963

 
49,307

Receivables related to Non-Residual Trusts
 
15,033

 
16,542

Servicing rights carried at fair value
 
936,423

 
1,682,016

Freestanding derivative instruments (IRLCs)
 
53,394

 
51,519

Assets at fair value using Level 3 inputs
 
$
12,245,112

 
$
13,089,216

As a percentage of total assets measured at fair value on a recurring basis
 
90.91
%
 
90.71
%
 
 
 
 
 
Liabilities
 
 
 
 
Freestanding derivative instruments (IRLCs)
 
$
4,193

 
$
1,070

Servicing rights related liabilities
 
—

 
117,000

Mortgage-backed debt related to Non-Residual Trusts
 
514,025

 
582,340

HMBS related obligations
 
10,509,449

 
10,647,382

Liabilities at fair value using Level 3 inputs
 
$
11,027,667

 
$
11,347,792

As a percentage of total liabilities measured at fair value on a recurring basis
 
99.91
%
 
99.95
%
When available, we generally use quoted market prices to determine fair value. If quoted market prices are not available, fair value is based upon internally-developed valuation models, such as a discounted cash flow model, that where possible, use current market-based or independently sourced market parameters, such as market rates commensurate with an instrument’s credit quality and duration. We consider market liquidity when estimating fair value based on the type of asset or liability measured and the valuation method used. For example, for mortgage loans where the significant inputs have become unobservable due to illiquidity in the markets for non-agency and non-conforming mortgage loans, we use a discounted cash flow technique to estimate fair value. This technique incorporates forecasting of expected cash flows discounted at an appropriate market discount rate that is intended to reflect the lack of liquidity in the market. Level 3 unobservable assumptions reflect our own estimates for assumptions that market participants would use in pricing the asset or liability.
Unobservable inputs used in our internal valuation models require considerable judgment and are inherently difficult to estimate. Changes to these inputs can have a significant effect on fair value measurements. Accordingly, our estimates of fair value are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. Separate from the possible future impact to our results of operations from changes to inputs, the value of market-sensitive assets and liabilities may change subsequent to the balance sheet date, due to the nature and magnitude of future credit and market conditions. Such credit and market conditions may change quickly and in unforeseen ways and the resulting volatility could have a significant, negative effect on future operating results. These fluctuations would not be indicative of deficiencies in our models or inputs.

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All of the techniques used and information obtained in the valuation process provide a range of estimated values, which are evaluated in order to establish an estimated value that, based on management's judgment, represents a reasonable estimate of fair value. It is not uncommon for the range of value to vary widely, and in such cases, we select an estimated value that we believe is the best indication of value based on the yield a market participant in the current environment would expect.
Our Valuation Committee determines and approves valuation policies and unobservable inputs used to estimate the fair value of items measured at fair value on a recurring basis. The Valuation Committee meets on a quarterly basis to review the assets and liabilities that require fair value measurement, including how each asset and liability has actually performed in comparison to the unobservable inputs and the projected performance provided. The Valuation Committee also reviews related available market data.
The changes to the fair value of our Level 3 assets and liabilities are discussed in the Results of Operations and Business Segment Results sections.
Reverse Loans and HMBS Related Obligations
Changes in market pricing for HECMs and HMBS and LIBOR can have a material impact on fair value and our results of operations. We utilize and give priority to observable market inputs, such as interest rates and market spreads, in our valuation of reverse loans and HMBS related obligations. However, we also utilize unobservable inputs, such as repayment speeds, mortality assumptions and expected duration, and also consider the value of underlying collateral. These unobservable inputs require the use of our judgment and can also have a significant impact on the determination of fair value.
Non-Residual Trusts
We utilize and give priority to observable market inputs, such as interest rates and market spreads, in our valuation of the assets and liabilities of the Non-Residual Trusts. However, we also utilize internal inputs, such as prepayment speeds, default rates, loss severity and discount rates, and also consider the value of underlying collateral. These internal inputs require the use of our judgment and can have a significant impact on the determination of fair value. The nets assets of the Non-Residual Trusts have remained relatively consistent at December 31, 2016 as compared to December 31, 2015 . Our mandatory call obligation associated with the Non-Residual Trusts will impact our liquidity in the future. Refer to the Liquidity and Capital Resources section for additional information.
Charged-off Loans
We primarily utilize internal inputs, such as collection rates and discount rates, in the valuation of charged-off loans and also consider borrower specific factors such as FICO scores and bankruptcy status as well as underlying collateral. In addition, we take into account current and expected future economic conditions. Charged-off loans decreased at December 31, 2016 as compared to December 31, 2015 primarily due to collections during 2016.
Servicing Rights
We estimate the fair value of our servicing rights by calculating the present value of expected future cash flows utilizing assumptions that we believe a market participant would consider in valuing our servicing rights. The significant components of the estimated future cash flows for servicing rights include estimates and assumptions related to the prepayments of principal, defaults, ancillary fees, and discount rates that we believe approximate yields required by investors for these assets, and the expected cost of servicing. We reassess periodically and adjust the underlying inputs and assumptions in the model to reflect market conditions and assumptions that a market participant would consider in valuing servicing rights.
We use a discounted cash flow model for our servicing rights. This process allows us to determine inputs that are significant to the valuation and serves as a basis to forecast prepayment and default rates. These rates, which are used in the development of expected future cash flows, are based on historical observations of prepayment behavior in similar periods, comparing current and expected future mortgage rates to the mortgage rates of our servicing portfolio, and incorporates loan characteristics (e.g., loan type and note rate) and the relative sensitivity of our servicing portfolio to refinancing and also considers estimated levels of home equity. The fair value estimates and assumptions are compared to industry surveys, recent market activity, actual portfolio experience, and when available, observable market data, and are adjusted as applicable based on this data. We obtain third-party valuations on a quarterly basis to assess the reasonableness of the fair value calculated by our model.
Changes in these assumptions are generally expected to affect our results of operations as follows:
•
A declining interest rate environment generally drives increases in prepayment speeds. Increases in prepayments of principal reduce the value of our servicing rights as the underlying loans prepay faster, which causes accelerated servicing right amortization or declines in the fair value of servicing rights;

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•
Increases in defaults generally reduce the value of our servicing rights as the cost of servicing increases during the delinquency period due primarily to increases in servicing advances and related interest expense, which is partially offset by increases in ancillary fees; and
•
Increases in discount rate reduce the value of our servicing rights due to the lower overall net present value of the cash flows.
In contrast, decreases in prepayment speeds, defaults and discount rates generally increase the value of servicing rights.
Refer to Note 15 to the Consolidated Financial Statements for the effect on the fair value of servicing rights carried at fair value for adverse changes to certain significant assumptions. Refer to the Servicing section within Business Segment Results for a discussion of the changes in servicing rights carried at fair value.
Interest Rate Lock Commitments
Fair values of IRLCs are derived using valuation models incorporating market pricing for instruments with similar characteristics and by estimating the fair value of the servicing rights expected to be recorded at sale of the loan and are adjusted for anticipated loan funding probability. The loan funding probability ratio represents the aggregate likelihood that loans currently in a lock position will ultimately close, which is largely dependent on the loan processing stage that a loan is currently in, and changes in interest rates from the time of the rate lock through the time a loan is closed. The estimation process involved with the fair value of servicing rights is discussed above. Both the fair value of the servicing rights expected to be recorded at sale of the loan and the loan funding probability ratio are based on management judgment; these inputs can have a material effect on the estimated fair values.
We have derivative instruments that we hold to manage the price risk associated with IRLCs and loans held for sale. These derivatives and loans held for sale are classified as Level 2 within the fair value hierarchy. Refer to Notes 9 and 10 to the Consolidated Financial Statements for additional information related to derivative instruments.
Servicing Rights Related Liabilities

Our procedures for estimating the fair value of servicing rights related liabilities are similar to those described above for servicing rights. Our servicing rights related liabilities measured at fair value on a recurring basis using Level 3 inputs consists of excess servicing spread liabilities and servicing rights financing, which resulted from the sales of servicing rights and excess servicing spread to WCO that we accounted for as secured borrowings. During the fourth quarter of 2016, WCO sold substantially all of its assets, including servicing rights we previously sold to WCO and accounted for as secured borrowings. In addition, we sold the servicing rights relating to the excess servicing spread we previously sold to WCO. The servicing rights and excess servicing spread qualified for sale accounting treatment as a result of these transactions, pursuant to which we derecognized the excess servicing spread liabilities and servicing rights financing. Refer to Notes 6 and 23 to the Consolidated Financial Statements for additional information regarding these transactions.
Allowance for Uncollectible Advances
We establish an allowance for uncollectible advances that provides for probable losses inherent in funded servicer and protective advances. The allowance is based on a collection risk analysis that considers the underlying loan, the type of advance, our customers’ servicing and advance reimbursement guidelines, reimbursement patterns and past loss experience. Although we examine a variety of available data to determine our allowance, our estimation process is subject to risks and uncertainties, including a reliance on historical loss and trend information that may not be representative of current conditions and indicative of future performance.
Asset Impairment Reviews
We review our long-lived assets for impairment indicators throughout the year. We perform impairment testing for goodwill at least annually and for all other long-lived assets whenever impairment indicators are present. When we have determined an impairment has occurred, we record an impairment charge for the amount by which the fair value is less than the carrying value of these assets. Our impairment review processes are described in Note 4 to the Consolidated Financial Statements.
Examples of events or circumstances that may be indicative of impairment include:
•
decline in future expected cash flows;
•
changes in facts and circumstances associated with a shift in strategic direction;
•
decline in overall financial performance;
•
changes in market capitalization;
•
changes in regulatory requirements;

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•
increased liquidity requirements; and
•
industry and market considerations.
When determining the fair value of goodwill, we are required to determine the fair value of each reporting unit. We primarily use the income approach but we may also use the market approach, or a weighted-average combination of both approaches.
The income approach is a forward-looking approach to estimating fair value and relies primarily on internal forecasts. Within the income approach, the method that we use is the discounted cash flow method. We start with a forecast of all the expected net cash flows associated with the reporting unit, which includes the application of a terminal value, and then we apply a reporting unit-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, long-term growth rate, discount rate and tax rate.
The market approach is a historical approach to estimating fair value and relies primarily on external information. Within the market approach are two methods that we may use:
•
Guideline public company method—this method employs market multiples derived from market prices of stocks of companies that are engaged in the same or similar lines of business and that are actively traded on a free and open market and the application of the identified multiples to the corresponding measure of our reporting unit’s financial performance.
•
Guideline transaction method—this method relies on pricing multiples derived from transactions of significant interests in companies engaged in the same or similar lines of business and the application of the identified multiples to the corresponding measure of our reporting unit’s financial performance.
The market approach is only appropriate when the available external information is robust and deemed to be a reliable proxy for the specific reporting unit being valued; however, these assessments may prove to be incomplete or inaccurate. Some of the more significant estimates and assumptions inherent in this approach include: the selection of appropriate guideline companies and transactions and the determination of applicable premiums and discounts based on any differences in ownership percentages, ownership rights, business ownership forms or marketability between the reporting unit and the guideline companies and transactions.
As a result of our goodwill impairment reviews, we recorded goodwill impairment of: $215.4 million , comprised of $194.1 million relating to the Servicing reporting unit and $21.3 million relating to the ARM reporting unit, in the second quarter of 2016; $91.0 million relating to the Servicing reporting unit in the third quarter of 2016; and $13.2 million relating to the ARM reporting unit in the fourth quarter of 2016. These impairment charges were the result of certain market, industry and company-specific matters as discussed in more detail in Note 16 to the Consolidated Financial Statements.
When determining the fair value of intangible assets other than goodwill, we use an income approach, specifically the discounted cash flow method. We start with a forecast of all the expected net cash flows associated with the asset, which includes the application of a terminal value for indefinite-lived assets, and then we apply an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, long-term growth rate, discount rate and tax rate.
As a result of our identifiable intangible asset impairment review, we recorded impairment charges of $6.7 million related to intangible assets in the Reverse Mortgage reporting unit for the year ended December 31, 2016, which is described in more detail in Note 16 to the Consolidated Financial Statements.
We are likely to continue to be impacted in the near term by certain company-specific matters, overall market performance within the sector, and a continued level of regulatory scrutiny. As a result, market capitalization, overall economic and sector conditions and other events or circumstances, including the ability to execute on our strategic objectives, amongst other factors, will continue to be regularly monitored by management. Unanticipated outcomes in these areas may result in an impairment of goodwill and/or intangible assets and have a related impact on income taxes in the future.
Income Taxes
We record a tax provision for the anticipated tax consequences of the reported results of operations. We compute the provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. We measure deferred tax assets and liabilities using the currently enacted tax rates in each jurisdiction that applies to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

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We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
We are required to establish a valuation allowance for deferred tax assets and record a charge to income if it is determined, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. In our Original Filing, we concluded that a partial valuation allowance was necessary at December 31, 2016. In connection with an error in our calculation of the valuation allowance identified subsequent to the Original Filing, we concluded that an additional valuation allowance in the amount of $304.7 million should have been recorded for the year ended December 31, 2016. Accordingly, this error has been corrected in this Amended Filing.
Our evaluation of the realizability of the deferred tax assets focuses on identifying significant, objective evidence that we will more likely than not be able to realize our deferred tax assets in the future. We consider both positive and negative evidence when evaluating the need for a valuation allowance which is highly judgmental and requires subjective weighting of such evidence.
Contingencies
We estimate contingent liabilities based on management's evaluation of the probability of outcomes and the ability to estimate the range of exposure. A liability is contingent if the extent of loss is not presently known but may become known in the future through the occurrence of some uncertain future event. Accounting standards require that a liability be recorded if it is determined that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. In deriving an estimate, we are required to make assumptions about matters that are, by their nature, highly uncertain. The assessment of contingent liabilities, including legal contingencies, curtailment obligations and repurchase obligations, involves the use of critical estimates, assumptions and judgments. Through our assessment we consider many factors, including the progress of the matter, prior experience and experience of others in similar matters, available defenses, and the advice of legal counsel and other experts. Our estimates are based on the belief that future events will validate the current assumptions regarding the ultimate outcome of these exposures. Because matters may be resolved over long periods of time, accruals are adjusted as more information becomes available or when an event occurs requiring a change. However, there can be no assurance that future events will not differ from our assessments.
New Accounting Pronouncements
Refer to Note 1 to the Consolidated Financial Statements for a summary of recently adopted and recently issued accounting standards and their related effects or anticipated effects on our consolidated results of operations and financial condition.

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Glossary of Terms
This Glossary of Terms includes acronyms and defined terms that are used throughout this Annual Report on Form 10-K/A.
2011 First Lien Term Loan
$500 million first lien senior secured term loan facility entered into on July 1, 2011
2011 Plan
2011 Omnibus Incentive Plan established by the Company on May 10, 2011, as amended and restated
2011 Second Lien Term Loan
$265 million second lien senior secured term loan facility entered into on July 1, 2011
2012 Common Stock Offering
Registered underwritten public offering of 6,900,000 shares of the Company's common stock completed on October 23, 2012
2013 Credit Agreement
Credit agreement entered into on December 19, 2013 among the Company, Credit Suisse AG, as administrative agent and collateral agent, the lenders from time to time party thereto and other parties thereto, as amended
2013 Revolver
Senior secured revolving credit facility entered into on December 19, 2013, as amended
2013 Secured Credit Facilities
2013 Term Loan and 2013 Revolver, collectively
2013 Term Loan
$1.5 billion senior secured first lien term loan entered into on December 19, 2013, as amended
Adjusted EBITDA
Adjusted earnings before interest, taxes, depreciation and amortization, a non-GAAP financial measure; refer to Non-GAAP Financial Measures section under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for description of metric
Adjusted Earnings (Loss)
Adjusted earnings or loss before taxes, a non-GAAP financial measure; refer to Non-GAAP Financial Measures section under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for description of metric
Advisers Act
Investment Advisers Act of 1940
Amended Filing
The Company's amended Annual Report on Form 10-K/A for the year ended December 31, 2016
ARM
Asset Receivables Management, a deficiencies collections reporting unit of the Company
Assurant
Assurant, Inc.
Bankruptcy Code
Title 11 of the United States Code
BOA asset purchase
The purchase of Fannie Mae MSR from Bank of America, N.A. on January 31, 2013
Borrowers
Borrowers under residential mortgage loans and installment obligors under residential retail installment agreements
Bps
Basis points
Bulk MSR
Bulk MSR as defined under the 2013 Credit Agreement
CCR
Corporate credit rating
CFPB
Consumer Financial Protection Bureau
Charged-off loans
Defaulted consumer and residential loans acquired by the Company at substantial discounts to face value during 2014, which are also referred to as post charge-off deficiency balances
Coal Acquisition
Warrior Met Coal, LLC (f/k/a Coal Acquisition LLC)
Code
Internal Revenue Code of 1986, as amended
Computershare
Computershare Trust Company, N.A., as Rights Agent to the Rights Agreement
Conditional Commitment
The time the lender becomes committed to the loan subject to the borrower meeting certain requirements
Consenting Term Lenders
Lenders holding, as of July 31, 2017, more than 50% of the loans and/or commitments outstanding under the 2013 Credit Agreement
Consolidated Financial Statements
The consolidated financial statements of Walter Investment Management Corp. and its subsidiaries and the notes thereto included in Item 8 of this Form 10-K/A
Convertible Notes
$290 million aggregate principal amount of 4.50% convertible senior subordinated notes due 2019 sold in a registered underwritten public offering on October 23, 2012
COSO
Committee of Sponsoring Organizations of the Treadway Commission

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Distribution taxes
Taxes imposed on Walter Energy or a Walter Energy shareholder as a result of the potential determination that the Company's spin-off from Walter Energy was not tax-free pursuant to Section 355 of the Code
Ditech Financial
Ditech Financial LLC, formerly Green Tree Servicing LLC, an indirect wholly-owned subsidiary of the Company
Ditech Mortgage Corp
Formerly an indirect wholly-owned subsidiary of the Company; Ditech Mortgage Corp and DT Holdings LLC were merged with and into Green Tree Servicing LLC, with Green Tree Servicing LLC continuing as the surviving entity, which was renamed Ditech Financial LLC
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
DOJ
United States Department of Justice
Early Advance Reimbursement
Agreement
$200 million financing facility with Fannie Mae
EBITDA
Earnings before interest, taxes, depreciation, and amortization
ECOA
Equal Credit Opportunity Act
EFTA
Electronic Fund Transfer Act
EverBank net assets
Assets purchased from EverBank Financial Corp under a series of definitive agreements entered into on October 30, 2013, including (i) certain private and GSE-backed MSR and related servicer advances, (ii) subservicing rights for mortgage loans and (iii) a default servicing platform
Excess Cash Flow
Excess Cash Flow as defined under the 2013 Credit Agreement
Exchange Act
Securities Exchange Act of 1934, as amended
Exchange Notes
New issue of registered notes with identical terms of the Company's $575 million aggregate principal amount of 7.875% Senior Notes due 2021, except that they will not be subject to certain restrictions on transfer
Fannie Mae
Federal National Mortgage Association
FASB
Financial Accounting Standards Board
FDCPA
Fair Debt Collection Practices Act
FHA
Federal Housing Administration
FHFA
Federal Housing Finance Agency
FICO
Fair Isaac Corporation (borrower credit score)
Fitch
Fitch Ratings Inc, a nationally recognized statistical rating organization designated by the SEC
Forward sales commitments
Forward sales of agency to-be-announced securities, a freestanding derivative financial instrument
Freddie Mac
Federal Home Loan Mortgage Corporation
FTC
Federal Trade Commission
GAAP
United States Generally Accepted Accounting Principles
Ginnie Mae
Government National Mortgage Association
Ginnie Mae II MBS
Modified pass-through mortgage-backed securities for which holders receive an aggregate principal and interest payment from a central paying agent
Ginnie Mae Guaranty Agreement
Ginnie Mae Guaranty Agreement together with related documents
Ginnie MBS Guide
Ginnie Mae Mortgage Backed-Securities Guide including the annexes thereto
GMBS
Government National Mortgage Association mortgage-backed securities
Green Tree
GTCS Holdings LLC, acquired by the Company on July 1, 2011
Green Tree Servicing
Green Tree Servicing LLC; former name of Ditech Financial. Ditech Mortgage Corp and DT Holdings LLC were merged with and into Green Tree Servicing LLC, with Green Tree Servicing LLC continuing as the surviving entity, which was renamed Ditech Financial LLC
GSE
Government-sponsored entity
GTAAFT Facility
Green Tree Agency Advance Funding Trust financing facility
GTIM
Green Tree Investment Management, LLC, an indirect wholly-owned subsidiary of the Company

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HAMP
Home Affordable Modification Program
Hanover
Hanover Capital Mortgage Holdings, Inc.
HARP
Home Affordable Refinance Program
HECM
Home Equity Conversion Mortgage
HECM IDL
Home Equity Conversion Mortgage Initial Disbursement Limit
HELOC
Home equity line of credit
HLTV
High loan to value
HMBS
Home Equity Conversion Mortgage-Backed Securities
HMDA
Home Mortgage Disclosure Act
HOA
Homeowners' association
HOEPA
Home Ownership and Equity Protection Act of 1994
HUD
U.S. Department of Housing and Urban Development
Interest Coverage Ratio
Interest Coverage Ratio as defined under the 2013 Credit Agreement
IRLC
Interest rate lock commitment, a freestanding derivative financial instrument
IRS
Internal Revenue Service
Lender-placed
Also referred to as "force-placed"
LIBOR
London Interbank Offered Rate
LOC
Letter of Credit
Marix
Marix Servicing, LLC
MBA
Mortgage Bankers Association
MBS
Mortgage-backed securities
MBS purchase commitments
Commitments to purchase mortgage-backed securities, a freestanding derivative financial instrument
MGCL
Maryland General Corporation Law
Moody's
Moody’s Investors Service Limited, a nationally recognized statistical rating organization designated by the SEC
Mortgage loans
Traditional mortgage loans and residential retail installment agreements, which include manufactured housing loans as well as consumer loans
MSP
A mortgage and consumer loan servicing platform licensed from Black Knight Financial Services, LLC
MSR
Mortgage servicing rights
N/A
Not applicable
Net realizable value
Fair value less cost to sell
n/m
Not meaningful
NOL
Net operating loss
Non-Residual Trusts
Securitization trusts that the Company consolidates and in which the Company does not hold residual interests
NRM
New Residential Mortgage LLC, a wholly owned subsidiary of New Residential Investment Corp., a Delaware Corporation
NRM Flow and Bulk Agreement
Flow and Bulk Agreement for the Purchase and Sale of Mortgage Servicing Rights, dated as of August 8, 2016, by and between Ditech Financial LLC and New Residential Mortgage LLC
NRM Subservicing Agreement
Subservicing Agreement, dated as of August 8, 2016, by and between New Residential Mortgage LLC and Ditech Financial LLC

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NYSE
New York Stock Exchange
Original Filing
The Company's Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 14, 2017
OTS
Office of Thrift Supervision
Parent Company
Walter Investment Management Corp.
RCS
Residential Credit Solutions, Inc., a Delaware corporation
Receivables Loan Agreement
$75 million financing facility entered into on May 2, 2012
REIT
Real estate investment trust
REO
Real estate owned
Residential loans
Residential mortgage loans, including traditional mortgage loans, reverse mortgage loans and residential retail installment agreements, which include manufactured housing loans as well as consumer loans
Residual Trusts
Securitization trusts that the Company consolidates and in which it holds a residual interest
ResCap
Residential Capital LLC
ResCap net assets
The rights acquired and liabilities assumed by the Company on January 31, 2013 relating to (a) all of ResCap’s Fannie Mae MSR and related servicer advances, and (b) ResCap’s mortgage originations and capital markets platforms
RESPA
Real Estate Settlement Procedures Act
Restructuring Support Agreement
Restructuring Support Agreement, dated as of July 31, 2017, by and among Walter Investment Management Corp. and the Consenting Term Lenders
Reverse loans
Reverse mortgage loans, including HECMs
Rights Agreement
The Amended and Restated Section 382 Rights Agreement, dated as of November 11, 2016, which amends and restates the Rights Agreement, dated as of June 29, 2015, between Walter Investment Management Corp. and Computershare Trust Company, N.A., as Rights Agent, as previously amended by Amendment No. 1, dated as of November 16, 2015, Amendment No. 2, dated as of November 22, 2015, and Amendment No. 3, dated as of June 28, 2016
Risk-managed loan class
Risk-managed mortgage loan class
RMS
Reverse Mortgage Solutions, Inc., an indirect wholly-owned subsidiary of the Company
RSU
Restricted stock unit
S1L
Security One Lending, an indirect wholly-owned subsidiary of the Company, now known as Ditech
SEC
U.S. Securities and Exchange Commission
Section 382
Section 382 of the Internal Revenue Code
Securities Act
Securities Act of 1933, as amended
Senior Notes
$575 million aggregate principal amount of 7.875% senior notes due 2021 issued on December 17, 2013
Senior Notes Indenture
Indenture for the 7.875% Senior Notes due 2021 dated December 17, 2013 among the Company, the guarantors and Wells Fargo Bank, National Association, as trustee
Servicer and Protective Advance
Financing Facilities
The Company's interests in financing entities that acquire servicer and protective advances from certain wholly-owned subsidiaries
Standard & Poor's (S&P)
Standard and Poor's Ratings Services, a nationally recognized statistical rating organization designated by the SEC
Tails
Participations in previously securitized HECMs created by additions to principal for borrower draws on lines of credit, interest, servicing fees, and mortgage insurance premiums
TBAs
To-be-announced securities
TCPA
Telephone Consumer Protection Act
TILA
Truth in Lending Act
Total Leverage Ratio
Total Leverage Ratio as defined under the 2013 Credit Agreement
Total Net Leverage Ratio
Total Net Leverage Ratio as defined under the 2013 Credit Agreement

123


Trust Notes
The mortgage-backed and asset-backed notes issued by the Residual Trusts
TSR
Total shareholder return
UPB
Unpaid principal balance
U.S.
United States of America
U.S. Treasury
U.S. Department of the Treasury
USDA
United States Department of Agriculture
VA
United States Department of Veterans Affairs
VIE
Variable interest entity
Walter Energy
Walter Energy, Inc.
Walter Energy Asset Purchase
Agreement
Stalking horse asset purchase agreement entered into by Walter Energy, together with certain of its subsidiaries, and Coal Acquisition on November 5, 2015 and amended and restated on March 31, 2016
Walter Investment
Walter Investment Management Corp. and its consolidated subsidiaries
Warehouse borrowings
Borrowings under master repurchase agreements
WCO
Walter Capital Opportunity Corp. and its consolidated subsidiaries
WCO LP
Walter Capital Opportunity, LP, a subsidiary of Walter Capital Opportunity Corp.


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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We seek to manage the risks inherent in our business — including, but not limited to, credit risk, liquidity risk, real estate market risk, and interest rate risk — in a prudent manner designed to enhance our earnings and preserve our capital. In general, we seek to assume risks that can be quantified from historical experience, to actively manage such risks, and to maintain capital levels consistent with these risks. For information regarding our credit risk, real estate market risk and liquidity risk, refer to the Credit Risk, Real Estate Market Risk and Liquidity and Capital Resources sections under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Interest Rate Risk
Interest rate risk is the risk of loss of future earnings or fair value due to changes in interest rates. Our principal market exposure associated with interest rate risk relates to changes in long-term U.S. Treasury and mortgage interest rates and LIBOR.
We provide sensitivity analysis surrounding changes in interest rates in the Servicing, Originations and Reverse Mortgage Segments and Other Financial Instruments sections below. However, there are certain limitations inherent in any sensitivity analysis, including the necessity to conduct the analysis based on a single point in time and the inability to include the complex market reactions that normally would arise from the market shifts modeled .
Servicing, Originations and Reverse Mortgage Segments
Sensitivity Analysis
The following table summarizes the estimated change in the fair value of certain assets and liabilities given hypothetical instantaneous parallel shifts in the interest rate yield curve (in thousands):
 
December 31, 2016
 
Down 50 bps
 
Down 25 bps
 
Up 25 bps
 
Up 50 bps
Servicing segment
 
 
 
 
 
 
 
Servicing rights carried at fair value
$
(115,168
)
 
$
(51,147
)
 
$
41,295

 
$
76,804

Net change in fair value - Servicing segment
$
(115,168
)
 
$
(51,147
)
 
$
41,295

 
$
76,804

 
 
 
 
 
 
 
 
Originations segment
 
 
 
 
 
 
 
Residential loans held for sale
$
21,851

 
$
12,410

 
$
(14,099
)
 
$
(29,869
)
Freestanding derivatives (1)
(28,898
)
 
(15,606
)
 
14,949

 
30,292

Net change in fair value - Originations segment
$
(7,047
)
 
$
(3,196
)
 
$
850

 
$
423

 
 
 
 
 
 
 
 
Reverse Mortgage segment
 
 
 
 
 
 
 
Reverse loans
$
110,485

 
$
54,754

 
$
(53,822
)
 
$
(106,714
)
HMBS related obligations
(90,327
)
 
(44,867
)
 
44,287

 
87,983

Net change in fair value - Reverse Mortgage segment
$
20,158

 
$
9,887

 
$
(9,535
)
 
$
(18,731
)

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December 31, 2015
 
Down 50 bps
 
Down 25 bps
 
Up 25 bps
 
Up 50 bps
Servicing segment
 
 
 
 
 
 
 
Servicing rights carried at fair value
$
(227,315
)
 
$
(99,025
)
 
$
78,064

 
$
145,147

Servicing rights related liabilities
8,408

 
4,005

 
(3,662
)
 
(7,011
)
Net change in fair value - Servicing segment
$
(218,907
)
 
$
(95,020
)
 
$
74,402

 
$
138,136

 
 
 
 
 
 
 
 
Originations segment
 
 
 
 
 
 
 
Residential loans held for sale
$
29,695

 
$
15,759

 
$
(17,443
)
 
$
(36,162
)
Freestanding derivatives (1)
(35,817
)
 
(18,457
)
 
18,404

 
37,024

Net change in fair value - Originations segment
$
(6,122
)
 
$
(2,698
)
 
$
961

 
$
862

 
 
 
 
 
 
 
 
Reverse Mortgage segment
 
 
 
 
 
 
 
Reverse loans
$
128,204

 
$
64,074

 
$
(63,184
)
 
$
(125,508
)
HMBS related obligations
(108,500
)
 
(54,385
)
 
53,808

 
107,053

Net change in fair value - Reverse Mortgage segment
$
19,704

 
$
9,689

 
$
(9,376
)
 
$
(18,455
)
__________
(1)
Consists of IRLCs, forward sales commitments and MBS purchase commitments.
We used December 31, 2016 and 2015 market rates on our instruments to perform the sensitivity analysis. These sensitivities measure the potential impact on fair value, are hypothetical, and presented for illustrative purposes only. There are certain limitations inherent in the sensitivity analysis presented, including the necessity to conduct the analysis based on a single point in time and the inability to include complex market reactions that normally would arise from the market shifts modeled. Changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor can have an effect on other factors (i.e., a decrease in total prepayment speeds may result in an increase in credit losses), which could impact the above hypothetical effects.
Servicing Rights Carried at Fair Value
Servicing rights carried at fair value are subject to prepayment risk as the mortgage loans underlying the servicing rights permit the borrowers to prepay the loans. Consequently, the value of these servicing rights generally tend to diminish in periods of declining interest rates (as prepayments increase) and tend to increase in periods of rising interest rates (as prepayments decrease). This analysis ignores the impact of changes on certain material variables, such as non-parallel shifts in interest rates, or changing consumer behavior to incremental changes in interest rates.
Although the level of interest rates is a key driver of prepayment activity, there are other factors that influence prepayments, including home prices, underwriting standards, availability of government-sponsored refinance programs and other product characteristics. Since our Originations segment’s results of operations are positively impacted when interest rates decline, our Originations segment’s results of operations may partially offset the change in fair value of servicing rights over time. The interaction between the results of operations of these activities is a core component of our overall interest rate risk assessment. We take into account the estimated benefit of originations on our Originations segment’s results of operations to determine the impact on net economic value from a decline in interest rates, and we continuously assess our ability to replenish lost value of servicing rights and cash flow due to increased prepayments. We do not currently use derivative instruments to hedge the interest rate risk inherent in the value of servicing rights, but we may choose to use such instruments in the future. The amount and composition of derivatives used to hedge the value of servicing rights, if any, will depend on the exposure to loss of value on the servicing rights, the expected cost of the derivatives, expected liquidity needs, and the expected increase to earnings generated by the origination of new loans resulting from the decline in interest rates. The servicing rights carried at fair value sensitivity to interest rate changes decreased at December 31, 2016 from December 31, 2015 due primarily to a lower underlying loan balance resulting from sales of servicing rights, offset in part by originated loans sold with servicing retained. A smaller portfolio reduces our overall exposure to interest rate change.

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Servicing Rights Related Liabilities
Servicing rights related liabilities consisted of excess servicing spread liabilities and servicing rights financing. Servicing rights related liabilities are generally subject to fair value losses when interest rates rise. Increasing interest rates typically slow down refinancing activity. Decreased refinancing activity increases the life of the loans underlying the servicing rights related liabilities, thereby increasing the fair value of the servicing rights related liabilities. As the fair value of the servicing rights related liabilities are related to the future economic performance of certain servicing rights, any adverse changes in those servicing rights would inherently benefit the fair value of the servicing rights related liabilities by decreasing our obligation, while any beneficial changes in the assumptions used to value servicing rights would negatively impact the fair value of the servicing rights related liabilities by increasing our obligation.
Residential Loans Held for Sale and Related Freestanding Derivatives
We are subject to interest rate risk and price risk on mortgage loans held for sale during the short time from the loan funding date until the date the loan is sold into the secondary market. Interest rate lock commitments represent an agreement to extend credit to a mortgage loan applicant or to purchase loans from a third-party originator, collectively referred to as IRLC, whereby the interest rate of the loan is set prior to funding or purchase. IRLCs, which are considered freestanding derivatives, are subject to interest rate risk and related price risk during the period from the date of the commitment through the loan funding date or expiration date. Loan commitments generally range from 35 to 50 days from lock to funding of the mortgage loan and our holding period from funding to sale is an average of approximately 20 days.
An integral component of our interest rate risk management strategy is our use of freestanding derivative instruments to minimize significant fluctuations in earnings caused by changes in interest rates that affect the value of our IRLCs and mortgage loans held for sale. The derivatives utilized to hedge the interest rate risk are forward sales commitments, which are forward sales of agency TBAs. These TBAs are primarily used to fix the forward sales price that will be realized upon the sale of the mortgage loans into the secondary market. We also enter into commitments to purchase MBS as part of our overall hedging strategy.
Reverse Loans and HMBS Related Obligations
We are subject to interest rate risk on our reverse loans and HMBS related obligations as a result of different expected cash flows and longer expected durations for loans as compared to HMBS related obligations. Our reverse loans have longer durations primarily as a result of our obligations as issuer of HMBS, which include the requirement to purchase loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of the maximum claim amount.
Other Financial Instruments
The following summarizes the estimated changes in annual interest expense at December 31, 2016 and 2015 given a hypothetical and instant parallel shift in the yield curve of 25 and 50 basis points. Our total market risk is influenced by a wide variety of factors including market volatility and the liquidity of the markets.
Servicing Advance Liabilities
At December 31, 2016 and 2015 , our servicing advance agreements included both fixed rate and LIBOR-based borrowings. Based on an increase of 25 and 50 basis points in LIBOR at December 31, 2016 and the outstanding LIBOR-based liabilities recorded at such time, our annual interest expense for servicing advance liabilities would have increased by $0.9 million and $1.7 million, respectively. Based on the same increases in LIBOR at December 31, 2015 and the outstanding liabilities recorded at such time, our annual interest expense for servicing advance liabilities would have increased by $1.8 million and $3.7 million, respectively.
Warehouse Borrowings
Our master repurchase agreements are primarily LIBOR-based. Based on an increase of 25 and 50 basis points in LIBOR at December 31, 2016 and the outstanding borrowings recorded at such time, our annual interest expense for warehouse borrowings would have increased by $3.0 million and $6.0 million, respectively. Based on the same increases in LIBOR at December 31, 2015 and the outstanding borrowings recorded at such time, our annual interest expense for warehouse borrowings would have increased by $3.4 million and $6.7 million, respectively.

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Corporate Debt
Our 2013 Term Loan is LIBOR-based with a 1.0% floor in place. Based on an increase of 25 and 50 basis points in LIBOR at December 31, 2016 and the outstanding balances at such time, our annual interest expense for corporate debt would have increased by $0.3 million and $3.8 million, respectively. Due to the 1.0% floor, an increase of 25 and 50 basis points in LIBOR on outstanding debt recorded at December 31, 2015 would have had no impact on interest expense as the applicable rate would not have exceeded the 1.0% floor.
Mortgage Loans and Related Mortgage-backed Debt
We exclude mortgage loans and mortgage-backed debt of the Residual and Non-Residual Trusts from the analysis of rate-sensitive assets and liabilities. These assets and liabilities generally do not represent significant interest rate risk to us as it relates to potential losses in future earnings or fair value. Although we hold residual interests in the Residual Trusts, the mortgage loans and mortgage-backed debt in these trusts, which are carried at amortized cost, are mostly at fixed rates of interest. In contrast, approximately half of the assets of the Non-Residual Trusts are fixed rate, whereas the mortgage-backed debt is entirely variable rate. Nonetheless, the impact of changes in interest rates are mostly offset. However, we are obligated to exercise mandatory clean-up call obligations related to the Non-Residual Trusts, which we anticipate will settle beginning in 2017 and continuing through 2019 based upon our current cash flow projections. The majority of the call obligations in 2017 are anticipated to occur during the second half of the year. Upon exercise of the clean-up calls, we will be exposed to interest rate risk with regard to the purchased loans.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (AS RESTATED)
Our financial statements and related notes, together with the Report of Independent Registered Certified Public Accounting Firm thereon, are included in Part IV, Item 15. Exhibits and Financial Statement Schedules and begin on page F-1 of this report. As discussed in the Explanatory Note to this Form 10-K/A and in Note 2 to the Consolidated Financial Statements, we have restated our audited Consolidated Financial Statements and related disclosures as of and for the year ended December 31, 2016 to correct the estimated valuation allowance recorded on our deferred tax assets.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES (AS RESTATED)
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the Company's reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
In connection with the Original Filing, the Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as of December 31, 2016 . Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2016 , the design and operation of the Company's disclosure controls and procedures were not effective because of a material weakness in its internal control over financial reporting as management determined that the Company did not maintain effective internal controls over operational processes within the transaction level processing of Ditech Financial default servicing activities. Specifically, the Company did not design and maintain effective controls related to our ability to identify foreclosure tax liens and resolve such liens timely, foreclosure related advances, and the processing and oversight of loans in bankruptcy status.
Subsequent to the above evaluation in the Original Filing, the Chief Executive Officer and Chief Financial Officer determined that the Company also did not have adequate controls operating effectively to ensure that it correctly calculated its deferred tax asset valuation allowance, including having adequate technical review of the deferred tax asset valuation allowance for the year ended December 31, 2016 . The Company determined that there was an error in the calculation of the valuation allowance for federal deferred tax assets related to an ineffective review of the tax calculations associated with the valuation allowance on the deferred tax asset balance. This resulted in an error requiring the Company to restate its financial statements as of and for the year ended December 31, 2016 .

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As a result of these material weaknesses in the Company’s internal control over financial reporting the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2016 .
Management's Report on Internal Control Over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.
Management assessed the effectiveness of our internal control over financial reporting at December 31, 2016 . In making this assessment, management used the 2013 criteria set forth by COSO in the Internal Control-Integrated Framework. Based on our assessment and those criteria, management has identified material weaknesses in our internal control over financial reporting at December 31, 2016 and has therefore determined that our internal control over financial reporting was not effective as of such date.
Management has determined that the Company did not design and maintain effective internal controls over operational processes within the transaction level processing of Ditech Financial default servicing activities. Specifically, the Company did not design and maintain effective controls related to our ability to identify foreclosure tax liens and resolve such liens timely, foreclosure related advances, and the processing and oversight of loans in bankruptcy status. This control deficiency did not result in a misstatement of the Consolidated Financial Statements for the year ended December 31, 2016 or prior periods. However, the control deficiency did result in several adjustments to reserves during the fourth quarter of 2016 totaling $16.3 million for exposures related to deficient processes within the operating control environment for default servicing. The control deficiency could result in a material misstatement to the annual or interim Consolidated Financial Statements that would not be prevented or detected. Accordingly, management determined that this control deficiency constitutes a material weakness.
Management has determined that the Company did not maintain effective internal controls with respect to the operating effectiveness of the review of the tax calculations associated with the valuation allowance on the deferred tax asset balances on an annual or quarterly basis. This control deficiency resulted in a restatement of the Consolidated Financial Statements for the year ended December 31, 2016. Accordingly, management determined that this control deficiency constitutes a material weakness.
The effectiveness of our internal control over financial reporting at December 31, 2016 , has been audited by Ernst & Young LLP, an independent registered certified public accounting firm, as stated in their attestation report included in this Annual Report on Form 10-K/A which has issued a report expressing an adverse opinion on the effectiveness of our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
Other than with respect to the remediation efforts outlined below, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended December 31, 2016 covered by this Annual Report on Form 10-K/A that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Remediation of the Material Weaknesses in Internal Control Over Financial Reporting
During the fourth quarter of 2016, the Company began placing new leadership throughout Ditech Financial to strengthen operations and improve oversight of controls and processes throughout the business. During 2017, Management’s emphasis will be to design and implement certain remediation measures to address the material weaknesses and enhance the Company’s internal control over financial reporting. Management, with the oversight of our Audit Committee, expects to take the following actions to improve the design and operating effectiveness of our internal control over financial reporting in order to remediate the material weaknesses, for Ditech Financial operational processes and over the deferred tax asset valuation allowance, respectively:
Ditech Financial operational processes:
•
Management will design, document, and implement control procedures related to the review of foreclosure liens, foreclosure related advance coding, and bankruptcy plans.

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•
Management will test and evaluate the design and operating effectiveness of control procedures throughout the default servicing function.
•
Management will assess the effectiveness of the remediation plan.
Deferred tax asset valuation allowance:
•
Management will enhance the key control over the review of the calculation of the deferred tax asset valuation allowances in accordance with GAAP.
•
Management will supplement our current tax professionals with personnel who have expertise in accounting for deferred tax asset valuation allowances and/or will augment the internal review procedures to include consultation and external review procedures over the quarterly and annual income tax calculations that are used to determine the deferred tax asset valuation, as applicable.
Management intends to implement the remediation measures outlined above, relating to default servicing and deferred tax asset valuation allowance, respectively, with an expected completion date of no later than December 31, 2017. Management believes the remediation measures will strengthen Walter Investment's internal control over financial reporting and remediate the material weaknesses identified. In connection with the restatement effort, management engaged and utilized additional third party tax advisors to review and provide necessary feedback with respect to the calculation of the deferred tax asset valuation allowance. Management expects to continue to utilize these third-party tax advisors in subsequent filing periods as needed. If management is unsuccessful in fully implementing the new controls to address the material weaknesses and to strengthen the overall internal control environment, our financial condition and results of operations may result in inaccurate and untimely reporting. Management will continue to monitor the effectiveness of these remediation measures and will make any changes and take such other actions that management deems appropriate given the circumstances.


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Report of Independent Registered Certified Public Accounting Firm
The Board of Directors and Stockholders of
Walter Investment Management Corp.
We have audited Walter Investment Management Corp. and subsidiaries' internal control over financial reporting as of December 31, 2016 , based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Walter Investment Management Corp. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our report dated March, 14, 2017 we expressed an adverse opinion that Walter Investment Management Corp. and subsidiaries had not maintained effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria. Management has subsequently determined that an additional deficiency in controls related to the inadequate technical review of the calculation of the deferred tax asset valuation allowance exists, and has further concluded that such deficiency represented a material weakness as of December 31, 2016. As a result, management has updated its assessment, as presented in the accompanying Management’s Report on Internal Control Over Financial Reporting to include the additional identified material weakness. Management’s assessment has not changed Walter Investment Management Corp. and subsidiaries’ conclusion that the Company has not maintained effective internal control over financial reporting as of December 31, 2016. Accordingly, our opinion on the effectiveness of Walter Investment Management Corp. and subsidiaries’ internal control over financial reporting as of December 31, 2016, as expressed herein, has not changed from that expressed in our previous report.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment:
•
Management has determined that the Company did not design and maintain effective internal controls over operational processes within the transaction level processing of Ditech Financial default servicing activities.
•
Management has determined that the Company did not design and maintain effective internal controls over the technical review of the deferred tax asset valuation allowance calculation.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2016 consolidated financial statements of Walter Investment Management Corp. and subsidiaries. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2016 financial statements, and this report does not affect our report dated March 14, 2017 , except for Note 2 and Note 3, as to which the date is August 9, 2017 , which expressed an unqualified opinion thereon that included an explanatory paragraph regarding Walter Investment Management Corp. and subsidiaries' ability to continue as a going concern.
In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, Walter Investment Management Corp. and subsidiaries has not maintained effective internal control over financial reporting as of December 31, 2016 , based on the COSO criteria.
/s/ Ernst & Young LLP
Tampa, Florida
March 14, 2017 except for the effect of the material weakness described in the fifth paragraph above as to which the date is August 9, 2017

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ITEM 9B. OTHER INFORMATION
None.

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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 was set forth in our definitive Proxy Statement filed with the SEC on April 5, 2017 pursuant to Regulation 14A, and is incorporated herein by reference.
Code of Conduct and Ethics
We have adopted a Code of Conduct and Ethics that applies to all employees, including executive officers, and to directors. The Code of Conduct and Ethics is available on the Corporate Governance page of our website at www.investor.walterinvestment.com . If we ever were to amend or waive any provision of our Code of Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or any person performing similar functions, we intend to satisfy our disclosure obligations with respect to any such amendment or waiver by posting such information on our website set forth above rather than by filing a Form 8-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 was set forth in our definitive Proxy Statement filed with the SEC on April 5, 2017 pursuant to Regulation 14A, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 was set forth in our definitive Proxy Statement filed with the SEC on April 5, 2017 pursuant to Regulation 14A, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 was set forth in our definitive Proxy Statement filed with the SEC on April 5, 2017 pursuant to Regulation 14A, and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 was set forth in our definitive Proxy Statement filed with the SEC on April 5, 2017 pursuant to Regulation 14A, and is incorporated herein by reference.

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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (AS RESTATED)
(a) Documents filed as part of this report
(1) Financial Statements.
The Consolidated Financial Statements filed as part of this report are listed on the Table of Contents to Consolidated Financial Statements on page F-1. As explained in Note 2 to the Consolidated Financial Statements included within this Annual Report on Form 10-K/A, the Company is restating its Consolidated Financial Statements as of and for the year ended December 31, 2016 to correct the estimated valuation allowance recorded on our deferred tax assets.
(2) Financial Statement Schedules.
Financial statement schedules filed as part of this report are listed on the Table of Contents to Consolidated Financial Statements on page F-1. As explained in Note 2 to the Consolidated Financial Statements included within this Annual Report on Form 10-K/A, the Company is restating its Consolidated Financial Statements as of and for the year ended December 31, 2016 to correct the estimated valuation allowance recorded on our deferred tax assets.
(b) Exhibits.
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits attached hereto, which is incorporated herein by reference.
ITEM 16. FORM 10-K SUMMARY
Omitted.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
 
WALTER INVESTMENT MANAGEMENT CORP.
 
 
 
 
 
Dated: August 9, 2017
 
By:
 
/s/ Gary L. Tillett
 
 
 
 
Gary L. Tillett
 
 
 
 
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

 

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INDEX TO EXHIBITS
Exhibit No.
 
 
Description
2.1.1
 
 
Second Amended and Restated Agreement and Plan of Merger, dated as of February 6, 2009, among Walter Industries, Inc., JWH Holding Company, LLC, Walter Investment Management LLC, and Hanover Capital Mortgage Holdings, Inc. (Incorporated herein by reference to Annex A to the proxy statement/ prospectus forming a part of Amendment No. 4 to the Registrant's Registration Statement on Form S-4, Registration No. 333-155091, as filed with the Securities and Exchange Commission on February 17, 2009).
 
 
 
 
2.1.2
 
 
Amendment to the Second Amended and Restated Agreement and Plan of Merger, dated February 17, 2009, among Walter Industries, Inc., JWH Holding Company, LLC, Walter Investment Management LLC, and Hanover Capital Mortgage Holdings, Inc. (Incorporated herein by reference to Annex A to the proxy statement/ prospectus forming a part of Amendment No. 4 to the Registrant's Registration Statement on Form S-4, Registration No. 333-155091, as filed with the Securities and Exchange Commission on February 17, 2009).
 
 
 
 
2.2
 
 
Securities Purchase Agreement, dated as of August 25, 2010, by and among Marathon Asset Management, L.P., Michael O’Hanlon, Marix Servicing LLC, and Walter Investment Management Corp. (Incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on August 25, 2010).
 
 
 
 
2.3
 
 
Membership Interest Purchase Agreement, dated as of March 25, 2011, by and among GTCS Holdings LLC, GTH LLC, and Walter Investment Management Corp., a Maryland corporation (Incorporated herein by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on March 30, 2011).
 
 
 
 
2.4.1
 
 
Stock Purchase Agreement, dated as of August 31, 2012, by and among Walter Investment Management Corp., Reverse Mortgage Solutions, Inc., JAM Special Opportunities Fund, L.P., as principal seller, and the stockholder sellers listed on the signature pages thereto (the “RMS Purchase Agreement”) (Incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on September 6, 2012).
 
 
 
 
2.4.2
 
 
Letter of Understanding dated November 1, 2012 relating to the RMS Purchase Agreement (Incorporated herein by reference to Exhibit 2.1.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 as filed with the Securities and Exchange Commission on November 8, 2012).
 
 
 
 
2.5.1
 
 
Joint Bidding Agreement, dated as of October 19, 2012, by and between Ocwen Loan Servicing, LLC and Walter Investment Management Corporation (Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 as filed with the Securities and Exchange Commission on November 8, 2012).
 
 
 
 
2.5.2
 
 
Asset Purchase Agreement, dated as of November 2, 2012, entered into between Ocwen Loan Servicing, LLC, as purchaser, and Residential Capital, LLC, Residential Funding Company, LLC, GMAC Mortgage, Executive Trustee Services, LLC, ETS of Washington, Inc., EPRE LLC, GMACM Borrower LLC, and RFC Borrower LLC (the “ResCap Purchase Agreement”) (Incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 8, 2012).
 
 
 
 
2.5.3
 
 
Amendment No. 1, dated as of November 20, 2012, to the ResCap Purchase Agreement, by and among Ocwen Loan Servicing, LLC, and Residential Capital, LLC, Residential Funding Company, LLC, GMAC Mortgage, LLC, Executive Trustee Services, LLC, ETS of Washington, Inc., EPRE LLC, GMACM Borrower LLC, and RFC Borrower LLC (Incorporated herein by reference to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 27, 2012).
 
 
 
 
2.6
 
 
Stock Purchase Agreement, dated as of December 31, 2012, by and among Walter Investment Management Corp., Security One Lending, JAM Special Opportunities Fund II, L.P., as principal seller, and the other stockholder sellers listed on the signature pages thereto (Incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on March 18, 2013).
 
 
 
 
2.7*
 
 
Stock Purchase Agreement among Green Tree Credit Solutions LLC, Walter Investment Management Corp., Insureco, Incorporated, and InterFinancial, Inc., solely with respect to Article X, dated as of December 30, 2016.
 
 
 
 
3.1
 
 
Walter Investment Management Corp. Articles of Amendment and Restatement effective May 3, 2013 (Incorporated herein by reference to Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 as filed with the Securities and Exchange Commission on May 10, 2013).
 
 
 
 

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Exhibit No.
 
 
Description
3.2
 
 
Walter Investment Management Corp. Amended and Restated Bylaws, effective February 28, 2012 (Incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on March 5, 2012).
3.3
 
 
Articles Supplementary for the Junior Participating Preferred Stock of the Company, effective June 29, 2015 (Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 30, 2015).
 
 
 
 
3.4
 
 
Walter Investment Management Corp. Articles of Amendment, effective June 9, 2016 (Incorporated herein by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 13, 2016).
 
 
 
 
3.5
 
 
Walter Investment Management Corp. First Amendment to Bylaws, effective June 9, 2016 (Incorporated herein by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 13, 2016).
 
 
 
 
4.1
 
 
Specimen Common Stock Certificate of Registrant (Incorporated herein by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 as filed with the Securities and Exchange Commission on May 15, 2009).
 
 
 
 
4.2
 
 
Subordinated Indenture, dated as of January 13, 2012, between Walter Investment Management Corp. and Wells Fargo Bank, National Association, as trustee (Incorporated herein by reference to Exhibit 4.6 to the Registrant’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission on January 13, 2012).
 
 
 
 
4.3
 
 
First Supplemental Indenture dated as of October 23, 2012 to the Indenture dated January 13, 2012 between Walter Investment Management Corp. and Wells Fargo Bank, National Association, as trustee, and Form of 4.50% Convertible Senior Subordinated Notes due 2019 (Incorporated herein by reference to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 23, 2012).
 
 
 
 
4.4
 
 
Indenture, dated as of December 17, 2013, among Walter Investment Management Corp., the guarantor parties thereto and Wells Fargo Bank, National Association, as trustee, and form of 7.875% Senior Notes due 2021) (Incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2013).
 
 
 
 
4.5.1
 
 
Rights Agreement, dated as of June 29, 2015, between Walter Investment Management Corp. and Computershare Trust Company, N.A., as Rights Agent, which includes the Form of Articles Supplementary for the Junior Participating Preferred Stock as Exhibit A , the Form of Right Certificate as Exhibit B  and the Form of Summary of Rights as Exhibit C  (Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 30, 2015).
 
 
 
 
4.5.2
 
 
Amendment No. 1, dated as of November 16, 2015, to the Rights Agreement, dated as of June 29, 2015, between Walter Investment Management Corp. and Computershare Trust Company, N.A., as Rights Agent (Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 17, 2015).
 
 
 
 
4.5.3
 
 
Amendment No. 2, dated as of November 22, 2015, to the Rights Agreement, dated as of June 29, 2015, and previously amended by Amendment No. 1, dated November 16, 2015, each between Walter Investment Management Corp. and Computershare Trust Company, N.A., as Rights Agent (Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 23, 2015).
 
 
 
 
4.5.4
 
 
Amendment No. 3, dated as of June 28, 2016, to the Rights Agreement, dated as of June 29, 2015, and previously amended by Amendment No. 1, dated as of November 16, 2015, and Amendment No. 2, dated as of November 22, 2015, each between Walter Investment Management Corp. and Computershare Trust Company, N.A., as Rights Agent (Incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 28, 2016).
 
 
 
 
4.5.5
 
 
Amended and Restated Section 382 Rights Agreement, dated as of November 11, 2016, between Walter Investment Management Corp. and Computershare Trust Company, N.A., as Rights Agent, which includes the Form of Articles Supplementary for the Junior Participating Preferred Stock as Exhibit A , the Form of Right Certificate as Exhibit B  and the Summary of Rights as Exhibit C  (Incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 15, 2016).
 
 
 
 

138

Table of Contents

Exhibit No.
 
 
Description
4.6.1
 
 
Second Amended and Restated Indenture, dated as of October 21, 2015, among Green Tree Agency Advance Funding Trust I, as Issuer, Wells Fargo Bank, N.A. as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, Ditech Financial LLC, as Servicer and Administrator, and Barclays Bank PLC, as Administrative Agent, and consented to by Barclays Bank PLC (Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 26, 2015).
 
 
 
 
4.6.2
 
 
Amendment No. 1 to Second Amended and Restated Indenture, dated as of September 30, 2016, among Green Tree Agency Advance Funding Trust I, as Issuer, Wells Fargo Bank, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, Ditech Financial LLC, as Servicer and Administrator, and Barclays Bank PLC, as Administrative Agent, and consented to by Barclays Bank PLC (Incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 6, 2016).
 
 
 
 
4.7.1
 
 
Amended and Restated Series 2014-VF2 Indenture Supplement to Second Amended and Restated Indenture, dated as of October 21, 2015, among Green Tree Agency Advance Funding Trust I, as Issuer, Wells Fargo Bank, N.A. as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, Ditech Financial LLC, as Servicer and Administrator, and Barclays Bank PLC, as Administrative Agent (Incorporated herein by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 26, 2015).
 
 
 
 
4.7.2
 
 
Amendment No. 1 to Amended and Restated Series 2014-VF2 Indenture Supplement to Second Amended and Restated Indenture, dated as of October 5, 2016, among Green Tree Agency Advance Funding Trust I, as Issuer, Wells Fargo Bank, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, Ditech Financial LLC, as Servicer and Administrator, and Barclays Bank PLC, as Administrative Agent (Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 6, 2016).
 
 
 
 
4.8
 
 
Series 2015-T2 Indenture Supplement to Second Amended and Restated Indenture, dated as of October 21, 2015, among Green Tree Agency Advance Funding Trust I, as Issuer, Wells Fargo Bank, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, Ditech Financial LLC, as Servicer and Administrator, and Barclays Bank PLC, as Administrative Agent (Incorporated herein by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 26, 2015).
 
 
 
 
4.9
 
 
Series 2016-T1 Indenture Supplement to Second Amended and Restated Indenture, dated as of September 30, 2016, among Green Tree Agency Advance Funding Trust I, as Issuer, Wells Fargo Bank, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, Ditech Financial LLC, as Servicer and Administrator, and Barclays Bank PLC, as Administrative Agent (Incorporated herein by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 6, 2016).
 
 
 
 
10.1.1†
 
 
1999 Equity Incentive Plan (Incorporated herein by reference to Exhibit 10.7.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 as filed with the Securities and Exchange Commission on March 30, 2000).
 
 
 
 
10.1.2†
 
 
Amendment No. 1 to the Walter Investment Management Corp. 1999 Equity Incentive Plan (Incorporated by reference to Exhibit 4.4.2 to the Registrant's Registration Statement on Form S-8, Registration No. 333-160743, as filed with the Securities and Exchange Commission on July 22, 2009).
 
 
 
 
10.1.3†
 
 
Amendment No. 2 to the Walter Investment Management Corp. 1999 Equity Incentive Plan (Incorporated by reference to Exhibit 4.4.3 to the Registrant's Registration Statement on Form S-8, Registration No. 333-160743, as filed with the Securities and Exchange Commission on July 22, 2009).
 
 
 
 
10.2
 
 
Trademark License Agreement dated April 17, 2009 by and between Walter Industries, Inc. and Walter Investment Management LLC (Incorporated herein by reference to Exhibit 10.1.6 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on April 23, 2009).
 
 
 
 
10.3
 
 
Tax Separation Agreement dated as of April 17, 2009 between Walter Industries, Inc. and Walter Investment Management LLC (Incorporated herein by reference to Exhibit 10.1.8 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on April 23, 2009).
 
 
 
 
10.4
 
 
Joint Litigation Agreement between Walter Industries, Inc. and Walter Investment Management LLC, effective as of April 17, 2009 (Incorporated herein by reference to Exhibit 10.1.9 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on April 23, 2009).
 
 
 
 

139

Table of Contents

Exhibit No.
 
 
Description
10.5.1†
 
 
The 2009 Long-Term Equity Incentive Plan of Walter Investment Management Corp. (Incorporated herein by reference to Exhibit 10.65 to Walter Investment Management Corp.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 as filed with the Securities and Exchange Commission on May 15, 2009).
 
 
 
 
10.5.2†
 
 
Form of Nonqualified Option Award Agreement for Executive Officers under the 2009 Long-Term Incentive Award Plan of Walter Investment Management Corp. (Incorporated herein by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on January 8, 2010).
 
 
 
 
10.6†
 
 
Form of Director and Officer Indemnity Agreements dated April 17, 2009 (Incorporated by reference to Exhibit 10.23 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 as filed with the Securities and Exchange Commission on August 14, 2009).
 
 
 
 
10.7.1†
 
 
Employment Letter Agreement between Walter Investment Management Corp. and Denmar J. Dixon dated January 22, 2010 (Incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on January 26, 2010).
 
 
 
 
10.7.2†
 
 
Employment Agreement, by and between Walter Investment Management Corp. and Denmar J. Dixon, entered into as of April 4, 2016 (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K/A as filed with the Securities and Exchange Commission on April 6, 2016).
 
 
 
 
10.7.3†
 
 
Separation Agreement and General Release of Claims, dated as of June 8, 2016, by and between Walter Investment Management Corp. and Denmar J. Dixon (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 9, 2016).
 
 
 
 
10.8.1†
 
 
Amended and Restated Employment Letter Agreement between Walter Investment Management Corp. and Mark J. O’Brien dated March 15, 2010 (Incorporated herein by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 as filed with the Securities and Exchange Commission on May 5, 2010).
 
 
 
 
10.8.2†
 
 
Amendment to Mark J. O'Brien Employment Contract dated March 29, 2012 (Incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on April 3, 2012).
 
 
 
 
10.8.3†
 
 
Retirement Agreement, by and between Walter Investment Management Corp. and Mark J. O'Brien, entered into as of October 2, 2015 (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 5, 2015).
 
 
 
 
10.9.1†
 
 
Walter Investment Management Corp. Amended and Restated 2011 Omnibus Incentive Plan (Amended and Restated May 3, 2013) (Incorporated herein by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on May 8, 2013).
 
 
 
 
10.9.2†
 
 
Form of Nonqualified Option Award Agreement under 2011 Omnibus Incentive Plan of Walter Investment Management Corp. (Incorporated herein by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on May 16, 2011).
 
 
 
 
10.9.3†
 
 
Form of Performance Share Award Agreement under the Walter Investment Management Corp. Amended and Restated 2011 Omnibus Incentive Plan (Amended and Restated May 3, 2013) (Incorporated herein by reference to Exhibit 10.10.3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on February 26, 2015).
 
 
 
 
10.9.4†
 
 
Form of Restricted Stock Unit Award Agreement under the Walter Investment Management Corp. Amended and Restated 2011 Omnibus Incentive Plan (Amended and Restated May 3, 2013) (Incorporated herein by reference to Exhibit 10.10.4 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on February 26, 2015).
 
 
 
 
10.9.5†
 
 
Walter Investment Management Corp. 2011 Omnibus Incentive Plan, Amended and Restated effective June 9, 2016 (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 13, 2016).
 
 
 
 
10.9.6*†
 
 
Form of 2016 Nonqualified Stock Options Award Agreement under the Walter Investment Management Corp. Amended and Restated 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016).
 
 
 
 
10.9.7*†
 
 
Form of 2016 Performance Share Award Agreement under the Walter Investment Management Corp. 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016).
 
 
 
 

140

Table of Contents

Exhibit No.
 
 
Description
10.9.8*†
 
 
Form of 2016 Long Term Incentive Cash-Based Award Agreement under the Walter Investment Management Corp. 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016).
 
 
 
 
10.10†
 
 
Form of Green Tree Executive Severance Plan for Senior Executives entered into by the Company's Green Tree subsidiary (Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 as filed with the Securities and Exchange Commission on November 8, 2011).
 
 
 
 
10.11†
 
 
Severance Policy of Walter Investment Management Corp. effective February 9, 2015 (Incorporated herein by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 as filed with the Securities and Exchange Commission on February 29, 2016).
 
 
 
 
10.12.1
 
 
Amended and Restated Receivables Loan Agreement (“Receivables Loan Agreement”), dated as of May 2, 2012, by and among Green Tree Advance Receivables II LLC, as borrower, Green Tree Servicing, as administrator, the financial institutions from time to time party hereto, as lenders, Wells Fargo Bank, National Association, and Wells Fargo Capital Finance, LLC, as agent for the lenders (Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 as filed with the Securities and Exchange Commission on May 9, 2012).
 
 
 
 
10.12.2
 
 
Amendment No. 1 to Receivables Loan Agreement, dated as of June 4, 2012, by and among Green Tree Advance Receivables II LLC, as borrower, Green Tree Servicing, as administrator, the financial institutions from time to time party hereto, as lenders, Wells Fargo Bank, National Association, and Wells Fargo Capital Finance, LLC, as agent for the lenders (Incorporated herein by reference to Exhibit 10.30.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission on February 27, 2014 and amended on August 14, 2014).
 
 
 
 
10.12.3
 
 
Amendment No. 2 to Receivables Loan Agreement, dated as of May 3, 2013, by and among Green Tree Advance Receivables II LLC, as borrower, Green Tree Servicing, as administrator, the financial institutions from time to time party hereto, as lenders, Wells Fargo Bank, National Association, and Wells Fargo Capital Finance, LLC, as agent for the lenders (Incorporated herein by reference to Exhibit 10.30.2 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission on February 27, 2014 and amended on August 14, 2014).
 
 
 
 
10.12.4
 
 
Amendment No. 3 to Receivables Loan Agreement, dated as of August 13, 2013, by and among Green Tree Advance Receivables II LLC, as borrower, Green Tree Servicing, as administrator, the financial institutions from time to time party hereto, as lenders, Wells Fargo Bank, National Association, and Wells Fargo Capital Finance, LLC, as agent for the lenders (Incorporated herein by reference to Exhibit 10.30.3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission on February 27, 2014 and amended on August 14, 2014).
 
 
 
 
10.12.5
 
 
Amendment No. 4 to Receivables Loan Agreement, dated as of September 30, 2013, by and among Green Tree Advance Receivables II LLC, as borrower, Green Tree Servicing, as administrator, the financial institutions from time to time party hereto, as lenders, Wells Fargo Bank, National Association, and Wells Fargo Capital Finance, LLC, as agent for the lenders (Incorporated herein by reference to Exhibit 10.30.4 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission on February 27, 2014 and amended on August 14, 2014).
 
 
 
 
10.12.6
 
 
Amendment No. 5 to Receivables Loan Agreement, dated as of December 30, 2013, by and among Green Tree Advance Receivables II LLC, as borrower, Green Tree Servicing, as administrator, the financial institutions from time to time party hereto, as lenders, Wells Fargo Bank, National Association, and Wells Fargo Capital Finance, LLC, as agent for the lenders (Incorporated herein by reference to Exhibit 10.30.5 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission on February 27, 2014 and amended on August 14, 2014).
 
 
 
 
10.12.7
 
 
Amendment No. 6 to Receivables Loan Agreement, dated as of December 30, 2013, by and among Green Tree Advance Receivables II LLC, as borrower, Green Tree Servicing, as administrator, the financial institutions from time to time party hereto, as lenders, Wells Fargo Bank, National Association, and Wells Fargo Capital Finance, LLC, as agent for the lenders (Incorporated herein by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 filed with the Securities and Exchange Commission on August 11, 2014).
 
 
 
 
10.12.8
 
 
Amendment No. 7 to Receivables Loan Agreement, dated as of September 9, 2014, and effective as of March 31, 2014, by and among Green Tree Advance Receivables II LLC, as borrower, Green Tree Servicing, as administrator, the financial institutions from time to time party hereto, as lenders, Wells Fargo Bank, National Association, and Wells Fargo Capital Finance, LLC, as agent for the lenders (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 filed with the Securities and Exchange Commission on November 6, 2014).
 
 
 
 

141

Table of Contents

Exhibit No.
 
 
Description
10.12.9
 
 
Amendment No. 8 to Receivables Loan Agreement, dated as of July 28, 2015, by and among Green Tree Advance Receivables II LLC, as borrower, Green Tree Servicing LLC, as administrator, the financial institutions identified on the signature pages thereto, as lenders, Wells Fargo Bank, National Association, as Calculation Agent, Account Bank, Verification Agent and Securities Intermediary, and Wells Fargo Capital Finance, LLC, as agent for the lenders (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 as filed with the Securities and Exchange Commission on November 5, 2015).
 
 
 
 
10.12.10
 
 
Amendment No. 9 to Receivables Loan Agreement, dated as of April 22, 2016, by and among Green Tree Advance Receivables II LLC, as borrower, Ditech Financial LLC, as administrator, the financial institutions identified on the signature pages thereto, as lenders, Wells Fargo Bank, National Association, as calculation agent, account bank, verification agent and securities intermediary, and Wells Fargo Capital Finance, LLC, as agent for the lenders (Incorporated herein by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 as filed with the Securities and Exchange Commission on May 3, 2016).
 
 
 
 
10.13.1
 
 
Mortgage Selling and Servicing Contract (the "MSSC"), dated March 23, 2005, by and between Fannie Mae and Green Tree Servicing (Incorporated herein by reference to Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on March 18, 2013).
 
 
 
 
10.13.2
 
 
Addendum to MSSC, dated March 23, 2005, by and between Fannie Mae and Green Tree Servicing (Incorporated herein by reference to Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on March 18, 2013).
 
 
 
 
10.13.3
 
 
Guaranty made as of March 17, 2014 by Walter Investment Management Corp. for the benefit of Fannie Mae (Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 as filed with the Securities and Exchange Commission on May 8, 2014 and amended on May 13, 2014).
 
 
 
 
10.13.4+
 
 
Addendum to the MSSC, effective June 6, 2014, by and between Fannie Mae and Green Tree Servicing (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 as filed with the Securities and Exchange Commission on August 11, 2014).
 
 
 
 
10.13.5
 
 
Addendum to the MSSC between Fannie Mae and Green Tree Servicing effective April 4, 2012 (Incorporated herein by reference to Exhibit 10.14.8 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on February 26, 2015).
 
 
 
 
10.13.6
 
 
Addendum to the MSSC between Fannie Mae and Green Tree Servicing effective February 8, 2013 (Incorporated herein by reference to Exhibit 10.14.9 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on February 26, 2015).
 
 
 
 
10.13.7
 
 
Addendum to the MSSC between Fannie Mae and Green Tree Servicing effective April 29, 2013 (Incorporated herein by reference to Exhibit 10.14.10 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on February 26, 2015).
 
 
 
 
10.13.8
 
 
Addendum to the MSSC between Fannie Mae and Ditech Financial LLC dated August 31, 2015 (Incorporated herein by reference to Exhibit 10.13.11 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 as filed with the Securities and Exchange Commission on February 29, 2016).
 
 
 
 
10.14
 
 
Mortgage Servicing Rights Purchase and Sale Agreement, dated as of January 6, 2013, by and between Green Tree Servicing, and Bank of America, National Association (Incorporated herein by reference to Exhibit 10.43 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on March 18, 2013).
 
 
 
 
10.15.1
 
 
Credit Agreement dated December 19, 2013, among Walter Investment Management Corp., Credit Suisse AG, as administrative agent and collateral agent, the lenders from time to time party thereto and the other parties thereto (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on December 20, 2013).
 
 
 
 
10.15.2
 
 
Amendment No. 1, dated February 23, 2016, to the Amended and Restated Credit Agreement dated December 19, 2013, among Walter Investment Management Corp., Credit Suisse AG, as administrative agent and collateral agent and the lenders from time to time party thereto (Incorporated herein by reference to Exhibit 10.16.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 as filed with the Securities and Exchange Commission on February 29, 2016).
 
 
 
 

142

Table of Contents

Exhibit No.
 
 
Description
10.15.3
 
 
Amendment No. 2 to Amended and Restated Credit Agreement, dated as of August 5, 2016, among Walter Investment Management Corp., as borrower, the lender from time to time and parties thereto, and Credit Suisse AG, as administrative agent (Incorporated herein by reference to Exhibit 10.8 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 as filed with the Securities and Exchange Commission on August 9, 2016).
 
 
 
 
10.16†
 
 
Employment Letter Agreement between Walter Investment Management Corp. and Gary Tillett dated January 28, 2013 (Incorporated herein by reference to Exhibit 10.39 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on February 27, 2014 and amended on August 14, 2014).
 
 
 
 
10.17.1*+
 
 
Subservicing Agreement between New Residential Mortgage LLC and Ditech Financial LLC, dated August 8, 2016.
 
 
 
 
10.17.2*
 
 
Amendment No. 1 to Subservicing Agreement between New Residential Mortgage LLC and Ditech Financial LLC, dated December 29, 2016.
 
 
 
 
10.18
 
 
Amended and Restated Receivables Sale Agreement, dated as of October 21, 2015, among Ditech Financial LLC, as Seller, Green Tree Advance Receivables III LLC, as Depositor, and Walter Investment Management Corp., as Limited Guarantor, and consented to by Barclays, as Administrative Agent (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 26, 2015).
 
 
 
 
10.19
 
 
Amended and Restated Receivables Pooling Agreement, dated as of October 21, 2015, between the Green Tree Advance Receivables III LLC, as Depositor, and Green Tree Agency Advance Funding Trust I, as Issuer, and consented to by Barclays, as Administrative Agent (Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 26, 2015).
 
 
 
 
10.20
 
 
Acknowledgment Agreement with respect to Servicing Advance Receivables, dated as of December 19, 2014, by and among Green Tree Servicing, Green Tree Agency Advance Funding Trust I, Green Tree Advance Receivables III LLC, Wells Fargo Bank, N.A. as Indenture Trustee and Fannie Mae (Incorporated herein by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on December 29, 2014).
 
 
 
 
10.21
 
 
Fifth Amended and Restated Consent Agreement, dated as of September 30, 2016, among Ditech Financial LLC, Green Tree Agency Advance Funding Trust I, Barclays Bank PLC, as Administrative Agent, Green Tree Advance Receivables III LLC, Wells Fargo Bank, N.A., as Indenture Trustee, and the Federal Home Loan Mortgage Corporation (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 6, 2016).
 
 
 
 
10.22.1
 
 
Master Repurchase Agreement, dated September 29, 2015, but effective as of October 15, 2015, among Barclays Bank PLC, as Agent, Sutton Funding LLC, as Purchaser, Reverse Mortgage Solutions, Inc., as a Seller and RMS REO BRC, LLC, as a Seller (Incorporated herein by reference to Exhibit 10.22.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 as filed with the Securities and Exchange Commission on February 29, 2016).
 
 
 
 
10.22.2
 
 
Guaranty, dated September 29, 2015, but effective as of October 15, 2015, by Walter Investment Management Corp., as Guarantor, and acknowledged and agreed by Barclays Bank PLC, as Agent and Sutton Funding LLC, as Purchaser (Incorporated herein by reference to Exhibit 10.22.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 as filed with the Securities and Exchange Commission on February 29, 2016).
 
 
 
 
10.22.3
 
 
Amendment No. 1 to Master Repurchase Agreement, dated as of May 23, 2016, among Barclays Bank PLC, as agent, Sutton Funding LLC, as purchaser, Reverse Mortgage Solutions, Inc., as a seller, and RMS REO BRC, LLC, as a seller (Incorporated herein by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 as filed with the Securities and Exchange Commission on August 9, 2016).
 
 
 
 
10.22.4*
 
 
Amendment No. 2 to Master Repurchase Agreement, dated as of February 27, 2017, among Barclays Bank PLC, as agent, Sutton Funding LLC, as purchaser, Reverse Mortgage Solutions, Inc., as a seller, and RMS REO BRC, LLC, as a seller.
 
 
 
 

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Exhibit No.
 
 
Description
10.23.1
 
 
Master Repurchase Agreement, dated February 23, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, Reverse Mortgage Solutions, Inc., RMS REO CS LLC and Wilmington Savings Fund Society, FSB, D/B/A Christian Trust (Incorporated herein by reference to Exhibit 10.23.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 as filed with the Securities and Exchange Commission on February 29, 2016).
 
 
 
 
10.23.2
 
 
Guaranty, dated as of February 23, 2016, by Walter Investment Management Corp., as Guarantor (Incorporated herein by reference to Exhibit 10.23.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 as filed with the Securities and Exchange Commission on February 29, 2016).
10.23.3
 
 
Side Letter, dated as of July 22, 2016, among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, Reverse Mortgage Solutions, Inc., as seller, RMS REO CS, LLC, as REO subsidiary, RMS CS Repo Trust 2016, as transaction subsidiary, and Credit Suisse AG, as buyer (Incorporated herein by reference to Exhibit 10.7 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 as filed with the Securities and Exchange Commission on August 9, 2016).
 
 
 
 
10.23.4*
 
 
Amended & Restated Master Repurchase Agreement, dated February 21, 2017, by and among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, acting through its Cayman Islands Branch, Alpine Securitization LTD, other Buyers from time to time, Reverse Mortgage Solutions, Inc. and RMS REO CS, LLC.
 
 
 
 
10.23.5*
 
 
Amended and Restated Guaranty, dated as of February 21, 2017, by Walter Investment Management Corp., as Guarantor of all of the obligations and liabilities of Reverse Mortgage Solutions, Inc. and RMS REO CS, LLC, in favor of Credit Suisse First Boston Mortgage Capital LLC, as administrative agent under the Amended and Restated Master Repurchase Agreement, dated as of February 21, 2017.
 
 
 
 
10.24.1†
 
 
Employment Letter Agreement between Walter Investment Management Corp. and Jonathan F. Pedersen, dated October 16, 2013 (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 as filed with the Securities and Exchange Commission on May 7, 2015).
 
 
 
 
10.24.2*†
 
 
Retention Agreement between Walter Investment Management Corp. and Jonathan F. Pedersen, dated February 17, 2017.
 
 
 
 
10.25.1†
 
 
Employment Letter Agreement between Walter Investment Management Corp. and David Schneider, dated February 10, 2015 (Incorporated herein by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 as filed with the Securities and Exchange Commission on February 29, 2016).
 
 
 
 
10.25.2*†
 
 
Separation Agreement and Release of Claims between Walter Investment Management Corp. and David Schneider, dated December 2, 2016.
 
 
 
 
10.26
 
 
Letter agreement, dated as of November 16, 2015, between Walter Investment Management Corp., Birch Run Capital Advisors, LP and Daniel Beltzman (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 17, 2015).
 
 
 
 
10.27
 
 
Investor Agreement, dated as of November 22, 2015, between Walter Investment Management Corp., Baker Street Capital Management, LLC and certain of its affiliates, and Vadim Perelman (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 23, 2015).
 
 
 
 
10.28*†
 
 
Employment Letter Agreement between Walter Investment Management Corp. and Jeffrey Baker, dated October 14, 2016.
 
 
 
 
10.29.1†
 
 
Employment Agreement, by and between Walter Investment Management Corp. and Anthony Renzi, entered into as of August 8, 2016 (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on August 12, 2016).
 
 
 
 
10.29.2†
 
 
Walter Investment Management Corp. Long Term Incentive Cash-Based Award Agreement Under the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016), entered into September 13, 2016, between the Company and Anthony Renzi (Incorporated herein by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 as filed with the Securities and Exchange Commission on November 9, 2016).
 
 
 
 

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Exhibit No.
 
 
Description
10.29.3†
 
 
Walter Investment Management Corp. Restricted Stock Unit Award Agreement Under the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016), entered into September 13, 2016, between the Company and Anthony Renzi (Incorporated herein by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 as filed with the Securities and Exchange Commission on November 9, 2016).
 
 
 
 
10.30.1†
 
 
Letter Agreement, dated as of June 8, 2016, by and between Walter Investment Management Corp. and George M. Awad (Incorporated herein by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 9, 2016).
 
 
 
 
10.30.2*†
 
 
Walter Investment Management Corp. Restricted Stock Unit Award Agreement Under the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016), dated June 30, 2016, between the Company and George M. Awad.
 
 
 
 
10.31.1*†
 
 
Employment Letter Agreement between Walter Investment Management Corp. and Sheryl L. Newman, dated March 26, 2015.
 
 
 
 
10.31.2*†
 
 
Separation Agreement and Release of Claims between Walter Investment Management Corp. and Sheryl L. Newman, dated December 1, 2016.
 
 
 
 
10.32*†
 
 
Employment Letter Agreement between Walter Investment Management Corp. and Alfred W. Young, Jr., dated October 12, 2016.
 
 
 
 
21*
 
 
Subsidiaries of the Registrant.
 
 
 
 
23*
 
 
Consent of Ernst & Young LLP.
 
 
 
 
31.1*
 
 
Certification by Anthony N. Renzi pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
31.2*
 
 
Certification by Gary L. Tillett pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
32*
 
 
Certification by Anthony N. Renzi and Gary L. Tillett pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
101**
 
 
XBRL (Extensible Business Reporting Language) - The following materials from Walter Investment Management Corp.’s Annual Report on Form 10-K/A for the year ended December 31, 2016, formatted in XBRL (Extensible Business Reporting Language); (i) Consolidated Balance Sheets as of December 31, 2016 and 2015, (ii) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2016, 2015 and 2014, (iii) Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2016, 2015 and 2014; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014; and (v) Notes to Consolidated Financial Statements.
* Filed or furnished herewith.
** Filed electronically with this report.
+
Certain information has been omitted from this exhibit and filed separately with the Securities and Exchange Commission. Confidential treatment has been granted with respect to the omitted portions pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. Omitted portions are indicated in this exhibit with [***].
†
Constitutes a management contract or compensatory plan or arrangement.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.




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WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES
TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)

 
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 



Table of Contents

Report of Independent Registered Certified Public Accounting Firm
The Board of Directors and Stockholders of
Walter Investment Management Corp.
We have audited the accompanying consolidated balance sheets of Walter Investment Management Corp. and subsidiaries as of December 31, 2016 and 2015 , and the related consolidated statements of comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2016 . Our audits also included the financial statement schedule listed in the Index at Schedule I. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Walter Investment Management Corp. and subsidiaries at December 31, 2016 and 2015 , and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 , in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, the 2016 financial statements have been restated to correct a misstatement of the valuation allowance on the net deferred tax assets balance.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, on July 31, 2017 the Company entered into a Restructuring Support Agreement (“RSA”) that provides for a prepackaged plan of restructuring (“prepackaged plan”) in the event the Company is unsuccessful in otherwise restructuring its corporate debt. The prepackaged plan would provide court relief under the provisions of Chapter 11 of Title 11 of the United States Bankruptcy Code. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The 2016 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Walter Investment Management Corp. and subsidiaries’ internal control over financial reporting as of December 31, 2016 , based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 14, 2017 , except for the effect of the material weakness described in the fifth paragraph of that report, as to which the date is August 9, 2017 expressed an adverse opinion thereon.
/s/ Ernst & Young LLP

Tampa, Florida
March 14, 2017 except for Note 2 and Note 3, as to which the date is August 9, 2017

F-2

Table of Contents

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (As Restated, See Note 2)
(in thousands, except share and per share data)
 
 
December 31,
 
 
2016
 
2015
 
 
(Restated)
 
 
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
224,598

 
$
202,828

Restricted cash and cash equivalents
 
204,463

 
708,099

Residential loans at amortized cost, net (includes $5,167 and $4,457 in allowance for loan losses at December 31, 2016 and 2015, respectively)
 
665,209

 
541,406

Residential loans at fair value
 
12,416,542

 
12,673,439

Receivables, net (includes $15,033 and $16,542 at fair value at December 31, 2016 and 2015, respectively)
 
267,962

 
137,190

Servicer and protective advances, net (includes $146,781 and $120,338 in allowance for uncollectible advances at December 31, 2016 and 2015, respectively)
 
1,195,380

 
1,631,065

Servicing rights, net (includes $949,593 and $1,682,016 at fair value at December 31, 2016 and 2015, respectively)
 
1,029,719

 
1,788,576

Goodwill
 
47,747

 
367,911

Intangible assets, net
 
11,347

 
84,038

Premises and equipment, net
 
82,628

 
106,481

Deferred tax assets, net
 
—

 
108,050

Assets held for sale
 
71,085

 
—

Other assets (includes $87,937 and $58,512 at fair value at December 31, 2016 and 2015, respectively)
 
242,290

 
200,364

Total assets
 
$
16,458,970

 
$
18,549,447

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
 
 
 
Payables and accrued liabilities (includes $11,804 and $6,475 at fair value at December 31, 2016 and 2015, respectively)
 
$
759,011

 
$
597,926

Servicer payables
 
146,332

 
603,692

Servicing advance liabilities
 
783,229

 
1,229,280

Warehouse borrowings
 
1,203,355

 
1,340,388

Servicing rights related liabilities at fair value
 
1,902

 
117,000

Corporate debt
 
2,129,000

 
2,157,424

Mortgage-backed debt (includes $514,025 and $582,340 at fair value at December 31, 2016 and 2015, respectively)
 
943,956

 
1,051,679

HMBS related obligations at fair value
 
10,509,449

 
10,647,382

Deferred tax liabilities, net
 
4,774

 
—

Liabilities held for sale
 
2,402

 
—

Total liabilities
 
16,483,410

 
17,744,771

 
 
 
 
 
Commitments and contingencies (Note 33)
 

 

 
 
 
 
 
Stockholders' equity (deficit):
 
 
 
 
Preferred stock, $0.01 par value per share:
 
 
 
 
Authorized - 10,000,000 shares
 
 
 
 
Issued and outstanding - 0 shares at December 31, 2016 and 2015
 
—

 
—

Common stock, $0.01 par value per share:
 
 
 
 
Authorized - 90,000,000 shares
 
 
 
 
Issued and outstanding - 36,391,129 and 35,573,405 shares at December 31, 2016 and 2015, respectively
 
364

 
355

Additional paid-in capital
 
596,067

 
591,454

Retained earnings (accumulated deficit)
 
(621,804
)
 
212,054

Accumulated other comprehensive income
 
933

 
813

Total stockholders' equity (deficit)
 
(24,440
)
 
804,676

Total liabilities and stockholders' equity (deficit)
 
$
16,458,970

 
$
18,549,447


F-3

Table of Contents

The following table presents the assets and liabilities of the Company’s consolidated variable interest entities, which are included on the consolidated balance sheets above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated variable interest entities. The liabilities in the table below include third-party liabilities of the consolidated variable interest entities only, and for which creditors or beneficial interest holders do not have recourse to the Company, and exclude intercompany balances that eliminate in consolidation.

 
 
December 31,
 
 
2016
 
2015
ASSETS OF CONSOLIDATED VARIABLE INTEREST ENTITIES THAT CAN ONLY BE USED TO SETTLE THE OBLIGATIONS OF CONSOLIDATED VARIABLE INTEREST ENTITIES:
 
 
 
 
Restricted cash and cash equivalents
 
$
45,843

 
$
59,705

Residential loans at amortized cost, net
 
462,877

 
500,563

Residential loans at fair value
 
492,499

 
526,016

Receivables, net
 
15,798

 
16,542

Servicer and protective advances, net
 
734,707

 
1,136,246

Other assets
 
19,831

 
12,170

Total assets
 
$
1,771,555

 
$
2,251,242

 
 
 
 
 
LIABILITIES OF THE CONSOLIDATED VARIABLE INTEREST ENTITIES FOR WHICH CREDITORS OR BENEFICIAL INTEREST HOLDERS DO NOT HAVE RECOURSE TO THE COMPANY:
 
 
 
 
Payables and accrued liabilities
 
$
2,985

 
$
3,435

Servicing advance liabilities
 
650,565

 
992,769

Mortgage-backed debt (includes $514,025 and $582,340 at fair value at December 31, 2016 and 2015, respectively)
 
943,956

 
1,051,679

Total liabilities
 
$
1,597,506

 
$
2,047,883

The accompanying notes are an integral part of the consolidated financial statements.


F-4

Table of Contents

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (As Restated, See Note 2)
(in thousands, except per share data)
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(Restated)
 
 
 
 
REVENUES
 
 
 
 
 
 
Net servicing revenue and fees
 
$
340,991

 
$
494,267

 
$
601,510

Net gains on sales of loans
 
409,448

 
453,840

 
462,172

Net fair value gains on reverse loans and related HMBS obligations
 
59,022

 
98,265

 
109,972

Interest income on loans
 
45,700

 
74,365

 
134,555

Insurance revenue
 
41,968

 
47,201

 
71,010

Other revenues
 
98,588

 
106,321

 
107,934

Total revenues
 
995,717

 
1,274,259

 
1,487,153

 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
General and administrative
 
619,772

 
574,091

 
577,506

Salaries and benefits
 
520,357

 
576,817

 
578,627

Goodwill and intangible assets impairment
 
326,286

 
207,557

 
82,269

Interest expense
 
255,781

 
273,606

 
303,103

Depreciation and amortization
 
59,426

 
69,128

 
72,721

Other expenses, net
 
10,530

 
10,557

 
10,803

Total expenses
 
1,792,152

 
1,711,756

 
1,625,029

 
 
 
 
 
 
 
OTHER GAINS (LOSSES)
 
 
 
 
 
 
Net gains on extinguishment
 
14,662

 
4,660

 
—

Other net fair value gains (losses)
 
(4,234
)
 
7,398

 
19,280

Other
 
(3,811
)
 
21,013

 
(744
)
Total other gains
 
6,617

 
33,071

 
18,536

 
 
 
 
 
 
 
Loss before income taxes
 
(789,818
)
 
(404,426
)
 
(119,340
)
Income tax expense (benefit)
 
44,040

 
(141,236
)
 
(9,012
)
Net loss
 
$
(833,858
)
 
$
(263,190
)
 
$
(110,328
)
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS) BEFORE TAXES
 
 
 
 
 
 
Change in postretirement benefits liability
 
$
100

 
$
193

 
$
138

Amortization of realized losses on closed hedges
 
—

 
—

 
(145
)
Unrealized gain on available-for-sale security in other assets
 
75

 
503

 
77

Other comprehensive income before taxes
 
175

 
696

 
70

Income tax expense for other comprehensive income items
 
55

 
278

 
173

Other comprehensive income (loss)
 
120

 
418

 
(103
)
Total comprehensive loss
 
$
(833,738
)
 
$
(262,772
)
 
$
(110,431
)
 
 
 
 
 
 
 
Net loss
 
$
(833,858
)
 
$
(263,190
)
 
$
(110,328
)
Basic and diluted loss per common and common equivalent share
 
$
(23.18
)
 
$
(7.00
)
 
$
(2.93
)
Weighted-average common and common equivalent shares outstanding — basic and diluted
 
35,973

 
37,578

 
37,631

The accompanying notes are an integral part of the consolidated financial statements.

F-5

Table of Contents

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (As Restated, See Note 2)
(in thousands, except share data)

 
 
Common Stock
 
Additional Paid-in Capital
 
Retained
Earnings (Accumulated Deficit)
 
Accumulated Other
Comprehensive
Income
 
Total
 
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
(Restated)
 
 
 
(Restated)
Balance at January 1, 2014
 
37,377,274

 
$
374

 
$
580,572

 
$
585,572

 
$
498

 
$
1,167,016

Net loss
 
—

 
—

 
—

 
(110,328
)
 
—

 
(110,328
)
Other comprehensive loss, net of tax
 
—

 
—

 
—

 
—

 
(103
)
 
(103
)
Share-based compensation
 
—

 
—

 
14,533

 
—

 
—

 
14,533

Excess tax benefit on share-based compensation
 
—

 
—

 
42

 
—

 
—

 
42

Share-based compensation issuances, net
 
334,349

 
3

 
5,496

 
—

 
—

 
5,499

Balance at December 31, 2014
 
37,711,623

 
377

 
600,643

 
475,244

 
395

 
1,076,659

Net loss
 
—

 
—

 
—

 
(263,190
)
 
—

 
(263,190
)
Other comprehensive income, net of tax
 
—

 
—

 
—

 
—

 
418

 
418

Share-based compensation
 
—

 
—

 
20,937

 
—

 
—

 
20,937

Tax shortfall on share-based compensation
 
 
 
 
 
(1,367
)
 
 
 
 
 
(1,367
)
Share-based compensation issuances, net
 
244,515

 
2

 
(718
)
 
—

 
—

 
(716
)
Repurchase and cancellation of common stock under repurchase plan
 
(2,382,733
)
 
(24
)
 
(28,041
)
 
—

 
—

 
(28,065
)
Balance at December 31, 2015
 
35,573,405

 
355

 
591,454

 
212,054

 
813


804,676

Net loss (As Restated)
 
—

 
—

 
—

 
(833,858
)
 
—

 
(833,858
)
Other comprehensive income, net of tax
 
—

 
—

 
—

 
—

 
120

 
120

Share-based compensation
 
—

 
—

 
6,568

 
—

 
—

 
6,568

Tax shortfall on share-based compensation
 
—

 
—

 
(1,393
)
 
—

 
—

 
(1,393
)
Share-based compensation issuances, net
 
817,724

 
9

 
(562
)
 
—

 
—

 
(553
)
Balance at December 31, 2016
 
36,391,129

 
$
364

 
$
596,067

 
$
(621,804
)
 
$
933

 
$
(24,440
)
The accompanying notes are an integral part of the consolidated financial statements.



F-6

Table of Contents

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (As Restated, See Note 2)
(in thousands)

 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(Restated)
 
 
 
 
Operating activities
 
 
 
 
 
 
Net loss
 
$
(833,858
)
 
$
(263,190
)
 
$
(110,328
)
 
 
 
 
 
 
 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
 
 
 
 
 
 
Net fair value gains on reverse loans and related HMBS obligations
 
(59,022
)
 
(98,265
)
 
(109,972
)
Amortization of servicing rights
 
21,801

 
26,827

 
43,101

Change in fair value of servicing rights
 
480,476

 
401,992

 
273,502

Change in fair value of servicing rights related liabilities
 
(13,518
)
 
(1,587
)
 
(2,114
)
Change in fair value of charged-off loans
 
(20,716
)
 
(18,475
)
 
(7,598
)
Other net fair value (gains) losses
 
11,087

 
1,682

 
(8,530
)
Accretion of discounts on residential loans and advances
 
(3,652
)
 
(7,130
)
 
(15,744
)
Accretion of discounts on debt and amortization of deferred debt issuance costs
 
33,413

 
31,412

 
33,783

Provision for uncollectible advances
 
64,729

 
52,679

 
75,704

Depreciation and amortization of premises and equipment and intangible assets
 
59,426

 
69,128

 
72,721

Provision (benefit) for deferred income taxes
 
111,374

 
(196,326
)
 
(35,408
)
Share-based compensation
 
6,568

 
20,937

 
14,533

Purchases and originations of residential loans held for sale
 
(21,054,053
)
 
(25,942,841
)
 
(18,878,305
)
Proceeds from sales of and payments on residential loans held for sale
 
21,410,118

 
25,896,204

 
19,042,387

Net gains on sales of loans
 
(409,448
)
 
(453,840
)
 
(462,172
)
Goodwill and intangible assets impairment
 
326,286

 
207,557

 
82,269

Proceeds from sale of trading security
 
—

 
70,390

 
—

Gain on sale of trading security
 
—

 
(10,296
)
 
—

Gain on sale of investments
 
—

 
(8,959
)
 
—

Other
 
4,999

 
(3,188
)
 
1,104

 
 
 
 
 
 
 
Changes in assets and liabilities
 
 
 
 
 
 
Decrease (increase) in receivables
 
(81,695
)
 
(4,196
)
 
67,416

Decrease (increase) in servicer and protective advances
 
380,298

 
135,831

 
(289,464
)
Decrease (increase) in other assets
 
16,434

 
29,793

 
(17,332
)
Increase (decrease) in payables and accrued liabilities
 
(24,429
)
 
5,936

 
67,018

Increase (decrease) in servicer payables, net of change in restricted cash
 
25,332

 
9,832

 
(40,841
)
Cash flows provided by (used in) operating activities
 
451,950

 
(48,093
)
 
(204,270
)
 
 
 
 
 
 
 

F-7

Table of Contents

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (As Restated, See Note 2) (Continued)
(in thousands)
 
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(Restated)
 
 
 
 
Investing activities
 
 
 
 
 
 
Purchases and originations of reverse loans held for investment
 
(896,879
)
 
(1,471,275
)
 
(1,505,215
)
Principal payments received on reverse loans held for investment
 
1,122,267

 
871,832

 
548,660

Principal payments received on mortgage loans held for investment
 
92,619

 
114,906

 
162,257

Payments received on charged-off loans held for investment
 
23,060

 
26,385

 
14,929

Payments received on receivables related to Non-Residual Trusts
 
8,110

 
7,481

 
9,471

Proceeds from sales of real estate owned, net
 
111,091

 
76,703

 
55,306

Purchases of premises and equipment
 
(32,866
)
 
(27,761
)
 
(21,573
)
Decrease in restricted cash and cash equivalents
 
8,946

 
9,219

 
11,333

Payments for acquisitions of businesses, net of cash acquired
 
(3,066
)
 
(5,095
)
 
(197,061
)
Acquisitions of servicing rights, net
 
(9,794
)
 
(264,743
)
 
(268,618
)
Proceeds from sales of servicing rights, net
 
280,970

 
—

 
—

Proceeds from sale of residual interests in Residual Trusts
 
—

 
189,513

 
—

Proceeds from sale of investment
 
—

 
14,376

 
—

Acquisitions of charged-off loans held for investment
 
—

 
—

 
(64,548
)
Other
 
(4,649
)
 
3,511

 
10,948

Cash flows provided by (used in) investing activities
 
699,809

 
(454,948
)
 
(1,244,111
)
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
Payments on corporate debt
 
(480
)
 
(12,901
)
 
(17,220
)
Extinguishments and settlement of debt
 
(31,037
)
 
(79,877
)
 
—

Proceeds from securitizations of reverse loans
 
960,157

 
1,622,481

 
1,617,399

Payments on HMBS related obligations
 
(1,371,375
)
 
(1,025,458
)
 
(637,272
)
Issuances of servicing advance liabilities
 
2,179,488

 
2,073,227

 
2,299,930

Payments on servicing advance liabilities
 
(2,625,476
)
 
(2,206,965
)
 
(1,905,331
)
Net change in warehouse borrowings related to mortgage loans
 
(151,172
)
 
207,305

 
75,726

Net change in warehouse borrowings related to reverse loans
 
14,139

 
(43,873
)
 
15,667

Proceeds from sales of excess servicing spreads and servicing rights
 
34,307

 
55,698

 
75,426

Payments on servicing rights related liabilities
 
(22,092
)
 
(12,317
)
 
(6,822
)
Payments on mortgage-backed debt
 
(107,598
)
 
(136,493
)
 
(181,155
)
Other debt issuance costs paid
 
(11,039
)
 
(13,949
)
 
(17,281
)
Repurchase of shares under stock repurchase plan
 
—

 
(28,065
)
 
—

Other
 
2,189

 
(13,119
)
 
(42,396
)
Cash flows provided by (used in) financing activities
 
(1,129,989
)
 
385,694

 
1,276,671

 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
21,770

 
(117,347
)
 
(171,710
)
Cash and cash equivalents at the beginning of the year
 
202,828

 
320,175

 
491,885

Cash and cash equivalents at the end of the year
 
$
224,598

 
$
202,828

 
$
320,175

The accompanying notes are an integral part of the consolidated financial statements.

F-8

Table of Contents

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)
1. Business and Basis of Presentation
Walter Investment Management Corp. and its subsidiaries, or the Company, is a leading independent servicer and originator of mortgage loans and servicer of reverse mortgage loans. The Company services a wide array of loans across the credit spectrum for its own portfolio and for GSEs, government agencies, third-party securitization trusts and other credit owners. Through the consumer, correspondent and wholesale lending channels, the Company originates and purchases residential mortgage loans that are predominantly sold to GSEs and government agencies. The Company also operates two supplementary businesses; asset receivables management and real estate owned property management and disposition.
The Company operates throughout the U.S. through three reportable segments, Servicing, Originations, and Reverse Mortgage. Refer to Note 31 for additional information related to segment reporting.
Certain acronyms and terms used throughout these notes are defined in the Glossary of Terms in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with GAAP. The consolidated financial statements include the accounts of Walter Investment, its wholly-owned subsidiaries, and VIEs, of which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated. The results of operations for business combinations are included from their respective dates of acquisition.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although management is not currently aware of any factors that would significantly change its estimates and assumptions, actual results may differ from these estimates.
Revision of Previously Issued Financial Statements
During the year ended December 31, 2016, the Company made immaterial corrections of errors in its consolidated balance sheet to insurance related receivables and payables. The insurance business was acquired in 2011. The accounting related to insurance premium receivables and carrier payables was maintained consistently with practices prior to the acquisition. As part of the potential sale transaction, discussed in Note 18, certain agreements related to the insurance business were further reviewed and it was determined that the gross up of premiums and related carrier payables was not consistent with the terms of such agreements. Thus, the Company assessed the effect of the overstatement in the aggregate on prior periods’ financial statements in accordance with the SEC’s Staff Accounting Bulletins No. 99 and 108 and, based on an analysis of quantitative and qualitative factors, determined that the overstatement was not material to the Company’s prior interim and annual financial statements. The Company corrected the overstatement in the year ended December 31, 2016 and revised its previously-issued financial statements for the years ended December 31, 2015. All financial information contained in the accompanying notes to these financial statements has been revised to reflect the correction of the overstatement. Total assets and total liabilities at December 31, 2015 decreased by $42.1 million , which included a decrease in receivables, net of $77.2 million $77.2 million , an increase in servicer and protective advances, net of $35.2 million , and a decrease in payables and accrued liabilities of $42.1 million .
The Company also revised the consolidated statements of cash flows for the years ended December 31, 2015 and 2014. All of the revisions were made to the changes in assets and liabilities included in cash flows provided by (used in) operating activities. For the year ended December 31, 2015, cash flows from the change in receivables decreased by $6.8 million , while the cash flows from the change in servicer and protective advances and change in payables and accrued liabilities increased by $1.9 million and $4.9 million , respectively. For the year ended December 31, 2014, cash flows from the change in receivables decreased by $3.1 million , while the cash flows from the change in servicer and protective advances and change in payables and accrued liabilities increased by $1.9 million and $1.2 million , respectively.
The Company evaluated its internal controls over financial reporting as it related to this overstatement. The error in application of accounting guidance occurred at the time of acquisition of the insurance business. Subsequent controls over contract review were implemented in 2013 and deemed to be operating effectively as of December 31, 2016 and 2015, respectively.

F-9

Table of Contents

Recent Accounting Guidance
In May 2014, the FASB issued new revenue recognition guidance that supersedes most industry-specific guidance but does exclude insurance contracts and financial instruments. Under the new revenue recognition guidance, entities are required to identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when the entity satisfies a performance obligation. In April 2015, the FASB voted for a one-year deferral of the effective date, resulting in this new guidance being effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017. Subsequent to the initial issuance, the FASB has continued to issue updates to this guidance to provide additional clarification and implementation instructions to issuers regarding (i) principal versus agent considerations, (ii) identifying performance obligations, (iii) licensing, and (iv) narrow-scope improvements and practical expedients relating to assessing collectability, presentation of sales taxes, non-cash consideration, and completed contracts and contract modifications at transition. The Company has reviewed the scope of the guidance and monitored the determinations of the FASB Transition Resource Group and concluded that a number of the Company's most significant revenue streams are not within the scope of the standard because the standard does not apply to revenue on contracts accounted for under the transfers and servicing of financial assets or financial instruments standards. Therefore, revenue recognition for these contracts will remain unchanged. However, the FASB has issued, and may issue in the future, interpretive guidance that may cause the Company’s evaluation to change. The Company continues to evaluate certain select revenue streams, including subservicing fees, for the effect that this guidance will have on its consolidated financial statements. Based on current guidance available, while there may be some impact on revenue recognition, we do not expect the adoption of this guidance to have a significant impact on the consolidated financial statements. The Company has not yet selected a transition method.
In August 2014, the FASB issued an accounting standards update intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. This standard was effective for the Company beginning December 31, 2016. The Company’s disclosures reflect required elements of this standard as a result of management’s evaluation.
In April 2015, the FASB issued an accounting standards update that provides guidance regarding whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the entity should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the entity should account for the arrangement as a service contract. This guidance was effective for the Company beginning January 1, 2016. The adoption of this guidance did not have a significant impact on the Company's consolidated financial statements.
In September 2015, the FASB issued an accounting standards update that provides updated guidance regarding simplifying the accounting for recognizing adjustments to provisional amounts identified during the measurement period in a business combination. To simplify the accounting for these adjustments, the amendments in this update eliminate the requirement to retrospectively account for the adjustments and to recognize them in the period that they are identified. This guidance was effective for the Company beginning January 1, 2016. The adoption of this guidance did not have a significant impact on the Company's consolidated financial statements.
In January 2016, the FASB issued an accounting standards update that amends the guidance on the classification and measurement of financial instruments. The new standard revises an entity's accounting related to (i) the classification and measurement of investments in equity securities and (ii) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017. At December 31, 2016, the Company did not hold any equity securities measured at fair value, but did have certain financial liabilities measured at fair value. The Company is currently evaluating the effect that this guidance will have on its consolidated financial statements.
In February 2016, the FASB issued an accounting standards update that requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset to not recognize lease assets and lease liabilities. In transition, lessees are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients that entities may elect to apply. This guidance is effective for fiscal years beginning after December 15, 2018, with early application permitted. While the Company is currently evaluating the effect that this guidance will have on its consolidated financial statements, it will result in the recognition of certain operating leases as right-of-use assets and lease liabilities on the consolidated balance sheets. The Company’s current minimum commitments under noncancelable operating leases are described in Note 33.

F-10

Table of Contents

In March 2016, the FASB issued an accounting standards update that provides updated guidance for improvements to employee share-based payment accounting. The new standard revises an entity's accounting for income taxes on share-based-compensation, such that all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Finally, the new standard allows entities to estimate the number of forfeitures expected to occur when measuring compensation cost (consistent with current GAAP) or to account for forfeitures in compensation cost when they occur. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2016. The Company will adopt this guidance in the first quarter of 2017 by recording the cumulative impact, if any, of applying the standard to retained earnings. The Company has elected to continue with its current methodology of estimating expected forfeitures at the date of grant, and adjust throughout the vesting term as needed. If the Company had adopted this guidance in 2016, the Company’s has estimated its income tax benefit and effective tax rate would have decreased by approximately $1.4 million and less than 1% , respectively, and diluted loss per share would have decreased by less than $0.10 per share.
In March 2016, the FASB issued an accounting standards update that provides guidance to simplify the transition to the equity method of accounting for investments. It requires that the equity method investor add the cost of acquiring additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. It also requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income. This guidance was effective for the Company beginning January 1, 2017. The adoption of this guidance will not have a significant impact on the Company's consolidated financial statements.
In June 2016, the FASB issued an accounting standards update that amends the guidance for recognizing credit losses on financial instruments measured at amortized cost. This update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2019. The Company does not expect that, based on the Company's current methodologies for accounting for financial instruments, the adoption of this guidance will have a material impact on its consolidated financial statements. The significance of the adoption of this guidance may change at the time of adoption based on the nature of the Company's financial instruments at that time and the corresponding conclusions reached.
In August 2016, the FASB issued an accounting standards update that amends the guidance on the classification of certain cash receipts and cash payments presented within the statement of cash flows to reduce the existing diversity in practice. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the effect that this guidance will have on its consolidated financial statements.
In October 2016, the FASB issued an accounting standards update that amends the guidance on the classification of income taxes related to the intra-entity transfer of assets other than inventory. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the effect that this guidance will have on its consolidated financial statements. However, the significance of adoption is dependent on the nature of the transactions and corresponding tax laws in effect at the time of adoption.
In October 2016, the FASB issued an accounting standards update that amends the guidance on consolidation for interests held through related parties that are under common control. The update amends the consolidation guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. This guidance was effective for the Company beginning January 1, 2017. The adoption of this guidance will not have a significant impact on the Company's consolidated financial statements.
In November 2016, the FASB issued an accounting standards update that amends the guidance on restricted cash within the statement of cash flows. The update amends the classification of restricted cash and cash equivalents to be included within cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The adoption will impact the presentation of the cash flows, but will not otherwise have a material impact on the consolidated results of operations or financial condition.

F-11

Table of Contents

In January 2017, the FASB issued an accounting standards update that amends the guidance on business combinations. The update clarifies the definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a transaction should be accounted for as an acquisition of assets or a business. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company will apply this guidance to its assessment of applicable transactions, such as acquisitions and disposals of assets or business, consummated after the adoption date.
In January 2017, the FASB issued an accounting standards update that amends the guidance on goodwill. Under the update, goodwill impairment is measured as the amount by which a reporting unit’s carrying value exceeds its fair value, while not exceeding the carrying value of goodwill. The update eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. This guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently considering the timing of adoption and will apply this guidance to applicable impairment tests after the adoption date.
2. Restatement of Previously Issued Consolidated Financial Statements
The restatement of the Company's audited consolidated financial statements results from an error in the calculation of the valuation allowance on the net deferred tax assets balance. In determining the amount of the valuation allowance in the Original Filing, an error was made that resulted in the double-counting of expected future taxable income associated with the projected reversals of taxable temporary differences (i.e., deferred tax liabilities). Accordingly, the Company has revised its calculation to reflect the removal of the duplicative amounts, and reevaluated all sources of estimated future taxable income used to assess the recoverability of deferred tax assets under GAAP after taking into account both positive and negative evidence through the issuance date of the restated financial statements to consider the effect of the error.
The determination of the need for a valuation allowance in deferred tax assets under GAAP is highly judgmental and requires the subjective weighting of both positive and negative evidence relating to expectations about the recoverability of those assets. Management has reevaluated both positive and negative evidence through the issuance date of the restated financial statements regarding the use of all sources of future taxable income on the recoverability of its deferred tax assets after correcting for the duplication error. While judgments and estimates made at the time of the Original Filing, using then-available facts and circumstances, are considered to be reasonable and appropriate, the revised analysis has resulted in management's conclusion as of the restatement issuance date that only reversals of deferred tax liabilities and/or net operating loss carrybacks when available should be used as a source of income to recover its deferred tax assets.
Based on the revised calculation and analysis, the Company concluded that the valuation allowance on the deferred tax assets should be increased by $304.7 million , which reduces the net deferred tax assets that are expected to be realized in the future. The impact of the adjustment was to reduce the overall net deferred tax assets balance by increasing the valuation allowance, and reducing the tax benefit recorded in the Company's previously issued consolidated statement of comprehensive loss.
The consolidated financial statements included in this Amended Filing have been restated as of and for the year ended December 31, 2016 to reflect the adjustment described above. The following statements present the effect of the restatement on (i) the consolidated balance sheet as of December 31, 2016, (ii) the consolidated statements of comprehensive loss; stockholders’ equity and cash flows for the year then ended, and (iii) the notes related thereto. The impact to stockholders' equity is reflected below in the restated consolidated balance sheet and statement of comprehensive loss. There was no impact on 2015 or prior financial statements.

F-12

Table of Contents

The following table presents the consolidated balance sheet as previously reported, restatement adjustments, and the consolidated balance sheet as restated as of December 31, 2016 (in thousands):
 
 
December 31, 2016
 
 
As Previously Reported
 
Restatement Adjustments
 
As Restated
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
224,598

 
$
—

 
$
224,598

Restricted cash and cash equivalents
 
204,463

 
—

 
204,463

Residential loans at amortized cost, net
 
665,209

 
—

 
665,209

Residential loans at fair value
 
12,416,542

 
—

 
12,416,542

Receivables, net
 
267,962

 
—

 
267,962

Servicer and protective advances, net
 
1,195,380

 
—

 
1,195,380

Servicing rights, net
 
1,029,719

 
—

 
1,029,719

Goodwill
 
47,747

 
—

 
47,747

Intangible assets, net
 
11,347

 
—

 
11,347

Premises and equipment, net
 
82,628

 
—

 
82,628

Deferred tax assets, net
 
299,926

 
(299,926
)
 
—

Assets held for sale
 
71,085

 
—

 
71,085

Other assets
 
242,290

 
—

 
242,290

Total assets
 
$
16,758,896

 
$
(299,926
)
 
$
16,458,970

 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
 
 
 
 
Payables and accrued liabilities
 
$
759,011

 
$
—

 
$
759,011

Servicer payables
 
146,332

 
—

 
146,332

Servicing advance liabilities
 
783,229

 
—

 
783,229

Warehouse borrowings
 
1,203,355

 
—

 
1,203,355

Servicing rights related liabilities at fair value
 
1,902

 
—

 
1,902

Corporate debt
 
2,129,000

 
—

 
2,129,000

Mortgage-backed debt
 
943,956

 
—

 
943,956

HMBS related obligations at fair value
 
10,509,449

 
—

 
10,509,449

Deferred tax liabilities, net
 
—

 
4,774

 
4,774

Liabilities held for sale
 
2,402

 
—

 
2,402

Total liabilities
 
16,478,636

 
4,774

 
16,483,410

 
 
 
 
 
 
 
Stockholders' equity (deficit):
 
 
 
 
 
 
Preferred stock
 
—

 
—

 
—

Common stock
 
364

 
—

 
364

Additional paid-in capital
 
596,067

 
—

 
596,067

Accumulated deficit
 
(317,104
)
 
(304,700
)
 
(621,804
)
Accumulated other comprehensive income
 
933

 
—

 
933

Total stockholders' equity (deficit)
 
280,260

 
(304,700
)
 
(24,440
)
Total liabilities and stockholders' equity (deficit)
 
$
16,758,896

 
$
(299,926
)
 
$
16,458,970



F-13

Table of Contents

The following table presents the consolidated statement of comprehensive loss as previously reported, restatement adjustments, and the consolidated statement of comprehensive loss as restated for the year ended December 31, 2016 (in thousands, except share and per share data):
 
 
For the Year Ended December 31, 2016
 
 
As Previously Reported
 
Restatement Adjustments
 
As Restated
REVENUES
 
 
 
 
 
 
Net servicing revenue and fees
 
$
340,991

 
$
—

 
$
340,991

Net gains on sales of loans
 
409,448

 
—

 
409,448

Net fair value gains on reverse loans and related HMBS obligations
 
59,022

 
—

 
59,022

Interest income on loans
 
45,700

 
—

 
45,700

Insurance revenue
 
41,968

 
—

 
41,968

Other revenues
 
98,588

 
—

 
98,588

Total revenues
 
995,717

 
—

 
995,717

 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
General and administrative
 
619,772

 
—

 
619,772

Salaries and benefits
 
520,357

 
—

 
520,357

Goodwill and intangible assets impairment
 
326,286

 
—

 
326,286

Interest expense
 
255,781

 
—

 
255,781

Depreciation and amortization
 
59,426

 
—

 
59,426

Other expenses, net
 
10,530

 
—

 
10,530

Total expenses
 
1,792,152

 
—

 
1,792,152

 
 
 
 
 
 
 
OTHER GAINS
 
 
 
 
 
 
Net gains on extinguishment
 
14,662

 
—

 
14,662

Other net fair value losses
 
(4,234
)
 
—

 
(4,234
)
Other
 
(3,811
)
 
—

 
(3,811
)
Total other gains
 
6,617

 
—

 
6,617

 
 
 
 
 
 
 
Loss before income taxes
 
(789,818
)
 
—

 
(789,818
)
Income tax expense (benefit)
 
(260,660
)
 
304,700

 
44,040

Net loss
 
$
(529,158
)
 
$
(304,700
)
 
$
(833,858
)
 
 
 
 
 
 
 
OTHER COMPREHENSIVE LOSS BEFORE TAXES
 
 
 
 
 
 
Change in postretirement benefits liability
 
$
100

 
$
—

 
$
100

Amortization of realized losses on closed hedges
 
—

 
—

 
—

Unrealized gain on available-for-sale security in other assets
 
75

 
—

 
75

Other comprehensive income before taxes
 
175

 
—

 
175

Income tax expense for other comprehensive income items
 
55

 
—

 
55

Other comprehensive income
 
120

 
—

 
120

Total comprehensive loss
 
$
(529,038
)
 
$
(304,700
)
 
$
(833,738
)
 
 
 
 
 
 
 
Basic and diluted loss per common and common equivalent share
 
$
(14.71
)
 
$
(8.47
)
 
$
(23.18
)
Weighted-average common and common equivalent shares outstanding — basic and diluted
 
35,973

 
—

 
35,973


F-14

Table of Contents

The following table presents the consolidated statement of cash flows as previously reported, restatement adjustments, and the consolidated statement of cash flows as restated for the year ended December 31, 2016 (in thousands):
 
 
For the Year Ended December 31, 2016
 
 
As Previously Reported
 
Restatement Adjustments
 
As Restated
Operating activities
 
 
 
 
 
 
Net loss
 
$
(529,158
)
 
$
(304,700
)
 
$
(833,858
)
 
 
 
 
 
 
 
Adjustments to reconcile net loss to net cash provided by operating activities
 
 
 
 
 
 
Net fair value gains on reverse loans and related HMBS obligations
 
(59,022
)
 
—

 
(59,022
)
Amortization of servicing rights
 
21,801

 
—

 
21,801

Change in fair value of servicing rights
 
480,476

 
—

 
480,476

Change in fair value of servicing rights related liabilities
 
(13,518
)
 
—

 
(13,518
)
Change in fair value of charged-off loans
 
(20,716
)
 
—

 
(20,716
)
Other net fair value losses
 
11,087

 
—

 
11,087

Accretion of discounts on residential loans and advances
 
(3,652
)
 
—

 
(3,652
)
Accretion of discounts on debt and amortization of deferred debt issuance costs
 
33,413

 
—

 
33,413

Provision for uncollectible advances
 
64,729

 
—

 
64,729

Depreciation and amortization of premises and equipment and intangible assets
 
59,426

 
—

 
59,426

Provision (benefit) for deferred income taxes
 
(193,326
)
 
304,700

 
111,374

Share-based compensation
 
6,568

 
—

 
6,568

Purchases and originations of residential loans held for sale
 
(21,054,053
)
 
—

 
(21,054,053
)
Proceeds from sales of and payments on residential loans held for sale
 
21,410,118

 
—

 
21,410,118

Net gains on sales of loans
 
(409,448
)
 
—

 
(409,448
)
Goodwill and intangible assets impairment
 
326,286

 
—

 
326,286

Other
 
4,999

 
—

 
4,999

 
 
 
 
 
 
 
Changes in assets and liabilities
 
 
 
 
 
 
Increase in receivables
 
(81,695
)
 
—

 
(81,695
)
Decrease in servicer and protective advances
 
380,298

 
—

 
380,298

Decrease in other assets
 
16,434

 
—

 
16,434

Decrease in payables and accrued liabilities
 
(24,429
)
 
—

 
(24,429
)
Increase in servicer payables, net of change in restricted cash
 
25,332

 
—

 
25,332

Cash flows provided by operating activities
 
451,950

 
—

 
451,950

 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
Purchases and originations of reverse loans held for investment
 
(896,879
)
 
—

 
(896,879
)
Principal payments received on reverse loans held for investment
 
1,122,267

 
—

 
1,122,267

Principal payments received on mortgage loans held for investment
 
92,619

 
—

 
92,619

Payments received on charged-off loans held for investment
 
23,060

 
—

 
23,060

Payments received on receivables related to Non-Residual Trusts
 
8,110

 
—

 
8,110

Proceeds from sales of real estate owned, net
 
111,091

 
—

 
111,091

Purchases of premises and equipment
 
(32,866
)
 
—

 
(32,866
)
Decrease in restricted cash and cash equivalents
 
8,946

 
—

 
8,946

Payments for acquisitions of businesses, net of cash acquired
 
(3,066
)
 
—

 
(3,066
)
Acquisitions of servicing rights, net
 
(9,794
)
 
—

 
(9,794
)
Proceeds from sales of servicing rights, net
 
280,970

 
—

 
280,970

Other
 
(4,649
)
 
—

 
(4,649
)
Cash flows provided by investing activities
 
699,809

 
—

 
699,809

 
 
 
 
 
 
 

F-15

Table of Contents

 
 
For the Year Ended December 31, 2016
 
 
As Previously Reported
 
Restatement Adjustments
 
As Restated
Financing activities
 
 
 
 
 
 
Payments on corporate debt
 
(480
)
 
—

 
(480
)
Extinguishments and settlement of debt
 
(31,037
)
 
—

 
(31,037
)
Proceeds from securitizations of reverse loans
 
960,157

 
—

 
960,157

Payments on HMBS related obligations
 
(1,371,375
)
 
—

 
(1,371,375
)
Issuances of servicing advance liabilities
 
2,179,488

 
—

 
2,179,488

Payments on servicing advance liabilities
 
(2,625,476
)
 
—

 
(2,625,476
)
Net change in warehouse borrowings related to mortgage loans
 
(151,172
)
 
—

 
(151,172
)
Net change in warehouse borrowings related to reverse loans
 
14,139

 
—

 
14,139

Proceeds from sales of excess servicing spreads and servicing rights
 
34,307

 
—

 
34,307

Payments on servicing rights related liabilities
 
(22,092
)
 
—

 
(22,092
)
Payments on mortgage-backed debt
 
(107,598
)
 
—

 
(107,598
)
Other debt issuance costs paid
 
(11,039
)
 
—

 
(11,039
)
Other
 
2,189

 
—

 
2,189

Cash flows used in financing activities
 
(1,129,989
)
 
—

 
(1,129,989
)
 
 
 
 
 
 
 
Net increase in cash and cash equivalents
 
21,770

 
—

 
21,770

Cash and cash equivalents at the beginning of the year
 
202,828

 
—

 
202,828

Cash and cash equivalents at the end of the year
 
$
224,598

 
$
—

 
$
224,598

3. Going Concern
The Company is facing certain challenges and uncertainties that could have significant adverse effects on its business, liquidity and financing activities. The Company may be adversely impacted by the following factors, among others: failure to maintain sufficient liquidity to operate its servicing and lending businesses due to the inability to renew, replace or extend its advance financing or warehouse facilities on favorable terms, or at all; failure to comply with covenants contained in its debt agreements or obtain any necessary waivers or amendments; failure to resolve its obligation with respect to the remaining mandatory clean-up calls; and failure to successfully restructure its corporate debt.
As disclosed in Note 22, the Company uses and relies upon short-term borrowing facilities to fund its servicing, originations and reverse mortgage operating businesses. As a result of continued losses, the need for additional waivers and/or amendments, including those required as a result of or in connection with the restatement discussed in Note 2, and the passage of time since the Company first announced its debt restructuring initiative, certain of the Company’s lenders have effected reductions in its advance rates and/or have required other changes to the terms of such facilities, which has negatively impacted the Company’s available liquidity and capital resources. Each of these facilities is typically subject to renewal each year. Borrowing capacity on the various facilities is dependent upon maintaining compliance with the representations, terms, conditions and covenants of the respective agreements. The Company intends to renew, replace, or expand its facilities consistent with its past practices and may seek waivers or amendments in the future, if necessary. The Company is in negotiations with current and prospective lenders regarding expanded financing capacity for its reverse loan repurchases and/or replacement financing capacity for its originations business in the event the Company experiences a material reduction in the financing capacity available to it under its existing borrowing facilities or otherwise requires additional financing capacity to support its businesses and obligations. No assurance can be given that the Company will be successful in maintaining adequate financing capacity with its current or prospective lenders.
The Company continues to focus on its debt restructuring initiative to seek to improve its capital structure through the restructuring of its corporate debt and continues to incur significant expense in connection therewith.

F-16

Table of Contents

On July 31, 2017, the Company entered into a Restructuring Support Agreement with lenders holding, as of July 31, 2017, more than 50% of the loans and/or commitments outstanding under the 2013 Credit Agreement. As set forth in the Restructuring Support Agreement, the parties thereto have agreed to, among other things, the principal terms of a proposed financial restructuring of the Company, which will be implemented through an out-of-court restructuring and, in the absence of sufficient stakeholder support for an out-of-court restructuring, a prepackaged plan of reorganization under Chapter 11 of the Bankruptcy Code. The Restructuring Support Agreement contains a number of conditions and milestones, including reaching an agreement with the holders of at least 66⅔% aggregate principal amount of Senior Notes to a restructuring support agreement consistent with the terms specified in the Restructuring Support Agreement. The Company and its debt restructuring advisors intend to continue to negotiate with the financial and legal advisors to ad hoc groups of holders of the Senior Notes and the lenders under the 2013 Credit Agreement as the Company seeks to obtain sufficient stakeholder support for a comprehensive de-leveraging transaction.
Pursuant to the terms of the Restructuring Support Agreement, on the dates specified in the Restructuring Support Agreement, the Company is obligated to purchase at par (or in certain limited circumstances, voluntarily prepay) the term loans of the lenders who become party to the Restructuring Support Agreement in an aggregate principal amount of $100 million . On July 31, 2017, the Company entered into a third amendment to the 2013 Credit Agreement pursuant to which the 2013 Credit Agreement was amended to, among other things, require that upon receipt by the Company or certain of its subsidiaries of the gross proceeds of any disposition of certain Bulk MSR by the Company or such subsidiaries, the Company shall make a prepayment of the term loans in an amount equal to 80% of such gross proceeds; provided that, to the extent as of the earlier of 120 days following the effective date (as defined in the Restructuring Support Agreement) and February 15, 2018 the aggregate principal amount of term loans prepaid as a result of such prepayments is less than $100 million , the Company shall be required to prepay as of such date the term loans in an amount equal to $100 million minus the amount of proceeds of such dispositions of Bulk MSR previously applied to prepay the term loans after the date of the third amendment to the 2013 Credit Agreement pursuant to such mandatory prepayment. The Third Amendment also requires mandatory prepayments of the term loans in an amount equal to (i) 80% of the net sale proceeds of non-ordinary course asset sales and dispositions of certain Bulk MSR and (ii) 100% of the net sale proceeds of certain non-core assets, in each case, received by the Company and certain of its subsidiaries.
As discussed previously, the Company is subject to various financial and other covenants under its existing debt agreements, many of which contain cross default provisions such that if a default occurs under any one agreement, the lenders under certain of the Company’s other debt agreements could declare a default. The lenders can waive their contractual rights in the event of a default. In connection with the financial statement restatement discussed in Note 2 and the circumstances impacting the Company's ability to continue as a going concern included in this disclosure, the Company received waivers and/or amendments under its warehouse and advance financing facilities, the 2013 Credit Agreement and the Senior Notes Indenture to the extent necessary to waive any default, event of default, amortization event, termination event or similar event resulting or arising from the restatement discussed in Note 2 and the going concern matters discussed herein.
The Company is not currently in compliance with, and may be unable to regain and/or maintain compliance with, certain continued listing standards of the NYSE. If the Company is unable to cure any event of noncompliance with any continued listing standard of the NYSE within the applicable timeframe and other parameters set forth by the NYSE, or if the Company fails to maintain compliance with certain continued listing standards that do not provide for a cure period, it will result in the delisting of the Company’s common stock from the NYSE, which could negatively impact the trading price, trading volume and liquidity of, and have other material adverse effects on, the Company’s common stock. If the Company’s common stock is delisted from the NYSE, this could also have negative implications on the Company’s business relationships under the Company’s material agreements with lenders and other counterparties. If the Company’s common stock is delisted from the NYSE, it would constitute a fundamental change as that term is defined under the terms of the Convertible Notes, and require, among other things, that the Company take steps to make an offer to repay the Convertible Notes at 100% of the principal amount thereof. The Company currently is not permitted to repurchase the Convertible Notes pursuant to the terms of certain of its debt facilities and agreements. If the Company is de-listed and is not able to satisfy this obligation, it would constitute an event of default under the indenture governing the Convertible Notes. In such event, the trustee or the holders of 25% in aggregate principal amount outstanding of the Convertible Notes will have the right to accelerate such indebtedness.

F-17

Table of Contents

The Company’s subsidiaries are parties to seller/servicer agreements with, and/or subject to the guidelines and regulations of (collectively, the seller/servicer obligations), the GSEs and various government agencies, including HUD, FHA, VA and Ginnie Mae. These seller/servicer obligations include financial covenants and other requirements as defined by the applicable agency. To the extent that these seller/servicer obligations are not met, the applicable GSE or government agency may, at its option, take action to implement one or more of a variety of remedies including, without limitation, requiring certain Company subsidiaries to deposit funds as security for one or more of such subsidiaries’ obligations to the GSEs or government agencies, imposing sanctions on one or more of such subsidiaries, which could include monetary fines or penalties, forcing one or more subsidiaries to transfer servicing on all or a portion of the mortgage loans such subsidiary services for the applicable GSE or government agency, and/or suspending or terminating the approved seller/servicer status of one or more subsidiaries, which could prohibit or severely limit the ability of one or more subsidiaries to originate, service and/or securitize mortgage loans for the applicable GSE or agency. To date, none of the GSEs or government agencies with which the Company and its subsidiaries do business has communicated any material sanction, suspension or prohibition that would materially adversely affect the Company’s business; however, the GSEs and certain of such government agencies have required frequent reporting regarding the financial status of the Company, including preliminary financial results and the availability to the Company of financing capacity under its existing borrowing facilities. The GSEs and certain of such government agencies have also requested frequent telephonic updates with senior Company management regarding the status of the Company’s debt restructuring initiative and other matters. The Company’s subservicing agreements also contain requirements regarding servicing practices and other matters, and a failure to comply with these requirements could have an adverse impact on the Company’s business and liquidity.
As disclosed in Note 33, the Company is obligated to exercise the mandatory clean-up call obligations assumed as part of an agreement to acquire the rights to service the loans in the Non-Residual Trusts. Additionally, as part of its Reverse Mortgage segment, the Company is obligated to purchase loans out of Ginnie Mae securitization pools under certain circumstances.
To address the challenges and uncertainties set forth above, the Company is proactively engaged with its lenders and other counterparties as follows:
•
Prior to the issuance of the restated consolidated financial statements discussed in Note 2, the Company entered into amendments and/or obtained waivers from each lender, to the extent necessary, to waive any default, event of default, amortization event, termination event or similar event resulting or arising from the restatement discussed in Note 2 or the substantial doubt as to the Company’s ability to continue as a going concern described in this Note 3, and/or to allow for compliance with profitability covenants at the Ditech level;
•
As a result of the above waivers and/or amendments, no known events of default exist, and amounts due under the Company's outstanding material debt and financing agreements have not been accelerated;
•
While the Company believes that the debt facilities it relies on to support ongoing operations remain renewable in the ordinary course of business, the Company is seeking additional, or expansion of existing facilities to provide adequate financing capacity for new loan originations should existing facilities not be renewed at their maturity date. The Company may also consider temporary volume reductions within the business lending channel of the originations business, if necessary;
•
The Company is seeking additional, or expansion of existing, master repurchase or similar agreements for continued growth of the required reverse loan repurchases. As part of this effort, in August 2017, RMS has entered into an amendment that increases the size of an existing credit facility by $100 million on a committed basis. The facility expires in May 2018 . Additionally, in the future, the Company may seek to access the securitization market, if such market is available to the Company, to provide adequate financing capacity for continued growth in the number and amount of required reverse loan repurchases;
•
The Company is in the process of negotiating a term sheet with a counterparty to resolve its obligations with respect to the remaining mandatory clean-up calls. The negotiated resolution is expected to cover all mandatory calls starting in the fourth quarter of 2017;
•
The Company has been in contact with the NYSE and is working to regain compliance with NYSE continued listing requirements, including, among other things, by restructuring its corporate debt. The Company continues to monitor other listing standards. No assurance can be given that the Company’s common stock will not be delisted from the NYSE; and
•
The Company continues to engage in communications with key stakeholders, including the GSEs, Ginnie Mae, HUD, regulators and government agencies in connection with the restatement discussed in Note 2, the status of the Company’s debt restructuring initiative, and the uncertainties regarding the Company’s ability to continue as a going concern as identified above. To date, none of these key stakeholders have communicated any material sanctions, suspensions or prohibitions.


F-18

Table of Contents

The above factors have been taken into account in assessing the Company’s liquidity and ability to meet its obligations for the next twelve months from the date of issuance of these financial statements. Based on this assessment, management has concluded that while there can be no assurance that the Company’s recent and future actions will be successful in mitigating the above risks and uncertainties, the Company’s current plans provide enough liquidity to meets its obligations over the next twelve months from the date of issuance of these financial statements.  However, as set forth in the Restructuring Support Agreement, the parties thereto have agreed to, among other things, the principal terms of a proposed financial restructuring of the Company, which will be implemented through an out-of-court restructuring and, in the absence of sufficient stakeholder support for an out-of-court restructuring, a prepackaged plan of reorganization under Chapter 11 of the Bankruptcy Code. The potential for a prepackaged Chapter 11 filing raises substantial doubt about the Company’s ability to continue as a going concern that has not been alleviated. The Company’s consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company will continue to monitor progress on its initiatives and the impact on its ongoing assessment of going concern in future periods.
4. Significant Accounting Policies
Principles of Consolidation
The Company’s consolidated financial statements include the accounts and transactions of Walter Investment and other entities in which the Company has a controlling financial interest. A controlling financial interest may exist in the form of an ownership of a majority of an entity’s voting interests or through other arrangements with entities, such as with a VIE.
The Company evaluates each securitization trust associated with its residential loan portfolio to determine if the Company has a variable interest in the trust, if the trust meets the definition of a VIE and whether the Company has a controlling financial interest as the primary beneficiary of the VIE. If the Company determines that it does have a variable interest in the trust, that the trust is a VIE, and that it is the primary beneficiary of the VIE, it consolidates the VIE. The evaluation considers all of the Company’s involvement with the VIE, identifying both the implicit and explicit variable interests that either individually or in the aggregate could be significant enough to warrant its designation as the primary beneficiary. This designation is evidenced by both the power to direct the activities of the VIE that most significantly impact its economic performance and the obligation to absorb the losses of, or the right to receive the benefits from, the VIE that could potentially be significant to the VIE.
When the Company’s only involvement with a securitization trust is that of servicer, the Company evaluates whether its servicing fee is deemed a variable interest. When the Company’s servicing fee meets all of the criteria in the accounting guidance for VIEs regarding fees paid to service providers, the Company concludes that it is acting in the capacity of a fiduciary and that it does not have a variable interest in the securitization trust. Accordingly, the Company does not consolidate the trust. However, in the event the servicing fee is deemed a variable interest, the Company evaluates whether it has the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. If the Company concludes that it has such power, the Company consolidates the trust. The Company performs a similar evaluation when it is involved with other entities that are not securitization trusts.
The Company re-evaluates whether an entity in which it has a variable interest is a VIE when certain significant events occur. Throughout the duration of its involvement with an entity that is deemed a VIE, the Company reassesses whether it is the primary beneficiary and, accordingly, whether it must consolidate the VIE. Certain events may change the primary beneficiary of a VIE determination including, but not limited to, a change in the Company’s ownership of the residual interests, a change in the Company’s role as servicer, or a change in the Company’s contractual obligations to a VIE.
Deconsolidation of Marix
During the second quarter of 2015, the Company completed the contribution and deconsolidation of 100% of the equity of Marix to WCO pursuant to the terms of an amended contribution agreement among the Company, WCO and certain other parties. Pursuant to such agreement and as consideration for such contribution, during the third quarter of 2015, the Company received 300,000 partnership common units in WCO LP, a contingent consideration, following achievement by Marix of various post-contribution milestones, including the purchase of its first MSR. The Company elected to account for the partnership common units as contingent consideration under the gain contingency model. As a result, during the third quarter of 2015 the Company recorded a $3.1 million gain for the consideration received for the contribution of Marix, which is recorded in the other line item within other gains (losses) on the consolidated statements of comprehensive loss.
Cash and Cash Equivalents
Cash and cash equivalents include short-term deposits and highly-liquid investments that have original maturities of three months or less when purchased and are stated at cost, which approximates fair value. The Company maintains cash and cash equivalents with federally-insured financial institutions and these balances typically exceed insurable amounts. Cash equivalents also include amounts due from third-party financial institutions in process of settlement. These transactions typically settle in three days or less and were $110.6 million and $116.1 million at December 31, 2016 and 2015 , respectively.

F-19

Table of Contents

Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents include cash and cash equivalents that are legally restricted as to use or withdrawal. Restricted cash primarily includes (i) principal and interest payments collected by the Company as servicer on behalf of third-party credit owners and unconsolidated securitization trusts that have not yet been remitted to the credit owners or trusts; (ii) principal and interest payments collected by consolidated securitization trusts that have not yet been remitted to the bondholders; and (iii) amounts pledged as collateral for servicing advance facilities. Restricted cash equivalents include investments in money market mutual funds. During the year ended December 31, 2016, the Company transitioned a large portion of its mortgage loan servicing portfolio to MSP, which resulted in a reduction to certain restricted cash account balances as a result of changes in the structure and timing of the flow of funds to certain custodial accounts that are not reflected in the consolidated balance sheets.
Residential Loans at Amortized Cost, Net
Residential loans carried at amortized cost include mortgage loans associated with the Residual Trusts and unencumbered mortgage loans. A majority of these loans were originated by the Company, acquired from other originators, principally an affiliate of Walter Energy, or acquired as part of a pool. Originated loans were initially recorded at the discounted value of the future payments using an imputed interest rate net of cost-basis adjustments such as deferred loan origination fees and associated direct costs, premiums and discounts. The imputed interest rate used represented the estimated prevailing market rate of interest for loans of similar terms issued to borrowers with similar credit risk. New originations of mortgage loans held for investment subsequent to May 1, 2008 relate primarily to the financing of sales of real estate owned. The imputed interest rate on these financings is based on observable market mortgage rates, adjusted for variations in expected credit losses where market data is unavailable.
Interest Income and Amortization
Interest income on the Company’s residential loans carried at amortized cost consists of the interest earned on the outstanding principal balance of the underlying loan based on the contractual terms of the residential loan and retail installment agreement and the amortization of cost-basis adjustments, principally premiums and discounts. The retail installment agreements state the maximum amount to be charged to borrowers and ultimately recognized as interest income, based on the contractual number of payments and dollar amount of monthly payments. Cost-basis adjustments are deferred and recognized over the contractual life of the loan as an adjustment to yield using the level yield method. Residential loan pay-offs received in advance of scheduled maturity (voluntary prepayments) affect the amount of interest income due to the recognition at that time of any remaining unamortized premiums, discounts, or other cost-basis adjustments arising from the loan’s inception.
Non-accrual Loans
Residential loans at amortized cost that are not insured are placed on non-accrual status when any portion of the principal or interest is 90  days past due. When placed on non-accrual status, the related interest receivable is reversed against interest income of the current period. Interest income on non-accrual loans, if received, is recorded using the cash basis method of accounting. Residential loans are removed from non-accrual status when there is no longer significant uncertainty regarding collection of the principal and the associated interest. If a non-accrual loan is returned to accruing status, the accrued interest, at the date the residential loan is placed on non-accrual status and interest during the non-accrual period are recorded as interest income as of the date the loan no longer meets the non-accrual criteria. The past due or delinquency status of residential loans is generally determined based on the contractual payment terms. In the case of loans with an approved repayment plan, including plans approved by the bankruptcy court, delinquency is based on the modified due date of the loan. Loan balances are charged off when it becomes evident that balances are not collectible.
Allowance for Loan Losses
The allowance for loan losses represents management’s estimate of probable incurred credit losses inherent in the residential loan portfolio carried at amortized cost as of the balance sheet date. This portfolio is made up of one segment and class that consists primarily of less-than prime, credit-challenged residential loans, whose primary risk to the Company is credit exposure. The method for monitoring and assessing credit risk is the same throughout the portfolio.

F-20

Table of Contents

Residential loans carried at amortized cost are homogeneous and evaluated collectively for impairment. The determination of the level of the allowance for loan losses and, correspondingly, the provision for loan losses is based on, but not limited to, delinquency levels, default frequency experience, prior loan loss severity experience, and management’s judgment and assumptions regarding various matters, including the composition of the residential loan portfolio, known and inherent risks in the portfolio, the estimated value of the underlying real estate collateral, the level of the allowance in relation to total loans and to historical loss levels, current economic and market conditions within the applicable geographic areas of the underlying real estate, changes in unemployment levels, and the impact that changes in interest rates have on a borrower’s ability to refinance its loan and to meet its repayment obligations. Management evaluates these assumptions and various other relevant factors impacting credit quality and inherent losses when quantifying the Company’s exposure to credit losses and assessing the adequacy of its allowance for loan losses as of each reporting date. The level of the allowance is adjusted based on the results of management’s analysis. Generally, as residential loans age, the credit exposure is reduced, resulting in decreasing provisions.
While the Company considers the allowance for loan losses to be adequate based on information currently available, future adjustments to the allowance may be necessary if circumstances differ from the assumptions used by management in determining the allowance for loan losses.
Loan Modifications
The Company will occasionally modify a loan agreement at the request of the borrower. The Company’s current modification program offered to borrowers is limited and is used to assist borrowers experiencing temporary hardships and is intended to minimize the economic loss to the Company and to avoid foreclosure. Generally, the Company’s modifications are short-term interest rate reductions and/or payment deferrals with forgiveness of principal rarely granted. A modification of a loan constitutes a troubled debt restructuring when a borrower is experiencing financial difficulty and the modification constitutes a concession. Loans modified in a troubled debt restructuring are typically already on non-accrual status and have an allowance recorded. At times, loans reflected on the Company's balance sheet are modified in a troubled debt restructuring and may have the financial effect of increasing the allowance associated with the loan. The allowance for an impaired loan that has been modified in a troubled debt restructuring is measured based on the present value of expected future cash flows discounted at the loan’s original effective interest rate or the estimated fair value of the collateral less any selling costs. Troubled debt restructurings for these loans have historically been, and continue to be, insignificant to the Company.
Residential Loans at Fair Value
Residential Loans Held for Investment
Residential loans held for investment and carried at fair value consist of reverse loans, mortgage loans related to the Non-Residual Trusts, and charged-off loans. The Company has elected to carry these loans at fair value.
Reverse loans consist of HECMs that were either originated or acquired by the Company. The loans are pooled and securitized into HMBS that are sold into the secondary market with servicing rights retained. Based upon the structure of the Ginnie Mae securitization program, the Company has determined that it has not met all of the requirements for sale accounting and accounts for these transfers as secured borrowings. Under this accounting treatment, the reverse loans remain on the consolidated balance sheets as residential loans. The proceeds from the transfers of reverse loans are recorded as HMBS related obligations with no gain or loss recognized on the transfers.
Reverse loans also include loans that have not yet been transferred to Ginnie Mae securitization pools and loans that have been repurchased from Ginnie Mae securitization pools. The Company, as an issuer of HMBS, is required to repurchase reverse loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of the maximum claim amount, which is defined as the lesser of a home's appraised value at the point in time that the Conditional Commitment is issued or the maximum loan limit that can be insured by the FHA. Performing repurchased loans are conveyed to HUD and nonperforming repurchased loans are generally liquidated through foreclosure and subsequent sale of the real estate owned. Loans are considered nonperforming upon events such as, but not limited to, the death of the mortgagor, the mortgagor no longer occupying the property as their principal residence, or the property taxes or insurance not being paid. In addition to having to fund these repurchases, the Company also typically earns a lower interest rate and incurs certain non-reimbursable costs during the process of liquidating nonperforming loans.
The yield on reverse loans and any change in fair value are recorded in net fair value gains on reverse loans and related HMBS obligations on the consolidated statements of comprehensive loss. Similarly, the yield on and change in fair value of mortgage loans related to the Non-Residual Trusts are recorded in other net fair value gains (losses) on the consolidated statements of comprehensive loss. The yield on reverse loans and mortgage loans related to the Non-Residual Trusts includes recognition of contractual interest income that is expected to be collected based on the stated interest rates of the loans, as well as the accretion of fair value.

F-21

Table of Contents

Charged-off loans represent a portfolio of defaulted consumer and residential loans that were acquired at substantial discounts to face value. Charged-off loans are consumers' unpaid financial commitments and include residential mortgage loans, auto loans and other unsecured consumer loans. The accretion of fair value associated with charged-off loans and any change in fair value are recorded in other revenues on the consolidated statements of comprehensive loss. There is no contractual interest income recognized in relation to charged-off loans.
Purchases and originations of and payments received on residential loans held for investment are included in investing activities on the consolidated statements of cash flows.
Residential Loans Held for Sale
Residential loans held for sale represent mortgage loans originated or acquired by the Company with the intent to sell. These loans are originated or acquired primarily for purposes of selling into the secondary market or to private investors as whole loans with servicing rights either retained or sold. The Company has elected to carry mortgage loans held for sale at fair value. The yield on the loans, any change in fair value, and gains or losses recognized upon sale of the loans are recorded in net gains on sales of loans on the consolidated statements of comprehensive loss. The yield on the loans includes recognition of interest income that is expected to be collected based on the stated interest rates of the loans, as well as the accretion of fair value. Loan origination fees are recorded in other revenues within the consolidated statements of comprehensive loss when earned and related costs are recognized in general and administrative expenses when incurred. All activity related to residential loans held for sale are included in operating activities on the consolidated statements of cash flows.
The Company’s agreements with GSEs and other third parties include standard representations and warranties related to the loans the Company sells. The representations and warranties require adherence to origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local laws. Breaches of representations and warranties, with the exception of certain loans originated under HARP, are generally enforceable at any time over the life of the loan. If the Company is unable to cure such breach, the purchaser of the loan may require the Company to repurchase such loan for the unpaid principle balance, accrued interest, and related advances, and in any event, the Company must indemnify such purchaser for certain losses and expenses incurred by such purchaser in connection with such breach. In the case the Company repurchases the loan, the Company bears any subsequent credit loss on the loan. The Company’s credit loss may be reduced by any recourse it has to correspondent lenders that, in turn, have sold such residential loans to the Company and breached similar or other representations and warranties. In such event, the Company has the right to seek a recovery of related repurchase losses from that correspondent lender. The Company actively contests claims to the extent that the Company does not consider the claims to be valid. The Company seeks to manage the risk of repurchase and associated credit exposure through the Company's underwriting and quality assurance practices.
The Company records a provision for losses relating to such representations and warranties as part of its loan sale transactions at the time the loan is sold in accordance with the accounting guidance for guarantees. The provision is a reduction in the net gains on sales of loans on the consolidated statements of comprehensive loss. The method used to estimate the liability for representations and warranties is a function of the representations and warranties given and considers a combination of factors, including, but not limited to, historical defect rates, projected repurchase rates, projected resale values, and the probability of reimbursement by the correspondent loan seller. The liability, which is recorded in payables and accrued liabilities on the consolidated balance sheets, is updated based on changes in estimates, with those changes recorded as a component of general and administrative expenses on the consolidated statements of comprehensive loss. The level of the liability for representations and warranties requires considerable management judgment. The level of residential loan repurchase losses is dependent on economic factors and external conditions that may change over the lives of the underlying loans.
Receivables Related to Non-Residual Trusts
Receivables related to Non-Residual Trusts, which are recorded in receivables, net on the consolidated balance sheets, consist of the estimated fair value of expected future draws on LOCs from a third party. The LOCs are credit enhancements to the Non-Residual Trusts. The cash flows received from the LOC draws are paid directly to the underlying securitization trusts and are used to pay bondholders of these securitizations for shortfalls in principal and interest collections on the loans in the securitizations. The Company has elected to carry these receivables at fair value. Changes in fair value are recorded in other net fair value gains (losses) on the consolidated statements of comprehensive loss.

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Servicing Operations
Servicing Rights, Net
Capitalized servicing rights include rights associated with servicing and subservicing contracts acquired in connection with business combinations and servicing rights acquired through the purchase of such rights from third parties or through the sale of loans with servicing rights retained. At initial recognition, the fair value of the servicing right is established using assumptions consistent with those used to establish the fair value of existing servicing rights.
A servicing or subservicing asset (or liability) is recognized on the consolidated balance sheets when the benefits of servicing are deemed to be greater (or lower) than adequate compensation for the servicing activities performed by the Company. No servicing or subservicing asset or liability is recorded if the amounts earned represent adequate compensation. Generally, no servicing asset or liability is recognized when the Company enters into new subservicing contracts; however, previously existing contracts acquired in a business combination may be deemed to provide greater (or lower) than adequate compensation.
Subsequent to acquisition, servicing rights (or liabilities) are accounted for using the amortization method or the fair value measurement method, based on the Company’s strategy for managing the risks of the underlying portfolios. Risks inherent in servicing rights include prepayment and interest rate risks.
The Company identifies classes of servicing rights based upon the availability of market inputs used in determining fair value and its available risk management strategies associated with the servicing rights. Based upon these criteria, the Company has identified three classes of servicing rights: a risk-managed loan class, a mortgage loan class, and a reverse loan class. The risk-managed loan class includes loan portfolios for which the Company may apply a hedging strategy in the future. For servicing assets associated with the risk-managed loan class, which are accounted for at fair value, the Company measures the fair value at each reporting date and records changes in fair value in net servicing revenue and fees on the consolidated statements of comprehensive loss.
Servicing rights associated with the mortgage loan class and the reverse loan class are amortized based on expected cash flows in proportion to and over the life of servicing revenue. Amortization is recorded as an adjustment to net servicing revenue and fees on the consolidated statements of comprehensive loss. Servicing assets (or liabilities) are stratified by product type and compared to the estimated fair value on a quarterly basis. Impairment (or an increased obligation) is recognized through a valuation allowance for each stratum. The valuation allowance is adjusted to reflect the amount, if any, by which the carrying value of the servicing rights for a given stratum exceeds (or in the case of servicing liabilities, is lower than) its fair value. Any fair value in excess of (or in the case of servicing liabilities, lower than) the carrying value for a given stratum is not recognized. The Company recognizes a direct impairment to the servicing asset or liability when the valuation allowance is determined to be unrecoverable.
Net Servicing Revenue and Fees
Servicing revenue and fees consist of income from the Company’s third-party servicing portfolio, which includes loans associated with arrangements in which the Company owns the servicing rights or acts as subservicer. Servicing revenue and fees include contractual servicing fees, incentive and performance fees, and ancillary income. Contractual servicing fees related to arrangements in which the Company owns the servicing rights are generally based on a percentage of the unpaid principal balance of the related collateral and are recorded when earned, which is generally upon collection of payments from borrowers. Contractual servicing fees related to arrangements in which the Company acts as subservicer are generally based on a fixed dollar amount per loan and are accrued in the period the services are performed. Incentive and performance fees include fees based on the performance of specific portfolios or loans, asset recovery income, and modification fees. Fees based on the performance of specific portfolios or loans are recognized when earned based on the terms of the various servicing and incentive agreements. Asset recovery income is generally recognized upon collection. Ancillary income includes late fees, prepayment fees, and collection fees and is generally recognized upon collection. Servicing revenue and fees are adjusted for the amortization of servicing rights carried at amortized cost, the change in fair value of servicing rights carried at fair value and the change in fair value of servicing rights related liabilities.

