WALTER INVESTMENT MANAGEMENT CORP (Form: 10-Q/A, Received: 08/09/2017 16:44:41)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

_______________________________________________________________________________________

Form 10-Q/A

_______________________________________________________________________________________



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016



o	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)

(844) 714-8603

(Registrant's telephone number, including area code)

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 x No o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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	o	Accelerated filer	x

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	o

		Emerging growth company	o

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 Exchange Act). Yes o No x

The registrant had 36,322,483 shares of common stock outstanding as of November 4, 2016 .

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EXPLANATORY NOTE

Certain acronyms and terms used throughout this Form 10-Q/A are defined in the Glossary of Terms located at the end of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Walter Investment Management Corp. is amending its Quarterly Report on Form 10-Q for the nine months ended September 30, 2016 (hereinafter referred to as the Original Filing and, as amended, the Amended Filing), and separately amending its Annual Report on Form 10-K for the year ended December 31, 2016 as well as its Quarterly Reports on Form 10-Q for the quarterly periods ended June 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. Further, as discussed in Note 2 to the Consolidated Financial Statements, the Company has also revised the amended quarterly reports for 2016 to include immaterial corrections of errors in its consolidated balance sheets related to insurance related receivables and payables.

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 nine months ended September 30, 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 $369.0 million higher than what was originally recorded and reduced the deferred tax assets, net to $56.9 million from $425.9 million at September 30, 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 and a corresponding increase in accumulated deficit of approximately $369.0 million as of September 30, 2016 . Net loss increased for the nine months ended September 30, 2016 by $369.0 million , which increased the loss per share by $10.30 .

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 a material weakness in internal controls over financial reporting as of September 30, 2016 . Refer to Item 9A in this Amended Filing for management's revised conclusions related to internal controls over financial reporting as of September 30, 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.

As disclosed in Note 2 to the Consolidated Financial Statements, in light of the Company’s need to restate the aforementioned financial statements, the Company received waivers from each of its warehouse and advance facility lenders, and from the requisite holders of its term loans and senior unsecured notes to the extent necessary to waive any default, event of default, amortization event, termination event or similar event resulting or arising from the restatement.

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-Q/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 September 30, 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 1, 2 and 4 of Part I, and Items 1A and 6 of Part II 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 Consolidated 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-Q/A

INDEX



		Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (As Restated)		5
Consolidated Balance Sheets as of September 30, 2016 (As Restated) (unaudited) and December 31, 2015		5
Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2016 (As Restated) (unaudited) and 2015 (unaudited)		7
Consolidated Statement of Stockholders' Equity (Deficit) for the Nine Months Ended September 30, 2016 (As Restated) (unaudited)		8
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 (As Restated) (unaudited) and 2015 (unaudited)		9
Notes to Consolidated Financial Statements (As Restated) (unaudited)		11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (As Restated)		64
Item 3. Quantitative and Qualitative Disclosures About Market Risk		121
Item 4. Controls and Procedures (As Restated)		123

PART II. OTHER INFORMATION
Item 1. Legal Proceedings		125
Item 1A. Risk Factors (As Restated)		126
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		132
Item 3. Defaults Upon Senior Securities		132
Item 4. Mine Safety Disclosures		132
Item 5. Other Information		132
Item 6. Exhibits		132
Signatures		133

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (As Restated, See Note 2)

(in thousands, except share and per share data)



	September 30, 2016			December 31, 2015
	(Restated)			(Restated)
	(unaudited)
ASSETS
Cash and cash equivalents	$	285,682		$	202,828
Restricted cash and cash equivalents	300,268			708,099
Residential loans at amortized cost, net (includes $3,224 and $4,457 in allowance for loan losses at September 30, 2016 and December 31, 2015, respectively)	616,936			541,406
Residential loans at fair value	12,640,302			12,673,439
Receivables, net (includes $15,010 and $16,542 at fair value at September 30, 2016 and December 31, 2015, respectively)	138,345			137,190
Servicer and protective advances, net (includes $124,055 and $120,338 in allowance for uncollectible advances at September 30, 2016 and December 31, 2015, respectively)	1,299,913			1,631,065
Servicing rights, net (includes $1,195,014 and $1,682,016 at fair value at September 30, 2016 and December 31, 2015, respectively)	1,284,543			1,788,576
Goodwill	65,302			367,911
Intangible assets, net	68,075			84,038
Premises and equipment, net	94,586			106,481
Deferred tax assets, net	56,875			108,050
Other assets (includes $80,435 and $58,512 at fair value at September 30, 2016 and December 31, 2015, respectively)	255,259			200,364
Total assets	$	17,106,086		$	18,549,447

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Payables and accrued liabilities (includes $18,522 and $6,475 at fair value at September 30, 2016 and December 31, 2015, respectively)	$	730,628		$	597,926
Servicer payables	141,422			603,692
Servicing advance liabilities	1,023,770			1,229,280
Warehouse borrowings	1,362,209			1,340,388
Servicing rights related liabilities at fair value	119,267			117,000
Corporate debt	2,124,541			2,157,424
Mortgage-backed debt (includes $529,373 and $582,340 at fair value at September 30, 2016 and December 31, 2015, respectively)	970,065			1,051,679
HMBS related obligations at fair value	10,699,720			10,647,382
Total liabilities	17,171,622			17,744,771
Commitments and contingencies (Note 17)
Stockholders' equity (deficit):
Preferred stock, $0.01 par value per share:
Authorized - 10,000,000 shares
Issued and outstanding - 0 shares at September 30, 2016 and December 31, 2015	—			—
Common stock, $0.01 par value per share:
Authorized - 90,000,000 shares
Issued and outstanding - 36,311,037 and 35,573,405 shares at September 30, 2016 and December 31, 2015, respectively	363			355
Additional paid-in capital	597,139			591,454
Retained earnings (accumulated deficit)	(663,878		)	212,054
Accumulated other comprehensive income	840			813
Total stockholders' equity (deficit)	(65,536		)	804,676
Total liabilities and stockholders' equity (deficit)	$	17,106,086		$	18,549,447

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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.



	September 30, 2016		December 31, 2015
ASSETS OF CONSOLIDATED VARIABLE INTEREST ENTITIES THAT CAN ONLY BE USED TO SETTLE THE OBLIGATIONS OF CONSOLIDATED VARIABLE INTEREST ENTITIES:	(unaudited)
Restricted cash and cash equivalents	$	123,934	$	59,705
Residential loans at amortized cost, net	475,693		500,563
Residential loans at fair value	538,567		526,016
Receivables	15,888		16,542
Servicer and protective advances, net	894,546		1,136,246
Other assets	29,884		12,170
Total assets	$	2,078,512	$	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	$	3,223	$	3,435
Servicing advance liabilities	866,898		992,769
Mortgage-backed debt (includes $529,373 and $582,340 at fair value at September 30, 2016 and December 31, 2015, respectively)	970,065		1,051,679
Total liabilities	$	1,840,186	$	2,047,883

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

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WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (As Restated, See Note 2)

(Unaudited)

(in thousands, except per share data)



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
	(Restated)						(Restated)
REVENUES
Net servicing revenue and fees	$	111,629		$	(1,771	)	$	37,803		$	313,031
Net gains on sales of loans	122,014			116,218			306,667			360,844
Net fair value gains on reverse loans and related HMBS obligations	18,627			52,644			61,485			90,233
Interest income on loans	11,332			12,410			35,352			62,537
Insurance revenue	10,000			8,763			31,644			34,323
Other revenues	23,728			31,129			78,623			81,715
Total revenues	297,330			219,393			551,574			942,683

EXPENSES
General and administrative	151,792			132,067			417,174			402,814
Salaries and benefits	133,199			142,088			399,519			432,473
Goodwill and intangible assets impairment	97,716			—			313,128			56,539
Interest expense	65,302			66,728			193,950			210,264
Depreciation and amortization	16,580			20,646			45,543			53,371
Other expenses, net	1,206			2,595			5,609			8,043
Total expenses	465,795			364,124			1,374,923			1,163,504

OTHER GAINS (LOSSES)
Net gains on extinguishment	13,734			—			14,662			—
Other net fair value gains (losses)	(3,302		)	1,119			(6,265		)	3,573
Other	(150		)	12,054			(1,706		)	21,013
Total other gains	10,282			13,173			6,691			24,586

Loss before income taxes	(158,183		)	(131,558		)	(816,658		)	(196,235		)
Income tax expense (benefit)	55,084			(54,630		)	59,274			(50,180		)
Net loss	$	(213,267	)	$	(76,928	)	$	(875,932	)	$	(146,055	)

Comprehensive loss	$	(213,281	)	$	(76,793	)	$	(875,905	)	$	(145,804	)

Net loss	$	(213,267	)	$	(76,928	)	$	(875,932	)	$	(146,055	)

Basic and diluted loss per common and common equivalent share	$	(5.90	)	$	(2.04	)	$	(24.45	)	$	(3.87	)

Weighted-average common and common equivalent shares outstanding — basic and diluted	36,144			37,802			35,828			37,760

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

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WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) (As Restated, See Note 2)

(Unaudited)

(in thousands, except share data)



	Common Stock			Additional Paid- In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income
	Shares	Amount		Additional Paid- In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income		Total
							(Restated)					(Restated)
Balance at January 1, 2016	35,573,405	$	355	$	591,454		$	212,054		$	813	$	804,676
Net loss (As Restated)	—	—		—			(875,932		)	—		(875,932		)
Other comprehensive income, net of tax	—	—		—			—			27		27
Share-based compensation	—	—		7,656			—			—		7,656
Tax shortfall on share-based compensation	—	—		(1,251		)	—			—		(1,251		)
Share-based compensation issuances, net	737,632	8		(720		)	—			—		(712		)
Balance at September 30, 2016	36,311,037	$	363	$	597,139		$	(663,878	)	$	840	$	(65,536	)

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

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WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (As Restated, See Note 2)

(Unaudited)

(in thousands)



	For the Nine Months Ended September 30,
	2016			2015
	(Restated)			(Restated)
Operating activities
Net loss	$	(875,932	)	$	(146,055	)

Adjustments to reconcile net loss to net cash provided by operating activities
Net fair value gains on reverse loans and related HMBS obligations	(61,485		)	(90,233		)
Amortization of servicing rights	13,058			20,634
Change in fair value of servicing rights	600,109			353,023
Change in fair value of servicing rights related liabilities	(8,486		)	107
Change in fair value of charged-off loans	(17,781		)	(16,294		)
Other net fair value losses	11,666			3,483
Accretion of discounts on residential loans and advances	(2,739		)	(6,301		)
Accretion of discounts on debt and amortization of deferred debt issuance costs	25,615			24,063
Provision for uncollectible advances	30,775			39,278
Depreciation and amortization of premises and equipment and intangible assets	45,543			53,371
Provision (benefit) for deferred income taxes	49,863			(28,118		)
Share-based compensation	7,656			14,345
Purchases and originations of residential loans held for sale	(15,553,394		)	(20,158,426		)
Proceeds from sales of and payments on residential loans held for sale	15,861,355			20,165,907
Proceeds from sale of trading security	—			70,390
Net gains on sales of loans	(306,667		)	(360,844		)
Gain on sale of trading security	—			(10,296		)
Gain on sale of investments	—			(8,959		)
Goodwill and intangible assets impairment	313,128			56,539
Other	(5,940		)	246

Changes in assets and liabilities
Increase in receivables	(7,279		)	(37,680		)
Decrease in servicer and protective advances	309,093			211,349
Decrease (increase) in other assets	(82,724		)	9,396
Increase (decrease) in payables and accrued liabilities	9,625			(50,291		)
Increase in servicer payables, net of change in restricted cash	20,113			5,880
Cash flows provided by operating activities	375,172			114,514

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

	For the Nine Months Ended September 30,
	2016			2015
	(Restated)
Investing activities
Purchases and originations of reverse loans held for investment	(653,471		)	(1,259,927		)
Principal payments received on reverse loans held for investment	770,636			618,446
Principal payments received on mortgage loans held for investment	69,238			93,062
Payments received on charged-off loans held for investment	17,827			19,859
Payments received on receivables related to Non-Residual Trusts	6,230			5,547
Proceeds from sales of real estate owned, net	81,591			56,948
Purchases of premises and equipment	(29,128		)	(16,706		)
Decrease in restricted cash and cash equivalents	9,778			7,039
Payments for acquisitions of businesses, net of cash acquired	(1,947		)	(4,737		)
Acquisitions of servicing rights, net	(7,701		)	(233,744		)
Proceeds from sales of servicing rights, net	35,541			778
Proceeds from sale of residual interests in Residual Trusts	—			189,513
Proceeds from sale of investment	—			14,376
Other	(3,665		)	7,950
Cash flows provided by (used in) investing activities	294,929			(501,596		)

Financing activities
Payments on corporate debt	(480		)	(62,544		)
Extinguishments and settlement of debt	(31,037		)	—
Proceeds from securitizations of reverse loans	684,711			1,382,359
Payments on HMBS related obligations	(958,720		)	(739,447		)
Issuances of servicing advance liabilities	1,526,733			712,307
Payments on servicing advance liabilities	(1,734,252		)	(869,110		)
Net change in warehouse borrowings related to mortgage loans	(147,389		)	142,481
Net change in warehouse borrowings related to reverse loans	169,210			(94,000		)
Proceeds from sales of servicing rights	29,742			—
Payments on servicing rights related liabilities	(16,013		)	(6,849		)
Payments on mortgage-backed debt	(80,335		)	(109,808		)
Other debt issuance costs paid	(9,260		)	(6,926		)
Other	(20,157		)	(12,955		)
Cash flows provided by (used in) financing activities	(587,247		)	335,508

Net increase (decrease) in cash and cash equivalents	82,854			(51,574		)
Cash and cash equivalents at beginning of the period	202,828			320,175
Cash and cash equivalents at end of the period	$	285,682		$	268,601

Supplemental Disclosures of Cash Flow Information
Cash paid for interest	$	190,381		$	207,495
Cash paid (received) for taxes	(28,155		)	469

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

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WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)

(Unaudited)

1. Business and Basis of Presentation

Walter Investment Management Corp. and its subsidiaries, or the Company, is a mortgage banking firm focused primarily on servicing and originating residential loans, including reverse loans. The Company services loans for its own portfolio and for GSEs, government agencies, third-party securitization trusts and other credit owners. In addition, the Company operates several other businesses that include managing a portfolio of credit-challenged, non-conforming residential mortgage loans; an insurance agency serving borrowers and credit owners of its servicing portfolio; a post charge-off collection agency; and an asset management business. The Company operates throughout the U.S.

The Company operates through three reportable segments: Servicing, Originations, and Reverse Mortgage. Refer to Note 16 for additional information.

Certain acronyms and terms throughout these notes are defined in the Glossary of Terms in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

RCS Asset Purchase Agreement

On December 8, 2015, the Company entered into an asset purchase agreement with RCS, which closed on January 28, 2016. Pursuant to the terms of the agreement, on or about the closing date, among other things: (i) the Company became obligated to purchase certain assets from, and assume certain liabilities of, RCS; (ii) the Company entered into a residential mortgage loan sub-servicing agreement with RCS pursuant to which the Company will sub-service residential mortgage loans for RCS; and (iii) RCS became obligated to transfer to the Company certain of its existing residential mortgage loan sub-servicing agreements (collectively, the sub-servicing assets). The Company gained control over the purchased assets on March 1, 2016, which is the date that the Company purchased and RCS transferred to the Company certain assets, including servicer and protective advances, and certain liabilities, including employee-related liabilities. In connection with the acquisition, the Company recorded $3.8 million in goodwill, which is included in the Servicing segment.

Interim Financial Reporting

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and related notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 . These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 .

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.

Income Taxes

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. 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.

Table of Contents

The decrease in deferred tax assets as of September 30, 2016 as compared to December 31, 2015 is 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.

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, noncash 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 and therefore will remain unchanged. However, the Company continues to evaluate certain select revenue streams for the effect that this guidance will have on its 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 update is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. The adoption of this guidance may result in additional disclosures; however, this guidance will not have a material impact on the consolidated results of operations or financial condition.

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 is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2015 with early adoption permitted. 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 is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2015 with early adoption permitted. 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. 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. The Company is currently evaluating the effect that this guidance will have on its consolidated financial statements.

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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. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2016. The Company is currently evaluating the effect that this guidance will have on its consolidated financial statements.

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 is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2016. The Company is currently evaluating the effect that this guidance will have on its 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 the adoption of this guidance will have a material impact on its consolidated financial statements.

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.

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 is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the effect that this guidance will have on its consolidated financial statements.

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.

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Based on the revised calculation and analysis, the Company concluded that the valuation allowance on the deferred tax assets should be increased by $369.0 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 Form 10-Q/A have been restated as of and for the three and nine months ended September 30, 2016 to reflect the adjustment described above. The following statements present the effect of the restatement on (i) the consolidated balance sheet as of September 30, 2016 , (ii) the consolidated statements of comprehensive loss; stockholders’ equity and cash flows for the nine months ended September 30, 2016 , and (iii) the notes related thereto. The impact to stockholders' equity is reflected below in the restated consolidated balance sheet.

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, 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 year 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 , 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 revised the Consolidated Statements of Cash Flows for the nine months ended September 30, 2015. All of the revisions were made to the changes in assets and liabilities included in cash flows provided by operating activities. For the nine months ended September 30, 2015, cash flows from the change in receivables and change in servicer and protective advances decreased by $1.0 million and $2.2 million , respectively, while cash flows from the change in payables and accrued liabilities increased by $3.2 million . Adjustments to the Company's balance sheet as of September 30, 2016 and cash flows for the nine months ended September 30, 2016 are included in the other adjustments column in the tables below.

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.

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The following table presents the consolidated balance sheet as previously reported, restatement adjustments, other adjustments, and the consolidated balance sheet as restated as of September 30, 2016 (in thousands):



	September 30, 2016 (unaudited)
	As Previously Reported			Restatement Adjustments			Other Adjustments			As Restated
ASSETS
Cash and cash equivalents	$	285,682		$	—		$	—		$	285,682
Restricted cash and cash equivalents	300,268			—			—			300,268
Residential loans at amortized cost, net	616,936			—			—			616,936
Residential loans at fair value	12,640,302			—			—			12,640,302
Receivables, net	196,939			—			(58,594		)	138,345
Servicer and protective advances, net	1,274,641			—			25,272			1,299,913
Servicing rights, net	1,284,543			—			—			1,284,543
Goodwill	65,302			—			—			65,302
Intangible assets, net	68,075			—			—			68,075
Premises and equipment, net	94,586			—			—			94,586
Deferred tax assets, net	425,878			(369,003		)	—			56,875
Other assets	255,259			—			—			255,259
Total assets	$	17,508,411		$	(369,003	)	$	(33,322	)	$	17,106,086

LIABILITIES AND STOCKHOLDERS' EQUITY
Payables and accrued liabilities	$	763,950		$	—		$	(33,322	)	$	730,628
Servicer payables	141,422			—			—			141,422
Servicing advance liabilities	1,023,770			—			—			1,023,770
Warehouse borrowings	1,362,209			—			—			1,362,209
Servicing rights related liabilities at fair value	119,267			—			—			119,267
Corporate debt	2,124,541			—			—			2,124,541
Mortgage-backed debt	970,065			—			—			970,065
HMBS related obligations at fair value	10,699,720			—			—			10,699,720
Total liabilities	17,204,944			—			(33,322		)	17,171,622

Stockholders' equity (deficit):
Preferred stock	—			—			—			—
Common stock	363			—			—			363
Additional paid-in capital	597,139			—			—			597,139
Accumulated deficit	(294,875		)	(369,003		)	—			(663,878		)
Accumulated other comprehensive income	840			—			—			840
Total stockholders' equity (deficit)	303,467			(369,003		)	—			(65,536		)
Total liabilities and stockholders' equity (deficit)	$	17,508,411		$	(369,003	)	$	(33,322	)	$	17,106,086

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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 three months ended September 30, 2016 (in thousands, except share and per share data):



	For the Three Months Ended September 30, 2016 (unaudited)
	As Previously Reported			Restatement Adjustments			As Restated
REVENUES
Net servicing revenue and fees	$	111,629		$	—		$	111,629
Net gains on sales of loans	122,014			—			122,014
Net fair value gains on reverse loans and related HMBS obligations	18,627			—			18,627
Interest income on loans	11,332			—			11,332
Insurance revenue	10,000			—			10,000
Other revenues	23,728			—			23,728
Total revenues	297,330			—			297,330

EXPENSES
General and administrative	151,792			—			151,792
Salaries and benefits	133,199			—			133,199
Goodwill and intangible assets impairment	97,716			—			97,716
Interest expense	65,302			—			65,302
Depreciation and amortization	16,580			—			16,580
Other expenses, net	1,206			—			1,206
Total expenses	465,795			—			465,795

OTHER GAINS (LOSSES)
Net gains on extinguishment	13,734			—			13,734
Other net fair value losses	(3,302		)	—			(3,302		)
Other	(150		)	—			(150		)
Total other gains	10,282			—			10,282

Loss before income taxes	(158,183		)	—			(158,183		)
Income tax expense (benefit)	(56,357		)	111,441			55,084
Net loss	$	(101,826	)	$	(111,441	)	$	(213,267	)

Comprehensive loss	$	(101,840	)	$	(111,441	)	$	(213,281	)

Basic and diluted loss per common and common equivalent share	$	(2.82	)	$	(3.08	)	$	(5.90	)
Weighted-average common and common equivalent shares outstanding — basic and diluted	36,144			—			36,144

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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 nine months ended September 30, 2016 (in thousands, except share and per share data):



	For the Nine Months Ended September 30, 2016 (unaudited)
	As Previously Reported			Restatement Adjustments			As Restated
REVENUES
Net servicing revenue and fees	$	37,803		$	—		$	37,803
Net gains on sales of loans	306,667			—			306,667
Net fair value gains on reverse loans and related HMBS obligations	61,485			—			61,485
Interest income on loans	35,352			—			35,352
Insurance revenue	31,644			—			31,644
Other revenues	78,623			—			78,623
Total revenues	551,574			—			551,574

EXPENSES
General and administrative	417,174			—			417,174
Salaries and benefits	399,519			—			399,519
Goodwill and intangible assets impairment	313,128			—			313,128
Interest expense	193,950			—			193,950
Depreciation and amortization	45,543			—			45,543
Other expenses, net	5,609			—			5,609
Total expenses	1,374,923			—			1,374,923

OTHER GAINS (LOSSES)
Net gains on extinguishment	14,662			—			14,662
Other net fair value losses	(6,265		)	—			(6,265		)
Other	(1,706		)	—			(1,706		)
Total other gains	6,691			—			6,691

Loss before income taxes	(816,658		)	—			(816,658		)
Income tax expense (benefit)	(309,729		)	369,003			59,274
Net loss	$	(506,929	)	$	(369,003	)	$	(875,932	)

Comprehensive loss	$	(506,902	)	$	(369,003	)	$	(875,905	)

Basic and diluted loss per common and common equivalent share	$	(14.15	)	$	(10.30	)	$	(24.45	)
Weighted-average common and common equivalent shares outstanding — basic and diluted	35,828			—			35,828

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The following table presents the consolidated statement of cash flows as previously reported, restatement adjustments, other adjustments, and the consolidated statement of cash flows as restated for the nine months ended September 30, 2016 (in thousands):



	For the Nine Months Ended September 30, 2016 (unaudited)
	As Previously Reported			Restatement Adjustments			Other Adjustments			As Restated
Operating activities
Net loss	$	(506,929	)	$	(369,003	)	$	—		$	(875,932	)

Adjustments to reconcile net loss to net cash provided by operating activities
Net fair value gains on reverse loans and related HMBS obligations	(61,485		)	—			—			(61,485		)
Amortization of servicing rights	13,058			—			—			13,058
Change in fair value of servicing rights	600,109			—			—			600,109
Change in fair value of servicing rights related liabilities	(8,486		)	—			—			(8,486		)
Change in fair value of charged-off loans	(17,781		)	—			—			(17,781		)
Other net fair value losses	11,666			—			—			11,666
Accretion of discounts on residential loans and advances	(2,739		)	—			—			(2,739		)
Accretion of discounts on debt and amortization of deferred debt issuance costs	25,615			—			—			25,615
Provision for uncollectible advances	30,775			—			—			30,775
Depreciation and amortization of premises and equipment and intangible assets	45,543			—			—			45,543
Provision (benefit) for deferred income taxes	(319,140		)	369,003			—			49,863
Share-based compensation	7,656			—			—			7,656
Purchases and originations of residential loans held for sale	(15,553,394		)	—			—			(15,553,394		)
Proceeds from sales of and payments on residential loans held for sale	15,861,355			—			—			15,861,355
Net gains on sales of loans	(306,667		)	—			—			(306,667		)
Goodwill and intangible assets impairment	313,128			—			—			313,128
Other	(5,940		)	—			—			(5,940		)

Changes in assets and liabilities
Decrease (increase) in receivables	11,335			—			(18,614		)	(7,279		)
Decrease in servicer and protective advances	299,211			—			9,882			309,093
Increase in other assets	(82,724		)	—			—			(82,724		)
Increase in payables and accrued liabilities	893			—			8,732			9,625
Increase in servicer payables, net of change in restricted cash	20,113			—			—			20,113
Cash flows provided by operating activities	375,172			—			—			375,172

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	For the Nine Months Ended September 30, 2016 (unaudited)
	As Previously Reported			Restatement Adjustments		Other Adjustments		As Restated
Investing activities
Purchases and originations of reverse loans held for investment	(653,471		)	—		—		(653,471		)
Principal payments received on reverse loans held for investment	770,636			—		—		770,636
Principal payments received on mortgage loans held for investment	69,238			—		—		69,238
Payments received on charged-off loans held for investment	17,827			—		—		17,827
Payments received on receivables related to Non-Residual Trusts	6,230			—		—		6,230
Proceeds from sales of real estate owned, net	81,591			—		—		81,591
Purchases of premises and equipment	(29,128		)	—		—		(29,128		)
Decrease in restricted cash and cash equivalents	9,778			—		—		9,778
Payments for acquisitions of businesses, net of cash acquired	(1,947		)	—		—		(1,947		)
Acquisitions of servicing rights, net	(7,701		)	—		—		(7,701		)
Proceeds from sales of servicing rights, net	35,541			—		—		35,541
Other	(3,665		)	—		—		(3,665		)
Cash flows provided by investing activities	294,929			—		—		294,929

Financing activities
Payments on corporate debt	(480		)	—		—		(480		)
Extinguishments and settlement of debt	(31,037		)	—		—		(31,037		)
Proceeds from securitizations of reverse loans	684,711			—		—		684,711
Payments on HMBS related obligations	(958,720		)	—		—		(958,720		)
Issuances of servicing advance liabilities	1,526,733			—		—		1,526,733
Payments on servicing advance liabilities	(1,734,252		)	—		—		(1,734,252		)
Net change in warehouse borrowings related to mortgage loans	(147,389		)	—		—		(147,389		)
Net change in warehouse borrowings related to reverse loans	169,210			—		—		169,210
Proceeds from sales of servicing rights	29,742			—		—		29,742
Payments on servicing rights related liabilities	(16,013		)	—		—		(16,013		)
Payments on mortgage-backed debt	(80,335		)	—		—		(80,335		)
Other debt issuance costs paid	(9,260		)	—		—		(9,260		)
Other	(20,157		)	—		—		(20,157		)
Cash flows used in financing activities	(587,247		)	—		—		(587,247		)

Net increase in cash and cash equivalents	82,854			—		—		82,854
Cash and cash equivalents at the beginning of the year	202,828			—		—		202,828
Cash and cash equivalents at the end of the year	$	285,682		$	—	$	—	$	285,682

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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 12, 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.

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.

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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.

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 17, 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;

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•

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.

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. Variable Interest Entities

Consolidated Variable Interest Entities

Included in Note 4 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 are descriptions of the Company’s Consolidated VIEs.

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.

During the nine months ended September 30, 2016 , the Reverse Mortgage 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 Reverse Mortgage VIEs. Refer to Note 12 for additional information.

