UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
  FORM 10-Q
 
 
 
 
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from      to                     
Commission file number: 001-35449
 
 
 
 
 
Nationstar Mortgage Holdings Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
 
45-2156869
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
8950 Cypress Waters Blvd
Coppell, TX
 
75019
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
(469) 549-2000
 
 
 
 
 
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   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, "accelerated filer" and "smaller reporting company" in Rule  12(b)-2 of the Exchange Act
Large Accelerated Filer
x
Accelerated Filer
¨
 
 
 
 
Non-Accelerated Filer
¨ (Do not check if a smaller reporting company.)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x
Number of shares of common stock, $0.01 par value, outstanding as of March 31, 2015: 109,239,120




NATIONSTAR MORTGAGE HOLDINGS INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 
 
 
Page
PART I
FINANCIAL INFORMATION
 
 
 
 
Item 1.
 
 
 
 
Consolidated Balance Sheets – March 31, 2015 (Unaudited) and December 31, 2014
 
 
 
 
Unaudited Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) - For the three months ended March 31, 2015 and 2014
 
 
 
 
Consolidated Statements of Stockholders’ Equity - For the three months ended March 31, 2015 (unaudited) and year ended December 31, 2014
 
 
 
 
Unaudited Consolidated Statements of Cash Flows - For the three months ended March 31, 2015 and 2014
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
Quantitative and Qualitative Disclosure About Market Risks
 
 
 
Item 4.
 
 
 
PART II
OTHER INFORMATION
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 
 
 


2


PART I. Financial Information

Item 1. Consolidated Financial Statements
NATIONSTAR MORTGAGE HOLDINGS INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
 
March 31,
2015
 
December 31,
2014
 
 
 
 
Assets
 
 
 
Cash and cash equivalents
$
815,776

 
$
299,002

Restricted cash
358,542

 
285,530

Mortgage servicing rights, $3,022,198 and $2,949,739 at fair value, respectively
3,032,982

 
2,961,321

Advances
2,470,315

 
2,546,362

Reverse mortgage interests
2,633,862

 
2,453,069

Mortgage loans held for sale
1,995,998

 
1,277,931

Mortgage loans held for investment, net of allowance for loan losses of $3,516 and $3,531, respectively
185,577

 
191,569

Property and equipment, net of accumulated depreciation of $77,450 and $69,721, respectively
131,869

 
129,611

Derivative financial instruments
103,367

 
91,051

Other assets
914,080

 
877,229

Total assets
$
12,642,368

 
$
11,112,675

Liabilities and stockholders' equity
 
 
 
Unsecured senior notes
$
2,158,812

 
$
2,159,231

Advance facilities
1,883,312

 
1,901,783

Warehouse facilities
2,477,472

 
1,572,622

Payables and accrued liabilities
1,402,611

 
1,322,078

MSR related liabilities - nonrecourse
1,092,634

 
1,080,465

Mortgage servicing liabilities
58,599

 
65,382

Derivative financial instruments
23,048

 
18,525

Other nonrecourse debt
1,870,269

 
1,768,311

Total liabilities
10,966,757

 
9,888,397

Commitments and contingencies
—

 
—

Preferred stock at $0.01 par value - 300,000 shares authorized, no shares issued and outstanding
—

 
—

Common stock at $0.01 par value - 1,000,000 shares authorized, 108,409 shares and 90,999 shares issued, respectively
1,084

 
910

Additional paid-in-capital
1,091,649

 
587,446

Retained earnings
594,744

 
643,059

Treasury shares; 830 shares and 602 shares at cost, respectively
(17,875
)
 
(12,433
)
Accumulated other comprehensive income
—

 
—

Total Nationstar stockholders' equity
1,669,602

 
1,218,982

Noncontrolling interest
6,009

 
5,296

Total equity
1,675,611

 
1,224,278

Total liabilities and equity
$
12,642,368

 
$
11,112,675

See accompanying notes to the unaudited consolidated financial statements.

3




NATIONSTAR MORTGAGE HOLDINGS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(amounts in thousands, except for earnings per share data)

 
For the three months ended March 31,
 
2015
 
2014
Revenues:
 
 
 
Service related
$
215,123

 
$
341,711

Net gain on mortgage loans held for sale
166,994

 
127,936

Total revenues
382,117

 
469,647

Expenses:
 
 
 
Salaries, wages and benefits
178,755

 
156,595

General and administrative
205,088

 
164,538

Total expenses
383,843

 
321,133

Other income (expense):
 
 
 
Interest income
43,774

 
43,943

Interest expense
(115,648
)
 
(156,600
)
Gain (loss) on interest rate swaps and caps
(767
)
 
2,821

Total other income (expense)
(72,641
)
 
(109,836
)
Income (loss) before taxes
(74,367
)
 
38,678

Income tax (benefit) expense
(27,525
)
 
15,001

Net income (loss)
(46,842
)
 
23,677

Less: Net gain (loss) attributable to noncontrolling interests
1,473

 
(359
)
Net income (loss) attributable to Nationstar
(48,315
)
 
24,036

Other comprehensive income, net of tax:
 
 
 
Change in value of designated cash flow hedge, net of tax of $0 and ($1,183), respectively
—

 
(1,963
)
Comprehensive income (loss)
$
(48,315
)
 
$
22,073

 
 
 
 
Earnings (loss) per share:
 
 
 
Basic earnings (loss) per share
$
(0.54
)
 
$
0.27

Diluted earnings (loss) per share
$
(0.53
)
 
$
0.27

Weighted average shares:
 
 

       Basic
89,911

 
89,342

       Dilutive effect of stock awards
669

 
733

       Diluted
90,580

 
90,075

Dividends declared per share
$
—

 
$
—

See accompanying notes to the unaudited consolidated financial statements.

4



NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(amounts in thousands)
 
Common Stock Outstanding
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Treasury shares
 
Accumulated
Other Comprehensive Income
 
Total Nationstar Stockholders'
Equity
 
Non-controlling interests
 
Total
Equity
Balance at December 31, 2013
90,330

 
$
906

 
$
566,642

 
$
422,341

 
$
(6,944
)
 
$
1,963

 
$
984,908

 
$
4,990

 
$
989,898

Shares (including forfeitures) issued under incentive plan
1,271

 
4

 
(4
)
 
—

 
—

 
—

 
—

 
—

 
—

Change in the value of cash flow hedge, net of tax of $1,183
—

 
—

 
—

 
—

 
—

 
(1,963
)
 
(1,963
)
 
—

 
(1,963
)
Share-based compensation
—

 
—

 
18,565

 
—

 
—

 
—

 
18,565

 
—

 
18,565

Excess tax benefit from share-based compensation
—

 
—

 
2,243

 
—

 
—

 
—

 
2,243

 
—

 
2,243

Shares acquired by Nationstar related to incentive compensation awards
—

 
—

 
—

 
—

 
(5,489
)
 
—

 
(5,489
)
 
—

 
(5,489
)
Net income
—

 
—

 
—

 
220,718

 
—

 
—

 
220,718

 
306

 
221,024

Balance at December 31, 2014
91,601

 
910

 
587,446

 
643,059

 
(12,433
)
 
—

 
1,218,982

 
5,296

 
1,224,278

(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares (including forfeitures) issued under incentive plan
138

 
(1
)
 
1

 
—

 
—

 
—

 
—

 
—

 
—

Acquisition of non-controlling interest in subsidiaries
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(760
)
 
(760
)
Share-based compensation
—

 
—

 
5,524

 
—

 
—

 
—

 
5,524

 
—

 
5,524

Issuance of common stock, net
17,500

 
175

 
497,583

 
—

 
—

 
—

 
497,758

 
—

 
497,758

Excess tax benefit from share-based compensation
—

 
—

 
1,095

 
—

 
—

 
—

 
1,095

 
—

 
1,095

Withholding tax related to share based settlement of common stock by management
—

 
—

 
—

 
—

 
(5,442
)
 
—

 
(5,442
)
 


 
(5,442
)
Net loss
—

 
—

 
—

 
(48,315
)
 
—

 
—

 
(48,315
)
 
1,473

 
(46,842
)
Balance at March 31, 2015
109,239

 
$
1,084

 
$
1,091,649

 
$
594,744

 
$
(17,875
)
 
$
—

 
$
1,669,602

 
$
6,009

 
$
1,675,611


See accompanying notes to the unaudited consolidated financial statements.

5


NATIONSTAR MORTGAGE HOLDINGS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
 
For the three months ended March 31,
 
2015
 
2014
Operating activities
 
 
 
Net income (loss) attributable to Nationstar
$
(48,315
)
 
$
24,036

Reconciliation of net income (loss) to net cash attributable to operating activities:
 
 
 
Share-based compensation
5,524

 
2,809

Excess tax benefit from share-based compensation
(1,095
)
 
(2,189
)
Net gain on mortgage loans held for sale
(166,994
)
 
(127,936
)
Mortgage loans originated and purchased, net of fees
(4,614,971
)
 
(5,402,862
)
Proceeds on sale of and payments of mortgage loans held for sale and held for investment
4,003,126

 
6,361,308

Gain (loss) on interest rate swaps and caps

767

 
(2,821
)
Depreciation and amortization
12,854

 
8,792

Amortization (accretion) of premiums/discounts
(1,797
)
 
9,959

Fair value changes in excess spread financing
13,114

 
(3,369
)
Fair value changes and amortization/accretion of mortgage servicing rights
204,201

 
78,687

Fair value change in mortgage servicing rights financing liability
(4,386
)
 
(10,788
)
Changes in assets and liabilities:
 
 
 
Advances
95,436

 
(205,562
)
Reverse mortgage interests
(180,793
)
 
(238,538
)
Other assets
20,150

 
271,376

Payables and accrued liabilities
2,872

 
(122,141
)
Net cash attributable to operating activities
(660,307
)
 
640,761

Investing activities
 
 
 
Property and equipment additions, net of disposals
(11,993
)
 
(8,913
)
Purchase of forward mortgage servicing rights, net of liabilities incurred
(196,081
)
 
(93,092
)
Proceeds on sale of servicer advances
—

 
182,871

Acquisitions, net
(31,276
)
 
—

Net cash attributable to investing activities
(239,350
)
 
80,866

Continued on following page.