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Servicer and Protective Advances, Net
In the ordinary course of servicing residential loans and pursuant to certain servicing agreements, the Company may advance the principal and interest portion of delinquent mortgage payments to credit owners prior to the collection of such amounts from borrowers, provided that the Company determines these advances are recoverable from either the borrower or the liquidation of collateral. In addition, the Company is required under certain servicing contracts to ensure that property taxes, insurance premiums, foreclosure costs and various other items are paid in order to preserve the collateral underlying the assets being serviced. Generally, the Company recovers such advances from borrowers for reinstated or performing loans, from proceeds of liquidation of collateral or ultimate disposition of the loan, from credit owners or from loan insurers. Certain of the Company’s servicing agreements provide that repayment of servicing advances made under the respective agreements have a priority over all other cash payments to be made from the proceeds of the residential loan, and in certain cases the proceeds of the pool of residential loans, which are the subject of that servicing agreement. As a result, the Company is entitled to repayment from loan proceeds before any interest or principal is paid to the bondholders, and in certain cases, advances in excess of loan proceeds may be recovered from pool-level proceeds. Servicer and protective advances are carried at cost, net of estimated losses. Losses can occur in the normal course of servicing loans when the Company fails to make advances in accordance with investor guidelines including filing claims timely, requesting approvals, or advancing outside of guidelines. The Company establishes an allowance for uncollectible advances based on an analysis of the underlying loans, their historical loss experience, and recoverability pursuant to the terms of underlying servicing agreements. Generally, estimated losses related to advances are recorded in general and administrative expenses on the consolidated statements of comprehensive loss.
Custodial Accounts
In connection with its servicing activities, the Company has a fiduciary responsibility for amounts primarily related to borrower escrow funds and other custodial funds due to credit owners aggregating $4.4 billion and $3.8 billion at December 31, 2016 and 2015 , respectively. These funds, which do not represent assets or liabilities of the Company, are maintained in segregated bank accounts, and accordingly, are not reflected on the consolidated balance sheets.
Goodwill
Goodwill represents the excess of the consideration paid in a business combination over the fair value of the identifiable net assets acquired. The Company tests goodwill for impairment at the reporting unit level at least annually or whenever events or circumstances indicate that the carrying value of goodwill may not be recoverable from future cash flows. A reporting unit is a business segment or one level below. The Company has identified five reporting units, which constitute businesses: (i) Servicing; (ii) ARM; (iii) Insurance; (iv) Originations; and (v) Reverse Mortgage. Segment management regularly reviews discrete financial information for these reporting units. The Company has the option of performing a qualitative assessment of impairment to determine whether any further quantitative testing for impairment is necessary. If the Company elects to bypass the qualitative assessment or if it determines, based on qualitative factors, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a two-step quantitative test is required. In Step 1, the Company compares the fair value of the reporting unit with its net carrying value, including goodwill. If the net carrying value of the reporting unit exceeds its fair value, the Company then performs Step 2 of the impairment test to measure the amount of impairment loss, if any. In Step 2, the Company allocates the reporting unit’s fair value to all of its assets and liabilities in a manner similar to a purchase price allocation, with any residual fair value allocated to goodwill (implied fair value of goodwill). If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of such goodwill, the Company recognizes an impairment loss in an amount equal to that excess up to the carrying value of goodwill. In performing the two-step quantitative assessment, fair value of the reporting unit is based on discounted cash flows, market multiples, and/or appraised values, as appropriate.
The Company completed its annual goodwill impairment test effective October 1, 2016 , which is discussed in more detail in Note 16.
Intangible Assets, Net
Intangible assets primarily consist of customer relationships and institutional relationships. Intangible assets are amortized using either an economic consumption method or a straight-line method over their related expected useful lives. Intangible assets subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An asset is considered to be impaired when the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition does not exceed its carrying amount. The amount of the impairment loss, if any, is measured as the amount by which the carrying value of the asset exceeds its fair value.

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Premises and Equipment, Net
Premises and equipment, net are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives of the related assets. Leasehold improvements and assets under capital leases are amortized over the lesser of the remaining term of the lease or the useful life of the leased asset. Costs to internally develop computer software are capitalized during the application development stage and include external direct costs of materials and services as well as employee costs directly associated with the project during the capitalization period. Premises and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An asset is considered to be impaired when the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition does not exceed its carrying amount. The amount of the impairment loss, if any, is measured as the amount by which the carrying value of the asset exceeds its fair value.
Derivatives
The Company enters into commitments to originate and purchase mortgage loans at interest rates that are determined prior to the funding or purchase of the loan. These commitments are referred to as IRLCs. IRLCs are considered freestanding derivatives and are recorded at fair value at inception. Changes in fair value subsequent to inception are based on changes in the fair value of the underlying loan, and changes in the probability that the loan will fund within the terms of the commitment.
The Company uses derivative financial instruments, primarily forward sales commitments, to manage exposure to interest rate risk and changes in the fair value of IRLCs and mortgage loans held for sale. The Company may also enter into commitments to purchase MBS as part of its overall hedging strategy. The Company has elected not to designate these freestanding derivatives as hedging instruments under GAAP.
The fair value of freestanding derivatives is recorded in other assets or payables and accrued liabilities on the consolidated balance sheets with changes in the fair values included in net gains on sales of loans on the consolidated statements of comprehensive loss. Cash flows related to freestanding derivatives are included in operating activities on the consolidated statements of cash flows.
In connection with forward sales commitments and MBS purchase commitments, the Company has margin agreements with its counterparties whereby both parties are required to post cash margin in the event the fair values of the derivative financial instruments meet or exceed established thresholds and minimum transfer amounts. This process substantially mitigates counterparty credit risk. The right to receive cash margin placed by the Company with its counterparties is included in other assets, and the obligation to return cash margin received by the Company from its counterparties is included in payables and accrued liabilities on the consolidated balance sheets. The Company has elected to record derivative assets and liabilities and related cash margin on a gross basis, even when a legally enforceable master netting arrangement exists between the Company and the derivative counterparty.
The derivative transactions described above are measured in terms of the notional amount. With the exception of IRLCs, the notional amount is generally not exchanged and is used only as a basis on which interest and other payments are determined.
Real Estate Owned, Net
Real estate owned, net is included in other assets on the consolidated balance sheets, and represents properties acquired in satisfaction of residential loans. Upon foreclosure, or when the Company otherwise takes possession of the property, real estate owned is recorded at the lower of cost or estimated fair value less estimated costs to sell. The excess of cost over the fair value of the property acquired less estimated costs to sell, or net realizable value, is charged to the allowance for loan losses for residential loans carried at amortized cost, to other net fair value gains (losses) for mortgage loans carried at fair value, and to net fair value gains on reverse loans and related HMBS obligations for reverse loans. The fair value of the property is generally based upon historical resale recovery rates and current market conditions or appraisals. Subsequent declines in the value of real estate owned are recorded as adjustments to the carrying amount through a valuation allowance and are recorded in other expenses, net on the consolidated statements of comprehensive loss. Losses from the sale of real estate owned associated with reverse loans are typically covered by FHA insurance, the benefit of which is considered in the net realizable value estimate. To the extent these losses are not covered by the FHA insurance, they are recognized in other expenses, net on the consolidated statements of comprehensive loss when incurred. Costs relating to the improvement of the property are capitalized to the extent the balance does not exceed its fair value, whereas those costs relating to maintaining the property are recorded when incurred to other expenses, net on the consolidated statements of comprehensive loss.

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The Company may finance the sale of its real estate owned for the portfolio associated with the Residual Trusts. Revenue from the sale of real estate owned is recognized by the full accrual method when the specific criteria for use of this method are met. However, frequently, the requirement for a minimum 5% initial cash investment for primary residences is not met. When this is the case, losses are recognized immediately while gains are deferred and recognized by the installment method until the borrower’s initial investment reaches the minimum 5% requirement. Once the borrower’s initial investment reaches the minimum required amount, revenue is recognized by the full accrual method. Gains and losses on the sale of real estate owned are charged to other expenses, net on the consolidated statements of comprehensive loss when incurred.
Insurance Operations
The Company earns commission revenue on voluntary insurance provided for residential loan borrowers and lender-placed hazard insurance for borrowers and credit owners, if permitted under applicable laws and regulations. Commission revenue is recognized when the earnings process has been completed, which is the effective date of the insurance policy, and collectability is reasonably assured. At the time commission revenue is recognized, the Company can reliably estimate expected policy cancellations and records a reserve for cancellations, which is estimated based on historical experience adjusted for known events or circumstances. The reserve for policy cancellations is evaluated on a quarterly basis and adjusted to reflect current estimates.
Servicer Payables
Servicer payables represent amounts collected that are required to be remitted to third-party trusts, credit owners, or others. These collections are primarily from borrowers whose loans the Company services.
Servicing Rights Related Liabilities
Servicing rights related liabilities consists of MSR liabilities related to NRM sales, excess servicing spread liabilities and servicing rights financing, as discussed below.
MSR Liabilities Related to NRM Sales
The Company records a liability for certain servicing rights that will be transferred to NRM under a recapture agreement. The Company elected to record MSR liabilities related to NRM sales at fair value consistent with the related servicing rights.
Excess Servicing Spread Liabilities
The Company recognized the proceeds from the sales to WCO of beneficial interests in certain portions of the contractual servicing fees associated with certain mortgage loans serviced by the Company as financing arrangements. The beneficial interest is referred to as excess servicing spread. The Company elected to record the excess servicing spread liabilities at fair value consistent with the related servicing rights. The change in fair value of the excess servicing spread liabilities is recorded in net servicing revenue and fees on the consolidated statements of comprehensive loss. The change in fair value of the excess servicing spread liabilities includes the accretion of fair value, which is recorded using the effective interest method based on the expected cash flows from the excess servicing spreads through the expected life of the underlying loans. There is no contractual interest rate on excess servicing spread liabilities.
Servicing Rights Financing
From time to time, the Company will enter into certain transactions to sell certain servicing rights. The Company evaluates these transactions to determine if they are sales or structured financing arrangements. When these transfers qualify for sale treatment, the Company derecognizes the transferred assets on its consolidated balance sheets.
The Company has determined that not all risk of rewards and ownership were passed to WCO upon the sales of servicing rights. As a result, the Company accounted for these sales of servicing rights as secured borrowings. Under this accounting treatment, the servicing rights remain on the consolidated balance sheets and the proceeds from the sale of the servicing rights are recognized as servicing rights financing. The Company elected to record the servicing rights financing at fair value consistent with the related servicing rights. The change in fair value of the servicing rights financing is recorded in net servicing revenue and fees on the consolidated statements of comprehensive loss. The change in fair value of the servicing rights financing includes the accretion of fair value, which is recorded using the effective interest method based on the expected cash flows from the servicing rights through the expected life of the underlying loans. There is no contractual interest rate on servicing rights financing. Proceeds from the sale of these servicing rights and payments on the servicing rights financing are included in financing activities on the consolidated statements of cash flows.

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Debt and Other Obligations
Servicing advance liabilities, warehouse borrowings and corporate debt are carried at amortized cost. Servicing advance liabilities relating to term notes and corporate debt are also presented net of related discounts and deferred debt issuance costs. Deferred debt issuance costs associated with servicing advance liabilities with line-of-credit arrangements, warehouse borrowings and the 2013 Revolver are recorded in other assets on the consolidated balance sheets. Deferred debt issuance costs and original issue discounts, if any, are amortized to interest expense over the term of the debt or obligation using either the effective interest method or the straight-line method.
Mortgage-Backed Debt
The Company’s mortgage-backed debt associated with the Residual Trusts is carried at amortized cost, net of discounts and deferred debt issuance costs. These costs and original issue discounts, if any, are amortized to interest expense over the term of the debt using the effective interest method. The Company elected to carry mortgage-backed debt related to the Non-Residual Trusts at fair value. The yield on mortgage-backed debt and any change in fair value are recorded in other net fair value gains (losses) on the consolidated statements of comprehensive loss. The yield on mortgage-backed debt includes recognition of interest expense based on the stated interest rates of the debt, as well as the accretion of fair value.
HMBS Related Obligations
The Company recognizes the proceeds from the transfer of HMBS as a secured borrowing. The Company elected to record the secured borrowing, or the HMBS related obligations, at fair value. The yield on HMBS related obligations and any change in fair value are recorded in net fair value gains on reverse loans and related HMBS obligations on the consolidated statements of comprehensive loss. The yield on HMBS related obligations includes recognition of contractual interest expense based on the stated interest rates of the obligations, as well as the accretion of fair value. Proceeds from securitizations of reverse loans and payments on HMBS related obligations are included in financing activities on the consolidated statements of cash flows.
Other Revenues
Other revenues of the Other non-reportable segment include $36.8 million in asset management performance fees collected and earned in connection with the asset management of a fund for the year ended December 31, 2014. These asset management performance fees were earned in connection with the liquidation of the fund’s investments during the period and were based on the fund performance exceeding pre-defined thresholds. The Company records the asset management performance fees when the fund is terminated or when the likelihood of claw-back is improbable.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates for the periods in which the differences are expected to reverse. The change in deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period of the change.
Periodic reviews of the carrying amount of deferred tax assets are made to determine if the establishment of a valuation allowance is necessary. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. All evidence, both positive and negative, is evaluated when making this determination. Items considered in this analysis include the ability to carry back losses to recoup taxes previously paid, the reversal of temporary differences, tax planning strategies, historical financial performance, expectations of future earnings, and the length of statutory carryforward periods. Significant judgment is required in assessing future earnings trends and the timing of reversals of temporary differences.
The Company assesses its tax positions for all open tax years and determines whether it has any material unrecognized liabilities in accordance with the guidance on accounting for uncertain tax positions. The Company records interest and penalties on uncertain tax positions in income tax expense and general and administrative expenses, respectively, on the consolidated statements of comprehensive loss.

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Share-Based Compensation
The Company has in effect stock incentive plans under which RSUs, performance shares and non-qualified stock options have been granted to employees and non-employee members of the Board of Directors. The Company estimates the fair value of share-based awards on the date of grant. The value of the award is generally recognized as an expense using the graded method over the requisite service period. The fair value of the Company’s RSUs is generally based on the average of the high and low market prices of its common stock on the date of grant. The Company estimates the fair value of performance shares and non-qualified stock options as of the date of grant using the Monte-Carlo simulation model and Black-Scholes option pricing model, respectively. These models consider, among other factors, the performance period or expected life of the award, the expected volatility of the Company’s stock price, and expected dividends. The Company records share-based compensation expense in salaries and benefits expense on the consolidated statements of comprehensive loss.
Advertising Costs
Advertising costs are expensed as incurred and are included in general and administrative expenses on the consolidated statements of comprehensive loss. The Company recorded advertising expense of $25.0 million , $44.5 million and $31.2 million for the years ended December 31, 2016, 2015 and 2014 , respectively.
Basic and Diluted Earnings (Loss) Per Share
The Company uses the two-class method to determine earnings per share. Outstanding share-based payment awards that include non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are considered participating securities and are included in the calculation of basic earnings per common share pursuant to the two-class method. The Company’s participating securities were comprised of RSUs. Under the two-class method, net income is reduced by the amount of dividends declared in the period for common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. Basic earnings per share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is calculated by dividing net income allocable to common shares by the weighted-average number of common shares for the period, as adjusted for the potential dilutive effect of non-participating share-based awards and convertible debt, based on the treasury method. The Company uses the treasury method to compute the dilutive effect of convertible debt based on its intention to settle all conversions through combination settlement, which involves repayment of an amount of cash equal to the principal amount of convertible debt and any excess of conversion value over the principal amount of convertible debt in shares of common stock. During periods of net loss, diluted loss per share is equal to basic loss per share as the antidilutive effect of non-participating share-based awards and convertible debt is disregarded. No effect is given to participating securities in the computation of basic and diluted loss per share as these securities do not share in the losses of the Company.
Contingencies
The Company evaluates contingencies based on information currently available and establishes accruals for those matters when a loss contingency is considered probable and the related amount is reasonably estimable. For matters where a loss is believed to be reasonably possible but not probable, no accrual is established but the nature of the loss contingency and an estimate of the reasonably possible range of loss in excess of amounts accrued, when such estimate can be made, is disclosed. In deriving an estimate, the Company is required to make assumptions about matters that are, by their nature, highly uncertain. The assessment of loss contingencies, including legal contingencies and curtailment obligations, involves the use of critical estimates, assumptions and judgments. Whenever practicable, the Company consults with outside experts, including legal counsel and consultants, to assist with the gathering and evaluation of information related to contingent liabilities. It is not possible to predict or determine the outcome of all loss contingencies. Accruals are periodically reviewed and may be adjusted as circumstances change.
5. Acquisitions
RCS Asset Purchase Agreement
On December 8, 2015 , the Company entered into an asset purchase agreement with RCS, which closed on January 28, 2016 . In connection therewith, the Company entered into a residential mortgage loan subservicing agreement with RCS pursuant to which the Company will subservice residential mortgage loans for RCS. On March 1, 2016, the Company gained control over the purchased assets, including servicer and protective advances, and assumed liabilities, including employee-related liabilities. In addition, RCS transferred to the Company certain of its existing residential mortgage loan subservicing agreements, which covered Fannie Mae and Freddie Mac mortgage loans with an aggregate $9.6 billion in unpaid principal balance as of the transfer date. The Company recorded $3.8 million in goodwill related to this acquisition, which was included in the Servicing segment. This goodwill was subsequently written off in connection with impairment charges recorded during 2016. Refer to Note 16 for additional information regarding goodwill impairment.
6. Transactions with NRM
On August 8, 2016, Ditech Financial and NRM executed the NRM Flow and Bulk Agreement whereby Ditech Financial agreed to sell to NRM all of Ditech Financial’s right, title and interest in mortgage servicing rights with respect to a pool of mortgage loans, with subservicing retained. The NRM Flow and Bulk Agreement provides that, from time to time, Ditech Financial may sell additional MSR to NRM in bulk or as originated or acquired on a flow basis, subject in each case to the parties agreeing on price and certain other terms.

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During 2016, in various bulk sale transactions under the NRM Flow and Bulk Agreement, the Company sold to NRM mortgage servicing rights relating to mortgage loans having an aggregate unpaid principal balance of $59.8 billion as of the applicable closing dates of such transactions, with subservicing retained. As of December 31, 2016, the Company had received $250.0 million in cash proceeds relating to such sales, which proceeds do not include certain holdback amounts relating to such sales that it expects to be paid to the Company over time. In addition, the Company has recently begun to sell NRM, on a flow basis and with subservicing retained, MSR relating to certain mortgage loans that it originates. NRM also acquired substantially all of WCO’s MSR portfolio in the fourth quarter of 2016, which consisted of MSR relating to mortgage loans having an aggregate unpaid principal balance of $9.8 billion as of the applicable closing dates, which was serviced by the Company and included $4.8 billion related to MSR that the Company previously accounted for as secured borrowings. Ditech Financial subservices these MSR under the NRM Subservicing Agreement.
The initial term of the NRM Flow and Bulk Agreement will expire on the third anniversary of the effective date and shall be renewed for successive one-year terms thereafter unless either party provides written notice to the other party of its election not to renew. Each party to the NRM Flow and Bulk Agreement also has termination rights upon the occurrence of certain events and NRM can terminate this agreement at any time on 30 days' notice. In connection with Ditech Financial’s entry into the NRM Flow and Bulk Agreement, the Company entered into a performance and payment guaranty whereby the Company guarantees performance of all obligations and all payments required by Ditech Financial under the NRM Flow and Bulk Agreement.
In addition, on August 8, 2016, Ditech Financial and NRM entered into the NRM Subservicing Agreement whereby Ditech Financial acts as subservicer for the mortgage loans whose MSR are sold by Ditech Financial to NRM under the NRM Flow and Bulk Agreement and for other mortgage loans as may be agreed upon by Ditech Financial and NRM from time to time, in exchange for a subservicing fee. Under the NRM Subservicing Agreement and a related agreement, Ditech Financial will perform all daily servicing obligations on behalf of NRM with respect to the MSR that are serviced by Ditech Financial pursuant to the terms of the NRM Subservicing Agreement, including collecting payments from borrowers and offering refinancing options to borrowers for purposes of minimizing portfolio runoff.
The initial term of the NRM Subservicing Agreement will expire on the first anniversary of the effective date thereof and will be automatically renewed for successive one-year terms thereafter. Ditech Financial may terminate the NRM Subservicing Agreement without cause at the end of the initial one-year term or at the end of any subsequent one-year renewal term by providing notice to NRM at least 120 days prior to the end of the applicable term. If Ditech Financial elects to terminate the NRM Subservicing Agreement without cause, Ditech Financial will not be entitled to receive any deconversion fee, will be responsible for certain servicing transfer costs and will owe NRM a transfer fee if such termination occurs within five years from the effective date of the agreement. Ditech Financial may also terminate the NRM Subservicing Agreement immediately for cause upon the occurrence of certain events, including, without limitation, any failure by NRM to remit payments (subject to a cure period), certain bankruptcy or insolvency events of NRM, NRM ceasing to be an approved servicer in good standing with Fannie Mae or Freddie Mac (unless caused by Ditech Financial) and any failure by NRM to perform, in any material respect, its obligations under the agreement (subject to a cure period). Upon any termination of the NRM Subservicing Agreement by Ditech Financial for cause, NRM will owe Ditech Financial a deconversion fee and be responsible for certain servicing transfer costs.
7. Variable Interest Entities
Consolidated Variable Interest Entities
Residual Trusts
The Company evaluates each securitization trust that funded its residential loan portfolio to determine if it meets the definition of a VIE, and whether or not the Company is required to consolidate the trust. The Company determined that it is the primary beneficiary of five securitization trusts in which it owns residual interests, and as a result, has consolidated these trusts. As a holder of the residual securities issued by the trusts, the Company has both the obligation to absorb losses to the extent of its investment and the right to receive benefits from the trusts, both of which could potentially be significant to the trusts. In addition, as the servicer for these trusts, the Company concluded it has the power to direct the activities that most significantly impact the economic performance of the trusts through its ability to manage the delinquent assets of the trusts. Specifically, the Company has discretion, subject to applicable contractual provisions and consistent with prudent mortgage-servicing practices, to decide whether to sell or work out any loans that become troubled.
The Company is not contractually required to provide any financial support to the Residual Trusts. The Company may, from time to time at its sole discretion, purchase certain assets or cover certain expenses for the trusts to cure delinquency or loss triggers for the sole purpose of releasing excess overcollateralization to the Company. Other than potentially acquiring assets for such purpose, based on current performance trends, the Company does not expect to provide financial support to the Residual Trusts.

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In April 2015, the Company sold its residual interests in seven of the Residual Trusts that it previously consolidated for $189.5 million in cash proceeds. Upon the sale of the residual interests, the Company determined that it was no longer required to consolidate the seven trusts as it was no longer the primary beneficiary of these trusts since (i) it did not hold the residual securities issued by the trusts and therefore had no obligation to absorb future losses to the extent of its investment and no right to receive future benefits from the trust, both of which could potentially be significant to the trusts, and (ii) it is adequately compensated and its role as servicer is of a fiduciary nature. In conjunction with the transaction, the Company deconsolidated the seven Residual Trusts and removed related assets of $783.9 million and liabilities of $588.5 million from its consolidated balance sheet and recorded servicing rights of $3.1 million . As a result of the sale, the Company recorded a loss of $2.8 million , which is recorded in other within other gains (losses) on the consolidated statements of comprehensive loss.
Non-Residual Trusts
The Company determined that it is the primary beneficiary of ten securitization trusts for which it does not own any residual interests. The Company does not receive economic benefit from the residential loans while the loans are held by the Non-Residual Trusts other than the servicing fees paid to the Company to service the loans. However, as part of a prior agreement to acquire the rights to service the loans in these securitization trusts, the Company has certain obligations to exercise mandatory clean-up calls for each of these trusts at their earliest exercisable date, which is the date the principal amount of each loan pool falls to 10% of the original principal amount. The Company will take control of the remaining collateral in the trusts when these calls are exercised, thus the clean-up call is deemed a variable interest as the Company will be required, under this obligation, to absorb any losses of the trusts subsequent to these calls, which could potentially be significant to each trust. Additionally, as servicer of these trusts, the Company has concluded that it has the power to direct the activities that most significantly impact the economic performance of the trusts.
The Company is not contractually required to provide any financial support to the Non-Residual Trusts. However, as described above, the Company is obligated to exercise the mandatory clean-up call obligations it assumed as part of the agreement to acquire the rights to service the loans in these trusts. The Company expects to call these securitizations beginning in 2017 and continuing through 2019 . The majority of the call obligations in 2017 are anticipated to occur during the second half of the year. The total outstanding balance of the residential loans expected to be called at the respective call dates is $418.1 million at December 31, 2016 .
For seven of the ten Non-Residual Trusts and four securitization trusts that have not been consolidated, the Company, as part of an agreement to service the loans in all eleven trusts, also has an obligation to reimburse a third party for the final $165.0 million in LOCs, if drawn, which were issued to the eleven trusts by a third party as credit enhancements to these trusts. As the LOCs were provided as credit enhancements to these securitizations, the trusts will draw on these LOCs if there are insufficient cash flows from the underlying collateral to pay the bondholders. The total amount available on these LOCs for these trusts was $254.1 million and $260.4 million at December 31, 2016 and 2015 , respectively. Based on the Company’s estimates of the underlying performance of the collateral in these securitizations, the Company does not expect that the final $165.0 million will be drawn, and therefore, no liability for the fair value of this obligation has been recorded on the Company’s consolidated balance sheets; however, actual performance may differ from this estimate in the future. For further information on the four securitization trusts that have not been consolidated by the Company, refer to the Unconsolidated Variable Interest Entities section of this Note.
Servicer and Protective Advance Financing Facilities
The Company has interests in financing entities that acquire servicer and protective advances from certain wholly-owned subsidiaries. The financing subsidiaries are deemed to be VIEs due to the design of the entities including restrictions on its operating activities. The Company is the primary beneficiary of these financing subsidiaries and, accordingly, consolidates the financing subsidiaries. The subsidiaries issue or enter into debt supported by collections on the transferred advances, as discussed in more detail in Note 21.
Revolving Credit Facilities-Related VIEs
Certain revolving credit facilities utilize subsidiaries and/or trusts, collectively referred to as the entities, which are considered VIEs. The Company transfers certain assets into the entities created as a mechanism for holding assets as collateral for the revolving credit facilities in order to facilitate the pledging of assets to the revolving credit facilities. The entities have no equity investment at risk, making them variable interest entities. The Company’s continuing involvement with the entities is in the form of servicing the assets and through holding the ownership interests of the entities. Accordingly, the Company concluded that it is the primary beneficiary of the entities and, therefore, the Company consolidated the entities. All of the subsidiaries and/or trusts are separate legal entities and the collateral held by the entities are owned by them and are not available to other creditors. 

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Table of Contents

During the year ended December 31, 2016, the Revolving Credit Facilities-Related VIEs were funded with HECMs and real estate owned that were repurchased from Ginnie Mae securitization pools utilizing warehouse facilities. These assets collateralize certain master repurchase agreements, which are not included in the Revolving Credit Facilities-Related VIEs. Refer to Note 22 for additional information.
Included in the tables below are summaries of the carrying amounts of the assets and liabilities of consolidated VIEs (in thousands):
 
 
December 31, 2016
 
 
Residual
Trusts
 
Non-Residual
Trusts
 
Servicer and
Protective
Advance
Financing
Facilities
 
 Revolving Credit Facilities-Related VIEs
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
Restricted cash and cash equivalents
 
$
13,321

 
$
10,257

 
$
22,265

 
$
—

 
$
45,843

Residential loans at amortized cost, net
 
462,877

 
—

 
—

 
—

 
462,877

Residential loans at fair value
 
—

 
450,377

 
—

 
42,122

 
492,499

Receivables, net
 
—

 
15,033

 
—

 
765

 
15,798

Servicer and protective advances, net
 
—

 
—

 
734,707

 
—

 
734,707

Other assets
 
10,028

 
1,028

 
1,440

 
7,335

 
19,831

Total assets
 
$
486,226

 
$
476,695

 
$
758,412

 
$
50,222

 
$
1,771,555

 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Payables and accrued liabilities
 
$
2,140

 
$
—

 
$
845

 
$
—

 
$
2,985

Servicing advance liabilities
 
—

 
—

 
650,565

 
—

 
650,565

Mortgage-backed debt
 
429,931

 
514,025

 
—

 
—

 
943,956

Total liabilities
 
$
432,071

 
$
514,025

 
$
651,410

 
$
—

 
$
1,597,506

 
 
December 31, 2015
 
 
Residual
Trusts
 
Non-Residual
Trusts
 
Servicer and
Protective
Advance
Financing
Facilities
 
Total
Assets
 
 
 
 
 
 
 
 
Restricted cash and cash equivalents
 
$
13,369

 
$
11,388

 
$
34,948

 
$
59,705

Residential loans at amortized cost, net
 
500,563

 
—

 
—

 
500,563

Residential loans at fair value
 
—

 
526,016

 
—

 
526,016

Receivables, net
 
—

 
16,542

 
—

 
16,542

Servicer and protective advances, net
 
—

 
—

 
1,136,246

 
1,136,246

Other assets
 
9,357

 
558

 
2,255

 
12,170

Total assets
 
$
523,289

 
$
554,504

 
$
1,173,449

 
$
2,251,242

 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Payables and accrued liabilities
 
$
2,084

 
$
—

 
$
1,351

 
$
3,435

Servicing advance liabilities
 
—

 
—

 
992,769

 
992,769

Mortgage-backed debt
 
469,339

 
582,340

 
—

 
1,051,679

Total liabilities
 
$
471,423

 
$
582,340

 
$
994,120

 
$
2,047,883


F-31

Table of Contents

The assets of the consolidated VIEs are pledged as collateral to the servicing advance liabilities, mortgage-backed debt and revolving credit facilities and are not available to satisfy claims of general creditors of the Company. The mortgage-backed debt issued by each consolidated securitization trust is to be satisfied solely from the proceeds of the residential loans and other collateral held in the trusts while the servicing advance liabilities related to the trusts are to be satisfied from the recoveries or repayments from the underlying advances. The consolidated VIEs are not cross-collateralized and the holders of the mortgage-backed debt issued by the trusts and lenders under the servicer and protective financing facilities do not have recourse to the Company. Refer to Note 25 for additional information regarding the mortgage-backed debt and Note 21 for additional information regarding servicing advance liabilities.
For the Residual Trusts, interest income earned on the residential loans and interest expense incurred on the mortgage-backed debt, both of which are carried at amortized cost, are recorded on the consolidated statements of comprehensive loss in interest income on loans and interest expense, respectively. Additionally, the Company records a provision for its estimate of probable incurred credit losses associated with the residential loans as provision for loan losses, which is included in other expenses, net on the consolidated statements of comprehensive loss. Interest receipts on residential loans and interest payments on mortgage-backed debt are included in operating activities, while principal payments on residential loans are included in investing activities and payments on mortgage-backed debt are included in financing activities on the consolidated statements of cash flows.
The change in fair value of the assets and liabilities of the Non-Residual Trusts are included in other net fair value gains on the consolidated statements of comprehensive loss. Included in other net fair value gains is the interest income that is expected to be collected on the residential loans, the interest expense that is expected to be paid on the mortgage-backed debt, as well as the accretion of fair value. The non-cash component of other net fair value gains is recognized as an adjustment in reconciling net income or loss to net cash provided by or used in operating activities on the consolidated statements of cash flows. Principal payments on residential loans and draws on receivables are included in investing activities while payments on mortgage-backed debt are included in financing activities on the consolidated statements of cash flows.
Interest expense associated with the servicer and protective advance financing facilities is included in interest expense on the consolidated statements of comprehensive loss. Changes in servicer and protective advances are included in operating activities while the issuances of and payments on servicing advance liabilities are included in financing activities on the consolidated statements of cash flows.
The change in fair value of the residential loans of the Revolving Credit Facilities-Related VIEs are included in net fair value gains on reverse loans and related HMBS obligations on the consolidated statements of comprehensive loss. Declines in the value of real estate owned are recorded as adjustments to the carrying amount through a valuation allowance and are recorded in other expenses, net on the consolidated statements of comprehensive loss.
Unconsolidated Variable Interest Entities
The Company has variable interests in VIEs that it does not consolidate as it has determined that it is not the primary beneficiary of the VIEs.
Servicing Arrangements with Letter of Credit Reimbursement Obligation
As part of an agreement to service the loans in eleven securitization trusts, the Company has an obligation to reimburse a third party for the final $165.0 million in LOCs if drawn. The LOCs were issued by a third party as credit enhancements to these eleven securitizations and, accordingly, the securitization trusts will draw on these LOCs if there are insufficient cash flows from the underlying collateral to pay the bondholders.
As noted above, the Company has determined that for seven of these securitization trusts, the Company is the primary beneficiary due to a mandatory clean-up call obligation related to these trusts and, accordingly, the Company has consolidated the seven trusts on the consolidated balance sheets. However, for the four remaining securitization trusts for which the Company does not have a mandatory clean-up call obligation, the Company’s involvement consists only of servicer and the LOC reimbursement obligation. As explained in the Consolidated VIEs section above, the Company does not expect that the final $165.0 million in LOCs will be drawn. As the Company’s only involvement is that of servicer and the LOC reimbursement obligation, which is not expected to be drawn, the Company has concluded that it is not the primary beneficiary of the trusts as it does not have a variable interest that could potentially be significant to the trusts. Accordingly, the four securitization trusts have not been consolidated on the Company’s consolidated balance sheets.

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Table of Contents

Other Servicing Arrangements
The Company is involved with other securitization trusts as servicer of the financial assets of the trusts. The Company’s servicing fees are anticipated to absorb more than an insignificant portion of the returns of the trusts and the Company has considered its contract to service the financial assets of the trusts a variable interest. Typically, the Company’s involvement as servicer allows it to control the activities of the trusts that most significantly impact the economic performance of the trusts; however, based on the nature of the trusts, the obligations to its beneficial interest holders are guaranteed. Further, the Company’s involvement as servicer is subject to substantive kick-out rights held by a single party, and there are no significant barriers to the exercise of those kick-out rights. As a result, the Company has determined that it is not the primary beneficiary of those trusts and those trusts are not consolidated on the Company’s balance sheets. The termination of the Company as servicer to the financial assets of the trusts would eliminate any future servicing revenues and related cash flows associated with the underlying financial assets held by the trusts.
Type of Involvement in Unconsolidated Variable Interest Entities
The following table presents the carrying amounts of the Company’s assets and liabilities that relate to its variable interests in the VIEs that are not consolidated, as well as its maximum exposure to loss and the size of the unconsolidated VIEs (in thousands):
 
 
Carrying Value of Assets
Recorded on the Consolidated Balance Sheets
 
 
 
Size of
VIEs (2)
Type of Involvement
 
Servicing Rights, Net
 
Servicer and Protective Advances, Net
 
Receivables, Net
 
Net Assets
 
Maximum
Exposure to
Loss (1)
 
VIEs associated with servicing arrangements
 
 
 
 
 
 
 
 
 
 
 
 
Servicing arrangements with a LOC reimbursement obligation
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
$
900

 
$
2,910

 
$
108

 
$
3,918

 
$
168,918

 
$
134,616

December 31, 2015
 
1,145

 
2,656

 
123

 
3,924

 
168,924

 
153,070

Other servicing arrangements
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
—

 
—

 
183

 
183

 
183

 
437,595

December 31, 2015
 
—

 
—

 
190

 
190

 
190

 
443,631

__________
(1)
The Company's maximum exposure to loss for VIEs equals the carrying value of assets recognized on the consolidated balance sheets, and in the case of arrangements with a LOC reimbursement obligation, also includes the obligation to reimburse a third party for the final $165.0 million drawn on LOCs discussed above.
(2)
The size of unconsolidated VIEs is represented by the unpaid principal balance of loans serviced for VIEs associated with servicing arrangements.
8. Transfers of Residential Loans
Sales of Mortgage Loans
As part of its originations activities, the Company sells substantially all of its originated or purchased mortgage loans into the secondary market for securitization or to private investors as whole loans. The Company sells conventional-conforming and government-backed mortgage loans through GSE and agency-sponsored securitizations in which mortgage-backed securities are created and sold to third-party investors. The Company also sells non-conforming mortgage loans to private investors. The Company accounts for these transfers as sales. Historically, the Company has generally retained the rights to subservice the MSR on the sold loans. If the servicing rights are retained, the Company receives a servicing fee for servicing the sold loans, which represents continuing involvement. During the year ended December 31, 2016 , 47% of all mortgage loans sold by the Company were purchased by Fannie Mae, 39% were pooled into mortgage-backed securities guaranteed by Ginnie Mae, and the remaining 14% were primarily sold to Freddie Mac. During the year ended December 31, 2015, 56% of all mortgage loans were purchased by Fannie Mae, 35% were pooled into mortgage-backed securities guaranteed by Ginnie Mae, and the remaining 9% were primarily sold to Freddie Mac. During the year ended December 31, 2014, substantially all of the mortgage loans sold were purchased by Fannie Mae.
Certain guarantees arise from agreements associated with the sale of the Company's residential loans. Under these agreements, the Company may be obligated to repurchase loans, or otherwise indemnify or reimburse the credit owner or insurer for losses incurred, due to material breach of contractual representations and warranties. Refer to Note 33 for further information.

F-33

Table of Contents

The following table presents the carrying amounts of the Company’s assets that relate to its continued involvement with mortgage loans that have been sold with servicing rights retained and the unpaid principal balance of these sold loans (in thousands):
 
 
Carrying Value of Assets
Recorded on the Consolidated Balance Sheets
 
Unpaid
Principal
Balance of
Sold Loans

 
Servicing
Rights, Net (1)
 
Servicer and
Protective
Advances, Net
 
Payables and Accrued Liabilities (1)
 
Total
 
December 31, 2016
 
$
439,062

 
$
21,825

 
$
(1,983
)
 
$
458,904

 
$
36,116,570

December 31, 2015
 
509,785

 
25,078

 
—

 
534,863

 
46,983,388

__________
(1)
In connection with preparing the Form 10-Q for the three months ended March 31, 2017, the Company revised the December 31, 2016 disclosed amount of net servicing rights and payables and accrued liabilities for which the Company has continuing involvement. The total net servicing rights and payables and accrued liabilities balances reported in the consolidated balance sheets as of December 31, 2016 were not impacted by this disclosure revision.
At December 31, 2016 and 2015 , 1.3% and 0.5% , respectively, of mortgage loans sold and serviced by the Company were 60 days or more past due.
The following table presents a summary of cash flows related to sales of mortgage loans (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Cash proceeds received from sales, net of fees
 
$
21,386,821

 
$
25,860,529

 
$
19,118,420

Servicing fees collected (1)
 
144,085

 
111,635

 
63,420

Repurchases of previously sold loans
 
33,045

 
14,636

 
8,186

__________
(1)
Represents servicing fees collected on all loans sold whereby the Company has continued involvement.
In connection with these sales, the Company recorded servicing rights using a fair value model that utilizes Level 3 unobservable inputs. Refer to Note 15 for information relating to servicing of residential loans.
Transfers of Reverse Loans
The Company, through RMS, is an approved issuer of Ginnie Mae HMBS. The HMBS are guaranteed by Ginnie Mae and collateralized by participation interests in HECMs insured by the FHA. The Company both originated and purchased HECMs that are pooled and securitized into HMBS that the Company sells into the secondary market with servicing rights retained. In December 2016, management decided to exit the reverse mortgage originations business, which occurred in January 2017. The Company intends to fulfill reverse loans in its originations pipeline consistent with its underwriting practices and to fund undrawn amounts available to borrowers.
Based upon the structure of the Ginnie Mae securitization program, the Company has determined that it has not met all of the requirements for sale accounting and accounts for these transfers as secured borrowings. Under this accounting treatment, the reverse loans remain on the consolidated balance sheets as residential loans. The proceeds from the transfer of reverse loans are recorded as HMBS related obligations with no gain or loss recognized on the transfer. Ginnie Mae, as guarantor of the HMBS, is obligated to the holders of the HMBS in an instance of RMS default on its servicing obligations, or when the proceeds realized on HECMs are insufficient to repay all outstanding HMBS related obligations. Ginnie Mae has recourse to RMS to the extent of the participation interests in HECMs serving as collateral to the HMBS, but does not have recourse to the general assets of the Company, except that Ginnie Mae has recourse to RMS in connection with certain claims relating to the performance and obligations of RMS as both an issuer of HMBS and a servicer of HECMs underlying HMBS.
At December 31, 2016 , the unpaid principal balance and the carrying value associated with both the reverse loans and the real estate owned pledged as collateral to the securitization pools were $9.9 billion and $10.4 billion , respectively.

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Table of Contents

9. Fair Value
Basis for Measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A three-tier fair value hierarchy is used to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:
Level 1 — Valuation is based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 — Valuation is based on quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 — Valuation is based on inputs that are both significant to the fair value measurement and unobservable.
The accounting guidance concerning fair value allows the Company to elect to measure financial instruments at fair value and report the changes in fair value through net income or loss. This election can only be made at certain specified dates and is irrevocable once made. Other than mortgage loans held for sale, which the Company has elected to measure at fair value, the Company does not have a fair value election policy, but rather makes the election on an instrument-by-instrument basis as assets and liabilities are acquired or incurred, other than for those assets and liabilities that are required to be recorded and subsequently measured at fair value.
Transfers into and out of the fair value hierarchy levels are assumed to be as of the end of the quarter in which the transfer occurred. During the year ended December 31, 2016, the Company transferred $212.6 million in servicing rights carried at fair value from Level 3 to Level 2 as there was direct observable input in a non-active market available to measure these assets. There were no transfers between levels during the year ended December 31, 2015.

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Table of Contents

Items Measured at Fair Value on a Recurring Basis
The following table summarizes the assets and liabilities in each level of the fair value hierarchy (in thousands). There were an insignificant amount of assets or liabilities measured at fair value on a recurring basis utilizing Level 1 assumptions.
 
 
December 31,
 
 
2016
 
2015
Level 2
 
 
 
 
Assets
 
 
 
 
Mortgage loans held for sale
 
$
1,176,280

 
$
1,334,300

Servicing rights carried at fair value
 
13,170

 
—

Freestanding derivative instruments
 
34,543

 
6,993

Level 2 assets
 
$
1,223,993

 
$
1,341,293

Liabilities
 
 
 
 
Freestanding derivative instruments
 
7,611

 
5,405

Servicing rights related liabilities
 
1,902

 
—

Level 2 liabilities
 
$
9,513

 
$
5,405

 
 
 
 
 
Level 3
 
 
 
 
Assets
 
 
 
 
Reverse loans
 
$
10,742,922

 
$
10,763,816

Mortgage loans related to Non-Residual Trusts
 
450,377

 
526,016

Charged-off loans
 
46,963

 
49,307

Receivables related to Non-Residual Trusts
 
15,033

 
16,542

Servicing rights carried at fair value
 
936,423

 
1,682,016

Freestanding derivative instruments (IRLCs)
 
53,394

 
51,519

Level 3 assets
 
$
12,245,112

 
$
13,089,216

Liabilities
 
 
 
 
Freestanding derivative instruments (IRLCs)
 
$
4,193

 
$
1,070

Servicing rights related liabilities
 
—

 
117,000

Mortgage-backed debt related to Non-Residual Trusts
 
514,025

 
582,340

HMBS related obligations
 
10,509,449

 
10,647,382

Level 3 liabilities
 
$
11,027,667

 
$
11,347,792


F-36

Table of Contents

The following assets and liabilities are measured on the consolidated balance sheets at fair value on a recurring basis utilizing significant unobservable inputs or Level 3 assumptions in their valuation. The following tables provide a reconciliation of the beginning and ending balances of these assets and liabilities (in thousands):
 
For the Year Ended December 31, 2016
 
Fair Value
January 1,
2016
 
Total
Gains (Losses)
Included in
Comprehensive
Loss
 
Purchases and Other
 
Sales
 
Originations / Issuances
 
Settlements
 
Transfers Out of Level 3
 
Fair Value December 31, 2016
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reverse loans
$
10,763,816

 
$
338,321

 
$
437,540

 
$
—

 
$
459,280

 
$
(1,256,035
)
 
$
—

 
$
10,742,922

Mortgage loans related to Non-Residual Trusts
526,016

 
19,464

 
—

 
—

 
—

 
(95,103
)
 
—

 
450,377

Charged-off loans (1)
49,307

 
41,391

 
—

 
—

 
—

 
(43,735
)
 
—

 
46,963

Receivables related to Non-Residual Trusts
16,542

 
6,601

 
—

 
—

 
—

 
(8,110
)
 
—

 
15,033

Servicing rights carried at fair value (2)
1,682,016

 
(478,558
)
 
7,729

 
(247,829
)
 
185,695

 
—

 
(212,630
)
 
936,423

Freestanding derivative instruments (IRLCs)
51,519

 
2,549

 
—

 
—

 
—

 
(674
)
 
—

 
53,394

Total assets
$
13,089,216

 
$
(70,232
)
 
$
445,269

 
$
(247,829
)
 
$
644,975

 
$
(1,403,657
)
 
$
(212,630
)
 
$
12,245,112

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Freestanding derivative instruments (IRLCs)
$
(1,070
)
 
$
(3,123
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(4,193
)
Servicing rights related liabilities (3) (4)
(117,000
)
 
(3,921
)
 
—

 
108,887

 
(27,886
)
 
39,920

 
—

 
—

Mortgage-backed debt related to Non-Residual Trusts
(582,340
)
 
(29,355
)
 
—

 
—

 
—

 
97,670

 
—

 
(514,025
)
HMBS related obligations
(10,647,382
)
 
(279,299
)
 
—

 
—

 
(960,156
)
 
1,377,388

 
—

 
(10,509,449
)
Total liabilities
$
(11,347,792
)
 
$
(315,698
)
 
$
—

 
$
108,887

 
$
(988,042
)
 
$
1,514,978

 
$
—

 
$
(11,027,667
)
__________
(1)
Included in gains on charged-off loans are gains from instrument-specific credit risk, which primarily result from changes in assumptions related to collection rates and discount rates, of $20.7 million during the year ended December 31, 2016.
(2)
Amounts transferred out of Level 3 consisted of servicing rights that were transferred to Level 2 during the third quarter of 2016. These transfers resulted from an agreement with NRM to sell such servicing rights, which were subsequently sold during the fourth quarter of 2016. In total, the Company sold $458.5 million of servicing rights during the year ended December 31, 2016.
(3)
Included in losses on servicing rights related liabilities are losses from instrument-specific credit risk, which primarily result from changes in assumptions related to discount rates, conditional prepayment rates and conditional default rates, of $15.8 million during the year ended December 31, 2016.
(4)
Sales of servicing rights related liabilities represents the derecognition of excess servicing spread liabilities and servicing rights financing in connection with the sale of related servicing rights and excess spread by the Company and WCO to NRM. Refer to Note 6 for additional information regarding transactions with NRM.




F-37

Table of Contents

 
 
For the Year Ended December 31, 2015
 
 
Fair Value
January 1,
2015
 
Total
Gains (Losses)
Included in
Comprehensive Loss
 
Purchases and Other
 
Sales
 
Originations / Issuances
 
Settlements
 
Fair Value
December 31, 2015
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reverse loans (1)
 
$
10,064,365

 
$
202,494

 
$
762,657

 
$
(16,592
)
 
$
708,948

 
$
(958,056
)
 
$
10,763,816

Mortgage loans related to Non-Residual Trusts
 
586,433

 
41,643

 
—

 
—

 
—

 
(102,060
)
 
526,016

Charged-off loans (2)
 
57,217

 
41,803

 
—

 
—

 
—

 
(49,713
)
 
49,307

Receivables related to Non-Residual Trusts
 
25,201

 
(1,178
)
 
—

 
—

 
—

 
(7,481
)
 
16,542

Servicing rights carried at fair value
 
1,599,541

 
(401,992
)
 
237,820

 
(60,094
)
 
306,741

 
—

 
1,682,016

Freestanding derivative instruments (IRLCs)
 
60,400

 
(8,281
)
 
—

 
—

 
—

 
(600
)
 
51,519

Total assets
 
$
12,393,157

 
$
(125,511
)
 
$
1,000,477

 
$
(76,686
)
 
$
1,015,689

 
$
(1,117,910
)
 
$
13,089,216

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Freestanding derivative instruments (IRLCs)
 
$
(263
)
 
$
(807
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
(1,070
)
Servicing rights related liabilities
 
(66,311
)
 
(7,741
)
 
—

 
—

 
(64,593
)
 
21,645

 
(117,000
)
Mortgage-backed debt related to Non-Residual Trusts
 
(653,167
)
 
(33,142
)
 
—

 
—

 
—

 
103,969

 
(582,340
)
HMBS related obligations
 
(9,951,895
)
 
(104,327
)
 
—

 
—

 
(1,622,481
)
 
1,031,321

 
(10,647,382
)
Total liabilities
 
$
(10,671,636
)
 
$
(146,017
)
 
$
—

 
$
—

 
$
(1,687,074
)
 
$
1,156,935

 
$
(11,347,792
)
__________
(1)
During the year ended December 31, 2015, the Company sold $16.6 million in reverse loans and recognized $0.1 million in net losses on sales of loans.
(2)
Included in gains on charged-off loans are gains from instrument-specific credit risk of $18.5 million , which primarily result from changes in assumptions related to collection rates and discount rates during the year ended December 31, 2015.
Refer to Note 4 for the location within the consolidated statements of comprehensive loss of the gains and losses resulting from changes in fair value of assets and liabilities disclosed above. Total gains and losses included above include interest income and interest expense at the stated rate for interest-bearing assets and liabilities, respectively, accretion and amortization, and the impact of the changes in valuation inputs and assumptions.
The Company’s Valuation Committee determines and approves valuation policies and unobservable inputs used to estimate the fair value of items measured at fair value on a recurring basis. The Valuation Committee, consisting of certain members of the senior executive management team, meets on a quarterly basis to review the assets and liabilities that require fair value measurement, including how each asset and liability has actually performed in comparison to the unobservable inputs and the projected performance. The Valuation Committee also reviews related available market data.
The following is a description of the methods used to estimate the fair values of the Company’s assets and liabilities measured at fair value on a recurring basis, as well as the basis for classifying these assets and liabilities as Level 2 or 3 within the fair value hierarchy. The Company’s valuations consider assumptions that it believes a market participant would consider in valuing the assets and liabilities, the most significant of which are disclosed below. The Company reassesses and periodically adjusts the underlying inputs and assumptions used in the valuations for recent historical experience, as well as for current and expected relevant market conditions.
Residential loans
•
Reverse loans, mortgage loans related to Non-Residual Trusts and charged-off loans — These loans are not traded in an active, open market with readily observable prices. Accordingly, the Company estimates fair value using Level 3 unobservable market inputs. The estimated fair value is based on the net present value of projected cash flows over the estimated life of the loans. The discount rate assumption for these assets considers, as applicable, collateral and credit risk characteristics of the loans, collection rates, current market interest rates, expected duration, and current market yields.
Mortgage loans held for sale — These loans are valued using a market approach by utilizing observable quoted market prices, where available, or prices for other whole loans with similar characteristics. The Company classifies these loans as Level 2 within the fair value hierarchy.

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Table of Contents

Receivables related to Non-Residual Trusts — The Company estimates the fair value of these receivables using the net present value of expected cash flows from the LOCs to be used to pay bondholders over the remaining life of the securitization trusts and applies Level 3 unobservable market inputs in its valuation. Receivables related to Non-Residual Trusts are recorded in receivables, net on the consolidated balance sheets.
Servicing rights carried at fair value — The Company accounts for servicing rights associated with the risk-managed loan class at fair value. The Company primarily uses a discounted cash flow model to estimate the fair value of these assets, unless there is an agreed upon sales price for a specific portfolio on or prior to the applicable reporting date relating to such reporting period, in which case the assets are valued at the price that the trade will be executed. The assumptions used in the discounted cash flow model vary based on collateral stratifications including product type, remittance type, geography, delinquency, and coupon dispersion of the underlying loan portfolio. The Company classifies servicing rights that are valued at the agreed upon sales price within Level 2 of the fair value hierarchy, and the servicing rights that are valued using a discounted cash flow model are classified within Level 3 of the fair value hierarchy. The Company obtains third-party valuations on a quarterly basis to assess the reasonableness of the fair values calculated by the cash flow model.
Freestanding derivative instruments — Fair values of IRLCs are derived using valuation models incorporating market pricing for instruments with similar characteristics and by estimating the fair value of the servicing rights expected to be recorded at sale of the loan. The fair values are then adjusted for anticipated loan funding probability. Both the fair value of servicing rights expected to be recorded at the date of sale of the loan and anticipated loan funding probability are significant unobservable inputs and, as a result, IRLCs are classified as Level 3 within the fair value hierarchy. The loan funding probability ratio represents the aggregate likelihood that loans currently in a lock position will ultimately close, which is largely dependent on the loan processing stage that a loan is currently in and changes in interest rates from the time of the rate lock through the time a loan is closed. IRLCs have positive fair value at inception and change in value as interest rates and loan funding probability change. Rising interest rates have a positive effect on the fair value of the servicing rights component of the IRLC fair value and increase the loan funding probability. An increase in loan funding probability (i.e., higher aggregate likelihood of loans estimated to close) will result in the fair value of the IRLC increasing if in a gain position, or decreasing, to a lower loss, if in a loss position. A significant increase (decrease) to the fair value of servicing rights component in isolation could result in a significantly higher (lower) fair value measurement.
The fair value of forward sales commitments and MBS purchase commitments is determined based on observed market pricing for similar instruments; therefore, these contracts are classified as Level 2 within the fair value hierarchy. Counterparty credit risk is taken into account when determining fair value, although the impact is diminished by daily margin posting on all forward sales and purchase commitments. Refer to Note 10 for additional information on freestanding derivative financial instruments.
Servicing rights related liabilities — The fair value of the MSR liabilities related to NRM sales is consistent with the fair value methodology of the related servicing rights. For excess servicing spread liabilities and servicing rights financings, the Company used a discounted cash flow model to estimate the fair value of both its excess servicing spread liabilities and its servicing rights financing. The assumptions utilized are based on collateral stratifications including product type, remittance type, geography, delinquency, and coupon dispersion of the underlying loan portfolio. The Company classified its servicing rights related liabilities as Level 3 within the fair value hierarchy.
Mortgage-backed debt related to Non-Residual Trusts — This debt is not traded in an active, open market with readily observable prices. Accordingly, the Company estimates fair value using Level 3 unobservable market inputs. The estimated fair value of the debt is based on the net present value of the projected principal and interest payments owed for the estimated remaining life of the securitization trusts. An analysis of the credit assumptions for the underlying collateral in each of the securitization trusts is performed to determine the required payments to bondholders.
HMBS related obligations — These obligations are not traded in an active, open market with readily observable prices. Accordingly, the Company estimates fair value using Level 3 unobservable market inputs. The estimated fair value is based on the net present value of projected cash flows over the estimated life of the liabilities. The discount rate assumption for these liabilities is based on an assessment of current market yields for HMBS, expected duration, and current market interest rates. The yield on seasoned HMBS is adjusted based on the duration of each HMBS and assuming a constant spread to LIBOR.

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Table of Contents

The following tables present the significant unobservable inputs used in the fair value measurement of the assets and liabilities described above. The Company utilizes a discounted cash flow model to estimate the fair value of all Level 3 assets and liabilities included on the consolidated financial statements at fair value on a recurring basis, with the exception of IRLCs for which the Company utilizes a market approach. Significant increases or decreases in any of the inputs disclosed below could result in a significantly lower or higher fair value measurement.
 
 
 
 
December 31, 2016
 
December 31, 2015
 
 
Significant
Unobservable Input (1) (2)
 
Range of Input (3)
 
Weighted
Average of Input (3)
 
Range of Input (3)
 
Weighted
Average of Input (3)
Assets
 
 
 
 
 
 
 
 
 
 
Reverse loans
 
Weighted-average remaining life in years (4)
 
0.6 - 10.2
 
3.8

 
1.1 - 10.0
 
4.1

 
 
Conditional repayment rate
 
13.23% - 55.32%
 
28.48
%
 
13.53% - 52.94%
 
25.59
%
 
 
Discount rate
 
1.93% - 3.69%
 
2.93
%
 
2.08% - 3.56%
 
2.84
%
Mortgage loans related to Non-Residual Trusts
 
Conditional prepayment rate
 
1.98% - 2.67%
 
2.27
%
 
2.67% - 4.66%
 
3.52
%
 
 
Conditional default rate
 
1.02% - 4.25%
 
2.61
%
 
1.47% - 2.74%
 
2.05
%
 
 
Loss severity
 
79.98% - 100.00%
 
96.61
%
 
73.07% - 95.88%
 
88.72
%
 
 
Discount rate
 
8.00%
 
8.00
%
 
8.00%
 
8.00
%
Charged-off loans
 
Collection rate
 
2.69% - 3.55%
 
2.74
%
 
2.15% - 3.54%
 
2.23
%
 
 
Discount rate
 
28.00%
 
28.00
%
 
28.00%
 
28.00
%
Receivables related to Non-Residual Trusts
 
Conditional prepayment rate
 
2.22% - 3.17%
 
2.65
%
 
1.93% - 3.62%
 
2.90
%
 
 
Conditional default rate
 
2.32% - 4.66%
 
3.34
%
 
1.66% - 2.98%
 
2.30
%
 
 
Loss severity
 
77.88% - 100.00%
 
94.51
%
 
70.33% - 93.46%
 
85.63
%
 
 
Discount rate
 
0.50%
 
0.50
%
 
0.50%
 
0.50
%
Servicing rights carried at fair value
 
Weighted-average remaining life in years (4)
 
2.6 - 7.4
 
6.0

 
5.2 - 9.0
 
6.3

 
 
Discount rate
 
10.68% - 14.61%
 
11.56
%
 
10.00% - 14.34%
 
10.88
%
 
 
Conditional prepayment rate
 
5.76% - 21.67%
 
9.09
%
 
6.07% - 13.15%
 
9.94
%
 
 
Conditional default rate
 
0.04% - 2.97%
 
0.88
%
 
0.05% - 2.49%
 
1.06
%
 
 
Cost to service
 
$62 - $1,260
 
$128
 
$70 - $455
 
$97
Interest rate lock commitments
 
Loan funding probability
 
16.00% - 100.00%
 
75.86
%
 
2.34% - 100.00%
 
79.42
%
 
 
Fair value of initial servicing rights multiple (5)  
 
0.01 - 5.98
 
3.06

 
0.05 - 7.06
 
3.71


F-40

Table of Contents

 
 
 
 
December 31, 2016
 
December 31, 2015
 
 
Significant
Unobservable Input (1) (2)
 
Range of Input (3)
 
Weighted
Average of Input (3)
 
Range of Input (3)
 
Weighted
Average of Input (3)
Liabilities
 
 
 
 
 
 
 
 
 
 
Interest rate lock commitments
 
Loan funding probability
 
34.40% - 100.00%
 
83.36
%
 
38.00% - 100.00%
 
83.28
%
 
 
Fair value of initial servicing rights multiple  (5)
 
0.04 - 6.04
 
3.69

 
0.11 - 5.88
 
4.00

Servicing rights related liabilities
 
Weighted-average remaining life in years (4)
 
—
 
—

 
6.3 - 7.4
 
6.6

 
 
Discount rate
 
—
 
—

 
11.67% - 13.85%
 
13.24
%
 
 
Conditional prepayment rate
 
—
 
—

 
8.32% - 11.28%
 
9.98
%
 
 
Conditional default rate
 
—
 
—

 
0.11% - 1.06%
 
0.58
%
Mortgage-backed debt related to Non-Residual Trusts
 
Conditional prepayment rate
 
2.22% - 3.17%
 
2.65
%
 
1.93% - 3.62%
 
2.90
%
 
 
Conditional default rate
 
2.32% - 4.66%
 
3.34
%
 
1.66% - 2.98%
 
2.30
%
 
 
Loss severity
 
77.88% - 100.00%
 
94.51
%
 
70.33% - 93.46%
 
85.63
%
 
 
Discount rate
 
6.00%
 
6.00
%
 
6.00%
 
6.00
%
HMBS related obligations
 
Weighted-average remaining life in years (4)
 
0.4 - 7.2
 
3.2

 
0.9 - 6.6
 
3.5

 
 
Conditional repayment rate
 
11.49% - 57.76%
 
27.74
%
 
12.06% - 55.49%
 
24.70
%
 
 
Discount rate
 
1.50% - 3.17%
 
2.56
%
 
1.73% - 3.08%
 
2.39
%
__________
(1)
Conditional repayment rate includes assumptions for both voluntary and involuntary rates as well as assumptions for the assignment of HECMs to HUD, in accordance with obligations as servicer.
(2)
Voluntary and involuntary prepayment rates have been presented as conditional prepayment rate and conditional default rate, respectively.
(3)
With the exception of loss severity, fair value of initial servicing rights embedded in IRLCs and discount rate on charged-off loans, all significant unobservable inputs above are based on the related unpaid principal balance of the underlying collateral, or in the case of HMBS related obligations, the balance outstanding. Loss severity is based on projected liquidations. Fair value of servicing rights embedded in IRLCs represents a multiple of the annual servicing fee. The discount rate on charged-off loans is based on the loan balance at fair value.
(4)
Represents the remaining weighted-average life of the related unpaid principal balance or balance outstanding of the underlying collateral adjusted for assumptions for conditional repayment rate, conditional prepayment rate and conditional default rate, as applicable.
(5)
Fair value of servicing rights embedded in IRLCs, which represents a multiple of the annual servicing fee, excludes the impact of certain IRLCs identified as servicing released for which the Company does not ultimately realize the benefits.
Fair Value Option
With the exception of freestanding derivative instruments, the Company has elected the fair value option for the assets and liabilities described above as measured at fair value on a recurring basis. The fair value option was elected for these assets and liabilities as the Company believes fair value best reflects their expected future economic performance.


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Table of Contents

Presented in the table below is the estimated fair value and unpaid principal balance of loans and debt instruments that have contractual principal amounts and for which the Company has elected the fair value option (in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Estimated
Fair Value
 
Unpaid Principal
Balance
 
Estimated
Fair Value
 
Unpaid Principal
Balance
Loans at fair value under the fair value option
 
 
 
 
 
 
 
 
Reverse loans (1)
 
$
10,742,922

 
$
10,218,007

 
$
10,763,816

 
$
10,187,521

Mortgage loans held for sale (1)
 
1,176,280

 
1,148,897

 
1,334,300

 
1,285,582

Mortgage loans related to Non-Residual Trusts
 
450,377

 
513,545

 
526,016

 
580,695

Charged-off loans
 
46,963

 
2,439,318

 
49,307

 
2,887,367

Total
 
$
12,416,542

 
$
14,319,767

 
$
12,673,439

 
$
14,941,165

 
 
 
 
 
 
 
 
 
Debt instruments at fair value under the fair value option
 
 
 
 
 
 
 
 
Mortgage-backed debt related to Non-Residual Trusts
 
$
514,025

 
$
518,317

 
$
582,340

 
$
585,839

HMBS related obligations (2)
 
10,509,449

 
9,916,383

 
10,647,382

 
10,012,283

Total
 
$
11,023,474

 
$
10,434,700

 
$
11,229,722

 
$
10,598,122

__________
(1)
Includes loans that collateralize master repurchase agreements. Refer to Note 22 for additional information.
(2)
For HMBS related obligations, the unpaid principal balance represents the balance outstanding.
Included in mortgage loans related to Non-Residual Trusts are loans that are 90 days or more past due that had a fair value of $1.6 million and $2.6 million , and an unpaid principal balance of $29.5 million and $16.2 million , at December 31, 2016 and 2015 , respectively. Mortgage loans held for sale that are 90 days or more past due are insignificant at December 31, 2016 and 2015. Charged-off loans are predominantly 90 days or more past due.
Items Measured at Fair Value on a Non-Recurring Basis
The Company held real estate owned, net of $104.6 million and $77.4 million at December 31, 2016 and 2015 , respectively. In addition, the Company had loans that were in the process of foreclosure of $418.4 million and $244.9 million at December 31, 2016 and 2015 , respectively, which are included in residential loans at amortized cost, net and residential loans at fair value on the consolidated balance sheet. Real estate owned, net is included on the consolidated balance sheets within other assets and is measured at net realizable value on a non-recurring basis utilizing significant unobservable inputs or Level 3 assumptions in their valuation.
The following table presents the significant unobservable input used in the fair value measurement of real estate owned, net:
 
 
 
 
December 31, 2016
 
December 31, 2015
 
 
Significant
Unobservable Input
 
Range of Input
 
Weighted
Average of Input
 
Range of Input
 
Weighted
Average of Input
Real estate owned, net
 
Loss severity (1)
 
0.00% - 61.61%
 
7.30
%
 
0.00% - 72.58%
 
8.25
%
__________
(1)
Loss severity is based on the unpaid principal balance of the related loan at the time of foreclosure.
The Company held real estate owned, net in the Reverse Mortgage and Servicing segments and Other non-reportable segment of $90.7 million , $12.9 million and $1.0 million at December 31, 2016 , respectively, and $66.4 million , $10.4 million and $0.6 million , at December 31, 2015 , respectively. At December 31, 2016 , concentrations of properties (represented by 5% or more of real estate owned) were located in Texas, Maryland, Illinois, and Puerto Rico. In determining fair value, the Company either obtains appraisals or performs a review of historical severity rates of real estate owned previously sold by the Company. When utilizing historical severity rates, the properties are stratified by collateral type and/or geographical concentration and length of time held by the Company. The severity rates are reviewed for reasonableness by comparison to third-party market trends and fair value is determined by applying severity rates to the stratified population. In the determination of fair value of real estate owned associated with reverse mortgages, the Company considers amounts typically covered by FHA insurance. Management approves valuations that have been determined using the historical severity rate method.

F-42

Table of Contents

Real estate owned expenses, net which are recorded in other expenses, net on the consolidated statements of comprehensive loss were $6.9 million , $6.3 million and $7.0 million for the years ended December 31, 2016, 2015 and 2014 , respectively. Included in real estate owned expenses, net are lower of cost or fair value adjustments of $5.1 million , $5.5 million and $2.8 million for the years ended December 31, 2016, 2015 and 2014 , respectively.
Fair Value of Other Financial Instruments
The following table presents the carrying amounts and estimated fair values of financial assets and liabilities that are not recorded at fair value on a recurring or non-recurring basis and their respective levels within the fair value hierarchy (in thousands). This table excludes cash and cash equivalents, restricted cash and cash equivalents, servicer payables and warehouse borrowings as these financial instruments are highly liquid or short-term in nature and as a result, their carrying amounts approximate fair value.
 
 
 
 
December 31, 2016
 
December 31, 2015
 
 
Fair Value
Hierarchy
 
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
Financial assets
 
 
 
 
 
 
 
 
 
 
Residential loans at amortized cost, net (1)
 
Level 3
 
$
665,209

 
$
674,851

 
$
541,406

 
$
554,664

Servicer and protective advances, net
 
Level 3
 
1,195,380

 
1,147,155

 
1,631,065

 
1,546,958

 
 
 
 
 
 
 
 
 
 
 
Financial liabilities
 
 
 
 
 
 
 
 
 
 
Servicing advance liabilities  (2)
 
Level 3
 
781,734

 
782,570

 
1,226,898

 
1,232,147

Corporate debt (3)
 
Level 2
 
2,126,176

 
1,967,518

 
2,152,031

 
1,904,467

Mortgage-backed debt carried at amortized cost
 
Level 3
 
429,931

 
435,679

 
469,339

 
475,347

__________
(1)
Includes loans subject to repurchase from Ginnie Mae. Refer to Note 11 for additional information regarding Ginnie Mae securitizations.
(2)
The carrying amounts of servicing advance liabilities are net of deferred issuance costs, including those relating to line-of-credit arrangements, which are recorded in other assets.
(3)
The carrying amounts of corporate debt are net of the 2013 Revolver deferred issuance costs, which are recorded in other assets on the consolidated balance sheets.
The following is a description of the methods and significant assumptions used in estimating the fair value of the Company’s financial instruments that are not measured at fair value on a recurring or non-recurring basis.
Residential loans at amortized cost, net — The methods and assumptions used to estimate the fair value of residential loans carried at amortized cost are the same as those described above for mortgage loans related to Non-Residual Trusts.
Servicer and protective advances, net — The estimated fair value of these advances is based on the net present value of expected cash flows. The determination of expected cash flows includes consideration of recoverability clauses in the Company’s servicing agreements, as well as assumptions related to the underlying collateral and when proceeds may be used to recover these receivables.
Servicing advance liabilities — The estimated fair value of the majority of these liabilities approximates carrying value as these liabilities bear interest at a rate that is adjusted regularly based on a market index.
Corporate debt — The Company’s 2013 Term Loan, Convertible Notes, and Senior Notes are not traded in an active, open market with readily observable prices. The estimated fair value of corporate debt is primarily based on an average of broker quotes.
Mortgage-backed debt carried at amortized cost — The methods and assumptions used to estimate the fair value of mortgage-backed debt carried at amortized cost are the same as those described above for mortgage-backed debt related to Non-Residual Trusts.

F-43

Table of Contents

Net Gains on Sales of Loans
Provided in the table below is a summary of the components of net gains on sales of loans (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Realized gains on sales of loans
 
$
233,447

 
$
171,128

 
$
367,314

Change in unrealized gains on loans held for sale
 
(14,803
)
 
(7,345
)
 
1,412

Gains (losses) on interest rate lock commitments
 
(574
)
 
(9,088
)
 
21,061

Losses on forward sales commitments
 
(12,335
)
 
(19,747
)
 
(156,201
)
Losses on MBS purchase commitments
 
(20,317
)
 
(24,250
)
 
(18,009
)
Capitalized servicing rights
 
196,963

 
306,741

 
214,285

Provision for repurchases
 
(15,331
)
 
(16,008
)
 
(7,741
)
Interest income
 
41,824

 
52,227

 
40,051

Other
 
574

 
182

 
—

Net gains on sales of loans
 
$
409,448

 
$
453,840

 
$
462,172

Net Fair Value Gains on Reverse Loans and Related HMBS Obligations
Provided in the table below is a summary of the components of net fair value gains on reverse loans and related HMBS obligations (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Interest income on reverse loans
 
$
450,008

 
$
435,585

 
$
398,925

Change in fair value of reverse loans
 
(111,687
)
 
(232,993
)
 
35,272

Net fair value gains on reverse loans
 
338,321

 
202,592

 
434,197

 
 
 
 
 
 
 
Interest expense on HMBS related obligations
 
(412,090
)
 
(403,817
)
 
(372,346
)
Change in fair value of HMBS related obligations
 
132,791

 
299,490

 
48,121

Net fair value losses on HMBS related obligations
 
(279,299
)
 
(104,327
)
 
(324,225
)
Net fair value gains on reverse loans and related HMBS obligations
 
$
59,022

 
$
98,265

 
$
109,972

10. Freestanding Derivative Financial Instruments
The following table provides the total notional or contractual amounts and related fair values of derivative assets and liabilities as well as cash margin (in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Notional/
Contractual
Amount
 
Fair Value
 
Notional/
Contractual
Amount
 
Fair Value
 
 
 
Derivative
Assets
 
Derivative
Liabilities
 
 
Derivative
Assets
 
Derivative
Liabilities
Interest rate lock commitments
 
$
3,046,549

 
$
53,394

 
$
4,193

 
$
3,398,892

 
$
51,519

 
$
1,070

Forward sales commitments
 
3,978,000

 
29,471

 
7,609

 
4,650,000

 
6,427

 
4,871

MBS purchase commitments
 
623,500

 
5,072

 
2

 
703,000

 
566

 
534

Total derivative instruments
 
 
 
$
87,937

 
$
11,804

 
 
 
$
58,512

 
$
6,475

Cash margin
 
 
 
$
—

 
$
30,941

 
 
 
$
209

 
$
10,101


F-44

Table of Contents

Derivative positions subject to netting arrangements include all forward sale commitments, MBS purchase commitments, and cash margin, as reflected in the table above, and allow the Company to net settle asset and liability positions, as well as associated cash margin, with the same counterparty. After consideration of these netting arrangements and offsetting positions by counterparty, the total net settlement amount as it relates to these positions were asset positions of $5.5 million and $0.3 million , and liability positions of $9.0 million and $8.6 million , at December 31, 2016 and 2015 , respectively. A master netting arrangement with one of the Company’s counterparties also allows for offsetting derivative positions and margin against amounts associated with the master repurchase agreement with that same counterparty. At December 31, 2016 , the Company’s net derivative liability position with that counterparty of $0.5 million was comprised of a cash margin received of $5.4 million , partially offset by a net derivative asset position of $4.0 million and $0.9 million of over-collateralized positions associated with the master repurchase agreement.
During the first quarter of 2016, the Company entered into a master netting arrangement with another of the Company’s counterparties, which also allows for offsetting derivative positions and margin against amounts associated with the master repurchase agreement with the same counterparty. At December 31, 2016 , the Company’s net derivative asset position with that counterparty was $1.7 million . Under the master netting arrangement, the Company is able to utilize certain over-collateralized positions and excess cash deposited with the counterparty associated with the master repurchase agreement to reduce potential cash margin posting requirements on derivative transactions. At December 31, 2016 , there were $6.1 million of over-collateralized positions and $23.6 million in excess cash deposited with the counterparty related to the master repurchase agreement. The master netting agreement does not obligate the counterparty to transfer cash margin to the Company related to the master repurchase agreement over-collateralization and excess cash positions.
Over collateralized positions on master repurchase agreements are not reflected as margin in the table above. Refer to Note 9 for a summary of the gains and losses on freestanding derivatives.
11. Residential Loans at Amortized Cost, Net
Residential loans at amortized cost, net consist of mortgage loans held for investment. The majority of these residential loans are held in securitization trusts that have been consolidated. Refer to Note 7 for further information regarding VIEs.
Residential loans at amortized cost, net are comprised of the following components (in thousands):
 
 
December 31,
 
 
2016
 
2015
Unpaid principal balance (1)
 
$
701,944

 
$
580,086

Unamortized discounts and other cost basis adjustments, net (2)
 
(31,568
)
 
(34,223
)
Allowance for loan losses
 
(5,167
)
 
(4,457
)
Residential loans at amortized cost, net (3)
 
$
665,209

 
$
541,406

__________
(1)
Includes loans subject to repurchase from Ginnie Mae, which are discussed in more detail below.
(2)
Includes $4.5 million and $4.6 million of accrued interest receivable at December 31, 2016 and 2015 , respectively.
(3)
Includes $202.3 million and $40.8 million of mortgage loans that are not related to consolidated VIEs at December 31, 2016 and 2015 , respectively.

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Allowance for Loan Losses
The following table summarizes the activity in the allowance for loan losses on residential loans at amortized cost, net (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Balance at beginning of the year
 
$
4,457

 
$
10,033

 
$
14,320

Provision for loan losses  (1)
 
2,701

 
3,142

 
1,491

Charge-offs, net of recoveries (2)
 
(1,991
)
 
(3,034
)
 
(5,778
)
Sale of residual interests (3)
 
—

 
(5,684
)
 
—

Balance at end of the year
 
$
5,167

 
$
4,457

 
$
10,033

__________
(1)
Provision for loan losses is included in other expenses, net on the consolidated statements of comprehensive loss.
(2)
Includes charge-offs recognized upon foreclosure of real estate in satisfaction of residential loans of $1.4 million , $1.7 million and $4.3 million for the years ended December 31, 2016, 2015 and 2014 , respectively.
(3)
Sale of residual interests represents a decrease to the allowance for loan losses resulting from the deconsolidation of the seven Residual Trusts during the year ended December 31, 2015. Refer to Note 7 for additional information regarding Residual Trusts.
Aging of Past Due Residential Loans and Credit Risk Profile Based on Delinquencies
Residential loans at amortized cost that are not insured are placed on non-accrual status when any portion of the principal or interest is 90 days past due. When placed on non-accrual status, the related interest receivable is reversed against interest income of the current period. Interest income on non-accrual loans, if received, is recorded using the cash-basis method of accounting. Residential loans are removed from non-accrual status when there is no longer significant uncertainty regarding collection of the principal and the associated interest. If a non-accrual loan is returned to accruing status, the accrued interest existing at the date the residential loan is placed on non-accrual status and interest during the non-accrual period are recorded as interest income as of the date the loan no longer meets the non-accrual criteria. The past due or delinquency status of residential loans is generally determined based on the contractual payment terms. In the case of loans with an approved repayment plan, including plans approved by the bankruptcy court, delinquency is based on the modified due date of the loan. Loan balances are charged off when it becomes evident that balances are not collectible. 
Factors that are important to managing overall credit quality and minimizing loan losses include sound loan underwriting, monitoring of existing loans, early identification of problem loans and timely resolution of problems. The Company primarily utilizes delinquency status to monitor the credit quality of the portfolio. The Company considers all loans 30 days or more past due to be non-performing and all loans that are current to be performing with regard to its credit quality profile. The Company had a recorded investment in loans that were 30 days or more past due of $68.3 million and $46.6 million at December 31, 2016 and 2015 , respectively.
Ginnie Mae Securitizations
For certain mortgage loans that the Company pooled and securitized with Ginnie Mae, the Company as the issuer has the unilateral right to repurchase, without Ginnie Mae’s prior authorization, any individual loan in a Ginnie Mae securitization pool if that loan meets certain criteria, including being delinquent greater than 90 days. As a result of this unilateral right, the Company must recognize the delinquent loan on its consolidated balance sheets when the loan becomes 90 days delinquent and establish a corresponding liability regardless of the Company’s intention to repurchase the loan. At December 31, 2016 and 2015, the Company has recorded $184.3 million and $22.5 million , respectively, in such loans with a corresponding liability in payables and accrued liabilities.
Concentrations of Credit Risk
Concentrations of credit risk associated with the residential loan portfolio carried at amortized cost are limited due to the large number of customers and their dispersion across many geographic areas. At December 31, 2016, the concentrations of homes securing these loans (represented by 5% or more of unpaid principal balance) were located in Texas, Mississippi and Alabama.

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12. Residential Loans at Fair Value
Residential Loans Held for Investment
Residential loans held for investment and carried at fair value include reverse loans, mortgage loans related to Non-Residual Trusts and charged-off loans.
Credit Risk
Concentrations of credit risk associated with the residential loan portfolio carried at fair value and held for investment are limited due to the large number of customers and their dispersion across many geographic areas. At December 31, 2016, the concentrations of homes securing reverse loans and mortgage loans related to Non-Residual Trusts (represented by 5% or more of unpaid principal balance) were located in California, Florida, Texas, and New York.
HECMs are insured by the FHA. Although performing and nonperforming reverse loans are covered by FHA insurance, the Company may incur expenses and losses in the process of foreclosing on and liquidating these loans that are not reimbursable by FHA in accordance with program guidelines, such as a portion of foreclosure related legal fees and closing costs incurred on the sale of REO.
The Company does not currently own residual interests in or provide credit support to the Non-Residual Trusts. However, the Company has assumed mandatory call obligations related to the Non-Residual Trusts and will be subject to a certain amount of credit risk associated with the purchased mortgage loans when the calls are exercised. This credit risk is considered in the fair value of the related mortgage loans. Refer to Note 33 for additional information.
The charged-off loan portfolio was acquired for a substantial discount to face value and as a result, exposes the Company to minimal credit risk.
Residential Loans Held for Sale
The Company sells substantially all of its originated or purchased mortgage loans into the secondary market for securitization or to private investors as whole loans. The Company typically retains the right to service these loans. Refer to Note 8 for additional information regarding these sales of residential loans that are held for sale.
A reconciliation of the changes in residential loans held for sale to the amounts presented on the consolidated statements of cash flows is presented in the following table (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Balance at beginning of the year
 
$
1,334,300

 
$
1,124,615

 
$
1,015,607

Purchases and originations of loans held for sale
 
21,054,053

 
25,942,841

 
18,878,305

Proceeds from sales of and payments on loans held for sale (1)
 
(21,467,419
)
 
(25,963,200
)
 
(19,177,179
)
Realized gains on sales of loans (2)
 
233,447

 
171,128

 
367,314

Change in unrealized gains on loans held for sale (2)
 
(14,803
)
 
(7,345
)
 
1,412

Interest income (2)
 
41,824

 
52,227

 
40,051

Transfers from loans held for investment
 
—

 
16,690

 
—

Other
 
(5,122
)
 
(2,656
)
 
(895
)
Balance at end of the year
 
$
1,176,280

 
$
1,334,300

 
$
1,124,615

__________
(1)
Excludes realized gains and losses on freestanding derivatives.
(2)
Amount is a component of net gains on sales of loans on the consolidated statements of comprehensive loss. Refer to Note 9 for additional information related to the components of net gains on sales of loans.
Credit Risk
The Company is subject to credit risk associated with mortgage loans that it purchases and originates during the period of time prior to the sale of these loans. The Company considers credit risk associated with these loans to be insignificant as it holds the loans for a short period of time, which is, on average, approximately 20 days from the date of borrowing, and the market for these loans continues to be highly liquid. The Company is also subject to credit risk associated with mortgage loans it has repurchased as a result of breaches of representations and warranties during the period of time between repurchase and resale. At December 31, 2016 , the Company held $4.4 million in repurchased loans.

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13. Receivables, Net
Receivables, net consist of the following (in thousands):
 
 
December 31,
 
 
2016
 
2015
Income tax receivables
 
$
95,874

 
$
10,671

Servicing rights holdback receivable (1)
 
73,365

 
9,173

Servicing fee receivables
 
35,698

 
42,773

Receivables related to Non-Residual Trusts
 
15,033

 
16,542

Insurance commission receivables (2)
 
—

 
12,845

Other receivables
 
49,725

 
48,790

Total receivables
 
269,695

 
140,794

Less: Allowance for uncollectible receivables
 
(1,733
)
 
(3,604
)
Receivables, net
 
$
267,962

 
$
137,190

__________
(1)
Servicing rights holdback receivable relates to sales of MSR to NRM and WCO at December 31, 2016, and 2015, respectively. Refer to Note 6 for further information regarding transactions with NRM and Note 35 for information regarding transactions with WCO.
(2)
Insurance commission receivables are included in assets held for sale at December 31, 2016. Refer to Note 18 for additional information. The December 31, 2015 balance was reduced by $77.2 million to correct an immaterial error as discussed in further detail in Note 1.
14. Servicer and Protective Advances, Net
Servicer advances consist of principal and interest advances to certain unconsolidated securitization trusts to meet contractual payment requirements to credit owners. Protective advances consist of advances to protect the collateral being serviced by the Company and primarily include payments made for property taxes, insurance and foreclosure costs. Servicer and protective advances, net consist of the following (in thousands):
 
 
December 31,
 
 
2016
 
2015
Servicer advances
 
$
87,818

 
$
44,031

Protective advances (1)
 
1,254,343

 
1,707,372

Total servicer and protective advances
 
1,342,161

 
1,751,403

Less: Allowance for uncollectible advances
 
(146,781
)
 
(120,338
)
Servicer and protective advances, net
 
$
1,195,380

 
$
1,631,065

__________
(1)
The December 31, 2015 balance was increased by $35.2 million to correct an immaterial error as discussed in further detail in Note 1.
The following table shows the activity in the allowance for uncollectible advances (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Balance at beginning of the year
 
$
120,338

 
$
112,427

 
$
62,542

Provision for uncollectible advances
 
64,729

 
52,679

 
75,704

Charge-offs, net of recoveries and other (1) (2)
 
(38,286
)
 
(44,768
)
 
(25,819
)
Balance at end of the year
 
$
146,781

 
$
120,338

 
$
112,427

__________
(1)
Includes $23.5 million related to the sale of residual interests in seven Residual Trusts during the year ended December 31, 2015.
(2 )
Includes $11.3 million related to the sale of Fannie Mae MSR, which was transferred to payables and accrued liabilities during the year ended December 31, 2016.

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15. Servicing of Residential Loans
The Company services residential loans and real estate owned for itself and on behalf of third-party credit owners. The Company’s total servicing portfolio consists of accounts serviced for others for which servicing rights have been capitalized, accounts subserviced for others, and residential loans and real estate owned carried on the consolidated balance sheets, but excludes charged-off loans managed by the Servicing segment.
Provided below is a summary of the Company’s total servicing portfolio (dollars in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Number
of Accounts
 
Unpaid Principal
Balance
 
Number
of Accounts
 
Unpaid Principal
Balance
Third-party credit owners
 
 
 
 
 
 
 
 
Capitalized servicing rights (1)
 
1,032,676

 
$
112,936,287

 
1,637,541

 
$
197,154,579

Capitalized subservicing (2)
 
130,018

 
7,426,803

 
159,368

 
9,053,755

Subservicing  (3) (4)
 
804,461

 
113,392,035

 
346,755

 
47,734,378

Total third-party servicing portfolio
 
1,967,155

 
233,755,125

 
2,143,664

 
253,942,712

On-balance sheet residential loans and real estate owned
 
97,388

 
12,690,018

 
102,044

 
12,705,532

Total servicing portfolio
 
2,064,543

 
$
246,445,143

 
2,245,708

 
$
266,648,244

__________
(1)
Includes $1.7 billion in unpaid principal balance associated with servicing rights sold to WCO at December 31, 2015 that did not meet all of the requirements for sale accounting. Refer to Note 23 for additional information relating to the sale of these servicing rights.
(2)
Consists of subservicing contracts acquired through business combinations whereby the benefits from the contract are greater than adequate compensation for performing the servicing.
(3)
Includes $6.6 billion in unpaid principal balance of subservicing performed for WCO at December 31, 2015.
(4)
Includes $64.6 billion in unpaid principal balance of subservicing that relates to transactions with NRM that closed in the fourth quarter of 2016, whereby the Company sold servicing rights with respect to pools of mortgage loans with subservicing retained. Refer to Note 6 for additional information relating to the sale of these servicing rights.
As of December 31, 2016, the Company's two largest subservicing customers represented approximately 56% and 23% of the Company's total subservicing portfolio based on unpaid principal balance.
The Company’s geographic diversification of its third-party servicing portfolio, based on the outstanding unpaid principal balance, is as follows (dollars in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Number
of Accounts
 
Unpaid Principal
Balance
 
Percentage of Total
 
Number
of Accounts
 
Unpaid Principal
Balance
 
Percentage of Total
California
 
224,408

 
$
42,939,204

 
18.4
%
 
244,708

 
$
46,704,146

 
18.4
%
Florida
 
163,186

 
19,530,088

 
8.4
%
 
180,242

 
21,714,653

 
8.6
%
Texas
 
152,485

 
12,935,308

 
5.5
%
 
169,167

 
14,380,328

 
5.7
%
Other <5%
 
1,427,076

 
158,350,525

 
67.7
%
 
1,549,547

 
171,143,585

 
67.3
%
Total
 
1,967,155

 
$
233,755,125

 
100.0
%
 
2,143,664

 
$
253,942,712

 
100.0
%

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Net Servicing Revenue and Fees
The Company earns servicing income from its third-party servicing portfolio. The following table presents the components of net servicing revenue and fees, which includes revenues earned by the Servicing and Reverse Mortgage segments (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Servicing fees (1) (2)
 
$
680,002

 
$
708,491

 
$
675,335

Incentive and performance fees (1)  
 
70,197

 
117,586

 
157,148

Ancillary and other fees (1) (3)
 
98,055

 
104,750

 
88,430

Servicing revenue and fees
 
848,254

 
930,827

 
920,913

Change in fair value of servicing rights
 
(480,476
)
 
(401,992
)
 
(273,502
)
Amortization of servicing rights (4)
 
(21,801
)
 
(26,827
)
 
(43,101
)
Change in fair value of servicing rights related liabilities (2) (5)
 
(4,986
)
 
(7,741
)
 
(2,800
)
Net servicing revenue and fees
 
$
340,991

 
$
494,267

 
$
601,510

__________
(1)
Includes subservicing fees related to servicing assets held by WCO of $4.4 million and $1.3 million for the years ended December 31, 2016 and 2015 , respectively. Includes incentive and performance fees, and ancillary and other fees related to servicing assets held by WCO of $0.7 million and $0.2 million for the years ended December 31, 2016 and 2015 , respectively.
(2)
Includes a pass-through of $9.8 million and $0.6 million relating to servicing rights sold to WCO for the years ended December 31, 2016 and 2015, respectively.
(3)
Includes late fees of $63.3 million , $62.8 million and $48.4 million for the years ended December 31, 2016, 2015 and 2014 , respectively.
(4)
Includes amortization of a servicing liability of $7.1 million and $0.4 million for the years ended December 31, 2016 and 2015 , respectively.
(5 )
Includes interest expense on servicing rights related liabilities, which represents the accretion of fair value, of $16.3 million , $9.3 million and $4.9 million for the years ended December 31, 2016, 2015 and 2014 , respectively.
Servicing revenue and fees included $458.9 million , $571.4 million and $615.8 million from servicing Fannie Mae residential loans for the years ended December 31, 2016, 2015 and 2014 , respectively. Servicing revenue and fees for the year ended December 31, 2016 also included $92.8 million and $85.2 million from servicing Freddie Mac and Ginnie Mae loans, respectively.
Servicing Rights
Servicing Rights Carried at Amortized Cost
The following table summarizes the activity in the carrying value of servicing rights carried at amortized cost by class (in thousands):
 
 
Mortgage Loan
 
Reverse Loan
Balance at January 1, 2014
 
$
161,782

 
$
11,994

Amortization of servicing rights
 
(40,418
)
 
(2,683
)
Balance at December 31, 2014
 
121,364

 
9,311

Servicing rights capitalized upon deconsolidation of Residual Trusts
 
3,133

 
—

Amortization of servicing rights
 
(25,195
)
 
(2,053
)
Balance at December 31, 2015
 
99,302

 
7,258

Sales
 
(318
)
 
—

Amortization of servicing rights (1)
 
(24,363
)

(1,753
)
Balance at December 31, 2016
 
$
74,621

 
$
5,505

__________
(1)
Includes impairment of servicing rights related to the mortgage loan class of $4.0 million for the year ended December 31, 2016.


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Servicing rights accounted for at amortized cost are evaluated for impairment by strata based on their estimated fair values. The risk characteristics used to stratify servicing rights for purposes of measuring impairment are the type of loan products, which consist of manufactured housing loans, first lien residential mortgages and second lien residential mortgages for the mortgage loan class, and reverse mortgages for the reverse loan class. The fair value of servicing rights for the mortgage loan class and the reverse loan class was $79.9 million and $7.3 million , respectively, at December 31, 2016 , and $117.3 million and $11.1 million , respectively, at December 31, 2015 . Fair value was estimated using the present value of projected cash flows over the estimated period of net servicing income.
The estimation of fair value requires significant judgment and uses key economic inputs and assumptions, which are provided in the table below:
 
 
December 31, 2016
 
December 31, 2015
 
 
Mortgage Loan
 
Reverse Loan
 
Mortgage Loan
 
Reverse Loan
Weighted-average remaining life in years (1)
 
5.1

 
2.6

 
5.6

 
2.8

Weighted-average discount rate
 
13.00
%
 
15.00
%
 
12.06
%
 
15.00
%
Conditional prepayment rate  (2)
 
6.51
%
 
N/A

 
6.49
%
 
N/A

Conditional default rate (2)
 
2.33
%
 
N/A

 
2.16
%
 
N/A

Conditional repayment rate (3)
 
N/A

 
32.28
%
 
N/A

 
29.53
%
__________
(1)
Represents the remaining weighted-average life of the related unpaid principal balance of the underlying collateral adjusted for assumptions for conditional repayment rate, conditional prepayment rate and conditional default rate, as applicable.
(2)
Voluntary and involuntary prepayment rates have been presented as conditional prepayment rate and conditional default rate, respectively.
(3)
Conditional repayment rate includes assumptions for both voluntary and involuntary rates as well as assumptions for the assignment of HECMs to HUD, in accordance with obligations as servicer.
The valuation of servicing rights is affected by the underlying assumptions above. Should the actual performance and timing differ materially from the Company’s projected assumptions, the estimate of fair value of the servicing rights could be materially different.
Servicing Rights Carried at Fair Value
The following table summarizes the activity in servicing rights carried at fair value (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Balance at beginning of the year (1)
 
$
1,682,016

 
$
1,599,541

 
$
1,131,124

Acquisition of EverBank net assets
 
—

 
—

 
58,680

Purchases
 
24,380

 
237,820

 
479,820

Servicing rights capitalized upon sales of loans
 
198,865

 
306,741

 
214,285

Sales
 
(458,541
)
 
(60,094
)
 
(10,866
)
Other
 
(16,651
)
 
—

 
—

Change in fair value due to:
 
 
 
 
 
 
Changes in valuation inputs or other assumptions (2)
 
(243,645
)
 
(157,262
)
 
(124,471
)
Other changes in fair value (3)
 
(236,831
)
 
(244,730
)
 
(149,031
)
Total change in fair value
 
(480,476
)
 
(401,992
)
 
(273,502
)
Balance at end of the year
 
$
949,593

 
$
1,682,016

 
$
1,599,541

__________
(1)
Includes servicing rights that were sold to WCO and accounted for as a financing of $16.9 million at December 31, 2015.
(2)
Represents the change in fair value resulting primarily from market-driven changes in interest rates and prepayment speeds.
(3)
Represents the realization of expected cash flows over time.
The fair value of servicing rights accounted for at fair value was estimated using the present value of projected cash flows over the estimated period of net servicing income. The estimation of fair value requires significant judgment and uses key economic inputs and assumptions, which are described in Note 9. Should the actual performance and timing differ materially from the Company's projected assumptions, the estimate of fair value of the servicing rights could be materially different.

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The following table summarizes the hypothetical effect on the fair value of servicing rights carried at fair value using adverse changes of 10% and 20% to the weighted average of the significant assumptions used in valuing these assets (dollars in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
 
 
Decline in fair value due to
 
 
 
Decline in fair value due to
 
 
Assumption
 
10% adverse change
 
20% adverse change
 
Assumption
 
10% adverse change
 
20% adverse change
Weighted-average discount rate
 
11.56
%
 
$
(41,926
)
 
$
(80,512
)
 
10.88
%
 
$
(68,874
)
 
$
(132,645
)
Weighted-average conditional prepayment rate
 
9.09
%
 
(30,513
)
 
(59,083
)
 
9.94
%
 
(63,884
)
 
(123,173
)
Weighted-average conditional default rate
 
0.88
%
 
(28,370
)
 
(57,854
)
 
1.06
%
 
(21,208
)
 
(43,576
)
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of an adverse variation in a particular assumption on the fair value of the servicing rights is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another, which may either magnify or counteract the effect of the change.
Fair Value of Originated Servicing Rights
For mortgage loans sold with servicing retained, the Company used the following inputs and assumptions to determine the fair value of servicing rights at the dates of sale. These servicing rights are included in servicing rights capitalized upon sales of loans in the table presented above that summarizes the activity in servicing rights accounted for at fair value.
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Weighted-average life in years
 
6.2
 
6.5
 
7.1
Weighted-average discount rate
 
12.47%
 
11.90%
 
9.43%
Weighted-average conditional prepayment rate
 
9.15%
 
8.19%
 
7.67%
Weighted-average conditional default rate
 
0.34%
 
0.39%
 
0.73%

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16. Goodwill and Intangible Assets, Net
Goodwill and intangible assets were recorded in connection with various business combinations.
Goodwill
The table below sets forth the activity in goodwill by reportable segment (in thousands):
 
 
Reportable Segment
 
 
 
 
Servicing (1)
 
Originations
 
Reverse Mortgage
 
Total
Balance at January 1, 2015 (2)
 
$
471,182

 
$
47,747

 
$
56,539

 
$
575,468

Impairment
 
(151,018
)
 
—

 
(56,539
)
 
(207,557
)
Balance at December 31, 2015 (2)
 
320,164

 
47,747

 
—

 
367,911

Acquisition of RCS net assets
 
3,784

 
—

 
—

 
3,784

Impairment (3)
 
(319,551
)
 
—

 
—

 
(319,551
)
Reclassification to assets held for sale (4)
 
(4,397
)
 
—

 
—

 
(4,397
)
Balance at December 31, 2016 (2)
 
$
—

 
$
47,747

 
$
—

 
$
47,747

__________
(1)
The Servicing, Insurance and ARM reporting units are components of the Servicing segment.
(2)
There were accumulated impairment losses relating to the Reverse Mortgage segment of $82.3 million at January 1, 2015 and $138.8 million at December 31, 2016 and 2015 , respectively. In addition, there were accumulated impairment losses relating to the Servicing segment of $470.6 million and $151.0 million at December 31, 2016 and 2015 , respectively.
(3)
As discussed in further detail below, the Company recorded goodwill impairment charges in its Servicing segment of $215.4 million , $91.0 million and $13.2 million during the second, third and fourth quarters of 2016, respectively.
(4)
Represents the goodwill balance associated with the Insurance business. Refer to Note 18 for additional information on assets held for sale at December 31, 2016.
Servicing 2015
The Company's share price experienced volatility during 2015. As a result, the Company reassessed its market capitalization and the implications that the decline in market capitalization had on the carrying value of its goodwill. Management concluded that there were circumstances evident that indicated the fair value of the Company's reporting units could be below their carrying amounts. As a result of the Step 1 testing, the Originations and ARM reporting units had fair values that exceeded their carrying values of 52% and 5% , respectively. However, the Servicing reporting unit had a carrying value that exceeded its fair value and therefore, the Company was required to perform the Step 2 testing for this reporting unit. Based on the Step 2 testing, the carrying amount of the Servicing reporting unit’s goodwill exceeded its implied fair value and as a result, the Company recorded a $151.0 million goodwill impairment charge in the fourth quarter of 2015, which is included in goodwill impairment on the consolidated statements of comprehensive loss. This impairment was primarily the result of higher discount rates applied to forecasted cash flows driven by the decline in the Company's stock price, which had been impacted by continued challenges in the Company's industry, market developments, as well as the impact these factors have had on certain Company specific matters.
Reverse Mortgage 2015
During the second quarter of 2015, the Reverse Mortgage reporting unit experienced operational challenges in its retail origination channel and experienced a reduction in opportunities for additional subservicing business. Additionally, more experience existed with respect to previously introduced product changes that deferred a significant amount of cash flow to future years. The initial impact of this deferral of cash flows to future years was greater than originally anticipated by the Company. Also during the second quarter of 2015, new financial assessment requirements for the HECM program went into effect and new mortgagee letters were issued that could impact the likelihood of curtailment events in future periods. At such time, the impact of those changes remained uncertain. At the same time, the Reverse Mortgage reporting unit continued to experience increasing liquidity requirements for the repurchase of certain HECMs and real estate owned from Ginnie Mae securitization pools, and based on recent developments, an increase in obligations surrounding curtailment-related items existing at the time of the RMS acquisition. Collectively, the impact of the greater than anticipated principal deferral, the operational challenges and the liquidity requirements resulted in reduced and delayed cash flows in the reverse mortgage business.

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In addition, during the second quarter of 2015, the Company revised its multi-year forecast for the reverse mortgage business. The change in assumptions used in the revised forecast and the fair value estimates utilized in the impairment testing of the Reverse Mortgage reporting unit goodwill incorporated lower projected revenue as a result of the factors noted above. The revised forecast also reflected changes related to current market trends and other expectations about the anticipated operating results of the reverse mortgage business. Based on these factors, the Company determined that there were interim impairment indicators that led to the need for a quantitative impairment analysis for goodwill purposes during the second quarter.
The Company performed the Step 1 testing and concluded that the fair value of the Reverse Mortgage reporting unit (determined based on the income approach) was below its carrying value and was therefore required to perform the Step 2 testing to determine the implied fair value of goodwill. The Company concluded, based on the Step 2 testing, that the carrying amount of the reporting unit's goodwill exceeded its implied fair value and as a result, recorded a $56.5 million goodwill impairment charge in the second quarter of 2015, which is included in goodwill impairment on the consolidated statements of comprehensive loss.
Servicing 2016
During the second quarter of 2016, the Company recorded goodwill impairment of $215.4 million , comprised of $194.1 million relating to the Servicing reporting unit and $21.3 million relating to the ARM reporting unit. The Servicing reporting unit impairment was driven by a decline in cash flows from lower than expected operating results due to continued challenges associated with certain company-specific matters, primarily due to delays in transitioning the Servicing business model to a more fee-for-service and capital-light business model, as well as external pressures that the sector continues to experience, including regulatory scrutiny and market volatility due to the declining interest rate environment. The ARM reporting unit impairment was primarily driven by lower cash flows due to the unsuccessful development of new business opportunities in this reporting unit. Additionally, as a result of the downward pressures on the Company's share price during the first half of 2016, the Company's market capitalization was reassessed, including the potential impact that the decline in market capitalization could have on the carrying value of goodwill. Management concluded that the aforementioned circumstances indicated that it was more likely than not that the fair value of the Servicing and ARM reporting units were below their respective carrying amounts, and accordingly, performed the Step 1 and Step 2 testing for these reporting units. The Step 1 testing indicated that both the Servicing and ARM reporting units had carrying values that exceeded the respective estimated fair values, and the Step 2 testing resulted in the conclusion that the carrying amount of the Servicing and ARM reporting units' goodwill exceeded the implied fair value. This impairment was primarily the result of an increased company-specific risk premium added to the discount rate that was applied to lower re-forecasted cash flows driven by the aforementioned circumstances.
During the third quarter of 2016, the Company recorded a goodwill impairment charge of $91.0 million relating to the Servicing reporting unit. The impairment indicator was continued elevated levels of expenses during the third quarter. The Company performed a Step 1 testing using a discounted cash flows model, which resulted in the carrying value exceeding the implied fair value, driven by a continuation of higher expense levels in the near term due to anticipated infrastructure investments and lower cash flows. Accordingly, the Step 2 testing was performed, which determined that the remaining Servicing reporting unit goodwill was impaired as of September 30, 2016.
During the fourth quarter of 2016, the Company recorded a goodwill impairment charge of $13.2 million relating to the ARM reporting unit. The impairment indicators included continued lack of new business. The Company performed the Step 1 testing using a discounted cash flows model, which resulted in the carrying value exceeding the implied fair value, driven by challenges in obtaining new business resulting in lower projected revenue in future periods and declining margins due to runoff of the purchased loan portfolio. Accordingly, the Step 2 testing was performed, which determined that the entire ARM reporting unit goodwill was impaired as of December 31, 2016.
Intangible Assets, Net
Amortization expense associated with intangible assets was $12.0 million , $19.5 million and $18.9 million for the years ended December 31, 2016, 2015 and 2014 , respectively.

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Intangible assets, net consist of the following (in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Gross Carrying Amount
 
Accumulated Amortization
 
Impairment
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Customer relationships (1)
 
$
29,141

 
$
(23,769
)
 
$
—

 
$
5,372

 
$
133,067

 
$
(64,238
)
 
$
68,829

Institutional relationships
 
11,900

 
(5,222
)
 
(6,340
)
 
338

 
16,600

 
(8,468
)
 
8,132

Other
 
10,000

 
(3,968
)
 
(395
)
 
5,637

 
10,000

 
(2,923
)
 
7,077

Total intangible assets
 
$
51,041

 
$
(32,959
)
 
$
(6,735
)
 
$
11,347

 
$
159,667

 
$
(75,629
)
 
$
84,038

__________
(1)
The balance as of December 31, 2016 excludes customer relationships related to the Insurance business with a net carrying amount of $54.0 million that were reclassified to assets held for sale. Refer to Note 18 for additional information on assets held for sale at December 31, 2016.
During the third quarter of 2016, the Company recorded impairment charges of $6.7 million related to intangible assets in the Reverse Mortgage reporting unit. The Company tested these intangible assets for recoverability due to changes in facts and circumstances associated with the shift in strategic direction and reduced profitability expectations for this business. Based on the testing results, it was determined that the carrying value of the intangible assets was not recoverable, and an impairment charge was recorded to the extent that carrying value exceeded estimated fair value. The Company primarily used the income approach to determine the fair value of the intangible assets and calculate the amount of impairment.
Based on the balance of intangible assets, net at December 31, 2016 , the following is an estimate of amortization expense for each of the next five years and thereafter (in thousands):
 
 
Amortization Expense
2017
 
$
2,444

2018
 
1,714

2019
 
1,370

2020
 
1,109

2021
 
904

Thereafter
 
3,806

Total
 
$
11,347

17. Premises and Equipment, Net
Premises and equipment, net consist of the following (dollars in thousands):
 
 
December 31,
 
Useful Life
(in years)
 
 
2016
 
2015
 
Computer software
 
$
239,868

 
$
213,923

 
3 - 7
Computer hardware
 
36,515

 
35,120

 
3
Furniture and fixtures
 
10,543

 
10,649

 
3
Office equipment and other
 
13,347

 
6,053

 
3
Assets in development
 
4,741

 
23,995

 
 
Total premises and equipment
 
305,014

 
289,740

 
 
Less: accumulated depreciation and amortization
 
(222,386
)
 
(183,259
)
 
 
Premises and equipment, net
 
$
82,628

 
$
106,481

 
 
The Company recorded depreciation and amortization expense for premises and equipment of $47.5 million , $49.7 million and $53.8 million , which includes amortization expense for computer software of $37.4 million , $37.9 million and $40.7 million , for the years ended December 31, 2016, 2015 and 2014 , respectively. Unamortized computer software costs were $62.7 million and $70.4 million at December 31, 2016 and 2015 .
18. Held for Sale Operations
On December 30, 2016, the Company executed a stock purchase agreement pursuant to which the Company agreed to sell 100% of the stock of its indirect, wholly-owned subsidiary, GTI Holdings Corp., which is the holding company of the Company's primary licensed insurance agency, Green Tree Insurance Agency, Inc., to a wholly-owned subsidiary of Assurant, for a purchase price of $125.0 million in cash, subject to adjustment as specified in the agreement. Under the agreement, an affiliate of Assurant has also agreed to make potential earnout payments to the Company in an aggregate amount of up to $25.0 million in cash, with the amount of such payments to be based upon the gross written premium of certain voluntary homeowners' insurance written by certain affiliates of Assurant over a specified timeframe. This transaction closed on February 1, 2017, at which time the Company received $131.1 million in cash. As a result of this transaction, the assets and liabilities related to the insurance business, which are included in the Servicing segment, were reclassified to operations held for sale line items on the consolidated balance sheets at December 31, 2016.
The assets and liabilities of held for sale operations consist of the following (in thousands):
 
 
December 31, 2016
Assets
 
 
Receivables
 
$
12,699

Goodwill
 
4,397

Intangible assets, net
 
53,989

Assets held for sale
 
$
71,085

 
 
 
Liabilities
 
 
Payables and accrued liabilities
 
$
2,402

Liabilities held for sale
 
$
2,402

19. Other Assets
Other assets consist of the following (in thousands):
 
 
December 31,
 
 
2016
 
2015
Real estate owned, net
 
$
104,554

 
$
77,383

Derivative instruments
 
87,937

 
58,512

Investment in WCO
 
19,403

 
22,598

Deferred debt issuance costs
 
6,879

 
10,261

Other
 
23,517

 
31,610

Total other assets
 
$
242,290

 
$
200,364


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20. Payables and Accrued Liabilities
Payables and accrued liabilities consist of the following (in thousands):
 
 
December 31,
 
 
2016
 
2015
Loans subject to repurchase from Ginnie Mae (1)
 
$
184,289

 
$
22,507

Accounts payable and accrued liabilities
 
155,556

 
113,325

Curtailment liability
 
121,305

 
115,453

Employee-related liabilities
 
91,063

 
95,926

Originations liability
 
62,969

 
48,930

Margin payable on derivative instruments
 
30,941

 
10,101

Servicing rights and related advance purchases payable
 
18,187

 
21,649

Derivative instruments
 
11,804

 
6,475

Uncertain tax positions (2)
 
9,414

 
64,554

Accrued interest payable
 
9,414

 
9,819

Payables to insurance carriers (3)
 
5,452

 
21,356

Acquisition related escrow funds payable to sellers
 
1,236

 
10,236

Other
 
57,381

 
57,595

Total payables and accrued liabilities
 
$
759,011

 
$
597,926

__________
(1)
As the amount of loans securitized with Ginnie Mae increases and the portfolio continues to season, this amount will continue to increase, which will be offset by actual repurchases of, or payments received on, these loans. Refer to Note 11 for additional information.
(2)
Refer to Note 28 for a rollforward of the activity in uncertain tax positions.
(3)
The December 31, 2015 balance was reduced by $42.1 million to correct an immaterial error as discussed in further detail in Note 1.
Costs Associated with Exit Activities
During 2015, the Company took distinct actions to improve efficiencies within the organization, which included re-branding its mortgage business by consolidating Ditech Mortgage Corp and Green Tree Servicing into one legal entity with one brand. Additionally, the Company took measures to restructure its mortgage loan servicing operations and improve the profitability of the reverse mortgage business by streamlining its geographic footprint and strengthening its retail originations channel. These actions resulted in costs relating to the closing of offices and the termination of certain employees as well as other expenses to institute efficiencies. The Company completed these activities in the fourth quarter of 2015.
In the fourth quarter of 2015, the Company made a decision to exit the consumer retail channel of the Originations segment beginning in January 2016. As a result of this decision, the Company incurred $1.2 million in costs during the fourth quarter of 2015 and $2.0 million in costs during the first half of 2016. The Company completed these activities in the second quarter of 2016. The actions to improve efficiencies, re-brand the mortgage business, restructure the servicing operations and exit from the consumer retail channel are collectively referred to as the 2015 Actions herein.
In addition, during 2016, the Company initiated actions in connection with its continued efforts to enhance efficiencies and streamline processes, which included various organizational changes to the scale and proficiency of the Company's leadership team and support functions to further align with the Company's business needs. Further, during December 2016 a decision was made by management to exit the reverse mortgage origination business, while maintaining its reverse mortgage servicing operations. These actions resulted in costs relating to the termination of certain employees and closing of offices. The Company expects to incur additional costs relating to these actions of approximately $0.3 million during 2017. The Company will continue to evaluate other opportunities for further cost reductions that may result in future costs associated with exit activities being incurred. These actions are collectively referred to as the 2016 Actions herein.
The costs resulting from the 2015 Actions and the 2016 Actions are recorded in salaries and benefits and general and administrative expenses on the Company's consolidated statements of comprehensive loss.

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The following table presents the current period activity in the accrued exit costs liability resulting from each of the 2015 Actions and 2016 Actions described above, which is included in payables and accrued liabilities on the consolidated balance sheets, and the related charges and cash payments and other settlements associated with these actions (in thousands):
 
 
For the Year Ended December 31, 2016
 
 
2015 Actions
 
2016 Actions
 
Total
Balance at January 1, 2016
 
$
4,183

 
$
—

 
$
4,183

Charges
 
 
 
 
 
 
Severance and related costs
 
1,232

 
19,768

 
21,000

Office closures and other costs
 
980

 
3,778

 
4,758

Total charges
 
2,212

 
23,546

 
25,758

Cash payments or other settlements
 
 
 
 
 
 
Severance and related costs
 
(3,595
)
 
(8,614
)
 
(12,209
)
Office closures and other costs
 
(1,812
)
 
(3,054
)
 
(4,866
)
Total cash payments or other settlements
 
(5,407
)
 
(11,668
)
 
(17,075
)
Balance at December 31, 2016
 
$
988

 
$
11,878

 
$
12,866

 
 
 
 
 
 
 
Cumulative charges incurred
 
 
 
 
 
 
Severance and related costs
 
$
7,238

 
$
19,768

 
$
27,006

Office closures and other costs
 
6,535

 
3,778

 
10,313

Total cumulative charges incurred
 
$
13,773

 
$
23,546

 
$
37,319

 
 
 
 
 
 
 
Total expected costs to be incurred
 
$
13,773

 
$
23,835

 
$
37,608


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The following table presents the current period activity for each of the 2015 Actions and 2016 Actions described above by reportable segment (in thousands):
 
 
For the Year Ended December 31, 2016
 
 
Servicing
 
Originations
 
Reverse
Mortgage
 
Other
 
Total
Consolidated
Balance at January 1, 2016
 
 
 
 
 
 
 
 
 
 
2015 Actions
 
$
1,174

 
$
1,663

 
$
1,346

 
$
—

 
$
4,183

2016 Actions
 
—

 
—

 
—

 
—

 
—

Total balance at January 1, 2016
 
1,174

 
1,663

 
1,346

 
—

 
4,183

Charges
 
 
 
 
 
 
 
 
 
 
2015 Actions
 
19

 
1,982

 
211

 
—

 
2,212

2016 Actions
 
11,602

 
1,136

 
5,226

 
5,582

 
23,546

Total charges
 
11,621

 
3,118

 
5,437

 
5,582

 
25,758

Cash payments or other settlements
 
 
 
 
 
 
 
 
 
 
2015 Actions
 
(740
)
 
(3,385
)
 
(1,282
)
 
—

 
(5,407
)
2016 Actions
 
(7,279
)
 
(113
)
 
(3,004
)
 
(1,272
)
 
(11,668
)
Total cash payments or other settlements
 
(8,019
)
 
(3,498
)
 
(4,286
)
 
(1,272
)
 
(17,075
)
Balance at December 31, 2016
 
 
 
 
 
 
 
 
 
 
2015 Actions
 
453

 
260

 
275

 
—

 
988

2016 Actions
 
4,323

 
1,023

 
2,222

 
4,310

 
11,878

Total balance at December 31, 2016
 
$
4,776

 
$
1,283

 
$
2,497

 
$
4,310

 
$
12,866

 
 
 
 
 
 
 
 
 
 
 
Total cumulative charges incurred
 
 
 
 
 
 
 
 
 
 
2015 Actions
 
$
6,481

 
$
4,590

 
$
1,851

 
$
851

 
$
13,773

2016 Actions
 
11,602

 
1,136

 
5,226

 
5,582

 
23,546

Total cumulative charges incurred
 
$
18,083

 
$
5,726

 
$
7,077

 
$
6,433

 
$
37,319

 
 
 
 
 
 
 
 
 
 
 
Total expected costs to be incurred
 
 
 
 
 
 
 
 
 
 
2015 Actions
 
$
6,481

 
$
4,590

 
$
1,851

 
$
851

 
$
13,773

2016 Actions
 
11,602

 
1,136

 
5,515

 
5,582

 
23,835

Total expected costs to be incurred
 
$
18,083

 
$
5,726

 
$
7,366

 
$
6,433

 
$
37,608

21. Servicing Advance Liabilities
Servicing advance liabilities, which are carried at amortized cost, consist of the following (in thousands):
 
 
December 31,
 
 
2016
 
2015
Servicing advance facilities (1)
 
$
708,462

 
$
1,072,541

Early Advance Reimbursement Agreement
 
74,767

 
156,739

Total servicing advance liabilities (2)
 
$
783,229

 
$
1,229,280

__________
(1)
Servicing advance facilities are net of $1.5 million and $2.9 million in deferred issuance costs relating to term notes at December 31, 2016 and 2015, respectively.
(2)
During the year ended December 31, 2016, the Company transitioned a large portion of its mortgage loan servicing portfolio to MSP, which resulted in a reduction to certain servicing advance liabilities as a result of changes in the structure and timing of the flow of funds to certain custodial accounts that are not reflected in the consolidated balance sheets.
 

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The Company's subsidiaries have four servicing advance facilities through several lenders and an Early Advance Reimbursement Agreement with Fannie Mae, which, in each case, are used to fund servicer and protective advances that are the responsibility of the Company under certain servicing agreements. The servicing advance facilities and the Early Advance Reimbursement Agreement had an aggregate capacity of $1.2 billion at December 31, 2016 . These facilities include $300.0 million of term notes at a weighted-average fixed interest rate of 2.68% expiring in October 2018 and $140.0 million of term notes at a weighted-average fixed interest rate of 3.45% expiring October 2018 . The interest rates on the remaining capacities are primarily based on LIBOR plus between 2.50% and 3.00% , and have various expiration dates through July 2018 . The facilities had a weighted-average stated interest rate of 3.32% and 3.25% at December 31, 2016 and 2015 , respectively. Payments on the amounts due under these agreements are paid from certain proceeds received by the subsidiaries (i) in connection with the liquidation of mortgaged properties, (ii) from repayments received from mortgagors, or (iii) from reimbursements received from the owners of the mortgage loans, such as Fannie Mae, Freddie Mac and private label securitization trusts, or (iv) issuance of new notes or other refinancing transactions. Accordingly, repayment of the servicing advance liabilities is dependent on the proceeds that are received on the underlying advances associated with the agreements. Two of the servicing advance facilities are non-recourse to the Company. Refer to Note 7 for additional information regarding these facilities.
Servicing Advance Facilities
The servicing advance facilities had $0.8 billion of collateral pledged by the Company's subsidiaries under these agreements at December 31, 2016 . The servicing advance facilities contain customary events of default and covenants, including financial covenants. Financial covenants most sensitive to the Company’s operating results and financial position are the requirements that Ditech Financial maintain minimum tangible net worth, indebtedness to tangible net worth and minimum liquidity. Ditech Financial was in compliance with these financial covenants at December 31, 2016 .
Subsequent to the Original Filing, Ditech Financial received waivers from each of its lenders to the extent necessary to waive any default, event of default, amortization event, termination event or similar event resulting from or arising from the restatement, as described in the Explanatory Note and Note 2.
The Company's subsidiaries are dependent on the ability to secure servicing advance facilities on acceptable terms and to renew, replace or resize existing facilities as they expire. If the Company fails to comply with the terms of an agreement that results in an event of default or breach of covenant without obtaining a waiver or amendment, the Company may be subject to termination of future funding, enforcement of liens against assets securing the respective facility, repurchase of assets pledged in a repurchase agreement, acceleration of outstanding obligations, or other adverse actions.
One of the Company's subsidiaries has a non-recourse servicer advance facility that provides funding for servicer and protective advances made in connection with its servicing of certain Fannie Mae and Freddie Mac mortgage loans. On September 30, 2016, an additional $300.0 million of two-year term notes were issued under this facility. Subsequently, on October 5, 2016, the terms of the variable funding notes issued pursuant to this facility were amended to, among other things, (i) extend the applicable expected repayment date and revolving period for such variable funding notes from October 19, 2016 to October 4, 2017 , (ii) decrease the applicable interest rate margins, and (iii) decrease the maximum permitted principal balance of the variable funding notes from $600.0 million in the aggregate to $400.0 million in the aggregate. Further, on October 17, 2016, $360.0 million of one-year term notes previously issued under this facility were fully redeemed.
After giving effect to the issuance of new term notes, the redemption of certain existing term notes and the amendment to the terms of the variable funding notes, each as described above, this facility consists of (i) previously issued three-year term notes with an aggregate principal balance of $140.0 million and an expected repayment date of October 15, 2018 , (ii) two-year term notes issued September 30, 2016 with an aggregate principal balance of $300.0 million and an expected repayment date of October 15, 2018 , and (iii) up to $400.0 million of previously issued variable funding notes with an expected repayment date of October 4, 2017 . At December 31, 2016 , an aggregate principal balance of $440.0 million of various series of term notes and $142.0 million of variable funding notes were outstanding under this facility.
Early Advance Reimbursement Agreement
Ditech Financial's Early Advance Reimbursement Agreement with Fannie Mae is used exclusively to fund certain principal and interest, servicer and protective advances that are the responsibility of Ditech Financial under its Fannie Mae servicing agreements. This agreement was renewed in March 2016 and expires in March 2017 . If not renewed in 2017, there will be no additional funding by Fannie Mae of new advances under the agreement. In addition, collections recovered during the 18 months following the expiration of the agreement are to be remitted to Fannie Mae to settle any remaining outstanding balance due under such agreement. Upon expiration of the 18 month period, any remaining balance would become due and payable. At December 31, 2016 , the Company had borrowings of $74.8 million under the Early Advance Reimbursement Agreement, which has a capacity of $200.0 million .

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22. Warehouse Borrowings (As Restated)
The Company's subsidiaries enter into master repurchase agreements with lenders providing warehouse facilities. The warehouse facilities are used to fund the origination and purchase of residential loans, as well as the repurchase of certain HECMs and real estate owned from Ginnie Mae securitization pools. The facilities had an aggregate funding capacity of $2.5 billion at December 31, 2016 and are secured by certain residential loans and real estate owned. At December 31, 2016 , the interest rates on the facilities were primarily based on LIBOR plus between 2.10% and 3.13% , and have various expiration dates through February 2018 . The facilities had a weighted-average stated interest rate of 3.27% and 2.83% at December 31, 2016 and 2015 , respectively. At December 31, 2016 , $1.1 billion of the outstanding borrowings were secured by $1.2 billion in originated and purchased residential loans and $104.8 million of outstanding borrowings were secured by $118.3 million in repurchased HECMs and real estate owned.
One of the warehouse facilities, utilized to finance the origination of reverse loans, and which has total and uncommitted capacity of $125.0 million matured on February 11, 2017 . Borrowings under this facility were fully repaid by the maturity date.
Borrowings utilized to fund the origination and purchase of residential loans are due upon the earlier of sale or securitization of the loan or within 60 to 90 days of borrowing. On average, the Company sells or securitizes these loans approximately 20 days from the date of borrowing. Borrowings utilized to repurchase HECMs and real estate owned are due upon the earlier of receipt of claim proceeds from HUD or receipt of proceeds from liquidation of the related real estate owned. In any event, borrowings associated with repurchased HECMs are due within 364 days of borrowing while borrowings relating to repurchased real estate owned are due, depending on the agreement, within 180 days or 364 days . In accordance with the terms of the agreements, the Company may be required to post cash collateral should the fair value of the pledged assets decrease below certain contractual thresholds. The Company is exposed to counterparty credit risk associated with the repurchase agreements in the event of non-performance by the counterparties. The amount at risk during the term of the repurchase agreement is equal to the difference between the amount borrowed by the Company and the fair value of the pledged assets. The Company mitigates this risk through counterparty monitoring procedures, including monitoring of the counterparties' credit ratings and review of their financial statements.
All of the Company’s master repurchase agreements contain customary events of default and covenants, the most significant of which are financial covenants. Financial covenants most sensitive to the Company’s operating results and financial position are minimum tangible net worth requirements, indebtedness to tangible net worth ratio requirements, and minimum liquidity and profitability requirements.
In the Original Filing, the Company disclosed that the three Ditech Financial master repurchase agreements that contain profitability covenants were amended to allow for a net loss under such covenants for the quarters ended December 31, 2016 and March 31, 2017. Without these amendments, Ditech Financial would not have been in compliance with these covenants for the quarter ended December 31, 2016. These amendments, amongst other things, also decrease the Company's advance rate under certain facilities, and require the Company to maintain additional cash in a deposit account for one of the facilities. This cash is included in restricted cash on the consolidated balance sheets.
Subsequent to the Original Filing, Ditech Financial received waivers and/or amendments required as a result of the restatement and conclusions reached regarding the Company's ability to continue as a going concern, as described in Notes 2 and 3. The Ditech Financial master repurchase agreements that contain profitability covenants were also amended to allow for a net loss under such covenants for the quarters ending September 30, 2017 and December 31, 2017 as applicable to the terms of each respective agreement.
During the quarter ended March 31, 2016, one of RMS’s master repurchase agreements was amended to allow for a lower adjusted EBITDA (as determined pursuant to this agreement) for each of the first quarter and second quarter of 2016 under such agreement’s profitability covenant. In August 2016, an additional amendment was executed to allow for a lower adjusted EBITDA for each of the third quarter and fourth quarter of 2016 under such agreement's profitability covenant.
Subsequent to the Original Filing, RMS received additional waivers and/or amendments required as a result of the restatement and conclusions reached regarding the Company's ability to continue as a going concern, as described in Notes 2 and 3.
The Company's subsidiaries are dependent on the ability to secure warehouse facilities on acceptable terms and to renew, replace or resize existing facilities as they expire. If the Company fails to comply with the terms of an agreement that results in an event of default or breach of covenant without obtaining a waiver or amendment, the Company may be subject to termination of future funding, enforcement of liens against assets securing the respective facility, repurchase of assets pledged in a repurchase agreement, acceleration of outstanding obligations, or other adverse actions. The Company intends to renew, replace, or extend its facilities and may seek waivers or amendments in the future, if necessary. The Company has plans in place to strengthen its operating results under its new leadership team, including transformation of its originations business as well as cost reduction efforts and efficiency initiatives; however, there can be no assurance that these or others actions will be successful.

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23. Servicing Rights Related Liabilities
Servicing rights related liabilities consist of the following (in thousands):
 
 
December 31,
 
 
2016
 
2015
MSR liabilities related to NRM sales
 
$
1,902

 
$
—

Excess servicing spread liabilities
 
—

 
100,111

Servicing rights financing
 
—

 
16,889

Total servicing rights related liabilities
 
$
1,902

 
$
117,000

MSR Liabilities Related to NRM Sales
The Company has a recapture agreement relating to certain subservicing performed on behalf of NRM, including subservicing relating to the servicing rights sold to NRM as discussed further in Note 6. NRM is entitled to the servicing right resulting from the refinancing by the Company of a loan in the servicing portfolio previously transferred to NRM. As transfer of the servicing rights on the refinanced loans has not yet occurred, the Company records a MSR liability relating to the MSR that will ultimately be transferred to NRM. The Company will transfer the MSR upon investor approval.
Excess Servicing Spread Liabilities
The Company sold to WCO portions of the excess servicing spread associated with certain mortgage loans serviced by the Company for $46.8 million and $75.4 million in November 2015 and July 2014, respectively. The Company retained all ancillary income associated with servicing the portfolio in addition to the receipt of a base servicing fee. The Company continued to be the servicer of the residential loans and provided all servicing functions, including responsibility to make advances. Payments on the excess servicing spread liabilities were based on future servicing fees received from residential loans underlying the servicing rights. Interest expense on the excess servicing spread liabilities, which represents the accretion of fair value, was $12.1 million and $9.0 million for the years ended December 31, 2016 and 2015 , respectively. There was no contractual interest rate on the excess servicing spread liabilities.
Contemporaneous with the agreement relating to the sale of the excess servicing spread in November 2015, the Company entered into a recapture agreement with WCO entitling WCO to the excess servicing spread on the subsequent refinancing by the Company of a loan in the original excess servicing spread portfolio. The new or replacement loan will be governed by the same terms set forth in the related excess servicing spread sale agreement. If the Company is unable to deliver, or WCO is unable to accept delivery of, the excess servicing spread associated with the new or replacement loan, then, in each case, the Company is obligated to “repurchase” the excess servicing spread related to the refinanced loan at the excess spread recapture price, as defined in the recapture agreement, upon the request of WCO.
During the fourth quarter of 2016, the Company sold NRM the servicing rights relating to such excess servicing spread, with subservicing retained by the Company. In connection with these transactions, the Company derecognized the excess servicing spread liabilities. Refer to Note 6 for additional information on these transactions.
Servicing Rights Financing
In November 2015, the Company sold servicing rights to WCO for a sales price of $17.8 million . In May 2016, the Company sold additional MSR to WCO for a sales price of $27.9 million . The Company also entered into an agreement to subservice the related residential loans. As a result, the Company continued to be the servicer of the residential loans and provided all servicing functions, including responsibility to make advances, and receives a subservicing fee for such services. The Company retained all ancillary income associated with servicing the portfolio. WCO was required to reimburse the Company for advances within 30 days of invoice. Payments on the servicing rights financing were based on future servicing fees received from residential loans underlying the servicing rights. Interest expense on the service rights financing, which represents the accretion of fair value, was $4.2 million and $0.3 million for the years ended December 31, 2016 and 2015 , respectively. There was no contractual interest rate on the service rights financing.

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The Company had a recapture agreement relating to certain subservicing performed on behalf of WCO, including subservicing relating to the servicing rights sold to WCO during the years ended December 31, 2016 and 2015, whereby WCO is entitled to the servicing right resulting from the refinancing by the Company of a loan in the original servicing portfolio. The new or replacement loan will be governed by the same terms set forth in the related subservicing agreement. In the event the Company originates a new loan that is not in compliance with the recapture agreement or fails to deliver the new loan to Fannie Mae or Freddie Mac as soon as commercially reasonable, the Company, upon WCO's demand, was obligated to repurchase the servicing right related to the original loan at the servicing rights recapture price, as defined in the recapture agreement, or replace the servicing rights with another loan, subject to mutually agreed upon terms.
During the fourth quarter of 2016, in connection with the sale by WCO of substantially all of its assets, including servicing rights which were previously sold by the Company to WCO and accounted for as secured borrowings, the Company derecognized the servicing rights financing. Refer to Note 6 for additional information on these transactions.
24. Corporate Debt
Corporate debt consists of the following (dollars in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Amortized Cost
 
Weighted- Average Stated Interest Rate (1)
 
Amortized Cost
 
Weighted- Average Stated Interest Rate (1)
2013 Term Loan (unpaid principal balance of $1,416,500 and $1,423,750 at December 31, 2016 and 2015, respectively)
 
$
1,394,658

 
4.75
%
 
$
1,396,884

 
4.75
%
Senior Notes (unpaid principal balance of $538,662 at December 31, 2016 and 2015, respectively)
 
529,738

 
7.875
%
 
528,337

 
7.875
%
Convertible Notes (unpaid principal balance of $242,468 and $290,000 at December 31, 2016 and 2015, respectively)
 
204,604

 
4.50
%
 
231,723

 
4.50
%
Capital leases
 
—

 

 
480

 

Total corporate debt
 
$
2,129,000

 
 
 
$
2,157,424

 
 
__________
(1)
Represents the weighted-average stated interest rate, which may be different from the effective rate, which considers the amortization of discounts and issuance costs.
The effective interest rate on corporate debt was 6.64% and 6.56% for the years ended December 31, 2016 and 2015 , respectively. The increase in effective interest rate is due primarily to the voluntary payment of the lower rate 2013 Term Loan during 2015 as described below.
The following table provides the contractual maturities (by unpaid principal balance) of corporate debt at December 31, 2016 (in thousands):
 
 
Corporate Debt
2019
 
256,218

2020
 
1,402,750

2021
 
538,662

Total
 
$
2,197,630


Term Loans and Revolver
The Company has a 2013 Term Loan in the original principal amount of $1.5 billion and a $100.0 million 2013 Revolver. The Company’s obligations under the 2013 Secured Credit Facilities are guaranteed by substantially all of the Company’s subsidiaries and secured by substantially all of the Company’s assets subject to certain exceptions, the most significant of which are the assets of the consolidated Residual and Non-Residual Trusts, the residential loans and real estate owned of the Ginnie Mae securitization pools, and advances of the consolidated financing entities. Refer to the Consolidated Variable Interest Entities section of Note 7 for additional information.

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The terms of the 2013 Secured Credit Facilities are summarized in the table below.
Debt Agreement
 
Interest Rate
 
Amortization
 
Maturity/Expiration
2013 Term Loan
 
LIBOR plus 3.75%
LIBOR floor of 1.00%
 
1.00% per annum beginning 1st quarter 2014; remainder at final maturity
 
December 18, 2020
2013 Revolver (1)
 
LIBOR plus 4.50% (2)
 
Bullet payment at maturity
 
December 19, 2018
__________
(1)
Under the 2013 Credit Agreement, in order to borrow in excess of 20% of the committed amount under the 2013 Revolver, the Company must satisfy both a specified Interest Coverage Ratio and a specified Total Leverage Ratio on a pro forma basis after giving effect to the borrowing. As of December 31, 2016, the Company did not satisfy both of these ratios, and as a result the maximum amount the Company would have been able to borrow on the 2013 Revolver was $20.0 million , of which $12.2 million remained available after utilization for issued letters of credit.
(2)
Represents the rate through and including January 1, 2017. After this date, the rate reverted back to LIBOR plus 3.75% .
On August 5, 2016, the Company entered into an amendment to the 2013 Credit Agreement, which, among other things, permanently reduced the aggregate commitments under the 2013 Revolver from $125.0 million to $100.0 million , increased the interest rate on any drawn amounts under the 2013 Revolver from LIBOR plus 3.75% to LIBOR plus 4.50% for the period through and including January 1, 2017, and increased the specified Total Leverage Ratio test (which is tested on a pro forma basis in connection with any requested draw of, and following any draw of, any amounts greater than 20% of the revolving commitments) for the four-quarter period ended June 30 2016 and September 30, 2016. There have been no borrowings under the 2013 Revolver. At December 31, 2016, the Company had outstanding $7.8 million in issued LOCs with remaining availability under the 2013 Revolver of $12.2 million . The commitment fee on the unused portion of the 2013 Revolver is 0.50%  per year.
During the year ended December 31, 2015, the Company made a voluntary payment of $50.0 million on the 2013 Term Loan that resulted in a loss on extinguishment of $1.0 million due to the write-off of the related issue costs. During the year ended December 31, 2016, the Company repurchased $7.2 million in principal balance of the 2013 Term Loan for $6.3 million resulting in a gain on extinguishment of $0.9 million , which is recorded in net gains on extinguishment on the consolidated statements of comprehensive loss.
Subsequent to the Original Filing, the Company received waivers from each of the requisite holders of its term loans to the extent necessary to waive any default, event of default, amortization event, termination event or similar event resulting from or arising from the restatement and conclusions reached regarding the Company's ability to continue as a going concern, as described in Notes 2 and 3.
Senior Notes
In December 2013, the Company completed the sale of $575.0 million Senior Notes. The Senior Notes pay interest semi-annually on June 15 and December 15, commencing on June 15, 2014 , at a rate of 7.875% per annum, and mature on December 15, 2021 .
On October 14, 2014, the Company filed with the SEC a registration statement under the Securities Act so as to allow holders of the Senior Notes to exchange their Senior Notes for the same principal amount of a new issue of notes, or the Exchange Notes, with identical terms, except that the Exchange Notes are not subject to certain restrictions on transfer. The registration statement was declared effective by the SEC on October 27, 2014 and the exchange offer closed on December 2, 2014.
During the year ended December 31, 2015, the Company repurchased Senior Notes with a carrying value of $35.7 million and an unpaid principal balance of $36.3 million for $30.0 million resulting in a gain on extinguishment of $5.7 million , which is recorded in net gains on extinguishment on the consolidated statements of comprehensive loss.
Subsequent to the Original Filing, the beneficial owners of the requisite principal amount of the Senior Notes agreed to waive any default or event of default arising from the restatement, as described in the Explanatory Note and Note 2 to the Consolidated Financial Statements.
Convertible Notes
In October 2012, the Company closed on a registered underwritten public offering of $290 million aggregate principal amount of Convertible Notes. The Convertible Notes pay interest semi-annually on May 1 and November 1, commencing on May 1, 2013 , at a rate of 4.50%  per annum, and mature on November 1, 2019 .

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Prior to May 1, 2019, the Convertible Notes will be convertible only upon specified events including the satisfaction of a sales price condition, satisfaction of a trading price condition or specified corporate events and during specified periods, and, on or after May 1, 2019, at any time. The Convertible Notes will initially be convertible at a conversion rate of 17.0068 shares of the Company’s common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $58.80 per share, which is a 40% premium to the public offering price of the Company’s common stock in the 2012 Common Stock Offering of $42.00 . Upon conversion, the Company may pay or deliver, at its option, either cash, shares of the Company’s common stock, or a combination of cash and shares of common stock.
During the year ended December 31, 2016, the Company repurchased Convertible Notes with a carrying value of $39.3 million and unpaid principal balance of $47.5 million for $24.8 million resulting in a gain on extinguishment of $14.5 million , which is recorded in net gains on extinguishment on the consolidated statements of comprehensive loss.
During the years ended December 31, 2016, 2015 and 2014 , the Company recorded $24.5 million , $24.6 million and $23.4 million , respectively, in interest expense related to its Convertible Notes, which included $11.2 million , $10.8 million and $9.8 million in amortization of discount, respectively. The effective interest rate of the liability component of the Convertible Notes, which includes the amortization of discount and debt issuance costs, was 11.0% for the year ended December 31, 2016 and 10.6% for the years ended December 31, 2015 and 2014. At December 31, 2016 and 2015 , the unamortized discount was $34.7 million and $53.5 million , respectively. The unamortized discount at December 31, 2016 will be recognized over its remaining life of 2.8 years.
25. Mortgage-Backed Debt
Mortgage-backed debt consists of debt issued by the Residual and Non-Residual Trusts that have been consolidated by the Company. The mortgage-backed debt of the Residual Trusts is carried at amortized cost while the mortgage-backed debt of the Non-Residual Trusts is carried at fair value.
Provided in the table below is information regarding the mortgage-backed debt (dollars in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Carrying Value
 
Weighted-Average Stated Interest Rate (1)
 
Carrying Value
 
Weighted-Average Stated Interest Rate  (1)
Mortgage-backed debt at amortized cost (unpaid principal balance of $434,667 and $474,759 at December 31, 2016 and 2015, respectively)
 
$
429,931

 
6.07
%
 
$
469,339

 
6.07
%
Mortgage-backed debt at fair value (unpaid principal balance of $518,317 and $585,839 at December 31, 2016 and 2015, respectively)
 
514,025

 
5.70
%
 
582,340

 
5.53
%
Total mortgage-backed debt
 
$
943,956

 
5.87
%
 
$
1,051,679

 
5.77
%
__________
(1)
Represents the weighted-average stated interest rate, which may be different from the effective rate, which considers the amortization of discounts and issuance costs.
Borrower remittances received on the residential loans of the Residual and Non-Residual Trusts collateralizing this debt and draws under LOCs issued by a third party and serving as credit enhancements to certain of the Non-Residual Trusts are used to make principal and interest payments due on the mortgage-backed debt. The Trust Notes issued by the Residual Trusts have final maturities ranging from 2036 to 2040 . The m aturity of the Company's mortgage-backed debt is directly affected by the rate of principal prepayments on the collateral. As a result, the actual m aturity of the mortgage-backed debt is likely to occur earlier than the stated maturity. Certain of the Company’s mortgage-backed debt issued by the Residual Trusts is subject to voluntary redemption according to the specific terms of the respective indenture agreements, including the option to exercise a clean-up call. Under the mortgage-backed debt issued by the Non-Residual Trusts, the Company has certain obligations to exercise mandatory clean-up calls for each of these trusts at their earliest exercisable date, which is the date the principal amount of each loan pool falls to 10% of the original principal amount. The Company expects to call these securitizations beginning in 2017 and continuing through 2019 . The majority of the call obligations in 2017 are anticipated to occur during the second half of the year. At December 31, 2016 , mortgage-backed debt was collateralized by $1.0 billion of assets including residential loans, receivables related to the Non-Residual Trusts, real estate owned and restricted cash and cash equivalents. Refer to the Consolidated Variable Interest Entities section of Note 7 for further information.
26. HMBS Related Obligations
The weighted-average stated interest rate on HMBS related obligations was 4.09% and 4.04% at December 31, 2016 and 2015 , respectively. At December 31, 2016 , the weighted-average remaining life was 3.2 years. The unpaid principal balance and the carrying value of residential loans and real estate owned pledged as collateral to the securitization pools was $9.9 billion and $10.4 billion , respectively, at December 31, 2016 .

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27. Share-Based Compensation
The Company established the 2011 Plan, which permits the grant of stock options, restricted stock, RSUs, performance-shares and other stock-based awards to the Company’s officers, directors, employees, and other persons expected to provide significant services to the Company and its subsidiaries through May 10, 2021 . A total of 6,550,000 shares were originally authorized to be granted under the 2011 Plan at December 31, 2012, some of which were previously granted under incentive plans that were in effect prior to the 2011 Plan. In May 2013, the 2011 Plan was amended to increase the authorized shares by 2,265,000 shares. On June 9, 2016, the 2011 Plan was further amended and restated to increase the authorized shares thereunder by 2,000,000 shares, resulting in a total of 10,815,000 shares of common stock authorized for issuance under the amended and restated 2011 Plan.
The 2011 Plan is administered by the Compensation Committee, which is comprised of two or more independent members of the Board of Directors. Under the 2011 Plan, the maximum number of shares for which options or stock appreciation rights may be granted to any participant in any calendar year is 2.0 million shares, and the maximum number of shares that may be paid to any participant in any calendar year in the form of RSUs, performance shares or other stock-based awards, in each case that are performance-based compensation, is 2.0 million shares determined as of the date of payout. Each contractual term of an option granted is fixed by the Compensation Committee, and except for limited circumstances, the term cannot exceed ten years from the grant date. Restricted stock, RSUs and performance-share awards have a vesting period as defined by the applicable award agreement.
At December 31, 2016 , there were 2,204,362 shares underlying the 2011 Plan that are authorized, but not yet granted. The Company issues new shares of stock upon the exercise of stock options and the vesting of restricted stock, RSUs and performance shares. Awards of stock options, restricted stock, and RSUs granted in recent years generally vest over a three or four year period and are based on service. Awards of performance shares granted in recent years generally vest over a three year performance period and are based on service and a market-based or company-based performance condition.
Stock Options
The following table summarizes the activity for stock options granted by the Company:
 
 
Shares
 
Weighted-Average Exercise Price Per Share
 
Weighted-Average Remaining Contractual Term (in years)
 
Aggregate Intrinsic Value (in $000s)
Outstanding at January 1, 2014
 
2,726,553

 
$
23.51

 
7.22
 
$
32,785

Granted
 
67,507

 
29.11

 
 
 
 
Exercised
 
(303,449
)
 
18.12

 
 
 
3,468

Forfeited or expired
 
(126,883
)
 
31.24

 
 
 
 
Outstanding at December 31, 2014
 
2,363,728

 
23.95

 
6.34
 
1,223

Granted
 
789,210

 
16.39

 
 
 
 
Exercised
 
(15,458
)
 
12.88

 
 
 
150

Forfeited or expired
 
(127,247
)
 
27.66

 
 
 
 
Outstanding at December 31, 2015
 
3,010,233

 
21.87

 
5.56
 
443

Granted
 
1,272,293

 
5.69

 
 
 
 
Exercised
 
(64,220
)
 
2.89

 
 
 
200

Forfeited or expired
 
(311,309
)
 
16.51

 
 
 
 
Outstanding at December 31, 2016
 
3,906,997

 
17.34

 
5.74
 
1,809

 
 
 
 
 
 
 
 
 
Exercisable at December 31, 2016
 
2,471,233

 
22.69

 
4.42
 
119

Options expected to vest as of December 31, 2016
 
1,355,723

 
8.14

 
7.95
 
1,577

The grant-date fair values of stock options granted to employees and directors of the Company during the years ended December 31, 2016, 2015 and 2014 were $1.8 million , $5.1 million and $0.7 million , respectively. The weighted-average grant-date fair values of stock options granted during the years ended December 31, 2016, 2015 and 2014 were $1.42 , $6.49 and $10.05 , respectively. The total amount of cash received by the Company from the exercise of stock options was $0.2 million for the years ended December 31, 2016 and 2015 and $5.5 million for the year ended December 31, 2014. The total fair values of options that vested during the years ended December 31, 2016, 2015 and 2014 were $10.4 million , $1.7 million and $5.7 million , respectively.

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Method and Assumptions Used to Estimate Fair Values of Options
The weighted-average assumptions the Company used to value options are shown below.
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Risk-free interest rate
 
0.99
%
 
1.07
%
 
1.17
%
Dividend yield
 
—
%
 
—
%
 
—
%
Expected life (years)
 
4.84

 
4.00

 
4.00

Volatility
 
56.96
%
 
50.00
%
 
42.56
%
Forfeiture rate
 
5.85
%
 
3.50
%
 
2.20
%
The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date with a term equal to the expected life of the option. The expected life of the options represents the period of time the options are expected to be outstanding. The dividend yield is based on the Company’s estimated annual dividend payout at the grant date. Volatility is based on the Company’s historical data and the forfeiture rate is based on historical termination experience.
Non-Vested Share Activity
The Company’s non-vested share-based awards consist of RSUs and performance shares. The grant-date fair values of share-based awards granted during the years ended December 31, 2016, 2015 and 2014 were $3.7 million , $18.4 million and $24.0 million , respectively.
The following table summarizes the activity for non-vested awards granted by the Company:
 
 
Shares
 
Weighted-Average Grant-Date Fair Value Per Share
 
Weighted-Average Contractual Term (in years)
 
Aggregate Intrinsic Value (in $000s)
Outstanding at January 1, 2014
 
308,426

 
$
25.65

 
1.90
 
$
10,906

Granted
 
738,164

 
32.46

 
 
 
 
Vested and settled
 
(30,898
)
 
29.45

 
 
 
910

Forfeited
 
(94,133
)
 
8.48

 
 
 
 
Outstanding at December 31,2014
 
921,559

 
30.42

 
1.84
 
15,215

Granted
 
1,046,362

 
17.62

 
 
 
 
Vested and settled
 
(303,166
)
 
24.31

 
 
 
4,132

Forfeited
 
(165,610
)
 
23.96

 
 
 
 
Outstanding at December 31, 2015
 
1,499,145

 
23.42

 
1.88
 
21,318

Granted  (1)
 
1,128,522

 
3.28

 
 
 
 
Vested and settled
 
(894,900
)
 
8.88

 
 
 
4,217

Forfeited
 
(322,557
)
 
22.64

 
 
 
 
Outstanding at December 31, 2016
 
1,410,210

 
16.71

 
4.68
 
6,698

Non-vested shares expected to vest as of December 31, 2016
 
1,287,348

 
16.46

 
4.88
 
6,115

__________
(1)
Excludes 192,024 performance shares legally granted on November 3, 2016 that have not met the grant date requirements in accordance with GAAP, as the performance target condition had not been determined at December 31, 2016. The performance target for these performance shares is based on the 2017 Annual Business Plan as approved by the Board, which was approved subsequent to the year end.
The total fair values of shares that vested and settled during the years ended December 31, 2016, 2015 and 2014 , were $7.9 million , $7.4 million and $0.9 million , respectively. The RSUs granted include immediately vesting RSUs granted to the Company's non-employee directors and former Chief Executive Officer, President and Vice Chairman of the Board of Directors, Denmar J. Dixon, detailed further below, and 500,000 RSUs granted to the Company's former Interim Chief Executive Officer and President and current chairman of the Board of Directors, George M. Awad, and 175,438 RSUs granted to the Company's newly appointed Chief Executive Officer and President, Anthony N. Renzi, that vest ratably in annual installments over three years subject to a service condition.

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Method and Assumptions Used to Estimate Fair Values of Performance-Share Awards
The weighted-average assumptions the Company used to value performance-share awards are shown below. As discussed above, the table excludes the 192,024 performance shares legally granted in 2016 that have not met the grant-date requirements as required by GAAP as the performance target condition had not been determined at December 31, 2016.
 
 
For the Years Ended December 31,
 
 
2015
 
2014
Risk-free interest rate
 
0.75
%
 
0.82
%
Simulation period (years)
 
2.72

 
2.76

Volatility
 
52.30
%
 
46.58
%
Beginning TSR price
 
$
16.57

 
$
28.09

Forfeiture rate
 
3.50
%
 
2.20
%
The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date with a term equal to the simulation period used in the Monte-Carlo simulation model. The simulation period is equal to the performance period associated with the performance shares. Volatility is based on the Company’s historical data. Beginning TSR price is equal to the average closing price for the last twenty trading days immediately prior to the first day of the performance period. The forfeiture rate is based on historical termination experience. The performance shares vest December 31, 2016 and 2017, and the shares ultimately awarded will be based upon the performance percentage, which can range from 0% to 200% of the target performance award grant. The performance shares ultimately awarded upon vesting are based on the percentile rank of the Company’s TSR relative to the distribution of the TSRs of peer group companies. There were zero shares awarded for the performance shares that vested December 31, 2016.
Share-Based Compensation Expense
Share-based compensation expense recognized by the Company is net of actual forfeitures as well as estimated forfeitures, which are estimated based on historical termination behavior. Share-based compensation expense of $6.6 million , $20.9 million and $14.5 million for the years ended December 31, 2016, 2015 and 2014 , respectively, is included in salaries and benefits expense on the consolidated statements of comprehensive loss. The tax benefit recognized related to share-based compensation expense for the years ended December 31, 2016, 2015 and 2014 was $2.5 million , $8.0 million and $5.5 million , respectively. For unvested stock options and shares, the Company had $1.3 million and $3.2 million , respectively, of total unrecognized compensation cost at December 31, 2016 , which is expected to be recognized over a weighted-average period of 1.4 years and 0.9 years , respectively.
On October 2, 2015, the Company and Mark J. O'Brien, the Company’s former Chief Executive Officer, entered into a retirement agreement effective October 10, 2015 pursuant to which the vesting dates of certain RSUs and stock options previously awarded to Mr. O'Brien were accelerated to October 10, 2015. Mr. O'Brien is also entitled to be paid the full amount of shares earned based on performance with regard to his currently outstanding awards of performance shares as if Mr. O'Brien remained an employee of the Company through the date on which the amount of the payout under such performance shares is determined. The retention of the performance shares was considered a Type III modification for share-based compensation, and, as a result, the Company reversed all expense previously recorded for these retained awards and recorded the new compensation expense over the new requisite service period. The compensation benefit resulting from these modifications was $1.3 million .
On June 8, 2016, the Company and Denmar J. Dixon, the Company’s former Chief Executive Officer, President and Vice Chairman of the Board of Directors, entered into a separation agreement effective June 30, 2016, pursuant to which all RSUs, performance shares and stock options previously awarded to Mr. Dixon will remain outstanding and continue to vest as though Mr. Dixon remained employed by the Company through each applicable vesting date. In addition, Mr. Dixon received 125,000 RSUs that immediately vested on June 30, 2016. The weighted-average grant-date fair value of $2.85 for these RSUs was based upon the average of the high and low market prices of the Company's stock on their date of grant. The retention of the performance shares was considered a Type III modification for share-based compensation, and, as a result, the Company reversed all expense previously recorded for these retained awards and recorded the new compensation expense over the new requisite service period. The total incremental compensation benefit resulting from these modifications was $1.0 million .