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Included in the tables below are summaries of the carrying amounts of the assets and liabilities of consolidated VIEs (in thousands):



	September 30, 2016
	Residual Trusts		Non-Residual Trusts		Servicer and Protective Advance Financing VIEs		Reverse Mortgage VIEs		Total
Assets
Restricted cash and cash equivalents	$	13,419	$	10,993	$	99,522	$	—	$	123,934
Residential loans at amortized cost, net	475,693		—		—		—		475,693
Residential loans at fair value	—		463,620		—		74,947		538,567
Receivables	—		15,010		—		878		15,888
Servicer and protective advances, net	—		—		894,546		—		894,546
Other assets	9,505		1,370		2,606		16,403		29,884
Total assets	$	498,617	$	490,993	$	996,674	$	92,228	$	2,078,512

Liabilities
Payables and accrued liabilities	$	2,173	$	—	$	1,050	$	—	$	3,223
Servicing advance liabilities	—		—		866,898		—		866,898
Mortgage-backed debt	440,692		529,373		—		—		970,065
Total liabilities	$	442,865	$	529,373	$	867,948	$	—	$	1,840,186



	December 31, 2015
	Residual Trusts		Non-Residual Trusts		Servicer and Protective Advance Financing VIEs		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

Unconsolidated Variable Interest Entities

Included in Note 4 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 are descriptions of the Company’s variable interests in VIEs relating to servicing arrangements with an LOC reimbursement obligation and other servicing arrangements that it does not consolidate as it has determined that it is not the primary beneficiary of such VIEs. Additionally, refer to Note 19 for information on the Company's transactions with WCO.

5. 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, and in most, but not all, cases, retains the servicing rights associated with the sold loans. If the servicing rights are retained, the Company receives a servicing fee for servicing the sold loans, which represents continuing involvement.

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 a breach of contractual representations and warranties. Refer to Note 17 for additional information.

The following table presents the carrying amounts of the Company’s assets that relate to its continuing involvement with mortgage loans that have been sold with servicing rights retained and the unpaid principal balance of these loans (in thousands):



	Carrying Value of Assets Recorded on the Consolidated Balance Sheets						Unpaid Principal Balance of Sold Loans
	Servicing Rights, Net		Servicer and Protective Advances, Net		Total		Unpaid Principal Balance of Sold Loans
September 30, 2016	$	418,070	$	20,656	$	438,726	$	52,872,042
December 31, 2015	509,785		25,078		534,863		46,983,388

At September 30, 2016 and December 31, 2015 , 1.0% and 0.5% , respectively, of mortgage loans sold and serviced by the Company were 60 days or more past due.

The Company has elected to measure mortgage loans held for sale at fair value. The gains and losses on the sale of mortgage loans held for sale are included in net gains on sales of loans on the consolidated statements of comprehensive loss. Also included in net gains on sales of loans is interest income earned during the period the loans were held, the change in fair value of loans, and the gain or loss on the related freestanding derivatives. All activity related to mortgage loans held for sale and the related freestanding derivatives are included in operating activities on the consolidated statements of cash flows.

The following table presents a summary of cash flows related to sales of mortgage loans (in thousands):



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2016		2015		2016		2015
Cash proceeds received from sales, net of fees	$	5,643,244	$	7,456,037	$	15,933,300	$	20,125,035
Servicing fees collected ⁽¹⁾	35,125		31,040		106,304		79,804
Repurchases of previously sold loans	7,974		4,355		24,292		12,734

__________


(1)	Represents servicing fees collected on all loans sold whereby the Company has continuing 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 8 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 originates and purchases HECMs that are pooled and securitized into HMBS that the Company sells 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 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 September 30, 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 $10.0 billion and $10.6 billion , respectively.

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6. Fair Value (As Restated)

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 three and nine months ended September 30, 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 other transfers between levels during the three and nine months ended September 30, 2015 .

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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 and liabilities measured at fair value on a recurring basis utilizing Level 1 assumptions.



	September 30, 2016		December 31, 2015
Level 2
Assets
Mortgage loans held for sale	$	1,182,352	$	1,334,300
Servicing rights carried at fair value	212,630		—
Freestanding derivative instruments	2,014		6,993
Level 2 assets	$	1,396,996	$	1,341,293
Liabilities
Freestanding derivative instruments	$	18,007	$	5,405
Level 2 liabilities	$	18,007	$	5,405

Level 3
Assets
Reverse loans	$	10,945,069	$	10,763,816
Mortgage loans related to Non-Residual Trusts	463,620		526,016
Charged-off loans	49,261		49,307
Receivables related to Non-Residual Trusts	15,010		16,542
Servicing rights carried at fair value	982,384		1,682,016
Freestanding derivative instruments (IRLCs)	78,421		51,519
Level 3 assets	$	12,533,765	$	13,089,216
Liabilities
Freestanding derivative instruments (IRLCs)	$	515	$	1,070
Servicing rights related liabilities	119,267		117,000
Mortgage-backed debt related to Non-Residual Trusts	529,373		582,340
HMBS related obligations	10,699,720		10,647,382
Level 3 liabilities	$	11,348,875	$	11,347,792

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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 Three Months Ended September 30, 2016
	Fair Value July 1, 2016			Total Gains (Losses) Included in Comprehensive Loss			Purchases and Other			Sales			Originations / Issuances			Settlements			Transfers Out of Level 3			Fair Value September 30, 2016
Assets
Reverse loans	$	10,910,237		$	96,139		$	157,138		$	—		$	111,645		$	(330,090	)	$	—		$	10,945,069
Mortgage loans related to Non-Residual Trusts	488,179			(1,025		)	—			—			—			(23,534		)	—			463,620
Charged-off loans ⁽¹⁾	51,062			8,880			—			—			—			(10,681		)	—			49,261
Receivables related to Non-Residual Trusts	12,681			4,547			—			—			—			(2,218		)	—			15,010
Servicing rights carried at fair value ⁽²⁾	1,255,351			(86,036		)	(11,421		)	(12,792		)	49,912			—			(212,630		)	982,384
Freestanding derivative instruments (IRLCs)	75,477			3,070			—			—			—			(126		)	—			78,421
Total assets	$	12,792,987		$	25,575		$	145,717		$	(12,792	)	$	161,557		$	(366,649	)	$	(212,630	)	$	12,533,765

Liabilities
Freestanding derivative instruments (IRLCs)	$	(163	)	$	(352	)	$	—		$	—		$	—		$	—		$	—		$	(515	)
Servicing rights related liabilities ⁽³⁾	(120,825		)	(9,885		)	—			—			—			11,443			—			(119,267		)
Mortgage-backed debt related to Non-Residual Trusts	(548,067		)	(6,182		)	—			—			—			24,876			—			(529,373		)
HMBS related obligations	(10,717,148		)	(77,512		)	—			—			(274,604		)	369,544			—			(10,699,720		)
Total liabilities	$	(11,386,203	)	$	(93,931	)	$	—		$	—		$	(274,604	)	$	405,863		$	—		$	(11,348,875	)

__________


(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 $3.5 million during the three months ended September 30, 2016 .


(2)	During the three months ended September 30, 2016 , the Company sold mortgage servicing rights with a fair value of $12.8 million and recognized a total net loss on sale of $0.1 million .


(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 $4.2 million during the three months ended September 30, 2016 .

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	For the Nine Months Ended September 30, 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 September 30, 2016
Assets
Reverse loans	$	10,763,816		$	392,348		$	296,093	$	—		$	357,603		$	(864,791	)	$	—		$	10,945,069
Mortgage loans related to Non-Residual Trusts	526,016			10,556			—		—			—			(72,952		)	—			463,620
Charged-off loans ⁽¹⁾	49,307			32,924			—		—			—			(32,970		)	—			49,261
Receivables related to Non-Residual Trusts	16,542			4,698			—		—			—			(6,230		)	—			15,010
Servicing rights carried at fair value ⁽²⁾	1,682,016			(600,109		)	5,685		(41,027		)	148,449			—			(212,630		)	982,384
Freestanding derivative instruments (IRLCs)	51,519			27,476			—		—			—			(574		)	—			78,421
Total assets	$	13,089,216		$	(132,107	)	$	301,778	$	(41,027	)	$	506,052		$	(977,517	)	$	(212,630	)	$	12,533,765

Liabilities
Freestanding derivative instruments (IRLCs)	$	(1,070	)	$	555		$	—	$	—		$	—		$	—		$	—		$	(515	)
Servicing rights related liabilities ⁽³⁾	(117,000		)	(4,688		)	—		—			(27,886		)	30,307			—			(119,267		)
Mortgage-backed debt related to Non-Residual Trusts	(582,340		)	(21,101		)	—		—			—			74,068			—			(529,373		)
HMBS related obligations	(10,647,382		)	(330,863		)	—		—			(684,711		)	963,236			—			(10,699,720		)
Total liabilities	$	(11,347,792	)	$	(356,097	)	$	—	$	—		$	(712,597	)	$	1,067,611		$	—		$	(11,348,875	)

__________


(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 $17.8 million during the nine months ended September 30, 2016 .


(2)	During the nine months ended September 30, 2016 , the Company sold mortgage servicing rights with a fair value of $41.0 million and recognized a total net loss on sale of $0.7 million .


(3)	Included in losses on servicing rights related liabilities are gains from instrument-specific credit risk, which primarily result from changes in assumptions related to discount rates, conditional prepayment rates and conditional default rates, of $9.7 million during the nine months ended September 30, 2016 .

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	For the Three Months Ended September 30, 2015
	Fair Value July 1, 2015			Total Gains (Losses) Included in Comprehensive Loss			Purchases and Other		Sales			Originations / Issuances			Settlements			Fair Value September 30, 2015
Assets
Reverse loans	$	10,736,098		$	52,625		$	178,021	$	—		$	158,971		$	(254,218	)	$	10,871,497
Mortgage loans related to Non-Residual Trusts	553,410			9,793			—		—			—			(25,013		)	538,190
Charged-off loans ⁽¹⁾	53,624			12,745			—		—			—			(12,717		)	53,652
Receivables related to Non-Residual Trusts	20,800			207			—		—			—			(1,694		)	19,313
Servicing rights carried at fair value	1,797,721			(224,929		)	42,551		(60,094		)	84,375			—			1,639,624
Freestanding derivative instruments (IRLCs)	50,750			15,638			—		—			—			(94		)	66,294
Total assets	$	13,212,403		$	(133,921	)	$	220,572	$	(60,094	)	$	243,346		$	(293,736	)	$	13,188,570

Liabilities
Freestanding derivative instruments (IRLCs)	$	(4,791	)	$	4,634		$	—	$	—		$	—		$	—		$	(157	)
Servicing rights related liabilities	(64,556		)	450			—		—			—			4,537			(59,569		)
Mortgage-backed debt related to Non-Residual Trusts	(616,794		)	(8,668		)	—		—			—			26,073			(599,389		)
HMBS related obligations	(10,588,671		)	19			—		—			(431,126		)	274,748			(10,745,030		)
Total liabilities	$	(11,274,812	)	$	(3,565	)	$	—	$	—		$	(431,126	)	$	305,358		$	(11,404,145	)

__________


(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 $7.6 million during the three months ended September 30, 2015 .

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	For the Nine Months Ended September 30, 2015
	Fair Value January 1, 2015			Total Gains (Losses) Included in Comprehensive Loss			Purchases and Other		Sales			Originations / Issuances			Settlements			Fair Value September 30, 2015
Assets
Reverse loans ⁽¹⁾	$	10,064,365		$	244,712		$	687,880	$	(16,592	)	$	572,306		$	(681,174	)	$	10,871,497
Mortgage loans related to Non-Residual Trusts	586,433			29,957			—		—			—			(78,200		)	538,190
Charged-off loans ⁽²⁾	57,217			34,436			—		—			—			(38,001		)	53,652
Receivables related to Non-Residual Trusts	25,201			(341		)	—		—			—			(5,547		)	19,313
Servicing rights carried at fair value	1,599,541			(353,023		)	209,713		(60,094		)	243,487			—			1,639,624
Freestanding derivative instruments (IRLCs)	60,400			6,308			—		—			—			(414		)	66,294
Total assets	$	12,393,157		$	(37,951	)	$	897,593	$	(76,686	)	$	815,793		$	(803,336	)	$	13,188,570

Liabilities
Freestanding derivative instruments (IRLCs)	$	(263	)	$	106		$	—	$	—		$	—		$	—		$	(157	)
Servicing rights related liabilities	(66,311		)	(7,062		)	—		—			—			13,804			(59,569		)
Mortgage-backed debt related to Non-Residual Trusts	(653,167		)	(25,498		)	—		—			—			79,276			(599,389		)
HMBS related obligations	(9,951,895		)	(154,577		)	—		—			(1,382,359		)	743,801			(10,745,030		)
Total liabilities	$	(10,671,636	)	$	(187,031	)	$	—	$	—		$	(1,382,359	)	$	836,881		$	(11,404,145	)

__________


(1)	During the nine months ended September 30, 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, which primarily result from changes in assumptions related to collection rates and discount rates, of $16.3 million during the nine months ended September 30, 2015 .

All gains and losses on assets and liabilities measured at fair value on a recurring basis and classified as Level 3 within the fair value hierarchy, with the exception of gains and losses on charged-off loans, IRLCs, servicing rights carried at fair value, and servicing rights related liabilities, are recognized in either other net fair value gains (losses) or net fair value gains on reverse loans and related HMBS obligations on the consolidated statements of comprehensive loss. Gains and losses related to charged-off loans are recorded in other revenues, while gains and losses relating to IRLCs are recorded in net gains on sales of loans on the consolidated statements of comprehensive loss. The change in fair value of servicing rights carried at fair value and servicing rights related liabilities are recorded in net servicing revenue and fees on the consolidated statements of comprehensive loss. Total gains and losses included in the financial statement line items disclosed 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.

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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.

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.

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 7 for additional information on freestanding derivative financial instruments.

Servicing rights related liabilities — The Company uses 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 classifies 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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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.



		September 30, 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⁾	0.8 - 11.2	4.0		1.1 - 10.0	4.1
	Conditional repayment rate	9.82% - 71.03%	26.38	%	13.53% - 52.94%	25.59	%
	Discount rate	1.66% - 3.00%	2.29	%	2.08% - 3.56%	2.84	%
Mortgage loans related to Non-Residual Trusts	Conditional prepayment rate	2.08% - 2.93%	2.51	%	2.67% - 4.66%	3.52	%
	Conditional default rate	0.93% - 4.14%	2.41	%	1.47% - 2.74%	2.05	%
	Loss severity	73.67% - 100.00%	95.76	%	73.07% - 95.88%	88.72	%
	Discount rate	8.00%	8.00	%	8.00%	8.00	%
Charged-off loans	Collection rate	2.52% - 3.27%	2.56	%	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	2.31% - 3.46%	2.89	%	1.93% - 3.62%	2.90	%
	Conditional default rate	2.08% - 4.38%	2.91	%	1.66% - 2.98%	2.30	%
	Loss severity	71.39% - 100.00%	92.80	%	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⁾	2.4 - 6.8	5.2		5.2 - 9.0	6.3
	Discount rate	11.00% - 14.79%	11.67	%	10.00% - 14.34%	10.88	%
	Conditional prepayment rate	8.08% - 21.08%	13.07	%	6.07% - 13.15%	9.94	%
	Conditional default rate	0.02% - 3.33%	1.03	%	0.05% - 2.49%	1.06	%
Interest rate lock commitments	Loan funding probability	14.96% - 100.00%	74.98	%	2.34% - 100.00%	79.42	%
	Fair value of initial servicing rights multiple ⁽⁵⁾	0.05 - 5.59	3.30		0.05 - 7.06	3.71

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		September 30, 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	26.50% - 100.00%	87.50	%	38.00% - 100.00%	83.28	%
	Fair value of initial servicing rights multiple ⁽⁵⁾	1.40 - 5.28	3.54		0.11 - 5.88	4.00
Servicing rights related liabilities	Weighted-average remaining life in years ⁽⁴⁾	2.0 - 7.5	5.4		6.3 - 7.4	6.6
	Discount rate	5.10% - 10.70%	8.33	%	11.67% - 13.85%	13.24	%
	Conditional prepayment rate	7.07% - 19.70%	13.29	%	8.32% - 11.28%	9.98	%
	Conditional default rate	0.01% - 5.23%	0.61	%	0.11% - 1.06%	0.58	%
Mortgage-backed debt related to Non-Residual Trusts	Conditional prepayment rate	2.31% - 3.46%	2.89	%	1.93% - 3.62%	2.90	%
	Conditional default rate	2.08% - 4.38%	2.91	%	1.66% - 2.98%	2.30	%
	Loss severity	71.39% - 100.00%	92.80	%	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⁾	0.5 - 7.9	3.4		0.9 - 6.6	3.5
	Conditional repayment rate	10.71% - 77.64%	27.05	%	12.06% - 55.49%	24.70	%
	Discount rate	1.38% - 2.46%	1.94	%	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 IRLCs identified as servicing released.

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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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):



	September 30, 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⁾	$	10,945,069	$	10,273,910	$	10,763,816	$	10,187,521
Mortgage loans held for sale ⁽¹⁾	1,182,352		1,128,049		1,334,300		1,285,582
Mortgage loans related to Non-Residual Trusts	463,620		528,461		526,016		580,695
Charged-off loans	49,261		2,749,110		49,307		2,887,367
Total	$	12,640,302	$	14,679,530	$	12,673,439	$	14,941,165

Debt instruments at fair value under the fair value option
Mortgage-backed debt related to Non-Residual Trusts	$	529,373	$	534,656	$	582,340	$	585,839
HMBS related obligations ⁽²⁾	10,699,720		9,981,537		10,647,382		10,012,283
Total	$	11,229,093	$	10,516,193	$	11,229,722	$	10,598,122

__________


(1)	Includes loans that collateralize master repurchase agreements. Refer to Note 12 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 $1.7 million and $2.6 million at September 30, 2016 and December 31, 2015 , respectively, and an unpaid principal balance of $20.4 million and $16.2 million at September 30, 2016 and December 31, 2015 , respectively. Mortgage loans held for sale that are 90 days or more past due are insignificant at September 30, 2016 and December 31, 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 $96.3 million and $77.4 million at September 30, 2016 and December 31, 2015 , respectively. In addition, the Company had loans that were in the process of foreclosure of $446.0 million and $244.9 million at September 30, 2016 and December 31, 2015, respectively, which are included in residential loans at amortized cost, net and residential loans at fair value on the consolidated balance sheets. 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:



		September 30, 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% - 81.95%	7.00	%	0.00% - 72.58%	8.25	%

__________


(1)	Loss severity is based on the unpaid principal balance of the related loan at time of foreclosure.

The Company held real estate owned, net in the Reverse Mortgage and Servicing segments and Other non-reportable segment of $82.3 million , $12.6 million and $1.4 million at September 30, 2016 , respectively and $66.4 million , $10.4 million and $0.6 million at December 31, 2015 , respectively. 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.

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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.



		September 30, 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	Level 3	$	616,936	$	621,952	$	541,406	$	554,664
Insurance premium receivables ⁽¹⁾	Level 3	12,133		11,715		12,845		12,463
Servicer and protective advances, net ⁽²⁾	Level 3	1,299,913		1,266,315		1,631,065		1,546,958

Financial liabilities
Payables to insurance carriers ⁽³⁾	Level 3	2,491		2,476		21,356		21,128
Servicing advance liabilities ⁽⁴⁾	Level 3	1,022,919		1,024,676		1,226,898		1,232,147
Corporate debt ⁽⁵⁾	Level 2	2,121,357		1,827,295		2,152,031		1,904,467
Mortgage-backed debt carried at amortized cost	Level 3	440,692		446,258		469,339		475,347

__________


(1)	The carrying amounts of insurance premium receivables were reduced by $58.6 million and $77.2 million at September 30, 2016 and December 31, 2015, respectively, and the estimated fair values were reduced by $56.4 million and $74.7 million at September 30, 2016 and December 31, 2015, respectively, to correct an immaterial error as discussed in further detail in Note 2.


(2)	The carrying amounts of servicer and protective advances, net were increased by $25.3 million and $35.2 million at September 30, 2016 and December 31, 2015, respectively, and the estimated fair values were increased by $24.8 million and $33.9 million at September 30, 2016 and December 31, 2015, respectively, to correct an immaterial error as discussed in further detail in Note 2.


(3)	The carrying amounts of payables to insurance carriers were reduced by $33.3 million and $42.1 million at September 30, 2016 and December 31, 2015, respectively, and the estimated fair values were reduced by $32.9 million and $41.6 million at September 30, 2016 and December 31, 2015, respectively, to correct an immaterial error as discussed in further detail in Note 2.


(4)	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.


(5)	The carrying amounts of corporate debt in the table above 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.

Insurance premium receivables — The estimated fair value of these receivables is based on the net present value of the expected cash flows. The determination of fair value includes assumptions related to the underlying collateral serviced by the Company, such as delinquency and default rates, as the insurance premiums are collected as part of the borrowers’ loan payments or from the related 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.

Payables to insurance carriers — The estimated fair value of these liabilities is based on the net present value of the expected carrier payments over the life of the payables.

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.

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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.

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 Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
Realized gains on sales of loans	$	90,736		$	51,580		$	250,815		$	131,655
Change in unrealized gains on loans held for sale	(4,261		)	19,146			8,578			4,886
Gains on interest rate lock commitments	2,719			20,272			28,031			6,414
Losses on forward sales commitments	(6,082		)	(72,448		)	(116,419		)	(39,161		)
Gains (losses) on MBS purchase commitments	(18,301		)	4,877			(31,574		)	(13,909		)
Capitalized servicing rights	49,912			84,375			148,449			243,487
Provision for repurchases	(3,221		)	(6,454		)	(11,658		)	(13,011		)
Interest income	10,545			14,870			30,478			40,483
Other	(33		)	—			(33		)	—
Net gains on sales of loans	$	122,014		$	116,218		$	306,667		$	360,844

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 Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
Interest income on reverse loans	$	112,838		$	110,278		$	337,063		$	325,964
Change in fair value of reverse loans	(16,699		)	(57,653		)	55,285			(81,154		)
Net fair value gains on reverse loans	96,139			52,625			392,348			244,810

Interest expense on HMBS related obligations	(102,879		)	(102,078		)	(309,501		)	(301,178		)
Change in fair value of HMBS related obligations	25,367			102,097			(21,362		)	146,601
Net fair value gains (losses) on HMBS related obligations	(77,512		)	19			(330,863		)	(154,577		)
Net fair value gains on reverse loans and related HMBS obligations	$	18,627		$	52,644		$	61,485		$	90,233

7. 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):



	September 30, 2016						December 31, 2015
	Notional/ Contractual Amount		Fair Value				Notional/ Contractual Amount		Fair Value
	Notional/ Contractual Amount		Derivative Assets		Derivative Liabilities		Notional/ Contractual Amount		Derivative Assets		Derivative Liabilities
Interest rate lock commitments	$	3,656,025	$	78,421	$	515	$	3,398,892	$	51,519	$	1,070
Forward sales commitments	4,875,000		431		17,470		4,650,000		6,427		4,871
MBS purchase commitments	1,002,500		1,583		537		703,000		566		534
Total derivative instruments			$	80,435	$	18,522			$	58,512	$	6,475
Cash margin			$	16,335	$	906			$	209	$	10,101

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 $3.8 million and $0.3 million , and liability positions of $4.5 million and $8.6 million , at September 30, 2016 and December 31, 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 September 30, 2016 , the Company’s net derivative asset position with that counterparty of $0.4 million was comprised of $3.0 million of over-collateralized positions associated with the master repurchase agreement, partially offset by a net derivative liability position of $1.8 million and cash margin received of $0.8 million .

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 September 30, 2016 , the Company’s net derivative liability position with that counterparty was $0.4 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 September 30, 2016 , there were $18.5 million of over-collateralized positions and $102.7 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 6 for a summary of the gains and losses on freestanding derivatives.

8. Servicing of Residential Loans

The Company provides servicing of residential loans and real estate owned for itself and third-party credit owners. The Company’s total servicing portfolio consists of accounts serviced for others for which servicing rights have been capitalized, accounts sub-serviced for others, as well as residential loans and real estate owned recognized on the consolidated balance sheets.

Provided below is a summary of the Company’s total servicing portfolio (dollars in thousands):



	September 30, 2016			December 31, 2015
	Number of Accounts	Unpaid Principal Balance		Number of Accounts	Unpaid Principal Balance
Third-party credit owners ⁽¹⁾
Capitalized servicing rights ^{(2) (3)}	1,525,909	$	180,662,145	1,637,541	$	197,154,579
Capitalized sub-servicing ⁽⁴⁾	136,636	7,789,368		159,368	9,053,755
Sub-servicing ^{(3) (5)}	375,219	54,711,575		346,755	47,734,378
Total third-party servicing portfolio	2,037,764	243,163,088		2,143,664	253,942,712
On-balance sheet residential loans and real estate owned	98,070	12,654,545		102,044	12,705,532
Total servicing portfolio ⁽⁶⁾	2,135,834	$	255,817,633	2,245,708	$	266,648,244

__________


(1)	Includes real estate owned serviced for third parties.


(2)	Includes $5.1 billion and $1.7 billion in unpaid principal balance associated with servicing rights sold to WCO at September 30, 2016 and December 31, 2015 , respectively, that did not meet all of the requirements for sale accounting.


(3)	Excludes the impact of an agreement to sell servicing rights associated with 253,723 accounts and $32.3 billion in unpaid principal balance, which was entered into during the nine months ended September 30, 2016 . On October 3, 2016, the underlying sale was completed and the Company became the sub-servicer for such servicing rights.


(4)	Consists of sub-servicing contracts acquired through business combinations whereby the benefits from the contract are greater than adequate compensation for performing the servicing.


(5)	Includes $5.6 billion and $6.6 billion in unpaid principal balance of sub-servicing performed for WCO at September 30, 2016 and December 31, 2015, respectively.


(6)	Excludes charged-off loans managed by the Servicing segment.

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Net Servicing Revenue and Fees

The Company services loans for itself, as well as for third parties, and 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 Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
Servicing fees ^{(1) (2)}	$	172,780		$	179,938		$	527,616		$	527,986
Incentive and performance fees ⁽¹⁾	17,158			25,093			54,941			90,512
Ancillary and other fees ^{(1) (3)}	23,434			24,333			73,101			75,252
Servicing revenue and fees	213,372			229,364			655,658			693,750
Amortization of servicing rights ⁽⁴⁾	(5,822		)	(6,656		)	(13,058		)	(20,634		)
Change in fair value of servicing rights	(86,036		)	(224,929		)	(600,109		)	(353,023		)
Change in fair value of servicing rights related liabilities ^{(2) (5)}	(9,885		)	450			(4,688		)	(7,062		)
Net servicing revenue and fees	$	111,629		$	(1,771	)	$	37,803		$	313,031

__________

(1)

Includes sub-servicing fees related to servicing assets held by WCO of $1.3 million and $3.5 million for the three and nine months ended September 30, 2016 , respectively, and $0.2 million and $0.3 million for the three and nine months ended September 30, 2015 , respectively. Includes incentive, performance, ancillary and other fees related to servicing assets held by WCO of $0.2 million and $0.5 million for the three and nine months ended September 30, 2016 , respectively.


(2)	Includes a pass-through of $3.5 million and $6.5 million relating to servicing rights sold to WCO for the three and nine months ended September 30, 2016 , respectively.


(3)	Includes late fees of $15.2 million for the three months ended September 30, 2016 and 2015 and $48.9 million and $44.8 million for the nine months ended September 30, 2016 and 2015 , respectively.


(4)	Includes amortization of a servicing liability of $2.4 million and less than $0.1 million for the three months ended September 30, 2016 and 2015 , respectively, and $6.7 million and less than $0.1 million for the nine months ended September 30, 2016 and 2015 , respectively.


(5)	Includes interest expense on servicing rights related liabilities, which represents the accretion of fair value, of $5.0 million and $2.3 million for the three months ended September 30, 2016 and 2015 , respectively, and $12.0 million and $7.0 million for the nine months ended September 30, 2016 and 2015 , 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):



	For the Nine Months Ended September 30, 2016						For the Nine Months Ended September 30, 2015
	Mortgage Loan			Reverse Loan			Mortgage Loan			Reverse Loan
Balance at beginning of the period	$	99,302		$	7,258		$	121,364		$	9,311
Servicing rights capitalized upon deconsolidation of Residual Trusts	—			—			3,133			—
Sales	(130		)	—			—			—
Amortization of servicing rights ⁽¹⁾	(15,545		)	(1,337		)	(19,086		)	(1,576		)
Impairment	(19		)	—			—			—
Balance at end of the period	$	83,608		$	5,921		$	105,411		$	7,735

__________


(1)	Includes amortization of servicing rights for the mortgage loan class and the reverse loan class of $4.9 million and $0.4 million , respectively, for the three months ended September 30, 2016 and $6.2 million and $0.5 million , respectively, for the three months ended September 30, 2015 .