6



NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(amounts in thousands)
 
For the three months ended March 31,
 
2015
 
2014
Financing activities
 
 
 
Transfers (to) / from restricted cash, net
(73,012
)
 
104,225

Issuance of common stock, net of issuance costs
497,758

 
—

Debt financing costs
(1,549
)
 
(2,050
)
Increase (decrease) in advance facilities
(18,471
)
 
(376,876
)
Increase (decrease) in warehouse facilities
904,850

 
(598,280
)
Proceeds from 2014-1 HECM Securitization
73,082

 
—

Repayment of 2014-1 HECM Securitization
(26,829
)
 
—

Issuance of excess spread financing
52,957

 
37,859

Repayment of excess spread financing
(49,516
)
 
(42,717
)
Increase in participating interest financing in reverse mortgage interests
64,781

 
103,324

Proceeds from mortgage servicing rights financing
—

 
20,651

Repayment of nonrecourse debt – Legacy assets
(3,273
)
 
(2,998
)
Excess tax benefit from share-based compensation
1,095

 
2,189

Surrender of shares relating to stock vesting
(5,442
)
 
(4,783
)
Net cash attributable to financing activities
1,416,431

 
(759,456
)
Net increase (decrease) in cash and cash equivalents
516,774

 
(37,829
)
Cash and cash equivalents at beginning of period
299,002

 
441,902

Cash and cash equivalents at end of period
$
815,776

 
$
404,073

Supplemental disclosures of cash activities
 
 
 
Cash paid for interest expense
$
110,144

 
$
123,058

Net cash (received)/paid for income taxes
(609
)
 
19

Supplemental disclosures of non-cash activities
 
 
 
Transfer of mortgage loans held for investment to REO at fair value
$
569

 
$
1,336

Mortgage servicing rights resulting from sale or securitization of mortgage loans
44,232

 
58,304

Payable to seller of forward mortgage servicing rights
61,720

 
6,494

See accompanying notes to the unaudited consolidated financial statements.  

7
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)



1. Nature of Business and Basis of Presentation
Nature of Business
Nationstar Mortgage Holdings Inc., a Delaware corporation, including its consolidated subsidiaries (collectively, Nationstar or the Company), earns fees through the delivery of servicing, origination and transaction based services related principally to single-family residences throughout the United States.
Basis of Presentation
The consolidated financial statements include the accounts of Nationstar, its wholly-owned subsidiaries, and other entities in which the Company has a controlling financial interest, and those variable interest entities (VIEs) where Nationstar's wholly-owned subsidiaries are the primary beneficiaries. Nationstar applies the equity method of accounting to investments when the entity is not a VIE and Nationstar is able to exercise significant influence, but not control, over the policies and procedures of the entity but owns less than 50% of the voting interests. Intercompany balances and transactions have been eliminated. Results of operations, assets and liabilities of VIEs are included from the date that Nationstar became the primary beneficiary through the date Nationstar ceases to be the primary beneficiary.
The interim consolidated financial statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results of the interim periods have been included. The consolidated interim financial statements of Nationstar have been prepared in accordance with generally accepted accounting principles for interim information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (SEC). Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States (GAAP) for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in Nationstar's Annual Report on Form 10-K filed on February 27, 2015. The results of operations for the interim periods disclosed are not necessarily indicative of the results that may be expected for the full year or any future period. Certain prior period amounts have been reclassified to conform to the current period presentation. Nationstar evaluated subsequent events through the date these interim consolidated financial statements were issued.

Recent Accounting Developments

Accounting Standards Update 2015-02: Consolidation (Topic 810) - Amendments to the Consolidation Analysis (ASU 2015-02) changes the analysis that a reporting entity must perform when deciding to consolidate a legal entity. This amendment changes the evaluation of whether limited partnerships are variable interest entities or voting interest entities and eliminates the presumption that a general partner should consolidate a limited partnership. This amendment also changes the analysis for entities that are involved with variable interest entities and provides an exception for companies with interests in entities that are required to comply with requirements of the Investment Company Act of 1940 for registered money market funds. The amendment is effective for fiscal years and interim periods beginning after December 15, 2015. The Company is currently evaluating the impact of adopting ASU 2015-02.
Accounting Standards Update 2015-03: Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03) requires that debt issuance costs be included in the carrying value of the related debt liability, when recognized, on the face of the balance sheet. This amendment is effective for fiscal years beginning after December 15, 2015. The Company is currently evaluating the impact of adopting ASU 2015-03.
Accounting Standards Update 2015-05 - Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (ASU 2015-05) was created to eliminate diversity in the reporting of fees paid by a customer in a cloud computing arrangement caused by lack of guidance. This update provides that if a cloud computing arrangement includes a software license, the license element should be accounted for as other acquired software licenses. If the cloud computing arrangement does not include a software license then the fees should be accounted for as a service contract. This amendment is effective for annual periods beginning after December 15, 2015. The Company is currently evaluating the impact of adopting ASU 2015-05.
Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15), creates consistency in the disclosures made by an entity when there is doubt that the entity will continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016. The adoption of ASU 2014-15 is not expected to have a material impact on our financial condition, liquidity or results of operations.


8
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


ASU No. 2014-12, Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (ASU 2014-12), requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU 2014-12 is not expected to have a material impact on our financial condition, liquidity or results of operation.

Accounting Standards Update 2015-01: Income Statement - Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (ASU 2015-01) eliminates the concept of extraordinary items from GAAP. ASU 2015-01 is effective for fiscal years beginning after December 15, 2015. The adoption of
ASU 2015-01 is not expected to have a material impact on our financial condition, liquidity or results of operations.

Effective January 1, 2015, the Company adopted Accounting Standards Update No. 2014-14, Receivables — Troubled Debt Restructurings by Creditors (Subtopic 310-40), Classification of Certain Government-Guaranteed Loans Upon Foreclosure ( ASU 2014-14). This update requires that foreclosed mortgage loans guaranteed by the government be derecognized and a separate other receivable recognized if certain conditions are met. Upon adoption of this ASU, foreclosed loans backed by government guarantees that were previously recorded as a component of Real Estate Owned in Other Assets were reclassified to Reverse Mortgage Interests on the Company's consolidated balance sheet. Consistent with the Company's adoption of ASU 2014-14, prior year amounts were reclassified to be in conformity with the current year presentation. The adoption of ASU 2014-14 did not have an impact to the Company's net income.

Effective January 1, 2015, the Company adopted Accounting Standards Update No. 2014-04, Receivables — Troubled Debt Restructurings by Creditors (Subtopic 310-40), Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure (ASU 2014-04). This update requires disclosure of consumer mortgage loans collateralized by residential real estate for which formal foreclosure proceedings are in process. Consistent with the Company's adoption of ASU 2014-04, the Company made the required disclosure for current and prior year in the Mortgage Loans Held for Sale and Investment footnote. The adoption of ASU 2014-04 did not have an impact to the Company's net income.


2. Mortgage Servicing Rights and Related Liabilities
MSRs and Related Liabilities
March 31, 2015
 
December 31, 2014
MSRs - Fair Value
$
3,022,198

 
$
2,949,739

MSRs - LOCOM
10,784

 
11,582

Mortgage Servicing Rights
3,032,982

 
2,961,321

 
 
 
 
Mortgage Servicing Liabilities
58,599

 
65,382

 
 
 
 
Excess spread financing - fair value
1,047,590

 
1,031,035

Mortgage servicing rights financing liability - fair value
45,044

 
49,430

MSR Related Liabilities (nonrecourse)
$
1,092,634

 
$
1,080,465

Mortgage Servicing Rights - Fair Value
M SRs - Fair Value consists of rights the Company owns and records as assets to service traditional residential mortgage loans for others either as a result of a purchase transaction or from the sale and securitization of loans originated. MSRs - Fair Value comprise both agency and non-agency loans. The Company segregates MSRs - Fair Value between credit sensitive and interest sensitive pools. Interest sensitive pools are primarily impacted by changes in forecasted interest rates, which in turn impact voluntary prepayment speeds. Credit sensitive pools are primarily impacted by borrower performance under specified repayment terms, which most directly impacts involuntary prepayments and delinquency rates.

9
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


The Company assesses whether acquired portfolios are more credit sensitive or interest sensitive in nature on the date of acquisition. The Company considers numerous factors in making this assessment, including loan-to-value ratios, FICO scores, percentage of portfolio previously modified, portfolio seasoning and similar criteria. Once the determination for a pool is made, it is not changed over time.

Interest sensitive portfolios consist of lower delinquency single-family conforming residential forward mortgage agency loans. Credit sensitive portfolios primarily consist of higher delinquency single-family non-conforming residential forward mortgage loans serviced both for agency and non-agency investors.

The following table provides a breakdown of the total credit and interest sensitive UPBs for Nationstar's owned MSRs.
 
March 31, 2015
 
December 31, 2014

UPB
 
Fair Value
 
UPB
 
Fair Value
Credit Sensitive
$
241,252,341

 
$
2,002,487

 
241,769,601

 
1,919,290

Interest Sensitive
101,866,277

 
1,019,711

 
91,843,044

 
1,030,449

 
$
343,118,618

 
$
3,022,198

 
$
333,612,645

 
$
2,949,739


The activity of MSRs carried at fair value is as follows for the dates indicated:
 
Three months ended,
 
March 31, 2015
 
March 31, 2014
Fair value at the beginning of the period
$
2,949,739

 
$
2,488,283

Additions:
 
 
 
Servicing resulting from transfers of financial assets
44,232

 
58,304

Purchases of servicing assets
238,413

 
108,312

Changes in fair value:
 
 
 
Due to changes in valuation inputs or assumptions used in the valuation model
(109,684
)
 
(3,083
)
Other changes in fair value
(100,502
)
 
(75,266
)
Fair value at the end of the period
$
3,022,198

 
$
2,576,550

In the fourth quarter of 2014, the Company revised its approach in calculating Other Changes in Fair Value in the above rollforward. Under the revised approach, Nationstar began incorporating voluntary principal payments, which were previously included as a component in the Due to changes in valuation inputs or assumptions line, as a component in Other changes in fair value. Nationstar has reclassified the amounts presented in the March 31, 2014 rollforward to conform to the current presentation. While amounts were reclassed in the 2014 period, there was no impact to net income or to the total changes in fair value in the prior period.
Nationstar used the following weighted average assumptions in estimating the fair value of MSRs for the dates indicated:
Credit Sensitive
March 31, 2015
 
December 31, 2014
Discount rate
11.79
%
 
11.96
%
Total prepayment speeds
18.14
%
 
18.58
%
Expected weighted-average life
5.74 years

 
5.39 years

Interest Sensitive
March 31, 2015
 
December 31, 2014
Discount rate
9.08
%
 
9.09
%
Total prepayment speeds
14.12
%
 
11.27
%
Expected weighted-average life
5.63 years

 
6.49 years


The following table shows the hypothetical effect on the fair value of the MSRs using certain unfavorable variations of the expected levels of key assumptions used in valuing these assets at March 31, 2015 and December 31, 2014 :


10
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


 
Discount Rate
 
Total Prepayment
Speeds
 
100 bps
Adverse
Change
200 bps
Adverse
Change
 
10%
Adverse
Change
20%
Adverse
Change
March 31, 2015
 
 
 
 
 
 Mortgage servicing rights
$
(110,706
)
$
(206,973
)
 
$
(119,295
)
$
(227,805
)
December 31, 2014
 
 
 
 
 
 Mortgage servicing rights
$
(110,900
)
$
(207,295
)
 
$
(112,603
)
$
(199,078
)

These sensitivities are hypothetical and should be evaluated with care. The effect on fair value of a 10% variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the 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 may lead to changes in other factors, which could impact the above hypothetical effects.