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28. Income Taxes (As Restated)
For the years ended December 31, 2016, 2015, and 2014, the Company recorded income tax expense (benefit) of $44.0 million , $(141.2) million and $(9.0) million , respectively. The increase in income tax expense for the year ended December 31, 2016 as compared to income tax benefit for the year ended December 31, 2015 results primarily from an increase in the valuation allowance as discussed further below, partially offset by the increase in loss before income taxes. The increase in income tax benefit for the year ended December 31, 2015 as compared to 2014 results primarily from the increase in loss before income taxes offset by the impact on income taxes for non-deductible expenses such as the impairment of goodwill of the Reverse Mortgage reporting unit.
Income tax expense (benefit) consists of the following components (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(Restated)
 
 
 
 
Current
 
 
 
 
 
 
Federal
 
$
(69,204
)
 
$
46,331

 
$
25,417

State and local
 
1,870

 
8,759

 
979

Current income tax expense (benefit)
 
(67,334
)
 
55,090

 
26,396

Deferred
 
 
 
 
 
 
Federal
 
93,902

 
(159,171
)
 
(33,788
)
State and local
 
17,472

 
(37,155
)
 
(1,620
)
Deferred income tax expense (benefit)
 
111,374

 
(196,326
)
 
(35,408
)
Total income tax expense (benefit)
 
$
44,040

 
$
(141,236
)
 
$
(9,012
)
Income tax expense (benefit) at the Company’s effective tax rate differed from the statutory tax rate as follows (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(Restated)
 
 
 
 
Loss before income taxes
 
$
(789,818
)
 
$
(404,426
)
 
$
(119,340
)
 
 
 
 
 
 
 
Tax provision at statutory tax rate of 35%
 
(276,436
)
 
(141,549
)
 
(41,769
)
Effect of:
 
 
 
 
 
 
Valuation allowance
 
343,200

 
—

 
—

State and local income tax
 
(28,558
)
 
(16,979
)
 
(1,649
)
Goodwill impairment
 
—

 
19,789

 
28,794

Penalties
 
—

 
—

 
5,140

Other
 
5,834

 
(2,497
)
 
472

Total income tax expense (benefit)
 
$
44,040

 
$
(141,236
)
 
$
(9,012
)

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The following table summarizes the components of deferred tax assets and liabilities (in thousands):
 
 
December 31,
 
 
2016
 
2015
 
 
(Restated)
 
 
Deferred tax assets
 
 
 
 
Net operating losses
 
$
112,553

 
$
36,014

Goodwill
 
111,865

 
—

Reverse loans
 
64,899

 
46,906

Servicer and protective advances
 
49,301

 
37,751

Curtailment liability
 
44,461

 
36,086

Intangible assets
 
32,750

 
37,013

Accrued expenses
 
25,022

 
23,824

Mandatory call obligation
 
19,695

 
19,768

Accrued legal contingencies and settlements
 
13,184

 
10,284

Servicing rights related liabilities
 
—

 
45,063

Other
 
65,175

 
48,668

Total deferred tax assets
 
538,905

 
341,377

Valuation allowance
 
(346,199
)
 
(2,999
)
Total deferred tax assets, net of valuation allowance
 
192,706

 
338,378

Deferred tax liabilities
 
 
 
 
Servicing rights
 
(135,125
)
 
(151,163
)
Net investment in residential loans
 
(33,126
)
 
(34,967
)
Discount on Convertible Notes
 
(12,515
)
 
(19,743
)
Intangible assets
 
(3,797
)
 
(9,723
)
Goodwill
 
—

 
(1,498
)
Other
 
(12,917
)
 
(13,234
)
Total deferred tax liabilities
 
(197,480
)
 
(230,328
)
Deferred tax assets (liabilities), net
 
$
(4,774
)
 
$
108,050

The following table summarizes the activity in the valuation allowance on deferred tax assets (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
 
(Restated)
 
 
Balance at beginning of year
 
$
2,999

 
$
3,096

Charges to income tax expense
 
343,200

 
—

Deductions
 
—

 
(97
)
Balance at end of year
 
$
346,199

 
$
2,999

The Company is required to establish a valuation allowance for deferred tax assets and record a charge to income if it is determined, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company’s evaluation focused on identifying significant, objective evidence that it will more likely than not be able to realize its deferred tax assets in the future. The Company considers both positive and negative evidence when evaluating the need for a valuation allowance which is highly judgmental and requires subjective weighting of such evidence.


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In the Original Filing, the Company concluded that a partial valuation allowance was necessary at December 31, 2016. Subsequent to Original Filing, management discovered an error in the calculation of the valuation allowance on the deferred tax assets, which is discussed in further detail in Note 2. As a result of this error, it was determined that the valuation allowance should have been higher than what was originally recorded in the amount of $304.7 million . The Company has restated its consolidated financial statements as of and for the year ended December 31, 2016 to correct this error. The restatement reflects the corrected estimated net amount of deferred tax assets that are considered by management to be recoverable based on the amounts of deferred tax assets that are likely to be realized.
The cumulative impact of the non-cash adjustment to correct this error was a reduction in the net deferred tax assets balance of $299.9 million , an increase to deferred tax liabilities of $4.8 million and an increase in accumulated deficit of approximately $304.7 million as of December 31, 2016. Net loss increased for the year ended December 31, 2016 by $304.7 million , which increased the loss per share by $8.47 .
The valuation allowance decreased marginally during the year ended December 31, 2015, as a result of the write-off of the net operating loss attributable to Marix upon its deconsolidation. There was no impact to the Company's effective tax rate during the year ended December 31, 2015 as the result of this change in the valuation allowance. The valuation allowance at December 31, 2015 is primarily attributable to net operating loss carryforwards where the Company believes it is more likely than not that these deferred tax assets will not be realized in the ordinary course of operations before they expire. Other than for those deferred tax assets for which the Company has a valuation allowance, management believes it is more likely than not that it will recover the remaining deferred tax assets.
At December 31, 2016 , the Company had total gross operating loss carryforwards of $294.6 million , resulting in net tax carryforwards of $112.6 million that will expire in 2028 through 2036 . In addition, at December 31, 2016 the Company had capital loss carryforwards of $8.2 million that will expire in 2021 and tax credit carryforwards of $3.7 million that will expire in 2036 .
Uncertain Tax Positions
The Company recognizes tax benefits in accordance with the accounting guidance concerning uncertainty in income taxes. This guidance establishes a more-likely-than-not recognition threshold that must be met before a tax benefit can be recognized in the consolidated financial statements.
A reconciliation of the beginning and ending balances of the total liability for unrecognized tax benefits is as follows (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Balance at the beginning of the year
 
$
58,148

 
$
8,705

 
$
12,523

Increases (reductions) related to prior year tax positions (1)
 
(52,230
)
 
33,858

 
(1,571
)
Increases related to current year tax positions
 
910

 
17,650

 
1,377

Reductions as a result of a lapse of the statute of limitations
 
(1,414
)
 
(2,065
)
 
(3,624
)
Balance at the end of the year
 
$
5,414

 
$
58,148

 
$
8,705

__________
(1)
During the year ended December 31, 2015, the Company determined that a tax accounting method as employed was not more likely than not to be realized, and therefore derecognized the tax position and recorded an offsetting deferred tax asset related to servicing rights. The Company filed for an accounting method change with the IRS during the first quarter of 2016 and, as a result, this uncertain tax position was reversed.
The total amount of unrecognized tax benefits that would affect the effective tax rate if recognized was $2.9 million and $8.3 million at December 31, 2016 and 2015 , respectively. For the years ended December 31, 2016, 2015 and 2014 , income tax expense (benefit) included $(2.4) million , $0.2 million and $1.8 million , respectively, for interest and penalties accrued on the liability for unrecognized tax benefits. At December 31, 2016 and 2015 , accrued interest and penalties were $4.0 million and $6.4 million , respectively, which are included in payables and accrued liabilities on the consolidated balance sheets.
The Company’s tax years that remain subject to examination by the IRS are 2012 through 2016 and by various states are 2001 through 2016 .

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29. Common Stock and Loss Per Share (As Restated)
Share Repurchase Program
On May 6, 2015, the Board of Directors of the Company authorized the Company to repurchase up to $50.0 million of shares of the Company’s common stock, during the period beginning on May 11, 2015 and ending on May 31, 2016 . The Company repurchased 2,382,733 shares of common stock pursuant to its share repurchase program, all of which were repurchased during the year ended December 31, 2015, at an aggregate cost of $28.1 million , or an average cost of $11.78 per share. Repurchased shares of common stock were canceled and returned to the status of authorized but unissued shares.
Rights Agreement
On November 11, 2016, the Company entered into an Amended and Restated Section 382 Rights Agreement with Computershare, which amends and restates the Rights Agreement between the Company and Computershare dated as of June 29, 2015, as previously amended. On June 29, 2015 , the Company's Board of Directors had authorized and the Company declared a dividend of one preferred stock purchase right for each outstanding share of the Company's common stock. The dividend was payable on July 9, 2015 to stockholders of record as of the close of business on July 9, 2015 and entitled the registered holder thereof to purchase from the Company one one-thousandth of a fully paid non-assessable share of Junior Participating Preferred Stock, par value $0.01 per share, of the Company at a price of $74.16 , subject to adjustment as provided in the Rights Agreement. Any shares of common stock issued by the Company after such date also receive such a right. The terms of the preferred stock purchase rights are set forth in the Rights Agreement.
Subsequent to the initial adoption of the Rights Agreement, it was amended to, among other things, permit certain stockholders to acquire up to 25% of the outstanding shares of the Company's common stock. The Company entered into the November 2016 amendment and restatement of the Rights Agreement to, among other things, lower the ownership thresholds permitted pursuant to the Rights Agreement such that if any person or group of persons, including persons who owned more than the threshold percentage of shares on the amendment date, but excluding certain exempted persons, acquires 4.99% or more of the Company's outstanding common stock or any other interest that would be treated as "stock" for the purposes of Section 382, there would be a triggering event potentially resulting in significant dilution in the voting power and economic ownership of such acquiring person or group. The Rights Agreement provides that the rights issued thereunder will expire on November 11, 2017 or upon the earlier occurrence of certain events, subject to the extension of the Rights Agreement by the Company's Board of Directors or the redemption or exchange of the rights by the Company, in each case as described in, and subject to the terms of, the Rights Agreement.
The November 2016 amendment to the Rights Agreement was intended to help protect our “built-in tax losses” and certain other tax benefits by acting as a deterrent to any person or group of persons acting in concert from becoming or obtaining the right to become the beneficial owner (including through constructive ownership of securities owned by others) of 4.99% or more of the shares of our common stock, or any other interest that would be treated as “stock” for the purposes of Section 382, then outstanding, without the approval of our Board of Directors, subject to certain exceptions.
Dividends on Common Stock
The decision to declare and pay dividends is made at the discretion of the Company’s Board of Directors and will depend on, among other things, results of operations, cash requirements, financial condition, contractual restrictions and other factors that the Company’s Board of Directors may deem relevant.
Many of the Company’s subsidiaries are subject to restrictions on their ability to pay dividends or otherwise transfer funds to other consolidated subsidiaries and, ultimately, to the Parent Company. These restrictions include, but are not limited to, minimum levels of net worth and other financial requirements imposed by GSEs, Ginnie Mae and other licensing requirements. The aggregate restricted net assets of these subsidiaries was $580.1 million at December 31, 2016 ; however, the restrictions on the net assets of these subsidiaries do not directly limit the ability to pay dividends from consolidated retained earnings.
In addition, the Company’s ability to pay dividends is limited by conditions set forth in the agreements governing the 2013 Secured Credit Facilities and the Senior Notes.

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Loss Per Share
The following is a reconciliation of the numerators and denominators of the basic and diluted loss per share computations shown on the consolidated statements of comprehensive loss (in thousands, except per share data):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(Restated)
 
 
 
 
Basic and diluted loss per share
 
 
 
 
 
 
Net loss available to common stockholders (numerator)
 
$
(833,858
)
 
$
(263,190
)
 
$
(110,328
)
Weighted-average common shares outstanding (denominator)
 
35,973

 
37,578

 
37,631

Basic and diluted loss per common and common equivalent share
 
$
(23.18
)
 
$
(7.00
)
 
$
(2.93
)
A portion of the Company’s unvested RSUs during the years ended December 31, 2015 and 2014 were considered participating securities. During periods of net income, the calculation of earnings per share for common stock is adjusted to exclude the income attributable to the participating securities from the numerator and exclude the dilutive impact of those shares from the denominator. During periods of net loss no effect is given to the participating securities because they do not share in the losses of the Company.
The following table summarizes antidilutive securities excluded from the computation of dilutive loss per share (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Outstanding share-based compensation awards
 
 
 
 
 
 
Stock options (1)
 
3,336

 
2,803

 
2,336

Performance shares (2)
 
30

 
—

 
—

Restricted stock units
 
565

 
564

 
165

Assumed conversion of Convertible Notes
 
4,932

 
4,932

 
4,932

__________
(1)
Includes out-of-the-money stock options totaling 2.9 million , 2.7 million and 2.0 million at December 31, 2016, 2015 and 2014, respectively.
(2)
Performance shares represent the number of shares expected to be issued based on the performance percentage as of the end of the reporting periods above.
The Convertible Notes are antidilutive when calculating earnings (loss) per share when the Company's average stock price is less than $58.80 . Upon conversion of the Convertible Notes, the Company may pay or deliver, at its option, cash, shares of the Company’s common stock, or a combination of cash and shares of common stock.

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30. Supplemental Disclosures of Cash Flow Information
The Company’s supplemental disclosures of cash flow information are summarized as follows (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Supplemental Disclosure of Cash Flow Information
 
 
 
 
 
 
Cash paid for interest
 
$
269,229

 
$
288,648

 
$
316,094

Cash paid (received) for taxes
 
61,881

 
(1,590
)
 
(5,338
)
Supplemental Disclosure of Non-Cash Investing and Financing Activities
 
 
 
 
 
 
Servicing rights capitalized upon sales of loans
 
198,865

 
306,741

 
214,285

Real estate owned acquired through foreclosure
 
158,690

 
122,911

 
122,213

Acquisition of trading security received as consideration for sale of servicing rights
 
—

 
60,094

 
—

Residential loans originated to finance the sale of real estate owned
 
13,389

 
22,022

 
52,130

Acquisitions of servicing rights
 
—

 
5,857

 
60,406

Servicing rights capitalized upon deconsolidation of Residual Trusts
 
—

 
3,133

 
—

Sales of servicing rights
 
73,365

 
9,173

 
1,056

31. Segment Reporting (As Restated)
Management has organized the Company into three reportable segments based primarily on its services as follows:
•
Servicing — performs servicing for the Company's mortgage loan portfolio and on behalf of third-party credit owners of mortgage loans for a fee and also performs subservicing for third-party owners of MSR. The Servicing segment also operates complementary businesses including a collections agency that performs collections of post charge-off deficiency balances for third parties and the Company. In addition, the Servicing segment holds the assets and mortgage-backed debt of the Residual Trusts. Until 2017, the servicing segment also operated an insurance agency serving residential loan borrowers and credit owners. Refer to Note 18 for additional information. In addition, the Servicing segment holds the assets and mortgage-backed debt of the Residual Trusts.
•
Originations —originates and purchases mortgage loans that are intended for sales to third parties.
•
Reverse Mortgage — purchases and originated HECMs that are securitized, but remain on the consolidated balance sheets as collateral for secured borrowings. The Reverse Mortgage segment performs servicing for the Company's own reverse mortgage portfolio and subservicing on behalf of third-party credit owners of reverse loans. The Reverse Mortgage segment also provides complementary services for the reverse mortgage market, such as real estate owned property management and disposition, for a fee. In December 2016, management decided to exit the reverse mortgage originations business, which occurred in January 2017. The Company intends to fulfill reverse loans in its originations pipeline consistent with its underwriting practices and to fund undrawn amounts available to borrowers.

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The following tables present select financial information for the reportable segments (in thousands). The Company has presented the revenue and expenses of the Non-Residual Trusts and other non-reportable operating segments, as well as certain corporate expenses that have not been allocated to the business segments, in Other. Intersegment revenues and expenses have been eliminated.
 
 
For the Year Ended December 31, 2016
 
 
Servicing
 
Originations
 
Reverse
Mortgage
 
Other
 
Eliminations
 
Total
Consolidated
Net servicing revenue and fees (1) (2)
 
$
321,912

 
$
—

 
$
31,031

 
$
—

 
$
(11,952
)
 
$
340,991

Net gains (losses) on sales of loans (2)
 
(4,931
)
 
410,544

 
—

 
—

 
3,835

 
409,448

Net fair value gains on reverse loans and related HMBS obligations
 
—

 
—

 
59,022

 
—

 
—

 
59,022

Interest income on loans
 
45,651

 
49

 
—

 
—

 
—

 
45,700

Insurance revenue
 
41,968

 
—

 
—

 
—

 
—

 
41,968

Other revenues (3) (4)
 
92,351

 
38,837

 
5,742

 
296

 
(38,638
)
 
98,588

Total revenues
 
496,951

 
449,430

 
95,795

 
296

 
(46,755
)
 
995,717

 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill and intangible assets impairment
 
319,551

 
—

 
6,735

 
—

 
—

 
326,286

Interest expense
 
68,529

 
34,012

 
9,070

 
144,170

 
—

 
255,781

Depreciation and amortization
 
44,439

 
8,888

 
6,088

 
11

 
—

 
59,426

Other expenses, net (6)
 
752,721

 
271,413

 
156,783

 
16,497

 
(46,755
)
 
1,150,659

Total expenses
 
1,185,240

 
314,313

 
178,676

 
160,678

 
(46,755
)
 
1,792,152

 
 
 
 
 
 
 
 
 
 
 
 
 
Total other gains (losses)
 
(2,113
)
 
—

 
(1,664
)
 
10,394

 
—

 
6,617

 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
$
(690,402
)
 
$
135,117

 
$
(84,545
)
 
$
(149,988
)
 
$
—

 
$
(789,818
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2016
Total assets (Restated)
 
$
3,449,055

 
$
1,475,408

 
$
11,056,291

 
$
1,023,181

 
$
(544,965
)
 
$
16,458,970


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For the Year Ended December 31, 2015
 
 
Servicing
 
Originations
 
Reverse
Mortgage
 
Other
 
Eliminations
 
Total
Consolidated
Net servicing revenue and fees (1) (2)
 
$
462,544

 
$
—

 
$
42,648

 
$
—

 
$
(10,925
)
 
$
494,267

Net gains (losses) on sales of loans (2)
 
3,699

 
448,533

 
(98
)
 
—

 
1,706

 
453,840

Net fair value gains on reverse loans and related HMBS obligations
 
—

 
—

 
98,265

 
—

 
—

 
98,265

Interest income on loans
 
74,303

 
62

 
—

 
—

 
—

 
74,365

Insurance revenue
 
47,201

 
—

 
—

 
—

 
—

 
47,201

Other revenues (3) (4)
 
81,756

 
45,250

 
6,794

 
5,345

 
(32,824
)
 
106,321

Total revenues  
 
669,503

 
493,845

 
147,609

 
5,345

 
(42,043
)
 
1,274,259

 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill impairment
 
151,018

 
—

 
56,539

 
—

 
—

 
207,557

Interest expense
 
85,482

 
36,470

 
3,902

 
147,752

 
—

 
273,606

Depreciation and amortization
 
45,437

 
15,811

 
7,865

 
15

 
—

 
69,128

Other expenses, net (6)
 
663,545

 
318,028

 
191,640

 
30,295

 
(42,043
)
 
1,161,465

Total expenses
 
945,482

 
370,309

 
259,946

 
178,062

 
(42,043
)
 
1,711,756

 
 
 
 
 
 
 
 
 
 
 
 
 
Total other gains
 
6,209

 
—

 
—

 
26,862

 
—

 
33,071

 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
$
(269,770
)
 
$
123,536

 
$
(112,337
)
 
$
(145,855
)
 
$
—

 
$
(404,426
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2015
Total assets
 
$
5,244,070

 
$
1,570,258

 
$
11,127,641

 
$
1,318,840

 
$
(711,362
)
 
$
18,549,447


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For the Year Ended December 31, 2014
 
 
Servicing
 
Originations
 
Reverse
Mortgage
 
Other
 
Eliminations
 
Total
Consolidated
Net servicing revenue and fees (1)
 
$
575,961

 
$
—

 
$
35,446

 
$
—

 
$
(9,897
)
 
$
601,510

Net gains on sales of loans
 
—

 
462,172

 
—

 
—

 
—

 
462,172

Net fair value gains on reverse loans and related HMBS obligations
 
—

 
—

 
109,972

 
—

 
—

 
109,972

Interest income on loans
 
134,472

 
83

 
—

 
—

 
—

 
134,555

Insurance revenue
 
71,010

 
—

 
—

 
—

 
—

 
71,010

Other revenues (3) (5)
 
75,991

 
19,567

 
11,743

 
41,179

 
(40,546
)
 
107,934

Total revenues
 
857,434

 
481,822

 
157,161

 
41,179

 
(50,443
)
 
1,487,153

 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill impairment
 
—

 
—

 
82,269

 
—

 
—

 
82,269

Interest expense
 
121,856

 
29,841

 
3,773

 
147,633

 
—

 
303,103

Depreciation and amortization
 
46,333

 
17,090

 
9,284

 
14

 
—

 
72,721

Other expenses, net (6)
 
716,992

 
317,787

 
163,003

 
19,597

 
(50,443
)
 
1,166,936

Total expenses
 
885,181

 
364,718

 
258,329

 
167,244

 
(50,443
)
 
1,625,029

 
 
 
 
 
 
 
 
 
 
 
 
 
Total other gains (losses)
 
(1,540
)
 
—

 
—

 
20,076

 
—

 
18,536

 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
$
(29,287
)
 
$
117,104

 
$
(101,168
)
 
$
(105,989
)
 
$
—

 
$
(119,340
)
__________
(1)
The Servicing segment recorded intercompany servicing revenue and fees from activity with the Originations segment and the Other non-reportable segment of $12.0 million , $10.9 million and $9.9 million for the years ended December 31, 2016, 2015 and 2014 , respectively.
(2)
Included in net servicing revenue and fees for the Servicing segment are late fees that were waived as an incentive for borrowers refinancing their loans of $3.8 million and $1.7 million for the years ended December 31, 2016 and 2015, respectively. These fees reduced net gains on sale of loans recognized by the Originations segment for the same period.
(3)
The Servicing segment recorded intercompany revenues for fees earned related to certain loan originations completed by the Originations segment from leads generated through the Servicing segment's servicing portfolio of $37.6 million , $30.8 million and $40.5 million for the years ended December 31, 2016, 2015 and 2014 , respectively. The expenses incurred by the Originations segment for these originations are included in other expenses, net in the tables above. In 2016, the Servicing segment increased the lead fee charged per origination to the Originations segment to reflect current market pricing, which increased intersegment revenues by $11.3 million for the year ended December 31, 2016.
(4)
The Originations segment recorded intercompany revenues for fees earned supporting the Servicing segment in administrative functions relating to the acquisition of certain servicing rights of $1.0 million and $2.0 million for the years ended December 31, 2016 and 2015, respectively.
(5)
Other revenues of the Other non-reportable segment include $36.8 million in asset management performance fees for the year ended December 31, 2014.
(6)
Other expenses, net in the tables above includes salaries and benefits, general and administrative, and other expenses, net on the consolidated statements of comprehensive loss.
32. Certain Capital Requirements and Guarantees (As Restated)
The Company's subsidiaries are required to comply with requirements under federal and state laws and regulations, including requirements imposed in connection with certain licenses and approvals, requirements of federal, state, GSE, Ginnie Mae and other business partner loan programs, some of which are financial covenants related to minimum levels of net worth and other financial requirements. If these financial covenants are not met, the Company’s selling and servicing agreements could be terminated and lending and servicing licenses could be suspended or revoked.

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Due to the accounting treatment for reverse loans as secured borrowings when transferred, RMS has obtained an indefinite waiver for certain of these requirements from Ginnie Mae and a waiver through December 2017 from Fannie Mae. In addition, the Parent Company has provided a guarantee whereby it guarantees the performance and obligations of RMS under the Ginnie Mae HMBS program. In the event that the Parent Company fails to honor this guarantee, Ginnie Mae could terminate RMS’s status as a qualified issuer of HMBS as well as take other actions permitted by law that could impact the operations of RMS, including the termination or suspension of RMS’s servicing rights associated with reverse loans underlying HMBS guaranteed by Ginnie Mae. Each subsidiary of the Parent Company that is a Ginnie Mae issuer has also entered into a cross default agreement with Ginnie Mae that provides that, upon the default by a subsidiary under an applicable Ginnie Mae program agreement, Ginnie Mae will have the right to (i) declare a default on all other pools and loan packages of that subsidiary and all pools and loan packages of any affiliated Ginnie Mae issuer that executed the cross default agreement and (ii) exercise any other remedies available under applicable law against each of the affiliated Ginnie Mae issuers.
The Parent Company has also provided a guarantee to (i) Fannie Mae, dated May 31, 2013, for RMS, (ii) Fannie Mae, dated March 17, 2014, for Ditech Financial, and (iii) Freddie Mac, dated December 19, 2013, for Ditech Financial. Pursuant to the RMS guarantee, the Parent Company agreed to guarantee all of the obligations required to be performed or paid by RMS under RMS's mortgage selling and servicing contract or any other agreement between Fannie Mae and RMS relating to mortgage loans or participation interests that RMS delivers or has delivered to Fannie Mae or services or has serviced for, or on behalf of, Fannie Mae. RMS does not currently sell loans to Fannie Mae. Pursuant to the Ditech Financial Fannie Mae guarantee, the Parent Company agreed to guarantee all of the servicing obligations required to be performed or paid by Ditech Financial under Ditech Financial's mortgage selling and servicing agreement, the Fannie Mae selling and servicing guides, or any other agreement between Fannie Mae and Ditech Financial. The Parent Company also agreed to guarantee all selling representations and warranties Ditech Financial has assumed, or may in the future assume, in connection with Ditech Financial's purchase of MSR related to Fannie Mae loans. The Parent Company does not guarantee Ditech Financial's obligations relating to the selling representations and warranties made or assumed by Ditech Financial in connection with the sale and/or securitization of mortgage loans to and/or by Fannie Mae. Pursuant to the Ditech Financial Freddie Mac guarantee, the Parent Company agreed to guarantee all of the seller and servicer obligations required to be performed or paid by Ditech Financial under any agreement between Freddie Mac and Ditech Financial.
As a result of the restatement as described in Note 2 to the Consolidated Financial Statements, RMS was not in compliance with certain financial covenants required by Ginnie Mae and Fannie Mae as of December 31, 2016 and for the periods included therein. As of June 30, 2017, the Company is in compliance with such financial covenants.
Factors that may significantly affect the adequacy of net worth include, but are not limited to, regulatory mandates, the overall economic condition in the mortgage and real estate markets, as well as the financial markets in general. The following table presents the required and actual adjusted net worth, as defined by the applicable agreement, for the most restrictive covenant, excluding covenants for which the Company has waivers, applicable to each of the Company's two largest operating subsidiaries (in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Required Adjusted Net Worth
 
Actual Adjusted Net Worth
 
Required Adjusted Net Worth
 
Actual Adjusted Net Worth
 
 
 
 
 
 
 
 
 
Ditech Financial
 
$
471,491

 
$
1,387,108

 
$
671,534

 
$
1,605,772

Reverse Mortgage Solutions
 
108,617

 
51,310

 
113,264

 
134,292

The Company also has financial covenant requirements relating to its servicing advance facilities and its master repurchase agreements, as discussed in more detail in Notes 21 and 22.
33. Commitments and Contingencies
Letter of Credit Reimbursement Obligation
As part of an agreement to service the loans in eleven securitization trusts, the Company has an obligation to reimburse a third party for the final $165.0 million in LOCs, if drawn, issued to the eleven trusts by a third party as credit enhancements to these trusts. The total amount available on these LOCs for these trusts was $254.1 million at December 31, 2016 . The securitization trusts will draw on these LOCs if there are insufficient cash flows from the underlying collateral to pay the bondholders of the securitization trusts. Based on the Company’s estimates of the underlying performance of the collateral in the securitizations, the Company does not expect that the final $165.0 million will be drawn and, therefore, no liability for the fair value of this obligation has been recorded on the Company’s consolidated balance sheets; however, actual performance may differ from this estimate in the future.

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Mandatory Clean-Up Call Obligation
The Company is obligated to exercise the mandatory clean-up call obligations assumed as part of an agreement to acquire the rights to service the loans in the Non-Residual Trusts. The Company is required to call these securitizations when the principal amount of each loan pool falls to 10% of the original principal amount and expects to begin to make such calls beginning in 2017 and continuing through 2019 . The total outstanding balance of the residential loans expected to be called at the respective call dates is $418.1 million at December 31, 2016. The Company estimates call obligations of $101.4 million , $253.5 million and $63.2 million during the years ending December 31, 2017, 2018 and 2019, respectively. The majority of the call obligations in 2017 are anticipated to occur during the second half of the year.
Unfunded Commitments
Reverse Mortgage Loans
At December 31, 2016 , the Company had floating-rate reverse loans in which the borrowers have additional borrowing capacity of $1.3 billion and similar commitments on fixed-rate reverse loans of $0.5 million primarily in the form of undrawn lines-of-credit. The borrowing capacity includes $1.0 billion in capacity that was available to be drawn by borrowers at December 31, 2016 and $215.3 million in capacity that will become eligible to be drawn by borrowers through the twelve months ending December 31, 2017, assuming the loans remain performing. In addition, the Company has other commitments of $26.0 million to fund taxes and insurance on borrowers’ properties to the extent of amounts that were set aside for such purpose upon the origination of the related reverse loan. There is no termination date for these drawings so long as the loan remains performing. The Company also had short-term commitments to lend $17.2 million and commitments to purchase and sell loans totaling $12.6 million and $32.0 million , respectively, at December 31, 2016 .
Mortgage Loans
The Company has short-term commitments to lend $2.9 billion and commitments to purchase loans totaling $97.8 million at December 31, 2016 . In addition, the Company had commitments to sell $4.0 billion and purchase $0.6 billion in mortgage-backed securities at December 31, 2016 .
HMBS Issuer Obligations
As an HMBS issuer, the Company assumes certain obligations related to each security issued. The most significant obligation is the requirement to purchase loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of the maximum claim amount. Performing repurchased loans are conveyed to HUD and payment is received from HUD typically within 30 days of repurchase. Non-performing repurchased loans are generally liquidated through foreclosure and subsequent sale of real estate owned. The Company relies upon certain master repurchase agreements and operating cash flows, to the extent necessary, to repurchase loans. The timing and amount of the Company's obligation to repurchase HECMs is uncertain as repurchase is predicated on certain factors such as whether or not a borrower event of default occurs prior to the HECM reaching the mandatory repurchase threshold under which the Company is obligated to repurchase the loan. During the years ended December 31, 2016 and 2015 , the Company repurchased $671.4 million and $333.2 million , respectively, in reverse loans and real estate owned from securitization pools. At December 31, 2016 , the Company had $419.5 million in repurchased reverse loans and real estate owned. Repurchases of reverse loans and real estate owned have increased significantly as compared to prior periods and are expected to continue to increase due to the increased flow of HECMs and real estate owned that are reaching 98% of their maximum claim amount.
Mortgage Origination Contingencies
The Company sells substantially all of its originated or purchased mortgage loans into the secondary market for securitization or to private investors as whole loans. The Company sells conventional-conforming and government-backed mortgage loans through GSE and agency-sponsored securitizations in which mortgage-backed securities are created and sold to third-party investors. The Company also sells non-conforming mortgage loans to private investors. In doing so, representations and warranties regarding certain attributes of the loans are made to the third-party investor. Subsequent to the sale, if it is determined that a loan sold is in breach of these representations or warranties, the Company generally has an obligation to cure the breach. In general, if the Company is unable to cure such breach, the purchaser of the loan may require the Company to repurchase such loan for the unpaid principal balance, accrued interest, and related advances, and in any event, the Company must indemnify such purchaser for certain losses and expenses incurred by such purchaser in connection with such breach. The Company’s credit loss may be reduced by any recourse it has to correspondent lenders that, in turn, have sold such residential loans to the Company and breached similar or other representations and warranties.

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The Company's representations and warranties are generally not subject to stated limits of exposure with the exception of certain loans originated under HARP, which limits exposure based on payment history of the loan. At December 31, 2016 , the Company’s maximum exposure to repurchases due to potential breaches of representations and warranties was $62.3 billion , and was based on the original unpaid principal balance of loans sold from the beginning of 2013 through December 31, 2016 adjusted for voluntary payments made by the borrower on loans for which the Company performs servicing. A majority of the Company's loan sales were servicing retained.
The Company’s obligations vary based upon the nature of the repurchase demand and the current status of the mortgage loan. During the second quarter of 2016, the Company decreased the liability associated with representations and warranties exposure by $8.9 million , due to adjustments to certain assumptions based on recently observed trends as compared to historical expectations, primarily relating to loan defect rates and counterparty review probabilities, partially offset by certain qualitative considerations regarding long-term assumptions related to resales and recoveries. This adjustment is considered a change in estimate and has been applied prospectively.
The following table summarizes the activity for the Company's liability associated with representations and warranties (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Balance at beginning of the year
 
$
23,145

 
$
10,959

 
$
9,134

Provision for new sales
 
15,331

 
16,008

 
7,741

Change in estimate of existing reserves
 
(15,660
)
 
(2,419
)
 
(5,068
)
Net realized losses on repurchases
 
(722
)
 
(1,403
)
 
(848
)
Balance at end of the year
 
$
22,094

 
$
23,145

 
$
10,959

The Company's estimate of the liability associated with the representations and warranties exposure is included in originations liability as part of payables and accrued liabilities on the consolidated balance sheets.
Servicing Contingencies
The Company’s servicing obligations are set forth in industry regulations established by HUD, the FHA, the VA, and other government agencies and in servicing and subservicing agreements with the applicable counterparties, such as Fannie Mae, Freddie Mac and other credit owners. Both the regulations and the servicing agreements provide that the servicer may be liable for failure to perform its servicing obligations and further provide remedies for certain servicer breaches.
Reverse Mortgage Loans
FHA regulations provide that servicers meet a series of event-specific timeframes during the default, foreclosure, conveyance, and mortgage insurance claim cycles. Failure to timely meet any processing deadline may stop the accrual of debenture interest otherwise payable in satisfaction of a claim under the FHA mortgage insurance contract and the servicer may be responsible to HUD for debenture interest that is not self-curtailed by the servicer, or for making the credit owner whole for any interest curtailed by FHA due to not meeting the required event-specific timeframes. The Company had a curtailment obligation liability of $103.1 million at December 31, 2016 related to the foregoing, which reflects management’s best estimate of the probable incurred claim. The curtailment liability is recorded in payables and accrued liabilities on the consolidated balance sheets. During the year ended December 31, 2016 , the Company recorded a provision, net of expected third-party recoveries, related to the curtailment liability of $16.0 million . The Company has potential estimated maximum financial statement exposure for an additional $142.6 million related to similar claims, which are reasonably possible, but which the Company believes are the responsibility of third parties (e.g., prior servicers and/or credit owners).
Mortgage Loans
The Company had a curtailment obligation liability of $18.2 million at December 31, 2016 related to mortgage loan servicing that it primarily assumed through an acquisition of servicing rights. The Company is obligated to service the related mortgage loans in accordance with Ginnie Mae requirements, including repayment to credit owners for corporate advances and interest curtailment. The curtailment liability is recorded in payables and accrued liabilities on the consolidated balance sheets.

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Lease Obligations
The Company leases office space and office equipment under various operating lease agreements with terms expiring through 2026 , exclusive of renewal option periods. Rent expense was $19.1 million , $21.6 million and $26.7 million for the years ended December 31, 2016, 2015 and 2014 , respectively. Estimated future minimum rental payments under operating leases at December 31, 2016 are as follows (in thousands):
 
 
Amount
2017
 
$
18,370

2018
 
13,787

2019
 
11,652

2020
 
9,861

2021
 
9,028

Thereafter
 
25,391

Total
 
$
88,089

Litigation and Regulatory Matters
In the ordinary course of business, the Parent Company and its subsidiaries are defendants in, or parties to, pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. Many of these actions and proceedings are based on alleged violations of consumer protection laws governing the Company's servicing and origination activities. In some of these actions and proceedings, claims for substantial monetary damages are asserted against the Company.
The Company, in the ordinary course of business, is also subject to regulatory and governmental examinations, information requests and subpoenas, inquiries, investigations and threatened legal actions and proceedings. In connection with formal and informal inquiries, the Company receives numerous requests, subpoenas and orders for documents, testimony and information in connection with various aspects of the Company’s activities.
In view of the inherent difficulty of predicting outcomes of such litigation, regulatory and governmental matters, particularly where the claimants seek very large or indeterminate restitution, penalties or damages, or where the matters present novel legal theories or involve a large number of parties, the Company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each pending matter may be.
Reserves are established for pending or threatened litigation, regulatory and governmental matters when it is probable that a loss has been incurred and the amount of such loss can be reasonably estimated. In light of the inherent uncertainties involved in litigation and other legal proceedings, it is not always possible to determine a reasonable estimate of the amount of a probable loss, and the Company may estimate a range of possible loss for consideration in its estimated accruals. The estimates are based upon currently available information, including advice of counsel, and involve significant judgment taking into account the varying stages and inherent uncertainties of such matters. Accordingly, the Company’s estimates may change from time to time and such changes may be material to the consolidated financial results.
At December 31, 2016 , the Company’s recorded reserves associated with legal and regulatory contingencies for which a loss is probable and can be reasonably estimated were approximately $48 million . There can be no assurance that the ultimate resolution of the Company’s pending or threatened litigation, claims or assessments will not result in losses in excess of the Company’s recorded reserves. As a result, the ultimate resolution of any particular legal matter, or matters, could be material to the Company’s results of operations or cash flows for the period in which such matter is resolved.
For matters involving a probable loss where the Company can estimate the range but not a specific loss amount, the aggregate estimated amount of reasonably possible losses in excess of the recorded liability was $0 to approximately $15 million at December 31, 2016 . Given the inherent uncertainties and status of the Company’s outstanding legal and regulatory matters, the range of reasonably possible losses cannot be estimated for all matters; therefore, this estimated range does not represent the Company’s maximum loss exposure. As new information becomes available, the matters for which the Company is able to estimate, as well as the estimates themselves, will be adjusted accordingly.

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The following is a description of certain litigation and regulatory matters:
The Company has received various subpoenas for testimony and documents, motions for examinations pursuant to Federal Rule of Bankruptcy Procedure 2004, and other information requests from certain Offices of the U.S. Trustees, acting through trial counsel in various federal judicial districts, seeking information regarding an array of the Company's policies, procedures and practices in servicing loans to borrowers who are in bankruptcy and the Company's compliance with bankruptcy laws and rules. The Company has provided information in response to these subpoenas and requests and have met with representatives of certain Offices of the U.S. Trustees to discuss various issues that have arisen in the course of these inquiries, including the Company's compliance with bankruptcy laws and rules. The Company cannot predict the outcome of the aforementioned proceedings and investigations, which could result in requests for damages, fines, sanctions, or other remediation. The Company could face further legal proceedings in connection with these matters. The Company may seek to enter into one or more agreements to resolve these matters. Any such agreement may require the Company to pay fines or other amounts for alleged breaches of law and to change or otherwise remediate the Company's business practices. Legal proceedings relating to these matters and the terms of any settlement agreement could have a material adverse effect on the Company's reputation, business, prospects, results of operations, liquidity and financial condition.
On December 7, 2016, RMS agreed to the terms of a consent order that settled the matters arising from a CFPB investigation relating to RMS’s marketing and provision of reverse mortgage products and services. Under the order, RMS, without admitting or denying the allegations detailed in the order, agreed to pay a $325,000 civil money penalty, which the Company fully accrued at December 31, 2016. RMS also agreed to injunctions against future violations of certain consumer protection statutes and regulations and agreed to establish and maintain a comprehensive compliance plan designed to ensure RMS’s compliance with applicable consumer financial protection law and the full terms of the consent order. If RMS fails to comply with the order, it could be subject to additional sanctions, including actions for contempt, actions seeking additional fines, or new actions alleging violations of consumer protection statutes. The failure to comply with the order could have a material adverse effect on RMS’s reputation, business, prospects, results of operation, liquidity, and financial condition.
On March 7, 2014, a putative shareholder class action complaint was filed in the U.S. District Court for the Southern District of Florida against the Company, Mark O’Brien, Charles Cauthen, Denmar Dixon, Marc Helm and Robert Yeary captioned Beck v. Walter Investment Management Corp., et al. , No. 1:14-cv-20880 (S.D. Fla.). On July 7, 2014, an amended class action complaint was filed. The amended complaint named as defendants the Company, Mark O’Brien, Charles Cauthen, Denmar Dixon, Keith Anderson, Brian Corey and Mark Helm, and is captioned Thorpe, et al. v. Walter Investment Management Corp., et al. No. 1:14-cv-20880-UU. The amended complaint asserted federal securities law claims against the Company and the individual defendants under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. Additional claims are asserted against the individual defendants under Section 20(a) of the Exchange Act. On December 23, 2014, the court granted the defendants’ motions to dismiss and dismissed the amended complaint without prejudice. On January 6, 2015, plaintiffs filed a second amended complaint. The second amended complaint asserted the same legal claims and alleged that between May 9, 2012 and August 11, 2014 the Company and the individual defendants made material misstatements or omissions relating to the Company’s internal controls over financial reporting, the processes and procedures for compliance with applicable regulatory and legal requirements by Ditech Financial, the liabilities associated with the Company’s acquisition of RMS, and RMS's internal controls. The complaint sought class certification and an unspecified amount of damages on behalf of all persons who purchased the Company’s securities between May 9, 2012 and August 11, 2014. On January 23, 2015, all defendants moved to dismiss the second amended complaint. On June 30, 2015, the court issued a decision that granted the motions to dismiss in part and denied the motions in part. Among other things, the court dismissed the claims against Messrs. O’Brien, Cauthen, Dixon and Helm and the claims relating to statements about the Company’s acquisition of RMS. On July 10, 2015, plaintiffs filed a third amended complaint that, among other things, added certain allegations concerning the Company’s settlement with the FTC and CFPB. On July 24, 2015, the Company and Messrs. Anderson and Corey filed an answer to the third amended complaint, which denied the substantive allegations and asserted various defenses. On August 30, 2015, Plaintiffs filed a motion for class certification, which the court granted in substantial part on March 16, 2016. On April 15, 2016, the parties entered into an agreement to fully resolve all claims that were asserted or could have been asserted in the action for a total payment of $24 million , which is inclusive of plaintiffs’ attorneys’ fees and all other costs associated with the proposed settlement. On June 13, 2016, the court entered an order preliminarily approving the proposed settlement and directing that potential members of the class be notified of the proposed settlement. On October 17, 2016, the court entered an order finally approving the proposed settlement and dismissing the action. In accordance with the settlement agreement, certain insurers of the Company have paid the full amount of the settlement into an escrow account. The defendants, including the Company, did not make any admission of liability or wrongdoing in connection with the settlement. In connection with the approved settlement and dismissal, the Company is no longer the primary obligor to the claimants and, as a result, has eliminated its $24 million reserve and corresponding receivable from certain insurers.

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As previously reported, Ditech Financial had been subject to several putative class action lawsuits related to lender-placed insurance. These actions alleged that Ditech Financial and its affiliates improperly received benefits from lender-placed insurance providers in the form of commissions for work not performed, services provided at a reduced cost, and expense reimbursements that did not reflect the actual cost of the services rendered. Plaintiffs in these suits asserted various theories of recovery and sought remedies including compensatory, actual, punitive, statutory and treble damages, return of unjust benefits, and injunctive relief. One such matter was Circeo-Loudon v. Green Tree Servicing, LLC et al. filed in the U.S. District Court for the Southern District of Florida on April 17, 2014 and amended on October 16, 2014. A settlement agreement was reached between the parties in the Circeo-Loudon matter on September 11, 2015 and the settlement was approved by the court on August 30, 2016. Pursuant to the settlement agreement, all of the defendants collectively, including Ditech Financial, are required to pay damages to class members who timely file a claim, administrative costs to effectuate the settlement and attorneys' fees and costs. The Company believes it has accrued the full amount expected to be paid under the settlement agreement in its consolidated financial statements as of December 31, 2016 . The settlement agreement also provides that Ditech Financial and its subsidiary, Green Tree Insurance Agency, Inc., and their affiliates will be released from certain claims and may no longer receive commissions on the placement of certain lender-placed insurance for a period of five years commencing January 27, 2017 . This settlement resolves all lender-placed insurance class actions for the relevant period of the class, although the settlement does not apply to potential individual claims by class members who have opted out of the proposed settlement.
From time to time, federal and state authorities investigate or examine aspects of the Company's business activities, such as its mortgage origination, servicing, collection and bankruptcy practices, among other things. It is the Company's general policy to cooperate with such investigations, and the Company has been responding to information requests and otherwise cooperating with various ongoing investigations and examinations by such authorities. The Company cannot predict the outcome of any of the ongoing proceedings and cannot provide assurances that investigations and examinations will not have a material adverse effect on the Company.
Walter Energy Matters
The Company may become liable for U.S. federal income taxes allegedly owed by the Walter Energy consolidated group for the 2009 and prior tax years . Under federal law, each member of a consolidated group for U.S. federal income tax purposes is severally liable for the federal income tax liability of each other member of the consolidated group for any year in which it was a member of the consolidated group at any time during such year. Certain former subsidiaries of the Company (which were subsequently merged or otherwise consolidated with certain current subsidiaries of the Company) were members of the Walter Energy consolidated tax group prior to the Company's spin-off from Walter Energy on April 17, 2009 . As a result, to the extent the Walter Energy consolidated group’s federal income taxes (including penalties and interest) for such tax years are not favorably resolved on the merits or otherwise paid, the Company could be liable for such amounts.
Walter Energy Tax Matters. According to Walter Energy’s Form 10-Q, or the Walter Energy Form 10-Q, for the quarter ended September 30, 2015 (filed with the SEC on November 5, 2015) and certain other public filings made by Walter Energy in its bankruptcy proceedings currently pending in Alabama, described below, as of the date of such filing, certain tax matters with respect to certain tax years prior to and including the year of the Company's spin-off from Walter Energy remained unresolved, including certain tax matters relating to: (i) a “proof of claim” for a substantial amount of taxes, interest and penalties with respect to Walter Energy’s fiscal years ended August 31, 1983 through May 31, 1994 , which was filed by the IRS in connection with Walter Energy’s bankruptcy filing on December 27, 1989 in the U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division; (ii) an IRS audit of Walter Energy’s federal income tax returns for the years ended May 31, 2000 through December 31, 2008 ; and (iii) an IRS audit of Walter Energy’s federal income tax returns for the 2009 through 2013 tax years .
Walter Energy 2015 Bankruptcy Filing. On July 15, 2015, Walter Energy filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Northern District of Alabama. On August 18, 2015, Walter Energy filed a motion with the Florida bankruptcy court requesting that the court transfer venue of its disputes with the IRS to the Alabama bankruptcy court. In that motion, Walter Energy asserted that it believed the liability for the years at issue "will be materially, if not completely, offset by the [r]efunds" asserted by Walter Energy against the IRS. The Florida bankruptcy court transferred venue of the matter to the Alabama bankruptcy court, where it remains pending.

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On November 5, 2015, Walter Energy, together with certain of its subsidiaries, entered into the Walter Energy Asset Purchase Agreement with Coal Acquisition, a Delaware limited liability company formed by members of Walter Energy’s senior lender group, pursuant to which, among other things, Coal Acquisition agreed to acquire substantially all of Walter Energy’s assets and assume certain liabilities, subject to, among other things, a number of closing conditions set forth therein. On January 8, 2016, after conducting a hearing, the Bankruptcy Court entered an order approving the sale of Walter Energy's assets to Coal Acquisition free and clear of all liens, claims, interests and encumbrances of the debtors. The sale of such assets pursuant to the Walter Energy Asset Purchase Agreement was completed on March 31, 2016 and was conducted under the provisions of Sections 105, 363 and 365 of the Bankruptcy Code. Based on developments in the Alabama bankruptcy proceedings following completion of this asset sale, such asset sale appears to have resulted in (i) limited value remaining in Walter Energy’s bankruptcy estate and (ii) to date, limited recovery for certain of Walter Energy’s unsecured creditors, including the IRS.
On January 9, 2017, Walter Energy filed with the Alabama Bankruptcy Court a motion to convert its Chapter 11 bankruptcy case to a Chapter 7 liquidation. In that motion, Walter Energy stated that, other than with respect to 1% of the equity of the acquirer of Walter Energy's core assets, no prospect of payment of unsecured claims exists. On January 23, 2017, the IRS filed an objection to Walter Energy's motion to convert, in which the IRS requested that a judgment be entered against Walter Energy in connection with the tax matters described above. The IRS further asserted that entry of a final judgment was necessary so that it could pursue collection of tax liabilities from former members of Walter Energy's consolidated group that are not debtors.
On January 30, 2017, the Bankruptcy Court held a hearing at which it denied the IRS's request for entry of a judgment and announced its intent to grant Walter Energy's motion to convert. The Bankruptcy Court entered an order on February 2, 2017 converting Walter Energy's Chapter 11 bankruptcy to a Chapter 7 liquidation. During February 2017, Andre Toffel was appointed Chapter 7 trustee of Walter Energy's bankruptcy estate .
The Company cannot predict whether or to what extent it may become liable for federal income taxes of the Walter Energy consolidated tax group during the tax years in which the Company was a part of such group, in part because the Company believes, based on publicly available information, that: (i) the amount of taxes owed by the Walter Energy consolidated tax group for the periods from 1983 through 2009 remains unresolved; and (ii) in light of Walter Energy’s conversion from a Chapter 11 bankruptcy to a Chapter 7 bankruptcy, it is unclear whether the IRS will seek to make a direct claim against the Company for such taxes. Further, because the Company cannot currently estimate its' liability, if any, relating to the federal income tax liability of Walter Energy’s consolidated tax group during the tax years in which it was a part of such group, the Company cannot determine whether such liabilities, if any, could have a material adverse effect on the Company's business, financial condition, liquidity and/or results of operations.
Tax Separation Agreement . In connection with the Company's spin-off from Walter Energy, the Company and Walter Energy entered into a Tax Separation Agreement, dated April 17, 2009 . Notwithstanding any several liability the Company may have under federal tax law described above, under the Tax Separation Agreement, Walter Energy agreed to retain full liability for all U.S. federal income or state combined income taxes of the Walter Energy consolidated group for 2009 and prior tax years (including any interest, additional taxes or penalties applicable thereto), subject to limited exceptions. The Company therefore filed proofs of claim in the Alabama bankruptcy proceedings asserting claims for any such amounts to the extent the Company is ultimately held liable for the same. However, the Company expects to receive little or no recovery from Walter Energy for any filed proofs of claim for indemnification.
It is unclear whether claims made by the Company under the Tax Separation Agreement would be enforceable against Walter Energy in connection with, or following the conclusion of, the various Walter Energy bankruptcy proceedings described above, or if such claims would be rejected or disallowed under bankruptcy law. It is also unclear whether the Company would be able to recover some or all of any such claims given Walter Energy's limited assets and limited recoveries for unsecured creditors in the Walter Energy bankruptcy proceedings described above.
Furthermore, the Tax Separation Agreement provides that Walter Energy has, in its sole discretion, the exclusive right to represent the interests of the consolidated group in any audit, court proceeding or settlement of a claim with the IRS for the tax years in which certain of the Company’s former subsidiaries were members of the Walter Energy consolidated tax group. However, in light of the conversion of Walter Energy’s bankruptcy proceeding from a Chapter 11 proceeding to a Chapter 7 proceeding, the Company may choose to take a direct role in proceedings involving the IRS’s claim for tax years in which the Company was a member of the Walter Energy consolidated tax group. Moreover, the Tax Separation Agreement obligates the Company to take certain tax positions that are consistent with those taken historically by Walter Energy. In the event the Company does not take such positions, it could be liable to Walter Energy to the extent the Company's failure to do so results in an increased tax liability or the reduction of any tax asset of Walter Energy. These arrangements may result in conflicts of interests between the Company and Walter Energy, particularly with regard to the Walter Energy bankruptcy proceedings described above.

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Lastly, according to its public filings, Walter Energy’s 2009 tax year is currently under audit. Accordingly, if it is determined that certain distribution taxes and other amounts are owed related to the Company's spin-off from Walter Energy in 2009, the Company may be liable under the Tax Separation Agreement for all or a portion of such amounts.
The Company is unable to estimate reasonably possible losses for the matter described above.
34. Separate Financial Information of Subsidiary Guarantors of Indebtedness (As Restated)
In accordance with the Senior Notes Indenture, certain existing and future 100% owned domestic subsidiaries of the Parent Company have fully and unconditionally guaranteed the Senior Notes on a joint and several basis. These guarantor subsidiaries also guarantee the Parent Company's obligations under the 2013 Secured Credit Facilities. The indenture governing the Senior Notes contains customary exceptions under which a guarantor subsidiary may be released from its guarantee without the consent of the holders of the Senior Notes, including (i) the permitted sale, transfer or other disposition of all or substantially all of a guarantor subsidiary's assets or common stock; (ii) the designation of a restricted guarantor subsidiary as an unrestricted subsidiary; (iii) the release of a guarantor subsidiary from its obligation under the 2013 Secured Credit Facilities and its guarantee of all other indebtedness of the Parent Company and other guarantor subsidiaries; and (iv) the defeasance of the obligations of the guarantor subsidiary by payment of the Senior Notes.
Presented below are the condensed consolidating financial information of the Parent Company, the guarantor subsidiaries on a combined basis, and the non-guarantor subsidiaries on a combined basis.

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Condensed Consolidating Balance Sheet (As Restated, See Note 2)
December 31, 2016
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries and VIEs
 
Eliminations
and
Reclassifications
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
773

 
$
221,825

 
$
2,000

 
$
—

 
$
224,598

Restricted cash and cash equivalents
 
1,502

 
158,204

 
44,757

 
—

 
204,463

Residential loans at amortized cost, net
 
12,891

 
189,441

 
462,877

 
—

 
665,209

Residential loans at fair value
 
—

 
11,924,043

 
492,499

 
—

 
12,416,542

Receivables, net
 
97,424

 
154,852

 
15,686

 
—

 
267,962

Servicer and protective advances, net
 
—

 
481,099

 
688,961

 
25,320

 
1,195,380

Servicing rights, net
 
—

 
1,029,719

 
—

 
—

 
1,029,719

Goodwill
 
—

 
47,747

 
—

 
—

 
47,747

Intangible assets, net
 
—

 
11,347

 
—

 
—

 
11,347

Premises and equipment, net
 
1,181

 
81,447

 
—

 
—

 
82,628

Assets held for sale
 
—

 
65,045

 
6,040

 
—

 
71,085

Other assets
 
30,789

 
191,671

 
19,830

 
—

 
242,290

Due from affiliates, net
 
392,998

 
—

 
—

 
(392,998
)
 
—

Investments in consolidated subsidiaries and VIEs
 
1,620,339

 
134,612

 
—

 
(1,754,951
)
 
—

Total assets
 
$
2,157,897

 
$
14,691,052

 
$
1,732,650

 
$
(2,122,629
)
 
$
16,458,970

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
 
 
 
 
 
 
 
 
Payables and accrued liabilities
 
$
53,337

 
$
708,070

 
$
5,474

 
$
(7,870
)
 
$
759,011

Servicer payables
 
—

 
146,332

 
—

 
—

 
146,332

Servicing advance liabilities
 
—

 
132,664

 
650,565

 
—

 
783,229

Warehouse borrowings
 
—

 
1,203,355

 
—

 
—

 
1,203,355

Servicing rights related liabilities at fair value
 
—

 
1,902

 
—

 
—

 
1,902

Corporate debt
 
2,129,000

 
—

 
—

 
—

 
2,129,000

Mortgage-backed debt
 
—

 
—

 
943,956

 
—

 
943,956

HMBS related obligations at fair value
 
—

 
10,509,449

 
—

 
—

 
10,509,449

Deferred tax liabilities, net
 
—

 
3,204

 
1,570

 
—

 
4,774

Liabilities held for sale
 
—

 
1,179

 
1,223

 
—

 
2,402

Obligation to fund Non-Guarantor VIEs
 
—

 
46,417

 
—

 
(46,417
)
 
—

Due to affiliates, net
 
—

 
392,812

 
185

 
(392,997
)
 
—

Total liabilities
 
2,182,337

 
13,145,384

 
1,602,973

 
(447,284
)
 
16,483,410

 
 
 
 
 
 
 
 
 
 
 
Stockholders' equity (deficit):
 
 
 
 
 
 
 
 
 
 
Total stockholders' equity (deficit)
 
(24,440
)
 
1,545,668

 
129,677

 
(1,675,345
)
 
(24,440
)
Total liabilities and stockholders' equity (deficit)
 
$
2,157,897

 
$
14,691,052

 
$
1,732,650

 
$
(2,122,629
)
 
$
16,458,970


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Condensed Consolidating Balance Sheet
December 31, 2015
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries and VIEs
 
Eliminations
and
Reclassifications
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
4,016

 
$
196,812

 
$
2,000

 
$
—

 
$
202,828

Restricted cash and cash equivalents
 
10,512

 
639,151

 
58,436

 
—

 
708,099

Residential loans at amortized cost, net
 
14,130

 
26,713

 
500,563

 
—

 
541,406

Residential loans at fair value
 
—

 
12,147,423

 
526,016

 
—

 
12,673,439

Receivables, net
 
11,465

 
108,227

 
17,498

 
—

 
137,190

Servicer and protective advances, net
 
—

 
514,213

 
1,082,405

 
34,447

 
1,631,065

Servicing rights, net
 
—

 
1,788,576

 
—

 
—

 
1,788,576

Goodwill
 
—

 
367,911

 
—

 
—

 
367,911

Intangible assets, net
 
—

 
78,523

 
5,515

 
—

 
84,038

Premises and equipment, net
 
1,559

 
104,922

 
—

 
—

 
106,481

Deferred tax assets, net
 
—

 
132,687

 
—

 
(24,637
)
 
108,050

Other assets
 
37,724

 
150,470

 
12,170

 
—

 
200,364

Due from affiliates, net
 
674,139

 
—

 
—

 
(674,139
)
 
—

Investments in consolidated subsidiaries and VIEs
 
2,278,009

 
54,810

 
—

 
(2,332,819
)
 
—

Total assets
 
$
3,031,554

 
$
16,310,438

 
$
2,204,603

 
$
(2,997,148
)
 
$
18,549,447

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Payables and accrued liabilities
 
$
43,778

 
$
554,710

 
$
5,206

 
$
(5,768
)
 
$
597,926

Servicer payables
 
—

 
603,692

 
—

 
—

 
603,692

Servicing advance liabilities
 
—

 
236,511

 
992,769

 
—

 
1,229,280

Warehouse borrowings
 
—

 
1,340,388

 
—

 
—

 
1,340,388

Servicing rights related liabilities at fair value
 
—

 
117,000

 
—

 
—

 
117,000

Corporate debt
 
2,156,944

 
480

 
—

 
—

 
2,157,424

Mortgage-backed debt
 
—

 
—

 
1,051,679

 
—

 
1,051,679

HMBS related obligations at fair value
 
—

 
10,647,382

 
—

 
—

 
10,647,382

Deferred tax liabilities, net
 
26,156

 
—

 
1,746

 
(27,902
)
 
—

Obligation to fund Non-Guarantor VIEs
 
—

 
36,048

 
—

 
(36,048
)
 
—

Due to affiliates, net
 
—

 
579,715

 
94,423

 
(674,138
)
 
—

Total liabilities
 
2,226,878

 
14,115,926

 
2,145,823

 
(743,856
)
 
17,744,771

 
 
 
 
 
 
 
 
 
 
 
Stockholders' equity:
 
 
 
 
 
 
 
 
 
 
Total stockholders' equity
 
804,676

 
2,194,512

 
58,780

 
(2,253,292
)
 
804,676

Total liabilities and stockholders' equity
 
$
3,031,554

 
$
16,310,438

 
$
2,204,603

 
$
(2,997,148
)
 
$
18,549,447



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Condensed Consolidating Statement of Comprehensive Income (Loss) (As Restated, See Note 2)
For the Year Ended December 31, 2016
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries and VIEs
 
Eliminations
and
Reclassifications
 
Consolidated
REVENUES
 
 
 
 
 
 
 
 
 
 
Net servicing revenue and fees
 
$
—

 
$
349,822

 
$
—

 
$
(8,831
)
 
$
340,991

Net gains on sales of loans
 
—

 
409,448

 
—

 
—

 
409,448

Net fair value gains (losses) on reverse loans and related HMBS obligations
 
—

 
59,422

 
(400
)
 
—

 
59,022

Interest income on loans
 
1,082

 
504

 
44,114

 
—

 
45,700

Insurance revenue
 
—

 
38,588

 
4,141

 
(761
)
 
41,968

Other revenues
 
(1,914
)
 
102,453

 
68,117

 
(70,068
)
 
98,588

Total revenues
 
(832
)
 
960,237

 
115,972

 
(79,660
)
 
995,717

 
 
 
 
 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
 
 
 
 
General and administrative
 
67,583

 
608,067

 
14,670

 
(70,548
)
 
619,772

Salaries and benefits
 
60,119

 
460,238

 
—

 
—

 
520,357

Goodwill and intangible assets impairment
 
—

 
326,286

 
—

 
—

 
326,286

Interest expense
 
144,170

 
49,769

 
63,929

 
(2,087
)
 
255,781

Depreciation and amortization
 
783

 
57,946

 
697

 
—

 
59,426

Corporate allocations
 
(119,953
)
 
119,953

 
—

 
—

 
—

Other expenses, net
 
621

 
4,434

 
5,475

 
—

 
10,530

Total expenses
 
153,323

 
1,626,693

 
84,771

 
(72,635
)
 
1,792,152

 
 
 
 
 
 
 
 
 
 
 
OTHER GAINS (LOSSES)
 
 
 
 
 
 
 
 
 
 
Net gains on extinguishment
 
14,662

 
—

 
—

 
—

 
14,662

Other net fair value losses
 
—

 
(805
)
 
(3,429
)
 
—

 
(4,234
)
Other
 
(979
)
 
(2,832
)
 
—

 
—

 
(3,811
)
Total other gains (losses)
 
13,683

 
(3,637
)
 
(3,429
)
 
—

 
6,617

 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
(140,472
)
 
(670,093
)
 
27,772

 
(7,025
)
 
(789,818
)
Income tax expense (benefit)
 
(5,224
)
 
42,114

 
7,528

 
(378
)
 
44,040

Income (loss) before equity in earnings (losses) of consolidated subsidiaries and VIEs
 
(135,248
)
 
(712,207
)
 
20,244

 
(6,647
)
 
(833,858
)
Equity in earnings (losses) of consolidated subsidiaries and VIEs
(698,610
)
 
13,356

 
—

 
685,254

 
—

Net income (loss)
 
$
(833,858
)
 
$
(698,851
)
 
$
20,244

 
$
678,607

 
$
(833,858
)
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
 
$
(833,738
)
 
$
(698,851
)
 
$
20,244

 
$
678,607

 
$
(833,738
)

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Condensed Consolidating Statement of Comprehensive Income (Loss)
For the Year Ended December 31, 2015
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries and VIEs
 
Eliminations
and
Reclassifications
 
Consolidated
REVENUES
 
 
 
 
 
 
 
 
 
 
Net servicing revenue and fees
 
$
—

 
$
506,154

 
$
66

 
$
(11,953
)
 
$
494,267

Net gains on sales of loans
 
—

 
453,840

 
—

 
—

 
453,840

Net fair value gains on reverse loans and related HMBS obligations
 
—

 
98,265

 
—

 
—

 
98,265

Interest income on loans
 
1,165

 
280

 
72,920

 
—

 
74,365

Insurance revenue
 
—

 
43,232

 
4,794

 
(825
)
 
47,201

Other revenues
 
3,563

 
105,399

 
55,130

 
(57,771
)
 
106,321

Total revenues
 
4,728

 
1,207,170

 
132,910

 
(70,549
)
 
1,274,259

 
 
 
 
 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
 
 
 
 
General and administrative
 
35,654

 
573,457

 
23,085

 
(58,105
)
 
574,091

Salaries and benefits
 
28,510

 
548,229

 
78

 
—

 
576,817

Goodwill impairment
 
—

 
207,557

 
—

 
—

 
207,557

Interest expense
 
147,752

 
46,920

 
81,756

 
(2,822
)
 
273,606

Depreciation and amortization
 
129

 
68,259

 
740

 
—

 
69,128

Corporate allocations
 
(54,452
)
 
54,452

 
—

 
—

 
—

Other expenses, net
 
(488
)
 
4,981

 
6,064

 
—

 
10,557

Total expenses
 
157,105

 
1,503,855

 
111,723

 
(60,927
)
 
1,711,756

 
 
 
 
 
 
 
 
 
 
 
OTHER GAINS
 
 
 
 
 
 
 
 
 
 
Net gains on extinguishment
 
4,660

 
—

 
—

 
—

 
4,660

Other net fair value gains
 
—

 
122

 
7,276

 
—

 
7,398

Other
 
12,076

 
8,937

 
—

 
—

 
21,013

Total other gains
 
16,736

 
9,059

 
7,276

 
—

 
33,071

 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
(135,641
)
 
(287,626
)
 
28,463

 
(9,622
)
 
(404,426
)
Income tax expense (benefit)
 
(53,546
)
 
(87,869
)
 
3,761

 
(3,582
)
 
(141,236
)
Income (loss) before equity in earnings (losses) of consolidated subsidiaries and VIEs
 
(82,095
)
 
(199,757
)
 
24,702

 
(6,040
)
 
(263,190
)
Equity in earnings (losses) of consolidated subsidiaries and VIEs
(181,095
)
 
9,571

 
—

 
171,524

 
—

Net income (loss)
 
$
(263,190
)
 
$
(190,186
)
 
$
24,702

 
$
165,484

 
$
(263,190
)
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
 
$
(262,772
)
 
$
(190,071
)
 
$
24,702

 
$
165,369

 
$
(262,772
)

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Table of Contents

Condensed Consolidating Statement of Comprehensive Income (Loss)
For the Year Ended December 31, 2014
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries and VIEs
 
Eliminations
and
Reclassifications
 
Consolidated
REVENUES
 
 
 
 
 
 
 
 
 
 
Net servicing revenue and fees
 
$
—

 
$
619,152

 
$
185

 
$
(17,827
)
 
$
601,510

Net gains on sales of loans
 
—

 
462,172

 
—

 
—

 
462,172

Net fair value gains on reverse loans and related HMBS obligations
 
—

 
109,972

 
—

 
—

 
109,972

Interest income on loans
 
1,007

 
587

 
132,961

 
—

 
134,555

Insurance revenue
 
—

 
66,051

 
5,854

 
(895
)
 
71,010

Other revenues
 
1,456

 
106,041

 
20,253

 
(19,816
)
 
107,934

Total revenues
 
2,463

 
1,363,975

 
159,253

 
(38,538
)
 
1,487,153

 
 
 
 
 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
 
 
 
 
General and administrative
 
32,198

 
597,331

 
30,221

 
(82,244
)
 
577,506

Salaries and benefits
 
19,311

 
559,316

 
—

 
—

 
578,627

Goodwill impairment
 
—

 
82,269

 
—

 
—

 
82,269

Interest expense
 
147,633

 
72,203

 
83,379

 
(112
)
 
303,103

Depreciation and amortization
 
120

 
71,815

 
786

 
—

 
72,721

Corporate allocations
 
(46,764
)
 
46,764

 
—

 
—

 
—

Other expenses, net
 
1,598

 
2,542

 
6,663

 
—

 
10,803

Total expenses
 
154,096

 
1,432,240

 
121,049

 
(82,356
)
 
1,625,029

 
 
 
 
 
 
 
 
 
 
 
OTHER GAINS (LOSSES)
 
 
 
 
 
 
 
 
 
 
Other net fair value gains (losses)
 
(54
)
 
(792
)
 
20,126

 
—

 
19,280

Other
 
—

 
(744
)
 
—

 
—

 
(744
)
Total other gains (losses)
 
(54
)
 
(1,536
)
 
20,126

 
—

 
18,536

 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
(151,687
)
 
(69,801
)
 
58,330

 
43,818

 
(119,340
)
Income tax expense (benefit)
 
(49,405
)
 
17,220

 
5,665

 
17,508

 
(9,012
)
Income (loss) before equity in earnings (loss) of consolidated subsidiaries and VIEs
 
(102,282
)
 
(87,021
)
 
52,665

 
26,310

 
(110,328
)
Equity in earnings (losses) of consolidated subsidiaries and VIEs
(8,046
)
 
21,238

 
—

 
(13,192
)
 
—

Net income (loss)
 
$
(110,328
)
 
$
(65,783
)
 
$
52,665

 
$
13,118

 
$
(110,328
)
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
 
$
(110,431
)
 
$
(65,702
)
 
$
52,435

 
$
13,267

 
$
(110,431
)


F-89

Table of Contents

Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2016
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries and VIEs
 
Eliminations
and
Reclassifications
 
Consolidated
Cash flows provided by (used in) operating activities
 
$
(204,359
)
 
$
203,585

 
$
452,724

 
$
—

 
$
451,950

 
 
 
 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
 
 
 
Purchases and originations of reverse loans held for investment
 
—

 
(896,879
)
 
—

 
—

 
(896,879
)
Principal payments received on reverse loans held for investment
 
—

 
1,122,267

 
—

 
—

 
1,122,267

Principal payments received on mortgage loans held for investment
 
940

 
—

 
91,679

 
—

 
92,619

Payments received on charged-off loans held for investment
 
—

 
23,060

 
—

 
—

 
23,060

Payments received on receivables related to Non-Residual Trusts
 
—

 
—

 
8,110

 
—

 
8,110

Proceeds from sales of real estate owned, net
 
30

 
107,347

 
3,714

 
—

 
111,091

Purchases of premises and equipment
 
(595
)
 
(32,271
)
 
—

 
—

 
(32,866
)
Decrease in restricted cash and cash equivalents
 
9,011

 
(114
)
 
49

 
—

 
8,946

Payments for acquisitions of businesses, net of cash acquired
 
—

 
(3,066
)
 
—

 
—

 
(3,066
)
Acquisitions of servicing rights, net
 
—

 
(9,794
)
 
—

 
—

 
(9,794
)
Proceeds from sales of servicing rights, net
 
—

 
280,970

 
—

 
—

 
280,970

Capital contributions to subsidiaries and VIEs
 
—

 
(26,440
)
 
—

 
26,440

 
—

Returns of capital from subsidiaries and VIEs
 
10,991

 
33,233

 
—

 
(44,224
)
 
—

Change in due from affiliates
 
126,883

 
2,372

 
(5,899
)
 
(123,356
)
 
—

Other
 
309

 
(4,958
)
 
—

 
—

 
(4,649
)
Cash flows provided by (used in) investing activities
 
147,569

 
595,727

 
97,653

 
(141,140
)
 
699,809

 
 
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
 
 
Payments on corporate debt
 
—

 
(480
)
 
—

 
—

 
(480
)
Extinguishments and settlement of debt
 
(31,037
)
 
—

 
—

 
—

 
(31,037
)
Proceeds from securitizations of reverse loans
 
—

 
960,157

 
—

 
—

 
960,157

Payments on HMBS related obligations
 
—

 
(1,371,375
)
 
—

 
—

 
(1,371,375
)
Issuances of servicing advance liabilities
 
—

 
228,059

 
1,951,429

 
—

 
2,179,488

Payments on servicing advance liabilities
 
—

 
(331,376
)
 
(2,294,100
)
 
—

 
(2,625,476
)
Net change in warehouse borrowings related to mortgage loans
 
—

 
(151,172
)
 
—

 
—

 
(151,172
)
Net change in warehouse borrowings related to reverse loans
 
—

 
14,139

 
—

 
—

 
14,139

Proceeds from sales of excess servicing spreads and servicing rights
 
—

 
34,307

 
—

 
—

 
34,307

Payments on servicing rights related liabilities
 
—

 
(22,092
)
 
—

 
—

 
(22,092
)
Payments on mortgage-backed debt
 
—

 
—

 
(107,598
)
 
—

 
(107,598
)
Other debt issuance costs paid
 
(528
)
 
(7,206
)
 
(3,305
)
 
—

 
(11,039
)
Capital contributions
 
—

 
—

 
26,440

 
(26,440
)
 
—

Capital distributions
 
—

 
(5,430
)
 
(38,794
)
 
44,224

 
—

Change in due to affiliates
 
85,801

 
(121,164
)
 
(87,993
)
 
123,356

 
—

Other
 
(689
)
 
(666
)
 
3,544

 
—

 
2,189

Cash flows provided by (used in) financing activities
 
53,547

 
(774,299
)
 
(550,377
)
 
141,140

 
(1,129,989
)
 
 
 
 
 
 
 
 
 
 

Net increase (decrease) in cash and cash equivalents
 
(3,243
)
 
25,013

 
—

 
—

 
21,770

Cash and cash equivalents at the beginning of the year
 
4,016

 
196,812

 
2,000

 
—

 
202,828

Cash and cash equivalents at the end of the year
 
$
773

 
$
221,825

 
$
2,000

 
$
—

 
$
224,598


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Table of Contents

Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2015
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries and VIEs
 
Eliminations
and
Reclassifications
 
Consolidated
Cash flows provided by (used in) operating activities
 
$
(107,969
)
 
$
(129,281
)
 
$
189,157

 
$
—

 
$
(48,093
)
 
 
 
 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
 
 
 
Purchases and originations of reverse loans held for investment
 
—

 
(1,471,275
)
 
—

 
—

 
(1,471,275
)
Principal payments received on reverse loans held for investment
 
—

 
871,832

 
—

 
—

 
871,832

Principal payments received on mortgage loans held for investment
 
828

 
—

 
114,078

 
—

 
114,906

Payments received on charged-off loans held for investment
 
—

 
26,385

 
—

 
—

 
26,385

Payments received on receivables related to Non-Residual Trusts
 
—

 
—

 
7,481

 
—

 
7,481

Proceeds from sales of real estate owned, net
 
118

 
69,307

 
7,278

 
—

 
76,703

Purchases of premises and equipment
 
(175
)
 
(27,586
)
 
—

 
—

 
(27,761
)
Decrease (increase) in restricted cash and cash equivalents
 
(6
)
 
824

 
8,401

 
—

 
9,219

Payments for acquisitions of businesses, net of cash acquired
 
—

 
(5,095
)
 
—

 
—

 
(5,095
)
Acquisitions of servicing rights, net
 
—

 
(264,743
)
 
—

 
—

 
(264,743
)
Proceeds from sale of residual interests in Residual Trusts
 
189,513

 
—

 
—

 
—

 
189,513

Proceeds from sale of investment
 
14,376

 
—

 
—

 
—

 
14,376

Capital contributions to subsidiaries and VIEs
 
(9,072
)
 
(37,285
)
 
—

 
46,357

 
—

Returns of capital from subsidiaries and VIEs
 
27,309

 
24,107

 
—

 
(51,416
)
 
—

Change in due from affiliates
 
(8,331
)
 
11,809

 
1,388

 
(4,866
)
 
—

Other
 
2,656

 
855

 
—

 
—

 
3,511

Cash flows provided by (used in) investing activities
 
217,216

 
(800,865
)
 
138,626

 
(9,925
)
 
(454,948
)
 
 
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
 
 
Payments on corporate debt
 
(11,250
)
 
(1,651
)
 
—

 
—

 
(12,901
)
Extinguishments and settlement of debt
 
(79,877
)
 
—

 
—

 
—

 
(79,877
)
Proceeds from securitizations of reverse loans
 
—

 
1,622,481

 
—

 
—

 
1,622,481

Payments on HMBS related obligations
 
—

 
(1,025,458
)
 
—

 
—

 
(1,025,458
)
Issuances of servicing advance liabilities
 
—

 
283,953

 
1,789,274

 
—

 
2,073,227

Payments on servicing advance liabilities
 
—

 
(253,070
)
 
(1,953,895
)
 
—

 
(2,206,965
)
Net change in warehouse borrowings related to mortgage loans
 
—

 
207,305

 
—

 
—

 
207,305

Net change in warehouse borrowings related to reverse loans
 
—

 
(43,873
)
 
—

 
—

 
(43,873
)
Proceeds from sales of excess servicing spreads and servicing rights
 
—

 
55,698

 
—

 
—

 
55,698

Payments on servicing rights related liabilities
 
—

 
(12,317
)
 
—

 
—

 
(12,317
)
Payments on mortgage-backed debt
 
—

 
—

 
(136,493
)
 
—

 
(136,493
)
Other debt issuance costs paid
 
—

 
(8,320
)
 
(5,629
)
 
—

 
(13,949
)
Repurchase of shares under stock repurchase plan
 
(28,065
)
 
—

 
—

 
—

 
(28,065
)
Capital contributions
 
—

 
9,072

 
37,285

 
(46,357
)
 
—

Capital distributions
 
—

 
(13,006
)
 
(38,410
)
 
51,416

 
—

Change in due to affiliates
 
11,553

 
5,893

 
(22,312
)
 
4,866

 
—

Other
 
(754
)
 
(11,559
)
 
(806
)
 
—

 
(13,119
)
Cash flows provided by (used in) financing activities
 
(108,393
)
 
815,148

 
(330,986
)
 
9,925

 
385,694

 
 
 
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
854

 
(114,998
)
 
(3,203
)
 
—

 
(117,347
)
Cash and cash equivalents at the beginning of the year
 
3,162

 
311,810

 
5,203

 
—

 
320,175

Cash and cash equivalents at the end of the year
 
$
4,016

 
$
196,812

 
$
2,000

 
$
—

 
$
202,828


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Table of Contents

Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2014
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries and VIEs
 
Eliminations
and
Reclassifications
 
Consolidated
Cash flows provided by (used in) operating activities
 
$
(74,452
)
 
$
1,005,449

 
$
(1,137,754
)
 
$
2,487

 
$
(204,270
)
 
 
 
 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
 
 
 
Purchases and originations of reverse loans held for investment
 
—

 
(1,505,215
)
 
—

 
—

 
(1,505,215
)
Principal payments received on reverse loans held for investment
 
—

 
548,660

 
—

 
—

 
548,660

Principal payments received on mortgage loans held for investment
 
535

 
399

 
161,323

 
—

 
162,257

Payments received on charged-off loans held for investment
 
—

 
14,929

 
—

 
—

 
14,929

Payments received on receivables related to Non-Residual Trusts
 
—

 
—

 
9,471

 
—

 
9,471

Proceeds from sales of real estate owned, net
 
227

 
39,452

 
15,627

 
—

 
55,306

Purchases of premises and equipment
 
—

 
(21,573
)
 
—

 
—

 
(21,573
)
Decrease in restricted cash and cash equivalents
 
4,246

 
3,723

 
3,364

 
—

 
11,333

Payments for acquisitions of businesses, net of cash acquired
 
—

 
(197,061
)
 
—

 
—

 
(197,061
)
Acquisitions of servicing rights, net
 
—

 
(268,618
)
 
—

 
—

 
(268,618
)
Acquisitions of charged-off loans held for investment
 
—

 
(64,548
)
 
—

 
—

 
(64,548
)
Capital contributions to subsidiaries and VIEs
 
(83,544
)
 
(131
)
 
—

 
83,675

 
—

Returns of capital from subsidiaries and VIEs
 
76,214

 
28,085

 
—

 
(104,299
)
 
—

Change in due from affiliates
 
88,360

 
214,613

 
250,108

 
(553,081
)
 
—

Other
 
(2,283
)
 
13,231

 
—

 
—

 
10,948

Cash flows provided by (used in) investing activities
 
83,755

 
(1,194,054
)
 
439,893

 
(573,705
)
 
(1,244,111
)
 
 
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
 
 
Payments on corporate debt
 
(15,000
)
 
(2,220
)
 
—

 
—

 
(17,220
)
Proceeds from securitizations of reverse loans
 
—

 
1,617,399

 
—

 
—

 
1,617,399

Payments on HMBS related obligations
 
—

 
(637,272
)
 
—

 
—

 
(637,272
)
Issuances of servicing advance liabilities
 
—

 
874,729

 
1,425,201

 
—

 
2,299,930

Payments on servicing advance liabilities
 
—

 
(1,572,482
)
 
(332,849
)
 
—

 
(1,905,331
)
Net change in warehouse borrowings related to mortgage loans
 
—

 
75,726

 
—

 
—

 
75,726

Net change in warehouse borrowings related to reverse loans
 
—

 
15,667

 
—

 
—

 
15,667

Proceeds from sales of excess servicing spreads and servicing rights
 
—

 
75,426

 
—

 
—

 
75,426

Payments on servicing rights related liabilities
 
—

 
(6,822
)
 
—

 
—

 
(6,822
)
Payments on mortgage-backed debt
 
—

 
—

 
(181,155
)
 
—

 
(181,155
)
Other debt issuance costs paid
 
—

 
(17,264
)
 
(17
)
 
—

 
(17,281
)
Capital contributions
 
—

 
83,544

 
131

 
(83,675
)
 
—

Capital distributions
 
—

 
(24,874
)
 
(79,425
)
 
104,299

 
—

Change in due to affiliates
 
(98,071
)
 
(329,277
)
 
(123,246
)
 
550,594

 
—

Other
 
6,921

 
(40,509
)
 
(8,808
)
 
—

 
(42,396
)
Cash flows provided by (used in) financing activities
 
(106,150
)
 
111,771

 
699,832

 
571,218

 
1,276,671

 
 
 
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
(96,847
)
 
(76,834
)
 
1,971

 
—

 
(171,710
)
Cash and cash equivalents at the beginning of the year
 
100,009

 
388,644

 
3,232

 
—

 
491,885

Cash and cash equivalents at the end of the year
 
$
3,162

 
$
311,810

 
$
5,203

 
$
—

 
$
320,175


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35. Related-Party Transactions
WCO was established to invest in mortgage-related assets. The Company's investment in WCO was $19.4 million and $22.6 million at December 31, 2016 and 2015 , respectively. The Company recorded income (loss) relating to its investment in WCO of $(2.2) million , $0.6 million and $0.2 million for the years ended December 31, 2016, 2015 and 2014 , respectively. Additionally, the Company received a dividend of $1.0 million from WCO during the year ended December 31, 2016 .
The Company’s subsidiary, GTIM, earns fees for providing investment advisory and management services to WCO and administering its business activities and day-to-day operations. The Company earned fees associated with these activities of $1.7 million , $1.0 million and $0.3 million for the years ended December 31, 2016, 2015 and 2014 , respectively, which are recorded in other revenues on the consolidated statements of comprehensive loss. The Company had $0.9 million and $1.2 million included in receivables, net on the consolidated balance sheets at December 31, 2016 and 2015 , respectively, relating to fees earned for the aforementioned investment advisory and management services provided to WCO, as well as pass-throughs to WCO related to general and administrative and payroll-related expenses.
The Company, in exchange for a servicing fee, services certain assets held by WCO. The Company also has servicing rights related liabilities for the sales to WCO of beneficial interests in certain portions of contractual servicing fees associated with mortgage loans serviced by the Company as well as for the sale of servicing rights. The Company is also engaged by WCO to offer refinancing options to borrowers with mortgage loans underlying the excess servicing spread and servicing rights transactions that occurred with WCO. In addition, the Company has a similar arrangement with WCO with respect to certain other servicing rights held by WCO. These arrangements were made for purposes of reducing portfolio runoff. Further, the Company entered into various other ancillary agreements with WCO pursuant to which, among other things, WCO has the right to make the first offer to purchase servicing rights relating to certain mortgage loans originated by the Company and certain excess servicing spread that the Company may create from time to time.
Subservicing fees from WCO were $4.4 million during the year ended December 31, 2016 and are included in net servicing revenue and fees on the consolidated statement of comprehensive loss. In addition, the Company earned incentive and performance fees and ancillary and other fees related to servicing assets held by WCO of $0.7 million for the year ended December 31, 2016 , which are included in net servicing revenue and fees on the consolidated statement of comprehensive loss.
WCO lacks sufficient equity at risk to finance its activities without subordinated financial support and as such is a VIE. WCO’s board of directors have decision making authority as it relates to the activities that most significantly impact the economic performance of WCO, including making decisions related to significant investments, servicing, capital and debt financing. As a result, the Company is not deemed to be the primary beneficiary of WCO as it does not have the power to direct the activities that most significantly impact WCO’s economic performance.
In November 2016, WCO entered into a series of agreements whereby it agreed to sell substantially all of its assets, including the sale of substantially all of its MSR portfolio to NRM. In connection with the December 2016 closing of the transactions relating thereto, WCO commenced liquidation activities and the Company does not expect to sell further assets to WCO.
The following table presents the carrying amounts of the Company’s assets and liabilities that relate to WCO, as well as the size of the unconsolidated VIE (in thousands):
 
 
Carrying Value of Assets and Liabilities
Recorded on the Consolidated Balance Sheets
 
 
 
 
Servicing Rights, Net (1)
 
Servicer and Protective Advances, Net
 
Receivables, Net
 
Other
Assets (2)
 
Payables and Accrued Liabilities
 
Servicing Rights Related Liabilities
 
Net Assets (Liabilities) (3)
 
Size of VIE (4)
December 31, 2016
 
$
—

 
$
6,980

 
$
1,392

 
$
19,403

 
$
(1,353
)
 
$
—

 
$
26,422

 
$
194,556

December 31, 2015
 
16,889

 
7,015

 
9,814

 
23,578

 
(4,500
)
 
(117,000
)
 
(64,204
)
 
228,361

__________
(1)
During the second quarter of 2016, the Company sold MSR, which did not qualify for sale accounting, to WCO for $27.9 million . Transactions between WCO and NRM during the fourth quarter of 2016 allowed the Company to derecognize the transferred assets on its consolidated balance sheets. Refer to Note 6 for additional information.
(2)
Other assets at December 31, 2016 and 2015 are primarily comprised of the Company's investment in WCO.
(3)
At December 31, 2015 , the Company had no net exposure to loss as it relates to transactions with WCO as a result of its net liabilities due to WCO.
(4)
The size of the VIE is deemed to be WCO's net assets.

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Table of Contents

36. Quarterly Results of Operations (Unaudited) (As Restated)
The following tables summarize the Company’s unaudited consolidated results of operations on a quarterly basis for the years ended December 31, 2016 (Restated) and 2015. The sum of the quarterly loss per share amounts do not equal the amount reported for the full year since per share amounts are computed independently for each quarter and for the full year based on respective weighted-average shares outstanding and other dilutive potential shares.
Quarterly results of operations are summarized as follows (in thousands, except per share data):
 
 
For the 2016 Quarters Ended
 
 
December 31 (3)
 
September 30 (3)
 
June 30  (3)
 
March 31
 
 
(Restated)
 
(Restated)
 
(Restated)
 
 
Total revenues
 
$
444,143

 
$
297,330

 
$
187,473

 
$
66,771

Total expenses
 
417,229

 
465,795

 
565,706

 
343,422

Total other gains (losses)
 
(74
)
 
10,282

 
(1,351
)
 
(2,240
)
Income (loss) before income taxes (1)
 
26,840

 
(158,183
)
 
(379,584
)
 
(278,891
)
Income tax expense (benefit) (2)
 
(15,234
)
 
55,084

 
110,379

 
(106,189
)
Net income (loss)
 
$
42,074

 
$
(213,267
)
 
$
(489,963
)
 
$
(172,702
)
Basic and diluted earnings (loss) per common and common equivalent share
 
$
1.16

 
$
(5.90
)
 
$
(13.68
)
 
$
(4.85
)
__________
(1)
A significant portion of the Company's asset and liabilities are carried at fair value and as a result, the Company’s net income or loss can be materially impacted quarter over quarter by gains and losses resulting from changes in valuation inputs and other assumptions used in the fair value of the assets and liabilities.
(2)
As a result of the restatement discussed in Note 2, the Company recorded additional income tax expense (benefit) of $257.6 million , $111.4 million and $(64.3) million during the second, third and fourth quarters of 2016, respectively.
(3)
The Company recorded goodwill impairment losses of $215.4 million , $91.0 million and $13.2 million during the second, third and fourth quarters of 2016, respectively. Refer to Note 16 for further information.
 
 
For the 2015 Quarters Ended
 
 
December 31 (2)
 
September 30
 
June 30 (2)
 
March 31
Total revenues
 
$
331,576

 
$
219,393

 
$
412,433

 
$
310,857

Total expenses
 
548,252

 
364,124

 
427,955

 
371,425

Total other gains
 
8,485

 
13,173

 
523

 
10,890

Loss before income taxes (1)
 
(208,191
)
 
(131,558
)
 
(14,999
)
 
(49,678
)
Income tax expense (benefit)
 
(91,056
)
 
(54,630
)
 
23,120

 
(18,670
)
Net loss
 
$
(117,135
)
 
$
(76,928
)
 
$
(38,119
)
 
$
(31,008
)
Basic and diluted loss per common and common equivalent share
 
$
(3.16
)
 
$
(2.04
)
 
$
(1.01
)
 
$
(0.82
)
__________
(1)
A significant portion of the Company's asset and liabilities are carried at fair value and as a result, the Company’s net income or loss can be materially impacted quarter over quarter by gains and losses resulting from changes in valuation inputs and other assumptions used in the fair value of the assets and liabilities.
(2)
The Company recorded goodwill impairment losses of $56.5 million and $151.0 million during the second and fourth quarters of 2015, respectively. Refer to Note 16 for further information.

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Table of Contents

Walter Investment Management Corp.
Schedule I
Financial Information (As Restated, See Note 2)
(Parent Company Only)

(in thousands, except share and per share data)
 
 
December 31,
 
 
2016
 
2015
 
 
(Restated)
 
 
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
773

 
$
4,016

Restricted cash and cash equivalents
 
1,502

 
10,512

Residential loans at amortized cost, net
 
12,891

 
14,130

Receivables, net
 
97,424

 
11,465

Premises and equipment, net
 
1,181

 
1,559

Other assets
 
30,789

 
37,724

Due from affiliates, net
 
392,998

 
674,139

Investments in consolidated subsidiaries and VIEs
 
1,620,339

 
2,278,009

Total assets
 
$
2,157,897

 
$
3,031,554

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
 
 
 
Payables and accrued liabilities
 
$
53,337

 
$
43,778

Corporate debt
 
2,129,000

 
2,156,944

Deferred tax liabilities, net
 
—

 
26,156

Total liabilities
 
2,182,337

 
2,226,878

 
 
 
 
 
Stockholders' equity (deficit):
 
 
 
 
Preferred stock, $0.01 par value per share:
 
 
 
 
Authorized - 10,000,000 shares
 
 
 
 
Issued and outstanding - 0 shares at December 31, 2016 and 2015
 
—

 
—

Common stock, $0.01 par value per share:
 
 
 
 
Authorized - 90,000,000 shares
 
 
 
 
Issued and outstanding - 36,391,129 and 35,573,405 shares at December 31, 2016 and 2015, respectively
 
364

 
355

Additional paid-in capital
 
596,067

 
591,454

Retained earnings (accumulated deficit)
 
(621,804
)
 
212,054

Accumulated other comprehensive income
 
933

 
813

Total stockholders' equity (deficit)
 
(24,440
)
 
804,676

Total liabilities and stockholders' equity (deficit)
 
$
2,157,897

 
$
3,031,554


The accompanying notes are an integral part of the consolidated financial statements.


F-95

Table of Contents

Walter Investment Management Corp.
Schedule I
Financial Information (As Restated, See Note 2)
(Parent Company Only)

(in thousands)
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(Restated)
 
 
 
 
REVENUES
 
 
 
 
 
 
Interest income on loans
 
$
1,082

 
$
1,165

 
$
1,007

Other revenues
 
(1,914
)
 
3,563

 
1,456

Total revenues
 
(832
)
 
4,728

 
2,463

 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
Interest expense
 
144,170

 
147,752

 
147,633

General and administrative
 
67,583

 
35,654

 
32,198

Salaries and benefits
 
60,119

 
28,510

 
19,311

Depreciation and amortization
 
783

 
129

 
120

Corporate allocations
 
(119,953
)
 
(54,452
)
 
(46,764
)
Other expenses, net
 
621

 
(488
)
 
1,598

Total expenses
 
153,323

 
157,105

 
154,096

 
 
 
 
 
 
 
OTHER GAINS (LOSSES)
 
 
 
 
 
 
Net gains on extinguishments
 
14,662

 
4,660

 
—

Other net fair value losses
 
—

 
—

 
(54
)
Other
 
(979
)
 
12,076

 
—

Total other gains (losses)
 
13,683

 
16,736

 
(54
)
 
 
 
 
 
 
 
Loss before income taxes
 
(140,472
)
 
(135,641
)
 
(151,687
)
Income tax benefit
 
(5,224
)
 
(53,546
)
 
(49,405
)
Loss before equity in losses of consolidated subsidiaries and VIEs
 
(135,248
)
 
(82,095
)
 
(102,282
)
Equity in losses of consolidated subsidiaries and VIEs
 
(698,610
)
 
(181,095
)
 
(8,046
)
Net loss
 
$
(833,858
)
 
$
(263,190
)
 
$
(110,328
)
 
 
 
 
 
 
 
Comprehensive loss
 
$
(833,738
)
 
$
(262,772
)
 
$
(110,431
)

The accompanying notes are an integral part of the consolidated financial statements.


F-96

Table of Contents

Walter Investment Management Corp.
Schedule I
Financial Information
(Parent Company Only)

(in thousands)
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Cash flows used in operating activities
 
$
(204,359
)
 
$
(107,969
)
 
$
(74,452
)
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
Principal payments received on mortgage loans held for investment
 
940

 
828

 
535

Proceeds from sales of real estate owned, net
 
30

 
118

 
227

Purchases of premises and equipment
 
(595
)
 
(175
)
 
—

Decrease (increase) in restricted cash and cash equivalents
 
9,011

 
(6
)
 
4,246

Proceeds from sale of investment
 
—

 
14,376

 
—

Proceeds from sale of residual interests in Residual Trusts
 
—

 
189,513

 
—

Capital contributions to subsidiaries and VIEs
 
—

 
(9,072
)
 
(83,544
)
Returns of capital from subsidiaries and VIEs
 
10,991

 
27,309

 
76,214

Change in due from affiliates
 
126,883

 
(8,331
)
 
88,360

Other
 
309

 
2,656

 
(2,283
)
Cash flows provided by investing activities
 
147,569

 
217,216

 
83,755

 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
Payments on corporate debt
 
—

 
(11,250
)
 
(15,000
)
Extinguishments and settlement of debt
 
(31,037
)
 
(79,877
)
 
—

Other debt issuance costs paid
 
(528
)
 
—

 
—

Repurchase of shares under stock repurchase plan
 
—

 
(28,065
)
 
—

Change in due to affiliates
 
85,801

 
11,553

 
(98,071
)
Other
 
(689
)
 
(754
)
 
6,921

Cash flows provided by (used in) financing activities
 
53,547

 
(108,393
)
 
(106,150
)
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
(3,243
)
 
854

 
(96,847
)
Cash and cash equivalents at the beginning of the year
 
4,016

 
3,162

 
100,009

Cash and cash equivalents at the end of the year
 
$
773

 
$
4,016

 
$
3,162


The accompanying notes are an integral part of the consolidated financial statements.


F-97

Table of Contents

Walter Investment Management Corp.
Schedule I
Notes to the Parent Company Financial Statements
1. Basis of Presentation
The financial information of the Parent Company should be read in conjunction with the Consolidated Financial Statements included in this report. These Parent Company financial statements reflect the results of operations, financial position and cash flows for the Parent Company and its consolidated subsidiaries and VIEs in which it is the primary beneficiary. These consolidated subsidiaries and VIEs are accounted for using the equity method of accounting.
The accompanying Parent Company financial statements have been prepared in accordance with GAAP. The preparation of these Parent Company financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These Parent Company financial statements include certain intercompany allocations to its subsidiaries that management believes have been made on a reasonable basis. These costs primarily include executive salaries and other centralized business functions. Refer to Note 31 to the Consolidated Financial Statements for additional information on intercompany allocations.
2. Restatement of Previously Issued Consolidated Financial Statements
The restatement of the Parent Company's audited consolidated financial statements results from an error in the calculation of the valuation allowance on the net deferred tax assets balance. In determining the amount of the valuation allowance in the Original Filing, an error was made that resulted in the double-counting of expected future taxable income associated with the projected reversals of taxable temporary differences (i.e., deferred tax liabilities). Accordingly, the Parent Company has revised its calculation to reflect the removal of the duplicative amounts, and reevaluated all sources of estimated future taxable income used to assess the recoverability of deferred tax assets under GAAP after taking into account both positive and negative evidence through the issuance date of the restated financial statements to consider the effect of the error.
The determination of the need for a valuation allowance in deferred tax assets under GAAP is highly judgmental and requires the subjective weighting of both positive and negative evidence relating to expectations about the recoverability of those assets. Management has reevaluated both positive and negative evidence through the issuance date of the restated financial statements regarding the use of all sources of future taxable income on the recoverability of its deferred tax assets after correcting for the duplication error. While judgments and estimates made at the time of the Original Filing, using then-available facts and circumstances, are considered to be reasonable and appropriate, the revised analysis has resulted in management's conclusion as of the restatement issuance date that only reversals of deferred tax liabilities and/or net operating loss carrybacks when available should be used as a source of income to recover its deferred tax assets.
Based on the revised calculation and analysis, the Parent Company concluded that the valuation allowance on the deferred tax assets should be increased by $27.3 million , which reduces the net deferred tax assets that are expected to be realized in the future. The impact of the adjustment was to reduce the Parent Company's overall net deferred tax assets balance by increasing the valuation allowance, and reducing the tax benefit recorded in the previously issued consolidated statement of comprehensive loss. The Parent Company financial statements included in this Amended Filing have been restated as of and for the year ended December 31, 2016 to reflect the adjustment described above. The following table presents the effect of the restatement.
 

F-98

Table of Contents

The following table presents the relevant balance sheet lines of the Parent Company as previously reported, restatement adjustments, and the Parent Company balance sheet as restated as of December 31, 2016 (in thousands):
 
 
December 31, 2016
 
 
As Previously Reported
 
Restatement Adjustments
 
As Restated
Deferred tax assets, net
 
$
27,310

 
$
(27,310
)
 
$
—

Investments in consolidated subsidiaries and VIEs
 
1,897,729

 
(277,390
)
 
1,620,339

Total assets
 
2,462,597

 
(304,700
)
 
2,157,897

 
 
 
 
 
 
 
Accumulated deficit
 
$
(317,104
)
 
$
(304,700
)
 
$
(621,804
)
Total stockholders' equity (deficit)
 
280,260

 
(304,700
)
 
(24,440
)
Total liabilities and stockholders' equity (deficit)
 
2,462,597

 
(304,700
)
 
2,157,897

The following table presents the relevant statement of comprehensive loss lines of the Parent Company as previously reported, restatement adjustments, and the Parent Company statement of comprehensive loss as restated for the year ended December 31, 2016 (in thousands):
 
 
For the Year Ended December 31, 2016
 
 
As Previously Reported
 
Restatement Adjustments
 
As Restated
Income tax expense (benefit)
 
$
(32,534
)
 
$
27,310

 
$
(5,224
)
Loss before equity in losses of consolidated subsidiaries and VIEs
 
(107,938
)
 
(27,310
)
 
(135,248
)
Equity in losses of consolidated subsidiaries and VIEs
 
(421,220
)
 
(277,390
)
 
(698,610
)
Net loss
 
(529,158
)
 
(304,700
)
 
(833,858
)
 
 
 
 
 
 
 
Comprehensive loss
 
$
(529,038
)
 
$
(304,700
)
 
$
(833,738
)
3. Corporate Debt
Corporate debt is comprised of secured term loans, convertible senior subordinated notes, and unsecured senior notes. In addition, the Parent Company has a $100.0 million senior secured revolving credit facility of which $12.2 million was available after reductions for issued letters of credit as of December 31, 2016. Refer to Note 24 to the Consolidated Financial Statements for additional information on corporate debt.
4. Supplemental Disclosures of Cash Flow Information
The Company’s supplemental disclosures of cash flow information are summarized as follows (in thousands):
 
 
For the Years Ended December 31,
 
 
2016
 
2015
 
2014
Supplemental Disclosure of Cash Flow Information
 
 
 
 
 
 
Cash paid for interest
 
$
123,369

 
$
128,913

 
$
132,422

Cash paid (received) for taxes
 
61,289

 
(3,318
)
 
(6,067
)
Supplemental Disclosure of Non-Cash Investing and Financing Activities
 
 
 
 
 
 
Servicing rights capitalized upon deconsolidation of Residual Trusts
 
—

 
3,133

 
—

Real estate owned acquired through foreclosure
 
806

 
783

 
671

Residential loans originated to finance the sale of real estate owned
 
540

 
1,466

 
1,657

Contributions to subsidiaries
 
68,637

 
28,249

 
19,143

Distributions from subsidiaries
 
14,727

 
7,469

 
183


F-99

Table of Contents

5. Guarantees
Refer to Note 32 to the Consolidated Financial Statements for certain guarantees made by the Parent Company in regards to Ditech Financial and RMS. In addition to these guarantees, all obligations of Ditech Financial and RMS under master repurchase agreements and certain servicing advance facilities are guaranteed by the Parent. The Parent also guarantees certain subsidiary obligations such as agreements to perform servicing in accordance with contract terms.

F-100

Exhibit 10.17.1
Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

Execution Version    














SUBSERVICING AGREEMENT


NEW RESIDENTIAL MORTGAGE LLC
as the Owner/Servicer and
DITECH FINANCIAL LLC
as the Subservicer Dated: August 8, 2016



Agency Mortgage Loans


TABLE OF CONTENTS




Page
ARTICLE I
DEFINITIONS     1
ARTICLE II
AGREEMENTS OF THE SUBSERVICER     14
Section 2.1.    General     14
Section 2.2.    Compliance with Applicable Requirements.     15
Section 2.3.    Engagement of Contractors.     16
Section 2.4.    Procedure     19
Section 2.5.    Other Services.     21
Section 2.6.    Service Level Agreements.     23
Section 2.7.    Accounting and Investor Reporting     23
Section 2.8.    Delinquency Control     26
Section 2.9.    REO Properties.     27
Section 2.10. Books and Records; Access to Facilities.     28
Section 2.11. Insurance     30
Section 2.12. Advances.     31
Section 2.13. Solicitation.     33
Section 2.14. HAMP     34
Section 2.15. Process Changes and Other Services; Statements of Work.     34
Section 2.16. Pending and Completed Loss Mitigation.     34
Section 2.17. Disaster Recovery Plan.     35
Section 2.18. Subservicer Performance Standards.     36
Section 2.19. Sanction Lists; Suspicious Activity Reports.     37
Section 2.20. [Reserved]     37
Section 2.21. Litigation Management     37
ARTICLE III
AGREEMENTS OF THE OWNER/SERVICER     38
Section 3.1.    Documents.     38

i


Section 3.2.    Pay-off of Mortgage Loan; Release of Mortgage Loan Documents.     40
Section 3.3.    Notices.     41
Section 3.4.    Mortgagor Requests.     41
Section 3.5.    Power of Attorney     41
ARTICLE IV
COMPENSATION     42
Section 4.1.    Subservicing Compensation.     42
Section 4.2.    Due Date of Payments; Penalties.     42
Section 4.3.    Resolution of Disputes and Monetary Errors.     43
ARTICLE V
TERM AND TERMINATION     43
Section 5.1.    Term     43

Section 5.2.    Termination without Cause     44
Section 5.3.    Termination with Cause     44
Section 5.4.    Reimbursement upon Expiration or Termination; Termination
Assistance     48
Section 5.5.    Accounting/Records.     50
Section 5.6.    Termination Right of the Subservicer     50
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE OWNER/SERVICER    51
Section 6.1.    Agency Approvals.    51
Section 6.2.    Authority    51
Section 6.3.    Consents.    51
Section 6.4.    Litigation.    51
Section 6.5.    Broker Fees.    51
Section 6.6.    Ownership.    52
Section 6.7.    Ability to Perform    52
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE SUBSERVICER    52
Section 7.1.    Agency Approvals.    52
Section 7.2.    Authority    52

i


Section 7.3.    Consents.    52
Section 7.4.    Litigation.    53
Section 7.5.    Accuracy of Information.    53
Section 7.6.    Broker Fees.    53
Section 7.7.    MERS    53
Section 7.8.    Agency Representations.    53
Section 7.9.    Ability to Perform    53
Section 7.10. HAMP    53
Section 7.11. Quarterly Reports.    53
ARTICLE VIII
INDEPENDENCE OF PARTIES; INDEMNIFICATION SURVIVAL     54
Section 8.1.    Independence of Parties.     54
Section 8.2.    Indemnification by the Subservicer; Compensatory Fees.     54
Section 8.3.    Indemnification by the Owner/Servicer     55
Section 8.4.    Indemnification Procedures.     56
Section 8.5.    Repurchase     56
Section 8.6.    Survival     56
ARTICLE IX
MISCELLANEOUS     56
Section 9.1.    Assignment     56
Section 9.2.    Prior Agreements.     57
Section 9.3.    Entire Agreement     57





Section 9.4.    Invalidity     57
Section 9.5.    Governing Law; Jurisdiction.     57
Section 9.6.    Waiver of Jury Trial     58
Section 9.7.    Notices.     58
Section 9.8.    Amendment, Modification and Waiver     59
Section 9.9.    Binding Effect     59
Section 9.10. Headings.     59
Section 9.11. Force Majeure     59
Section 9.12. Confidentiality; Security     60
Section 9.13. Further Assurances.     61
Section 9.14. Execution of Agreement     61
Section 9.15. Publicity     61
Section 9.16. Executory Contract     61
Section 9.17. Restrictions of Notices; Information and Disclosure     62





EXHIBITS

EXHIBIT A    Form of Acknowledgment Agreement
EXHIBIT B    Subservicing Fees
EXHIBIT C    Form of Limited Power of Attorney
EXHIBIT D    Servicing Transfer Procedures
EXHIBIT E    List of Servicing Reports
EXHIBIT F-1    Service Level Agreements
EXHIBIT F-2    Form of SLA Monthly Report
EXHIBIT G    Additional Servicing Requirements
EXHIBIT H    Form of Quarterly Financial Metrics Report
EXHIBIT I    Form of Quarterly Certificate
EXHIBIT J    Vendor List
EXHIBIT K    Litigation Protocols





SUBSERVICING AGREEMENT

THIS SUBSERVICING AGREEMENT (this " Agreement "), dated as of August 8, 2016, (the    " Effective Date "),    is    by    and    between    New    Residential    Mortgage    LLC    (the " Owner/Servicer "), having an office at 1345 Avenue of the Americas, 45th Floor, New York, New York 10105, and Ditech Financial LLC (the " Subservicer "), having an office at 7630 S. Kyrene Road, Tempe, Arizona 85283.

RECITALS

WHEREAS, the Subservicer is engaged in the business of servicing and subservicing residential mortgage loans evidenced by notes and secured by deeds of trust, mortgages, trust deeds or like security instruments;

WHEREAS, the Owner/Servicer owns or will acquire from time to time the right to service the residential mortgage loans or pools of residential mortgage loans identified on the schedule attached to the related Acknowledgement Agreement or other schedule or data file delivered and accepted by the Subservicer and the Subservicer has the capacity to subservice such residential mortgage loans for the Owner/Servicer; and

WHEREAS, the Owner/Servicer desires that the Subservicer perform, as a subservicer, the Subservicing and the Subservicer is agreeable thereto.

NOW, THEREFORE, in consideration of the mutual recitals, promises and covenants set forth herein, and other good and valuable consideration herein receipted for, but not herein recited, the receipt of which is hereby acknowledged, the parties hereto agree and covenant as follows:

ARTICLE I DEFINITIONS

Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings specified in this Article I :

Acknowledgment Agreement : The document substantially in the form attached hereto as Exhibit A , to be executed by the Owner/Servicer and the Subservicer prior to each Transfer Date with respect to Subservicing any Mortgage Loans identified on the schedule attached thereto pursuant to this Agreement.

Affiliate : An Affiliate of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person; provided, however , that, with respect to the Owner/Servicer, an Affiliate shall be limited to New Residential Investment Corp. and its direct or indirect wholly-owned subsidiaries. For




purposes of this definition, the term "control" (including its correlative meanings "controlled by" and "under common control with") means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).

1




Agency :    Fannie Mae, Freddie Mac, Ginnie Mae, HUD, FHA, USDA, VA and State Agencies, as applicable.

Agency Guidelines: The Fannie Mae Guides, Freddie Mac Guide, Ginnie Mae Guide, FHA Regulations, USDA Regulations, VA Regulations, as applicable, as such Agency Guidelines may be modified from time to time or enacted subsequent to the date of this Agreement, and any other applicable agreements, rules, regulations, directives, announcements, bulletins and instructions of the applicable Agency or Insurer relating to the servicing or subservicing of the Mortgage Loans, including any delegated authority and variances permitted by the related Agency.

Agreement : This Agreement as the same may be amended from time to time by the Owner/Servicer and the Subservicer.

Ancillary Income : All fees and charges derived from the Mortgage Loans (other than servicing or Subservicing fees, Float Benefit and prepayment penalties attributable to the Mortgage Loans), which the Subservicer is entitled to collect and retain (for itself or the Owner/Servicer) under Applicable Requirements and Section 4.1, including but not limited to late fees, payoff fees, assumption fees, reinstatement fees, fees received with respect to checks on bank drafts returned by the related bank for insufficient funds, and similar types of fees arising from or in connection with any Mortgage Loan, in any case to the extent not exceeding or violating any applicable amounts or limitations under Applicable Requirements. The Subservicer shall not change the amount of fees or charges constituting Ancillary Income that it charges Mortgagors without the prior written approval of the Owner/Servicer; provided, however , such fees or charges may be reduced or otherwise changed by the Subservicer to conform with changes in Applicable Requirements without the consent of the Owner/Servicer provided notice of such change is given to the Owner/Servicer. Ancillary Income shall be payable to the Owner/Servicer and the Subservicer as set forth in Exhibit B ; provided that Ancillary Income shall not include fees related to portfolio defense.

Applicable Requirements: As to any Mortgage Loan, as of the time of reference: (a) all Mortgage Loan-related obligations of the Owner/Servicer as servicer, including without limitation those contractual obligations of the Owner/Servicer or the Subservicer contained in this Agreement or any agreement with any Agency, Insurer or Investor (including but not limited to all Investor and Agency guides, manuals, handbooks, bulletins, circulars, announcements, issuances, releases, letters, correspondence and other instructions applicable to the Mortgage Loans and/or the Servicing Rights), or in the related Mortgage Loan Documents for which the Owner/Servicer is responsible; (b) all federal, state and local laws, statutes, rules, regulations and ordinances applicable to the Owner/Servicer or the Subservicer that are related to residential mortgage loans or the servicing or Subservicing thereof, including with limitation the Vendor Oversight Guidance and applicable FHA Regulations, USDA Regulations or VA Regulations;
(c) all applicable Agency Guidelines, (d) all other applicable requirements and guidelines related to the servicing or Subservicing of residential mortgage loans as promulgated by (i) any




Governmental Authority having jurisdiction, including without limitation the CFPB and (ii) any Insurer; and (e) all other applicable judicial and administrative judgments, assurances, orders, stipulations, directives, consent decrees (including, without limitation, the CFPB Stip Order and each State Order), awards, writs and injunctions that is made or given at any time by any court or

2





regulator to which a party or any of its Affiliates is subject or is otherwise applicable to the servicing or Subservicing of the Mortgage Loans; provided, that in the event that either the Owner/Servicer or the Subservicer becomes subject to such judicial or administrative judgment, order, stipulation, directive, consent decree, award, writ or injunction after the date of this Agreement that would affect the servicing or Subservicing of the Mortgage Loans hereunder, such party shall promptly notify the other party of the relevant terms thereof.

Bankruptcy Code : As defined in Section 9.16.

BCP : As defined in Section 2.17.

Business Day : Any day other than (a) a Saturday or Sunday, (b) a day on which banking institutions in the State of New York are authorized or obligated by law or by executive order to be closed, (c) a day that is not a business day as provided in the related Agency Guidelines or (d) such other days as agreed upon by the parties in writing.

Calculation Date : The close of business on the last Business Day occurring in March, June, September and December of each calendar year, beginning in September 2016.

CFPB :    The Consumer Financial Protection Bureau, an independent federal agency operating as part of the United States Federal Reserve System.

CFPB Stip Order : That certain Stipulated Order for Permanent Injunction and Monetary Judgment entered in Federal Trade Commission and Consumer Financial Protection Bureau v. Green Tree Servicing LLC , 15-cv-02064, (D. Minn. April 23, 2015).

Change of Control : With respect to the Subservicer, shall mean (i) any transaction or event as a result of which the Walter ceases to own, directly or indirectly, at least 51% of the stock of Subservicer; (ii) the sale, transfer, or other disposition of all or substantially all of Subservicer’s assets (excluding any such action taken in connection with any securitization transaction or routine sales of mortgage loans); or (iii) the consummation of a merger or consolidation of Subservicer with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity’s equity outstanding immediately after such merger, consolidation or such other reorganization is owned by persons who were not equityholders of the Subservicer immediately prior to such merger, consolidation or other reorganization. With respect to the Walter, shall mean (i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act as in effect on the Effective Date) shall have obtained the power (whether or not exercised) to elect a majority of the board of directors (or equivalent governing body) of the Walter, (ii) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act as in effect on the Effective Date) is or shall become the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act as in effect on the Effective




Date), directly or indirectly, of 35% or more on a fully diluted basis of the voting interests in the Walter’s Equity Interests, or (iii) the board of directors (or equivalent governing body) of the Walter shall cease to consist of a majority of Continuing Directors.

Claim : Any claim, demand or litigation related to the Mortgage Loans, the Servicing Rights or this Agreement.

3





Collateral File : With respect to each Mortgage Loan, the file containing the Mortgage Loan Documents and such other documents or instruments as are required by the Investor pursuant to Applicable Requirements or by the Owner/Servicer to be held by a Custodian or, as permitted by Applicable Requirements, copies thereof.

Compensatory Fees: Any compensatory fees, fines, penalties or other monies assessed by the Agency for failure to adhere to the applicable Agency Guidelines in servicing the Mortgage Loans.

Confidential Information:     Any and all information regarding the transactions contemplated by this Agreement, Consumer Information, the proprietary, confidential and non- public information or material relating to the business (including business practices) of the Disclosing Party (or the Disclosing Party’s clients and investors), information regarding the financial condition, operations and prospects of the Disclosing Party, and any other information that is disclosed to one party by or on behalf of the other party or any of their respective Affiliates or representatives, either directly or indirectly, in writing, orally or by drawings or by permitting inspection of documents or other tangible expression, whether exchanged before or after the date of this Agreement, and contained in any medium, which such entity considers to be non-public, proprietary or confidential. Confidential Information includes (but is not limited to) all (a) except as expressly required in connection with the Subservicing of the Mortgage Loans pursuant to this Agreement, information relating to the Owner/Servicer’s interest in the Mortgage Loans or the amount, characteristics or performance of the Mortgage Loans or any economic or noneconomic terms of this Agreement, (b) information relating to research and development, discoveries, formulae, inventions, policies, guidelines, displays, specifications, drawings, codes, concepts, practices, improvements, processes, know-how, patents, copyrights, trademarks, trade names, trade secrets, and any application for any patent, copyright or trademark; and (c) descriptions, financial and statistical data, business plans, data, pricing, reports, business processes, recommendations, accounting information, identity of suppliers, business relationships, personnel information, technical specifications, computer hardware or software, information systems, customer lists, costs, product concepts and features, corporate assessments strategic plans, services, formation of investment strategies and policies, other plans, or proposals, and all information encompassed in the foregoing. Information relating to the Disclosing Party’s consultants, employees, clients, investors, customers, members, vendors, research and development, software, financial condition or marketing plans is also considered Confidential Information.

Consumer Information: Any personally identifiable information relating to a Mortgagor which is considered "nonpublic personal information" of "customers" and "consumers" as those terms are defined in the GLBA.

Continuing Directors: The directors (or equivalent governing body) of Walter on the Effective Date and each other director (or equivalent Person) if such director’s (or equivalent




Person’s) nomination for election to the board of directors (or equivalent governing body) of Walter is recommended by a majority of the then Continuing Directors.

Custodial Account : The accounts in which Custodial Funds are deposited and held by the Subservicer.

4





Custodial Funds: All funds held by or on behalf of the Subservicer with respect to the Mortgage Loans, including, but not limited to, all principal and interest funds and any other funds due Investors, buydown funds, funds for the payment of taxes, assessments, insurance premiums, ground rents and similar charges, funds from hazard insurance loss drafts and other mortgage escrow and impound amounts (including interest accrued thereon for the benefit of the Mortgagors under the Mortgage Loans, if required by law or contract) maintained by or on behalf of the Subservicer relating to the Mortgage Loans.

Custodian:     With respect to each Mortgage Loan, the Person designated by the Owner/Servicer to act as custodian of the Mortgage Loan Documents for such Mortgage Loan, notice of which shall be provided to the Subservicer by the Owner/Servicer.

Deconversion Fee : The fee payable by the Owner/Servicer to the Subservicer as provided in Section 5.4(a), which fee, if any, shall equal the amount set forth in Exhibit B. The Deconversion Fee relating to a termination of this Agreement with respect to an Interim Serviced Mortgage Loan, if any, shall equal the amount set forth in Exhibit B .

Default Firms: Shall have the meaning assigned to such term in Section 2.3.

Delinquency or Delinquent : With respect to any Mortgage Loan, the Mortgage Loan that would be considered one month or more delinquent following the MBA Methodology.

Delinquency Ratio: With respect to the Prior Ditech Serviced Loans as of the end of each calendar month, the percentage equivalent of a fraction, the numerator of which is the total unpaid principal balance of the Prior Ditech Serviced Loans that were subserviced by the Subservicer during such calendar month which are thirty (30) days or more Delinquent, including loans in foreclosure and bankruptcy, plus the loan balance (prior to conversion to REO) of REO properties, and the denominator of which is the unpaid principal balance of all Prior Ditech Serviced Loans.

Ditech Agreements:     The Ditech MSRPA, this Agreement and any other document executed in connection with this Agreement.

Ditech Transfer Fees:     The fee payable by the Subservicer to the Owner/Servicer as provided in Section 5.4(b), which fee, if any, shall equal the amount set forth in Exhibit B and is referred to therein as the Ditech Transfer Fees.

Ditech MSRPA : The Flow and Bulk Agreement for the Purchase and Sale of Mortgage Servicing Rights dated August 8, 2016 by and between the Owner/Servicer and the Subservicer.





Draft Date : Any Business Day on which funds may be released to, or withdrawn by, an Investor from a Custodial Account in accordance with Applicable Requirements.

Equity Interests: of any Person shall mean any and all shares, interests, rights to purchase, warrants, options, participation or other equivalents of or interest in (however designated) equity of such Person, including any common stock, preferred stock, any limited or general partnership interest and any limited liability company membership interest; provided that, for the avoidance

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of doubt and without limitation, “Equity Interests” shall exclude the convertible notes and any other indebtedness convertible into or exchangeable for Equity Interests.

Escrow Account :    A time deposit or demand account created and maintained at a financial institution designated by the Owner/Servicer for the deposit of Escrow Payments and related disbursements in accordance with applicable Agency Guidelines.

Escrow Payments: The amounts required to be escrowed by the Mortgagor pursuant to any Mortgage Loan and held in Escrow Accounts, which include amounts being held for payment of taxes, assessments, water rates, flood insurance premiums, fire and hazard insurance premiums and other payments.

Exchange Act : The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Fannie Mae : The Federal National Mortgage Association, or any successor thereto.

Fannie Mae Guides:     The Fannie Mae Single Family Servicing Guide, as amended, supplemented or otherwise modified from time to time.

FDIC : The Federal Deposit Insurance Corporation, or any successor thereto.

FHA : The Federal Housing Administration of the Department of Housing and Urban Development of the United States of America, or any successor.

FHA Regulations: Regulations promulgated by HUD under the National Housing Act, codified in Title 24 of the Code of Federal Regulations, and other HUD issuances relating to mortgage loans insured by the FHA.

Float Benefit :    All benefit (including interest or earnings), not due to the applicable Agency or the Mortgagors under the related Agency Guidelines, related to the Escrow Accounts and the Custodial Accounts, as applicable, with respect to the Mortgage Loans during the Interim Servicing Period.

Freddie Mac : The Federal Home Loan Mortgage Corporation, or any successor thereto.

Freddie Mac Guide :    The Freddie Mac Single Family Servicing Guide, as amended, supplemented or otherwise modified from time to time.





GAAP : Generally accepted accounting principles in effect from time to time in the United States of America

Ginnie Mae : The Government National Mortgage Association, or any successor thereto.

Ginnie Mae Guide : The Ginnie Mae Mortgage Backed Securities (MBS) Guide, as amended, supplemented or otherwise modified from time to time.

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GLBA : The Gramm-Leach-Bliley Act of 1999 as amended, modified, or supplemented from time to time, and any successor statute, and all rules and regulations issued or promulgated in connection therewith.

Governmental Authority :    Any court, board, agency, commission, office or other authority or quasi-governmental authority or self-regulatory organization of any nature whatsoever for any governmental unit (foreign, federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence.

HAMP : The Home Affordable Modification Program implemented by the United States Department of Treasury pursuant to Section 101 and 109 of the Emergency Economic Stabilization Act of 2008, as the same may be amended or modified.

HUD :    The United States Department of Housing and Urban Development, or any successor thereto.

In-process Loan Modification: A trial or permanent loan modification offered by the Subservicer, Agency or any prior servicer that was either accepted by the Mortgagor or for which the time for the Mortgagor to accept the offer has not expired and the offer has not been rejected. The term also means and includes (a) trial modifications in which the Subservicer, Agency or any prior servicer agreed to modify the payment terms of the Mortgage Loan unless the Subservicer or a prior servicer has clear written evidence that the Mortgagor has failed to perform under the trial loan modification terms and (b) modifications in which the Mortgagor completed making the trial payments, but the permanent modification was not input into the Subservicer or any prior servicer’s system.

Insurer : FHA, VA, USDA or any private mortgage insurer, pool insurer and any insurer or guarantor under any standard hazard insurance policy, any federal flood insurance policy, any title insurance policy, any earthquake insurance policy or other insurance policy, and any successor thereto, with respect to the Mortgage Loan or the Mortgaged Property.

Interim Serviced Mortgage Loan : As defined in Section 5.2.

Investor or Investors: With respect to any Mortgage Loan, Fannie Mae, Freddie Mac or Ginnie Mae as applicable.

Loss Mitigation : With respect to any Mortgage Loan, any modified or proposed payment arrangement, proposed, trial or permanent loan modification, In-process Loan Modification, forbearance plan, short sale, deed-in-lieu agreement, HAMP and any other non-foreclosure home




retention or non-retention option offered by the Subservicer, Agency or any prior servicer that is made available to the Mortgagor by or through Subservicer, Agency, or any prior servicer, including any application or request of a Mortgagor for any of the foregoing. For avoidance of doubt, this definition shall apply only to Mortgage Loans in loss mitigation or where a loss mitigation application is pending.

MA State Order : That certain Assurance of Discontinuance entered in Commonwealth of Massachusetts In re Ditech Financial LLC (MA Sup. Ct. August 2016).

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Material Adverse Change :    Any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Subservicer or the Owner/Servicer, as applicable, in each case, in the present and/or the future.

Material Adverse Effect : With respect to the Subservicer (a) a Material Adverse Change with respect to the Subservicer or any of its Affiliates taken as a whole; (b) a material impairment of the ability of the Subservicer to perform under the Ditech Agreements, or to avoid any event of default with respect to the Subservicer under this Agreement (that cannot be timely cured, to the extent a cure period is applicable); (c) a material adverse effect upon the legality, validity, binding effect or enforceability of the Ditech Agreements against the Subservicer; or (d) a material adverse effect upon the value or marketability of a material portion of the Mortgage Loans or related Servicing Rights. With respect to the Owner/Servicer (a) a Material Adverse Change with respect to the Owner/Servicer or any of its Affiliates taken as a whole; (b) a material impairment of the ability of the Owner/Servicer to perform under the Ditech Agreements, or to avoid any event of default with respect to the Owner/Servicer under this Agreement (that cannot be timely cured, to the extent a cure period is applicable); (c) a material adverse effect upon the legality, validity, binding effect or enforceability of the Ditech Agreements against the Owner/Servicer; or (d) a material adverse effect upon the value or marketability of a material portion of the Mortgage Loans or related Servicing Rights. With respect to the Servicing Rights purchased by the Owner/Servicer pursuant to the MSRPA or any Mortgage Loan relating thereto, a material adverse effect (a) upon the value or marketability of such Servicing Rights or such Mortgage Loan or (b) on the ability of the Subservicer to enforce such Mortgage Loan or realize the full benefits of such Servicing Rights.

MBA Methodology : A method of calculating delinquency of a Mortgage Loan based upon Mortgage Bankers Association method, under which method a Mortgage Loan is considered delinquent if the payment had not been received by the end of the day immediately preceding the Mortgage Loan’s next due date (generally the last day of the month in which the payment was due). For example, a Mortgage Loan with a due date of August 1, 2016, with no payment received by the close of business on September 1, 2016, would have been reported as delinquent on September 30, 2016.

MERS : Mortgage Electronic Registration Systems, Inc., or any successor thereto.

Mortgage : The mortgage, deed of trust or other instrument creating a first or second lien on a Mortgaged Property securing a Note (or a first or second lien on (a) in the case of a cooperative, the related shares of stock in the cooperative securing the Note and (b) in the case of a ground rent, the leasehold interest securing the Note).

Mortgage Loan : Fixed or adjustable rate residential mortgage loans in which either (i) the related Servicing Rights was purchased by the Owner/Servicer from the Subservicer pursuant to the MSRPA or (ii) with respect to any Mortgage Loan in which the related Servicing Rights were




not purchased by the Owner/Servicer from the Subservicer pursuant to the MSRPA, identified by the Owner/Servicer pursuant to Section 2.1, in each case, for which the Subservicer accepts subservicing from the Owner/Servicer from time to time for inclusion under the terms of this Agreement and any REO Property resulting from Mortgage Loans described in this definition.

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Mortgage Loan Documents:     With respect to each Mortgage Loan, (a) the original Mortgage Loan documents held by the Custodian, including the Note, and if applicable, cooperative mortgage loan related documents and (b) all documents required by the applicable Investor to be held by the Custodian under Applicable Requirements or otherwise required to be held by the Custodian by the Owner/Servicer.

Mortgage Servicing File : With respect to each Mortgage Loan, all documents, whether in hard copy, computer record, microfiche or any other format, evidencing and pertaining to a particular Mortgage Loan and relating to the processing, origination, servicing, collection, payment and foreclosure of such Mortgage Loan, necessary to service the Mortgage Loans in accordance with Applicable Requirements or required to be held by the mortgage loan servicers under Applicable Requirements, including without limitation the following documents with respect to each Mortgage Loan: (a) a schedule of all transactions credited or debited to the Mortgage Loan, including the Escrow Account and any suspense account; (b) a copies of the Mortgage Loan Documents; (c) any notes created by the Subservicer (or any prior servicer) personnel reflecting communications with the Mortgagor about the Mortgage Loan; (d) any reports specific to the Mortgage Loan created by the Subservicer (or any prior servicer) in connection with the Subservicing of the Mortgage Loan; (v) copies of information or documents provided by Mortgagor to the Subservicer in connection with any error resolution or loss mitigation; and (e) any documents or records required to be maintained by mortgage loan servicers under the applicable Agency Guidelines.

Mortgaged Property : The residential real property securing a Mortgage Loan, including all buildings and fixtures thereon.

Mortgagor : The mortgagor, grantor of security deeds, grantor of trust deeds and deeds of trust, and the grantor of any Mortgage.

MSRPA : The Ditech MSRPA.

New Mortgage Loan : A mortgage loan which is originated when the related mortgagor refinances an existing Mortgage Loan with proceeds from such new mortgage loan which is secured by the same mortgaged property.

Note : The original executed note evidencing the indebtedness of a Mortgage.

Off-shore Vendor : Any Vendor which is located outside the United States of America and/or the services provided by any Vendor are being performed outside the United States of America.





Owner/Servicer Economics:     The sum of the following, with duplication, (i) all prepayment penalties and servicing-related fees payable to the Owner/Servicer as servicer of the Mortgage Loans under the applicable Agency Guidelines and received during the applicable prior Investor accounting cycle or applicable portion thereof, (ii) all amounts payable to the Owner/Servicer as the Investor of any Mortgage Loans, (iii) all recoveries on the Mortgage Loans during the applicable prior Investor accounting cycle or applicable portion thereof of Servicing Advances and P&I Advances previously funded or reimbursed by the Owner/Servicer to the Subservicer or the prior servicer and (iv) all other outstanding amounts collected during

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the applicable prior Investor accounting cycle or applicable portion thereof and payable to the Owner/Servicer under this Agreement (including Float Benefit pursuant to Section 2.7(e) and any Loss Mitigation or incentive fees payable to the Owner/Servicer as servicer under applicable Agency Guidelines as described in Section 4.1) .

P&I : Principal and interest.

P&I Advance :    Principal and interest, if any, advanced to an Investor related to a Mortgage Loan, including those Mortgage Loans in any pool created through mortgage backed pass-through certificates or securities. P&I Advances shall also include, to the extent applicable and not otherwise paid, (a) the payment of prepayment interest shortfalls required to be paid under Applicable Requirements in connection with the payment in part or in full of a Mortgage Loan, (b) any Agency guaranty fees and (c) any lender-paid PMI premiums.

Person : Any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, limited partnership, government or any agency or political subdivision thereof or any similar entity.

PMI : Private mortgage insurance.

PMI Companies : The insurance companies that have issued PMI policies insuring any of the Mortgage Loans.

Prime Rate : The prime rate announced to be in effect from time to time, as published as the average rate in The Wall Street Journal (Northeast edition) .

Prior Ditech Serviced Loans : Any Mortgage Loan in which the Subservicer serviced the related Mortgage Loans immediately prior to the acquisition of the related Servicing Rights by the Owner/Servicer pursuant to the MSRPA.

Quarterly Collection Period : With respect to any Calculation Date, the calendar month of such Calculation Date and the two (2) calendar months immediately prior to such related calendar month.

Quarterly Financial Metrics : As defined in Section 7.11.

Quarterly Financial Metrics Report : As defined in Section 7.11.





Quarterly Refinancing Percentage : With respect to the Prior Ditech Serviced Loans and a Calculation Date, a fraction, expressed as a percentage, the numerator of which is equal to the aggregate principal balance of the New Mortgage Loans that were originated by the Subservicer and were refinancings of Prior Ditech Serviced Loans that were subserviced by the Subservicer over the related Quarterly Collection Period as measured on their respective refinancing date, and the denominator of which is the aggregate principal balance of all Prior Ditech Serviced Loans that voluntarily prepaid in full over the Quarterly Collection Period (measured as of the date of such prepayment).

Quarterly Report : As defined in Section 7.11.

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REO Property : A Mortgaged Property acquired on behalf of Investor by foreclosure or other process.

REO Disposition : The final sale by the Subservicer of any REO Property. Reporting Date : The fifth (5 th ) Business Day of the each month.
Sale Date :    With respect to each Mortgage Loan to be subserviced pursuant to this Agreement, the related date in which the Owner/Servicer acquires all economic right, title and interest in and to the related Servicing Rights pursuant to the MSRPA.

Service Level Agreements or SLAs : As defined in Section 2.6(a) of this Agreement.

Servicing Advance Ratio : With respect to the Prior Ditech Serviced Loans as of the end of each calendar month, the percentage equivalent of a fraction, the numerator of which is the aggregate outstanding receivables balance of the Advances with respect to the Prior Ditech Serviced Loans that were subserviced by the Subservicer during such calendar month, and the denominator of which is the aggregate outstanding principal balance of all Prior Ditech Serviced Loans.

Servicer Transfer Data : The computer records requested by the Subservicer reflecting the status of payments, balances and other pertinent information with respect to the Mortgage Loans necessary to subservice the Mortgage Loans in accordance with Applicable Requirements and this Agreement.

Servicing Advance : All customary, reasonable and necessary actual "out of pocket" costs and expenses incurred by the Subservicer (i) in accordance with the Applicable Requirements,
(ii) for which the Subservicer has a right of reimbursement from the Mortgagor, the applicable Agency, Insurer, Investor and/or otherwise, and (iii) which are recoverable by the Owner/Servicer pursuant to applicable Agency and Investor requirements and, in each case, arising out of or related to (a) the performance of the Subservicer’s servicing and other obligations under this Agreement or Applicable Requirements, (b the preservation, restoration and protection of the Mortgaged Property, (c) any enforcement or judicial proceedings, including foreclosures, including reasonable attorney’s fees and settlement costs, (d) the management and liquidation of the REO Property, (e) payment of taxes, assessments, water rates, mortgage insurance premiums including fire and hazard insurance premiums, flood insurance premiums and similar payments set forth in the applicable Agency Guidelines, (f) any Claims made against the Subservicer and/or the Owner/Servicer in connection with the Mortgage Loans (excluding Claims relating to the Prior Ditech Serviced Loans prior to the Transfer Date), and (g) amounts paid by the Subservicer to third parties pursuant to the terms of this Agreement or advanced pursuant to any applicable Investor requirements, excluding




any P&I Advance or any penalties, fines or indemnification amounts payable by the Subservicer pursuant to the terms of this Agreement.

Servicing Agreements : The contracts (including, without limitation, any pooling agreement, servicing agreement, custodial agreement or other agreement or arrangement), and all applicable rules, regulations, procedures, manuals and guidelines incorporated therein, defining the rights and obligations of the Owner/Servicer, with respect to Mortgage Loans.

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Servicing Compensation : The annual aggregate amount payable to Owner/Servicer under the applicable Servicing Agreement related to Mortgage Loan as consideration for servicing such loan, expressed as a percentage of the unpaid principal balance thereof, and excluding Ancillary Income.

Servicing Rights:     With respect to an Mortgage Loan, collectively, (i) the rights and obligations to service, administer, collect payments for the reduction of principal and application of interest thereon, collect payments on account of taxes and insurance, pay taxes and insurance, remit collected payments, provide foreclosure services, provide full escrow administration, (ii) any other obligations required by any Agency, Investor or Insurer in, of, for or in connection with such Mortgage Loan pursuant to the applicable Servicing Agreement (but not, for the avoidance of doubt, the Servicing Agreement), (iii) the right to possess any and all documents, files, records, Mortgage File, servicing documents, servicing records, data tapes, computer records, or other information pertaining to such Mortgage Loan or pertaining to the past, present or prospective servicing of such Mortgage Loan, (iv) the right to receive the Servicing Compensation and any Ancillary Income arising from or connected to such Mortgage Loan and the benefits derived from and obligations related to any accounts arising from or connected to such Mortgage Loan and (v) all rights, powers and privileges incident to any of the foregoing, subject, in each case, to any rights, powers and prerogatives retained or reserved by the Investors.

Servicing Transfer Costs : All reasonable out-of-pocket costs and expenses incurred in connection with the transfer of the servicing of the Mortgage Loans from the Subservicer to a successor servicer or subservicer, including, without limitation, any reasonable costs or expenses associated with the complete transfer of all servicing data and the completion, correction or manipulation of such servicing data as may be required by the Owner/Servicer or a successor servicer or subservicer to correct any errors or insufficiencies in the servicing data or otherwise enable the Owner/Servicer or successor servicer or subservicer to service the Mortgage Loans properly and effectively, all costs and expenses incurred in connection with the transfer and delivery of the Mortgage Loans, if applicable, including without limitation custodial recertification costs, recording fees, fees for title policy endorsements and continuations, fees for the preparation, delivery, tracking and recording of assignments of Mortgages or any MERS transfer related costs related to a transfer of servicing and all costs associated with the transfer of (or, if not transferable to a successor servicer or subservicer, the purchase of) tax service contracts and flood certification contracts and any expenses related to the transfer of the servicing related to the Mortgage Loans.

Servicing Transfer Procedures : With respect to each Mortgage Loan which is not a Prior Ditech Serviced Loan, the procedures with respect to the transfer of subservicing of such Mortgage Loans to the Subservicer as set forth in Exhibit D hereto as may be amended from time to time as mutually agreed by the prior servicer and the Subservicer. The Subservicer shall (i) provide written notice to the Owner/Servicer of amendments or modifications to the Servicing Transfer Procedures at least thirty (30) days prior to the applicable Transfer Date and (ii) ensure that the Servicing Transfer Procedures comply with Applicable Requirements.





State Agency : Any state or local agency with authority to (i) regulate the business of the Owner/Servicer or the Subservicer, including without limitation any state or local agency with

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authority to determine the investment or servicing requirements with regard to mortgage loans originated, purchased or serviced by the Owner/Servicer or the Subservicer, or (ii) originate, purchase or service mortgage loans, or otherwise promote mortgage lending, including without limitation state and local housing finance authorities.

State Orders : Collectively, the MA State Order and the VT State Order.

Statement of Work : Shall have the meaning set forth in Section 2.15.

Subservicer Economics : The sum of the following, without duplication, (i) all accrued and unpaid subservicing fees, Ancillary Income and other compensation set forth on Exhibit B payable to the Subservicer and not payable by third parties with respect to the applicable prior Investor accounting cycle or applicable portion thereof, (ii) all unreimbursed Servicing Advances paid by the Subservicer with respect to the applicable prior Investor accounting cycle that were not separately funded by the Owner/Servicer or reimbursed by the Owner/Servicer or pursuant to the terms of this Agreement and (iii) all other outstanding amounts payable or reimbursable to the Subservicer under this Agreement, other than amounts payable under Section 8.3, with respect to the applicable prior Investor accounting cycle or applicable portion thereof.

Subservicing : Certain servicing functions for the Mortgage Loans, including, without limitation, the usual servicing operational functions of providing customer statements, accepting and applying customer payments, calculating, holding and applying escrowed amounts, providing customer service, collecting defaulted accounts, performing loss mitigation, protecting the value of the Owner/Servicer’s investment in such Servicing Rights through solicitation and refinance of the Mortgage Loans, and those functions set forth in Exhibit G , if any, as may be amended from time to time as mutually agreed by the Owner/Servicer and the Subservicer.

T&I : Taxes and insurance.

Transfer Date :    With respect to any particular Mortgage Loan, the date on which Subservicing of the Mortgage Loan is transferred to the Subservicer and the Subservicer commences Subservicing such Mortgage Loan pursuant to this Agreement, which date shall be set forth on the related Acknowledgement Agreement, if any, or otherwise the date on which the servicing of such Mortgage Loan is boarded on the Subservicer’s servicing system following the identification of such Mortgage Loan pursuant to Section 2.1; provided that , notwithstanding the foregoing, solely with respect to the Prior Ditech Serviced Loans, the Transfer Date for such Prior Ditech Serviced Loans shall be the Sale Date (as defined in the MSRPA).

USDA : The United States Department of Agriculture or any successor thereto.





USDA Regulations:     The regulations promulgated by the USDA and other USDA issuances relating to mortgage loans guaranteed by the USDA.

VA : The United States Department of Veterans Affairs or any successor thereto.

VA Regulations : The regulations promulgated by the VA pursuant to the Serviceman’s Readjustment Act, as amended, codified in Title 38 of the Code of Federal Regulations, and other VA issuances relating to mortgage loans guaranteed by the VA.

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Vendor :    Any third-party contractors, vendor and/or service provider engaged by the Subservicer in accordance with general servicing practices and procedures and Applicable Requirements; provided, however , this definition of Vendor shall not include consulting services and non-trade business support services (i) not involved with and not having access to the servicing process or (ii) not involved with the protection of, or having access to, information and/or data related to the Mortgagor, the Mortgage Loans or the Servicing Rights.

Vendor Oversight Guidance : All applicable requirements and guidelines related to the oversight of third-party contractors, vendors and/or service providers as promulgated by (i) the CFPB (including but not limited to CFPB Bulletin 2012-03), (ii) the Board of Governors of the Federal Reserve System (including but not limited to the "Guidance on Managing Outsourcing Risk" dated December 5, 2013), (iii) the Federal Deposit Insurance Corporation (including but not limited to FIL-44-2008 ("Guidance for Managing Third-Party Risk")) and (iv) the Office of the Comptroller of the Currency (including but not limited to OCC Bulletin 2013-29 ("Risk Management Guidance").

VT State Order : That certain Assurance of Discontinuance entered in State of Vermont
In re Green Tree Servicing LLC , 64210-14WnCV, (VT Sup Ct. October 30, 2014).

Walter : Walter Investment Management Corp.

ARTICLE II AGREEMENTS OF THE SUBSERVICER

Section 2.1.     General .

The Subservicer hereby agrees to subservice the Mortgage Loans on behalf of the Owner/Servicer pursuant and subject to the terms of this Agreement. Except for any Mortgage Loans in which the related Servicing Rights were purchased under the MSRPA, prior to each Transfer Date, the Owner/Servicer shall deliver by electronic transmission to the Subservicer a data tape identifying the Mortgage Loans to be included under this Agreement on such Transfer Date, which Mortgage Loans shall thereby be deemed to be subject to the terms of the Agreement. In connection with a Transfer Date, the Subservicer shall execute an Acknowledgment Agreement identifying the Mortgage Loans to be made subject to this Agreement on such Transfer Date and setting forth any additional business terms mutually agreed upon by the parties with respect to such Mortgage Loans.

Except with respect to any Prior Ditech Serviced Loans, the Subservicer shall not have any liability for any breach under this Agreement resulting from any incorrect information provided by the Owner/Servicer or on the Owner/Servicer’s behalf with respect to the Mortgage Loans, Mortgage Loan Schedule or Mortgage Servicing File, or the Owner/Servicer’s failure to deliver or cause to




be delivered the complete Mortgage Servicing File for each Mortgage Loan (other than each Prior Ditech Serviced Loan). The Subservicer shall promptly notify the Owner/Servicer if it becomes aware of any incorrect or missing information or documents relating to any Mortgage Loan or Mortgage Servicing File to the extent material to the servicing of a Mortgage Loan and compliance with the Subservicer’s obligations hereunder.

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Upon the Owner/Servicer's request, the Subservicer shall fully cooperate with the Owner/Servicer and any backup servicer designated by the Owner/Servicer, including, but not limited to, working and coordinating with such backup servicer's personnel to provide applicable mapping system fields, data checks, conversion routines and other assistance to enable such backup servicer to receive readable data from the Subservicer on a periodic basis, which frequency shall be determined by the Owner/Servicer. In connection therewith, the Subservicer shall provide information and data regarding the Mortgage Loans and Servicing Rights to the designated backup servicer as reasonably required by such backup servicer, including but not limited to contacts for Vendors and Default Firms performing services on the Mortgage Loans, images of Mortgage Servicing Files, reports identifying the party in possession of the Mortgage Loan Documents from the Custodian, etc. The Owner/Servicer shall reimburse the Subservicer for its reasonable, actual and documented out-of-pocket or internally allocated, as applicable, costs and expenses incurred by the Subservicer in connection with its cooperation with such backup servicer.

Section 2.2.     Compliance with Applicable Requirements.

(a)      In connection with Subservicing, the Subservicer will comply with all Applicable Requirements. Where Applicable Requirements appear to be in conflict, the Subservicer shall use commercially reasonable efforts to determine a course of action in resolution of such conflict and, if a resolution is not apparent, the Subservicer shall notify the Owner/Servicer, and the parties shall consult with each other and cooperate to determine the appropriate course of action.

(b)      Where applicable, the Subservicer will comply with the National Housing Act, as amended, and with the Servicemembers Civil Relief Act of 2003, as amended, and with all rules and regulations issued under each of those statutes, and with requirements of PMI Companies, including requirements concerning the giving of notices and submitting of claims required to be given or submitted pursuant to Applicable Requirements.

(c)      The Subservicer shall maintain its current internal quality control program that reviews, on a regular basis, its compliance with and conformity to all Applicable Requirements (including all applicable regulations, rules, directives and published guidance of the CFPB, as such may be amended, modified or supplemented from time to time) to which the Subservicer is subject. The program shall include evaluating and monitoring the overall quality of the Subservicer’s loan servicing and origination activities, including collection call programs, in accordance with industry standards and this Agreement. The Subservicer shall provide to the Owner/Servicer on a quarterly basis (no later than the 5th Business Day following any such three-month period), a written summary setting forth material findings of such quality control program relevant to the servicing and origination of the Mortgage Loans from such three (3) month period and, on an quarterly basis, shall provide Owner/Servicer with a copy of its quality control program. The quality control will include tests of business process controls and loan level sampling and diligence. The Subservicer shall track any issues that emerge from the quality control reviews of itself and its Vendors, Off-




shore Vendors and Default Firms to ensure that the Owner/Servicer is promptly notified of any potential material issues on a semi-annual basis and that such potential material issues are timely addressed and remediated. The Subservicer shall provide the Owner/Servicer with notice of any modifications to the quality control program as promptly as possible and in any event not later than within one calendar

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month following the implementation of such modification (which notification requirement may be satisfied by the Subservicer identifying such modifications during the monthly telephone status conference between the Owner/Servicer and the Subservicer), in which case the Owner/Servicer shall have the option to perform a due diligence review of the revised quality control program on reasonable notice to the Subservicer.

(d)      With respect to Mortgage Loans for which the Owner/Servicer is the Investor, the Subservicer shall service such Mortgage Loans in accordance with applicable Agency Guidelines; provided , however , that (i) the Subservicer shall, on each Business Day, remit to the Owner/Servicer all collections received by the Subservicer two (2) Business Days prior to such Business Day or such other frequency as to match the remittance cycles that the Subservicer remits funds to the applicable Agency, (ii) the parties may agree in writing to provide for servicing provisions different from the applicable Agency Guidelines and (iii) at the request of the Owner/Servicer, the Subservicer shall cooperate in good faith in negotiating a separate subservicing agreement related to such Mortgage Loans.

(e)      Notwithstanding any provision in this Agreement to the contrary, with respect to any Mortgage Loan for which an Agency is the Investor, to the extent any provision in this Agreement is inconsistent with the applicable Agency Guidelines, the applicable Agency Guidelines shall control.

Section 2.3.     Engagement of Contractors.

(a) The Subservicer and the Owner/Servicer agree that Exhibit J will be finalized and attached hereto within ten (10) Business Days of the date hereof without any further action by the parties. Exhibit J will set forth the following lists (in a format reasonably acceptable to the Owner/Servicer): (i) Vendors (excluding Off-shore Vendors) that the Subservicer engages on a platform-wide basis to which the Subservicer has assigned a tier 1 or tier 2 risk tier rating, a summary of activities for each such Vendor and the applicable risk tier the Subservicer has assigned such Vendor, (ii) Off-shore Vendors that the Subservicer engages on a platform-wide basis to which the Subservicer has assigned a tier 1 or tier 2 risk tier rating, a summary of activities for each such Vendor and the applicable risk tier the Subservicer has assigned such Off-shore Vendor, (iii) Default Firms engaged by the Subservicer for foreclosures only which the Subservicer has assigned a tier 1 or tier 2 risk tier rating and identifying the applicable risk tier the Subservicer has assigned such Default Firm and (iv) Default Firms engaged by the Subservicer for litigation only (excluding foreclosures) to which the Subservicer has assigned a tier 1 or tier 2 risk tier rating and identifying the applicable risk tier the Subservicer has assigned such Default Firm (collectively, the " Vendor List ").

(b) From time to time, the Subservicer may engage other Vendors in addition to those appearing on the Vendor List to provide services to the Subservicer that are related to the Mortgage




Loans. The Subservicer shall notify the Owner/Servicer of any additional Vendors and/or Default Firms. In the event any such additional Vendor and/or Default Firm used by Subservicer to which the Subservicer has assigned a tier 1 or tier 2 risk tier rating or any Off- shore Vendor is identified by the Owner/Servicer as having been deficient in the reasonable judgment of the Owner/Servicer, the Owner/Servicer shall notify the Subservicer with its concerns of such Vendor and/or Default Firm. The Subservicer shall promptly respond to the

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Owner/Servicer and the parties hereto shall cooperate in good faith to resolve the Owner/Servicer's concerns and/or findings relating to such Vendor and/or Default Firm, including but not limited to determining if such deficiencies can be corrected or to replace such Vendor or Default Firm, as applicable, with another Vendor or Default Firm, as applicable, mutually acceptable to the parties and in accordance with Applicable Requirements. In addition, the Subservicer shall promptly notify the Owner/Servicer of any material deficiencies with respect to any Vendor and/or Default Firm used by the Subservicer with respect to any Mortgage Loan.

(c) With respect to any Vendor that performs any Mortgagor-facing activity, Owner/Servicer-facing activity and/or Investor-facing activity, the Owner/Servicer and its designees shall have the right to (i) examine and audit the books, records, and/or other information of any such Vendor and (ii) monitor the activities of such Vendor (including but not limited to reviewing call transcripts and listening to audio-recordings of calls to Mortgagors).