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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. At September 30, 2016 , the fair value of servicing rights for the mortgage loan class and the reverse loan class was $102.4 million and $8.2 million , respectively. At December 31, 2015 , the fair value of servicing rights for the mortgage loan class and the reverse loan class was $117.3 million and $11.1 million , respectively. 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:



	September 30, 2016
	Mortgage Loan		Reverse Loan
Weighted-average remaining life in years ⁽¹⁾	4.9		2.8
Weighted-average discount rate	11.58	%	15.00	%
Conditional prepayment rate ⁽²⁾	8.11	%	N/A
Conditional default rate ⁽²⁾	2.39	%	N/A
Conditional repayment rate ⁽³⁾	N/A		28.79	%

__________


(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 Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
Balance at beginning of the period ⁽¹⁾	$	1,255,351		$	1,797,721		$	1,682,016		$	1,599,541
Purchases	497			42,551			22,336			209,713
Servicing rights capitalized upon sales of loans	49,912			84,375			148,449			243,487
Sales	(12,792		)	(60,094		)	(41,027		)	(60,094		)
Other	(11,918		)	—			(16,651		)	—
Change in fair value due to:
Changes in valuation inputs or other assumptions ⁽²⁾	(25,922		)	(158,251		)	(412,095		)	(173,499		)
Other changes in fair value ⁽³⁾	(60,114		)	(66,678		)	(188,014		)	(179,524		)
Total change in fair value	(86,036		)	(224,929		)	(600,109		)	(353,023		)
Balance at end of the period ⁽¹⁾	$	1,195,014		$	1,639,624		$	1,195,014		$	1,639,624

__________


(1)	Includes servicing rights that were sold to WCO and accounted for as a financing of $34.0 million and $16.9 million at September 30, 2016 and December 31, 2015 , respectively.


(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.

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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 6. 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.

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):



	September 30, 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	11.67	%	$	(37,321	)	$	(71,943	)	10.88	%	$	(68,874	)	$	(132,645	)
Weighted-average conditional prepayment rate	13.07	%	(46,876		)	(89,693		)	9.94	%	(63,884		)	(123,173		)
Weighted-average conditional default rate	1.03	%	(19,172		)	(38,893		)	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 assumptions, 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 Three Months Ended September 30,		For the Nine Months Ended September 30,
	2016	2015	2016	2015
Weighted-average life in years	5.8	6.4	6.0	6.5
Weighted-average discount rate	12.14%	12.28%	12.51%	11.43%
Weighted-average conditional prepayment rate	11.32%	8.49%	10.11%	8.06%
Weighted-average conditional default rate	0.18%	0.37%	0.31%	0.43%

9. Goodwill and Intangible Assets, Net

Goodwill

The table below sets forth the activity in goodwill by reportable segment (in thousands):



	Reportable Segment
	Servicing ⁽²⁾			Originations		Total
Balance at January 1, 2016 ⁽¹⁾	$	320,164		$	47,747	$	367,911
Acquisition of RCS net assets	3,784			—		3,784
Impairment ⁽³⁾	(306,393		)	—		(306,393		)
Balance at September 30, 2016 ⁽¹⁾	$	17,555		$	47,747	$	65,302

__________

(1)

The goodwill included in the Reverse Mortgage segment became fully impaired as of the second quarter of 2015. There were accumulated impairment losses of $138.8 million relating to the Reverse Mortgage segment at both September 30, 2016 and December 31, 2015 . In addition, there were accumulated impairment losses included in goodwill relating to the Servicing segment of $457.4 million and $151.0 million at September 30, 2016 and December 31, 2015 , respectively.


(2)	The Servicing, Insurance and ARM reporting units are components of the Servicing segment.


(3)	As discussed in further detail below, the Company recorded goodwill impairment charges in its Servicing segment of $215.4 million and $91.0 million during the second and third quarters of 2016, respectively.

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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 impairment assessment 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 impairment assessment was performed, which determined that the remaining Servicing reporting unit goodwill was impaired as of September 30, 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 impairment evaluation for these reporting units. The Step 1 test indicated that both the Servicing and ARM reporting units had carrying values that exceeded the respective estimated fair values, and the Step 2 analysis 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.

The Company is 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 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 in the future.

Intangible Assets, Net

Intangible assets, net consists of the following (in thousands):



	September 30, 2016										December 31, 2015
	Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	133,067	$	(71,469	)	$	—		$	61,598	$	133,067	$	(64,238	)	$	68,829
Institutional relationships	11,900		(4,886		)	(6,340		)	674		16,600		(8,468		)	8,132
Other	10,000		(3,802		)	(395		)	5,803		10,000		(2,923		)	7,077
Total intangible assets	$	154,967	$	(80,157	)	$	(6,735	)	$	68,075	$	159,667	$	(75,629	)	$	84,038

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.

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Based on the balance of intangible assets, net at September 30, 2016 , the following is an estimate of amortization expense for the fourth quarter of 2016 and for each of the next four years and thereafter (in thousands):



	Amortization Expense
Fourth quarter of 2016	$	2,739
2017	9,243
2018	7,833
2019	6,877
2020	6,066
Thereafter	35,317
Total	$	68,075

10. Payables and Accrued Liabilities (As Restated)

Payables and accrued liabilities consist of the following (in thousands):



	September 30, 2016		December 31, 2015
Accounts payable and accrued liabilities	$	161,610	$	113,325
Loans subject to repurchase from Ginnie Mae ⁽¹⁾	123,135		22,507
Curtailment liability	108,525		115,453
Income taxes payable ⁽²⁾	72,925		—
Employee-related liabilities	72,250		95,926
Originations liability	52,212		48,930
Payables to insurance carriers ⁽³⁾	2,491		21,356
Servicing rights and related advance purchases payable	24,225		21,649
Accrued interest payable	22,697		9,819
Derivative instruments	18,522		6,475
Uncertain tax positions ⁽⁴⁾	11,383		64,554
Acquisition related escrow funds payable to sellers	1,236		10,236
Margin payable on derivative instruments	906		10,101
Other	58,511		57,595
Total payables and accrued liabilities	$	730,628	$	597,926

__________

(1)

For certain mortgage loans that the Company has 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 and establish a corresponding liability regardless of the Company’s intention to repurchase the loan. 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.


(2)	During the third quarter of 2016, the Company filed certain amended tax returns. The current income taxes payable reflects the tax liability associated with these amended returns, for which payment has not yet been remitted to the various taxing jurisdictions. The Company expects to make such payments during the fourth quarter of 2016.


(3)	The balances were reduced by $33.3 million and $42.1 million at September 30, 2016 and December 31, 2015, respectively, to correct an immaterial error as discussed in further detail in Note 2.

(4)

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.

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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, Ditech, a Walter Company. 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 scale the Company's leadership team and support functions to further align with the Company's business needs. 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 $4.1 million during the fourth quarter of 2016. However, 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.

The following table presents the current period activity in the accrued restructuring 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 Nine Months Ended September 30, 2016
	2015 Actions			2016 Actions			Total
Balance at January 1, 2016	$	4,183		$	—		$	4,183
Charges
Severance and related costs	1,284			7,994			9,278
Office closures and other costs	990			1,114			2,104
Total charges	2,274			9,108			11,382
Cash payments or other settlements
Severance and related costs	(3,540		)	(4,247		)	(7,787		)
Office closures and other costs	(1,641		)	(141		)	(1,782		)
Total cash payments or other settlements	(5,181		)	(4,388		)	(9,569		)
Balance at September 30, 2016	$	1,276		$	4,720		$	5,996

Cumulative charges incurred
Severance and related costs	7,290			7,994			15,284
Office closures and other costs	6,545			1,114			7,659
Total cumulative charges incurred	$	13,835		$	9,108		$	22,943

Total expected costs to be incurred	$	13,835		$	13,237		$	27,072

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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 Nine Months Ended September 30, 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			2,049			206			—			2,274
2016 Actions	7,384			34			361			1,329			9,108
Total charges	7,403			2,083			567			1,329			11,382
Cash payments or other settlements
2015 Actions	(645		)	(3,323		)	(1,213		)	—			(5,181		)
2016 Actions	(3,777		)	(28		)	(309		)	(274		)	(4,388		)
Total cash payments or other settlements	(4,422		)	(3,351		)	(1,522		)	(274		)	(9,569		)
Balance at September 30, 2016
2015 Actions	548			389			339			—			1,276
2016 Actions	3,607			6			52			1,055			4,720
Total balance at September 30, 2016	$	4,155		$	395		$	391		$	1,055		$	5,996

Total cumulative charges incurred
2015 Actions	$	6,481		$	4,657		$	1,846		$	851		$	13,835
2016 Actions	7,384			34			361			1,329			9,108
Total cumulative charges incurred	$	13,865		$	4,691		$	2,207		$	2,180		$	22,943

Total expected costs to be incurred
2015 Actions	$	6,481		$	4,657		$	1,846		$	851		$	13,835
2016 Actions	9,073			478			1,111			2,575			13,237
Total expected costs to be incurred	$	15,554		$	5,135		$	2,957		$	3,426		$	27,072

11. Servicing Advance Liabilities

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 September 30, 2016, an aggregate principal balance of $800.0 million of various series of notes were outstanding under this facility.

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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.

12. 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 and reverse 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 September 30, 2016 and are secured by certain residential loans, reverse loans and real estate owned. At September 30, 2016, the interest rates on the facilities are primarily based on LIBOR plus between 2.10% and 3.13% , and have various expiration dates through August 2017 . At September 30, 2016 , $1.1 billion of the outstanding borrowings were secured by $1.2 billion in originated and purchased residential loans and $235.0 million of outstanding borrowings were secured by $266.0 million in repurchased HECMs and real estate owned.

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. Ditech Financial was in compliance with all financial covenants relating to master repurchase agreements at September 30, 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 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.

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 Notes 2 and 3.

13. Corporate Debt

On August 5, 2016, the Company entered into an amendment to the 2013 Credit Agreement that, 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 second and third quarters of 2016.

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 September 30, 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 $19.7 million remained available.

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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.

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.

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14. Share-Based Compensation

On June 9, 2016, the 2011 Plan was 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.

During the nine months ended September 30, 2016 , the Company granted 1,128,522 RSUs and 1,272,293 options.

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. The weighted-average grant date fair value of $3.27 for these awards was based on the average of the high and low market prices of the Company's stock on their respective dates of grant.

The options granted included 208,074 options that cliff vest in three years based upon a service condition and have a five year contractual term, and 1,064,219 options that vest ratably in annual installments over three years based upon a service condition and have a 10 year contractual term. The fair value of the stock options of $1.59 and $1.38 , respectively, were both based on the estimate of fair value on the dates of grant using the Black-Scholes option pricing model and related assumptions.

The Company's share-based compensation expense has been reflected in salaries and benefits expense in the consolidated statements of comprehensive loss.

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 .

15. Common Stock and Loss Per Share (As Restated)

Rights Agreement

On June 29, 2015, the Company and Computershare, as Rights Agent, entered into a Rights Agreement. Also on June 29, 2015 , the Board of Directors of the Company authorized and the Company declared a dividend of one preferred stock purchase right for each outstanding share of common stock of the Company. The dividend was payable on July 9, 2015 to stockholders of record as of the close of business on July 9, 2015 and entitles the registered holder 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. The terms of the preferred stock purchase rights are set forth in the Rights Agreement, which is summarized in the Company's Current Report on Form 8-K dated June 29, 2015. Subject to certain limited exceptions specified in the Rights Agreement (including the amendments described below), the rights are not exercisable until a person or group of persons acting in concert acquires beneficial ownership, as defined in the Rights Agreement, of more than 20% of the Company's outstanding shares of common stock. One such exception is that a person or group that already owned 20% or more of the Company's outstanding shares of common stock before the first public announcement of the rights plan may continue to own those shares without causing the rights to become exercisable.

Amendment No. 1 to the Rights Agreement

On November 16, 2015, the Company and Computershare entered into Amendment No. 1 to the Rights Agreement. Upon the terms and subject to the conditions set forth in the Rights Agreement and this Amendment, (i) Birch Run and its affiliates and associates may acquire up to 25% of the total voting power of all shares of the Company’s common stock without triggering the exercisability of the preferred share purchase rights attached to shares of the Company’s common stock pursuant to the Rights Agreement, and (ii) shares of the Company’s common stock received by directors as compensation for their services, pursuant to any director compensation program of the Company, will also not trigger the exercisability of such rights.

Amendment No. 2 to the Rights Agreement

On November 22, 2015, the Company and Computershare entered into Amendment No. 2 to the Rights Agreement. Upon the terms and subject to the conditions set forth in the Rights Agreement and this Amendment, Baker Street may acquire up to 25% of the total voting power of all shares of the Company’s common stock without triggering the exercisability of the preferred share purchase rights attached to shares of the Company’s common stock pursuant to the Rights Agreement.

Amendment No. 3 to the Rights Agreement

On June 28, 2016, the Company and Computershare entered into Amendment No. 3 to the Rights Agreement to extend the expiration date of the Rights Agreement by one year , from June 29, 2016 to June 29, 2017 .

Loss Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted loss per share computation shown on the consolidated statements of comprehensive loss (in thousands, except per share data):



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
	(Restated)						(Restated)
Basic and diluted loss per share
Net loss available to common stockholders (numerator)	$	(213,267	)	$	(76,928	)	$	(875,932	)	$	(146,055	)
Weighted-average common shares outstanding (denominator)	36,144			37,802			35,828			37,760
Basic and diluted loss per common and common equivalent share	$	(5.90	)	$	(2.04	)	$	(24.45	)	$	(3.87	)

A portion of the Company’s unvested RSUs during the nine months ended September 30, 2015 were 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, as was the case for the periods above, 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 Three Months Ended September 30,		For the Nine Months Ended September 30,
	2016	2015	2016	2015
Outstanding share-based compensation awards
Stock options	3,962	3,047	3,245	3,047
Performance shares ⁽¹⁾	—	251	—	251
Restricted stock units	808	769	564	769
Assumed conversion of Convertible Notes	4,932	4,932	4,932	4,932

__________


(1)	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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16. Segment Reporting (As Restated)

Management has organized the Company into three reportable segments based primarily on its services as follows:

•

Servicing — consists of operations that perform servicing for third-party credit owners of mortgage loans for a fee and the Company’s own mortgage loan portfolio. The Servicing segment also operates complementary businesses consisting of an insurance agency serving residential loan borrowers and credit owners and 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.


•	Originations — consists of operations that originate and purchase mortgage loans that are intended for sale to third parties.


•	Reverse Mortgage — consists of operations that purchase and originate HECMs that are securitized, but remain on the consolidated balance sheet as collateral for secured borrowings. This segment performs servicing for third-party credit owners and the Company and provides other complementary services for the reverse mortgage market, such as real estate owned property management and disposition.

The following tables present select financial information of 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 servicing revenues and expenses have been eliminated. Intersegment revenues are recognized on the same basis of accounting as such revenue is recognized on the consolidated statements of comprehensive loss.



	For the Three Months Ended September 30, 2016
	Servicing			Originations		Reverse Mortgage			Other			Eliminations			Total Consolidated
Total revenues ^{(1) (2) (3)}	$	148,873		$	133,440	$	27,023		$	(194	)	$	(11,812	)	$	297,330
Income (loss) before income taxes	(161,581		)	51,672		(23,023		)	(25,251		)	—			(158,183		)



	For the Three Months Ended September 30, 2015
	Servicing			Originations		Reverse Mortgage		Other			Eliminations			Total Consolidated
Total revenues ^{(1) (2) (3)}	$	31,186		$	132,026	$	65,395	$	739		$	(9,953	)	$	219,393
Income (loss) before income taxes	(152,822		)	36,518		22,543		(37,797		)	—			(131,558		)

__________

(1)

With the exception of $3.0 million and $2.2 million for the three months ended September 30, 2016 and 2015 , respectively, associated with intercompany activity with the Originations segment and the Other non-reportable segment, all net servicing revenue and fees of the Servicing segment were derived from external customers, including WCO. Included in these revenues for the three months ended September 30, 2016 are late fees of $1.0 million recorded by the Servicing segment that were waived as an incentive for borrowers refinancing their loans. These fees reduced the gain on sale of loans recognized by the Originations segment. All net servicing revenue and fees of the Company's Reverse Mortgage segment were derived from external customers.

(2)

The Company's Servicing segment includes other revenues of $9.8 million and $7.0 million for the three months ended September 30, 2016 and 2015 , respectively, associated with fees earned for certain loan originations completed by the Originations segment from leads generated through the Servicing segment's servicing portfolio. Beginning in the first quarter of 2016, the Servicing segment increased the fee per origination charged to the Originations segment to reflect current market pricing. As a result of the change in fee, these intersegment revenues increased by $2.9 million .


(3)	The Company’s Originations segment includes other revenues of less than $0.1 million and $0.8 million for the three months ended September 30, 2016 and 2015 , respectively, associated with fees earned for supporting the Servicing segment in administrative functions relating to the acquisition of certain servicing rights.

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	For the Nine Months Ended September 30, 2016
	Servicing			Originations		Reverse Mortgage			Other			Eliminations			Total Consolidated
Total revenues ^{(1) (2) (3)}	$	158,431		$	343,926	$	87,255		$	(119	)	$	(37,919	)	$	551,574
Income (loss) before income taxes	(773,928		)	113,688		(44,940		)	(111,478		)	—			(816,658		)



	For the Nine Months Ended September 30, 2015
	Servicing			Originations		Reverse Mortgage			Other			Eliminations			Total Consolidated
Total revenues ^{(1) (2) (3)}	$	449,145		$	391,028	$	129,494		$	4,886		$	(31,870	)	$	942,683
Income (loss) before income taxes	(121,198		)	111,281		(81,874		)	(104,444		)	—			(196,235		)

__________

(1)

With the exception of $9.2 million and $7.0 million for the nine months ended September 30, 2016 and 2015 , respectively, associated with intercompany activity with the Originations segment and the Other non-reportable segment, all net servicing revenue and fees of the Servicing segment were derived from external customers, including WCO. Included in these revenues for the nine months ended September 30, 2016 are late fees of $3.0 million recorded by the Servicing segment that were waived as an incentive for borrowers refinancing their loans. These fees reduced the gain on sale of loans recognized by the Originations segment. All net servicing revenue and fees of the Company's Reverse Mortgage segment were derived from external customers.

(2)

The Company's Servicing segment includes other revenues of $30.8 million and $23.5 million for the nine months ended September 30, 2016 and 2015 , respectively, associated with fees earned for certain loan originations completed by the Originations segment from leads generated through the Servicing segment's servicing portfolio. Beginning in the first quarter of 2016, the Servicing segment increased the fee per origination charged to the Originations segment to reflect current market pricing. As a result of the change in fee, these intersegment revenues increased by $9.2 million .


(3)	The Company’s Originations segment includes other revenues of $1.0 million and $1.4 million for the nine months ended September 30, 2016 and 2015 , respectively, associated with fees earned for supporting the Servicing segment in administrative functions relating to the acquisition of certain servicing rights.



	Total Assets Per Segment (As Restated)
	Servicing		Originations		Reverse Mortgage		Other		Eliminations			Total Consolidated
September 30, 2016	$	3,840,912	$	1,468,720	$	11,238,121	$	1,227,127	$	(668,794	)	$	17,106,086
December 31, 2015	5,244,070		1,570,258		11,127,641		1,318,840		(711,362		)	18,549,447

17. Commitments and Contingencies

Letter of Credit Reimbursement Obligation

As part of an agreement to service the loans in seven securitization trusts, the Company has an obligation to reimburse a third party for the final $165.0 million drawn under LOCs issued by such third party as credit enhancements to such trusts. The total amount available on these LOCs for these trusts was $255.7 million at September 30, 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 securitization trusts, the Company does not expect that the final $165.0 million of capacity under the LOCs will be drawn and, therefore, no liability for the fair value of this obligation has been recorded on the Company’s consolidated balance sheets, although actual performance may differ from this estimate in the future.

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 determined that it is the primary beneficiary of these securitization trusts and as a result, has consolidated these trusts. The Company is required to call these securitizations when each loan pool falls to 10% of the original principal amount and expects to begin to make such calls in 2017 and continuing through 2019 . The total outstanding balance of the residential loans expected to be called at the respective call dates is $416.9 million . The Company estimates call obligations of $101.0 million , $253.0 million and $62.9 million during the years ending December 31, 2017, 2018 and 2019, respectively. Substantially all of the call obligations in 2017 are anticipated to occur during the second half of the year.

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Unfunded Commitments

Reverse Mortgage Loans

At September 30, 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 $0.6 million primarily in the form of undrawn lines-of-credit. The borrowing capacity includes $1.1 billion in capacity that was available to be drawn by borrowers at September 30, 2016 and $189.3 million in capacity that will become eligible to be drawn by borrowers through the period ending October 1, 2017, assuming the loans remain performing. In addition, the Company has other commitments of $20.3 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 $24.3 million and commitments to purchase and sell loans totaling $37.1 million and $86.3 million , respectively, at September 30, 2016 .

Mortgage Loans

The Company had short-term commitments to lend $3.6 billion and commitments to purchase loans totaling $72.4 million at September 30, 2016 . In addition, the Company had commitments to sell $4.9 billion and purchase $1.0 billion in mortgage-backed securities at September 30, 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 nine months ended September 30, 2016 and 2015 , the Company repurchased $445.4 million and $221.3 million , respectively, in reverse loans and real estate owned from securitization pools. At September 30, 2016 , the Company had $369.6 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.

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 September 30, 2016 , the Company’s maximum exposure to repurchases due to potential breaches of representations and warranties was $60.1 billion , and was based on the original unpaid principal balance of loans sold from the beginning of 2013 through September 30, 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.

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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 Company’s estimate of the liability associated with representations and warranties exposure was $20.6 million at September 30, 2016 and 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 sub-servicing 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 $98.1 million at September 30, 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 nine months ended September 30, 2016 , the Company recorded a provision, net of expected third party recoveries, related to the curtailment liability of $7.3 million . The Company has potential estimated maximum financial statement exposure for an additional $145.0 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 $10.4 million at September 30, 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.

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.

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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 September 30, 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 $54 million . In addition, the Company has recorded a receivable for a loss recovery where a recovery is deemed probable of $24 million due from insurers relating to the shareholder class action complaint detailed further below. 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 $13 million at September 30, 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.

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 United States 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 United States 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 August 28, 2015, RMS received a CID from the CFPB to produce certain documents and answer questions relating to RMS’s marketing and provision of reverse mortgage products and services. RMS has been cooperating with the CFPB by responding to the CID. The CFPB investigation staff have advised RMS that they have received authorization from the Director of the CFPB to institute an administrative proceeding against RMS regarding alleged violations by RMS of the MAP Rule and the CFPA. RMS has provided a response to the CFPB denying these allegations and discussions with the CFPB are ongoing to resolve this matter. The Company cannot provide any assurance as to the outcome of this matter.

On March 7, 2014, a putative shareholder class action complaint was filed in the United States 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

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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.

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 United States 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 September 30, 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 part 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 discharged by Walter Energy or otherwise, 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 United States 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 .

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Walter Energy 2015 Bankruptcy Filing. On July 15, 2015, Walter Energy filed for Chapter 11 bankruptcy in the United States 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.

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.

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 it 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; (ii) in light of Walter Energy’s 2015 Chapter 11 bankruptcy filing, it is unclear (a) whether Walter Energy will be obligated or able to pay any or all of such amounts owed and (b) what portion of the IRS claims against the Walter Energy consolidated tax group for 2009 and prior tax years are attributable to tax, interest and/or penalties and what priority, if any, the IRS will receive in the Alabama bankruptcy proceedings with respect to its claims against Walter Energy; and (iii) the Company cannot predict whether, in the event Walter Energy does not discharge all tax obligations for the consolidated tax group, the IRS will seek to enforce tax claims against former members of the Walter Energy consolidated tax group. 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, it cannot determine whether such liabilities, if any, could have a material adverse effect on its 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.

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 a member of the Walter Energy consolidated group for U.S. federal income tax purposes. 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.

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.