MSRs - LOCOM
Nationstar owns the right to service certain reverse mortgages with an unpaid principal balance of $27.4 billion and $28.0 billion as of March 31, 2015 and December 31, 2014 , respectively. Nationstar utilizes a variety of assumptions in assessing the fair value of its servicing assets or liabilities, with the primary assumptions including discount rates, prepayment speeds, home price index, collateral values and the expected weighted average life. At March 31, 2015 and December 31, 2014 , no impairment was identified. Interest and servicing fees collected on reverse mortgage interests are included as a component of either interest income or service related revenues based on whether Nationstar acquired the related borrower draws from a predecessor servicer or funded borrower draws under its obligation to service the related HECMs subsequent to the acquisition of the rights to service these loans.

The activity of MSRs carried at amortized cost is as follows for the dates indicated:
 
Three months ended,
 
March 31, 2015
 
March 31, 2014
 
Assets
 
Liabilities
 
Assets
 
Liabilities
Activity of MSRs at amortized cost
 
 
 
 
 
 
 
Balance at the beginning of the period
$
11,582

 
$
65,382

 
$
14,879

 
$
82,521

Additions:
 
 
 
 
 
 
 
Purchase /Assumptions of servicing rights/obligations
—

 
—

 
—

 
—

Deductions:
 
 
 
 
 
 
 
Amortization/Accretion
(798
)
 
(6,783
)
 
(649
)
 
(311
)
Balance at end of the period
$
10,784

 
$
58,599

 
$
14,230

 
$
82,210

Fair value at end of period
$
32,618

 
$
55,579

 
$
38,430

 
$
68,965


For the three month period ended March 31, 2015, the Company accreted $6.8 million of the mortgage servicing liability as a result of increased HECM loan repurchase activity. Issuers of HECMs are responsible for repurchasing any loans out of the HMBS pool when the outstanding principal balance of the related HECM loan is equal to or greater than 98% of the lesser of the appraised value of the underlying property at origination or $625 thousand .

Excess Spread Financing at Fair Value
In conjunction with Nationstar's acquisition of certain MSRs on various pools of residential mortgage loans (the Portfolios), Nationstar has entered into sale and assignment agreements with certain entities formed by New Residential Investment Corp. (New Residential) in which New Residential and/or certain funds managed by Fortress Investment Group LLC (Fortress) own an interest. Nationstar, in transactions accounted for as financing arrangements, sold to such entities the right to receive a specified percentage of the excess cash flow generated from the Portfolios after receipt of a fixed basic servicing fee per loan. Nationstar has elected fair value accounting for these financing agreements.


11
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


Servicing fees associated with a traditional MSR can be segregated into a base servicing fee and an excess servicing fee. The base servicing fee, along with ancillary income, is meant to cover costs incurred to service the specified pool plus a reasonable profit margin. The remaining servicing fee is considered excess.
Nationstar retains all the base servicing fee and ancillary revenues associated with servicing the Portfolios and the retained portion of the excess servicing fee. Nationstar continues to be the servicer of the Portfolio and provides all servicing and advancing functions. New Residential has no prior or ongoing obligations associated with the Portfolio.

Contemporaneous with the above, Nationstar entered into refinanced loan agreements with New Residential. Should Nationstar refinance any loan in the Portfolios, subject to certain limitations, Nationstar can be required to transfer the new loan or a replacement loan of similar economic characteristics into the Portfolios. The new or replacement loan will be governed by the same terms set forth in the sale and assignment agreement described above.

The range of various assumptions used in Nationstar's valuation of Excess Spread financing were as follows:
Excess Spread financing
Prepayment Speeds
 
Average
Life (years)
 
Discount
Rate
 
Recapture Rate
March 31, 2015
 
 
 
 
 
 
 
Low
8.2%
 
3.9 years
 
8.5%
 
6.7%
High
18.5%
 
7.8 years
 
14.2%
 
31.2%
December 31, 2014
 
 
 
 
 
 
 
Low
6.2%
 
4.0 years
 
8.5%
 
6.7%
High
19.4%
 
7.1 years
 
14.2%
 
31.3%

The following table shows the hypothetical effect on the fair value of excess spread financing using certain unfavorable variations of the expected levels of key assumptions used in valuing these liabilities at the dates indicated:
 
Discount Rate
 
Total Prepayment
Speeds
 
100 bps
Adverse
Change
200 bps
Adverse
Change
 
10%
Adverse
Change
20%
Adverse
Change
March 31, 2015
 
 
 
 
 
Excess spread financing
$
38,747

$
80,440

 
$
34,326

$
71,911

December 31, 2014
 
 
 
 
 
Excess spread financing
$
36,632

$
75,964

 
$
33,618

$
70,379


As the cash flow assumptions utilized in determining the fair value amounts in the excess spread financing are based on the related cash flow assumptions utilized in the financed MSRs, any fair value changes recognized in the MSRs would inherently have an inverse impact on the carrying amount in the related excess spread financing. For example, while an increase in discount rates would negatively impact the value of the Company's MSRs, it would reduce the carrying value of the associated excess spread financing liability and provide a benefit to the Company's net service related revenue.

These sensitivities are hypothetical and should be evaluated with care. The effect on fair value of a 10% variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the 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 may lead to changes in other factors, which could impact the above hypothetical effects. Also, a positive change in the above assumptions would not necessarily correlate with the corresponding decrease in the net carrying amount of the excess spread financing.

Mortgage Servicing Rights Financing
Nationstar has entered into agreements to sell a contractually specified basic fee component of certain MSRs and servicer advances under specified terms. Nationstar continues to be the named servicer and, for accounting purposes, ownership of the mortgage servicing rights continues to reside with Nationstar. Nationstar continues to account for the MSRs on its consolidated balance

12
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


sheets. In addition, Nationstar records a MSRs financing liability associated with this financing transaction. See Note 18, Disclosures Related to Transactions with Affiliates of Fortress Investment Group LLC for additional information.

Nationstar has elected to measure the mortgage servicing rights financings at fair value with all changes in fair value recorded as a charge or credit to servicing related revenue in the consolidated statements of income (loss) and comprehensive income (loss). The weighted average assumptions used in Nationstar's valuation of Mortgage Servicing Rights Financing were as follows:
 
March 31, 2015
 
December 31, 2014
Advance financing rates
2.72
%
 
2.79
%
Annual advance recovery rates
24.91
%
 
27.55
%

3. Advances
 
March 31, 2015
 
December 31, 2014
Advances
$
2,470,315

 
$
2,546,362


Servicing advances on non-agency securities are typically recovered first at a loan-level from proceeds of the mortgage loans for which the advance was made, and then if loan-level funds are determined to be ultimately insufficient, from cash collected from all borrowers in a securitization trust. For advances on agency securities, servicing advances represent a receivable from the respective agency and are recovered from cash collections in a securitization trust and/or a requested reimbursement from the agency.
Nationstar accretes purchase discounts into interest income as the related servicer advances are recovered. During the quarters ended March 31, 2015 and 2014 the Company accreted $0.3 million and $3.8 million , respectively, of the purchase discounts from recovered servicer advances.

In 2014, Nationstar sold approximately $2.5 billion of servicer advances to a joint venture entity capitalized by New Residential and other investors (Mortgage Servicing Rights Financing Liability). See Note 18, Disclosures Related to Transactions with Affiliates of Fortress Investment Group LLC, for additional information. Consequently, the related purchase discount of $52.9 million was eliminated from Nationstar's consolidated balance sheet.

As of March 31, 2015 and December 31, 2014, Nationstar carried an allowance for uncollectible servicer advances of $10.6 million and $9.2 million , respectively.

4. Reverse mortgage interests


 
March 31, 2015
 
December 31, 2014
Participating interests
$
1,421,867

 
$
1,363,225

Other interests securitized
316,182

 
341,268

Unsecuritized interests
902,860

 
752,801

Allowance for losses - reverse mortgage interests
(7,047
)
 
(4,225
)
Total reverse mortgage interests
$
2,633,862

 
$
2,453,069


Participating interests consists of Nationstar issued or advanced and purchased Home Equity Conversion Mortgages (HECMs) that have been securitized through the issuance of Home Equity Conversion Mortgage Backed Securities (HMBS) to third party security holders guaranteed by Ginnie Mae.




13
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


Other interests securitized consists of reverse mortgage interests which have been transferred to private securitization trusts and are subject to nonrecourse debt. Nationstar evaluated these trusts to determine whether they meet the definition of a VIE and whether Nationstar is the primary beneficiary. See Note 10, Securitizations and Financing.

Unsecuritized interests consist primarily of recently funded borrower draws that have not yet been sold into a GNMA HECM securitization, GNMA HECMs that have been repurchased out of a GNMA HECM securitization since they have reached 98% or more of the maximum claim amount, repurchased GNMA HECM interests that have been assigned to the FHA for reimbursement, foreclosed assets, and advances made on inactive loans that cannot be securitized due to the delinquency status of the loan. Under the GNMA HMBS program, the company is required to repurchase a HECM loan from the HMBS pool when the outstanding principal balance of the HECM loan is equal to or greater than 98% of the maximum claim amount.

Nationstar collectively evaluates all reverse mortgage interest assets for impairment.

In 2015, Nationstar adopted ASU 2014-14. As a result of this adoption, the Company reclassified $68.9 million and $69.4 million of real estate owned (previously recorded as a component of other assets) to reverse mortgage interest as of March 31, 2015 and December 31, 2014, on its consolidated balance sheet.


5. Mortgage Loans Held for Sale and Investment
Mortgage loans held for sale
Nationstar maintains a strategy of originating mortgage loan products primarily for the purpose of selling to government-sponsored enterprises (GSEs) or other third-party investors, primarily Ginnie Mae, in the secondary market. Nationstar primarily focuses on assisting customers currently in the Company's servicing portfolio with refinances of loans for new home purchases (or recapture). Generally, all newly originated mortgage loans held for sale are delivered to third-party purchasers or securitized shortly after origination.