(d) All foreclosure attorneys, bankruptcy attorneys and eviction attorneys (collectively, " Default Firms ") to be used in connection with the servicing and administration of the Mortgage Loans and REO Properties shall be engaged in accordance with Applicable Requirements.

(e) Notwithstanding anything in this Agreement to the contrary, for the avoidance of doubt, any approval of any Vendor, Off-shore Vendor or Default Firm on the Vendor List by the Owner/Servicer as well as any due diligence review conducted by Owner/Servicer thereon shall not relieve Subservicer of its representations, warranties and/or covenants set forth in this Agreement or any related remedies under the Agreement. Any such Vendor, Off-shore Vendor and/or Default Firms engaged by Subservicer shall be engaged on commercially reasonable, arm’s length basis and at competitive rates of compensation consistent with Applicable Requirements.

(f) The Subservicer shall oversee all Vendors, Off-shore Vendors and Default Firms on the Vendor List in accordance with the Vendor Oversight Guidance and its third-party management policy, and require that all Vendors', Off-shore Vendors' and Default Firms' on the Vendor List’ policies and procedures relating to services provided with respect to this Agreement comply with all Applicable Requirements, the Vendor Oversight Guidance and the servicing standards consistent with this Agreement. If reasonably necessary for the Owner/Servicer to comply with the requirements of any Governmental Authority that exercises authority over the Owner/Servicer, the Subservicer shall, unless explicitly prohibited under Applicable Requirements or under the applicable Vendor, Off-shore Vendor or Default Firm contract, at the request of the Owner/Servicer, provide Owner/Servicer with copies of any contracts, by or with any Vendors, Off-shore Vendors and/or Default Firms on the Vendor List and any reports, evaluations, reviews or assessments with respect to such contractors. Solely as it relates to violation by a Vendor that affects the Mortgage Loans, the Subservicer shall provide to the Owner/Servicer, within twenty-one (21) Business Days, (i) notice of any violations by any Vendor, Off-shore Vendor and/or Default Firm under the Vendor Oversight Guidance, the Subservicer's third-party management policy and/or Applicable




Requirements and (ii) a summary and action-plan by the Subservicer detailing how such violation(s) will be remediated. The Subservicer shall provide the Owner/Servicer with a searchable electronic copy of the

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Subservicer's then current third-party management policy on a monthly basis via electronic mail, the Subservicer's website and/or a DVD or other portable storage device, provided, however , that the Subservicer shall provide an updated copy of the third-party management policy promptly following the implementation of a material change.

(g) The Subservicer shall conduct periodic reviews of the Vendors, Off-shore Vendors and Default Firms on the Vendor List that are involved in performing servicing activities related to this Agreement in accordance with the Vendor Oversight Guidance and the Subservicer’s policies and procedures to confirm compliance, timeliness and completeness with respect to the terms of this Agreement and Applicable Requirements. The Subservicer shall maintain a risk management program that establishes appropriate controls in place to monitor the Subservicer’s Vendors, Off-shore Vendors and Default Firms. During such periodic reviews, the Subservicer shall confirm that the Vendors, Off-shore Vendors and Default Firms providing services with respect to this Agreement are not subject to litigation or other enforcement actions that could have a material effect on such Vendor's, Off-shore Vendor's and/or Default Firm's financial viability or reputation. The Subservicer shall provide to the Owner/Servicer, no later than the Reporting Date, the results of the periodic reviews conducted by or on behalf of the Subservicer during the prior month or other applicable review period for any Vendors, Off-shore Vendors and Default Firms on the Vendor List, which shall be in the form of performance scorecards, risk rating and risk-tier assignment system, in each case, in a format reasonably acceptable to the Owner/Servicer. The Subservicer shall notify the Owner/Servicer of any changes to the Subservicer's scorecarding, risk-rating, or risk-tiering methodology, in any event, as promptly as possible thereafter, and in no event later than one calendar month following the implementation of such change.

(h) In accordance with the terms and conditions of Subservicer's agreement with the applicable Vendor, Off-shore Vendor and/or Default Firm, Subservicer shall satisfy in a timely manner its financial obligations to the Vendors, Off-shore Vendors and Default Firms providing services with respect to this Agreement to the extent such financial obligation is required to be made under such agreement. Subservicer shall maintain appropriate controls to ensure that (i) compensation paid to the Vendors, Off-shore Vendors and Default Firms on the Vendor List providing foreclosure services with respect to the Mortgage Loans is based on a method that is consistent with Applicable Requirements and considers the accuracy, completeness and legal compliance of foreclosure filings and (ii) that such services are provided only as frequently as reasonably necessary in light of the circumstances, and, in the case of both (i) and (ii) above, is not based solely on increased foreclosure volume or meeting processing timelines.

(i) The Subservicer shall maintain a risk management program to monitor the Vendors, Off-shore Vendors and Default Firms on the Vendor List. This program will include evaluating Default Firms used by the Subservicer for compliance with Applicable Requirements, including verification of all documents filed or otherwise utilized by such firms in any foreclosure or




bankruptcy proceeding or other foreclosure-related litigation and all compensation arrangements with such Default Firms are consistent with this Agreement and Applicable Requirements.

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Section 2.4.     Procedure .

Until the principal and interest of each Mortgage Loan is paid in full, unless this Agreement is sooner terminated pursuant to the terms hereof, and subject to all Applicable Requirements, the Subservicer shall:

(a) Collect from Mortgagors applicable payments of principal and interest, and applicable deposits for taxes, assessments and other public charges that are generally escrowed, hazard insurance premiums, flood insurance premiums as required or private mortgage insurance premiums, optional insurance premiums, and all other items, as they become due;

(b) Accept payments of principal and interest and Escrow Payments only in accordance with the Mortgage Loan and Applicable Requirements. Deficiencies or excesses in payments shall be accepted and applied, or accepted and not applied, or rejected in accordance with Applicable Requirements;

(c) Apply all installment payments and Escrow Payments collected from the Mortgagor, and maintain permanent mortgage account records capable of producing, in chronological order: the date, amount, distribution, installment due date, or other transactions affecting the amounts due from or to the Mortgagor and indicating the latest outstanding balances of principal, escrow accounts, advances, and unapplied payments;

(d) Pending disbursement, segregate and deposit funds collected in one or more Custodial Accounts or Escrow Accounts, as applicable, maintained at an insured financial institution approved by the Owner/Servicer in such manner as to show the custodial nature thereof, and so that Investor and each separate Mortgagor whose funds have been deposited into such account or accounts will be individually insured under the rules of the FDIC. The Subservicer’s records shall show the respective interest of Investor and each Mortgagor in all such Custodial Accounts and Escrow Accounts. All Custodial Accounts and Escrow Accounts shall be maintained by and carried in records of the Subservicer as "trustee" for the Owner/Servicer and/or Investors and/or Mortgagors, except as may otherwise be required by Applicable Requirements;

(e) Pay interest on Mortgagors’ escrow accounts if any Applicable Requirement requires the payment of interest on such amounts. Such interest amounts paid by the Subservicer shall be reimbursed by the Owner/Servicer and included as part of the Subservicer Economics payable to the Subservicer. As applicable, the Subservicer will determine the amount of Escrow Payments to be made by Mortgagors and will furnish to each Mortgagor, at least once a year, an analysis of each Mortgagor’s escrow account in accordance with Applicable Requirements;





(f) Maintain accurate records reflecting the status of taxes, ground rents, and other recurring similar charges generally accepted by the mortgage servicing industry, which would become a lien on the Mortgaged Property. For all Mortgage Loans providing for the payment to and collection by the Subservicer of Escrow Payments for taxes, ground rents, or such other recurring charges, the Subservicer shall remit payments for such charges before any penalty date. The Subservicer assumes responsibility for the timely remittance of all such payments and will hold harmless and indemnify the Owner/Servicer and Investor from all penalties, loss, or damage

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resulting from the Subservicer’s failure to discharge said responsibility subsequent to the Sale Date of the particular Mortgage Loan by the Subservicer. The Subservicer shall promptly notify the Owner/Servicer if it becomes aware of any missing or erroneous information with respect to the Mortgage Loans that is preventing or impeding the Subservicer from timely meeting tax or other payments obligations with respect to the Mortgage Loans or from otherwise meeting the Subservicer’s obligations under this Agreement. Within thirty (30) days of each Transfer Date, the Subservicer shall notify the Owner/Servicer in writing identifying the related Mortgage Loans for which assignable life-of-loan tax service or flood service contracts have not been provided to the Subservicer in connection with the servicing transfer. If directed by the Owner/Servicer, the Subservicer shall obtain, at the Owner/Servicer’s cost with respect to each Mortgage Loan which is not a Prior Ditech Serviced Loan or at the Subservicer's cost with respect to each Prior Ditech Serviced Loan, such tax service and flood service contracts for the related Mortgage Loans pursuant to such directions received from the Owner/Servicer;

(g) For all Mortgage Loans for which no provision has been made for the payment to and collection by the Subservicer of Escrow Payments, the Subservicer shall use commercially reasonable efforts to determine whether any such payments are made by the Mortgagor in a manner and at a time that avoids the loss of the Mortgaged Property due to a tax sale or the foreclosure of a tax lien and otherwise satisfies Applicable Requirements. The Subservicer assumes full responsibility for the payment of all such bills within such time period and shall effect payments of all such bills irrespective of the Mortgagor’s faithful performance in the payment of same or the making of the Escrow Payments. The Subservicer shall make Servicing Advances to effect such payments and shall seek reimbursement of such Servicing Advances on the Owner/Servicer’s behalf from the Mortgagor in accordance with the applicable Mortgage Loan documents or otherwise as permitted by Applicable Requirements. Unless collected by the Subservicer prior to the Subservicer’s next monthly invoice, the Owner/Servicer shall reimburse the Subservicer for such Servicing Advances in accordance with Section 4.1 hereof;

(h) When a Mortgagor’s Escrow Payments are insufficient to pay taxes, assessments, mortgage insurance premiums, hazard or flood insurance premiums, or other items due therefrom, pay such amounts as a Servicing Advance and seek reimbursement from the Mortgagor. Unless collected by the Subservicer from the Mortgagor prior to the Subservicer’s next monthly invoice, the Owner/Servicer shall reimburse the Subservicer for all outstanding deficiencies, and any other Servicing Advances made by the Subservicer to protect the security of the Owner/Servicer and Investor, in accordance with Section 4.1 hereof;

(i) Maintain applicable private mortgage insurance, or optional insurance, as applicable, in effect on the Transfer Date; provided , however , that the Subservicer shall not be obligated to make a Servicing Advance for payment of any optional insurance premium;





(j) Ensure that improvements on a Mortgaged Property are insured pursuant to Investor requirements by a hazard insurance policy and, if required by Applicable requirements, a flood insurance policy;

(k) Comply with any and all procedures outlined in any applicable Agency Guidelines and any applicable guidelines promulgated by a Governmental Authority, which guidelines shall control in the event of any conflict with the terms of this Agreement;

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(l) In accordance with Applicable Requirements, report Mortgagor payment history to consumer reporting agencies with respect to the period following the related Sale Date;

(m) With respect to any MERS Mortgage Loan, update all required MERS fields, with the cooperation of the Owner/Servicer, as necessary and comply with all applicable requirements of MERS; and

(n) For each Mortgage Loan, maintain, at a minimum, copies or images of the Mortgage Servicing File, including original collateral, origination and credit documentation with respect to such Mortgage Loan as may be required by applicable Agency Guidelines and provide copies of the same to the Owner/Servicer promptly upon request.

Section 2.5.     Other Services.

Subject to Applicable Requirements, the Subservicer shall be responsible for further safeguarding Investor’s interest in each Mortgaged Property as follows:

(a) The Subservicer shall identify a relationship manager with respect to the Mortgage Loans, who shall serve as the principal point of contact for the Owner/Servicer for purposes of answering questions with respect to the Subservicing pursuant to this Agreement. The Subservicer will provide prompt notice to the Owner/Servicer if a change occurs with the relationship manager. The Subservicer will provide the Owner/Servicer with a contact for inquiries regarding the Subservicer’s financial condition and its status as an eligible servicer in good standing with each Agency;

(b) The Subservicer shall (i) promptly notify the Owner/Servicer but in no event later than two (2) Business Days of following receipt from any Agency, Insurer or Governmental Authority of an inquiry relating to an alleged violation of Applicable Requirements with respect to any Mortgage Loans that could reasonably result in a sanction, fee or other liability to the Owner/Servicer or otherwise materially adversely affect the Owner/Servicer or the Subservicer’s ability to perform its obligations under this Agreement, including, but not limited to, any allegations of discrimination by the Subservicer and any civil investigative demand or request for information, and shall promptly provide a copy of any such allegation, demand or inquiry to the Owner/Servicer, and (ii) cooperate fully with the Owner/Servicer to respond promptly and completely to any such allegations or inquiries and similarly to any such allegations or inquiries received by the Owner/Servicer. The Subservicer shall promptly provide the Owner/Servicer with notice but in no event later than two (2) Business Days of learning that an investigation of the Subservicer's servicing practices by any Governmental Authority has determined that material deficiencies in servicing performance or violation of Applicable Requirements has occurred; provided , however , that the Subservicer shall provide prompt notice but in no event later than two (2) Business Days to the




Owner/Servicer if (i) the Subservicer reasonably believes that a Governmental Authority is reasonably likely to suspend, revoke or limit any license or approval necessary for the Subservicer to service the Mortgage Loans in accordance with the terms of this Agreement or (ii) a special investigation or non-routine exam of the Subservicer commenced by a Governmental Authority is reasonably likely to materially and adversely affect the Mortgage Loans. The Subservicer shall then periodically (but not less frequently than monthly) confer with the Owner/Servicer to advise the Owner/Servicer of the status of any such

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investigation. In addition, within two (2) Business Days of the Subservicer's receipt of the reports or findings with respect to any such investigation, the Subservicer shall deliver to the Owner/Servicer any such reports and/or findings relating to any material deficiencies in servicing performance or violations of Applicable Requirements. Within two (2) Business Days of the Subservicer's receipt, Subservicer shall provide the Owner/Servicer any consent decree terms and/or any proposed consent decree terms in connection with any investigation or settlement negotiations of the Subservicer's servicing practices by any Governmental Authority.

(c) The Subservicer shall maintain a log of all "qualified written requests" (as such term is used in the Real Estate Settlement Procedures Act) relating to the Mortgage Loans and a log of all escalated telephone complaints related to the Mortgage Loans. The Subservicer shall provide copies of such logs and copies of any correspondence or documentation relating to any items included in such logs the following month no later than the Reporting Date (or promptly upon the request by the Owner/Servicer);

(d) The Subservicer shall keep accessible and retrievable, and shall transmit to the Owner/Servicer no later than the Reporting Date (or promptly upon the request by the Owner/Servicer), copies of all records relating to the Subservicing, including records related to foreclosure that the Subservicer has produced, or has received from a prior subservicer;

(e) The Subservicer shall maintain a MERS quality assurance plan to promote compliance with all MERS requirements and Applicable Requirements and provide the Owner/Servicer with a copy of such plan upon request. The Subservicer shall provide the Owner/Servicer with prompt notice of any material modification to its MERS quality assurance plan made after the date hereof and agrees to cooperate in good faith in addressing any questions or concerns of the Owner/Servicer regarding such modification. The Subservicer shall cooperate with any audit by the Owner/Servicer with respect to any Mortgage Loan registered with MERS and compliance with the MERS requirements, including providing access to any relevant documentation or information in connection therewith; and

(f) The Subservicer shall strictly comply with the CFPB Stip Order and each State Order. The Subservicer shall notify the Owner/Servicer of any notice from a Governmental Authority that such Governmental Authority has determined the noncompliance (or alleged noncompliance) of the CFPB Stip Order and/or a State Order by the Subservicer as soon as reasonably practicable not to exceed five (5) Business Days of the Subservicer's receipt thereof. Subservicer shall make available to the Owner/Servicer via a secure web meeting (or such other medium reasonably acceptable to the Owner/Servicer) of any and all reports which Subservicer or its Affiliates have delivered to a Governmental Authority required under the CFPB Stip Order and/or any State Orders within five (5) Business Day of Subservicer's submission to such Governmental Authority. At the Owner/Servicer's request, the Subservicer agrees to participate in quarterly meetings (which meetings may be in-person, telephonic or via a secure web meeting) to discuss any of CFPB Stip




Order and/or each State Order, the Subservicer's reporting submissions in connection therewith and the validation of the Subservicer's compliance therewith.

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Section 2.6.     Service Level Agreements.

(a) The Subservicer shall comply with the Service Level Agreements (" SLAs ") as set forth from time to time on Exhibit F-1 and Exhibit F-2 , or as modified pursuant to this Section 2.6 ; provided , however , that the Subservicer will not be responsible for delays, errors or omissions caused by the Owner/Servicer or any verifiable factors outside of the Subservicer’s control.

(b) No later than the applicable reporting schedule or deadline as set forth in any SLA, Subservicer shall provide to Owner/Servicer a report in the form of Exhibit F-2 that sets forth the Subservicer’s actual results with respect to such SLA for the applicable prior reporting period. In the event the Subservicer fails to comply with any SLA for a particular reporting period, the Subservicer shall provide to the Owner/Servicer in either the same reporting period or the immediately subsequent reporting period an explanation in writing of the reasons for failing to comply with each SLA and the proposed actions that the Subservicer shall undertake to address such failure. The Owner/Servicer and the Subservicer shall cooperate in good faith to resolve any questions or issues regarding the SLAs and the Subservicer’s performance with respect to such SLAs.

(c) At either party’s request, the Owner/Servicer and the Subservicer shall review the SLAs and any proposed modifications to the SLAs (including the related tools and methodologies for measuring or calculating compliance with such SLAs). Such modifications shall become effective when acknowledged in writing and signed by both parties.

Section 2.7.     Accounting and Investor Reporting .

Subject to Applicable Requirements, the Subservicer shall:

(a) Remit to each Investor, on a date and in a manner required under the applicable Agency Guidelines, all principal, interest, Agency guaranty fees (and any other amounts) due to such Investor. The Owner/Servicer shall reimburse the Subservicer for advancing any Agency guaranty fees as part of P&I Advances in accordance with Section 4.1 hereof;

(b) Provide the Owner/Servicer with the servicing reports set forth in Exhibit E in a format reasonably requested by the Owner/Servicer and in the frequency set forth in Exhibit E . The Subservicer and the Owner/Servicer agree that Exhibit E will be finalized and attached hereto within ten (10) Business Days of the date hereof (or such other date as mutually agreed upon) without any further action by the parties. The Subservicer shall also provide to the Owner/Servicer monthly reports (and the related calculations) of the Delinquency Ratio, the Servicing Advance Ratio and Quarterly Refinancing Percentage, in each case, in a format reasonably requested by the Owner/Servicer. All monthly reports shall be provided by the Subservicer to the Owner/Servicer on or prior




to Reporting Date. Subservicer also shall provide Owner/Servicer with a customized daily data file as set forth in Exhibit E in a format reasonably requested by Owner/Servicer. In addition, the Subservicer shall cooperate in good faith with the Owner/Servicer to provide any additional reports as may be reasonably requested from time to time and the reasonable, actual and documented out-of-pocket or internally allocated, as applicable, expenses incurred by the Subservicer shall be reimbursed by the Owner/Servicer only

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to the extent the applicable information for such reports is not readily available without the Subservicer incurring material costs and expenses and as otherwise agreed from time to time. Reports required pursuant to this Section 2.7(b) may be changed from time to time as mutually agreed to by the parties. The Subservicer shall acknowledge the Owner/Servicer’s written request for such reports within 24 hours of receipt. Within two (2) Business Days from such acknowledgment, the Subservicer shall provide the Owner/Servicer with a loan-level download (in a format reasonably requested by the Owner/Servicer) of servicing system collection comments and such other servicing system data as the Owner/Servicer may reasonably request, except that if such reports reasonably require more than two (2) Business days to prepare and provide, the Subservicer will provide the Owner/Servicer an action plan detailing the delivery of such reports;

(c) On each Business Day, no later than two (2) Business Days of receipt thereof, remit to the Owner/Servicer all Owner/Servicer Economics (to the extent greater than zero) with respect to the Mortgage Loans pursuant to Section 4.1 ; provided , however , the Subservicer shall immediately notify the Owner/Servicer of any disputed amounts as forth in Section 4.3 and any disputed amounts shall not be included in the calculation until resolved in a mutually acceptable fashion pursuant to Section 4.3 . The Subservicer shall provide the Owner/Servicer with sufficient information in an electronic format to confirm and reconcile the calculation of (i) the Owner/Servicer Economics each day and (ii) the Owner/Servicer Economics and Subservicer Economics each month, including the appropriate breakdown and support of the various components of the daily Owner/Servicer Economics and monthly Owner/Servicer Economics and Subservicer Economics (on a loan-by-loan basis) and reflecting all applicable fees payable to Owner/Servicer and to Subservicer;

(d) Promptly deliver to the Owner/Servicer any notice received by the Subservicer from an Investor that instructs the Subservicer to transfer servicing of any Mortgage Loan. In the event of a conflict between the Investor instructions and instructions by the Owner/Servicer, the Owner/Servicer and the Subservicer agree to work with such Investor and each other in good faith to resolve the conflict. In no event shall the Subservicer be required to comply with any instruction by the Owner/Servicer that might reasonably jeopardize the Subservicer’s status, standing, or approval with an Agency, or that would violate any Applicable Requirements;

(e) Except as otherwise required by Applicable Requirements, all Float Benefit shall be payable to the Owner/Servicer, which amounts shall be included in the calculation of the Owner/Servicer Economics in accordance with Section 4.1 .    The Owner/Servicer shall be responsible for all fees and charges associated with maintaining any Custodial Account or Escrow Account;

(f) Where Investors require interest paid through the end of the month although interest due from the Mortgagor is to the actual date of the prepayment in part or in full, Subservicer will pay the amount necessary to cover any uncollected interest due Investor, which amount will be reimbursable as a P&I Advance;





(g) Not accept any prepayment of any Mortgage Loan except as specified, required, or authorized by Applicable Requirements and by the terms of the Mortgage, nor waive, modify,

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release, or consent to postponement on the part of the Mortgagor of any term or provision of the applicable Mortgage Loan documents, except as permitted under Applicable Requirements;

(h) Upon payment of a Mortgage Loan in full, and subject to Section 3.2 hereof, have prepared and file any necessary release or satisfaction documents, and continue Subservicing of the Mortgage Loan pending final settlement, and refund amounts due the Mortgagor in accordance with Applicable Requirements;

(i) Make interest rate adjustments in compliance with Applicable Requirements and the Mortgage Loan documents to reflect the movements of the applicable Mortgage Loan rate index. The Subservicer shall deliver all appropriate notices required by Applicable Requirements and the Mortgage Loan regarding such interest rate adjustments including but not by way of limitation, timely notification to Investor, of the applicable date and information regarding such interest rate adjustment, the methods of implementation of such interest rate adjustments, new schedules of Investor’s share of collections of principal and interest, and of all prepayments of any Mortgage Loan hereunder by Mortgagor;

(j) Perform such other customary duties, furnish copies of standard reports and execute such other documents in connection with its duties hereunder as the Owner/Servicer and Investor from time to time reasonably may require. Upon request, the Subservicer shall provide the Owner/Servicer with some or all of the reports provided to the Investor. The Subservicer shall cooperate in good faith with reasonable requests by the Owner/Servicer or Investors to adapt or update reports to reflect their reporting needs or preferences and shall make any changes required to conform with then current Applicable Requirements;

(k) The Subservicer shall cause a certified public accountant selected and employed by it to provide the Owner/Servicer not later than ninety (90) days after the close of Subservicer’s fiscal year, with a certified statement of the Subservicer’s financial condition as of the close of its fiscal year and an attestation relating to compliance with the relevant servicing criteria under Item 1123 of Regulation AB promulgated by the Securities and Exchange Commission (or compliance with the Uniform Single Attestation Program for Mortgage Bankers) by an independent public accounting firm which is a member of the American Institute of Certified Public Accountants at such time that such statements, certifications and other reports are delivered to the Agencies or other Investors;

(l) As promptly as possible and in no event later than two (2) Business Days following receipt thereof, the Subservicer shall notify the Owner/Servicer of (i) any notice by an Agency regarding the termination or potential termination of the Subservicer as an eligible servicer for any Agency, (ii) any notices of material noncompliance received from any Agency that is not resolved within the cure period provided by the Agency, if applicable, and (iii) any downgrade or anticipated downgrade of the Subservicer’s servicer ratings with any rating agency. In the event any items of




material noncompliance with Applicable Requirements are discovered, or are specifically noted in connection with any audit or examination of the Subservicer’s servicing of any of the Mortgage Loans, the Subservicer shall promptly address and resolve such items and report the status, findings and resolution of such items in a timely manner to the Owner/Servicer and as otherwise required by the applicable Agencies;

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(m) The Subservicer shall promptly notify the Owner/Servicer if it becomes aware of any repurchase claim by the applicable Agency with respect to any Mortgage Loan and shall cooperate with any reasonable requests of the Owner/Servicer for information with respect to such Mortgage Loan and in connection with coordinating the repurchase claim (including, but not limited to, providing copies of related collection system comments) and delivery of the applicable Mortgage Loan file and related documents to the Owner/Servicer or its designee with respect to such repurchase transaction. In accordance with applicable Agency Guidelines and the MSRPA, once the rebuttal process has been completed and the related Agency or other Investor still requires repurchase of the related Mortgage Loan, the Subservicer, in accordance with the MSRPA, shall cause the applicable repurchase price amount to be deposited in the related Custodial Account in order to be drafted by or remitted to the applicable Agency or other Investor in accordance with the applicable Agency Guidelines; and

(n) The Subservicer shall as promptly as possible and in no event later than two (2) Business Days following receipt thereof, forward to the Owner/Servicer any and all communications received from Investors regarding the Mortgage Loans or affecting the servicing of the Mortgage Loans. In addition, the Subservicer shall notify the Owner/Servicer of any litigation, including mortgagor litigation, contested foreclosure actions, mortgagor bankruptcy proceedings, arising with respect to any of the Mortgage Loans, which are required to be reflected in the normal monthly reporting provided by the Subservicer under this Agreement, provide ongoing monthly reports regarding the status of such litigation and associated costs and expenses and promptly provide copies of all notices, correspondence, subpoenas and other items regarding any litigation or potential litigation relating to any of the Mortgage Loans. The Subservicer shall cooperate in good faith with any requests or instructions regarding such litigation from the Owner/Servicer.

Section 2.8.     Delinquency Control .

The Subservicer shall, in accordance with Applicable Requirements:

(a) Maintain a delinquent mortgage servicing program that shall include an adequate accounting system that indicates the existence of Delinquent Mortgage Loans, a procedure that provides for sending delinquent notices, assessing late charges, and returning inadequate payments, and a procedure for the individual analysis of distressed or chronically delinquent Mortgage Loans;

(b) Maintain a collection department and an on-line automated collection system that complies in all material respects with applicable Agency Guidelines;

(c) Provide the Owner/Servicer and the applicable Investor, in an electronic format, with a month end collection and delinquency report containing data elements to be mutually agreed upon by the parties (or required by Applicable Requirements) identifying and describing on a loan-level




basis the status of any Delinquent Mortgage Loans, and any Loss Mitigation efforts, including, but not limited to, loan modifications and forbearances. In addition, the Subservicer shall provide to the Owner/Servicer, in an electronic format, with daily reports containing data elements to be mutually agreed upon by the parties, including but not limited to servicing advances, collections and remittances. Loan-level monthly reports shall be properly

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coded by the Subservicer to identify Mortgage Loans affected by Loss Mitigation efforts or other changes in payment terms and such reports shall reflect such pending payment terms. From time to time as the need may arise, the Subservicer shall provide the Owner/Servicer and the applicable Investor with Mortgage Loan service reports relating to any items of information that Subservicer is otherwise required to provide hereunder, or detailing any matters Subservicer believes should be brought to the special attention of Owner/Servicer and Investor;

(d) In accordance with Applicable Requirements, administer the foreclosure or other acquisition of the Mortgaged Property relating to any Mortgage Loan in the name of the Subservicer, process claims for any applicable insurance and until the transfer of such Mortgaged Property to Investor or private mortgage insurer, as applicable, protect such property from waste and vandalism. The Subservicer will have title to the Mortgaged Property conveyed in the name designated by Investor or the name designated by the Owner/Servicer (if the Owner/Servicer is the Investor with respect to such Mortgaged Property) or pursuant to Applicable Requirements; provided that, in no event shall the Subservicer have title to the Mortgaged Property conveyed in the name of the Owner/Servicer without the Owner/Servicer's prior written consent; and

(e) The Subservicer shall take appropriate measures to ensure, on an ongoing basis, the accuracy of all documents filed or otherwise utilized by the Subservicer or its Vendors, Off- shore Vendors and/or Default Firms in any judicial or non-judicial foreclosure proceeding, related bankruptcy proceeding or in other foreclosure-related litigation, including but not limited to, documentation sufficient to establish ownership of the Mortgage Loan by the related Investor or the Owner/Servicer (if the Owner/Servicer is the Investor with respect to such Mortgage Loan) and the right to foreclose at the time the foreclosure action is commenced in the name of the Subservicer. The Subservicer shall be required to maintain, and to cause its Vendors, Off- shore Vendors and Default Firms to maintain, current and accurate records relating to foreclosure or related bankruptcy proceedings or related litigation, with a clear auditable trail of documentation capable of validating foreclosure that the Subservicer has produced, or has received from a prior subservicer, and shall cause its Vendors, Off-shore Vendors and Default Firms to do the same. In connection with any foreclosure proceeding, the Subservicer shall handle such foreclosure proceedings in the name of the Subservicer and the Subservicer shall comply with all Applicable Requirements and any regulatory orders, directives or guidance applicable to the Owner/Servicer or the Subservicer; provided that, in no event shall the Subservicer (ii) foreclose on the related Mortgaged Property in the name of the Owner/Subservicer or (ii) have title to the Mortgaged Property conveyed in the name of the Owner/Servicer, in each case, without the Owner/Servicer's prior written consent. The Subservicer shall (i) require that each Default Firm providing foreclosure or bankruptcy services regularly certify that its attorneys are licensed to practice in the relevant jurisdiction and are in good standing in the relevant jurisdictions and bars and (ii) provide the Owner/Servicer with a copy of each such certification upon request of the Owner/Servicer.

Section 2.9.     REO Properties .





In the event that title to a Mortgaged Property is acquired in foreclosure, redemption, ratification or by deed in lieu of foreclosure, the deed or certificate of sale shall be taken in the name of Investor, or its designee (or as otherwise required by applicable Agency Guidelines);

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provided that, in no event shall the Subservicer have title to the Mortgaged Property conveyed in the name of the Owner/Servicer without the Owner/Servicer's prior written consent.

The Subservicer shall transfer REO Properties to the Investor in such manner and at such time as required under Applicable Requirements; provided that, in no event shall the Subservicer have title to the Mortgaged Property transferred to the name of the Owner/Servicer without the Owner/Servicer's prior written consent. Prior to transferring any REO Property to the Investor, the Subservicer shall comply with all Applicable Requirements related to the maintenance of such property. The Subservicer shall maintain on each REO Property monthly fire and hazard insurance with extended coverage in an amount that is at least equal to the maximum insurable value of the improvements that are a part of such property and, to the extent required and available under the national flood insurance program, flood insurance, all in the amounts and with such coverage as required under Applicable Requirements. The Owner/Servicer shall be responsible for obtaining and maintaining any liability coverage insuring the Owner/Servicer.

The Subservicer shall be entitled to the monthly servicing fee with respect to REO Property indicated in Exhibit B to the extent servicing responsibilities with respect to such REO Property is not transferred to the Investor or another party.

Section 2.10. Books and Records; Access to Facilities .

(a) The Owner/Servicer shall have the right to conduct diligence on the Subservicer and the Servicing Rights, Mortgage Loans (including, without limitation, the origination and prior servicing of the Mortgage Loans); provided that with respect to any on-site diligence reviews that exceed one (1) review in any three-month period (absent an event occurring under Section 5.3), any reasonable, actual and documented out-of-pocket or internally allocated, as applicable, costs and expenses incurred by the Subservicer in connection with such additional review shall be at the Owner/Servicer’s expense. In such reviews, the Subservicer will allow the Owner/Servicer, its Affiliates, its agents and its counsel, accountants and other representatives, during normal business hours and upon reasonable notice and provided that such review shall not unduly or unreasonably interrupt the Subservicer’s business operations, to, at any time and from time to time, access to review all of Subservicer’s origination and servicing platform, the Mortgage Files, facilities, employees servicing files, servicing documents, servicing records, data tapes, computer records, servicing systems, and other computer and technology systems or other information pertaining to the Servicing Rights, the Mortgage Loans, P&I Advances and the Servicing Advances. The Subservicer may require that any Persons performing such due diligence on behalf of the Owner/Servicer agree to the same non-disclosure and confidentiality agreements set forth in Section 9.12. In furtherance thereof, the Subservicer shall provide such information, data and materials as reasonably requested by the Owner/Servicer in furtherance of this Section 2.10. In addition, Subservicer shall provide to the regulatory authorities supervising Owner/Servicer or its Affiliates and the examiners and supervisory agents of such authorities, access to the documentation required




by applicable regulations of such authorities supervising Owner/Servicer or its Affiliates with respect to the Mortgage Loans.

(b) The Subservicer shall cooperate in good faith with the Owner/Servicer, its agents, and regulators in responding to any reasonable inquiries regarding the Subservicer’s Subservicing of the Mortgage Loans and the Subservicer’s compliance with, and ability to

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perform its obligations under, the provisions of this Agreement and Applicable Requirements, including without limitation inquiries regarding the Subservicer’s qualifications, expertise, capacity and staffing levels, training programs, work quality and workload balance, reputation (including complaints), information security, document custody practices, business continuity and financial viability, monitoring and oversight of the Vendors, Off-shore Vendors and Default Firms as well as the current accuracy of the representations and warranties made by the Subservicer in Article VII .    The Owner/Servicer may request, and the Subservicer shall cooperate with, reasonable periodic reviews of the Subservicer’s performance and competence under this Agreement to confirm timeliness, completeness, and compliance with all Applicable Requirements and the provisions of this Agreement, and to confirm that foreclosures are conducted in a manner consistent with Applicable Requirements and any regulatory orders, directives or guidance applicable to the Owner/Servicer, the Subservicer, or their Affiliates. The Subservicer shall provide the Owner/Servicer with at least ninety (90) days’ prior written notice if it intends to discontinue or change its current servicing system of record.

(c) The Subservicer shall provide the Owner/Servicer, its Affiliates and/or its agents with access to its secure reporting website portal for electronic data and reports to allow the Owner/Servicer to monitor the Mortgage Loans. Through such secure website portal, the Owner/Servicer shall be provided with access on demand to certain reports and data referenced in this Agreement. Such secure website portal shall have targeted availability of twenty-four hours a day, three-hundred sixty-five (365) days per calendar year with a targeted uptime of 98% per month not to include scheduled maintenance. The Subservicer shall provide the Owner/Servicer at least five (5) Business Days’ notice prior to any scheduled maintenance or other scheduled access interruption such secure website portal; provided that the Subservicer shall immediately notify the Owner/Servicer of any unscheduled access interruptions. The Subservicer shall use commercially reasonable efforts to address any access or availability issues on the same Business Day on which such issues arises. During any such unscheduled access interruptions, the Subservicer shall use commercially reasonable efforts to provide Owner/Servicer certain reports and data in an alternative medium. The Subservicer's secure website portal shall include the following data and documents: (i) imaged Mortgage Loan Documents and Mortgage Servicing File; (ii) imaged copies of all Mortgagor communications;
(iii) records of all Mortgagor communications; (iv) imaged copies of all litigation, bankruptcy, foreclosure related solely to each Mortgage Loan (for the avoidance of doubt, such imaged copies of litigation, bankruptcy and foreclosure will not include those unrelated to the Mortgage Loans); (v) current commentary regarding all Mortgagor communications and all activity related to each Mortgage Loan with sufficient detail to understand the status of any issues; (vi) any Default Firm(s) engaged relating to the Mortgage Loan, if applicable; (vii) call transcripts; (viii) call recordings; (ix) insurance, including LPI, if applicable, hazard, flood; (x) single point of contact; and (xi) the documents and materials described in Section 2.18(e) .

(d) The Owner/Servicer and its designees shall have the right to examine and audit (not to exceed one on-site visit in any three-month period; provided that the Owner/Servicer,




notwithstanding the foregoing, shall be permitted further on-site access if required by Governmental Authorities) the books, records, and/or other information of the Subservicer across the Subservicer's entire servicing platform (excluding any access or information relating to any mortgagor data or performance data for mortgage loans which are not Mortgage Loans) and with respect to the Mortgage Loans, including the servicing systems, computer systems, books,

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records, or other information of the Subservicer relating to the Mortgage Loans, whether held by the Subservicer or by another on its behalf (including but not limited to reviewing call transcripts and listening to audio of calls to Mortgagors (in-person or remotely)) at any time, upon five (5) Business Days' notice. The Subservicer shall cooperate with any request of the Owner/Servicer in connection with such examination/audit and shall facilitate such audits and in connection therewith shall provide Owner/Servicer and its designees access to Subservicer’s offices, servicing systems, computer systems, books and records concerning the Subservicer, this Agreement and the Mortgage Loans at any time. The Owner/Servicer shall pay its own expenses in connection with any such examination.

(e) The Subservicer shall promptly notify the Owner/Servicer that the Subservicer has received the results of any and all reviews or audits conducted by or obtained by the Subservicer, its Vendors, Off-shore Vendors Default Firms, agents or representatives (including internal and external auditors) relating to the Subservicer’s operating practices and procedures to the extent relevant to the services provided by the Subservicer under this Agreement and, the Subservicer shall make such results available to the Owner/Servicer. Such reviews shall include, without limitation, rating agency reviews, SSAE 16 reviews, and MERS reconciliation reports. The Subservicer shall also, and shall cause its Vendors, Off-shore Vendors, Default Firms, agents and representatives to, provide all audit-related materials relevant to the Subservicing of the Mortgage Loans to the Owner/Servicer at the Subservicer’s expense.

(f) For critical systems relied upon by the Subservicer in connection with its obligations under this Agreement, the Subservicer shall, upon the Owner/Servicer’s request, provide the Owner/Servicer with a copy of SSAE 16 or equivalent reviews of its data processing environment and internal controls related thereto, as well as copies of SSAE 16 or equivalent reviews provided by its Vendors, Off-shore Vendors and Default Firms with respect to obligations or services under this Agreement within a reasonable time after such reports are completed, with reasonable time to be no later than thirty days after calendar year end. For the Subservicer’s data processing environment and internal controls, the Subservicer shall provide the Owner/Servicer with a SSAE 16 SOC 1 Type II attestation performed by an independent audit firm with coverage of a minimum of nine months and a bridge letter for each year starting the year ended December 31, 2016 for so long as the Subservicer perform the Subservicing under this Agreement. To the extent such SSAE 16 SOC 1 Type II attestation results in findings, the Subservicer will make commercially reasonable efforts to remediate and respond to any reasonable inquiries regarding any such findings from the Owner/Servicer and its external auditor.

Section 2.11. Insurance .

The Subservicer shall maintain, at its own expense, a blanket fidelity bond and an errors and omissions insurance policy, with broad coverage with financially responsible companies that meet the current requirements of each Agency on all officers, employees or other Persons acting in any capacity with regard to the Mortgage Loans to handle funds, money, documents and papers




relating to the Mortgage Loans. The fidelity bond and errors and omissions insurance shall protect and insure the Subservicer against losses, including forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of such Persons. Such fidelity bond and errors and omissions insurance policy shall also protect and insure the Subservicer against losses in

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connection with the failure to maintain any insurance policies required pursuant to this Agreement and Applicable Requirements and the release or satisfaction of a Mortgage Loan without having obtained payment in full of the indebtedness secured thereby.

No provision of this Section 2.11 requiring the fidelity bond and errors and omissions insurance policy shall diminish or relieve the Subservicer from its duties and obligations as set forth in this Agreement. The minimum coverage under any such bond and insurance policy shall be at least equal to the corresponding amounts required by the Agency Guidelines. Upon request of the Owner/Servicer or Investor, the Subservicer shall cause to be delivered proof of coverage of the fidelity bond and errors and omissions insurance policy. The Subservicer will notify the Owner/Servicer immediately if such fidelity bond and errors and omissions insurance policy is terminated or if the policy amount is decreased.

Section 2.12. Advances .

(a)
Servicing Advances .

The Subservicer shall, from time to time during the term of this Agreement, and for ease of administration, make Servicing Advances when in its good faith judgment it is necessary or advisable to do so and otherwise required under applicable Agency Guidelines, and the Subservicer shall not have any obligation to notify the Owner/Servicer before making any Servicing Advance. The Subservicer shall not make any Servicing Advance not eligible for reimbursement under Agency Guidelines unless required under Applicable Requirements or the Subservicer has obtained the prior consent of the Owner/Servicer to make such Servicing Advance.

(b)
P&I Advances .

The Subservicer shall make all required P&I Advances to an Investor using funds available for remittance to the applicable Investor to the extent permitted under applicable Agency Guidelines. The Subservicer shall cooperate with the Owner/Servicer, Owner/Servicer's lender(s) and any rating agency in connection with the Owner/Servicer's financing of any P&I Advances.

If the Subservicer reasonably determines that on any Draft Date there will not be adequate funds in any Custodial Account to be withdrawn for payment to an Investor, then the Subservicer shall provide the Owner/Servicer written notice of the amount required to be deposited in such Custodial Account so that the Custodial Account will have funds on deposit at least equal to the amount required to be paid to the applicable Investor. The Subservicer shall provide the Owner/Servicer and Owner/Servicer's lender(s) (as identified to the Subservicer by the Owner/Servicer) such written notice at least three (3) Business Days before the Draft Date applicable to such notice which shall contain an estimate of the P&I advance activities for such month and any other information reasonably requested by the Owner/Servicer or Owner/Servicer's lender(s). At least




one Business Day prior to the applicable Draft Date, the Owner/Servicer shall fund (or cause to be funded) the amount set forth in the written notice provided by the Subservicer (or such lesser amount as reasonably determined by the Subservicer) via wire transfer into the applicable Custodial Account. To the extent the amounts the


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Owner/Servicer (or its lender(s)) funded exceeded the amounts required to be paid to the applicable Investor on the related Draft Date, the Subservicer shall remit such excess funds to the Owner/Investor or lender(s), as applicable, on the same Draft Date that such amounts were deposited in the applicable Custodial Account.

(c)
Reimbursement of Servicing Advances .

(1)
The Subservicer shall cooperate with the Owner/Servicer, Owner/Servicer's lender(s) and any rating agency in connection with the Owner/Servicer's financing of any Servicing Advances.

(2)
The Subservicer shall be entitled to be reimbursed for all Servicing Advances made by the Subservicer pursuant to this Agreement on a weekly basis as further described in this Section 2.12(c). On the first Business Day of each week, or as mutually agreed by the Owner/Servicer and Subservicer, the Subservicer shall provide the Owner/Servicer and Owner/Servicer's lender(s) (as identified to the Subservicer by the Owner/Servicer) with reasonable and customary documentation in accordance with Applicable Requirements (and any other information reasonably requested by the Owner/Servicer or Owner/Servicer's lender(s)) and acceptable to the Owner/Servicer and/or Owner/Servicer's lender(s) evidencing Servicing Advances made by the Subservicer in the previous week. Within two (2) Business Days of Owner/Servicer and Owner/Servicer's lender's receipt of such notice, the Owner/Servicer shall remit (or cause to be remitted) the amount set forth in the written notice provided by the Subservicer (or such lesser amount as reasonably determined by the Subservicer) via wire transfer to the Subservicer.

(3)
Notwithstanding any provision in this Agreement to the contrary, the Subservicer shall reimburse the Owner/Servicer for any Servicing Advances made by the Subservicer and reimbursed by the Owner/Servicer in the event (i) the applicable Agency declines to reimburse such advance as a result of the failure of the Subservicer to service the related Mortgage Loan in accordance with Applicable Requirements or (ii) such advance is not    eligible for reimbursement under Agency Guidelines (unless Subservicer is required to make such advance under Applicable Requirements or the Subservicer has obtained the consent of the Owner/Servicer to make such Servicing Advance). In connection therewith, in no event shall the Subservicer be entitled to any processing fees (or other similar fees) set forth on Exhibit B to the extent the Owner/Servicer is entitled to reimbursement from the Subservicer pursuant to this Section 2.12(c)(3).





(4)
No later than the Reporting Date, the Subservicer shall provide a monthly report in a format reasonably acceptable to the Owner/Servicer relating to Servicing Advances which are not eligible for reimbursement under Agency Guidelines or the Agency declines to reimburse such Servicing

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Advances and documenting the reason that such Servicing Advances are not recoverable. In addition, from time to time and upon request of the Owner/Servicer, the Subservicer shall provide, to the Owner/Servicer and Owner/Servicer's lender(s) such documentation, data and/or reports required by the Owner/Servicer and/or Owner/Servicer's lender(s) to enable Owner/Servicer to finance the Servicing Advances and/or P&I Advances.

(d)
Recovery of P&I Advances and Servicing Advances from Mortgagors .

The Subservicer shall use commercially reasonable efforts to collect and recover from the Mortgagors, in accordance with Applicable Requirements, all P&I Advances and Servicing Advances made by the Subservicer or any prior subservicer. The recovery of such advances shall be available to first reimburse the Subservicer for unreimbursed Servicing Advances funded by the Subservicer and the balance of such recovery shall be available to reimburse the Owner/Servicer for unreimbursed advances previously funded or reimbursed by the Owner/Servicer. The Subservicer shall provide the Owner/Servicer with a detailed loan-level report in a format mutually acceptable to the parties setting forth on a loan-level and aggregate basis all P&I Advances and Servicing Advances made or reimbursed during the related reporting period and the advances outstanding on a cumulative basis for each Mortgage Loan. The Subservicer shall promptly notify the Owner/Servicer in the event it has determined that any outstanding advances made with respect to a Mortgage Loan are nonrecoverable from related proceeds on the Mortgage Loan and shall take all commercially reasonable efforts to ensure that the Owner/Servicer is fully reimbursed for outstanding P&I Advances and Servicing Advances upon the liquidation of the related Mortgage Loan. The Subservicer shall cooperate in good faith with the Owner/Servicer to pursue full reimbursement of outstanding P&I Advances and Servicing Advances and shall immediately notify the Owner/Servicer upon becoming aware that any such reimbursement is at risk.

Section 2.13. Solicitation .

The Subservicer shall not, without the prior written consent of the Owner/Servicer, solicit Mortgagors for accident, health, life, property and casualty insurance, or any other non-mortgage related products or services, except for products or processes that facilitate normal servicing activities, such as "phonepay", portfolio defense or automatic payment plans. Only upon receipt of the prior written consent of the Owner/Servicer and in accordance with Applicable Requirements, shall the Subservicer be entitled to solicit individual Mortgagors for accident, health, life, property and casualty insurance and any other non-mortgage related products or services that the Subservicer and the Owner/Servicer deem appropriate. The Subservicer shall retain any resulting commission or other income in such amounts not to exceed those approved by the Owner/Servicer. The Subservicer covenants to the Owner/Servicer that it shall not solicit any Mortgagor for prepaid single-premium credit life, credit disability, credit unemployment, credit property, accident or health insurance, or any other single-premium insurance product. The Subservicer may engage in




solicitation activities not expressly prohibited by this Section. The Subservicer and Owner/Servicer shall negotiate in good faith regarding whether the Owner/Servicer shall grant the Subservicer its prior written consent to solicit Mortgagors for hazard/casualty insurance.

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Section 2.14. HAMP .

The Subservicer acknowledges that the Mortgage Loans may include mortgage loans modified under HAMP and Mortgage Loans that may now or in the future be subject to other local, state or federal government mortgage-related programs that currently exist or may exist in the future. The Subservicer confirms that it is aware of the special requirements for such Mortgage Loans that currently exist or may exist in the future and the Subservicer agrees to assume the additional responsibilities associated with servicing such Mortgage Loans and to take such actions as are necessary to comply with such programs. With respect to each Mortgage Loan subject to a trial payment period pursuant to HAMP as of the related Sale Date, the Subservicer shall take all actions required of a servicer participating in HAMP to complete such trial payment period and implement the related loan modification. The Subservicer will cooperate in good faith in connection with any audit, inspection, review, or investigation of the Subservicer’s compliance with or reporting under HAMP or other government program related to the Mortgage Loans.

Section 2.15. Process Changes and Other Services; Statements of Work .

From time to time during the term of this Agreement, the Owner/Servicer may submit a request, in writing, to the Subservicer to implement process changes and/or perform services in relation to the Subservicing that are not contemplated by or sufficiently described in this Agreement. Upon receipt of such request, the Subservicer shall cooperate in good faith with the Owner/Servicer to enter into a mutually acceptable agreement for implementation of such request (such agreement, a " Statement of Work "), which shall include the time frame for implementation and, if such request involves significant additional cost to the Subservicer, any additional charges to be paid by the Owner/Servicer in connection with such request. Upon the due execution by both parties, the Statement of Work shall constitute an amendment to this Agreement without further action on the part of either party, and such additional services shall be deemed Subservicing requirements hereunder. The Subservicer shall perform the services set forth in the Statement of Work in the manner provided therein and in accordance with the terms of this Agreement, and the Owner/Servicer shall pay for any agreed upon cost, if any, of the implementation and any additional services resulting therefrom in accordance with the terms of the Statement of Work and this Agreement. For the avoidance of doubt, the parties understand and agree that a Statement of Work shall not be required to implement (a) the services already enumerated or contemplated herein or (b) other services or projects previously commenced by the Subservicer on behalf of the Owner/Servicer.

Section 2.16. Pending and Completed Loss Mitigation .

With respect to the Mortgage Loans, (a) the Subservicer shall accept and continue processing any loan modification, deed in lieu, short sale, or other Loss Mitigation requests pending at the time of the applicable Sale Date in accordance with Applicable Requirements, (b) the Subservicer shall honor outstanding trial and permanent loan modification, deeds in lieu, short sales, or other Loss




Mitigation agreements in accordance with Applicable Requirements, including without limitation any trial or permanent loan modifications made under HAMP, and
(c)
the Subservicer shall correctly apply payments with respect to Mortgage Loans for which the

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related Mortgagor is a debtor in a case under Chapter 13 of the United States Bankruptcy Code of 1986, as amended, at the time of the applicable Sale Date.

Section 2.17. Disaster Recovery Plan .

The Subservicer shall maintain its current business continuity plan (" BCP ") that addresses the continuation of services if an incident (act or omission) impairs or disrupts the Subservicer’s obligation to provide the services contemplated under this Agreement. The Subservicer agrees to provide the Owner/Servicer (and any applicable regulatory agencies having jurisdiction over the Owner/Servicer) with a copy of its entire BCP upon the Owner/Servicer’s request. The Subservicer warrants that the BCP conforms to Applicable Requirements and generally accepted industry standards for business continuity planning (collectively, the " BCP Standards "), which include, but are not limited to, recovery strategy, loss of critical personnel, restoring access to documents and data to the Owner/Servicer, documented recovery plans covering all areas of operations pursuant to this Agreement, vital records protection, and testing plans. The Subservicer will maintain and test the BCP at regular intervals (no less frequently than annually) to ensure that the BCP complies with BCP Standards and shall provide reporting of the test results to the Owner/Servicer upon request. The Subservicer will comply with the BCP during the term of this Agreement. The Subservicer shall notify the Owner/Servicer of any material modifications to the BCP.

The Subservicer shall provide disaster recovery and backup capabilities and facilities through which it will be able to perform its obligations under this Agreement with minimal disruptions or delays. The recovery strategy shall, at a minimum, provide for recovery after short and long term disruptions in facilities, environmental support, workforce availability and data processing equipment. If requested by the Owner/Servicer, the Subservicer must provide evidence of its capability to meet any applicable regulatory requirement concerning business continuity applicable to the Owner/Servicer or the Subservicer. In the event that the Owner/Servicer’s internal requirements concerning business continuity diverge from those of the Subservicer, the parties shall agree on a plan of enhancement with the reasonable, actual and documented out-of-pocket or internally allocated, as applicable, costs of the enhancement to the BCP to be paid by the Owner/Servicer.

The Subservicer shall notify the Owner/Servicer immediately of the occurrence of any catastrophic event that affects or could affect the Subservicer’s performance of the services contemplated under this Agreement.

The BCP shall include appropriate provisions to ensure the continued availability of critical third-party services and to ensure an orderly transition to new service providers should that become necessary. The Subservicer shall require that any of its Vendors, Off-shore Vendors and Default Firms providing critical services with respect to this Agreement provide copies of their own business




continuity plans to the Subservicer and the Subservicer shall make such plans available to the Owner/Servicer upon request.

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Section 2.18. Subservicer Performance Standards .

The Subservicer shall perform its obligations under this Agreement in accordance with the following standards:

(a)      The Subservicer shall use commercially reasonable efforts to respond to inquiries from the Owner/Servicer regarding errors, omissions or exceptions in a manner reasonably satisfactory to the Owner/Servicer by acknowledging receipt of such inquires with 24 hours following request by the Owner/Servicer. Within three (3) Business Days from such acknowledgment, the Subservicer shall provide the Owner/Servicer with such information to respond to the inquiry as the Owner/Servicer may reasonably request, except that if such response reasonably require more than three (3) Business days to prepare and provide, the Subservicer will provide the Owner/Servicer an action plan detailing the delivery of such response.

(b)      The Subservicer shall use commercially reasonable efforts to resolve to the reasonable satisfaction of the Owner/Servicer any instances of failure to service the Mortgage Loans in accordance with Applicable Requirements or this Agreement identified by the Owner/Servicer within a reasonable and mutually agreed upon timeframe.

(c)      The Subservicer will maintain adequate staffing, training and procedures in fulfillment, collections, Loss Mitigation, customer service, customer complaint, foreclosure, REO and bankruptcy departments in accordance with Applicable Requirements and Agency Guidelines.

(d)      The Subservicer will maintain adequate foreclosure/bankruptcy staffing to address market conditions and heightened industry focus on current mortgage servicing issues as it relates to defaulted loans and ownership. Staffing includes but is not limited to, when appropriate, engagement of external resources, shadow counsel for document execution, witness preparatory attorney, or other parties. These heightened servicing and staffing protocols are intended to address state mandated Loss Mitigation mediation, document execution protocols, default witnesses, increased litigation/contested cases, chain of title or standing issues, and state and federal law changes affecting default processes and procedures.

(e)      The Subservicer shall input all material information concerning each Mortgage Loan into the Subservicer’s servicing system and shall image and maintain all correspondence and Subservicing documents it prepares or obtains relating to the Mortgage Loans.

(f)      All data and information provided by the Subservicer to the Owner/Servicer or an Investor, or to any other third party at the request or on behalf of the Owner/Servicer pursuant to this Agreement shall be true, accurate and complete in all material respects; provided , that the




Subservicer shall not be liable for inaccurate information that is based on information provided by the Owner/Servicer, an originator, or a prior servicer (other than the Subservicer or an Affiliate of the Subservicer) unless the Subservicer knew of such inaccuracy or reasonably should have known of such inaccuracy pursuant to Applicable Requirements.

(g)      Unless otherwise agreed to by the Subservicer and the Owner/Servicer in a SLA attached hereto, no later than forty-five (45) calendar days after the end of each fiscal quarter

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after the date of this Agreement, the Subservicer shall deliver to the Owner/Servicer the following platform-wide customer service statistics (or such other statistics reasonably requested by the Owner/Servicer): (i) staffing numbers changes, including turnover numbers and outsourced vs. internal; (ii) staffing location changes, including off-shore moves; (iii) advance notice of any outsourcing of consumer-facing staff; (iv) advance notice of any off-shore consumer-facing staff; (v) compliant reports; (vi) changes to staff scoring methodology; (vi) changes to training programs; (vi) numbers of calls/month; (vii) numbers of call monitored each month; (viii) changes to credit-reporting practice; and (ix) answer times, hold times and other measurements of consumer call performance as reasonably requested by the Owner/Servicer.

Section 2.19. Sanction Lists; Suspicious Activity Reports .

(a) The Subservicer represents, warrants and covenants that it has, and shall maintain, policies and internal controls reasonably designed to comply with the economic sanctions administered or enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control (" OFAC "; collectively, with OFAC, the " Sanction Lists ") and the requirements of this Section 2.19(a) . The Subservicer shall screen all existing Mortgagors and related mortgage participants monthly against the Sanction Lists. The Subservicer’s policies shall detail steps (i) to identify and resolve potential matches against the Sanction Lists, and (ii) required for record retention in accordance with regulatory requirements. The Subservicer shall promptly notify the Owner/Servicer of any unresolved potential matches against the Sanction Lists.

(b) The Subservicer represents, warrants and covenants that is has, and shall maintain, policies, training and internal controls reasonably designed to detect and investigate potential suspicious activity and fraud by Mortgagors and related mortgage participants in compliance with the requirements of this Section 2.19(b) .    The Subservicer will promptly disclose to the Owner/Servicer potentially suspicious or unusual activity detected as part of the services performed on behalf of the Owner/Servicer. The Subservicer represents and warrants that it has processes in place for such escalation and disclosure process. The Subservicer represents that it will coordinate the filing of any necessary Suspicious Activity Reports (" SARs ") with respect to the Mortgagors and related mortgage participants with a designated representative of the Owner/Servicer, if appropriate, and will maintain records of all such SARs filed and investigations performed in accordance with regulatory requirements. The Subservicer further represents, warrants and covenants that it has, and shall maintain, policies regarding (i) conducting investigations in a timely manner that is consistent with regulatory expectations and requirements, (ii) maintaining appropriate records for reviews, investigations and escalations, and (iii) if applicable, reviewing requests made pursuant to Section 314(a) of the USA PATRIOT ACT through the Financial Crimes Enforcement Network.

Section 2.20. [Reserved] .

Section 2.21. Litigation Management .





Any litigation related solely to a single Mortgage Loan and incidental to the Subservicer’s servicing obligations hereunder (other than litigation between or among the Owner/Servicer, on the one hand, and Subservicer, on the other hand) shall be managed by the Subservicer or its counsel on behalf of the Owner/Servicer, such as foreclosure, evictions, quiet


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title and bankruptcy filings, at the Subservicer’s internal expense with respect to administration of such litigation (excluding, however, third party costs such as reasonable out-of-pocket attorney’s fees and expenses for which the Owner/Servicer shall remain responsible and which shall be a Servicing Advance hereunder). Any and all such proceedings described in this paragraph shall be taken by the Subservicer in its own name on behalf of the Owner/Servicer.

The parties shall manage litigation relating to other Mortgage Loans in accordance with the Litigation Protocol attached hereto as Exhibit K. The Subservicer and the Owner/Servicer agree that Exhibit K will be finalized and attached hereto within ten (10) Business Days of the date hereof without any further action by the parties. The Subservicer shall deliver on the first (1st) Business Day of each month a report describing all litigation managed by the Subservicer on behalf of the Owner/Servicer.

In addition to the other reports the Subservicer is providing under this Agreement, the Subservicer shall provide the Owner/Servicer, no later than the Reporting Date (or such other applicable deadline, as specified below), the following litigation-related reports: (i) results of periodic foreclosure firm audits, (ii) results of monthly scorecards of foreclosure and bankruptcy firms, including peer comparisons, (iii) changes in scorecarding methodology, (iv) changes in Subservicer’s foreclosure checklist or other foreclosure practices, (v) annual certification that each foreclosure firm is approved by the Agencies and (vi) monthly reports summarizing litigation, foreclosure and bankruptcy activity (volume, new, resolved, costs/expenses projections, etc.).



ARTICLE III
AGREEMENTS OF THE OWNER/SERVICER

Section 3.1.     Documents .

(a) With respect to any Transfer Date, with respect to any Mortgage Loan which is not a Prior Ditech Serviced Loan, the Owner/Servicer shall deliver the Servicing Transfer Procedures to the prior subservicer and shall request that such subservicer comply with the Servicing Transfer Procedures in all material respects, including delivering the Mortgage Servicing Files and/or servicing records necessary to provide current data with respect to the Mortgage Loans in a manner that is compatible with the Subservicer’s system and Applicable Requirements. The Subservicer and the Owner/Servicer shall comply with all Applicable Requirements with respect to servicing transfers, including the CFPB’s rules and/or guidelines with respect to servicing transfers, including without limitation its Bulletin 2014-1 issued on August 19, 2014, which may be amended or updated from time to time. The Subservicer and the Owner/Servicer shall provide all reasonable cooperation and assistance as may be requested by the other party in connection with compliance with such requirements, rules and/or guidelines. The Subservicer and the Owner/Servicer shall cooperate after the applicable Sale Date to promptly resolve all customer complaints, disputes and inquiries related to activities that occurred prior to such Sale Date or in connection with the transfer of servicing.




With respect to any Mortgage Loan which is not a Prior Ditech Serviced Loan, the Owner/Servicer acknowledges that the Owner/Servicer may be subject to certain provisions of the CFPB Stip Order solely as it relates to the transfer of servicing responsibilities from a prior servicer (which

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is not the Subservicer) to the Subservicer where the applicable mortgage loans are subject to loss mitigation.

(b) With respect to any Mortgage Loan which is not a Prior Ditech Serviced Loan, pursuant to the Servicing Transfer Procedures and Applicable Requirements, prior to each Transfer Date, the Subservicer shall use commercially reasonable efforts to obtain the Servicer Transfer Data and the Mortgage Servicing Files from the prior subservicer. The Subservicer may undertake an audit of a sampling of the Servicer Transfer Data and the Mortgage Servicing Files to determine the existence therein of any materially inaccurate or incomplete or missing data, information or documents. If the Subservicer determines, in its sole discretion, that there are material deficiencies in Servicer Transfer Data or in the related Mortgage Servicing File, the Owner/Servicer and the Subservicer shall cooperate in good faith to cure or correct such deficiencies reasonably necessary for the Subservicer to service the related Mortgage Loans pursuant to this Agreement. For any Mortgage Loan which is not a Prior Ditech Serviced Loan, the Owner/Servicer may elect to (a) cure or correct any such deficiencies in the Servicer Transfer Data or the related Mortgage Servicing Files, at the expense of the Owner/Servicer or (b) request that the Subservicer cure or correct such items, in which case the reasonable, actual and documented out-of-pocket or internally allocated, as applicable, expenses incurred by the Subservicer in connection with such cure or correction shall be reimbursed by the Owner/Servicer. For any Mortgage Loan which is a Prior Ditech Serviced Loan, the Subservicer shall cure or correct such items and all out-of-pocket expenses incurred in connection with such cure or correction shall be at the expense of the Subservicer without reimbursement. Solely with respect to any Mortgage Loan which is not a Prior Ditech Serviced Loan, to the extent the Owner/Servicer declines to cure or correct such deficiencies or engage the Subservicer to do so on its behalf or, upon reasonable effort, such deficiencies are not able to be cured or corrected, then the Subservicer will have the right to reject the obligation to subservice the related Mortgage Loan.

(c) The Subservicer shall maintain the Mortgage Servicing Files and the Mortgage Loan Documents in its possession pursuant to Applicable Requirements and shall maintain a record of its handling of such documents and files. Any Mortgage Loan Documents that are in the possession of the Subservicer shall be held in secure and fireproof facilities or storage areas in accordance with customary standards for the custody of similar documents and Applicable Requirements. The Subservicer shall conduct periodic audits of the Mortgage Servicing Files and Mortgage Loan Documents in its possession, and shall allow the Owner/Servicer, its Affiliates and its agents to conduct such audits, from time to time, to confirm the Subservicer’s recordkeeping, storage and security practices with respect to such files and documents. The Subservicer shall only release Mortgage Servicing Files and Mortgage Loan Documents in its possession pursuant to this Agreement and Applicable Requirements and shall deliver any such documents within three (3) Business Days of a request. Notwithstanding the foregoing sentence, in connection with an examination or any request by any Agency, the Subservicer shall use all commercially reasonable efforts to release any requested Mortgage Servicing Files and/or Mortgage Loan Documents in its




possession pursuant to this Agreement and Applicable Requirements and shall deliver any such documents within the time frame set forth by such Agency. Any documents or files that are released by the Subservicer shall be properly tracked and pursued to the extent such documents or files are not returned to the Subservicer or to the Custodian. The Subservicer shall provide the Owner/Servicer with any tracking information

39




related to documents or files that have been released by the Subservicer promptly upon request. The Subservicer shall cooperate in good faith with the Owner/Servicer in connection with clearing any document exceptions with any third parties consistent with Applicable Requirements and the direction of the Owner/Servicer.

(d) Solely with respect to any Mortgage Loan which is not a Prior Ditech Serviced Loan, the Owner/Servicer shall cooperate and shall cause the prior subservicer to cooperate with the Subservicer in providing timely responses to inquiries from Mortgagors to the extent information provided with respect to the Mortgage Loans is insufficient to allow the Subservicer to adequately respond without such cooperation.

Section 3.2.     Pay-off of Mortgage Loan; Release of Mortgage Loan Documents .

(a) Upon pay-off of a Mortgage Loan, the Subservicer will request the applicable Mortgage Loan Documents from the Custodian, Investor, or the Owner/Servicer, as the case may be, and upon receipt of same will prepare the appropriate discharge/satisfaction documents, and shall request execution of any document necessary to satisfy the Mortgage Loan or shall execute such document pursuant to a limited power of attorney to be provided by the Owner/Servicer to the Subservicer in the form attached hereto as Exhibit C . The Subservicer shall prepare, execute, and record all satisfactions and releases in accordance with the timeframes and requirements of all Applicable Requirements, and the Subservicer shall reimburse the Owner/Servicer for any losses it may incur as a result of the Subservicer’s failure to act in accordance with such Applicable Requirements.

(b) In the event the Subservicer prepares a satisfaction or release of a Mortgage without having obtained payment in full (excluding payments in full or other satisfactions as provided for in a Loss Mitigation plan permitted under Applicable Requirements) of the indebtedness secured by the Mortgage or should it otherwise prejudice any enforcement right the related Investor may have under the mortgage instruments, the Subservicer, upon written demand, shall (i) use commercially reasonable efforts to expunge such satisfaction or release or
(ii) if such satisfaction or release cannot be expunged by the Subservicer in such timeframe required under Applicable Requirements, the Subservicer shall remit to the Investor or indemnify and reimburse the Owner/Servicer for all amounts required to be paid by the Owner/Servicer under Applicable Requirements as a result of such satisfaction or release. The Subservicer shall maintain a fidelity bond insuring the Subservicer against any loss it may sustain with respect to any Mortgage Loan not satisfied in accordance with Applicable Requirements.

(c) From time to time and as appropriate for the Subservicing (including, without limitation, insurance claims) or foreclosure of each Mortgage Loan, the Owner/Servicer shall cause the Custodian to, upon request of the Subservicer and only upon delivery to the Custodian of an




acceptable servicing receipt signed by an authorized employee of the Subservicer, release the portion of the Mortgage Loan Documents held by the Custodian to the Subservicer. If any Mortgage Loan Documents are to be released to a third-party attorney for purposes of facilitating foreclosure, bankruptcy, or litigation proceedings on behalf of the Subservicer or the Investor, the Subservicer must obtain a commercially acceptable attorney bailee agreement from such attorney, a copy which shall be provided to the Custodian promptly following receipt thereof.

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(d) The Subservicer shall return the related Mortgage Loan Documents to the Custodian within five (5) Business Days following the time such documents are no longer needed by the Subservicer, unless the Mortgage Loan has been liquidated and the liquidation proceeds relating to the Mortgage Loan have been deposited in the Custodial Account. The Subservicer shall indemnify the Owner/Servicer pursuant to Section 7.01 for any loss or damage of such Mortgage Loan Documents by the Subservicer or its agents, Vendors, Off-shore Vendors or Default Firms.

Section 3.3.     Notices .

(a) The Owner/Servicer shall cause to be provided servicing transfer notices and any other similar notices to the related Mortgagors in a timely manner as may be required under Applicable Requirements, including the Real Estate Settlement Procedures Act. Within fifteen
(15) days following each Transfer Date, the Subservicer shall deliver to each related Mortgagor a "Welcome Letter" in accordance with Applicable Requirements. Notwithstanding the above, the Owner/Servicer, the Subservicer, and the prior subservicer may agree to send in accordance with Applicable Requirements a joint notification to the related Mortgagors regarding the transfer of the servicing function to the Subservicer. The Subservicer and the Owner/Servicer agree that the form of any notice sent to Mortgagors under this Section 3.3 shall be subject to approval by the Owner/Servicer and the Subservicer.

(b) The Subservicer shall furnish to each Mortgagor each notice (including privacy notices) required to be provided to such Mortgagors in accordance with Applicable Requirements and in form required by the Owner/Servicer.

(c) The Subservicer shall include in the related Mortgage Servicing File a copy of each notice furnished to a Mortgagor pursuant to this Section 3.3 .

(d) Notwithstanding the foregoing, except as required by Applicable Requirements, no applicable notification shall be required pursuant to this Section 3.3 to the extent that the Subservicer is already acting as the Subservicer with respect to the Mortgage Loans.

Section 3.4.     Mortgagor Requests .

The Subservicer shall process requests for partial releases, easements, substitutions, division, subordination, alterations, waivers of security instrument terms, or similar matters in accordance with Applicable Requirements and the Subservicer shall notify the Owner/Servicer of such requests and the outcomes of such requests.

Section 3.5.     Power of Attorney .





Prior to the first Sale Date, the Owner/Servicer shall execute a mutually agreed upon number of limited powers of attorney substantially in the form set forth in Exhibit C hereto and provide such original executed limited powers of attorney to the Subservicer for use in connection with the servicing activities contemplated in this Agreement. The Owner/Servicer agrees to provide additional original executed limited powers of attorney as may be requested by the Subservicer from time to time.

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ARTICLE IV COMPENSATION

Section 4.1.     Subservicing Compensation .

As consideration for Subservicing the Mortgage Loans under this Agreement (other than with respect to portfolio defense), except as otherwise set forth in this Agreement, the Subservicer shall be paid the fees and compensation set forth in Exhibit B . The Subservicer shall provide the Owner/Servicer, in an electronic format, a monthly report containing data elements to be mutually agreed upon by the parties detailing all the Owner/Servicer Economics and the Subservicer Economics.    Pursuant to Section 2.7(c) , the Subservicer shall provide the Owner/Servicer with sufficient information to reflect the calculation of the Owner/Servicer Economics and the Subservicer Economics, including the fees payable to the Subservicer by the Owner/Servicer under this Agreement. The Owner/Servicer shall pay the Subservicer Economics on a monthly basis within ten (10) Business Days following receipt of an invoice and information necessary to confirm and reconcile the Owner/Servicer Economics and the Subservicer Economics relating to such month, subject to Section 4.3 .

Subject to the term of this Agreement, the Subservicer shall be entitled to its monthly Subservicing fees as set forth in Exhibit B for each Mortgage Loan that it subservices for a given month based upon beginning of month Mortgage Loan count and status; provided , however , that the Subservicer shall only be entitled to a pro rata portion of such fees for Mortgage Loans boarded or deboarded during the related month. Notwithstanding anything to the contrary in this Agreement, (i) in no event shall the Subservicer be entitled to any boarding fees or other similar fees with respect to any Prior Ditech Serviced Loan, (ii) with respect to any incentive fees set forth in Exhibit B or this Agreement, the Subservicer shall not be entitled to receive any amount greater than the maximum amount for the similar and/or corresponding incentive fees set forth in the applicable Agency Guidelines and (iii) in no event shall the Subservicer be entitled to any processing fees (or other similar fees) set forth on Exhibit B related to any supplemental claims to the applicable Agency when the Subservicer has previously submitted three claims to the applicable Agency for reimbursement of any Servicing Advances, P&I Advances or any other amounts.

The Owner/Servicer shall be entitled to all amounts paid or allowed to a servicer from time to time by the applicable Agency, other governmental or quasi-governmental programs or PMI Companies, as applicable, for engaging in Loss Mitigation either directly or through the Subservicer. In addition, the Owner/Servicer shall be entitled to the portion of late fees and Ancillary Income as set forth in Exhibit B , which amounts and the related Loss Mitigation fees and incentives referenced in the preceding sentence shall be remitted by the Subservicer to the Owner/Servicer as part of the Owner/Servicer Economics pursuant to Section 2.7(c) .

Section 4.2.     Due Date of Payments; Penalties .





In the event either party fails to make a required payment under this Agreement to the other party, the owing party shall be required to pay the other party a finance charge on such amount for each day such payment is delinquent at an annual rate equal to 5% over the Prime Rate on the first Business Day of the month in the billing period, but in no event greater than the

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amount permitted by applicable law. In addition, Subservicer shall be required to reimburse Owner/Servicer for any late interest, penalties, or Compensatory Fees paid by the Owner/Servicer to an Agency as a result of Subservicer’s failure to timely comply with its obligations under this Agreement or Applicable Requirements. The Subservicer shall notify the Owner/Servicer (i) on or prior to the date of this Agreement, of any agreement which the Subservicer has with any Agency with respect to Compensatory Fees, (ii) no later than the Reporting Date, of any modification, extension or termination of such agreement which occurred in the prior calendar month and (iii) no later than the Reporting Date, of any notices from received by the Subservicer in the prior calendar month from an Agency relating to Compensatory Fees.

Section 4.3.     Resolution of Disputes and Monetary Errors .

In the event either party, in good faith, disputes any sum the other party contends are due and payable hereunder, such disputing party shall deliver to the contending party a written notice of dispute. All sums that are not disputed shall be paid as and when due under this Agreement. If the contending party provides documentation substantiating that the disputed amount is properly due and payable, the disputing party shall pay such amount within five (5) Business Days after receipt of such documentation. If the disputing party continues to dispute all or any portion of such amount and the parties cannot thereafter reconcile such dispute within a reasonable period of time not to exceed thirty (30) days, the contending party shall be entitled, upon ten (10) days’ written notice to the disputing party, to submit such matter to a dispute resolution process and if such amounts are subsequently determined to be proper, contending party shall be entitled to recover as part of its claim its reasonable costs and expenses, including attorneys’ fees, incurred in prosecuting such claim with interest on the disputed amount at an annual rate of 5% over the Prime Rate, but in no event greater than the amount permitted by applicable law. If such disputed amounts are subsequently determined not to be due and payable to the contending party, the disputing party shall be entitled to recover as part of its claim its reasonable costs and expenses, including attorneys’ fees, incurred in connection with prosecuting such claim.

ARTICLE V
TERM AND TERMINATION

Section 5.1.     Term .

(a) The initial term of this Agreement for the Subservicer shall be from the date hereof until the date that is the first (1st) anniversary of the Effective Date (the " Subservicer's Initial Term "). The Subservicer shall not be permitted to terminate this Agreement without cause except as set forth in Section 5.2 . If this Agreement has not otherwise been terminated pursuant to this Article V , then the term of this Agreement for the Subservicer shall automatically be renewed for successive one (1) year terms after the expiration of the Subservicer's Initial Term.





(b) The initial term of this Agreement for the Owner/Servicer shall be from the date hereof until the date that is the first (1st) anniversary of the Effective Date (the " Owner/Servicer's Initial Term "). The Owner/Servicer shall not be permitted to terminate this Agreement during the Owner/Servicer's Initial Term without cause except as set forth in Section 5.2 .

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(c) Following the Owner/Servicer's Initial Term, the term of this Agreement for the Owner/Servicer may be extended by the Owner/Servicer for successive one-month renewal periods (which, if extended, shall commence on the expiration date of the then-current term and end in the following month on the monthly calendar day of the Effective Date (or if such day is not a Business Day, on the first Business Day immediately following such day)), by delivering notice of such one-month extension to the Subservicer. Such notice shall be delivered on the twentieth (20th) day of the calendar month preceding such extension (or if such day is not a Business Day, the first Business Day immediately preceding such day), provided that any such extension notice that is delivered prior to the expiration of the then-current term shall be effective.    Subject to any other effective date of termination as set forth in Section 5.4 , this Agreement shall terminate at the expiration of the then-current term if the Owner/Servicer fails to notify the Subservicer of a one-month extension prior to such expiration.

(d) This Agreement shall otherwise terminate upon the earliest of (i) the distribution of the final payment on or liquidation of the last Mortgage Loan and REO Property subject to this Agreement or (ii) as otherwise set forth in this Article V.

Section 5.2.     Termination without Cause .

(a) The Owner/Servicer may, without cause, terminate this Agreement with respect to one or more Mortgage Loans at any time during the Owner/Servicer's Initial Term upon at least ninety (90) days’ written notice.

(b) The Subservicer may terminate this Agreement at the end of the Subservicer's Initial Term or at the end of any subsequent one (1) year term as to all of the Mortgage Loans then being subserviced hereunder upon written notice to the Owner/Servicer at least one hundred twenty (120) days’ prior to the end of such term; provided , however , that if the Subservicer terminates this Agreement as provided in this Section 5.2(b), the Subservicer (i) shall not be entitled to any Deconversion Fees and (ii) shall be responsible for all Servicing Transfer Costs incurred in connection with transferring the servicing to a successor servicer or subservicer.

(c) Notwithstanding any provision in this Agreement to the contrary, if the Owner/Servicer terminates this Agreement at any time with respect to one or more Mortgage Loans for which the Owner/Servicer has entered into an agreement to sell or otherwise transfer such Mortgage Loan or its Servicing Rights therein to a third party (an " Interim Serviced Mortgage Loan "), the Subservicer shall interim service such Interim Serviced Mortgage Loan until the transfer of servicing to the successor servicer identified by such third party.

Section 5.3.     Termination with Cause .





The Owner/Servicer may terminate this Agreement with respect to one or more Mortgage Loans immediately for cause based on the following:

(a) any failure by the Subservicer to remit any payment required to be made under the terms of this Agreement or Applicable Requirements that continues unremedied for a period of two (2) Business Days after the date upon which such payment was required to be remitted under the terms of this Agreement;

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(b) any failure by the Subservicer to provide to the Owner/Servicer any report required by this Agreement to be provided to the Owner/Servicer within three (3) Business Days of the date such report is due;

(c) any failure by Walter or the Subservicer to comply with the Quarterly Financial Metrics set forth in the Quarterly Financial Metrics Report;

(d) any failure by the Subservicer to duly observe or perform, in any material respect, any other covenants, obligations or agreements of the Subservicer as set forth in this Agreement (other than Service Level Agreements), which failure continues unremedied for a period of thirty
(30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Subservicer by the Owner/Servicer;

(e) subject to any applicable cure set forth in the applicable agreement, any default and/or failure by Subservicer to duly observe or perform, in any material respect, any covenants, obligations or agreements of Subservicer set forth in (i) the MSRPA or (ii) any other agreement executed in connection with this Agreement, the MSRPA, the Mortgage Loans and/or the related Servicing Rights;

(f) a decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator or other similar official in any insolvency, bankruptcy, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Subservicer and/or Walter and such decree or order shall have remained in force, undischarged or unstayed for a period of thirty (30) days;

(g) the Subservicer and/or Walter shall consent to the appointment of a conservator, receiver, or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities, or similar proceedings of or relating to the Subservicer’s and/or Walter, respectively, or relating to all or substantially all of the Subservicer’s and/or Walter property, respectively;

(h) any representation or warranty made by the Subservicer hereunder shall prove to be untrue or incomplete in any material respect and, if such breach of a representation or warranty is capable of being cured, continues unremedied for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Subservicer by the Owner/Servicer;

(i) the Subservicer and/or Walter shall admit in writing its inability to pay its debt as they become due, admit in writing its inability to, or intention not to, perform any of its material




obligations, file a petition to take advantage of any applicable insolvency or reorganization statute, voluntarily suspend payment of its obligations, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its obligations;

(j) (A) the Subservicer shall cease being an approved subservicer/servicer in good standing with any Agency or a HUD approved mortgagee, (B) any Agency provides a notice of termination to the Subservicer or the Owner/Servicer for failure of the Subservicer to comply with the applicable Agency Guidelines or (C) any Agency directs or otherwise notifies the Owner/Servicer that such Agency demands that the Subservicer should be terminated;

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(k) failure of the Subservicer to maintain any required qualification, license or approval to do business, to service residential mortgage loans, or to otherwise collect debts or perform any activities relating to residential mortgage loans in any jurisdiction where the Mortgaged Properties are located, to the extent required under Applicable Requirements;

(l) the Subservicer attempts to assign its rights to servicing compensation hereunder or the Subservicer attempts, without the consent of the Owner/Servicer, to sell or otherwise dispose of all or substantially all of its property or assets or to assign this Agreement or the Subservicing responsibilities hereunder or to delegate its duties hereunder or any portion thereof without the consent of the Owner/Servicer;

(m)
[Reserved];

(n) the then-current primary and/or special servicer rating (if any) of Owner/Servicer assigned by any rating agency is downgraded by the applicable rating agency from such rating (or any corresponding rating) which is caused by Subservicer's failure to service in accordance with Applicable Requirements;

(o) any report required herein contains materially inaccurate data or information; provided , that such inaccuracy is not the direct result of inaccurate data or information provided to the Subservicer by a prior servicer or originator or the Owner/Servicer; provided , further , that such inaccuracy is (i) not cured or corrected within five (5) Business Days of receiving notice of such inaccuracy and such similar inaccuracy had not previously occurred or (ii) if such inaccuracy cannot be reasonably be cured within such five (5) Business Day period then (A) the failure of the Subservicer to commence correction efforts within such five (5) Business Day period pursuant to a management action plan reasonably acceptable to the Owner/Servicer, (B) the failure of the Subservicer to reasonably pursue such curing efforts thereafter or (C) the failure to cure such failure within thirty (30) days;

(p) The Subservicer shall fail to comply in any material respect with any audit procedures pursuant to Section 2.10 of this Agreement, including, but not limited to, failure to provide any information requested by the Owner/Servicer or its designees in connection with any such audit; which failure continues unremedied for a period of five (5) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Subservicer by the Owner/Servicer;

(q) The Subservicer shall fail to (i) materially comply with the terms and conditions of any Service Level Agreement within the applicable period set forth in the applicable SLA attached hereto, which failure is not cured or corrected within the applicable cure period set forth in such SLA or (ii) provide a monthly report in the form attached hereto as Exhibit F-2 or any subsequent




report, as required under Section 2.6(b) , which failure continues unremedied for a period of thirty (30) days after the date on which such report was due;

(r) Subservicer or any subsidiary or Affiliate of Subservicer shall default under, or fail to perform as requested under, the terms of any repurchase agreement, loan and security agreement or similar credit facility or agreement for borrowed funds entered into by Subservicer or such other entity and any third party, which default or failure is not otherwise waived by the

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applicable party and results in such party being entitled to cause the acceleration or prepayment of any indebtedness thereunder;

(s) the Subservicer's or Walter's audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of the Subservicer or Walter, respectively, as a "going concern" or a reference of similar import or shall indicate that the Subservicer or Walter, respectively, is insolvent;

(t) the Owner/Servicer's or any subsidiary or Affiliate of Owner/Servicer's audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall indicate that the Owner/Servicer or any subsidiary or Affiliate of Owner/Servicer has a "material weakness" and/or "significant deficiency", which is caused by the Subservicer delivering and/or providing any incorrect information, reports and/or data to the Owner/Servicer;

(u) the Owner/Servicer shall cease being an approved subservicer/servicer in good standing with Fannie Mae or Freddie Mac or a HUD approved mortgagee which is caused by the Subservicer's failure to service in accordance with Applicable Requirements;

(v) (A) except for the CFPB Stip Order and the State Orders, an investigation by any Governmental Authority has determined that material deficiencies in servicing performance or violation of Applicable Requirements by the Subservicer has occurred which, in either case, the Owner/Servicer shall have reasonably determined is a Material Adverse Effect, (B) a Governmental Authority has instituted additional requirements and/or obligations on the Subservicer in connection with the CFPB Stip Order and/or any State Order which the Owner/Servicer shall have reasonably determined is a Material Adverse Effect and/or (C) a Governmental Authority has determined material noncompliance of the CFPB Stip Order and/or any State Order by the Subservicer which the Owner/Servicer shall have reasonably determined is a Material Adverse Effect;

(w) the Delinquency Ratio exceeds 10% for a period of three (3) consecutive months or longer;

(x) the Servicing Advance Ratio exceeds 1.2% for a period of three (3) consecutive months or longer;

(y) the Quarterly Refinancing Percentage falls below 10% for two (2) consecutive Calculation Dates on or after March 31, 2017;

(z)
a Change of Control has occurred with respect to the Subservicer or Walter;





(aa) the Owner/Servicer shall have reasonably determined that a Material Adverse Effect shall have occurred; or

(bb) any Governmental Authority or any person, agency or entity acting or purporting to act under Governmental Authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of the Subservicer, or shall have taken any action to displace the management of the Subservicer or to curtail its authority in the conduct of the business of the Subservicer, or takes any action in the

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nature of enforcement to remove, limit or restrict the approval of the Subservicer as a servicer of mortgage loans.

The Subservicer recognizes that an Agency may rescind its recognition of a Subservicing arrangement if the Agency decides to transfer the Owner/Servicer’s portfolio for any reason, in which event this Agreement would be terminated with respect to the related Mortgage Loans, and such termination shall be treated as a termination for cause for purposes of this Agreement if the Agency’s actions is related to an act or omission of the Subservicer or as a termination without cause if the Agency’s action is unrelated to an act or omission of the Subservicer, respectively.

Each party shall promptly notify the other party in the event of any breach or anticipated breach by the notifying party of its obligations under this Agreement or any event of default or anticipated event of default or other termination event with respect to such party set forth in this Agreement.

The rights of termination, as provided herein, are in addition to all other available rights and remedies, including the right to recover damages in respect of any breach.

Section 5.4.     Reimbursement upon Expiration or Termination; Termination Assistance .

(a) Payment of Deconversion Fees . Notwithstanding anything to the contrary in this Agreement, within three (3) Business Days following the effective date of any termination described in this Section 5.4(a), the Owner/Servicer shall remit to the Subservicer the applicable Deconversion Fees if (i) this Agreement is terminated with cause by the Subservicer pursuant to Section 5.6 , (ii) the Owner/Servicer fails to notify the Subservicer of any one-month extension of the term before the expiration of the then-current term pursuant to Section 5.1(c) , except for a termination of this Agreement with respect to one or more Mortgage Loans with cause pursuant to Section 5.3 , (iii) the Owner/Servicer terminates this Agreement without cause at any time during the Owner/Servicer's Initial Term, as further described in Section 5.2(a) , or (iv) the Owner/Servicer exercises its right, as provided in Section 5.2(b) , to transfer Interim Serviced Mortgage Loan(s) to a successor servicer.

(b) Payment of Ditech Transfer Fees . Notwithstanding anything to the contrary in this Agreement, within three (3) Business Days following receipt of the applicable notice of termination, the Subservicer shall remit to the Owner/Servicer the applicable Ditech Transfer Fees if: (i) the Owner/Servicer terminates this Agreement with respect to one or more Mortgage Loans with cause pursuant to Section 5.3 or (ii) the Subservicer terminates this Agreement without cause at any time, as further described in Section 5.2(b) .

(c) In the event the Subservicer is terminated without cause as subservicer of some or all of the Mortgage Loans by the Owner/Servicer or if the Subservicer terminates this Agreement




pursuant to Section 5.6 , the Owner/Servicer shall pay or reimburse the Subservicer for any Servicing Transfer Costs and all accrued and unpaid Subservicing compensation. In the event the Subservicer is terminated with cause as subservicer of some or all of the Mortgage Loans by the Owner/Servicer or an Agency or if the Subservicer terminates this Agreement without cause, the Subservicer (a) shall reimburse the Owner/Servicer for Servicing Transfer Costs and (b) shall

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be entitled to receive accrued and unpaid Subservicing compensation that is earned prior to the date the servicing is transferred to a successor servicer or subservicer. In addition, upon termination of this Agreement, subject to the foregoing, the Owner/Servicer and the Subservicer shall pay or reimburse the other party any other amounts due under this Agreement.

(d) In connection with the termination of this Agreement with respect to some or all of the Mortgage Loans, the Subservicer and the Owner/Servicer shall use commercially reasonable efforts to ensure the prompt transfer of the servicing of such Mortgage Loans to a successor servicer or subservicer designated by the Owner/Servicer, including delivery of notices to the Mortgagors relating to the servicing transfer in accordance with Applicable Requirements.

(e) Notwithstanding any provision in this Agreement to the contrary, the termination of this Agreement shall not be effective until a successor servicer or subservicer has been appointed by the Owner/Servicer or an Investor, as applicable, and a servicing transfer has been completed in accordance with Applicable Requirements, and the Subservicer shall not be relieved of its obligation under this Agreement until such time. The Owner/Servicer and the Subservicer shall discharge such duties and responsibilities during the period from the date each acquires knowledge of such termination until the effective date thereof with the same degree of diligence and prudence that it is obligated to exercise under this Agreement.

(f) In the event of a servicing transfer to a successor servicer or subservicer, the Subservicer shall comply with all Applicable Requirements with respect to servicing transfers. In addition, the Subservicer shall comply with the CFPB’s rules and/or guidelines with respect to servicing transfers, including without limitation its Bulletin 2014-1 issued on August 19, 2014, as may be amended or updated. The Subservicer and the Owner/Servicer shall provide all reasonable cooperation and assistance as may be requested by the other party in connection with compliance with such rules and/or guidelines. The Subservicer and the Owner/Servicer shall cooperate after the applicable Sale Date to promptly resolve all customer complaints, disputes and inquiries related to activities that occurred prior to such Sale Date or in connection with the transfer of servicing.

(g) In addition, in connection with the servicing transfer to a successor servicer or subservicer, the Subservicer shall (a) promptly forward to the Owner/Servicer's designee all Mortgage Servicing Files, data, Mortgage Loan documents, files, data tapes and other information customarily delivered by a servicer upon transfer of servicing of mortgage loans, (ii) reasonably comply in all material respects with the transfer instructions of the successor servicer or subservicer, (b) provide Owner/Servicer's designee accepted servicing industry documentation meeting all Applicable Requirements regarding outstanding Servicing Advances and P&I Advances related to the Mortgage Loans, (c) take appropriate actions and cooperate in good faith with any Investor approval process and in reflecting the servicing transfer on the MERS system for the related Mortgage Loans registered on MERS to the extent the Subservicer is authorized to do so with the MERS system and (d) cooperate with the document custodian recertification process.





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Section 5.5.     Accounting/Records .

Upon expiration or termination of this Agreement and after the completed transfer of the servicing of the Mortgage Loans to a successor servicer or subservicer, the Subservicer will cease all Subservicing activities and account for and turn over to the successor servicer or subservicer, as applicable, all funds collected hereunder, less the compensation and other amounts then due the Subservicer, and deliver to the successor servicer or subservicer, as applicable, all records and documents relating to each Mortgage Loan and will advise Mortgagors that their mortgages will henceforth be serviced by the successor servicer or subservicer, as applicable.

Section 5.6.     Termination Right of the Subservicer .

Subject to the effective date of such termination as set forth in Section 5.4 , the Subservicer may terminate this Agreement immediately for cause based on the following:

(a) Owner/Servicer fails to remit any payment required to be made under the terms of this Agreement or Applicable Requirements that continues unremedied for a period of five (5) Business Days after the date upon which such payment was required to be remitted under the terms of this Agreement;

(b) Any failure by the Owner/Servicer to duly observe or perform, in any material respect, any other covenants, obligations or agreements of the Owner/Servicer as set forth in this Agreement, which failure continues unremedied for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Owner/Servicer by the Subservicer;

(c) a decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator or other similar official in any insolvency, bankruptcy, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Owner/Servicer and such decree or order shall have remained in force, undischarged or unstayed for a period of thirty (30) days;

(d) any representation or warranty made by the Owner/Servicer hereunder shall prove to be untrue or incomplete in any material respect and, if such breach of a representation or warranty is capable of being cured, continues unremedied for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Owner/Servicer by the Subservicer;





(e) the Owner/Servicer shall cease being an approved servicer in good standing with Fannie Mae, Freddie Mac or a HUD approved mortgagee unless caused by the Subservicer's failure to service in accordance with Applicable Requirements.

Notwithstanding anything to the contrary in this Agreement, for the avoidance of doubt to the extent the Subservicer terminates this Agreement pursuant to this Section 5.6 , the Owner/Servicer shall remain the owner of the Servicing Rights and Subservicer shall have no right, title interest or claim to the Servicing Rights.

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ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OWNER/SERVICER

As of each Sale Date, the Owner/Servicer hereby represents, warrants and covenants to the Subservicer as follows:

Section 6.1.     Agency Approvals .

If required by Applicable Requirements, the Owner/Servicer is an approved servicer for, and in good standing with, each applicable Agency and a HUD approved mortgagee.

Section 6.2.     Authority .

The Owner/Servicer is a duly organized and validly existing limited liability company in good standing under the laws of its state of formation and has all requisite power and authority to enter into this Agreement and the Persons executing this Agreement on behalf of the Owner/Servicer are duly authorized to do so. The Owner/Servicer has all licenses necessary to carry on its business as now being conducted and is duly authorized and qualified to transact, in each state where a Mortgaged Property is located, any and all business contemplated by this Agreement, except where the failure of the Owner/Servicer to possess such qualifications or licenses would not be reasonably expected to have a Material Adverse Effect or where the Owner/Servicer is otherwise exempt under Applicable Requirements from such qualification, or is otherwise not required under Applicable Requirements to effect such qualification.

Section 6.3.     Consents .

Except for approvals required from the applicable Agency in connection with any Sale Date, no consent, approval, authorization or order of any court or Governmental Authority is required for the execution, delivery, and performance by the Owner/Servicer of or compliance by the Owner/Servicer with this Agreement or the consummation of the transactions contemplated by this Agreement, or if required, such consent, approval, authorization, or order has been obtained.

Section 6.4.     Litigation .

There is no action, suit, proceeding, or investigation pending or, to its knowledge, threatened against the Owner/Servicer that, either in any one instance or in the aggregate, would draw into question the validity of this Agreement or of any action taken or to be contemplated herein, or would




be likely to impair materially the ability of the Owner/Servicer to perform under the terms of this Agreement or applicable Agency Guidelines.

Section 6.5.     Broker Fees.

The Owner/Servicer has not dealt with any broker or agent or anyone else who might be entitled to a fee or commission in connection with this transaction.

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Section 6.6.     Ownership .




Loans.

The Owner/Servicer is the sole owner of the Servicing Rights related to the Mortgage


Section 6.7.     Ability to Perform .

The Owner/Servicer does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant applicable to it and contained in this Agreement.

ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SUBSERVICER

As of the date of this Agreement and each day in which the Subservicer is Subservicing Mortgage Loans under this Agreement, the Subservicer hereby represents, warrants and covenants to the Owner/Servicer as follows:

Section 7.1.     Agency Approvals .

The Subservicer is an approved servicer for, and in good standing with, each Agency and a HUD approved mortgagee. No event has occurred, including but not limited to, a change in insurance coverage, that would make the Subservicer unable to comply with eligibility requirements of each Agency, or that would require notification to any Agency and, to the best of the Subservicer’s knowledge, there are no pending business issues with any Agency that would likely materially adversely affect the ability of the Subservicer to service mortgage loans on behalf of such entities or to comply with Applicable Requirements.

Section 7.2.     Authority .

The Subservicer is a duly organized and validly existing limited liability company in good standing under the laws of its state of organization and has all requisite power and authority to enter into this Agreement and the Persons executing this Agreement on behalf of the Subservicer are duly authorized so to do. The Subservicer has all licenses necessary to carry on its business as now being conducted and is duly authorized and qualified to transact, in each state where a Mortgaged Property is located, any and all business contemplated by this Agreement, except where the failure of the




Subservicer to possess such qualifications or licenses would not be reasonably expected to have a Material Adverse Effect or where the Subservicer is otherwise exempt under Applicable Requirements from such qualification, or is otherwise not required under Applicable Requirements to effect such qualification.

Section 7.3.     Consents .

Except for approvals required from the applicable Agency in connection with any Sale Date, no consent, approval, authorization, or order of any court or Governmental Authority is required for the execution, delivery, and performance by the Subservicer of or compliance by the Subservicer with this Agreement or the consummation of the transactions contemplated by this Agreement, or if required, such consent, approval, authorization, or order has been obtained.

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Section 7.4.     Litigation .

There is no action, suit, proceeding or investigation pending or, to its knowledge, threatened against the Subservicer that, either in any one instance or in the aggregate, would draw into question the validity of this Agreement or the Mortgage Loans or of any action taken or to be contemplated herein, or would be likely to impair materially the ability of the Subservicer to perform under the terms of this Agreement or applicable Agency Guidelines.

Section 7.5.     Accuracy of Information .

Information furnished to the Owner/Servicer or any Investor by the Subservicer regarding its financial condition or its servicing operations is true and correct in all material respects.

Section 7.6.     Broker Fees .

The Subservicer has not dealt with any broker or agent or anyone else who might be entitled to a fee or commission in connection with this transaction.

Section 7.7.     MERS .

The Subservicer is a member of MERS in good standing.

Section 7.8.     Agency Representations .

Each of the representations and warranties made by the Subservicer to the Agencies under the Agency Guidelines in connection with the Subservicer’s role as a servicer or subservicer of Agency mortgage loans is true and correct.

Section 7.9.     Ability to Perform .

The Subservicer does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant applicable to it and contained in this Agreement.

Section 7.10. HAMP .

The Subservicer is participating in HAMP. The Subservicer has entered into a Servicer Participation Agreement (" SPA ") with Fannie Mae, as financial agent of the United States, pursuant to HAMP. As such, the Subservicer: (i) has implemented HAMP as required by the SPA; (ii) will




report to Fannie Mae the transfer of servicing of any Mortgage Loans that are Eligible Loans (as defined by the SPA) in order to ensure compliance with the SPA; and (iii) will service any of the Mortgage Loans that are Eligible Loans in accordance with HAMP requirements.

Section 7.11. Quarterly Reports .

(a) No later than (I) forty-five (45) calendar days after the end of each of the first three quarterly fiscal periods of each fiscal year of Subservicer after the date of this Agreement

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and (II) ninety (90) calendar days after the end of each fiscal year of Subservicer after the date of this Agreement, in each case, the Subservicer shall deliver to Owner/Servicer, a report in the form of Exhibit H (the " Quarterly Financial Metrics Report "), certifying whether the conditions described in column entitled "Financial Metric" set forth in Exhibit H attached hereto (the " Quarterly Financial Metrics ") have been met.

(b) No later than forty-five (45) calendar days after the end of each fiscal quarter after the date of this Agreement, the Subservicer shall deliver to Owner/Servicer, a certificate in the form of Exhibit I (the " Quarterly Report "), signed by the chief risk and compliance officer of the Subservicer.




ARTICLE VIII
INDEPENDENCE OF PARTIES; INDEMNIFICATION SURVIVAL

Section 8.1.     Independence of Parties .

Except as set forth in the MSRPA, the following terms shall govern the relationship between the Owner/Servicer and the Subservicer under this Agreement:

(a) The Subservicer shall have the status of, and act as, an independent contractor. Nothing herein contained shall be construed to create a partnership or joint venture between the Owner/Servicer and the Subservicer;

(b) The Subservicer shall be not be liable to the Owner/Servicer for any action taken, or for refraining from the taking of any action, in good faith pursuant to this Agreement or for errors in judgment; provided, however , that this provision shall not protect the Subservicer against any breach of its representations, warranties, or covenants made herein or its failure to comply with Applicable Requirements, or against any liability that would otherwise be imposed on the Subservicer by reason of the Subservicer’s willful misfeasance, bad faith, fraud, or negligence in the performance of its duties hereunder, or by reason of its negligent disregard of its obligations or duties hereunder. The Subservicer may rely in good faith on any document of any kind that, prima facie, is executed and submitted by any appropriate Person respecting any matters arising hereunder.

Section 8.2.     Indemnification by the Subservicer; Compensatory Fees .

The Subservicer shall indemnify and hold the Owner/Servicer harmless from any liability, Claim, loss, damage or expense, including reasonable attorneys’ fees, directly or indirectly resulting from or arising out of:





(a)      the Subservicer’s failure to observe or perform any or all of the Subservicer’s covenants and obligations under this Agreement in all material respects;

(b)      the Subservicer’s material breach of its representations and warranties contained in this Agreement;

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(c)      the failure of Subservicer or any Vendors, Off-shore Vendors and/or Default Firms hired by Subservicer to perform its duties and service the Mortgage Loans in strict compliance with the terms of this Agreement, the Mortgage Loan documents and Applicable Requirements;

(d)      with respect to any Prior Ditech Serviced Loans, the amount of any Compensatory Fees, curtailments and/or denied insurance claims arising out of or related to prior to the applicable Transfer Date;

(e)      any Agency-imposed fees, penalties or curtailments imposed on the Owner/Servicer related to (a) any Mortgage Loan foreclosures exceeding the applicable Agency’s required timelines or (b) other servicing acts or omissions relating to the Mortgage Loans, in each case relating to or arising from the Subservicer’s failure to comply with Applicable Requirements on or after the related Transfer Date;

(f)      any pending or threatened claim or litigation (including but not limited to any class action or purported class action), solely with respect to the Prior Ditech Serviced Loans, arising out of events occurring in whole or in part before the applicable Sale Date in connection with the Servicing Rights, the Mortgage Loans or Subservicer, whether made by any Agency or insurer, any Mortgagor or other Person; or

(g)      the Subservicer's use or misuse of any power of attorney provided to the Subservicer under this Agreement;

provided,      however ,    the    Subservicer    shall    not    be    obligated    to    indemnify the Owner/Servicer with respect to (i) any consequential, special, punitive or speculative damages except to the extent such damages are recovered from the Owner/Servicer by third parties in connection with claims made by such third parties that are indemnified under this Agreement; and (ii) any liabilities, Claims, costs or expenses which are covered in Section 8.3 .

Section 8.3.     Indemnification by the Owner/Servicer .

Except as otherwise stated herein, the Owner/Servicer shall indemnify and hold the Subservicer harmless against any liability, Claim, loss, damage or expense, including reasonable attorneys’ fees, resulting from or arising out of (a) the Owner/Servicer’s failure to observe or perform any or all of the Owner/Servicer’s covenants and obligations under this Agreement or breach of its representations and warranties contained in this Agreement, (b) the failure of a Mortgage Loan (which is not a Prior Ditech Serviced Loan) to be transferred in accordance with the Servicing




Transfer Procedures in any material respect, (c) acts or omissions relating to the origination or servicing of the Mortgage Loans (which are not Prior Ditech Serviced Loans) prior to the related Sale Date or (d) any claim, litigation or proceeding relating to the subservicing following the related Transfer Date to which the Subservicer is made a party as a result of its acting as, or status as, servicer or subservicer of a Mortgage Loan; provided , however , the Owner/Servicer shall not be obligated to indemnify the Subservicer with respect to (i) any consequential, special, punitive or speculative damages except to the extent such damages are

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recovered from the Subservicer by third parties in connection with claims made by such third parties that are indemnified under this Agreement, (ii) any breach by the Subservicer of its representations and warranties contained in this Agreement or any failure to observe or perform its obligations and covenants under this Agreement or (iii) any liabilities, Claims, costs or expenses which are covered in Section 8.2 .

Section 8.4.     Indemnification Procedures.

Promptly after receipt by an indemnified party under Sections 8.2 or 8.3 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under Sections 8.2 or 8.3 , notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability that it may have to any indemnified party under Sections 8.2 or 8.3 , except to the extent that it has been prejudiced in any material respect, or from any liability that it may have, otherwise than under Sections 8.2 or 8.3 .    The indemnifying party shall assume (with the consent of the indemnified party) the defense of any such claim and pay all expenses in connection therewith, including attorneys’ fees, and promptly pay, discharge, and satisfy any judgment or decree that may be entered against it or the indemnified party in respect of such claim. The indemnifying party shall follow any reasonable written instructions received from the indemnified party in connection with such claim. The provisions of Sections 8.2 or 8.3 shall survive termination of this Agreement. The Subservicer shall provide the Owner/Servicer a monthly report of legal action(s) by individual Mortgagor(s) relating to the Mortgage Loans and against the Subservicer or the Owner/Servicer.

Section 8.5.     Repurchase .

To the extent the Owner/Servicer shall cease being an approved subservicer/servicer in good standing with any Agency or a HUD approved mortgagee which is caused by the Subservicer's failure to service in accordance with Applicable Requirements, the Subservicer shall remit to the Owner/Servicer an amount equal to the Servicing Rights Repurchase Price (as defined in the MSRPA) for the Servicing Rights less any proceeds (if any) received by the Owner/Servicer in connection with a transfer of servicing of the Mortgage Loans permitted by the applicable Agency.

Section 8.6.     Survival .

The representations, warranties, and indemnifications set forth in Article VII and this Article VIII shall survive termination of this Agreement.

ARTICLE IX MISCELLANEOUS





Section 9.1.     Assignment .

This Agreement may be assigned only by written consent of the Owner/Servicer and the Subservicer. The Owner/Servicer may also assign to an Affiliate without the consent of the Subservicer, provided such Affiliate will be bound by the representations, warranties and covenants of the Owner/Servicer set forth in Article VI. The sale of all or substantially all of the

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stock or assets of the Subservicer, or the transfer of a controlling interest in the Subservicer, shall not be deemed an assignment of this Agreement for purposes of this Section.

Section 9.2.     Prior Agreements .

Except with respect to the MSRPA, if any provision of this Agreement is inconsistent with any prior agreements between the parties, oral or written, with respect to the Mortgage Loans, the terms of this Agreement shall prevail, and after the Effective Date of this Agreement, the relationship and agreements between the Owner/Servicer and the Subservicer with respect to the Mortgage Loans shall be governed in accordance with the terms of this Agreement and the MSRPA.

Section 9.3.     Entire Agreement .

Except as otherwise set forth herein, this Agreement contains the entire agreement between the parties hereto and cannot be modified in any respect except by an amendment in writing signed by both parties. In the event of a conflict with the MSRPA, the terms of this Agreement shall control.

Section 9.4.     Invalidity .

Any part, provision, representation or warranty of this Agreement which is prohibited or unenforceable or is held to be void or unenforceable in any jurisdiction shall be ineffective, as to such jurisdiction, to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction as to any Mortgage Loan shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereto waive any provision of law which prohibits or renders void or unenforceable any provision hereof. If the invalidity of any part, provision, representation or warranty of this Agreement shall deprive any party of the economic benefit intended to be conferred by this Agreement, the parties shall negotiate, in good-faith, to develop a structure the economic effect of which is as close as possible to the economic effect of this Agreement without regard to such invalidity.

Section 9.5.     Governing Law; Jurisdiction .

THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).





ANY LEGAL ACTION, SUIT OR OTHER PROCEEDING ARISING OUT OF, OR IN ANY WAY CONNECTED WITH, THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, OR IN THE UNITED STATES COURTS FOR THE SOUTHERN DISTRICT OF NEW YORK. WITH RESPECT TO

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ANY SUCH PROCEEDING IN ANY SUCH COURT: (A) EACH PARTY GENERALLY AND UNCONDITIONALLY SUBMITS ITSELF AND ITS PROPERTY TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT; AND (B) EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT HAS OR HEREAFTER MAY HAVE TO THE VENUE OF SUCH PROCEEDING, AS WELL AS ANY CLAIM IT HAS OR MAY HAVE THAT SUCH PROCEEDING IS IN AN INCONVENIENT FORUM.

Section 9.6.     Waiver of Jury Trial .

THE PARTIES HERETO HEREBY VOLUNTARILY, KNOWINGLY AND IRREVOCABLY WAIVE ANY RIGHT EACH MAY HAVE TO TRIAL BY JURY IN THE EVENT OF ANY LITIGATION CONCERNING THIS AGREEMENT.

Section 9.7.     Notices .

Any notices or other communications permitted or required hereunder shall be in writing and shall be deemed conclusively to have been given if personally delivered by hand, courier or overnight delivery service at or mailed by registered mail, postage prepaid, and return receipt requested or email and confirmed by a similar mailed writing, to (or such other address as may hereafter be furnished to the other party by like notice):

(a)
in the case of the Subservicer:    Ditech Financial LLC
1100 Virginia Drive, Suite 100 Ft. Washington, PA 19034 Attention: President

(b)
in the case of the Owner/Servicer:    New Residential Mortgage LLC
c/o New Residential Investment Corp. 1345 Avenue of the Americas, 45th Floor New York, New York 10105
Attention: Jonathan Grebinar, Austin Sandler and Andrew Miller Telephone: 212-798-6100
Facsimile: 212-798-6060 Email: jgrebinar@fortress.com;
amiller@fortress.com ; asandler@fortress.com






All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

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Section 9.8.     Amendment, Modification and Waiver .

No amendment to this Agreement shall be effective unless it shall be in writing and signed by each party. Any failure of a party to comply with any obligation, covenant, agreement or condition contained in this Agreement may be waived by the party entitled to the benefits thereof only by a written instrument duly executed and delivered by the party granting such waiver, but such waiver or failure or delay to insist upon strict compliance with such obligation, covenant, agreement or condition or any waiver, failure or delay in exercising any right, power or privilege hereunder or any single or partial exercise thereof shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure of compliance or preclude any other or further exercise thereof or any other right, power or privilege hereunder. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 9.9.     Binding Effect .

This Agreement shall inure to the benefit of and be binding upon the parties hereto and their successors and assigns.

Section 9.10. Headings .

Headings of the Articles and Sections in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect.

Section 9.11. Force Majeure .

Each party will be excused from performance under this Agreement, except for any payment obligations for services that have been or are being performed hereunder, for any period and to the extent that it is prevented from performing, in whole or in part, as a result of delays caused by the other party or any act of God, war, civil disturbance, court order, labor dispute, or other cause beyond its reasonable control, including failure, fluctuations, or unavailability of heat, light, air conditioning, or telecommunications equipment. A party excused from performance pursuant to this Section shall exercise commercially reasonable efforts to continue to perform its obligations hereunder and shall thereafter continue with reasonable due diligence and good faith to remedy its inability to so perform, except that nothing herein shall obligate either party to settle a strike or labor dispute when it does not wish to do so. Such nonperformance will not be deemed a breach of this Agreement as long as the party uses commercially reasonable efforts to expeditiously remedy the problem causing such nonperformance and to execute its disaster recovery plan then in existence. If the failure of a party to perform under this Agreement as a result of a force majeure event exceeds fifteen (15) days, the other party may terminate this Agreement immediately without liability and the parties shall cooperate in good faith to facilitate the transfer of servicing to a successor servicer or subservicer




designated by the Owner/Servicer. Notwithstanding the foregoing, in the event the force majeure provisions set forth in the Agency Guidelines are more restrictive as they relate to the Owner/Servicer or the Subservicer, such provisions in the Agency Guidelines shall control in the event an Agency is an Investor.

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Section 9.12. Confidentiality; Security .

(a) Each party acknowledges that it may, in the course of performing its responsibilities under this Agreement, be exposed to or acquire Confidential Information that is proprietary to or confidential to the other party, its Affiliates, their respective clients and investors or to third parties to whom the other party owes a duty of confidentiality. The party providing Confidential Information in each case shall be called the " Disclosing Party " and the party receiving the Confidential Information shall be called the " Recipient ". With respect to all such Confidential Information, the Recipient shall (i) act in accordance and comply with all Applicable Requirements (including, without limitation, security and privacy laws with respect to its use of such Confidential Information), (ii) maintain, and shall require all third parties that receive Confidential Information from the Recipient as permitted hereunder to maintain, effective information security measures to protect Confidential Information from unauthorized disclosure or use, and (iii) provide the Disclosing Party with information regarding such security measures upon the reasonable request of the Disclosing Party and promptly provide the Disclosing Party with information regarding any failure of such security measures or any security breach. The Recipient shall hold the Disclosing Party’s Confidential Information in strict confidence, exercising no less care with respect to such Confidential Information than the level of care exercised with respect to the Recipient’s own similar Confidential Information and in no case less than a reasonable standard of care, and shall not copy, reproduce, summarize, quote, sell, assign, license, market, transfer or otherwise dispose of, give or disclose such information to third parties or use such information for any purposes other than the provision of the services to the Disclosing Party or as expressly permitted under the Ditech Agreements without the prior written authorization of the Disclosing Party. In addition, the Recipient shall not use the Confidential Information to make any contact with any of the parties identified in the Confidential Information without the prior authorization of the Disclosing Party, except in the course of performing its obligations under the terms of this Agreement.

(b)
The Recipient may disclose the Disclosing Party’s Confidential Information only
(i) to its and its Affiliates’ officers, directors, attorneys, accountants, employees, agents and representatives and, with respect to the Owner/Servicer only, rating agencies, consultants, bankers, financial advisors and potential financing sources (collectively, " Representatives ") who need to know such Confidential Information in connection with the transactions contemplated by the Ditech Agreements (the " Transactions ") and who are subject to a duty of confidentiality (contractual or otherwise) with respect to such Confidential Information, (ii) to those Persons within the Recipient’s organization directly involved in the Transactions, and who are bound by confidentiality terms substantially similar to the terms set forth herein, (iii) to the Recipient’s regulators and examiners, (iv) to defend itself in connection with a legal proceeding regarding the Transactions and (v) as required by Applicable Requirements. The Recipient shall be liable for any breach of its confidentiality obligations and the confidentiality obligations of its Representatives.





(c) The parties shall not, without the other party’s prior written authorization, publicize, disclose, or allow disclosure of any information about the other party, its present or former partners, managing directors, directors, officers, employees, agents or clients, its or their business and financial affairs, personnel matters, operating procedures, organization responsibilities, marketing matters and policies or procedures, with any reporter, author,

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producer or similar Person or entity, or take any other action seeking to publicize or disclose any such information in any way likely to result in such information being made available to the general public in any form, including books, articles or writings of any other kind, as well as film, videotape, audiotape, or any other medium except as required by Applicable Requirements.

(d) The obligations under this Section 9.12 shall survive the termination of this Agreement.

Section 9.13. Further Assurances .

Each of the Owner/Servicer and the Subservicer shall cooperate with and assist the other party as reasonably requested in connection with such other party’s duties and obligations under this Agreement and in connection therewith shall execute and deliver all such papers, documents and instruments as may be necessary and appropriate in furtherance thereof.

Section 9.14. Execution of Agreement .

This Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. This Agreement shall be deemed binding when executed by both the Owner/Servicer and the Subservicer. Telecopy or electronically transmitted signatures shall be deemed valid and binding to the same extent as the original.

Section 9.15. Publicity .

The Subservicer shall not issue any media releases, public announcements and public disclosures, relating to this Agreement or use the name or logo of the Owner/Servicer, including, without limitation, in promotional or marketing material or on a list of customers, without the prior written consent of the Owner/Servicer; provided , that nothing in this paragraph shall restrict compliance with this Agreement or any disclosure required by legal, accounting or regulatory requirements.

Section 9.16. Executory Contract .

Notwithstanding any provision in this Agreement to the contrary, Subservicer acknowledges and agrees that, in the event it files bankruptcy under 11 U.S.C. § 101 et seq. (the "Bankruptcy Code"), this Agreement is an "executory contract" within the meaning of Section 365 of the Bankruptcy Code and, therefore, Subservicer shall have no right to modify on any basis whatsoever, including without limitation Section 105 of the Bankruptcy Code, any of the terms, provisions or




conditions of this Agreement in any such bankruptcy proceeding and hereby irrevocably waives any ability to do so. Further, Subservicer acknowledges and agrees that its services provided under this Agreement are essential and should Subservicer fail to perform its obligations under this Agreement, Owner/Servicer shall suffer irreparable harm and, consequently, Owner/Servicer shall have the right to obtain on an expedited basis an order from the bankruptcy court: (i) lifting the Section 362 automatic stay so as to permit Owner/Servicer to terminate this Agreement; and (ii) compelling Subservicer to immediately assume or reject this Agreement in accordance with the provisions of Section 365 of the Bankruptcy Code. In the event this Agreement is rejected under Section 365 of the Bankruptcy Code, this Agreement

70




shall be terminated and Subservicer agrees to immediately comply with its obligations under this Agreement with respect to termination of this Agreement. Finally, Subservicer acknowledges and agrees that Section 506(c) of the Bankruptcy Code has no application to this Agreement and, even if it did, Subservicer hereby expressly waives any right to surcharge Owner/Servicer under Section 506(c) of the Bankruptcy Code.

Section 9.17. Restrictions of Notices; Information and Disclosure .

Notwithstanding anything else herein, nothing in this Agreement shall require any party to provide any notice, information, investigation, audit, correspondence, and any other communication (collectively, "Information") to any other party (1) if providing such Information is prohibited by Applicable Requirements (as defined in the MSRPA) or (2) upon advice of counsel, if providing such Information may cause such party to lose attorney-client privilege (governed by the applicable jurisdiction) between such party and its attorneys.

[Signature Page Follows]

71




IN WITNESS WHEREOF, each party has caused this instrument to be signed in its corporate name on its behalf by its proper officials duly authorized as of the day, month and year first above written.


NEW RESIDENTIAL MORTGAGE LLC

By:     /s/ Cameron MacDougall    
Name: Cameron MacDougall
Title: President






















































[Signature Page to Subservicing Agreement]





DITECH FINANCIAL LLC

By:     /s/ Patricia Hobbib        
Name: Patricia Hobbib
Title Senior Vice President, Secretary




























































[Signature Page to Subservicing Agreement]





EXHIBIT A

FORM OF ACKNOWLEDGEMENT AGREEMENT


On this      day of      , 20      , New Residential Mortgage LLC

(the " Owner/Servicer ") and Ditech Financial LLC (the " Subservicer "), hereby acknowledge that the Mortgage Loans listed on the Mortgage Loan Schedule attached hereto as Schedule I are subject to that certain Subservicing Agreement, dated as of August 8, 2016, by and between the Owner/Servicer and the Subservicer (the " Agreement "). Notwithstanding any provision to the contrary, the Owner/Servicer retains all rights to the Servicing Rights relating to the Mortgage Loans subject to the contractual provisions of the Agreement. The Subservicer hereby agrees to service such Mortgage Loans pursuant to the terms of the Agreement.

1.
With respect to the Mortgage Loans made subject to the Agreement hereby, the Transfer Date shall be [      ].

2.
With respect to the Mortgage Loans made subject to the Agreement hereby, the Sale Date shall be [      ].

3.
With respect to the Mortgage Loans made subject to the Agreement hereby, the following terms shall apply:

[Insert any amendments to the Agreement]

All other terms and conditions of this transaction shall be governed by the Agreement. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Agreement.

This Acknowledgment Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. Telecopy or electronically transmitted signatures shall be deemed valid and binding to the same extent as the original.









Exhibit A-1





IN WITNESS WHEREOF, the Owner/Servicer and the Subservicer have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.

NEW RESIDENTIAL MORTGAGE LLC,
as the Owner/Servicer


By:     

Name:     

Title:     




DITECH FINANCIAL LLC,
as the Subservicer


By:     

Name:     

Title:     


















Exhibit A-2






EXHIBIT B SUBSERVICING FEES
Monthly Base
Servicing Fees: All fees with respect to any Mortgage Loan which is not a Prior Ditech Serviced Loan are subject to validation of the loan servicing tape and customary due diligence.

FNMA/FHLMC Portfolio :     C    30    60    90    120+ FCL    REO     

Base monthly Fees :                 [***]

[***] monthly fee for Current loans for initial bulk MSR trades with Subservicer which include Servicing Rights where Owner/Servicer may subsequently purchase the associated excess servicing rights from WCO/Marix.




Incentive and Resolution Fees:     See Schedule 1 to Exhibit B attached

Allocation of Other Fees/Expenses:     The Subservicer would retain all Ancillary Income.
Except with respect to Prior Ditech Serviced Loans:
The Owner/Servicer would retain investment earnings and float on related P&I and Escrow Custodial Accounts and be obligated to pay statutory interest on borrower escrow accounts where required. The Owner/Servicer would also bear the expense for compensating interest, mortgage level insurance, pool insurance, and guaranty fees, pool level certification and re-certification costs and expenses, as applicable, life of loan tax and flood monitoring contracts, loan document assignments for non MERS loans, custodial transfer expenses, MERS transfer expenses, and document imaging expenses. The Owner/Servicer would also bear Agency curtailment expenses, except for curtailments caused solely by the servicing error of the Subservicer. The Owner/Servicer as the owner of the Servicing Rights would also bear the funding obligation for repurchase claims and early buy-out claims, and the consequence or obligation with respect to VA No Bids and VA Buy-downs (if applicable).

Exhibit B-1


*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


Processing Fees
Servicing would be subject to the following processing fees on a per claim basis:

GSE Claims (1x per account)    [* **]
Supplemental Claims (capped at 2x per account)    [***]



Boarding and Deboarding Fee
Boarding Fee
[***]
Deboarding Fee
[***]





Deconversion Fees:* :    The sum of the Termination Fee (if any) and the Deboarding Fee.
* Deconversion Fees does not apply to REO Properties

Termination Fees:     The Termination Fee calculated in accordance with the following Termination Fee Schedule:


Termination Fee Schedule
Months 1-12
[***]
Months 13-18
[***]
Months 19-24
[***]
Months 25-30
[***]
Months 31-36
[***]



Ditech Transfer Fees:     Ditech Transfer Fees calculated pursuant in accordance with the following Transfer Fee Schedule:




Exhibit B-2

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


Ditech Transfer Fee Schedule



Month



$ Amount
Projected.
Current Loan Count
Ditech
Transfers Fee/Loan
1
[***]
[***]
[***]
2
[***]
[***]
[***]
3
[***]
[***]
[***]
4
[***]
[***]
[***]
5
[***]
[***]
[***]
6
[***]
[***]
[***]


Exhibit B-2

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.



Ditech Transfer Fee Schedule



Month



$ Amount
Projected.
Current Loan Count
Ditech
Transfers Fee/Loan
7
[***]
[***]
[***]
8
[***]
[***]
[***]
9
[***]
[***]
[***]
10
[***]
[***]
[***]
11
[***]
[***]
[***]
12
[***]
[***]
[***]
13
[***]
[***]
[***]
14
[***]
[***]
[***]
15
[***]
[***]
[***]
16
[***]
[***]
[***]
17
[***]
[***]
[***]
18
[***]
[***]
[***]
19
[***]
[***]
[***]
20
[***]
[***]
[***]
21
[***]
[***]
[***]
22
[***]
[***]
[***]
23
[***]
[***]
[***]
24
[***]
[***]
[***]

Exhibit B-3

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


25
[***]
[***]
[***]
26
[***]
[***]
[***]
27
[***]
[***]
[***]
28
[***]
[***]
[***]
29
[***]
[***]
[***]
30
[***]
[***]
[***]
31
[***]
[***]
[***]
32
[***]
[***]
[***]
33
[***]
[***]
[***]
34
[***]
[***]
[***]
35
[***]
[***]
[***]
36
[***]
[***]
[***]
37
[***]
[***]
[***]
38
[***]
[***]
[***]
39
[***]
[***]
[***]
40
[***]
[***]
[***]
41
[***]
[***]
[***]
42
[***]
[***]
[***]


Exhibit B-3

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.



Ditech Transfer Fee Schedule



Month



$ Amount
Projected.
Current Loan Count
Ditech
Transfers Fee/Loan
43
[***]
[***]
[***]
44
[***]
[***]
[***]
45
[***]
[***]
[***]
46
[***]
[***]
[***]
47
[***]
[***]
[***]
48
[***]
[***]
[***]
49
[***]
[***]
[***]
50
[***]
[***]
[***]
51
[***]
[***]
[***]
52
[***]
[***]
[***]
53
[***]
[***]
[***]
54
[***]
[***]
[***]
55
[***]
[***]
[***]
56
[***]
[***]
[***]
57
[***]
[***]
[***]
58
[***]
[***]
[***]
59
[***]
[***]
[***]

Exhibit B-4

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


60
[***]
[***]
[***]
61
-
 
 



Due Diligence:
Solely with respect to any Mortgage Loan which is not a Prior Ditech Serviced Loan, the Subservicer will conduct customary due diligence, including, but not limited to, (i) a loan level legal/compliance review of servicing activities with respect to the Servicing Rights; and (ii) a review of past servicing comments and correspondence relating to the mortgage loans comprising the Servicing Rights. The Subservicer reserves the right to expand the scope of such due diligence. Diligence shall not be required for any Prior Ditech Serviced Loan.

Performance-based Termination
Events:          Termination events with respect to the Delinquency Ratio, the Servicing Advance Ratio and the Quarterly Refinancing Percentage are set forth in Section 5.3 of the Agreement.


Exhibit B-4

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.




These triggers may be revisited as additional Mortgage Loans which are not Prior Ditech Serviced Loans are added to be subserviced pursuant to this Agreement.





    
    


Exhibit B-5


SCHEDULE 1 to Exhibit B
Agency Loan Resolution Incentive Fees



FNMA Servicer Incentives
 
HAMP
Less than or equal to 120 days delinquent
[***]
121 days or more delinquent to and including 210
[***]
Greater than 210 days delinquent
[***]
Non-HAMP
Less than or equal to 120 days delinquent
[***]
121 days or more delinquent to and including 210
[***]
Greater than 210 days delinquent
[***]
DIL
Less than or equal to 210 days delinquent
[***]
211 days delinquent up to and including 300 days delinquent
[***]
Greater than 300 days delinquent
[***]
Short Sale
Less than or equal to 210 days delinquent
[***]
211 days delinquent up to and including 300 days delinquent
[***]
Greater than 300 days delinquent
[***]
Repayment Plan
The mortgage loan must be brought current upon the successful
completion of the repayment plan.
[***]


Exhibit B-6

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.




FHLMC Servicer Incentives
HAMP
Less than or equal to 120 days delinquent (150
days from Due Date of Last Paid Installment (DDLPI))
[***]
 
121 days or more delinquent to and including 210 days delinquent (151 to 240 days from DDLPI)
[***]
 
Greater than 210 days delinquent (greater than 240 days from
DDLPI)
[***]
Non-HAMP
Less than or equal to 120 days delinquent (150
days from Due Date of Last Paid Installment (DDLPI))
[***]
 
121 days or more delinquent to and including 210
days delinquent (151 to 240 days from DDLPI)
[***]
 
Greater than 210 days delinquent (greater than 240 days from
DDLPI)
[***]
DIL
 
[***]
HAFA Short Sale
 
[***]
Repayment Plan
The mortgage must be 60 or more days delinquent at the time the
borrower entered into the repayment plan.
[***]


Subservicer’s incentive fee set forth in this Schedule 1 will be capped at the actual Fannie Mae or Freddie Mac applicable incentive.


Exhibit B-7

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.





EXHIBIT C

FORM OF
LIMITED POWER OF ATTORNEY

New Residential Mortgage LLC (the " Owner/Servicer "), a [      ] limited liability company, whose address is [          ], constitutes and appoints Ditech Financial LLC (the " Subservicer "), a [      ] limited liability company, its true and lawful attorney-in-fact, in its name, place and stead to take the following designated actions in connection with any mortgage loan or real estate owned property (each, a " Mortgage Loan ") owned by the Owner/Servicer and serviced by the Subservicer pursuant to that certain Subservicing Agreement, dated as of August 8, 2016, between the Owner/Servicer and the Subservicer:

1.
To ask, demand, sue for, collect and receive all sums of money, debts or other obligations of any kind with respect to a Mortgage Loan which are now or shall after this date become due, owing or payable, or otherwise belong to the Owner/Servicer, to settle and compromise any of such debts or obligations that may be or become due to the Owner/Servicer, to endorse in the name of the Owner/Servicer for deposit in the appropriate account any instrument payable to or to the order of the Owner/Servicer; in each case with respect to a Mortgage Loan.

2.
To make demand(s) on behalf of the Owner/Servicer upon any or all parties liable on a Mortgage Loan; to declare defaults with respect to a Mortgage Loan; to give notices of intention to accelerate; to give notices of acceleration and any other notices as the Subservicer deems reasonably appropriate; to post all notices as required by law and the documents securing a Mortgage Loan in order to foreclose such Mortgage Loan; to handle all aspects of foreclosure on behalf of the Owner/Servicer, including, but not limited to, conducting the foreclosure sale, bidding for the Owner/Servicer and executing all documents including all deeds and conveyances, needed to effect such foreclosure sale and/or liquidation; to execute any documents or instruments necessary for the offer, listing, closing of sale, and conveyance of real estate owned property, including, but not limited to, grant, warranty, quit claim and statutory deeds or similar instruments of conveyance; to execute any documents or instruments in connection with any bankruptcy or receivership of a mortgagor on a Mortgage Loan; to file suit and prosecute legal actions against all parties liable for amounts due under a Mortgage Loan, including, but not limited to, any deficiency amounts due following foreclosure; to take such other actions and exercise such rights which may be taken by the Owner/Servicer under the terms of any Mortgage Loan, including, but not limited to, satisfaction, release, cancellation or discharge of mortgage, eviction, unlawful detainer, or similar dispossessory proceeding, sale, taking possession of, release of security instruments, realization upon all or any part of a Mortgage Loan or any collateral therefor or guaranty thereof; and to assign, convey, accept or otherwise transfer, the Owner/Servicer’s interest in any Mortgage Loan.
Exhibit C-1







3.
To perform all other acts and do all other things as may be reasonably necessary to manage the Mortgage Loans.

Nothing herein shall give the attorney-in-fact hereunder the right or power to negotiate or settle any suit, counterclaim or action against the Owner/Servicer. The Owner/Servicer shall have no obligation to inspect or review any agreement or other document or item executed by the attorney-in-fact hereunder on behalf of the Owner/Servicer pursuant to this Limited Power of Attorney and as such, the attorney-in-fact hereunder expressly acknowledges that the Owner/Servicer is relying upon such attorney-in-fact to undertake any and all necessary procedures to confirm the accuracy of any such agreement, document or other item.

This Limited Power of Attorney shall continue in full force and effect unless terminated in writing by an officer of the Owner/Servicer so authorized to do so (a " Revocation ").

Any third party may rely upon a copy of this Limited Power of Attorney, to the same extent as if it were an original, and shall be entitled to rely on a writing signed by the attorney-in- fact hereunder to establish conclusively the identity of a particular right, power, capacity, asset, liability, obligation, property, loan or commitment of such attorney-in-fact for all purposes of this Limited Power of Attorney, unless a Revocation has been recorded in the public records of the jurisdiction where this Limited Power of Attorney has been recorded, or unless such third party has received actual written notice of a Revocation.

No attorney-in-fact hereunder shall be obligated to furnish a bond or other security in connection with its actions hereunder.

The Owner/Servicer authorizes the Subservicer, by and through any of its directors or officers, or any other employee who is duly authorized by the Subservicer as attorney-in-fact appointed hereunder, to certify, deliver, and/or record copies and originals of this Limited Power of Attorney.

If any provision of this Limited Power of Attorney shall be held invalid, illegal or unenforceable, the validity, legality or enforceability of each of the other provisions hereof shall not be affected thereby.

[Signature Page Follows]








IN WITNESS WHEREOF , [      ] has caused this Limited Power of Attorney to be executed and subscribed in its name as of          ,      .

NEW RESIDENTIAL MORTGAGE LLC

By:          Name:          Title:         

WITNESS:
By:          Name:         

WITNESS:
By:          Name:         


STATE OF          )
) ss COUNTY OF      )

I certify that      , personally came before me and acknowledged that he/she, is the          of      and that he/she as          being authorized to do so, executed the foregoing Limited Power of Attorney on behalf of said company.

IN WITNESS WHEREOF, I have hereunto set my hand and have affixed my official seal.
     , Notary Public

My Commission Expires:     




Exhibit C-3








EXHIBIT D

SERVICING TRANSFER PROCEDURES

[to be provided from time to time pursuant to the definition of "Servicing Transfer Procedures"]






















Exhibit D-1















EXHIBIT E

LIST OF SERVICING REPORTS

[to be provided pursuant to Section 2.7]
























Exhibit E-1















EXHIBIT F-1

SERVICE LEVEL AGREEMENTS

[to be provided from time to time pursuant to Section 2.6]
























Exhibit F-1-1















EXHIBIT F-2

FORM OF SLA MONTHLY REPORT

LOAN_NUMBER OLD_LOAN_NUMBER ZONE
ORIGINAL_OCCUPANCY_STATUS MORTGAGOR_LAST_NAME MORTGAGOR_FIRST_NAME CO_BORROWER_LAST_NAME BILL_LINE3
BILL_LINE4 BILL_LINE5 BILL_CITY BILL_STATE BILL_ZIP
TELEPHONE_NUMBER TELEPHONE_CODE SECOND_TELEPHONE_NUMBER PROPERTY_STREET_NUMBER PROPERTY_STREET_DIRECTION PROPERTY_STREET_NAME PROPERTY_CITY_NAME PROPERTY_STATE PROPERTY_ZIP ZIP_CODE_SUFFIX PROPERTY_TYPE PROPERTY_STATE_CODE ORIGINAL_PROPERTY_VALUE FLOOD_ZONE1
FLOOD_ZONE23 FLOOD_LOMA_DETERMINATION_DATE PRINCIPAL_BALANCE ORIGINAL_INTEREST_RATE ANNUAL_INTEREST_RATE ESCROW_BALANCE ESCROW_ADVANCE_BALANCE SUSPENSE_BALANCE REPLACEMENT_RESERVE_BALANCE REPLACEMENT_RESERVE_AMOUNT







RESTRICTED_ESCROW_BALANCE FIRST_DUE_DATE
NEXT_DUE_DATE LOAN_MATURITY_DATE LOAN_TERM LAST_FULL_PAYMENT_DATE
TOTAL_MONTHLY_PAYMENT DRAFTING_INDICATOR PRINCIPAL_AND_INTEREST_PAYMENT T_AND_I_MONTHLY_AMOUNT ESCROW_A_H_PREMIUM_AMOUNT LATE_CHARGE_STOP_CODE PAYMENT_PERIOD DISTRIBUTION_TYPE ESCROW_COUPON_MONTH_NUMBER LAST_ANALYSIS_DATE
ESCROW_LAST_ANALYSIS_EFFECTIVE_DATE ESCROW_LAST_ANALYSIS_OS_AMOUNT YTD_HAZARD_AMOUNT
YTD_TAX_AMOUNT INTEREST_ON_ESCROW_FLAG YTD_IOE_AMOUNT YTD_PRINCIPAL_BALANCE YTD_INTEREST_AMOUNT YE_POINTS_PAID_AM INVESTOR_IDENTITY INVESTOR_CATEGORY INVESTOR_LOAN_NUMBER PURCHASE_DATE RECR_CODE
LEVEL_SERVICE_FEE_AMOUNT PAY_HISTORY_TABLE PAY_HISTORY
BKR_CODE BANKRUPTCY_CODE YTD_LATE_CHARGE_AMOUNT
ACCRUED_LATE_CHARGE_AMOUNT NFS_BALANCE FORECLOSURE_STOP DONT_PROCESS_FLAG ACCRUAL_STATUS







MI_EXPIRE_DT MI_TERM_DT MI_MIDPOINT_DT MI_HI_RISK_CD MI_CANCEL_DT
DELINQUENCY_STATUS_CODE CBR_COMMENT_CODE CBR_EXPIRATION_DATE CBR_CODE CBR_CODE_EXPIRATION_DATE CBR_STATUS
CREDIT_QUALITY_CURRENT_CODE CREDIT_QUALITY_DATE CREDIT_QUALITY_AGENT_CODE DATETHREE
FIFTEENPOS FIRST_SERVICE_FEE_RATE MAX_LATE_CHARGE_AMOUNT MIN_LATE_CHARGE_AMOUNT LATE_CHARGE_FC FORECLOSURE_STATUS_CODE ARM_INDICATOR
AR_PLAN_ID AR_ORIG_IR_CHG_DT AR_ORIG_PI_CHG_DT ARM_IR_CHANGE_PERIOD PI_CHANGE_PERIOD ARM_IR_MARGIN_RATE AR_NXT_CALC_DT AR_NXT_IR_EFF_DT AR_NXT_PI_EFF_DT ARM_IR_MAX_INCREASE_RATE ARM_IR_MAX_DECREASE_RATE ARM_MAX_LIFE_INCR_RATE ARM_MAX_LIFE_DECR_RATE AR_CONVERSION_DT PIF_UPDATED_DATE PIF_AS_OF_DATE
HAZARD_FLOOD_INSURANCE_CODE MI_PAYEE_ID







PAYOFF_STOP_CODE PAYOFF_STOP_DATE FC_SALE_DATE MI_PMI_RT MI_PRI_COVERAGE_FC AR_NEXT_PI_AM AR_NEXT_INT_RT ARM_INDEX_RATE AR_INDEX_1ST_RT MI_CERT_NO BL_ACTIVATION_DT AR_ORIG_PI_AM
ORIGINAL_DISCOUNT_BALANCE ORIGINATION_FEE_AMOUNT MAN_CODE VACANCY_FIRST_KNOWN_DATE PRODUCT_LINE_CODE








MI_VA_NO LTV_RATIO DATEONE MI_TY
ESCROWED_INDICATOR SETUP_DATE HAZ1_START_DATE HAZ1_COMPLETE_DATE DELINQUENCY_CLASS_CODE APPRAISAL_AS_IS APPRAISAL_COMPLETE_DATE LIST_PRICE LIST_START_DATE BKRCASENUMBER BKRCHAPTERTYPE BKRSETUPDATE BKRNOTICERECEIVEDDATE BKRPREPETITIONDUEDATE BKRCOMPLETIONDATE
BKRCONFIRMATIONHEARINGDATE BKRDISCHARGEDATE BKRDISMISSALDATE BKRFILINGDATE BKRPREPETITIONCLAIMDATE BKRPREPETITIONCONFIRMDATE BKRPROOFOFCLAIMFILINGDATE BKRRELIEFFILEDDATE BKRRELIEFHEARINGDATE BKRPOSTPETITIONDUEDATE BKRRELIEFREQUESTEDDATE BKRRELIEFDENIEDDATE BKRRELIEFGRANTEDDATE BKRREMOVALDATE BKRREMOVALDESCRIPTION FCSETUPDATE
FCSTARTDATE FCATTORNEYNAME FCSALEDATE FCREMOVALDATE FC_SALE_AMOUNT REOFORECLOSURESALEDATE REO_LISTING_PRICE_AMOUNT







REO_LISTING_START_DATE REOSCHEDULEDCLOSINGDATE REO_SETUP_DATE REO_START_DATE
REOACQUISITIONDATE REO_CMA_ORDER_DATE REO_CMA_COMPLETED_DATE REO_CMA_AS_IS_VALUE REO_COMPLETED_DATE REO_EVICTION_START_DATE REO_EVICTION_COMPLETED_DATE LOSS MIT SET UP DATE
LOSS MIT STAGE CODE LOSS MIT STATUS CODE LM TEMPLATE ID
LOSS MIT DENIAL REASON CODE FHA ADP CODE
FHA CASE NUMBER FHA SECTION CODE INT ONLY END DATE INTEREST ONLY FLAG MERS MOM INDICATOR
MERS REGISTRATION DATE MERS REGISTRATION FLAG ROUNDING_FACTOR
USDA - CASE NUMBER - BORROWER ID USDA ANNUAL DISB AMT
USDA DUE DATE USDA GUARANTEE# MI_FHA_OFFICE_CD MI_FHA_CHK_DIG_XX
RECOVER_CORP_ADVANCE_BALANCE NON_REC_CORP_ADVANCE_BALANCE THIRD_PARTY_RECOVERABLE_CA_BAL LIEN_POSITION_NUMBER







OCCUPANCY_CURRENT_STATUS_CODE PROPERTY_CONDITION LOAN_TO_VALUE_COMBINED_CURRENT SL_360_365_FACTOR LOAN_MODIFICATION_TYPE MOD_INFO_BEFORE_PRIN_BALANCE MOD_INFO_AFTER_INTEREST_RATE MOD_INFO_AFTER_PI_PMT_AMOUNT
MOD_INFO_AFTER_DUE_DATE PROPERTY_VALUE ORIGINAL_APPRAISAL_DATE ARM_IR_ROUNDING_FACTOR ARM_IR_ROUNDING_TYPE PB_NEGATIVE_AMORT_PCT RESOLUTION_DATE






























Exhibit F-2-1







RESOLUTION_TYPE FC_ACTUAL_STEP_T25 FC_ACTUAL_STEP_U94 FC_STATUS_CODE REO_STEP_R33_COST REO_STEP_Z53_COST HZ_FORCE_COV_CD BNK1 PMTS INSIDE LOSS_MITIGATION_CODE
LOSS_MITIGATION_STATUS_CODE PLAN_STATUS_CD
PLAN_TYPE PLAN_FIRST_DUE PLAN_STATUS_DT PLAN_AMOUNT REPAY_NEXT_DUE_DATE LM_STATUS_CODE REO_STATUS_CODE REO_STAGE_CODE REO_SALE_PRICE_AMOUNT REO_PROCEEDS_AMOUNT FIFTEENP2
DIST_TYPE_1_INT_ONLY_FLAG LOAN_MODIFICATION_DATE ARM_INDEX_LEAD_DAYS 1 MI_UPFRONT_AM
TIMES_30_DAYS_DELINQUENCY_CURRENT_YEAR_SYS TIMES_60_DAYS_DELINQUENCY_CURRENT_YEAR_SYS TIMES_90_DAYS_DELINQUENCY_CURRENT_YEAR_SYS TIMES_120_DAYS_DELINQUENCY_CURRENT_YEAR_SYS AR_LST_NOTICE_DT








EXHIBIT G

ADDITIONAL SERVICING REQUIREMENTS

[None]








EXHIBIT H

FORM OF QUARTERLY FINANCIAL METRICS REPORT

The following term shall have the meanings specified in this Exhibit H:

Consolidated Liquidity : As to any Person, unrestricted cash and cash equivalents of such Person and its subsidiaries (excluding cash held in a special purpose entities or vehicles and cash and cash equivalents pertaining to minority interests) on a consolidated basis.











FINANCIAL METRIC
CONFIRMATION
EVIDENCE OF
CALCULATION
 
 
 
A.
With respect to Subservicer, such report shall
include confirmation of the following information with respect to the Subservicer's financial condition:
 
 
i. Minimum adjusted net worth for
sellers/servicers (as described in the Fannie Mae Guides and calculated in accordance with Fannie Mae Guides for sellers/servicers), equal to a minimum of $300 million.
[YES]
 
ii. Minimum adjusted net worth for
sellers/servicers (as described in the Fannie Mae Guides) to total assets (as defined in the Fannie Mae Guides) are greater than 10% (calculated in accordance with Fannie Mae Guidelines).
[YES]
 
iii. Minimum liquidity at least equal to
minimum liquidity requirements for sellers/servicers (calculated in accordance with Fannie Mae Guidelines).
[YES]
 
iv. Declines in net worth for
sellers/servicers (as described and calculated in the Fannie Mae Guides) is not greater than the amount described in the Fannie Mae Guide which would be deemed a breach of the applicable lender contract).
[YES]
 
 
 
 
B.
With respect to Walter, such report shall
include confirmation of the following information:
[YES]
 









 
 
 
i. Consolidated Liquidity, comprising of
cash and cash equivalents equal to
$180 million (calculated in accordance with GAAP).
[YES]
 
ii. Leverage ratio equal to 4:1 by
December 31, 2017 (calculated in accordance with the Amended And Restated Credit Agreement, dated as of December 19, 2013, among Walter Investment Management Corp., as Borrower, the Lenders and other parties thereto, and Credit Suisse AG, as Administrative Agent and as Collateral Agent for the Lenders.).
[YES]
 






                    















Exhibit H-2
















































EXHIBIT I

FORM OF QUARTERLY CERTIFICATE



New Residential Mortgage LLC
c/o New Residential Investment Corp. 1345 Avenue of the Americas, 45th Floor New York, New York 10105

Certification re: CFPB Stipulated Order and State Orders

In my role as the Chief Risk and Compliance Officer for Walter Investment Management Corp., I am responsible for overseeing Ditech Financial LLC’s (the "Company") compliance program, including aspects of the program related to each of the following:








(i)
the Stipulated Order for Permanent Injunction and Monetary Judgment entered in Federal Trade Commission and Consumer Financial Protection Bureau v. Green Tree Servicing LLC, 15-cv-02064 , (D. Minn. April 23, 2015) (the "CFPB Stip Order");

(ii)
the Assurance of Discontinuance entered in State of Vermont In re Green Tree Servicing LLC , 64210-14WnCV, (VT Sup Ct. October 30, 2014) (the "VT State Order"); and

(iii)
the Assurance of Discontinuance entered in Commonwealth of Massachusetts In re Ditech Financial LLC (MA Sup. Ct. August 2016) (the "MA State Order").

I hereby certify that during the period [. to. ], nothing has come to my attention that has made me believe that the Company is not in compliance with each of the CFPB Stip Order, the MA State Order or VT State Order described above, in each case, in all material respects.

For purposes of this certificate, please note that the determination of what is material has subjective elements and that the Consumer Financial Protection Bureau, the Federal Trade Commission, state regulatory or enforcement authorities, as applicable, or other parties may take a different view of what is material.

Executed on [Insert Date]


Sheryl L. Newman
Chief Risk and Compliance Officer Walter Investment Management Corp.








EXHIBIT J
VENDOR LIST
[to be provided pursuant to Section 2.3]









EXHIBIT K LITIGATION PROTOCOLS
[to be provided pursuant to Section 2.21]


Exhibit 10.17.2

AMENDMENT NO. 1 TO
SUBSERVICING AGREEMENT
This AMENDMENT NO.1 TO SUBSERVICING AGREEMENT (“ Amendment ”), dated as of December 29, 2016 by and between New Residential Mortgage LLC (the “ Owner/Servicer ”), and Ditech Financial LLC (“ Ditech ” or the “ Subservicer ” and together with Servicer, the “ Parties ”).
RECITALS
WHEREAS, the Parties entered into that certain Subservicing Agreement, dated as of August 8, 2016, as amended (“ Subservicing Agreement ”); and
WHEREAS, the Parties desire to amend the Subservicing Agreement (i) to revise the definition of Quarterly Refinancing Percentage to clarify that such percentage is only applicable to Prior Ditech Serviced Loans (as defined in the Subservicing Agreement) which are subject to the Recapture Agreement (as defined in this Amendment), (ii) to provide that the Subservicer termination event with cause set forth in Section 5.3(y) of the Subservicing Agreement shall no longer apply if the Recapture Agreement has been terminated and (iii) to remove the payment of Ditech Transfer Fees (as defined in the Subservicing Agreement) in connection with a termination of Subservicer with cause pursuant to Section 5.3(y) of the Subservicing Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
I.
Amendments.
a.      The following definition of “Recapture Agreement” is hereby added to Article I of the Subservicing Agreement in its appropriate place in alphabetical order:

“Recapture Agreement: The MSR Recapture Agreement, dated as of August 8, 2016, by and between the Subservicer and the Owner/Servicer, as may be amended, restated or modified pursuant to its terms and in effect from time to time”.
b.      The definition of Quarterly Refinancing Percentage is hereby deleted in its entirety from Article I in the Subservicing Agreement and replaced with the following:

“Quarterly Refinancing Percentage: With respect to the Prior Ditech Serviced Loans which are subject to the Recapture Agreement during the applicable Quarterly Collection Period and a Calculation Date, a fraction, expressed as a percentage, the numerator of which is equal to the aggregate principal balance of the New Mortgage Loans that were originated by the Subservicer and were refinancings of Prior Ditech Serviced Loans that were subserviced by the Subservicer over such Quarterly Collection Period (and subject to the Recapture Agreement) as measured on their respective refinancing date, and the denominator of which is the aggregate principal balance of all Prior Ditech Serviced Loans which were subject to the Recapture Agreement during such Quarterly Collection Period that voluntarily prepaid in full over such Quarterly Collection Period (measured as of the date of such prepayment).”

720563610.5

c.      Section 5.3(y) of the Subservicing Agreement is hereby deleted in its entirety and replaced with the following:

“(y) the Quarterly Refinancing Percentage falls below 10% for two (2) consecutive Calculation Dates on or after March 31, 2017; provided, however, that this Section 5.3(y) shall not be applicable to the extent that the Recapture Agreement has been terminated.”
d.      Section 5.4(b) of the Subservicing Agreement is hereby deleted in its entirety and replaced with the following:

“(b)     Payment of Ditech Transfer Fees . Notwithstanding anything to the contrary in this Agreement, within three (3) Business Days following receipt of the applicable notice of termination, the Subservicer shall remit to the Owner/Servicer the applicable Ditech Transfer Fees if: (i) the Owner/Servicer terminates this Agreement with respect to one or more Mortgage Loans with cause pursuant to Section 5.3 (other than with respect to a termination pursuant to Section 5.3(y)) or (ii) the Subservicer terminates this Agreement without cause at any time, as further described in Section 5.2(b) .”
II.
Limited Effect. Except as amended hereby, the Subservicing Agreement shall continue in full force and effect in accordance with its terms. Reference to this Amendment need not be made in the Subservicing Agreement or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Subservicing Agreement, any reference in any of such items to the Subservicing Agreement being sufficient to refer to the Subservicing Agreement as amended hereby.
III.
Counterparts. Signatures of the Parties transmitted by facsimile or .pdf shall be deemed to have the same effectiveness as if they are original signatures for all purposes.
[Signature page follows]




IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date first above written.

NEW RESIDENTIAL MORTGAGE LLC (Owner/Servicer)

By: New Residential Investment Corp., its managing member

 

By:
/s/ Nicola Santoro, Jr.
 

Name:
Nicola Santoro, Jr.
 