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18. 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)
September 30, 2016
Unaudited
(in thousands)

	Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries and VIEs		Eliminations and Reclassifications			Consolidated
ASSETS
Cash and cash equivalents	$	999		$	282,683	$	2,000	$	—		$	285,682
Restricted cash and cash equivalents	1,501			176,148		122,619		—			300,268
Residential loans at amortized cost, net	13,519			127,724		475,693		—			616,936
Residential loans at fair value	—			12,101,735		538,567		—			12,640,302
Receivables, net	25,188			96,035		17,122		—			138,345
Servicer and protective advances, net	—			423,727		847,557		28,629			1,299,913
Servicing rights, net	—			1,284,543		—		—			1,284,543
Goodwill	—			65,302		—		—			65,302
Intangible assets, net	—			63,087		4,988		—			68,075
Premises and equipment, net	1,385			93,201		—		—			94,586
Deferred tax assets, net	—			59,451		—		(2,576		)	56,875
Other assets	35,231			190,144		29,884		—			255,259
Due from affiliates, net	641,934			—		—		(641,934		)	—
Investments in consolidated subsidiaries and VIEs	1,492,160			164,446		—		(1,656,606		)	—
Total assets	$	2,211,917		$	15,128,226	$	2,038,430	$	(2,272,487	)	$	17,106,086

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Payables and accrued liabilities	$	152,912		$	577,757	$	6,726	$	(6,767	)	$	730,628
Servicer payables	—			141,422		—		—			141,422
Servicing advance liabilities	—			156,872		866,898		—			1,023,770
Warehouse borrowings	—			1,362,209		—		—			1,362,209
Servicing rights related liabilities at fair value	—			119,267		—		—			119,267
Corporate debt	2,124,541			—		—		—			2,124,541
Mortgage-backed debt	—			—		970,065		—			970,065
HMBS related obligations at fair value	—			10,699,720		—		—			10,699,720
Deferred tax liabilities, net	—			—		2,576		(2,576		)	—
Obligation to fund Non-Guarantor VIEs	—			47,027		—		(47,027		)	—
Due to affiliates, net	—			611,876		30,058		(641,934		)	—
Total liabilities	2,277,453			13,716,150		1,876,323		(698,304		)	17,171,622

Stockholders' equity (deficit):
Total stockholders' equity (deficit)	(65,536		)	1,412,076		162,107		(1,574,183		)	(65,536		)
Total liabilities and stockholders' equity (deficit)	$	2,211,917		$	15,128,226	$	2,038,430	$	(2,272,487	)	$	17,106,086

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Condensed Consolidating Balance Sheet (As Restated, See Note 2)
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 Three Months Ended September 30, 2016
Unaudited
(in thousands)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries and VIEs			Eliminations and Reclassifications			Consolidated
REVENUES
Net servicing revenue and fees	$	—		$	113,803		$	—		$	(2,174	)	$	111,629
Net gains on sales of loans	—			122,014			—			—			122,014
Net fair value gains (losses) on reverse loans and related HMBS obligations	—			18,687			(60		)	—			18,627
Interest income on loans	248			143			10,941			—			11,332
Insurance revenue	—			9,287			871			(158		)	10,000
Other revenues, net	(938		)	25,017			17,882			(18,233		)	23,728
Total revenues	(690		)	288,951			29,634			(20,565		)	297,330

EXPENSES
General and administrative	19,859			145,563			3,488			(17,118		)	151,792
Salaries and benefits	13,505			119,694			—			—			133,199
Goodwill and intangible assets impairment	—			97,716			—			—			97,716
Interest expense	36,986			13,249			15,451			(384		)	65,302
Depreciation and amortization	234			16,173			173			—			16,580
Corporate allocations	(32,203		)	32,203			—			—			—
Other expenses, net	47			1,150			9			—			1,206
Total expenses	38,428			425,748			19,121			(17,502		)	465,795

OTHER GAINS (LOSSES)
Net gains on extinguishment	13,734			—			—			—			13,734
Other net fair value losses	—			(643		)	(2,659		)	—			(3,302		)
Other	—			(150		)	—			—			(150		)
Total other gains (losses)	13,734			(793		)	(2,659		)	—			10,282

Income (loss) before income taxes	(25,384		)	(137,590		)	7,854			(3,063		)	(158,183		)
Income tax expense	7,505			45,550			2,185			(156		)	55,084
Income (loss) before equity in earnings (losses) of consolidated subsidiaries and VIEs	(32,889		)	(183,140		)	5,669			(2,907		)	(213,267		)
Equity in earnings (losses) of consolidated subsidiaries and VIEs	(180,378		)	2,267			—			178,111			—
Net income (loss)	$	(213,267	)	$	(180,873	)	$	5,669		$	175,204		$	(213,267	)

Comprehensive income (loss)	$	(213,281	)	$	(180,873	)	$	5,669		$	175,204		$	(213,281	)

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Condensed Consolidating Statement of Comprehensive Income (Loss)
For the Three Months Ended September 30, 2015
Unaudited
(in thousands)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries and VIEs		Eliminations and Reclassifications			Consolidated
REVENUES
Net servicing revenue and fees	$	—		$	564		$	—	$	(2,335	)	$	(1,771	)
Net gains on sales of loans	—			116,218			—		—			116,218
Net fair value gains on reverse loans and related HMBS obligations	—			52,644			—		—			52,644
Interest income on loans	344			122			11,944		—			12,410
Insurance revenue	—			7,849			1,118		(204		)	8,763
Other revenues	239			31,518			11,708		(12,336		)	31,129
Total revenues	583			208,915			24,770		(14,875		)	219,393

EXPENSES
General and administrative	8,223			132,657			3,633		(12,446		)	132,067
Salaries and benefits	5,998			136,090			—		—			142,088
Interest expense	38,371			12,511			16,517		(671		)	66,728
Depreciation and amortization	37			20,425			184		—			20,646
Corporate allocations	(12,661		)	12,661			—		—			—
Other expenses, net	214			999			1,382		—			2,595
Total expenses	40,182			315,343			21,716		(13,117		)	364,124

OTHER GAINS (LOSSES)
Other net fair value gains (losses)	—			(213		)	1,332		—			1,119
Other	3,117			8,937			—		—			12,054
Total other gains	3,117			8,724			1,332		—			13,173

Income (loss) before income taxes	(36,482		)	(97,704		)	4,386		(1,758		)	(131,558		)
Income tax expense (benefit)	(14,058		)	(40,885		)	1,015		(702		)	(54,630		)
Income (loss) before equity in earnings (losses) of consolidated subsidiaries and VIEs	(22,424		)	(56,819		)	3,371		(1,056		)	(76,928		)
Equity in earnings (losses) of consolidated subsidiaries and VIEs	(54,504		)	1,331			—		53,173			—
Net income (loss)	$	(76,928	)	$	(55,488	)	$	3,371	$	52,117		$	(76,928	)

Comprehensive income (loss)	$	(76,793	)	$	(55,488	)	$	3,371	$	52,117		$	(76,793	)

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Condensed Consolidating Statement of Comprehensive Income (Loss) (As Restated, See Note 2)
For the Nine Months Ended September 30, 2016
Unaudited
(in thousands)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries and VIEs			Eliminations and Reclassifications			Consolidated
REVENUES
Net servicing revenue and fees	$	—		$	44,507		$	—		$	(6,704	)	$	37,803
Net gains on sales of loans	—			306,667			—			—			306,667
Net fair value gains (losses) on reverse loans and related HMBS obligations	—			61,771			(286		)	—			61,485
Interest income on loans	860			345			34,147			—			35,352
Insurance revenue	—			29,215			2,971			(542		)	31,644
Other revenues, net	(1,746		)	82,259			49,967			(51,857		)	78,623
Total revenues	(886		)	524,764			86,799			(59,103		)	551,574

EXPENSES
General and administrative	42,448			417,128			9,884			(52,286		)	417,174
Salaries and benefits	44,598			354,921			—			—			399,519
Goodwill and intangible assets impairment	—			313,128			—			—			313,128
Interest expense	108,802			36,958			50,186			(1,996		)	193,950
Depreciation and amortization	598			44,419			526			—			45,543
Corporate allocations	(83,326		)	83,326			—			—			—
Other expenses, net	464			3,114			2,031			—			5,609
Total expenses	113,584			1,252,994			62,627			(54,282		)	1,374,923

OTHER GAINS (LOSSES)
Net gains on extinguishment	14,662			—			—			—			14,662
Other net fair value losses	—			(273		)	(5,992		)	—			(6,265		)
Other	—			(1,706		)	—			—			(1,706		)
Total other gains (losses)	14,662			(1,979		)	(5,992		)	—			6,691

Income (loss) before income taxes	(99,808		)	(730,209		)	18,180			(4,821		)	(816,658		)
Income tax expense (benefit)	(5,237		)	58,529			6,282			(300		)	59,274
Income (loss) before equity in earnings (loss) of consolidated subsidiaries and VIEs	(94,571		)	(788,738		)	11,898			(4,521		)	(875,932		)
Equity in earnings (loss) of consolidated subsidiaries and VIEs	(781,361		)	2,945			—			778,416			—
Net income (loss)	$	(875,932	)	$	(785,793	)	$	11,898		$	773,895		$	(875,932	)

Comprehensive income (loss)	$	(875,905	)	$	(785,793	)	$	11,898		$	773,895		$	(875,905	)

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Condensed Consolidating Statement of Comprehensive Income (Loss)
For the Nine Months Ended September 30, 2015
Unaudited
(in thousands)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries and VIEs		Eliminations and Reclassifications			Consolidated
REVENUES
Net servicing revenue and fees	$	—		$	322,570		$	66	$	(9,605	)	$	313,031
Net gains on sales of loans	—			360,844			—		—			360,844
Net fair value gains on reverse loans and related HMBS obligations	—			90,233			—		—			90,233
Interest income on loans	893			222			61,422		—			62,537
Insurance revenue	—			31,240			3,710		(627		)	34,323
Other revenues	3,527			80,157			42,858		(44,827		)	81,715
Total revenues	4,420			885,266			108,056		(55,059		)	942,683

EXPENSES
General and administrative	27,311			402,715			14,555		(41,767		)	402,814
Salaries and benefits	18,369			414,026			78		—			432,473
Goodwill impairment	—			56,539			—		—			56,539
Interest expense	112,170			35,939			64,265		(2,110		)	210,264
Depreciation and amortization	96			52,715			560		—			53,371
Corporate allocations	(39,114		)	39,114			—		—			—
Other expenses, net	(599		)	4,042			4,600		—			8,043
Total expenses	118,233			1,005,090			84,058		(43,877		)	1,163,504

OTHER GAINS (LOSSES)
Other net fair value gains (losses)	—			(545		)	4,118		—			3,573
Other	12,076			8,937			—		—			21,013
Total other gains	12,076			8,392			4,118		—			24,586

Income (loss) before income taxes	(101,737		)	(111,432		)	28,116		(11,182		)	(196,235		)
Income tax expense (benefit)	(32,552		)	(16,213		)	3,053		(4,468		)	(50,180		)
Income (loss) before equity in earnings (loss) of consolidated subsidiaries and VIEs	(69,185		)	(95,219		)	25,063		(6,714		)	(146,055		)
Equity in earnings (loss) of consolidated subsidiaries and VIEs	(76,870		)	10,719			—		66,151			—
Net income (loss)	$	(146,055	)	$	(84,500	)	$	25,063	$	59,437		$	(146,055	)

Comprehensive income (loss)	$	(145,804	)	$	(84,500	)	$	25,063	$	59,437		$	(145,804	)

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Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2016
Unaudited
(in thousands)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries and VIEs			Eliminations and Reclassifications			Consolidated
Cash flows provided by (used in) operating activities	$	(3,013	)	$	170,573		$	207,612		$	—		$	375,172

Investing activities
Purchases and originations of reverse loans held for investment	—			(653,471		)	—			—			(653,471		)
Principal payments received on reverse loans held for investment	—			770,636			—			—			770,636
Principal payments received on mortgage loans held for investment	705			—			68,533			—			69,238
Payments received on charged-off loans held for investment	—			17,827			—			—			17,827
Payments received on receivables related to Non-Residual Trusts	—			—			6,230			—			6,230
Proceeds from sales of real estate owned, net	26			78,616			2,949			—			81,591
Purchases of premises and equipment	(468		)	(28,660		)	—			—			(29,128		)
Decrease (increase) in restricted cash and cash equivalents	9,011			818			(51		)	—			9,778
Payments for acquisitions of businesses, net of cash acquired	—			(1,947		)	—			—			(1,947		)
Acquisitions of servicing rights, net	—			(7,701		)	—			—			(7,701		)
Proceeds from sales of servicing rights, net	—			35,541			—			—			35,541
Capital contributions to subsidiaries and VIEs	—			(11,878		)	—			11,878			—
Returns of capital from subsidiaries and VIEs	10,524			18,629			—			(29,153		)	—
Change in due from affiliates	10,927			58,684			(3,963		)	(65,648		)	—
Other	235			(3,900		)	—			—			(3,665		)
Cash flows provided by investing activities	30,960			273,194			73,698			(82,923		)	294,929

Financing activities
Payments on corporate debt	—			(480		)	—			—			(480		)
Extinguishments and settlement of debt	(31,037		)	—			—			—			(31,037		)
Proceeds from securitizations of reverse loans	—			684,711			—			—			684,711
Payments on HMBS related obligations	—			(958,720		)	—			—			(958,720		)
Issuances of servicing advance liabilities	—			185,444			1,341,289			—			1,526,733
Payments on servicing advance liabilities	—			(265,083		)	(1,469,169		)	—			(1,734,252		)
Net change in warehouse borrowings related to mortgage loans	—			(147,389		)	—			—			(147,389		)
Net change in warehouse borrowings related to reverse loans	—			169,210			—			—			169,210
Proceeds from sales of servicing rights	—			29,742			—			—			29,742
Payments on servicing rights related liabilities	—			(16,013		)	—			—			(16,013		)
Payments on mortgage-backed debt	—			—			(80,335		)	—			(80,335		)
Other debt issuance costs paid	(528		)	(6,707		)	(2,025		)	—			(9,260		)
Capital contributions	—			—			11,878			(11,878		)	—
Capital distributions	—			(6,125		)	(23,028		)	29,153			—
Change in due to affiliates	1,382			(6,742		)	(60,288		)	65,648			—
Other	(781		)	(19,744		)	368			—			(20,157		)
Cash flows used in financing activities	(30,964		)	(357,896		)	(281,310		)	82,923			(587,247		)

Net increase (decrease) in cash and cash equivalents	(3,017		)	85,871			—			—			82,854
Cash and cash equivalents at the beginning of the period	4,016			196,812			2,000			—			202,828
Cash and cash equivalents at the end of the period	$	999		$	282,683		$	2,000		$	—		$	285,682

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Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2015
Unaudited
(in thousands)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries and VIEs			Eliminations and Reclassifications			Consolidated
Cash flows provided by (used in) operating activities	$	(100,939	)	$	5,820		$	209,633		$	—		$	114,514

Investing activities
Purchases and originations of reverse loans held for investment	—			(1,259,927		)	—			—			(1,259,927		)
Principal payments received on reverse loans held for investment	—			618,446			—			—			618,446
Principal payments received on mortgage loans held for investment	709			—			92,353			—			93,062
Payments received on charged-off loans held for investment	—			19,859			—			—			19,859
Payments received on receivables related to Non-Residual Trusts	—			—			5,547			—			5,547
Proceeds from sales of real estate owned, net	13			50,902			6,033			—			56,948
Purchases of premises and equipment	(175		)	(16,531		)	—			—			(16,706		)
Decrease (increase) in restricted cash and cash equivalents	(4		)	(871		)	7,914			—			7,039
Payments for acquisitions of businesses, net of cash acquired	—			(4,737		)	—			—			(4,737		)
Acquisitions of servicing rights, net	—			(233,744		)	—			—			(233,744		)
Proceeds from sales of servicing rights, net	—			778			—			—			778
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	(14,531		)	(8,891		)	—			23,422			—
Returns of capital from subsidiaries and VIEs	22,449			15,464			—			(37,913		)	—
Change in due from affiliates	(59,695		)	33,094			82			26,519			—
Other	7,468			482			—			—			7,950
Cash flows provided by (used in) investing activities	160,123			(785,676		)	111,929			12,028			(501,596		)

Financing activities
Payments on corporate debt	(61,250		)	(1,294		)	—			—			(62,544		)
Proceeds from securitizations of reverse loans	—			1,382,359			—			—			1,382,359
Payments on HMBS related obligations	—			(739,447		)	—			—			(739,447		)
Issuances of servicing advance liabilities	—			193,843			518,464			—			712,307
Payments on servicing advance liabilities	—			(186,887		)	(682,223		)	—			(869,110		)
Net change in warehouse borrowings related to mortgage loans	—			142,481			—			—			142,481
Net change in warehouse borrowings related to reverse loans	—			(94,000		)	—			—			(94,000		)
Payments on servicing rights related liabilities	—			(6,849		)	—			—			(6,849		)
Payments on mortgage-backed debt	—			—			(109,808		)	—			(109,808		)
Other debt issuance costs paid	—			(5,912		)	(1,014		)	—			(6,926		)
Capital contributions	—			14,235			9,187			(23,422		)	—
Capital distributions	—			(9,926		)	(27,987		)	37,913			—
Change in due to affiliates	(444		)	59,366			(32,403		)	(26,519		)	—
Other	252			(14,226		)	1,019			—			(12,955		)
Cash flows provided by (used in) financing activities	(61,442		)	733,743			(324,765		)	(12,028		)	335,508

Net decrease in cash and cash equivalents	(2,258		)	(46,113		)	(3,203		)	—			(51,574		)
Cash and cash equivalents at the beginning of the period	3,162			311,810			5,203			—			320,175
Cash and cash equivalents at the end of the period	$	904		$	265,697		$	2,000		$	—		$	268,601

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19. Related-Party Transactions

WCO was established to invest in mortgage-related assets. The Company's investment in WCO was $19.6 million and $22.6 million at September 30, 2016 and December 31, 2015 , respectively. The Company recorded income (loss) relating to its investment in WCO of $(1.0) million and $0.2 million for the three months ended September 30, 2016 and 2015 , respectively, and $(2.0) million and $0.6 million for the nine months ended September 30, 2016 and 2015 , respectively. Additionally, the Company received a dividend of $1.0 million from WCO during the nine months ended September 30, 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 $0.4 million and $0.3 million for the three months ended September 30, 2016 and 2015 , respectively, and $1.2 million and $0.6 million for the nine months ended September 30, 2016 and 2015 , respectively, which are recorded in other revenues on the consolidated statements of comprehensive loss. The Company had $0.5 million and $1.2 million included in receivables, net on the consolidated balance sheets at September 30, 2016 and December 31, 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.

Sub-servicing fees from WCO were $1.3 million and $3.5 million during the three and nine months ended September 30, 2016 , respectively, 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 $0.2 million and $0.5 million for the three and nine months ended September 30, 2016 , respectively, 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.

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 Liabilities ⁽³⁾			Size of VIE ⁽⁴⁾
September 30, 2016	$	33,990	$	6,435	$	5,454	$	20,625	$	(7,149	)	$	(119,267	)	$	(59,912	)	$	199,712
December 31, 2015	16,889		7,015		9,814		23,578		(4,500		)	(117,000		)	(64,204		)	228,361

__________


(1)	During May 2016, the Company sold additional mortgage servicing rights to WCO for $27.9 million .


(2)	Other assets at September 30, 2016 and December 31, 2015 are primarily comprised of the Company's investment in WCO.


(3)	At September 30, 2016 and 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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20. Subsequent Events

On August 8, 2016, Ditech Financial and NRM executed an 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 sub-servicing retained. After giving effect to certain adjustments based upon developments with respect to the MSR pool prior to the closing date and calculated in accordance with the NRM Flow and Bulk Agreement, this first bulk MSR transaction closed on October 3, 2016 and NRM purchased from Ditech Financial MSRs with an aggregate unpaid principal balance of $32.3 billion for a purchase price of $212 million .

On October 11, 2016, Ditech Financial agreed to sell to NRM mortgage servicing rights with respect to a pool of mortgage loans with an aggregate unpaid principal balance of $5.0 billion for a purchase price of $27 million (in each case subject to adjustment based upon developments with respect to the MSR pool prior to the closing date), with sub-servicing expected to be retained. The closing of this second bulk MSR transaction between Ditech Financial and NRM under the NRM Flow and Bulk Agreement is subject to the receipt of certain government-sponsored entity and other approvals, various other conditions precedent and certain termination provisions.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (AS RESTATED)

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. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q/A and in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016 and with the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in that Annual Report on Form 10-K. Historical results and trends discussed herein and therein may not be indicative of future operations, particularly in light of regulatory developments. Our results of operations and financial condition, as reflected in the accompanying consolidated financial statements and related footnotes, reflect management’s evaluation and interpretation of business conditions, changing capital market conditions, and other factors.

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 nine months ended September 30, 2017 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 2 has been amended and this Item 2 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.

We use certain acronyms and terms throughout this Quarterly Report on Form 10-Q/A that are defined in the Glossary of Terms of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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 Quarterly Report on Form 10-Q/A.

Our Investor Relations Department can be contacted at 3000 Bayport Drive, Suite 1100, Tampa, Florida 33607, Attn: Investor Relations, telephone (813) 421-7694.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Certain statements in this report, including matters discussed under this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Part II, Item 1. Legal Proceedings, and 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. 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 under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015 , our Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2016 and Form 10-Q/A for the quarterly period ended June 30, 2016, this Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2016 , and in our other filings with the SEC.

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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. GSEs 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;


•	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;

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•	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 ability 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;


•	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;

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•	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.

Executive Summary

The Company

We are a diversified mortgage banking firm focused primarily on servicing and originating residential loans, including reverse 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 and correspondent lending channels, we originate and purchase residential loans that we predominantly sell to GSEs and government entities. In addition, we operate several other complementary businesses that include managing a portfolio of credit-challenged, non-conforming residential mortgage loans; an insurance agency serving borrowers and credit owners of our servicing portfolio; a post charge-off collection agency; and an asset management business through our SEC registered investment advisor. These supplemental businesses allow us to leverage our core servicing capabilities and consumer base to generate complementary revenue streams.

At September 30, 2016 , we serviced 2.1 million residential loans with a total unpaid principal balance of $255.8 billion . We have been one of the 10 largest mortgage loan servicers in the U.S. by unpaid principal balance for the past three years according to Inside Mortgage Finance. Our originations business originated $15.0 billion in mortgage loan volume during the first nine months of 2016 , ranking it in the top 20 originators nationally by unpaid principal balance according to Inside Mortgage Finance. Our reverse mortgage business is a leading integrated franchise in the reverse mortgage sector and, according to an industry source, was the sixth leading issuer of HMBS during the nine months ended September 30, 2016.

During the nine months ended September 30, 2016 , we added to the unpaid principal balance of our third-party mortgage loan servicing portfolio: $5.2 billion relating to acquired servicing rights, $10.8 billion relating to sub-servicing contracts and $10.3 billion relating to servicing rights capitalized upon sales of mortgage loans, while also adding $2.1 billion to our third-party reverse loan servicing portfolio. Our third-party mortgage loan and reverse mortgage servicing portfolio was reduced by $39.3 billion of unpaid principal balance in payoffs and sales, net of recapture activities, during the nine months ended September 30, 2016 . In the same period, we originated and purchased $640.6 million in reverse mortgage volume and issued $622.0 million in HMBS.

Our mortgage loan originations business diversifies our revenue base and offers various sources for replenishing our servicing portfolio. During the nine months ended September 30, 2016 , we originated $5.0 billion of mortgage loans, the majority of which resulted from retention activities associated with our existing servicing portfolio. Through our retention activities, we assist consumers in refinancing their loans, which reduces the runoff on our existing servicing portfolio. In addition, we purchased $10.0 billion of mortgage loans through our correspondent channel during the nine months ended September 30, 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:

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Servicing — Our Servicing segment consists of operations that perform servicing for third-party credit owners of mortgage loans for a fee and the Company’s own mortgage loan portfolio. The Servicing segment also operates complementary businesses consisting of an insurance agency serving residential loan borrowers and credit owners and 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.

Originations — Our Originations segment consists of operations that originate and purchase mortgage loans that are intended for sale to third parties. During the nine months ended September 30, 2016 , the mix of mortgage loans sold by our Originations segment, based on unpaid principal balance, consisted of (i) 46% Fannie Mae conventional conforming loans, (ii) 40% Ginnie Mae loans, and (iii) 14% Freddie Mac conventional conforming loans.

Reverse Mortgage — Our Reverse Mortgage segment consists of operations that purchase and originate HECMs that are securitized, but remain on the consolidated balance sheet as collateral for secured borrowings. This segment performs servicing for third-party credit owners and the Company and provides other complementary services for the reverse mortgage market, such as real estate owned property management and disposition.

Other — Our Other non-reportable segment primarily consists of the assets and liabilities of the Non-Residual Trusts, corporate debt and our asset management business, which we operate through GTIM.

Overview

Our profitability is dependent on our ability to generate revenue, primarily from our servicing and originations businesses. Our Servicing segment revenue is primarily impacted by the size and mix of our capitalized servicing and sub-servicing portfolios and is generated through servicing of mortgage loans for clients and/or credit owners. Net servicing revenue and fees includes 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 level and timing of entrance into sub-servicing 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, which are influenced by interest rates. Our Originations segment revenue, which is primarily 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 origination channels. Net gains on sales of loans include the cost of additions to the representations and warranties reserve. Our Reverse Mortgage segment is impacted by new origination reverse loan volume, draws on existing reverse loans, sub-servicing contracts and the fair value of reverse loans and HMBS.

Our results of operations are also affected by expenses such as salaries and benefits, information technology, occupancy, legal and professional fees, the provision for uncollectible advances, curtailment, interest expense and other operating expenses. Refer to the Financial Highlights, Results of Operations and Business Segment Results sections below for further information.

Currently, our profitability in the Reverse segment is being negatively impacted by the legacy HECM product and the acceleration of default status driven by new HUD regulations. Regulatory changes to the HECM program in late 2013 reduced the principal available to be drawn initially by borrowers, and further changes effective in April of 2015 introduced certain financial assessment requirements of borrowers and in certain instances, required that a portion of the borrowing capacity be set-aside to pay for insurance and taxes on the related property. We believe that over time, the improved credit risk profile of these products may have a favorable impact on our costs to service reverse mortgages as the legacy HECM product seasons and the newer HECM IDL product becomes a larger portion of our portfolio.

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, issuance of HMBS and excess servicing spread financing arrangements. We may generate additional liquidity through sales of MSRs, any portion thereof, or other assets.

Financial Highlights

Total revenues for the three months ended September 30, 2016 were $297.3 million , which represented an increase of $77.9 million , or 36% , as compared to the same period of 2015 . The increase in revenue reflects an increase of $113.4 million in net servicing revenue and fees, primarily driven by $138.9 million in lower fair value losses on servicing rights.

Total revenues for the nine months ended September 30, 2016 were $551.6 million , which represented a decline of $391.1 million , or 41% , as compared to the same period of 2015 . The decline in revenue reflects a decrease of $275.2 million in net servicing revenue and fees, primarily driven by $247.1 million in higher fair value losses on servicing rights; $54.2 million in lower net gains on sales of loans; and $27.2 million in lower interest income on loans.

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During the nine months ended September 30, 2016 , we recorded fair value losses on our servicing rights carried at fair value primarily as a result of a higher assumed conditional prepayment rate used to value our servicing rights and accelerated realization of expected cash flows driven by declining interest rates, as well as an increase in discount rates. 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 interest in seven of the Residual Trusts in the second quarter of 2015.

Total expenses for the three months ended September 30, 2016 were $465.8 million , which represented an increase of $101.7 million as compared to the same period of 2015 , which reflects $97.7 million in higher goodwill and intangible assets impairment. Income tax expense was impacted by the recording of a valuation allowance on the deferred tax assets balance in the amount of $111.4 million in connection with the restatement as discussed in Note 2 to the Consolidated Financial Statements.

Total expenses for the nine months ended September 30, 2016 were $1.4 billion , which represented an increase of $211.4 million as compared to the same period of 2015 . The increase in expenses reflects $256.6 million in higher goodwill and intangible assets impairment, offset in part by $33.0 million in lower salaries and benefits and $16.3 million in lower interest expense for the nine months ended September 30, 2016 as compared to the same period of 2015 . Income tax expense was impacted by the recording of a valuation allowance on the deferred tax assets balance in the amount of $369.0 million in connection with the restatement as discussed in Note 2 to the Consolidated Financial Statements.

As a result of goodwill evaluations performed during the second and third quarters of 2016, we recorded $215.4 million and $91.0 million , respectively, in non-cash goodwill impairment charges, which impacted the Servicing and ARM reporting units' goodwill. In addition, we incurred $6.7 million in intangible assets impairment charges to our Reverse Mortgage segment as a result of an evaluation performed in the third quarter of 2016. As a result of goodwill evaluations performed during the second quarter of 2015, we recorded $56.5 million in non-cash goodwill impairment charges to the Reverse Mortgage reporting unit's goodwill. Intangible assets impairment is included in goodwill and intangible assets impairment in the consolidated statements of comprehensive loss. Refer to Note 9 to the Consolidated Financial Statements for additional information on the goodwill and intangible assets impairment charges incurred during 2016.

We had lower salaries and benefits primarily due to a decrease in compensation, benefits and incentives resulting from a lower average headcount, a decrease in commissions 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 driven by a decrease in interest expense related to mortgage-backed debt, primarily as a result of the sale of our residual interest in seven of the Residual Trusts in April 2015.

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 to certain custodial accounts that are not reflected in the consolidated balance sheets. 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 $375.2 million during the nine months ended September 30, 2016 . We finished the nine months ended September 30, 2016 with $285.7 million in cash and cash equivalents. Cash flows provided by operating activities increased by $260.7 million during the nine months ended September 30, 2016 as compared to the same period of 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 originated loans for the nine months ended September 30, 2016 as compared to the same period of 2015.

Refer to the Results of Operations and Business Segment Results sections below for further information on the changes addressed above. Also included in our Business Segment Results 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.

Strategy

Capital Efficiency

We are focused on using our capital efficiently while continuing to pursue opportunities to bolster our servicing portfolio. First, we use our originations platform to refinance and retain loans in our current servicing portfolio as well as to generate new loans to add to our servicing portfolio. Second, we are seeking to increase over time the portion of our servicing portfolio that is associated with sub-servicing contracts, which generate fee income for us with lower capital outlay, as compared to purchasing servicing rights. Third, we believe there will continue to be a trend towards consolidation in the mortgage servicing industry and, accordingly, from time to time if opportunities arise, we may seek to acquire mortgage servicing rights or other businesses or assets that are complementary to our core servicing portfolio and mortgage banking platform.

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With a view to using our capital efficiently, we expect to limit or reduce our investment in mortgage servicing rights. We plan to seek opportunities to sell mortgage servicing rights owned by us to third parties, generally on the basis that we are retained by the buyer to sub-service such rights; however, from time to time we may sell the servicing rights with servicing released. We may also seek to sell excess servicing spread or other similar assets. Our ability to execute such transactions will depend on various factors such as the capital available to potential counterparties, their ability to purchase servicing rights at a price attractive to them, and agreement between us and them on the price and terms for our sub-servicing engagement. In May 2016, we sold Fannie Mae mortgage servicing rights to a third party for $40.2 million, for which we did not retain sub-servicing on the related mortgage loans. In May 2016, we sold Fannie Mae mortgage servicing rights to WCO for $27.9 million ; we continue to service the mortgage loans relating to these mortgage servicing rights under our sub-servicing arrangement with WCO. Additionally, in 2016, Fannie Mae sold certain non-performing loans for which we owned the servicing rights. In connection with this transaction, we paid $12.9 million to relinquish our servicing rights related to these loans and we were reimbursed for approximately $200 million in related protective advances. The majority of these proceeds were used to pay down related servicing advance facilities.