Mortgage loans held for sale consist of the following for the dates indicated:
 
 
March 31, 2015
 
December 31, 2014
Mortgage loans held for sale – unpaid principal balance
$
1,913,092

 
$
1,218,596

Mark-to-market adjustment
82,906

 
59,335

Total mortgage loans held for sale
$
1,995,998

 
$
1,277,931

The total UPB of mortgage loans held for sale on nonaccrual status was as follows for the dates indicated:
 
March 31, 2015
 
December 31, 2014
Mortgage loans held for sale - unpaid principal balance

UPB
 
Fair Value
 
UPB
 
Fair Value
Nonaccrual
$
28,573

 
$
25,405

 
31,968

 
26,022

The total UPB of mortgage loans held for sale for which the Company has begun formal foreclosure proceedings was as follows for the dates indicated:
Mortgage loans held for sale - unpaid principal balance
March 31, 2015
 
December 31, 2014
Foreclosure
$
18,085

 
$
17,493

A reconciliation of the changes in mortgage loans held for sale for the dates indicated is presented in the following table:
 

14
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


 
For the three months ended
 
March 31, 2015
 
March 31, 2014
Mortgage loans held for sale – beginning balance
$
1,277,931

 
$
2,603,380

Mortgage loans originated and purchased, net of fees
4,602,628

 
5,402,862

Proceeds on sale of and payments of mortgage loans held for sale
(3,882,661
)
 
(6,261,204
)
Transfer of mortgage loans held for sale to held for investment or other assets
(1,900
)
 
(3,912
)
Mortgage loans held for sale – ending balance
$
1,995,998

 
$
1,741,126


Nationstar, as the servicer has the right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets certain criteria, including being delinquent greater than 90 days. The majority of Ginnie Mae repurchased loans are repurchased solely with the intent to repool into new Ginnie Mae securitizations or to otherwise sell to third-party investors. For the three months ended March 31, 2015 and March 31, 2014, Nationstar repurchased out of Ginnie Mae securitization pools $0.4 billion and $0.6 billion of mortgage loans, respectively.
Mortgage loans held for investment, net
Mortgage loans held for investment, net as of the dates indicated include:  
 
 
March 31, 2015
 
December 31, 2014
Mortgage loans held for investment, net – unpaid principal balance
 
$
268,865

 
$
276,820

Transfer discount:
 

 

Accretable
 
(15,090
)
 
(15,503
)
Non-accretable
 
(64,682
)
 
(66,217
)
Allowance for loan losses
 
(3,516
)
 
(3,531
)
Total mortgage loans held for investment, net
 
$
185,577

 
$
191,569


The changes in accretable yield on loans transferred to mortgage loans held for investment, net were as follows:  

 
For the three months ended March 31, 2015
 
For the year ended December 31, 2014
Accretable Yield
 
 
 
Balance at the beginning of the period
$
15,503

 
$
17,362

Accretion
(713
)
 
(2,955
)
Reclassifications from (to) nonaccretable discount
300

 
1,096

Balance at the end of the period
$
15,090

 
$
15,503

Nationstar may periodically modify the terms of any outstanding mortgage loans held for investment, net for loans that are either in default or in imminent default. Modifications often involve reduced payments by borrowers, modification of the original terms of the mortgage loans, forgiveness of debt and/or modified servicing advances. As a result of the volume of modification agreements entered into, the estimated average outstanding life in this pool of mortgage loans has been extended. Nationstar records interest income on the transferred loans on a level-yield method. To maintain a level-yield on these transferred loans over the estimated extended life, Nationstar reclassified approximately $0.3 million of transfer discount to accretable yield for the three months ended March 31, 2015 and $1.1 million for the year ended December 31, 2014. Furthermore, Nationstar considers the decrease in principal, interest, and other cash flows expected to be collected arising from the transferred loans as an impairment.

Loan delinquency and Loan-to-Value Ratio (LTV) are common credit quality indicators that Nationstar monitors and utilizes in
its evaluation of the adequacy of the allowance for loan losses, of which the primary indicator of credit quality is loan delinquency status. LTV refers to the ratio of the loan’s unpaid principal balance to the property’s collateral value. Loan delinquencies and unpaid principal balances are updated monthly based upon collection activity. Collateral values are updated from third party providers on a periodic basis. The collateral values used to derive LTV’s are obtained at various dates, but the majority were within the last twenty-four months. For an event requiring a decision based at least in part on the collateral value, the Company takes its last known value provided by a third party and then adjusts the value based on the applicable home price index.

15
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)



The total UPB of mortgage loans held for investment for which the Company has begun formal foreclosure proceedings was as follows for the dates indicated:
Mortgage loans held for investment - unpaid principal balance
March 31, 2015
 
December 31, 2014
Foreclosure
$
50,394

 
$
52,769



 

6. Other Assets
Other assets consisted of the following:
 
 
March 31, 2015
 
December 31, 2014
Receivables from trusts, agencies and prior servicers, net
$
419,008

 
$
386,166

Accrued revenues
157,462

 
154,436

Loans subject to repurchase right from Ginnie Mae
118,649

 
131,592

Goodwill
63,446

 
54,701

Deferred financing costs
43,104

 
46,986

Intangible assets
38,520

 
19,622

Collateral deposits on derivative instruments
11,540

 
9,810

Prepaid expenses
9,551

 
9,837

Receivables from affiliates, net
5,752

 
4,713

Accrued interest
2,637

 
1,890

Real estate owned (REO), net
1,511

 
1,625

Other
42,900

 
55,851

Total other assets
$
914,080

 
$
877,229

For certain loans that Nationstar sold to Ginnie Mae, Nationstar 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. Once Nationstar has the unilateral right to repurchase a delinquent loan, Nationstar has effectively regained control over the loan, and under GAAP, must re-recognize the loan on its consolidated balance sheets and establish a corresponding repurchase liability regardless of Nationstar’s intention to repurchase the loan. Nationstar’s re-recognized loans included in other assets and the corresponding liability in payables and accrued liabilities was $118.6 million at March 31, 2015 and $131.6 million at December 31, 2014 .

In 2015, Nationstar adopted ASU 2014-14. As a result of this adoption, the Company reclassified $43.6 million and $36.0 million of Real Estate Owned to Receivables from trusts, agencies and prior servicers, net, as of March 31, 2015 and December 31, 2014, both of which are a component of Other Assets on the consolidated balance sheet.

Acquisitions
In January 2015, Solutionstar Holdings LLC, a wholly owned subsidiary of Nationstar, acquired Experience 1, Inc., the holding company for Title 365, Trusted Signing, and technology subsidiaries X1 Labs and X1 Analytics (collectively, Title 365), a technology services provider for title insurance and escrow services. The total consideration transferred for the acquisition was $35.6 million in cash. Related to the acquisition, the Company recorded an additional $16.4 million related to Goodwill and $14.2 million in intangible assets. The recognized intangible assets primarily relate to customer relationships, trade names and technology.


7. Derivative Financial Instruments


16
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


Derivatives instruments utilized by Nationstar primarily include interest rate lock commitments (IRLCs), Loan Purchase Commitments (LPCs), Forward MBS trades, Eurodollar futures and interest rate swap agreements.

Nationstar enters into IRLCs with prospective borrowers. These commitments are carried at fair value, with any changes in fair value recorded in earnings as a component of net gain on mortgage loans held for sale. The estimated fair values of IRLCs are based on the fair value of the related mortgage loans which is based on observable market data and is recorded in derivative financial instruments within the consolidated balance sheets. Nationstar adjusts the outstanding IRLCs with prospective borrowers based on an expectation that it will be exercised and the loan will be funded.

Nationstar actively manages the risk profiles of its IRLCs and mortgage loans held for sale on a daily basis. To manage the price risk associated with IRLCs, Nationstar enters into forward sales of MBS in an amount equal to the portion of the IRLC expected to close, assuming no change in mortgage interest rates. In addition, to manage the interest rate risk associated with mortgage loans held for sale, Nationstar enters into forward sale commitments to deliver mortgage loan inventory to investors. The estimated fair values of forward sales of MBS and forward sale commitments are based on exchange prices or the dealer market price and are recorded as a component of derivative financial instruments and mortgage loans held for sale, respectively, in the consolidated balance sheets. The initial and subsequent changes in value on forward sales of MBS and forward sale commitments are a component of net gain on mortgage loans held for sale.

Nationstar may occasionally enter into contracts with other mortgage lenders to purchase residential mortgage loans at a future date, which are referred to as LPCs. LPCs are accounted for as derivatives and recorded at fair value in derivative financial instruments on Nationstar's consolidated balance sheet. Subsequent changes in LPCs are recorded as a charge or credit to net gain on mortgage loans held for sale.

In addition, Nationstar enters into Eurodollar futures contracts to replicate the economic hedging results achieved with interest rate swaps or offset the changes in value of its forward sales of certain agency securities. The Company has not designated its futures contracts as hedges for accounting purposes. As a result, realized and unrealized changes in fair value are recognized in net gain on mortgage loans held for sale in the period in which the changes occur.

Periodically, Nationstar has entered into interest rate swap agreements to hedge the interest payment on the warehouse debt and
securitization of its mortgage loans held for sale. These interest rate swap agreements generally require Nationstar to pay a fixed interest rate and receive a variable interest rate based on LIBOR. Unless designated as an accounting hedge, Nationstar records gains and losses on interest rate swaps as a component of gain/(loss) on interest rate swaps and caps in Nationstar’s consolidated statements of income (loss) and comprehensive income (loss). Unrealized losses on dedesignated interest rate derivatives are separately disclosed under operating activities in the consolidated statements of cash flows.

Historically, Nationstar has entered into interest rate swap agreements to hedge the interest payments associated with its outstanding floating rate financing servicer advance facilities. Prior to March 31, 2014, certain of these derivatives were designated as cash flow hedges and were recorded at fair value on Nationstar's balance sheet, with any change in fair value being recorded as an adjustment to other comprehensive income. On March 31, 2014, the Company dedesignated the remainder of the interest rate swap agreements, with any further changes in fair value being recorded as a charge to gain or loss in interest rate swaps and caps in Nationstar's consolidated statements of income (loss) and comprehensive income (loss).