Title:
Chief Financial Officer
 

Date:
December 29, 2016
 




Signature Page to Amendment No. 1 to Subservicing Agreement




DITECH FINANCIAL LLC (Subservicer)


By:                         

Name:                              

Title:                              

Date:                         

Signature Page to Amendment No. 1 to Subservicing Agreement





Exhibit 10.22.4

EXECUTION


AMENDMENT NO. 2 TO
MASTER REPURCHASE AGREEMENT

THIS AMENDMENT NO. 2 TO MASTER REPURCHASE AGREEMENT, dated as of February 27, 2017 (this “ Amendment ”), among Reverse Mortgage Solutions, Inc. (“ RMS ”), RMS REO BRC, LLC (“ REO Subsidiary ” and, individually or collectively with RMS, as the context may require, “ Seller ”), Barclays Bank PLC (“ Barclays ”) and Sutton Funding LLC (“ Sutton ”) amends that certain Master Repurchase Agreement, dated as of September 29, 2015, but effective as of October 15, 2015 (as amended by that certain Amendment No. 1 to Master Repurchase Agreement, dated as of May 23, 2016, the “ Repurchase Agreement ”). Unless otherwise defined herein, capitalized terms used in this Amendment have the meanings assigned to such terms in the Repurchase Agreement.
Recitals
WHEREAS, pursuant to Section 28 of the Repurchase Agreement, the parties hereto desire to amend the Repurchase Agreement as described below.
NOW, THEREFORE, pursuant to the provisions of the Repurchase Agreement concerning modification and amendment thereof, and in consideration of the amendments, agreements and other provisions herein contained and of certain other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
Agreements
Section 1. Amendments . Effective as of the Effective Date, the Repurchase Agreement is hereby amended as follows:
(a)      Section 2 of the Repurchase Agreement is hereby amended by inserting the following defined term in appropriate alphabetical order.
“ Bail-In Action ” means the exercise by the Bank of England (or any successor resolution authority) of any write-down or conversion power existing from time to time (including, without limitation, any power to amend or alter the maturity of eligible liabilities of an institution under resolution or amend the amount of interest payable under such eligible liabilities or the date on which interest becomes payable, including by suspending payment for a temporary period and together with any power to terminate and value transactions) under, and exercised in compliance with, any laws, regulations, rules or requirements in effect in the United Kingdom relating to the transposition of the European Banking Recovery and Resolution Directive as amended from time to time, including but not limited to, the Banking Act 2009 as amended from time to time, and the instruments, rules and standards created thereunder, pursuant to which Purchaser’s obligations (or those of Purchaser’s affiliates) can be reduced (including to zero), cancelled or converted into shares, other securities, or other obligations of ours or any other person.
(b)      The Repurchase Agreement is hereby amended by adding the following as a new Section 40 of the Agreement in its proper numerical sequence:
40.     Contractual Recognition of Bail-in.


1

Seller acknowledges and agrees that notwithstanding any other term of this Repurchase Agreement or any other agreement, arrangement or understanding with Purchaser, any of Purchaser’s liabilities, as the Bank of England (or any successor resolution authority) may determine, arising under or in connection with this Repurchase Agreement may be subject to Bail-In Action and Seller accepts to be bound by the effect of:

(a)    Any Bail-In Action in relation to such liability, including (without limitations):
        
(i)    a reduction, in full or in part, of any amount due in respect of any such liability;

(ii)    a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, Seller; and

(iii)     a cancellation of any such liability; and
    
(b)    a variation of any term of this Repurchase Agreement to the extent necessary to give effect to Bail-In Action in relation to any such liability.
Section 2.      Agreement in Full Force and Effect as Amended . As specifically amended hereby, the Repurchase Agreement remains in full force and effect. All references to the Agreement in any Program Document shall be deemed to mean the Repurchase Agreement as supplemented and amended hereby. This Amendment shall not constitute a novation of the Repurchase Agreement, but is a supplement thereto. The parties hereto agree to be bound by the terms and conditions of the Repurchase Agreement, as supplemented and amended by this Amendment, to the same effect as if such terms and conditions were set forth herein verbatim .
Section 3.      Conditions to Effectiveness of this Amendment . This Amendment shall become effective on the day (the “ Effective Date ”) when Seller shall have paid or delivered, as applicable, to Barclays and Sutton all of the following fees, expenses, documents and instruments, each of which shall be in form and substance acceptable to Barclays and Sutton:
(a) all accrued and unpaid fees and expenses owed to Purchaser in accordance with the Program Documents, in each case, in immediately available funds, and without deduction, set-off or counterclaim; and
(b) a copy of this Amendment duly executed by each of the parties hereto.
Section 4.      Miscellaneous .
(a)      This Amendment shall be binding upon the parties hereto and their respective successors and assigns.
(b)      The various headings and sub-headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or the Repurchase Agreement or any provision hereof or thereof.

2

(c)      THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS EXCEPT SECTIONS 5-1401 AND 5-1402 OF NEW YORK GENERAL OBLIGATIONS LAW, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(d)      This Amendment may be executed in one or more counterparts and by the different parties hereto on separate counterparts, including without limitation counterparts transmitted by facsimile or in .pdf format, each of which, when so executed, shall be deemed to be an original and such counterparts, together, shall constitute one and the same agreement.
(The remainder of this page is intentionally blank.)


3


IN WITNESS WHEREOF, each undersigned party has caused this Amendment to be duly executed by one of its officers thereunto duly authorized as of the date and year first above written.
REVERSE MORTGAGE SOLUTIONS, INC ., as a Seller


By: /s/ Cheryl Collins                
Name: Cheryl Collins
Title: Senior Vice President

RMS REO BRC, LLC, as a Seller


By: /s/ Cheryl Collins                
Name: Cheryl Collins
Title: Manager

SUTTON FUNDING LLC , as a Purchaser


By: /s / Ellen Kiernan                
Name: Ellen Kiernan
Title: Vice President

BARCLAYS BANK PLC , as Agent


By: /s/ George Van Schaick            
Name: George Van Schaick
Title: Managing Director


Signature Page to Barclays – RMS Amendment No. 2 to MRA
Exhibit 10.23.4

EXECUTION VERSION

AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as administrative agent
(“ Administrative Agent ”),
CREDIT SUISSE AG, a company incorporated in Switzerland, acting through its CAYMAN ISLANDS BRANCH (“ CS Cayman ”, a “ Committed Buyer ” and a “ Buyer ”) and ALPINE SECURITIZATION LTD (“ Alpine ” and a “ Buyer ”), and other Buyers from time to time (“ Buyers ”),
REVERSE MORTGAGE SOLUTIONS, INC., as seller (“ Seller ”) and
RMS REO CS, LLC (“ REO Subsidiary ”)
Dated February 21, 2017




LEGAL02/36925940v15

TABLE OF CONTENTS
Page
1. Applicability     1
2. Definitions     2
3. Program; Initiation of Transactions     22
4. Repurchase; Conversion to REO Property     23
5. Price Differential     25
6. Margin Maintenance     25
7. Income Payments     26
8. Security Interest     27
9. Payment and Transfer     30
10. Conditions Precedent     31
11. Program; Costs     34
12. Servicing     37
13. Representations and Warranties     38
14. Covenants     43
15. Events of Default     50
16. Remedies Upon Default     52
17. Reports     55
18. Repurchase Transactions     58
19. Single Agreement     58
20. Notices and Other Communications     58
21. Entire Agreement; Severability     60
22. Non assignability     60
23. Set‑off     61


- i -
LEGAL02/36925940v15

24. Binding Effect; Governing Law; Jurisdiction     61
25. No Waivers, Etc.     62
26. Intent     62
27. Disclosure Relating to Certain Federal Protections     63
28. Power of Attorney     63
29. Buyers May Act Through Administrative Agent     64
30. Indemnification; Obligations     64
31. Counterparts     65
32. Confidentiality     65
33. Recording of Communications     66
34. Periodic Due Diligence Review     67
35. Authorizations     67
36. Acknowledgment of Assignment and Administration of Repurchase Agreement     68
37. Acknowledgement Of Anti‑Predatory Lending Policies     68
38. Documents Mutually Drafted     68
39. General Interpretive Principles     68
40. Conflicts     69
41. Bankruptcy Non-Petition     69
42. Limited Recourse     69
43. Nominee     70
44. Termination of Agreement     70
45. Joint and Several     70
46. Amendment and Restatement     71



- ii -
LEGAL02/36925940v15

SCHEDULES
Schedule 1-A – Representations and Warranties with Respect to Transaction Mortgage Loans
Schedule 1-B – Representations and Warranties with Respect to REO Subsidiary Interests
Schedule 1-C – Representations and Warranties with Respect to REO Property
Schedule 2 –
Authorized Representatives
EXHIBITS
Exhibit A –
Reserved
Exhibit B –
Form of Trade Assignment
Exhibit C –
Reserved
Exhibit D –
Form of Seller Party Power of Attorney
Exhibit E –
Reserved
Exhibit F –
Reserved
Exhibit G –
Seller’s and REO Subsidiary’s Tax Identification Number
Exhibit H –
Form of Correspondent Seller Release
Exhibit I –
Form of Addendum to Escrow Instructions to be Provided by Seller Before Closing
Exhibit J –
Form of Servicer Notice


This is an AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT, dated as of February 21, 2017, by and among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the “ Administrative Agent ”), on behalf of Buyers, including but not limited to CREDIT SUISSE AG, a company incorporated in Switzerland, acting through its CAYMAN ISLANDS BRANCH (“ CS Cayman ”, a “ Committed Buyer ” and a “ Buyer ”) and ALPINE SECURITIZATION LTD (“ Alpine ” and a “ Buyer ”), REVERSE MORTGAGE SOLUTIONS, INC. (the “ Seller ”) and RMS REO CS, LLC (the “ REO Subsidiary ” and together with the Seller, each a “ Seller Party ” and collectively, the “ Seller Parties ”).
The Administrative Agent, as buyer, and the Seller Parties previously entered into a Master Repurchase Agreement, dated as of February 23, 2016 (as amended, restated, modified and/or supplemented from time to time, the “ Existing Repurchase Agreement ”);
Pursuant to that certain Assignment, Assumption and Appointment Agreement, dated as of June 17, 2016 by and among Administrative Agent, CS Cayman, as a buyer, and certain Buyers identified therein (as amended, restated, modified and/or supplemented from time to time, the “ Assignment, Assumption and Appointment Agreement ”), Administrative Agent sold and assigned its right, title and interest in the Transactions and the related Purchased Assets and Contributed REO Property hereunder to such Buyers and was retained as Administrative Agent hereunder;
Administrative Agent may, from time to time, assign its rights and obligations under this Agreement as permitted hereunder; provided that Administrative Agent shall continue to administer this Agreement as contemplated hereunder;
The parties hereto have requested that the Existing Repurchase Agreement be amended and restated, in its entirety, on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Applicability
a.      On the initial Purchase Date, CSFBMC, as buyer, purchased the Certificate (as defined herein) from the Seller in connection with the Transaction on such date, with a simultaneous agreement by CSFBMC, as buyer, to transfer to Seller the Certificate at a date certain, against the transfer of funds by Seller, in an amount equal to the related Repurchase Price. From time to time the parties hereto may enter into Transactions in which Seller agrees to initiate (a) the purchase of Transaction Mortgage Loans and/or (b) the transfer of REO Properties to REO Subsidiary, against the transfer of funds by Administrative Agent on behalf of Buyers to Seller in an amount equal to the Purchase Price of the related Transaction Mortgage Loan in the case of clause (a) above or the Purchase Price Increase as the result of the increase in value with respect to the REO Properties transferred to the REO Subsidiary in the case of clause (b) above, as applicable, with a simultaneous agreement by Administrative Agent on behalf of Buyers to (x) transfer to Seller such Mortgage Loans on a servicing released basis at a date certain or on demand upon payment by Seller of the Repurchase Price for the related Transaction Mortgage Loan or (y) permit the release of REO Properties, with respect thereto from the REO Subsidiary, to or for the benefit of Seller upon payment by Seller of a portion of the Repurchase Price for the Certificate representing the Allocated Repurchase Price in respect of the related REO Properties, in all cases subject to the terms of this Agreement. This Agreement is a commitment by the Committed Buyer to engage in the Transactions as set forth herein up to the Maximum Committed Purchase Price; provided , that Committed Buyer shall have no commitment to enter into any Transaction requested that would result in the aggregate Purchase Price of then-outstanding Transactions exceeding the Maximum Committed Purchase Price, and in no event shall the aggregate Purchase Price of outstanding Transactions exceed the Maximum Aggregate Purchase Price at any time. Each such transaction involving any acquisition or transfer of Transaction Mortgage Loans and REO Properties, as applicable, with a resulting increase in the Purchase Price shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in any annexes identified herein, as applicable hereunder.
Seller owned 100% of the Capital Stock in the REO Subsidiary on the initial Purchase Date. On the initial Purchase Date, Buyer purchased the REO Subsidiary Interests from the Seller in connection with the Transactions on such date.
In order to further secure the Obligations hereunder, the interests in the assets of the REO Subsidiary were pledged by the REO Subsidiary to the Buyer.
b.      On the initial Purchase Date, CSFBMC, as buyer, also purchased a certificate of beneficial interest in the Transaction Subsidiary in connection with the Transaction on such date, with a simultaneous agreement by CSFBMC, as buyer, to transfer such certificate to Seller on a date certain, against the transfer of funds by Seller, in an amount equal to the repurchase price allocated to such certificate. From time to time Seller and Buyer entered into transactions in which Seller agreed to initiate the transfer of mortgage loans to Transaction Subsidiary, against the transfer of funds by CSFBMC, as buyer, to Seller with a simultaneous agreement by CSFBMC, as buyer, to permit the release of such mortgage loans from the Transaction Subsidiary, to or for the benefit of Seller upon payment by Seller of the repurchase price related to such mortgage loans. As of the date hereof, all interests in the mortgage loans which were transferred to the Transaction Subsidiary shall hereby constitute Transaction Mortgage Loans governed by the terms of this Agreement until termination of such related Transactions as set forth in Sections 4 or 16 of this Agreement.
2.      Definitions
Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:
“ 1933 Act ” means the Securities Act of 1933, as amended from time to time.
“ 1934 Act ” means the Securities Exchange Act of 1934, as amended from time to time.
“ Acceptable State ” means any state acceptable pursuant to Seller’s Underwriting Guidelines.
“ Accepted Servicing Practices ” means, with respect to any Mortgage Loan or REO Property, those mortgage servicing practices or property management practices, as applicable, of prudent mortgage lending institutions (including as set forth in the GNMA Guide, the FHA Regulations and the VA Regulations) which service mortgage loans and manage real estate properties, as applicable, of the same type as such Mortgage Loan or REO Property in the jurisdiction where the related Mortgaged Property is located in accordance with applicable law.
“ Act of Insolvency ” means, with respect to any Person or its Affiliates, (a) the filing of a petition, commencing, or authorizing the commencement of any case or proceeding, or the voluntary joining of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law relating to the protection of creditors, or suffering any such petition or proceeding to be commenced by another which is consented to, not timely contested or results in entry of an order for relief; (b) the seeking of the appointment of a receiver, trustee, custodian or similar official for such party or an Affiliate or any substantial part of the property of either; (c) the appointment of a receiver, conservator, or manager for such party or an Affiliate by any governmental agency or authority having the jurisdiction to do so; (d) the making or offering by such party or an Affiliate of a composition with its creditors or a general assignment for the benefit of creditors; (e) the admission by such party or an Affiliate of such party of its inability to pay its debts or discharge its obligations as they become due or mature; or (f) that any governmental authority or agency or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of such party or of any of its Affiliates, or shall have taken any action to displace the management of such party or of any of its Affiliates or to curtail its authority in the conduct of the business of such party or of any of its Affiliates.
“ Additional Buyers ” has the meaning set forth in Section 36 hereof.
“ Additional Repurchase Assets ” has the meaning set forth in Section 8(a)(3) hereof.
“ Adjusted Principal Balance ” means for a HECM Buyout, the FHA HECM Principal Balance as of the date of repurchase from a GNMA Security reduced by all amounts received or collected in respect of principal on such HECM Buyout.
“ Adjusted Tangible Net Worth ” has the meaning assigned to such term in the Pricing Side Letter.
“ Administrative Agent ” means CSFBMC or any successor thereto.
“ Affiliate ” means, (i) with respect to any Person, other than a Seller Party or the Guarantor, any “affiliate” of such Person, as such term is defined in the Bankruptcy Code, which shall also include, for the avoidance of doubt, with respect to Administrative Agent only, any CP Conduit, and (ii) with respect to a Seller Party, the Guarantor and (iii) with respect to the Guarantor, a Seller Party.
“ Aged Loan ” has the meaning assigned to such term in the Pricing Side Letter.
“ Agency ” means Freddie Mac, Fannie Mae or GNMA, as applicable.
“ Agency Approvals ” means approval by Fannie Mae and GNMA, as applicable, as an approved issuer, by FHA as an approved mortgagee, in each case in good standing, and, to the extent necessary, by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act.
“ Agency Security ” means a mortgage-backed security issued by an Agency including a Ginne Mae Security.
“ Agreement ” means this Amended and Restated Master Repurchase Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“ Allocated Repurchase Price ” means, as of any date of determination, for each REO Property, as applicable, the portion of the Purchase Price allocated to such REO Property as of such date, as applicable, together with the related accrued and unpaid Price Differential.
“ Appraised Value ” means, with respect to any Mortgage Loan, the lesser of (i) the value set forth on the appraisal (or similar valuation approved by the applicable Agency for the related product) made in connection with the origination of the related Mortgage Loan as the value of the related Mortgaged Property, or (ii) the purchase price paid for the Mortgaged Property, provided, however, that in the case of a Mortgage Loan the proceeds of which are not used for the purchase of the Mortgaged Property, such value shall be based solely on the appraisal made in connection with the origination of such Mortgage Loan.
“ Asset Documents ” means the documents in the related Asset File to be delivered to the Custodian.
“ Asset File ” means, with respect to a Mortgage Loan or REO Property, the documents and instruments relating to such Mortgage Loan or REO Property and set forth in an exhibit to the Custodial Agreement.
“ Asset Schedule ” means, with respect to any Transaction as of any date, a schedule in the form of a computer tape or other electronic medium generated by Seller, and delivered to Administrative Agent and Custodian, which provides information required by Administrative Agent to enter into Transactions relating to the Transaction Mortgage Loans and Contributed REO Properties in a format acceptable to Administrative Agent.
“ Asset Value ” has the meaning assigned to such term in the Pricing Side Letter.
“ Assignment and Acceptance ” has the meaning assigned to such term in Section 22 hereof.
“ Assignment of Mortgage ” means an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the transfer of the Mortgage.
“ Bailee Letter ” has the meaning assigned to such term in the Custodial Agreement.
“ Bankruptcy Code ” means the United States Bankruptcy Code of 1978, as amended from time to time.
“ Base Rate ” means the “CS Base Rate” as identified in Buyer’s warehouse system
“ Business Day ” means any day other than (i) a Saturday or Sunday; (ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of New York or the Custodian is authorized or obligated by law or executive order to be closed or (iii) a public or bank holiday in New York City.
“ Buyer ” means CS Cayman, Alpine and each Buyer identified by the Administrative Agent from time to time and their successors in interest and assigns pursuant to Section 22 and, with respect to Section 11, its participants.
“ Capital Lease Obligations ” means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.
“ Capital Stock ” means, as to any Person, any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent equity ownership interests in a Person which is not a corporation, including, without limitation, any and all member or other equivalent interests in any limited liability company, limited partnership, trust, and any and all warrants or options to purchase any of the foregoing, in each case, designated as “securities” (as defined in Section 8-102 of the Uniform Commercial Code) in such Person, including, without limitation, all rights to participate in the operation or management of such Person and all rights to such Person’s properties, assets, interests and distributions under the related organizational documents in respect of such Person. “Capital Stock” also includes (i) all accounts receivable arising out of the related organizational documents of such Person; (ii) all general intangibles arising out of the related organizational documents of such Person; and (iii) to the extent not otherwise included, all proceeds of any and all of the foregoing (including within proceeds, whether or not otherwise included therein, any and all contractual rights under any revenue sharing or similar agreement to receive all or any portion of the revenues or profits of such Person).
“ Cash Equivalents ” means (a) securities with maturities of ninety (90) calendar days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and Eurodollar time deposits with maturities of ninety (90) calendar days or less from the date of acquisition and overnight bank deposits of Administrative Agent or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of Administrative Agent on behalf of Buyers or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than seven days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A 1 or the equivalent thereof by S&P or P 1 or the equivalent thereof by Moody’s and in either case maturing within ninety (90) calendar days after the day of acquisition, (e) securities with maturities of ninety (90) calendar days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s, (f) securities with maturities of ninety (90) calendar days or less from the date of acquisition backed by standby letters of credit issued by Administrative Agent or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition.
“ Certificate ” means any certificate evidencing Capital Stock of the REO Subsidiary.
“ Change in Control ” means:
1. any transaction or event as a result of which Guarantor ceases to own, directly or indirectly, at least 51% of the stock of Seller; or
2. other than in connection with the Transactions under this Agreement, any transaction or event as a result of which Seller fails to own 100% of the Capital Stock of the REO Subsidiary; or
3. the sale, transfer, or other disposition of all or substantially all of any Seller Party’s assets (excluding any such action taken in connection with any securitization transaction or sales of mortgage loans or mortgage servicing rights in the ordinary course of business for the Seller or as otherwise permitted hereunder); or
4. the consummation of a merger or consolidation of Seller with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity’s equity outstanding immediately after such merger, consolidation or such other reorganization is owned by persons who were not equityholders of the Seller immediately prior to such merger, consolidation or other reorganization.
“ Clearing Account ” has the meaning assigned to such term in Section 7(b) hereof.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Committed Buyer ” means CS Cayman or any successor thereto.
“ Commitment Fee ” has the meaning assigned to such term in the Pricing Side Letter.
“ Committed Mortgage Loan ” means a Transaction Mortgage Loan which is the subject of a Take‑out Commitment with a Take‑out Investor.
“ Confidential Information ” has the meaning assigned to such term in Section 32(b). hereof.
“ Contributed REO Properties ” means the REO Properties converted from HECM Buyout together with the Repurchase Assets related to such REO Properties transferred by Seller to REO Subsidiary or acquired by REO Subsidiary directly in connection with a Transaction under this Agreement, listed on the related Asset Schedule, until the Buyer releases its interest in such Contributed REO Properties in accordance with the terms of this Agreement.
“ Conversion Date ” means the later of (x) the date an REO Property is contributed to the REO Subsidiary or (y) such Purchased Asset becomes an REO Property.
“ Correspondent Mortgage Loan ” means a Mortgage Loan which is (a) originated by a Correspondent Seller and underwritten in accordance with the Underwriting Guidelines and (b) acquired by the Seller from a Correspondent Seller in the ordinary course of business.
“ Correspondent Seller ” means a mortgage loan originator that sells Mortgage Loans originated by it to Seller as a “correspondent” or “private label” client approved by Administrative Agent in writing.
“ Correspondent Seller Release ” means, with respect to any Correspondent Mortgage Loan, a release by the related Correspondent Seller, substantially in the form of Exhibit H hereto or as otherwise approved by Administrative Agent in writing, of all right, title and interest, including any security interest, in such Correspondent Mortgage Loan.
“ CP Conduit ” means a commercial paper conduit, including but not limited to Alpine Securitization LTD, administered, managed or supported by CSFBMC or an Affiliate of CSFBMC.
“ CSFBMC ” means Credit Suisse First Boston Mortgage Capital LLC, or any successors or assigns.
“ Custodial Agreement ” means the Amended and Restated Custodial Agreement, dated as of the date hereof, among each Seller Party, Administrative Agent, Buyers and Custodian, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“ Custodial Asset Schedule ” has the meaning assigned to such term in the Custodial Agreement.
“ Custodian ” means Deutsche Bank National Trust Company or such other party specified by Administrative Agent and agreed to by Seller, which approval shall not be unreasonably withheld.
“ Deed ” means the deed issued in connection with a foreclosure sale of a Mortgaged Property with respect to a FHA HECM or in connection with receiving a deed in lieu of foreclosure evidencing title to the related REO Property.
“ Default ” means an Event of Default or an event that with notice or lapse of time or both would become an Event of Default.
“ D elinquency Advance ” means any advance made by the S ervicer, u nder the S ervicing Agreements, to cover due, but uncollected or unavailable as a result of funds not yet being cleared, principal and interest payments on the FHA HECM s i ncluded in the portfolio of FHA HECM s s erviced by S ervicers.
“ Dollars ” and “ $ ” means dollars in lawful currency of the United States of America.
“ E arly Buyout ” means the purchase of a modified or defaulted FHA HECM b y the S eller Parties f rom a G NMA Security.
“ Effective Date ” means the date upon which the conditions precedent set forth in Section 10(a) shall have been satisfied.
“ Electronic Tracking Agreement ” means the Amended and Restated Electronic Tracking Agreement among Administrative Agent, Seller Parties, MERS and MERSCORP Holdings, Inc., to the extent applicable as the same may be amended, restated, supplemented or otherwise modified from time to time.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor thereto, and the regulations promulgated and administrative rulings issued thereunder.
“ ERISA Affiliate ” means any corporation or trade or business that, together with Seller Parties is treated as a single employer under Section 414(b) or (c) of the Code or solely for purposes of Section 302 of ERISA and Section 412 of the Code is treated as single employer described in Section 414 of the Code.
“ Escrow Instruction Letter ” means the Escrow Instruction Letter from Seller to the Settlement Agent, substantially in the form of Exhibit I hereto or as otherwise approved by Administrative Agent in writing, as the same may be modified, supplemented and in effect from time to time.
“ Escrow Payments ” means, with respect to any Mortgage Loan, the amounts constituting ground rents, taxes, assessments, water rates, sewer rents, municipal charges, mortgage insurance premiums, fire and hazard insurance premiums, condominium charges, and any other payments required to be escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
“ Event of Default ” has the meaning assigned to such term in Section 15 hereof.
“ Event of Termination ” means with respect to any Seller Party, as applicable to such Seller Party, as the case may be, (a) with respect to any Plan, a reportable event, as defined in Section 4043 of ERISA, as to which the PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event, or (b) the withdrawal of such Seller Party or any ERISA Affiliate thereof from a Plan during a plan year in which it is a substantial employer, as defined in Section 4001(a)(2) of ERISA, or (c) the failure by such Seller Party or any ERISA Affiliate thereof to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA with respect to any Plan, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code (or Section 430(j) of the Code as amended by the Pension Protection Act) or Section 302(e) of ERISA (or Section 303(j) of ERISA, as amended by the Pension Protection Act), or (d) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by such Seller Party or any ERISA Affiliate thereof to terminate any plan, or (e) the failure to meet requirements of Section 436 of the Code resulting in the loss of qualified status under Section 401(a)(29) of the Code, or (f) the institution by the PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (g) the receipt by such Seller Party or any ERISA Affiliate thereof of a notice from a Multiemployer Plan that action of the type described in the previous clause (f) has been taken by the PBGC with respect to such Multiemployer Plan, or (h) any event or circumstance exists which may reasonably be expected to constitute grounds for such Seller Party or any ERISA Affiliate thereof to incur liability under Title IV of ERISA or under Sections 412(b) or 430(k) of the Code with respect to any Plan.
“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to a Buyer or other recipient of any payment hereunder or required to be withheld or deducted from a payment to such Buyer or such other recipient: (a) Taxes based on (or measured by) net income or net profits, franchise Taxes and branch profits Taxes that are imposed on a Buyer or other recipient of any payment hereunder as a result of (i) being organized under the laws of, or having its principal office or its applicable lending office located in the jurisdiction imposing such Tax (or any political subdivision thereof), or (ii) a present or former connection between such Buyer or other recipient and the jurisdiction of the Governmental Authority imposing such Tax or any political subdivision or taxing authority thereof (other than connections arising from such Buyer or other recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced under this Agreement or any Program Agreement, or sold or assigned an interest in any Purchased Asset); (b) any Tax imposed on a Buyer or other recipient of a payment hereunder that is attributable to such Buyer’s or other recipient’s failure to comply with relevant requirements set forth in Section 11(e); (c) any withholding Tax that is imposed on amounts payable to or for the account of such Buyer or other recipient of a payment hereunder pursuant to a law in effect on the date such person becomes a party to or under this Agreement, or such person changes its lending office, except in each case to the extent that amounts with respect to Taxes were payable either to such person’s assignor immediately before such person became a party hereto or to such person immediately before it changed its lending office; and (d) any U.S. federal withholding Taxes imposed under FATCA.
“ Fannie Mae ” means Fannie Mae, the government sponsored enterprise formerly known as the Federal National Mortgage Association or any successor thereto.
“ FATCA ” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.
“ FHA ” means the Federal Housing Administration, an agency within HUD, or any successor thereto, and including the Federal Housing Commissioner and the Secretary of Housing and Urban Development where appropriate under the FHA Regulations.
“ FHA Approved Mortgagee ” means a corporation or institution approved as a mortgagee by the FHA under the National Housing Act, as amended from time to time, and applicable FHA Regulations, and eligible to own and service mortgage loans such as the FHA Loans.
“ FHA HECM ” means a home equity conversion Mortgage Loan which is (a) secured by a first lien and (b) is insured by FHA.
“ FHA HECM Principal Balance ” means the principal balance of an FHA HECM (including without limitation all scheduled payments and/or unscheduled payments, accrued interest and MIP Payments and other amounts capitalized into the principal balance) reduced by all amounts received or collected in respect of principal on such FHA HECM.
“ FHA HERMIT System ” means the FHA’s Home Equity Reverse Mortgage Information Technology, together with any successor FHA electronic access portal.
“ FHA Loan ” means a Mortgage Loan which is the subject of an FHA Mortgage Insurance Contract.
“ FHA Mortgage Insurance ” means, mortgage insurance authorized under the National Housing Act, as amended from time to time, and provided by the FHA.
“ FHA Mortgage Insurance Contract ” means the contractual obligation of the FHA respecting the insurance of a Mortgage Loan.
“ FHA Regulations ” means the regulations promulgated by HUD under the National Housing Act, as amended from time to time and codified in 24 Code of Federal Regulations, and other HUD issuances relating to FHA Loans, including the related handbooks, circulars, notices and mortgagee letters.
“ Freddie Mac ” means the Federal Home Loan Mortgage Corporation or any successor thereto.
“ Fidelity Insurance ” means insurance coverage with respect to employee errors, omissions, dishonesty, forgery, theft, disappearance and destruction, robbery and safe burglary, property (other than money and securities) and computer fraud in an aggregate amount acceptable to Seller’s regulators.
“ Flow Assignment Agreements ” means (i) that certain Flow Assignment Agreement, dated as of February 21, 2017 between Seller, as assignor, and REO Subsidiary, as assignee, as the same may be amended, restated, supplemented or otherwise modified from time to time and (ii) that certain Flow Assignment Agreement, dated as of February 21, 2017 between Seller, as assignee, and REO Subsidiary, as assignor, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“ GAAP ” means generally accepted accounting principles in effect from time to time in the United States of America and applied on a consistent basis.
“ GNMA ” means the Government National Mortgage Association and any successor thereto.
“ GNMA Guide ” means the GNMA Mortgage-Backed Security Guide, Handbook 5500.3, Rev. 1, as amended from time to time, and any related announcements, directives and correspondence issued by GNMA.
“ GNMA HECM Repurchase Trigger ” means, with respect to a FHA HECM, the lesser of (a) 98% of the Maximum Claim Amount and (b) such lesser percentage of the Maximum Claim Amount allowed by GNMA.
“ GNMA Security ” means a mortgage-backed security guaranteed by GNMA pursuant to the GNMA Guide.
“ Governmental Authority ” means any nation or government, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions over any Seller Party, Administrative Agent or any Buyer, as applicable.
“ Guarantee ” means, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep‑well, to purchase assets, goods, securities or services, or to take‑or‑pay or otherwise); provided that the term “ Guarantee ” shall not include (a) endorsements for collection or deposit in the ordinary course of business, or (b) obligations to make servicing advances for delinquent taxes and insurance or other obligations in respect of a Mortgage Loan or Mortgaged Property, to the extent required by Administrative Agent. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. The terms “ Guarantee ” and “ Guaranteed ” used as verbs shall have correlative meanings.
“ Guarantor ” means Walter Investment Management Corp., in its capacity as guarantor under the Guaranty.
“ Guaranty ” means the Amended and Restated Guaranty of the Guarantor dated as of the date hereof in favor of the Administrative Agent for the benefit of Buyers as the same may be amended, restated, supplemented or otherwise modified from time to time, pursuant to which the Guarantor fully and unconditionally guarantees the obligations of the Seller Parties hereunder.
“ HECM Buyout ” means a FHA HECM w hich is subject to an E arly Buyout as a result of the FHA HECM Principal Balance equaling or exceeding the GNMA HECM Repurchase Trigger o r that was never pooled in a G NMA Security.
“ High Cost Mortgage Loan ” means a Mortgage Loan classified as a “high cost,” “threshold,” “covered,” or “predatory” loan under any other applicable state or local law (or a similarly classified loan using different terminology under a law, regulation or ordinance imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees).
“ HUD ” means the United States Department of Housing and Urban Development or any successor thereto.
“ Inbound Account ” has the meaning set forth in Section 7 hereof.
“ Income ” means, without duplication, with respect to any Purchased Asset or Contributed REO Property, at any time until repurchased, or removed from, REO Subsidiary, by Seller, any principal received thereon or in respect thereof and all interest, dividends or other distributions thereon.
“ Indebtedness ” means, for any Person: at any time, and only to the extent outstanding at such time: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business, so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (c) indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements or like arrangements; (g) indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (i) indebtedness of general partnerships of which such Person is a general partner; and (j) any other indebtedness of such Person evidenced by a note, bond, debenture or similar instrument.
“ Indemnified Taxes ” means Taxes other than Excluded Taxes and Other Taxes, imposed on or with respect to any payment made by or on account of any obligation of Seller hereunder or under any Program Agreement.
“ Investment Company Act ” has the meaning assigned to such term in Section 10(a)(6) hereof.
“ Interest Rate Protection Agreement ” means, with respect to any or all of the Transaction Mortgage Loans that are FHA HECMs, any short sale of a U.S. Treasury Security, or futures contract, or mortgage related security, or Eurodollar futures contract, or options related contract, or interest rate swap, cap or collar agreement or Take‑out Commitment, or similar arrangement providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by a Seller Party and an Affiliate of Administrative Agent or such other party acceptable to Administrative Agent in its good faith discretion, which agreement is acceptable to Administrative Agent in its good faith discretion.
“ Lender Insurance Authority ” means the permission granted to certain FHA‑approved lenders to process single family mortgage applications without first submitting documentation to HUD as set forth in 12 U.S.C. §1715z‑21 and the regulations enacted thereunder set forth in 24 CFR §203.6.
“ Lien ” means any mortgage, lien, pledge, charge, security interest or similar encumbrance.
“ Loan to Value Ratio ” or “ LTV ” means with respect to any FHA HECM, the ratio of the original outstanding principal amount of such Mortgage Loan to the lesser of (a) the Appraised Value of the Mortgaged Property at origination or (b) if the Mortgaged Property was purchased within twelve (12) months of the origination of such Mortgage Loan, the purchase price of the Mortgaged Property.
“ Margin Call ” has the meaning assigned to such term in Section 6(a) hereof.
“ Margin Deadlines ” has the meaning assigned to such term in Section 6(b) hereof.
“ Margin Deficit ” has the meaning assigned to such term in Section 6(a) hereof.
“ Market Value ” has the meaning assigned to such term in the Pricing Side Letter.
“ Material Adverse Effect ” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, or condition (financial or otherwise) of any Seller Party, Guarantor, or any Affiliate that is a party to any Program Agreement taken as a whole; (b) a material impairment of the ability of any Seller Party, Guarantor or any Affiliate that is a party to any Program Agreement to perform under any Program Agreement and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Program Agreement against any Seller Party, Guarantor or any Affiliate that is a party to any Program Agreement, in each case as determined by the Administrative Agent in its sole discretion.
“ Maximum Aggregate Purchase Price ” means TWO HUNDRED MILLION DOLLARS ($200,000,000).
“ Maximum Claim Amount ” means the amount of insurance coverage for an FHA HECM provided by the related HUD/FHA insurance thereon.
“ Maximum Committed Purchase Price ” means FIFTY MILLION DOLLARS ($50,000,000).
“ MERS ” means Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.
“ MERS® System ” means the system of recording transfers of mortgages electronically maintained by MERS.
“ MIP Payment ” means with respect to a Mortgage Loan, all mortgage insurance premiums payable to either HUD or a private mortgage insurer, as set forth in the related Asset File.
“ Moody’s ” means Moody’s Investors Service, Inc. or any successors thereto.
“ Mortgage ” means each mortgage, assignment of rents, security agreement and fixture filing, or deed of trust, assignment of rents, security agreement and fixture filing, deed to secure debt, assignment of rents, security agreement and fixture filing, or similar instrument creating and evidencing a lien on real property and other property and rights incidental thereto.
“ Mortgage Interest Rate ” means the rate of interest borne on a Mortgage Loan from time to time in accordance with the terms of the related Mortgage Note.
“ Mortgage Loan ” means any FHA HECM or HECM Buyout evidenced by a promissory note and secured by a first lien mortgage, which satisfies the requirements set forth in the Underwriting Guidelines and Section 13(b) hereof.
“ Mortgage Note ” means the promissory note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage.
“ Mortgaged Property ” means the real property securing repayment of the debt evidenced by a Mortgage Note.
“ Mortgagor ” means the obligor or obligors on a Mortgage Note, including any person who has assumed or guaranteed the obligations of the obligor thereunder.
“ Multiemployer Plan ” means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been or are required to be made by a Seller Party or any ERISA Affiliate and that is covered by Title IV of ERISA.
“ Net Income ” means, for any period, the net income of Seller on a consolidated basis for such period as determined in accordance with GAAP.
“ Net Worth ” means an amount equal to, on a consolidated basis, Seller’s stockholder equity (determined in accordance with GAAP).
“ Nominee ” means Reverse Mortgage Solutions, Inc., or any successor Nominee appointed by Administrative Agent following an Event of Default.
“ Nominee Agreement ” means that certain Amended and Restated Nominee Agreement dated as of February 21, 2017, by and between REO Subsidiary and Seller, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“ Non-Recourse Debt ” means an obligation for borrowed money secured by a lien on any property owned by a Person, with respect to which obligation the Person has not assumed or become liable for the payment thereof.
“ Obligations ” means (a) all of Seller Parties’ obligations to pay the Repurchase Price on the Repurchase Date, the Price Differential on each Payment Date, and other obligations and liabilities, to Administrative Agent and Buyers or Custodian arising under, or in connection with, the Program Agreements, whether now existing or hereafter arising; (b) any and all sums paid by Administrative Agent, Buyers or Administrative Agent on behalf of Buyers in order to preserve any Purchased Asset or Contributed REO Property or its interest therein; (c) in the event of any proceeding for the collection or enforcement of any of Seller Parties’ indebtedness, obligations or liabilities referred to in clause (a), the reasonable expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of, or realizing on, any Purchased Asset or Contributed REO Property, or of any exercise by Administrative Agent or Buyers of their rights under the Program Agreements, including, without limitation, attorneys’ fees and disbursements and court costs; and (d) all of Seller Parties’ indemnity obligations to Administrative Agent, Buyers and Custodian pursuant to the Program Agreements.
“ OFAC ” has the meaning set forth in Section 13(a)(27) hereof.
“ Officer’s Compliance Certificate ” has the meaning assigned to such term in the Pricing Side Letter.
“ Optional Repurchase ” has the meaning assigned to such term in Section 4(b) hereof.
“ Optional Repurchase Date ” has the meaning assigned to such term in Section 4(b) hereof.
“ Other Taxes ” means any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes or any excise, sales, goods and services or transfer taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Program Agreement.
“ Payee Number ”: means the code used by Fannie Mae to indicate the wire transfer instructions that will be used by Fannie Mae to purchase a Mortgage Loan.
“ Payment Date ” means, with respect to a Purchased Asset, the fifth (5 th ) day of the month following the related Purchase Date and each succeeding fifth (5 th ) day of the month thereafter; provided, that, with respect to such Purchased Asset, the final Payment Date shall be the related Repurchase Date; and provided, further, that if any such day is not a Business Day, the Payment Date shall be the next succeeding Business Day.
“ PBGC ” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
“ Pension Protection Act ” means the Pension Protection Act of 2006.
“ Person ” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.
“ Plan ” means an employee benefit or other plan established or maintained by any Seller Party or any ERISA Affiliate and covered by Title IV of ERISA, other than a Multiemployer Plan.
“ Post-Default Rate ” has the meaning assigned to such term in the Pricing Side Letter.
“ Power of Attorney ” means a Power of Attorney delivered by each Seller Party substantially in the form of Exhibit D hereto.
“ Price Differential ” means with respect to any Purchased Asset and/or Contributed REO Property as of any date of determination, the aggregate amount obtained by daily application of, for each Purchased Asset or Contributed REO Property, the amount equal to the product of (a) the Pricing Rate for such Purchased Asset or Contributed REO Property, as applicable (or during the continuation of an Event of Default, the Post-Default Rate) and (b) the Purchase Price for such Purchased Asset or Contributed REO Property, as applicable, calculated daily on the basis of a 360-day year for the actual number of days during the period commencing on (and including) the Purchase Date for such Purchased Asset or Contributed REO Property, as applicable and ending on (but excluding) the Repurchase Date.
“ Pricing Rate ” has the meaning assigned to such term in the Pricing Side Letter.
“ Pricing Side Letter ” means, that certain amended and restated letter agreement dated as of the date hereof, among Administrative Agent, Buyers and Seller Parties, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“ Primary Repurchase Assets ” has the meaning set forth in Section 8(a)(1) hereof.
“ Program Agreements ” means, collectively, this Agreement, the Custodial Agreement, the Pricing Side Letter, the Electronic Tracking Agreement, the Guaranty, each Power of Attorney, the REO Subsidiary Agreement, the Nominee Agreement, the Flow Assignment Agreements, the Assignment, Assumption and Appointment Agreement, the Servicing Agreement, if any, and the Servicer Notice, if entered into.
“ Prohibited Person ” has the meaning set forth in Section 13(a)(27) hereof.
“ Property ” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.
“ P rotective Advance ” means any servicing advance (i ncluding, but not limited to, any advance made to pay t axes a nd insurance premiums; any advance to pay the costs of protecting the value of any real p roperty o r other security for a m ortgage loan; and any advance to pay the costs of realizing on the value of any such security) made by the S eller Parties i n connection with any FHA HECM s.
“ Purchase Date ” means the date on which a Purchased Asset is to be transferred by Seller to Administrative Agent for the benefit of Buyers, or a Purchase Price Increase Date, as applicable.
“ Purchase Price ” means, without duplication: (a) with respect to REO Subsidiary Interests, the aggregate Purchase Price of all REO Properties owned by REO Subsidiary, (b) with respect to each Transaction Mortgage Loan or Contributed REO Property, the price at which such Transaction Mortgage Loan or Contributed REO Property is made subject to a Transaction hereunder, as applicable, which shall equal:
(a)    on the Purchase Date of the Purchased Asset or Conversion Date of Contributed REO Property, the Asset Value of such Purchased Asset or Contributed REO Property as of the Purchase Date;
(b)    on any day after the Purchase Date, except where Buyer and the Seller agree otherwise, the amount determined under the immediately preceding clause decreased by the amount of any cash applied to reduce the Seller’s obligations hereunder with respect to such Transaction Mortgage Loan or Contributed REO Property.
“ Purchase Price Increase ” means an increase in the Purchase Price for the Certificate based upon the REO Subsidiary acquiring additional REO Properties to which such portion of the Purchase Price is allocated.
“ Purchase Price Increase Date ” means the date on which a Purchase Price Increase is made with respect to the acquisition of additional REO Properties by the REO Subsidiary.
“ Purchase Price Percentage ” has the meaning assigned to such term in the Pricing Side Letter.
“ Purchased Assets ” means the collective reference to (a) Transaction Mortgage Loans, together with the Repurchase Assets related to such Transaction Mortgage Loans and (b) REO Subsidiary Interests, together with the indirect beneficial interest in the Contributed REO Properties represented by the REO Subsidiary Interests, together with the Repurchase Assets related to such Contributed REO Properties and REO Subsidiary Interests which are (in the case of clause (a) above) transferred or (in case of clause (b) above) transferred and/or pledged by Seller to Administrative Agent for the benefit of Buyers in a Transaction hereunder, and/or listed on the related Asset Schedule attached to the related Transaction Request, which such Asset Files the Custodian has been instructed to hold for the benefit of Administrative Agent pursuant to the Custodial Agreement.
“ Qualified Insurer ” means an insurance company duly authorized and licensed where required by law to transact insurance business and approved as an insurer by Fannie Mae or Freddie Mac or GNMA, as applicable.
“ Records ” means all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by any Seller Party, Servicer or any other person or entity with respect to a Purchased Asset or Contributed REO Property. Records shall include the Mortgage Notes, any Mortgages, the Asset Files, the Deeds, the credit files related to the Purchased Asset and any other instruments necessary to document or service a Mortgage Loan or REO Property.
“ Register ” has the meaning assigned to such term in Section 22 hereof.
“ REO Property ” means real property acquired by REO Subsidiary through foreclosure of a HECM Buyout or by deed in lieu of such foreclosure.
“ REO Subsidiary ” means RMS REO CS, LLC, a Delaware limited liability company.
“ REO Subsidiary Agreement ” means the limited liability company agreement, dated as of February 23, 2016, between RMS REO CS, LLC and Reverse Mortgage Solutions, Inc., as the same may be amended, restated, supplemented or otherwise modified from time to time.
“ REO Subsidiary Interests ” means any and all of the Capital Stock of the REO Subsidiary.
“ REO Subsidiary Repurchase Assets ” has the meaning set forth in Section 8(a)(2) hereof.
“ Repledge Transaction ” has the meaning set forth in Section 18 hereof.
“ Repledgee ” means each Repledgee identified by the Administrative Agent from time to time.
“ Reporting Date ” means the seventh (7 th ) Business Day of each month.
“ Repurchase Assets ” has the meaning assigned to such term in Section 8 hereof.
“ Repurchase Date ” means the earliest of (a) the Termination Date, (b) the date requested pursuant to Section 4(a), (c) any Optional Repurchase Date, or (d) the date determined by application of Section 16 hereof.
“ Repurchase Price ” means the price at which (a) Purchased Assets are to be transferred from Administrative Agent for the benefit of Buyers, to Seller termination of any Transaction or (b) the REO Subsidiary Interests are to be reduced in value with respect to Contributed REO Properties, released therefrom to Seller upon an Optional Repurchase or termination of a Transaction, each of which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price for such Purchased Asset or Contributed REO Property and the accrued but unpaid Price Differential relating to such Purchased Asset or Contributed REO Property as of the date of such determination.
“ Request for Certification ” means a notice sent to the Custodian reflecting that one or more of the Transaction Mortgage Loans or REO Properties shall be made subject to a Transaction with the Administrative Agent for the benefit of Buyers hereunder.
“ Requirement of Law ” means, with respect to any Person, any law, treaty, rule or regulation or determination of an arbitrator, a court or other governmental authority, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“ Responsible Officer ” means as to any Person, the chief executive officer or, with respect to financial matters, any vice president, senior vice president or financial officer primarily responsible for financial matters.
“ S&P ” means Standard & Poor’s Ratings Services, or any successor thereto.
“ S cheduled HECM Payments ” shall mean, on any date, the term or tenure monthly disbursements made to the borrower of an FHA HECM .
“ SEC ” means the Securities and Exchange Commission, or any successor thereto.
“ Seller ” means Reverse Mortgage Solutions, Inc. or its permitted successors and assigns.
“ Seller Party(ies) ” means, individually or collectively, as applicable, Seller and/or REO Subsidiary, as applicable.
“ Servicer ” means any servicer or subservicer approved by Administrative Agent in its sole discretion, which may be Seller.
“ S ervicer Advance ” means a D elinquency Advance o r a P rotective Advance, which advances shall be owned by the Seller, and to the extent first advanced by Servicer shall be reimbursed by Seller pursuant to the terms of the Servicing Agreement. For the avoidance of doubt, the rights of Servicer to reimbursement are a contractual right derived solely from the Servicing Agreement and shall be subordinated to the rights of the Seller Parties, and Administrative Agent on behalf of Buyers hereunder.
“ Servicer Notice ” means the notice acknowledged by a third party Servicer substantially in the form of Exhibit J hereto, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“ Servicing Agreement ” means any servicing agreement entered into between Seller and a third party Servicer with respect to any Purchased Assets or Contributed REO Properties, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“ Servicing Rights ” means the rights of any Person to administer, service or subservice, the Transaction Mortgage Loans or REO Properties or to possess related Records.
“ Settlement Agent ” means, with respect to any Transaction the subject of which is a Wet‑Ink Mortgage Loan, the entity approved by Administrative Agent, in its sole good‑faith discretion, which may be a title company, escrow company or attorney in accordance with local law and practice in the jurisdiction where the related Wet‑Ink Mortgage Loan is being originated. A Settlement Agent is deemed approved unless Administrative Agent notifies Seller otherwise at any time electronically or in writing.
“ SIPA ” means the Securities Investor Protection Act of 1970, as amended from time to time.
“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, trust or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, limited liability company, partnership, trust or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, limited liability company, partnership, trust or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.
“ Take‑out Commitment ” means a commitment of Seller to either (a) sell one or more identified Transaction Mortgage Loans (other than a HECM Buyout) to a Take‑out Investor or (b) (i) swap one or more identified Transaction Mortgage Loans (other than a HECM Buyout) with a Take‑out Investor that is an Agency for an Agency Security, and (ii) sell the related Agency Security to a Take‑out Investor, and in each case, the corresponding Take‑out Investor’s commitment back to Seller to effectuate any of the foregoing, as applicable. With respect to any Take‑out Commitment with an Agency, the applicable agency documents list Administrative Agent or Administrative Agent’s agent from an intercreditor agreement as sole subscriber.
“ Take‑out Investor ” means (a) an Agency or (b) other institution which has made a Take‑out Commitment that has not been rejected in writing by Administrative Agent for the benefit of Buyers.
“ Taxes ” means any and all present or future taxes (including social security contributions and value added taxes), levies, imposts, duties (including stamp duties), deductions, charges (including ad valorem charges), withholdings (including backup withholding), assessments, fees or other charges of any nature whatsoever imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“ Termination Date ” means the earlier of (a) February 20, 2018, and (b) the date of the occurrence of an Event of Default.
“ Test Period ” has the meaning assigned to such term in the Pricing Side Letter.
“ TILA-RESPA Integrated Disclosure Rule ” means the Truth-in-Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure Rule, adopted by the Consumer Finance Protection Bureau, which is effective for residential mortgage loan applications received on or after October 3, 2015.
“ Trade Assignment ” means an assignment to Administrative Agent for the benefit of Buyers under an intercreditor agreement of a forward trade between a Take‑out Investor and Seller with respect to one or more Transaction Mortgage Loans that are Pooled Mortgage Loans substantially in the form of Exhibit B hereto.
“ Transaction ” has the meaning set forth in Section 1 hereof.
“ Transaction Mortgage Loan ” means a Mortgage Loan which is subject to a Transaction under this Agreement.
“ Transaction Request ” means a request via email from Seller to Administrative Agent notifying Administrative Agent that Seller wishes to enter into a Transaction, including a Purchase Price Increase, hereunder that indicates that it is a Transaction Request under this Agreement and that contains language substantially in the form attached hereto as Exhibit A . For the avoidance of doubt, a Transaction Request may refer to multiple Mortgage Loans; provided that each Mortgage Loan shall be deemed to be subject to its own Transaction.
“ Transaction Subsidiary ” means RMS CS Repo Trust 2016.
“ Trust Receipt ” means, with respect to any Transaction as of any date, a receipt in the form attached as an exhibit to the Custodial Agreement.
“ Underwriting Guidelines ” means the standards, procedures and guidelines which conform to the guidelines of the applicable Agency of the Seller for underwriting and acquiring Mortgage Loans, which are set forth in the written policies and procedures of the Seller, a copy of which have been provided to Administrative Agent and such other guidelines as are identified to and approved in writing by Administrative Agent.
“ Uniform Commercial Code ” or “ UCC ” means the Uniform Commercial Code as in effect on the date hereof in the State of New York or the Uniform Commercial Code as in effect in the applicable jurisdiction.
“ U nscheduled HECM Payments ” shall mean, on any date, any disbursement made to a borrower of an FHA HECM u nder the terms of the related FHA HECM d ocuments other than a S cheduled HECM Payment.
“ VA ” means the U.S. Department of Veterans Affairs, an agency of the United States of America, or any successor thereto including the Secretary of Veterans Affairs.
“ VA Approved Lender ” means a lender which is approved by the VA to act as a lender in connection with the origination of VA Loans.
“ VA Loan ” means a Mortgage Loan which is subject of a VA Loan Guaranty Agreement as evidenced by a loan guaranty certificate.
“ VA Loan Guaranty Agreement ” means the obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the Mortgagor pursuant to the Servicemen’s Readjustment Act, as amended.
“ VA Regulations ” means the regulations promulgated by the U.S. Department of Veterans Affairs and codified in Title 38 Code of Federal Regulations, and other U.S. Department of Veterans Affairs issuances relating to VA Loans, including the related handbooks, circulars, notices and mortgagee letters.
“ Warehouse Indebtedness ” means Indebtedness of Seller in connection with any repurchase, warehouse, gestation, early purchase or similar facility.
“ Wet‑Ink Delivery Date ” has the meaning assigned to such term in the Pricing Side Letter.
“ Wet‑Ink Documents ” means, with respect to any Wet‑Ink Mortgage Loan, the (a) Transaction Request and (b) the Asset Schedule.
“ Wet‑Ink Mortgage Loan ” means a Transaction Mortgage Loan which is being made subject to a Transaction simultaneously with the origination thereof.
“ Wire Instruction Data ” has the meaning assigned to such term in the Custodial Agreement.
3.      Program; Initiation of Transactions
a.      On the initial Purchase Date, Administrative Agent on behalf of Buyers purchased the REO Subsidiary Interests. From time to time, Seller may request, and Administrative Agent for the benefit of Buyers (i) will facilitate the purchase by Buyers from Seller of certain Transaction Mortgage Loans that have been either originated by Seller or purchased by Seller from other originators and (ii) may fund additional Purchase Price Increases in connection with the conveyance of Contributed REO Properties to the REO Subsidiary and the corresponding increases of the Purchase Price on account of the REO Subsidiary Interests. This Agreement is a commitment by Committed Buyer to enter into Transactions with Seller up to an aggregate amount equal to the Maximum Committed Purchase Price. This Agreement is not a commitment by Administrative Agent on behalf of Buyers to enter into Transactions with Seller for amounts exceeding the Maximum Committed Purchase Price, but rather, sets forth the procedures to be used in connection with periodic requests for Administrative Agent on behalf of Buyers to enter into Transactions with Seller. Seller hereby acknowledges that, beyond the Maximum Committed Purchase Price, Administrative Agent on behalf of Buyers is under no obligation to agree to enter into, or to enter into, any Transaction pursuant to this Agreement; provided that once Administrative Agent for the benefit of Buyers and Seller enter into a Transaction with respect to one or more Transaction Mortgage Loans or Contributed REO Properties that would in the aggregate exceed the Maximum Committed Purchase Price, Administrative Agent shall not require Seller to repurchase any such Transaction Mortgage Loans or Contributed REO Properties unless such repurchase is otherwise permitted by the terms of this Agreement. All Transaction Mortgage Loans shall exceed or meet the Underwriting Guidelines, and shall be serviced by Seller or Servicer, as applicable. The aggregate Purchase Price of the Purchased Assets (adjusted for any Purchase Price Increases or reductions in Purchase Price, as applicable) subject to outstanding Transactions shall not exceed the Maximum Aggregate Purchase Price.
b.      Seller shall request that Administrative Agent enter into a Transaction with respect to Transaction Mortgage Loans by delivering (i) to Administrative Agent, a Transaction Request (A) one (1) Business Day prior to the proposed Purchase Date for Mortgage Loans that are not Wet‑Ink Mortgage Loans or (B) by 3:30 p.m. (New York City time) on the proposed Purchase Date for Wet‑Ink Mortgage Loans and (ii) to Administrative Agent and Custodian an Asset Schedule in accordance with the Custodial Agreement and (iii) to Administrative Agent, with respect to Wet-Ink Mortgage Loans and Correspondent Mortgage Loans, the Wire Instruction Data in accordance with the Custodial Agreement. In the event the Asset Schedule provided by Seller contains erroneous computer data, is not formatted properly or the computer fields are otherwise improperly aligned, Administrative Agent shall provide written or electronic notice to Seller describing such error and Seller shall correct the computer data, reformat or properly align the computer fields itself and resubmit the Asset Schedule as required herein.
c.      Reserved .
d.      Reserved .
e.      Upon the satisfaction of the applicable conditions precedent set forth in Section 10 hereof, all of Seller’s interest in the applicable Purchased Assets shall pass to, and/or be pledged to, Administrative Agent for the benefit of Buyers on the Purchase Date, against the transfer of the Purchase Price for such Purchased Assets to Seller. Upon transfer of the Purchased Assets to Administrative Agent on behalf of Buyers as set forth in this Section and until termination of any related Transactions or the release of Contributed REO Property as set forth in Sections 4 or 16 of this Agreement, ownership of each Purchased Asset, including beneficial ownership interest in the related Contributed REO Property and each document in the related Asset File and Records, is vested in the Buyers; provided that, prior to the recordation by the Custodian as provided for in the Custodial Agreement, record title in the name of Seller to each Transaction Mortgage Loan shall be retained by Seller in trust and as Nominee, for the Administrative Agent for the benefit of Buyers, for the sole purpose of facilitating the servicing and the supervision of the servicing of the Transaction Mortgage Loans.
f.      With respect to each Wet‑Ink Mortgage Loan, by no later than the Wet‑Ink Delivery Date, Seller shall cause the related Settlement Agent to deliver to the Custodian the remaining documents in the Asset File, as more particularly set forth in the Custodial Agreement.
4.      Repurchase; Conversion to REO Property
a.      Seller shall repurchase the Purchased Assets from Administrative Agent for the benefit of Buyers on the Termination Date. In addition, Seller may repurchase Purchased Assets or effect an Optional Repurchase with respect to Purchased Assets or Contributed REO Property without penalty or premium on any date pursuant to Section 4(b) below. If Seller intends to make such a repurchase, Seller shall give one (1) Business Day’s prior written notice to Administrative Agent, designating the Purchased Assets or Contributed REO Property to be repurchased. Such obligation to repurchase exists without regard to any prior or intervening liquidation or foreclosure with respect to any Purchased Asset or Contributed REO Property (but liquidation or foreclosure proceeds received by Administrative Agent shall be applied to reduce the Repurchase Price for such Purchased Asset or Contributed REO Property on each Payment Date except as otherwise provided herein). Seller is obligated to repurchase and take physical possession of the Purchased Assets or Contributed REO Property and related Asset Files from Administrative Agent or its designee (including the Custodian) at Seller’s expense on the related Repurchase Date.
b.      When any Purchased Asset or Contributed REO Property is desired by Seller to be released, sold or otherwise liquidated, Seller shall make payment to Administrative Agent for the benefit of Buyers of the applicable Repurchase Price attributable to such Purchased Asset or Contributed REO Properties, supporting the portion of the Purchase Price of the Transaction related to such Purchased Asset or Contributed REO Property, as applicable, in order to prepay the applicable Repurchase Price (an “ Optional Repurchase ”) in an amount equal to the applicable Repurchase Price on each date such Purchased Assets or Contributed REO Properties, as applicable, are desired to be repurchased, sold or otherwise liquidated (each, an “ Optional Repurchase Date ”). Such payment shall serve as a partial prepayment of the Repurchase Price in connection with the Transaction with respect to such Purchased Assets or Contributed REO Properties, as applicable. Seller shall pay the applicable Repurchase Price and take (or cause its designee to take) physical possession of the Purchased Assets or Contributed REO Properties, as applicable from the Seller, the REO Subsidiary or their respective designees (including the Custodian) at Seller’s expense on the related Optional Repurchase Date. Immediately following such payment, the related Purchased Asset or Contributed REO Property, as applicable, shall cease to be subject to this Agreement or the other Program Agreements, and Administrative Agent, any Repledgee or assignee of Buyer, as the case may be, shall be deemed to have released all of its interests in such Purchased Asset or Contributed REO Property, as applicable, without further action by any Person and shall direct Custodian to release the related Asset File to the Seller or its designee pursuant to the Custodial Agreement, failing which Seller may direct the Custodian or any other custodian to release the related Asset File to the Seller.
c.      Provided that no Default shall have occurred and is continuing, and Administrative Agent has received the related Repurchase Price upon repurchase of the Purchased Assets or release of Contributed REO Property from the REO Subsidiary, as applicable, Administrative Agent and Buyers agree to release (or permit the release of) their ownership interest hereunder, as applicable in the Purchased Assets or lien on the Contributed REO Property (including the Repurchase Assets related thereto), as applicable, at the request of Seller. The applicable Purchased Assets or Contributed REO Properties (including the Repurchase Assets related thereto) shall be delivered to Seller free and clear of any lien, encumbrance or claim of Administrative Agent or the Buyers. With respect to payments in full by the related Mortgagor of a Transaction Mortgage Loan, Seller agrees to immediately remit (or cause to be remitted) to Administrative Agent for the benefit of Buyers the Repurchase Price with respect to such Transaction Mortgage Loan. Administrative Agent and Buyers agree to release the Transaction Mortgage Loans which have been prepaid in full after receipt of evidence of compliance with the immediately preceding sentence.
d.      Pursuant to that certain Flow Assignment Agreement between Seller, as assignor and REO Subsidiary, as assignee, the Seller may from time to time assign certain Transaction Mortgage Loans to the REO Subsidiary. Upon the assignment of any such Transaction Mortgage Loan to the REO Subsidiary, Seller and the REO Subsidiary shall provide notice thereof to Administrative Agent and deliver to Administrative Agent an updated Asset Schedule showing updated ownership of Transaction Mortgage Loans subject to a Transaction. Any such assignment shall be made subject to the Lien of Administrative Agent on for the benefit of Buyers hereunder.
e.      Promptly upon a HECM Buyout becoming an REO Property as contemplated by Section 8, Seller shall (i) notify Administrative Agent in writing that such HECM Buyout has become an REO Property and the value attributed to such REO Property by Seller, (ii) deliver to Administrative Agent and Custodian an Asset Schedule with respect to such REO Property, (iii) be deemed to make the representations and warranties listed on Schedule 1-C hereto with respect to such REO Property, and (iv) the Purchase Price on account of such Transaction Mortgage Loans shall be decreased and the Purchase Price on account of the REO Subsidiary Interests shall be increased by the same amount. Such REO Property (x) shall be deemed a Contributed REO Property owned by the REO Subsidiary hereunder and its Asset Value as determined by Administrative Agent shall be included in the Asset Value of the REO Subsidiary Interests and (y) to the extent that such conversion results in a Margin Deficit, Seller shall pay such amount in accordance with Section 6.
5.      Price Differential
a.      On each Business Day that a Transaction is outstanding, the applicable Pricing Rate shall be reset and, unless otherwise agreed, the accrued and unpaid Price Differential shall be settled in cash on each related Payment Date. Two (2) Business Days prior to the Payment Date, Administrative Agent shall give Seller written or electronic notice of the amount of the Price Differential due on such Payment Date. On the Payment Date, Seller shall pay to Administrative Agent the Price Differential for the benefit of Buyers for such Payment Date (along with any other amounts to be paid pursuant to Section 7 hereof and Section 3 of the Pricing Side Letter), by wire transfer in immediately available funds.
b.      If Seller fails to pay all or part of the Price Differential by 3:00 p.m. (New York City time) on the related Payment Date, with respect to any Purchased Asset, Seller shall be obligated to pay to Administrative Agent for the benefit of Buyers (in addition to, and together with, the amount of such Price Differential) interest on the unpaid Repurchase Price at a rate per annum equal to the Post-Default Rate until the Price Differential is received in full by Administrative Agent for the benefit of Buyers.
6.      Margin Maintenance
a.      If at any time the outstanding Purchase Price allocated to any Purchased Asset or Contributed REO Property subject to a Transaction is greater than the Asset Value allocated to such Purchased Asset or Contributed REO Property subject to a Transaction (a “ Margin Deficit ”), then Administrative Agent may by notice to Seller require Seller to transfer to Administrative Agent for the benefit of Buyers cash in an amount at least equal to the Margin Deficit (such requirement, a “ Margin Call ”).
b.      Notice delivered pursuant to Section 6(a) above may be given by any written or electronic means. Any notice given before 10:00 a.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on such Business Day; notice given after 10:00 a.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the following Business Day (the foregoing time requirements for satisfaction of a Margin Call are referred to as the “Margin Deadlines”). The failure of Administrative Agent, on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Administrative Agent to do so at a later date. Seller and Administrative Agent each agree that a failure or delay by Administrative Agent to exercise its rights hereunder shall not limit or waive Administrative Agent’s or Buyers’ rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller.
c.      In the event that a Margin Deficit exists with respect to any Purchased Asset or Contributed REO Property, Administrative Agent may retain any funds received by it to which the Seller would otherwise be entitled hereunder, which funds (i) shall be held by Administrative Agent against the related Margin Deficit for a Purchased Asset or Contributed REO Property and (ii) may be applied by Administrative Agent against the Allocated Repurchase Price related to such Purchased Asset or Contributed REO Property for which the related Margin Deficit remains otherwise unsatisfied. Notwithstanding the foregoing, the Administrative Agent retains the right, in its sole discretion, to make a Margin Call in accordance with the provisions of this Section 6.
7.      Income Payments
a.      All Income received on account of the Purchased Assets and Contributed REO Property during the term of a Transaction shall be the property of Administrative Agent for the benefit of Buyers.
b.      Notwithstanding that certain Contributed REO Property is owned by the REO Subsidiary, the Seller, as Nominee, shall be listed as the mortgagee of record and shall deposit all claims submitted on account of HECM Buyout into the payee account (the “ Clearing Account ”) and shall transfer all such amounts so received into the Inbound Account as set forth below.
c.      With respect to HECM Buyout and Contributed REO Properties, Seller shall, and shall cause the applicable Servicer to, deposit all Income related to any (x) prepayment of principal in full with respect to any Transaction Mortgage Loan, (y) HUD claim payments or (z) liquidation proceeds from any REO Property into the Inbound Account (x) within one (1) Business Day following receipt thereof if received by 3:00 p.m. (New York City time) and (y) within two (2) Business Days following receipt thereof if received after 3:00 p.m. (New York City time). To the extent HUD deducts from amounts otherwise due on account of a HECM Buyout subject to the Agreement, any amounts owing by Servicer to HUD, Seller shall give prompt written notice thereof to Administrative Agent and shall deposit, within one (1) Business Day following notice or knowledge of such deduction by HUD, such deducted amounts into the Inbound Account. Provided no Event of Default has occurred and is continuing, funds deposited in the Inbound Account shall be held therein and shall be applied on each Payment Date following receipt thereof prior to the occurrence of an Event of Default as follows:
(1)      first, to Administrative Agent for the benefit of Buyers on account of unpaid fees, expenses, indemnity amounts, Price Differential and any other amounts then due and owing to the Administrative Agent for the benefit of Buyers (including, without limitation, any amount sufficient to eliminate any outstanding Margin Deficit ) from the Seller under this Agreement; and
(2)      second, all remaining amounts (if any), to the Seller.
d.      Notwithstanding any provision to the contrary in this Section 7, (i) upon the occurrence and continuance of an Event of Default or on the Termination Date, Seller shall and shall cause Servicer to deposit all Income to the Inbound Account upon receipt thereof and Administrative Agent shall apply all Income in the Inbound Account to reduce the Obligations hereunder to zero; and (ii) within one (1) Business Day after receipt by Seller of any (x) prepayment of principal in full with respect to any Transaction Mortgage Loan, (y) HUD claims payments or (z) liquidation proceeds from any REO Property, Seller shall remit such amount to Administrative Agent for the benefit of Buyers and Administrative Agent shall apply any such amount received by Administrative Agent for the benefit of Buyers to reduce the amount of the Repurchase Price due upon termination of the related Transaction.
8.      Security Interest
a.      Conveyance; Security Interest; REO Property .
(1)      On each Purchase Date, Seller hereby sells, assigns and conveys all of Seller’s rights and interests in the Purchased Assets, including, without limitation, the beneficial interests in the Contributed REO Property identified on the related Asset Schedule, the related Repurchase Assets and the related Servicing Rights and Asset Documents to Administrative Agent for the benefit of Buyers and Repledgees. Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, and in any event, Seller hereby pledges to Administrative Agent as security for the performance by Seller of its Obligations and hereby grants, assigns and pledges to Administrative Agent a fully perfected first priority security interest in the Purchased Assets (including, without limitation, all Scheduled HECM Payments, all Unscheduled HECM Payments and all MIP Payments), including related Servicing Rights, Servicer Advances payable by HUD and/or VA, all debenture interest payable by HUD on account of any HECM Buyout, and Asset Documents, the beneficial interest in the Contributed REO Property, any Agency Security or right to receive such Agency Security when issued to the extent backed by any of the Purchased Assets and Contributed REO Property, the Records, the Program Agreements (to the extent such Program Agreements and Seller’s rights thereunder relate to the Purchased Assets or Contributed REO Property), any related Take‑out Commitments, any Property relating to the Purchased Assets or Contributed REO Property, all insurance policies and insurance proceeds relating to any Purchased Asset, Contributed REO Property or the related Mortgaged Property, including, but not limited to, any payments or proceeds under any related primary insurance, hazard insurance and FHA Mortgage Insurance Contracts and VA Loan Guaranty Agreements (if any), Income, Interest Rate Protection Agreements, accounts (including any interest of Seller in escrow accounts) and any other contract rights (other than those rights retained by GNMA pursuant to the GNMA Guide), instruments, accounts, payments, rights to payment (including payments of interest or finance charges), general intangibles related to the Purchased Assets, and other assets relating to the Purchased Assets or Contributed REO Property (including, without limitation, any other accounts) or any interest in the Purchased Assets or Contributed REO Property, and any proceeds (including the related securitization proceeds) and distributions with respect to any of the foregoing and any other property, rights, title or interests as are specified on a Transaction Request and/or Trust Receipt and/or delivered to Administrative Agent pursuant to a Transaction, in all instances, whether now owned or hereafter acquired, now existing or hereafter created (collectively, the “ Primary Repurchase Assets ”).
(2)      In order to further secure the Obligations hereunder, REO Subsidiary hereby grants, assigns and pledges to Administrative Agent a fully perfected first priority security interest in the REO Properties, all related Servicing Rights, Asset Documents, the Records, the Program Agreements (to the extent such Program Agreements and REO Subsidiary’s rights thereunder relate to the REO Properties), any related Take-out Commitments, any Property relating to the REO Properties, all insurance policies and insurance proceeds relating to any REO Property, as applicable, including, but not limited to, any payments or proceeds under any related primary insurance, hazard insurance and FHA Mortgage Insurance Contracts and VA Loan Guaranty Agreements (if any), Income, Interest Rate Protection Agreements, accounts (including any interest of REO Subsidiary in escrow accounts) and any other contract rights (other than those rights retained by GNMA pursuant to the GNMA Guide), instruments, accounts, payments, rights to payment (including payments of interest or finance charges), general intangibles and other assets relating to the REO Properties (including, without limitation, any other accounts) or any interest in the REO Properties, and any proceeds (including the related securitization proceeds) and distributions with respect to any of the foregoing and any other property, rights, title or interests as are specified on a Transaction Request and/or Trust Receipt and/or delivered to Administrative Agent pursuant to a Transaction, in all instances, whether now owned or hereafter acquired, now existing or hereafter created (collectively, the “ REO Subsidiary Repurchase Assets ” and together with the Primary Repurchase Assets, the “ Repurchase Assets ”).
(3)      The provisions of paragraphs (a), (b) and (c) are intended to constitute a security agreement or other arrangement or other credit enhancement related to this Agreement and transactions hereunder as defined under Section 101(47)(v) and 741(7)(xi) of the Bankruptcy Code, and are further intended to be a guaranty of the Obligations to the Buyer by the REO Subsidiary, to the extent of its Repurchase Assets.
b.      Release of Security Interest upon Sale . Notwithstanding the foregoing, upon the repurchase of any Purchased Asset by the Seller or release of a Contributed REO Property from the REO Subsidiary or the sale of a Purchased Asset or Contributed REO Property to any third party and receipt by Administrative Agent for the benefit of Buyers and Repledgees in each case of the related Repurchase Price, the security interest of Administrative Agent for the benefit of Buyers and Repledgees in such Purchased Asset or Contributed REO Property and all related Repurchase Assets will be released with no further action on the part of Administrative Agent, Seller or REO Subsidiary.
c.      Acquisition of REO Property . If the REO Subsidiary acquires any REO Property by extinguishing any Mortgage Note in connection with the foreclosure of the related Transaction Mortgage Loan, transferring the real property underlying the Mortgage Note in lieu of foreclosure or otherwise transferring of such real property, the REO Subsidiary shall cause such real property to be taken by Deed, or by means of such instruments as is provided by the Governmental Authority governing the transfer, or right to request transfer and issuance of the Deed, or such instrument as is provided by the related Governmental Authority, or to be acquired through foreclosure sale in the jurisdiction in which the REO Property is located, in the name of the Nominee in accordance with Section 43 hereof.
d.      REO Subsidiary Interests as Securities . The parties acknowledge and agree that the REO Subsidiary Interests shall constitute and remain “securities” as defined in Section 8-102 of the Uniform Commercial Code; Seller Parties covenant and agree that (i) the REO Subsidiary Interests are not and will not be dealt in or traded on securities exchanges or securities markets, and (ii) the REO Subsidiary Interests are not and will not be investment company securities within the meaning of Section 8-103 of the Uniform Commercial Code. Seller shall, at its sole cost and expense, take all steps as may be necessary in connection with the re-registration, indorsement, transfer, delivery and pledge of all REO Subsidiary Interests to Administrative Agent for the benefit of Buyers.
e.      Additional Interests . If Seller shall, as a result of ownership of the REO Subsidiary Interests, become entitled to receive or shall receive any certificate evidencing any REO Subsidiary Interests or other equity interest, any option rights, or any equity interest in the REO Subsidiary Interests, whether in addition to, in substitution for, as a conversion of, or in exchange for the REO Subsidiary Interests, or otherwise in respect thereof, Seller shall accept the same as the Administrative Agent’s agent, hold the same in trust for the Administrative Agent and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by the Seller to the Administrative Agent for the benefit of Buyers, if required, together with an undated transfer power, if required, covering such certificate duly executed in blank, or if requested, deliver the Certificate re-registered in the name of Administrative Agent for the benefit of Buyers, to be held by the Administrative Agent subject to the terms hereof as additional security for the Obligations. Any sums paid upon or in respect of the REO Subsidiary Interests upon the liquidation or dissolution of the REO Subsidiary, or otherwise shall be paid over to the Administrative Agent as additional security for the Obligations. If following the occurrence and during the continuation of an Event of Default, any sums of money or property so paid or distributed in respect of the REO Subsidiary Interests shall be received by Seller, Seller shall, until such money or property is paid or delivered to the Administrative Agent for the benefit of Buyers, hold such money or property in trust for the Administrative Agent for the benefit of Buyers segregated from other funds of Seller as additional security for the Obligations.
f.      Voting Rights . Subject to this Section, Administrative Agent as the holder, may exercise all voting and member rights with respect to the REO Subsidiary Interests. Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing, (a) Administrative Agent shall notify and consult with Seller prior to the exercise of any rights under this Section, and (b) Seller will have the right to direct Administrative Agent, with respect to any action or inaction related to the REO Subsidiary Interests (in the event any action is requested or required to be taken), and the Administrative Agent shall comply with such direction unless the Administrative Agent determines in its good faith discretion that such compliance with such direction will result in a Material Adverse Effect or conflict with any Program Agreement. In no event shall Administrative Agent be required to vote or exercise any right or take any other action which would impair the REO Subsidiary Interests or which would be inconsistent with or result in a violation of any provision of this Agreement. Without limiting the generality of the foregoing, Administrative Agent shall have no obligation (other than as expressly set forth in this Agreement) to (i) vote to enable, or take any other action to permit, the REO Subsidiary to issue any interests of any nature or to issue any other interests convertible into or granting the right to purchase or exchange for any interests of such entity; (ii) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the REO Subsidiary Interests; or (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, the Seller’s interest in the Purchased Assets except for the Lien provided for by this Agreement. In no event shall Buyer enter into any agreement or undertaking restricting the right or ability of Seller to sell, assign or transfer the Purchased Assets prior to an Event of Default. For the avoidance of doubt, prior to the occurrence and continuance of an Event of Default, the REO Subsidiary shall not need the consent of Administrative Agent with respect to the day-to-day operations thereof and any related resolution required to verify authority for such transactions, so long as such day-to-day operations are performed in accordance with the terms of the REO Subsidiary Agreement and this Agreement, as applicable.
g.      Servicing Rights . Each Seller Party acknowledges that it has no rights to service the Transaction Mortgage Loans and Contributed REO Properties, except as required hereunder. Without limiting the generality of the foregoing and in the event that any Seller Party is deemed to retain any residual Servicing Rights, and for the avoidance of doubt, subject and subordinate to any rights retained by GNMA in the Servicing Rights or any prohibition on the grant of a security interest in the Servicing Rights without the prior express written approval of GNMA, each Seller Party grants, assigns and pledges to Administrative Agent, for its benefit and the benefit of each applicable Buyer, a security interest in the Servicing Rights and proceeds related thereto and in all instances, whether now owned or hereafter acquired, now existing or hereafter created. The foregoing provision is intended to constitute a security agreement or other arrangement or other credit enhancement related to this Agreement and Transactions hereunder as defined under Sections 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.
h.      Financing Statements . Seller Parties agree to execute, deliver and/or file such documents and perform such acts as may be reasonably necessary to fully perfect Administrative Agent’s security interest created hereby. Furthermore, the Seller Parties hereby authorize the Administrative Agent to file financing statements relating to the Repurchase Assets, as the Administrative Agent, at its option, may deem appropriate. The Seller shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 8.
i.      Powers of Attorney . In addition to the foregoing, each Seller Party agrees to execute a Power of Attorney, in the form of Exhibit D hereto, to be delivered on the date hereof which may be used only in accordance with Section 28 hereof.
j.      Intent . The foregoing provisions in this Section 8 are each intended to constitute a security agreement or other arrangement or other credit enhancement related to this Agreement and Transactions hereunder as defined under Sections 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.
k.      The parties acknowledge and agree that the intent of the parties is for the Seller to grant a Lien to Administrative Agent for the benefit of Buyers on the REO Subsidiary Repurchase Assets prior to such REO Subsidiary Repurchase Assets having been conveyed to the REO Subsidiary and that the REO Subsidiary is acquiring any REO Subsidiary Repurchase Assets subject to and subordinate to Administrative Agent’s Lien hereunder. It is further intended that simultaneous with the acquisition by the REO Subsidiary of the REO Subsidiary Assets, as applicable, the REO Subsidiary intends to grant a Lien on such REO Subsidiary Repurchase Assets to Administrative Agent hereunder.
9.      Payment and Transfer
Unless otherwise mutually agreed in writing, all transfers of funds to be made by Seller hereunder shall be made in Dollars, in immediately available funds, without deduction, set‑off or counterclaim, to Administrative Agent at the following account maintained by Administrative Agent: Account No. 31018027, for the account of CS ADMINISTRATIVE AGENT/REVERSE MORTG INBOUND, Citibank, ABA No. 021 000 089 or such other account as Administrative Agent shall specify to Seller in writing. Each Seller Party acknowledges that it has no rights of withdrawal from the foregoing account. All Repurchase Assets transferred by one party hereto to the other party shall be in the case of a purchase by a Buyer in suitable form for transfer or shall be accompanied by duly executed instruments of transfer or assignment in blank and such other documentation as Administrative Agent may reasonably request. All Repurchase Assets shall be evidenced by a Trust Receipt or Certificate. Any Repurchase Price received by Administrative Agent after 2:00 p.m. (New York City time) shall be deemed received on the next succeeding Business Day.
10.      Conditions Precedent
a.      Continuing Transaction . As conditions precedent to the continuing Transactions, Administrative Agent shall have received on or before the date hereof the following, in form and substance satisfactory to Administrative Agent and duly executed by each Seller Party and each other party thereto:
(1)      Program Agreements . The Program Agreements duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver.
(2)      Security Interest . Evidence that all other actions necessary or, in the opinion of Administrative Agent, desirable to perfect and protect Administrative Agent’s and Buyers’ interest in the Purchased Assets and other Repurchase Assets have been taken, including, without limitation, duly authorized and filed Uniform Commercial Code financing statements on Form UCC‑1 and UCC-3, as applicable.
(3)      Organizational Documents . A certificate of the duly authorized Person of each Seller Party, attaching certified copies of each Seller Party’s organizational documents and resolutions approving the Program Agreements and transactions thereunder (either specifically or by general resolution) and all documents evidencing other necessary action or governmental approvals as may be required in connection with the Program Agreements.
(4)      Good Standing Certificate . A certified copy of a good standing certificate from the jurisdiction of organization of each Seller Party, dated as of no earlier than the date ten (10) Business Days prior to the Purchase Date with respect to the initial Transaction hereunder.
(5)      Incumbency Certificate . An incumbency certificate of each Seller Party, certifying the names, true signatures and titles of the representatives duly authorized to request transactions hereunder and to execute the Program Agreements.
(6)      Opinion of Counsel . An opinion of each Seller Party’s counsel, in form and substance acceptable to Administrative Agent, including, without limitation (i) the enforceability opinion with respect to each Seller Party, including an Investment Company Act opinion indicating that no Seller Party nor any of its Subsidiaries is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended (the “ Investment Company Act ”) and that it is not necessary to register the REO Subsidiary under the Investment Company Act, for reasons specified in such opinion other than the exemption provided by Section 3(c)(1) or Section 3(c)(7) thereof; (ii) a Bankruptcy Code opinion of counsel to Seller Parties with respect to matters outlined in Section 26(e) hereof and (iii) the creation, perfection and priority opinion with respect to each Seller Party.
(7)      Underwriting Guidelines . A true and correct copy of the Underwriting Guidelines.
(8)      Fees . Payment of any fees due to Administrative Agent and Buyers hereunder.
(9)      Reserved .
b.      All Transactions . The obligation of Administrative Agent for the benefit of Buyers to enter into each Transaction pursuant to this Agreement is subject to the following conditions precedent:
(1)      Due Diligence Review . Without limiting the generality of Section 34 hereof, Administrative Agent and Buyers shall have completed, to its satisfaction, its due diligence review of the related Purchased Assets, Contributed REO Properties, Seller, REO Subsidiary and the Servicer.
(2)      Required Documents .
(a)      With respect to each Transaction Mortgage Loan that is not a Wet‑Ink Mortgage Loan, the Asset File has been delivered to the Custodian in accordance with the Custodial Agreement.
(b)      With respect to each Wet‑Ink Mortgage Loan, the Wet‑Ink Documents have been delivered to Administrative Agent or Custodian, as the case may be, in accordance with the Custodial Agreement.
(c)      With respect to each Correspondent Mortgage Loan which the Correspondent Seller is selling to Seller simultaneously with such Correspondent Mortgage Loan becoming a Transaction Mortgage Loan, Seller shall have delivered to the Administrative Agent the Seller Wire Instruction Data in accordance with the terms of the Custodial Agreement.
(d)      With respect to each Correspondent Mortgage Loan, Administrative Agent shall have received a Correspondent Seller Release for such Transaction Mortgage Loan that is duly executed and delivered by the related Correspondent Seller by no later than the time set forth in Section 3(b) hereof.
(3)      Transaction Documents . Administrative Agent or its designee shall have received on or before the day of such Transaction (unless otherwise specified in this Agreement) the following, in form and substance satisfactory to Administrative Agent and (if applicable) duly executed:
(a)      A Transaction Request and Asset Schedule delivered by Seller pursuant to Section 3.b) hereof.
(b)      The Request for Certification and the related Asset Schedule delivered by Seller, and the Trust Receipt and Custodial Asset Schedule delivered by Custodian.
(c)      Such certificates, customary opinions of counsel or other documents as Administrative Agent may reasonably request, provided that such opinions of counsel shall not be required routinely in connection with each Transaction but shall only be required from time to time as deemed necessary by Administrative Agent in good faith; provided further that Seller may provide such opinions of counsel or other documents to Administrative Agent within five (5) Business Days following such Purchase Date.
(4)      No Default . No Default or Event of Default shall have occurred and be continuing.
(5)      Requirements of Law . Neither Administrative Agent nor Buyers shall have determined that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to Administrative Agent or any Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Administrative Agent or any Buyer to enter into Transactions with a Pricing Rate based on Base Rate.
(6)      Representations and Warranties . Both immediately prior to the related Transaction and also after giving effect thereto and to the intended use thereof, the representations and warranties made by each Seller Party in each Program Agreement shall be true, correct and complete on and as of such Purchase Date in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
(7)      Electronic Tracking Agreement . To the extent any Transaction Mortgage Loans are registered on the MERS® System, an Electronic Tracking Agreement entered into, duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver.
(8)      Releases . Administrative Agent shall have received a warehouse lender’s release or other document acceptable to Administrative Agent in its sole discretion evidencing the release and conveyance of the loan to Seller.
(9)      Material Adverse Change . None of the following shall have occurred and/or be continuing (it being understood that Administrative Agent will make the following determinations acting in good faith):
(a)      Credit Suisse AG, New York Branch’s corporate bond rating as calculated by S&P or Moody’s has been lowered or downgraded to a rating below investment grade by S&P or Moody’s;
(b)      an event or events shall have occurred in the good faith determination of a Buyer resulting in the effective absence of a “repo market” or comparable “lending market” for financing debt obligations secured by mortgage loans or securities or an event or events shall have occurred resulting in such Buyer not being able to finance Transaction Mortgage Loans or REO Properties through the “repo market” or “lending market” with traditional counterparties at rates which would have been reasonable prior to the occurrence of such event or events; or
(c)      an event or events shall have occurred resulting in the effective absence of a “securities market” for securities backed by mortgage loans or an event or events shall have occurred resulting in such Buyer not being able to sell securities backed by mortgage loans at prices which would have been reasonable prior to such event or events; or
(d)      there shall have occurred a material adverse change in the financial condition of a Buyer which affects (or can reasonably be expected to affect) materially and adversely the ability of such Buyer to fund its obligations under this Agreement.
(10)      UCC-3 Filing . Seller shall have filed or cause to be filed a Uniform Commercial Code Financing Statement on form UCC-3 to amend that certain initial filing No. 2012-4577468 in form and substance acceptable to Buyer in its sole discretion no later than thirty (30) Business Days following the Effective Date.
(11)      Insurance . Evidence that Seller has added Administrative Agent as an additional loss payee under the Seller’s Fidelity Insurance no later than ten (10) Business Days following the Effective Date.
11.      Program; Costs
a.      Seller shall reimburse Administrative Agent and Buyers for any of Administrative Agent’s and Buyers’ reasonable out-of-pocket costs, including due diligence review costs and reasonable attorney’s fees, incurred by Administrative Agent and Buyers in determining the acceptability to Administrative Agent and Buyers of any Repurchase Assets; provided that Administrative Agent shall provide notice to Seller at such time such out-of-pocket costs and expenses reaches $25,000; provided, however, that failure to deliver such notice shall not affect Seller’s obligations hereunder. Seller shall also pay, or reimburse Administrative Agent and Buyers if Administrative Agent or Buyers shall pay, any termination fee, which may be due any Servicer. Seller shall pay the fees and expenses of Administrative Agent’s and Buyers’ counsel in connection with the Program Agreements. Legal fees for any subsequent amendments to this Agreement or related documents shall be borne by Seller. Seller shall pay ongoing custodial fees and expenses as set forth in the Custodial Agreement, and any other ongoing fees and expenses under any other Program Agreement.
b.      If any Buyer determines, in good faith, that, due to the introduction of, any change in, or the compliance by such Buyer with (i) any eurocurrency reserve requirement or (ii) the interpretation of any law, regulation or any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be an increase in the cost to such Buyer in engaging in the present or any future Transactions, then Seller agrees to pay to such Buyer, from time to time, upon demand by such Buyer (with a copy to Custodian) the actual cost of additional amounts as specified by such Buyer to compensate such Buyer for such increased costs.
c.      With respect to any Transaction, Administrative Agent and Buyers may conclusively rely upon, and shall incur no liability to any Seller Party in acting upon, any request or other communication that Administrative Agent and Buyers reasonably believe to have been given or made by a person authorized to enter into a Transaction on such Seller Party’s behalf, whether or not such person is listed on the certificate delivered pursuant to Section 10.a(5) hereof.
d.      Notwithstanding the assignment of the Program Agreements with respect to each Purchased Asset to Administrative Agent for the benefit of Buyers, each Seller Party agrees and covenants with Administrative Agent and Buyers to enforce diligently their rights and remedies set forth in the Program Agreements.
e.      (i) Any payments made by Seller to Administrative Agent, a Buyer or a Buyer assignee or participant hereunder or any Program Agreement shall be made free and clear of and without deduction or withholding for any Taxes, except as required by applicable law. If Seller shall be required by applicable law (as determined in the good faith discretion of the applicable withholding agent) to deduct or withhold any Tax from any sums payable to Administrative Agent, a Buyer or a Buyer assignee or participant, then (i) the Seller shall make such deductions or withholdings and pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law; (ii) to the extent the withheld or deducted Tax is an Indemnified Tax or Other Tax, the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 11(e)) the Administrative Agent receives an amount equal to the sum it would have received had no such deductions or withholdings been made; and (iii) the Seller shall notify the Administrative Agent of the amount paid and shall provide the original or a certified copy of a receipt issued by the relevant Governmental Authority evidencing such payment within ten (10) days thereafter. Seller shall otherwise indemnify Administrative Agent and such Buyer, within ten (10) days after demand therefor, for any Indemnified Taxes or Other Taxes imposed on Administrative Agent or such Buyer (including Indemnified Taxes and Other Taxes imposed or asserted on or attributable to amounts payable under this Section 11(e)) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority.
(ii) Administrative Agent shall cause each Buyer and Buyer assignee and participant to deliver to the Seller, at the time or times reasonably requested by the Seller, such properly completed and executed documentation reasonably requested by the Seller as will permit payments made hereunder to be made without withholding or at a reduced rate of withholding. In addition, Administrative Agent shall cause each Buyer and Buyer assignee and participant, if reasonably requested by Seller, to deliver such other documentation prescribed by applicable law or reasonably requested by the Seller as will enable the Seller to determine whether or not such Buyer or Buyer assignee or participant is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in this Section 11, the completion, execution and submission of such documentation (other than such documentation in Section 11(e)(ii)(A), (B) and (C) below) shall not be required if in the Buyer’s or Buyer’s assignee’s or participant’s judgment such completion, execution or submission would subject such Buyer or Buyer assignee or participant to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Buyer or Buyer assignee or participant. Without limiting the generality of the foregoing, Administrative Agent shall cause a Buyer or Buyer assignee or participant to deliver to each of the Seller Parties, to the extent legally entitled to do so:
(A) in the case of a Buyer or Buyer assignee or participant which is a “U.S. Person” as defined in section 7701(a)(30) of the Code, a properly completed and executed Internal Revenue Service (“IRS”) Form W-9 certifying that it is not subject to U.S. federal backup withholding tax;
(B) in the case of a Buyer or Buyer assignee or participant which is not a “U.S. Person” as defined in Code section 7701(a)(30): (I) a properly completed and executed IRS Form W-8BEN or W-8ECI, as appropriate, evidencing entitlement to a zero percent or reduced rate of U.S. federal income tax withholding on any payments made hereunder, (II) in the case of such non-U.S. Person claiming exemption from the withholding of U.S. federal income tax under Code sections 871(h) or 881(c) with respect to payments of “portfolio interest,” a duly executed certificate (a “ U.S. Tax Compliance Certificate ”) to the effect that such non-U.S. Person is not (x) a “bank” within the meaning of Code section 881(c)(3)(A), (y) a “10 percent shareholder” of Seller or affiliate thereof, within the meaning of Code section 881(c)(3)(B), or (z) a “controlled foreign corporation” described in Code section 881(c)(3)(C), (III) to the extent such non-U.S. person is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if such non-U.S. person is a partnership and one or more direct or indirect partners of such non-U.S. person are claiming the portfolio interest exemption, such non-U.S. person may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner, and (IV) executed originals of any other form or supplementary documentation prescribed by law as a basis for claiming exemption from or a reduction in United States federal withholding tax together with such supplementary documentation as may be prescribed by law to permit the Seller to determine the withholding or deduction required to be made.
(C) if a payment made to a Buyer or Buyer assignee or participant under this Agreement would be subject to U.S. federal withholding tax imposed by FATCA if such Buyer or assignee or participant were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), Administrative Agent on behalf of such Buyer or assignee or participant shall deliver to the Seller at the time or times prescribed by law and at such time or times reasonably requested by the Seller such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Seller as may be necessary for the Seller to comply with their obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 11(e), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
The applicable IRS forms referred to above shall be delivered by Administrative Agent on behalf of each applicable Buyer or Buyer assignee or participant on or prior to the date on which such person becomes a Buyer or Buyer assignee or participant under this Agreement, as the case may be, and upon the obsolescence or invalidity of any IRS form previously delivered by it hereunder.
f.      Any indemnification payable by Seller to Administrative Agent or a Buyer or Buyer assignee or participant for Indemnified Taxes or Other Taxes that are imposed on such Buyer or a Buyer assignee or participant, as described in Section 11(e)(i) hereof, shall be paid by Seller within ten (10) days after demand therefor from Administrative Agent. A certificate as to the amount of such payment or liability delivered to the Seller by Administrative Agent on behalf of a Buyer or a Buyer assignee or participant shall be conclusive absent manifest error.
g.      Each party’s obligations under this Section 11 shall survive any assignment of rights by, or the replacement of, a Buyer or a Buyer assignee or participant, and the repayment, satisfaction or discharge of all obligations under any Program Agreement.
h.      Each party to this Agreement acknowledges that it is its intent for purposes of U.S. federal, state and local income and franchise taxes to treat each Transaction as indebtedness of Seller that is secured by the Purchased Assets and Contributed REO Property, and the Purchased Assets, as owned by Seller, and the Contributed REO Properties, as owned by REO Subsidiary, in the absence of an Event of Default by Seller. Administrative Agent on behalf of Buyers and Seller agree that they will treat and report for all tax purposes the Transactions entered into hereunder as one or more loans from a Buyer to Seller secured by the Purchased Assets and Contributed REO Properties, unless otherwise prohibited by law or upon a final determination by any taxing authority that the Transactions are not loans for tax purposes.
12.      Servicing
a.      Each Seller Party, on Administrative Agent’s and Buyers’ behalf, shall contract with Servicer to, or if Seller is the Servicer, Seller shall, service the Transaction Mortgage Loans and Contributed REO Properties for each Seller Party hereunder consistent with the degree of skill and care that Seller customarily requires with respect to similar Transaction Mortgage Loans and Contributed REO Properties owned or managed by it and in accordance with Accepted Servicing Practices. Each Seller Party and Servicer shall (i) comply with all applicable federal, state and local laws and regulations, (ii) maintain all state and federal licenses necessary for it to perform its servicing responsibilities (if any) hereunder and (iii) not impair the rights of Administrative Agent or Buyers in any Transaction Mortgage Loan or Contributed REO Property or any payment thereunder. Upon the occurrence and during the continuance of an Event of Default, Administrative Agent may terminate the servicing of any Transaction Mortgage Loan or Contributed REO Property with the then-existing Servicer in accordance with Section 12.e) hereof.
b.      Each Seller Party shall and shall cause the Servicer to hold or cause to be held all escrow funds collected by such Seller Party and Servicer with respect to any Transaction Mortgage Loans and Contributed REO Properties in trust accounts and shall apply the same for the purposes for which such funds were collected.
c.      Reserved .
d.      In the event there is a third party Servicer other than Seller and upon Administrative Agent’s request, Seller shall provide promptly to Administrative Agent a Servicer Notice addressed to and agreed to by the Servicer of the related Transaction Mortgage Loans and Contributed REO Properties, advising such Servicer of such matters as Administrative Agent may reasonably request, including, without limitation, recognition by the Servicer of Administrative Agent’s and Buyers’ interest in such Transaction Mortgage Loans and Contributed REO Properties and the Servicer’s agreement that upon receipt of notice of an Event of Default from Administrative Agent, it will follow the instructions of Administrative Agent with respect to the Transaction Mortgage Loans and Contributed REO Properties and any related Income with respect thereto.
e.      Upon the occurrence and during the continuance of an Event of Default and upon written notice, Administrative Agent shall have the right to immediately terminate the Servicer’s right to service the Transaction Mortgage Loans and Contributed REO Properties without payment of any penalty or termination fee. Each Seller Party and the Servicer shall cooperate in transferring the servicing of the Transaction Mortgage Loans and Contributed REO Properties to a successor servicer appointed by Administrative Agent on behalf of Buyers in its sole discretion. For the avoidance of doubt any termination of the Servicer’s rights to service by the Administrative Agent as a result of an Event of Default shall be deemed part of an exercise of the Administrative Agent’s rights to cause the liquidation, termination or acceleration of this Agreement.
f.      If any Seller Party should discover that, for any reason whatsoever, such Seller Party or any entity responsible to such Seller Party for managing or servicing any such Transaction Mortgage Loan or Contributed REO Property has failed to perform fully such Seller Party’s obligations under the Program Agreements or any of the obligations of such entities with respect to the Transaction Mortgage Loans and Contributed REO Properties, such Seller Party shall promptly notify Administrative Agent.
g.      Reserved .
h.      For the avoidance of doubt, the Seller Parties do not retain any economic rights to the servicing of the Transaction Mortgage Loans and Contributed REO Properties; provided that Seller shall, and shall cause the Servicer to, continue to service the Transaction Mortgage Loans and Contributed REO Properties hereunder as part of its Obligations hereunder. As such, each Seller Party expressly acknowledges that (i) the Transaction Mortgage Loans are sold to Administrative Agent for the benefit of Buyers on a “servicing released” basis and (ii) the Contributed REO Property is transferred to REO Subsidiary on a “servicing released” basis and pledged to Administrative Agent for the benefit of Buyers on a “servicing released” basis.
13.      Representations and Warranties
a.      Seller represents and warrants to Administrative Agent and Buyers as of the date hereof and as of each Purchase Date for any Transaction that:
(1)      Seller Party Existence . Seller has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware. REO Subsidiary has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware.
(2)      Licenses . Each Seller Party is duly licensed or is otherwise qualified in each jurisdiction in which it transacts business for the business which it conducts and is not in default of any applicable federal, state or local laws, rules and regulations unless, in either instance, the failure to take such action is not reasonably likely (either individually or in the aggregate) to cause a Material Adverse Effect. Each Seller Party has the requisite power and authority and legal right to originate and purchase each Transaction Mortgage Loan (as applicable) and to own, sell and grant a lien on all of its right, title and interest in and to the Transaction Mortgage Loans, and to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, each Program Agreement and any Transaction Request. Seller is an FHA Approved Mortgagee and, to the extent Seller is originating VA Loans, a VA Approved Lender.
(3)      Power . Each Seller Party has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect.
(4)      Due Authorization . Each Seller Party has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Program Agreements, as applicable. Each Program Agreement has been (or, in the case of Program Agreements not yet executed, will be) duly authorized, executed and delivered by such Seller Party, all requisite or other corporate action having been taken, and each is valid, binding and enforceable against such Seller Party in accordance with its terms except as such enforcement may be affected by bankruptcy, by other insolvency laws, or by general principles of equity.
(5)      Reserved .
(6)      Event of Default . There exists no Event of Default under Section 15 hereof, which default gives rise to a right to accelerate indebtedness as referenced in Section 15 hereof, under any mortgage, borrowing agreement or other instrument or agreement pertaining to indebtedness for borrowed money or to the repurchase of mortgage loans or securities.
(7)      Solvency . Each Seller Party is solvent and will not be rendered insolvent by any Transaction and, after giving effect to such Transaction, will not be left with an unreasonably small amount of capital with which to engage in its business. No Seller Party is contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such entity or any of its assets. The amount of consideration being received by Seller upon the sale of the Purchased Assets to Administrative Agent for the benefit of Buyers constitutes reasonably equivalent value and fair consideration for such Purchased Assets. The amount of consideration being received by Seller upon the transfer of the Contributed REO Properties to REO Subsidiary constitutes reasonably equivalent value and fair consideration for such Contributed REO Properties. Seller is not transferring any Purchased Assets to Administrative Agent for the benefit of Buyers or any Contributed REO Property to REO Subsidiary with any intent to hinder, delay or defraud any of its creditors.
(8)      No Conflicts . The execution, delivery and performance by each Seller Party of each Program Agreement do not conflict with any term or provision of the formation documents or by‑laws of such Seller Party or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to such Seller Party of any court, regulatory body, administrative agency or governmental body having jurisdiction over such Seller Party, which conflict would have a Material Adverse Effect and will not result in any violation of any such mortgage, instrument, agreement or obligation to which such Seller Party is a party.
(9)      True and Complete Disclosure . All information, reports, exhibits, schedules, financial statements or certificates of Seller Parties or any Affiliate thereof or any of their officers furnished or to be furnished to Administrative Agent or Buyers in connection with the initial or any ongoing due diligence of any Seller Party or any Affiliate or officer thereof, and the negotiation, preparation, or delivery of the Program Agreements, when taken as a whole, (i) are true and complete and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading and (ii) with respect to financial statements, present fairly, in all material respects, the financial condition and results of operations of Seller as of the dates and for the periods indicated. All financial statements have been prepared in accordance with GAAP (other than monthly financial statements solely with respect to footnotes, year‑end adjustments and cash flow statements). Except as disclosed in such financial statements or pursuant to Section 17(b) hereof, Seller is not subject to any contingent liabilities or commitments that, individually or in the aggregate, have a material possibility of causing a Material Adverse Effect with respect to Seller.
(10)      Approvals . No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by any Seller Party of each Program Agreement.
(11)      Litigation . There is no action, proceeding or investigation pending with respect to which any Seller Party has received service of process or, to the best of such Seller Party’s knowledge threatened against it before any court, administrative agency or other tribunal (A) asserting the invalidity of any Program Agreement, (B) seeking to prevent the consummation of any of the transactions contemplated by any Program Agreement or (C)  which is reasonably likely to be determined adversely and, if adversely determined, is reasonably likely to materially and adversely affect the validity of the Purchased Assets or Contributed REO Properties or the performance by it of its obligations under, or the validity or enforceability of any Program Agreement.
(12)      Material Adverse Change . There has been no material adverse change in the business, operations, financial condition or properties of any Seller Party or its Affiliates since the date set forth in the most recent financial statements supplied to Administrative Agent as determined by Administrative Agent in its sole discretion.
(13)      Ownership . Upon (a) payment of the Purchase Price and the filing of the financing statement and delivery of the Purchased Assets to the Custodian, delivery to Administrative Agent or Custodian of the originals of the Certificate re-registered in Administrative Agent’s name and the Custodian’s receipt of the related Request for Certification, Administrative Agent shall become the sole owner of the Purchased Assets and have a Lien on the related Repurchase Assets for the benefit of the Buyers and Repledgees, free and clear of all liens and encumbrances and (b) transfer of each Contributed REO Property to REO Subsidiary by Seller, REO Subsidiary shall become the sole owner of the Contributed REO Property transferred thereto, subject to the Lien of the Administrative Agent.
(14)      Underwriting Guidelines . The Underwriting Guidelines provided to Administrative Agent are the true and correct Underwriting Guidelines in all material respects of the Seller.
(15)      Taxes . Each Seller Party and its Subsidiaries have timely filed all material tax returns that are required to be filed by them and have paid all material taxes, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided. The charges, accruals and reserves on the books of such Seller Party and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of Seller, adequate.
(16)      Investment Company . (i) No Seller Party nor any of its Subsidiaries is an “investment company”, or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act and (ii) it is not necessary to register the REO Subsidiary under the Investment Company Act, for specified reasons other than the exemption provided by Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.
(17)      Chief Executive Office; Jurisdiction of Organization . On the Effective Date, Seller Parties’ chief executive office, is, and has been, located at 14405 Walters Road, Suite 200, Houston, TX 77014. On the Effective Date, Seller Parties’ jurisdiction of organization is Delaware. Seller shall provide Administrative Agent with thirty (30) days advance notice of any change in any Seller Party’s principal office or place of business or jurisdiction. Seller has no trade name. During the preceding five years, no Seller Party has been known by or done business under any other name, corporate or fictitious, and has not filed or had filed against it any bankruptcy receivership or similar petitions nor has it made any assignments for the benefit of creditors.
(18)      Location of Books and Records . The location where Seller Parties keep their books and records, including all computer tapes and records relating to the Purchased Assets or Contributed REO Properties and the related Repurchase Assets, as applicable, is their chief executive office.
(19)      Adjusted Tangible Net Worth . On the Effective Date, Seller’s Adjusted Tangible Net Worth is not less than the amount set forth in Section 2.1 of the Pricing Side Letter.
(20)      ERISA . Each Plan to which each Seller Party or its Subsidiaries make direct contributions, and, to the knowledge of such Seller Party, each other Plan and each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other federal or state law.
(21)      Adverse Selection . No Seller Party has selected the Purchased Assets or Contributed REO Properties in a manner so as to adversely affect Buyers’ interests.
(22)      Reserved .
(23)      Reserved .
(24)      Agency Approvals . With respect to each Agency Security and to the extent necessary, Seller is an FHA Approved Mortgagee and a GNMA approved issuer. Seller is also approved by Fannie Mae as an approved lender and, to the extent necessary, approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act. In each such case, Seller is in good standing, with no event having occurred or Seller having any reason whatsoever to believe or suspect will occur prior to the issuance of the Agency Security or the consummation of the Take-out Commitment, as the case may be, including, without limitation, a change in insurance coverage which would either make Seller unable to comply with the eligibility requirements for maintaining all such applicable approvals or require notification to the relevant Agency or to HUD or FHA but only to the extent that such notification to the relevant Agency or to HUD or FHA is expected to result in a Material Adverse Effect. Should Seller for any reason cease to possess all such applicable approvals, or should notification to the relevant Agency or to HUD or FHA be required, Seller shall so notify Administrative Agent immediately in writing. Seller may, however, surrender or terminate its status as a Fannie Mae lender/servicer, notwithstanding any term, condition or provisions of this Agreement to the contrary.
(25)      No Reliance . Each Seller Party has made its own independent decisions to enter into the Program Agreements and each Transaction and as to whether such Transaction is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including without limitation, legal counsel and accountants) as it has deemed necessary. No Seller Party is relying upon any advice from Administrative Agent or Buyers as to any aspect of the Transactions, including without limitation, the legal, accounting or tax treatment of such Transactions.
(26)      Plan Assets . No Seller Party is an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code, and the Purchased Assets and REO Properties are not “plan assets” within the meaning of 29 CFR §2510.3 101 as amended by Section 3(42) of ERISA, in any Seller Party’s hands, and transactions by or with any Seller Party are not subject to any state or local statute regulating investments or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA.
(27)      No Prohibited Persons . No Seller Party nor any of its Affiliates, officers, directors, partners or members, is an entity or person (or to such Seller Party’s knowledge, owned or controlled by an entity or person): (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 (“ EO13224 ”); (ii) whose name appears on the United States Treasury Department’s Office of Foreign Assets Control (“ OFAC ”) most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a “ Prohibited Person ”).
(28)      Servicing . Seller services the Transaction Mortgage Loans and Contributed REO Properties in accordance with Accepted Servicing Practices.
(29)      Compliance with 1933 Act . Except as contemplated herein, neither Seller nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of any Certificate, any interest in any Certificate or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of any Certificate, any interest in any Certificate or any other similar security from, or otherwise approached or negotiated with respect to any Certificate, any interest in any Certificate or any other similar security with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action which would constitute a distribution of any Certificate under the 1933 Act or which would render the disposition of any Certificate a violation of Section 5 of the 1933 Act or require registration pursuant thereto.
(30)      Margin Regulations . The use of all funds acquired by Seller under this Agreement will not conflict with or contravene any of Regulations D, T, U or X promulgated by the Board of Governors of the Federal Reserve System as the same may from time to time be amended, supplemented or otherwise modified.
b.      With respect to every Purchased Asset and Contributed REO Property, Seller represents and warrants to Administrative Agent and Buyers as of the applicable Purchase Date for any Transaction and each date thereafter that each representation and warranty set forth on Schedule 1-A , Schedule 1-B , Schedule 1-C and Schedule 1-D as applicable, is true and correct.
c.      The representations and warranties set forth in this Agreement shall survive transfer of the Purchased Assets and the pledge of Contributed REO Properties to Administrative Agent for the benefit of Buyers and to each Buyer and shall continue for so long as the Purchased Assets and Contributed REO Properties are subject to this Agreement. Upon discovery by Seller, Servicer or Administrative Agent of any breach of any of the representations or warranties set forth in this Agreement, the party discovering such breach shall promptly give notice of such discovery to the others. Administrative Agent has the right to require, in its unreviewable discretion, Seller to repurchase within one (1) Business Day after receipt of notice from Administrative Agent any Purchased Asset or pay the Allocated Repurchase Price for any Contributed REO Property for which a breach of one or more of the representations and warranties referenced in Section 13.b) exists and which breach has a material adverse effect on the value of such Purchased Asset, Contributed REO Property or Transaction Mortgage Loan or the interests of Administrative Agent or Buyers.
14.      Covenants
Seller as to itself, and each Seller Party, as applicable, covenants with Administrative Agent and Buyers that, during the term of this facility:
a.      Litigation . Seller Parties will promptly, and to the extent permitted by applicable, law, rule or regulation, and in any event within ten (10) calendar days after service of process on any of the following, give to Administrative Agent notice of all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are threatened or pending) or other legal or arbitrable proceedings affecting any Seller Party or any of its Subsidiaries or affecting any of the Property of any of them before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Program Agreements or any action to be taken in connection with the transactions contemplated hereby or (ii) which, individually or in the aggregate, is reasonably likely to be adversely determined, and if adversely determined, could be reasonably likely to have a Material Adverse Effect. Seller will promptly provide notice of any judgment, which with the passage of time, could cause an Event of Default hereunder; provided, that, if disclosure of such information is not permitted by any law, rule or regulation, for as long as such disclosure is not permitted, Seller Parties shall (x) disclose to Administrative Agent any portion of such information that is permitted, (y) notify Administrative Agent of any material event in a level of specificity that would not violate such law, rule or regulation and (z) promptly seek permission to disclose the information from the necessary authorities and shall provide Administrative Agent such information upon receipt of such permission.
b.      Prohibition of Fundamental Changes . No Seller Party shall enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets (other than the sale or securitization of Mortgage Loans, servicing rights, RMS REO BRC, LLC or interests in real property, foreclosed or otherwise, in the ordinary course of business of a Seller Party) provided, that Seller may merge or consolidate with (a) any wholly owned subsidiary of Guarantor or Seller (other than REO Subsidiary), or (b) any other Person if Seller is the surviving corporation; and provided further, that if after giving effect thereto, no Default would exist hereunder.
c.      Servicing . Seller Parties shall not cause the Transaction Mortgage Loans and Contributed REO Properties to be serviced by any Servicer other than a Servicer expressly approved in writing by Administrative Agent on behalf of Buyers, which approval shall be deemed granted by Administrative Agent on behalf of Buyers with respect to Seller with the execution of this Agreement.
d.      Insurance . The Seller shall continue to maintain, for Seller and its Subsidiaries, Fidelity Insurance in an aggregate amount at least equal to the amount required by GNMA to be maintained. The Seller shall maintain, for Seller and its Subsidiaries, Fidelity Insurance in respect of its officers, employees and agents, with respect to any claims made in connection with all or any portion of the Repurchase Assets. The Seller shall notify the Administrative Agent of any material change in the terms of any such Fidelity Insurance.
e.      No Adverse Claims . Each Seller Party warrants and will defend, and shall cause any Servicer to defend, the right, title and interest of Administrative Agent and Buyers in and to all Purchased Assets, Contributed REO Properties and the related Repurchase Assets.
f.      Assignment . Except as permitted herein, no Seller Party nor any Servicer shall sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to the Program Agreements), any of the Purchased Assets or Contributed REO Properties or any interest therein to the extent of such Seller Party’s interest therein, provided that this Section shall not prevent any transfer of Purchased Assets or Contributed REO Properties in accordance with the Program Agreements.
g.      Security Interest . Seller Parties shall do all things necessary to preserve the Purchased Assets, Contributed REO Properties and the related Repurchase Assets, as applicable, so that they remain subject to a first priority perfected security interest hereunder. Without limiting the foregoing, each Seller Party will comply with all rules, regulations and other laws of any Governmental Authority and cause the Purchased Assets, Contributed REO Properties or the related Repurchase Assets, as applicable, to comply, in all material respects, with all applicable rules, regulations and other laws. No Seller Party will allow any default for which such Seller Party is responsible to occur under any Purchased Assets, Contributed REO Properties or the related Repurchase Assets or any Program Agreement and each Seller Party shall fully perform or cause to be performed when due all of its obligations under any Purchased Assets, Contributed REO Properties or the related Repurchase Assets and any Program Agreement.
h.      Records .
(1)      Seller shall collect and maintain or cause to be collected and maintained all Records relating to the Purchased Assets, Contributed REO Properties and Repurchase Assets in accordance with industry custom and practice for assets similar to Purchased Assets, Contributed REO Properties and the Repurchase Assets, including those maintained pursuant to the preceding subparagraph, and all such Records shall be in Custodian’s possession unless Administrative Agent otherwise approves. Except in accordance with the Custodial Agreement, no Seller Party will allow any such papers, records or files that are an original or an only copy to leave Custodian’s possession, except for individual items removed in connection with servicing a specific Transaction Mortgage Loan or REO Property, in which event such Seller Party will obtain or cause to be obtained a receipt from a financially responsible person for any such paper, record or file. Seller Parties or the Servicer of the Purchased Assets and Contributed REO Properties will maintain all such Records not in the possession of Custodian in good and complete condition in accordance with industry practices for assets similar to the Purchased Assets and Contributed REO Properties and preserve them against loss.
(2)      For so long as Administrative Agent has an interest in or lien on any Purchased Asset or Contributed REO Property, Seller Parties will hold or cause to be held all related Records in trust for Administrative Agent. Seller Parties shall notify, or cause to be notified, every other party holding any such Records of the interests and liens in favor of Administrative Agent granted hereby.
(3)      Upon reasonable advance notice from Custodian or Administrative Agent, Seller Parties shall (x) make any and all such Records available to Custodian, Administrative Agent and a Buyer to examine any such Records, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof, and (y) permit Administrative Agent or a Buyer or its authorized agents to discuss the affairs, finances and accounts of Seller with its chief operating officer and chief financial officer and to discuss the affairs, finances and accounts of Seller with its independent certified public accountants.
i.      Books . Each Seller Party shall keep or cause to be kept in reasonable detail books and records of account of its assets and business and shall clearly reflect therein the transfer of Purchased Assets and REO Properties to Administrative Agent for the benefit of Buyers.
j.      Approvals . Seller shall maintain all material licenses, permits or other approvals necessary for Seller to conduct its business and to perform its obligations under the Program Agreements.
k.      Material Change in Business . Seller shall not make any material change in the nature of its business as carried on at the date hereof.
l.      Underwriting Guidelines . Seller shall not permit any material modifications to be made to the Underwriting Guidelines (other than those required by HUD or GNMA) that will impact either Administrative Agent or any Buyer or the Transaction Mortgage Loans without the prior consent of Administrative Agent (such consent not to be unreasonably withheld). Seller agrees to deliver to Administrative Agent copies of the Underwriting Guidelines in the event that any changes are made to the Underwriting Guidelines following the Effective Date that could reasonably be expected to affect any of the Purchased Assets or REO Properties.
m.      Reserved .
n.      Applicable Law . Each Seller Party shall comply, in all material respects, with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority except where the failure to comply is not reasonably likely to have a Material Adverse Effect on Seller or any Purchased Assets.
o.      Existence . Each Seller Party shall preserve and maintain its legal existence in the State of its formation and all of its material rights, privileges, licenses and franchises.
p.      Chief Executive Office; Jurisdiction of Organization . No Seller Party shall move its chief executive office from the address referred to in Section 13(a)(17) or change its jurisdiction of organization from the jurisdiction referred to in Section 13(a)(17) unless it shall have provided Administrative Agent thirty (30) days’ prior written notice of such change.
q.      Taxes . Each Seller Party shall timely file all material tax returns that are required to be filed by it and shall timely pay and discharge all material taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained.
r.      Transactions with Affiliates . Without providing Administrative Agent with not less than forty-five (45) calendar days’ prior written notice of such event, Seller will not, nor shall Seller permit any other Seller Party to, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (x) otherwise permitted under the Program Agreements or (y) (A) in the ordinary course of such Seller Party’s business and (B) upon fair and reasonable terms no less favorable to such Seller Party than it would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate.
s.      Reserved .
t.      HUD and FHA Matters Regarding Income and Accounts with Respect to HECM Buyout .
(1)      With respect to each HECM Buyout that is an FHA Loan, Seller Parties shall cause the Servicer to list the Servicer as the servicer on FHA HERMIT System, as applicable, and the Seller to be identified as the mortgagee of record on such system under mortgagee number 2461100006, and shall cause Servicer to submit all claims to HUD under such applicable number for remittance of amounts to the Clearing Account.
(2)      Seller shall maintain HUD and GNMA approvals (including any waivers). Should Seller for any reason cease to possess a HUD or GNMA approval (including any waivers), Seller shall so notify Administrative Agent in writing. Administrative Agent hereby acknowledges that Seller has obtained a waiver in respect of its GNMA approval and that such waiver constitutes a part of its GNMA approval.
u.      Hedging . Seller has entered into Interest Rate Protection Agreements with respect to the FHA HECMs (other than in respect of HECM Buyout), having terms with respect to protection against fluctuations in interest rates consistent with its hedging policy.
v.      True and Correct Information . All information, reports, exhibits, schedules, financial statements or certificates of Seller Parties, any Affiliate thereof or any of their officers furnished to Administrative Agent and/or Buyers hereunder and during Administrative Agent’s and/or Buyers’ diligence of Seller Parties are and will be, when taken as a whole, true and complete and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading. All required financial statements, information and reports delivered by Seller to Administrative Agent and/or Buyers pursuant to this Agreement shall be prepared in accordance with U.S. GAAP, or, if applicable, to SEC filings, the appropriate SEC accounting regulations.
w.      Agency Approvals . Seller shall maintain all Agency Approvals. Seller shall service all Transaction Mortgage Loans which are Committed Mortgage Loans in accordance with the applicable Agency Guide, in all material respects. Should Seller, for any reason, cease to possess all such applicable Agency Approvals, or should notification to the relevant Agency or to HUD, the FHA or the VA be required, such Seller shall so notify Administrative Agent immediately in writing, but only to the extent that such notification to the relevant Agency or HUD, the FHA or the VA is expected to result in a Material Adverse Effect. Notwithstanding the preceding sentence, Seller shall take all necessary action to maintain all of their applicable Agency Approvals at all times during the term of this Agreement and each outstanding Transaction.
x.      Take‑out Payments . With respect to each Committed Mortgage Loan, Seller shall arrange that all payments under the related Take‑out Commitment shall be paid directly to Administrative Agent at the Inbound Account, or to an account approved by Administrative Agent in writing prior to such payment. With respect to any Take‑out Commitment with an Agency, if applicable, (1) with respect to the wire transfer instructions as set forth in Freddie Mac Form 987 (Wire Transfer Authorization for a Cash Warehouse Delivery) such wire transfer instructions are identical to Administrative Agent’s wire instructions or Administrative Agent has approved such wire transfer instructions in writing in its sole discretion, or (2) the Payee Number set forth on Fannie Mae Form 1068 (Fixed‑Rate, Graduated-Payment, or Growing-Equity Mortgage Loan Schedule) or Fannie Mae Form 1069 (Adjustable-Rate Mortgage Loan Schedule), as applicable, shall be identical to the Payee Number that has been identified by Administrative Agent in writing as Administrative Agent’s Payee Number or Administrative Agent shall have previously approved the related Payee Number in writing in its sole discretion; with respect to any Take‑out Commitment with an Agency, the applicable agency documents shall list Administrative Agent as sole subscriber, unless otherwise agreed to in writing by Administrative Agent, in Administrative Agent’s sole discretion.
y.      Reserved .
z.      Plan Assets . No Seller Party shall be an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code and the Seller Parties shall not use “plan assets” within the meaning of 29 CFR §2510.3 101, as amended by Section 3(42) of ERISA to engage in this Agreement or any Transaction hereunder. Transactions by or with any Seller Party shall not be subject to any state or local statute regulating investments of or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA.
aa.      Sharing of Information . Upon an event which in the good faith discretion of Administrative Agent could result in a Default, the Seller Parties shall allow the Administrative Agent and Buyers to exchange information related to the Seller and the Transaction hereunder with third party lenders and the Seller shall permit each third party lender to share such information with the Administrative Agent and Buyers.
bb.      Lender Insurance Authority . In the event that Seller has on the date hereof or subsequently receives Lender Insurance Authority, such authority shall not be revoked or suspended.
cc.      Quality Control . Seller shall maintain an internal quality control program that verifies, on a regular basis, the existence and accuracy of all legal documents, credit documents, property appraisals, and underwriting decisions related to Mortgage Loans. Such program shall be capable of evaluating and monitoring the overall quality of Seller’s loan production and servicing activities. Such program shall (i) ensure that the Mortgage Loans are originated and serviced in accordance with prudent mortgage banking practices and accounting principles; (ii) guard against dishonest, fraudulent, or negligent acts; and (iii) guard against errors and omissions by officers, employees, or other authorized persons.
dd.      Financial Covenants . Seller shall comply with all financial covenants and/or financial ratios set forth in Section 2 of the Pricing Side Letter as of the dates set forth therein.
ee.      Most Favored Status . Seller and Administrative Agent each agree that should Seller or any Subsidiary thereof enter into a repurchase agreement, warehouse facility or similar credit facility in each case providing mortgage warehouse financing with any Person (including, without limitation, Administrative Agent or any of its Affiliates) which by its terms provides more favorable financial covenants covering the same or similar matters set forth in Section 14(dd) hereof (each, a “ More Favorable Agreement ”) then the Seller shall provide the Administrative Agent with notice of such more favorable terms contained in such More Favorable Agreement within five (5) Business Days of entering into such More Favorable Agreement and the terms of this Agreement or the Pricing Side Letter, as applicable, shall be deemed automatically amended to include such more favorable terms contained in such More Favorable Agreement, such that such terms operate in favor of Administrative Agent or an Affiliate of Administrative Agent; provided, that in the event that such More Favorable Agreement is terminated, upon notice by Seller to Administrative Agent of such termination, the original terms of this Agreement shall be deemed to be automatically reinstated.
ff.      SPE Covenant; Separateness . Except as permitted by this Agreement, the REO Subsidiary shall (a) own no assets, and will not engage in any business, other than the assets and transactions specifically contemplated by this Agreement; (b) not incur any Indebtedness or obligation, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation), other than pursuant hereto or as permitted hereunder; (c) not make any loans or advances to any third party, and shall not acquire obligations or securities of its Affiliates; (d) pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) only from its own assets; (e) comply with the provisions of its organizational documents; (f) do all things necessary to observe organizational formalities and to preserve its existence, and will not amend, modify or otherwise change its organizational documents, or suffer same to be amended, modified or otherwise changed, without the prior written consent of Administrative Agent on behalf of Buyers; (g) maintain all of its books, records, financial statements and bank accounts separate from those of its Affiliates (except that such financial statements may be consolidated to the extent consolidation is required under GAAP or as a matter of applicable law; provided , that (A) appropriate notation shall be made on such financial statements if prepared to indicate the separateness of the REO Subsidiary from such Affiliate and to indicate that the REO Subsidiary’s assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person and (B) such assets shall also be listed on the REO Subsidiary’s own separate balance sheet if prepared and (C) each of the REO Subsidiary shall file its own tax returns if filed, except to the extent consolidation is required or permitted under applicable law); (h) with respect to the REO Subsidiary only, be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate), shall correct any known misunderstanding regarding its status as a separate entity, and shall conduct business in its own name; (i) reserved ; (j) to the fullest extent permitted by law, not engage in or suffer any change of ownership, dissolution, winding up, liquidation, consolidation or merger in whole or in part other than such activities that are expressly permitted hereunder; (k) not commingle its funds or other assets with those of any Affiliate or any other Person; (l) maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any affiliate or any other person other than as contemplated hereunder; (m) not and will not hold itself out to be responsible for the debts or obligations of any other Person; (n) cause each of its direct and indirect owners to agree not to (i) file or consent to the filing of any bankruptcy, insolvency or reorganization case or proceeding with respect to the REO Subsidiary; institute any proceedings under any applicable insolvency law or otherwise seek any relief under any laws relating to the relief from debts or the protection of debtors generally with respect to the REO Subsidiary; (ii) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for such REO Subsidiary, or a substantial portion of its properties; or (iii) make any assignment for the benefit of the REO Subsidiary’s creditors.
15.      Events of Default
Each of the following shall constitute an “ Event of Default ” hereunder:
a.      Payment Failure . Failure of Seller to (i) make any payment of Price Differential or Repurchase Price or any other sum which has become due, on a Payment Date or a Repurchase Date or otherwise, whether by acceleration or otherwise, under the terms of this Agreement, any other warehouse and security agreement or any other document evidencing or securing Indebtedness of Seller to Administrative Agent, Buyers or to any Affiliate of Administrative Agent or Buyers, or (ii) cure any Margin Deficit when due pursuant to Section 6 hereof.
b.      Cross Default . Seller, Guarantor or any of their Affiliates shall be in default under (i) any Indebtedness, in the aggregate, in excess of (x) $5,000,000 of Seller or of such Affiliate or (y) $250,000 with respect to REO Subsidiary which default (1) involves the failure to pay (subject to any applicable cure period) a matured obligation, or (2) permits the acceleration (subject to any applicable cure period) of the maturity of obligations by any other party to or beneficiary with respect to such Indebtedness, or (ii) any other contract or contracts, in the aggregate in excess of (x) $5,000,000 to which Seller, Guarantor or such Affiliate is a party or (y) $250,000 to which REO Subsidiary is a party which default (1) involves the failure to pay (subject to any applicable cure period) a matured obligation, or (2) permits the acceleration (subject to any applicable cure period) of the maturity of obligations by any other party to or beneficiary of such contract.
c.      Assignment . Assignment or attempted assignment by any Seller Party or Guarantor of this Agreement or any rights hereunder without first obtaining the specific written consent of Administrative Agent, or the granting by any Seller Party of any security interest, lien or other encumbrances on any Purchased Asset or Contributed REO Property, as applicable, to any person other than Administrative Agent.
d.      Insolvency . An Act of Insolvency shall have occurred with respect to any Seller Party, Guarantor or any Affiliate.
e.      Material Adverse Change . Any material adverse change in the Property, business, financial condition or operations of any Seller Party, Guarantor or any of their Affiliates shall occur, in each case as determined by Administrative Agent in its sole good faith discretion, or any other condition shall exist which, in Administrative Agent’s sole good faith discretion, constitutes a material impairment of any Seller Party’s ability to perform its obligations under this Agreement or any other Program Agreement.
f.      Breach of Financial Representation or Covenant or Obligation . A breach by any Seller Party of any of the representations, warranties or covenants or obligations set forth in Sections13.a(1) ( Seller Party Existence ), 13.a(7) ( Solvency ), 13.a(12) ( Material Adverse Change ), 13.a(19) ( Adjusted Tangible Net Worth ), 13(a)(29) ( Compliance with 1933 Act ), 14.b) ( Prohibition of Fundamental Changes ), 14.o) ( Existence ), 14(z) ( Plan Assets ), 14(dd) ( Financial Covenants ), 14(ee) ( Most Favored Status ) or 14(ff) ( SPE Covenant; Separateness ) of this Agreement.
g.      Breach of Non‑Financial Representation or Covenant . A breach by any Seller Party of any other material representation, warranty or covenant set forth in this Agreement (and not otherwise specified in Section 15(f) above) or any other Program Agreement, if such breach is not cured within five (5) Business Days or with respect to an event set forth in Section 16(c) , thirty (30) calendar days, of such Seller Party’s or Guarantor’s knowledge thereof (other than the representations and warranties set forth in Schedule 1-A , Schedule 1-B and Schedule 1-C which shall be considered solely for the purpose of determining the Asset Value, the existence of a Margin Deficit and the obligation to repurchase any Transaction Mortgage Loan or REO Property unless (i) such party shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made, (ii) any such representations and warranties have been determined by Administrative Agent in its sole discretion to be materially false or misleading on a regular basis, or (iii) Administrative Agent, in its sole discretion, determines that such breach of a material representation, warranty or covenant materially and adversely affects (A) the condition (financial or otherwise) of such party, its Subsidiaries or Affiliates; or (B) Administrative Agent’s determination to enter into this Agreement or Transactions with such party, then such breach shall constitute an immediate Event of Default and no Seller Party shall have any cure right hereunder).
h.      Change of Control . The occurrence of a Change in Control.
i.      Failure to Transfer . Any Seller Party fails to either (i) transfer the Purchased Assets or pledge the Contributed REO Properties, as applicable, to Administrative Agent for the benefit the applicable Buyer or (ii) transfer Contributed REO Properties to the REO Subsidiary on the applicable Purchase Date (provided the Administrative Agent, on behalf of the applicable Buyer, has tendered the related Purchase Price).
j.      Judgment . A final judgment or judgments for the payment of money in excess of (i) $5,000,000 in the aggregate shall be rendered against Seller Parties, Guarantor or any of their Affiliates or (ii) $250,000 against REO Subsidiary by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within thirty (30) calendar days from the date of entry thereof.
k.      Government Action . Any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of any Seller Party, Guarantor or any Affiliate thereof, or shall have taken any action to displace the management of any Seller Party, Guarantor or any Affiliate thereof or to materially curtail its authority in the conduct of the business which adversely impacts the value of the Purchased Assets, or any Seller Party, Guarantor or any Affiliate thereof, or takes any action in the nature of enforcement to remove, limit or restrict the approval of any Seller Party, Guarantor or Affiliate as an issuer, buyer or a seller/servicer of Purchased Assets or Contributed REO Properties or securities backed thereby which is reasonably likely to have a material adverse impact on the value of the Purchased Assets, or any Seller Party, Guarantor or any Affiliate thereof, and such action provided for in this Section 15(k) shall not have been discontinued or stayed within thirty (30) calendar days.
l.      Inability to Perform . An officer of any Seller Party or Guarantor shall admit its inability to, or its intention not to, perform any of such Seller Party’s Obligations hereunder or Guarantor’s obligations hereunder or under the Guaranty.
m.      Security Interest . This Agreement shall for any reason cease to create a valid, first priority security interest in any material portion of the Purchased Assets, Contributed REO Properties or other Repurchase Assets purported to be covered hereby.
n.      Financial Statements . Seller’s or Guarantor’s audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of Seller or Guarantor as a “going concern” or a reference of similar import.
o.      Guarantor Breach . A breach by Guarantor of any representation, warranty or covenant set forth in the Guaranty or any other Program Agreement (subject to any applicable cure periods), any “event of default” by Guarantor under the Guaranty, any repudiation of the Guaranty by the Guarantor, or if the Guaranty is not enforceable against the Guarantor.
p.      Servicer Default . A Servicer has defaulted, in any material respect, under the applicable Servicing Agreement and Seller has not, within thirty (30) calendar days, (i) replaced such Servicer with a successor Servicer approved by Administrative Agent in its sole discretion or (ii) repurchased all Transaction Mortgage Loans subject to the applicable Servicing Agreement.
q.      Take-out Payments . A breach by Seller of any representation, warranty or covenant or obligation set forth in Section 14(x) immediately upon receipt of written notice to Seller of such breach from Administrative Agent.
r.      Custodian . With respect to FHA HECMs or HECM Buyout, the Custodian fails to maintain its good standing under the GNMA Guide or FHA Regulations and is not replaced or Seller fails to repurchase all FHA HECMs and HECM Buyout within sixty (60) calendar days.
An Event of Default shall be deemed to be continuing unless expressly waived by Administrative Agent in writing.
16.      Remedies Upon Default
In the event that an Event of Default shall have occurred and be continuing:
a.      Administrative Agent may, at its option (which option shall be deemed to have been exercised immediately upon the occurrence of an Act of Insolvency of any Seller Party or any Affiliate), declare an Event of Default to have occurred hereunder and, upon the exercise or deemed exercise of such option, the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (except that, in the event that the Purchase Date for any Transaction has not yet occurred as of the date of such exercise or deemed exercise, such Transaction shall be deemed immediately canceled). Administrative Agent shall (except upon the occurrence of an Act of Insolvency of a Seller Party or any Affiliate) give notice to Seller of the exercise of such option as promptly as practicable.
b.      If Administrative Agent exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Section, (i) Seller’s obligations in such Transactions to repurchase all Purchased Assets, Contributed REO Properties and Repurchase Assets, at the Repurchase Price therefor on the Repurchase Date determined in accordance with subparagraph (a) of this Section, shall thereupon become immediately due and payable, (ii) all Income paid after such exercise or deemed exercise shall be retained by Administrative Agent and applied, in Administrative Agent’s sole discretion, to the aggregate unpaid Repurchase Prices for all outstanding Transactions and any other amounts owing by Seller hereunder, and (iii) Seller shall immediately deliver to Administrative Agent the Asset Files relating to any Purchased Assets, Contributed REO Properties and Repurchase Assets subject to such Transactions then in a Seller Party’s possession or control.
c.      Administrative Agent also shall have the right to obtain physical possession, and to commence an action to obtain physical possession, of all Records and files of each Seller Party relating to the Purchased Assets and Contributed REO Properties and all documents relating to the Purchased Assets, Contributed REO Properties and Repurchase Assets (including, without limitation, any legal, credit or servicing files with respect to the Purchased Assets, Contributed REO Properties and Repurchase Assets) which are then or may thereafter come in to the possession of any Seller Party or any third party acting for such Seller Party. To obtain physical possession of any Purchased Assets, Contributed REO Properties or Repurchase Assets held by Custodian, Administrative Agent shall present to Custodian a Trust Receipt. Without limiting the rights of Administrative Agent hereto to pursue all other legal and equitable rights available to Administrative Agent for any Seller Party’s failure to perform its obligations under this Agreement, each of the Seller Parties acknowledges and agrees that the remedy at law for any failure to perform obligations hereunder would be inadequate and Administrative Agent shall be entitled to specific performance, injunctive relief, or other equitable remedies in the event of any such failure. The availability of these remedies shall not prohibit Administrative Agent from pursuing any other remedies for such breach, including the recovery of monetary damages.
d.      Administrative Agent shall have the right to direct all servicers then servicing any Purchased Assets and Contributed REO Properties to remit all collections thereon to Administrative Agent, and if any such payments are received by any Seller Party, such Seller Party shall not commingle the amounts received with other funds of such Seller Party and shall promptly pay them over to Administrative Agent. Administrative Agent shall also have the right to terminate any one or all of the servicers then servicing any Purchased Assets and Contributed REO Properties with or without cause. In addition, Administrative Agent shall have the right to immediately sell the Purchased Assets and Contributed REO Properties and liquidate all Repurchase Assets. Such disposition of Purchased Assets, Contributed REO Properties and Repurchase Assets may be, at Administrative Agent’s option, on either a servicing-released or a servicing-retained basis. Administrative Agent shall not be required to give any warranties as to the Purchased Assets, Contributed REO Properties or Repurchase Assets with respect to any such disposition thereof. Administrative Agent may specifically disclaim or modify any warranties of title or the like relating to the Purchased Assets, Contributed REO Properties or Repurchase Assets. The foregoing procedure for disposition of the Purchased Assets, Contributed REO Properties or Repurchase Assets and liquidation of the Repurchase Assets shall not be considered to adversely affect the commercial reasonableness of any sale thereof. Each Seller Party agrees that it would not be commercially unreasonable for Administrative Agent to dispose of the Purchased Assets, Contributed REO Properties or the Repurchase Assets or any portion thereof by using internet sites that provide for the auction of assets similar to the Purchased Assets, Contributed REO Properties or the Repurchase Assets, or that have the reasonable capability of doing so, or that match buyers and sellers of assets. Administrative Agent shall be entitled to place the Purchased Assets and Contributed REO Properties in a pool for issuance of mortgage-backed securities at the then-prevailing price for such securities and to sell such securities for such prevailing price in the open market. Administrative Agent shall also be entitled to sell any or all of such Purchased Assets, Contributed REO Properties and Repurchase Assets individually for the prevailing price. Administrative Agent shall also be entitled, in its sole discretion to elect, in lieu of selling all or a portion of such Purchased Assets, Contributed REO Properties and Repurchase Assets, to give the Seller credit for such Purchased Assets, Contributed REO Properties and the Repurchase Assets in an amount equal to the Market Value of the Purchased Assets, Contributed REO Properties and Repurchase Assets against the aggregate unpaid Repurchase Price and any other amounts owing by the Seller hereunder.
e.      Upon the happening of one or more Events of Default, Administrative Agent may apply any proceeds from the liquidation of the Purchased Assets, Contributed REO Properties and Repurchase Assets to the Repurchase Prices hereunder and all other Obligations in the manner Administrative Agent deems appropriate in its sole discretion.
f.      Each Seller Party shall be liable to Administrative Agent and each Buyer for (i) the amount of all reasonable legal or other expenses (including, without limitation, all costs and expenses of Administrative Agent and each Buyer in connection with the enforcement of this Agreement or any other agreement evidencing a Transaction), whether in action, suit or litigation or bankruptcy, insolvency or other similar proceeding affecting creditors’ rights generally, further including, without limitation, the reasonable fees and expenses of counsel (including the costs of internal counsel of Administrative Agent and Buyers) incurred in connection with or as a result of an Event of Default, (ii) damages in an amount equal to the cost (including all fees, expenses and commissions) of entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default, and (iii) any other loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default in respect of a Transaction.
g.      Seller further recognizes that Administrative Agent may be unable to effect a public sale of any or all of the REO Subsidiary Interests, by reason of certain prohibitions contained in the 1934 Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not a view to the distribution or resale thereof. In view of the nature of the REO Properties, Seller agrees that liquidation of any REO Property may be conducted in a private sale and at such price as Administrative Agent may deem commercially reasonable. Administrative Agent shall be under no obligation to delay a sale of any of the REO Subsidiary Interests for the period of time necessary to permit the Seller to register the REO Subsidiary Interests for public sale under the 1934 Act, or under applicable state securities laws, even if Seller would agree to do so.
h.      To the extent permitted by applicable law, Seller shall be liable to Administrative Agent and each Buyer for interest on any amounts owing by Seller hereunder, from the date Seller becomes liable for such amounts hereunder until such amounts are (i) paid in full by Seller or (ii) satisfied in full by the exercise of Administrative Agent’s and Buyers’ rights hereunder. Interest on any sum payable by Seller under this Section 16(h) shall accrue at a rate equal to the Post Default Rate.
i.      Administrative Agent shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement or applicable law.
j.      Administrative Agent may exercise one or more of the remedies available to Administrative Agent immediately upon the occurrence of an Event of Default and, except to the extent provided in subsections (a) and (d) of this Section, at any time thereafter without notice to Seller Parties. All rights and remedies arising under this Agreement as amended from time to time hereunder are cumulative and not exclusive of any other rights or remedies which Administrative Agent may have.
k.      Administrative Agent may enforce its rights and remedies hereunder without prior judicial process or hearing, and each Seller Party hereby expressly waives any defenses such Seller Party might otherwise have to require Administrative Agent to enforce its rights by judicial process. Each Seller Party also waives any defense (other than a defense of payment or performance) such Seller Party might otherwise have arising from the use of nonjudicial process, enforcement and sale of all or any portion of the Repurchase Assets, or from any other election of remedies. Each Seller Party recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.
l.      Administrative Agent shall have the right to perform reasonable due diligence with respect to any Seller Party and the Purchased Assets, the Contributed REO Properties and the Repurchase Assets, which review shall be at the expense of Seller.
17.      Reports
a.      Default Notices . Seller shall furnish to Administrative Agent (i) promptly, copies of any material and adverse notices (including, without limitation, notices of defaults, breaches, potential defaults or potential breaches) and any material financial information that is not otherwise required to be provided by Seller hereunder which is given to Seller’s lenders and (ii) immediately, notice of the occurrence of any (A) Event of Default hereunder, (B) default or breach by Seller or Servicer of any obligation under any Program Agreement or any material contract or agreement of Seller or Servicer or (C) event or circumstance that such party reasonably expects has resulted in, or will, with the passage of time, result in, a Material Adverse Effect or an Event of Default or such a default or breach by such party.
b.      Financial Notices . Seller shall furnish to Administrative Agent:
(1)      as soon as available and in any event within forty-five (45) calendar days after the end of each calendar month (other than a calendar month which is also the last month in a fiscal quarter), the unaudited consolidated balance sheets of Seller and its consolidated Subsidiaries as of the end of such period and the related unaudited consolidated statements of comprehensive income for the Seller and its consolidated Subsidiaries for such period and the portion of the fiscal year through the end of such period, accompanied by a certificate of a Responsible Officer of Seller, which certificate shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of Seller and its consolidated Subsidiaries in accordance with GAAP consistently applied, as at the end of, and for, such period;
(2)      as soon as available and in any event within (x) forty-five (45) calendar days after the end of each of the first three fiscal quarters, the unaudited consolidated balance sheets of Seller and its consolidated Subsidiaries as of the end of such period and the related unaudited consolidated statements of comprehensive income and stockholders’ equity and of cash flows for the Seller and its consolidated Subsidiaries for such period and the portion of the fiscal year through the end of such period, accompanied by a certificate of a Responsible Officer of Seller, which certificate shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of Seller and its consolidated Subsidiaries in accordance with GAAP consistently applied, as at the end of, and for, such period;
(3)      as soon as available and in any event within ninety (90) calendar days after the end of each fiscal year of Seller, the consolidated balance sheets of Seller and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of comprehensive income and stockholders’ equity and of cash flows for the Seller and its consolidated Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion and the scope of audit shall be acceptable to Administrative Agent in its sole discretion, shall have no “going concern” qualification and shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of Seller and its respective consolidated Subsidiaries as at the end of, and for, such fiscal year in accordance with GAAP;
(4)      Reserved ;
(5)      at the time the Seller furnishes each set of financial statements pursuant to Section 17(b)(1), (1) or (3) above, an Officer’s Compliance Certificate of a Responsible Officer of Seller in the form attached as Exhibit A to the Pricing Side Letter;
(6)      as soon as available and in any event within thirty (30) calendar days of receipt thereof;
(a)      if applicable, copies of any 10‑Ks, 10‑Qs, registration statements and other “ corporate finance ” SEC filings by Guarantor, within 5 Business Days of their filing with the SEC; provided, that, Guarantor or any Affiliate will provide Administrative Agent with a copy of the annual 10‑K filed with the SEC by Guarantor or its Affiliates, no later than ninety (90) calendar days after the end of the year; provided, however, that this clause (6)(a) is deemed to be satisfied by Seller arranging for Administrative Agent to receive automatic email notifications from Guarantor with respect to such items;
(b)      solely with respect to Seller as an originator or purchaser of Transaction Mortgage Loans and not in its capacity as a Servicer, copies of relevant portions of all final written Agency, FHA, VA, Governmental Authority and investor audits, examinations, evaluations, monitoring reviews and reports of its operations (including those prepared on a contract basis) which provide for or relate to (i) material corrective action required or (ii) material sanctions proposed, imposed or required, including without limitation notices of defaults, notices of termination of approved status, notices of imposition of supervisory agreements or interim servicing agreements, and notices of probation, suspension, or non‑renewal;
(c)      such other information regarding the financial condition, operations, or business of any Seller Party as Administrative Agent may reasonably request; and
(d)      the particulars of any Event of Termination in reasonable detail.
c.      Notices of Certain Events . As soon as possible and in any event within five (5) Business Days of knowledge thereof, Seller shall furnish to Administrative Agent notice of the following events:
(1)      Upon knowledge of a Responsible Officer of Seller or a Person listed on Schedule 2 hereto, with respect to any Transaction Mortgage Loan or REO Property, that the underlying Mortgaged Property has been damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged so as to affect adversely the value of such Transaction Mortgage Loan or REO Property in an amount in excess of $5,000;
(2)      any material issues raised upon examination of any Seller Party or its facilities by any Governmental Authority to the extent such matters may be disclosed;
(3)      any default related to any Repurchase Asset or any lien or security interest (other than security interests created hereby or by the other Program Agreements) on, or claim asserted against, any of the Purchased Assets, Contributed REO Properties or Repurchase Assets; and
(4)      any other event, circumstance or condition that has resulted, or has a possibility of resulting, in a Material Adverse Effect with respect to a Seller Party or Servicer; and
d.      Portfolio Performance Data . On the first Reporting Date of each calendar month, Seller will furnish to Administrative Agent (i) in the event the Transaction Mortgage Loans and Contributed REO Properties are serviced on a “retained” basis, an electronic Transaction Mortgage Loan and Contributed REO Property performance data, including, without limitation, delinquency reports and volume information, broken down by product (i.e., delinquency, foreclosure and net charge off reports) and (ii) electronically, in a format mutually acceptable to Administrative Agent and Seller, servicing information, including, without limitation, those fields reasonably requested by Administrative Agent from time to time, on a loan by loan basis and in the aggregate, with respect to the Transaction Mortgage Loans and Contributed REO Properties serviced by Seller or any Servicer for the month (or any portion thereof) prior to the Reporting Date. In addition to the foregoing information on each Reporting Date, Seller will furnish to Administrative Agent such information upon (i) the occurrence and continuation of an Event of Default and (ii) upon any Transaction Mortgage Loan becoming an Aged Loan.
e.      Reserved .
f.      Other Reports . Seller shall deliver to Administrative Agent any other reports or information reasonably requested by Administrative Agent or as otherwise required pursuant to this Agreement.
18.      Repurchase Transactions
Subject to Section 4(a), Section 4(c), Section 6 and this Section 18, a Buyer may, in its sole election, engage in repurchase transactions (as “seller” thereunder) with any or all of the Transaction Mortgage Loans and/or Repurchase Assets or pledge, hypothecate, assign, transfer or otherwise convey any or all of the Transaction Mortgage Loans and/or Repurchase Assets with a counterparty of Buyers’ choice (such transaction, a “ Repledge Transaction ”). Any Repledge Transaction shall be effected by notice to the Administrative Agent, and shall be reflected on the books and records of the Administrative Agent. No such Repledge Transaction shall relieve such Buyer of its obligations to transfer Transaction Mortgage Loans and Repurchase Assets to Seller (and not substitutions thereof) pursuant to the terms hereof. In furtherance, and not by limitation of, the foregoing, it is acknowledged that each counterparty under a Repledge Transaction (a “ Repledgee ”), is a repledgee as contemplated by Sections 9-207 and 9-623 of the UCC (and the relevant Official Comments thereunder). Administrative Agent and Buyers are each hereby authorized to share any information delivered hereunder with the Repledgee.
19.      Single Agreement
Administrative Agent, Buyers and each Seller Party acknowledge they have and will enter into each Transaction hereunder, in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, each of Administrative Agent, Buyers and each Seller Party agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, and (ii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted.
20.      Notices and Other Communications
Any and all notices (with the exception of Transaction Requests which shall be delivered via electronic mail or other electronic medium agreed to by the Administrative Agent and the Seller), statements, demands or other communications hereunder may be given by a party to the other by mail, email, facsimile, messenger or otherwise to the address specified below, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other. All notices, demands and requests hereunder may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence. In all cases, to the extent that the related individual set forth in the respective “Attention” line is no longer employed by the respective Person, such notice may be given to the attention of a Responsible Officer of the respective Person or to the attention of such individual or individuals as subsequently notified in writing by a Responsible Officer of the respective Person.
If to a Seller Party:

Reverse Mortgage Solutions, Inc.
14405 Walters Road, Suite 200
Houston, TX 77014
Attention: Treasurer, Andrew G. Dokos
Telephone: 832- 616-5815
Email: Andrew.dokos@rmsnav.com
With a copy to:

Reverse Mortgage Solutions, Inc.
14405 Walters Road, Suite 200
Houston, TX 77014
Attention: General Counsel
And a copy to:

Walter Investment Management Corp.
345 St. Peter Street, Suite 1100
St. Paul, MN 55102
Attention: Cheryl Collins
Telephone: 651-293-3410
Fax: 651-293-5746
Email: Cheryl.collins@walterinvestment.com
If to Administrative Agent:
For Transaction Requests :

Credit Suisse First Boston Mortgage Capital LLC
c/o Credit Suisse Securities (USA) LLC
One Madison Avenue, 2nd Floor
New York, New York 10010
Attention: Christopher Bergs, Resi Mortgage Warehouse Ops
Phone: 212‑538‑5087
E‑mail: christopher.bergs@credit‑suisse.com
with a copy to:

Credit Suisse First Boston Mortgage Capital LLC
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue, 4th Floor
New York, NY 10010
Attention: Margaret Dellafera
E‑mail: margaret.dellafera @credit‑suisse.com
For all other Notices :