In part to simplify our business and also to generate cash in connection with our focus on efficient use of capital, we have sold certain non-core assets, including our first quarter 2015 sale of an equity method investment and our April 2015 sale of the residual interest in seven of the Residual Trusts. During the second quarter of 2016, we began to evaluate strategic options for our reverse mortgage business, including the possibility of transitioning this business to a fee-for-service model, entering into flow arrangements for future production, selling some or all of the business and other potential alternatives. Total assets within the reverse business were $11.2 billion as of September 30, 2016 . Further, we continue to work on a potential sale of substantially all of our insurance business. We are not certain whether we will be able to consummate the sale of our insurance business or effectuate the strategic alternatives being considered for the reverse mortgage business. We may consider other asset sale opportunities if they arise.

During the nine months ended September 30, 2016 , we repurchased $7.2 million in principal balance of the 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 strengthen our capital structure. We intend to pursue additional opportunities designed to further strengthen our capital structure through the efficient deployment of capital we generate from operations and other future actions. Among other things, we may deploy funds to reduce our leverage by repurchasing debt securities in privately negotiated or open market transactions, by tender offer or otherwise, or repaying 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. We may also from time to time seek to repurchase our equity securities. Our ability to deploy such funds or engage in such transactions may be limited by covenants in our debt facilities and securities and by our other contractual and regulatory obligations, including covenants restricting our ability to sell assets, covenants imposing requirements on the use of the proceeds from such sales and covenants and other obligations requiring us to meet certain financial tests.

Operational Efficiency

We have been focused on improving the efficiency of and reducing costs in our operations. We have already taken actions that we expect will result in over $75 million of annual savings, including $17 million of cost savings from actions taken during the first quarter of 2016, and includes further site consolidation, operational realignment, a focused collections strategy and the redesign of certain operational procedures. Approximately $46 million of these annual savings as well as the elimination of losses from closure of retail originations were a direct result of the exit activities discussed in Note 10 to the Consolidated Financial Statements. One-time costs associated with exit activities were $11.4 million during the nine months ended September 30, 2016 .

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 and our compliance results. We expect further investments 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.

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Transactions with NRM

The NRM Flow and Bulk Agreement provides that, from time to time, Ditech Financial may sell additional MSRs 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. 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. 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 to the NRM Flow and Bulk Agreement, on August 8, 2016, Ditech Financial and NRM entered into a sub-servicing agreement whereby Ditech Financial will act as sub-servicer for the mortgage loans whose MSRs are sold by Ditech Financial to NRM under the NRM Flow and Bulk Agreement, including the MSRs sold by Ditech Financial to NRM in the aforementioned bulk MSR transactions between Ditech Financial and NRM, and for other mortgage loans as may be agreed upon by Ditech Financial and NRM from time to time, in exchange for a sub-servicing fee. Under the NRM Sub-servicing Agreement and a related agreement, Ditech Financial will perform all daily servicing obligations on behalf of NRM with respect to the MSRs that are serviced by Ditech Financial pursuant to the terms of the NRM Sub-servicing 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 Sub-servicing Agreement will expire on the first anniversary of the effective date thereof and will be renewed for successive one year terms, subject to certain termination rights. With respect to NRM, the initial term of the NRM Sub-servicing Agreement will expire on the first anniversary of the effective date thereof and thereafter shall automatically terminate unless renewed on a monthly basis, subject to certain termination rights.

Sub-servicing

As of September 30, 2016, 24% of our mortgage loan servicing portfolio was comprised of sub-servicing for third parties, and our two largest sub-servicing customers represented 46% and 18%, respectively, of our total sub-servicing portfolio. Following the October 3, 2016 closing of our initial bulk sale of MSRs to NRM under the NRM Flow and Bulk Agreement (with sub-servicing retained by Ditech Financial), we estimate that approximately 37% of our mortgage loan servicing portfolio was comprised of sub-servicing for third parties, and that our two largest sub-servicing customers represented approximately 34% and 30%, respectively, of our total sub-servicing portfolio. These estimates are based on unpaid principal loan balances as of September 30, 2016.

The sub-servicing contracts pursuant to which we are retained to sub-service mortgage loans generally provide that our customer, the owner of the MSRs that we sub-service, can terminate us as sub-servicer with or without cause, and each such contract has unique terms establishing the fees we will be paid for our work under the contract and the standards of performance we are required to meet in servicing the relevant mortgage loans, such that the profitability of our sub-servicing activity may vary among different contracts. We believe that our sub-servicing customers consider various factors from time to time in determining whether to retain or change sub-servicers, including the financial strength and servicer ratings of the sub-servicer, the sub-servicer's record of compliance with regulatory and contractual obligations (including any enhanced, "high touch" processes required by the contract) and the success of the sub-servicer in limiting the default rate of the relevant portfolio. The termination of one or more of our sub-servicing contracts could have a material adverse effect on us, including on our business, financial condition, liquidity and results of operations. See the risk factor entitled “The owners of loans we service or sub-service may, under certain circumstances, transfer our servicing rights or sub-servicing or otherwise terminate our servicing rights or sub-servicing contracts” in Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2015 for a discussion of certain additional risks and uncertainties relating to our sub-servicing contracts.

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Walter Capital Opportunity Corp.

In 2014, we established WCO, a company formed to invest in mortgage-related assets, including MSRs, excess servicing spread related to MSRs, residential whole loans, agency mortgage-backed securities and other real estate-related securities and related derivatives, (i) to facilitate our transition toward a business model in which, where appropriate and feasible, we sub-service and manage mortgage-related assets owned by third parties rather than by us, and (ii) to grow our investment management business. We, WCO and NRM are negotiating transaction documents relating to a sale of substantially all of WCO’s assets and certain related transactions. We expect to sub-service the MSRs acquired by NRM in connection with these transactions, all of which are subject to negotiation, finalization and execution of transaction documents and, thereafter, GSE approval and other conditions to closing, as applicable. There can be no assurance we, WCO and NRM will successfully execute these transactions.

As of September 30, 2016 , WCO had aggregate total capital commitments of $245 million, of which approximately $220 million had been funded, including the entirety of our $20.0 million capital commitment. We also own warrants to purchase additional equity in WCO.

Concurrently with the first funding of WCO capital commitments in July 2014:

(i)

we entered into a management agreement with WCO pursuant to which GTIM was appointed the manager of WCO. Under the management agreement, GTIM provides investment advisory and management services to WCO and administers its business activities and day-to-day operations, including providing the management team of WCO (which is comprised of persons that are also officers and/or employees of the Company) and counseling WCO regarding its qualification as a REIT. GTIM provides its services under the management agreement subject to the supervision of WCO’s board of directors, which was comprised of four members as of June 30, 2016. Effective June 30, 2016, our former Chief Executive Officer and Vice Chairman resigned from the WCO board, and effective July 1, 2016, we appointed two of our officers to the WCO board, which resulted in the WCO board being comprised of five members as of July 1, 2016. Pursuant to the management agreement, GTIM is entitled to earn a base management fee and certain performance-based incentive fees. The management agreement has an initial four-year term, with automatic one-year renewal periods;

(ii)

we entered into a contribution agreement with WCO, which was subsequently amended, and pursuant thereto, in May 2015, contributed 100% of the equity of Marix to WCO (Marix holds certain state licenses to own MSRs and is an approved Freddie Mac and Fannie Mae servicer; however, any transfer to Marix of an MSR relating to a GSE mortgage loan would require the consent of the applicable GSE, and potentially other approvals);


(iii)	we sold to WCO a portion of the excess servicing spread associated with certain mortgage loans serviced by us for $75.4 million; and


(iv)	we 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 we originate and certain excess servicing spread that we may create from time to time.

In November 2015, we entered into additional arrangements with WCO:


(i)	we sold to WCO excess servicing spread associated with certain mortgage loans serviced by us for $46.8 million;


(ii)	we sold mortgage servicing rights originated by Ditech Financial to WCO for $17.8 million;


(iii)	we entered into a sub-servicing arrangement with WCO pursuant to which we sub-service the mortgage loans underlying the mortgage servicing rights sold by Ditech Financial to WCO in exchange for a sub-servicing fee; and


(iv)	Ditech Financial was engaged by WCO to offer refinancing options to borrowers with mortgage loans underlying the aforementioned excess spread sale transaction and mortgage servicing rights transaction for purposes of minimizing portfolio runoff.

Further, in May 2016, pursuant to the aforementioned November 2015 arrangement, we sold additional mortgage servicing rights originated by Ditech Financial to WCO for $27.9 million, and in accordance with the aforementioned sub-servicing arrangement with WCO are now sub-servicing the mortgage loans underlying the mortgage servicing rights sold in exchange for a sub-servicing fee.

In addition, we have entered into servicing and sub-servicing arrangements with WCO pursuant to which we service residential whole loans acquired by WCO from a third party in exchange for a servicing fee and sub-service GSE mortgage loans underlying mortgage servicing rights acquired by WCO from a third party in exchange for a sub-servicing fee. Ditech Financial was also engaged by WCO to offer refinancing options to borrowers with mortgage loans underlying the aforementioned sub-servicing arrangement for purposes of minimizing portfolio runoff.

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We have sold excess servicing spread and servicing rights to WCO and have been engaged by WCO to service whole loans and sub-service mortgage loans underlying mortgage servicing rights owned by WCO.

Regulatory Developments

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 and the VA/FHA. Furthermore, our industry has been under increased scrutiny by federal and state regulators over the past several years. 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.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2015 for additional information about the regulatory framework under which we operate.

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Results of Operations — Comparison of Consolidated Results of Operations (dollars in thousands):



	For the Three Months Ended September 30,						Variance					For the Nine Months Ended September 30,						Variance
	2016			2015			$			%		2016			2015			$			%
	(Restated)											(Restated)
REVENUES
Net servicing revenue and fees	$	111,629		$	(1,771	)	$	113,400		n/m		$	37,803		$	313,031		$	(275,228	)	(88	)%
Net gains on sales of loans	122,014			116,218			5,796			5	%	306,667			360,844			(54,177		)	(15	)%
Net fair value gains on reverse loans and related HMBS obligations	18,627			52,644			(34,017		)	(65	)%	61,485			90,233			(28,748		)	(32	)%
Interest income on loans	11,332			12,410			(1,078		)	(9	)%	35,352			62,537			(27,185		)	(43	)%
Insurance revenue	10,000			8,763			1,237			14	%	31,644			34,323			(2,679		)	(8	)%
Other revenues	23,728			31,129			(7,401		)	(24	)%	78,623			81,715			(3,092		)	(4	)%
Total revenues	297,330			219,393			77,937			36	%	551,574			942,683			(391,109		)	(41	)%

EXPENSES
General and administrative	151,792			132,067			19,725			15	%	417,174			402,814			14,360			4	%
Salaries and benefits	133,199			142,088			(8,889		)	(6	)%	399,519			432,473			(32,954		)	(8	)%
Goodwill and intangible assets impairment	97,716			—			97,716			n/m		313,128			56,539			256,589			n/m
Interest expense	65,302			66,728			(1,426		)	(2	)%	193,950			210,264			(16,314		)	(8	)%
Depreciation and amortization	16,580			20,646			(4,066		)	(20	)%	45,543			53,371			(7,828		)	(15	)%
Other expenses, net	1,206			2,595			(1,389		)	(54	)%	5,609			8,043			(2,434		)	(30	)%
Total expenses	465,795			364,124			101,671			28	%	1,374,923			1,163,504			211,419			18	%

OTHER GAINS (LOSSES)
Net gains on extinguishment	13,734			—			13,734			n/m		14,662			—			14,662			n/m
Other net fair value gains (losses)	(3,302		)	1,119			(4,421		)	(395	)%	(6,265		)	3,573			(9,838		)	(275	)%
Other	(150		)	12,054			(12,204		)	(101	)%	(1,706		)	21,013			(22,719		)	(108	)%
Total other gains	10,282			13,173			(2,891		)	(22	)%	6,691			24,586			(17,895		)	(73	)%

Loss before income taxes	(158,183		)	(131,558		)	(26,625		)	20	%	(816,658		)	(196,235		)	(620,423		)	316	%
Income tax expense (benefit)	55,084			(54,630		)	109,714			(201	)%	59,274			(50,180		)	109,454			(218	)%
Net loss	$	(213,267	)	$	(76,928	)	$	(136,339	)	177	%	$	(875,932	)	$	(146,055	)	$	(729,877	)	500	%

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Net Servicing Revenue and Fees

A summary of net servicing revenue and fees is provided below (dollars in thousands):



	For the Three Months Ended September 30,						Variance					For the Nine Months Ended September 30,						Variance
	2016			2015			$			%		2016			2015			$			%
Servicing fees	$	172,780		$	179,938		$	(7,158	)	(4	)%	$	527,616		$	527,986		$	(370	)	—	%
Incentive and performance fees	17,158			25,093			(7,935		)	(32	)%	54,941			90,512			(35,571		)	(39	)%
Ancillary and other fees	23,434			24,333			(899		)	(4	)%	73,101			75,252			(2,151		)	(3	)%
Servicing revenue and fees	213,372			229,364			(15,992		)	(7	)%	655,658			693,750			(38,092		)	(5	)%
Changes in valuation inputs or other assumptions ⁽¹⁾	(25,922		)	(158,251		)	132,329			(84	)%	(412,095		)	(173,499		)	(238,596		)	138	%
Other changes in fair value ⁽²⁾	(60,114		)	(66,678		)	6,564			(10	)%	(188,014		)	(179,524		)	(8,490		)	5	%
Change in fair value of servicing rights	(86,036		)	(224,929		)	138,893			(62	)%	(600,109		)	(353,023		)	(247,086		)	70	%
Amortization of servicing rights	(5,822		)	(6,656		)	834			(13	)%	(13,058		)	(20,634		)	7,576			(37	)%
Change in fair value of servicing rights related liabilities	(9,885		)	450			(10,335		)	n/m		(4,688		)	(7,062		)	2,374			(34	)%
Net servicing revenue and fees	$	111,629		$	(1,771	)	$	113,400		n/m		$	37,803		$	313,031		$	(275,228	)	(88	)%

__________


(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 on servicing performed for third parties in which we either own the servicing right or act as sub-servicer. This revenue includes contractual fees earned on the serviced loans, incentive and performance fees earned based on the performance of certain loans or loan portfolios serviced by us, and loan modification fees. Servicing revenue and fees also include asset recovery income, which is included in incentive and performance fees, and ancillary fees such as late fees and expedited payment fees. Servicing revenue and fees are adjusted for the amortization and change in fair value of servicing rights and the change in fair value of the servicing rights related liabilities.

Servicing fees decreased $7.2 million for the three months ended September 30, 2016 as compared to the same period of 2015 due primarily to runoff of the servicing portfolio, the sale of servicing rights for which we did not retain sub-servicing, and a decline in the average servicing fee related to our Servicing segment, partially offset by portfolio acquisitions and servicing rights capitalized as a result of our loan origination activities. Incentive and performance fees decreased $7.9 million and $35.6 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, due primarily to lower real estate owned management fees resulting from the phase out of one of our larger arrangements for the management of real estate owned, and lower fees earned under HAMP resulting from lower fees for maintenance of performing modified loans no longer eligible for HAMP incentive fees. Ancillary and other fees remained relatively flat for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 . 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 our 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 $54.2 million for the nine months ended September 30, 2016 as compared to the same period of 2015 primarily due to a lower volume of locked loans, partially offset by a shift in mix from the lower margin correspondent channel to the higher margin consumer channel. Additionally, we had lower capitalized servicing rights due primarily to a lower volume of loans sold with servicing retained, coupled with a reduction in the fair value of servicing rights.

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.

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Net fair value gains on reverse loans and related HMBS obligations decreased $34.0 million and $28.7 million during the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, due primarily to a flattening of the interest rate curve in 2016 as compared to 2015 and lower origination volumes. 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.

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 interest in seven of the Residual Trusts, or the sale of our residual interests, and deconsolidated the assets and liabilities of these trusts. Interest income on loans decreased $27.2 million for the nine months ended September 30, 2016 as compared to the same period of 2015 primarily due to the aforementioned sale of our residual interests in 2015, 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 Three Months Ended September 30,									For the Nine Months Ended September 30,
	2016			2015			Variance			2016			2015			Variance
Residential loans at amortized cost
Interest income	$	11,332		$	12,410		$	(1,078	)	$	35,352		$	62,537		$	(27,185	)
Average balance ^{(1) (2)}	503,166			538,474			(35,308		)	512,518			883,016			(370,498		)
Annualized average yield	9.01		%	9.22		%	(0.21		)%	9.20		%	9.44		%	(0.24		)%

__________


(1)	Average balance is calculated as the average recorded investment in the loans at the beginning of each month during the period.


(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 10 to the Consolidated Financial Statements for further information.

Other Revenues

Other revenues consist primarily of the change in fair value of charged-off loans, origination fee income, investment income and other interest income. Other revenues decreased $7.4 million for the three months ended September 30, 2016 as compared to the same period of 2015 due primarily to $3.9 million in lower fair value gains relating to charged-off loans resulting from lower variances between actual and expected collections over time and $2.9 million in lower origination fee income resulting from a decline in originations volume during 2016. Origination fee income was $9.9 million and $12.8 million for the three months ended September 30, 2016 and 2015 , respectively.

Other revenues decreased $3.1 million for the nine months ended September 30, 2016 as compared to the same period of 2015 due primarily to $2.6 million in higher losses on our equity-method investment in WCO, $1.7 million in lower other interest income, $1.5 million in lower fair value gains relating to charged-off loans resulting from lower variances between actual and expected collections over time. These decreases were partially offset by $2.4 million in higher origination fee income resulting from our having waived certain fees charged to borrowers refinancing mortgage loans during the first half of 2015, offset in part by lower originations volume during 2016. Origination fee income was $31.3 million and $28.9 million for the nine months ended September 30, 2016 and 2015 , respectively.

General and Administrative

General and administrative expenses increased $19.7 million for the three months ended September 30, 2016 as compared to the same period of 2015 resulting primarily from $14.8 million in additional costs to support efficiency and technology-related initiatives, $5.6 million in higher accruals for loss contingencies and legal expenses primarily related to the cost of defending and resolving legal proceedings, and $4.5 million in additional purchased services driven by the MSP implementation and processing costs as well as other business initiatives, partially offset by $4.6 million in lower curtailment expense and $4.6 million in lower advertising costs due to a decrease in mail solicitations and internet lead generation due to a strategy shift in lead acquisition.

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General and administrative expenses increased $14.4 million for the nine months ended September 30, 2016 as compared to the same period of 2015 resulting primarily from $29.7 million in additional costs to support efficiency and technology-related initiatives including the MSP conversion in the second quarter of 2016, $11.2 million in higher legal accruals for loss contingencies and legal expenses primarily related to the cost of defending and resolving legal proceedings, $6.7 million in additional purchased services driven by the MSP implementation and processing costs as well as other business initiatives, and $5.1 million in higher information technology maintenance costs, partially offset by $15.4 million in lower curtailment expense, $15.4 million in lower advertising costs primarily due to a decrease in mail solicitations and internet lead generation due to a strategy shift in lead acquisition, and 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.

Salaries and Benefits

Salaries and benefits decreased $8.9 million and $33.0 million during the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, primarily due to a decrease in compensation, benefits and incentives resulting from a lower average headcount, a decrease in commissions due to lower originations volume, and a decrease in share-based compensation due to higher forfeitures, partially offset by an increase in severance. Headcount decreased by approximately 900 full-time employees from approximately 5,900 at September 30, 2015 to approximately 5,000 at September 30, 2016 .

Goodwill and Intangible Assets Impairment

We incurred $91.0 million and $306.4 million in goodwill impairment charges in our Servicing segment during the three and nine months ended September 30, 2016 , respectively, as a result of evaluations performed in the second and third quarters of 2016. In addition, we incurred $6.7 million in intangible assets impairment charges in our Reverse Mortgage segment as a result of an evaluation performed in the third quarter of 2016. Refer to Note 9 to the Consolidated Financial Statements for further information.

We incurred $56.5 million in goodwill impairment charges in our Reverse Mortgage segment during the nine months ended September 30, 2015 as a result of an evaluation performed in the second quarter of 2015. As a result of these impairment charges, the Reverse Mortgage reporting unit no longer has goodwill.

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 $16.3 million for the nine months ended September 30, 2016 as compared to the same period of 2015 driven by a decrease in interest expense related to mortgage-backed debt primarily as a result of the sale of our residual interest in seven of the Residual Trusts in April 2015, which required the deconsolidation of the related mortgage-backed debt, and the runoff of the overall related mortgage loan portfolio. Refer to the Liquidity and Capital Resources section below for additional information on our debt.

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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 Three Months Ended September 30,									For the Nine Months Ended September 30,
	2016			2015			Variance			2016			2015			Variance
Corporate debt ⁽¹⁾
Interest expense	$	36,986		$	38,378		$	(1,392	)	$	108,803		$	112,204		$	(3,401	)
Average balance ⁽⁴⁾	2,167,598			2,267,256			(99,658		)	2,177,966			2,268,233			(90,267		)
Annualized average rate	6.83		%	6.77		%	0.06		%	6.66		%	6.60		%	0.06		%

Servicing advance liabilities ⁽²⁾
Interest expense	$	9,608		$	9,714		$	(106	)	$	31,899		$	30,385		$	1,514
Average balance ⁽⁴⁾	992,338			1,228,972			(236,634		)	1,146,433			1,272,349			(125,916		)
Annualized average rate	3.87		%	3.16		%	0.71		%	3.71		%	3.18		%	0.53		%

Master repurchase agreements ⁽³⁾
Interest expense	$	11,704		$	11,053		$	651		$	31,771		$	31,030		$	741
Average balance ⁽⁴⁾	1,321,527			1,540,823			(219,296		)	1,223,034			1,497,058			(274,024		)
Annualized average rate	3.54		%	2.87		%	0.67		%	3.46		%	2.76		%	0.70		%

Mortgage-backed debt of the Residual Trusts ⁽²⁾
Interest expense	$	7,004		$	7,583		$	(579	)	$	21,477		$	36,645		$	(15,168	)
Average balance ⁽⁵⁾	449,848			487,629			(37,781		)	459,578			754,248			(294,670		)
Annualized average rate	6.23		%	6.22		%	0.01		%	6.23		%	6.48		%	(0.25		)%

__________


(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 period.

Depreciation and Amortization

Depreciation and amortization decreased $4.1 million and $7.8 million during the three and nine months ended September 30, 2016 , respectively, as compared to the same periods of 2015 , respectively, 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 $13.7 million and $14.7 million for the three and nine months ended September 30, 2016, respectively, are primarily attributable to the repurchase of a portion of our Convertible Notes with a carrying value of $39.3 million during the third quarter of 2016, which resulted in a gain of $14.5 million , offset in part by a loss on extinguishment related to the 2013 Revolver.

Other Net Fair Value Gains (Losses)

Other net fair value gains (losses) decreased $4.4 million and $9.8 million for the three and nine months ended September 30, 2016 , respectively, as compared to the same periods of 2015 , respectively, due primarily to higher net fair value losses on the assets and liabilities of the Non-Residual Trusts during 2016.

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Other Gains (Losses)

Other gains of $12.1 million and $21.0 million for the three and nine months ended September 30, 2015, respectively, include an $8.9 million realized gain recognized on the sale of a trading security and a $3.1 million gain for consideration received from the contribution of 100% of the equity of Marix to WCO. In the third quarter of 2015, we received and subsequently sold a trading security as consideration for the sale of the excess servicing spread associated with certain servicing rights. In addition, other gains for the nine months ended September 30, 2015 include an $11.8 million gain recognized on the sale of an investment accounted for using the equity method in the first quarter of 2015 and a $2.8 million loss recognized on the sale of our residual interests in the second quarter of 2015.

Income Tax Expense (Benefit)

We calculate income tax expense (benefit) based on our estimated annual effective tax rate, which takes into account all expected ordinary activity for the calendar year. 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.

Income tax expense was $55.1 million during the three months ended September 30, 2016 , as compared to an income tax benefit of $54.6 million in the same period of 2015 . This change was primarily driven by the additional valuation allowance recorded on the net deferred tax assets balance in connection with this Amended Filing of $111.4 million .

Income tax expense was $59.3 million during the nine months ended September 30, 2016 , as compared to an income tax benefit of $50.2 million in for the same period of 2015 . The decrease in income tax benefit was primarily driven by the additional valuation allowance recorded on the net deferred tax assets balance in connection with this Amended Filing of $369.0 million , offset in part by the impairment of non-deductible goodwill.

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. Deferred tax assets, net decreased $369.0 million 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, which increased the valuation allowance by $369.0 million at September 30, 2016 .

Non-GAAP Financial Measures

We manage our Company in three reportable segments: Servicing, Originations and Reverse Mortgage. We measure 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 net income (loss) with respect to the consolidated entity and income (loss) before income taxes at the segment level plus changes in fair value due to changes in valuation inputs and other assumptions; certain depreciation and amortization costs related to the increased basis in assets (including servicing rights and sub-servicing contracts) acquired within business combination transactions (or step-up depreciation and amortization); goodwill and intangible assets impairment, if any; a portion of the provision for curtailment expense, net of expected third-party recoveries; share-based compensation expense; non-cash interest expense; restructuring and 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 MSRs 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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Adjusted EBITDA eliminates the effects of financing, income taxes and depreciation and amortization. Adjusted EBITDA is defined as net income (loss) with respect to the consolidated entity and income (loss) before income taxes at the segment level 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; share-based compensation expense; restructuring and 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.

The Company intends to revise its method of calculating Adjusted Earnings (Loss) beginning with its 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 sub-servicing contracts) acquired within business combination transactions.

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 Nine Months Ended September 30, 2016
	(Restated)
Net loss	$	(875,932	)
Adjust for income tax expense	59,274
Loss before income taxes	(816,658		)
Adjustments to loss before income taxes
Changes in fair value due to changes in valuation inputs and other assumptions ⁽¹⁾	385,826
Goodwill and intangible assets impairment	313,128
Step-up depreciation and amortization ⁽²⁾	31,643
Restructuring and exit costs ⁽³⁾	11,382
Non-cash interest expense	9,460
Share-based compensation expense	7,656
Fair value to cash adjustment for reverse loans ⁽⁴⁾	(2,507		)
Legal and regulatory matters	2,196
Other ⁽⁵⁾	22,955
Sub-total	781,739
Adjusted Loss	$	(34,919	)

__________


(1)	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.


(2)	Represents depreciation and amortization costs related to the increased basis in assets, including servicing and sub-servicing rights, acquired within business combination transactions.

(3)

Restructuring and exit costs include expenses related to the closing of offices and the termination of certain employees as well as other expenses to institute efficiencies. Restructuring and exit costs incurred in the nine months ended September 30, 2016 include those relating to our exit from the consumer retail channel of the Originations segment 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 10 to the Consolidated Financial Statements.


(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, the net impact of the Non-Residual Trusts, transaction and integration costs, and certain non-recurring costs.

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Adjusted EBITDA



	For the Nine Months Ended September 30, 2016
	(Restated)
Net loss	$	(875,932	)
Adjust for income tax expense	59,274
Loss before income taxes	(816,658		)
EBITDA Adjustments
Amortization of servicing rights and other fair value adjustments ⁽¹⁾	586,899
Goodwill and intangible assets impairment	313,128
Interest expense	115,125
Depreciation and amortization	45,543
Restructuring and exit costs ⁽²⁾	11,382
Share-based compensation expense	7,656
Fair value to cash adjustment for reverse loans ⁽³⁾	(2,507		)
Legal and regulatory matters	2,196
Other ⁽⁴⁾	16,832
Sub-total	1,096,254
Adjusted EBITDA	$	279,596

__________


(1)	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.

(2)


(3)	Represents the non-cash fair value adjustment to arrive at cash generated from reverse mortgage origination activities.


(4)	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, 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. Refer below for further information on the results of operations for our Servicing, Originations and Reverse Mortgage segments. For a reconciliation of our income (loss) before income taxes for our business segments to our GAAP consolidated loss before income taxes, refer to Note 16 to the Consolidated Financial Statements.