Associated with the Company's forward MBS trades are $11.5 million and $9.8 million in collateral deposits on derivative instruments recorded in other assets on the Company's balance sheets as of March 31, 2015 and December 31, 2014, respectively. The Company does not offset fair value amounts recognized for derivative instruments and the amounts collected and/or deposited on derivative instruments in its consolidated balance sheets.
The following tables provide the outstanding notional balances and fair values of outstanding positions for the dates indicated, and recorded gains/(losses) during the periods indicated:

17
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


 
 
Expiration
Dates
 
Outstanding
Notional
 
Fair
Value
 
Recorded
Gains /
(Losses)
For the three months ended March 31, 2015
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
MORTGAGE LOANS HELD FOR SALE
 
 
 
 
 
 
 
Loan sale commitments
2015
 
$
20,633

 
$
(68
)
 
$
(64
)
DERIVATIVE FINANCIAL INSTRUMENTS
 
 
 
 
 
 
 
IRLCs
2015
 
3,021,115

 
99,921

 
12,019

Forward MBS trades
2015
 
732,535

 
1,314

 
1,030

LPCs
2015
 
280,871

 
2,068

 
69

Interest rate swaps and caps
2018
 
97,650

 
64

 
(801
)
Eurodollar futures
2015-2018
 
—

 
—

 
(1
)
LIABILITIES
 
 
 
 
 
 
 
DERIVATIVE FINANCIAL INSTRUMENTS
 
 
 
 
 
 
 
IRLCs
2015
 
—

 
—

 
7

Interest rate swaps on ABS debt
2017
 
32,746

 
69

 
34

       Forward MBS trades
2015
 
4,169,500

 
22,752

 
(4,392
)
LPCs
2015
 
41,029

 
113

 
(65
)
Eurodollars futures
2015-2017
 
120,000

 
114

 
(107
)
 
 
 
 
 
 
 
 
For the year ended December 31, 2014
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
MORTGAGE LOANS HELD FOR SALE
 
 
 
 
 
 
 
Loan sale commitments
2015
 
$
1,666

 
$
(4
)
 
$
(11
)
DERIVATIVE FINANCIAL INSTRUMENTS
 
 
 
 
 
 
 
IRLCs
2015
 
2,556,169

 
87,902

 
774

Forward MBS trades
2015
 
319,112

 
284

 
(31,982
)
LPCs
2015
 
287,089

 
1,999

 
1,206

Interest rate swaps and caps
2018
 
124,650

 
865

 
(1,673
)
Eurodollar futures
2015-2017
 
40,000

 
1

 
1

LIABILITIES
 
 
 
 
 
 
 
DERIVATIVE FINANCIAL INSTRUMENTS
 
 
 
 
 
 
 
IRLCs
2015
 
865

 
7

 
2,691

Interest rate swaps on ABS debt
2015-2017
 
105,681

 
103

 
731

Forward MBS trades
2015
 
2,958,700

 
18,360

 
(15,055
)
LPCs
2015
 
30,494

 
48

 
1,641

Eurodollar futures
2015-2017
 
80,000

 
7

 
(7
)
 


18
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


8. Indebtedness
Notes Payable
 
 
 
 
 
 
 
 
 
March 31, 2015
 
December 31, 2014
 
Interest Rate
 
Maturity Date
 
Collateral
 
Capacity Amount
 
Outstanding
 
Collateral Pledged
 
Outstanding
 
Collateral pledged
Advance Facilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MBS advance financing facility
LIBOR+2.50% to 4.00%
 
March 2016
 
Servicing advance receivables
 
$
130,000

 
$
74,548

 
$
79,094

 
$
363,014

 
$
418,126

Securities repurchase facility (2011)
LIBOR +3.50%
 
90 day revolving
 
Nonrecourse debt - Legacy Assets
 
—

 
35,058

 
55,603

 
34,613

 
55,603

Nationstar agency advance financing facility (1)
LIBOR+1.20% to 3.75%
 
October 2015
 
Servicing advance receivables
 
1,300,000

 
1,090,612

 
1,244,349

 
805,706

 
885,115

MBS advance financing facility (2012) (2)
LIBOR+5.00%
 
April 2016
 
Servicing advance receivables
 
50,000

 
50,000

 
60,354

 
42,472

 
50,758

Nationstar Mortgage Advance Receivable
Trust (3)
LIBOR+1.15% to 5.30%
 
June 2018
 
Servicing advance receivables
 
475,000

 
420,423

 
472,377

 
419,170

 
471,243

MBS servicer advance facility (2014) (4)
LIBOR+3.50%
 
July 2015
 
Servicing advance receivables
 
80,000

 
78,490

 
149,021

 
79,084

 
138,010

Nationstar servicer advance receivables trust 2014 - BC
LIBOR+1.50% to 3.00%
 
November 2015
 
Servicing advance receivables
 
200,000

 
134,181

 
149,393

 
106,115

 
121,030

Securities repurchase facility (2014)
LIBOR+1.50% to 2.00%
 
November 2017
 
Securities
 
—

 
—

 
—

 
51,609

 
74,525

 
 
1,883,312


2,210,191

 
1,901,783

 
2,214,410

 
 
 
March 31, 2015
 
December 31, 2014
 
Interest Rate
 
Maturity Date
 
Collateral
 
Capacity Amount
 
Outstanding
 
Collateral Pledged
 
Outstanding
 
Collateral pledged
Warehouse Facilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$1.3 billion warehouse facility
LIBOR+2.00% to 2.875%
 
October 2015
 
Mortgage loans or MBS
 
$
1,300,000

 
$
1,138,604

 
$
1,202,005

 
$
663,167

 
$
697,257

$749 million warehouse facility
LIBOR+1.75% to 2.50%
 
May 2015
 
Mortgage loans or MBS
 
749,000

 
537,757

 
559,287

 
307,294

 
320,285

$500 million warehouse facility
LIBOR+1.75% to 2.75%
 
September 2015
 
Mortgage loans or MBS
 
500,000

 
297,182

 
304,476

 
176,194

 
179,994

$500 million warehouse facility
LIBOR+ 1.50% to 2.25%
 
June 2015
 
Mortgage loans or MBS
 
500,000

 
292,682

 
309,640

 
183,290

 
192,990

$350 million warehouse facility
LIBOR+2.20% to 4.50%
 
March 2016
 
Mortgage loans or MBS
 
350,000

 
173,525

 
180,660

 
210,049

 
223,849

$75 million warehouse facility (HCM) (5)
LIBOR+ 2.25% to 2.875%
 
October 2015
 
Mortgage loans or MBS
 
75,000

 
29,836

 
30,479

 
23,949

 
29,324

$50 million warehouse facility (HCM)
LIBOR + 2.50% to 2.75%
 
November 2015
 
Mortgage loans or MBS
 
50,000

 
7,886

 
8,616

 
8,679

 
9,044

ASAP+ facility
LIBOR+1.50%
 
Up to 45 days
 
GSE mortgage loans or GSE MBS
 
—

 
—

 
—

 
—

 
—

 
 
 

 
 
 
 
 
2,477,472

 
2,595,163

 
1,572,622

 
1,652,743

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage loans
 
 
 
 
 
 
 
 
1,967,762

 
2,038,117

 
1,196,956

 
1,241.043

Reverse mortgage interests
 
 
 
 
 
 
 
 
509,710

 
557,046

 
375,666

 
411,700


(1) This facility has both variable funding notes (VFN) and term notes. Nationstar issued $300.0 million in term notes to institutional investors of which $100.0 million remains outstanding. The notes have a weighted average interest rate of 2.07% and a weighted average term of 5 years .
(2) The maturity date of this facility was extended to April 2016 on April 29, 2015.

19
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


(3) This facility has both VFNs and term notes. Nationstar issued $1.0 billion of term notes to institutional investors of which $300.0 million remains outstanding. The notes have an average interest rate of 1.51% and will mature in June 2018 . The notes scheduled to mature in June 2014 were redeemed in January 2014. The notes scheduled to mature in June 2016 were redeemed in June 2014.
(4) As of April 15, 2015 the capacity of this facility was increased to $100.0 million
(5) This facility is a sublimit of the $1.3 billion facility specific to HCM.
Unsecured Senior Notes
A summary of the balances of Unsecured Senior Notes is presented below:
 
March 31, 2015
 
December 31, 2014
$475 million face value, 6.500% interest rate payable semi-annually, due August 2018
$
475,000

 
$
475,000

$375 million face value, 9.625% interest rate payable semi-annually, due May 2019
378,354

 
378,555

$400 million face value, 7.875% interest rate payable semi-annually, due October 2020
400,518

 
400,541

$600 million face value, 6.500% interest rate payable semi-annually, due July 2021
604,940

 
605,135

$300 million face value, 6.500% interest rate payable semi-annually, due June 2022
300,000

 
300,000

Total
$
2,158,812

 
$
2,159,231


The indentures for the unsecured senior notes contain various covenants and restrictions that limit Nationstar's ability to incur additional indebtedness, pay dividends, make certain investments, create liens, consolidate, merge or sell substantially all of its assets, or enter into certain transactions with affiliates. The indentures contain certain events of default, including (subject, in some cases, to customary cure periods and materiality thresholds) defaults based on (i) the failure to make payments under the indenture when due, (ii) breach of covenants, (iii) cross-defaults to certain other indebtedness, (iv) certain bankruptcy or insolvency events, (v) material judgments and (vi) invalidity of material guarantees.

The indentures for the unsecured senior notes provide that Nationstar may redeem all or a portion of the notes prior to certain fixed dates by paying a make-whole premium plus accrued and unpaid interest and additional interest, if any, to the redemption dates. In addition, Nationstar may redeem all or a portion of the senior notes at any time on or after certain fixed dates at the applicable redemption prices set forth in the indentures plus accrued and unpaid interest and additional interest, if any, to the redemption dates.

Additionally, the indentures provide that on or before certain fixed dates, Nationstar may redeem up to 35% of the aggregate principal amount of the senior notes with the net proceeds of certain equity offerings at fixed redemption prices, plus accrued and unpaid interest and additional interest, if any, to the redemption dates, subject to compliance with certain conditions.
The ratios included in the indentures for the Unsecured Senior Notes are incurrence-based compared to the customary ratio covenants that are often found in credit agreements that require a company to maintain a certain ratio.
As of March 31, 2015 , the expected maturities of Nationstar's unsecured senior notes based on contractual maturities are as follows:

20
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


Year
Amount
2015
$
—

2016
—

2017
—

2018
475,000

2019
375,000

Thereafter
1,300,000

Total
$
2,150,000

Other Nonrecourse Debt
A summary of the balances of other nonrecourse debt is presented below:
 
March 31, 2015
 
December 31, 2014
Participating interest financing
$
1,491,530

 
$
1,433,145

2014-1 HECM securitization
305,716

 
259,328

Nonrecourse debt - Legacy Assets
73,023

 
75,838

Total
$
1,870,269

 
$
1,768,311


Participating Interest Financing
Participating interest financing represents the issuance of pools of HMBS to third-party security holders which are guaranteed by certain GSEs. Nationstar has accounted for the transfer of these advances in the related HECM loans as secured borrowings, retaining the initial reverse mortgage interests on its consolidated balance sheet, and recording the pooled HMBS as participating interest financing liabilities on the Company’s consolidated balance sheet. Monthly cash flows generated from the HECM loans are used to service the HMBS. The interest rate is based on the underlying HMBS rate with a range of 0.14% to 6.98% . The participating interest financing was $1,491.5 million and $ 1,433.1 million at March 31, 2015 and December 31, 2014 , respectively.