Credit Suisse First Boston Mortgage Capital LLC
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue, 4th Floor
New York, New York 10010
Attention: Margaret Dellafera
Phone Number: 212‑325‑6471
Fax Number: 212‑743‑4810
E‑mail: margaret.dellafera@credit‑suisse.com
with a copy to:

Credit Suisse First Boston Mortgage Capital LLC
c/o Credit Suisse Securities (USA) LLC
One Madison Avenue, 9th Floor
New York, NY 10010
Attention: Legal Department—RMBS Warehouse Lending
Fax Number: (212) 322‑2376
21.      Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
22.      Non assignability
a.      Assignments . The Program Agreements are not assignable by any Seller Party. Subject to Section 36 (Acknowledgement of Assignment and Administration of Repurchase Agreement) hereof, Administrative Agent and Buyers may from time to time assign all or a portion of their rights and obligations under this Agreement and the Program Agreements; provided , however that Administrative Agent shall maintain, solely for this purpose as a non-fiduciary agent of any Seller Party, for review by any Seller Party upon written request, a register of assignees and participants (the “ Register ”) and a copy of an executed assignment and acceptance by Administrative Agent and assignee (“ Assignment and Acceptance ”), specifying the percentage or portion of such rights and obligations assigned and Seller shall only be required to deal directly with the Administrative Agent.  The entries in the Register shall be conclusive absent manifest error, and the Seller Parties, Administrative Agent and Buyers shall treat each Person whose name is recorded in the Register pursuant to the preceding sentence as a Buyer hereunder. Upon such assignment and recordation in the Register, (a) such assignee shall be a party hereto and to each Program Agreement to the extent of the percentage or portion set forth in the Assignment and Acceptance, and shall succeed to the applicable rights and obligations of Administrative Agent and Buyers hereunder, as applicable, and (b) Administrative Agent and Buyers shall, to the extent that such rights and obligations have been so assigned by them to either (i) an Affiliate of Administrative Agent or Buyers which assumes the obligations of Administrative Agent and Buyers, as applicable or (ii) another Person approved by any Seller Party (such approval not to be unreasonably withheld) which assumes the obligations of Administrative Agent and Buyers, as applicable, be released from its obligations hereunder and under the Program Agreements. Any assignment hereunder shall be deemed a joinder of such assignee as a Buyer hereto. Unless otherwise stated in the Assignment and Acceptance, the Seller Parties shall continue to take directions solely from Administrative Agent unless otherwise notified by Administrative Agent in writing. Administrative Agent and Buyers may distribute to any prospective or actual assignee this Agreement, the other Program Agreements, any document or other information delivered to Administrative Agent and/or Buyers by any Seller Party.
b.      Participations . Any Buyer may sell participations to one or more Persons in or to all or a portion of its rights and obligations under this Agreement and under the Program Agreements; provided, however, that (i) such Buyer’s obligations under this Agreement and the other Program Agreements shall remain unchanged, (ii) such Buyer shall remain solely responsible to the other parties hereto for the performance of such obligations; and (iii) Seller Parties shall continue to deal solely and directly with Administrative Agent and/or Buyers in connection with such Buyer’s rights and obligations under this Agreement and the other Program Agreements except as provided in Section 7. Administrative Agent and Buyers may distribute to any prospective or actual participant this Agreement, the other Program Agreements any document or other information delivered to Administrative Agent and/or Buyers by any Seller Party.
23.      Set‑off
In addition to any rights and remedies of the Administrative Agent and Buyers hereunder and by law, the Administrative Agent and Buyers shall have the right, without prior notice to the Seller Parties, any such notice being expressly waived by the Seller Parties to the extent permitted by applicable law to set-off and appropriate and apply against any Obligation from any Seller Party or any Affiliate thereof to a Buyer or any of its Affiliates any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other obligation (including to return excess margin), credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by or due from a Buyer or any Affiliate thereof to or for the credit or the account of any Seller Party or any Affiliate thereof. The Administrative Agent and Buyers agree promptly to notify the Seller Parties after any such set off and application made by the Administrative Agent or such Buyer; provided that the failure to give such notice shall not affect the validity of such set off and application.
24.      Binding Effect; Governing Law; Jurisdiction
a.      This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Each Seller Party acknowledges that the obligations of Administrative Agent and Buyers hereunder or otherwise are not the subject of any guaranty by, or recourse to, any direct or indirect parent or other Affiliate of Administrative Agent and Buyers. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
b.      EACH OF SELLER PARTIES AND ADMINISTRATIVE AGENT HEREBY WAIVES TRIAL BY JURY. EACH OF SELLER PARTIES AND BUYER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS IN ANY ACTION OR PROCEEDING. EACH OF SELLER PARTIES AND ADMINISTRATIVE AGENT HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION IT MAY HAVE TO, EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS.
25.      No Waivers, Etc.
No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation on any of the foregoing, the failure to give a notice pursuant to Section 6(a), Section 16.a) or otherwise, will not constitute a waiver of any right to do so at a later date.
26.      Intent
a.      The parties recognize that each Transaction is a “ repurchase agreement ” as that term is defined in Section 101 of Title 11 of the United States Code, as amended, a “ securities contract ” as that term is defined in Section 741 of Title 11 of the United States Code, as amended, and a “master netting agreement” as that term is defined in Section 101(38A)(A) of the Bankruptcy Code, that all payments hereunder are deemed “ margin payments ” or “ settlement payments ” as defined in Title 11 of the United States Code, and that the pledge of the Repurchase Assets constitutes “a security agreement or other arrangement or other credit enhancement” that is “related to” the Agreement and Transactions hereunder within the meaning of Sections 101(38A)(A), 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code. Seller Parties and Administrative Agent and Buyers further recognize and intend that this Agreement is an agreement to provide financial accommodations and is not subject to assumption pursuant to Bankruptcy Code Section 365(a).
b.      Administrative Agent’s or a Buyer’s right to liquidate the Purchased Assets and Repurchase Assets delivered to it in connection with the Transactions hereunder or to accelerate or terminate this Agreement or otherwise exercise any other remedies pursuant to Section 16 hereof is a contractual right to liquidate, accelerate or terminate such Transaction as described in Bankruptcy Code Sections 555, 559 and 561; any payments or transfers of property made with respect to this Agreement or any Transaction to satisfy a Margin Deficit shall be considered a “margin payment” as such term is defined in Bankruptcy Code Section 741(5).
c.      Reserved .
d.      It is understood that this Agreement constitutes a “ netting contract ” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“ FDICIA ”) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a “ covered contractual payment entitlement ” or “ covered contractual payment obligation ”, respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “ financial institution ” as that term is defined in FDICIA).
e.      This Agreement is intended to be a “repurchase agreement” and a “securities contract,” within the meaning of Section 101(47), Section 555, Section 559 and Section 741 under the Bankruptcy Code.
f.      Each party agrees that this Agreement is intended to create mutuality of obligations among the parties, and as such, the Agreement constitutes a contract which (i) is between all of the parties and (ii) places each party in the same right and capacity.
27.      Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
a.      in the case of Transactions in which one of the parties is a broker or dealer registered with the SEC under Section 15 of the 1934 Act, the Securities Investor Protection Corporation has taken the position that the provisions of the SIPA do not protect the other party with respect to any Transaction hereunder;
b.      in the case of Transactions in which one of the parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and
c.      in the case of Transactions in which one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable.
28.      Power of Attorney
Each Seller Party hereby authorizes Administrative Agent to file such financing statement or statements relating to the Repurchase Assets without such Seller Party’s signature thereon as Administrative Agent, at its option, may deem appropriate. Each Seller Party hereby respectively appoints Administrative Agent as such Seller Party’s agent and attorney-in-fact to execute any such financing statement or statements in such Seller Party’s name and, upon the occurrence and continuance of an Event of Default, to perform all other acts which Administrative Agent deems appropriate to perfect and continue its ownership interest in and/or the security interest granted hereby, if applicable, and to protect, preserve and realize upon the Repurchase Assets, including, but not limited to, the right to endorse notes, complete blanks in documents, transfer servicing, and sign assignments on behalf of such Seller Party as its agent and attorney-in-fact. This agency and power of attorney is coupled with an interest and is irrevocable without Administrative Agent’s consent. Notwithstanding the foregoing, the power of attorney hereby granted may be exercised only during the occurrence and continuance of any Default hereunder. Seller shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 28. In addition the foregoing, each Seller Party agrees to execute a Power of Attorney, in the form of Exhibit D hereto, to be delivered on the date hereof.
29.      Buyers May Act Through Administrative Agent
Each Buyer has designated the Administrative Agent for the purpose of performing any action hereunder.
30.      Indemnification; Obligations
a.      Seller agrees to hold Administrative Agent, Buyers and each of their respective Affiliates and their officers, directors, employees, agents and advisors (each, an “ Indemnified Party ”) harmless from and indemnify each Indemnified Party (and will reimburse each Indemnified Party as the same is incurred) against all liabilities, losses, damages, judgments, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) of any kind which may be imposed on, incurred by, or asserted against any Indemnified Party by any third party relating to or arising out of this Agreement, any Transaction Request, any Program Agreement or any transaction contemplated hereby or thereby resulting from anything other than the Indemnified Party’s gross negligence or willful misconduct. Seller also agrees to reimburse each Indemnified Party for all reasonable expenses in connection with the enforcement of this Agreement and the exercise of any right or remedy provided for herein, any Transaction Request and any Program Agreement, including, without limitation, the reasonable fees and disbursements of counsel. Seller’s agreements in this Section 30 shall survive the payment in full of the Repurchase Price and the expiration or termination of this Agreement. Seller hereby acknowledges that its obligations hereunder are recourse obligations of Seller and are not limited to recoveries each Indemnified Party may have with respect to the Purchased Assets, Contributed REO Properties and Repurchase Assets. Each of Seller, Administrative Agent and each Buyer also agrees not to assert any claim against the other or any of such party’s, or any of such party’s respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the facility established hereunder, the actual or proposed use of the proceeds of the Transactions, this Agreement or any of the transactions contemplated thereby. THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.
b.      Without limitation to the provisions of Section 4, if any payment of the Repurchase Price of any Transaction or Purchase Price Increase is made by Seller other than on the then scheduled Repurchase Date thereto as a result of an acceleration of the Repurchase Date pursuant to Section 16 or for any other reason, Seller shall, upon demand by Administrative Agent, pay to Administrative Agent on behalf of Buyers an amount sufficient to compensate Buyers for any losses, costs or expenses that they may reasonably incur as of a result of such payment.
c.      Without limiting the provisions of Section 30(a) hereof, if Seller fails to pay when due any costs, expenses or other amounts payable by it under this Agreement, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of Seller by Administrative Agent (subject to reimbursement by Seller), in its sole discretion.
31.      Counterparts
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement in a Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Agreement.
32.      Confidentiality
a.      This Agreement and its terms, provisions, supplements and amendments, and notices hereunder, are proprietary to Administrative Agent and Buyers and shall be held by each Seller Party in strict confidence and shall not be disclosed to any third party without the written consent of Administrative Agent except for (i) disclosure to Administrative Agent’s, Buyers’, Seller Party’s direct and indirect Affiliates and Subsidiaries, attorneys or accountants, but only to the extent such disclosure is necessary and such parties agree to hold all information in strict confidence, (ii) disclosure required by law, rule, regulation or order of a court or other regulatory body, (iii) disclosure to the disclosing party’s direct and indirect Affiliates and Subsidiaries, attorneys, accountants, but only to the extent such disclosure is necessary and such parties agree to hold all information in strict confidence, (iv)  disclosure required by law, rule, regulation or order of a court or other regulatory body (“ Governmental Order ”) or rating agency in connection with any securities issued by Buyer or an Affiliate of a Buyer, (v) disclosure as Administrative Agent and Buyers deem appropriate in connection with the enforcement of Administrative Agent’s or Buyers’ rights hereunder or under any Transaction or in connection with working with Administrative Agent’s and Buyer’s Affiliates, Subsidiaries and representatives in connection with the management and/or review of the Transactions, (vi) disclosure of any confidential terms that are in the public domain other than due to a breach of this covenant, or (vii) disclosure made to an assignee, participant, repledgee or any of their direct and indirect Affiliates and Subsidiaries, representatives, attorneys or accountants, but only to the extent such disclosure is necessary in connection with the transactions or performing rights or obligations hereunder. Notwithstanding the foregoing or anything to the contrary contained herein or in any other Program Agreement, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the Transactions, any fact relevant to understanding the federal, state and local tax treatment of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that Seller may not disclose the name of or identifying information with respect to Administrative Agent and Buyers or any pricing terms (including, without limitation, the Pricing Rate, Commitment Fee, Purchase Price Percentage, Purchase Price and any other fees specified in the Pricing Side Letter) or other nonpublic business or financial information (including any sublimits and financial covenants) that is unrelated to the federal, state and local tax treatment of the Transactions and is not relevant to understanding the federal, state and local tax treatment of the Transactions, without the prior written consent of the Administrative Agent.
b.      Notwithstanding anything in this Agreement to the contrary, each of the Seller Parties and Administrative Agent shall comply with all applicable local, state and federal laws, including, without limitation, all privacy and data protection law, rules and regulations that are applicable to the Purchased Assets and the Repurchase Assets and/or any applicable terms of this Agreement, including information pertaining to any Purchased Asset that is not purchased hereunder or customer or loan information that another lender may share with the Administrative Agent pursuant to an intercreditor agreement or other agreement (the “ Confidential Information ”). Each of Seller Party and Administrative Agent understands that the Confidential Information may contain “nonpublic personal information”, as that term is defined in Section 509(4) of the Gramm‑Leach‑Bliley Act (the “ GLB Act ”), and each of Seller Party and Administrative Agent agrees to maintain such nonpublic personal information that it receives hereunder in accordance with the GLB Act and other applicable federal and state privacy laws. Seller shall implement such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of the “nonpublic personal information” of the “customers” and “consumers” (as those terms are defined in the GLB Act) of Administrative Agent and Buyers or any Affiliate of Administrative Agent or Buyers which the Seller holds, (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Seller represents and warrants that it has implemented appropriate measures to meet the objectives of Section 501(b) of the GLB Act and of the applicable standards adopted pursuant thereto, as now or hereafter in effect. Upon request, Seller will provide evidence reasonably satisfactory to allow Administrative Agent and/or Buyers to confirm that the providing party has satisfied its obligations as required under this Section. Without limitation, this may include Administrative Agent’s or Buyers’ review of audits, summaries of test results, and other equivalent evaluations of the Seller. Seller shall notify Administrative Agent immediately following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the customers and consumers of Administrative Agent, Buyers or any Affiliate of Buyers provided directly to such Seller Party by Administrative Agent, Buyers or such Affiliate. Each Seller Party shall provide such notice to Administrative Agent by personal delivery, by facsimile with confirmation of receipt, or by overnight courier with confirmation of receipt to the applicable requesting individual.
33.      Recording of Communications
Administrative Agent, Buyers and Seller Parties shall have the right (but not the obligation) from time to time to make or cause to be made tape recordings of communications between its employees and those of the other party with respect to Transactions. Administrative Agent, Buyers and Seller Parties consent to the admissibility of such tape recordings in any court, arbitration, or other proceedings. The parties agree that a duly authenticated transcript of such a tape recording shall be deemed to be a writing conclusively evidencing the parties’ agreement.
34.      Periodic Due Diligence Review
Seller acknowledges that Administrative Agent and Buyers have the right to perform continuing due diligence reviews with respect to each Seller Party and the Purchased Assets and Contributed REO Properties, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, for the purpose of performing quality control review of the Purchased Assets and Contributed REO Properties or otherwise, and Seller agrees that upon reasonable (but no less than three (3) Business Days’) prior notice unless an Event of Default shall have occurred, in which case no notice is required, to Seller, Administrative Agent, Buyers or their authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Asset Files and any and all documents, data, records, agreements, instruments or information relating to such Repurchase Assets (including, without limitation, quality control review) in the possession or under the control of Seller Parties and/or the Custodian. Seller also shall make available to Administrative Agent and Buyers a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Asset Files and the Repurchase Assets. Without limiting the generality of the foregoing, Seller acknowledges that Administrative Agent and Buyers may purchase Purchased Assets and the Contributed REO Properties or enter into Transactions with respect to Transaction Mortgage Loans from Seller based solely upon the information provided by Seller to Administrative Agent and Buyers in the Asset Schedule and the representations, warranties and covenants contained herein, and that Administrative Agent or Buyers, at their option, have the right at any time to conduct a partial or complete due diligence review on some or all of the Purchased Assets, Contributed REO Properties and Repurchase Assets purchased in a Transaction, including, without limitation, ordering broker’s price opinions, new credit reports and new appraisals on the related Mortgaged Properties and otherwise re‑generating the information used to originate such Transaction Mortgage Loan. Administrative Agent or Buyers may underwrite such Purchased Assets and Contributed REO Properties itself or engage a mutually agreed upon third party underwriter to perform such underwriting. Seller agrees to cooperate with Administrative Agent, Buyers and any third party underwriter in connection with such underwriting, including, but not limited to, providing Administrative Agent, Buyers and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased Asset and Contributed REO Properties in the possession, or under the control, of Seller. Seller further agrees that Seller shall pay all out‑of‑pocket costs and expenses incurred by Administrative Agent and Buyers in connection with Administrative Agent’s and Buyers’ activities pursuant to this Section 34; provided that Administrative Agent shall notify Seller of any due diligence expenses in excess of $25,000 per annum.
35.      Authorizations
Any of the persons whose signatures and titles appear on Schedule 2 are authorized, acting singly, to act for Seller Parties or Administrative Agent to the extent set forth therein, as the case may be, under this Agreement. The Seller Parties may amend Schedule 2 from time to time by delivering a revised Schedule 2 to Administrative Agent and expressly stating that such revised Schedule 2 shall replace the existing Schedule 2 .
36.      Acknowledgment of Assignment and Administration of Repurchase Agreement
Pursuant to Section 22 (Non assignability) of this Agreement, Administrative Agent may sell, transfer and convey or allocate certain Transaction Mortgage Loans and the related Repurchase Assets and related Transactions to certain affiliates of Administrative Agent and/or one or more CP Conduits (the “ Additional Buyers ”). The Seller Parties each hereby acknowledge and agree to the joinder of such Additional Buyers. The Administrative Agent shall administer the provisions of this Agreement for the benefit of the Buyers and any Repledgees, as applicable. For the avoidance of doubt, all payments, notices, communications and agreements pursuant to this Agreement shall be delivered to, and entered into by, the Administrative Agent for the benefit of the Buyers and/or the Repledgees, as applicable and the Buyers shall not have any direct right against the Seller under this Agreement. Furthermore, to the extent that the Administrative Agent exercises remedies pursuant to this Agreement, solely the Administrative Agent will have the right to bid on and/or purchase any of the Repurchase Assets pursuant to Section 16 (Remedies Upon Default). The benefit of all representations, rights, remedies and covenants set forth in the Agreement shall inure to the benefit of the Administrative Agent on behalf of each Buyer and Repledgees, as applicable. All provisions of the Agreement shall survive the transfers contemplated herein (including any Repledge Transactions). Notwithstanding that multiple Buyers may purchase individual Mortgage Loans subject to Transactions entered into under this Agreement, all Transactions shall continue to be deemed a single Transaction and all of the Repurchase Assets shall be security for all of the Obligations hereunder.
37.      Acknowledgement Of Anti‑Predatory Lending Policies
Administrative Agent has in place internal policies and procedures that expressly prohibit its purchase of any High Cost Mortgage Loan.
38.      Documents Mutually Drafted
The Seller Parties, Administrative Agent and the Buyers agree that this Agreement and each other Program Agreement prepared in connection with the Transactions set forth herein have been mutually drafted and negotiated by each party, and consequently such documents shall not be construed against either party as the drafter thereof.
39.      General Interpretive Principles
For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:
a.      the terms defined in this Agreement have the meanings assigned to them in this Agreement and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other gender;
b.      accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP;
c.      references herein to “Articles”, “Sections”, “Subsections”, “Paragraphs”, and other subdivisions without reference to a document are to designated Articles, Sections, Subsections, Paragraphs and other subdivisions of this Agreement;
d.      a reference to a Subsection without further reference to a Section is a reference to such Subsection as contained in the same Section in which the reference appears, and this rule shall also apply to Paragraphs and other subdivisions;
e.      the words “herein”, “hereof”, “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular provision;
f.      the term “include” or “including” shall mean without limitation by reason of enumeration;
g.      all times specified herein or in any other Program Agreement (unless expressly specified otherwise) are local times in New York, New York unless otherwise stated; and
h.      all references herein or in any Program Agreement to “good faith” means good faith as defined in Section 5‑102(7) of the UCC as in effect in the State of New York.
40.      Conflicts
In the event of any conflict between the terms of this Agreement and any other Program Agreement, the documents shall control in the following order of priority: first , the terms of the Pricing Side Letter shall prevail, then the terms of this Agreement shall prevail, and then the terms of the other Program Agreements shall prevail.
41.      Bankruptcy Non-Petition
The parties hereby agree that they shall not institute against, or join any other person in instituting against, any Buyer that is a CP Conduit any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after the latest maturing commercial paper note issued by the applicable CP Conduit is paid in full.
42.      Limited Recourse
The obligations of each Buyer under this Agreement or any other Program Agreement are solely the corporate obligations of such Buyer. No recourse shall be had for the payment of any amount owing by any Buyer under this Agreement, or for the payment by any Buyer of any fee in respect hereof or any other obligation or claim of or against such Buyer arising out of or based on this Agreement, against any stockholder, partner, member, employee, officer, director or incorporator or other authorized person of such Buyer. In addition, notwithstanding any other provision of this Agreement, the Parties agree that all payment obligations of any Buyer that is a CP Conduit under this Agreement shall be limited recourse obligations of such Buyer, payable solely from the funds of such Buyer available for such purpose in accordance with its commercial paper program documents. Each party waives payment of any amount which such Buyer does not pay pursuant to the operation of the preceding sentence until the day which is at least one year and one day after the payment in full of the latest maturing commercial paper note (and waives any “claim” against such Buyer within the meaning of Section 101(5) of the Bankruptcy Code or any other Debtor Relief Law for any such insufficiency until such date).
43.      Nominee
a.      Seller Parties, Administrative Agent and the Buyers hereby acknowledge and agree, and Seller Parties hereby appoint, the Nominee as (i) their nominee as mortgagee of record and payee on the FHA HERMIT System, as applicable, and the Nominee hereby accepts such appointment, and (ii) as nominee and agent of Seller Parties, Administrative Agent and the Buyers as set forth herein, to the extent applicable.
b.      Following receipt by Nominee of written notice of the occurrence of an Event of Default, the Nominee agrees to take direction from the Administrative Agent with respect to the FHA Loans.
c.      It is the intent of the Seller Parties, Servicer, Administrative Agent and the Buyers that the Servicer or Nominee, as applicable, retains bare legal title to the Transaction Mortgage Loans and Contributed REO Property for all purposes including, without limitation, for purposes of Section 541(d) of the Bankruptcy Code and accordingly, Servicer and Nominee, in their respective capacity as servicer or nominee, shall have no property right to the Transaction Mortgage Loans or Contributed REO Property.
d.      Administrative Agent may, upon notice to the Seller Parties, terminate the Servicer as Nominee and appoint itself or another person as the successor nominee following an Event of Default that is continuing.
44.      Termination of Agreement
This Agreement shall remain in effect until the Termination Date. Notwithstanding the foregoing, Seller may terminate this Agreement at any time (i) upon the occurrence of an Act of Insolvency in respect of Administrative Agent, (ii) upon the failure of Administrative Agent to return any Transaction Mortgage Loan or REO Property to Seller after the payment by Seller to the Administrative Agent of the related Repurchase Price within five (5) Business Days, or (iii) upon the occurrence of an event of default on the part of Credit Suisse Securities (USA) LLC under any Master Securities Forward Transaction Agreement between Credit Suisse Securities (USA) LLC and Seller, in each case, without the payment of any penalties, breakage costs or termination fees. If Seller exercises such right of termination, to the extent permitted by applicable law, Administrative Agent shall promptly reimburse Seller for the pro-rated amount of the Commitment Fee attributable to the number of days remaining from the date such of such termination until the Termination Date.
45.      Joint and Several
Seller Parties, Administrative Agent and Buyers hereby acknowledge and agree that each Seller Party is jointly and severally liable to Administrative Agent and Buyers for the full, complete and punctual performance and satisfaction of all obligations of any Seller Party under this Agreement, provided, however, Buyers (including any Repledgee) agree that Administrative Agent has the sole, exclusive and non-delegable right and power to enforce this Agreement and any other Program Agreement against a Seller Party or Guarantor, as applicable, as agent for the other Buyers/Repledgee and notwithstanding the following text or any Program Agreement. Accordingly, each Seller Party waives any and all notice of creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by Administrative Agent or any Buyer upon such Seller Party’s joint and several liability. Each Seller Party waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon such Seller Party with respect to the Obligations. When pursuing its rights and remedies hereunder against any Seller Party, Administrative Agent and any Buyer may, but shall be under no obligation to, pursue such rights and remedies hereunder against any Seller Party or any other Person or against any collateral security for the Obligations or any right of offset with respect thereto, and any failure by Administrative Agent or any Buyer to pursue such other rights or remedies or to collect any payments from such Seller Party or any such other Person to realize upon any such collateral security or to exercise any such right of offset, or any release of such Seller Party or any such other Person or any such collateral security, or right of offset, shall not relieve such Seller Party of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of Administrative Agent or such Buyer against such Seller Party.
46.      Amendment and Restatement
Administrative Agent, as a Buyer and Seller Parties entered into the Existing Repurchase Agreement. Administrative Agent, Buyers and the Seller Parties desire to enter into this Agreement in order to amend and restate the Existing Repurchase Agreement in its entirety. The amendment and restatement of the Existing Repurchase Agreement shall become effective on the date hereof, and each of Administrative Agent, Buyers and the Seller Parties shall hereafter be bound by the terms and conditions of this Agreement and the other Program Agreements. This Agreement amends and restates the terms and conditions of the Existing Repurchase Agreement, and is not a novation of any of the agreements or obligations incurred pursuant to the terms of the Existing Repurchase Agreement. Accordingly, all of the agreements and obligations incurred pursuant to the terms of the Existing Repurchase Agreement are hereby ratified and affirmed by the parties hereto and remain in full force and effect. For the avoidance of doubt, it is the intent of Administrative Agent, Buyers and the Seller Parties that the security interests and liens granted in the Purchased Assets, Contributed REO Properties or Repurchase Assets pursuant to Section 8 of the Existing Repurchase Agreement shall continue in full force and effect. All references to the Existing Repurchase Agreement in any Program Agreement or other document or instrument delivered in connection therewith shall be deemed to refer to this Agreement and the provisions hereof.
[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed as of the date first above written.
Credit Suisse First Boston Mortgage Capital LLC,
as Administrative Agent

By:
/s/ Elie Chau    
Name:     Elie Chau    
Title:     Vice President    
Credit Suisse AG, Cayman Islands Branch,
as a Buyer and as a Committed Buyer

By:
/s/ Chris Fera    
Name:     Chris Fera    
Title:     Authorized Signatory    
By:
/s/ Olivier Nisenson    
Name:     Olivier Nisenson    
Title:     Authorized Signatory    
ALPINE SECURITIZATION LTD,
as a Buyer, by CREDIT SUISSE AG,
NEW YORK BRANCH, as Attorney-in-Fact


By:
/s/ Chris Fera    
Name:     Chris Fera    
Title:     Vice President    
By:
/s/ Olivier Nisenson    
Name:     Olivier Nisenson    
Title:     Authorized Signatory    


Reverse Mortgage Solutions, Inc., as Seller

By:
/s/ Cheryl Collins    
Name:     Cheryl Collins    
Title:     Senior Vice President    
RMS REO CS, LLC, as REO Subsidiary
By:
/s/ Cheryl Collins    
Name:     Cheryl Collins    
Title:     Manager    


SCHEDULE 1-A

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO TRANSACTION MORTGAGE LOANS
The Seller Parties makes the following representations and warranties to Administrative Agent with respect to each Transaction Mortgage Loan that is at all times subject to a Transaction hereunder and at all times while the Program Agreements and any Transaction hereunder is in full force and effect. With respect to those representations and warranties which are made to the best of a Seller’s knowledge, if it is discovered by such Seller Party or Administrative Agent that the substance of such representation and warranty is inaccurate, notwithstanding such Seller Party’s lack of knowledge with respect to the substance of such representation and warranty, such inaccuracy shall be deemed a breach of the applicable representation and warranty for purposes of determining Asset Value.
(a) Reserved .
(b)      No Outstanding Charges . All taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable. The Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required under the Transaction Mortgage Loan, except for interest accruing from the date of the Mortgage Note or date of disbursement of the proceeds of the Transaction Mortgage Loan, whichever is earlier.
(c)      Original Terms Unmodified . The terms of the Mortgage Note and Mortgage have not been impaired, waived, altered or modified in any respect, from the date of origination; except by a written instrument which has been recorded, if necessary to protect the interests of Buyers, and which original or (other than with respect to the Mortgage Note) certified copy has been delivered to the Custodian and the terms of which are reflected in the Custodial Asset Schedule. The substance of any such waiver, alteration or modification has been approved by the title insurer, to the extent required, and its terms are reflected on the Custodial Asset Schedule. No Mortgagor in respect of the Transaction Mortgage Loan has been released, in whole or in part, except in connection with an assumption agreement approved by the title insurer, to the extent required by such policy, and which assumption agreement is part of the Asset File delivered to the Custodian and the terms of which are reflected in the Custodial Asset Schedule.
(d)      No Defenses . The Transaction Mortgage Loan is not subject to any right of rescission, set‑off, counterclaim or defense, including, without limitation, the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part and no such right of rescission, set‑off, counterclaim or defense has been asserted with respect thereto, and no Mortgagor in respect of the Transaction Mortgage Loan was a debtor in any state or federal bankruptcy or insolvency proceeding at the time the Transaction Mortgage Loan was originated.
(e)      Hazard Insurance . The Mortgaged Property is insured by a fire and extended perils insurance policy, issued by a Qualified Insurer, and such other hazards as are customary in the area where the Mortgaged Property is located, and to the extent required by Seller as of the date of origination consistent with the Underwriting Guidelines, against earthquake and other risks insured against by Persons operating like properties in the locality of the Mortgaged Property, in an amount not less than the greatest of (i) 100% of the replacement cost of all improvements to the Mortgaged Property, (ii) the outstanding principal balance of the Transaction Mortgage Loan, or (iii) the amount necessary to avoid the operation of any co‑insurance provisions with respect to the Mortgaged Property, and consistent with the amount that would have been required as of the date of origination in accordance with the Underwriting Guidelines. If any portion of the Mortgaged Property is in an area identified by any federal Governmental Authority as having special flood hazards, and flood insurance is available, a flood insurance policy meeting the current guidelines of the Federal Emergency Management Agency is in effect with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (1) the outstanding principal balance of the Transaction Mortgage Loan (2) the full insurable value of the Mortgaged Property, and (3) the maximum amount of insurance available under the National Flood Insurance Act of 1968, as amended by the Flood Disaster Protection Act of 1973. All such insurance policies (collectively, the “hazard insurance policy”) contain a standard mortgagee clause naming Seller, its successors and assigns (including, without limitation, subsequent owners of the Transaction Mortgage Loan), as mortgagee, and may not be reduced, terminated or canceled without thirty (30) calendar days’ prior written notice to the mortgagee. No such notice has been received by any Seller Party. All premiums on such insurance policy have been paid. The related Mortgage obligates the Mortgagor to maintain all such insurance and, at such Mortgagor’s failure to do so, authorizes the mortgagee to maintain such insurance at the Mortgagor’s cost and expense and to seek reimbursement therefor from such Mortgagor. Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance, provided the policy is not a “master” or “blanket” hazard insurance policy covering a condominium, or any hazard insurance policy covering the common facilities of a planned unit development. The hazard insurance policy is the valid and binding obligation of the insurer and is in full force and effect. Seller Party has not engaged in, and has no knowledge of the Mortgagor’s having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of either including, without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other Person, and no such unlawful items have been received, retained or realized by any Seller Party.
(f)      Environmental Compliance . There does not exist on the Mortgaged Property any hazardous substances, hazardous wastes or solid wastes, as such terms are defined in the Comprehensive Environmental Response Compensation and Liability Act, the Resource Conservation and Recovery Act of 1976, or other applicable federal, state or local environmental laws including, without limitation, asbestos, in each case in excess of the permitted limits and allowances set forth in such environmental laws to the extent such laws are applicable to the Mortgaged Property. There is no pending action or proceeding directly involving the Mortgaged Property in which compliance with any environmental law, rule or regulation is an issue; there is no violation of any applicable environmental law (including, without limitation, asbestos), rule or regulation with respect to the Mortgaged Property; and nothing further remains to be done to satisfy in full all requirements of each such law, rule or regulation constituting a prerequisite to use and enjoyment of said property.
(g)      Compliance with Applicable Laws . Any and all requirements of any federal, state or local law including, without limitation, usury, truth‑in‑lending, real estate settlement procedures, consumer credit protection, equal credit opportunity or disclosure laws applicable to the Transaction Mortgage Loan have been complied with, in all material respects, the consummation of the transactions contemplated hereby will not involve the violation of any such laws or regulations, and Seller shall maintain or shall cause its agent to maintain in its possession, available for the inspection of Administrative Agent, and shall deliver to Administrative Agent, upon demand, evidence of compliance with all such requirements.
(h)      No Satisfaction of Mortgage . The Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part, nor has any instrument been executed that would effect any such release, cancellation, subordination or rescission. Seller has not waived the performance by the Mortgagor of any action, if the Mortgagor’s failure to perform such action would cause the Transaction Mortgage Loan to be in default, nor has Seller waived any default resulting from any action or inaction by the Mortgagor.
(i)      Location and Type of Mortgaged Property . The Mortgaged Property is located in an Acceptable State as identified in the Custodial Asset Schedule and consists of a single parcel of real property with a detached or attached single family residence erected thereon, or a two‑ to four‑family dwelling, or an individual unit in a planned unit development or a de minimis planned unit development; provided, however, that any condominium unit or planned unit development shall conform with the applicable Fannie Mae and Freddie Mac requirements regarding such dwellings or shall conform to underwriting guidelines acceptable to Administrative Agent in its sole discretion and that no residence or dwelling is a mobile home. No portion of the Mortgaged Property is used for commercial purposes; provided, that, the Mortgaged Property may be a mixed use property if such Mortgaged Property conforms to underwriting guidelines acceptable to Administrative Agent in its sole discretion.
(j)      Valid First Lien . The Mortgage is a valid, subsisting, enforceable and perfected with respect to each first lien Transaction Mortgage Loan, first priority lien and first priority security interest on the real property included in the Mortgaged Property, including all buildings on the Mortgaged Property and all installations and mechanical, electrical, plumbing, heating and air conditioning systems located in or annexed to such buildings, and all additions, alterations and replacements made at any time with respect to the foregoing. The lien of the Mortgage is subject only to:
a.    the lien of current real property taxes and assessments not yet due and payable;
b.    covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to prudent mortgage lending institutions generally and specifically referred to in lender’s title insurance policy delivered to the originator of the Transaction Mortgage Loan and (a) referred to or otherwise considered in the appraisal made for the originator of the Transaction Mortgage Loan or (b) which do not adversely affect the Appraised Value of the Mortgaged Property set forth in such appraisal;
c.    other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Transaction Mortgage Loan establishes and creates a valid, subsisting and enforceable first lien and first priority security interest on the property described therein and the applicable Seller Party has full right to pledge and assign the same to Administrative Agent. The Mortgaged Property was not, as of the date of origination of the Transaction Mortgage Loan, subject to a mortgage, deed of trust, deed to secure debt or other security instrument creating a lien subordinate to the lien of the Mortgage.
(k)      Validity of Mortgage Documents . The Mortgage Note and the Mortgage and any other agreement executed and delivered by a Mortgagor or guarantor, if applicable, in connection with a Transaction Mortgage Loan are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms. All parties to the Mortgage Note, the Mortgage and any other such related agreement had legal capacity to enter into the Transaction Mortgage Loan and to execute and deliver the Mortgage Note, the Mortgage and any such agreement, and the Mortgage Note, the Mortgage and any other such related agreement have been duly and properly executed by such related parties. To the best of Seller’s knowledge, no fraud, error, omission, misrepresentation, negligence or similar occurrence with respect to a Transaction Mortgage Loan has taken place on the part of any Person, including, without limitation, the Mortgagor, any appraiser, any builder or developer, or any other party involved in the origination of the Transaction Mortgage Loan. Seller has reviewed all of the documents constituting the Asset File and has made such inquiries as it deems necessary to make and confirm the accuracy of the representations set forth herein. To the best of Seller’s knowledge, except as disclosed to Administrative Agent in writing, all tax identifications and property descriptions are legally sufficient; and tax segregation, where required, has been completed.
(l)      Full Disbursement of Proceeds . Except as allowable under the FHA HECM program, each Transaction Mortgage Loan has no future disbursement obligation, and any and all requirements as to completion of any on‑site or off‑site improvement and as to disbursements of any escrow funds therefor have been complied with. All costs, fees and expenses incurred in making or closing the Transaction Mortgage Loan and the recording of the Mortgage were paid, and the Mortgagor is not entitled to any refund of any amounts paid or due under the Mortgage Note or Mortgage. All broker fees have been properly assessed to the Mortgagor and no claims will arise as to broker fees that are double charged and for which the Mortgagor would be entitled to reimbursement.
(m)      Ownership . The applicable Seller Party has full right to sell or pledge, as applicable, the Transaction Mortgage Loan to Buyers free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest, and has full right and authority subject to no interest or participation of, or agreement with, any other party, to sell or pledge, as applicable, each Transaction Mortgage Loan pursuant to this Agreement and following the sale or pledge, as applicable, of each Transaction Mortgage Loan, Buyers will own or have received a pledge of, as applicable, such Transaction Mortgage Loan free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest except any such security interest created pursuant to the terms of this Agreement.
(n)      Doing Business . All parties which have had any interest in the Transaction Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (i) in compliance, in all material respects, with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and (ii) either (A) organized under the laws of such state, (B) qualified to do business in such state, (C) a federal savings and loan association, a savings bank or a national bank having a principal office in such state, or (D) not doing business in such state.
(o)      Title Insurance . The Transaction Mortgage Loan is covered by either (i) an attorney’s opinion of title and abstract of title, the form and substance of which is acceptable to prudent mortgage lending institutions making mortgage loans in the area wherein the Mortgaged Property is located or (ii) an American Land Title Association (“ ALTA ”) lender’s title insurance policy or other generally acceptable form of policy or insurance acceptable to Fannie Mae or Freddie Mac and each such title insurance policy is issued by a title insurer acceptable to Fannie Mae or Freddie Mac and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring Seller, its successors and assigns, as to the first priority lien of the Mortgage, as applicable, in the original principal amount of the Transaction Mortgage Loan, with respect to a Transaction Mortgage Loan (or to the extent a Mortgage Note provides for negative amortization, the maximum amount of negative amortization in accordance with the Mortgage), subject only to the exceptions contained in clauses (a), (b) and (c) of paragraph (i) of this Schedule 1-A , and in the case of adjustable rate Transaction Mortgage Loans, against any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of the Mortgage providing for adjustment to the Mortgage Interest Rate. Where required by state law or regulation, the Mortgagor has been given the opportunity to choose the carrier of the required mortgage title insurance. Additionally, such lender’s title insurance policy affirmatively insures ingress and egress and against encroachments by or upon the Mortgaged Property or any interest therein. The title policy does not contain any special exceptions (other than the standard exclusions) for zoning and uses and has been marked to delete the standard survey exception or to replace the standard survey exception with a specific survey reading. Seller, its successors and assigns, are the sole insureds of such lender’s title insurance policy, and such lender’s title insurance policy is valid and remains in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement. No claims have been made under such lender’s title insurance policy, and no prior holder or servicer of the related Mortgage, including Seller, has done, by act or omission, anything which would impair the coverage of such lender’s title insurance policy, including without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other Person, and no such unlawful items have been received, retained or realized by Seller.
(p)      No Defaults . Except with respect to a Mortgage Loan that is a HECM Buyout, there is no default, breach, violation or event of acceleration existing under the Mortgage or the Mortgage Note and no event has occurred which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration, and neither Seller nor its predecessors have waived any default, breach, violation or event of acceleration; and neither Seller nor any of its affiliates nor any of their respective predecessors, have waived any default, breach, violation or event which would permit acceleration, except with respect to a Mortgage Loan that is a HECM Buyout.
(q)      No Mechanics’ Liens . There are no mechanics’ or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the Mortgaged Property which are or may be liens prior to, or equal or coordinate with, the lien of the Mortgage.
(r)      Location of Improvements; No Encroachments . All improvements which were considered in determining the Appraised Value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property, and no improvements on adjoining properties encroach upon the Mortgaged Property. No improvement located on or being part of the Mortgaged Property is in violation, in any material respect, of any applicable zoning and building law, ordinance or regulation. All seller and/or builder concessions have been subtracted from the Appraised Value of the Mortgaged Property for purposes of determining the LTV.
(s)      Origination; Payment Terms . The Transaction Mortgage Loan was originated by or in conjunction with a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or similar banking institution which is supervised and examined by a federal or state authority.
(t)      Customary Provisions . The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (i) in the case of a Mortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwise by judicial foreclosure. Upon default by a Mortgagor on a Transaction Mortgage Loan and foreclosure on, or trustee’s sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Transaction Mortgage Loan will be able to deliver good and merchantable title to the Mortgaged Property. There is no homestead or other exemption or other right available to the Mortgagor or any other person, or restriction on the Seller or any other person, including without limitation, any federal, state or local, law, ordinance, decree, regulation, guidance, attorney general action, or other pronouncement, whether temporary or permanent in nature, that would interfere with, restrict or delay, either (y) the ability of the Seller, Administrative Agent, a Buyer or any servicer or any successor servicer to sell the related Mortgaged Property at a trustee's sale or otherwise, or (z) the ability of the Seller, Administrative Agent, a Buyer or any servicer or any successor servicer to foreclose on the related Mortgage. The Mortgage Note and Mortgage are on forms acceptable to Freddie Mac, Fannie Mae or FHA.
(u)      Occupancy of the Mortgaged Property . As of the Purchase Date the Mortgaged Property is lawfully occupied under applicable law. To the best of Seller’s knowledge, all inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities. Seller has not received notification from any Governmental Authority that the Mortgaged Property is in material non‑compliance with such laws or regulations, is being used, operated or occupied unlawfully or has failed to have or obtain such inspection, licenses or certificates, as the case may be. Seller has not received notice of any violation or failure to conform with any such law, ordinance, regulation, standard, license or certificate. With respect to any Transaction Mortgage Loan originated with an “owner‑occupied” Mortgaged Property, the Mortgagor represented at the time of origination of the Transaction Mortgage Loan that the Mortgagor would occupy the Mortgaged Property as the Mortgagor’s primary residence.
(v)      No Additional Collateral . The Mortgage Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage and the security interest of any applicable security agreement or chattel mortgage referred to in clause (j) above.
(w)      Deeds of Trust . In the event the Mortgage constitutes a deed of trust, a trustee, authorized and duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by the Custodian or Administrative Agent to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the Mortgagor.
(x)      Transfer of Transaction Mortgage Loans . Except with respect to Transaction Mortgage Loans intended for purchase by GNMA and for Transaction Mortgage Loans registered with MERS, the Assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located.
(y)      Due‑On‑Sale . Except with respect to Mortgage Loans intended for purchase by GNMA, the Mortgage contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Transaction Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the mortgagee thereunder.
(z)      No Contingent Interests . The Transaction Mortgage Loan does not have a shared appreciation or other contingent interest feature.
(aa)      Consolidation of Future Advances . Any future advances made to the Mortgagor prior to the Purchase Date have been consolidated with the outstanding principal amount secured by the Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term. The lien of the Mortgage securing the consolidated principal amount is expressly insured as having first lien priority by a title insurance policy, an endorsement to the policy insuring the mortgagee’s consolidated interest or by other title evidence acceptable to Fannie Mae, Freddie Mac and FHA. The consolidated principal amount does not exceed the original principal amount of the Transaction Mortgage Loan.
(bb)      No Condemnation Proceeding . There have not been any condemnation proceedings with respect to the Mortgaged Property and Seller has no knowledge of any such proceedings.
(cc)      Collection Practices; Escrow Deposits; Interest Rate Adjustments . The origination and collection practices used by the originator, each servicer of the Transaction Mortgage Loan and Seller with respect to the Transaction Mortgage Loan have been in all material respects in compliance with Accepted Servicing Practices, applicable laws and regulations, and have been in all respects legal and proper. With respect to escrow deposits and Escrow Payments, all such payments are in the possession of, or under the control of, Seller and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. All Mortgage Interest Rate adjustments have been made in material compliance with state and federal law and the terms of the related Mortgage Note. Any interest required to be paid pursuant to state, federal and local law has been properly paid and credited.
(dd)      Conversion to Fixed Interest Rate . Except as allowed by Fannie Mae or Freddie Mac or otherwise as expressly approved in writing by Administrative Agent, with respect to adjustable rate Transaction Mortgage Loans, the Transaction Mortgage Loan is not convertible to a fixed interest rate Transaction Mortgage Loan.
(ee)      Reserved .
(ff)      Servicemembers Civil Relief Act . The Mortgagor has not notified Seller, and Seller has no knowledge, of any relief requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act.
(gg)      Appraisal . The Asset File contains an appraisal of the related Mortgaged Property signed prior to the funding of the Transaction Mortgage Loan by a qualified appraiser, duly appointed by Seller, who had no interest, direct or indirect in the Mortgaged Property or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Transaction Mortgage Loan, and the appraisal and appraiser both satisfy the requirements of Fannie Mae, Freddie Mac or FHA and Title XI of the Federal Institutions Reform, Recovery, and Enforcement Act of 1989 as amended and the regulations promulgated thereunder, all as in effect on the date the Transaction Mortgage Loan was originated.
(hh)      Disclosure Materials . The Mortgagor has executed a statement to the effect that the Mortgagor has received all disclosure materials required by applicable law with respect to the making of adjustable rate mortgage loans, and Seller maintains such statement in the Asset File.
(ii)      Construction or Rehabilitation of Mortgaged Property . No Transaction Mortgage Loan was made in connection with the construction or rehabilitation of a Mortgaged Property or facilitating the trade‑in or exchange of a Mortgaged Property.
(jj)      No Defense to Insurance Coverage . No action has been taken or failed to be taken, no event has occurred and no state of facts exists or has existed on or prior to the Purchase Date (whether or not known to Seller on or prior to such date) which has resulted or will result in an exclusion from, denial of, or defense to coverage under any private mortgage insurance (including, without limitation, any exclusions, denials or defenses which would limit or reduce the availability of the timely payment of the full amount of the loss otherwise due thereunder to the insured) whether arising out of actions, representations, errors, omissions, negligence, or fraud of Seller, the related Mortgagor or any party involved in the application for such coverage, including the appraisal, plans and specifications and other exhibits or documents submitted therewith to the insurer under such insurance policy, or for any other reason under such coverage, but not including the failure of such insurer to pay by reason of such insurer’s breach of such insurance policy or such insurer’s financial inability to pay.
(kk)      Reserved .
(ll)      No Equity Participation . No document relating to the Transaction Mortgage Loan provides for any contingent or additional interest in the form of participation in the cash flow of the Mortgaged Property or a sharing in the appreciation of the value of the Mortgaged Property. The indebtedness evidenced by the Mortgage Note is not convertible to an ownership interest in the Mortgaged Property or the Mortgagor and Seller has not financed nor does it own directly or indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.
(mm)      Proceeds of Transaction Mortgage Loan . The proceeds of the Transaction Mortgage Loan have not been and shall not be used to satisfy, in whole or in part, any debt owed or owing by the Mortgagor to Seller or any Affiliate or correspondent of Seller, except in connection with a refinanced Transaction Mortgage Loan; provided, however, no such refinanced Transaction Mortgage Loan shall have been originated pursuant to a streamlined mortgage loan refinancing program.
(nn)      Origination Date . (i) Other than with respect to a HECM Buyout and Correspondent Mortgage Loans, the Purchase Date is no more than thirty (30) calendar days following the origination date and (ii) with respect to Correspondent Mortgage Loans, the Purchase Date is no more than one-hundred and eighty (180) calendar days following the origination date, unless otherwise agreed to by Administrative Agent.
(oo)      No Exception . The Custodian has not noted any material exceptions on a Custodial Asset Schedule with respect to the Transaction Mortgage Loan which would materially adversely affect the Transaction Mortgage Loan or Administrative Agent’s or Buyers’ interest in the Transaction Mortgage Loan.
(pp)      Mortgage Submitted for Recordation . The Mortgage either has been or will promptly be submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.
(qq)      Documents Genuine . Such Transaction Mortgage Loan and all accompanying collateral documents are complete and authentic and all signatures thereon are genuine.
(rr)      Reserved .
(ss)      Other Encumbrances . To the best of Seller’s knowledge, any property subject to any security interest given in connection with such Transaction Mortgage Loan is not subject to any other encumbrances other than a stated first mortgage, if applicable, and encumbrances which may be allowed under the Underwriting Guidelines.
(tt)      Description . The information set forth in the Asset Schedule is true and correct in all material respects.
(uu)      Located in U.S. No collateral (including, without limitation, the related real property and the dwellings thereon and otherwise) relating to a Transaction Mortgage Loan is located in any jurisdiction other than in one of the fifty (50) states of the United States of America or the District of Columbia or the commonwealth of Puerto Rico.
(vv)      Underwriting Guidelines . Each Transaction Mortgage Loan has been originated in accordance with the Underwriting Guidelines (including all supplements or amendments thereto) previously provided to Administrative Agent.
(ww)      Reserved .
(xx)      Committed Mortgage Loans . Other than any HECM Buyout, each Committed Mortgage Loan is covered by a Take‑out Commitment, does not exceed the availability under such Take‑out Commitment (taking into consideration mortgage loans which have been purchased by the respective Take‑out Investor under the Take‑out Commitment and mortgage loan which Seller has identified to Administrative Agent as covered by such Take‑out Commitment) and conforms to the requirements and the specifications set forth in such Take‑out Commitment and the related regulations, rules, requirements and/or handbooks of the applicable Take‑out Investor and is eligible for sale to and insurance or guaranty by, respectively the applicable Take‑out Investor and applicable insurer. Each Take‑out Commitment is a legal, valid and binding obligation of Seller enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
(yy)      Submission of Claims . All claims submitted to HUD for FHA Insurance for any Transaction Mortgage Loan have been submitted via the Home Equity Reverse Mortgage Information Technology (HERMIT) servicing system in accordance with the GNMA Guide (or via any other method specified in the GNMA Guide).
(zz)      Tax Service . The Transaction Mortgage Loan is covered by a life of loan, transferrable real estate tax service contract that may be assigned to Administrative Agent or Buyers.
([[)      Predatory Lending Regulations; High Cost Loans . No Transaction Mortgage Loan (i) is classified as High Cost Mortgage Loans (ii) is subject to any law, regulation or rule that (A) imposes liability on a mortgagee or a lender to a mortgagee for upkeep to a Mortgaged Property prior to completion of foreclosure thereon, or (B) imposes liability on a lender to a mortgagee for acts or omissions of the mortgagee or otherwise defines a mortgagee in a manner that would include a lender to a mortgagee.
(aaa)      Reserved .
(bbb)      Wet‑Ink Mortgage Loans . With respect to each Mortgage Loan that is a Wet‑Ink Mortgage Loan, the Settlement Agent has been instructed in writing by Seller to hold the related Mortgage Loan Documents as agent and bailee for Administrative Agent or Administrative Agent’s agent and to promptly forward such Mortgage Loan Documents in accordance with the provisions of the Custodial Agreement and the Escrow Instruction Letter.
(ccc)      FHA Mortgage Insurance . With respect to the FHA Loans, the FHA Mortgage Insurance Contract is or eligible to be in full force and effect and there exists no impairment to full recovery without indemnity to HUD or the FHA under FHA Mortgage Insurance. All necessary steps have been taken to keep such guaranty or insurance valid, binding and enforceable and each of such is the binding, valid and enforceable obligation of the FHA, to the full extent thereof, without surcharge, set‑off or defense. Each FHA Loan was originated in accordance with the criteria of an Agency for purchase of such Transaction Mortgage Loans.
(ddd)      Reserved.
(eee)      Reserved.
(fff)      Reserved.
(ggg)      TRID Compliance . With respect to each Transaction Mortgage Loan where the Mortgagor’s loan application for the Transaction Mortgage Loan was taken on or after October 3, 2015, such Transaction Mortgage Loan was originated in compliance with the TILA-RESPA Integrated Disclosure Rule, if applicable.
(hhh)      FHA HECMs . With respect to each FHA HECM (i) all of the related Mortgage Loan Documents, including the Mortgage Note, are in a form required by, or acceptable under, the HUD handbook provisions relating to reverse mortgage loans; (ii) all requirements as to any improvement and/or repair to the Mortgaged Property and to the disbursement of set-aside amounts for such FHA HECM have been complied with; (iii) all advances of principal secured by the related Mortgage are consolidated and such consolidated principal amount bears a single interest rate as set forth in the Asset Schedule; (iv) no portion of any proceeds of such FHA HECM received by the related Mortgagor on the closing date of such FHA HECM were disbursed at the closing for any purpose prohibited under the HUD handbook provisions relating to reverse mortgage loans (including, without limitation, for estate planning purposes); (v) the outstanding principal balance of the FHA HECM does not exceed the lesser of (x) 98% of the Maximum Claim Amount and (y) the related principal limit; (vi) all advances of principal made on such FHA HECM (A) shall automatically become subject to a Transaction under this Agreement without the requirement of Administrative Agent to remit any additional Purchase Price and (B) with the Seller disbursing such advances of principal to the related Mortgagor with its own funds and not the funds of any third party lender; (vii) such FHA HECM is eligible to be pooled into a HECM mortgage-backed security, but no participation in such FHA HECM shall have been pooled into a HECM mortgage-backed securitization; (viii) the related Mortgaged Property is lawfully occupied by the Mortgagor as such Mortgagor’s primary residence; (ix) the related principal limit, all scheduled payments and other calculation terms have each been calculated in accordance with and comply with all requirements of the HUD handbook provisions relating to reverse mortgage loans; (x) such FHA HECM bears interest at a rate of interest permitted in accordance with the provisions of the HUD handbook provisions relating to reverse mortgage loans; (xi) no Mortgagor under such FHA HECM is less than sixty-two (62) years old and is otherwise an eligible Mortgagor in accordance with the requirements of the HUD handbook provisions relating to reverse mortgage loans; (xii) each Mortgagor has received all counseling required under the HUD handbook provisions relating to reverse mortgage loans and (xiii) the Custodian holds the related Mortgage Note (except for Wet-Ink Mortgage Loans).


SCHEDULE 1-B

REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO REO SUBSIDIARY INTERESTS

The Seller Parties makes the following representations and warranties to Administrative Agent with respect to the REO Subsidiary Interests that are at all times subject to a Transaction hereunder and at all times while the Program Agreements and any Transaction hereunder is in full force and effect. With respect to those representations and warranties which are made to the best of a Seller’s knowledge, if it is discovered by such Seller Party or Administrative Agent that the substance of such representation and warranty is inaccurate, notwithstanding such Seller Party’s lack of knowledge with respect to the substance of such representation and warranty, such inaccuracy shall be deemed a breach of the applicable representation and warranty for purposes of determining Asset Value.
(a) Ownership . The REO Subsidiary Interests constitute all the issued and outstanding beneficial interests of all classes of the Capital Stock of such REO Subsidiary and are certificated.
(b)      Compliance with Law . Each REO Subsidiary Interest complies in all respects with, or is exempt from, all applicable requirements of federal, state or local law relating to such REO Subsidiary Interest.
(c)      Good Title . Immediately prior to the sale, transfer and assignment to Administrative Agent thereof, Seller has good title to, and is the sole owner and holder of the REO Subsidiary Interests, and Seller is transferring such REO Subsidiary Interests free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such REO Subsidiary Interests.
(d)      No Fraud . No fraudulent acts were committed by Seller or any of their respective Affiliates in connection with the issuance of such REO Subsidiary Interests.
(e)      No Defaults . No (i) monetary default, breach or violation exists with respect to any agreement or other document governing or pertaining to the REO Subsidiary Interests, or (ii) event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach or violation of the REO Subsidiary Interests.
(f)      No Modifications . Seller is not a party to any document, instrument or agreement, and there is no document, that by its terms modifies or affects the rights and obligations of any holder of the REO Subsidiary Interests and Seller has not consented to any material change or waiver to any term or provision of any such document, instrument or agreement and no such change or waiver exists.
(g)      Power and Authority . Seller has full right, power and authority to sell and assign the REO Subsidiary Interests and the REO Subsidiary Interests have not been cancelled, satisfied or rescinded in whole or part nor has any instrument been executed that would effect a cancellation, satisfaction or rescission thereof.
(h)      Consents and Approvals . Other than consents and approvals obtained as of the related Purchase Date or those already granted in the documents governing the REO Subsidiary Interests, no consent or approval by any Person is required in connection with Seller’s sale and/or Administrative Agent’s acquisition of the REO Subsidiary Interests, for Administrative Agent’s exercise of any rights or remedies in respect of the REO Subsidiary Interests or for Administrative Agent’s sale, pledge or other disposition of the REO Subsidiary Interests. No third party holds any “right of first refusal”, “right of first negotiation”, “right of first offer”, purchase option, or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies with respect to the REO Subsidiary Interests.
(i)      No Governmental Approvals . No consent, approval, authorization or order of, or registration or filing with, or notice to, any court or governmental agency or body having jurisdiction or regulatory authority over Seller is required for any transfer or assignment by the holder of the REO Subsidiary Interests to the Administrative Agent.
(j)      Original Certificate . Seller has delivered to Administrative Agent the original Certificate or other similar indicia of ownership of the REO Subsidiary Interests, however denominated, re-registered in Administrative Agent’s name.
(k)      No Litigation . Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of the REO Subsidiary Interests is or may become obligated.
(l)      Duly and Validly Issued . The Certificate has been duly and validly issued in the name of Administrative Agent.
(m)      No Notices . Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of the REO Subsidiary Interests is or may become obligated.
(n)      REO Subsidiary Interests as Securities . The REO Subsidiary Interests (a) constitute “securities” as defined in Section 8-102 of the Uniform Commercial Code (b) are not dealt in or traded on securities exchanges or in securities markets, (c) do not constitute investment company securities (within the meaning of Section 8-103(c) of the Uniform Commercial Code) and (d) are not held in a securities account (within the meaning of Section 8-103(c) of the Uniform Commercial Code).
(o)      No Distributions . There are (x) no outstanding rights, options, warrants or agreements for a purchase, sale or issuance, in connection with the REO Subsidiary Interests, (y) no agreements on the part of Seller to issue, sell or distribute the REO Subsidiary Interests (except as contemplated or permitted by this Agreement), and (z) no obligations on the part of Seller (contingent or otherwise) to purchase, repurchase, redeem or otherwise acquire any securities or any interest therein (other than from Administrative Agent or as contemplated by this Agreement) or to pay any dividend or make any distribution in respect of the REO Subsidiary Interests (other than to Administrative Agent or as contemplated by this Agreement until the repurchase of the REO Subsidiary Interests).
(p)      Conveyance; First Priority Lien . Upon delivery to the Administrative Agent of the Certificate (and assuming the continuing possession by the Administrative Agent of such Certificate in accordance with the requirements of applicable law) and the filing of a financing statement covering the REO Subsidiary Interests, as applicable, in the appropriate jurisdictions and naming the Seller as debtor and the Administrative Agent as secured party, Seller has conveyed and transferred to Administrative Agent all of its right, title and interest to the REO Subsidiary Interests, including taking all steps as may be necessary in connection with the endorsement, transfer of power, delivery and pledge of all REO Subsidiary Interests as “securities” (as defined in Section 8-102 of the Uniform Commercial Code) to Administrative Agent. The Lien granted hereunder is a first priority Lien on the REO Subsidiary Interests.
(q)      No Waiver . Seller has not waived or agreed to any waiver under, or agreed to any amendment or other modification of the REO Subsidiary Agreement except as agreed to by Administrative Agent in writing.
(r)      Status of REO Subsidiary . Since the date of its formation until the date of this Agreement, the REO Subsidiary has neither been engaged in any business or activity nor owned assets other than the assets made subject to Transactions hereunder and related Repurchase Assets.
(s)      Margin Regulations . The use of all funds acquired by Seller under this Agreement will not conflict with or contravene any of Regulations D, T, U or X promulgated by the Board of Governors of the Federal Reserve System as the same may from time to time be amended, supplemented or otherwise modified.



SCHEDULE 1-C
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO REO PROPERTY
    
The Seller makes the following representations and warranties to the Administrative Agent, with respect to the REO Property owned or deemed owned by the REO Subsidiary, that as of the Conversion Date for the contribution of REO Property by REO Subsidiary and as of the date of this Agreement and any Transaction hereunder relating to the REO Subsidiary Interests is outstanding and on each day while the Program Agreements and any Transaction hereunder is in full force and effect.
(a) Asset File . (i) The related Deed in the name of the REO Subsidiary shall have been submitted for recording within fifteen (15) Business Days of the related Mortgage Loan having been converted to REO Property, (ii) a copy of the recorded Deed shall be delivered to the applicable Custodian within one hundred and eighty (180) calendar days of such REO Property being acquired by the REO Subsidiary, and (iii) all other documents required to be delivered as part of the Asset File shall be delivered to the applicable Custodian within fifteen (15) Business Days of such REO Property being acquired by the REO Subsidiary or held by an attorney in connection with a foreclosure pursuant to a Bailee Letter.
(b) Ownership . The REO Subsidiary is the sole owner and holder of the REO Property and the Servicing Rights related thereto. The REO Subsidiary has not assigned or pledged the REO Property and the related Servicing Rights except as contemplated in the Agreement, and, except as otherwise disclosed to Administrative Agent in writing, the REO Property is free and clear of any lien or encumbrance other than (A) liens for real estate taxes not yet due and payable, (B) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of the related security instrument, such exceptions appearing of record being acceptable to mortgage lending institutions generally, and (C) other matters to which like properties are commonly subject which do not, individually or in the aggregate, materially interfere with the use, enjoyment or marketability of the REO Property.
(c) Title . Each Deed is genuine, constitutes the legal, valid and binding conveyance of the REO Property in fee simple to the REO Subsidiary or its designee.
(d) REO Property as Described . The information set forth in the related Asset Schedule and all other information or data furnished by, or on behalf of, Seller to Administrative Agent is true and correct in all material respects as of the date or dates on which such information is furnished.
(e) Taxes and Assessments . Except as otherwise disclosed to Administrative Agent in writing, there are no property taxes, governmental charges, levies or governmental assessments with respect to any REO Property that are delinquent by more than ninety (90) days; provided, however, that a disclosure of outstanding charges provided to Administrative Agent may include the total amount without specifying the related categories of outstanding charges.
(f) No Litigation . Other than any customary claim or counterclaim arising out of any eviction, foreclosure or collection proceeding relating to any REO Property or as otherwise disclosed in writing to Administrative Agent, there is no litigation, proceeding or governmental investigation pending, or any order, injunction or decree outstanding, existing or relating to Seller, REO Subsidiary or any of their Subsidiaries with respect to the REO Property that would materially and adversely affect the value of the REO Property.
(g) Existing Insurance . All improvements upon each REO Property are insured by a borrower or blanket hazard insurance policy in an amount at least equal to the lesser of (1) 100% of the maximum insurable value of such improvements; (2) the replacement value of such improvements; and (3) the amount of the BPO valuation. Each such insurance policy contains a standard mortgagee clause naming REO Subsidiary or Servicer, its successors and assigns as loss payee or named insured, as applicable. If such REO Property at the time of origination of the related mortgage loan was in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and such flood insurance has been made available) a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration is in effect with respect to such REO Property unless such REO Property is no longer so identified.
(h) No Mechanics’ Liens . Except as otherwise disclosed to Administrative Agent in writing, there are no mechanics’ or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the REO Property which are or may be liens prior to, or equal or coordinate with, the lien of the Mortgage.
(i) No Damage . Except as otherwise disclosed to Administrative Agent in writing, the REO Property is undamaged by water, fire, earthquake, earth movement other than earthquake, windstorm, flood, tornado, defective construction materials or work, or similar casualty which would cause such REO Property to become uninhabitable.
(j) No Condemnation . Except as otherwise disclosed to Administrative Agent in writing, there is no proceeding pending, or to Seller’s knowledge, threatened, for the total or partial condemnation of the REO Property.
(k) No Hazardous Materials . To Seller’s knowledge, there is no condition affecting any REO Property (x) relating to lead paint, radon, asbestos or other hazardous materials, (y) requiring remediation of any condition or (z) relating to a claim which could impose liability upon, diminish rights of or otherwise adversely affect Administrative Agent.
(l) Location and Type of REO Property . Unless otherwise agreed in writing by Administrative Agent, each REO Property is located in the U.S. or a territory of the U.S. and consists of a one- to four-unit residential property, which may include, but is not limited to, a single-family dwelling, townhouse, condominium unit, or unit in a planned unit development.
(m) No Fraudulent Acts . No fraudulent acts were committed by Seller or REO Subsidiary in connection with the acquisition of such REO Property.
(n) Acquisition of REO Property . With respect to each such REO Property, (i) such REO Property is a Mortgaged Property acquired by REO Subsidiary through foreclosure or by deed in lieu of foreclosure or otherwise, which was, prior to such foreclosure or deed in lieu of foreclosure, subject to the lien of a Mortgage Loan, and (ii) with respect to each such REO Property, upon the consummation of the related Transaction, the applicable Custodian shall have received the related Asset File and such Asset File shall not have been released from the possession of the applicable Custodian for longer than the time periods permitted under the Custodial Agreement.
(o) No Occupants . Except as otherwise disclosed in writing to Administrative Agent, no tenant or other party has any right to occupy or is currently occupying any REO Property. Other than with respect to an REO Property as to which the redemption period has not yet expired or the eviction process has not yet been completed, no holdover borrower has any right to occupy or is currently occupying any REO Property.
(p) Title Policy . From and after the date that is one (1) Business Day following the conversion of a Mortgage Loan to an REO Property, the REO Property is insured by either an American Land Title Association (“ ALTA ”) title insurance policy or other generally acceptable form of policy of title insurance acceptable to prudent mortgage lending institutions in the area where the related REO Property is located, issued by a title insurer acceptable to prudent mortgage lenders. With respect to each REO Property, REO Subsidiary is the sole insured of such policy, and such policy is in full force and effect and will be in full force and effect and inure to the benefit of Seller and its successors. To the Seller's knowledge, no claims have been made under such policy and no prior holder of the REO Property, including REO Subsidiary, has done by act or omission, anything that would impair the coverage of such policy.
(q) FHA/VA Insurance . Each REO Property (i) is covered by FHA Mortgage Insurance and there exists no impairment to full recovery without indemnity to HUD or the FHA under the FHA Mortgage Insurance, or (ii) is guaranteed, or eligible to be guaranteed by a VA Loan Guaranty Agreement, under the VA Regulations and there exists no impairment to full recovery without indemnity to the VA under the VA Loan Guaranty Agreement.


SCHEDULE 2

AUTHORIZED REPRESENTATIVES
SELLER AND REO SUBSIDIARY AUTHORIZATIONS
Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for Seller and REO Subsidiary under this Agreement:
Authorized Representatives for execution of Program Agreements and amendments
Name
Title
Signature
Jeffrey Baker
President
/s/ Jeffrey Baker
Cheryl A. Collins
Senior Vice President
/s/ Cheryl Collins
Andrew G. Dokos
Vice President & Treasurer
/s/ Andrew Dokos
 
 
 


Authorized Representatives for execution of Transaction Requests and day-to-day operational functions
Name
Title
Signature
Jeffrey Baker
President
/s/ Jeffrey Baker
Andrew G. Dokos
Vice President & Treasurer
/s/ Andrew Dokos
Robbye Johnson
Vice President
/s/ Robbye Johnson
 
 
 



ADMINISTRATIVE AGENT AND BUYER AUTHORIZATIONS
Any of the persons whose signatures and titles appear below, including any other authorized officers, are authorized, acting singly, to act for Administrative Agent and/or Buyers under this Agreement:
Name
Title
Signature
Margaret Dellafera
Vice President
/s/ Margaret Dellafera
Elie Chau
Vice President
/s/ Elie Chau
Deirdre Harrington
Vice President
/s/ Deirdre Harrington
Robert Durden
Vice President
/s/ Robert Durden
Ron Tarantino
Vice President
/s/ Ronald Tarantino
Michael Marra
Vice President
/s/ Michael Marra
 

EXHIBIT A
RESERVED.

.


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LEGAL02/36925940v15


EXHIBIT B
FORM OF TRADE ASSIGNMENT

[NAME] (“ Take-out Investor ”)
[Address]
[Address]
Attention: [__]
[DATE]
Ladies and Gentlemen:

Attached hereto is a correct and complete copy of your confirmation of commitment (the “ Commitment ”) for the following security (the “ Security ”):

Trade Date:         [__]
Settlement Date:     [__]
Security Description:    [__]
Coupon:        [__]
Price:            [__]
Par Amount:        [__]
Pool Number:        [__]

The undersigned customer (the “ Customer ”) has assigned the Security to Credit Suisse First Boston Mortgage Capital LLC (“ Credit Suisse ”) as security for Customer’s Obligations under the Amended and Restated Master Repurchase Agreement, as amended (the “ Agreement ”), by and among Customer, Credit Suisse and [________].

This is to confirm that (i) Take-out Investor’s obligation to purchase the Security on the above terms in accordance with the Commitment is in full force and effect, (ii) Take-out Investor will accept delivery of the Security directly from Credit Suisse, (iii) Take-out Investor will pay Credit Suisse for the Security, (iv) Customer unconditionally guarantees payment to Credit Suisse of all sums due under the Commitment, (v) Credit Suisse shall deliver the Security to Take-out Investor on the above terms and in accordance with the Commitment. Payment will be made “delivery versus payment” to Take-out Investor in immediately available funds. Capitalized terms used, but not otherwise defined herein, shall have the respective meanings assigned to such terms in the Agreement.


B-1
LEGAL02/36925940v15

Very truly yours,

[CUSTOMER]

By:                 
 
Name:                  
 
Title:              
Agreed to, confirmed and accepted:

[TAKEOUT INVESTOR]

By:                
 
Name:                
 
Title:                


EXHIBIT C
RESERVED


EXHIBIT D
FORM OF SELLER PARTY POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that [Reverse Mortgage Solutions, Inc.] [RMS REO CS, LLC] (“ Seller Party ”) hereby irrevocably constitutes and appoints Credit Suisse First Boston Mortgage Capital LLC (“ Administrative Agent ”) and any officer or agent thereof, with full power of substitution, as its true and lawful attorney‑in‑fact with full irrevocable power and authority in the place and stead of Seller Party and in the name of Seller Party or in its own name, from time to time in Administrative Agent’s discretion:
(a) in the name of Seller Party, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any assets purchased by Administrative Agent on behalf of certain Buyers and/or Repledgees under the Amended and Restated Master Repurchase Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “ Agreement ”) dated February 21, 2017 (the “ Assets ”) and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Administrative Agent for the purpose of collecting any and all such moneys due with respect to any other assets whenever payable;
(b)      to pay or discharge taxes and liens levied or placed on or threatened against the Assets;
(c)      (i) to direct any party liable for any payment under any Assets to make payment of any and all moneys due or to become due thereunder directly to Administrative Agent or as Administrative Agent shall direct; (ii) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Assets; (iii) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Assets; (iv) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Assets or any proceeds thereof and to enforce any other right in respect of any Assets; (v) to defend any suit, action or proceeding brought against Seller Party with respect to any Assets; (vi) to settle, compromise or adjust any suit, action or proceeding described in clause (v) above and, in connection therewith, to give such discharges or releases as Administrative Agent may deem appropriate; (vii) to cause the mortgagee of record to be changed to Administrative Agent on the FHA or VA system, as applicable; and (viii) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Assets as fully and completely as though Administrative Agent were the absolute owner thereof for all purposes, and to do, at Administrative Agent’s option and Seller Party’s expense, at any time, and from time to time, all acts and things which Administrative Agent deems necessary to protect, preserve or realize upon the Assets and Administrative Agent’s Liens thereon and to effect the intent of this Agreement, all as fully and effectively as Seller Party might do;
(d)      for the purpose of carrying out the transfer of servicing with respect to the Assets from Seller Party to a successor servicer appointed by Administrative Agent in its sole discretion and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such transfer of servicing, and, without limiting the generality of the foregoing, Seller Party hereby gives Administrative Agent the power and right, on behalf of Seller Party, without assent by Seller Party, to, in the name of Seller Party or its own name, or otherwise, prepare and send or cause to be sent “good‑bye” letters to all mortgagors under the Assets, transferring the servicing of the Assets to a successor servicer appointed by Administrative Agent in its sole discretion; and
(e)      for the purpose of delivering any notices of sale to mortgagors or other third parties, including without limitation, those required by law.
Seller Party hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.
Seller Party also authorizes Administrative Agent, from time to time, to execute, in connection with any sale, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Assets.
The powers conferred on Administrative Agent hereunder are solely to protect Administrative Agent’s interests in the Assets and shall not impose any duty upon it to exercise any such powers. Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to Seller Party for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER PARTY HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND ADMINISTRATIVE AGENT ON ITS OWN BEHALF AND ON BEHALF OF ADMINISTRATIVE AGENT’S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
[REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURES FOLLOW.]

IN WITNESS WHEREOF Seller Party has caused this Power of Attorney to be executed and Seller Party’s seal to be affixed this ______ day of ____________, 201__.

[REVERSE MORTGAGE SOLUTIONS, INC.]

By:
    
Name:
Title:
[RMS REO CS, LLC]
By:
    
Name:
Title:

                        
On the ______ day of ____________, 201__ before me, a Notary Public in and for said State, personally appeared ________________________________, known to me to be _____________________________________ of [Reverse Mortgage Solutions, Inc.] [RMS REO CS, LLC], the institution that executed the within instrument and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.
STATE OF
)
 
 
)
ss.:
COUNTY OF
)
 
IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.
_____________________________
Notary Public
My Commission expires ________________________________


EXHIBIT E
RESERVED


EXHIBIT F
RESERVED

EXHIBIT G
SELLER’S AND REO SUBSIDIARY’S TAX IDENTIFICATION NUMBER


Seller Tax ID: 77-0672274

REO Subsidiary: 81-1530433



    
    
EXHIBIT H
FORM OF CORRESPONDENT SELLER RELEASE

[insert date]

Reverse Mortgage Solutions, Inc.
14405 Walters Road, Suite 200
Houston, TX 77014
Attention: Treasurer, Andrew G. Dokos

Re: Correspondent Seller Release

Effective immediately upon the receipt (the date and time of such receipt, the “ Date and
Time of Sale ”) by [Name of Correspondent Seller] of $____________, [Name of Correspondent
Seller] hereby relinquishes any and all right, title and interest it may have in and to the mortgage
loans described in Exhibit A attached hereto (the “ Loans ”), including any security interest
therein, and certifies that all notes, mortgages, assignments and other documents in its possession
or in the possession of its custodial agent relating to such Loans have been released to Reverse Mortgage Solutions, Inc. or its designee as of the Date and Time of Sale.

[NAME OF CORRESPONDENT SELLER]

By:________________________________
Name:
Title:


EXHIBIT A TO CORRESPONDENT SELLER RELEASE

[List of Loans]


EXHIBIT I
FORM OF ESCROW INSTRUCTION LETTER TO BE PROVIDED BY SELLER BEFORE CLOSING
The escrow instruction letter (the “ Escrow Instruction Letter ”) shall also include the following instruction to the Settlement Agent (the “ Escrow Agent ”):
Credit Suisse First Boston Mortgage Capital LLC (the “ Administrative Agent ”), has agreed to provide funds (“ Escrow Funds ”) to Reverse Mortgage Solutions, Inc. (“ Seller ”) to finance certain mortgage loans (the “ Mortgage Loans ”) for which you are acting as Escrow Agent.
You hereby agree that (a) you shall receive such Escrow Funds from Administrative Agent to be disbursed in connection with this Escrow Instruction Letter, (b) you will hold such Escrow Funds in trust, without deduction, set‑off or counterclaim for the sole and exclusive benefit of Administrative Agent until such Escrow Funds are fully disbursed on behalf of Administrative Agent in accordance with the instructions set forth herein, and (c) you will disburse such Escrow Funds on the date specified for closing (the “ Closing Date ”) only after you have followed the Escrow Instruction Letter’s requirements with respect to the Mortgage Loans. In the event that the Escrow Funds cannot be disbursed on the Closing Date in accordance with the Escrow Instruction Letter, you agree to promptly remit the Escrow Funds to the Administrative Agent by re‑routing via wire transfer the Escrow Funds in immediately available funds, without deduction, set‑off or counterclaim, back to the account specified in Administrative Agent’s incoming wire transfer.
You further agree that, upon disbursement of the Escrow Funds, you will hold all Mortgage Loan Documents specified in the Escrow Instruction Letter in escrow as agent and bailee for Administrative Agent, and will forward the Mortgage Loan Documents and original Escrow Instruction Letter in connection with such Mortgage Loans by overnight courier to the Custodian within five (5) Business Days following the date of origination.
You agree that all fees, charges and expenses regarding your services to be performed pursuant to the Escrow Instruction Letter are to be paid by Seller or its borrowers, and Administrative Agent shall have no liability with respect thereto.
You represent, warrant and covenant that you are not an affiliate of or otherwise controlled by Seller, and that you are acting as an independent contractor and not as an agent of Seller.
The provisions of this Escrow Instruction Letter may not be modified, amended or altered, except by written instrument, executed by the parties hereto and Administrative Agent. You understand that Administrative Agent shall act in reliance upon the provisions set forth in this Escrow Instruction Letter, and that Administrative Agent on behalf of Buyers and certain Repledgees is an intended third party beneficiary hereof.
Whether or not an Escrow Instruction Letter executed by you is received by the Custodian, your acceptance of the Escrow Funds shall be deemed to constitute your acceptance of the Escrow Instruction Letter.
[ESCROW AGENT/SETTLEMENT AGENT]

By: ____________________________
Name: __________________________
Title: ___________________________


EXHIBIT J
FORM OF SERVICER NOTICE
[Date]
[________________], as Servicer
[ADDRESS]
Attention: ___________
Re:
Amended and Restated Master Repurchase Agreement, dated as of February 21, 2017 (the “ Repurchase Agreement ”), by and among Reverse Mortgage Solutions, Inc. (the “ Seller ”), RMS REO CS, LLC (the “ REO Subsidiary ” and together with Seller, the “ Seller Parties ”) and Credit Suisse First Boston Mortgage Capital LLC (the “ Administrative Agent ”) on behalf of Buyers and/or certain Repledgees, as applicable, Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Islands Branch and Alpine Securitization LTD (“ Buyers ”).
Ladies and Gentlemen:
[_____________] (the “ Servicer ”) is servicing certain mortgage loans and REO properties for Seller Parties pursuant to that certain Servicing Agreement between the Servicer and Seller Parties (the “ Servicing Agreement ”). Pursuant to the Repurchase Agreement among Administrative Agent, Buyers and the Seller Parties, the Servicer is hereby notified that Seller Parties have pledged to Administrative Agent for the benefit of Buyers certain mortgage loans which are serviced by Servicer which are subject to a security interest in favor of Administrative Agent.
Section 1.     Defined Terms .
(a)    As used herein, the following terms have the following meanings (all terms defined in this Section 1 or in other provisions of this Servicer Notice in the singular to have the same meanings when used in the plural and vice versa):
“ Accepted Servicing Practices ” means, with respect to any Mortgage Loan or REO Property, those mortgage servicing practices or property management practices, as applicable, of prudent mortgage lending institutions (including as set forth in the GNMA Guide, the FHA Regulations and the VA Regulations) which service mortgage loans and manage real estate properties, as applicable, of the same type as such Mortgage Loan or REO Property in the jurisdiction where the related Mortgaged Property is located, and which are in accordance with the applicable Agency servicing practices and procedures for mortgage-backed security pool mortgages as set forth in the applicable Agency guides, including future updates.
“ Affiliate ” means, with respect to any Person, any “affiliate” of such Person, as such term is defined in the Bankruptcy Code.
“ Agency ” means Freddie Mac, Fannie Mae or GNMA, as applicable.
“ Business Day ” means any day other than (A) a Saturday or Sunday and (B) a public or bank holiday in New York City or the State of California or Texas.
“ Custodian ” has the meaning assigned to such term in the Repurchase Agreement.
“ FHA ” means the Federal Housing Administration, an agency within HUD, or any successor thereto, and including the Federal Housing Commissioner and the Secretary of Housing and Urban Development where appropriate under the FHA Regulations.
“ FHA Mortgage Insurance ” means, mortgage insurance authorized under the National Housing Act, as amended from time to time, and provided by the FHA.
“ GNMA ” means the Government National Mortgage Association and any successor thereto.
“ GNMA Guide ” means the GNMA Mortgage-Backed Securities Guide, Handbook 5500.3, Rev. 1, as amended from time to time, and any related announcements, directives and correspondence issued by GNMA.
“ GNMA Security ” means a mortgage-backed security guaranteed by GNMA pursuant to the GNMA Guide.
“ Governmental Authority ” means any nation or government, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions over Seller Parties, Administrative Agent or Buyers, as applicable.
“ HUD ” means the United States Department of Housing and Urban Development or any successor thereto.
“ Inbound Account ” has the meaning assigned to such term in the Repurchase Agreement.
“ Income ” means, with respect to any Mortgage Loan or REO Property at any time until repurchased by the Seller, any principal received thereon or in respect thereof and all interest, dividends or other distributions thereon.
“ Lien ” means any mortgage, lien, pledge, charge, security interest or similar encumbrance.
“ Mortgage Loan ” means those mortgage loans subject to Transactions under the Repurchase Agreement.
“ Obligations ” has the meaning assigned to such term in the Repurchase Agreement.
“ Person ” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.
“ Program Agreements ” means, collectively, this Agreement, the Guaranty, each Custodial Agreement, the Pricing Side Letter, the Electronic Tracking Agreement, the Assignment, Assumption and Appointment Agreement, the Collection Account Control Agreement, the Netting Agreement, the Power of Attorney, each Servicing Agreement, and each Servicer Notice, if entered into.
“ Property ” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.
“ Purchased Asset ” has the meaning assigned to such term in the Repurchase Agreement.
“ Requirement of Law ” means, with respect to any Person, any law, treaty, rule or regulation or determination of an arbitrator, a court or other governmental authority, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“ Responsible Officer ” means as to any Person, the chief executive officer or, with respect to financial matters, the chief financial officer of such Person.
“ Servicer Material Adverse Effect ” means any (a) material adverse change to the property, business, operations or financial condition of Servicer, (b) material impairment of the ability of Servicer to perform its obligations under any of the Program Agreements to which it is a party, (c) material adverse effect on the validity, binding effect or enforceability against the Servicer of any of the Program Agreements to which Servicer is a party, or (d) material adverse effect on the rights and remedies of Administrative Agent as against Servicer under any of the Program Agreements to which Servicer is a party.
“ Servicer Termination Event ” has the meaning assigned to such term in Section 5(a).
“ Servicing Advances ” has the meaning assigned to such term in the Servicing Agreement.
“ Servicing Fees ” has the meaning assigned to such term in the Servicing Agreement.
“ REO Property ” means those REO properties subject to Transactions under the Repurchase Agreement.
“ VA ” means the U.S. Department of Veterans Affairs, an agency of the United States of America, or any successor thereto including the Secretary of Veterans Affairs.
“ VA Loan Guaranty Agreement ” means the obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the Mortgagor pursuant to the Servicemen’s Readjustment Act, as amended.
(b)    Capitalized terms used herein but not herein defined shall have the meanings ascribed thereto in the Repurchase Agreement.
Section 2.     Remittance of Collections .
(a)    The Servicer shall segregate all amounts collected on account of such Mortgage Loans and REO Properties in the Inbound Account in accordance with the terms and provisions of the Servicing Agreement. Following receipt by Servicer of written notice of the occurrence of an Event of Default, each of the Seller Parties hereby notifies and instructs the Servicer and the Servicer is hereby authorized and instructed to remit any and all amounts which would be otherwise payable to Seller Parties with respect to the Mortgage Loans and/or REO Property to the following account which instructions are irrevocable without the prior written consent of Administrative Agent:
[INSERT INBOUND ACCOUNT]
(b)    To the extent any of HUD or VA deducts, from amounts otherwise due on account of Mortgage Loans or REO Property subject to this Servicer Notice, any amounts owing by Servicer to HUD or VA, Servicer shall give prompt written notice thereof to Seller and Administrative Agent and shall deposit, within two (2) Business Days following notice or knowledge of such deduction by HUD or VA, such deducted amounts into the Inbound Account.
Section 3.     Agency Matters .
(a)    Servicer shall maintain its status as an approved servicer for the Agency, HUD and VA, in each case in good standing (each such approval, a “ Servicer Approval ”). Servicer has adequate financial standing, servicing facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans and REO Property of the same types as may from time to time constitute Mortgage Loans and REO Properties and in accordance with Accepted Servicing Practices.
(b)    Should Servicer for any reason, cease to possess all such Servicer Approvals, or should notification to the Agency or, to HUD, FHA or VA be required with respect to any non-compliance or breach, Servicer shall so notify Seller Parties and Administrative Agent immediately in writing. Notwithstanding the preceding sentence, Servicer shall take, all necessary action to maintain all of its Servicer Approvals at all times during the term of the Repurchase Agreement and each outstanding Transaction. Servicer shall service all Mortgage Loans and REO Properties in accordance with the FHA Regulations or VA Regulations, as applicable.
Section 4.     Covenants of Servicer . On and as of the date of this Servicer Notice and on each day until this Servicer Notice is no longer in force, Servicer covenants to permit representatives of Administrative Agent, upon five (5) Business Days’ prior notice (unless a Servicer Termination Event shall have occurred and is continuing, in which case, one (1) Business Day’s prior notice shall be required), during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its Properties, and to discuss its business and affairs with its officers, all to the extent requested by Administrative Agent as relating to the Mortgage Loans and underlying REO Property.
Section 5.     Servicer Termination Events .
(a)    Servicer’s right to service pursuant to each Servicing Agreement shall terminate upon the occurrence of any of the following (each a “ Servicer Termination Event ”):
(i)
An Event of Default;
(ii)
This Servicer Notice is deemed unenforceable;
(iii)
Servicer materially breaches or fails to comply with (A) the Servicing Agreement and such breach or failure continues uncured or unremedied for a period of thirty (30) calendar days or Servicer fails to diligently pursue a cure or remedy (without regard to any other cure periods) or (B) this Servicer Notice (relating to the deposit or transfer of funds) and such breach or failure continues uncured or unremedied for a period of two (2) Business Days (without regard to any other cure periods), in each case, after a Responsible Officer of a Seller Party or Servicer first learns of it;
(iv)
Servicer is unable to comply with the eligibility requirements, or ceases to be an approved servicer, of, in each case, GNMA, HUD or VA;
(v)
Servicer fails to make any required servicing advance, to the extent that such failure would be reasonably likely to impair FHA Mortgage Insurance coverage or VA Loan Guaranty Agreement coverage, with respect to the principal portion of any Mortgage Loan or would be reasonably likely to give rise to a liability to HUD, FHA or VA, as determined by Administrative Agent in its good faith discretion;
(vi)
Servicer fails to make a required deposit to the Inbound Account (i) which is not cured within one (1) Business Day of Seller Party’s knowledge of such failure, or (ii) to the extent such failure or failures occur on multiple occasions (regardless of any subsequent cure);
(vii)
Servicer provides a notice of its intent to resign as Servicer of the Mortgage Loans and REO Property and a new Servicer reasonably acceptable to Administrative Agent is not promptly appointed;
(viii)
Servicer is subject to FHA, HUD or VA fees or penalties which have not been paid or is subject to a set-off by any of FHA, HUD or VA which (A) is reasonably likely to result in a Servicer Material Adverse Effect or (B) failure or failures occur on a persistent and material basis after notice or knowledge thereof (regardless of any subsequent cure); or
(ix)
There shall occur a Servicer Material Adverse Effect, in the determination of Administrative Agent.
(b)     Upon the occurrence of a Servicer Termination Event at the Request of Administrative Agent, Servicer shall transfer the servicing to a successor servicer in accordance with the terms of the Servicing Agreement.
Section 6.     Notice of Event of Default .
(a)    Upon an Event of Default, Administrative Agent may send Servicer notice thereof (a “ Notice of Default ”) and Administrative Agent shall identify in the Notice of Default the Mortgage Loans and REO Property subject to an Event of Default.
(b)    Servicer may conclusively rely on any information or Notice of Default delivered by Administrative Agent, and Seller Parties shall indemnify and hold Servicer harmless for any and all claims asserted against it, and for any liabilities, losses, damages, judgments, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) imposed upon it for any actions taken by Servicer in connection with the delivery of such information or Notice of Default.
(c)    Following receipt of a Notice of Default from Administrative Agent, Servicer shall follow the instructions of Administrative Agent exclusively with respect to the Mortgage Loans and REO Properties, and shall deliver to Administrative Agent any information with respect to the Mortgage Loans and REO Properties reasonably requested by Administrative Agent.
(d)    Following receipt of a Notice of Default from Administrative Agent, Seller and Servicer shall cooperate in changing the mortgagee of record to a successor appointed by Administrative Agent.
Section 7.     Indemnification . Without limiting the rights of Seller Parties and Administrative Agent and Buyers set forth in this Servicer Notice, Servicer shall indemnify Seller Parties and Administrative Agent and Buyers for any and all liabilities, losses, damages, judgments, costs and expenses (including, without limitation, reasonable fees and expenses of counsel) suffered for any breach of a representation, warranty or covenant in connection with or relating to or arising out of the Servicing Agreement and this Servicer Notice. Without prejudice to the survival of any other agreement of Servicer hereunder, the covenants and obligations of Servicer contained in this Section 7 shall survive the termination of this Servicer Notice.
Section 8.     Delay Not Waiver; Remedies are Cumulative . No failure on the part of Administrative Agent or Buyers to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Administrative Agent of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All rights and remedies of Administrative Agent or Buyers provided for herein are cumulative and in addition to any and all other rights and remedies provided by law, the Program Agreements and the other instruments and agreements contemplated hereby and thereby, and are not conditional or contingent on any attempt by Administrative Agent or Buyers to exercise any of their rights under any other related document. Administrative Agent may exercise at any time after the occurrence of a Servicer Termination Event one or more remedies, as either may desire, and may thereafter at any time and from time to time exercise any other remedy or remedies.
Section 9.     Counterparts . This Servicer Notice may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Servicer Notice by signing any such counterpart.
Section 10.     Entire Agreement . This Servicer Notice embodies the entire agreement and understanding of the parties hereto and thereto and supersede any and all prior agreements, arrangements and understandings relating to the matters provided for herein and therein. No alteration, waiver, amendments, or change or supplement hereto shall be binding or effective unless the same is set forth in writing by a duly authorized representative of each party hereto.
Section 11.     Successors and Assigns . This Servicer Notice shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
Section 12.     Severability . If any provision of this Servicer Notice is declared invalid by any court of competent jurisdiction, such invalidity shall not affect any other provision of this Servicer Notice, and this Servicer Notice shall be enforced to the fullest extent permitted by law.
Section 13.     Back-up Administrative Agent; Successor Administrative Agent . In the event that the Administrative Agent gives the Servicer written notice that a back-up Administrative Agent (the “ Back-up Administrative Agent ”) has been appointed under the Repurchase Agreement, then to the extent that the Servicer subsequently receives written notice from the Back-up Administrative Agent that it has assumed the role of Administrative Agent thereunder (in such case, the “ Successor Administrative Agent ”), then the Successor Administrative Agent shall assume all rights and obligations of the Administrative Agent hereunder, with no further action required by the parties, and the Servicer shall follow the directions of the Successor Administrative Agent hereunder for all directions to be given by the Administrative Agent hereunder.
Section 14.     Servicer as Bailee . Servicer hereby acknowledges and agrees that on receipt of any Asset File, it shall hold such Asset File as bailee for Administrative Agent.
Section 15.     Governing Law; Jurisdiction; Waiver of Trial by Jury .
(a)    THIS SERVICER NOTICE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (EXCEPT FOR SECTION 5 1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
(b)    EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i)    SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS SERVICER NOTICE AND/OR ANY OTHER PROGRAM AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(ii)    CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii)    AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN THE REPURCHASE AGREEMENT OR AT SUCH OTHER ADDRESS OF WHICH ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED; AND
(iv)    AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
(c)    EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SERVICER NOTICE AGREEMENT, ANY OTHER PROGRAM AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Please acknowledge receipt of this instruction letter by signing in the signature block below and forwarding an executed copy to Administrative Agent promptly upon receipt. Any notices to Administrative Agent should be delivered to the following addresses: Eleven Madison Avenue, New York, New York 10010; Attention: Margaret Dellafera; Telephone: 212‑325‑6471.
Very truly yours,

[____________________]
By:     
Name:
Title:


ACKNOWLEDGED:
[____________________]
as Servicer
By:     
Title:
Telephone:
Facsimile:

REVERSE MORTGAGE SOLUTIONS, INC.
By:     
Name:
Title:
RMS REO CS, LLC
By:     
Name:
Title:


B-2
LEGAL02/36925940v15
Exhibit 10.23.5

EXECUTION VERSION

AMENDED AND RESTATED GUARANTY
THIS AMENDED AND RESTATED GUARANTY, dated as of February 21, 2017 (as amended, restated, supplemented, or otherwise modified from time to time, this “ Guaranty ”), is made by Walter Investment Management Corp., a Maryland corporation (the “ Guarantor ”), in favor of Credit Suisse First Boston Mortgage Capital LLC (the “ Administrative Agent” ) for the benefit of Buyers.
RECITALS
Guarantor previously delivered that certain Guaranty, dated as of February 23, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the “ Existing Guaranty ”) in favor of Administrative Agent, as buyer;
The Guarantor and the Administrative Agent have agreed that the Existing Guaranty be amended and restated in its entirety on the terms and subject to the conditions set forth herein;
Pursuant to the Amended and Restated Master Repurchase Agreement, dated as of February 21, 2017 (as amended, restated, supplemented, or otherwise modified from time to time, the “ Repurchase Agreement ”), among Reverse Mortgage Solutions, Inc. (the “ Seller ”), RMS REO CS, LLC (the “ REO Subsidiary ”, and together with Seller, each a “ Seller Party ” and collectively, the “ Seller Parties ”) Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Islands Branch (“ CS Cayman ” and a “ Buyer ”), Alpine Securitization LTD (“ Alpine ” and a “ Buyer ”) and the Administrative Agent on behalf of Buyers and Repledgees, the Administrative Agent on behalf of certain Buyers has agreed from time to time to enter into transactions in which the Seller Parties agree to transfer to Administrative Agent on behalf of Buyers certain Purchased Assets against the transfer of funds by Administrative Agent, with a simultaneous agreement by Administrative Agent to transfer to the applicable Seller Party such Purchased Assets at a date certain or on demand, against the transfer of funds by such Seller Party. Each such transaction shall be referred to herein as a “ Transaction ”. It is a condition precedent to the obligation of the Administrative Agent on behalf of Buyers to enter into future Transactions under the Repurchase Agreement that the Guarantor shall have executed and delivered this Guaranty to the Administrative Agent for the benefit of Buyers.
NOW, THEREFORE, in consideration of the foregoing premises, to induce the Administrative Agent and Buyers to enter into the Repurchase Agreement and to enter into Transactions thereunder, the Guarantor hereby agrees with the Administrative Agent and Buyers, as follows:
1. Defined Terms .
(a)      Unless otherwise defined herein, terms which are defined in the Repurchase Agreement and used herein are so used as so defined.
(b)      For purposes of this Guaranty, “Obligations” shall mean all obligations and liabilities of the Seller Parties to the Administrative Agent and Buyers, whether direct or indirect,

LEGAL02/36936773v5

absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, or out of or in connection with the Repurchase Agreement and any other Program Agreements and any other document made, delivered or given in connection therewith or herewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to the Administrative Agent and Buyers that are required to be paid by a party to the Transaction pursuant to the terms of the Program Agreements and costs of enforcement of this Guaranty) or otherwise.
2.      Guaranty .
(a)      The Guarantor hereby unconditionally and irrevocably guarantees to the Administrative Agent for the benefit of Buyers the prompt and complete payment and performance by the Seller Parties when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.
(b)      The Guarantor further agrees to pay any and all expenses (including, without limitation, all fees and disbursements of counsel) which may be paid or incurred by the Administrative Agent or Buyers in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, the Guarantor under this Guaranty. This Guaranty shall remain in full force and effect until the later of (i) the termination of the Repurchase Agreement or (ii) the Obligations are paid in full, notwithstanding that from time to time prior thereto the Seller Parties may be free from any Obligations.
(c)      No payment or payments made by the Seller Parties or any other Person or received or collected by the Administrative Agent from the Seller Parties or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the Guarantor hereunder which shall, notwithstanding any such payment or payments, remain liable for the amount of the Obligations until the Obligations are paid in full.
(d)      Guarantor agrees that whenever, at any time, or from time to time, the Guarantor shall make any payment to the Administrative Agent for the benefit of Buyers on account of the Guarantor’s liability hereunder, the Guarantor will notify the Administrative Agent in writing that such payment is made under this Guaranty for such purpose.
3.      Right of Set-off . The Buyers are hereby irrevocably authorized at any time and from time to time without notice to the Guarantor, any such notice being hereby waived by the Guarantor, to set off and appropriate and apply any and all monies and other property of the Guarantor, deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Buyers or any affiliate thereof to or for the credit or the account of the Guarantor, or any part thereof in such amounts as the Buyers may elect, on account of the Obligations and liabilities of the Guarantor

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hereunder and claims of every nature and description of the Buyers against the Guarantor, in any currency, whether arising hereunder, under the Repurchase Agreement or otherwise, as the Buyers may elect, whether or not the Administrative Agent has made any demand for payment and although such Obligations and liabilities and claims may be contingent or unmatured. The Administrative Agent shall notify the Guarantor promptly after receipt of notice of any such set-off and the application made by the Buyers, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Buyers under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Buyers may have.
4.      Subrogation . Notwithstanding any payment or payments made by the Guarantor hereunder or any set-off or application of funds of the Guarantor by the Buyers, the Guarantor shall not be entitled to be subrogated to any of the rights of the Administrative Agent or Buyers against the Seller Parties or any other guarantor or any collateral security or guarantee or right of offset held by the Administrative Agent or Buyers for the payment of the Obligations, nor shall the Guarantor seek or be entitled to seek any contribution or reimbursement from the Seller Parties or any other guarantor in respect of payments made by the Guarantor hereunder, until all amounts owing to the Administrative Agent or Buyers by the Seller Parties on account of the Obligations are paid in full and the Repurchase Agreement is terminated. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amounts shall be held by the Guarantor in trust for the Administrative Agent, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to the Administrative Agent in the exact form received by the Guarantor (duly indorsed by the Guarantor to the Administrative Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine.
5.      Amendments, etc. with Respect to the Obligations . Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor, and without notice to or further assent by the Guarantor, any demand for payment of any of the Obligations made by the Administrative Agent may be rescinded by the Administrative Agent, and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or Buyers, and the Repurchase Agreement, and the other Program Agreements and any other document in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. The Administrative Agent shall have no obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guaranty or any property subject thereto. When making any demand hereunder against the Guarantor, the Administrative Agent may, but shall be under no obligation to, make a similar demand on the Seller Parties or any other guarantor, and any failure by the

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Administrative Agent to make any such demand or to collect any payments from the Seller Parties or any such other guarantor or any release of the Seller Parties or such other guarantor shall not relieve the Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Administrative Agent or Buyers against the Guarantor. For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.
6.      Guaranty Absolute and Unconditional .
(a)      Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent upon this Guaranty or acceptance of this Guaranty; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived in reliance upon this Guaranty; and all dealings between the Seller Parties or the Guarantor, on the one hand, and the Administrative Agent on behalf of Buyers, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guaranty. Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Seller Parties or the Guarantor with respect to the Obligations. This Guaranty shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (i) the validity or enforceability of the Repurchase Agreement, the other Program Agreements, any of the Obligations or any collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent, (ii) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Seller Parties against the Administrative Agent or Buyers, or (iii) any other circumstance whatsoever (with or without notice to or knowledge of the Seller Parties or the Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Seller Parties for the Obligations, or of the Guarantor under this Guaranty, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against the Guarantor, the Administrative Agent may, but shall be under no obligation, to pursue such rights and remedies that they may have against the Seller Parties or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent to pursue such other rights or remedies or to collect any payments from the Seller Parties or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Seller Parties or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent on behalf of Buyers against the Guarantor. This Guaranty shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantor and their successors and assigns thereof, and shall inure to the benefit of the Administrative Agent, the Buyers and their respective successors, indorsees, transferees and assigns, until all the Obligations and the obligations of the Guarantor under this Guaranty shall have been satisfied by payment in full, notwithstanding that from time to time during the term of the Repurchase Agreement the Seller Parties may be free from any Obligations.

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(b)      Without limiting the generality of the foregoing, Guarantor hereby agrees, acknowledges, and represents and warrants to the Administrative Agent and Buyers as follows:
(i)      Guarantor hereby waives any defense arising by reason of, and any and all right to assert against the Administrative Agent and Buyers any claim or defense based upon, an election of remedies by the Administrative Agent and Buyers which in any manner impairs, affects, reduces, releases, destroys and/or extinguishes Guarantor’s subrogation rights, rights to proceed against the Seller Parties or any other guarantor for reimbursement or contribution, and/or any other rights of the Guarantor to proceed against the Seller Parties, against any other guarantor, or against any other person or security.
(ii)      Guarantor is presently informed of the financial condition of the Seller Parties and of all other circumstances which diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. The Guarantor hereby covenants that it will make its own investigation and will continue to keep itself informed of the Seller Parties’ financial condition, the status of other guarantors, if any, of all other circumstances which bear upon the risk of nonpayment and that it will continue to rely upon sources other than the Administrative Agent for such information and will not rely upon the Administrative Agent for any such information. Absent a written request for such information by the Guarantor to the Administrative Agent, Guarantor hereby waives its right, if any, to require the Administrative Agent to disclose to Guarantor any information which the Administrative Agent may now or hereafter acquire concerning such condition or circumstances including, but not limited to, the release of or revocation by any other guarantor.
(iii)      Guarantor has independently reviewed the Repurchase Agreement and related agreements and has made an independent determination as to the validity and enforceability thereof, and in executing and delivering this Guaranty to the Administrative Agent, Guarantor is not in any manner relying upon the validity, and/or enforceability, and/or attachment, and/or perfection of any Liens or security interests of any kind or nature granted by the Seller Parties or any other guarantor to the Administrative Agent, now or at any time and from time to time in the future.
7.      Reinstatement . This Guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Seller Parties or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Seller Parties or any substantial part of its property, or otherwise, all as though such payments had not been made.
8.      Payments . Guarantor hereby agrees that the Obligations will be paid to the Administrative Agent without set-off or counterclaim in U.S. Dollars.

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9.      Representations and Warranties . Guarantor makes and represents to Administrative Agent and Buyers as of the date hereof and as of each Purchase Date for any Transaction under the Repurchase Agreement the following representations and warranties:
(a)      The Guarantor (i) is a duly organized and validly existing corporation in good standing under the laws of the State of Maryland, (ii) has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the ownership, leasing or operation of its property or the conduct of its business requires such qualifications, unless such failure is not reasonably likely (either individually or in the aggregate) to cause a Material Adverse Effect.
(b)      The execution, delivery and performance of this Guaranty (i) have been duly authorized by all necessary limited liability company action on the part of Guarantor, (ii) will not violate any provision of applicable law, statue, rule or regulation or any order, writ, injunction or decree of any court or Governmental Authority applicable to Guarantor, (iii) will not violate any provision of the organizational documents of Guarantor, (iv) will not violate or result in a default under any provision of any indenture, material agreement, bond, note or other similar material instrument to which Guarantor is a party or by which Guarantor or any of its properties or assets are bound, and (v) will not result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any properties or assets of Guarantor.
(c)      This Guaranty when executed will constitute the legal, valid and binding obligation of Guarantor, enforceable in accordance with its terms, subject (i) as to the enforcement of remedies, to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and (ii) to general principles of equity.
(d)      Guarantor will realize a direct economic benefit as a result of the amounts paid by Administrative Agent to Seller Parties pursuant to the Repurchase Agreement.
10.      Reserved .
11.      Negative Covenants . Guarantor covenants and agrees with Administrative Agent that, during the term of the Repurchase Agreement it will make those covenants and agreements with Administrative Agent as set forth in Sections 6.03, 6.08 and 6.09 of the Credit Agreement. When making those covenants and agreements set forth in the Credit Agreement with the Administrative Agent under this Guaranty, the defined terms used therein unless modified hereunder shall have the meanings set forth in the Credit Agreement and section references and references to schedules and exhibits shall refer to those sections, schedules and exhibits in the Credit Agreement. To the extent provisions of the Credit Agreement are incorporated by reference and such provisions use other defined terms set forth in the Credit Agreement, such defined terms are hereby incorporated by reference as well. Notwithstanding that the Credit Agreement may be terminated, the provisions incorporated by reference into this Guaranty shall survive and continue to bind the Guarantor hereunder. Notwithstanding the foregoing, the following defined terms used in Article 6 of the

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Credit Agreement and sections in Article 6 of the Credit Agreement shall have the following meanings and/or usages and are hereby amended as follows under the Program Agreements:
•
“Borrower” shall mean “Guarantor”.
•
“Credit Agreement” shall mean that certain Amended and Restated Credit Agreement dated as of December 19, 2013, among Guarantor, as borrower, the lenders party thereto and Credit Suisse AG, as administrative agent and collateral agent as the same may be amended, restated, supplemented or otherwise modified from time to time. To the extent provisions of the Credit Agreement are incorporated by reference and such provisions use other defined terms set forth in the Credit Agreement, such defined terms are hereby incorporated by reference as well; provided that if any such provisions or defined terms are subsequently amended or modified, the provisions and defined terms that are incorporated by reference shall be deemed to be such amended or modified provisions and defined terms. Notwithstanding that the Credit Agreement may be terminated, the provisions incorporated by reference into this Guaranty shall survive and continue to bind the Guarantor hereunder.
•
The reference to the term “Closing Date” in the definition of Unrestricted Subsidiary (as used in Article 6) shall mean the “Closing Date” as defined in the Credit Agreement.
•
The use of the terms “Default” and “Event of Default” in Section 6.03 of the Credit Agreement as incorporated herein by reference shall mean a Default or Event of Default under the Credit Agreement and a Default or Event of Default solely related to Section 15(o) of the Repurchase Agreement.
•
All references to restrictions on dividends imposed on any Person other than the Guarantor shall be deemed deleted.
12.      Credit Agreement . Guarantor shall promptly provide to Administrative Agent all amendments, waivers, modifications and supplements to the Credit Agreement.
13.      Event of Default . If an Event of Default under the Repurchase Agreement shall have occurred and be continuing, the Guarantor agrees that, as between the Guarantor and Administrative Agent, the Obligations may be declared to be due for purposes of this Guaranty notwithstanding any stay, injunction or other prohibition which may prevent, delay or vitiate any such declaration as against a Seller Party and that, in the event of any such declaration (or attempted declaration), such Obligations shall forthwith become due by the Guarantor for purposes of this Guaranty.
14.      Severability . Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such

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prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
15.      Headings . The paragraph headings used in this Guaranty are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
16.      No Waiver; Cumulative Remedies . The Administrative Agent shall not by any act (except by a written instrument pursuant to paragraph 17 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law.
17.      Waivers and Amendments; Successors and Assigns; Governing Law . None of the terms or provisions of this Guaranty may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Guarantor and the Administrative Agent on behalf of Buyers, provided that any provision of this Guaranty may be waived by the Administrative Agent on behalf of Buyers in a letter or agreement executed by the Administrative Agent or by facsimile or electronic transmission from the Administrative Agent. This Guaranty shall be binding upon the successors and assigns of the Guarantor and shall inure to the benefit of the Administrative Agent on behalf of Buyers and its respective successors and assigns. Administrative Agent has the sole, exclusive and non-delegable right and power to enforce this Agreement and any other Program Agreement against the Guarantor, as agent for the other Buyers notwithstanding any term, conditions or provision of this Guaranty or any other Program Agreement to the contrary.
18.      Notices . Any and all notices, statements, demands or other communications hereunder may be given by a party to the other by mail, email, facsimile, messenger or otherwise to the address specified below, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other. All notices, demands and requests hereunder may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence. In all cases, to the extent that the related individual set forth in the respective “Attention” line is no longer employed by the respective Person, such notice may be given to the attention of a Responsible Officer of the respective Person or to the attention of such individual or individuals as subsequently notified in writing by a Responsible Officer of the respective Person.

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If to Guarantor:

Walter Investment Management Corp.
3000 Bayport Drive, Suite 1100
Tampa, Florida 33607
Attention: Stuart D. Boyd, Senior Vice President Administration and Deputy General Counsel
Phone Number: 813-421-7605
Fax Number: 813-281-5635
E‑mail: sboyd@walterinvestment.com

If to Administrative Agent:
Credit Suisse First Boston Mortgage Capital LLC
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue, 4th Floor
Attention: Margaret Dellafera
New York, New York 10010
Phone Number: 212‑325‑6471
Fax Number: 212‑743‑4810
E‑mail: margaret.dellafera@credit-suisse.com
with a copy to:

Credit Suisse First Boston Mortgage Capital LLC
c/o Credit Suisse Securities (USA) LLC
One Madison Avenue, 9th Floor
New York, NY 10010
Attention: Legal Department—RMBS Warehouse Lending
Fax Number: (212) 322‑2376
19.      Jurisdiction .
(a)      THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(b)      GUARANTOR HEREBY WAIVES TRIAL BY JURY. GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS IN ANY ACTION OR PROCEEDING. GUARANTOR HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION IT MAY HAVE TO, EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF

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NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS.
20.      Integration . This Guaranty represents the agreement of the Guarantor with respect to the subject matter hereof and there are no promises or representations by the Seller Parties or Guarantor relative to the subject matter hereof not reflected herein.
21.      Acknowledgments . Guarantor hereby acknowledges that:
(a)      Guarantor has been advised by counsel in the negotiation, execution and delivery of this Guaranty and the other Program Agreements;
(b)      the Administrative Agent does not have any fiduciary relationship to the Guarantor, and the relationship between the Administrative Agent and the Guarantor is solely that of surety and creditor; and
(c)      no joint venture exists between the Administrative Agent, Buyers and the Guarantor or among the Administrative Agent, Buyers, the Seller Parties and the Guarantor.
22.      Intent . This Guaranty is intended to constitute a security agreement or other arrangement or other credit enhancement related to the Repurchase Agreement and Transactions thereunder as defined under Sections 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.
23.      Amendment and Restatement . The parties desire to enter into this Guaranty in order to amend and restate the Existing Guaranty in its entirety. The amendment and restatement of the Existing Guaranty shall become effective on the date hereof, and the Guarantor shall hereafter be bound by the terms and conditions of this Guaranty and the other Program Agreements. This Guaranty amends and restates the terms and conditions of the Existing Guaranty, and is not a novation of any of the agreements or obligations incurred pursuant to the terms of the Existing Guaranty. Accordingly, all of the agreements and obligations incurred pursuant to the terms of the Existing Guaranty are hereby ratified and affirmed by the parties hereto and remain in full force and effect. All references to the Existing Guaranty in any Program Agreement or other document or instrument delivered in connection therewith shall be deemed to refer to this Guaranty and the provisions hereof. This Guaranty may be amended from time to time only by written agreement of the Guarantor and the Administrative Agent.
[Signature pages follow]


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IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered as of the date first above written.
Walter Investment Management Corp., as Guarantor
By: /s/ Cheryl Collins                
Name: Cheryl Collins
Title: Senior Vice President and Treasurer

Signature Page to the Amended and Restated Guaranty
Exhibit 10.24.2
EXECUTION VERSION




February 17, 2017


Jonathan Pedersen
330 East 30th Street
New York, New York 10016


Re: Retention Agreement
Dear Jon:
In recognition of your past services and your agreement to continue in your position as Chief Legal Officer/General Counsel and Secretary of Walter Investment Management Corp. (the “ Company ”), you shall be entitled to receive incentive and retention bonus compensation upon the terms and conditions set forth in this letter agreement (this “ Agreement ”). Reference is made hereby to your letter agreement with the Company dated October 16, 2013 (the “ Employment Agreement ”).

1.
2016 Annual Bonus . You shall be entitled to a 2016 annual bonus, as determined by the Company’s Compensation Committee, in the amount of $650,000 , payable within three (3) business days of your execution of this Agreement. Such amount is in full satisfaction of any entitlement or eligibility you may have to any annual bonus payable in respect of calendar year 2016, whether pursuant to the Company’s 2016 Management Incentive Plan, the Employment Agreement, or otherwise.
2.
Retention Bonus . You shall be entitled to a retention bonus in the amount of $250,000 . The retention bonus shall be paid on March 31, 2017, provided that you remain employed and continue to perform your duties to the Company through such date, including with respect to the preparation and filing with the SEC of the Company’s 2016 Form 10-K prior to such date. Notwithstanding the foregoing, if the Company terminates your employment without “Cause” (as defined in the Employment Agreement), you shall receive such payment within three (3) business days of the date of such termination.
3.
Other Programs and Agreements . The payments hereunder shall not be taken into account for purposes of any other compensation or benefit program of the Company, nor for the calculation of any rights or benefits under your Employment Agreement. This Agreement shall have no effect on any awards you have previously received to equity incentive compensation, which shall continue to be governed by the terms thereof.
4.
Withholding Taxes . The incentive and retention bonus compensation payable under this Agreement shall be subject to withholding for federal, state or local taxes (including, but not limited to, any social security contributions) as shall be required to be withheld pursuant to any applicable law or regulation.
5.
Section 409A . The payments and benefits under this Agreement are intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively “ Section 409A ”), whether pursuant to





the short-term deferral exception or otherwise, and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be exempt from Section 409A.
6.
Assignment . You may not assign your rights under this Agreement except upon your death. This Agreement shall be binding upon the Company and its successors and assigns.
7.
Entire Agreement . This Agreement sets forth the entire understanding of the Company and you regarding the subject matter hereof and supersedes all prior agreements, understandings and inducements, whether express or implied, oral or written; provided , however , this Agreement does not impact, alter, modify, amend or otherwise supersede any of the rights or obligations of either party under the Employment Agreement, which remains in full force and effect. No modification or amendment of this Agreement shall be effective without a prior written agreement signed by you and the Company.
8.
Governing Law . This Agreement shall be interpreted under and in accordance with the laws of the State of Florida without regard to conflicts of laws principles thereof.
Sincerely,

WALTER INVESTMENT MANAGEMENT
CORP.

/s/ Anthony Renzi
By: Anthony Renzi
Title: CEO and President


ACCEPTED AND AGREED AS OF THE
DATE BELOW:

/s/ Jonathan Pedersen
By: Jonathan Pedersen

Date: February 17, 2017





Exhibit 10.25.2

Execution Copy

SEPARATION AGREEMENT

This Separation Agreement (this “ Agreement ”), dated as of the date set forth on the signature page hereto, confirms the following understandings and agreements between Walter Investment Management Corp. (the “ Company ” and, together with its subsidiaries and affiliates, collectively, the “ Company Group ”) and David Schneider (hereinafter referred to as “ you ” or “ your ”). You acknowledge and agree that this Agreement and the Release (as defined below) were provided to you on November 17, 2016.
In consideration of the promises set forth herein, you and the Company agree as follows:
1. Termination of Employment/Employment Agreement; Resignation from Offices .
(a)      You hereby confirm that your employment with the Company and all other members of the Company Group terminated effective as of the close of business on October 12, 2016 (the “ Separation Date ”). In addition, you hereby confirm and the Company hereby acknowledges your resignation, effective as of the Separation Date, as an employee, officer, director, agent, representative or similar position of all members of the Company Group (the “ Officer/Director Resignation ”). Except as otherwise provided for herein, the employment agreement between you and the Company, dated as of February 10, 2015 (the “ Employment Agreement ”), is hereby terminated as of the Separation Date. You agree to execute and deliver to the applicable member of the Company Group such documents concerning such separation from employment (and any related service) as may reasonably requested by such member of the Company Group.
(b)      From and after the Separation Date you will not represent yourself as being an employee, officer, director, agent or representative of any member of the Company Group.
2.      Separation Payments and Benefits; Treatment of Equity-Based Awards .
(a)      The Separation Date shall be the termination date of your employment for purposes of participation in and coverage under all benefit plans and programs sponsored by or through any member of the Company Group. In connection with your separation from employment with the Company Group, you will receive: (i) any accrued but unpaid base salary earned through the Separation Date, payable in accordance with the Company’s usual payroll practices or such earlier date as may be required by applicable law; (ii) reimbursement for any properly submitted, but unreimbursed, business expenses incurred on or prior to the Separation Date and in accordance with the Company’s expense policy (to be eligible for such reimbursement, you must submit any such expenses within forty-five (45) days following the Separation Date); and (iii) payment for any accrued but unused vacation days, to the extent, and in the amounts provided under the Company’s applicable policies and arrangements. In addition, you will be entitled to receive any and all vested and non-forfeitable benefits provided under any employee benefit plans maintained by the Company in which you participated prior to and


097231-0021-15408-Active.20363104.18        
2

including the Separation Date (excluding any employee benefit plan providing severance or similar benefits), in each case, in accordance with the terms of such plans and applicable law.
(b)      As you are aware, in connection with your employment with the Company, you were granted (i) 3,460 restricted stock units (“ RSUs ”) pursuant to that certain Company Restricted Stock Unit Award Agreement Under the 2011 Omnibus Incentive Plan (Amended and Restated May 3, 2013), dated as of March 24, 2014 (the “ 2014 RSU Agreement ”), (ii) 22,879 RSUs pursuant to that certain Company Restricted Stock Unit Award Agreement Under the 2011 Omnibus Incentive Plan (Amended and Restated May 3, 2013), dated as of April 6, 2015 (the “ 2015 RSU Agreement ”), (iii) 10,382 performance shares pursuant to that certain Company Performance Share Award Agreement Under the 2011 Omnibus Incentive Plan (Amended and Restated May 3, 2013), dated as of March 24, 2014 (the “ 2014 Performance Share Agreement ”), (iv) 22,879 performance shares pursuant to that certain Company Performance Share Award Agreement Under the 2011 Omnibus Incentive Plan (Amended and Restated May 3, 2013), dated as of April 6, 2015 (the “ 2015 Performance Share Agreement ”), (v) 121,428 stock options pursuant to that certain 2011 Omnibus Incentive Plan of Walter Investment Management Corp. Nonqualified Option Award Agreement, dated as of April 6, 2015 (the “ 2015 Stock Option Agreement ”), and (vi) 146,789 stock options pursuant to that certain Company Nonqualified Stock Options Award Agreement under the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016), dated as of July 8, 2016 (the “ 2016 Stock Option Agreement ” and, together with the 2014 RSU Agreement, the 2015 RSU Agreement, the 2014 Performance Share Agreement, the 2015 Performance Share Agreement and the 2015 Stock Option Agreement, collectively, the “ Grant Agreements ” and each RSU, stock option and performance share granted thereunder, individually and collectively, the “ Equity Awards ”). Pursuant to the terms of the applicable Grant Agreements, in connection with your termination of employment, you are entitled to retain (x) 40,476 stock options that were unvested as of the Separation Date granted pursuant to the 2015 Stock Option Agreement, and (y) 146,789 stock options that were unvested as of the Separation Date granted pursuant to the 2016 Stock Option Agreement (such options in clauses (x) and (y), the “ Retained Options ”), which Retained Options will continue to vest following the Separation Date in accordance with the 2015 Stock Option Agreement and the 2016 Stock Option Agreement, as applicable, and shall remain exercisable in accordance with, and subject to the terms and conditions of, such agreements. You acknowledge and agree that, as of the Separation Date, other than the Retained Options, all Equity Awards granted to you that were unvested as of the Separation Date were cancelled and that you have no further rights with respect thereto. With respect to vested or retained Equity Awards, such awards shall continue to be governed by the terms of the applicable Grant Agreements and the Company’s 2011 Omnibus Incentive Plan (amended and restated June 9, 2016). Notwithstanding the foregoing, the Company hereby waives Section 3(e) of each of the 2015 Stock Option Agreement and 2016 Stock Option Agreement.
(c)      In addition to the payments, rights and benefits provided under Sections 2(a) and (b) above, subject to (i) your continued compliance with the terms of (A) this Agreement and (B) the restrictive covenants set forth in Sections 8(a), 8(c), 9 and 10 of the Employment Agreement, (ii) your timely execution, delivery and non-revocation of the Release of Claims attached hereto as Exhibit A (the “ Release ”) within the time period provided for therein, and (iii)

097231-0021-15408-Active.20363104.18        
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the Officer/Director Resignation, the Company will provide you with the following payments and benefits (collectively, the “ Consideration ”):
(i)      An amount equal to $98,000, payable in a lump sum on the first regularly scheduled payroll date immediately following the Release Effective Date (as defined in the Release);
(ii)      an amount equal to $425,000, which represents twelve (12) months of your Base Salary (as defined in your Employment Agreement) as in effect on the Separation Date, payable over a period of six (6) months in accordance with the Company’s normal payroll practices, with the first of such installments to be paid on the first regularly scheduled payroll date immediately following the Release Effective Date;
(iii)      an amount equal to $690,000 which represents the sum of (x) your Annual Bonus (as defined in your Employment Agreement) for a period of twelve (12) months and (y) a pro-rated Annual Bonus for the year of termination, which amount shall be payable in three (3) substantially equal installments, with one (1) installment payable on each of (A) the first regularly scheduled payroll date immediately following the Release Effective Date, (B) the first regularly scheduled payroll date immediately following the date that is three (3) months following the Release Effective Date and (C) the first regularly scheduled payroll date immediately following the date that is six (6) months following the Release Effective Date, provided that, if such amount is not evenly divisible by three (3), then the installments shall be as equal as possible with the smaller installment(s) payable first; and
(iv)      subject to your timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”) and under the Company’s group health and dental plans, so long as you are receiving COBRA continuation coverage in accordance with COBRA, the Company will pay, on your behalf, the Company’s portion of health, dental and/or vision benefits for a period of twelve (12) months (the “ COBRA Benefits Payment Period ”) in the same amount as would be paid in respect of similarly situated active employees (the “ Company COBRA Payment ”). Notwithstanding the foregoing, if the Company determines, in its reasonable judgment, that providing the Company COBRA Payment would result in the imposition of any excise taxes on the Company for failure to comply with the non-discrimination requirements of the Patient Protection and Affordable Care Act of 2010, as amended, and/or the Health Care and Education Reconciliation Act of 2010, as amended (to the extent applicable), then, an amount equal to the Company COBRA Payment shall thereafter be paid to you as currently taxable compensation in substantially equal monthly installments over the COBRA Benefits Payment Period.
(d)      You acknowledge and agree that the payments and other rights and benefits provided pursuant to this Section 2 are being made in full discharge of any and all liabilities and obligations of the Company Group to you, monetarily or with respect to employee benefits or otherwise, including, but not limited to, any and all obligations arising under your Employment Agreement and any other alleged written or oral employment agreement, policy,

097231-0021-15408-Active.20363104.18        
4

plan or procedure of any member of the Company Group and/or any alleged understanding or arrangement between you and any member of the Company Group (other than claims for vested and non-forfeitable benefits under an employee benefit, insurance, or pension plan of any member of the Company Group (excluding any employee benefit plan, policy or arrangement providing severance or similar benefits)), subject to the terms and conditions of such plan(s) and claims for indemnification under any indemnification agreement with the Company to which you may be a party, subject to the terms and conditions of such agreement).
(e)      You acknowledge that the Company may withhold from any amounts payable under this Agreement such U.S. federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
3.      Release and Waiver of Claims . As a condition of your right to receive the Consideration, you hereby agree to execute the Release prior to the expiration of the Review Period (as defined in the Release) and deliver the Release no later than the first (1 st ) business day following the expiration of the Review Period. It is further expressly understood that the Company’s payment obligations under Section 2 shall cease in the event you breach the restrictive covenants set forth in Sections 8(a), 8(c), 9 and 10 of your Employment Agreement and, upon such event, to the fullest extent permitted by applicable law, you will be required to repay any Consideration received prior to such breach; provided , however , that you shall remain eligible for continuation coverage for the remainder of the period required under COBRA, if any, at the full rate charged to all other similarly-situated former employees entitled to such continuation coverage.
4.      No Suit . You represent and warrant that you have not previously filed, and, subject to Section 5(a) below, to the maximum extent permitted by law agree that you will not file, a complaint, charge or lawsuit regarding any of the claims released herein against any members of the Company Group. If, notwithstanding this representation and warranty, you have filed or file such a complaint, charge or lawsuit, you agree that you shall cause such complaint, charge or lawsuit to be dismissed with prejudice and shall pay any and all costs required in obtaining dismissal of such complaint, charge or lawsuit, including without limitation the attorneys’ fees of any of the Company Parties (as defined in Exhibit A , attached hereto) against whom you have filed such a complaint, charge, or lawsuit.
5.      Affirmative Covenants .
(a)      Nothing in this Agreement or in the Release shall prohibit or impede you from communicating, cooperating or filing a complaint with any U.S. federal, state or local governmental or law enforcement branch, agency or entity (collectively, a “ Governmental Entity ”) with respect to possible violations of any U.S. federal, state or local law or regulation, or otherwise making disclosures to any Governmental Entity, in each case, that are protected under the whistleblower provisions of any such law or regulation, provided that in each case such communications and disclosures are consistent with applicable law and nothing herein shall preclude your right to receive an award from a Governmental Entity for information provided under any whistleblower program. You do not need the prior authorization of (or to give notice to) the Company regarding any such communication or disclosure. You hereby confirm that you

097231-0021-15408-Active.20363104.18        
5

understand and acknowledge that an individual shall not be held criminally or civilly liable under any U.S. federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a U.S. federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. You understand and acknowledge further that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order. Notwithstanding the foregoing, under no circumstance will you be authorized to disclose any information covered by attorney-client privilege or attorney work product of the Company without prior written consent of the Company’s General Counsel or other officer designated by the Company.
(b)      You acknowledge and agree that this Agreement is a confidential matter and agree that you have not, may not, and shall not disclose the existence or terms of this Agreement (including any amounts paid in connection with this Agreement) to any third party, except as required by applicable law and unless and until this Agreement is disclosed by the Company as may be required by law. Further, you understand that you may disclose the terms of this Agreement to your spouse, personal attorney, accountant or tax advisor, provided you instruct such person that the information is confidential and not to be disclosed.
(c)      Cooperation . (i) You agree that you will provide reasonable cooperation to the members of the Company Group and the Company’s counsel in connection with any investigation, action, administrative proceeding or litigation (or any appeal therefrom) relating to any matter that occurred during your employment with any member of the Company Group in which you were involved or of which you have knowledge. In consideration for your compliance with this Section 5(c), the Company agrees to reimburse you for reasonable out-of-pocket expenses incurred at the request of the Company. The Company agrees that any requests for cooperation shall take into account and accommodate your employment obligations following the Separation Date. This provision shall survive any termination of this Agreement.
(ii)    You agree that, in the event you are subpoenaed by any person or entity (including, but not limited to, any government agency) to give testimony or provide documents (in a deposition, court proceeding or otherwise) which in any way relates to your employment by the Company, you will give prompt notice of such request to the Company’s General Counsel and will make no disclosure until the Company has had a reasonable opportunity to contest the right of the requesting person or entity to such disclosure.
(d)      Return of Property . You agree that you will promptly return to the Company all property belonging to the Company Group, including, but not limited to, all proprietary and/or confidential information and documents (including any copies thereof) in any form belonging to the Company Group, and any other equipment or property belonging to any member of the Company Group in your possession, including laptop, smart phone, beeper, keys,

097231-0021-15408-Active.20363104.18        
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card access to the building and office floors, Employee Handbook, phone card, computer user name and password, disks and/or voicemail code.
6.      Successors and Assigns . The provisions hereof shall inure to the benefit of your heirs, executors, administrators, legal personal representatives and assigns and shall be binding upon your heirs, executors, administrators, legal personal representatives and assigns. You hereby represent that you have not assigned any claims which you may have against the Company Group.
7.      Severability . If any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect. The illegality or unenforceability of such provision, however, shall have no effect upon and shall not impair the enforceability of any other provision of this Agreement.
8.      Non-Admission . Nothing contained in this Agreement will be deemed or construed as an admission of wrongdoing or liability on the part of any member of the Company Group.
9.      No Additional Payments . The payments, rights and benefits described in this Agreement will be the only such payments, rights and benefits you are to receive as a result of your termination of employment and you agree you are not entitled to any additional payments, rights or benefits not otherwise described in this Agreement. You hereby acknowledge and agree that you are not eligible to be a participant in any severance or incentive compensation plan of any member of the Company Group. Any payments, rights or benefits received under this Agreement will not be taken into account for purposes of determining benefits under any employee benefit plan of any member of the Company Group, except to the extent required by law, or as otherwise expressly provided by the terms of such plan.
10.      Entire Agreement . This Agreement and the Release constitute the entire understanding and agreement of the parties hereto regarding the termination of your employment. This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating to the subject matter of this Agreement, including, without limitation, your Employment Agreement and the Grant Agreements, except that it does not replace (x) Sections 5, 8(a), 8(c), 9 – 12 and 16 of your Employment Agreement, which you and the Company agree shall remain in full force and effect and that you are obligated to comply with all such provisions, (y) the 2015 Stock Option Agreement (other than Section 3(e) therein), or (z) the 2016 Stock Option Agreement (other than Section 3(e) therein). For the avoidance of doubt, (a) the Company hereby waives Section 8(b) of the Employment Agreement and (b) the Company specifically reminds you that Section 11 of your Employment Agreement regarding the Company’s right to claw back any amount paid to you pursuant to the Employment Agreement or otherwise remains in effect.
11.      409A . This Agreement is intended to comply with the short-term deferral rule under Treasury Regulation Section 1.409A-1(b)(4) and the separation pay plans rule under Treasury Regulation Section 1.409A-1(b)(9) and to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and shall be construed and interpreted in

097231-0021-15408-Active.20363104.18        
7

accordance with such intent, provided that, if any payments or benefits provided at any time hereunder involves nonqualified deferred compensation within the meaning of Code Section 409A, it is intended to comply with the applicable rules with regard thereto and shall be interpreted accordingly.
12.      Governing Law; Jurisdiction . THIS AGREEMENT SHALL BE INTERPRETED UNDER AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICTS OF LAWS. THE PARTIES HERETO AGREE TO RESOLVE ANY DISPUTE OVER THE TERMS AND CONDITIONS OR APPLICATION OF THIS AGREEMENT THROUGH BINDING ARBITRATION PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION (“ AAA ”). THE ARBITRATION WILL BE HEARD BY ONE ARBITRATOR TO BE CHOSEN AS PROVIDED BY THE RULES OF THE AAA AND SHALL BE HELD IN TAMPA, FLORIDA.
13.      Counterparts . This Agreement may be executed in multiple original counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same document.
*    *    *


097231-0021-15408-Active.20363104.18        
8


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth below.

Dated: December 2 , 2016

WALTER INVESTMENT MANAGEMENT CORP.



/s/ Anthony Renzi        
By:
Anthony Renzi
Title:
Chief Executive Officer and President






/s/ David Schneider        
David Schneider



097231-0021-15408-Active.20363104.18        



RELEASE OF CLAIMS
As used in this Release of Claims (this “ Release ”), the term “claims” will include all claims, covenants, warranties, promises, undertakings, actions, suits, causes of action, obligations, debts, accounts, attorneys’ fees, judgments, losses, and liabilities, of whatsoever kind or nature, in law, in equity, or otherwise. Capitalized terms not otherwise defined herein shall have the meaning set forth in my Separation Agreement, dated December 2, 2016, and to which this Release is attached as an Exhibit (the “ Separation Agreement ”).
I intend the release contained herein to be a general release of any and all claims to the fullest extent permissible by law.
For and in consideration of the foregoing, the Consideration and other payments and benefits described in the Separation Agreement, and other good and valuable consideration, I, David Schneider, for and on behalf of myself and my heirs, administrators, executors, and assigns, effective the date on which this Release becomes effective pursuant to its terms, do fully and forever release, remise, and discharge the Company Group, together with their respective current and former officers, directors, partners, members, shareholders, fiduciaries, counsel, employees, representatives, successors, assigns, and agents and family members of the aforementioned (collectively, and with the Company Group, the “ Company Parties ”) from any and all claims, complaints, charges, liabilities, demands, causes of action (whether known or unknown, fixed or contingent) whatsoever up to the date hereof that I had, may have had, or now have against the Company Parties, for or by reason of any matter, cause, or thing whatsoever, including any right or claim arising out of or attributable to my employment or the termination of my employment with the Company or otherwise, whether for (by way of example only) tort, breach of express or implied employment contract, intentional infliction of emotional distress, wrongful termination, unjust dismissal, defamation, libel, slander, claims for personal injury, harm, or other damages (whether intentional or unintentional and whether occurring on the job or not including, without limitation, negligence, misrepresentation, fraud, assault, battery, invasion of privacy, and other such claims) or under any U.S. federal, state, or local law, ordinance, rule, regulation or common law dealing with employment, including, but not limited to, discrimination in employment based on age, race, sex, national origin, handicap, religion, disability, or sexual orientation. This release of claims includes, but is not limited to, all claims arising under the Age Discrimination in Employment Act of 1967 (“ ADEA ”), Title VII of the Civil Rights Act of 1964, Section 1981 of the Civil Rights Act of 1866, the Americans with Disabilities Act of 1990, the Civil Rights Act of 1991, the Family and Medical Leave Act, the Equal Pay Act, the Older Workers Benefit Protection Act of 1990, the Sarbanes-Oxley Act of 2002, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Employee Retirement Income Security Act of 1974, the Immigration and Reform Control Act, the Uniformed Services Employment and Reemployment Rights Act, the Rehabilitation Act of 1973, the Workers Adjustment and Retraining Notification Act, the Fair Labor Standards Act, and the National Labor Relations Act, each as may be amended from time to time, and all other U.S. federal, state,


097231-0021-15408-Active.20363104.18        
10

and local laws, regulations or ordinances, the common law, and any other purported restriction on an employer’s right to terminate the employment of employees.
I acknowledge and agree that as of the date I execute this Release, I have no knowledge of any facts or circumstances that give rise or could give rise to any claims, including any claims under any of the laws listed in the preceding paragraph.
By executing this Release, I specifically release all claims relating to my employment and its termination under ADEA, a U.S. federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefit plans.
Notwithstanding the foregoing, nothing in this Release shall be a waiver of: (i) any claim by me to enforce the terms of this Release or the Separation Agreement, including any rights with respect to the payment of the amounts and provision of benefits as set forth specifically in Section 2 of the Separation Agreement; (ii) any claims that cannot be waived by law including, without limitation, any claims filed with any Governmental Entity or claims under the ADEA that arise after the date of this Agreement; or (iii) my right of indemnification and D&O coverage by virtue of my service as an officer, whether by agreement, common law, statute or pursuant to the Company’s Certificate of Incorporation, as amended to date. While this Release does not prevent me from filing a charge with any Governmental Entity, I agree that I will not be entitled to or accept any personal recovery in any action or proceeding that may be commenced on my behalf arising out of the matters released hereby, including but not limited to, any charge filed with the EEOC or any other Governmental Entity that prohibits the waiver of the right to file a charge; provided , however , that nothing herein shall preclude my right to receive an award from a Governmental Entity for information provided under any whistleblower program.
I acknowledge and agree that by virtue of the foregoing, I have waived any relief available (including, without limitation, monetary damages, equitable relief, and reinstatement) under any of the claims and/or causes of action waived in this Release. Therefore, I agree not to accept any award, settlement, or relief (including legal or equitable relief) from any source or proceeding (including but not limited to any proceeding brought by any other person or by any Governmental Entity) with respect to any claim or right waived in this Release.
I represent and warrant that I have not previously filed any action, grievance, arbitration, complaint, charge, lawsuit or similar proceedings regarding any of the claims released herein against any of the Company Parties.
I expressly acknowledge and agree that I
•
Am able to read the language, and understand the meaning, conditions, and effect, of this Release;
•
Understand that this Release effects a release and waiver of any rights I may have under ADEA, as amended by the Older Workers Benefit Protection Act of 1990, and acknowledge that the disclosure required by the Older Workers

097231-0021-15408-Active.20363104.18        
11

Benefit Protection Act of 1990 is attached hereto as Exhibit A.1 for my review;
•
Have no physical or mental impairment of any kind that has interfered with my ability to read and understand the meaning of this Release or its terms, and that I am not acting under the influence of any medication, drug, or chemical of any type in entering into this Release;
•
Am specifically agreeing to the terms of the release of claims contained in this Release because the Company has agreed to pay me the Consideration, which the Company has agreed to provide because of my agreement to accept it in full settlement of all possible claims I might have or ever had, and because of my execution of this Release;
•
Acknowledge that, but for my execution of this Release, I would not be entitled to the Consideration;
•
Understand that, by entering into this Release, I do not waive rights or claims that may arise after the date I execute this Release;
•
Had or could have forty-five (45) days following my receipt of this Release (the “ Review Period ”) in which to review and consider this Release, and that if I execute this Release prior to the expiration of the Review Period, I have voluntarily and knowingly waived the remainder of the Review Period;
•
Have not relied upon any representation or statement not set forth in this Release made by the Company or any of its representatives;
•
Was advised to consult with my attorney regarding the terms and effect of this Release prior to executing this Release; and
•
Have signed this Release knowingly and voluntarily and I have not been coerced, intimidated, or threatened into signing this Release.
I hereby agree to waive any and all claims to re-employment with the Company or any other member of the Company Group and affirmatively agree not to seek further employment with the Company or any other member of the Company Group.
Notwithstanding anything contained herein to the contrary, this Release will not become effective or enforceable prior to the expiration of the period of seven (7) calendar days following the date of its delivery by me to the Company (the “ Revocation Period ”), during which time I may revoke my acceptance of this Release by notifying the Company, in writing, delivered to the Company at its principal executive office, marked for the attention of its General Counsel. To be effective, such revocation must be received by the Company no later than 11:59 p.m. on the seventh (7 th ) calendar day following the delivery of this Release to the Company. Provided that the Release is executed and I do not revoke it during the Revocation Period, the eighth (8 th ) day

097231-0021-15408-Active.20363104.18        
12

following the date on which this Release is executed shall be its effective date (the “ Release Effective Date ”). I acknowledge and agree that if I revoke this Release during the Revocation Period, this Release will be null and void and of no effect, and neither the Company nor any other member of the Company Group will have any obligations to pay me the Consideration.
The provisions of this Release shall be binding upon my heirs, executors, administrators, legal personal representatives, assigns, and successors. If any provision of this Release shall be held by any court of competent jurisdiction to be illegal, void, or unenforceable, such provision shall be of no force or effect. The illegality or unenforceability of such provision, however, shall have no effect upon and shall not impair the enforceability of any other provision of this Release.
THIS RELEASE SHALL BE INTERPRETED UNDER AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICTS OF LAWS. I HEREBY AGREE TO RESOLVE ANY DISPUTE OVER THE TERMS AND CONDITIONS OR APPLICATION OF THIS RELEASE THROUGH BINDING ARBITRATION PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION (“ AAA ”). THE ARBITRATION WILL BE HEARD BY ONE ARBITRATOR TO BE CHOSEN AS PROVIDED BY THE RULES OF THE AAA AND SHALL BE HELD IN TAMPA, FLORIDA. IF THIS RELEASE IS DECLARED ILLEGAL OR UNENFORCEABLE BY THE ARBITRATOR, I AGREE TO EXECUTE A BINDING REPLACEMENT RELEASE OR, IF REQUESTED BY THE COMPANY, TO RETURN THE MONIES PAID PURSUANT TO THE SEPARATION AGREEMENT OR TO APPLY THE CONSIDERATION AS A SET-OFF TO ANY CLAIM OR RELIEF.








/s/ David Schneider        
David Schneider

Date: 12/2/16    

097231-0021-15408-Active.20363104.18        
Exhibit 10.28







October 14, 2016

Jeffry Baker
6633 Whispering Woods Ct
Plano, TX 75024

RE:
Employment Terms and Conditions

Dear Jeff:
This letter of understanding (Letter") will summarize your compensation and other terms and conditions of your employment with Reverse Mortgage Solutions, Inc. ("RMS"), a subsidiary of Walter Investment Management Corp. ("Company"). Except where otherwise noted the effective date of this Letter is June 1, 2016.
Position
Effective October 13, 2016, your position is President of RMS, reporting to the Company's Chief Executive Officer or other executive as the Company may determine from time to time.
At-Will Employment
Your employment with RMS is at-will, meaning that either you or we may terminate the employment relationship at any time for any reason, with or without cause, and with or without advance notice to the other. Nothing herein or elsewhere constitutes or shall be construed as a commitment to employ you for any specified period of time.
Base Salary
You will receive a gross monthly salary of $35,000, less withholdings, paid to you in the time and manner consistent with the Company's normal payroll practices.
Transaction Incentive
In addition to your base salary, you will be paid an incentive in connection with the completion of any transaction closed on or before May 31, 2017 that results in the sale of a significant portion of RMS's net assets ("Transaction") as follows:


•
$100,000 upon completion of the Transaction;
•
Additional $100,000 if the Transaction is completed at 6/30/16 Book Value for Net Assets sold; and
•
Additional incentive of up to 1% of any net after tax gain above the 6/30/16 Book Value of the net assets sold, up to a maximum of $200,000;




all for a maximum payment of $400,000, less withholdings ("Transaction Incentive") . In the event that your employment terminates for any reason prior to the close of the Transaction, the Transaction Incentive may be prorated based upon the status of the Transaction at the time of your termination of employment. In any event, the Transaction Incentive will be paid to you on the first administratively feasible payroll following the close of the Transaction.
Retention Bonus
So long as you remain actively employed by RMS in your current role until May 31, 2017, you will be paid a retention bonus in the amount of $180,000.00 minus applicable withholdings ("Retention Bonus"). The Retention Bonus shall be paid to you on the payroll for the pay period that includes May 31, 2017. In the event that your employment is terminated involuntarily without Cause prior to May 31, 2017, you will be eligible for a prorated Retention Bonus.
You understand that the Company does not maintain a formal retention bonus program or plan, and that your opportunity to receive the Retention Bonus is unique and not generally available to other employees. As such, as a further condition for entitlement to the Retention Bonus, You agree to keep this Letter, and the fact that you have been offered the Retention Bonus, confidential at all times during and after your employment, except that you may disclose it to your spouse, accountant and financial advisor.
Benefits and Severance Eligibility
In the Company's human resources system of record, you are classified as temporary, rendering you ineligible to participate in any of the Company's benefits plans. Likewise, as a temporary employee, you are ineligible for benefits under any Severance Policy or Plan sponsored by the Company or any of its parents, subsidiaries or affiliates.


Governing Law
This letter agreement shall be construed in accordance with the laws of the State of Texas, without regard to conflict of law provisions. All claims, disputes, disagreements and controversies arising out of this Agreement brought by either you or the Company (including for purposes of this paragraph any of its parents, affiliates, subsidiaries or successors) shall be brought only in a court of competent jurisdiction in Harris County, Texas and you and the Company hereby consent to the exclusive jurisdiction and venue of such courts.
Acknowledgment
Please indicate your agreement to the terms and conditions set forth in this Letter by signing below and returning to Human Resources.

If you have any questions, please contact me.


Sincerely,

/s/ Anthony Renzi

Anthony Renzi
Chief Executive Officer


-Page 2-




ACKNOWLEDGED AND AGREED TO:


/s/ Jeffry Baker            

-Page 3-


Exhibit 10.30.2






Walter Investment Management Corp.


George M. Awad
Restricted Stock Unit Award Agreement Under the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016)



Walter Investment Management Corp.


George M. Awad
Restricted Stock Unit Award Agreement Under the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016)



Pursuant to that certain Letter Agreement, dated June 8, 2016 (the “Letter Agreement”), between you and Walter Investment Management Corp., a Maryland corporation (the “Company”), the Company agreed to grant you an award of 500,000 restricted stock units (“RSUs”) on or about June 30, 2016 (the “Award”) in connection with your assumption of responsibilities as interim Chief Executive Officer and President of the Company (“Interim CEO”).

This Restricted Stock Unit Award Agreement (this “Agreement”) under the Company’s 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016) (as it may be further amended and restated, the “Plan”), together with the Plan, contains the terms and conditions of the Award and is in full satisfaction of the Company’s obligation to grant the Award to you as set forth in the Letter Agreement.

Participant: George M. Awad     

Date of Grant: June 30, 2016                    

Number of RSUs Granted: 500,000

Vesting Dates : One-third of the RSUs underlying the Award shall vest on each of September 30, 2016, September 30, 2017 and September 30, 2018.

THIS AGREEMENT , effective as of the Date of Grant set forth above, represents the grant of RSUs by the Company to the Participant named above, pursuant to the provisions of the Plan.

The Compensation and Human Resources Committee of the Company’s Board of Directors (the “Committee”) determined that it is in the best interests of the Company and its stockholders to grant the Award provided for in the Letter Agreement and this Agreement to the Participant, pursuant to the Plan and the terms of this Agreement.

The Plan provides a complete description of the terms and conditions governing this Award and the underlying RSUs. If there is any inconsistency between the terms of this Agreement and the terms of the Plan, the Plan’s terms shall completely supersede and replace the conflicting terms of this Agreement. All capitalized terms shall have the meanings ascribed to them in the Plan or on Exhibit A, unless specifically set forth otherwise herein. The parties hereto agree as follows:

1. Service with the Company. Except as may otherwise be provided in Section 5 or Section 6, below, the RSUs granted hereunder will become vested in substantially equal installments subject to the condition that the Participant remains a Director of the Company from the Date of Grant through (and including) each applicable Vesting Date and will be settled in accordance with Section 2 below, provided that if the number of RSUs is not evenly divisible by three, then no





fractional units shall vest and the installments shall be as equal as possible. If the Participant is a Director of the Company through the applicable Vesting Date, subject to Section 5(c) below, payment of the relevant installment will occur irrespective of whether the Participant is a Director of the Company on the payment date. This grant of RSUs shall not confer any right to the Participant (or any other Participant) to be granted RSUs or other awards in the future under the Plan.

2.
Timing of Payout . Payout of any vested RSUs (and any accrued but unpaid dividend equivalents thereon) shall occur as soon as administratively feasible after (but in no event later than March 15 of the year following) the earliest to occur of (a) the applicable Vesting Date, (b) the date of the Participant’s termination of service due to death or Disability, (c) the date of the Participant’s termination of service as a result of a decision by the Board not to nominate the Participant for re- election to the Board at an annual stockholders meeting of the Company (such decision, the “Failure to Nominate”), or (d) a Change in Control; unless, in the case of (a), (b), (c), or (d) of this Section 2, the Participant irrevocably elects to voluntarily defer the payout of RSUs to a specific date or event as approved by the Committee and in compliance with Section 409A of the Code and the regulations promulgated thereunder.

3.
Form of Payout . Vested RSUs will be paid out solely in the form of Shares.

4.
Voting Rights and Dividends Equivalents . Until such time as the RSUs are paid out in Shares, the Participant shall not have voting rights with respect to the RSUs. However, the Company will pay dividend equivalents on the RSUs, in the same form ( e.g ., cash, stock, a combination of cash and stock, or such other dividend as shall be determined by the Company) paid on the Company’s outstanding Shares. All dividend equivalents will be accrued as of the time they are paid on the Company’s outstanding Shares, however, they will not be earned or payable to the Participant unless and until such time as the RSUs to which they apply are settled as provided for in Section 2 above.

5.
Termination of Service.

(a)
Death or Disability. In the event the Participant’s service with the Company terminates due to the Participant’s death or Disability prior to the final Vesting Date, any unvested RSUs (and any dividend equivalents accrued thereon pursuant to this Agreement) shall become immediately fully vested and settled in accordance with Section 2 above.

(b)
Failure to Nominate. In the event of a termination of the Participant’s service as a Director of the Company on the date of the applicable annual stockholders meeting of the Company due to a Failure to Nominate (which, for the avoidance of doubt, will not be determinable until the date of the applicable annual stockholders meeting of the Company) prior to the final Vesting Date, any unvested RSUs (and any dividend equivalents accrued thereon pursuant to this Agreement) shall become immediately fully vested and settled in accordance with Section 2 above.

(c)
For Cause. In the event the Participant’s service with the Company (whether as Interim CEO and/or as a Director) is terminated by the Company for Cause, in each case prior to the final Vesting Date (or the payout date relating to the final Vesting Date), the Participant shall forfeit any outstanding RSUs and any accrued but unpaid dividend equivalents thereon.





(d)
For Other Reasons. If the Participant’s service with the Company terminates for any reason prior to the final Vesting Date, other than due to death, Disability, or Failure to Nominate, the Participant shall forfeit any unvested portion of the RSUs.

6.
Change in Control. Notwithstanding anything to the contrary in this Agreement, in the event of a Change in Control that occurs prior to the final Vesting Date (or the payout date relating to the final Vesting Date), and provided that prior to such Change in Control the Participant’s service with the Company has not terminated, any unvested RSUs (and any dividend equivalents accrued thereon pursuant to this Agreement) shall become immediately fully vested and settled in accordance with Section 2 above.