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Reconciliation of GAAP Income (Loss) Before Income Taxes to Adjusted Earnings (Loss) and Adjusted EBITDA (in thousands):



	For the Three Months Ended September 30, 2016
	Servicing			Originations			Reverse Mortgage			Other			Total Consolidated
Income (loss) before income taxes	$	(161,581	)	$	51,672		$	(23,023	)	$	(25,251	)	$	(158,183	)

Adjustments to income (loss) before income taxes
Changes in fair value due to changes in valuation inputs and other assumptions	26,672			—			—			—			26,672
Goodwill and intangible assets impairment	90,981			—			6,735			—			97,716
Step-up depreciation and amortization	6,632			156			966			—			7,754
Restructuring and exit costs	1,396			(16		)	160			1,102			2,642
Non-cash interest expense	829			—			—			2,835			3,664
Step-up amortization of sub-servicing rights	4,335			—			—			—			4,335
Share-based compensation expense	1,178			357			157			259			1,951
Fair value to cash adjustment for reverse loans	—			—			690			—			690
Other	11,842			3,488			1,961			(14,666		)	2,625
Total adjustments	143,865			3,985			10,669			(10,470		)	148,049
Adjusted Earnings (Loss)	(17,716		)	55,657			(12,354		)	(35,721		)	(10,134		)

EBITDA adjustments
Amortization of servicing rights and other fair value adjustments	61,170			—			432			—			61,602
Interest expense on debt	1,518			—			—			34,152			35,670
Depreciation and amortization	5,690			2,185			951			—			8,826
Other	(2,215		)	119			32			(146		)	(2,210		)
Total adjustments	66,163			2,304			1,415			34,006			103,888
Adjusted EBITDA	$	48,447		$	57,961		$	(10,939	)	$	(1,715	)	$	93,754

Table of Contents



	For the Nine Months Ended September 30, 2016
	Servicing			Originations			Reverse Mortgage			Other			Total Consolidated
Income (loss) before income taxes	$	(773,928	)	$	113,688		$	(44,940	)	$	(111,478	)	$	(816,658	)

Adjustments to income (loss) before income taxes
Changes in fair value due to changes in valuation inputs and other assumptions	385,826			—			—			—			385,826
Goodwill and intangible assets impairment	306,393			—			6,735			—			313,128
Step-up depreciation and amortization	19,967			608			2,755			—			23,330
Restructuring and exit costs	7,403			2,083			567			1,329			11,382
Non-cash interest expense	818			—			—			8,642			9,460
Step-up amortization of sub-servicing rights	8,313			—			—			—			8,313
Share-based compensation expense	5,119			590			1,080			867			7,656
Fair value to cash adjustment for reverse loans	—			—			(2,507		)	—			(2,507		)
Legal and regulatory matters	2,196			—			—			—			2,196
Other	18,215			5,003			4,407			(4,670		)	22,955
Total adjustments	754,250			8,284			13,037			6,168			781,739
Adjusted Earnings (Loss)	(19,678		)	121,972			(31,903		)	(105,310		)	(34,919		)

EBITDA adjustments
Amortization of servicing rights and other fair value adjustments	191,422			—			1,338			—			192,760
Interest expense on debt	5,504			—			—			100,161			105,665
Depreciation and amortization	13,840			6,326			2,037			10			22,213
Other	(3,317		)	(3,093		)	86			201			(6,123		)
Total adjustments	207,449			3,233			3,461			100,372			314,515
Adjusted EBITDA	$	187,771		$	125,205		$	(28,442	)	$	(4,938	)	$	279,596

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	For the Three Months Ended September 30, 2015
	Servicing			Originations		Reverse Mortgage			Other			Total Consolidated
Income (loss) before income taxes	$	(152,822	)	$	36,518	$	22,543		$	(37,797	)	$	(131,558	)

Adjustments to income (loss) before income taxes
Changes in fair value due to changes in valuation inputs and other assumptions	147,900			—		—			—			147,900
Step-up depreciation and amortization	6,945			5,068		1,329			—			13,342
Restructuring and exit costs	3,756			664		973			127			5,520
Non-cash interest expense	375			—		—			2,759			3,134
Step-up amortization of sub-servicing rights	4,737			—		—			—			4,737
Share-based compensation expense	3,346			1,487		929			154			5,916
Fair value to cash adjustment for reverse loans	—			—		(27,441		)	—			(27,441		)
Legal and regulatory matters	—			—		2,158			—			2,158
Curtailment expense	—			—		450			—			450
Other	335			137		26			2,188			2,686
Total adjustments	167,394			7,356		(21,576		)	5,228			158,402
Adjusted Earnings (Loss)	14,572			43,874		967			(32,569		)	26,844

EBITDA adjustments
Amortization of servicing rights and other fair value adjustments	68,098			—		499			—			68,597
Interest expense on debt	2,270			—		1			35,612			37,883
Depreciation and amortization	4,492			2,136		672			4			7,304
Other	(232		)	4,950		76			22			4,816
Total adjustments	74,628			7,086		1,248			35,638			118,600
Adjusted EBITDA	$	89,200		$	50,960	$	2,215		$	3,069		$	145,444

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	For the Nine Months Ended September 30, 2015
	Servicing			Originations		Reverse Mortgage			Other			Total Consolidated
Income (loss) before income taxes	$	(121,198	)	$	111,281	$	(81,874	)	$	(104,444	)	$	(196,235	)

Adjustments to income (loss) before income taxes
Changes in fair value due to changes in valuation inputs and other assumptions	157,312			—		—			—			157,312
Goodwill and intangible assets impairment	—			—		56,539			—			56,539
Step-up depreciation and amortization	20,912			6,856		3,985			—			31,753
Restructuring and exit costs	5,739			985		973			851			8,548
Non-cash interest expense	1,493			—		—			7,983			9,476
Step-up amortization of sub-servicing rights	14,564			—		—			—			14,564
Share-based compensation expense	8,474			3,737		1,749			385			14,345
Fair value to cash adjustment for reverse loans	—			—		(7,647		)	—			(7,647		)
Legal and regulatory matters	2,218			—		5,020			—			7,238
Curtailment expense	—			—		23,012			—			23,012
Other	1,583			559		456			6,470			9,068
Total adjustments	212,295			12,137		84,087			15,689			324,208
Adjusted Earnings (Loss)	91,097			123,418		2,213			(88,755		)	127,973

EBITDA adjustments
Amortization of servicing rights and other fair value adjustments	184,019			—		1,576			—			185,595
Interest expense on debt	6,987			—		2			104,187			111,176
Depreciation and amortization	13,410			6,227		1,970			11			21,618
Other	(5,640		)	7,493		175			109			2,137
Total adjustments	198,776			13,720		3,723			104,307			320,526
Adjusted EBITDA	$	289,873		$	137,138	$	5,936		$	15,552		$	448,499

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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 Three Months Ended September 30,						Variance					For the Nine Months Ended September 30,						Variance
	2016			2015			$			%		2016			2015			$			%
Net servicing revenue and fees
Third parties	$	104,474		$	(12,094	)	$	116,568		n/m		$	16,738		$	279,387		$	(262,649	)	(94	)%
Intercompany	2,999			2,235			764			34	%	9,216			7,018			2,198			31	%
Total net servicing revenue and fees	107,473			(9,859		)	117,332			n/m		25,954			286,405			(260,451		)	(91	)%
Interest income on loans	11,320			12,397			(1,077		)	(9	)%	35,315			62,487			(27,172		)	(43	)%
Insurance revenue	10,000			8,763			1,237			14	%	31,644			34,323			(2,679		)	(8	)%
Intersegment retention revenue	9,772			6,969			2,803			40	%	30,766			23,508			7,258			31	%
Net gains (losses) on sales of loans	(2,271		)	(2,286		)	15			(1	)%	(7,998		)	1,418			(9,416		)	n/m
Other revenues	12,579			15,202			(2,623		)	(17	)%	42,750			41,004			1,746			4	%
Total revenues	148,873			31,186			117,687			377	%	158,431			449,145			(290,714		)	(65	)%
General and administrative and allocated indirect expenses	123,018			94,398			28,620			30	%	330,444			267,464			62,980			24	%
Goodwill impairment	90,981			—			90,981			n/m		306,393			—			306,393			n/m
Salaries and benefits	66,980			68,120			(1,140		)	(2	)%	205,075			202,476			2,599			1	%
Interest expense	16,657			17,303			(646		)	(4	)%	53,549			67,062			(13,513		)	(20	)%
Depreciation and amortization	12,322			11,437			885			8	%	33,807			34,322			(515		)	(2	)%
Other expenses, net	(298		)	1,474			(1,772		)	(120	)%	1,991			4,608			(2,617		)	(57	)%
Total expenses	309,660			192,732			116,928			61	%	931,259			575,932			355,327			62	%
Other net fair value losses	(644		)	(213		)	(431		)	202	%	(418		)	(545		)	127			(23	)%
Other	(150		)	8,937			(9,087		)	(102	)%	(682		)	6,134			(6,816		)	(111	)%
Total other gains (losses)	(794		)	8,724			(9,518		)	(109	)%	(1,100		)	5,589			(6,689		)	(120	)%
Loss before income taxes	(161,581		)	(152,822		)	(8,759		)	6	%	(773,928		)	(121,198		)	(652,730		)	n/m
Adjustments to loss
Changes in fair value due to changes in valuation inputs and other assumptions	26,672			147,900			(121,228		)	(82	)%	385,826			157,312			228,514			145	%
Goodwill impairment	90,981			—			90,981			n/m		306,393			—			306,393			n/m
Step-up depreciation and amortization	6,632			6,945			(313		)	(5	)%	19,967			20,912			(945		)	(5	)%
Step-up amortization of sub-servicing rights	4,335			4,737			(402		)	(8	)%	8,313			14,564			(6,251		)	(43	)%
Restructuring and exit costs	1,396			3,756			(2,360		)	(63	)%	7,403			5,739			1,664			29	%
Share-based compensation expense	1,178			3,346			(2,168		)	(65	)%	5,119			8,474			(3,355		)	(40	)%
Legal and regulatory matters	—			—			—			—	%	2,196			2,218			(22		)	(1	)%
Non-cash interest expense	829			375			454			121	%	818			1,493			(675		)	(45	)%
Other	11,842			335			11,507			n/m		18,215			1,583			16,632			n/m
Total adjustments	143,865			167,394			(23,529		)	(14	)%	754,250			212,295			541,955			255	%
Adjusted Earnings (Loss)	(17,716		)	14,572			(32,288		)	(222	)%	(19,678		)	91,097			(110,775		)	(122	)%
EBITDA adjustments
Amortization of servicing rights and other fair value adjustments	61,170			68,098			(6,928		)	(10	)%	191,422			184,019			7,403			4	%
Depreciation and amortization	5,690			4,492			1,198			27	%	13,840			13,410			430			3	%
Interest expense on debt	1,518			2,270			(752		)	(33	)%	5,504			6,987			(1,483		)	(21	)%
Other	(2,215		)	(232		)	(1,983		)	n/m		(3,317		)	(5,640		)	2,323			(41	)%
Total adjustments	66,163			74,628			(8,465		)	(11	)%	207,449			198,776			8,673			4	%
Adjusted EBITDA	$	48,447		$	89,200		$	(40,753	)	(46	)%	$	187,771		$	289,873		$	(102,102	)	(35	)%

Table of Contents

Mortgage Loan Servicing Portfolio

Our Servicing segment services loans for which we own the servicing right and on behalf of other servicing right or mortgage loan owners, which we refer to as “sub-servicing.” A sub-servicing asset (or liability) is recognized on our consolidated balance sheets when the sub-servicing fee is deemed to be greater (or lower) than adequate compensation for the servicing activities performed by the Company. No sub-servicing asset or liability is recorded if the amounts earned represent adequate compensation. Generally, no servicing asset or liability is recognized when we enter into new sub-servicing contracts; however, previously existing contracts acquired in a business combination may be deemed to provide greater (or lower) than adequate compensation as compared to market conditions at the time of the transaction.

Provided below are summaries of the activity in our mortgage loan servicing portfolio (dollars in thousands):



	For the Nine Months Ended September 30, 2016					For the Nine Months Ended September 30, 2015
	Number of Accounts		Unpaid Principal Balance			Number of Accounts		Unpaid Principal Balance
Third-party servicing portfolio ⁽¹⁾
Balance at beginning of the period	2,087,618		$	244,124,312		2,142,689		$	234,905,729
Loan sales with servicing retained	48,558		10,336,625			64,964		14,447,066
Other new business added ⁽²⁾	93,475		16,053,749			126,438		22,753,658
Sales	(26,598	)	(5,867,129		)	—		—
Payoffs and other reductions, net ⁽²⁾ ⁽³⁾	(222,980	)	(31,900,449		)	(222,862	)	(28,909,388		)
Balance at end of the period ⁽⁴⁾	1,980,073		232,747,108			2,111,229		243,197,065
On-balance sheet residential loans and real estate owned ⁽⁵⁾	34,845		2,287,944			36,369		2,368,012
Total mortgage loan servicing portfolio	2,014,918		$	235,035,052		2,147,598		$	245,565,077

__________


(1)	Third-party servicing includes servicing rights capitalized, sub-servicing rights capitalized and sub-servicing rights not capitalized. Sub-servicing rights capitalized consist of contracts acquired through business combinations whereby the benefits from the contract are greater than adequate compensation for performing the servicing.


(2)	Consists of activities associated with servicing and sub-servicing contracts.


(3)	Amounts presented are net of loan sales associated with servicing retained multi-channel recapture activities of $4.6 billion and $4.9 billion for the nine months ended September 30, 2016 and 2015 , respectively.


(4)	Excludes the impact of the sale of servicing rights during the nine months ended September 30, 2016 associated with 7,481 accounts and $1.7 billion in unpaid principal balance as we continue to service these loans as sub-servicer until the expected release of servicing in the fourth quarter of 2016.


(5)	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 annualized portfolio disappearance rate, consisting of contractual payments, voluntary prepayments, and defaults, net of recapture, of the total mortgage loan portfolio was 15.39% and 14.57% for the nine months ended September 30, 2016 and 2015 , respectively.

Provided below are summaries of the composition of our mortgage loan servicing portfolio (dollars in thousands):



	At September 30, 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	1,619,153	$	221,829,407	0.26	%	11.14	%
Second lien mortgages	151,831	4,900,645		0.46	%	4.61	%
Manufactured housing and other	209,089	6,017,056		1.09	%	9.84	%
Total accounts serviced for third parties ^{(3) (4)}	1,980,073	232,747,108		0.29	%	10.97	%
On-balance sheet residential loans and real estate owned ⁽⁵⁾	34,845	2,287,944				11.99	%
Total mortgage loan servicing portfolio	2,014,918	$	235,035,052			10.98	%

Table of Contents



	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 annual average servicing fee divided by the 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 $178.6 billion and $54.2 billion in unpaid principal balance associated with servicing and sub-servicing contracts, respectively, at September 30, 2016 and $194.8 billion and $49.3 billion, respectively, at December 31, 2015 .


(4)	Includes $5.6 billion and $6.6 billion in unpaid principal balance of sub-servicing performed for WCO at September 30, 2016 and December 31, 2015 , respectively, and $5.1 billion and $1.7 billion associated with servicing rights sold to WCO at September 30, 2016 and December 31, 2015 , respectively. Refer to Note 19 to the Consolidated Financial Statements for further information.


(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 $11.4 billion at September 30, 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 sub-servicing, partially offset by our originations sales with servicing retained as well as servicing and sub-servicing portfolio acquisitions. Sub-servicing portfolio acquisitions include servicing acquired through the RCS asset acquisition and sub-servicing performed for WCO. The decrease in the unpaid principal balance of our on-balance sheet residential loans and real estate owned of $151.9 million can be attributed to a decrease in mortgage loans held for sale of $157.5 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 September 30, 2016 as compared to December 31, 2015 resulting from an increase in loans that were 30 to 60 days past due. 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 the aforementioned increase in the 30 to 60 day past due loans.

Table of Contents

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 Three Months Ended September 30,						Variance					For the Nine Months Ended September 30,						Variance
	2016			2015			$			%		2016			2015			$			%
Servicing fees	$	171,249		$	178,702		$	(7,453	)	(4	)%	$	523,215		$	524,732		$	(1,517	)	—	%
Incentive and performance fees	14,729			19,361			(4,632		)	(24	)%	47,818			70,976			(23,158		)	(33	)%
Ancillary and other fees	22,807			22,714			93			—	%	71,439			69,840			1,599			2	%
Servicing revenue and fees	208,785			220,777			(11,992		)	(5	)%	642,472			665,548			(23,076		)	(3	)%
Changes in valuation inputs or other assumptions ⁽¹⁾	(25,922		)	(158,251		)	132,329			(84	)%	(412,095		)	(173,499		)	(238,596		)	138	%
Other changes in fair value ⁽²⁾	(60,114		)	(66,678		)	6,564			(10	)%	(188,014		)	(179,524		)	(8,490		)	5	%
Change in fair value of servicing rights	(86,036		)	(224,929		)	138,893			(62	)%	(600,109		)	(353,023		)	(247,086		)	70	%
Amortization of servicing rights	(5,391		)	(6,157		)	766			(12	)%	(11,721		)	(19,058		)	7,337			(38	)%
Change in fair value of servicing rights related liabilities ⁽³⁾	(9,885		)	450			(10,335		)	n/m		(4,688		)	(7,062		)	2,374			(34	)%
Net servicing revenue and fees	$	107,473		$	(9,859	)	$	117,332		n/m		$	25,954		$	286,405		$	(260,451	)	(91	)%

__________


(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 $5.0 million and $2.3 million for the three months ended September 30, 2016 and 2015 , respectively, and $12.0 million and $7.0 million for the nine months ended September 30, 2016 and 2015 , respectively.

Servicing fees decreased $7.5 million and $1.5 million during the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, primarily due to runoff of the servicing portfolio, the sale of servicing rights for which we did not retain sub-servicing, and a decline in the average servicing fee, partially offset by portfolio acquisitions and servicing rights capitalized as a result of our loan origination activities. Average loans serviced decreased by $4.0 billion , or 2% , for the three months ended September 30, 2016 as compared to the same period of 2015 . Average loans serviced increased $5.3 billion , or 2% , for the nine months ended September 30, 2016 as compared to the same period of 2015 .

Incentive and performance fees include modification fees, fees earned under HAMP, asset recovery income, and other incentives. Fees earned under HAMP decreased $2.7 million and $10.8 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, due primarily to lower fees for maintenance of performing modified loans no longer eligible for HAMP incentive fees and, to a lesser extent, a lower volume of completed modifications. Fees earned under HAMP will continue to decrease as a result of the scheduled termination of HAMP in December 2016. Modification fees decreased $1.0 million and $6.8 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, due primarily to a lower volume of completed modifications. In addition, asset recovery income decreased $0.7 million and $4.9 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, as a result of lower gross collections due primarily to runoff of the related loans managed for third parties by the Servicing segment and reaching the statute of limitations. Incentives relating to the performance of certain loan pools serviced by us decreased $0.1 million and $0.7 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively. We expect incentives relating to the performance of loan pools serviced by us 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.

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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 Three Months Ended September 30,									For the Nine Months Ended September 30,
	2016			2015			Variance			2016			2015			Variance
Average unpaid principal balance of loans serviced ⁽¹⁾	$	241,485,090		$	245,468,475		$	(3,983,385	)	$	248,591,780		$	243,272,016		$	5,319,764
Annualized average servicing fee ⁽²⁾	0.28		%	0.29		%	(0.01		)%	0.28		%	0.29		%	(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 the three and nine months ended September 30, 2016 as compared to the same periods of 2015 related primarily to a shift in our third-party servicing portfolio from servicing to sub-servicing as well as an overall increase in delinquencies.

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):



	September 30, 2016			December 31, 2015			Variance
Servicing rights at fair value	$	1,195,014		$	1,682,016		$	(487,002	)
Unpaid principal balance of accounts serviced	168,582,554			183,506,006			(14,923,452		)
Inputs and assumptions
Weighted-average remaining life in years	5.2			6.3			(1.1		)
Weighted-average stated borrower interest rate on underlying collateral	3.92		%	4.31		%	(0.39		)%
Weighted-average discount rate	11.67		%	10.88		%	0.79		%
Weighted-average conditional prepayment rate	13.07		%	9.94		%	3.13		%
Weighted-average conditional default rate	1.03		%	1.06		%	(0.03		)%

We recognized a reduction in the fair value of servicing rights during the nine months ended September 30, 2016 comprised of a loss of $412.1 million in changes in valuation inputs or other assumptions and a loss of $188.0 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.

The loss resulting from changes in valuation inputs or other assumptions during the nine months ended September 30, 2016 was due primarily to an increase in discount rates and a higher assumed conditional prepayment rate at September 30, 2016 as compared to December 31, 2015 resulting from lower interest rates and forward projections of interest rate curves.

The change in fair value of servicing rights resulting from the realization of expected cash flows resulted in a lower loss of $6.6 million for the three months ended September 30, 2016 as compared to the same period of 2015 due primarily to reduced runoff relating to a smaller capitalized servicing portfolio resulting from recent sales, offset in part by higher prepayment speeds resulting from lower interest rates.

The change in fair value of servicing rights resulting from the realization of expected cash flows resulted in a higher loss of $8.5 million for the nine months ended September 30, 2016 as compared to the same period of 2015 due primarily to increased runoff of the servicing portfolio in early 2016 relating to higher prepayment speeds resulting from lower interest rates.

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Servicing Rights Related Liabilities

The change in fair value of servicing rights related liabilities resulted in a higher loss of $10.3 million for the three months ended September 30, 2016 as compared to the same period of 2015 was due primarily to significantly higher servicing related liabilities due to the completion of additional excess servicing spread and servicing rights financing transactions and higher interest expense, offset in part by a higher assumed conditional prepayment rate resulting from lower interest rates.

The change in fair value of servicing rights related liabilities resulted in a lower loss of $2.4 million for the nine months ended September 30, 2016 as compared to the same period of 2015 was due primarily to a higher assumed conditional prepayment rate resulting from the low interest rate environment, partially offset by higher interest expense driven by additional financing transactions completed since September 2015.

Interest Income on Loans

Interest income on loans decreased $27.2 million for the nine months ended September 30, 2016 as compared to the same period of 2015 primarily due to the sale of our residual interests in April 2015, 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.

Intersegment Retention Revenue

Intersegment retention revenue relates to fees the Servicing segment charges to our Originations segment for loan originations completed that resulted from access to the Servicing segment’s servicing portfolio for which there was a related capitalized servicing right. The increase in intersegment retention revenue of $2.8 million and $7.3 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, was due primarily to a higher fee per origination charged by the Servicing segment beginning in 2016 to reflect current market pricing.

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.

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 $9.4 million for the nine months ended September 30, 2016 as compared to the same period of 2015 primarily due to interest rate declines from the time of the rate lock through the time a loan is closed.

Other Revenues

Other revenues decreased $2.6 million for the three months ended September 30, 2016 as compared to the same period of 2015 primarily as a result of $3.9 million in lower fair value gains relating to charged-off loans resulting from lower variances between actual and expected collections over time, partially offset by $1.3 million in higher other interest income.

Other revenues increased $1.7 million for the nine months ended September 30, 2016 as compared to the same period of 2015 primarily as a result of $3.3 million in higher other interest income, offset in part by $1.5 million in lower fair value gains relating to charged-off loans resulting from lower variances between actual and expected collections over time.

General and Administrative and Allocated Indirect Expenses

General and administrative and allocated indirect expenses increased $28.6 million and $63.0 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, resulting primarily from $7.8 million and $21.1 million, respectively, in additional costs to support efficiency and technology-related initiatives including the MSP conversion in the second quarter of 2016, $6.5 million and $16.1 million, respectively, in higher accruals for loss contingencies and legal expenses primarily related to the cost of defending and resolving legal proceedings, $4.9 million and $5.3 million, respectively, in additional purchased services driven by the MSP implementation and processing costs and other business initiatives, and $1.3 million and $5.1 million, respectively, in higher information technology maintenance costs.

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Goodwill Impairment

We incurred $91.0 million and $306.4 million in goodwill impairment charges during the three and nine months ended September 30, 2016 , respectively, as a result of evaluations performed in the second and third quarters of 2016, which impacted the Servicing and ARM reporting units. Refer to Note 9 to the Consolidated Financial Statements for further information.

Interest Expense

Interest expense decreased $13.5 million for the nine months ended September 30, 2016 as compared to the same period of 2015 primarily as a result of the sale of our residual interests in April 2015, which required the deconsolidation of the related mortgage-backed debt, offset in part by an increase in expense related to servicing advance liabilities due to a higher average interest rate.

Other Gains (Losses)

Other gains of $8.9 million and $6.1 million for the three and nine months ended September 30, 2015 include an $8.9 million realized gain recognized on the sale of a trading security in the third quarter of 2015. In addition, other gains for the nine months ended September 30, 2015 include a $2.8 million loss recognized on the sale of our residual interests in the second quarter of 2015.

Adjusted Earnings (Loss) and Adjusted EBITDA

Provided below is a summary of our Servicing segment's margin (in basis points):



	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2016		2015	Variance		2016		2015	Variance
Annualized Adjusted Earnings (Loss) margin ⁽¹⁾	(3	)	2	(5	)	(1	)	5	(6	)
Annualized Adjusted EBITDA margin ⁽¹⁾	8		15	(7	)	10		16	(6	)

__________


(1)	Margins are calculated by dividing the applicable non-GAAP measure by the average unpaid principal balance of loans serviced during the period as set forth in the table above under Net Servicing Revenue and Fees.

Adjusted Earnings (Loss) margin and Adjusted EBITDA margin decreased by five and seven basis points, respectively, for the three months ended September 30, 2016 as compared to the same period of 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 is primarily due to the decline in servicing fees and incentive and performance fees, generally in line with portfolio runoff. The increase in expenses per loan serviced is primarily due to higher general and administrative and allocated indirect expenses.

Adjusted Earnings (Loss) margin and Adjusted EBITDA margin each decreased by six basis points for the nine months ended September 30, 2016 as compared to the same period of 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 is 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 is primarily due to higher general and administrative and allocated indirect expenses offset in part by lower interest expense.

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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):



	For the Three Months Ended September 30,					Variance					For the Nine Months Ended September 30,					Variance
	2016			2015		$			%		2016			2015		$			%
Net gains on sales of loans	$	123,285		$	117,580	$	5,705		5	%	$	311,625		$	358,600	$	(46,975	)	(13	)%
Other revenues	10,155			14,446		(4,291		)	(30	)%	32,301			32,428		(127		)	—	%
Total revenues	133,440			132,026		1,414			1	%	343,926			391,028		(47,102		)	(12	)%
Salaries and benefits	33,163			38,767		(5,604		)	(14	)%	93,408			121,467		(28,059		)	(23	)%
General and administrative and allocated indirect expenses	27,774			32,357		(4,583		)	(14	)%	74,401			93,731		(19,330		)	(21	)%
Intersegment retention expense	9,772			6,969		2,803			40	%	30,766			23,508		7,258			31	%
Interest expense	8,718			10,211		(1,493		)	(15	)%	24,729			27,958		(3,229		)	(12	)%
Depreciation and amortization	2,341			7,204		(4,863		)	(68	)%	6,934			13,083		(6,149		)	(47	)%
Total expenses	81,768			95,508		(13,740		)	(14	)%	230,238			279,747		(49,509		)	(18	)%
Income before income taxes	51,672			36,518		15,154			41	%	113,688			111,281		2,407			2	%

Adjustments to income
Restructuring and exit costs	(16		)	664		(680		)	(102	)%	2,083			985		1,098			111	%
Step-up depreciation and amortization	156			5,068		(4,912		)	(97	)%	608			6,856		(6,248		)	(91	)%
Share-based compensation expense	357			1,487		(1,130		)	(76	)%	590			3,737		(3,147		)	(84	)%
Other	3,488			137		3,351			n/m		5,003			559		4,444			795	%
Total adjustments	3,985			7,356		(3,371		)	(46	)%	8,284			12,137		(3,853		)	(32	)%
Adjusted Earnings	55,657			43,874		11,783			27	%	121,972			123,418		(1,446		)	(1	)%

EBITDA adjustments
Depreciation and amortization	2,185			2,136		49			2	%	6,326			6,227		99			2	%
Other	119			4,950		(4,831		)	(98	)%	(3,093		)	7,493		(10,586		)	(141	)%
Total adjustments	2,304			7,086		(4,782		)	(67	)%	3,233			13,720		(10,487		)	(76	)%
Adjusted EBITDA	$	57,961		$	50,960	$	7,001		14	%	$	125,205		$	137,138	$	(11,933	)	(9	)%

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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 Three Months Ended September 30, 2016						For the Three Months Ended September 30, 2015
	Locked Volume ⁽¹⁾		Funded Volume		Sold Volume		Locked Volume ⁽¹⁾		Funded Volume		Sold Volume
Correspondent	$	3,711,254	$	3,671,766	$	3,766,945	$	4,523,989	$	5,089,333	$	5,344,220
Consumer	1,991,016		1,616,508		1,602,796		1,644,160		1,625,948		1,674,207
Wholesale ⁽²⁾	72,831		3,417		—		—		—		—
Retail ⁽³⁾	—		—		—		165,623		151,735		167,775
Total	$	5,775,101	$	5,291,691	$	5,369,741	$	6,333,772	$	6,867,016	$	7,186,202



	For the Nine Months Ended September 30, 2016						For the Nine Months Ended September 30, 2015
	Locked Volume ⁽¹⁾		Funded Volume		Sold Volume		Locked Volume ⁽¹⁾		Funded Volume		Sold Volume
Correspondent	$	10,373,503	$	10,020,528	$	10,042,879	$	14,001,723	$	13,935,924	$	13,834,431
Consumer	5,205,788		4,970,836		5,043,170		5,134,562		5,227,300		5,205,129
Wholesale ⁽²⁾	72,831		3,417		—		—		—		—
Retail ⁽³⁾	10,923		14,883		64,667		446,215		400,988		385,289
Total	$	15,663,045	$	15,009,664	$	15,150,716	$	19,582,500	$	19,564,212	$	19,424,849

__________


(1)	Volume has been adjusted by the percentage of mortgage loans not expected to close based on previous historical experience and change in interest rates.