2014-1 HECM Securitization

In December 2014, Nationstar Mortgage LLC completed the securitization of approximately $343.6 million in Nationstar HECM Loan Trust 2014-1Mortgage Backed Securities. The trust was created to provide investors with the ability to invest in a pool of non-performing home equity conversion reverse mortgage loans that are covered by Federal Housing Administration (FHA) insurance and secured by one to four-family residential properties and a pool of REO properties acquired through foreclosure or grant of a deed in lieu of foreclosure in connection with reverse mortgage loans that are covered by FHA insurance. The transaction provides Nationstar with access to liquidity for the acquired non-performing HECM loan portfolio, ongoing servicing fees, and potential residual returns.

The notes were issued under two separate classes, comprised of Class A Notes and Class M Notes. As part of the securitization, Nationstar retained a portion of the offered Class A notes of approximately $70.4 million as well as the Class M Notes with an outstanding note balance of $36.2 million . A portion of the notes retained by Nationstar represent subordinated beneficial interests. In the first quarter 2015, the Company sold the remaining retained portions of the Class A and the Class M notes for total proceeds of $73.1 million.

The transaction was structured as a secured borrowing with the reverse mortgage loans included in the consolidated financial statements as a reverse secured borrowing and the related financing included in other nonrecourse debt. The nonrecourse debt totaled $305.7 million and $259.3 million at March 31, 2015 and December 31, 2014 , respectively.

Nonrecourse Debt–Legacy Assets


21
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


In November 2009 , Nationstar completed the securitization of approximately $222.0 million of ABS, which was accounted for as a secured borrowing. This structure resulted in Nationstar carrying the securitized mortgage loans on Nationstar’s consolidated bal ance sheet and recognizing the asset-backed certificates acquired by third parties as nonrecourse debt, totaling approximately $73.0 million and $75.8 million at March 31, 2015 , and December 31, 2014 , respectively. The principal and interest on these notes are paid using the cash flows from the underlying mortgage loans, which serve as collateral for the debt. The interest rate paid on the outstanding securities is 7.50% , which is subject to an available funds cap. The total outstanding principal balance on the underlying mortgage loans serving as collateral for the debt was approximately $260.0 million and $268.2 million at March 31, 2015 and December 31, 2014 , respectively. The timing of the principal payments on this nonrecourse debt is dependent on the payments received on the underlying mortgage loans. The unpaid principal balance on the outstanding notes was $84.9 million and $88.2 million at March 31, 2015 and December 31, 2014 , respectively.
Financial Covenants

The Company's borrowing arrangements and credit facilities contain various financial covenants which primarily relate to required tangible net worth amounts, liquidity reserves, leverage requirements, and profitability requirements. As a result of the decrease in interest rates during the three month period ended March 31, 2015, Nationstar recorded a charge to service related revenues for changes in fair value associated with the Company's MSRs recorded at fair value. As a result of the charge, Nationstar was unable to meet the profitability requirements in two of its outstanding warehouse facilities and one MBS facility. Nationstar asked for, and received, a waiver from these financial institutions on these profitability requirements for the period ending March 31, 2015. With the exception of this waiver, the Company was in compliance with all other required financial covenants as of March 31, 2015.
Nationstar is required to maintain a minimum tangible net worth of at least $450.0 million as of each quarter-end related to its outstanding Master Repurchase Agreements on its outstanding repurchase facilities. As of March 31, 2015, Nationstar was in compliance with these minimum tangible net worth requirements.

9. Payables and Accrued Liabilities
Payables and accrued liabilities consist of the following:
 
March 31, 2015
 
December 31, 2014
Payables to servicing and subservicing investors
$
345,414

 
$
329,306

Payable to insurance carriers and insurance cancellation reserves
159,560

 
163,381

Loans subject to repurchase from Ginnie Mae
118,649

 
131,592

MSR purchases payable including advances
81,128

 
45,697

Taxes
66,398

 
96,237

Accrued interest
66,168

 
59,708

Accrued bonus and payroll
59,558

 
85,366

Repurchase reserves
30,735

 
29,165

Other
475,001

 
381,626

Total payables and accrued liabilities
$
1,402,611

 
$
1,322,078


Payables to servicing and subservicing investors
Payables to servicing and subservicing investors represents amounts due to investors in connection with loans serviced and that
are paid from collections of the underlying loans, insurance proceeds or at time of property disposal.

Payable to insurance carriers and insurance cancellation reserves
Payable to insurance carriers and insurance cancellation reserves consist of insurance premiums received from borrower payments awaiting disbursement to the insurance carrier and/or amounts due to third party investors on liquidated loans.


10. Securitizations and Financings
Variable Interest Entities

22
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)



Nationstar evaluates its interest in certain entities to determine if these entities meet the definition of a VIE and whether the Company is the primary beneficiary and should consolidate the entity based on the variable interests it held both at inception and when there is a change in circumstances that require a reconsideration.

A summary of the assets and liabilities of Nationstar’s transactions with VIEs included in the Company’s consolidated financial statements is presented below for the periods indicated:
 
 
March 31, 2015
 
December 31, 2014
 
Transfers
Accounted for as
Secured
Borrowings
 
Reverse Secured Borrowings
 
Transfers
Accounted for as
Secured
Borrowings
 
Reverse Secured Borrowings
ASSETS
 
 
 
 
 
 
 
Restricted cash
$
138,094

 
$
16,523

 
$
90,068

 
$
15,578

Reverse mortgage interests
—

 
1,738,049

 
—

 
1,704,492

Advances
1,866,119

 
—

 
1,477,388

 
—

Mortgage loans held for investment, net
184,439

 
—

 
189,456

 
—

Derivative financial instruments
63

 
—

 
865

 
—

Other assets
2,616

 
—

 
2,678

 
—

Total Assets
$
2,191,331

 
$
1,754,572

 
$
1,760,455

 
$
1,720,070

LIABILITIES
 
 
 
 
 
 
 
Advance facilities
$
1,645,216

 
$
—

 
$
1,330,991

 
$
—

Payables and accrued liabilities
1,889

 
173

 
1,596

 
186

Nonrecourse debt–Legacy Assets
73,023

 
—

 
75,838

 
—

2014-1 HECM Securitization
—

 
305,716

 
—

 
259,328

Participating interest financing
—

 
1,491,530

 
—

 
1,433,145

Total Liabilities
$
1,720,128

 
$
1,797,419

 
$
1,408,425

 
$
1,692,659


Securitizations Treated as Sales

When Nationstar sells mortgage loans in securitization transactions structured as sales, it may retain one or more bond classes and servicing rights in the securitization. Gains and losses on the assets transferred are recognized based on the carrying amount of the financial assets involved in the transfer, allocated between the assets transferred and the retained interests based on their relative fair value at the date of transfer, other than MSRs. Retained MSRs are recorded at their fair value on the transfer date.

A summary of the outstanding collateral and certificate balances for securitization trusts for which Nationstar was the transferor, including any retained beneficial interests and MSRs, that were not consolidated by Nationstar for the periods indicated are as follows:

 
March 31, 2015
 
December 31, 2014
Total collateral balances
$
3,148,539

 
$
3,258,472

Total certificate balances
3,179,801

 
3,297,256


Nationstar has not retained any variable interests in the unconsolidated securitization trusts that were outstanding as of March 31, 2015 or December 31, 2014 , and therefore does not have a significant maximum exposure to loss related to these unconsolidated VIEs.

A summary of mortgage loans transferred by Nationstar to unconsolidated securitization trusts that are 60 days or more past due
and the credit losses incurred in the unconsolidated securitization trusts are presented below:
 

23
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


Principal Amount of Loans 60 Days or More Past Due
March 31, 2015
 
December 31, 2014
Unconsolidated securitization trusts
$
795,746

 
$
861,419


 
For the three months ended March 31,
Credit Losses
2015
 
2014
Unconsolidated securitization trusts
$
57,461

 
$
66,542


Certain cash flows received from securitization trusts related to the transfers of mortgage loans accounted for as sales for the dates indicated were as follows:
 
 
For the three months ended March 31,
 
2015
 
2014
 
Servicing Fees
Received
 
Loan
Repurchases
 
Servicing Fees
Received
 
Loan
Repurchases
Unconsolidated securitization trusts
$
6,373

 
$
—

 
$
7,778

 
$
—



24
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)




11. Stockholders' Equity
In March 2015, Nationstar completed an equity offering of $17.5 million for a total of $497.8 million in cash proceeds. The Company expects to utilize excess cash to pay for MSR purchases and other acquisitions.

In January 2015, certain key employees of Solutionstar were granted stock appreciation rights (SARs) which can be settled in cash or units of Solutionstar Holdings LLC (Solutionstar, now known as Xome Holdings LLC) at the election of Solutionstar. The SARs vest over three years and have a ten year term. The SARs become exercisable upon a liquidity event at Solutionstar which includes a change in control or an initial public offering of Solutionstar. The Company did not recognize expense related to the share-based awards as of March 31, 2015.


25
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


12. Income Taxes

Income tax expense (benefit) was as follows:

 
For the three months ended March 31,
2015
 
2014
Tax expense (benefit)
$
(27,525
)
 
$
15,001

 
 
 
 
Effective tax rate
36.6
%
 
38.8
%

The Company had a net deferred tax liability of $60.7 million at March 31, 2015 and $109.8 million at December 31, 2014. A valuation allowance of $6.4 million was recorded against deferred tax assets at March 31, 2015 and December 31, 2014 as management believes that it is more likely than not that some of the deferred tax assets will not be realized.

13. Fair Value Measurements
Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a three-tiered fair value hierarchy has been established based on the level of observable inputs used in the measurement of fair value (e.g., Level 1 representing quoted prices for identical assets or liabilities in an active market; Level 2 representing values using observable inputs other than quoted prices included within Level 1; and Level 3 representing estimated values based on significant unobservable inputs).
The following describes the methods and assumptions used by Nationstar in estimating fair values:
Cash and Cash Equivalents, Restricted Cash (Level 1) – The carrying amount reported in the consolidated balance sheets approximates fair value.
Mortgage Loans Held for Sale (Level 2) – Nationstar originates mortgage loans in the U.S. that it intends to sell to Fannie Mae, Freddie Mac, and Ginnie Mae (collectively, the Agencies). Additionally, Nationstar holds mortgage loans that it intends to sell into the secondary markets via whole loan sales or securitizations. Nationstar measures newly originated prime residential mortgage loans held for sale at fair value.
Mortgage loans held for sale are typically pooled together and sold into certain exit markets, depending upon underlying attributes of the loan, such as agency eligibility, product type, interest rate, and credit quality. Mortgage loans held for sale are valued on a recurring basis using a market approach by utilizing either: (i) the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk, (ii) current commitments to purchase loans or (iii) recent observable market trades for similar loans, adjusted for credit risk and other individual loan characteristics. As these prices are derived from market observable inputs, Nationstar classifies these valuations as Level 2 in the fair value disclosures.