7.
Restrictions on Transfer . Subject to Committee discretion, unless and until actual Shares are received upon payout, RSUs granted pursuant to this Agreement may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, except as provided in the Plan.

8.
Recapitalization . In the event of any change in the capitalization of the Company such as a stock split or a corporate transaction such as any merger, consolidation, separation or otherwise, the number and class of RSUs subject to this Agreement shall be equitably adjusted by the Committee as set forth in the Plan.

9.
Beneficiary Designation . The Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Agreement is to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations by the Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Secretary of the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.

10.
Continuation of Service . This Agreement shall not confer upon the Participant any right to continued service with the Company or any of its Subsidiaries, nor shall this Agreement interfere in any way with the Company’s right to terminate the Participant’s service with the Company at any time.

11.
Miscellaneous .

(a)
This Agreement and the rights of the Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. The Committee shall have the right to impose such restrictions on any Shares acquired pursuant to this Agreement as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon the Participant.

(b)
With the approval of the Board, the Committee may terminate, amend, or modify this Agreement; provided, however, that no such termination, amendment, or modification of this Agreement may in any material way adversely affect the Participant’s rights under this Agreement, without the written consent of the Participant.






(c)
The Company shall have the power and the right to deduct or withhold Shares from the Participant’s payout under this Agreement, or require the Participant to remit to the Company an amount sufficient to satisfy the minimum statutory required withholding for federal, state, and local taxes (if any), domestic or foreign, required by law to be withheld with respect to any payout to the Participant under this Agreement.

(d)
The Participant agrees to take all steps necessary to comply with all applicable provisions of federal and state securities laws in exercising his rights under this Agreement.

(e)
This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

(f)
This Agreement and the Plan constitute the entire understanding between the Participant and the Company regarding the RSUs granted hereunder. This Agreement and the Plan supersede any prior agreements, commitments or negotiations concerning the RSUs granted hereunder, including, without limitation, the Letter Agreement.

(g)
All obligations of the Company under the Plan and this Agreement with respect to the RSUs shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect merger, consolidation, acquisition, purchase of all or substantially all of the business and/or assets of the Company, or otherwise.

(h)
To the extent not preempted by federal law, this Agreement shall be governed by, and construed in accordance with, the laws of the state of Maryland.

(i)
The intent of the parties is that payments and benefits under this Agreement be exempt from Section 409A of the Code, and accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in accordance therewith.

(j)
To the extent any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.

(k)
Notice hereunder shall be given to the Company at its principal place of business, and shall be given to the Participant at the address set forth below, or in either case at such addresses as one party may subsequently furnish to the other party in writing.

(l)
This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.










IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the
Date of Grant.


Walter Investment Management Corp.



By: /s/ Gary Tillett        




/s/ George Awad        
Participant

Participant's name and address:

George M. Awad
1379 Smith Ridge Road
New Canaan , CT 06840





EXHIBIT A
PLAN DEFINITIONS

All of the definitions of the terms below are consistent with the definitions in the Plan.

A.
“ Cause ” shall mean any one of the following:

(a)
Willful misconduct of the Participant;

(b)
Willful failure to perform the Participant’s duties;

(c)
The conviction of the Participant by a court of competent jurisdiction of a felony or entering the plea of nolo contendere to such crime by the Participant; or

(d)
The commission of an act of theft, fraud, dishonesty or insubordination that is materially detrimental to the Company or any Subsidiary.

B.
“ Change in Control ” shall mean the occurrence of one or more of the following events:

(a)
The acquisition by any Person of Beneficial Ownership of more than 40% of either (A) the then-outstanding Shares (“Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this subsection (a) the following acquisitions shall not constitute a Change in Control:

(i)
Any acquisition by the Company,

(ii)
Any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company,

(iii)
Any acquisition by any entity controlled by the Company, or

(iv)
Any acquisition by any entity pursuant to a transaction that complies with subsections (c)(i), (ii) and (iii), below.

(b)
Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a Director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the Directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.





(c)
Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company and/or any entity controlled by the Company, or a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any entity controlled by the Company (each, a “Business Combination”), in each case, provided, however, that, for purposes of this subsection (d) a Business Combination shall not constitute a Change in Control if following such Business Combination:
(i)
All or substantially all of the individuals and entities that were the Beneficial Owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 66 2/3% of the then-outstanding Shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; and

(ii)
No Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then-outstanding Shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination; and

(iii)
At least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination .

(d)
Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

C.
“ Disability ” shall mean permanent and total disability as defined in Code Section 22(e)(3). A determination of Disability may be made by a physician selected or approved by the Committee and, in this respect, the Participant shall submit to any reasonable examination(s) required by such physician upon request. Notwithstanding the foregoing provisions of this paragraph, in the event any Award is considered to be “deferred compensation” as that term is defined under Code Section 409A, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Code Section 409A, the definition of “Disability” for purposes of such Award shall be the definition of “disability” provided for under Code Section 409A and the regulations or other guidance issued thereunder.


Exhibit 10.31.1




March 26, 2015


Sheryl Newman
439 Sierra Vista Court
Jacksonville, FL 32259

Dear Sheryl:

We are pleased to offer you the position of Senior Vice President, Chief Compliance and Risk Officer, at Walter Investment Management Corp. ("Walter" or the "Company"). The purpose of this letter agreement (this "Agreement") is to outline the terms of your employment with the Company. The effective date of this Agreement will be April 6, 2015 (the "Effective Date").

1.
Subject to the terms and conditions of this Agreement, Walter shall employ you as Senior Vice President, Chief Compliance and Risk Officer, with responsibility over Walter's compliance and risk functions. In this role, you will report to the Chief Executive Officer of the Company or such other executive as the Company shall, in its discretion, appoint (the "Designated Officer"). You will be responsible for directing all aspects of the Company's compliance and risk functions, along with such additional duties as the Designated Officer may from time to time reasonably assign. In addition, you shall comply with the general policies, standards and reputations of the Company and perform such duties with fidelity and to the best of your ability. Such responsibilities may change from time to time; provided that such changed responsibilities shall be consistent in all material respects with your title.
2.
While employed hereunder, you will be eligible to receive the following payments and benefits:
(a)      Base Salary
Your base salary will be $285,000 per year which shall be subject to annual review and potential increase (but not decrease) by the Board of Directors and paid in accordance with the regular payroll practices of the Company, as they may change from time to time. Your base salary, as in effect from time to time, is hereinafter referred to as the "Base Salary."
(b)     Bonus
(i)
You will be eligible to participate in the Company's Management Incentive Plan, as it may be amended from time to time (the "MIP") and you will be eligible to earn an annual target bonus under the MIP equal to 85% of your Base Salary, with the potential to increase your bonus to a maximum of 120% of your Base Salary in accordance with the terms of the MIP; provided, however, that the actual amount of your bonus will be dependent upon the, achievement of annual corporate financial and other goals consistent with those established for other members of



executive management, as well as the accomplishment of individual objectives, established annually no later than March 31 of the year being measured and communicated to you in writing (the actual bonus awarded to you in any given year, which may be greater or less than your target bonus, and may be zero if minimum thresholds are not met, is referred to herein as your "Annual Bonus" for that year (the "Bonus Year").
(ii)
Unless otherwise expressly provided herein, in order to be eligible to receive an Annual Bonus you must be employed by the Company at the time the bonus is paid. The bonus for any Bonus Year will be payable to you in accordance with the terms of the MIP at the same time as other senior executives of the Company are paid, after the Company closes its books for the Bonus Year.
(c)     Long-Term Incentive
You will be entitled to participate in the Company's long-term incentive plan(s) as in effect from time to time, beginning in 2015, and will receive a grant under the plan(s) with components and terms that are consistent with awards granted to other members of the Company's executive management. In 2015 such award will have an economic value of $250,000 on the date of the award. The components and terms of any LTI award, and the methodology for determining the economic value for such awards shall be as provided in the plan(s) or otherwise as determined by the Company's Compensation Committee in its discretion and provided to you in a grant document memorializing such terms.
(d)     Benefits
(i)
You will be entitled to receive from the Company prompt reimbursement for all reasonable out-of-pocket business expenses incurred by you in the performance of your duties hereunder, in accordance with the most favorable policies, practices and procedures of the Company relating to reimbursement of business expenses incurred by Company directors, officers or employees in effect at any time during the 12 month period preceding the date you incur the expenses; provided, however, that any such expense reimbursement will be made no later than the last day of the calendar year following the calendar year in which you incur the expense, will not affect the expenses eligible for reimbursement in any other calendar year, and cannot be liquidated or exchanged for any other benefit.
(ii)
You will be eligible to participate in the Company's group life and health insurance benefit programs that are generally applicable to executives, in accordance with their terms, as they may change from time to time.
(iii)
You will be eligible to participate in the Company's retirement plan that is generally applicable to salaried employees, as it may change from time to time and in accordance with its terms. Your eligibility to participate will be consistent with the requirements of ERISA.

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(iv)
You will be entitled to four weeks of annual vacation with carryover to be treated as per the Company's vacation policy, as it may change from time to time.
(v)
Your Benefits under this Agreement, including grants to you under the Company's long-term incentive plan(s), will be subject to periodic review and increase by the Board of Directors.

3.
It is agreed and understood that your employment with the Company is to be at will, and either you or the Company may terminate the employment relationship at any time for any reason, with or without Cause, and with or without notice to the other; nothing herein or elsewhere constitutes or shall be construed as a commitment to employ you or to pay you severance, other than as stated herein, for any period of time.
4.
While employed by Walter, you agree to devote your full business time and best efforts to the performance of your duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services either directly or indirectly without the prior written consent of the Chief Executive Officer. Notwithstanding the foregoing, you may manage your personal finances and engage in charitable and civic activities, so long as such activities do not conflict or interfere with the performance of your responsibilities hereunder.
5.
You agree that all inventions, improvements, trade secrets, reports, manuals, computer programs, systems, tapes and other ideas and materials developed or invented by you during the period of your employment with the Company, either solely or in collaboration with others, which relate to the actual or anticipated business or research of the Company, which result from or are suggested by any work you may do for the Company, or which result from use of the Company's premises or the Company's customers' property (collectively, the "Developments") shall be the sole and exclusive property of Walter. You hereby assign to the Company your entire right and interest in any such Developments, and will hereafter execute any documents in connection therewith that Walter may reasonably request.
6.
As an inducement to the Company to make this offer to you, you represent and warrant that you are not a party to any agreement or obligation for personal services, and there exists no impediment or restraint, contractual or otherwise on your power, right or ability to accept this offer and to perform the duties and obligations specified herein.
7.
In the event of a termination or cessation of your employment with the Company for any reason, the sole rights and obligations of the Company in connection with your termination shall be those provided under the relevant provision below.
(a)
In the event that your employment is terminated for any reason, you will receive (i) accrued but unpaid Base Salary earned through the date of termination, payable in accordance with the Company's usual payment practices, (ii) any unreimbursed expenses, payable in accordance with Section 2(e)(i), plus (iii) payment for any accrued but unused vacation days, to the extent, and in the amounts provided under the Company's usual policies and arrangements (the "Accrued Obligations").

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(b)
In the event that you suffer a Disability, the Company may terminate your employment on written notice thereof, or in the event of your death, in either case, the Company will pay you (i) amounts payable pursuant to the terms of any applicable disability insurance policy or similar arrangement (if any) that the Company maintains, (ii) the Accrued Obligations, and (iii) any earned but unpaid Annual Bonus for any year preceding the year in which the date of termination occurs and a pro-rated Annual Bonus for the year of termination, in each case, payable in accordance with the terms of the MIP ("Prior Bonus").
(c)
Separately, and, in addition to the Accrued Obligations and any vesting of equity-based awards as expressly provided for herein, in the event that your employment (y) is terminated by the Company without Cause, or (z) is terminated by you as a result of Constructive Termination (clauses (y) and (z), each, a "Good Leaver Termination"), in each case, the Company will continue to pay (i) your Base Salary as in effect on the termination date for a period of twelve (12) months, payable in accordance with the Company's normal payroll practices, as they may change from time to time, (ii) your Annual Bonus (which shall be in an amount that is consistent with other Company executives of your level) for a period of twelve (12) months, payable at the same time Annual Bonuses would otherwise be payable had you remained employed during such period, (iii) any unpaid Prior Bonus, and (iv) the Company's contribution towards your health, dental and vision benefits for a period of twelve (12) months. By way of example and for the sake of clarity, should your employment terminate pursuant to clause (y) or (z) above on June 30 of any given year, you will be paid the pro-rated Annual Bonus for the year in which your employment terminated, plus, the balance of the Annual Bonus for the remainder of the year in which your employment terminated (i.e., the Annual Bonus for the first six months of your 12 month severance period) plus six months for the following year (the Annual Bonus for the remaining 6 months of the 12 month severance period).
(d)
Payment of the severance payments and benefits set forth in Sections 7(b) and (c) is subject to (a) your or, in the event of death, your heir's, execution, delivery and non-revocation of a release, including a release of any claims against the Company and its subsidiaries, substantially in the form attached hereto as Appendix I within thirty (30) days following the termination of your employment, (b) your compliance with the provisions of Sections 8 and 9 of this Agreement, and (c) your resignation, effective as of the date of your termination of employment, as an officer and/or director of the Company or any of its subsidiaries or affiliates. In order to be entitled to the foregoing in the event of Constructive Termination, you must provide written notice, including details describing the basis of your claim, to the Company within 60 days of the occurrence of the event(s) giving rise to a claim of Constructive Termination, and the Company will have 30 days to remedy any noncompliance. In the event the Company fails or is unable to remedy any non-compliance, the effective date of your termination of employment shall be 90 days from the date the Company received notice, unless otherwise agreed in writing by you and the Company. Should you fail to provide the foregoing notice, you will thereafter be barred from receiving treatment under the Constructive Termination definition based upon the events giving rise to the claim.
(e)
For purposes of this Agreement, "Cause" shall mean (A) conviction of, or plea of guilty or nolo contendere to, a felony arising from any act of fraud, embezzlement or willful dishonesty

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in relation to the business or affairs of the Company, (B) conviction of, or plea of guilty or nolo contendere to, any other felony which is materially injurious to the Company or its reputation or which compromises your ability to perform your job function, and/or act as a representative of the Company, or (C) a willful failure to attempt to substantially perform your duties (other than any such failure resulting from your Disability), after a written demand for substantial performance is delivered to you that specifically identifies the manner in which the Company believes that you have not attempted to substantially perform such duties, and you have failed to remedy the situation, to the extent possible, within fifteen (15) business days of such written notice from the Company or such longer time as may be reasonably required to remedy the situation, but no longer than forty-five (45) calendar days. For purposes of this definition, no act or failure to act on your part shall be considered to be Cause if done, or omitted to be done, by you in good faith and with the reasonable belief that the action or omission was in the best interests of, or were not, in fact, materially detrimental to the Company or a Company subsidiary.
(f)
For purposes of this Agreement, "Constructive Termination" shall mean, without your written consent: (A) a material failure of the Company to comply with the provisions of this Agreement; (B) a material diminution of your position (including status, offices, title and reporting relationships), duties or responsibilities or pay; (C) any purported termination of your employment other than for Cause; or (D) if you are required to relocate more than 50 miles from the Company's Tampa, Florida location; provided however, that any isolated, insubstantial or inadvertent change, condition, failure or breach described under clauses (A) - (D) above which is not taken in bad faith and is remedied by the Company promptly after the Company's actual receipt of notice from you as provided in this Section 7 shall not constitute Constructive Termination. For purposes of this Agreement, a material diminution in pay shall not be deemed to have occurred if the amount of your bonus fluctuates due to (i) a failure of you or the Company to meet financial targets or performance considerations under the Mil' or other Company incentive plan applicable to you and in effect from time to time or (ii) you experience a reduction in salary that is relatively comparable to reductions imposed upon all senior executives of the Company. To be entitled to severance benefits on the basis of Constructive Termination, the event causing Constructive Termination must not be implemented for the purpose of avoiding the restrictions of Section 409A of the Code.

8.
Non-Compete/Non-Solicit. It is understood and agreed that you will have substantial relationships with specific businesses and personnel, prospective and existing, vendors, contractors, customers, and employees of the Company that result in the creation of customer goodwill. It is also understood and agreed that the business of the Company is national in scope and that your duties could be conducted remotely. Therefore, while employed by the Company and continuing for a period of twelve months following the termination of your employment for any reason (the "Restricted Period"), unless the Board of Directors approves an exception, you shall not, directly or indirectly, for yourself or on behalf of, or in conjunction with, any other person, persons, company, partnership, corporation, business entity or otherwise:
(a)
Call upon, solicit, write, direct, divert, influence, accept business (either directly or indirectly) with respect to any account or customer or prospective customer of the Company or any

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corporation controlling, controlled by, under common control with, or otherwise related to the Company or its affiliates, in each case, for any purpose that is inconsistent with this non-compete provision;
(b)
Accept employment from or become an independent contractor for any Competitor (as defined below) of the Company pursuant to which you would have the same or substantially similar duties, in whole or in part, to the duties that you perform for the Company; or
(c)
Hire away any independent contractors or personnel of Walter and/or entice any such persons to leave the employ of the Company without the prior written consent of the Company; provided, however, that the restriction contained in this clause (c) shall extend through the one year anniversary of the expiration of the Restricted Period.
For purposes of this Agreement, "Competitor" shall mean any business or division or unit of any business which provides, in whole or in part, in the United States of America, servicing for and/or the origination of mortgages and/or reverse mortgages.
9.
Non-Disparagement. Following the termination of your employment under this Agreement for any reason, neither you nor the Company shall, directly or indirectly, for yourself or itself, or on behalf of, or in conjunction with, any other person, persons, company, partnership, corporation, business entity or otherwise:
(a)
Make any statements or announcements or give anyone authority to make any public statements or announcements concerning the termination of your employment with the Company, other than a mutually agreeable press release, if any, or
(b)
Make any statements that are inflammatory, detrimental, slanderous, or negative in any way to the interests of you or the Company.
(c)
Nothing in this section shall prevent either party from testifying or responding truthfully to any request for discovery or testimony in any judicial or quasi-judicial proceeding or any government inquiry, investigation or other proceeding.
10.
You acknowledge and agree that you will respect and safeguard the Company's property, trade secrets and confidential information. You acknowledge that the Company's electronic communication systems (such as email and voicemail) are maintained to assist in the conduct of the Company's business and that such systems and data exchanged or stored thereon are Company property. In the event that your employment with the Company terminates for any reason, you agree not to disclose any Company trade secrets or confidential information you acquired while an employee of the Company to any other person or entity, including without limitation, a subsequent employer, or use such information in any manner; provided, however, that any information which enters the public domain other than by breach of this Agreement shall not be considered confidential and provided, further, that nothing in this section shall prevent either party from testifying or responding truthfully to any request for discovery or testimony in any judicial or quasi-judicial proceeding or any government inquiry, investigation or other proceeding.

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11.
Clawback. Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to you pursuant to this Agreement or any other agreement or arrangement with the Company, which is subject to recovery under any present or future law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).
12.
Indemnification and Insurance. Effective as of the Effective Date, the Company will enter into an Indemnification Agreement in a form provided by the Company which agreement is incorporated herein by reference. In addition, during the term of this Agreement, you will be covered by a Company held directors and officers liability insurance policy, covering acts or omissions, which occur prior to the termination of your employment.
13.
Tax Compliance Delay in Payment. This Agreement is intended to comply with Section 409A of the Code and will be interpreted accordingly. References under this Agreement to the termination of your employment shall be deemed to refer to the date upon which you have experienced a "separation from service" within the meaning of Section 409A of the Code. If the Company reasonably determines that any payment or benefit due under this Agreement, or any other amount that may become. due to you after termination of employment, is subject to Section 409A of the Code, and also determines that you are a "specified employee," as defined in Section 409A(a)(2)(B)(i) of the Code, upon your termination of employment for any reason other than death (whether by resignation or otherwise), no amount may be paid to you or on your behalf earlier than six months after the date of your termination of employment (or, if earlier, your death) if such payment would violate the provisions of Section 409A of the Code and the regulations issued thereunder, and payment shall be made, or commence to be made, as the case may be, on the date that is six months and one day after your termination of employment (or, if earlier, one day after your death). For this purpose, you will be considered a "specified employee" if you are employed by an employer, or a subsidiary of a company, that has its stock publicly traded on an established securities market or certain related entities have their stock traded on an established securities market and you are a "key employee", with the exact meaning of "specified employee", "key employee" and "publicly traded" defined in Section 409A(a)(2)(B)(i) of the Code and the regulations thereunder. Notwithstanding the above, the Company hereby retains discretion to make determinations regarding the identification of "specified employees" and to take any necessary corporate action in connection with such determination. To the extent any reimbursements or in-kind benefits due to you under this Agreement constitute "deferred compensation" under Section 409A of the Code, any such reimbursements or in-kind benefits shall be paid to you in a manner consistent with Treasury Regulation Section 1.409A-3(i)(l)(iv). For purposes of Section 409A of the Code, each payment made under this Agreement shall be designated as a "separate payment" within the meaning of Section 409A of the Code.
14.
You acknowledge and agree that you have read this Agreement carefully, have been advised by the Company to consult with an attorney regarding its contents, and that you fully understand the same.
15.
The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

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16.
It is agreed and understood that this Agreement shall constitute our entire agreement with respect to the subject matter hereof and shall supersede all prior agreements, discussions, understandings and proposals (written or oral) relating to your employment with the Company. This Agreement will be interpreted under and in accordance with the laws of the State of Florida without regard to conflicts of laws. The parties hereto agree to resolve any dispute over the terms and conditions or application of this Agreement through binding arbitration pursuant to the rules of the American Arbitration Association ("AAA"). The arbitration will be heard by one arbitrator to be chosen as provided by the rules of the AAA and shall be held in Tampa, Florida. Notwithstanding the foregoing, in the event of a breach or threatened breach of the provisions of Sections 8-10, the party that is in breach or in threatened breach acknowledges and agrees that the other party will suffer irreparable harm that is not subject to being cured with monetary damages and that the aggrieved party shall be entitled to injunctive relief in a state court of the State of Florida. In any case, in the event you prevail in the dispute, the Company will pay your reasonable fees and costs in connection with the matter (including attorneys' fees). Whether you have prevailed or not shall be determined by the arbitrator or the court, as the case may, or if the arbitrator or court declines to determine whether or not you have prevailed, you will be deemed to have prevailed if in the case of monetary damages you receive in excess of 50% of what you demanded, or if the case has been filed against you, if the Company receives less than 50% of what it has demanded.

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17.
Survival. Sections 5 , 7--13 and 15-17 shall survive termination of your employment.
If the terms contained within this Agreement are acceptable, please sign one of the enclosed copies and return it to me in the envelope provided and retain one copy for your records.

Very truly yours,

Walter Investment Management Corp.


/s/ Mark O’Brien            
By:    Mark O’Brien
Its:    Chairman and Chief Executive Officer

ACCEPTANCE
I have read the foregoing, have been advised to consult with counsel of my choice concerning the same, and I fully understand the same. I approve and accept the terms set forth above as governing my employment relationship with the Company subject to the satisfactory completion of background, reference and credit checks, and a drug test.

Signature /s/ Sheryl Newman             Date 3/30/15        

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APPENDIX I
SEPARATION AGREEMENT
AND GENERAL RELEASE OF CLAIMS
This Separation Agreement and General Release of Claims ("Release") is entered into by and between Walter Investment Management Corp., and its subsidiaries, predecessors, successors, assigns, affiliates, insurers and related entities, (hereinafter collectively referred to as "Employer") and Sheryl Newman (hereinafter "Employee"). In consideration for the mutual promises set forth below, Employer and Employee agree as follows:
1.    Employer and Employee are parties to a contract of employment ("Employment Contract") to which this Release has been attached and incorporated by reference.. Employee's employment with Employer has been terminated and, pursuant to the terms of the Employment Contract, Employee must execute this Release in order to receive the severance set forth in the Employment Contract.
2.     In consideration for the promises and covenants set forth in the Employment Contract and this Release, including, specifically but without limitation, the general release set forth in paragraph 3 below, Employee will be paid in accordance with Section 7 of the Employment Contract. Payments to Employee will be made at such times as are set forth in the Employment Contract.
3.    Employee agrees, on behalf of himself, and his heirs, executors, administrators, successors in interest and assigns that, except as specifically provided herein, Employee will not file, or cause to be filed, any charges, lawsuits, or other actions of any kind in any forum against Employer and/or its officers, directors, employees, agents, successors and assigns and does hereby further release and discharge Employer and all of its affiliated or related entities, and each of their respective parents, successors, officers, directors, employees, agents, successors and assigns (the "Released Parties") from any and all claims, causes of action, rights, demands, and obligations of whatever nature kind or character which you may have, known or unknown, against them (including those seeking equitable relief) alleging, without limitation, breach of contract or any tort, legal actions under Title VII of the Civil Rights Act of 1964, as amended, Section 1981 of the Civil Rights Act of 1966, as amended, the Rehabilitation Act of 1973, as amended, the Employee Retirement Income Security Act of 1974, as amended, the Fair Labor Standards Act of 1938, as amended, the Age Discrimination in Employment Act of 1967, as amended, (the "ADEA") (except to the extent claims under the ADEA arise after the date on which this Release is signed by Employee), the Older Workers' Benefit Protection Act, as amended, the Americans with Disability Act, the Civil Rights Act of 1991, or any state, Federal, or local law or any tort, contract, and quasi-contract or other common law claim or cause of action concerning age, race, religion, national origin, handicap, or any other form of discrimination, or otherwise relating in any way to, Employee's employment with the Company or Employee's separation from the Company or the. Company (in its capacities as Employee's former employer or otherwise) or the other Released Parties, including any and all future claims, except claims arising in connection with rights and obligations under this Release or as specifically provided in paragraph 4 or 8 below. Employee further agrees to waive and release any claim for damages occurring at any time after the date of this Release because of any alleged continuing effect of any alleged acts or omissions involving Employee and/or Employer which occurred on or before the date of this Release.
4.    Notwithstanding anything contained in this Release to the contrary, the general release set forth in paragraph 3 shall not apply to any claims under any equity, option or other Employer incentive

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plan or award, which shall be governed by the terms and conditions of such plan(s) or award. Furthermore, claims relating to the breach of, or to enforce, the severance or any surviving provision of the Employment Contract, the terms of any indemnification agreement, or any other rights to indemnification, expense advancement, or contribution are expressly not released.
5.    Employee represents that he has not filed any charges, including, but not limited to, charges against the Company with the Equal Employment Opportunity Commission ("EEOC"), suits, claims or complaints against the Company or a Released Party. This Release forever bars all actions, claims and suits which arose or might arise in the future from any occurrences arising prior to the date of this Release and authorizes any court or administrative agency to dismiss any claim filed by Employee with prejudice. If any administrative agency files any charge, claim or suit on Employee's behalf, Employee agrees to waive all rights to recovery of any equitable or monetary relief and attorneys' fees.
6.    Except as required by law, and unless and until this Release is disclosed by the Company or any of its affiliates as may be required by law, the parties to this Release agree that the existence and terms of this Release will remain confidential; provided that Employee may reveal the terms of the Release to Employee's legal, tax and financial advisors, and immediate family so long as Employee advises each such person that they must keep its terms confidential on the same basis as is required of Employee.
7.    This Release shall not in any way be construed as an admission by Employer or Employee that they have acted wrongfully with respect to each other or that one party has any rights whatsoever against the other or the other Released Parties.
8.    Employee and Employer specifically acknowledge the following:
a.
Employee does not release or waive any right or claim which Employee may have which arises after the date of this Release.
b.
In exchange for this general release, Employee acknowledges that Employee has received separate consideration beyond that which Employee is otherwise entitled to under Employer's policy or applicable law.
c.
Employee is releasing, among other rights, all claims and rights under the Age Discrimination in Employment Act ("ADEA'') and the Older Workers' Benefit Protection Act ("OWBPA"), 29 U.S.C; §621, et seq.
d.
Employee has twenty-one (21) days to consider this Release.
e.
Employee has seven (7) days to revoke this Release after acceptance. However, this Release will not become effective and no consideration will be paid until after the revocation of the acceptance period has expired. Additionally, for the revocation to be effective, Employee must give written notice of Employee's revocation to Employer's General Counsel, stating "I hereby revoke the Release and General Release of Claims I executed on [insert date]" and such revocation must be postmarked via certified mail within such seven (7) day period to Walter Investment Management Corp., attention Human Resources, 3000 Bayport Drive, Tampa, FL 33607.
f.
Employee will resign as an officer and/or director of Walter Investment Management Corp. or any of its affiliates or subsidiaries.

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9.    Should Employee breach any provision of this Release, Employer's obligation to continue to pay the consideration set forth herein shall cease and Employer shall have no further obligation to Employee. All other terms and conditions of this Release, including, but not limited to, the general release in paragraph 3 shall remain in full force and effect. Should Employer breach any provision of this Release, the Employee's obligations hereunder shall cease and Employee shall have no further obligations pursuant to this Release.
10.    This Release shall be binding upon Employer, Employee and upon Employee's heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of Employer and the other released parties and their successors and assigns.
11.    Employee and Employer acknowledge that this Release and the Employment Contract shall be considered as one document and that, except as set forth herein and therein, including without limitation the provisions of paragraphs 4 and 8 of this Release, any and all prior understandings and agreements between the parties to this Release with respect to the subject matter of this Release and/or the Employment Contract are merged into the Employment Contract and this Release, which fully and completely expresses the entire understanding of the parties with respect to the subject matter hereof and thereof.
12.    Employee represents that no inducements, statements, or representations have been made that are not set out in this Release and that Employee does not rely on any inducements, statements, or representations not set forth herein or therein. -Employee further represents that he enters into this Release knowingly and voluntarily and on his own free will and choice and that he has been encouraged and given significant opportunity to consult with an attorney of his choice.
13.    This Release shall in all respects be interpreted, enforced and governed under the laws of the State of Florida. The language of all parts of this Release shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against any of the parties to this Release.
Should any provision of this Release be declared or be determined by any Court to be illegal or invalid, the validity of the remaining parts, terms or provisions shall not be affected thereby and said illegal or invalid part, term or provision shall be deemed not to be a part of this Release.
14.    This Release may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument.
SHERYL NEWMAN

                  
Name Printed:             
Date:                   
WALTER INVESTMENT MANAGEMENT CORP.

By:                
Title:                
Date:                


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Exhibit 10.31.2

Execution Copy

SEPARATION AGREEMENT

This Separation Agreement (this “ Agreement ”), dated as of the date set forth on the signature page hereto, confirms the following understandings and agreements between Walter Investment Management Corp. (the “ Company ” and, together with its subsidiaries and affiliates, collectively, the “ Company Group ”) and Sheryl Newman (hereinafter referred to as “ you ” or “ your ”). You acknowledge and agree that this Agreement and the Release (as defined below) were provided to you on November 17, 2016.
In consideration of the promises set forth herein, you and the Company agree as follows:
Termination of Employment/Employment Agreement; Resignation from Offices .
(a)      You hereby confirm that your employment with the Company and all other members of the Company Group terminated effective as of the close of business on October 13, 2016 (the “ Separation Date ”). In addition, you hereby confirm and the Company hereby acknowledges your resignation, effective as of the Separation Date, as an employee, officer, director, agent, representative or similar position of all members of the Company Group (the “ Officer/Director Resignation ”). Except as otherwise provided for herein, the employment agreement between you and the Company, dated as of March 26, 2015 (the “ Employment Agreement ”), is hereby terminated as of the Separation Date. You agree to execute and deliver to the applicable member of the Company Group such documents concerning such separation from employment (and any related service) as may reasonably requested by such member of the Company Group.
(b)      From and after the Separation Date you will not represent yourself as being an employee, officer, director, agent or representative of any member of the Company Group.
2.      Separation Payments and Benefits; Treatment of Equity-Based Awards .
(a)      The Separation Date shall be the termination date of your employment for purposes of participation in and coverage under all benefit plans and programs sponsored by or through any member of the Company Group. In connection with your separation from employment with the Company Group, you will receive reimbursement for any properly submitted, but unreimbursed, business expenses incurred on or prior to the Separation Date and in accordance with the Company’s expense policy (to be eligible for such reimbursement, you must submit any such expenses within forty-five (45) days following the Separation Date). In addition, you will be entitled to receive any and all vested and non-forfeitable benefits provided under any employee benefit plans maintained by the Company in which you participated prior to and including the Separation Date (excluding any employee benefit plan providing severance or similar benefits), in each case, in accordance with the terms of such plans and applicable law. You acknowledge and agree that, as of the date set forth on the signature page hereto, you have received (x) your accrued but unpaid base salary earned through the Separation Date; and (y) payment for any accrued but unused vacation days, to the extent, and in the amounts provided under the Company’s applicable policies and arrangements.

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(b)      As you are aware, in connection with your employment with the Company, you were granted (i) 7,048 restricted stock units (“ RSUs ”) pursuant to that certain Company Restricted Stock Unit Award Agreement Under the 2011 Omnibus Incentive Plan (Amended and Restated May 3, 2013), dated as of May 13, 2015 (the “ 2015 RSU Agreement ”), (ii) 7,048 performance shares pursuant to that certain Company Performance Share Award Agreement Under the 2011 Omnibus Incentive Plan (Amended and Restated May 3, 2013), dated as of May 13, 2015 (the “ 2015 Performance Share Agreement ”), and (iii) 64,220 stock options pursuant to that certain Company Nonqualified Stock Options Award Agreement under the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016), dated as of July 8, 2016 (the “ 2016 Stock Option Agreement ” and, together with the 2015 RSU Agreement and the 2015 Performance Share Agreement, collectively, the “ Grant Agreements ” and each RSU, stock option and performance share granted thereunder, individually and collectively, the “ Equity Awards ”). Notwithstanding anything in the 2016 Stock Option Agreement to the contrary, in connection with the termination of your employment, the 64,220 stock options that were unvested as of the Separation Date (the “ Accelerated Options ”) will become fully vested, effective as of the Release Effective Date (as defined in the Release), and shall remain exercisable in accordance with, and subject to the terms and conditions of, such agreement. You acknowledge and agree that, as of the Separation Date, other than the Accelerated Options, all Equity Awards granted to you that were unvested as of the Separation Date were cancelled and that you have no further rights with respect thereto. With respect to vested Equity Awards, such awards shall continue to be governed by the terms of the applicable Grant Agreements and the Company’s 2011 Omnibus Incentive Plan (amended and restated June 9, 2016). Notwithstanding the foregoing, the Company hereby waives Section 3(e) of the 2016 Stock Option Agreement.
(c)      In addition to the payments, rights and benefits provided under Sections 2(a) and (b) above, subject to (i) your continued compliance with the terms of (A) this Agreement and (B) the restrictive covenants set forth in Sections 8(a), 8(c), 9 and 10 of the Employment Agreement, (ii) your timely execution, delivery and non-revocation of the Release of Claims attached hereto as Exhibit A (the “ Release ”) within the time period provided for therein, and (iii) the Officer/Director Resignation, the Company will provide you with the following payments and benefits (collectively, the “ Consideration ”):
(i)      an amount equal to $325,000, which represents twelve (12) months of your Base Salary (as defined in your Employment Agreement) as in effect on the Separation Date, payable over a period of six (6) months in accordance with the Company’s normal payroll practices, with the first of such installments to be paid on the first regularly scheduled payroll date immediately following the Release Effective Date;
(ii)      an amount equal to $625,000 which represents the sum of (x) your Annual Bonus (as defined in your Employment Agreement) for a period of twelve (12) months and (y) a pro-rated Annual Bonus for the year of termination, which amount shall be payable in three (3) substantially equal installments, with one (1) installment payable on each of (A) the first regularly scheduled payroll date immediately following the Release Effective Date, (B) the first regularly scheduled payroll date immediately following the date that is three (3) months following the Release Effective Date and (C)

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the first regularly scheduled payroll date immediately following the date that is six (6) months following the Release Effective Date, provided that, if such amount is not evenly divisible by three (3), then the installments shall be as equal as possible with the smaller installment(s) payable first; and
(iii)      Subject to your timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”) and under the Company’s group health and dental plans, so long as you are receiving COBRA continuation coverage in accordance with COBRA, the Company will pay, on your behalf, the Company’s portion of health, dental and/or vision benefits for a period of twelve (12) months (the “ COBRA Benefits Payment Period ”) in the same amount as would be paid in respect of similarly situated active employees (the “ Company COBRA Payment ”). Notwithstanding the foregoing, if the Company determines, in its reasonable judgment, that providing the Company COBRA Payment would result in the imposition of any excise taxes on the Company for failure to comply with the non-discrimination requirements of the Patient Protection and Affordable Care Act of 2010, as amended, and/or the Health Care and Education Reconciliation Act of 2010, as amended (to the extent applicable), then, an amount equal to the Company COBRA Payment shall thereafter be paid to you as currently taxable compensation in substantially equal monthly installments over the COBRA Benefits Payment Period.
(d)      You acknowledge and agree that the payments and other rights and benefits provided pursuant to this Section 2 are being made in full discharge of any and all liabilities and obligations of the Company Group to you, monetarily or with respect to employee benefits or otherwise, including, but not limited to, any and all obligations arising under your Employment Agreement and any other alleged written or oral employment agreement, policy, plan or procedure of any member of the Company Group and/or any alleged understanding or arrangement between you and any member of the Company Group (other than claims for vested and non-forfeitable benefits under an employee benefit, insurance, or pension plan of any member of the Company Group (excluding any employee benefit plan, policy or arrangement providing severance or similar benefits)), subject to the terms and conditions of such plan(s) and claims for indemnification under any indemnification agreement with the Company to which you may be a party, subject to the terms and conditions of such agreement).
(e)      You acknowledge that the Company may withhold from any amounts payable under this Agreement such U.S. federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
3.      Release and Waiver of Claims . As a condition of your right to receive the Consideration, you hereby agree to execute the Release prior to the expiration of the Review Period (as defined in the Release) and deliver the Release no later than the first (1 st ) business day following the expiration of the Review Period. It is further expressly understood that the Company’s payment obligations under Section 2 shall cease in the event you breach the restrictive covenants set forth in Sections 8(a), 8(c), 9 and 10 of your Employment Agreement and, upon such event, to the fullest extent permitted by applicable law, you will be required to

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repay any Consideration received prior to such breach; provided , however , that you shall remain eligible for continuation coverage for the remainder of the period required under COBRA, if any, at the full rate charged to all other similarly-situated former employees entitled to such continuation coverage.
4.      No Suit . You represent and warrant that you have not previously filed, and, subject to Section 5(a) below, to the maximum extent permitted by law agree that you will not file, a complaint, charge or lawsuit regarding any of the claims released herein against any members of the Company Group. If, notwithstanding this representation and warranty, you have filed or file such a complaint, charge or lawsuit, you agree that you shall cause such complaint, charge or lawsuit to be dismissed with prejudice and shall pay any and all costs required in obtaining dismissal of such complaint, charge or lawsuit, including without limitation the attorneys’ fees of any of the Company Parties (as defined in Exhibit A , attached hereto) against whom you have filed such a complaint, charge, or lawsuit.
5.      Affirmative Covenants .
(a)      Nothing in this Agreement or in the Release shall prohibit or impede you from communicating, cooperating or filing a complaint with any U.S. federal, state or local governmental or law enforcement branch, agency or entity (collectively, a “ Governmental Entity ”) with respect to possible violations of any U.S. federal, state or local law or regulation, or otherwise making disclosures to any Governmental Entity, in each case, that are protected under the whistleblower provisions of any such law or regulation, provided that in each case such communications and disclosures are consistent with applicable law and nothing herein shall preclude your right to receive an award from a Governmental Entity for information provided under any whistleblower program. You do not need the prior authorization of (or to give notice to) the Company regarding any such communication or disclosure. You hereby confirm that you understand and acknowledge that an individual shall not be held criminally or civilly liable under any U.S. federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a U.S. federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. You understand and acknowledge further that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order. Notwithstanding the foregoing, under no circumstance will you be authorized to disclose any information covered by attorney-client privilege or attorney work product of the Company without prior written consent of the Company’s General Counsel or other officer designated by the Company.
(b)      You acknowledge and agree that this Agreement is a confidential matter and agree that you have not, may not, and shall not disclose the existence or terms of this Agreement (including any amounts paid in connection with this Agreement) to any third party, except as required by applicable law and unless and until this Agreement is disclosed by the

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Company as may be required by law. Further, you understand that you may disclose the terms of this Agreement to your spouse, personal attorney, accountant or tax advisor, provided you instruct such person that the information is confidential and not to be disclosed.
(c)      Cooperation . (i) You agree that you will provide reasonable cooperation to the members of the Company Group and the Company’s counsel in connection with any investigation, action, administrative proceeding or litigation (or any appeal therefrom) relating to any matter that occurred during your employment with any member of the Company Group in which you were involved or of which you have knowledge. In consideration for your compliance with this Section 5(c), the Company agrees to reimburse you for reasonable out-of-pocket expenses incurred at the request of the Company. The Company agrees that any requests for cooperation shall take into account and accommodate your employment obligations following the Separation Date. This provision shall survive any termination of this Agreement.
(ii)    You agree that, in the event you are subpoenaed by any person or entity (including, but not limited to, any government agency) to give testimony or provide documents (in a deposition, court proceeding or otherwise) which in any way relates to your employment by the Company, you will give prompt notice of such request to the Company’s General Counsel and will make no disclosure until the Company has had a reasonable opportunity to contest the right of the requesting person or entity to such disclosure.
(d)      Return of Property . You agree that you will promptly return to the Company all property belonging to the Company Group, including, but not limited to, all proprietary and/or confidential information and documents (including any copies thereof) in any form belonging to the Company Group, and any other equipment or property belonging to any member of the Company Group in your possession, including laptop, smart phone, beeper, keys, card access to the building and office floors, Employee Handbook, phone card, computer user name and password, disks and/or voicemail code.
6.      Successors and Assigns . The provisions hereof shall inure to the benefit of your heirs, executors, administrators, legal personal representatives and assigns and shall be binding upon your heirs, executors, administrators, legal personal representatives and assigns. You hereby represent that you have not assigned any claims which you may have against the Company Group.
7.      Severability . If any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect. The illegality or unenforceability of such provision, however, shall have no effect upon and shall not impair the enforceability of any other provision of this Agreement.
8.      Non-Admission . Nothing contained in this Agreement will be deemed or construed as an admission of wrongdoing or liability on the part of any member of the Company Group.
9.      No Additional Payments . The payments, rights and benefits described in this Agreement will be the only such payments, rights and benefits you are to receive as a result of

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your termination of employment and you agree you are not entitled to any additional payments, rights or benefits not otherwise described in this Agreement. You hereby acknowledge and agree that you are not eligible to be a participant in any severance or incentive compensation plan of any member of the Company Group. Any payments, rights or benefits received under this Agreement will not be taken into account for purposes of determining benefits under any employee benefit plan of any member of the Company Group, except to the extent required by law, or as otherwise expressly provided by the terms of such plan.
10.      Entire Agreement . This Agreement and the Release constitute the entire understanding and agreement of the parties hereto regarding the termination of your employment. This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating to the subject matter of this Agreement, including, without limitation, your Employment Agreement and the Grant Agreements, except that it does not replace (x) Sections 5, 8(a), 8(c), 9 – 12 and 16 of your Employment Agreement, which you and the Company agree shall remain in full force and effect and that you are obligated to comply with all such provisions, or (y) the 2016 Stock Option Agreement (other than Section 3(e) therein). For the avoidance of doubt, (a) the Company hereby waives Section 8(b) of the Employment Agreement and (b) the Company specifically reminds you that Section 11 of your Employment Agreement regarding the Company’s right to claw back any amount paid to you pursuant to the Employment Agreement or otherwise remains in effect.
11.      409A . This Agreement is intended to comply with the short-term deferral rule under Treasury Regulation Section 1.409A-1(b)(4) and the separation pay plans rule under Treasury Regulation Section 1.409A-1(b)(9) and to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and shall be construed and interpreted in accordance with such intent, provided that, if any payments or benefits provided at any time hereunder involves nonqualified deferred compensation within the meaning of Code Section 409A, it is intended to comply with the applicable rules with regard thereto and shall be interpreted accordingly.
12.      Governing Law; Jurisdiction . THIS AGREEMENT SHALL BE INTERPRETED UNDER AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICTS OF LAWS. THE PARTIES HERETO AGREE TO RESOLVE ANY DISPUTE OVER THE TERMS AND CONDITIONS OR APPLICATION OF THIS AGREEMENT THROUGH BINDING ARBITRATION PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION (“ AAA ”). THE ARBITRATION WILL BE HEARD BY ONE ARBITRATOR TO BE CHOSEN AS PROVIDED BY THE RULES OF THE AAA AND SHALL BE HELD IN TAMPA, FLORIDA.
13.      Counterparts . This Agreement may be executed in multiple original counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same document.
*    *    *


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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth below.

Dated: December 1 , 2016

WALTER INVESTMENT MANAGEMENT CORP.



/s/ Anthony Renzi        
By:
Anthony Renzi
Title:
Chief Executive Officer and President






/s/ Sheryl Newman        
Sheryl Newman



097231-0021-10943-Active.20370502.11        



RELEASE OF CLAIMS
As used in this Release of Claims (this “ Release ”), the term “claims” will include all claims, covenants, warranties, promises, undertakings, actions, suits, causes of action, obligations, debts, accounts, attorneys’ fees, judgments, losses, and liabilities, of whatsoever kind or nature, in law, in equity, or otherwise. Capitalized terms not otherwise defined herein shall have the meaning set forth in my Separation Agreement, dated December 1 , 2016, and to which this Release is attached as an Exhibit (the “ Separation Agreement ”).
I intend the release contained herein to be a general release of any and all claims to the fullest extent permissible by law.
For and in consideration of the foregoing, the Consideration and other payments and benefits described in the Separation Agreement, and other good and valuable consideration, I, Sheryl Newman, for and on behalf of myself and my heirs, administrators, executors, and assigns, effective the date on which this Release becomes effective pursuant to its terms, do fully and forever release, remise, and discharge the Company Group, together with their respective current and former officers, directors, partners, members, shareholders, fiduciaries, counsel, employees, representatives, successors, assigns, and agents and family members of the aforementioned (collectively, and with the Company Group, the “ Company Parties ”) from any and all claims, complaints, charges, liabilities, demands, causes of action (whether known or unknown, fixed or contingent) whatsoever up to the date hereof that I had, may have had, or now have against the Company Parties, for or by reason of any matter, cause, or thing whatsoever, including any right or claim arising out of or attributable to my employment or the termination of my employment with the Company or otherwise, whether for (by way of example only) tort, breach of express or implied employment contract, intentional infliction of emotional distress, wrongful termination, unjust dismissal, defamation, libel, slander, claims for personal injury, harm, or other damages (whether intentional or unintentional and whether occurring on the job or not including, without limitation, negligence, misrepresentation, fraud, assault, battery, invasion of privacy, and other such claims) or under any U.S. federal, state, or local law, ordinance, rule, regulation or common law dealing with employment, including, but not limited to, discrimination in employment based on age, race, sex, national origin, handicap, religion, disability, or sexual orientation. This release of claims includes, but is not limited to, all claims arising under the Age Discrimination in Employment Act of 1967 (“ ADEA ”), Title VII of the Civil Rights Act of 1964, Section 1981 of the Civil Rights Act of 1866, the Americans with Disabilities Act of 1990, the Civil Rights Act of 1991, the Family and Medical Leave Act, the Equal Pay Act, the Older Workers Benefit Protection Act of 1990, the Sarbanes-Oxley Act of 2002, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Employee Retirement Income Security Act of 1974, the Immigration and Reform Control Act, the Uniformed Services Employment and Reemployment Rights Act, the Rehabilitation Act of 1973, the Workers Adjustment and Retraining Notification Act, the Fair Labor Standards Act, and the National Labor Relations Act, each as may be amended from time to time, and all other U.S. federal, state,

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and local laws, regulations or ordinances, the common law, and any other purported restriction on an employer’s right to terminate the employment of employees.
I acknowledge and agree that as of the date I execute this Release, I have no knowledge of any facts or circumstances that give rise or could give rise to any claims, including any claims under any of the laws listed in the preceding paragraph.
By executing this Release, I specifically release all claims relating to my employment and its termination under ADEA, a U.S. federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefit plans.
Notwithstanding the foregoing, nothing in this Release shall be a waiver of: (i) any claim by me to enforce the terms of this Release or the Separation Agreement, including any rights with respect to the payment of the amounts and provision of benefits as set forth specifically in Section 2 of the Separation Agreement; (ii) any claims that cannot be waived by law including, without limitation, any claims filed with any Governmental Entity or claims under the ADEA that arise after the date of this Agreement; or (iii) my right of indemnification and D&O coverage by virtue of my service as an officer, whether by agreement, common law, statute or pursuant to the Company’s Certificate of Incorporation, as amended to date. While this Release does not prevent me from filing a charge with any Governmental Entity, I agree that I will not be entitled to or accept any personal recovery in any action or proceeding that may be commenced on my behalf arising out of the matters released hereby, including but not limited to, any charge filed with the EEOC or any other Governmental Entity that prohibits the waiver of the right to file a charge; provided , however , that nothing herein shall preclude my right to receive an award from a Governmental Entity for information provided under any whistleblower program.
I acknowledge and agree that by virtue of the foregoing, I have waived any relief available (including, without limitation, monetary damages, equitable relief, and reinstatement) under any of the claims and/or causes of action waived in this Release. Therefore, I agree not to accept any award, settlement, or relief (including legal or equitable relief) from any source or proceeding (including but not limited to any proceeding brought by any other person or by any Governmental Entity) with respect to any claim or right waived in this Release.
I represent and warrant that I have not previously filed any action, grievance, arbitration, complaint, charge, lawsuit or similar proceedings regarding any of the claims released herein against any of the Company Parties.
I expressly acknowledge and agree that I
•
Am able to read the language, and understand the meaning, conditions, and effect, of this Release;
•
Understand that this Release effects a release and waiver of any rights I may have under ADEA, as amended by the Older Workers Benefit Protection Act of 1990, and acknowledge that the disclosure required by the Older Workers

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Benefit Protection Act of 1990 is attached hereto as Exhibit A.1 for my review;
•
Have no physical or mental impairment of any kind that has interfered with my ability to read and understand the meaning of this Release or its terms, and that I am not acting under the influence of any medication, drug, or chemical of any type in entering into this Release;
•
Am specifically agreeing to the terms of the release of claims contained in this Release because the Company has agreed to pay me the Consideration, which the Company has agreed to provide because of my agreement to accept it in full settlement of all possible claims I might have or ever had, and because of my execution of this Release;
•
Acknowledge that, but for my execution of this Release, I would not be entitled to the Consideration;
•
Understand that, by entering into this Release, I do not waive rights or claims that may arise after the date I execute this Release;
•
Had or could have forty-five (45) days following my receipt of this Release (the “ Review Period ”) in which to review and consider this Release, and that if I execute this Release prior to the expiration of the Review Period, I have voluntarily and knowingly waived the remainder of the Review Period;
•
Have not relied upon any representation or statement not set forth in this Release made by the Company or any of its representatives;
•
Was advised to consult with my attorney regarding the terms and effect of this Release prior to executing this Release; and
•
Have signed this Release knowingly and voluntarily and I have not been coerced, intimidated, or threatened into signing this Release.
I hereby agree to waive any and all claims to re-employment with the Company or any other member of the Company Group and affirmatively agree not to seek further employment with the Company or any other member of the Company Group.
Notwithstanding anything contained herein to the contrary, this Release will not become effective or enforceable prior to the expiration of the period of seven (7) calendar days following the date of its delivery by me to the Company (the “ Revocation Period ”), during which time I may revoke my acceptance of this Release by notifying the Company, in writing, delivered to the Company at its principal executive office, marked for the attention of its General Counsel. To be effective, such revocation must be received by the Company no later than 11:59 p.m. on the seventh (7 th ) calendar day following the delivery of this Release to the Company. Provided that the Release is executed and I do not revoke it during the Revocation Period, the eighth (8 th ) day

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following the date on which this Release is executed shall be its effective date (the “ Release Effective Date ”). I acknowledge and agree that if I revoke this Release during the Revocation Period, this Release will be null and void and of no effect, and neither the Company nor any other member of the Company Group will have any obligations to pay me the Consideration.
The provisions of this Release shall be binding upon my heirs, executors, administrators, legal personal representatives, assigns, and successors. If any provision of this Release shall be held by any court of competent jurisdiction to be illegal, void, or unenforceable, such provision shall be of no force or effect. The illegality or unenforceability of such provision, however, shall have no effect upon and shall not impair the enforceability of any other provision of this Release.
THIS RELEASE SHALL BE INTERPRETED UNDER AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICTS OF LAWS. I HEREBY AGREE TO RESOLVE ANY DISPUTE OVER THE TERMS AND CONDITIONS OR APPLICATION OF THIS RELEASE THROUGH BINDING ARBITRATION PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION (“ AAA ”). THE ARBITRATION WILL BE HEARD BY ONE ARBITRATOR TO BE CHOSEN AS PROVIDED BY THE RULES OF THE AAA AND SHALL BE HELD IN TAMPA, FLORIDA. IF THIS RELEASE IS DECLARED ILLEGAL OR UNENFORCEABLE BY THE ARBITRATOR, I AGREE TO EXECUTE A BINDING REPLACEMENT RELEASE OR, IF REQUESTED BY THE COMPANY, TO RETURN THE MONIES PAID PURSUANT TO THE SEPARATION AGREEMENT OR TO APPLY THE CONSIDERATION AS A SET-OFF TO ANY CLAIM OR RELIEF.








/s/ Sheryl Newman        
Sheryl Newman
Date: 12/1/16

097231-0021-10943-Active.20370502.11        
Exhibit 10.32







October 12, 2016


Alfred W. Young, Jr.
287 Hudson Court
Holland, PA 18966

Dear Alfred:
 
It is with great pleasure that we extend to you an offer to join Walter Investment Management Corp. (the “Company”) as Executive Vice President and Chief Risk and Compliance Officer. This letter will confirm the basic terms and conditions of your offer:
 
Position: You will be employed in the position of Executive Vice President and Chief Risk and Compliance Officer, reporting to Anthony Renzi or such other management representatives as the Company may designate from time to time depending on business needs and circumstances (the “Designated Officer”).  We anticipate your employment will commence on or about November 1, 2016 or such other date that is mutually agreeable, but in no event later than December 1, 2016. Your principal place of employment will be in Fort Washington, PA, although you agree that you may be required to travel from time to time for business reasons.
 
Salary: While employed hereunder, you will receive an annual base pay of $300,000 per year, before deducting all applicable withholdings, payable at the time and in the manner dictated by the Company’s standard payroll policies and practices, as in effect from time to time.

Annual Bonus: While employed hereunder, in respect of the 2017 fiscal year, you will be eligible for an annual incentive bonus opportunity under the Company’s annual incentive plan. The annual incentive bonus, if any, will be earned based on objectives established by the Designated Officer. For the 2017 fiscal year, you will be eligible to earn a target bonus of $300,000, depending on the extent to which the objectives established by the Designated Officer, and if applicable, approved by the Compensation and Human Resources Committee of the Board of Directors of the Company (the “Compensation Committee”), are satisfied. Annual incentive bonus payments, if any, are typically paid on or before March 15 th of the year following the year to which the bonus relates, subject to your continued employment through and including the bonus payment date.

The Designated Officer or the Compensation Committee, as applicable, will review your salary and annual incentive bonus opportunity at least annually to determine whether there should be any adjustments thereto.




Sign-on Bonus: The Company has agreed to provide you with a one-time sign-on bonus in the amount of $200,000, before deducting all applicable withholdings, to be payable within 30 days after your start date. Should you voluntarily resign from the Company or be terminated by the Company for cause (as determined by the




Company in its good faith discretion), in each case, on or prior to the first anniversary of your start date, you will be required to repay to the Company, within sixty (60) days following such termination date, an amount equal to the product of (A) the sign-on bonus and (B) a fraction, the numerator of which is 365 less the number of full days of your employment with the Company between the start date through and including the date of such termination of employment, and the denominator of which is 365.

Long Term Equity Incentive Plan: Beginning with the 2017 grant cycle, which will occur in 2017, subject to your continued employment hereunder, management will recommend to the Compensation Committee that you be eligible to participate in the Company’s long-term incentive plan in a like manner and to the same degree as similarly situated employees. For the 2017 grant cycle, management will recommend that you receive a long-term equity incentive opportunity with a target economic value of $300,000 on the date of the grant.

Non-Disclosure, Non-Solicitation, and Non-Competition Agreement: You will, as a condition of employment, be required to execute the Employee Agreement on Non-Disclosure, Non-Solicitation and Non-Competition attached hereto in Exhibit A.

Benefits: You will also be eligible to participate in and receive the following:

Health / Welfare & Retirement Benefits:   In addition to compensation, you shall be entitled to participate in all employment benefit programs including, but not limited to, medical, dental, disability, group life, 401(k), and any other benefits as the Company may from time to time and in its sole discretion make available to all employees of similar rank, subject to eligibility requirements.  You will be eligible to participate in these benefits on the first of the month following 30 days of employment.
 
Paid Time Off and Holidays:   As a Sr. Executive, the Company will be providing unlimited paid time off.
You will be on the honor system to take as much paid time off as is needed, while still ensuring that your job duties and responsibilities are being met. In addition, you will also receive such paid holidays consistent with the Company’s standard policies or as the Company’s Board of Directors may approve.

At-Will Employment: You will be employed at will, which means that either you or the Company can elect to terminate the employment relationship at any time, for any or no reason; provided, however, that you will be required to provide the Company at least two weeks’ prior written notice of your termination of employment. Notwithstanding the foregoing, the Company may, in its sole and absolute discretion, by written notice to you, accelerate such date of termination. All base salary, benefits and other compensation will end upon the termination of your employment except as required by applicable law.

Background Check : In accordance with standard Company practice, your employment is contingent upon satisfactory completion of a background check and a drug screen.

This offer letter replaces any previous oral or written representations about this job offer and is to be interpreted and governed by the laws of the State of Pennsylvania.
This letter may be signed in counterparts, each of which, along with any facsimile or scanned email version, will be deemed an original.

If you should have any questions, please do not hesitate to contact me. Otherwise, please sign and return this letter. I am confident that you will find your assignment both challenging and rewarding.  I'm excited that you have accepted employment with the Company and look forward to working with you.

Sincerely,

-Page 2-




Walter Investment Management Corp.      


/s/ Anthony Renzi            
Anthony Renzi
Chief Executive Officer and President                     

ACKNOWLEDGMENT

I hereby agree to employment on the terms and conditions set forth in this letter.
 
Dated:  October 12, 2016                 



/s/ Alfred W. Young, Jr.        
Alfred W. Young, Jr.                



-Page 3-

Exhibit 10.9.6

Walter Investment Management Corp.

Nonqualified Stock Options Award Agreement
under the
2011 Omnibus Incentive Plan
(Amended and Restated June 9, 2016)
You have been selected to receive a grant of nonqualified stock options (“Options”) pursuant to the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016) of Walter Investment Management Corp. (the “Plan”), as specified below:
Participant: ____________________
Date of Grant: July 8, 2016
Number of Options: __________________
Number of Shares Covered by the Options: __________________
Option Price: $2.89
Date of Expiration: July 8, 2026
Vesting of Options: One-third of the Options granted hereunder shall vest on each of the first, second and third anniversaries of the Date of Grant (each such date, a “Vest Date”).    
THIS “AGREEMENT” , effective as of the Date of Grant set forth above, represents the grant of Options to purchase shares of common stock (“Shares”) of Walter Investment Management Corp., a Maryland corporation (the “Company”), to the Participant named above, pursuant to the provisions of the Plan.
The Plan provides a complete description of the terms and conditions governing this Grant of Options. If there is any inconsistency between the terms of this Agreement and the terms of the Plan, the Plan’s terms shall completely supersede and replace the conflicting terms of this Agreement. All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The parties hereto agree as follows:
1. Grant of Options . The Company hereby grants to the Participant Options to purchase the number of Shares set forth above (with one Option corresponding to one Share), at the Option Price set forth above, which is 100% of the Fair Market Value (“FMV”) of a Share on the Date of Grant. The FMV is equal to the average of the high and the low selling price of Shares on the New York Stock Exchange on the Date of Grant.

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2. Exercise of Options . Subject to the provisions set forth in Section 3 of this Agreement, each installment of Options granted hereunder will become vested and exercisable on the applicable Vest Date, subject to the Participant remaining continuously employed by the Company or a direct or indirect subsidiary thereof through such Vest Date. Except as specifically provided in Section 3 any unvested Options awarded hereunder shall be immediately forfeited in the event of Participant’s termination of employment with the Company or one of its subsidiaries prior to the applicable Vest Date. For purposes of clarification, “termination” shall not include a reassignment of the Participant from the Company to one of its subsidiaries, from one of the Company’s subsidiaries to the Company or from one subsidiary company to another subsidiary company. The Participant may exercise a vested Option at any time on or after the applicable Vest Date, provided that no exercise may occur subsequent to the close of business on the Date of Expiration. The Options may be exercised in whole or in part, but not for less than 100 Shares at any one time, unless fewer than 100 Shares then remain subject to the Options, and the Options are then being exercised as to all such remaining Shares.
3. Termination of Employment .
(a)
By Death, Disability, Retirement or Constructive Termination . In the event the employment of the Participant with the Company or any of its subsidiaries is terminated prior to the final Vest Date by reason of death, Disability, Retirement, or Constructive Termination (each as defined below) the Participant, or his or her estate, shall not forfeit the unvested Options and shall be entitled, subject to the condition set forth in subsection 3(e) below, to retain all of the Options granted under this award (together with any Options retained pursuant to subsection 3(b) below, “Retained Options”). Each installment of the Retained Options shall become vested and exercisable on the applicable Vest Date to which such installment relates and shall remain exercisable thereafter by the Participant or such person or persons as shall have been named as the Participant’s beneficiary, or by such persons that have acquired the Participant’s rights under the Options by will or by the laws of descent and distribution, at any time prior to the close of business on the Date of Expiration.
(i) “Disability” shall mean a “permanent and total disability” within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986 (the “Code”), as amended and such other disabilities, infirmities, afflictions or conditions as the Compensation and Human Resources Committee of the Company’s Board of Directors (the “Compensation Committee”) may determine in its sole discretion.
(ii)
In order to be eligible for “Retirement,” the Participant must (A) have been employed by the Company and/or any of its direct or indirect subsidiary companies for a minimum of four years, and (B) the Participant must have either reached the age of 60, or the sum of the Participant’s age and years of service with the Company or its subsidiaries must exceed 70 ; provided that, in either case, the Participant provides the Company with at least nine months written notice of the Participant’s intention to retire, or such lesser time as the Company may agree. For purposes of this definition, the Participant’s years of service with any predecessor company that the Company or its subsidiaries has acquired shall not apply for purposes of determining years of employment with the Company or its subsidiary pursuant to subsection (A) but shall

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apply for purposes of determining years of employment with the Company or its subsidiary pursuant to subsection (B).
(iii) “Constructive Termination” shall occur if, without Participant’s consent Participant is subjected to: (A) a material breach of any written employment agreement Participant may have with the Company, (B) a material diminution of Participant’s position (including status, offices, title and reporting relationships), duties or responsibilities or pay, or (C) the forced relocation of Participant’s primary job location more than 50 miles from Participant’s primary place of employment at the time of this award; provided however, that any isolated, insubstantial or inadvertent change, condition, failure or breach described under subsections (A) – (C) above which is not taken in bad faith and is remedied by the Company promptly after the Company’s actual receipt of notice from the Participant as provided below, shall not constitute Constructive Termination. In order for the Participant to be eligible for Retained Options in the event of Constructive Termination, Participant must provide written notice, including details describing the basis of Participant’s claim, to the Company within 60 days of the occurrence of the event(s) giving rise to a claim of Constructive Termination. The Company will have 30 days to remedy any non-compliance. In the event the Company fails or is unable to remedy any non-compliance, the effective date of Participant’s termination of employment shall be 90 days from the date the Company received the notice, unless otherwise agreed by Participant and the Company. Should the Participant fail to provide the foregoing notice within the specified time, the Participant will be deemed to have accepted the change which would otherwise give rise to a claim and thereafter no longer be eligible for Retained Options as a result of Constructive Termination based upon the events giving rise to the claim. For purposes of this Agreement, a material diminution in pay or responsibility shall not be deemed to have occurred if: (X) the amount of Participant’s bonus fluctuates due to performance considerations under any Company incentive plan applicable to Participant, (Y) Participant is transferred to a position of comparable responsibility, status, title, office and compensation within the Company or its subsidiaries, or (Z) Participant experiences a reduction in salary that is relatively comparable to reductions imposed upon employees of comparable position within the Company or its subsidiaries.
(b)
Termination by the Company for Other than Cause . If the Company shall terminate Participant’s employment for other than Cause (as defined below) prior to the final Vest Date, the Participant, or his or her estate, shall not forfeit the unvested Options and shall be entitled, subject to the condition set forth in subsection 3(e) below, to retain all of the Options granted under this award. Each installment of the Retained Options shall become vested and exercisable on the applicable Vest Date to which such installment relates and shall remain exercisable thereafter by the Participant at any time prior to the close of business on the Date of Expiration.

(c)
Voluntary Termination by the Participant or Involuntary Termination by the Company for Cause . In the event that, prior to the final Vest Date, the Participant voluntarily terminates Participant’s employment with the Company or its subsidiary, or the employment of the Participant with the Company or any of its subsidiaries is

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terminated by the Company for Cause, all unvested Options awarded pursuant to this Agreement shall be forfeited.
(i) For purposes of this Agreement, “Cause” shall mean (A) conviction of, or plea of guilty or nolo contendere to, a felony arising from any act of fraud, embezzlement or willful dishonesty in relation to the business or affairs of the Company, or (B) conviction of, or plea of guilty or nolo contendere to, any other felony which is materially injurious to the Company or its reputation or which compromises the Participant’s ability to perform the Participant’s job function, and/or act as a representative of the Company, or (C) a willful failure to attempt to substantially perform the Participant’s duties (other than any such failure resulting from the Participant’s Disability), after a written demand for substantial performance is delivered to the Participant that specifically identifies the manner in which the Company believes that the Participant has not attempted to substantially perform such duties, and has failed to remedy the situation, to the extent possible, within fifteen (15) business days of such written notice from the Company or such longer time as may be reasonably required to remedy the situation, but no longer than forty‑five (45) calendar days. For purposes of this definition, no act or failure to act on the Participant’s part shall be considered to be Cause if done, or omitted to be done, in good faith and with the reasonable belief that the action or omission was in the best interests of, or were not, in fact, materially detrimental to, the Company or a Company subsidiary.
(d) Termination in Connection with a Divestiture . In the event that, prior to the final Vest Date, the Company sells, contributes or otherwise transfers one or more of its subsidiaries, business units, or divisions such that the Company no longer controls such subsidiary, business unit or division (collectively a “Divestiture”), and the Participant is advised that Participant will be terminated as an employee of the Company or its subsidiary in connection with such Divestiture, but Participant is offered comparable employment with the acquirer (“Subsequent Employment”), the Company will, at the sole discretion of the Compensation Committee, (a) accelerate the vesting of all unvested Options granted hereunder, (b) seek to replace the award granted hereunder with an award of substantially comparable value, on substantially comparable terms (the comparability of which, in each case, will be in the Compensation Committee’s sole discretion) with the acquirer in the Divestiture (a “Substitute Award”), or (c) continue the award as described below. If the Company is successful in negotiating a Substitute Award this Agreement shall be terminated and the award granted hereunder will be forfeited in its entirety. In the event the Company is unable to negotiate a Substitute Award and opts not to accelerate the vesting of the unvested Options, then this award shall continue pursuant to its terms, provided, however, that the terms hereof, including the terms of subsection (e) below, shall apply equally to the Participant’s Subsequent Employment as if the Participant remained an employee of the Company or its subsidiary. By way of example, if Participant voluntarily terminates Participant’s employment with the acquiring entity prior to the final Vest Date, then, for purposes of this award, such termination will be treated in the same manner as a voluntary termination from the Company pursuant to subsection (c) above and the unvested portion of the Options granted hereunder will be forfeited. In the event the Participant is not offered Subsequent

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Employment in connection with a Divestiture, or if Participant declines to accept Subsequent Employment, then Participant’s termination shall be treated as a termination by the Company for other than Cause as provided in subsection (b) above.
(e)
Non-Compete . Notwithstanding any provision of this Agreement to the contrary, any unvested Retained Options shall be immediately forfeited in the event that, prior to the final Vest Date, the Participant (i) violates the post-employment terms of any written employment agreement Participant has with the Company, (ii) violates any obligation of confidentiality Participant may have towards the Company, (iii) becomes employed by, or otherwise accepts compensation from any Competitor (as defined below) for (A) performing work for such Competitor similar to that performed by the Participant for the Company, or (B) otherwise acting in a similar capacity for a Competitor, or (iv) it is determined subsequent to Participant’s termination of employment with the Company that the Participant had acted during the time of Participant’s employment with the Company in a manner that would have constituted a basis for termination for Cause had it been known during the period of Participant’s employment. For purposes of this Agreement, “Competitor” shall mean any business, or any division or unit of any business, which provides, in whole or in part, in the United States of America, the same or similar services and/or products offered by the Company or any of its subsidiaries at the time of Participant’s termination of employment with the Company or its subsidiary. Unvested Retained Options will be forfeited in the event the Participant accepts employment with a Competitor as provided by subsection (iii) above prior to the final Vest Date, even if the terms of a written employment agreement with the Company permit employment with a Competitor prior to the final Vest Date.

4. Change-in-Control. Notwithstanding anything to the contrary in this Agreement, in the event of a Change-in-Control of the Company, the Participant shall become immediately fully vested without restriction in all Options granted pursuant to this Agreement. For purposes of this Agreement, a “Change-in-Control” shall mean a change of ownership of the Company, a change in the effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Treas. Reg. 1.409A-3(i)(5). A “Change-in-Control” shall not include a Divestiture unless such a Divestiture meets the definition of a Change-in-Control set forth in the immediately preceding sentence.
5. Restrictions on Transfer . Unless otherwise determined by the Compensation Committee in accordance with the Plan, this award of Options may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, this Option shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s legal representative.
6. Recapitalization . In the event of any change in the capitalization of the Company such as a stock split or a corporate transaction such as any merger, consolidation, separation, or otherwise, the number and class of Shares subject to this Option, as well as the Option Price, shall be equitably adjusted by the Compensation Committee to prevent dilution or enlargement of rights.
7. Procedure for Exercise of Option . This Option may be exercised by delivery of written notice to the Company at its executive offices, addressed to the attention of its Secretary. Such notice:

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(a) shall be signed by the Participant or his or her legal representative; (b) shall specify the number of full Shares then elected to be purchased with respect to the Option; (c) unless a Registration Statement under the Securities Act of 1933 is in effect with respect to the Shares to be purchased, shall contain a representation of the Participant that the Shares are being acquired by him or her for investment and with no present intention of selling or transferring them, and that he or she will not sell or otherwise transfer the Shares except in compliance with all applicable securities laws and requirements of any stock exchange upon which the Shares may then be listed; and (d) shall be accompanied by payment in full of the Option Price of the Shares to be purchased.
The Option Price upon exercise of this Option shall be payable to the Company in full as provided for in the Plan. As promptly as practicable after receipt of notice and payment upon exercise, the Company shall cause to be issued and delivered to the Participant or his or her legal representative, as the case may be, certificates for the Shares so purchased, which may, if appropriate, be endorsed with appropriate restrictive legends. The share certificates shall be issued in the Participant’s name (or, at the discretion of the Participant, jointly in the names of the Participant and the Participant’s spouse). The Company shall maintain a record of all information pertaining to the Participant’s rights under this Agreement, including the number of shares for which Participant’s Option is exercisable. If the Option shall have been exercised in full, this Agreement shall be returned to the Company and canceled.
8. Beneficiary Designation . The Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Agreement is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Secretary of the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
9. Rights as a Stockholder . The Participant shall have no rights as a stockholder of the Company with respect to the Shares subject to this Agreement until such time as the purchase price has been paid, and the Shares have been issued and delivered to him or her.
10. Continuation of Employment . This Agreement shall not confer upon the Participant any right to continue employment with the Company or a subsidiary thereof, nor shall this Agreement interfere in any way with the Company’s (or a subsidiary’s) right to terminate the Participant’s service at any time.

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11. Miscellaneous .
(a)
This Agreement and the rights of the Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Compensation Committee may adopt for administration of the Plan. The Compensation Committee shall have the right to impose such restrictions on any Shares acquired pursuant to the exercise of this Option, as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. It is expressly understood that the Compensation Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon the Participant.
(b)
With the approval of the Board, the Compensation Committee may terminate, amend, or modify this Agreement; provided, however, that no such termination, amendment, or modification of this Agreement may in any material way adversely affect the Participant’s rights under this Agreement, without the written consent of the Participant.
(c)
The Participant acknowledges and agrees that the Company shall have the power and the right to deduct or withhold, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s FICA obligation), domestic or foreign, required by law to be withheld with respect to any exercise of the Participant’s rights under this Agreement should Participant fail to make timely payment of all taxes due.
(d)
The Participant agrees to take all steps necessary to comply with all applicable provisions of federal and state securities laws in exercising his or her rights under this Agreement.
(e)
This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(f)
All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect merger, consolidation, acquisition, purchase of all or substantially all of the business and/or assets of the Company, or otherwise.
(g)
To the extent any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.
(h)
To the extent not preempted by federal law, this Agreement shall be governed by, and construed in accordance with, the laws of the state of Maryland.

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(i)
Notice hereunder shall be given to the Company at its principal place of business, and shall be given to the Participant at the address set forth below, or in either case at such addresses as one party may subsequently furnish to the other party in writing.
(j)
This Option is not intended to qualify as an “incentive stock option” under Section 422 of the Code.
Balance of page left intentionally blank


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IN WITNESS WHEREOF , the parties have caused this Agreement to be executed as of the Date of Grant.
Walter Investment Management Corp.

By: _________________________

This Option and the terms and conditions thereof are hereby accepted
_________________________
Participant
Participant’s name and address:
_________________________
_________________________
_________________________
_________________________
 






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Exhibit 10.9.7





Walter Investment Management Corp.
Performance Share Award Agreement
Under the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016)






Walter Investment Management Corp.
Performance Share Award Agreement
Under the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016)

You have been selected by Walter Investment Management Corp., a Maryland corporation (the “Company”), to receive an award of Performance Shares (the “Award”) pursuant to the Company’s 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016) (as it may be further amended and restated, the “Plan”). This Performance Share Award Agreement (as it may be further amended and restated, this “Agreement”) under the Plan, together with the Plan, contains the terms and conditions of the Award.
Participant :     
Date of Grant : November 3, 2016
Target Number of Performance Shares : [•] for the 2017 Performance Period (as defined below) (such target number of Shares, the “2017 Target Award Opportunity”) and [•] for the 2018 Performance Period (as defined below) (such target number of Shares, the “2018 Target Award Opportunity”).
THIS AGREEMENT , effective as of the Date of Grant set forth above, represents the grant of Performance Shares by the Company to the Participant named above, pursuant to the provisions of the Plan and the terms of this Agreement.
The Compensation and Human Resources Committee of the Company’s Board of Directors (the “Committee”) determined that it is in the best interests of the Company and its stockholders to grant the Award provided for in this Agreement to the Participant, pursuant to the Plan and the terms of this Agreement.
The Plan provides a complete description of the terms and conditions governing this Award and the underlying Performance Shares. If there is any inconsistency between the terms of this Agreement and the terms of the Plan, other than with respect to the definitions of the terms “Cause” and “Disability” as set forth on Exhibit A hereto, the Plan’s terms shall completely supersede and replace the conflicting terms of this Agreement. All capitalized terms shall have the meanings ascribed to them in the Plan or on Exhibit A hereto, unless specifically set forth otherwise herein. The parties hereto agree as follows:
1.
Performance Periods . The performance period related to the 2017 Target Award Opportunity commences on January 1, 2017 and ends on December 31, 2017 (such period, the “2017 Performance Period”) and the performance period related to the 2018 Target Award Opportunity commences on January 1, 2018 and ends on December 31, 2018 (such period, the “2018 Performance Period”).
2.
Performance Measures . For purposes of this Agreement, subject to any adjustments that may be made in accordance with Section 21.2 of the Plan:
(a)
the performance measure for the 2017 Target Award Opportunity shall be target fiscal year 2017 APS as set forth in the final version of the Company’s 2017 Annual Business Plan as approved by the Board, or, if not set forth therein, as calculated by the Company’s Chief


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Financial Officer and presented to the Audit Committee of the Board (the “Target 2017 APS”); and
(b)
the performance measure for the 2018 Target Award Opportunity shall be target fiscal year 2018 APS as set forth in the final version of the Company’s 2017 Annual Business Plan as approved by the Board, or, if not set forth therein, as calculated by the Company’s Chief Financial Officer and presented to the Audit Committee of the Board (the “Target 2018 APS”).
3.
Calculation of Number of Shares . Each Performance Share shall represent the right to receive a number of Shares, if any, determined by multiplying the number of Performance Shares allocable to the 2017 Target Award Opportunity or the 2018 Target Award Opportunity, as applicable by the Achievement Percentage (as set forth in the table below) applicable to the 2017 Performance Period and/or the 2018 Performance Period (as applicable, each, a “Performance Period”), which Shares, if any, shall be settled in accordance with Section 8 below. The Achievement Percentage with respect to any Performance Period shall be based upon the Performance Level as determined in accordance with Section 4 below:
Performance Level
Actual APS
Achievement Percentage
Maximum
130% of Target 2017 APS or Target 2018 APS, as applicable
200%
Target
Target 2017 APS or Target 2018 APS, as applicable
100%
Threshold
70% of Target 2017 APS or Target 2018 APS, as applicable
50%
Below Threshold
< 70% of Target 2017 APS or Target 2018 APS, as applicable
0%

Payout for performance between Maximum and Target or Threshold and Target shall be interpolated on a straight-line basis.
4.
Determination of the Performance Level . The Committee shall determine, no later than April 15 th of the year immediately following the end of each of the 2017 Performance Period and the 2018 Performance Period (such actual date of determination, the “2017 Determination Date” or the “2018 Determination Date”, as applicable), the Performance Level applicable to the relevant Performance Period based on the actual fiscal year 2017 or 2018, as applicable, APS as set forth in the Company’s earnings press release relating to the 2017 Performance Period or the 2018 Performance Period, as applicable, or, if not set forth therein, as calculated by the Company’s Chief Financial Officer and presented to the Audit Committee of the Board (such actual APS, the “Actual APS”), subject to any adjustments that may be made in accordance with Section 21.2 of the Plan as compared to the Target 2017 APS or Target 2018 APS, as applicable. The determination made by the Committee shall be final, conclusive and binding, and the Committee shall certify in writing such determination and the extent to which the performance measures under the Award have been achieved.


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5.
Termination of Employment .
(a)
Due to death, Disability or Retirement, by the Company without Cause (other than due to death or Disability) or by the Participant for Good Reason . In the event the Participant’s employment with the Company (or a Subsidiary thereof) (i) terminates due to death, Disability or Retirement or (ii) is terminated (x) by the Company (or a Subsidiary thereof) without Cause (other than due to death or Disability) or (y) by the Participant for Good Reason, in each case, prior to the 2017 Determination Date and/or the 2018 Determination Date, the Participant (or the Participant’s estate, as applicable) shall not forfeit any Performance Shares and shall be entitled to retain all such Performance Shares that have not otherwise been forfeited in accordance with Section 4 above, which Shares, if any, shall be settled on the Settlement Date to the extent provided for in Section 4 above.
(b)
For Other Reasons . If the Participant’s employment terminates for any reason prior to the applicable Settlement Date other than as provided for above, the Participant shall forfeit all Performance Shares.
6.
Change in Control . Notwithstanding anything to the contrary in this Agreement, in the event of a Change in Control that occurs prior to the 2017 Determination Date or the 2018 Determination Date, as applicable, and prior to the Participant’s termination of employment with the Company (or a Subsidiary thereof), the Achievement Percentage with respect to the 2017 Target Award Opportunity and/or the 2018 Target Award Opportunity shall be 100%.
7.
Voting Rights and Dividend Equivalents . Until such time as the Performance Shares are paid out in Shares, the Participant shall not have voting rights with respect to the Performance Shares. However, the Company will pay dividend equivalents on the Performance Shares in the same form ( e.g., cash, stock, or such other dividend as shall be determined by the Company) paid on the Company’s outstanding Shares. All dividend equivalents will be accrued as of the time such dividend equivalents are paid on the Company’s Shares, however, such dividend equivalents will not be earned or payable to the Participant unless and until such time as, and to the extent that, the Performance Shares to which such dividend equivalents apply are earned following the end of the 2017 Performance Period and/or the 2018 Performance Period, as applicable.
8.
Settlement . Settlement of Performance Shares (and any accrued but unpaid dividend equivalents thereon) for which the Performance Level has been determined to be at the Threshold level or above in accordance with Section 4 above shall occur as soon as administratively feasible following the 2017 Determination Date or the 2018 Determination Date, as applicable (each, a “Settlement Date”), but in all events prior to April 30 th of the calendar year immediately following the end of the 2017 Performance Period or the 2018 Performance Period, as applicable; provided, however, that in connection with a Change in Control, the Settlement Date shall instead occur as soon as practicable following such Change in Control (but in all events no later than sixty (60) days following such Change in Control). Settlement of Performance Shares will be made solely in the form of Shares. For the avoidance of doubt, to the extent that the Performance Level is at the Below Threshold level, no Shares will be deliverable upon settlement of the Performance Shares applicable to the 2017 Performance Period and/or the 2018 Performance Period, as applicable, and such Performance Shares


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shall be forfeited immediately following the 2017 Determination Date and/or the 2018 Determination Date, as applicable.
9.
Restrictions on Transfer . Subject to Committee discretion, unless and until actual Shares are received upon payout, Performance Shares granted pursuant to this Agreement may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, except as provided in the Plan.
10.
Recapitalization . In the event of any corporate event or transaction, including, but not limited to, a change in the Shares or the capitalization of the Company, in accordance with the terms of the Plan, the number and class of Shares subject to this Award shall be equitably adjusted by the Committee, as determined in its sole discretion, in order to prevent the dilution or enlargement of the Participant’s rights.
11.
Beneficiary Designation . The Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Agreement is to be paid in case of the Participant’s death before the Participant receives any or all of such benefit. Each such designation shall revoke all prior designations by the Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Secretary of the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
12.
Continuation of Employment . This Agreement shall not confer upon the Participant any right to continued employment with the Company or any of its Subsidiaries, nor shall this Agreement interfere in any way with the Company’s (or a Subsidiary’s) right to terminate the Participant’s employment with the Company (or a Subsidiary thereof) at any time.
13.
Miscellaneous .
(a)
This Agreement and the rights of the Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. The Committee shall have the right to impose such restrictions on any Shares acquired pursuant to this Agreement as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon the Participant.
(b)
With the approval of the Board, the Committee may terminate, amend, or modify this Agreement; provided , however , that no such termination, amendment, or modification of this Agreement may in any material way adversely affect the Participant’s rights under this Agreement without the written consent of the Participant.


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(c)
Unless the Participant elects otherwise in accordance with the procedures established by the Company, the Participant hereby elects to have the Company, and the Company shall, withhold a number of Shares having an aggregate Fair Market Value on the last regular New York Stock Exchange trading day prior to the applicable Settlement Date (based on the closing price of a Share on such day) equal to the amount required to be withheld to satisfy minimum statutory withholding tax requirements; provided, however, that in no event shall the Fair Market Value of withheld Shares exceed the minimum statutory withholding tax requirements.
(d)
The Company shall have the power and the right to deduct or withhold Shares from the Participant’s payout under this Agreement, or require the Participant to remit to the Company, an amount sufficient to satisfy the minimum statutory required withholding for federal, state, and local taxes (including the Participant’s FICA obligation), domestic or foreign, required by law to be withheld with respect to any payout to the Participant under this Agreement.
(e)
The Participant agrees to take all steps necessary to comply with all applicable provisions of federal and state securities laws in exercising the Participant’s rights under this Agreement.
(f)
This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(g)
This Agreement and the Plan constitute the entire understanding between the Participant and the Company regarding the Performance Shares granted hereunder. This Agreement and the Plan supersede any prior agreements, commitments or negotiations concerning the Performance Shares granted hereunder.
(h)
All obligations of the Company under the Plan and this Agreement with respect to the Performance Shares shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect merger, consolidation, acquisition, purchase of all or substantially all of the business and/or assets of the Company, or otherwise.
(i)
To the extent not preempted by federal law, this Agreement shall be governed by, and construed in accordance with, the laws of the state of Maryland.
(j)
The intent of the parties is that payments and benefits under this Agreement with respect to the Award be exempt from or comply with Section 409A of the Code and accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in accordance therewith. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six (6)-month period immediately following the Participant’s separation from service shall instead be paid on the first business day after the date that is


5


six months following the Participant’s separation from service; provided , however , that payment may be made earlier as provided in the event of Participant’s death. Each payment in a series of payments hereunder shall be deemed to be a separate payment for purposes of Section 409A of the Code.
(k)
To the extent any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.
(l)
Notice hereunder shall be given to the Company at its principal place of business, and shall be given to the Participant at the address set forth below, or in either case at such addresses as one party may subsequently furnish to the other party in writing.
(m)
This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.


6


IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Date of Grant.
Walter Investment Management Corp.

By: _________________________



_________________________
Participant
Participant’s name and address:
_________________________
_________________________
_________________________
_________________________





7


EXHIBIT A
DEFINITIONS
A.    “ Cause ” shall mean:
(a)
“Cause” as defined in any employment, consulting or similar agreement between the Participant and the Company (or any Subsidiary) in effect at the time of the Participant’s termination of employment; or
(b)
In the absence of any such employment, consulting or similar agreement (or the absence of any definition of “Cause” contained therein) any one or more of the following:
(i)
Willful misconduct of the Participant;
(ii)
Willful failure to perform the Participant’s duties;
(iii)
The conviction of the Participant by a court of competent jurisdiction of a felony or entering the plea of nolo contendere to such crime by the Participant; or
(iv)
The commission of an act of theft, fraud, dishonesty or insubordination that is materially detrimental to the Company or any Subsidiary.
B.
“ Change in Control ” shall mean the occurrence of one or more of the following events:
(a)
The acquisition by any Person of Beneficial Ownership of more than 40% of either (A) the then-outstanding Shares (“Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided , however , that, for purposes of this subsection (a) the following acquisitions shall not constitute a Change in Control:
(i)
Any acquisition by the Company;
(ii)
Any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company;
(iii)
Any acquisition by any entity controlled by the Company; or
(iv)
Any acquisition by any entity pursuant to a transaction that complies with subsections (c)(i), (ii) and (iii), below.
(b)
Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided , however , that any individual becoming a Director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the Directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.


8


(c)
Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company and/or any entity controlled by the Company, or a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any entity controlled by the Company (each, a “Business Combination”), in each case, provided , however , that, for purposes of this subsection (d) a Business Combination shall not constitute a Change in Control if following such Business Combination:
(i)
All or substantially all of the individuals and entities that were the Beneficial Owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 66 2/3% of the then-outstanding Shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more Subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be;
(ii)
No Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then-outstanding Shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination; and
(iii)
At least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination.
(d)
Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

C.
“ Disability ” shall mean:
(a)
“Disability” as defined in any employment, consulting or similar agreement between the Participant and the Company (or any Subsidiary) in effect at the time of the Participant’s termination of employment; or
(b)
In the absence of any such employment, consulting or similar agreement (or the absence of any definition of “Disability” contained therein), permanent and total disability as defined in Code Section 22(e)(3). A determination of Disability may be made by a physician selected or approved by the Committee and, in this respect, the Participant shall submit to any reasonable examination(s) required by such physician upon request.
Notwithstanding the foregoing provisions of this paragraph, in the event any Award is considered to be “deferred compensation” as that term is defined under Code Section 409A, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Code Section


9


409A, the definition of “Disability” for purposes of such Award shall be the definition of “disability” provided for under Code Section 409A and the regulations or other guidance issued thereunder.
D.
“ Good Reason ” shall mean:
(a)
“Good Reason” or “Constructive Termination,” as applicable, as defined in any employment, consulting or similar agreement between the Participant and the Company (or any Subsidiary) in effect at the time of the Participant’s termination of employment; or
(b)
In the absence of any such employment, consulting or similar agreement (or the absence of any definition of “Good Reason” or “Constructive Termination” contained therein) any one or more of the following:
(i)
The occurrence, without the Participant’s consent of:
1.
A material breach of any written employment agreement the Participant may have with the Company;
2.
A material diminution of the Participant’s position (including status, offices, title and reporting relationships), duties or responsibilities or pay; or
3.
The forced relocation of the Participant’s primary job location more than 50 miles from the Participant’s primary place of employment at the time of this award.
Provided , however , that any isolated, insubstantial or inadvertent change, condition, failure or breach described under subsections (1) – (3) above which is not taken in bad faith and is remedied by the Company promptly after the Company’s actual receipt of notice from the Participant as provided below, shall not constitute Good Reason; provided , further , that the Participant must provide written notice, including details describing the basis of Participant’s claim, to the Company within 60 days of the occurrence of the event(s) giving rise to a claim of Good Reason. The Company will have 30 days to remedy any non-compliance. In the event the Company fails or is unable to remedy any non-compliance, the effective date of Participant’s termination of employment shall be 90 days from the date the Company received the notice, unless otherwise agreed by Participant and the Company. Should the Participant fail to provide the foregoing notice within the specified time, the Participant will be deemed to have accepted the change which would otherwise give rise to a claim of Good Reason. For purposes of this Agreement, a material diminution in pay or responsibility shall not be deemed to have occurred if: (X) the amount of the Participant’s bonus fluctuates due to performance considerations under any Company incentive plan applicable to the Participant, (Y) the Participant is transferred to a position of comparable responsibility, status, title, office and compensation within the Company or its subsidiaries, or (Z) the Participant experiences a reduction in salary that is relatively comparable to reductions imposed upon employees of comparable position within the Company or its subsidiaries.
E.
“ Retirement. ” In order to have terminated employment due to Retirement, the Participant must (a) have been employed by the Company and/or any of its direct or indirect Subsidiaries for a minimum of four years, and (b) the Participant must have either reached the age of 60, or the sum of the Participant’s age and years of service with the Company or its Subsidiaries must exceed 70;


10


provided, that, in either case, the Participant provides the Company with at least nine months’ written notice of the Participant’s intention to retire, or such lesser time as the Company may agree. For purposes of this definition, the Participant’s years of service with any predecessor company that the Company or its Subsidiaries has acquired shall not apply for purposes of determining years of employment with the Company or its Subsidiary pursuant to subsection (a) but shall apply for purposes of determining years of employment with the Company or its Subsidiary pursuant to subsection (b).

F.
“ Share ” shall mean a share of common stock of the Company.


11
Exhibit 10.9.8
[Form For Participants Who Are
Retirement Eligible at Grant or
Will Be At Any Time Prior To The Last Vesting Date]



Walter Investment Management Corp.

2016 Long Term Incentive
Cash-Based Award Agreement
Under the 2011 Omnibus Incentive Plan
(Amended and Restated June 9, 2016)







        


Walter Investment Management Corp.
2016 Long Term Incentive
Cash-Based Award Agreement
Under the 2011 Omnibus Incentive Plan
(Amended and Restated June 9, 2016)
You have been selected to receive a grant of a long term incentive cash-based award (the “Cash-Based Award”) pursuant to the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016) (as it may be further amended and restated, the “Plan”) of Walter Investment Management Corp., a Maryland corporation (the “Company”) as specified below. This Cash-Based Award Agreement (as it may be further amended and restated, this “Agreement”) under the Plan, together with the Plan, contains the terms and conditions of the Cash-Based Award.
Participant :     
Date of Grant : November 3, 2016
Amount of Cash-Based Award : $     
Vesting Dates : April 1, 2017 and April 1, 2018, subject to Section 1 below.
THIS AGREEMENT , effective as of the Date of Grant set forth above, represents the grant of the Cash-Based Award by the Company to the Participant named above, pursuant to the provisions of the Plan and the terms of this Agreement.
The Compensation and Human Resources Committee of the Company’s Board of Directors (the “Committee”) determined that it is in the best interests of the Company and its stockholders to grant the Cash-Based Award provided for in this Agreement to the Participant, pursuant to the Plan and the terms of this Agreement.
The Plan provides a complete description of the terms and conditions governing this Cash-Based Award. If there is any inconsistency between the terms of this Agreement and the terms of the Plan, other than with respect to the definitions of the terms “Cause” and “Disability” as set forth on Exhibit A hereto, the Plan’s terms shall completely supersede and replace the conflicting terms of this Agreement. All capitalized terms shall have the meanings ascribed to them in the Plan or on Exhibit A hereto, unless specifically set forth otherwise herein. The parties hereto agree as follows:
1.
Employment with the Company . Except as may otherwise be provided in Section 4 or Section 5 below, the Cash-Based Award granted hereunder will become vested in two substantially equal installments subject to the condition that the Participant remains an employee of the Company (or a Subsidiary thereof) from the Date of Grant through (and including) each applicable Vesting Date; provided , that if the amount is not evenly divisible by two, then the installments shall be as equal as possible with the smaller installment vesting first. If the Participant remains employed by the Company (or a Subsidiary thereof) through each applicable Vesting Date, payment of the relevant installment of the Cash-Based Award will occur irrespective of whether the Participant is employed by the Company (or a Subsidiary thereof) on the payment date. This grant of the Cash-Based Award shall not confer any right to the Participant to be granted other Cash-Based Awards in the future under the Plan.


1
        


2.
Timing of Payout . Cash payments in satisfaction of the Company’s obligations with respect to any vested installment of the Cash-Based Award (i) that has vested pursuant to Section 1 shall occur as soon as administratively feasible after the applicable Vesting Date (but in no event later than May 1 of the calendar year in which the applicable Vesting Date occurs) or (ii) that has vested in accordance with Section 4 or Section 5, below, shall occur as soon as administratively feasible after the applicable event (but in no event later than 30 days following the applicable event); unless, in the case of (i) or (ii) of this Section 2, the Participant irrevocably elects to voluntarily defer the payout of the Cash-Based Award to a specific date or event as approved by the Committee and in compliance with Section 409A of the Code.
3.
Form of Payout . The Cash-Based Award shall be paid out solely in the form of United States dollars.
4.
Termination of Employment/Retirement Eligibility .
(a)
By Death or Disability, By the Company Without Cause (other than due to Death or Disability) or by the Participant for Good Reason . In the event the Participant’s employment with the Company (or a Subsidiary thereof) (i) terminates by reason of death or Disability or (ii) is terminated (x) by the Company (or a Subsidiary thereof) without Cause (other than due to death or Disability) or (y) by the Participant for Good Reason (in each of (i) or (ii), prior to the Retirement Vesting Date), in each case, prior to the final Vesting Date, any unvested portion of the Cash-Based Award shall become immediately fully vested and paid out in accordance with Section 2 above.
(b)
Retirement Eligibility . On the earlier to occur of (i) the Date of Grant, if the Participant is Retirement eligible on or prior to the Date of Grant or (ii) the date the Participant first becomes Retirement eligible after the Date of Grant but prior to the final Vesting Date, if the Participant is not Retirement eligible on or prior to the Date of Grant (either such date in (i) or (ii), the “Retirement Vesting Date”), any unvested portion of the Cash-Based Award (such amount, the “Retirement Vesting Portion”) shall become immediately fully vested and, notwithstanding anything herein to the contrary and, to the extent permitted by Treasury Regulation Section 1.409A-3(j)(4)(vi) and in accordance with Section 8(c) below, the Retirement Vesting Portion shall be reduced (pro-rata based on the remaining Vesting Date(s), as applicable) by an amount equal to the amount necessary to satisfy all employment and other taxes due in connection with the Retirement Vesting Date upon the occurrence of such event and the remaining portion of the Cash-Based Award shall be paid out on each remaining Vesting Date(s) in accordance with Section 2 above.
(c)
For Cause . In the event the Participant’s employment is terminated by the Company (or a Subsidiary thereof) for Cause prior to the final Vesting Date (or the payout date relating to a Vesting Date), the Participant shall forfeit any unvested portion of the Cash-Based Award.


2
        


(d)
For Other Reasons . If the Participant’s employment terminates for any reason prior to the final Vesting Date (other than as provided for above), the Participant shall forfeit any unvested portion of the Cash-Based Award.
5.
Change in Control. Notwithstanding anything to the contrary in this Agreement, in the event of a Change in Control that occurs prior to the final Vesting Date (or the payout date relating to the final Vesting Date), and provided that prior to such Change in Control the Participant’s employment with the Company (or a Subsidiary thereof) has not terminated, any unvested portion of the Cash-Based Award shall become immediately fully vested and paid out in accordance with Section 2 above.
6.
Beneficiary Designation . The Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Agreement is to be paid in case of the Participant’s death before the Participant receives any or all of such benefit. Each such designation shall revoke all prior designations by the Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Secretary of the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
7.
Continuation of Employment . This Agreement shall not confer upon the Participant any right to continued employment with the Company or any of its Subsidiaries, nor shall this Agreement interfere in any way with the Company’s (or a Subsidiary’s) right to terminate the Participant’s employment with the Company (or a Subsidiary thereof) at any time.
8.
Miscellaneous .
(a)
This Agreement and the rights of the Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon the Participant.
(b)
With the approval of the Board, the Committee may terminate, amend, or modify this Agreement; provided, however, that no such termination, amendment, or modification of this Agreement may in any material way adversely affect the Participant’s rights under this Agreement, without the written consent of the Participant.
(c)
The Company shall have the power and the right to deduct or withhold from the Participant’s Cash-Based Award, or require the Participant to remit to the Company, an amount sufficient to satisfy the minimum statutory required withholding for federal, state, and local taxes (including the Participant’s FICA obligation), domestic or foreign, required by law to be withheld with respect to any payout to the Participant under this Agreement.
(d)
This Agreement and the Plan constitute the entire understanding between the Participant and the Company regarding the Cash-Based Award. This Agreement and the Plan supersede any prior agreements, commitments or negotiations concerning the Cash-Based Award, including, without limitation, any employment, consulting or similar agreement.


3
        


(e)
All obligations of the Company under the Plan and this Agreement with respect to the Cash-Based Award shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect merger, consolidation, acquisition, purchase of all or substantially all of the business and/or assets of the Company, or otherwise.
(f)
To the extent not preempted by federal law, this Agreement shall be governed by, and construed in accordance with, the laws of the state of Maryland.
(g)
The intent of the parties is that payments and benefits under this Agreement with respect to the Cash-Based Award comply with Section 409A of the Code, and accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in accordance therewith. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following the Participant’s separation from service shall instead be paid on the first business day after the date that is six months following the Participant’s separation from service; provided, however, that payment may be made earlier as provided by Section 4(a) in the event of the Participant’s death. Each payment in a series of payments hereunder shall be deemed to be a separate payment for purposes of Section 409A of the Code.
(h)
To the extent any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.
(i)
Notice hereunder shall be given to the Company at its principal place of business, and shall be given to the Participant at the address set forth below, or in either case at such addresses as one party may subsequently furnish to the other party in writing.
(j)
This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.



4
        


IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Date of Grant.
Walter Investment Management Corp.

By: _________________________


_________________________
Participant
Participant’s name and address:
_________________________
_________________________
_________________________
_________________________



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EXHIBIT A
DEFINITIONS
A.    “ Cause ” shall mean:
(a)
“Cause” as defined in any employment or similar agreement between the Participant and the Company (or any Subsidiary) in effect at the time of the Participant’s termination of employment; or
(b)
In the absence of any such employment, consulting or similar agreement (or the absence of any definition of “Cause” contained therein) any one or more of the following:
(i)
Willful misconduct of the Participant;
(ii)
Willful failure to perform the Participant’s duties;
(iii)
The conviction of the Participant by a court of competent jurisdiction of a felony or entering the plea of nolo contendere to such crime by the Participant; or
(iv)
The commission of an act of theft, fraud, dishonesty or insubordination that is materially detrimental to the Company or any Subsidiary.
B.
“ Change in Control ” shall mean the occurrence of one or more of the following events:
(a)
The acquisition by any Person of Beneficial Ownership of more than 40% of either (A) the then-outstanding Shares (“Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided , however , that, for purposes of this subsection (a) the following acquisitions shall not constitute a Change in Control:
(i)
Any acquisition by the Company;
(ii)
Any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company;
(iii)
Any acquisition by any entity controlled by the Company; or
(iv)
Any acquisition by any entity pursuant to a transaction that complies with subsections (c)(i), (ii) and (iii), below.
(b)
Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided , however , that any individual becoming a Director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the Directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of Directors or


6
        


other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.
(c)
Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company and/or any entity controlled by the Company, or a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any entity controlled by the Company (each, a “Business Combination”), in each case, provided , however , that, for purposes of this subsection (d) a Business Combination shall not constitute a Change in Control if following such Business Combination:
(i)
All or substantially all of the individuals and entities that were the Beneficial Owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 66 2/3% of the then-outstanding Shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be;
(ii)
No Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then-outstanding Shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination; and
(iii)
At least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination.
(d)
Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

C.
“ Disability ” shall mean:
(a)
“Disability” as defined in any employment or similar agreement between the Participant and the Company (or any Subsidiary) in effect at the time of the Participant’s termination of employment; or
(b)
In the absence of any such employment, consulting or similar agreement (or the absence of any definition of “Disability” contained therein), permanent and total disability as defined in Code Section 22(e)(3). A determination of Disability may be made by a physician selected or approved by the Committee and, in this respect, the Participant shall submit to any reasonable examination(s) required by such physician upon request.


7
        


Notwithstanding the foregoing provisions of this paragraph, in the event any Award is considered to be “deferred compensation” as that term is defined under Code Section 409A, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Code Section 409A, the definition of “Disability” for purposes of such Award shall be the definition of “disability” provided for under Code Section 409A and the regulations or other guidance issued thereunder.
D.
“ Good Reason ” shall mean:
(a)
“Good Reason” or “Constructive Termination,” as applicable, as defined in any employment, consulting or similar agreement between the Participant and the Company (or any Subsidiary) in effect at the time of the Participant’s termination of employment; or
(b)
In the absence of any such employment, consulting or similar agreement (or the absence of any definition of “Good Reason” or “Constructive Termination” contained therein) any one or more of the following:
(i)
The occurrence, without the Participant’s consent of:
1.
A material breach of any written employment agreement the Participant may have with the Company;
2.
A material diminution of the Participant’s position (including status, offices, title and reporting relationships), duties or responsibilities or pay; or
3.
the forced relocation of the Participant’s primary job location more than 50 miles from the Participant’s primary place of employment at the time of this award.
Provided , however , that any isolated, insubstantial or inadvertent change, condition, failure or breach described under subsections (1) – (3) above which is not taken in bad faith and is remedied by the Company promptly after the Company’s actual receipt of notice from the Participant as provided below, shall not constitute Good Reason; provided , further , that the Participant must provide written notice, including details describing the basis of Participant’s claim, to the Company within 60 days of the occurrence of the event(s) giving rise to a claim of Good Reason. The Company will have 30 days to remedy any non-compliance. In the event the Company fails or is unable to remedy any non-compliance, the effective date of Participant’s termination of employment shall be 90 days from the date the Company received the notice, unless otherwise agreed by Participant and the Company. Should the Participant fail to provide the foregoing notice within the specified time, the Participant will be deemed to have accepted the change which would otherwise give rise to a claim of Good Reason. For purposes of this Agreement, a material diminution in pay or responsibility shall not be deemed to have occurred if: (X) the amount of the Participant’s bonus fluctuates due to performance considerations under any Company incentive plan applicable to the Participant, (Y) the Participant is transferred to a position of comparable responsibility, status, title, office and compensation within the Company or its subsidiaries, or (Z) the Participant experiences a reduction in salary that is


8
        


relatively comparable to reductions imposed upon employees of comparable position within the Company or its subsidiaries.

E.
“ Retirement .” In order to be eligible for Retirement, the Participant must (a) have been employed by the Company and/or any of its Subsidiary for a minimum of four years, and (b) have either reached the age of 60, or the sum of the Participant’s age and years of service with the Company or its Subsidiaries must exceed 70; provided , that, in either case, the Participant provides the Company with at least nine months written notice of the Participant’s intention to retire, or such lesser time as the Company may agree. For purposes of this definition, the Participant’s years of service with any predecessor company that the Company or one of its Subsidiaries has acquired shall not apply for purposes of determining years of employment with the Company or its Subsidiary pursuant to subsection (a) but shall apply for purposes of determining years of employment with the Company or a Subsidiary pursuant to clause (b).
F.
“ Share ” shall mean a share of common stock of the Company.



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Exhibit 21

SUBSIDIARIES OF REGISTRANT
As of March 7, 2017

Subsidiary
 
State of Incorporation
Mid-State Capital, LLC
 
Delaware
Hanover SPC-A, Inc.
 
Delaware
Green Tree Credit Solutions LLC
 
Delaware
Green Tree Investment Holdings III LLC
 
Delaware
Green Tree Investment Management LLC
 
Delaware
Green Tree Insurance Agency of Nevada, Inc.
 
Nevada
Walter Management Holding Company LLC
 
Delaware
Green Tree Servicing Corp.
 
Delaware
Ditech Financial LLC
 
Delaware
Green Tree Advance Receivables II LLC
 
Delaware
Green Tree Advance Receivables III LLC
 
Delaware
Green Tree Agency Advance Funding Trust I
 
Delaware
Green Tree Credit LLC
 
New York
WIMC Real Estate Investment LLC
 
Delaware
Walter Reverse Acquisition LLC
 
Delaware
Reverse Mortgage Solutions, Inc.
 
Delaware
REO Management Solutions, LLC
 
Delaware
Mortgage Asset Systems, LLC
 
Delaware
2013 WCO Holdings Corp.
 
Maryland
RMS REO BRC, LLC
 
Delaware
RMS REO CS, LLC
 
Delaware
DF Insurance Agency LLC
 
Delaware
RMS CS Repo Trust 2016
 
New York


EXHIBIT 23

Consent of Independent Registered Certified Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1)
Registration Statement (Form S-8 No. 333-160743) pertaining to the Walter Investment Management Corp. 1999 Equity Incentive Plan (As Amended) and the Walter Investment Management Corp. 2009 Long-Term Incentive Award Plan,
(2)
Registration Statement (Form S-8 No. 333-192033) pertaining to the Walter Investment Management Corp. 2011 Omnibus Incentive Plan,
(3)
Registration Statement (Form S-3 No. 333-201054) of Walter Investment Management Corp., including the related Prospectus, and
(4)
Registration Statement (Form S-8 No. 333-213112) pertaining to the Walter Investment Management Corp. 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016);

of our reports dated March 14, 2017, (except for Note 2 and Note 3, as to which the date is August 9, 2017 ), with respect to the consolidated financial statements and schedule of Walter Investment Management Corp. and subsidiaries, and our report dated March 14, 2017 (except for the effect of the material weakness described in the fifth paragraph, as to which the date is August 9, 2017 ), with respect to the effectiveness of internal control over financial reporting of Walter Investment Management Corp. and subsidiaries, included in this Annual Report (Form 10-K/A) of Walter Investment Management Corp. for the year ended December 31, 2016.

/s/ Ernst & Young LLP

Tampa, Florida
August 9, 2017


Exhibit 2.7

EXECUTION VERSION
PRIVILEGED & CONFIDENTIAL

    
STOCK PURCHASE AGREEMENT
AMONG
GREEN TREE CREDIT SOLUTIONS LLC,
WALTER INVESTMENT MANAGEMENT CORP.,
INSURECO, INCORPORATED,
AND
INTERFINANCIAL, INC.,
solely with respect to Article X
DATED AS OF DECEMBER 30 , 2016



1

16260554.27

TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS
1
SECTION 1.1.
Definitions    1
ARTICLE II. PURCHASE OF THE SHARES
12
SECTION 2.1.
Purchase and Sale of the Shares    12
SECTION 2.2.
Closing    12
SECTION 2.3.
Closing Deliveries    12
SECTION 2.4.
Payment at Closing    14
SECTION 2.5.
Final Payment    14
SECTION 2.6.
Withholding    16
ARTICLE III. REPRESENTATIONS AND WARRANTIES
17
SECTION 3.1.
Representations and Warranties of Seller    17
SECTION 3.2.
Representations and Warranties of Buyer    32
ARTICLE IV. COVENANTS
34
SECTION 4.1.
Conduct of Business of the Companies    34
SECTION 4.2.
Access to Information; Confidentiality    37
SECTION 4.3.
Confidentiality    37
SECTION 4.4.
Commercially Reasonable Efforts; Consents, Approvals and Filings    40
SECTION 4.5.
Public Announcements    41
SECTION 4.6.
Related Party Agreements    42
SECTION 4.7.
Further Assurances    42
SECTION 4.8.
Notice of Certain Events    42
SECTION 4.9.
Books and Records    43
SECTION 4.10.
Tracking Services Agreement    43
SECTION 4.11.
Use of Names    43
SECTION 4.12.
Intellectual Property License    44
SECTION 4.13.
Guaranties    45
SECTION 4.14.
Restructuring    45
SECTION 4.15.
Business Transition    45
SECTION 4.16.
Bank Accounts    45
SECTION 4.17.
Resignations    46
SECTION 4.18.
Transition Matters        46
SECTION 4.19.
Discontinued Accounts    46
SECTION 4.20.
Closing Date Indebtedness    47
ARTICLE V. EMPLOYEE MATTERS
47
SECTION 5.1.
Benefit Plans    47

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16260554.27

SECTION 5.2.
Transfer of Employment of Claims Employees and Related Liabilities    47
SECTION 5.3.
Continuing Employees    47
SECTION 5.4.
COBRA    49
SECTION 5.5.
Cooperation    49
SECTION 5.6.
Nonsolicitation; No-Hire    49
SECTION 5.7.
Effect of this Article V    50
ARTICLE VI. CONDITIONS PRECEDENT
50
SECTION 6.1.
Conditions to Each Party’s Obligations    50
SECTION 6.2.
Conditions to Obligations of Buyer    50
SECTION 6.3.
Conditions to Obligations of Seller    51
ARTICLE VII. INDEMNIFICATION
52
SECTION 7.1.
Survival of Representations, Warranties, and Covenants    52
SECTION 7.2.
Indemnification    52
SECTION 7.3.
Certain Limitations    54
SECTION 7.4.
Definitions    55
SECTION 7.5.
Procedures for Third-Party Claims    57
SECTION 7.6.
Direct Claims    58
SECTION 7.7.
Sole Remedies    58
SECTION 7.8.
Certain Other Matters    58
SECTION 7.9.
Privileged Information    58
ARTICLE VIII. TAX MATTERS
59
SECTION 8.1.
Indemnification for Taxes    59
SECTION 8.2.
Filing of Tax Returns    60
SECTION 8.3.
Tax Refunds    62
SECTION 8.4.
Cooperation and Exchange of Information    62
SECTION 8.5.
Conveyance Taxes    63
SECTION 8.6.
Tax Covenants    63
SECTION 8.7.
Miscellaneous    64
ARTICLE IX. TERMINATION PRIOR TO CLOSING
64
SECTION 9.1.
Termination of Agreement    64
SECTION 9.2.
Survival    65
ARTICLE X. GENERAL PROVISIONS
65
SECTION 10.1.
Fees and Expenses    65
SECTION 10.2.
Notices    65
SECTION 10.3.
Interpretation    67
SECTION 10.4.
Entire Agreement; Third-Party Beneficiaries    67
SECTION 10.5.
Governing Law    68
SECTION 10.6.
Assignment    68

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16260554.27

SECTION 10.7.
Jurisdiction; Enforcement    68
SECTION 10.8.
Severability; Amendment; Waiver    69
SECTION 10.9.
Certain Limitations    70
SECTION 10.10.
Offset    70
SECTION 10.11.
Counterparts    70
SECTION 10.12.
Buyer Parent Undertaking    70

EXHIBIT A – BROKER AGREEMENT
EXHIBIT B – MARKETING SERVICES AGREEMENT
EXHIBIT C – SERVICES AGREEMENT
EXHIBIT D – SUBLEASE AGREEMENT
EXHIBIT E – ASSURTRACK SERVICES AGREEMENT
EXHIBIT F – TRUST AGREEMENT
EXHIBIT G – VOLUNTARY INSURANCE PLACEMENT AGREEMENT
EXHIBIT H – PRICEWATERHOUSECOOPERS OPINION
EXHIBIT I – EARNOUT EXAMPLE CALCULATION


STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of December 30 , 2016 (this “ Agreement ”), is made among Green Tree Credit Solutions LLC, a Delaware limited liability company (“ Seller ”), Walter Investment Management Corp., a Maryland corporation (“ WIMC ”), Insureco, Incorporated, a California corporation (“ Buyer ”), and Interfinancial, Inc., a Georgia corporation (“ Buyer Parent ”), solely with respect to Article X.
WHEREAS, Seller owns 100% of the issued and outstanding shares of capital stock (the “ Shares ”) of GTI Holdings Corp., a Delaware corporation (“ GTIH ”);
WHEREAS, WIMC owns, directly or indirectly, 100% of the issued and outstanding units of membership interest of Seller;
WHEREAS, GTIH owns 100% of the issued and outstanding capital stock of Green Tree Insurance Agency, Inc., a Minnesota corporation (“ GTIA ”), Green Tree Insurance Agency of Nevada, Inc., a Nevada corporation (“ GTN ”), and Green Tree Insurance Agency Reinsurance Limited, a company organized under the laws of the Turks and Caicos Islands (“ GTR ,” and together with GTIA and GTIH, the “ Transferred Companies ”);
WHEREAS, prior to the Closing (as defined herein), Seller will cause GTIH to distribute all of the capital stock of GTN to Seller as a distribution (the “ Dividend ”); and
WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, following payment of the Dividend, Seller desires to sell to Buyer, and Buyer desires to acquire from Seller, all of the Shares.
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1.      Definitions . For purposes of this Agreement, the following terms shall have the respective meanings set forth below:
“ Action ” means any civil, criminal or administrative action, suit, claim, litigation or similar proceeding, in each case before a Governmental Entity.
“ Affiliate ” with respect to any Person or entity, means another Person that directly or indirectly, including through one or more intermediaries, controls, is controlled by or is under common control with, such first Person.  For purposes of this definition, a Person shall be deemed to “control” another Person if such first person owns, directly or indirectly, a majority of the issued voting common stock or other voting equity interests of such other Person and has the direct or indirect ability to elect or appoint a majority of the board of directors or equivalent governing body of such other Person, whether through the ownership of voting securities, by contract or otherwise.  For the avoidance of doubt, unless otherwise specified herein, the Transferred Companies shall be deemed to be Affiliates of Seller (and not Buyer) prior to Closing, and shall be deemed Affiliates of Buyer (and not Seller) from and after the Closing.
“ Affiliated Group ” means any affiliated group within the meaning of Section 1504(a) of the Code or any similar group defined under a similar provision of state, local or foreign law.
“ American Bankers ” means American Bankers Insurance Company of Florida, a Florida insurance company.
“ Applicable Law ” means any law, statute, regulation, rule, ordinance, order, injunction, judgment, decree, principle of common law, constitution or treaty enacted, promulgated, issued, enforced or entered by any Governmental Entity applicable to a party hereto, or any Transferred Company, or any of its respective Affiliates, businesses, properties, rights or assets, as may be amended from time to time.
“ AssurTrack Services Agreement ” means the Amended and Restated AssurTrack Services Agreement by and among American Bankers, WIMC, Ditech and RMS in the form set forth in Exhibit E, which will amend and restate the existing AssurTrack Services Agreement and the Broker Agreement.
“ Benefit Plan ” means each “employee benefit plan” within the meaning of Section 3(3) of ERISA, including multiemployer plans within the meaning of Section 3(37) of ERISA, and each other stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, restricted stock, equity or equity-based, severance, separation, termination, pay in lieu of notice, retention, employment, consulting, change-of-control, collective bargaining, bonus, incentive, performance, deferred compensation, employee loan, fringe benefit, health, medical, dental, life, disability, accident or group insurance, welfare, vacation layoff, day or dependent care, legal services, cafeteria, retirement, pension, profit sharing, and any other material benefit plan, agreement, program, policy, commitment or other arrangement, in each case, that is sponsored, maintained, contributed or required to be contributed to by WIMC, Seller or their Subsidiaries (including each Transferred Company and its or their Subsidiaries) for the benefit of any Employees or former Employees, or with respect to which any of the Transferred Companies has or may have any liability.
“ Broker Agreement ” means the Amended and Restated Broker Agreement by and among GTIA, Ditech and RMS attached hereto as Exhibit A.
“ Business ” means the business conducted by Transferred Companies as of the date of this Agreement, which includes the procuring of, and the providing of customer services related to, insurance products for customers of Ditech. For the purposes of this definition, “insurance products” include, but are not limited to, physical damage insurance for homes, manufactured homes, automobiles and certain recreational vehicles as well as collateral protection products for homes, manufactured homes and certain recreational vehicles designated as collateral for loans serviced by Ditech. For a portion of certain other low volume product lines including accidental death and dismemberment or insurance designed to reduce or eliminate underlying debt in the event of the borrowers’ death or disability, GTR (a Transferred Company) also assumes the underwriting risk, including incurred losses and premium taxes on the business, via a reinsurance arrangement.
“ Business Day ” means any day other than a Saturday, a Sunday or any other day on which banking institutions in New York City are required or authorized by Applicable Law to be closed.
“ Business Support Services Agreements ” means the Voluntary Insurance Placement Agreement (as amended and restated as of the Closing), the Services Agreement, the AssurTrack Services Agreement, the Trust Agreement, the Marketing Services Agreement and the Sublease Agreement.
“ Buyer Disclosure Schedule ” means the disclosure schedule of Buyer (including any attachments thereto) delivered in connection with, and constituting a part of, this Agreement.
“ Buyer Party ” means Buyer or any Affiliate of Buyer that is a party to any Transaction Document.
“ Claims Employees ” means each individual formerly employed in the claims division of GTIA.
“ Closing Date Funded Indebtedness ” means (A) the aggregate amount that would be required to be paid in order to pay, satisfy, terminate, release and discharge in full all Closing Date Indebtedness of the type referred to in items (i) to (vi) of the definition of Indebtedness, plus (B) to the extent related to the foregoing items in clause (A), items (ix), (x) and (xi) of the definition of Indebtedness.
“ Closing Date Indebtedness ” means the aggregate value of all Indebtedness as of the Closing Date, in each case of the Transferred Companies determined on a consolidated basis without duplication and calculated in accordance with the Accounting Principles.
“ Closing Date Other Indebtedness ” means (A) the aggregate amount that would be required to be paid in order to pay, satisfy, terminate, release and discharge in full all Closing Date Indebtedness of the type referred to in items (vii) to (viii) of the definition of Indebtedness, plus (B) to the extent related to the foregoing items in clause (A), items (ix), (x) and (xi) of the definition of Indebtedness.
“ COBRA ” means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code and any similar state law.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Commissions Receivable, Net ” has the meaning set forth on Section 2.5(g) of the Disclosure Schedule.
“ Companies ” means, collectively, the Transferred Companies and GTN.
“ Company Benefit Plan ” means each Benefit Plan (i) sponsored or maintained solely by any Transferred Company for the benefit of any Employee, or (ii) entered into solely between any Transferred Company and any Employee, and, in each case, with respect to which only a Transferred Company has any liability.
“ Contract ” means any contract, agreement, indenture, note, bond, loan, instrument, license, lease or other enforceable arrangement or agreement, whether in writing or oral.
“ Current Representation ” means the representation by Willkie Farr & Gallagher LLP or any other law firm of Seller or any Affiliate prior to the Closing in connection with this Agreement, any other Transaction Document or any agreement, certificate, instrument or other document executed or delivered pursuant to this Agreement or any other Transaction Document or any transaction contemplated hereby or thereby (including the negotiation, execution or performance hereof or thereof).
“ Disclosure Schedule ” means the disclosure schedule of Seller and WIMC (including any attachments thereto) delivered in connection with, and constituting a part of, this Agreement.
“ Ditech ” means Ditech Financial LLC (f/k/a Green Tree Servicing LLC).
“ Earnout Commencement Date ” means the one-year anniversary of the first day of the calendar month immediately following the month in which Buyer or one of its Affiliates starts writing Specified Voluntary GWP.
“ Employee ” means any individual employed by any of the Transferred Companies; such employees, as of the date hereof, are set forth on Section 1.1(b) of the Disclosure Schedule. A “former Employee” means any individual who was an Employee but is no longer, as of such date, an Employee.  
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.
“ ERISA Affiliate ” means with respect to any Person, each business or entity which is or was a member of a “controlled group of corporations,” under “common control” or a member of an “affiliated service group” with such Person within the meaning of Sections 414(b), (c) or (m) of the Code or Section 4001(b)(1) of ERISA, or required to be aggregated with such Person under Section 414(o) of the Code, or is or was under “common control” with such Person within the meaning of Section 4001(a)(14) of ERISA.
“ ERISA Affiliate Liability ” means any liability, fine, lien or penalty imposed by ERISA (including Title IV thereof), the Code or similar non-U.S. Applicable Law with respect to any Company Benefit Plan by reason of any Transferred Company having been an ERISA Affiliate of any Person (other than any Transferred Companies) prior to the Closing.

“ Governmental Entity ” means any (i) federal, state, local, municipal, foreign or other government, (ii) governmental or quasi-governmental entity of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal), whether foreign or domestic, or (iii) body exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature, whether foreign or domestic, including any arbitral tribunal.
“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity.
“ GSE ” means any government-sponsored entity, including the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Government National Mortgage Association (Ginnie Mae).
“ Indebtedness ” means any of the following liabilities, obligations or commitments, whether secured (with or without limited recourse) or unsecured, asserted or unasserted, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise: (i) all indebtedness for borrowed money, (ii) any indebtedness which is evidenced by a note, bond, debenture or similar instrument, (iii) any letter of credit, surety, bond, performance bond or bankers acceptance, (iv) all liabilities in respect of capital leases, (v) deferred purchase price of goods or services, (vi) cash held on account of third Persons (other than pursuant to any collection or similar agreement), (vii) Pre-Closing Payroll Obligations, (viii) the Seller Transaction Expenses, (ix) all obligations of the type referred to in clauses (i) through (viii) of other Persons secured by any Liens on property owned by a Transferred Company subject to such Lien whether or not the obligation secured has been assumed, (x) any guarantees of the foregoing indebtedness of any other Person; including, in each case, any accrued and unpaid interest or penalty thereon, and (xi) all liabilities for accrued but unpaid interest expense and unpaid penalties, fees, charges and prepayment premiums that are payable, in each case, with respect to any of the obligations of a type described in clauses (i) through (x) above.
“ Insurance Carrier Client ” means any insurance company with whom the Agency has placed insurance in its capacity as Insurance Producer.
“ Insurance Producer ” means any insurance broker, customer representative, agent, agency, managing general agent, solicitor, producer or sub-producer.
“ Intellectual Property ” means, in any and all jurisdictions: (a) Trademarks; (b) copyrights and rights in copyrightable subject matter in published and unpublished works of authorship; (c) rights in Software and databases; (d) all registrations and applications to register or renew the registration of any of the foregoing; (e) patents and applications for patents, including all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (f) rights in Trade Secrets; (g) all other intellectual property rights; and (h) all administrative and legal rights and remedies arising therefrom and relating thereto, including the right to prosecute and perfect such interests and rights to sue, oppose, cancel, interfere, and enjoin based upon such interests.
“ IT Systems ” means the hardware, Software, data, databases, data communication lines, network and telecommunications equipment, Internet-related information technology infrastructure, wide area network and other information technology equipment, owned, leased or licensed by Seller, WIMC or any of their respective Affiliates (including the Transferred Companies) and used in the Business.
“ Knowledge ” means, unless otherwise expressly provided herein, the actual knowledge after reasonable inquiry of those Persons listed (a) with respect to Seller, in Section 1.1(c) of the Disclosure Schedule, but only with respect to the section or sections of this Agreement specified therein for each such Person, and (b) with respect to Buyer, in Section 1.1(d) of the Buyer Disclosure Schedule. For the avoidance of doubt, the obligation to undertake reasonable inquiry by such Persons shall not extend to any third party other than Affiliates of such Persons.
“ Marketing Services Agreement ” means the Marketing Services Agreement by and between DF Insurance Agency LLC and GTIA in the form set forth in Exhibit B.
“ Material Adverse Effect ” means a material adverse effect on, or material adverse change in, (i) the Business, condition (financial or otherwise), assets, liabilities and results of operations of the Transferred Companies, in each case taken as a whole, but shall exclude any such effect or change to the extent resulting from (a) any change in general political, economic or securities or financial market conditions (including changes in interest rates or changes in equity prices), (b) any change, occurrence or condition generally affecting participants in any segment of the Business, (c) any change or proposed change in GAAP, Applicable Law or the interpretation or enforcement thereof, (d) natural catastrophe events, hostilities, acts of war or terrorism, or any escalation or worsening thereof, (e) the announcement of the transactions contemplated by the Transaction Documents, (f) the effect of any action taken by Buyer or its Affiliates, or refrained from being taken by Seller, the Companies or any of their respective Affiliates at the direction of Buyer, (g) the identity of Buyer, or (h) any failure of the Companies to meet any financial projections or targets ( provided that this clause (h) shall not by itself exclude the underlying causes of any such failure); except, in the case of clauses (a) through (d), to the extent disproportionately affecting the Transferred Companies as compared to other Persons engaged in the industries in which the Transferred Companies operate; provided that, for the avoidance of doubt, any material decrease in the ability of the Mortgage Companies (as defined in the Transaction Documents in the agreed form) to generate business would be deemed to have a material adverse effect on the Transferred Companies or (ii) the ability of Seller and its Affiliates to consummate the transactions contemplated by this Agreement or the other Transaction Documents.
“ Owned Intellectual Property ” means all Intellectual Property owned or purported to be owned by a Transferred Company.
“ Permitted Lien ” means, with respect to an asset, any: (a) carriers’, mechanics’, materialmens’ or similar Lien arising in the ordinary course of business with respect to amounts not yet due and payable or the validity of which is being contested in good faith and for which adequate reserves are maintained in accordance with GAAP; (b) Lien for Taxes, assessments or other governmental charges not yet due and payable or due and payable but not delinquent or the amount or validity of which is being contested in good faith and for which adequate reserves are maintained in accordance with GAAP; (c) Lien arising under a conditional sales contract or equipment lease with a third party; (d) easements, rights of way, zoning ordinances and other similar encumbrances affecting real property, and common law landlord-tenant Liens; and (e) security arrangement or other Lien securing an obligation to pay premium amounts to an insurance carrier, including Liens on renewal rights of GTIA; and (f) other Lien that does not materially detract from the current value or materially impair the current use of such asset.
“ Person ” means an individual, corporation, partnership, joint venture, limited liability company, association, trust, unincorporated organization or other entity.
“ Post-Closing Tax Periods ” means any and all Tax periods that begin after the Closing Date and the portion of any Straddle Period beginning after the Closing Date.
“ Pre-Closing Payroll Obligations ” means any and all liabilities of the Transferred Companies for (i) accrued but unpaid base salary, wages, bonuses (including with respect to each Annual Incentive Plan participant, the prorated amount of each participant’s 2017 bonus calculated by multiplying (i) the product of each participant’s target percentage times his annual base salary and (ii) a fraction equal to (x) the number of days elapsed between the start of the applicable performance period and the Closing Date divided by (y) 365) and commissions, accrued but unused vacation and other paid time off, and any other accrued and unpaid employee benefit obligations (in each case, including employer payroll taxes in respect thereof), in each case, in respect of Continuing Employees for all periods up to (but not including) the Closing Date, and (ii) accrued but unpaid severance in respect of any Employee or former Employee, in each case, whose employment was terminated prior to the Closing Date. For the avoidance of doubt, any and all obligations to Andrew Jeska, Paul Berman and Jeffrey Knoll under their respective retention agreements dated April 6, 2015 shall remain the obligation of WIMC and shall not be assumed by Buyer.
“ Pre-Closing Tax Periods ” means any and all Tax periods that end on or before the Closing Date and the portion of any Straddle Period ending on and including the Closing Date.
“ Pre-Closing Taxes ” means (a) all liability for Taxes imposed on or payable by or with respect to any of the Transferred Companies for any and all Pre‑Closing Tax Periods (other than Taxes imposed as a result of any transaction outside the ordinary course of business undertaken at the exclusive direction of Buyer (or any Affiliate of Buyer including the Transferred Companies) that occurs on the Closing Date after the Closing); (b) all liability resulting by reason of the several liability of the Transferred Companies pursuant to Treasury Regulations Section 1.1502‑6 or any analogous state, local or foreign law or regulation or by reason of the Transferred Companies having been a member of any consolidated, combined or unitary group on or prior to the Closing Date; (c) all liability for Taxes resulting by reason of any of the Transferred Companies ceasing to be a member of the Affiliated Group that includes Seller; (d) any liability for Taxes imposed with respect to a Pre-Closing Tax Period resulting from the Restructuring; (e) any liability for Taxes imposed with respect to a Pre-Closing Tax Period resulting from a breach of a representation or warranty contained in Section 3.1(j) or a breach by Seller of Article VIII; (f) all liability in respect of Taxes imposed by reason of any Transferred Company having liability for Taxes of another Person arising under principles of transferee or successor liability or by contract as a result of activities or transactions taking place at or prior to the Closing; and (g) any liability for Taxes imposed with respect to a Pre-Closing Tax Period resulting from the transactions described in Section 4.10.
“ Prime Rate ” means, as of any date of determination, that rate of interest identified as the “Prime Rate” of interest on the Business Day immediately preceding such date of determination as published in the Money Rates section of The Wall Street Journal (United States edition) (or the rate of interest announced publicly by Citibank, N.A. from time to time as its “reference rate” (on the basis of a 365-day year) if The Wall Street Journal no longer publishes the Prime Rate).
“ Privacy and Data Security Law ” means any applicable data privacy, data security, or data protection law, or regulation in the United States of America.
“ Purchase Price ” means $125,000,000.
“ Reference Period ” means the one-year period commencing on the Earnout Commencement Date.
“ Regulations ” means the Treasury Regulations (including Temporary Regulations) promulgated by the United States Department of Treasury with respect to the Code.
“ Representative ” means any Person’s Affiliates, directors, officers, employees, agents, advisors, attorneys, accountants, consultants and representatives.
“ Restructuring ” means, collectively (i) the contribution of Green Tree Investment Holdings III LLC, a Delaware limited liability company (“ GTIII ”), to GTIH, (ii) the distribution by GTIII of the Transferred Companies to GTIH, (iii) the distribution by GTIH of GTIII to Seller, and (iv) the Dividend.
“ RMS ” means Reverse Mortgage Solutions, Inc.
“ Securities Act ” means the Securities Act of 1933, as amended.
“ Seller Benefit Plan ” means any Benefit Plan that is not a Company Benefit Plan.
“ Seller Party ” means Seller or any Affiliate of Seller (which includes the Transferred Companies prior to the Closing Date) that is a party to any Transaction Document.
“ Seller Trademarks ” means the Trademarks (i) owned by Seller or any of its Affiliates (including the Transferred Companies) that include the name “Green Tree” and (ii) owned by Seller or any of its Affiliates (other than the Transferred Companies) that are used, but not primarily or exclusively used in the Business.
“ Seller Transaction Expenses ” means without duplication, the aggregate amount of all unpaid fees, costs and expenses, accrued or incurred by or on behalf of each of the Transferred Companies that are payable by the Transferred Companies, in each case prior to and through and including the Closing as a result of the contemplation, negotiation, efforts to consummate or consummation of the transactions contemplated by the Transaction Documents , the transfer of Claims Employees as set forth in Section 5.2, the Restructuring or the solicitation of other potential buyers of any Transferred Company or any of its Affiliates or consideration of other strategic alternatives, including any public or private offering of shares, including (i) the fees and expenses of accountants, consultants, lawyers, bankers and other advisors, (ii) any retention, success, change of control or similar payments or bonuses or severance which are or become payable to any Employee in connection with or as a result of the transactions contemplated by this Agreement or any transactions contemplated by the Transaction Documents pursuant to any agreement or any Benefit Plan in effect prior to the Closing and (iii) any fees payable to Governmental Entities or subject to Section 4.4(a), other third parties.
“ Seller’s Licensed IP Rights ” means, other than the Seller Trademarks, any and all Intellectual Property owned by Seller or any of its Affiliates (other than the Transferred Companies) that was used or practiced by the Transferred Companies in connection with the Business in the twelve (12) months prior to the Closing.
“ Services Agreement ” means the Business Services Agreement in the form set forth as Exhibit C.
“ Software ” means all computer software, including application software, system software, firmware, middleware, mobile digital applications, assemblers, applets, compilers and binary libraries, including all source code and object code versions of any and all of the foregoing, in any and all forms and media, and all related documentation.
“ Specified Voluntary GWP ” means the amount of gross written premium of voluntary-homeowners insurance written by Buyer or one of its Affiliates within the lender placed insurance (“ LPI ”) process for their clients (excluding WIMC and its Affiliates) to homeowners, including both the depopulation of LPI policies and voluntary homeowners insurance offered to preempt LPI while borrowers are in the letter cycle, net of cancelations. For the avoidance of doubt, Specified Voluntary GWP shall include gross written premiums generated by renewals issued during the Reference Period of voluntary homeowners insurance policies initially issued (within the LPI process as set forth above) prior to the Reference Period.
“ Straddle Period ” means any Tax period that includes, but does not end on, the Closing Date.
“ Sublease Agreement ” means the sublease agreement substantially in the form set forth as Exhibit D.
“ Subsidiary ” of any Person means another Person more than 50% of the total combined voting power of all classes of capital stock or other voting interests of which, or more than 50% of the equity securities of which, is owned directly or indirectly by such first Person.
“ Tax Authority ” means any Governmental Entity responsible for the collection, operation or administration of Taxes.
“ Tax Return ” means any report, declaration, estimate, extension request, information statement, claim for refund, return, information return or other document (including any related or supporting schedules, statements or information, and including any amendments thereof) relating to, or required to be filed in connection with, any Taxes.
“ Taxes ” means (a) any and all U.S. federal, state, local, or foreign or other income, premium, gross receipts, property (real or personal), sales, license, excise, employment, payroll, withholding, gross receipts, license, severance, stamp, occupation, windfall profits, environmental, customs duties, capital stock, franchise, profits, social security (or similar, including FICA), employment, unemployment, disability, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind or any charge of any kind in the nature of (or similar to) taxes whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and (b) any liability for the payment of or in respect of any amounts of the type described in clause (a) of this definition as a result of being a member of a consolidated or other similar group for Tax purposes for any period, as a result of any Tax sharing or Tax allocation agreement, arrangement or understanding, or as a result of being liable for another person’s Taxes as a transferee or successor, by Contract or otherwise other than any Contract entered into in the ordinary course of business not primarily related to Taxes.
“ Trade Secrets ” means all inventions, processes, designs, formulae, models, tools, algorithms, Software architectures, trade secrets, know-how, ideas, research and development, data and databases and confidential information.
“ Trademarks ” means any trademarks, service marks, trade names, trade dress, logos, slogans, social media identifiers and accounts, handles and tags, domain names, personalized subdomains or vanity URLs, and other brand or source identifiers, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith.
“ Transaction Documents ” means this Agreement and the Business Support Services Agreements.
“ Treasury Regulations ” means the regulations prescribed under the Code.
“ Trust Agreement ” means the Trust Agreement in the form set forth as Exhibit F.
“ Voluntary Insurance Placement Agreement ” means an amended and restated Voluntary Insurance Placement Agreement by and among GTIA, WIMC, Ditech and RMS in the form set forth in Exhibit G.
In addition, the following terms shall have the respective meanings set forth in the following sections of this Agreement:
Term
Section
Accounting Principles
2.5(g)
Agency
3.1(n)
Agreement
Preamble
Burdensome Condition
4.4(c)
Buyer
Preamble
Buyer Benefit Plans
5.3(d)
Buyer Fundamental Representations
7.1(a)
Buyer Indemnified Persons
7.2(a)
Buyer Parent
Preamble
Calculation Date
2.5(g)
Cap
7.3(a)
Change of Control
6.2(g)
Claims Employee Liabilities
5.2
Closing
2.2
Closing Date
2.2
Closing Payment
2.4
Consolidated Tax Returns
8.2(a)
Continuing Employee
5.3(a)
Conveyance Taxes
8.5
Deductible
7.3(a)
Discontinued Accounts
4.19
Discontinued Liabilities
4.19
Dividend
Recitals
Earnout Amount
2.6(a)
Earnout Dispute Notice
2.6(b)(iii)
Earnout Statement
2.6(b)(i)
Employee Agent
3.1(n)
Enforceability Exceptions
3.1(d)
Estimate Date
2.5(a)
Estimated Closing Date Other Indebtedness
2.5(a)
Estimated Final Payment
2.5(a)
Exchange Act
6.2(g)
Final Earnout Statement
2.6(b)(i)
Final Payment
2.5(g)
Final Payment Statement
2.5(b)
Final Report
2.5(d)
Final Statement
2.5(b)
Financial Data
3.1(f)(i)
GAAP
3.1(f)(i)
GTIA
Recitals
GTIH
Recitals
GTN
Recitals
GTR
Recitals
HSR Act
3.1(e)
Indemnifiable Losses
7.4(iii)
Indemnitee
7.4(i)
Indemnitor
7.4(ii)
Indemnity Payment
7.4(iv)
Independent Accounting Firm
2.5(d)
Joint Representation
7.9
Leased Real Property
3.1(q)
Leave Employee
5.3(b)
Liability Indemnity
7.2(d)
Liens
3.1(b)
LPI
Definitions
Marks
4.11
Material Contract
3.1(m)
New York Court
10.7(a)
Objection Notice
2.5(c)
Organizational Documents
3.1(a)(iii)
Permits
3.1(k)(ii)
Post-Closing Accounts
3.1(f)(i)
Pre-Closing Accounts
3.1(f)(i)
Privileged Information
7.9
Protected Period
5.3(a)
PWC Opinions
2.3(a)
Seller
Preamble
Seller Fundamental Representations
7.1(a)
Seller Guaranty
4.13
Seller Indemnified Persons
7.2(b)
Seller Retained Balances
3.1(f)(i)
Separate Income Tax Returns
8.2(b)
Shares
Recitals
Specific Indemnifiable Loss
7.4(v)
Specific Indemnity
7.2(c)
Specific Indemnity Cap
7.2(c)
Tax Proceeding
8.1(d)
Tax Refund
8.3
Terminating Agreements
4.6
Third-Party Claim
7.4(vi)
Third Party Fees
4.4(a)
Threshold Amount
7.3(a)
Transferred Companies
Recitals
Transferred Company Balances
3.1(f)(i)
WIMC
Preamble