(2)	During the third quarter of 2016 we re-entered the wholesale channel to expand our non-HARP customer base.


(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, 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 receive 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 consist of the following (dollars in thousands):



	For the Three Months Ended September 30,						Variance					For the Nine Months Ended September 30,						Variance
	2016			2015			$			%		2016			2015			$			%
Realized gains on sales of loans	$	88,693		$	50,456		$	38,237		76	%	$	243,560		$	130,517		$	113,043		87	%
Change in unrealized gains on loans held for sale	(5,775		)	19,241			(25,016		)	(130	)%	8,641			4,981			3,660			73	%
Gains on interest rate lock commitments ⁽¹⁾	3,669			21,823			(18,154		)	(83	)%	30,683			6,047			24,636			n/m
Losses on forward sales commitments ⁽¹⁾	(6,082		)	(72,448		)	66,366			(92	)%	(116,419		)	(39,161		)	(77,258		)	197	%
Gains (losses) on MBS purchase commitments ⁽¹⁾	(18,301		)	4,877			(23,178		)	(475	)%	(31,574		)	(13,909		)	(17,665		)	127	%
Capitalized servicing rights	53,851			85,215			(31,364		)	(37	)%	158,053			242,653			(84,600		)	(35	)%
Provision for repurchases	(3,221		)	(6,454		)	3,233			(50	)%	(11,658		)	(13,011		)	1,353			(10	)%
Interest income	10,484			14,870			(4,386		)	(29	)%	30,372			40,483			(10,111		)	(25	)%
Other	(33		)	—			(33		)	n/m		(33		)	—			(33		)	n/m
Net gains on sales of loans	$	123,285		$	117,580		$	5,705		5	%	$	311,625		$	358,600		$	(46,975	)	(13	)%

__________


(1)	Realized losses on freestanding derivatives were $40.4 million and $15.6 million for the three months ended September 30, 2016 and 2015 , respectively, and $129.8 million and $42.4 million for the nine months ended September 30, 2016 and 2015 , respectively.

The increase in net gains on sales of loans for the three months ended September 30, 2016 as compared to the same period of 2015 was primarily due to a channel mix shift to the higher margin consumer channel, partially offset by lower volume of locked loans. The decrease in net gains on sales of loans for the nine months ended September 30, 2016 as compared to the same period of 2015 was primarily due to a lower volume of locked loans, partially offset by a shift in mix from the lower margin correspondent channel to the higher margin consumer channel during the 2016 period. The decline in volume is largely due to an increase in market competition, lower HARP volume, and a slight market shift towards more home purchase volume as opposed to refinancing volume. We had lower capitalized servicing rights during the three and nine months ended September 30, 2016 as compared to the same periods of 2015 due primarily to a lower volume of loans sold with servicing retained, coupled with a reduction in the fair value of servicing rights.

The three and nine months ended September 30, 2016 and 2015 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 Three Months Ended September 30,				Variance				For the Nine Months Ended September 30,				Variance
	2016		2015		Amount		%		2016		2015		Amount		%
Gain on sale of loans ⁽¹⁾	213		186		27		15	%	199		183		16		9	%
Fee income ⁽²⁾	19		21		(2	)	(10	)%	22		17		5		29	%
Direct expenses ⁽²⁾	(123	)	(101	)	(22	)	22	%	(128	)	(107	)	(21	)	20	%
Direct margin	109		106		3		3	%	93		93		—		—	%

__________


(1)	Calculated on pull-through adjusted lock volume.


(2)	Calculated on funded volume.

The direct margin remained relatively flat for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 . Our correspondent volume represented 66% of total pull-through adjusted locked volume during the nine months ended September 30, 2016 as compared to 72% during the nine months ended September 30, 2015 .

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Other Revenues

Other revenues, which consist primarily of origination fee income and interest on cash equivalents, decreased $4.3 million for the three months ended September 30, 2016 as compared to the same period of 2015 primarily as a result of $2.9 million in lower origination fee income resulting from a decline in originations volume during 2016.

During the nine months ended September 30, 2016 , there was $2.5 million in higher origination fee income within other revenues as compared to the same period of 2015 resulting from the waiver of certain refinancing fees charged to borrowers during the first half of 2015, offset in part by lower originations volume during 2016. In addition, there was $2.2 million in lower other interest income resulting in a relatively flat variance for the nine months ended September 30, 2016 as compared to the same period of 2015 .

Salaries and Benefits

Salaries and benefits decreased $5.6 million and $ 28.1 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, primarily due to a lower average headcount as well a decrease in share-based compensation due to higher forfeitures, partially offset by an increase in severance.

General and Administrative and Allocated Indirect Expenses

General and administrative and allocated indirect expenses decreased $4.6 million for the three months ended September 30, 2016 as compared to the same periods of 2015 primarily a result of lower loan origination expenses due to a decreased volume of loan fundings and decreased advertising resulting from a decrease in mail solicitations and internet lead generation due to a strategy shift in lead acquisition.

General and administrative and allocated indirect expenses decreased $19.3 million for the nine months ended September 30, 2016 as compared to the same periods of 2015 , primarily due to a reserve reduction recorded in the second quarter of 2016 related to the change in estimate of the liability associated with our selling representations and warranties. The reduction 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. The remainder of the decrease is due primarily to lower loan origination expenses due to a decreased volume of loan fundings and decreased advertising resulting from a decrease in mail solicitations and internet lead generation due to a strategy shift in lead acquisition.

Intersegment Retention Expense

Intersegment retention expense relates to fees charged by the Servicing segment to the Originations segment in relation to loan originations completed that resulted from access to the Servicing segment’s servicing portfolio for which there was a related capitalized servicing right. The increase in intersegment retention expense of $2.8 million and $7.3 million during the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, was due primarily to a higher fee per origination charged by the Servicing segment beginning in 2016 to reflect current market pricing.

Interest Expense

Interest expense decreased $1.5 million and $3.2 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, primarily due to lower average borrowings on master repurchase agreements due to a lower volume of loan fundings, offset partially by higher average cost of debt.

Adjusted Earnings

Adjusted Earnings increased $11.8 million for the three months ended September 30, 2016 as compared to the same period in 2015 due primarily to lower expenses as it relates to headcount and volume-related expenses.

Adjusted Earnings decreased $1.4 million for the nine months ended September 30, 2016 as compared to the same period of 2015 due primarily to lower net gains on sales of loans, offset in part by lower expenses as described above.

Adjusted EBITDA

Adjusted EBITDA increased $7.0 million for the three months ended September 30, 2016 as compared to the same period in 2015 due primarily to lower expenses as described above.

Adjusted EBITDA decreased $11.9 million for the nine months ended September 30, 2016 as compared to the same period of 2015 due primarily to lower net gains on sales of loans, partially offset by lower expenses as described above.

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Reverse Mortgage

Provided below is a summary of results of operations, Adjusted Earnings (Loss) and Adjusted EBITDA for our Reverse Mortgage segment (dollars in thousands):



	For the Three Months Ended September 30,						Variance					For the Nine Months Ended September 30,						Variance
	2016			2015			$			%		2016			2015			$			%
Net fair value gains on reverse loans and related HMBS obligations	$	18,627		$	52,644		$	(34,017	)	(65	)%	$	61,485		$	90,233		$	(28,748	)	(32	)%
Net servicing revenue and fees	7,155			11,247			(4,092		)	(36	)%	21,065			34,568			(13,503		)	(39	)%
Net losses on sales of loans	—			—			—			—	%	—			(98		)	98			(100	)%
Other revenues	1,241			1,504			(263		)	(17	)%	4,705			4,791			(86		)	(2	)%
Total revenues	27,023			65,395			(38,372		)	(59	)%	87,255			129,494			(42,239		)	(33	)%
General and administrative and allocated indirect expenses	19,832			16,859			2,973			18	%	57,794			73,050			(15,256		)	(21	)%
Salaries and benefits	17,478			22,116			(4,638		)	(21	)%	51,876			69,619			(17,743		)	(25	)%
Interest expense	2,941			843			2,098			249	%	6,870			3,074			3,796			123	%
Depreciation and amortization	1,917			2,001			(84		)	(4	)%	4,792			5,955			(1,163		)	(20	)%
Goodwill and intangible assets impairment	6,735			—			6,735			n/m		6,735			56,539			(49,804		)	(88	)%
Other expenses, net	1,143			1,033			110			11	%	3,104			3,131			(27		)	(1	)%
Total expenses	50,046			42,852			7,194			17	%	131,171			211,368			(80,197		)	(38	)%
Other losses	—			—			—			—	%	(1,024		)	—			(1,024		)	n/m
Income (loss) before income taxes	(23,023		)	22,543			(45,566		)	(202	)%	(44,940		)	(81,874		)	36,934			(45	)%

Adjustments to income (loss)
Fair value to cash adjustment for reverse loans	690			(27,441		)	28,131			(103	)%	(2,507		)	(7,647		)	5,140			(67	)%
Step-up depreciation and amortization	966			1,329			(363		)	(27	)%	2,755			3,985			(1,230		)	(31	)%
Share-based compensation expense	157			929			(772		)	(83	)%	1,080			1,749			(669		)	(38	)%
Restructuring and exit costs	160			973			(813		)	(84	)%	567			973			(406		)	(42	)%
Goodwill and intangible assets impairment	6,735			—			6,735			n/m		6,735			56,539			(49,804		)	(88	)%
Curtailment expense	—			450			(450		)	(100	)%	—			23,012			(23,012		)	(100	)%
Legal and regulatory matters	—			2,158			(2,158		)	(100	)%	—			5,020			(5,020		)	(100	)%
Other	1,961			26			1,935			n/m		4,407			456			3,951			n/m
Total adjustments	10,669			(21,576		)	32,245			(149	)%	13,037			84,087			(71,050		)	(84	)%
Adjusted Earnings (Loss)	(12,354		)	967			(13,321		)	n/m		(31,903		)	2,213			(34,116		)	n/m

EBITDA adjustments
Depreciation and amortization	951			672			279			42	%	2,037			1,970			67			3	%
Amortization of servicing rights	432			499			(67		)	(13	)%	1,338			1,576			(238		)	(15	)%
Interest expense on debt	—			1			(1		)	(100	)%	—			2			(2		)	(100	)%
Other	32			76			(44		)	(58	)%	86			175			(89		)	(51	)%
Total adjustments	1,415			1,248			167			13	%	3,461			3,723			(262		)	(7	)%
Adjusted EBITDA	$	(10,939	)	$	2,215		$	(13,154	)	n/m		$	(28,442	)	$	5,936		$	(34,378	)	n/m

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Reverse Mortgage Servicing Portfolio

Provided below are summaries of the activity in our third-party servicing portfolio for our reverse mortgage business, which includes accounts serviced for third parties for which we earn servicing revenue and, thus, excludes servicing performed related to reverse loans and real estate owned that have been recognized on our consolidated balance sheets, as the reverse loan transfer was accounted for as a secured borrowing (dollars in thousands):



	For the Nine Months Ended September 30, 2016					For the Nine Months Ended September 30, 2015
	Number of Accounts		Unpaid Principal Balance			Number of Accounts		Unpaid Principal Balance
Third-party servicing portfolio
Balance at beginning of the period	56,046		$	9,818,400		50,196		$	8,626,946
New business added	8,789		1,517,807			9,955		1,555,587
Other additions ⁽¹⁾	—		588,043			—		463,977
Payoffs and sales	(7,144	)	(1,508,270		)	(5,069	)	(1,073,699		)
Balance at end of the period	57,691		$	10,415,980		55,082		$	9,572,811

__________


(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 are summaries of our reverse loan servicing portfolio (dollars in thousands):



	At September 30, 2016			At December 31, 2015
	Number of Accounts	Unpaid Principal Balance		Number of Accounts	Unpaid Principal Balance
Third-party servicing portfolio ⁽¹⁾	57,691	$	10,415,980	56,046	$	9,818,400
On-balance sheet residential loans and real estate owned	63,225	10,366,601		65,187	10,265,726
Total reverse loan servicing portfolio	120,916	$	20,782,581	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 0.14% at September 30, 2016 and December 31, 2015 .

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 Three Months Ended September 30,						Variance				For the Nine Months Ended September 30,						Variance
	2016			2015			$			%	2016			2015			$			%
Interest income on reverse loans	$	112,838		$	110,278		$	2,560		2%	$	337,063		$	325,964		$	11,099		3%
Interest expense on HMBS related obligations	(102,879		)	(102,078		)	(801		)	1%	(309,501		)	(301,178		)	(8,323		)	3%
Net interest income on reverse loans and HMBS related obligations	9,959			8,200			1,759			21%	27,562			24,786			2,776			11%

Change in fair value of reverse loans	(16,699		)	(57,653		)	40,954			(71)%	55,285			(81,154		)	136,439			(168)%
Change in fair value of HMBS related obligations	25,367			102,097			(76,730		)	(75)%	(21,362		)	146,601			(167,963		)	(115)%
Net change in fair value on reverse loans and HMBS related obligations	8,668			44,444			(35,776		)	(80)%	33,923			65,447			(31,524		)	(48)%
Net fair value gains on reverse loans and related HMBS obligations	$	18,627		$	52,644		$	(34,017	)	(65)%	$	61,485		$	90,233		$	(28,748	)	(32)%

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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 $1.8 million and $2.8 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, primarily as a result of an overall increase in reverse loans compounded by 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 $7.6 million and $26.4 million during the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, 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 gains decreased by $28.1 million and $5.1 million during the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, due primarily to a flattening of the interest rate curve 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 26.38% and 27.05% , respectively, at September 30, 2016 primarily due to the aging of the portfolio.

Provided below are summaries of our funded volume, which represent purchases and originations of reverse loans, and volume of securitizations into HMBS (dollars in thousands):



	For the Three Months Ended September 30,				Variance					For the Nine Months Ended September 30,				Variance
	2016		2015		$			%		2016		2015		$			%
Funded volume	$	255,544	$	327,330	$	(71,786	)	(22	)%	$	640,568	$	1,208,025	$	(567,457	)	(47	)%
Securitized volume ⁽¹⁾	245,628		389,772		(144,144		)	(37	)%	622,013		1,244,964		(622,951		)	(50	)%

__________

(1)

Securitized volume includes $101.7 million and $104.0 million of tails securitized for the three months ended September 30, 2016 and 2015 , respectively, and $330.6 million and $294.5 million for the nine months ended September 30, 2016 and 2015 , respectively. Tail draws associated with the HECM IDL product were $59.5 million and $53.9 million during the three months ended September 30, 2016 and 2015 , respectively, and $198.0 million and $136.9 million for the nine months ended September 30, 2016 and 2015 , respectively.

Funded and securitized volumes decreased during the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, 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.

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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 Three Months Ended September 30,						Variance					For the Nine Months Ended September 30,						Variance
	2016			2015			$			%		2016			2015			$			%
Servicing fees	$	3,530		$	3,471		$	59		2	%	$	10,577		$	10,272		$	305		3	%
Incentive and performance fees	2,429			5,732			(3,303		)	(58	)%	7,123			19,536			(12,413		)	(64	)%
Ancillary and other fees	1,627			2,543			(916		)	(36	)%	4,702			6,336			(1,634		)	(26	)%
Servicing revenue and fees	7,586			11,746			(4,160		)	(35	)%	22,402			36,144			(13,742		)	(38	)%
Amortization of servicing rights	(431		)	(499		)	68			(14	)%	(1,337		)	(1,576		)	239			(15	)%
Net servicing revenue and fees	$	7,155		$	11,247		$	(4,092	)	(36	)%	$	21,065		$	34,568		$	(13,503	)	(39	)%

The decline in net servicing revenue and fees of $4.1 million and $13.5 million for the three and nine months ended September 30, 2016 as compared to the same periods in 2015 , respectively, was due primarily to a decrease in incentive and performance fees for the management of real estate owned. In March 2015, we entered into an agreement with a counterparty to phase out one of our larger arrangements for the management of real estate owned through October 1, 2015.

General and Administrative and Allocated Indirect Expenses

General and administrative and allocated indirect expenses increased by $3.0 million for the three months ended September 30, 2016 as compared to the same period of 2015 due primarily to an increase in curtailment related accruals as a result of longer time periods to complete foreclosure on defaulted loans relative to estimated timelines.

General and administrative and allocated indirect expenses decreased by $15.3 million for the nine months ended September 30, 2016 as compared to the same period of 2015 due primarily to certain regulatory developments during 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. This reduction was offset in part by the impact due to lower provisions recorded on uncollectible receivables and advances in 2015 resulting from improved collections.

Salaries and Benefits

Salaries and benefits expense decreased $4.6 million and $17.7 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, due primarily to lower commissions and bonuses as a result of lower origination volume combined with a lower average headcount.

Goodwill and Intangible Assets Impairment

We incurred $6.7 million in intangible assets impairment charges during the three and nine months ended September 30, 2016 as a result of an evaluation performed in the third quarter of 2016. Refer to Note 9 to the Consolidated Financial Statements for further information.

We incurred $56.5 million in goodwill impairment charges during the nine months ended September 30, 2015 as a result of a goodwill evaluation performed in the second quarter of 2015. As a result of these goodwill charges, the Reverse Mortgage reporting unit no longer has goodwill.

Adjusted Earnings (Loss) and Adjusted EBITDA

Adjusted Loss for the three and nine months ended September 30, 2016 changed from Adjusted Earnings during the respective prior periods by $13.3 million and $34.1 million , and Adjusted EBITDA decreased by $13.2 million and $34.4 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015, respectively. 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. The increase in general and administrative expenses during the three months ended September 30, 2016 was primarily due to an increase in curtailment related accruals, as described above. The increase in general and administrative expenses for the nine months ended September 30, 2016 was primarily attributable to the lower provisions recorded on uncollectible receivables and advances in 2015, as described above.

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Other Non-Reportable

Other revenues for our Other non-reportable segment consist primarily of asset management advisory fees, investment income and other interest income. Other revenues decreased $0.9 million and $5.0 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 as a result of $1.2 million and $2.6 million , respectively, in higher losses on our equity-method investment in WCO during the current year periods. In addition, other revenues for the nine months ended September 30, 2015 included $2.7 million related to the settlement of a receivable that was repaid in conjunction with the sale of an investment accounted for using the equity method.

Expenses decreased $6.8 million and $8.2 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, driven by the resolution of certain matters within the Investment Management business and $1.4 million and $3.4 million, respectively, in lower interest expense.

Net gains on extinguishment of debt of $13.7 million and $14.7 million for the three and nine months ended September 30, 2016, respectively, are primarily attributable to the repurchase of a portion of our Convertible Notes with a carrying value of $39.3 million during the third quarter of 2016, which resulted in a gain of $14.5 million , offset in part by a loss on extinguishment related to the 2013 Revolver. Net fair value gains (losses) decreased $4.0 million and $10.0 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, due to higher net fair value losses on the assets and liabilities of the Non-Residual Trusts during 2016. Other gains (losses) decreased $3.1 million and $14.9 million for the three and nine months ended September 30, 2016 as compared to the same periods of 2015 , respectively, due to a $3.1 million gain for consideration received from the contribution of 100% of the equity of Marix to WCO during the third quarter of 2015. Additionally, other gains for the nine months ended September 30, 2015 include an $11.8 million gain recognized on the sale of an investment accounted for using the equity method in the first quarter of 2015.

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 below under "Corporate Debt", 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 September 30, 2016 , we did not satisfy both of 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 $19.7 million remained available.

At September 30, 2016 , we had liquidity of $240.6 million , including cash liquidity of $220.9 million and availability under the 2013 Revolver of $19.7 million . On October 14, 2016 we issued a $7.5 million LOC, which reduced the remaining availability under the 2013 Revolver to $12.2 million . At September 30, 2016 , we had contractual obligations, subject to certain conditions and adjustments, to utilize approximately $4.0 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, issuance of HMBS and excess servicing spread financing arrangements. We may generate additional liquidity through sales of MSRs, any portion thereof, or other assets.

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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 for financial flexibility 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 and reverse 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 may access the capital markets from time to time, in public or in private transactions, to augment our liquidity position, fund growth opportunities or for other reasons. We continually monitor our cash flows and liquidity in order to be responsive to changing conditions.

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.

Share Repurchase Program

On May 6, 2015, our Board of Directors 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. Repurchases were made from time to time based upon our discretion through one or more open market or privately negotiated transactions, and pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act. The timing and amounts of any such repurchases depended on a variety of factors, including the market price of our shares and general market and economic conditions. Our share repurchase program expired on May 31, 2016.

We repurchased a total of 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. Shares of common stock that we repurchased were canceled and returned to the status of authorized but unissued shares.

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 taxes, insurance 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 right acquisitions in 2013 and 2014, we experienced and continue to incur an elevated level of advance funding requirements. Sub-servicers 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 sub-servicing 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 amount of $1.8 billion at September 30, 2016 . This capacity includes $300.0 million two-year term notes under the GTAAFT Facility issued on September 30, 2016, as well as $360.0 million of previously issued one-year term notes that were redeemed on October 17, 2016. Additionally, on October 5, 2016 the GTAAFT Facility was amended to, amongst other things, decrease the maximum permitted principal balance of the variable funding notes from $600.0 million to $400.0 million . See below for additional information regarding the GTAAFT Facility. After giving effect to the issuance of new term notes, the redemption of the existing one-year term notes referenced above and the amendment decreasing the amount available on the variable funding notes, the servicing advance facilities and the Early Advance Reimbursement Agreement have an aggregate capacity amount of $1.2 billion .

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After giving effect to the issuance of new term notes, the redemption of the existing one-year term notes and the amendment to the variable funding notes referenced above, the interest rates for the servicing advance facilities and Early Advance Reimbursement Agreement are either fixed or are primarily based on LIBOR plus between 1.85% and 3.92% 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 $1.5 billion at September 30, 2016, or $0.9 billion after giving effect to the aforementioned changes to the GTAAFT Facility, 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 these financial covenants at September 30, 2016.

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. 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 September 30, 2016 , an aggregate principal balance of $800.0 million of various series of term notes were outstanding under this facility.

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 each monthly payment date thereafter. Failure to make any such one-twelfth payment will result in an event of default.

After giving effect to the amendment to the terms of the variable funding notes referenced above, 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. If such 364-day period is not extended, the variable funding notes will become due and payable on October 4, 2017.

Under this facility, creditors of the issuer and depositor entities (including the holders of the term notes and variable funding notes) have no recourse to any assets or revenues of Ditech Financial or the Parent Company other than to the limited 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,

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covenants and indemnities under the facility. 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.

The facility's base indenture and indenture supplements include facility events of default and target amortization events customary for financings of this type, including but not limited to target amortization events related to breaches of covenants, 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, certain financial tests, change of control, defaults under certain other material indebtedness and material judgments. 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 a subsidiary, Green Tree Agency Advance Funding Trust I, 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, 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 now 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 September 30, 2016 , we had borrowings of $95.0 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 September 30, 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 September 30, 2016 , we had borrowings of $129.6 million under these facilities.

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Mortgage Loan Originations Business

Master Repurchase Agreements

We utilize master repurchase agreements to support our origination or purchase of mortgage loans. These agreements were entered into by Ditech Financial and various warehouse lenders. The five facilities under the repurchase agreements had an aggregate capacity of $2.1 billion at September 30, 2016 . At September 30, 2016 , the interest rates on the facilities were primarily based on LIBOR plus between 2.10% and 3.00% and have various expiration dates from December 2016 to August 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 the master repurchase agreements are guaranteed by the Parent Company. We had $1.1 billion of short-term borrowings under these master repurchase agreements at September 30, 2016 , which included $170.7 million of borrowings utilizing uncommitted funds.

All of our master repurchase agreements contain customary events of default and covenants, the most significant of which are financial covenants. The quarterly 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.

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.

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 September 30, 2016 , our maximum exposure to repurchases due to potential breaches of representations and warranties was $60.1 billion , and was based on the original unpaid principal balance of loans sold from the beginning of 2013 through September 30, 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 Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
Balance at beginning of the period	$	20,263		$	15,375		$	23,145		$	10,959
Provision for new sales	3,221			6,454			11,658			13,011
Change in estimate of existing reserves ⁽¹⁾	(2,686		)	(251		)	(13,445		)	(1,278		)
Net realized losses on repurchases	(198		)	(267		)	(758		)	(1,381		)
Balance at end of the period	$	20,600		$	21,311		$	20,600		$	21,311

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__________


(1)	The change in estimate during the nine months ended September 30, 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.

Rollforwards of loan repurchase requests based on the original unpaid principal balance are included below (dollars in thousands):



	For the Three Months Ended September 30, 2016					For the Three Months Ended September 30, 2015
	No. of Loans		Unpaid Principal Balance			No. of Loans		Unpaid Principal Balance
Balance at beginning of the period	30		$	6,996		94		$	19,992
Repurchases and indemnifications	(6	)	(1,122		)	(45	)	(10,200		)
Claims initiated	33		6,591			59		13,771
Rescinded	(34	)	(7,915		)	(73	)	(16,836		)
Balance at end of the period	23		$	4,550		35		$	6,727



	For the Nine Months Ended September 30, 2016					For the Nine Months Ended September 30, 2015
	No. of Loans		Unpaid Principal Balance			No. of Loans		Unpaid Principal Balance
Balance at beginning of the period	30		$	6,225		48		$	11,509
Repurchases and indemnifications	(25	)	(5,538		)	(78	)	(16,270		)
Claims initiated	143		31,316			234		49,835
Rescinded	(125	)	(27,453		)	(169	)	(38,347		)
Balance at end of the period	23		$	4,550		35		$	6,727

The following table presents our maximum exposure to repurchases due to potential breaches of representations and warranties at September 30, 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	$	10,276,699
2014	13,488,771
2015	21,569,097
2016	14,795,424
Total	$	60,129,991

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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 September 30, 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. The interest rates on the facilities are primarily based on LIBOR plus between 2.50% and 3.13% , and have expiration dates from November 2016 to May 2017. These facilities are secured by the underlying asset 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 September 30, 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 September 30, 2016 , we had $91.5 million of borrowings utilizing uncommitted funds. All obligations of RMS under the master repurchase agreements are guaranteed by the Parent Company. We had $291.5 million of aggregated borrowings under these master repurchase agreements at September 30, 2016 , which included borrowings of $235.0 million related to repurchases of HECMs and real estate owned.

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.

For 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 September 30, 2016 under this covenant and, therefore, would not have been in compliance with such covenant for the current quarter.

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 September 30, 2016 , we had $10.0 billion in unpaid principal balance outstanding on the HMBS related obligations. At September 30, 2016 , $10.0 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 below for additional information on repurchases of reverse loans.