The Company may acquire mortgage loans held for sale from various securitization trusts for which it acts as servicer through the exercise of various clean-up call options as permitted through the respective pooling and servicing agreements. The Company has elected to account for these loans at the lower of cost or market. Nationstar classifies these valuations as Level 2 in the fair value disclosures.

Nationstar may also purchase loans out of a Ginnie Mae securitization pool if that loan meets certain criteria, including being delinquent greater than 90 days.
Mortgage Loans Held for Investment, net (Level 3) – Nationstar determines the fair value of loans held for investment, net, using internally developed valuation models. These valuation models estimate the exit price Nationstar expects to receive in the loan’s principal market. Although Nationstar utilizes and gives priority to observable market inputs such as interest rates and market spreads within these models, Nationstar typically is required to utilize internal inputs, such as prepayment speeds and discount rates. These internal inputs require the use of judgment by Nationstar and can have a significant impact on the determination of the loan’s fair value. As these prices are derived from internally developed valuation, Nationstar classifies these valuations as Level 3 in the fair value disclosures.

26
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


Mortgage Servicing Rights – Fair Value (Level 3) – Nationstar estimates the fair value of its forward MSRs on a recurring basis using a process that combines the use of a discounted cash flow model and analysis of current market data to arrive at an estimate of fair value. The cash flow assumptions and prepayment assumptions used in the model are based on various factors, with the key assumptions being mortgage prepayment speeds, discount rates, ancillary revenues and costs to service. These assumptions are generated and applied based on collateral stratifications including product type, remittance type, geography, delinquency and coupon dispersion. These assumptions require the use of judgment by Nationstar and can have a significant impact on the fair value of the MSRs. Quarterly, management obtains third party valuations to assess the reasonableness of the fair value calculations provided by the internal cash flow model. Because of the nature of the valuation inputs, Nationstar classifies these valuations as Level 3 in the fair value disclosures.
Reverse Mortgage Interests (Level 3) – Nationstar’s reverse mortgage interests consist of fees paid to taxing authorities for borrowers' unpaid taxes and insurance, and payments made to borrowers for line of credit draws on reverse mortgages. These interests are carried at lower of cost or market in the financial statements. Nationstar estimates the fair value using a market approach by utilizing the fair value of securities backed by similar reverse mortgage loans, adjusted for certain factors. As the adjustments to factors require the use of judgment, Nationstar classifies these valuations as Level 3 in the fair value disclosures.
Derivative Financial Instruments (Level 2) – Nationstar enters into a variety of derivative financial instruments as part of its hedging strategy and measures these instruments at fair value on a recurring basis in the balance sheet. The majority of these derivatives are exchange-traded or traded within highly active dealer markets. In order to determine the fair value of these instruments, Nationstar utilizes the exchange price or dealer market price for the particular derivative contract; therefore, these contracts are classified as Level 2. In addition, Nationstar enters into IRLCs and LPCs with prospective borrowers and other loan originators. These commitments are carried at fair value based on the fair value of underlying mortgage loans which are based on observable market data. Nationstar adjusts the outstanding IRLCs with prospective borrowers based on an expectation that it will be exercised and the loan will be funded. IRLCs and LPCs are recorded in derivative financial instruments in the consolidated balance sheets. These commitments are classified as Level 2 in the fair value disclosures, as the valuations are based on market observable inputs. Nationstar has entered into Eurodollar futures contracts as part of its hedging strategy. The future contracts are measured at fair value on a recurring basis and classified as Level 2 in the fair value disclosures as the valuation is based on market observable data.
Notes Payable (Level 2) – Notes payable consists of outstanding borrowings on Nationstar's warehouse and advance financing facilities. As the underlying warehouse and advance finance facilities bear interest at a rate that is periodically adjusted based on a market index, the carrying amount reported on the consolidated balance sheets approximates fair value. Nationstar previously classified these as Level 3; however, upon further consideration reclassified such amounts as Level 2 in current year principally because interest rates are tied directly to mark indices.
Unsecured Senior Notes (Level 1) – The fair value of unsecured senior notes, which are carried at amortized cost, is based on quoted market prices and is considered Level 1 from the market observable inputs used to determine fair value.
Nonrecourse Debt – Legacy Assets (Level 3) – Nationstar estimates fair value based on the present value of future expected discounted cash flows with the discount rate approximating current market value for similar financial instruments. These prices are derived from a combination of internally developed valuation models and quoted market prices, and are classified as Level 3.
Excess Spread Financing (Level 3) – Nationstar estimates fair value on a recurring basis based on the present value of future expected discounted cash flows with the discount rate approximating current market value on a recurring basis for similar financial instruments. The cash flow assumptions and prepayment assumptions used in the model are based on various factors, with the key assumptions being mortgage prepayment speeds, average life, recapture rates and discount rate. Changes in fair value of the excess spread financing are recorded as a component of service related revenue in Nationstar's consolidated statements of income (loss) and comprehensive income (loss). As these prices are derived from a combination of internally developed valuation models and quoted market prices based on the value of the underlying MSRs, Nationstar classifies these valuations as Level 3 in the fair value disclosures.
Mortgage Servicing Rights Financing Liability (Level 3) - Nationstar estimates fair value on a recurring basis based on the present value of future expected discounted cash flows with the discount rate approximating current market value on a recurring basis for similar financial instruments. The cash flow assumptions and prepayment assumptions used in the model are based on various factors, with the key assumptions being advance financing rates, annual advance recovery rates and working capital. Changes in fair value of the mortgage servicing rights financing liability are recorded as a component of service related revenues in Nationstar’s consolidated statements of income (loss) and comprehensive income (loss). As these prices are derived from a combination of internally developed valuation models and quoted market prices based on the value of the underlying MSRs.

27
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


Participating Interest Financing (Level 2) – Nationstar estimates the fair value using a market approach by utilizing the fair value of securities backed by similar participating interests in reverse mortgage loans. Nationstar classifies these valuations as Level 2 in the fair value disclosures.
2014-1 HECM Securitization (Level 3) – Nationstar estimates fair value of the non-recourse debt related to the 2014-1 HECM securitization based on the present value of future expected discounted cash flows with the discount rate approximating that of similar financial instruments. As the prices are derived from both internal models and other observable inputs, Nationstar classifies this as Level 3 in the fair value disclosures.

28
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


The estimated carrying amount and fair value of Nationstar’s financial instruments and other assets and liabilities measured at fair value on a recurring basis is as follows for the dates indicated:
 
 
 
March 31, 2015
 
 
 
Recurring Fair Value Measurements
 
Total Fair Value
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Mortgage loans held for sale (1)
$
1,995,998

 
$
—

 
$
1,995,998

 
$
—

Mortgage servicing rights (1)
3,022,198

 
—

 
—

 
3,022,198

Derivative financial instruments:
 
 
 
 
 
 
 
IRLCs
99,921

 
—

 
99,921

 
—

       Forward MBS trades
1,314

 
—

 
1,314

 
—

       LPCs
2,068

 
—

 
2,068

 
—

Interest rate swaps and caps
64

 
—

 
64

 
—

Total assets
$
5,121,563

 
$
—

 
$
2,099,365

 
$
3,022,198

LIABILITIES
 
 
 
 
 
 
 
Derivative financial instruments
 
 
 
 
 
 
 
Interest rate swaps on ABS debt
69

 
—

 
69

 
—

       Forward MBS trades
22,752

 
—

 
22,752

 
—

       LPCs
113

 
—

 
113

 
—

Eurodollar futures
114

 
—

 
114

 
—

Mortgage servicing rights financing
45,044

 
—

 
—

 
45,044

Excess spread financing
1,047,590

 
—

 
—

 
1,047,590

Total liabilities
$
1,115,682

 
$
—

 
$
23,048

 
$
1,092,634

 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
 
 
Recurring Fair Value Measurements
 
Total Fair Value
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Mortgage loans held for sale (1)
$
1,277,931

 
$
—

 
$
1,277,931

 
$
—

Mortgage servicing rights (1)
2,949,739

 
—

 
—

 
2,949,739

Derivative financial instruments:
 
 
 
 
 
 
 
IRLCs
87,902

 
—

 
87,902

 
—

       Forward MBS trades
284

 
—

 
284

 
—

       LPCs
1,999

 
—

 
1,999

 
—

Interest rate swaps and caps
865

 
—

 
865

 
—

Eurodollar futures
1

 
—

 
1

 
—

Total assets
$
4,318,721

 
$
—

 
$
1,368,982

 
$
2,949,739

LIABILITIES
 
 
 
 
 
 
 
Derivative financial instruments
 
 
 
 
 
 
 
IRLCs
$
7

 
$
—

 
$
7

 
$
—

Interest rate swaps on ABS debt
103

 
—

 
103

 
—

       Forward MBS trades
18,360

 
—

 
18,360

 
—

       LPCs
48

 
—

 
48

 
—

Eurodollar futures
7

 
—

 
7

 
—

Mortgage servicing rights financing
49,430

 
—

 
—

 
49,430

Excess spread financing
1,031,035

 
—

 
—

 
1,031,035

Total liabilities
$
1,098,990

 
$
—

 
$
18,525

 
$
1,080,465


29
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


(1)  
Based on the nature and risks of these assets and liabilities, the Company has determined that presenting them as a single class is appropriate.

The table below presents a reconciliation for all of Nationstar’s Level 3 assets and liabilities measured at fair value on a recurring basis for the dates indicated:
 
 
ASSETS
 
LIABILITIES
For the three months ended March 31, 2015
Mortgage
servicing rights
 
Excess spread
financing
 
Mortgage servicing rights financing
Beginning balance
$
2,949,739

 
$
1,031,035

 
$
49,430

Transfers into Level 3
—

 
—

 
—

Transfers out of Level 3
—

 
—

 
—

Total gains or losses
 
 
 
 
 
Included in earnings
(210,186
)
 
13,114

 
(4,386
)
Included in other comprehensive income
—

 
—

 
—

Purchases, issuances, sales and settlements
 
 
 
 
 
Purchases
238,413

 
—

 
—

Issuances
44,232

 
52,957

 
—

Sales
—

 
—

 
—

Settlements
—

 
(49,516
)
 
—

Ending balance
$
3,022,198

 
$
1,047,590

 
$
45,044


 
ASSETS
 
LIABILITIES
For the year ended December 31, 2014
Mortgage
servicing rights
 
Excess spread
financing
 
Mortgage servicing rights financing
Beginning balance
$
2,488,283

 
$
986,410

 
$
29,874

Transfers into Level 3
—

 
—

 
—

Transfers out of Level 3
—

 
—

 
—

Total gains or losses
 
 
 
 
 
Included in earnings
(247,379
)
 
57,554

 
(33,279
)
Included in other comprehensive income
—

 
—

 
—

Purchases, issuances, sales and settlements
 
 
 
 
 
Purchases
470,543

 
—

 
—

Issuances
238,292

 
171,317

 
52,835

Sales
—

 
—

 
—

Settlements
—

 
(184,246
)
 
—

Ending balance
$
2,949,739

 
$
1,031,035

 
$
49,430


30
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


The table below presents a summary of the estimated carrying amount and fair value of Nationstar’s financial instruments.