ARTICLE II.     
PURCHASE OF THE SHARES
SECTION 2.1.      Purchase and Sale of the Shares . Upon the terms and subject to the conditions of this Agreement, Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller, all of the Shares, free and clear of all Liens, for an aggregate purchase price in cash equal to the Purchase Price, as adjusted pursuant to Section 2.5, plus the Earnout Amount (as determined in accordance with Section 2.6), if any.
SECTION 2.2.      Closing . Unless this Agreement shall have been terminated pursuant to Section 9.1 and subject to the satisfaction or waiver of each of the conditions set forth in Article VI, the closing of the purchase and sale of the Shares (the “ Closing ”) shall take place at 12:00 p.m., local time, on the first Business Day of the first month following the day on which the last of the conditions set forth in Article VI to be fulfilled or waived (other than those conditions that by their terms are to be satisfied at the Closing) shall have been so fulfilled or waived in accordance with this Agreement, at the offices of Willkie Farr & Gallagher LLP, 787 7 th Avenue, New York, New York 10019, unless another date, time or place is agreed to in writing by the parties hereto. The actual time and date at which the Closing occurs are herein referred to as the “ Closing Date .”
SECTION 2.3.      Closing Deliveries .
(a)      Seller’s Closing Deliveries . At the Closing, Seller shall deliver or cause to be delivered to Buyer:
(i)      a certificate of Seller duly executed by an authorized signatory of Seller, dated as of the Closing Date, certifying as to Seller’s compliance with the conditions set forth in Section 6.2(a) and Section 6.2(b);
(ii)      counterparts of each Transaction Document other than this Agreement to which a Seller Party is a party, duly executed by such Seller Party;
(iii)      the written resignations of the directors and officers of each of the Transferred Companies from their positions as directors or officers of the Transferred Companies to the extent requested by Buyer in accordance with Section 4.17;
(iv)      a statement, meeting the requirements of Section 1.1445-2(b) of the Treasury Regulations, to the effect that Seller is not a “foreign person” within the meaning of Section 1445 of the Code and the Treasury Regulations thereunder;
(v)      a certificate of good standing (or its equivalent) of each of the Transferred Companies from its relevant jurisdiction of incorporation or organization, dated within 10 Business Days prior to the Closing Date;
(vi)      reasonably satisfactory pay-off letters or evidence of release with respect to all of the Closing Date Funded Indebtedness of the Transferred Companies required to be repaid or terminated under the terms of this Agreement, duly executed by the applicable Transferred Company, Seller or its Affiliates and the appropriate person, lender or creditor indicating the amount required for the payment and satisfaction in full of all such Closing Date Funded Indebtedness, together with evidence reasonably satisfactory to Buyer of the contemporaneous release of all Liens related thereto;
(vii)      to the extent not already provided under Section 2.3(a)(vi), evidence reasonably satisfactory to Buyer of the release of all Liens on the Shares of GTIH and on the equity of any of the other Transferred Companies and all Liens (other than Permitted Liens) on the assets of the Transferred Companies;
(viii)      final written opinions from PricewaterhouseCoopers substantially in the form attached hereto as Exhibit H (the “PWC Opinions”);
(ix)      certificates representing the Shares, duly endorsed in blank or accompanied by instruments of transfer in proper form to vest good and valid title to the Shares in Buyer, free and clear of any and all Liens; and
(x)      such further instruments and documents as may be required to be delivered by Seller pursuant to the terms of this Agreement or of a ministerial nature as may be reasonably requested by Buyer, and which are customary for transactions of this nature, in connection with the Closing of the transactions contemplated hereby.
(b)      Buyer’s Closing Deliveries . At the Closing, Buyer shall make the payment contemplated by Section 2.4 and deliver to Seller:
(i)      a certificate duly executed by an authorized officer of Buyer, dated as of the Closing Date, certifying as to Buyer’s compliance with the conditions set forth in ‎Section 6.3(a) and ‎Section 6.3(b); and
(ii)      counterparts of each Transaction Document other than this Agreement to which a Buyer Party is a party, duly executed by such Buyer Party.
SECTION 2.4.      Payment at Closing . In addition to the deliveries contemplated by Section 2.3(b), at the Closing, Buyer shall deliver, or cause to be delivered to Seller or its designee, an amount equal to the Purchase Price, less the Estimated Closing Date Other Indebtedness, plus the Estimated Final Payment, in each case determined pursuant to Section 2.5(a) (the “ Closing Payment ”), by wire transfer of immediately available funds to the bank account or accounts designated by Seller to Buyer at least two Business Days prior to the Closing Date.
SECTION 2.5.      Final Payment .
(a)      At the Closing, the Purchase Price shall be subject to adjustment based on (A) the estimated Final Payment (the “ Estimated Final Payment ”) and (B) the Estimated Closing Date Other Indebtedness. No later than the close of the third Business Day prior to the Closing, Seller shall furnish to Buyer (i) an estimated unaudited consolidating balance sheet for the Transferred Companies in trial balance format as of the last day of the month prior to the month in which the Calculation Date occurs (the “ Estimate Date ”), prepared on a basis consistent with the Financial Data, (ii) Seller’s good faith calculation in reasonable detail of the Estimated Final Payment as of the Estimate Date and (iii) a written statement with reasonably detailed calculations of the components thereof and in a manner consistent with the Accounting Principles, setting forth Seller’s good faith estimate of the amount of the Closing Date Other Indebtedness (the “ Estimated Closing Date Other Indebtedness ”).
(b)      As promptly as reasonably practicable (but in any event within 90 days) following the Closing Date, Seller shall deliver to Buyer (i) an unaudited consolidating balance sheet for the Transferred Companies in trial balance format as of the Calculation Date, prepared on a basis consistent with the Financial Data, (ii) a statement of its determination of the Final Payment (collectively, the “ Final Payment Statement ”) and (iii) a statement of its determination of the Closing Date Other Indebtedness (together with the Final Payment Statement, the “ Final Statement ”), and Buyer shall reasonably cooperate and assist in the preparation thereof, including providing reasonable access to the books and records of Transferred Companies and employees of Transferred Companies, in each case to the extent requested by Seller.
(c)      The Final Statement shall be final and binding on the parties unless Buyer shall, within 60 days following the delivery of the Final Statement, deliver to Seller written notice of objection (the “ Objection Notice ” ) with respect to the Final Statement. The Objection Notice shall specify in reasonable detail the disputed items on the Final Statement and describe in reasonable detail the basis for the disputed items, including the data that forms the basis thereof, as well as the amount in dispute. Following Seller’s delivery of the Final Statement to Buyer, Seller shall grant Buyer and its Representatives, upon reasonable prior notice, reasonable access during normal business hours to the books and records, management employees and accountants of Seller and its Affiliates relevant to the preparation of such statements; provided such access does not interfere with the conduct of Seller’s or such Affiliates’ business in any material respect.
(d)      If an Objection Notice is delivered, the parties shall consult with each other with respect to the disputed items and attempt in good faith to resolve the dispute. If the parties are unable to reach agreement within 30 days after delivery of the Objection Notice, either Buyer or Seller may refer any unresolved disputed items to Deloitte LLP or, if Deloitte LLP will not accept the engagement, an accounting firm of national reputation selected by mutual agreement of Buyer and Seller (the “ Independent Accounting Firm ” ). Once engaged, Buyer and Seller will direct the Independent Accounting Firm to render a determination within 25 Business Days of its retention, and Buyer, Seller and their respective employees and agents will cooperate with the Independent Accounting Firm during its engagement.  Buyer, on the one hand, and Seller, on the other hand, shall each submit to the Independent Accounting Firm (within 10 Business Days after the Independent Accounting Firm’s engagement) their respective computations of the disputed items identified in the Objection Notice and information, arguments and support for their respective positions, and shall concurrently deliver a copy thereof to the other party.  Each party shall then be given an opportunity to supplement such information, arguments and support with one additional submission to respond to any arguments or positions taken by the other party, which supplemental information shall be submitted to the Independent Accounting Firm (with a copy thereof to the other party) within five Business Days after the first date on which both parties have submitted their respective materials to the Independent Accounting Firm.  The Independent Accounting Firm shall thereafter be permitted to request additional or clarifying information from the parties, and each of the parties shall cooperate and shall cause their Representatives to cooperate with such requests of the Independent Accounting Firm.  The Independent Accounting Firm shall determine, based solely on the materials presented and upon information received in response to such requests for additional or clarifying information and not by independent review, only those issues in dispute specifically set forth in the Objection Notice and shall render a written report to Buyer and Seller (the “ Final Report ”) in which the Independent Accounting Firm shall, after considering all matters set forth in the Objection Notice, determine what adjustments, if any, should be made to the amounts and computations set forth in the Final Statement solely as to the disputed items and shall determine the appropriate Final Payment and Closing Date Other Indebtedness in the Final Payment Statement on that basis.  The Final Report shall set forth, in reasonable detail, the Independent Accounting Firm’s determination with respect to each of the disputed items or amounts specified in the Objection Notice, and the revisions, if any, to be made to the Final Statement, together with supporting calculations. In resolving any disputed item, the Independent Accounting Firm (i) shall be bound to the terms of this Agreement, including the Accounting Principles, (ii) shall limit its review to matters specifically set forth in the Objection Notice and (iii) shall not assign a value to any item higher than the highest value for such item claimed by either party or less than the lowest value for such item claimed by either party.  The Final Report, absent fraud, shall be final and binding upon Buyer and Seller, shall be deemed a final arbitration award that is binding on each of Buyer and Seller, and no party shall seek further recourse to courts, other tribunals or otherwise, other than to enforce the Final Report. Judgment may be entered to enforce the Final Report in any court having proper jurisdiction.
(e)      The fees and costs of the Independent Accounting Firm shall be allocated between Buyer and Seller in the same proportion as the aggregate amount of such resolved disputed items so submitted to the Independent Accounting Firm that is unsuccessfully disputed by each such party (as finally determined by the Independent Accounting Firm) bears to the total amount of such resolved disputed items so submitted.
(f)      As promptly as reasonably practicable (but in any event within five Business Days) following the final determination of the Final Statement and the amount of the Final Payment and the Closing Date Other Indebtedness in accordance with Section 2.5(c) or Section 2.5(d), (i) if the Final Payment is greater than the Estimated Final Payment, then Buyer shall pay to Seller the amount of such excess and interest on such excess determined pursuant to this Section 2.5(f) by wire transfer of immediately available funds to the bank account or accounts designated by Seller to Buyer, (ii) if the Final Payment is less than the Estimated Final Payment then Seller shall pay to Buyer the amount of such deficiency and interest on such deficiency determined pursuant to this Section 2.5(f) by wire transfer of immediately available funds to the bank account or accounts designated by Buyer to Seller, (iii) if the Closing Date Other Indebtedness is greater than the Estimated Closing Date Other Indebtedness, then Seller shall pay to Buyer the amount of such excess and interest on such excess determined pursuant to this Section 2.5(f) by wire transfer of immediately available funds to the bank account or accounts designated by Buyer to Seller, and (iv) if the Closing Date Other Indebtedness is less than the Estimated Closing Date Other Indebtedness then Buyer shall pay to Seller the amount of such deficiency and interest on such deficiency determined pursuant to this Section 2.5(f) by wire transfer of immediately available funds to the bank account or accounts designated by Seller to Buyer. Until paid, the amount of any such excess or deficiency payable pursuant to this Section 2.5(f) shall bear interest determined by computing simple interest on such amount from the Closing Date to the date of payment at the Prime Rate. Any amount payable by Seller or Buyer pursuant to this Section 2.5(f) shall be netted against any amount owed to such party pursuant to this Section 2.5(f) so that only a single net amount shall be payable.
(g)      As used in this Agreement:
(i)      “ Accounting Principles ” means the principles and practices set forth in Section 2.5(g) of the Disclosure Schedule.
(ii)      “ Final Payment ” means (A) the Commissions Receivable, Net as of the close of business on the last day of the month ended immediately prior to the Closing Date (the “ Calculation Date ”) as calculated in accordance with the Accounting Principles, minus (B) $3.5 million. Section 2.5(g) of the Disclosure Schedule sets forth an illustrative calculation, as of the date set forth therein, of the Commission Receivable, Net prepared and calculated in accordance with this Agreement.
(h)      The parties agree to treat all payments, if any, made under this Section 2.5 as adjustments to the Purchase Price solely for Tax purposes and that such agreed treatment shall govern for purposes hereof.
(i)      Buyer hereby acknowledges and agrees that its sole and exclusive remedy with respect to any and all matters relating to the calculation of the Final Payment shall be pursuant to this Section 2.5.
SECTION 2.6.      Earn-out .
(a)      Buyer agrees to pay to Seller, as additional consideration for the purchase of the Shares, an amount (the “ Earnout Amount ”) equal to: (i) the Specified Voluntary GWP during the Reference Period, minus (ii) $25,000,000; provided , that in no event shall Buyer pay Seller more than $25,000,000 under this Section 2.6. If the Specified Voluntary GWP during the Reference Period does not exceed $25,000,000, no Earnout Amount shall be due under this Section 2.6. An example calculation of the Earnout Amount is attached hereto as Exhibit I .
(b)      For purposes of this Section 2.6, the Specified Voluntary GWP and the Earnout Amount shall be determined as follows:
(i)      Within 30 days following each of (w) the three-month anniversary of the Earnout Commencement Date, (x) the six-month anniversary of the Earnout Commencement Date, (y) the nine-month anniversary of the Earnout Commencement Date and (z) the last day of the Reference Period, Buyer shall prepare and deliver to Seller a statement (each an “ Earnout Statement ,” and the Earnout Statement delivered pursuant to the foregoing clause (z), the “ Final Earnout Statement ”) setting forth its good faith calculation of the Specified Voluntary GWP and the corresponding Earnout Amount then-accrued during the Reference Period, and shall pay to the Seller (by wire transfer of immediately available funds to the bank account or accounts designated by Seller to Buyer), with the delivery of the Earnout Statement, any positive Earnout Amount shown thereon and not previously paid to Seller pursuant to this Section 2.6;
(ii)      Following the Closing and until the final determination of the Earnout Amount pursuant to Section 2.6(b)(iii), subject to Applicable Law, Buyer shall grant Seller and its Representatives, upon reasonable prior notice, reasonable access during normal business hours to the books and records (redacted or aggregated as required to not violate any confidentiality obligations of the Buyer and its Affiliates) of Buyer and its Affiliates directly related to Specified Voluntary GWP that are relevant to the Earnout Statements, and, during such period, Buyer shall furnish to Seller such information that relates to Buyer’s obligations under this Section 2.6 as Seller may from time to time reasonably request ; provided such access does not interfere with the conduct of the business of the Buyer or any of its Affiliates in any material respect;
(iii)      The Final Earnout Statement and its calculation of Specified Voluntary GWP shall be final and binding on the parties unless Seller shall, within 45 days following the delivery of the Final Earnout Statement, deliver to Buyer written notice of objection (an “ Earnout Dispute Notice ”) with respect to the Final Earnout Statement. The Earnout Dispute Notice shall specify in reasonable detail the disputed items on the Final Earnout Statement and describe in reasonable detail the basis for the disputed items and the amount in dispute. Following the delivery of an Earnout Dispute Notice, the parties shall consult with each other with respect to the disputed items and attempt in good faith to resolve the dispute. If the parties are unable to reach agreement within 30 days after delivery of an Earnout Dispute Notice, such dispute shall be resolved in accordance with the same dispute resolution procedures that apply to resolution of disputes with respect to the Final Payment Statement in accordance with Section 2.5(d) and Section 2.5(e), applied mutatis mutandis .
(c)      If the Earnout Amount as finally determined pursuant to Section 2.6(b)(iii) is positive and exceeds the aggregate amount previously paid pursuant to Section 2.6(b)(i), within 30 days of such determination, Buyer shall pay Seller, by wire transfer of immediately available funds to the bank account or accounts designated by Seller to Buyer, an amount equal to (i) the Earnout Amount, minus (ii) any prior payments of the Earnout Amount made to Seller under this Section 2.6. In the event Buyer has paid Seller $25,000,000 under this Section 2.6, the Buyer's obligations under this Section 2.6 shall terminate.
(d)      The parties acknowledge and agree that (i) any Earnout Amount is not guaranteed and is highly speculative and is subject to numerous factors outside of Buyer's and its Affiliates’ control, (ii) any Earnout Amount is payable at a level that reflects strong future performance, (iii) there is no assurance that any Earnout Amount will be achieved and neither Buyer nor any of its Affiliates has promised or projected such achievement and (iv) that subject to their obligations under Section 2.6(e), Buyer, its Affiliates and their respective Representatives shall have sole discretion over the business and operations of the Buyer and its Affiliates (including the Transferred Companies from and after the Closing) and may make business decisions which they believe to be appropriate but in hindsight may directly or indirectly affect the likelihood that any Earnout Amount is payable. The right to receive any Earnout Amount (if any) hereunder (A) is solely a contractual right and is not a security, (B) is solely represented by this Agreement and is not represented by any certificate, instrument or other delivery, (C) shall confer upon Seller, WIMC or any of their respective Affiliates only the rights of a general unsecured creditor under Applicable Law, (D) does not give Seller, WIMC or any of their respective Affiliates any dividend rights, voting rights, liquidation rights, preemptive rights or other rights common to holders of equity securities of the Buyer, its Affiliates (including the Transferred Companies from and after the Closing), or any other Person, (E) is not redeemable and (F) may not be transferred, assigned, conveyed, gifted, pledged or otherwise hypothecated by Seller.
(e)      Buyer and its Affiliates shall (i) act in good faith and use their commercially reasonable efforts which, for these purposes, shall mean the efforts typically used by Buyer and its Affiliates in developing, launching, marketing, selling and otherwise promoting other new insurance products (as such efforts might be reasonably adapted for purposes of promoting this product) to produce Specified Voluntary GWP in an amount such that the Earnout Amount equals $25,000,000, (ii) without limiting the foregoing, not take any action, the sole purpose of which, is to reduce and eliminate Buyer's obligations under this Section 2.6., and (iii) that from and after the Closing Date until the final determination of the Earnout Amount in accordance with Section 2.6(b), maintain the books and records contemplated by Section 2.6(b) such that they are complete and accurate in all material respects. Subject to the foregoing, the parties acknowledge and agree that Buyer and its Affiliates (including the Transferred Companies from and after the Closing) shall have the power and right to control all aspects of their business and operations.
(f)      Seller and its Affiliates shall, and shall cause each of their Representatives to, maintain in confidence any information derived from the books and records contemplated by Section 2.6(b) in accordance with their obligations under Section 4.3(c); provided , that the term of such obligations under Section 4.3(c) with respect to such information shall survive for a period of three years after the expiration of the Reference Period.
(g)      Buyer will give Seller notice thereof promptly following the first date when Buyer or one of its Affiliates starts writing Specified Voluntary GWP.
SECTION 2.7.      Withholding . Notwithstanding anything in this Agreement to the contrary, Buyer shall be entitled to deduct and withhold from the Purchase Price or any other payment made by it under this Agreement such amounts as it is required to deduct and withhold under Applicable Law. Buyer agrees to provide notice to Seller at least five (5) Business Days in advance of the Closing Date of the nature and type of any anticipated Tax withholding in respect of the Purchase Price, and Buyer shall cooperate with Seller in good faith to minimize the amount of any applicable withholding. To the extent that amounts are deducted and withheld by Buyer, such deducted and withheld amounts shall be treated for all purposes of this Agreement as having been paid to Seller.
ARTICLE III.     
REPRESENTATIONS AND WARRANTIES
SECTION 3.1.      Representations and Warranties of Seller . Subject to and as qualified by the matters set forth in the Disclosure Schedule, Seller and WIMC represent and warrant, jointly and severally, to Buyer as of the date hereof and as of the Closing Date as follows:
(a)      Organization, Standing and Corporate Power .
(i)      Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. WIMC is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland.
(ii)      Each of the Companies (A) is an organization duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (B) has the requisite corporate or other entity power and authority to own, lease or otherwise hold the assets, rights and properties owned, leased or otherwise held by it and to carry on the activities it currently conducts in connection with its business as it is being conducted as of the date hereof, and (C) is duly qualified as a foreign corporation or other entity to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification necessary, except, in the case of clause (C), where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to be material.
(iii)      Seller has made available to Buyer true, complete and correct copies of the certificate of formation, the certificate of incorporation, the operating agreement and bylaws (or other organizational documents), as applicable, each as amended to date (collectively, the “ Organizational Documents ”), of each of the Companies. The Organizational Documents that have been so delivered are in full force and effect.
(b)      Capital Structure . The issued and outstanding shares of capital stock of GTIH as of the date hereof consist of 100 shares of common stock, which constitute the Shares. All of the Shares have been duly authorized, are validly issued and fully paid and non-assessable, and Seller is the record and beneficial owner of 100% of the Shares, free and clear of all pledges, mortgages, liens, charges, encumbrances and security interests of any kind (collectively, “ Liens ”) except, as of the date hereof, as set forth in Section 3.1(b) of the Disclosure Schedule. With the exception of the Shares, there are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the shares of capital stock of GTIH or obligating GTIH to issue or sell any shares of capital stock of, or any other interest in, GTIH. GTIH does not have outstanding or authorized any interest appreciation, phantom interest, profit participation or similar rights. There are no voting trusts, membership agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Shares. Assuming Buyer has the requisite power and authority to be the lawful owner of the Shares, upon consummation of the transactions contemplated by this Agreement, Buyer shall own all of the Shares, free and clear of all Liens. All of the Shares were issued in compliance with Applicable Law. None of the Shares were issued in violation of any agreement, arrangement or commitment to which Seller is a party or is subject to or in violation of any preemptive or similar rights of any Person.
(c)      Subsidiaries . There are no Subsidiaries of GTIH other than GTIA, GTN and GTR. None of GTIA, GTN or GTR own any securities of any other entity. The capitalization of each of the Transferred Companies is as set forth in Section 3.1(c) of the Disclosure Schedule. Except as contemplated by the Dividend, all the outstanding shares of capital stock and other securities of each Subsidiary of GTIH are owned, directly or indirectly, by GTIH, free and clear of all Liens. All outstanding shares of capital stock of each Transferred Company are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any capital stock or other ownership interests of any Transferred Company pursuant to the Organizational Documents of the applicable Transferred Company or any agreement to which Seller or the applicable Transferred Company is a party. There are not any securities, options, warrants, rights, commitments or agreements of any kind to which Seller or any of its Affiliates (including the Transferred Companies) is a party or by which any of them is bound obligating any of them to issue, sell, repurchase, redeem, acquire or deliver shares of capital stock or other securities of any Transferred Company.
(d)      Authority . Each Seller Party has the requisite corporate power or other applicable organizational authority to enter into the Transaction Documents to which it is or is to be a party, to perform its obligations thereunder and to consummate the transactions contemplated thereby. The execution and delivery by each Seller Party of the Transaction Documents to which it is or is to be a party, the performance by it of its obligations thereunder and the consummation by each Seller Party of the transactions contemplated thereby have been duly authorized by all necessary corporate, limited liability company or other similar organizational action on the part of such Seller Party. Each of the Transaction Documents to which a Seller Party is a party has been (or as of the Closing will be) duly executed and delivered by such Seller Party and, assuming such Transaction Document constitutes a valid and binding agreement of the other parties thereto, constitutes, or upon execution and delivery thereof will constitute, a valid and binding obligation of such Seller Party, enforceable against such Seller Party in accordance with its terms, except that such enforcement may be subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, rehabilitation, liquidation, fraudulent conveyance, preferential transfer or other similar laws, now or hereafter in effect, affecting creditors’ rights generally and (ii) general equitable principles, including that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses or other general equity principles and to the discretion of the court before which any proceeding therefor may be brought (the “ Enforceability Exceptions ”).
(e)      Noncontravention; Consents . Provided that all consents, approvals, authorizations and other actions described in Section 3.1(e) of the Disclosure Schedule have been obtained or taken, the execution and delivery of the Transaction Documents by each Seller Party that is a party thereto do not, the performance by it of its obligations thereunder will not, and the consummation of the transactions contemplated thereby by such Seller Party will not, (i) violate or conflict with any of the provisions of the Organizational Documents of any Seller Party, (ii) subject to the matters referred to in the next sentence, conflict with, result in a material breach of or default (or event which, with the giving of notice or lapse of time or both, would constitute a default) under, require consent, approval or authorization under, give rise to a right of termination, acceleration or cancellation under, or result in the creation of any Lien on any property, right or asset of any Company under, any Contract to which any Company is a party, (iii) subject to the matters referred to in the next sentence and except as otherwise set forth in Section 3.1(e) of the Disclosure Schedule, violate or conflict with any Applicable Law or Governmental Order applicable to any Company or by which any of them or any of their respective material properties, assets or rights is bound or subject, or (iv) result in a material breach or violation of any of the terms or conditions of, result in a default under, or otherwise cause an impairment or revocation of, any Permit used in the Business. No material consent, approval or authorization of, or declaration or filing with, or notice to, any Governmental Entity is required by or with respect to any Seller Party in connection with the execution and delivery of any Transaction Document by any Seller Party that is a party thereto, the performance by it of its obligations thereunder, or the consummation by the Seller Parties of the transactions contemplated hereby and thereby, except for (i) the filing required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”) and (ii) the consents, approvals, authorizations, declarations, filings or notices set forth in Section 3.1(e) of the Disclosure Schedule.
(f)      Financial Data .  
(i)      Seller has previously made available to Buyer copies of the unaudited consolidating balance sheet of the Transferred Companies in trial balance format as of December 31, 2014, December 31, 2015 and as of November 30, 2016, and the unaudited consolidated income statements of the Companies in trial balance format for the years, and the period then ended (the “ Financial Data ”). The Financial Data has been prepared (A) from, and in accordance with, the books and records of WIMC, which books and records have been maintained (x) in accordance with generally accepted accounting principles in the United States (“ GAAP ”), applied on a consistent basis throughout the periods indicated, and (y) on a basis consistent with the past practices of WIMC, and (B) in conformity with WIMC’s accounting practices and principles used for internal financial reporting purposes with respect to the Transferred Companies applied on a consistent basis. All general ledger accounts of the Transferred Companies that have been used in the compilation of the Financial Data as of and for the years ended December 31, 2014 and December 31, 2015 and the period ended November 30, 2016 are set out in Section 3.1(f)(i) of the Disclosure Schedule under the heading “Pre-Closing Accounts” (such accounts, the “ Pre-Closing Accounts ”). All such Pre-Closing Accounts that will remain the responsibility of the Transferred Companies after the Closing are set out in Section 3.1(f)(i) of the Disclosure Schedule under the heading “Post-Closing Accounts” (such Pre-Closing Accounts, the “ Post-Closing Accounts ”). The Post-Closing Accounts for which Seller shall retain the balances as of the Closing (whether positive or negative) are set out in Section 3.1(f)(i) of the Disclosure Schedule under the heading “Seller Retained Balances” (such Post-Closing Accounts, the “ Seller Retained Balances ”). The Post-Closing Accounts for which the Transferred Companies shall continue to be responsible as of and after the Closing (whether positive or negative) are set out in Section 3.1(f)(i) of the Disclosure Schedule under the heading “Transferred Company Balances” (such Post-Closing Accounts, the “ Transferred Company Balances ”). The amounts of the Post-Closing Accounts have been calculated in accordance with GAAP consistently applied, are accurate in all material respects and fairly present in all material respects the financial position of the Post-Closing Accounts as of and for the years ended December 31, 2014 and December 31, 2015 and the period ended November 30, 2016. The designation of a Pre-Closing Account as a Post-Closing Account or of a Post-Closing Account as a Seller Retained Balance or a Transferred Company Balance shall not limit or alter any indemnification obligation under Article VII or VIII.
(ii)      GTR does not prepare standalone financial statements, other than a trial balance prepared for inclusion in the consolidating trial balance of the Transferred Companies and in GTR’s Tax Returns. GTR does not have any restricted cash requirements.
(iii)      Except as set forth in Section 3.1(f)(iii) of the Disclosure Schedule, none of the Transferred Companies has any outstanding Indebtedness.
(iv)      The books and records of the Transferred Companies have been maintained in all material respects in accordance with Applicable Law.
(v)      WIMC maintains a system of internal controls over financial reporting sufficient, in all material respects, to provide reasonable assurance regarding the (i) reliability of the financial reporting of WIMC and (ii) preparation of financial statements for WIMC’s external purposes in accordance with GAAP.  There are no material weaknesses or significant deficiencies (as defined by PCAOB Auditing Standard No. 5) in the internal controls over financial reporting of WIMC with respect to the Business or with respect to its mortgage servicing operations.
For the avoidance of doubt, references to “materiality” in this Section 3.1(f), shall be with respect to the results, position and operations of the Business of the Transferred Companies, taken as a whole.
(g)      No Undisclosed Liabilities . None of the Transferred Companies has any material liability that would be required to be reflected in a consolidated balance sheet (or the notes thereto) of such Transferred Companies prepared in accordance with GAAP except (i) those liabilities provided for, reflected, reserved against and disclosed (in each case specifically) in the Post-Closing Accounts, (ii) liabilities disclosed in Section 3.1(g) of the Disclosure Schedule, (iii) liabilities incurred in the ordinary course of business consistent with past practice since December 31, 2015 and (iv) liabilities resulting from claims under reinsurance agreements between GTR and any Affiliate of Buyer.
(h)      Absence of Certain Changes or Events . Except as disclosed in Section 3.1(h) of the Disclosure Schedule, from December 31, 2015 through the date hereof, (i) the Companies have conducted their business in the ordinary course of business consistent with past practice in all material respects, (ii) there has not been any event or change having, or that would reasonably be expected to have, a Material Adverse Effect and (iii) none of the Companies nor any of their Affiliates has taken any action or failed to take any action that would have resulted in a breach of Section 4.1 of this Agreement, had Section 4.1 been in effect since December 31, 2015.
(i)      Employees and Benefit Plans .
(i)      Section 3.1(i)(i)(A) of the Disclosure Schedule contains a true and complete list of each Company Benefit Plan and, separately, each material Seller Benefit Plan, identifying each as a Company Benefit Plan or a Seller Benefit Plan. No Benefit Plan is or has ever been subject to Title IV of ERISA. Each Benefit Plan has been, and is, maintained and administered in respect of current or former Employees in all material respects in compliance with the terms thereof and applicable requirements of ERISA, the Code and other Applicable Law. No event has occurred and no condition exists that would reasonably be expected to subject any of the Transferred Companies to any Tax, fine, lien, penalty, or other liability imposed by ERISA or the Code due to the establishment and maintenance of any Benefit Plan. The Transferred Companies and their Subsidiaries do not have any ERISA Affiliate Liability. No Benefit Plan is maintained outside the jurisdiction of the United States, or covers (or has covered) any current or former Employees or service providers of the Transferred Companies who primarily reside or whose services are performed primarily outside the United States.
(ii)      There is no pending, or to the Knowledge of Seller, threatened, action, suit, proceeding, hearing or claim relating to any Benefit Plan (other than routine claims for benefits) by or in respect of any current or former Employee. As of the date hereof, no Benefit Plan is subject to any pending, or to the Knowledge of Seller, threatened, audit , investigation, examination, suit, proceeding, hearing or claim by the Internal Revenue Service, the Department of Labor or any other Governmental Entity.
(iii)      (A) Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code has timely received a favorable determination letter from the Internal Revenue Service covering all of the provisions applicable to the Benefit Plan for which determination letters are currently available that the Benefit Plan is so qualified and each trust established in connection with any Benefit Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the Internal Revenue Service that it is so exempt and (B) no event has occurred or circumstance exists that could reasonably be expected to give rise to disqualification or loss of tax-exempt status, or the imposition of any penalty or liability with respect to the qualified status, of any such Benefit Plan or trust.
(iv)      None of the Transferred Companies or their Subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to Employees and, to the Knowledge of Seller, there are not, and have not been in the past three years, any activities or proceedings of any labor union to organize any Employees. To the Knowledge of Seller, (A) there is no unfair labor practice charge or complaint pending before any applicable Governmental Entity relating to any of the Transferred Companies or their Subsidiaries or any current Employee; (B) there is no labor strike, material slowdown or material work stoppage or lockout pending or threatened against or affecting the Transferred Companies or their Subsidiaries, and the Transferred Companies and their Subsidiaries have not experienced any strike, material slowdown or material work stoppage, lockout or other collective labor action by or with respect to Employees; (C) there is no representation claim or petition pending before any applicable Governmental Entity, and no question concerning representation exists, relating to the Employees; (D) there are no charges with respect to or relating to any of the Transferred Companies or their Subsidiaries pending before any applicable Governmental Entity responsible for the prevention of unlawful employment practices; and (E) there are no actions, suits, proceedings, hearings, claims or disputes pending or threatened against the Transferred Companies or their Subsidiaries by or with respect to any Employee.
(v)      The Transferred Companies and their Subsidiaries are in compliance in all material respects with all Applicable Laws relating to employment, including all Applicable Laws relating to wages, hours, collective bargaining, employment discrimination, civil rights, safety and health, workers’ compensation, pay equity, classification of Employees as exempt or non-exempt or as employees or independent contractors, immigration matters, and the collection and payment of withholding and/or social security Taxes. None of the Benefit Plans provides for medical or life insurance benefits to former Employees (other than as required under Section 4980B of the Code, Section 601 of ERISA or similar state Applicable Law or at the expense of the participant or the participant’s beneficiary).
(vi)      The Transferred Companies and their Subsidiaries have in all material respects properly classified for all purposes (including for all Tax purposes and for purposes of determining eligibility to participate in any employee benefit plan) all current and former Employees, and have in all material respects withheld and paid all applicable Taxes and made all appropriate filings in connection with services provided by current and former Employees to the Transferred Companies and their Subsidiaries.
(vii)      Except as set forth on Section 3.1(i)(vii) of the Disclosure Schedule or as required by Applicable Law, neither the execution of this Agreement nor the consummation of the transactions contemplated by this Agreement (whether alone or together with any other events) will (i) result in any material payment or benefit under any Benefit Plan becoming due, (ii) increase any benefits otherwise payable to any Employee under any Benefit Plan or trigger any funding obligation to any Benefit Plan, (iii) result in any loan forgiveness to any Employee, (iv) result in the acceleration of the time of, or otherwise secure the funding of, payment or vesting of any such benefits, or (v) result in any payment or benefit (whether in cash or property or the vesting of property) to any “disqualified individual” (as such term is defined in Treasury Regulation Section 1.280G-1) that, individually or in combination with any other such payment, constitutes an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).
(viii)      (i) Each Benefit Plan that constitutes a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code complies in all material respects in form and operation with Section 409A of the Code and the regulations thereunder so as to avoid any Tax, penalty or interest under Section 409A of the Code, (ii) each Benefit Plan that constitutes a “nonqualified deferred compensation plan” of a “nonqualified entity” within the meaning of Section 457A of the Code complies in all material respects in form and operation with Section 457A of the Code and all applicable Internal Revenue Service guidance promulgated thereunder so as to avoid any Tax, penalty or interest under Section 457A of the Code, and (iii) the Transferred Companies do not have any indemnity obligation for any Taxes imposed under Sections 4999, 409A, or 457A of the Code.
(j)      Taxes . Except as disclosed in Section 3.1(j) of the Disclosure Schedule:
(i)      WIMC is the common parent of an Affiliated Group of corporations eligible to file consolidated federal income Tax Returns, of which each of GTIH, GTIH III and GTIA is a member. From July 1, 2011 (or, in the case of GTIH, its date of formation) through the Closing Date, WIMC has included (or, with respect to the taxable year ending on the Closing Date, will include) GTIH, GTIH III and GTIA in its consolidated federal income Tax Return as a member of the Affiliated Group of which WIMC is the common parent. Since January 1, 2006, GTR has filed a U.S. federal income Tax Return on a standalone basis and has not been part of a consolidated federal income Tax Return, other than the period covering January 1, 2011 through June 30, 2011 when GTR was included in a consolidated federal income Tax Return with GTIH III. No Transferred Company is, nor since July 1, 2011 has been, a member of any other Affiliated Group filing a consolidated United States federal income Tax Return. No Transferred Company has any liability for the Taxes of any Person by Contract (other than any Contract entered into in the ordinary course of business not primarily related to Taxes), as a transferee, successor or otherwise, except under Applicable Law as a result of being a member of the Affiliated Group of which WIMC is the common parent.
(ii)      (A) All Tax Returns required to be filed by, with respect to, or filed on behalf of each of the Transferred Companies (including, for the avoidance of doubt, any Tax Return required to be filed with respect to an Affiliated Group) have been properly prepared and duly and timely filed (after giving effect to any valid extensions of time in which to make such filings) with the appropriate Tax Authority in all jurisdictions in which such Tax Returns are required to be filed, and are correct and complete in all material respects, and (B) all Taxes, including any Taxes for which any of the Transferred Companies may be liable under Treasury Regulations Section 1.1502‑6 (or analogous state or foreign provisions) by virtue of having been a member of any Affiliated Group (or other group filing on a combined or unitary basis) at any time on or prior to the Closing Date (whether or not required to be shown on such Tax Returns) required to be paid by or with respect to any Transferred Company on or prior to the Closing Date have been timely and fully paid to the appropriate Governmental Entity.
(iii)      Each of the Transferred Companies has complied with all Applicable Laws relating to the payment and withholding of Taxes and has duly and timely withheld on all amounts paid or deemed paid in connection with any employee, independent contractor, creditor, stockholder or other party.
(iv)      No deficiencies for any Taxes have been proposed, asserted or assessed in writing against or with respect to any Company. No Taxes with respect to any Transferred Company are currently under audit, examination or investigation by any Governmental Entity or the subject of any judicial or administrative proceeding and, except as disclosed in Section 3.1(j)(iv) of the Disclosure Schedule, since January 1, 2011, no Transferred Company has been subject to an audit that has since been closed. No Transferred Company or any Affiliate thereof has received a Tax opinion with respect to any transaction other than a transaction in the ordinary course of business. No agreement, waiver or other document or arrangement is currently in effect extending the period for assessment or collection of Taxes (including any applicable statute of limitation) by or on behalf of any Transferred Company, and no written power of attorney with respect to any Taxes has been filed or entered into with any Governmental Entity. No jurisdiction (whether within or without the United States) in which any Transferred Company has not filed a particular type of Tax Return or paid a particular type of Tax has asserted that such Transferred Company is required to file such Tax Return or pay such type of Tax in such jurisdiction and no Transferred Company is treated or has been treated for Tax purposes as a resident in a country other than the country of its organization (excluding GTR, but only with respect to the United States) and no Company has, or has had, a branch, agency or permanent establishment for Tax purposes in a country other than the country of its organization. No claim has been made by a Tax Authority that a Transferred Company may be subject to taxation in a jurisdiction where Tax Returns are not filed by or on behalf of such Transferred Company.
(v)      None of the Transferred Companies is a party to any agreement dealing primarily with Tax sharing, allocation, indemnity or distribution pursuant to which it will have any obligation to make any payments after the Closing, other than (A) any agreement between or among only two or more of the Transferred Companies or (B) any agreement entered into in the ordinary course of business not principally related to Taxes. No Transferred Company has received or applied for a Tax ruling or entered into a closing agreement pursuant to Section 7121 of the Code (or any predecessor provision or any similar provision of state or local law), in either case that would be binding upon any Transferred Company after the Closing Date.
(vi)      There are no Liens for Taxes as a result of any unpaid Taxes upon the assets of any Transferred Company except for Taxes not yet due and payable that may be due under the ordinary course Business of a Transferred Company.
(vii)      During the past two years, none of the Transferred Companies has been a “distributing corporation” or a “controlled corporation” within the meaning of Code section 355(a)(1)(A). No Transferred Company is a direct or indirect beneficiary of a guarantee of Tax benefits or any other arrangement that has the same economic effect (including an indemnity from a seller or lessee of property, or other insurance) with respect to any transaction or Tax opinion. No Transferred Company is a party, directly or indirectly, to a “reportable transaction” within the meaning of Section 6707A(c)(1) of the Code or Treasury Regulation Section 1.6011-4(b)(1).
(viii)      No Transferred Company will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date, as a result of any (A) change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481 of the Code (or any corresponding provision of state, local or foreign income Tax law), (B) installment sale or open transaction disposition made on or prior to the Closing Date, (C) any election pursuant to Section 108(i) of the Code (or any similar provision of state, local or foreign law) made with respect to any Pre-Closing Tax Period, (D) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or non-U.S. income Tax law) executed on or prior to the Closing Date, (E) intercompany transactions or excess loss account described in Treasury Regulations under Section 1502 of the Code (or similar provision of state, local or non-U.S. law) or (F) prepaid amount received on or prior to the Closing Date.
(ix)      Since January 1, 2006, GTR has had in effect a valid election under Section 953(d) of the Code and the Treasury Regulations issued thereunder to be treated as a domestic corporation (as such term is used in such Section of the Code). Since January 1, 2006, GTR has been taxed as a life insurance company (as such term is used in Section 816 of the Code).
(x)      No Transferred Company is disregarded as an entity for Tax purposes. With respect to each entity in which any of the Transferred Companies owns an equity interest and which is treated as a partnership or a disregarded entity for U.S. federal income Tax purposes, such entity’s Tax year will end on the Closing Date.
(k)      Compliance with Applicable Laws .
(i)      Except as disclosed in Section 3.1(k)(i) of the Disclosure Schedule, each of the Companies is, and at all times since December 31, 2013 has been, in compliance with all Applicable Laws with respect to the conduct of the Business in all material respects. Except as disclosed in Section 3.1(k)(i) of the Disclosure Schedule, no Company has at any time since December 31, 2013 received any written notice or other written communication or, to the Knowledge of Seller, oral communication from any Governmental Entity or has paid or incurred any penalty or fine imposed by a Governmental Entity, in each case, regarding any actual or alleged violation of, or failure on the part of the Companies to comply with, any Applicable Laws, in each case other than any such item that has been cured or otherwise resolved to the satisfaction of such Governmental Entity or that is no longer being pursued by such Governmental Entity following a response by the relevant Company.
(ii)      Each of the Companies owns, holds, possesses or lawfully uses in its business all material permits, licenses, approvals, authorizations, consents, registrations and similar documents of and from all Governmental Entities (collectively, “ Permits ”) necessary for the conduct of its business as now conducted or the ownership and use of its assets or properties, in compliance with all Applicable Laws. All such Permits are valid and in full force and effect. Each of the Companies is, and at all times since December 31, 2013 has been, in material compliance with all of the terms of each such Permit. With respect to the Permits of the Companies, none of the Companies has at any time since December 31, 2013 received any written notice (except for notices that are subject to cure) or other written communication or, to the Knowledge of Seller, oral communication from any Governmental Entity regarding (A) any actual, proposed, alleged or potential material violation or failure to comply with, the terms and requirements of any such Permit, or (B) any revocation, suspension or termination of, or material modification to, any such Permit, in each case other than any such item that has been cured or otherwise resolved to the satisfaction of such Governmental Entity, that is no longer being pursued by such Governmental Entity following a response by the relevant Company.
(iii)      Since January 1, 2013, each Company has filed all material reports, statements, documents, registrations, filings or submissions required to be filed by such Company with any Governmental Entity to the extent they relate to the Business. All such registrations, filings and submissions were in compliance with Applicable Law when filed or as amended or supplemented, and no deficiencies have been asserted by any Governmental Entity with respect to such registrations, filings or submissions that have not been satisfied.
(l)      Litigation . Except as set forth in Section 3.1(l) of the Disclosure Schedule, there is no Action by any Person, or by or before (or any investigation by) any Governmental Entity, pending or, to the Knowledge of the Seller, threatened against or affecting (a) the Companies, or any of their respective properties or rights, (b) the transactions contemplated in the Transaction Documents, or (c) Seller’s or the Companies’ ability to comply with or perform their respective covenants or obligations under this Agreement or the other Transaction Documents to which it is, or will be a party. Except as set forth in Section 3.1(l) of the Disclosure Schedule, there is no Governmental Order outstanding against any Company or any of its assets, properties or Business under which any Company has any continuing obligation.
(m)      Contracts . Section 3.1(m) of the Disclosure Schedule sets forth a list of all Material Contracts as of the date hereof. For purposes of this Agreement, “ Material Contracts ” means all of the following Contracts to which any Company is a party or by which any of the Companies’ respective assets are bound (other than any Company Benefit Plan or Contracts with Insurance Carrier Clients):
(i)      Contracts (A) containing any provision or covenant limiting the ability of any Company to engage in any line of business, to compete with any Person, to do business in any geographic area or during any period of time, or to market, sell or administer any insurance policies, in each case except for Contracts that limit the ability of any Company to solicit the employment of or hire individuals employed by other Persons, (B) containing any exclusivity obligations or restrictions that would be binding on any Company or its Affiliates or (C) containing any “most favored nations” or similar provisions;
(ii)      mortgages, indentures, loan or credit agreements, security agreements and other agreements and instruments relating to the borrowing of money or extension of credit to any Company or the direct or indirect guarantee by any Company of any obligation for borrowed money of any Person or any other liability of any Company in respect of indebtedness for borrowed money of any Person or any Contracts in respect of any other Indebtedness;
(iii)      Contracts with the material vendors (measured by total annual payments made to vendors) of the Companies, taken as a whole, for the year ended December 31, 2015; other than enterprise-wide purchasing arrangements to which no Company is a party;
(iv)      any Contract pursuant to which any Company has the right to occupy real property;
(v)      (A) any contract between any Company, on the one hand, and Seller or any Affiliate of Seller (other than a Transferred Company), on the other hand and (B) any contract between any Company, on the one hand, and any director or officer (or any Affiliate of a director or officer (other than any Company)), on the other hand;
(vi)      any Contract to which the Company is a party that provides for any joint venture, partnership or similar arrangement (including any agreement providing for joint research, development or marketing) binding on any Company;
(vii)      any contract under which any Company may become obligated to pay any brokerage or finder’s or similar fees or expenses in connection with the transactions contemplated hereby;
(viii)      any collective bargaining agreement;
(ix)      any employment agreements, any severance arrangements or agreements with any independent contractor who is a natural person;
(x)      any Contract to which any of the Companies is a party or by which any of them is bound restricting or granting rights to use or practice rights under Intellectual Property that is material to the Business;
(xi)      any Contract pursuant to which any third Person provides support or maintenance for IT Systems material to the Business (other than off-the-shelf Software);
(xii)      any Contract pursuant to which any material operational function of the Business is outsourced to or otherwise performed by a third Person (other than Seller or any Affiliate of Seller);
(xiii)      any Contract relating to acquisitions or dispositions consummated by any of the Companies with unaffiliated third Persons since January 1, 2013, or pending as of the date hereof, of the assets comprising an operating business of any such third Person or the capital stock, other equity interests or real property of any such third Person, and any Contract containing any earn-out or similar contingent payment obligations that have not been satisfied in full;
(xiv)      any other Contract of any Company providing for the provision of goods or services involving consideration paid or required to be paid in excess of $100,000 annually or $500,000 in the aggregate over the term of the contract;
(xv)      any Contract pursuant to which any Company has an obligation to make an investment in or loan to any other Person, other than a Group Company;
(xvi)      any Contract evidencing a settlement or compromise of any Action;
(xvii)      any Contract including a pledge or a commitment to pledge any assets of any Company; and
(xviii)      any reinsurance or retrocession treaty or agreement to which a Company is a party.
True and complete copies in all material respects of each of the Material Contracts, in each case including all amendments and addenda thereto and in effect as of the date hereof, have been made available to Buyer prior to the date hereof. Each of the Material Contracts (A) constitutes a valid and binding obligation of the applicable Company and, to the Knowledge of Seller, each other party thereto, enforceable against the applicable Company and, to the Knowledge of Seller, each other party thereto in accordance with its terms, subject to the Enforceability Exceptions and (B) is in full force and effect. No Company nor, to the Knowledge of Seller, any other Person that is a party thereto, is (or, with the giving of notice or the lapse of time or both, will be) in any material respect, in violation or breach of or default under any of the Material Contracts. No Company has received written or, to the Knowledge of Seller, oral notice of cancellation of any Material Contract. There exists no material breach, default or event of default with respect to any Material Contract on the part of any Company or, to the Knowledge of Seller, any other party thereto.
(n)      Employee Agents . Each employee or officer of GTIA (the “ Agency ”) acting as an Insurance Producer on behalf of such Agency (each, an “ Employee Agent ”) is, and during the past 36 months in which such employee or officer has acted as an Insurance Producer on behalf of such Agency has been, duly registered with and/or licensed by the appropriate Governmental Entity in jurisdictions requiring such registration and/or license for the business such Employee Agent conducts or has conducted as an Insurance Producer on behalf of such Agency. Section 3.1(n) of the Disclosure Schedule sets forth a true and complete list of the Employee Agents as of the date hereof. To the Knowledge of the Seller, no such Employee Agent is in material violation of any Applicable Law applicable to the brokering, writing, sale or production of the business of the Agency or has breached the terms of any applicable agency or broker contract. Since December 31, 2012, there has not been a proceeding and there is no proceeding pending or, to the Knowledge of Seller, threatened, to suspend, revoke or limit any such license or registration. To the Knowledge of Seller, no Person, other than an Employee Agent, is acting as an Insurance Producer for or on behalf of an Agency.
(o)      Insurance Carrier Clients . Section 3.1(o) of the Disclosure Schedule sets forth the five largest non-affiliated Insurance Carrier Clients (measured by premium dollar volume) of GTIH and its Subsidiaries (on a consolidated basis) for the 12-month period ended December 31, 2014 and the 12-month period ended December 31, 2015, and the amount of business done with each such Insurance Carrier Client. Except as disclosed in Section 3.1(o) of the Disclosure Schedule, since January 1, 2014, no such Insurance Carrier Client has (i) terminated, cancelled, not renewed or materially reduced the amount of business it transacts with the Companies or (ii) given notice to any Company in writing or, to the Knowledge of Seller, orally that it intends to terminate, cancel, not renew or materially reduce the amount of business it transacts with the Companies.
(p)      Intellectual Property .
(i)      Section 3.1(p)(i) of the Disclosure Schedule sets forth a true, complete and correct list of unregistered Owned Intellectual Property that is material to the Business (other than Trade Secrets). The Intellectual Property set forth in Section 3.1(p)(i) of the Disclosure Schedule is owned free and clear of Liens other than Permitted Liens, is subsisting and, to the Knowledge of Seller, is valid and enforceable.
(ii)      Since January 1, 2012, (A) the conduct of the Business has not been and is not infringing, misappropriating, diluting or violating Intellectual Property rights owned by any third parties, (B) to the Knowledge of Seller, none of the Owned Intellectual Property has been or is being infringed, misappropriated, diluted, violated or otherwise used or made available for use by any Person without a license or permission from Seller or the Companies, (C) none of the Companies has received any written notice that it has infringed, misappropriated, diluted or otherwise violated any Intellectual Property rights owned by any third Person, (D) the Owned Intellectual Property is not subject to any outstanding judgment, injunction, order, decree or agreement, and (E) there are no claims pending or to the Knowledge of Seller, threatened, alleging any such infringement, misappropriation, dilution or violation.
(iii)      Seller and its Affiliates (including the Transferred Companies) have taken all actions reasonably necessary to maintain the secrecy of all confidential Intellectual Property used in the Business.
(iv)      The Transferred Companies do not have any registered Owned Intellectual Property.
(q)      Real Property . The Transferred Companies do not currently own, and since July 1, 2011 have not owned, any real property. Section 3.1(q) of the Disclosure Schedule sets forth a list of all real property occupied by any of the Companies (the “ Leased Real Property ”) and also identifies each lease or sublease under which such real property is occupied by such Companies. The Affiliate of Seller that is a party to any such lease has a valid and enforceable leasehold interest in the Leased Real Property, free and clear of all Liens other than Permitted Liens and subject to the Enforceability Exceptions. Seller has not received written notice of any default under any lease and no material breach or default exists with respect to any lease covering the Leased Real Property on the part of the applicable Affiliate and, to the Knowledge of Seller, no event has occurred that, with notice or lapse of time or both, would constitute such a breach or default. The Leased Real Property constitutes all of the real property currently occupied by the Transferred Companies in the operation of their respective businesses and operations.
(r)      Environmental Matters . There are no pending or, to the Knowledge of Seller, threatened Actions against any of the Transferred Companies that seek to impose, or that are reasonably likely to result in, any material liability or obligation of any of the Transferred Companies under any Applicable Law concerning worker health and safety, pollution or the protection of the environment or human health as it relates to the environment and (ii) none of the Companies is subject to any agreement, order, judgment, decree, letter or memorandum by or with any Governmental Entity or third party imposing any liability or obligation on such entity with respect to any of the foregoing.
(s)      Sufficiency of Assets . Except as set forth in Section 3.1(s) of the Disclosure Schedule and subject to the receipt of all approvals or authorizations of Governmental Entities as set out in Section 3.1(e) of the Disclosure Schedule and subject to the receipt of all third party consents as set out in Section 3.1(e) of the Disclosure Schedule and the continued employment of all Employees immediately after the Closing, the assets, rights, properties and services of the Transferred Companies or made available to Buyer and its Affiliates pursuant to this Agreement and the other Transaction Documents will, as of the Closing, comprise assets, rights, properties and services that are sufficient in all material respects to permit the Transferred Companies to operate the Business immediately following the Closing Date in substantially the same manner as conducted immediately prior to the Closing.
(t)      Data Protection and Privacy; IT Systems .
(i)      Since January 1, 2013, Seller and the Transferred Companies with respect to the Business have been and are in compliance in all material respects with any and all applicable Privacy and Data Security Laws. The conduct of the Business as currently conducted complies with any contractual obligations that govern the use, collection, storage, disclosure and transfer of any personally identifiable information in all material respects.
(ii)      The Transferred Companies own or have a valid right to access and use the IT Systems. The IT Systems (i) are adequate and suitable for the purposes for which they are being used or held for use, and (ii) do not contain any “malware” that would reasonably be expected to materially interfere with the ability of the Transferred Companies to conduct the Business. Seller and its Affiliates (including the Transferred Companies) have implemented, maintain, and comply with commercially reasonable business continuity and backup and disaster recovery plans and procedures with respect to the IT Systems. Since January 1, 2013, there has been no failure, unauthorized access or use, or other adverse event affecting any of the IT Systems that has caused or would reasonably be expected to cause any material disruption to the conduct of the Business.
(u)      GTN and GTIII .
(i)      GTN does not conduct any material business operations and, except for the Contracts set forth in Schedule 4.14(i) of the Disclosure Schedule (each of which GTN shall seek to be released from in accordance with the terms and conditions of Section 4.14 ), does not own, lease or otherwise have any right to any assets or property of any kind that are necessary for the operation of the Business. The Transferred Companies are not responsible for any liabilities or obligations of GTN. Seller will cause GTIA to have the benefit of all renewal rights, if any, as of the Closing in connection with the Business with respect to GTN.
(ii)      GTIII does not conduct any Business operations and does not own, lease or otherwise have any right to any assets or property of any kind that are necessary for the operation of the Business. The Transferred Companies are not responsible for any liabilities or obligations of GTIII.
(v)      Insurance .  All current property and liability insurance policies covering the Transferred Companies are in full force and effect, all premiums due and payable thereon have been paid and no notice of cancellation or termination has been received with respect to any such policy.  Neither Seller nor any of its Affiliates maintains any self-insurance arrangement with respect to the Transferred Companies.
(w)      Brokers . Seller is solely responsible for the payment of the fees and expenses of any broker, investment banker, financial adviser or other Person acting in a similar capacity in connection with the transactions contemplated by this Agreement or any of the Transaction Documents based upon arrangements made by or on behalf of Seller or any Affiliate.
(x)      PWC Opinions . As of the Closing, WIMC or a Subsidiary has received the PWC Opinions in substantially the form attached as Exhibit H, and has not received any amendment thereto or any other written opinion or advice from PricewaterhouseCoopers, in each case that modifies, amends or otherwise contradicts the opinions expressed therein in any significant respect.
SECTION 3.2.      Representations and Warranties of Buyer . Subject to, and as qualified by the matters set forth in, the Buyer Disclosure Schedule, Buyer represents and warrants to Seller as of the date hereof and as of the Closing Date as follows:
(a)      Organization and Standing . Each Buyer Party is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.
(b)      Authority . Each Buyer Party has the requisite corporate power or other applicable organizational authority to enter into the Transaction Documents to which it is (or is to be) a party, to perform its obligations thereunder and to consummate the transactions contemplated thereby. The execution and delivery by each Buyer Party of the Transaction Documents to which it is (or is to be) a party, the performance by it of its obligations thereunder and the consummation by each Buyer Party of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of such Buyer Party. Each of the Transaction Documents to which a Buyer Party is a party has been (or as of the Closing will be) duly executed and delivered by such Buyer Party and, assuming such Transaction Document constitutes a valid and binding agreement of the other parties thereto, constitutes, or upon execution and delivery thereof will constitute, a valid and binding obligation of such Buyer Party, enforceable against such Buyer Party in accordance with its terms, except that such enforcement may be subject to the Enforceability Exceptions.
(c)      Noncontravention; Consents . Provided that all consents, approvals, authorizations and other actions described in Section 3.2(c) of the Buyer Disclosure Schedule have been obtained and taken, the execution and delivery of the Transaction Documents by each Buyer Party that is a party thereto do not, the performance by it of its obligations thereunder will not, and the consummation of the transactions contemplated thereby by such Buyer Party will not, (i) violate or conflict with any of the provisions of the Organizational Documents of any Buyer Party, (ii) subject to the matters referred to in the next sentence, conflict with, result in a material breach of or default (or event which, with the giving of notice or lapse of time or both, would constitute a default) under, require consent, approval or authorization under, give rise to a right of termination, acceleration or cancelation under, or result in the creation of any Lien on any property, right or asset of Buyer or any of its Subsidiaries under, any agreement, permit, license or instrument to which Buyer or any of its Subsidiaries is a party, (iii) subject to the matters referred to in the next sentence and except as otherwise set forth in Section 3.2(c) of the Buyer Disclosure Schedule, conflict with or violate any Applicable Law or Governmental Order applicable to any Buyer Party or by which any of them or any of their respective material properties, assets or rights is bound or subject, or (iv) result in a material breach or violation of any of the terms or conditions of, result in a default under, or otherwise cause an impairment or revocation of, any Permit of Buyer and its Affiliates. No material consent, approval or authorization of, or declaration or filing with, or notice to, any Governmental Entity is required by or with respect to any Buyer Party in connection with the execution and delivery of this Agreement by the Buyer Parties, the performance by them of their obligations under any Transaction Document or the consummation by the Buyer Parties of any of the transactions contemplated hereby, except for (i) the filing required under the HSR Act and (ii) the other consents, approvals, authorizations, declarations, filings or notices as are set forth in Section 3.2(c) of the Buyer Disclosure Schedule.
(d)      Purchase Not for Distribution . The Shares to be acquired under the terms of this Agreement will be acquired by Buyer for its own account and not with a view to the resale or distribution of any part thereof. Buyer is an “accredited investor” as defined in Regulation D promulgated by the Securities and Exchange Commission under the Securities Act. Buyer acknowledges that the Shares have not been registered under the Securities Act or any state or foreign securities laws. Buyer will not resell, transfer, assign, pledge or otherwise dispose of any Shares, except in compliance with the registration requirements of the Securities Act and any other applicable federal or state securities laws, or pursuant to an available exemption therefrom.
(e)      Compliance with Applicable Laws . Except as disclosed in Section 3.2(e)(i) of the Buyer Disclosure Schedule, each Buyer Party is and has been in compliance with all Applicable Laws and Governmental Orders, except as would not, individually or in the aggregate, reasonably be expected to impair materially the ability of such Buyer Party to consummate any of the transactions contemplated by any Transaction Document to which it is or will be a party or perform its obligations thereunder. Except as disclosed in Section 3.2(e)(ii) of the Buyer Disclosure Schedule, no Buyer Party has received any written notice or other written communication, or, to knowledge of Buyer, oral communication from any Governmental Entity or has paid or incurred any penalty or fine imposed by a Governmental Entity, in each case, regarding any actual or alleged violation of, or failure on the part of such Buyer Party to comply with, any Applicable Laws, in each case other than any such item that would not, individually or in the aggregate, reasonably be expected to impair materially the ability of such Buyer Party to consummate any of the transactions contemplated by any Transaction Document to which it is or will be a party or perform its obligations thereunder.
(f)      Litigation . There is no Action pending or threatened in writing or, to the Knowledge of Buyer, orally against or affecting Buyer or any Affiliate of Buyer that (i) seeks to restrain or enjoin the consummation of any of the transactions contemplated by this Agreement or (ii) would reasonably be expected to impair materially the ability of any Buyer Party to consummate any of the transactions contemplated by any Transaction Document to which it is or will be a party or perform its obligations thereunder. Neither Buyer nor any of its Affiliates nor, to the Knowledge of Buyer, any officer, director or employee of Buyer or any of its Affiliates has been permanently or temporarily enjoined or barred by any order, judgment or decree of any Governmental Entity from engaging in or continuing any conduct or practice in connection with the business conducted by the Companies or otherwise that would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of any Buyer Party to consummate any of the transactions contemplated by any Transaction Document to which it is or will be a party or perform its obligations thereunder.
(g)      Brokers . Buyer is solely responsible for the payment of the fees and expenses of any broker, investment banker, financial adviser or other Person acting in a similar capacity in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer or any Affiliate.
(h)      Financial Ability . Buyer has access to, and on the Closing Date will have, sufficient funds available to purchase the Shares on the terms and conditions contemplated by this Agreement, to consummate the other transactions contemplated by this Agreement and to pay all associated costs and expenses required to be paid by Buyer.
ARTICLE IV.     
COVENANTS
SECTION 4.1.      Conduct of Business of the Companies .
(a)      Except as contemplated or permitted by this Agreement, as required by Applicable Law, as set forth in Section 4.1 of the Disclosure Schedule or as Buyer otherwise consents in advance (which consent shall not be unreasonably withheld, conditioned or delayed), from the date of this Agreement to the Closing Date, Seller shall cause the Companies to carry on the Business only in the ordinary course of business consistent with past practice and to use commercially reasonable efforts to maintain the current business relationships and goodwill of the Business with Governmental Entities and GSEs (if any), employees and third Persons. Without limiting the generality of the foregoing, from the date of this Agreement to the Closing Date, except as contemplated or permitted by this Agreement, as required by Applicable Law or as set forth in Section 4.1 of the Disclosure Schedule, Seller shall not permit the Companies, without the prior consent of Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), to:
(i)      (A) amend, assign, transfer or waive any rights under any Material Contract, (B) enter into or, other than pursuant to its current terms, extend or terminate any Material Contract outside the ordinary course of business consistent with past practice;
(ii)      acquire, dispose of or transfer any asset of the Companies with a value in excess of $100,000 in the aggregate;
(iii)      (A) split, combine or reclassify any of the Companies’ outstanding Shares, capital stock or equity securities or issue or authorize the issuance of any other stock or securities in respect of, in lieu of or in substitution for Shares, shares or other interests representing any of the Companies’ outstanding equity interests, capital stock or equity securities, (B) whether directly or indirectly, purchase, redeem or otherwise acquire any shares or other interests representing outstanding Shares, equity interests, capital stock or equity securities of the Companies or any rights, warrants or options to acquire any such shares or interests or (C) amend the Organizational Documents, or adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization, of any of the Companies;
(iv)      issue, sell, grant, pledge or otherwise encumber any shares or other interests representing the capital stock of or equity interests in the Companies, any other voting securities or interests or any securities convertible into or exchangeable for any such shares or interests, or issue, sell, grant or enter into any subscription, warrant, option, conversion or other right, agreement, commitment, arrangement or understanding of any kind, contingent or otherwise, to purchase or otherwise acquire any such shares or interests in any Company, or any securities convertible into or exchangeable for any such shares or interests;
(v)      acquire (by merger, consolidation, acquisition of stock or assets, reinsurance or otherwise) any other Person or substantially all the business or assets or any division of any other Person;
(vi)      (A) increase the compensation (including bonuses) payable or benefits provided on or after the date hereof to any Employee, except as required by any Benefit Plans in effect on the date hereof or Applicable Law, (B) establish or adopt any employment, severance, retention, change in control, deferred compensation, bonus, equity, pension or other compensation or benefit plan or arrangement which, upon its establishment or adoption, would constitute a Benefit Plan, (C) terminate or amend any Benefit Plan, (D) accelerate the vesting or payment of, or fund or in any other way secure payment of compensation or benefits under any Benefit Plan except as required by such Benefit Plan or Applicable Law, (E) hire, engage, promote or terminate any Employee (or any individual who, if hired or engaged, would constitute an Employee) (other than any termination of an Employee for cause as defined in the employment agreement of such Employee in effect as of the date hereof), or (F) enter into a collective bargaining or similar agreement;
(vii)      make any material change in the accounting policies, practices or principles of the Companies, in each case except as may be required by GAAP or Applicable Law;
(viii)      make or authorize any capital expenditures that have not been disclosed to Buyer prior to the date of this Agreement, and that are, in the aggregate, in excess of $50,000;
(ix)      other than intercompany payables incurred in the ordinary course of business consistent with past practice, incur, assume or guarantee any indebtedness for borrowed money or guarantee the obligations of another Person, in the aggregate no more than $50,000;
(x)      make any loans, advances or capital contributions to, or investments in, any other Person, other than (i) trade accounts receivable and (ii) loans and advances to Employees in the ordinary course of business consistent with past practice;
(xi)      enter into any settlement with respect to any Action or Governmental Order applicable to any Transferred Company (except for claims under policies or contracts of insurance or reinsurance in the ordinary course of business consistent with past practice), unless such settlement contemplates only the payment of an amount of money not exceeding $25,000 without ongoing material limits on the conduct or operations of the Business;
(xii)      abandon, modify, waive, terminate or allow to lapse any material Permit of any Transferred Company to the extent relating to the Business;
(xiii)      enter into any Contracts between Seller and its Affiliates (other than the Transferred Companies), on the one hand, and any of the Transferred Companies, on the other hand;
(xiv)      make, change or revoke any election related to Taxes, settle or compromise any Tax liability (other than settlements or compromises of Tax liabilities in the ordinary course of business) or surrender any right to claim a Tax refund, offset or other reduction in Tax liability, enter into any closing agreement related to Tax (other than in the ordinary course of business consistent with past practice), file or amend any Tax Return (but excluding any Consolidated Tax Return), consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment, or change any taxable period or any Tax accounting method; or
(xv)      enter into a Contract to take any of the foregoing actions.
SECTION 4.2.      Access to Information; Confidentiality .
(a)      Prior to the Closing Date, Seller shall cause the Companies to afford to Buyer and its Representatives reasonable access upon reasonable notice at reasonable times during normal business hours to all of the properties, books, Contracts and records of the Companies and, during such period, Seller shall cause the Companies to furnish to Buyer such information that relates to the business, properties, financial condition, operations, senior personnel and employees of the Companies as Buyer may from time to time reasonably request, other than any such properties, books, Contracts, records and information that (i) are subject to an attorney-client or other legal privilege that would be impaired by such disclosure (after taking into account, and taking reasonable steps to implement, any common interest or other reasonable means to preserve privilege) or (ii) are subject to an obligation of confidentiality; provided, that Seller agrees to use commercially reasonable efforts to obtain a waiver of any such obligation of confidentiality or make other arrangements (including redacting information or entering into joint defense agreements). All requests for access or information pursuant to this ‎Section 4.2 shall be directed to such Person or Persons as Seller shall designate.
(b)      Until the later of the fifth anniversary of the Closing or such time as the information and access described below is no longer reasonably required by Buyer (provided that Seller shall give 30 days’ notice to Buyer prior to destroying any records to permit Buyer, at its expense, to examine, duplicate or repossess such books and records), Seller shall (i) afford promptly to Buyer and its Representatives reasonable access to Seller’s and its Affiliates’ Representatives and to any books and records of the Transferred Companies (or of Seller or any of its Affiliates, other than of the Transferred Companies, to the extent relating to the Business) not transferred by Seller or its Affiliates in accordance with Section 4.9(a) of this Agreement and (ii) provide information with respect to the Transferred Companies in a readily accessible form, in each case, to the extent reasonably required by Buyer for any lawful business purpose, including litigation, disputes, compliance, financial reporting (including financial audits of historical information), loss reporting, regulatory, Tax and accounting matters (including for any such matters related to the Services Agreement), relating to the Transferred Companies, and Seller shall cooperate fully with Buyer and its Representatives to furnish such books and records and information and make available such Representatives; provided that such access be at Buyer’s expense and does not unreasonably interfere with the conduct of the business of Seller. Notwithstanding the foregoing, (x) access to records relating to Taxes shall be governed exclusively by Section 8.4 and (y) Seller shall not be obligated to afford access to any books and records of, or provide any information with respect to, the Transferred Companies that are subject to an attorney-client or other legal privilege that might be impaired by such disclosure (and any such access or provided information shall be subject to the terms of Section 7.9) or in contravention of the terms of any Contract or in violation of any Applicable Law. Seller shall, and shall cause its Affiliates to, implement an internal process to ensure the deletion of all data relating to the Transferred Companies from any computers, hard drives or other similar electronic devices prior to disposing of any such device.  
SECTION 4.3.      Confidentiality .
(a)      Seller, Buyer and their respective Affiliates shall not make public the terms or conditions of any Transaction Document or the negotiations relating to any Transaction Document or the transactions contemplated thereby; provided , however , that the foregoing obligation of Seller, Buyer and their respective Affiliates shall not prohibit disclosure of any such information (i) if required by Applicable Law, stock exchange rules, GAAP or any Governmental Entity, (ii) to auditors, GSEs or ratings agencies; provided , that such auditors or ratings agencies are made aware of the provisions of this Section 4.3(a), (iii) to an advisor for the purpose of advising in connection with the transactions contemplated by this Agreement and the other Transaction Documents; provided , that such advisor is made aware of the provisions of this Section 4.3(a), (iv) to the extent that the information has been made public by, or with the prior consent of, the other party and (v) in connection with any Action with respect to this Agreement or any other Transaction Documents; provided , further , that if either party or any of its respective Affiliates becomes legally compelled by Applicable Law, stock exchange rules, GAAP or any Governmental Entity, including by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar judicial or administrative process, to disclose such confidential information, such party shall, to the extent reasonably practicable, (i) provide the other party with prompt written notice of such requirement prior to such disclosure, (ii) allow the other party a reasonable opportunity to comment on such disclosure in advance of such disclosure and (iii) cooperate with such other party and its Affiliates to obtain a protective order or similar remedy to cause such information not to be disclosed. In the event that such protective order or other similar remedy is not obtained, the party compelled to disclose any confidential information shall furnish only that portion of such confidential information that has been legally compelled, and shall exercise its commercially reasonable efforts to obtain assurance that confidential treatment will be accorded such disclosed information. Notwithstanding the foregoing, nothing in this Section 4.3(a) shall prohibit Seller or Buyer or any of their respective Affiliates from disclosing anything related to the Tax treatment of the transactions contemplated by, or entered into in connection with, the Transaction Documents to any Tax Authority in connection with the filing of any Tax Return or otherwise interacting with any Tax Authority with respect to Seller’s, Buyer’s or any of their respective Affiliates’ Taxes.
(b)      Seller and its Affiliates shall enforce the terms of any confidentiality or other similar agreements entered into with any prospective purchaser of any of the Business, the Transferred Companies, or any portion thereof. To the extent assignable, as of the Closing Seller and its Affiliates will assign to Buyer all rights that Seller and any of its Affiliates or Representatives may have with respect to any such agreements, and immediately following execution of this Agreement will terminate any access that any such Persons may have to information about any of the Business or the Transferred Companies, whether through the electronic “data room” established by Seller or otherwise. All discussions with any such Persons with respect to the Transferred Companies or any portion thereof will be formally terminated immediately following execution of this Agreement.
(c)      For a period of three years after the Closing, (i) Seller and its Affiliates shall, and shall cause each of their Representatives to, maintain in confidence any written, oral or other confidential information relating to the Business or obtained from Buyer or its Affiliates and provided in connection with the transactions contemplated by this Agreement and (ii) Buyer and its Affiliates shall, and shall cause each of their Representatives to, maintain in confidence any written, oral or other confidential information relating to Seller or its Affiliates (other than relating to the Business) and provided in connection with the transactions contemplated by this Agreement, except that the foregoing requirements in clauses (i) and (ii) of this Section 4.3(c) shall not apply to the extent that (1) any such information is or becomes generally available to the public other than as a result of disclosure by Seller or its Affiliates (in the case of clause (i)) or Buyer and its Affiliates (in the case of clause (ii)) or any of their respective Representatives, in violation of this Section 4.3(c), (2) any such information is required by Applicable Law, stock exchange rules, GAAP or a Governmental Entity to be disclosed, (3) any such information was or becomes available to Seller or its Affiliates (in the case of clause (i)) or Buyer or its Affiliates (in the case of clause (ii)) on a non-confidential basis and from a source (other than the other party or any Affiliate (including the Companies) or Representative of such other party or its Affiliates) that is not bound by a confidentiality agreement with respect to such information or is not otherwise obligated to keep such information confidential, (4) any such information is reasonably necessary to be disclosed in connection with any Action with respect to this Agreement or any other Transaction Document or (5) in the case of Seller and its Affiliates, any such information about the Business is disclosed as permitted pursuant to the Voluntary Insurance Placement Agreement; provided , that if either party or any of its Affiliates becomes legally compelled by Applicable Law, stock exchange rules, GAAP or any Governmental Entity, including by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar judicial or administrative process, to disclose such confidential information, such party shall provide the other party with prompt written notice of such requirement prior to such disclosure if practical and, to the extent reasonably practicable, cooperate with the other party and its Affiliates, at such other party’s expense, to obtain a protective order or similar remedy to cause such information not to be disclosed. In the event that such protective order or other similar remedy is not obtained, the party required to make such disclosure or its Affiliates shall furnish only that portion of confidential information that has been legally compelled, and shall exercise its commercially reasonable efforts to obtain assurance that confidential treatment will be accorded such disclosed information. Each party shall instruct its Affiliates and its and their respective Representatives having access to such confidential information of such obligation of confidentiality. Notwithstanding the foregoing, the confidentiality provisions of the Business Support Services Agreements, and not this Agreement, shall apply with respect to information furnished pursuant to those agreements.
(d)      From the date hereof until the Closing, (i) Seller and its Affiliates shall, and shall cause each of their Representatives to, maintain in confidence any written, oral or other confidential information relating to Buyer or its Affiliates and provided in connection with the transactions contemplated by this Agreement and (ii) Buyer and its Affiliates shall, and shall cause each of their Representatives to, maintain in confidence any written, oral or other confidential information relating to Seller or its Affiliates and provided in connection with the transactions contemplated by this Agreement, except that the foregoing requirements in clauses (i) and (ii) of this Section 4.3(d) shall not apply to the extent that (1) any such information is or becomes generally available to the public other than as a result of disclosure by Seller or its Affiliates (in the case of clause (i)) or Buyer and its Affiliates (in the case of clause (ii)) or any of their respective Representatives, in violation of this Section 4.3(d), (2) any such information is required by Applicable Law, stock exchange rules, GAAP or a Governmental Entity to be disclosed, (3) any such information was or becomes available to Seller or its Affiliates (in the case of clause (i)) or Buyer or its Affiliates (in the case of clause (ii)) on a non-confidential basis and from a source (other than the other party or any Affiliate (including the Companies) or Representative of such other party or its Affiliates) that is not bound by a confidentiality agreement with respect to such information or is not otherwise obligated to keep such information confidential or (4) any such information is reasonably necessary to be disclosed in connection with any Action with respect to this Agreement or any other Transaction Document; provided , that if either party or any of its Affiliates becomes legally compelled by Applicable Law, stock exchange rules, GAAP or any Governmental Entity, including by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar judicial or administrative process, to disclose such confidential information, such party shall provide the other party with prompt written notice of such requirement prior to such disclosure if practical and, to the extent reasonably practicable, cooperate with the other party and its Affiliates, at such other party’s expense, to obtain a protective order or similar remedy to cause such information not to be disclosed. In the event that such protective order or other similar remedy is not obtained, the party required to make such disclosure or its Affiliates shall furnish only that portion of confidential information that has been legally compelled, and shall exercise its commercially reasonable efforts to obtain assurance that confidential treatment will be accorded such disclosed information. Each party shall instruct its Affiliates and its and their respective Representatives having access to such confidential information of such obligation of confidentiality.
(e)      Each of the parties acknowledge and agree that the letter relating to the Proposed Negotiated Transaction dated December 14, 2016 by and between Assurant, Inc. (d/b/a Assurant Group) and WIMC shall terminate on the date hereof in accordance with its terms.
SECTION 4.4.      Commercially Reasonable Efforts; Consents, Approvals and Filings .
(a)      Upon the terms and subject to the conditions hereof, Seller and Buyer shall each use its commercially reasonable efforts, and shall cooperate fully with each other (i) to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective, as soon as practicable after the date hereof, the transactions contemplated by this Agreement or any other Transaction Document and (ii) to obtain as promptly as practicable all necessary permits, orders or other consents, approvals or authorizations of Governmental Entities and consents or waivers of all other third parties necessary in connection with the consummation of the transactions contemplated by this Agreement or any other Transaction Document; provided that any fees, costs and expenses in respect of such consents or waivers of all other third parties (the “ Third Party Fees ”) shall be borne equally by Buyer and Seller. In connection therewith, Seller and Buyer shall make and cause their respective Affiliates to make all legally required filings as promptly as practicable in order to facilitate prompt consummation of the transactions contemplated by this Agreement or any other Transaction Document, shall provide and shall cause their respective Affiliates to provide such information and communications to Governmental Entities and third parties as such Governmental Entity or third party may request, shall take and shall cause their respective Affiliates to take all steps that are necessary, proper or advisable to avoid any Action by any Governmental Entity or third party with respect to the transactions contemplated by this Agreement or any other Transaction Document, shall defend or contest in good faith any Action by any third party (other than any Governmental Entity), whether judicial or administrative, challenging this Agreement, any of the other Transaction Documents or the transactions contemplated hereby or thereby, or that could otherwise prevent, impede, interfere with, hinder or delay in any material respect the consummation of the transactions contemplated hereby or thereby, and shall consent to and comply with any condition imposed by any Governmental Entity on its grant of any such permit, order, consent, approval or authorization, other than any Burdensome Condition. Each of the parties shall provide to the other party copies of all applications or other communications to Governmental Entities and third parties in connection with this Agreement in advance of the filing or submission thereof. Seller has had discussions with American Modern about obtaining its approval to the transactions contemplated hereby under the agency agreements to which it is a party. Buyer acknowledges that American Modern may require that those agreements be extended for one year as a condition to granting such approval.
(b)      Without limiting the generality of the foregoing, each party shall give to the other party prompt written notice if it receives any notice or other communication from any Governmental Entity or GSE in connection with the transactions contemplated by this Agreement or any other Transaction Document, and, in the case of any such notice or communication which is in writing, shall promptly furnish the other party with a copy thereof. Each party shall give to the other party reasonable prior written notice of the time and place when any meetings or other conferences may be held by it with any Governmental Entity or GSE in connection with the transactions contemplated by this Agreement or any other Transaction Document (other than telephone calls regarding routine administrative matters), and the other party shall have the right to have a representative or representatives attend or otherwise participate in any such meeting or conference unless the relevant Governmental Entity or GSE does not consent to attendance or participation by such other party’s representative or such attendance or participation is prohibited by Applicable Law.
(c)      Notwithstanding anything to the contrary in this Agreement, neither Buyer nor Seller shall be obligated to take or refrain from taking or to agree to it, its Affiliates or any of the Transferred Companies or any of their respective Representatives taking or refraining from taking any action or to permit or suffer to exist any restriction, condition, limitation or requirement which, individually or together with all other such actions, restrictions, conditions, limitations or requirements, would constitute a Burdensome Condition. A “ Burdensome Condition ” shall mean any condition that would reasonably be expected to (i) materially impair the expected benefits to be derived by either party or its Affiliates (including the Transferred Companies in respect of Buyer after Closing) from the transactions contemplated by the Transaction Documents, (ii) materially impair the ability of either party or its Affiliates to continue to conduct their respective businesses following the Closing substantially in the manner conducted immediately prior to the Closing (after giving effect to any changes to their respective businesses contemplated by the transactions contemplated hereby), (iii) require either party or its Affiliates to sell, divest, operate in a specified manner, hold separate or discontinue or limit, before or after the Closing Date, any material assets, securities or other instruments whether now owned or hereafter acquired or to accept any limitation on such party’s or its Affiliates’ investment activities, (iv) in the case of an express requirement from a Governmental Entity, cause either party or any of its Affiliates to contribute material additional capital to the Transferred Companies or (v) defend any Action brought by a Governmental Entity.
SECTION 4.5.      Public Announcements . Without limiting the terms of Section 4.3, Buyer and Seller, and their respective Affiliates, shall consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statement with respect to this Agreement or the transactions contemplated hereby, including the Closing (including regarding its plans relating to employees or other third parties); provided that, in the event that any party is required under Applicable Law or the requirements of any securities exchange to issue any such press release or make any public statement and it is not feasible to provide an advance copy to the other party hereto as required by this Section 4.5, the party that issues such press release or makes such statement shall provide the other party with notice and a copy of such press release or statement as soon as reasonably practicable.
SECTION 4.6.      Related Party Agreements . Except as set forth in Section 4.6(a) of the Disclosure Schedule, all of the intercompany arrangements between Seller and its Affiliates (other than the Transferred Companies), on the one hand, and any of the Transferred Companies, on the other hand, including those agreements listed in Section 3.1(m) of the Disclosure Schedule, will be terminated immediately prior to the Closing, and Seller shall cause all intercompany balances between Seller and its respective Affiliates (other than the Transferred Companies), on the one hand, and any of the Transferred Companies, on the other hand, to be cancelled in full without payment immediately prior to the Closing (all such terminating intercompany agreements and intercompany balances being referred to as the “ Terminating Agreements ”). Seller shall at or prior to the Closing deliver to Buyer evidence of the termination of all such Terminating Agreements in form and substance reasonably acceptable to Buyer it being understood and agreed that from and after the Closing no party thereto shall have any liabilities of any nature whatsoever with respect to such Terminating Agreements. Further, prior to Closing Seller shall contribute cash to GTIA’s bank account on which GTIA has written unclaimed premium refund checks in an amount equal to the negative balance of such account as of the Calculation Date, and the linkage of such account (and any other bank account of GTIA) to other accounts of Seller and its Affiliates shall be terminated.
SECTION 4.7.      Further Assurances . Seller and Buyer agree to use and cause their respective Affiliates to use their commercially reasonable efforts to execute and deliver, at no cost to the other party, such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement.
SECTION 4.8.      Notice of Certain Events . From the date hereof through the Closing Date, Seller shall notify Buyer of (i) any event or change that has resulted in or would reasonably be expected to have a Material Adverse Effect; (ii) any event that would reasonably be expected to cause any representations or warranties of Seller in this Agreement to be untrue or inaccurate at or prior to the Closing in a manner that causes the condition in Section 6.2(a) to not be satisfied; or (iii) any failure of Seller or WIMC to comply with its covenants and other obligations in a manner that would reasonably be expected to cause the conditions in Section 6.2(b) to not be satisfied; provided that Seller shall not have any liability with respect to any breach or alleged breach of this ‎Section 4.8, and the failure of Seller to comply with the terms of this ‎Section 4.8, in and of itself, shall not cause the failure of the condition set forth in ‎Section 6.2(b). For the avoidance of doubt, nothing contained in this Section 4.8 or otherwise in this Agreement, including the delivery of any notice, pursuant to this Section 4.8 or otherwise, shall operate as a waiver or otherwise affect any representation, warranty, covenant or agreement given or made by Seller or WIMC in this Agreement nor shall it (a) cure any inaccuracy in any representation or warranty or (b) limit or otherwise affect any remedies available to a Buyer Indemnified Persons contained in this Agreement (including for purposes of determining whether conditions to Closing have been satisfied or in respect of indemnification rights).
SECTION 4.9.      Books and Records .
(a)      Prior to the Closing Date, the parties hereto shall develop and implement a commercially reasonable plan that shall result in the delivery or transfer, subject to compliance with Applicable Law, of the books and records of the Transferred Companies to Buyer (or a Person designated by Buyer) at, or as soon as reasonably practicable following, the Closing in the manner (and in the case of physical books and records of the Transferred Companies at the location(s)) reasonably requested by Buyer to the extent not located at an office of the Transferred Companies. Seller shall, and shall cause its Affiliates to, use their commercially reasonable efforts to separate any books and records of the Transferred Companies (or of Seller or any of its Affiliates, other than the Transferred Companies, to the extent relating to the Business) from any other books and records of Seller and its Affiliates (other than the Transferred Companies); provided that, for the avoidance of doubt, this Section 4.9 shall not require the delivery or transfer to Buyer (or a Person designated by Buyer) of any books and records of the Transferred Companies (or of Seller or any of its Affiliates, other than of the Transferred Companies, to the extent relating to the Business) that cannot be separated by use of commercially reasonable efforts from any other books and records of Seller and its Affiliates (other than the Transferred Companies).
(b)      Until the later of the fifth anniversary of the Closing, Buyer shall afford to Seller and its Representatives reasonable access during regular business hours to the Employees and to the books and records of the Transferred Companies that were transferred to Buyer on Closing, to the extent reasonably required by Seller for Tax, regulatory, reporting, litigation and similar legitimate business purposes; provided that (i) such access be at Seller’s expense and does not unreasonably interfere with the conduct of the business of Buyer or the Transferred Companies, (ii) Seller shall provide at least 5 Business Days prior written notice to Buyer, (iii) neither Buyer nor any of the Transferred Companies shall be required to furnish any access, information or documents or take any other action that Buyer determines could adversely affect the ability to effectively assert attorney-client, attorney work product or other privilege, and (iv) neither Buyer nor any of the Transferred Companies shall be required to supply any information which, in Buyer’s reasonable judgment, such Person is under a contractual or legal obligation not to supply or which is a trade secret or commercially sensitive. Notwithstanding the foregoing, access to records relating to Taxes shall be governed exclusively by Section 8.4.
SECTION 4.10.      AssurTrack Services Agreement . Immediately following the Closing, GTIA will assign all of its rights and obligations under the Broker Agreement to American Bankers. Immediately following such assignment, American Bankers, WIMC, Ditech and RMS will enter into the AssurTrack Services Agreement, which will amend and restate the existing AssurTrack Services Agreement and the Broker Agreement.
SECTION 4.11.      Use of Names . Subject to the terms of this Agreement, with effect from the Closing Date, Seller hereby grants to Buyer a transitional non-exclusive limited license to use the GREEN TREE mark, and solely in connection with renewals of policies and other transitional matters contemplated by this Agreement, the DITECH mark, including variations of such marks (e.g. "GTSERVICING", "GT", or "GTINSURANCE AGENCY") (such marks collectively, the “ Marks ”), in each case solely as used by the Transferred Companies in connection with the Business prior to the date of this Agreement. Buyer shall make commercially reasonable efforts to transition to a new mark of its choosing that is not confusingly similar to the Marks, and cease use of the Marks in connection with the Business, as soon as reasonably practicable. This license shall terminate and expire 180 days after the Closing Date (which period may be extended only with Seller's prior written consent, not to be unreasonably withheld), at which time Buyer shall immediately (a) cause the Transferred Companies to cease all use of the Marks and (b) for uses of the Marks by the Transferred Companies on websites within the control of Seller or its Affiliates (other than the Transferred Companies), instruct Seller to cease such use, provided that, in the case of clause (a), to the extent Buyer desires to use the Marks to identify the former name of the Agency exclusively in connection with the renewal of policies as to which the original policy was issued under the Marks, the license shall terminate and expire two (2) years from the Closing Date. The quality of the goods and services offered under the Marks shall be of a high standard acceptable to Seller, and shall be at least of equal quality to such goods and services provided directly by or on behalf of the Transferred Companies prior to the date hereof. Upon request, Buyer shall submit to Seller samples of use of the Marks, and the goods and services offered under the Marks for Seller’s review and approval within five Business Days of submission by Buyer, approval of which shall not be unreasonably withheld. Buyer shall conform its use of the Marks to any trademark standards provided by Seller, including but not limited to use of a ® designation where appropriate. Should Buyer’s use of the Marks fail to comply with the terms of this Section, upon written notice from Seller (including, at Seller’s discretion, a reasonable opportunity to cure such non-compliance), Buyer shall promptly cause the Transferred Companies to discontinue all use of the Marks and shall be subject to any and all claims pursuant to Section 7.2 herein. Buyer acknowledges and agrees that all use of the Marks and associated goodwill shall inure to the benefit of Seller. Buyer agrees to (i) cooperate with Seller, at Seller’s cost and expense, to preserve Seller’s rights in and to the Marks, (ii) to promptly notify Seller of any known or suspected misuse or misappropriation of the Marks during the term of the license granted in this Section 4.11, and (iii) to execute any and all documents, reasonably requested by Seller and at Seller’s expense, to protect Seller’s rights in the Marks. Except as expressly provided herein, nothing herein set forth shall be deemed to be an assignment, transfer or conveyance by Seller to Buyer of any right, title, proprietorship, goodwill or interest in or to the Marks. Any intentional misuse of the Marks, or failure to discontinue use after written notice by Seller pursuant to this Section, shall be deemed breach of this Agreement.
SECTION 4.12.      Intellectual Property License . Effective as of the Closing, excluding confidential information covered by Section 4.3 of this Agreement that is not necessary for the conduct of the Business as conducted as of the Closing Date and excluding the rights to information and services provided under the Services Agreement, Seller, on behalf of itself and its Affiliates (other than the Transferred Companies), hereby grants to the Transferred Companies a non-exclusive, worldwide, perpetual, irrevocable, transferable (solely in connection with all or substantially all of the Business), sublicensable, and royalty-free right and license to use and practice Seller’s Licensed IP Rights solely as used by the Transferred Companies in connection with the Business, as conducted as of the Closing Date, and colorable variations thereof. The parties agree that any future conveyance of rights in Seller’s Licensed IP Rights by Seller is intended to be subject to the foregoing license grant. All rights and licenses to intellectual property granted under or pursuant to this Agreement or the Services Agreement (including for the avoidance of doubt, all rights of access to data or information provided in the performance of the Services Agreement) are, and will otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code. The parties agree that the parties and their respective Affiliates and any sublicensees, as licensees of such rights under this Agreement, will retain and may fully exercise all of their rights and elections under the U.S. Bankruptcy Code and any foreign counterparts thereto.
SECTION 4.13.      Guaranties . From and after the date of this Agreement, the parties shall use their respective commercially reasonable efforts to obtain, on or prior to the Closing, the termination of, and full release of Seller and its Affiliates (other than the Transferred Companies) from, the guaranties described in Section 4.13 of the Disclosure Schedule (each, a “ Seller Guaranty ”).
SECTION 4.14.      Dividend . Seller shall cause GTIH to pay the Dividend prior to the Closing. Prior to the payment thereof, with respect to the agreements set out in Schedule 4.14 of the Disclosure Schedule to which Buyer or one of its Affiliates is not a party, Seller shall use its commercially reasonable efforts to obtain the release of GTN therefrom, and the assignment of GTN’s rights and obligations thereunder to GTIA. Buyer shall, and shall cause its respective Affiliates to, use commercially reasonable efforts to assist Seller (at the sole cost and expense of Seller) with the release of GTN from such agreements prior to the Closing; provided , that any such assistance will be limited to Buyer or its Affiliates participating in a reasonable number of telephone conference calls, during normal business hours, with the counterparties to such agreements. With respect to the agreements set out in Schedule 4.14 of the Disclosure Schedule to which Buyer or one of its Affiliates is a party, Buyer shall use its commercially reasonable efforts, and shall cause its Affiliates to use their commercially reasonable efforts, to release GTN from such agreements prior to the Closing.
SECTION 4.15.      Business Transition .
(a)      Each month, GTR receives a net payment from or makes a payment to its ceding insurers which are Affiliates of Buyer which represents its share of premiums received in the second preceding month, less certain expenses and reserve adjustments established by such ceding insurers. Following the Closing, Buyer shall pay or cause to be paid promptly to Seller in cash an amount equal to the foregoing net payment received for all months prior to Closing and for the month in which Closing occurs. If instead GTR is required to make a payment to such ceding insurers following the Closing in respect of any month prior to Closing or the month in which the Closing occurs, Seller shall promptly reimburse GTR in cash for the amount thereof. Seller shall have the right to reasonable access to the books and records of Buyer and its Affiliates to the extent reasonably required by Seller to determine the amount of payments required pursuant to this Section 4.15(a); provided that (i) Seller shall provide at least 5 Business Days prior written notice to Buyer, (ii) neither Buyer nor its Affiliates shall be required to furnish any access, information or documents or take any other action that Buyer determines could adversely affect the ability to effectively assert attorney-client, attorney work product or other privilege, and (iii) neither Buyer nor any Affiliate shall be required to supply any information which, in Buyer’s reasonable judgment, such Person is under a contractual or legal obligation not to supply or which is a trade secret or commercially sensitive.
(b)      Following the Closing, (i) Seller shall be entitled to all commission or other amounts of agent compensation with respect to direct bill voluntary products payable to GTIA by Insurance Carrier Clients or other unaffiliated producers received prior to the start of the second full month after Closing, and (ii) Seller shall be required to repay such commission or compensation to GTIA to the extent any such commission or compensation is required to be returned as result of the cancellation of such direct bill voluntary products. If either party or its Affiliate receives a payment to which the other is entitled under this Section 4.15(b), it shall promptly pay or cause to be paid over to the other party such amount in accordance herewith.
(c)      In the event that the Closing does not occur on the last day of a calendar month, then the amounts described in Section 4.15(a) (which is intended to take account of the fact that the payments described therein are made in arrears) and Section 4.15(b) shall be equitably adjusted on a pro rata basis in respect of the month in which Closing occurs to take account of the portion of such month that falls after the Closing compared to the entire month.
SECTION 4.16.      Bank Accounts . Prior to the Closing, Seller shall change, effective as of the Closing, the individuals authorized to draw on or having access to the bank, savings, deposit or custodial accounts and safe deposit boxes maintained by the Transferred Companies to the individuals designated in writing by Buyer to Seller at least three Business Days prior to the Closing Date.
SECTION 4.17.      Resignations . If directed by Buyer by written notice to Seller at least three Business Days prior to the Closing Date, Seller shall cause the directors and officers of the Transferred Companies identified in such written notice to resign from such positions, effective as of the Closing.
SECTION 4.18.      Transition Matters . Promptly after the date hereof, and in any event within fifteen (15) days thereafter, Seller and Buyer shall appoint a transition team comprised of representatives of each of them to coordinate efforts to complete the transactions contemplated hereby and implement efficiently the arrangements contemplated by the other Transaction Documents at or following Closing (including reviewing and revising Schedule 1(a) to the Services Agreement).
SECTION 4.19.      Discontinued Accounts . On or prior to the Closing Date, in order to give effect to the discontinuance of all the Pre-Closing Accounts that are not also Post-Closing Accounts as of the Closing (the “ Discontinued Accounts ”), (i) Seller shall cause the relevant Transferred Companies to transfer to Seller any and all assets and liabilities arising from or related to the Discontinued Accounts; and (ii) Seller and its Affiliates (other than any Transferred Companies) shall assume any and all liabilities of the Transferred Companies relating to the Discontinued Accounts, whenever arising (such liabilities being the “ Discontinued Liabilities ”). On the Closing, in order to give effect to the retention of the Seller Retained Balances by Seller, (i) Seller shall cause the relevant Transferred Companies to transfer to Seller the balance as of the Closing (whether positive or negative) of the Seller Retained Balances; and (ii) Seller and its Affiliates (other than any Transferred Companies) to assume any and all liabilities of the Transferred Companies as of the Closing relating to the Seller Retained Balances. To the extent that the foregoing assumption conflicts with Articles VII or VIII or with the Business Support Services Agreements, those provisions or Agreements and not this Section 4.19 shall control.
SECTION 4.20.      Closing Date Indebtedness . On or prior to the Closing Date, Seller and WIMC shall pay or release, or cause to be paid or released on behalf of the Transferred Companies, all the Closing Date Funded Indebtedness.
ARTICLE V.     
EMPLOYEE MATTERS
SECTION 5.1.      Benefit Plans . Except as otherwise expressly provided in this Article V, as of the Closing Date, the Transferred Companies shall terminate participation in each Seller Benefit Plan, and in no event shall any Employee be entitled to accrue any benefits under such Seller Benefit Plans with respect to services rendered or compensation paid on or after the Closing Date.
SECTION 5.2.      Transfer of Employment of Claims Employees and Related Liabilities . Prior to the date hereof, Seller has caused (i) the employment of each Claims Employee who was employed by any Transferred Company to be transferred to Seller or an Affiliate of Seller (other than any Transferred Company), and (ii) Seller and its Affiliates (other than any Transferred Company) to assume any and all liabilities of the Transferred Companies relating to the Claims Employees, whenever arising (such liabilities, “ Claims Employee Liabilities ”).
SECTION 5.3.      Continuing Employees .
(a)      For a period of one year following the Closing Date, or, if shorter, for the duration of the applicable individual’s employment (the “ Protected Period ”), Buyer shall provide each Employee employed by a Transferred Company immediately prior to the Closing Date (each, a “ Continuing Employee ”) with base compensation for such period at a rate not less than such Continuing Employee’s base compensation as in effect immediately prior to the Closing Date.
(b)      Seller shall cause the employment of each Employee who is not actively employed as of immediately prior to the Closing Date (including, but not limited to, due to a leave of absence, short-term or long-term disability or otherwise) (any such Employee, a “ Leave Employee ”) to be transferred to Seller or any of its Affiliates (other than the Transferred Companies) immediately prior to the Closing Date. Seller shall cause the employment of any Leave Employee who returns to active employment within 12 months following the Closing Date to be transferred to a Transferred Company designated by Buyer.
(c)      During the Protected Period, Buyer shall, or shall cause an Affiliate of Buyer (including the Transferred Companies) to, provide each Continuing Employee with employee benefits (other than defined benefit pension, retiree medical and equity-related benefits), including target annual cash incentive compensation opportunities, that are no less favorable in the aggregate than the employee benefits (other than defined benefit pension, retiree medical and equity-related benefits) made available by Buyer to similarly situated employees of Buyer and its Affiliates.
(d)      Effective as of the Closing Date, each Continuing Employee shall commence participation in the “employee benefit plans” (within the meaning of Section 3(3) of ERISA), programs and arrangements of Buyer or its Affiliates (including group health) in which he or she is eligible to participate and for which he or she satisfies the applicable eligibility requirements for participation therein (after giving effect to pre-Closing service credit in accordance with Section 5.3(e))(collectively, “ Buyer Benefit Plans ”). Buyer shall waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively at work requirements and waiting periods under any Buyer Benefit Plan (other than with respect to any short-term disability plan) that is a welfare benefit plan in which Continuing Employees (and their eligible dependents) will be eligible to participate from and after the Closing Date. Buyer shall recognize and credit, or cause to be recognized and credited, the dollar amount of all co-payments, deductibles and similar expenses incurred by each Continuing Employee (and his or her eligible dependents) under Benefit Plans providing group health benefits during the plan year in which the Closing Date occurs for purposes of satisfying such year’s deductible and out-of-pocket maximums under the relevant Buyer Benefit Plans providing group health benefits in which they will be eligible to participate from and after the Closing Date.
(e)      Except as otherwise set forth in this Section 5.3, for purposes of eligibility and vesting under any Buyer Benefit Plans and for purposes of benefit accrual and determining benefits under any Buyer Benefit Plan providing for severance and paid time-off, Buyer shall give each Continuing Employee credit for such Continuing Employee’s service with Seller and its Affiliates (as well as service with any predecessor employer) to the same extent recognized by Seller or its Affiliates immediately prior to the Closing Date under a similar Benefit Plan, except to the extent that such credit would result in duplication of benefits.
(f)      To the extent allowable by Applicable Law, Buyer shall take any and all necessary action to cause the trustee of a tax-qualified defined contribution plan of Buyer or one of its Affiliates, if requested to do so by a Continuing Employee, to accept a direct “rollover” of all of such Continuing Employee’s distribution from Seller’s tax qualified defined contribution plan (including plan loans).
(g)      From and after the Closing Date, Buyer shall, or shall cause an Affiliate of Buyer (including the Transferred Companies) to satisfy all Pre-Closing Payroll Obligations. The Pre-Closing Payroll Obligations in respect of any unpaid 2016 or 2017 annual, monthly and quarterly bonuses and commissions shall be determined using the applicable methodology set forth on Section 5.3(g) of the Disclosure Schedule.  From and after the Closing Date, Buyer and its Affiliates (including the Transferred Companies) shall establish an annual, monthly and quarterly bonus and commission opportunity for the Continuing Employees for the remainder of such performance period using the applicable methodology set forth on Section 5.3(g) of the Disclosure Schedule.
(h)      With respect to each Continuing Employee (including any beneficiary or the dependent thereof), Seller shall retain all liabilities and obligations for any medical, dental, health, accident, life or disability claim to the extent that such liability or obligation relates to claims incurred (whether or not reported or paid) prior to the Closing Date and Buyer and its Affiliates shall be liable for any such claim incurred on or following the Closing Date. For purposes of this Section 5.3(h) a claim shall be deemed to be incurred when, with respect to medical, dental, health-related, accident and disability (including workmen’s compensation) benefits, the medical, dental, health-related, accident or disability services giving rise to such claim are performed.
SECTION 5.4.      COBRA . Effective as of the Closing Date, Seller shall be responsible for providing coverage under COBRA to any Employee (and his or her qualified beneficiaries) as to whom a “qualifying event” (as defined in Section 4890B of the Code) has occurred prior to the Closing Date. Buyer shall be responsible for providing coverage under COBRA to any Continuing Employee (and his or her qualified beneficiaries) whose “qualifying event” occurs on or after the Closing Date.
SECTION 5.5.      Cooperation . Seller and Buyer shall, and each shall cause its Affiliates to, cooperate with the other party hereto and its Affiliates to provide such current information regarding the Employees on an ongoing basis as may be necessary to facilitate determinations of eligibility for, and payments of benefits to, such employees (and their spouses and dependents, as applicable) under Benefit Plans or Buyer Benefit Plans, as applicable, except to the extent prohibited by Applicable Law. Buyer and Seller shall each have the opportunity to review and comment on any material written communication by the other party to any Employees regarding the transaction contemplated by the Transaction Documents prior to such communication being distributed to any Employees.
SECTION 5.6.      Nonsolicitation; No-Hire . For a term commencing on the Closing Date and ending on the three-year anniversary of the Closing Date:
(a)      without the prior written consent of Buyer, WIMC and Seller shall not, and WIMC and Seller shall cause their Affiliates and their respective Representatives acting on behalf of them not to, directly or indirectly, in any individual, representative or other capacity (i) solicit for employment or hire any Continuing Employee who is on the date of such solicitation or hiring, or who within six (6) months preceding the date of such solicitation or hiring was, employed by Buyer or any Affiliate or (ii) otherwise seek to influence or alter any Continuing Employee’s relationship with his or her employer; and
(b)      without the prior written consent of Seller, Buyer and its Affiliates shall not, and each of them shall cause its Representatives acting on its behalf not to, directly or indirectly, in any individual, representative or other capacity solicit for employment or hire any individual set forth on Section 5.6(b) of the Disclosure Schedule or otherwise seek to influence or alter any such individual’s relationship with his or her employer.
The foregoing limitations, however, do not prohibit each party or its Representatives from: (i) soliciting for employment or hiring officers, directors or employees of the other party through general job advertisements or similar notices (such as advertisements, Internet job board postings or similar solicitations) that are not targeted specifically at the officers, directors or employees of the other party or (ii) soliciting or hiring any officer, director or employee whose employment has been terminated by the other party or who otherwise ceases to be employed by the other party prior to any solicitation by such party and (if Section 5.6(a) applies to such individual) as to which the six (6) month period referred to in Section 5.6(a) has elapsed.
SECTION 5.7.      Effect of this Article V . This Article V shall be binding upon and inure solely to the benefit of each of the parties to this Agreement; nothing in this Article V, expressed or implied, is intended to confer upon any other person any rights or remedies of any nature whatever; and no provision of this Article V will create any third-party beneficiary rights in any current or former employee, officer, director or individual independent contractor of Seller and its Affiliates or Buyer and its Affiliates in respect of continued employment (or resumed employment) or service or any other matter. This Article V shall not be considered, or be deemed to be, an amendment to any Benefit Plan or any compensation or benefit plan, program, agreement or arrangement of Buyer or any of its Affiliates. Nothing in this Article V shall (i) obligate Buyer or any of its Affiliates (including the Transferred Companies) to continue to employ any Employee for any specific period of time following the Closing Date, subject to Applicable Law, or (ii) subject to the provisions of this Article V, limit the right of Buyer, or the Transferred Companies, to, at any time, change, modify or terminate any employee benefit plan or arrangement at any time and in any manner.
ARTICLE VI.     
CONDITIONS PRECEDENT
SECTION 6.1.      Conditions to Each Party’s Obligations . The respective obligations of each party to consummate the transactions contemplated hereby and the other actions to be taken at the Closing are subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:
(a)      Approvals . The waiting period (and any extension thereof) applicable to the transactions contemplated hereby under the HSR Act shall have been terminated or shall have otherwise expired without the imposition of a Burdensome Condition with respect to the party seeking to invoke this condition. All other consents, approvals or authorizations of, declarations or filings with or notices to any Governmental Entity in connection with the transactions contemplated hereby, including those set forth in Sections 3.1(e) of the Disclosure Schedule and 3.2(c) of the Buyer Disclosure Schedule, shall have been obtained or made and shall be in full force and effect and all waiting periods required by Applicable Law shall have expired or been terminated, in each case without the imposition of a Burdensome Condition with respect to the party seeking to invoke this condition.
(b)      No Restraints . No Applicable Law shall be in effect that prohibits or makes illegal any aspect of the transactions contemplated by this Agreement, and there shall be no Action, pending or threatened, by any Governmental Entity that seeks to prohibit any aspect thereof or to obtain any monetary remedy in respect thereof.
SECTION 6.2.      Conditions to Obligations of Buyer . The obligations of Buyer to effect the purchase and sale of the Shares and the other actions to be taken at the Closing are further subject to the satisfaction (or waiver by Buyer) on or prior to the Closing Date of the following conditions:
(a)      Representations and Warranties . (i) The Seller Fundamental Representations shall be true and correct in all respects at and as of the date hereof and the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date and relate solely to a particular date or period, which shall be true and correct in all respects as of such specified date or period), and (ii) the other representations and warranties of Seller and WIMC set forth in this Agreement shall be true and correct in all respects (without regard to any limitation set forth therein in respect of materiality or Material Adverse Effect, except in Section 3.1(h)(ii) or Section 4.1 (in respect of Section 3.1(h)(iii)) at and as of the date hereof and the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date and relate solely to a particular date or period, which shall be true and correct in all respects as of such specified date or period), except where the failure of such other representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b)      Performance of Obligations of Seller . Seller shall have performed and complied in material respects with all agreements, obligations and covenants required to be performed or complied with by it under this Agreement on or prior to the Closing Date.
(c)      Regulatory Stance . No Governmental Entity or GSE shall have modified its stance or indicated any opposition with respect to the transactions contemplated by this Agreement in a manner that is materially adverse to Buyer and its Affiliates or taken any other action that would have a material adverse effect on the benefits sought to be obtained by Buyer from the transactions contemplated by this Agreement.
(d)      Closing Deliveries . Seller shall have delivered or caused to be delivered to Buyer each of the documents required to be delivered pursuant to Section 2.3.
(e)      Dividend . The Dividend shall have been paid.
(f)      No Material Adverse Effect . Since the date of this Agreement, no event, change or development shall have occurred that has had or would reasonably be expected to have a Material Adverse Effect.
(g)      Change of Control . Since the date of this Agreement, to the actual Knowledge of Seller without a duty of inquiry, (a) there has been no Change of Control of WIMC, and (b) there have been no communications between the directors or executive officers of WIMC and any third party that are continuing and that are intended (by either party) to result in a Change of Control of WIMC.  For purposes of this section, “ Change of Control ” means any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) is or shall become the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the outstanding capital stock of WIMC.
SECTION 6.3.      Conditions to Obligations of Seller . The obligations of Seller to effect the purchase and sale of the Shares and the other actions to be taken at the Closing are further subject to the satisfaction or waiver by Seller on or prior to the Closing Date of the following conditions:
(a)      Representations and Warranties . (i) The Buyer Fundamental Representations set forth in this Agreement shall be true and correct in all respects at and as of the date hereof and the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date and relate solely to a particular date or period, which shall be true and correct in all respects as of such specified date or period), other than to any de minimis extent, and (ii) the other representations and warranties of Buyer set forth in this Agreement shall be true and correct in all respects (without regard to any limitation set forth therein in respect of materiality or Material Adverse Effect) at and as of the date hereof and the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date and relate solely to a particular date or period, which shall be true and correct in all respects as of such specified date or period), except where the failure of such other representations and warranties to be so true and correct would not, individually or in the aggregate, have a material adverse effect on the ability of Buyer to consummate any of the transactions contemplated by this Agreement.
(b)      Performance of Obligations of Buyer . Buyer shall have performed and complied in all material respects with all agreements, obligations and covenants required to be performed or complied with by it under this Agreement on or prior to the Closing Date.
(c)      Regulatory Stance . No Governmental Entity or GSE shall have modified its stance or indicated any opposition with respect to the transactions contemplated by this Agreement in a manner that is materially adverse to Seller and its Affiliates or taken any other action that would have a material adverse effect on the benefits sought to be obtained by Seller and its Affiliates from the transactions contemplated by this Agreement.
(d)      Closing Deliveries . Buyer shall have delivered or caused to have delivered to Seller each of the documents required to be delivered pursuant to Section 2.3.
ARTICLE VII.     
INDEMNIFICATION
SECTION 7.1.      Survival of Representations, Warranties, and Covenants .
(a)      The representations and warranties of Seller and Buyer contained in this Agreement shall survive the Closing solely for purposes of this Article VII and shall terminate and expire on the date that is 18 months following the Closing Date; provided , however , that (i) the representations and warranties made in Sections 3.1(a)(i), (a)(ii), (b), (c), (d), (i)(vii)(v), (s) and (w) (collectively, the “ Seller Fundamental Representations ”), Sections 3.2(a), (b), (d) and (g) (collectively, the “ Buyer Fundamental Representations ”) shall survive indefinitely and (ii) Sections 3.1(i) and (j) shall survive until the expiration of the applicable statute of limitations. Any claim for indemnification in respect of any representation or warranty that is not asserted by notice given as required herein prior to the expiration of the specified period of survival shall not be valid. Any claim properly made for an Indemnifiable Loss in respect of such a breach asserted within such period of survival as herein provided will be timely made for purposes hereof.
(b)      To the extent that they are to be performed after the Closing, the covenants in this Agreement will survive and remain in effect in accordance with their terms. All covenants in this Agreement that by their terms are required to be performed prior to the Closing will survive until the 18-month anniversary of the Closing Date, after which no claim for indemnification may be brought hereunder.

SECTION 7.2.      Indemnification .
(a)      Seller and WIMC shall, jointly and severally, indemnify and hold harmless Buyer and its Affiliates (for avoidance of doubt, including the Transferred Companies from and after the Closing Date) (the “ Buyer Indemnified Persons ”) from and against any and all Indemnifiable Losses resulting from:
(i)      any breach of any representation or warranty of Seller or WIMC made in this Agreement or in any certificate delivered pursuant hereto;
(ii)      any breach or nonfulfillment of any agreement or covenant of Seller or WIMC under this Agreement;
(iii)      any liabilities arising under the Seller Benefit Plans, including any severance obligations arising in respect of any termination or transfer of employment of any Claims Employee, Employee or former Employee on or prior to the Closing Date;
(iv)      Claims Employee Liabilities;
(v)      Discontinued Liabilities (other than any Tax liability with respect thereto, which is the subject of Article VIII);
(vi)      Closing Date Indebtedness (including Seller Transaction Expenses) but solely to the extent such amounts have not been included in the Closing Date Other Indebtedness as finally determined, and paid to Buyer, pursuant to Section 2.5 of this Agreement; or
(vii)      Seller’s actions or omissions in effecting the Restructuring, including any failure to obtain any approvals or authorizations of Governmental Entities required in connection therewith.
(b)      Buyer shall indemnify and hold harmless Seller and its Affiliates (the “ Seller Indemnified Persons ”) from and against any and all Indemnifiable Losses resulting from:
(i)      any breach of representation or warranty of Buyer made in this Agreement or in any certificate delivered pursuant hereto;
(ii)      any liabilities under the Company Benefit Plans arising on or after the Closing Date that are not Pre-Closing Payroll Obligations; or
(iii)      any breach or nonfulfillment of any agreement or covenant of Buyer under this Agreement.
(c)      Seller and WIMC shall, jointly and severally, indemnify and hold harmless Buyer Indemnified Persons from and against any and all Specific Indemnifiable Losses resulting from any actual or alleged violations of any Applicable Law, breaches of fiduciary or other duties or breaches of contract (including any GSE servicing guide or equivalent requirement) to the extent related to any period prior to the Closing, if any, or any Actions related thereto, whether allegations are based on breach of contract or tort, in each case, in connection with force-placed or lender-placed insurance bound prior to the Closing (the “ Specific Indemnity ”); provided that, for the avoidance of doubt, the Specific Indemnity shall not (i) cover any losses or expenses to the extent arising from any of Buyer’s or its Affiliates’ actual or alleged violations of any Applicable Law, breaches of fiduciary or other duties or breaches of contract (including any GSE servicing guide or equivalent requirement to the extent Buyer or any of its Affiliates is subject thereto) to the extent related to any period prior to the Closing, if any, or any Actions related thereto, whether allegations are based on breach of contract or tort, in each case, in connection with force-placed or lender-placed insurance bound prior to the Closing, (ii) amend, modify or otherwise affect any settlement agreement in effect as of immediately prior to the Closing of Seller or any of its Affiliates, on the one hand, or Buyer or any of its Affiliates, on the other hand; provided , further , that in the event of any conflict between the terms and conditions of this Agreement and such settlement agreement, the terms and conditions of such settlement agreement shall control, or (iii) amend, modify or otherwise affect any indemnification obligations in any Contract in effect as of immediately prior to the Closing between Seller or any of its Affiliates, on the one hand, and Buyer or any of its Affiliates, on the other hand; provided , further , that in the event of any conflict between the terms and conditions of this Agreement and such Contract, the terms and conditions of such Contract shall control.  The Specific Indemnity shall survive until the fourth anniversary of the Closing Date.  Any claim for indemnification in respect of the Specific Indemnity that is not asserted by notice given as required herein prior to the fourth anniversary of the Closing Date shall not be valid.  The maximum aggregate liability of Seller and WIMC to all Buyer Indemnified Persons for any and all Specific Indemnifiable Losses under ‎this Section 7.2(c) (which for the avoidance of doubt shall not include any amounts payable under any settlement agreement set forth in Sections 7.2(c)(i) of the Disclosure Schedule which shall be governed by the terms and conditions of such settlement agreements) shall be $31.25 million; provided that such $31.25 million maximum aggregate liability shall be increased by the difference, if any, between the Cap and the aggregate amount of Indemnifiable Losses subject to the Cap for which a claim has been made as of the date that is 18 months following the Closing Date (the “ Specific Indemnity Cap ”); provided , further that the Specific Indemnity Cap shall not apply with respect to the Actions set forth in Section 7.2(c)(ii) of the Disclosure Schedule.
(d)      Seller and WIMC shall, jointly and severally, indemnify and hold harmless Buyer Indemnified Persons from and against any and all liabilities that would have been required to be disclosed as of the Closing Date on a consolidated balance sheet (or the notes thereto), prepared in accordance with GAAP, of the Transferred Companies (the “ Liability Indemnity ”) other than in respect of (i) any reinsurance related liabilities owed by GTR to an Affiliate of Buyer, (ii) any amounts in respect of insurance premium cancellation reserves, which are the subject of Section 2.5(g), (iii) any amounts in respect of Taxes, which are the subject of Article VIII and (iv) any Third Party Fees. The Liability Indemnity shall survive until the date that is six months after the Closing Date. Any claim for indemnification in respect of the Liability Indemnity that is not asserted by notice given as required herein prior to the date that is six months after the Closing Date shall not be valid. 
(e)      For purposes of determining the amount of any Indemnifiable Losses under this Article VII, each representation and warranty contained in this Agreement shall be read without regard to any materiality or Material Adverse Effect qualifier contained therein, except in Section 3.1(h)(ii) and Section 4.1 (in respect of Section 3.1(h)(iii)).
SECTION 7.3.      Certain Limitations .
(a)      No party shall be obligated to indemnify and hold harmless its respective Indemnitees under ‎Section 7.2(a)(i) (in the case of Seller) or ‎Section 7.2(b)(i) (in the case of Buyer) (i) with respect to any claim, unless such claim involves Indemnifiable Losses in excess of $25,000 (the “ Threshold Amount ”) (nor shall any claim that does not exceed the Threshold Amount be applied to or considered for purposes of calculating the amount of Indemnifiable Losses for which the Indemnitor is responsible under clause (ii) below) and (ii) unless and until the aggregate amount of all Indemnifiable Losses of the Indemnitees under such ‎Section 7.2(a)(i) or such ‎Section 7.2(b)(i), as the case may be, exceeds $1,562,500 for all Indemnifiable Losses (the “ Deductible ”), at which point such Indemnitor shall be liable to its respective Indemnitees for the value of the Indemnitee’s claims under ‎Section 7.2(a)(i) or ‎Section 7.2(b)(i), as the case may be, that is in excess of the Deductible, subject to the limitations set forth in this Article VII. The maximum aggregate liability of Seller and WIMC, on the one hand, and Buyer on the other hand, to their respective Indemnitees for any and all Indemnifiable Losses under ‎Sections 7.2(a)(i) in the case of Seller, or ‎Section 7.2(b)(i), in the case of Buyer, shall be $15.625 million (the “ Cap ”). Notwithstanding anything to the contrary contained herein, none of the Threshold Amount, the Deductible or the Cap shall apply with respect to Indemnifiable Losses (A) under Section 7.2(a)(i) or Section 7.2(b)(i) to the extent relating to, resulting from or arising out of common law fraud, (B) under ‎Section 7.2(a)(i) to the extent relating to, resulting from or arising out of any breach of a Seller Fundamental Representation or a representation in Section 3.1(i) or (j), or (C) under ‎Section 7.2(b)(i) to the extent relating to, resulting from or arising out of any breach of a Buyer Fundamental Representation; provided , however , that, except to the extent relating to, resulting from or arising out of intentional fraud or Section 7.2(a)(iv), 7.2(a)(v), 7.2(a)(vi), 7.2(a)(vii) or 7.2(d), the maximum aggregate liability of Seller and WIMC to all Buyer Indemnified Persons and Buyer to all Seller Indemnified Persons, for any or all Indemnifiable Losses and Specific Indemnifiable Losses under this Agreement, shall not exceed $125,000,000.
(b)      Each Indemnitee shall mitigate all Indemnifiable Losses for which indemnification may be sought hereunder in accordance with the laws of the State of New York.
SECTION 7.4.      Definitions . As used in this Agreement:
(i)      “ Indemnitee ” means any Person entitled to indemnification under this Agreement;
(ii)      “ Indemnitor ” means any Person required to provide indemnification under this Agreement;
(iii)      “ Indemnifiable Losses ” means any and all damages, losses, liabilities, obligations, costs, Taxes (including regulatory fines owed to a Governmental Entity) and expenses (including reasonable attorneys’ and other professional fees and expenses); provided , however , that any Indemnity Payment (x) shall in no event include any consequential or punitive damages (except to the extent such damages are actually paid to a third party in connection with a Third-Party Claim) and (y) shall be net of the net amount (after deducting reasonable related costs and expenses, including any resulting increase in premium) of any (A) amounts actually recovered by the Indemnitee for the Indemnifiable Losses for which such Indemnity Payment is made under any insurance policy, warranty, indemnity or other applicable source of recovery from any Person other than a party hereto (except for a Tax Authority), and the Indemnitee shall promptly reimburse the Indemnitor for the net amount that is received by it from any such other Person with respect to any Indemnifiable Losses after any indemnification with respect thereto has actually been paid pursuant to this Agreement, (B) Tax benefits actually recognized (in the form of a cash Tax refund or reduction in cash Taxes payable) by the Indemnitee (or its Affiliates) in respect of the year in which such Indemnifiable Loss is incurred, in respect of the Indemnifiable Losses for which such Indemnity Payment is made (it being understood that no Indemnity Payment to be made hereunder may be withheld or otherwise delayed due to the fact that an anticipated Tax benefit has not actually been recognized by the applicable Indemnitee), and (C) amount to the extent credited on account of insurance premium cancellation reserves in calculating the Final Payment or taken into account in determining the Closing Date Other Indebtedness under Section 2.5; and (z) shall be increased by any Tax costs actually recognized by the Indemnitee or its Affiliates as a result of such Indemnitee’s entitlement to indemnification hereunder, provided , for the avoidance of doubt, that any reduction in the Tax basis and any liability resulting therefrom shall not be treated as a Tax cost for purposes of this clause (z) or the parenthetical clause at the end of Section 7.4(v)(B);
(iv)      “ Indemnity Payment ” means any amount of Indemnifiable Losses or Specific Indemnifiable Losses required to be paid pursuant to this Agreement;
(v)      “ Specific Indemnifiable Losses ” means any and all out-of-pocket losses and expenses, net of any (A) amounts actually recovered (after deducting reasonable related costs and expenses) by the Buyer Indemnified Persons for the Specific Indemnifiable Losses for which such Indemnity Payment is made under any insurance policy, warranty or indemnity or otherwise from any Person other than a party hereto (except for a Tax Authority), and the Buyer Indemnified Persons shall promptly reimburse the Indemnitor for any such amount that is received by it from any such other Person with respect to any Specific Indemnifiable Losses after any indemnification with respect thereto has actually been paid pursuant to this Agreement and (B) Tax benefits actually recognized (in the form of a cash Tax refund or reduction in cash Taxes payable) by any Buyer Indemnified Person in respect of the year in which such Specific Indemnifiable Loss is incurred, in respect of any Specific Indemnifiable Losses for which such Indemnity Payment is made (it being understood that no Indemnity Payment to be made hereunder may be withheld or otherwise delayed due to the fact that an anticipated Tax benefit has not actually been recognized by such Buyer Indemnified Person) (but increased by any Tax costs actually recognized by the Buyer Indemnified Persons or their Affiliates as a result of the Buyer Indemnified Persons’ entitlement to indemnification hereunder); and
(vi)      “ Third-Party Claim ” means any claim, action, suit, or proceeding made or brought by any Person that is not a party to this Agreement.
SECTION 7.5.      Procedures for Third-Party Claims .
(a)      If any Indemnitee receives notice of assertion or commencement of any Third-Party Claim against such Indemnitee in respect of which an Indemnitor may be obligated to provide indemnification under this Article VII, the Indemnitee shall give such Indemnitor reasonably prompt written notice thereof and such notice shall include a reasonable description of the claim and any documents relating to the claim and an estimate of the Indemnifiable Loss or the Specific Indemnifiable Loss, as applicable, and shall reference the specific sections of this Agreement that form the basis of such claim; provided , however , that no delay on the part of the Indemnitee in notifying any Indemnitor shall relieve the Indemnitor from any obligation hereunder unless (and then solely to the extent) the Indemnitor is actually prejudiced by such delay (except that the Indemnitor shall not be liable for any expenses incurred during the period in which the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver to the Indemnitor, reasonably promptly after the Indemnitee’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim.
(b)      The Indemnitor shall be entitled to participate in the defense of any Third-Party Claim and, if it so chooses, to assume the defense thereof with counsel selected by the Indemnitor and reasonably acceptable to the Indemnitee; provided, however, that as a condition to assuming such defense, the Indemnitor shall acknowledge its responsibility for Indemnifiable Losses (subject to the limits set forth herein) resulting from such Third Party Claim. Should the Indemnitor so elect to assume the defense of a Third-Party Claim, the Indemnitor shall not, for as long as it conducts such defense, be liable to the Indemnitee for legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof. If the Indemnitor assumes such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnitor, it being understood that the Indemnitor shall control such defense. The Indemnitor shall be liable for the reasonable fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnitor has not assumed the defense thereof (other than during any period in which the Indemnitee shall have not yet given notice of the Third-Party Claim as provided above). If the Indemnitor chooses to defend any Third-Party Claim, all of the parties hereto shall cooperate in the defense thereof. Such cooperation shall include the retention and (upon the Indemnitor’s request) the provision to the Indemnitor of records and information which are relevant to such Third-Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Whether or not the Indemnitor shall have assumed the defense of a Third-Party Claim, the Indemnitee shall not admit any liability with respect to, or pay, settle, compromise or discharge, such Third-Party Claim without the Indemnitor’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned). If the Indemnitor has assumed the defense of a Third-Party Claim, the Indemnitor may only pay, settle, compromise or discharge a Third-Party Claim with the Indemnitee’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned); provided , however , that the Indemnitor may pay, settle, compromise or discharge such Third-Party Claim without the written consent of the Indemnitee if such settlement (i) includes a complete and unconditional release of the Indemnitee from all liability in respect of such Third-Party Claim, (ii) involves a cash payment only and does not subject the Indemnitee to any injunctive relief or other equitable remedy and (iii) does not include a statement or admission of fault, culpability or failure to act by or on behalf of the Indemnitee. If the Indemnitor submits to the Indemnitee a bona fide settlement offer that satisfies the requirements set forth in the proviso of the immediately preceding sentence and the Indemnitee refuses to consent to such settlement, then thereafter the Indemnitor’s liability to the Indemnitee with respect to such Third-Party Claim shall not exceed the Indemnitor’s portion of the settlement amount included in such settlement offer, and the Indemnitee shall thereafter assume the defense of such Third-Party Claim and pay attorney’s fees and other out-of-pocket costs incurred thereafter in continuing the defense of such Third-Party Claim.
SECTION 7.6.      Direct Claims . The Indemnitor will have a period of 30 days within which to respond in writing to any claim by an Indemnitee on account of an Indemnifiable Loss or a Specific Indemnifiable Loss, as applicable that does not result from a Third-Party Claim. If the Indemnitor does not so respond within such 30 day period, the Indemnitor will be deemed to have rejected such claim, in which event the Indemnitee will be entitled to pursue such remedies as may be available to the Indemnitee.
SECTION 7.7.      Sole Remedies . Except with respect to any claims for breach of contract under, remedies provided for in, or as otherwise provided for in, the Business Support Services Agreements, the parties hereto acknowledge and agree that, except as set forth in Section 10.7(b), if the Closing occurs, their sole and exclusive remedy following the Closing with respect to any and all claims arising out of or related to the transactions contemplated by this Agreement shall be pursuant to the provisions set forth in this Article VII or Article VIII, as applicable. Buyer further agrees that, if the Closing occurs, Section 7.2(c) shall be its sole and exclusive remedy for the types of matters described therein, whether or not they might otherwise be indemnifiable under another provision of this Agreement.
SECTION 7.8.      Certain Other Matters .
(a)      Upon making any Indemnity Payment, Indemnitor will, to the extent of such Indemnity Payment, be subrogated to all rights of Indemnitee against any Person (other than any Tax Authority) in respect of the Indemnifiable Loss or the Specific Indemnifiable Loss, as applicable, to which the Indemnity Payment related. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnitor will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation rights.Notwithstanding anything to the contrary in this Agreement, the rights and obligations of the parties with respect to indemnification for any and all Tax matters shall be governed by Article VIII hereof, and shall not be subject to this Article VII (other than Section 7.1(a), the proviso at the end of Section 7.3(a) and Section 7.4).
SECTION 7.9.      Privileged Information . The parties acknowledge that there exists a common interest among them and the Transferred Companies with respect to matters that are now or may in the future be the subject of Third-Party Claims.  To the extent that information that is subject to an attorney-client or work product privilege (“ Privileged Information ”) has been or in the future is shared between them, their respective Affiliates and/or the Transferred Companies, the parties agree that such sharing has been or will be done in furtherance of such common interest and not with an intent to waive any such privilege.  Such Privileged Information has been kept confidential to date and the parties agree that they will, and will cause the Transferred Companies to, keep such Privileged Information confidential in the future. Without limiting the foregoing, effective as of the Closing, Buyer hereby agrees to cause the Transferred Companies not to waive, or to take an action that would result in a waiver of, any attorney-client privilege, work product protection or other similar privilege or protection applicable to any communication occurring prior to or after the Closing in connection with any Joint Representation between any law firm or other person, on the one hand, and any Transferred Company or Representative of any Transferred Company, on the other hand.  As used herein, “ Joint Representation ” shall mean the joint representation by any law firm of Seller or any Affiliate (other than a Transferred Company) and any Transferred Company in connection with any matter. For the avoidance of doubt, following Closing any privilege in connection with the Current Representation shall belong exclusively to Seller.
ARTICLE VIII.     
TAX MATTERS
SECTION 8.1.      Indemnification for Taxes .  
(a)      Seller and WIMC shall, jointly and severally, indemnify and hold harmless the Buyer Indemnified Persons from any and all Indemnifiable Losses to the extent constituting or arising out of Pre-Closing Taxes of the Transferred Companies.
(b)      For purposes of this Agreement, Taxes for a Straddle Period shall be allocated between the Pre-Closing Tax Period and the Post-Closing Tax Period in the following manner:
(i)      in the case of Taxes other than real or personal property Taxes or other Taxes calculated on a periodic basis, such Taxes shall be allocated based on an interim closing of the books as of the Closing Date; and
(ii)      in the case of real or personal property Taxes or other Taxes calculated on a periodic basis, the portion of such Taxes allocable to the Pre-Closing Tax Period shall be deemed to be the amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the portion of the Straddle Period ending on the Closing Date and the denominator of which is the number of days in the entire Straddle Period. Any exemptions, allowances or deductions that are calculated on a periodic basis shall be apportioned on the same basis.
(c)      For avoidance of doubt, any payment of estimated Taxes, or any other prepayment of Taxes, made by, or on behalf of or for the account of, any of the Companies before the Closing Date (including any deposit made in respect of Taxes) shall be treated as a payment of Taxes in respect of the income, gains, profits, business, property or operations of the applicable Company for a period ending prior to the Closing Date or the portion of any Straddle Period ending on the Closing Date and the amount that would otherwise be payable by Seller pursuant to this Agreement in respect of the relevant Tax had such payment or deposit not been made shall be reduced by the amount of any such payment.
(d)      Buyer agrees to give prompt notice to Seller of any Indemnifiable Loss or the assertion of any claim or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under this Section 8.1 (a “ Tax Proceeding ”) and will give Seller such information with respect thereto as Seller may reasonably request. Seller may (i) participate in and (ii) upon written notice to Buyer, assume the defense of any suit, action or Tax Proceeding (including any Tax audit) that relates solely to a Pre-Closing Tax Period; provided that (x) Seller shall thereafter consult with Buyer upon Buyer’s reasonable request for such consultation from time to time with respect to such suit, action or proceeding (including any Tax audit) and (y) Seller shall not, without Buyer’s consent, agree to any settlement with respect to any Tax if such settlement could adversely affect the Tax liability of any Buyer Indemnified Person (including, effective upon the Closing, the Transferred Companies). If Seller assumes such defense, (i) Buyer shall have the right (but not the duty) to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by Seller and (ii) Seller shall acknowledge its responsibility for the Indemnifiable Loss, or any portion thereof, with respect to which Buyer seeks indemnification. For the avoidance of doubt, unless and until Seller notifies Buyer in writing of Seller’s decision to exercise the control and participation rights described in this Section 8.1(d), Buyer shall be entitled to take such actions as it decides are reasonable with respect to such suit, action or proceeding, including paying, compromising or contesting the Tax at issue. Seller shall be liable for the fees and expenses of counsel employed by Buyer for any period during which Seller has not assumed the defense thereof. Whether or not Seller chooses to defend or prosecute any claim, all of the parties hereto shall cooperate in the defense or prosecution thereof. Notwithstanding any other provision of this Section 8.1, Seller shall not be liable under this Section 8.1 with respect to any Indemnifiable Loss resulting from a claim or demand the defense of which Seller was not offered the opportunity to assume as provided under this Section 8.1(d), to the extent Seller’s liability under this Section 8.1 is actually and materially adversely affected as a result thereof. Notwithstanding anything to the contrary in this paragraph, with respect to any Tax Proceeding commenced with respect to a group filing or a Consolidated Tax Return, Seller shall control all proceedings and may make all decisions taken in connection with such Tax Proceeding (including selection of counsel) and, without limiting the foregoing, may, in its sole discretion, pursue or forego any and all administrative appeals, proceedings, hearings and conferences with any Tax Authority with respect thereto, and may, in its sole discretion, either pay the applicable Tax liability and sue for a refund or contest such Tax liability.
(e)      Seller shall not be obligated to indemnify Buyer for any increase in Taxes with respect to any Post-Closing Tax Period as a result of any utilization of, or reduction in, any Tax benefit, Tax attribute or Tax benefit item attributable to any Pre-Closing Tax Period (including any net operating loss, capital loss, tax deduction or tax credit arising in Pre-Closing Tax Period). Indemnification pursuant to Section 8.1(a) shall be determined without regard to any Tax benefit, Tax attribute or Tax benefit item attributable to any Post-Closing Tax Period (including any net operating loss, capital loss, tax deduction or tax credit arising in any Post-Closing Tax Period).
SECTION 8.2.      Filing of Tax Returns .
(a)      Seller shall cause to be prepared (in a manner reasonably consistent with past practice and consistent with Applicable Law) and timely filed, taking into account all valid extensions of time to file, (i) all Tax Returns of the Transferred Companies that are due on or before the Closing Date and (ii) all consolidated, unitary, combined or similar Tax Returns that include (x) the Transferred Companies and (y) Seller or any Affiliate of Seller (“ Consolidated Tax Returns ”) regardless of when such Tax Returns are required to be filed.  Seller shall pay or cause to be paid all Taxes shown to be due on Tax Returns that it is responsible for preparing and filing under this Section 8.2(a).  Seller shall provide to Buyer a pro-forma copy of the Tax Return of the Transferred Companies prepared on a stand-alone basis as described in the preceding sentences within a reasonable time (but in no event any later than 30 days) after the Consolidated Tax Returns have been filed.
(b)      Seller shall cause to be prepared (i) all income Tax Returns for the Transferred Companies for the taxable periods that end on or before the Closing Date that are due after the Closing Date and that are not described in Section 8.2(a) (“ Separate Income Tax Returns ”) and (ii) all other Tax Returns of the Transferred Companies for the taxable periods that end on or before the Closing Date that are due within 45 days of the Closing Date. Each Separate Income Tax Return prepared by Seller shall be submitted to Buyer at least 30 days prior to the due date of such Tax Return for Buyer’s approval, which approval shall not be unreasonably withheld, conditioned or delayed. Buyer shall cause the Transferred Companies to file each such Tax Return, subject to Section 8.2(d). All such Separate Income Tax Returns and Tax Returns described in clause (i) of Section 8.2(a) shall be prepared in a manner consistent with the positions taken, and with the accounting methods used, on the Tax Returns filed by or with respect to the appropriate Transferred Company prior to the date on which the Closing occurs, unless otherwise required by Applicable Law or agreed by Seller and Buyer.
(c)      Buyer shall prepare and timely file, or cause to be prepared and timely filed, Tax Returns for each of the Transferred Companies for any Pre-Closing Tax Period to the extent not governed by Section 8.2(a) or Section 8.2(b), including the relevant portion of any Straddle Period. Such Tax Returns shall be prepared in a manner consistent with the positions taken, and with the accounting methods used, on the Tax Returns filed by or with respect to the appropriate Transferred Company prior to the date on which the Closing occurs, unless otherwise required by Applicable Law or agreed by Seller and Buyer. Buyer shall deliver any such Tax Return to Seller at least 30 days (or, in the case of premium tax returns, 10 days) prior to the date such Tax Return is required to be filed for Seller’s approval, which shall not be unreasonably withheld, conditioned or delayed. To the extent consistent with Applicable Law, Buyer shall, or shall cause each of the Transferred Companies to, file all Tax Returns for any Straddle Period on the basis that the relevant Tax period ended as of the Closing Date, unless the relevant Tax authority will not accept a Tax Return filed on that basis.
(d)      If Buyer or Seller objects to any item on any Tax Return provided to it for its approval, it shall, within fifteen days after delivery of such Tax Return, notify the other party responsible for preparation of such Tax Return in writing that it so objects, specifying with particularity any such item and stating the specific factual or legal basis for any such objection. If a notice of objection is duly delivered, Buyer and Seller shall negotiate in good faith and use their reasonable best efforts to resolve such items. In the event of any disagreement that cannot be resolved between Buyer and Seller, such disagreement shall be resolved by the Independent Accounting Firm, and any such determination by the Independent Accounting Firm shall be final. The fees and expenses of the Independent Accounting Firm shall be borne equally by Buyer and Seller. If the Independent Accounting Firm does not resolve any differences between Seller and Buyer with respect to such Tax Return at least five days prior to the due date therefor, such Tax Return shall be filed as prepared by the relevant party and amended to reflect the Independent Accounting Firm’s resolution.
(e)      Buyer shall prepare and timely file, or cause the Transferred Companies to prepare and timely file, all Tax Returns required to be filed by or with respect to each Transferred Company for any Tax period beginning after the Closing Date.
(f)      Except to the extent otherwise required by Applicable Law, neither Seller nor Buyer shall, and shall not permit any of its Affiliates to, without the prior written consent of the other party, which consent may not be unreasonably withheld, conditioned or delayed, amend any Tax Returns of or with respect to the Transferred Companies relating in whole or in part to a Pre-Closing Tax Period in a manner that would reasonably be expected to adversely affect the other party or its Affiliates.
SECTION 8.3.      Tax Refunds . Any Tax refund, whether received in cash or applied as a credit against a Tax of a Transferred Company by Buyer in a Post-Closing Tax Period (including any interest paid or credited with respect thereto by a Governmental Entity) (a “ Tax Refund ”), relating to any of the Transferred Companies for Taxes paid for any Pre-Closing Tax Period (other than to the extent such Tax Refund results from the carryback of a Tax attribute of a Transferred Company relating to a Post-Closing Tax Period) shall be property of Seller. If received by Buyer or any of the Transferred Companies, Buyer shall, or shall cause such Transferred Company to, pay such Tax Refund promptly to Seller, net of any Tax cost to Buyer or any of its Affiliates attributable to the receipt of such refund and any reasonable costs or expenses with respect thereto. In the event that any such Tax Refund is subsequently contested by any Tax authority, such contest shall be handled in accordance with the procedures in Section 8.1. Any additional Taxes resulting from the contest shall be indemnified in accordance with Section 8.1. All other Tax Refunds relating to the Transferred Companies shall be the property of Buyer, and if received by Seller or its Affiliates, Seller shall, or shall cause its Affiliates to, pay such Tax Refund promptly to Buyer, net of any Tax cost to Seller or any of its Affiliates attributable to the receipt of such refund and any reasonable costs or expenses with respect thereto.
SECTION 8.4.      Cooperation and Exchange of Information . Seller and Buyer shall provide each other with such cooperation and information as either of them or their respective Affiliates reasonably may request of the other in filing any Tax Return, amended Tax Return or claim for Tax Refund, determining a liability for Taxes or a right to a Tax Refund, or participating in or conducting any contest in respect of Taxes. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by Tax authorities. Each party and its Affiliates shall make its employees available on a basis mutually convenient to both parties to provide explanations of any documents or information provided hereunder. Any party making a request for cooperation pursuant to this Section 8.4 shall reimburse the party providing such cooperation for its reasonable out-of-pocket expense occasioned by the provision of such cooperation. Each of Seller and Buyer shall retain all Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Transferred Companies for each Tax period first ending after the Closing Date and for all prior Tax periods until the later of (i) the expiration of the statute of limitations of the Tax period to which such Tax Returns and other documents relate, without regard to extensions except to the extent notified in writing of such extensions for the respective Tax periods or (ii) three years following the due date (without extension) for such Tax Returns. Notwithstanding the foregoing, Seller shall not be required to deliver any such documents that relate to any Consolidated Tax Return with respect to any Pre-Closing Tax Period, other than the portions thereof that relate solely to the Transferred Companies. Any information obtained under this Section 8.4 shall be kept confidential except as otherwise may be necessary in connection with the filing of Tax Returns or claims for Tax Refunds or in conducting a contest or as otherwise may be required by Applicable Law or the rules of any stock exchange.
SECTION 8.5.      Conveyance Taxes . Buyer or Seller, as appropriate, shall execute and deliver all instruments and certificates necessary to enable the other to comply with any filing requirements relating to any real property transfer or sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees and any similar Taxes (“ Conveyance Taxes ”) which become payable in connection with the purchase of Shares by Buyer or the consummation of any of the other transactions contemplated by this Agreement and shall file such applications and documents as shall permit any Conveyance Taxes to be assessed and paid. Any Conveyance Taxes incurred in connection with the consummation of the transactions contemplated by this Agreement (other than the Dividend) shall be shared equally by Buyer and Seller.
SECTION 8.6.      Tax Covenants .
(a)      All Tax sharing agreements and arrangements between Seller or any of its Affiliates (other than the Transferred Companies), on the one hand, and any of the Transferred Companies, on the other hand, shall be terminated as of the day before the Closing Date and none of the Transferred Companies shall thereafter be bound thereby or have any liability thereunder.
(b)      To the extent permitted by Applicable Law, none of Buyer or any of the Transferred Companies shall carry back losses, credits and similar items of any of the Transferred Companies from any Straddle Period or other period ending after the Closing Date to any period ending on or before the Closing Date.
(c)      Neither Buyer nor any Transferred Company shall make, change or revoke any material election related to Taxes with retroactive effect with respect to a Pre-Closing Tax Period, except as may be required under Applicable Law.
(d)      The parties agree that no election under Section 338(g), Section 336(e) or Section 338(h)(l0) of the Code in respect of any of the Transferred Companies shall be made in connection with the transactions contemplated by this Agreement.
(e)      Notwithstanding anything to the contrary in this Agreement, Seller shall make (or cause to be made) a timely and valid election pursuant to Treasury Regulations Section 1.1502-36(d)(6)(i)(A) in a form reasonably acceptable to Buyer to reduce Seller’s tax basis in the Shares (and, if applicable, an interest in any other Transferred Company) in an amount equal to Seller’s Net Loss on the sale of such interests (if any). For purposes of this paragraph, the “Net Loss” shall mean the “attribute reduction amount,” if any, within the meaning of Treasury Regulation Section 1.1502-36(d)(3), arising on the sale of the Shares to Buyer (or such other interest in a Transferred Company, as applicable) that, in the absence of an election under Treasury Regulations Section 1.1502-36(d)(6)(i)(A), would reduce Underlying Attributes of any of the Transferred Companies. For this purpose, an Underlying Attribute is an attribute of GTIH (and, if applicable, an interest in any other Transferred Company) described in Treasury Regulations Section 1.1502-36(d)(4). Seller shall not make (and shall cause its Affiliates not to make) an election pursuant to Treasury Regulations Section 1.1502-36(d)(6)(i)(B) or (C) to reattribute any of the GTIH or other Transferred Company’s tax attributes to Seller or any of its Affiliates.
SECTION 8.7.      Miscellaneous .
(a)      Seller and Buyer agree to treat all payments (other than interest on a payment) made by either of them to or for the benefit of the other or the other’s Affiliates or the Transferred Companies under this Article VIII and under other indemnity provisions of this Agreement as adjustments to the Purchase Price for Tax purposes and that such treatment shall govern for purposes hereof to the extent permissible under Applicable Law.
(b)      Notwithstanding any provision in this Agreement to the contrary, the obligations of Seller and WIMC to indemnify and hold harmless the Buyer Indemnified Persons pursuant to this Article VIII shall terminate on the later of 90 days after the expiration of the applicable statute of limitations (taking into account any applicable extensions or tollings thereof) with respect to the Tax liabilities in question or 60 days after the final administrative or judicial determination of such Tax liabilities, except for any indemnity obligations as to which a claim has been made before the expiration of the applicable period.
(c)      Notwithstanding anything to the contrary in this Agreement, indemnification for any and all Tax matters and the procedures with respect thereto shall be governed exclusively by this Article VIII and shall not be governed by the provisions of Article VII (except for Section 7.1(a), the proviso at the end of Section 7.3(a), Section 7.4 and Section 7.8(b)).
(d)      Should it be necessary, equitable adjustments will be made to prevent duplicate recovery for indemnification with respect to the same item.
ARTICLE IX.     
TERMINATION PRIOR TO CLOSING
SECTION 9.1.      Termination of Agreement . This Agreement may be terminated at any time prior to the Closing:
(a)      by Seller or Buyer in writing, if there shall be any order, injunction or decree of any Governmental Entity or GSE that prohibits or restrains any party from consummating the transactions contemplated hereby, and such order, injunction or decree shall have become final and non-appealable; provided that the party seeking to terminate this Agreement pursuant to this Section 9.1(a) shall have performed in all material respects its obligations under this Agreement, acted in good faith and, if binding on such party, used commercially reasonable efforts to prevent the entry of, and to remove, such order, injunction or decree in accordance with its obligations under this Agreement;
(b)      by Seller or Buyer in writing, if the Closing has not occurred on or prior to the date that is nine months after the date of this Agreement, unless due to the failure of the party seeking to terminate this Agreement materially to perform each of its obligations under this Agreement required to be performed by it on or prior to the Closing Date;
(c)      by either Seller or Buyer in writing, if a breach of any provision of this Agreement that has been committed by the other party would cause the failure of any mutual condition to Closing or any condition to Closing for the benefit of the non-breaching party and such breach is not capable of being cured or is not cured within 20 calendar days after the breaching party receives written notice from the non-breaching party that the non-breaching party intends to terminate this Agreement pursuant to this ‎Section 9.1(c); or
(d)      at any time on or prior to the Closing Date, by mutual written consent of Seller and Buyer.
SECTION 9.2.      Survival . If this Agreement is terminated as permitted by ‎Section 9.1, and the transactions contemplated hereby are not consummated as described above, this Agreement shall become null and void and of no further force and effect without liability of either party (or any Representative of such party) to the other party to this Agreement, except for (a) the provisions of Section 4.3(d), this ‎Section 9.2 and Article X and (b) rights and obligations arising from any intentional breach of this Agreement prior to such termination.
ARTICLE X.     
GENERAL PROVISIONS
SECTION 10.1.      Fees and Expenses . Except as otherwise expressly provided herein, (a) Seller and WIMC shall pay the Seller Transaction Expenses on or prior to the Closing; (b) WIMC shall cause GTIA to pay the amounts contemplated by the retention agreements set forth in Section 10.1 of the Disclosure Schedule at or prior to the Closing; (c) Buyer shall pay for its own fees, expenses, costs or charges as a result of the contemplation, negotiation, efforts to consummate or consummation of the transactions contemplated by the Transaction Documents, including any fees and expenses of its investment bankers, attorneys, accountants or other advisors; and (d) Buyer shall pay for any filing fees for the notification and form under the HSR Act.
SECTION 10.2.      Notices . All notices, requests, consents, claims, demands and other communications to be given or delivered under or by reason of this Agreement shall be in writing and shall be deemed to be given or delivered (a) when personally delivered or (b) the day following the day (except if not a Business Day, then the next Business Day) on which the same has been sent by overnight courier (providing proof of delivery), to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
(a)      if to Buyer:
Insureco, Incorporated
C/O Assurant, Inc.
28 Liberty Street, Floor 41
New York, NY 10005
Attention: Lila Subramanian, M&A Counsel
E-mail: lila.subramanian@assurant.com
with a copy (which shall not constitute notice) to:
Clifford Chance US LLP
31 W. 52nd Street
New York, New York 10019
Attention: Gary D. Boss
Telecopy: (212) 878-8375
E-mail: gary.boss@cliffordchance.com
(b)      if to Buyer Parent:
Interfinancial, Inc.
C/O Assurant, Inc.
28 Liberty Street, Floor 41
New York, NY 10005
Attention: Lila Subramanian, M&A Counsel
E-mail: lila.subramanian@assurant.com
with a copy (which shall not constitute notice) to:
Clifford Chance US LLP
31 W. 52nd Street
New York, New York 10019
Attention: Gary D. Boss
Telecopy: (212) 878-8375
E-mail: gary.boss@cliffordchance.com
(c)      if to Seller:
Green Tree Credit Solutions
3000 Bayport Drive, Suite 1100
Tampa, FL 33607
Attention: President Ditech Financial Services
(d)      if to WIMC:
Walter Investment Management Corp.
3000 Bayport Drive, Suite 1100
Tampa, FL 33607
Attention: General Counsel
For both Seller and WIMC provide a copy (which shall not constitute notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attention: Robert S. Rachofsky
Any party may, by notice given in accordance with this Section 10.2 to the other parties, designate another address or person for receipt of notices hereunder, provided that notice of such a change shall be effective upon receipt.
SECTION 10.3.      Interpretation . When a reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. Any fact or item disclosed in any section of the Disclosure Schedule or the Buyer Disclosure Schedule shall be deemed disclosed in all other sections of the Disclosure Schedule or the Buyer Disclosure Schedule to the extent the applicability of such fact or item to such other section of the Disclosure Schedule or the Buyer Disclosure Schedule respectively is reasonably apparent. Disclosure of any item in the Disclosure Schedule or the Buyer Disclosure Schedule shall not be deemed an admission that such item represents a material item, fact, exception of fact, event or circumstance or that occurrence or non-occurrence of any change or effect related to such item would reasonably be expected to result in a Material Adverse Effect. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References to the “transactions contemplated by this Agreement,” the “transactions contemplated hereby” and similar expressions shall include the Dividend. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Whenever the singular is used herein, the same shall include the plural, and whenever the plural is used herein, the same shall include the singular, where appropriate. This Agreement has been fully negotiated by the parties hereto and shall not be construed by any Governmental Entity against either party by virtue of the fact that such party was the drafting party.
SECTION 10.4.      Entire Agreement; Third-Party Beneficiaries . This Agreement (including all exhibits and schedules hereto) and the other Transaction Documents constitute the entire agreement, and supersede all prior agreements, understandings, representations and warranties, both written and oral, among the parties with respect to the subject matter of this Agreement. Except as set forth in (i) Section 4.13 with respect to Affiliates of Seller, (ii) Articles VII and VIII with respect to the Buyer Indemnified Persons and the Seller Indemnified Persons and (iii) Section 10.10 with respect to Affiliates of Buyer, this Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies.
SECTION 10.5.      Governing Law . This Agreement and any dispute arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.
SECTION 10.6.      Assignment . Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise (other than following the Closing by operation of law in a merger), by any of the parties without the prior written consent of each of the parties hereto, and any such assignment that is not consented to shall be null and void, except that Buyer may assign any or all of its rights, interests and obligations under this Agreement to an Affiliate provided that any such Affiliate agrees in writing to be bound by all of the terms, conditions and provisions contained in this Agreement, but no such assignment shall relieve Buyer of its obligations under this Agreement if such assignee does not perform such obligations; provided further that Seller may reasonably object to such assignment by Buyer to an Affiliate if such assignment would reasonably be expected to have an adverse effect, in which event Seller’s consent for such assignment shall be required (such consent not to be unreasonably withheld, conditioned or delayed). Without limiting the generality of the foregoing, if requested by Buyer, Seller agrees to cause the Shares or any portion thereof at Closing to be transferred to any Person that Buyer may direct. Subject to the foregoing, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
SECTION 10.7.      Jurisdiction; Enforcement .
(a)      Each of the parties hereto hereby irrevocably and unconditionally submits to the exclusive jurisdiction of the Supreme Court of the State of New York in New York County, Commercial Part, or any court of the United States which is located in the State of New York (each, a “ New York Court ”) for purposes of enforcing this Agreement or determining any claim arising from or related to the transactions contemplated by this Agreement. In any such action, suit or other proceeding, each of the parties hereto irrevocably and unconditionally waives and agrees not to assert by way of motion, as a defense or otherwise any claim that it is not subject to the jurisdiction of any such New York Court, that such action, suit or other proceeding is not subject to the jurisdiction of any such New York Court, that such action, suit or other proceeding is brought in an inconvenient forum or that the venue of such action, suit or other proceeding is improper; provided , that nothing set forth in this sentence shall prohibit any of the parties hereto from removing any matter from one New York Court to another New York Court. Each of the parties hereto also agrees that any final and unappealable judgment against a party hereto in connection with any action, suit or other proceeding will be conclusive and binding on such party and that such award or judgment may be enforced in any court of competent jurisdiction, either within or outside of the United States. A certified or exemplified copy of such award or judgment will be conclusive evidence of the fact and amount of such award or judgment. Any process or other paper to be served in connection with any action or proceeding under this Agreement shall, if delivered or sent in accordance with Section 10.2 of this Agreement, constitute good, proper and sufficient service thereof. Notwithstanding this Section 10.7(a), the determination of the Final Payment shall be made as set forth in Section 2.5.
(b)      The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that, without the necessity of posting bond or other undertaking, the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Agreement, this being in addition (subject to the terms of this Agreement) to any other remedy to which such party is entitled at law or in equity. In the event that any Action is brought in equity to enforce the provisions of this Agreement, no party hereto shall allege, and each party hereto hereby waives any defense or counterclaim, that there is an adequate remedy at law.
(c)      EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.7.
SECTION 10.8.      Severability; Amendment; Waiver .
(a)      Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
(b)      This Agreement may be amended, supplemented or modified only by a written instrument signed by each of Buyer and Seller. No provision of this Agreement may be waived except by a written instrument signed by the party against whom the waiver is to be effective.
(c)      No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege.
SECTION 10.9.      Certain Limitations . Buyer acknowledges and agrees that neither Seller nor any of its Affiliates (including the Companies), nor any Representative of any of them, makes or has made, and Buyer has not relied on, any inducement or promise to Buyer except as specifically made in this Agreement or any certificates delivered pursuant hereto or any other Transaction Documents or any representation or warranty to Buyer, oral or written, express or implied, other than as expressly set forth in ‎this Agreement or any certificates delivered pursuant hereto or any other Transaction Documents. Without limiting the generality of the foregoing, other than as expressly set forth in this Agreement or any certificates delivered pursuant hereto or any other Transaction Documents, no Person has made any representation or warranty to Buyer with respect to the Companies, the Shares or any other matter, including with respect to (A) merchantability, suitability or fitness for any particular purpose, (B) the operation of the Transferred Companies or Business by Buyer after the Closing, (C) the probable success or profitability of the Transferred Companies or Business after the Closing or (D) any information, documents or material made available to Buyer, its Affiliates or their respective Representatives in any “data rooms,” information memoranda, management presentations, functional “break-out” discussions or in any other form or forum in connection with the transactions contemplated by this Agreement, including any estimation, valuation, appraisal, projection or forecast with respect to all or any of the Companies. With respect to any such estimation, valuation, appraisal, projection or forecast, Buyer acknowledges that: (A) there are uncertainties inherent in attempting to make such estimations, valuations, appraisals, projections and forecasts; (B) it is familiar with such uncertainties; (C) it is not acting and has not acted in reliance on any such estimation, valuation, appraisal, projection or forecast delivered by or on behalf of Seller to Buyer; and (D) it shall have no claim against any Person with respect to any such estimation, valuation, appraisal, projection or forecast.
SECTION 10.10.      Offset . Each party may offset any amounts payable by such party or any of its Affiliates pursuant to the terms of any other Transaction Documents to the other party or its Affiliates against any amounts due to the first party or any of its Affiliates pursuant to the terms of this Agreement or any other Transaction Documents from the other party or its Affiliates; provided that (a) such amount due is not reasonably disputed, (b) such first party has provided such other party with notice that it intends to exercise its offset right pursuant to this Section 10.10 and (c) such other party or any of its Affiliates has failed to pay to such first party such amount due within a reasonable period of time after receipt of such notice.  For the avoidance of doubt, any premiums owed to Buyer or any of its Affiliates pursuant to the Services Agreement may not be withheld by Seller or its Affiliates for purposes of this Section 10.10, which Section shall survive termination of this Agreement.
SECTION 10.11.      Counterparts . This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other party. Each party may deliver its signed counterpart of this Agreement to the other party by means of electronic mail or any other electronic medium utilizing image scan technology, and such delivery will have the same legal effect as hand delivery of an originally executed counterpart.
SECTION 10.12.      Buyer Parent Undertaking . Buyer Parent hereby fully, irrevocably and unconditionally guarantees the full, complete and timely performance of all agreements, covenants and obligations of Buyer under this Agreement, including all payment obligations of Buyer arising in connection with this Agreement, in each case, when and to the extent that any of the same shall become due and payable or performance of the same shall be required in accordance with the terms of this Agreement. Buyer Parent’s guaranty constitutes a guaranty of performance and payment when due and not of collection and is not conditional or contingent upon any attempt to obtain performance by or to collect from, or pursue or exhaust any rights or remedies against, Buyer or any other condition or contingency. Buyer Parent waives all defenses that would otherwise be available to a surety or guarantor.
[ Remainder of page intentionally left blank ]

IN WITNESS WHEREOF, Seller, WIMC, Buyer and Buyer Parent have caused this Agreement to be signed by their respective duly authorized officers, all as of the date first written above.

GREEN TREE CREDIT SOLUTIONS LLC


By:      /s/ Cheryl Collins            
Name: Cheryl Collins
Title: Senior Vice President & Treasurer


WALTER INVESTMENT MANAGEMENT CORPORATION


By:      /s/ Stuart D. Boyd            
Name: Stuart D. Boyd
Title: SVP & Deputy General Counsel


INSURECO, INCORPORATED



By:      /s/ Gene Mergelmeyer        
Name: Gene Mergelmeyer
Title: President


INTERFINANCIAL, INC.,
solely with respect to Article X



By:      /s/ Richard Dziadzio        
Name: Richard Dziadzio
Title: President

iii


EXHIBIT A
BROKER AGREEMENT

EXHIBIT B
MARKETING SERVICES AGREEMENT

EXHIBIT C
SERVICES AGREEMENT

EXHIBIT D
SUBLEASE AGREEMENT

EXHIBIT E
ASSURTRACK SERVICES AGREEMENT

EXHIBIT F
TRUST AGREEMENT

EXHIBIT G
VOLUNTARY INSURANCE PLACEMENT AGREEMENT

EXHIBIT H
PRICEWATERHOUSECOOPERS OPINION

EXHIBIT I
EARNOUT EXAMPLE CALCULATION



EXHIBIT 31.1
CERTIFICATION BY ANTHONY N. RENZI
PURSUANT TO SECURITIES EXCHANGE ACT RULE 13A-14(a),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Anthony N. Renzi, certify that:
1. I have reviewed this Annual Report on Form 10-K of Walter Investment Management Corp. (the “Registrant”) for the period ended December 31, 2016 (the “Report”);
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
d) disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
 
 
/s/ Anthony N.Renzi
Anthony N. Renzi
Chief Executive Officer and President
Date: August 9, 2017



EXHIBIT 31.2
CERTIFICATION BY GARY L. TILLETT
PURSUANT TO SECURITIES EXCHANGE ACT RULE 13A-14(a),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gary L. Tillett, certify that:
1. I have reviewed this Annual Report on Form 10-K of Walter Investment Management Corp. (the “Registrant”) for the period ended December 31, 2016 (the “Report”);
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
d) disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
 
 
/s/ Gary L. Tillett
Gary L. Tillett
Executive Vice President and Chief Financial Officer
Date: August 9, 2017





EXHIBIT 32
WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
Anthony N. Renzi, Chief Executive Officer and President, and Gary L. Tillett, Executive Vice President and Chief Financial Officer, of Walter Investment Management Corp. (the “Company”), each certify to such officer’s knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 that:
1. The Annual Report on Form 10-K of the Company for the period ended December 31, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
 
 
 
Date: August 9, 2017
By:
 
/s/ Anthony N. Renzi
 
 
 
Anthony N. Renzi
 
 
 
Chief Executive Officer and President
 
 
 
 
Date: August 9, 2017
By:
 
/s/ Gary L. Tillett
 
 
 
Gary L. Tillett
 
 
 
Executive Vice President and Chief Financial Officer