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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 Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
Balance at beginning of the period	$	316,555		$	173,882		$	233,594		$	114,727
Repurchases and other additions ⁽¹⁾	175,069			93,442			445,408			221,304
Liquidations	(122,017		)	(62,074		)	(309,395		)	(130,781		)
Balance at end of the period	$	369,607		$	205,250		$	369,607		$	205,250

__________


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

Our repurchases of reverse loans and real estate owned have increased significantly during the three and nine months ended September 30, 2016 as compared to the same periods of 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. The Company has $65.0 million available under its master repurchase agreements as of September 30, 2016 for repurchases of loans, and is evaluating the expansion of existing lines to accommodate future repurchase requirements. 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 September 30, 2016 , which includes $1.1 billion in capacity that was available to be drawn by borrowers at September 30, 2016 and $189.3 million in capacity that will become eligible to be drawn by borrowers throughout the period ending October 1, 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.

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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. We elected to record the excess servicing spread liabilities at fair value similar to the related servicing rights. At September 30, 2016 , the carrying value of our excess servicing spread liabilities was $85.3 million , the repayment of which is based on future servicing fees received from the residential loans underlying the servicing rights.

Servicing Rights Financing

In November 2015, we completed the sale of servicing rights, with an unpaid principal balance of $1.8 billion, to WCO for a sales price of $17.8 million . Further, 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. We elected to record the servicing rights financing at fair value similar to the related servicing rights. The repayment of such financing is based on future servicing fees received from the residential loans underlying the servicing rights. At September 30, 2016 , the carrying value of our servicing rights financing was $34.0 million . We have a receivable due from WCO for these sales of $4.6 million at September 30, 2016 .

Corporate Debt

Term Loans and Revolver

We have a $1.5 billion 2013 Term Loan 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, such as the assets of the consolidated Residual and Non-Residual Trusts and consolidated financing entities, as well as the residential loans and real estate owned of the Ginnie Mae securitization pools that have been recorded on our consolidated balance sheets.

The material terms of our 2013 Secured Credit Facilities are summarized in the table below:



Debt Agreement	Interest Rate	Amortization	Maturity/Expiration
$1.5 billion 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
$100.0 million 2013 Revolver ⁽¹⁾	LIBOR plus 4.50%	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 September 30, 2016 , we did not satisfy both of 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 $19.7 million remained available.

During the nine months ended September 30, 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 September 30, 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 ending 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.

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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 September 30, 2016 , we had no borrowings under the 2013 Revolver and $0.3 million outstanding in an issued LOC, and resultantly had remaining availability under the 2013 Revolver of $19.7 million . On October 14, 2016 we issued a $7.5 million LOC, which reduced the remaining availability under the 2013 Revolver to $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.

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 September 30, 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 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, the exchange offer expired on November 25, 2014, and settlement occurred on December 2, 2014.

Prior to December 15, 2016, we may redeem some or all of the Senior Notes at a make-whole premium plus accrued and unpaid interest, if any, as of the redemption date. Furthermore, on or prior to December 15, 2016, we may on any one or more occasions redeem up to 35% of the aggregate principal amount of the Senior Notes with the net cash proceeds of certain equity offerings at 107.875% of their aggregate principal amount plus accrued and unpaid interest as of the redemption date.

On or after December 15, 2016, 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 September 30, 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 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. 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 payment 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.

During the nine months ended September 30, 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 September 30, 2016.

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.

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 $980.3 million at September 30, 2016 .

At September 30, 2016 , mortgage-backed debt was collateralized by $989.6 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 payments 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 also 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. The mortgage-backed debt issued by the Non-Residual Trusts is subject to mandatory clean-up call provisions pursuant to which we are required to purchase the related mortgage loans from the trusts at the earliest of their exercisable call dates, which is the date each loan pool falls to 10% of the original principal amount. We anticipate the mandatory call obligations to settle beginning in 2017 and continuing through 2019 based upon our current cash flow projections for the Non-Residual Trusts. At September 30, 2016 , the total estimated outstanding balance of the residential loans expected to be called at the respective call dates is $416.9 million . We estimate call obligations of $101.0 million , $253.0 million and $62.9 million during the years ending December 31, 2017, 2018 and 2019, respectively. Substantially all of the call obligations in 2017 are anticipated to occur during the second half of the year.

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. Our obligation for the mandatory clean-up call could have a significant impact on our liquidity.

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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 September 30, 2016. As of June 30, 2017, RMS was in compliance with such financial covenants.

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 Nine Months Ended September 30,
	2016			2015			Variance
Cash flows provided by operating activities:
Net loss adjusted for non-cash operating activities	$	(181,617	)	$	(102,011	)	$	(79,606	)
Changes in assets and liabilities	248,828			138,654			110,174
Net cash provided by originations activities ⁽¹⁾	307,961			7,481			300,480
Proceeds from sale of a trading security	—			70,390			(70,390		)
Cash flows provided by operating activities	375,172			114,514			260,658
Cash flows provided by (used in) investing activities	294,929			(501,596		)	796,525
Cash flows provided by (used in) financing activities	(587,247		)	335,508			(922,755		)
Net increase (decrease) in cash and cash equivalents	$	82,854		$	(51,574	)	$	134,428

__________


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

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 $260.7 million during the nine months ended September 30, 2016 as compared to the same period of 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 originated loans for the nine months ended September 30, 2016 as compared to the same period of 2015.

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. Net cash provided by investing activities increased $796.5 million during the nine months ended September 30, 2016 as compared to net cash used in investing activities for the same period of 2015 . Cash used for purchases and originations of reverse loans held for investment, net of payments received, decreased $758.6 million primarily as a result of a lower funded volume and higher principal repayments and payments received for loans conveyed to HUD. Cash paid for business acquisitions and purchases of servicing rights decreased $228.8 million . These increases in cash described above were partially offset by the cash received in 2015 of $189.5 million in proceeds from the sale of our residual interests.

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. Net cash used in financing activities increased by $922.8 million during the nine months ended September 30, 2016 as compared to net cash provided by financing activities for the same period of 2015 . Cash generated from the securitization of reverse loans, net of payments on HMBS related obligations, decreased $916.9 million 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.

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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 5 and 17 to the Consolidated Financial Statements and to the Liquidity and Capital Resources section for additional information. At September 30, 2016 , we held $6.6 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, including our mortgage loan sales and MBS purchase commitments. We attempt to minimize this risk through monitoring procedures, including monitoring of our counterparties’ credit ratings, review of our counterparties' financial statements, and 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 daily cash margin posting on the majority of our mortgage loan sales and MBS purchase commitments and other collateral requirements.

Counterparty credit risk also exists with our third-party originators from whom we purchase originated mortgage loans and certain third-party originators from whom we acquire servicing rights. The third-party originators incur a representation and warranty obligation when they sell the mortgage loan to us or another third party, and they agree to reimburse us for any losses incurred due to an origination defect. We become exposed to losses for origination defects if the third-party originator is not able to reimburse us for losses incurred for indemnification or repurchase. We attempt to mitigate this risk by conducting quality control reviews of the third-party originators, reviewing compliance by third-party originators with applicable underwriting standards and our client guide, and evaluating the credit worthiness of third-party originators on a periodic basis.

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.

We held real estate owned, net of $82.3 million , $12.6 million and $1.4 million in the Reverse Mortgage and Servicing segments and the Other non-reportable segment, respectively, at September 30, 2016 . We held real estate owned, net of $66.4 million , $10.4 million and $0.6 million in the Reverse Mortgage and Servicing segments and the Other non-reportable segment, respectively, at December 31, 2015 .

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.

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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	July 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 has 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 sheet. Refer to Notes 5 and 17 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 perform sub-servicing for WCO. Refer to Notes 8 and 19 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. Included in Note 4 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2015 are descriptions of our variable interests in VIEs that we do not consolidate, as we have determined that we are not the primary beneficiary of such VIEs.

Critical Accounting Estimates

The critical accounting estimates used in preparation of our consolidated financial statements are described in the Critical Accounting Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016 . Provided below is a summary of goodwill as described in such Annual Report on Form 10-K and significant updates. Except as provided below, there have been no material changes to our critical accounting policies or estimates and the methodologies or assumptions we apply under them.

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Goodwill

As a result of our various acquisitions, we have recorded goodwill, which represents the excess of the consideration paid for a business combination over the fair value of the identifiable net assets acquired. Goodwill is initially recorded at fair value and is subsequently evaluated at least annually for impairment. We perform this annual test at the reporting unit level as of October 1 of each year, or whenever events or circumstances indicate potential impairment. Impairment exists when a reporting unit’s carrying amount of goodwill exceeds its implied fair value. A reporting unit is a business segment or one level below. We have 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.

We have the option of performing a qualitative assessment to determine whether any further quantitative testing for a potential impairment is necessary. Our qualitative assessment will use judgments including, but not limited to, changes in the general economic environment, industry and regulatory considerations, current economic performance compared to historical economic performance, entity-specific events, events affecting our reporting units, and sustained changes in our stock price, where applicable. If we elect to bypass the qualitative assessment or if we determine, based upon our assessment of those qualitative factors that it is more likely than not that the fair value of the reporting unit is less than its net carrying value, a quantitative assessment is required. The quantitative test is a two-step test. The first step identifies whether there is potential impairment by comparing the fair value of a reporting unit to the carrying amount, including goodwill. If the fair value of a reporting unit is less than its carrying amount, the second step of the impairment test is required to measure the amount of impairment loss, if any. As part of the second step, we allocate 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, we recognize an impairment loss in an amount equal to that excess up to the carrying value of goodwill.

During the third quarter of 2016, we 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. We performed a Step 1 impairment assessment 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 impairment assessment was performed, which determined that the remaining Servicing reporting unit goodwill was impaired as of September 30, 2016 .

During the second quarter of 2016, 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. Our 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. Our 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 our share price during the first half of 2016, our 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 impairment evaluation for these reporting units. The Step 1 test indicated that both the Servicing and ARM reporting units had carrying values that exceeded the respective estimated fair values, and the Step 2 analysis 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.

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 in the future.

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Glossary of Terms

This Glossary of Terms includes acronyms and defined terms that are used throughout this Quarterly Report on Form 10-Q/A.


2011 Plan	2011 Omnibus Incentive Plan established by the Company on May 10, 2011, as amended and restated


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 Term Loan	$1.5 billion senior secured first lien term loan entered into on December 19, 2013, as amended


2013 Secured Credit Facilities	2013 Term Loan and 2013 Revolver, collectively


Adjusted EBITDA	Adjusted earnings before interest, taxes, depreciation and amortization, a non-GAAP financial measure; refer to Non-GAAP Financial Measures section under Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for a description of this metric


Adjusted Earnings (Loss)	Adjusted earnings or loss before taxes, a non-GAAP financial measure; refer to Non-GAAP Financial Measures section under Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for a description of this metric


Amended Filing	The Company's Amended Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2016


ARM	Asset Receivables Management, a reporting unit of the Company


Baker Street	Baker Street Capital Management, LLC and certain of its affiliates, collectively


Bankruptcy Code	Title 11 of the United States Code


Birch Run	Birch Run Capital Advisors, LP


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


CFPA	Consumer Financial Protection Act of 2010


CFPB	Consumer Financial Protection Bureau


Charged-off loans	Defaulted consumer and residential loans acquired by the Company at substantial discounts to face value acquired during 2014, which are also referred to as post charge-off deficiency balances


CID	Civil investigative demand


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


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 1 of this Form 10-Q/A


Convertible Notes	$290 million aggregate principal amount of 4.50% convertible senior subordinated notes sold in a registered underwritten public offering on October 23, 2012


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

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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


EBITDA	Earnings before interest, taxes, depreciation, and amortization

Early Advance Reimbursement


Agreement	$200 million financing facility with Fannie Mae


ECOA	Equal Credit Opportunity Act


EFTA	Electronic Fund Transfer Act


Exchange Act	Securities Exchange Act of 1934, as amended


Fannie Mae	Federal National Mortgage Association


FASB	Financial Accounting Standards Board


FHA	Federal Housing Administration


FHFA	Federal Housing Finance Agency


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


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


HAMP	Home Affordable Modification Program


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


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


MAP Rule	Mortgage Acts and Practices Advertising Rule


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


Moody's	Moody's Investors Service Limited, a nationally recognized statistical rating organization designated by the SEC

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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


Net realizable value	Fair value less cost to sell


n/m	Not meaningful


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 Sub-servicing Agreement	Sub-servicing Agreement, dated as of August 8, 2016, by and between New Residential Mortgage LLC and Ditech Financial LLC


Original Filing	The Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016, initially filed with the SEC on November 9, 2016


OTS	Office of Thrift Supervision


Parent Company	Walter Investment Management Corp.


RCS	Residential Credit Solutions, Inc., a Delaware corporation


REIT	Real estate investment trust


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


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 Agent	Computershare Trust Company, N.A.


Rights Agreement	Rights Agreement, dated as of June 29, 2015, between Walter Investment Management Corp. and Computershare Trust Company, N.A., as Rights Agent


RMS	Reverse Mortgage Solutions, Inc., an indirect wholly-owned subsidiary of the Company


RSA	Restructuring support agreement, dated as of July 15, 2015, by and between Walter Energy and its affiliated debtors and debtors-in-possession and the holders of its first lien claims party thereto, relating to Walter Energy’s Chapter 11 bankruptcy filed on July 15, 2015 in the United States Bankruptcy Court for the Northern District of Alabama


RSU	Restricted stock unit


SEC	U.S. Securities and Exchange Commission


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 as of December 17, 2013 among the Company, the guarantors and Wells Fargo Bank, National Association, as trustee


S&P	Standard and Poor's Ratings Services, a nationally recognized statistical rating organization designated by the SEC


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

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U.S.	United States of America


VA	United States Department of Veteran 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


Warehouse borrowings	Borrowings under master repurchase agreements


WCO	Walter Capital Opportunity Corp. and its consolidated subsidiaries

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ITEM 3. 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 above in Item 2. 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 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 tables summarize 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):



	September 30, 2016
	Down 50 bps			Down 25 bps			Up 25 bps			Up 50 bps
Servicing segment
Servicing rights carried at fair value	$	(206,938	)	$	(112,348	)	$	111,764		$	200,513
Servicing rights related liabilities	19,200			11,169			(12,252		)	(22,576		)
Net change in fair value - Servicing segment	$	(187,738	)	$	(101,179	)	$	99,512		$	177,937

Originations segment
Residential loans held for sale	$	12,698		$	7,674		$	(10,643	)	$	(23,688	)
Freestanding derivatives ⁽¹⁾	(24,033		)	(12,543		)	13,086			27,300
Net change in fair value - Originations segment	$	(11,335	)	$	(4,869	)	$	2,443		$	3,612

Reverse Mortgage segment
Reverse loans	$	122,923		$	60,919		$	(59,844	)	$	(118,652	)
HMBS related obligations	(99,625		)	(49,499		)	48,879			97,138
Net change in fair value - Reverse Mortgage segment	$	23,298		$	11,420		$	(10,965	)	$	(21,514	)

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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 September 30, 2016 and December 31, 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

Servicing rights 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. The Company does not currently use derivative instruments to hedge the interest rate risk inherent in the value of servicing rights. The Company 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 sensitivity to interest rate changes increased at September 30, 2016 from December 31, 2015 due primarily to a lower interest rate environment.

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Servicing Rights Related Liabilities

Servicing rights related liabilities consist 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 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 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.

Other Financial Instruments

For quantitative and qualitative disclosures about interest rate risk on other financial instruments, refer to Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk of our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016 . These risks have not changed materially since December 31, 2015 .

ITEM 4. CONTROLS AND PROCEDURES (AS RESTATED)

(a) 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. The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as of September 30, 2016 .

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 September 30, 2016 . Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2016 , the design and operation of the Company's disclosure controls and procedures were effective at the reasonable assurance level.

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Subsequent to the Original Filing, the Chief Executive Officer and Chief Financial Officer determined that the Company's 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. Additionally, subsequent to the Original Filing, the Company also determined it 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 nine months ended September 30, 2016 . The Company determined that there was an error in the calculation of the valuation allowance for 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 nine months ended September 30, 2016 .

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 September 30, 2016 .

(b) 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 September 30, 2016 covered by this Quarterly Report on Form 10-Q/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.


•	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 circumstance.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is, and expects that, from time to time, it will continue to become, 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 United States 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, Mark O’Brien, Denmar Dixon 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 and the aforementioned individuals are cooperating 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 has received a subpoena from the Office of Inspector General of the U.S. Department of Housing and Urban Development 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 has also received a letter from the New York Department of Financial Services requesting information on the company's reverse mortgage servicing business in New York. We are cooperating with these and other inquiries relating to our reverse mortgage business.

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 United States 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 United States 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 investigations, 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.

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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. For example, 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. Ditech Financial is also subject to several purported 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 June 17, 2016, the Board of Directors of the Company received a letter from a stockholder demanding that the Board of Directors of the Company 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. The Board of Directors of the Company has appointed an evaluation committee to consider the demand letter and the matters raised therein. The Company cannot provide any assurance as to the outcome or the effect on the Company of the matter.

The outcome of all of the Company's regulatory matters and other legal proceedings 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 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 favorable and without a material effect, 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. 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, please see Note 17 to the Consolidated Financial Statements.

ITEM 1A. RISK FACTORS (AS RESTATED)

In addition to the other information set forth in this report, you should carefully review and consider the risks and uncertainties described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 and in our Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2016 and Form 10-Q/A for the quarterly period ended June 30, 2016, which are the risks and uncertainties that could materially adversely affect our business, prospects, financial condition, cash flows, liquidity, 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 report or in the aforementioned periodic reports constitute forward-looking information, the risk factors set forth in such periodic reports 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.

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Risks Related to Our Business

Subsequent to our Original Filing, we identified two material weaknesses in the original filing of the Form 10-K for the year ended December 31, 2016. 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 the original filing of the Form 10-K for the year ended December 31, 2016, 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 I, Item 4. 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.

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 our Annual Report on Form 10-K for the year ended December 31, 2016, originally filed with the SEC on March 14, 2017. Management has concluded that our internal control over financial reporting and disclosure controls and procedures were ineffective as of September 30, 2016 . For a description of these material weaknesses, refer to Part I, Item 4. 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.

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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.

We have significant unrealized tax losses which may be impaired if we have a significant change in our stockholder base and which could inhibit certain acquisitions of our stock.

We, and certain of our subsidiaries, have significant unrealized tax losses for United States 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 of the Code (“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. We estimate that the current three year period for the Company began on January 1, 2015, which was, based on our analysis, the first day of the first year we were a loss company. 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 June 30, 2016, estimate that our ownership change during the applicable look back period under Section 382 was approximately 22%, 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.

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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 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.

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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 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 part 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 discharged by Walter Energy or otherwise, 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 United States 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.

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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; (ii) in light of Walter Energy’s 2015 Chapter 11 bankruptcy filing, it is unclear (a) whether Walter Energy will be obligated or able to pay any or all of such amounts owed and (b) what portion of the IRS claims against the Walter Energy consolidated tax group for 2009 and prior tax years are attributable to tax, interest and/or penalties and what priority, if any, the IRS will receive in the Alabama bankruptcy proceedings with respect to its claims against Walter Energy; and (iii) we cannot predict whether, in the event Walter Energy does not discharge all tax obligations for the consolidated tax group, the IRS will seek to enforce tax claims against former members of the Walter Energy consolidated tax group. 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.

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 a member of the Walter Energy consolidated group for U.S. federal income tax purposes. 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.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


a)	Not applicable.


b)	Not applicable.


c)	Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The Index to Exhibits, which appears immediately following the signature page below, is incorporated by reference herein.

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SIGNATURES

Pursuant to the requirements 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/ Anthony N. Renzi
		Anthony N. Renzi
		Chief Executive Officer and President (Principal Executive Officer)

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.	Note	Description

4.1		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).

4.2		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).

4.3		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		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 as filed with the Securities and Exchange Commission on August 9, 2016).

10.2		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 as filed with the Securities and Exchange Commission on August 9, 2016).

10.3		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).

10.4	(1)	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.

10.5	(1)	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.

10.6		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).

31.1	(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	(1)	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	(1)	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	(1)	XBRL (Extensible Business Reporting Language) — The following materials from Walter Investment Management Corp.’s Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2016, formatted in XBRL (Extensible Business Reporting Language); (i) Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015; (ii) Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2016 and 2015; (iii) Consolidated Statement of Stockholders’ Equity (Deficit) for the nine months ended September 30, 2016; (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015; and (v) Notes to Consolidated Financial Statements.



Note		Notes to Exhibit Index

(1)		Filed or furnished herewith.

134

Exhibit 10.4

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)

Pursuant to that certain employment agreement, dated as of August 8, 2016 (as it may be further amended and restated, the “Employment Agreement”), between you and Walter Investment Management Corp., a Maryland corporation (the “Company”), the Company agreed to grant you a long term incentive cash-based award with an aggregate value equal to $600,000 (the “Cash-Based Award”) in connection with your assumption of responsibilities as Chief Executive Officer and President of the Company on the Commencement Date (as defined in the Employment Agreement).

This Cash-Based Award Agreement (as it may be further amended and restated, 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 Employment Agreement.

Participant : Anthony Renzi_______________________________________

Commencement Date : September 12, 2016 ___________________________

Amount of Cash-Based Award: $ 600,000___________________________

Vesting Dates : The first, second, and third anniversaries of the Commencement Date, subject to Section 1 below.

THIS AGREEMENT , effective as of the Commencement Date, represents the grant of a 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 the Employment 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 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 substantially equal installments subject to the condition that the Participant remains an employee of the Company from the Commencement Date through (and including) each applicable Vesting Date; provided , that if

the amount is not evenly divisible by three, then the installments shall be as equal as possible with the smaller installment(s) vesting first. If the Participant remains employed by the Company 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 on the payment date. Unless otherwise expressly provided for in the Employment Agreement, 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.

Timing of Payout . Cash payments in satisfaction of the Company’s obligations with respect to any vested installment of the Cash-Based Award shall occur as soon as administratively feasible after (but in all events prior to March 15 of the calendar year immediately following the calendar year in which the applicable event occurs) the earliest to occur of (a) the applicable Vesting Date, (b) the date of the Participant’s termination of employment due to death or Disability, (c) the date of the Participant’s termination of employment (x) by the Company without Cause (other than due to death or Disability), (y) by the Company due to non-renewal of the term of employment under the Employment Agreement, or (z) by the Participant for Good Reason, 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 the Cash-Based Award 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 . The Cash-Based Award shall be paid out solely in the form of United States dollars.


4.	Termination of Employment .


(a)	By Death or Disability . In the event the Participant’s employment with the Company terminates due to the Participant’s death or Disability, 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)

By the Company Without Cause (other than due to death or Disability), due to Non-Renewal of the Term of Employment by the Company, or by the Participant for Good Reason . In the event the Participant’s employment with the Company is terminated (i) by the Company without Cause (other than due to death or Disability), (ii) by the Company due to non-renewal of the term of employment under the Employment Agreement, or (iii) by the Participant for Good Reason, 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.


(c)	For Cause . In the event the Participant’s employment is terminated by the Company 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.


(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 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.

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 right to terminate the Participant’s employment with the Company at any time.


8.	Miscellaneous .

(a)


(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, the Employment Agreement.


(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 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.


(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.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of September 13, 2016.

Walter Investment Management Corp.

By: /s/ Greg Williamson

/s/ Anthony Renzi

Participant

Participant’s name and address:

Anthony Renzi

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 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.

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 “Good Reason” 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.


E.	“ Share ” shall mean a share of common stock of the Company.

Exhibit 10.5

Walter Investment Management Corp.
Restricted Stock Unit Award Agreement
Under the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016)

097231-0021-15408-Active.20065759.6

Walter Investment Management Corp.
Restricted Stock Unit Award Agreement
Under the 2011 Omnibus Incentive Plan (Amended and Restated June 9, 2016)

Pursuant to that certain employment agreement, dated as of August 8, 2016 (as it may be further amended and restated, the “Employment Agreement”), between you and Walter Investment Management Corp., a Maryland corporation (the “Company”), the Company agreed to grant you an award of restricted stock units (“RSUs”) with an economic value determined as of the Commencement Date (as defined in the Employment Agreement) equal to $600,000 (the “Award”) in connection with your assumption of responsibilities as Chief Executive Officer and President of the Company on the Commencement Date.

This Restricted Stock Unit Award Agreement (as it may be further amended and restated, 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 Employment Agreement.

Participant : Anthony Renzi _____________________________

Commencement Date : September 12, 2016 ________________

Number of RSUs Granted : 175,438

Vesting Dates : The first, second, and third anniversaries of the Commencement Date, subject to Section 1 below.

THIS AGREEMENT , effective as of the Commencement Date, represents the grant of RSUs 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 the Employment 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, 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 5 or Section 6 below, the RSUs granted hereunder will become vested in substantially equal installments subject to the condition that the Participant remains an employee of the Company from the Commencement Date 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 with the smaller installment(s) vesting first. If the Participant remains employed by the Company through each applicable Vesting Date, payment of the relevant installment of the Award will occur irrespective of whether the Participant is employed by the Company on the payment date. Unless otherwise expressly provided for in the Employment Agreement, this grant of RSUs shall not confer any right to the Participant to be granted RSUs or other awards in the future under the Plan.

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 all events prior to March 15 of the calendar year immediately following the calendar year in which the applicable event occurs) the earliest to occur of (a) the applicable Vesting Date, (b) the date of the Participant’s termination of employment due to death or Disability, (c) the date of the Participant’s termination of employment (x) by the Company without Cause (other than due to death or Disability), (y) by the Company due to non-renewal of the term of employment under the Employment Agreement, or (z) by the Participant for Good Reason, 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 . Each vested RSU will be paid out solely in the form of one Share.

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 such dividend equivalents are paid on the Company’s outstanding Shares, however, such dividend equivalents will not be earned or payable to the Participant unless and until such time as the RSUs to which such dividend equivalents apply are settled as provided for in Section 2 above.


5.	Termination of Employment .


(a)	By Death or Disability . In the event the Participant’s employment with the Company terminates due to the Participant’s death or Disability, in each case, 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)

By the Company Without Cause (other than due to death or Disability), due to Non-Renewal of the Term of Employment by the Company, or by the Participant for Good Reason . In the event the Participant’s employment with the Company is terminated (i) by the Company without Cause (other than due to death or Disability), (ii) by the Company due to non-renewal of the term of employment under the Employment Agreement, or (iii) by the Participant for Good Reason, in each case, 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 employment is terminated by the Company for Cause prior to the final Vesting Date (or the payout date relating to a 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 employment terminates for any reason prior to the final Vesting Date (other than as provided for above), the Participant shall forfeit any outstanding RSUs and any accrued but unpaid dividend equivalents thereon.

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 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.

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.


10.	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 right to terminate the Participant’s employment 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 Participant may elect, subject to any procedural rules adopted by the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold and sell Shares having an aggregate Fair Market Value on the date the tax is to be determined equal to the amount required to be withheld.

(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 RSUs granted hereunder. This Agreement and the Plan supersede any prior agreements, commitments or negotiations concerning the RSUs granted hereunder, including, without limitation, the Employment Agreement.


(h)	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.


(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 Section 409A of the Code, and accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in accordance therewith.


(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.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of September 13, 2016.

Walter Investment Management Corp.

By: /s/ Greg Williamson

/s/ Anthony Renzi

Participant

Participant’s name and address:

Anthony Renzi

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)


(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)

other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.

(c)

(i)

(ii)


(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.

“ Fair Market Value ” or “ FMV ” shall mean, as applied to a specific date, the price of a Share that is based on the opening, closing, actual, high, low or average selling prices of a Share reported on any established stock exchange or national market system including without limitation the New York Stock Exchange and the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation System on the applicable date, the preceding trading day, the next succeeding trading day, or an average of trading days, as determined by the Committee in its discretion. Unless the Committee determines otherwise or unless otherwise specified in an Award Agreement, Fair Market Value shall be deemed to be equal to the closing price of a Share on the most recent date on which Shares were publicly traded. Notwithstanding the foregoing, if Shares are not traded on any established stock exchange or national market system, the Fair Market Value means the price of a Share as established by the Committee acting in good faith based on a reasonable valuation method that is consistent with the requirements of Section 409A of the Code and the regulations thereunder.


E.	“ Good Reason ” shall mean “Good Reason” 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.


F.	“ Share ” shall mean a share of common stock of the Company.

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 Quarterly Report on Form 10-Q of Walter Investment Management Corp. (the “Registrant”) for the period ended September 30, 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 Quarterly Report on Form 10-Q of Walter Investment Management Corp. (the “Registrant”) for the period ended September 30, 2016 (the “Report”);

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 Quarterly Report on Form 10-Q of the Company for the period ended September 30, 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