 
March 31, 2015
 
Carrying
Amount
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Financial assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
815,776

 
$
815,776

 
$
—

 
$
—

Restricted cash
358,542

 
358,542

 
—

 
—

Mortgage loans held for sale
1,995,998

 
—

 
1,995,998

 
—

Mortgage loans held for investment, net
185,577

 
—

 
—

 
188,238

Reverse mortgage interests
2,633,862

 
—

 
—

 
2,693,036

Derivative financial instruments
103,367

 
—

 
103,367

 
—

Financial liabilities:
 
 
 
 
 
 
 
Unsecured senior notes
2,158,812

 
2,170,824

 
—

 
—

Advance Facilities
1,883,312

 
—

 
1,883,312

 
 
Warehouse Facilities
2,477,472

 
 
 
2,477,472

 
 
Derivative financial instruments
23,048

 
—

 
23,048

 
—

Excess spread financing
1,047,590

 
—

 
—

 
1,047,590

Mortgage servicing rights financing liability
45,044

 
—

 
—

 
45,044

Nonrecourse debt - Legacy assets
73,023

 
—

 
—

 
84,031

Participating interest financing
1,491,530

 
—

 
1,491,143

 
—

2014-1 HECM Securitization
305,716

 
—

 
—

 
315,940

 
 
 
 
 
 
 
 
 
December 31, 2014
 
Carrying
Amount
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Financial assets:
 
 
 
 
 
 
 
Cash and cash equivalents
299,002

 
299,002

 
—

 
—

Restricted cash
285,530

 
285,530

 
—

 
—

Mortgage loans held for sale
1,277,931

 
—

 
1,277,931

 
—

Mortgage loans held for investment, net
191,569

 
—

 
—

 
192,865

Reverse mortgage interests
2,383,647

 
—

 
—

 
2,432,735

Derivative financial instruments
91,051

 
—

 
91,051

 
—

Financial liabilities:


 


 


 
 
Unsecured senior notes
2,159,231

 
2,057,038

 
—

 
—

Advance Facilities
1,901,783

 
—

 
1,901,783

 
—

Warehouse Facilities
1,572,622

 
—

 
1,572,622

 
—

Derivative financial instruments
18,525

 
—

 
18,525

 
—

Excess spread financing
1,031,035

 
—

 
—

 
1,031,035

Mortgage servicing rights financing liability
49,430

 
—

 
—

 
49,430

Nonrecourse debt - Legacy assets
75,838

 
—

 
—

 
86,570

Participating interest financing
1,433,145

 
—

 
1,423,291

 
—

2014-1 HECM Securitization
259,328

 
—

 
—

 
259,328


31


14. Capital Requirements
Certain of Nationstar's secondary market investors require minimum net worth (capital) requirements, as specified in the respective selling and servicing agreements. In addition, these investors may require capital ratios in excess of the stated requirements to approve large servicing transfers. To the extent that these requirements are not met, Nationstar's secondary market investors may utilize a range of remedies ranging from sanctions, suspension or ultimately termination of Nationstar's selling and servicing agreements, which would prohibit Nationstar from further originating or securitizing these specific types of mortgage loans or being an approved servicer.
Among Nationstar's various capital requirements related to its outstanding selling and servicing agreements, the most restrictive of these requires Nationstar to maintain a minimum adjusted net worth balance of $1.0 billion . As of March 31, 2015, Nationstar was in compliance with its selling and servicing capital requirements.
15. Commitments and Contingencies
Litigation and Regulatory Matters
Nationstar and its affiliates are routinely and currently involved in a significant number of legal proceedings concerning matters that arise in the ordinary course of business, including putative class actions and other litigation. These actions and proceedings are generally based on alleged violations of consumer protection, securities, employment, contract and other laws, including, without limitation, the Equal Credit Opportunity Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Real Estate Settlement Procedures Act, Service members Civil Relief Act, Telephone Consumer Protection Act, Truth in Lending Act, Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and False Claims Act. Additionally, along with others in its industry, the Company is subject to repurchase and indemnification claims and may continue to receive claims in the future, relating to the sale of mortgage loans and/or the servicing of mortgage loans and securitizations. The Company is also subject to legal actions or proceedings related to loss sharing and indemnification provisions of its various acquisitions. Certain of the actual legal actions and proceedings include claims for substantial compensatory, punitive and/or statutory damages or claims for an indeterminate amount of damages. The outcome of such proceedings is difficult to predict or estimate until late in the proceedings, which may last several years. In particular, ongoing and other legal proceedings brought under federal or state consumer protection laws may result in a separate fine for each violation of the laws, which, particularly in the case of class action lawsuits, could result in damages substantially in excess of the amount earned from the underlying activities and that could have a material adverse effect on the Company's liquidity and financial position. The certification of any putative class action could substantially increase the Company's exposure to damages.
Further, in the ordinary course of business the Company and its subsidiaries can be or are involved in governmental and regulatory examinations, information gathering requests, investigations and proceedings (both formal and informal), regarding the Company’s business, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. Such inquiries may include those into servicer foreclosure processes and procedures, lender-placed insurance and originations.

The Company seeks to resolve all litigation and regulatory matters in the manner management believes is in the best interest of the Company and contests liability, allegations of wrongdoing and, where applicable, the amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter. On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with outstanding legal and regulatory proceedings utilizing the latest information available. Where available information indicates that it is probable a liability has been incurred and the Company can reasonably estimate the amount of the loss, an accrued liability is established. The actual costs of resolving these proceedings may be substantially higher or lower than the amounts accrued.

As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is both probable and estimable. If, at the time of evaluation, the loss contingency is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. Once the matter is deemed to be both probable and estimable, the Company will establish an accrued liability and record a corresponding amount to litigation related expense. The Company will continue to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established. Litigation related expense, which includes the fees paid to external legal service providers, of $7.3 million for the three months ended March 31, 2015, and $ 4.9 million for the three months ended March 31, 2014, respectively, was included in general and administrative expenses on the consolidated statements of income (loss) and comprehensive income (loss).
For a number of matters for which a loss is probable or reasonably possible in future periods, whether in excess of a related accrued liability or where there is no accrued liability, the Company may be able to estimate a range of possible loss. In determining whether it is possible to provide an estimate of loss or range of possible loss, the Company reviews and evaluates its material

32
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


litigation and regulatory matters on an ongoing basis, in conjunction with any outside counsel handling the matter. For those matters for which an estimate is possible, management currently believes the aggregate range of reasonably possible loss is $6.5 million to $18.1 million in excess of the accrued liability (if any) related to those matters as of March 31, 2015. This estimated range of possible loss is based upon currently available information and is subject to significant judgment, numerous assumptions and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary substantially from the current estimate. Those matters for which an estimate is not possible are not included within the estimated range. Therefore, this estimated range of possible loss represents what management believes to be an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Company's maximum loss exposure.
Based on current knowledge, and after consultation with counsel, management believes that the current legal accrued liability is appropriate, and the amount of any incremental liability arising from these matters is not expected to have a material effect on the financial statements of the Company, although the outcome of such proceedings could be material to the Company’s financial statements for a particular period depending, on among other things, the level of the Company’s revenues or income for such period. However, in the event of significant developments on existing cases, it is possible that the ultimate resolution, if unfavorable, may be material to the Company’s consolidated financial statements.

Loan and Other Commitments
Nationstar enters into IRLCs with prospective borrowers whereby the Company commits to lend a certain loan amount under specific terms and interest rates to the borrower. Nationstar also enters into LPCs with prospective sellers. These loan commitments are treated as derivatives and are carried at fair value (See Note 7 - Derivative Financial Instruments).

Nationstar has certain MSRs related to approximately $27.4 billion of unpaid principal balance in reverse mortgage loans. As servicer for these reverse mortgage loans, among other things, the Company is obligated to make advances to the loan customers as required. At March 31, 2015, the Company’s maximum unfunded advance obligation related to these MSRs was approximately $3.1 billion . Upon funding any portion of these advances, the Company expects to securitize and sell the advances in transactions that will be accounted for as a financing arrangement.
 
16. Business Segment Reporting

Nationstar presents financial performance utilizing reportable segments aligned with how the operations are managed. The Servicing segment reflects the results of operations attributable to MSRs acquired from and loans subserviced for third-parties and originated loans. The Solutionstar segment reflects financial performance related to real estate services (e.g., collateral valuation, title, closing services) and real estate exchange, including our HomeSearch.com SM residential market portal. The Originations segment includes fees associated with loan originations and gains from the sale and securitization of loans. The Corporate and Other segment encompasses certain identified corporate costs as well as the 'Legacy' portfolio which includes primarily subprime mortgage loans originated in the latter portion of 2006 and 2007 or acquired from Nationstar's predecessor.
Nationstar’s segments are based upon an organizational structure that focuses primarily on the services offered. The accounting policies of each reportable segment are the same as those of Nationstar except for 1) expenses for consolidated back-office operations and general overhead-type expenses such as executive administration and accounting, and 2) revenues generated on inter-segment services performed. Expenses are allocated to individual segments based on the estimated value of services performed, including estimated utilization of square footage and corporate personnel as well as the equity invested in each segment. Revenues generated on inter-segment services performed are valued based on similar services provided to external parties.
To reconcile to Nationstar’s consolidated results, certain inter-segment revenues and expenses are eliminated in the “Eliminations” column in the following tables.
The following tables are a presentation of financial information by segment for the periods indicated:


33
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


 
 
For the three months ended March 31, 2015
 
 
Servicing
 
Originations
 
Solutionstar
 
Total Operating
Segments
 
Corporate and Other
 
Eliminations
 
Consolidated
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service related
 
$
95,324

 
$
7,065

 
$
112,459

 
$
214,848

 
$
497

 
$
(222
)
 
$
215,123

Net gain on mortgage loans held for sale
 
14,013

 
151,281

 
—

 
165,294

 
1,700

 
—

 
166,994

Total revenues
 
109,337

 
158,346

 
112,459

 
380,142

 
2,197

 
(222
)
 
382,117

Total expenses
 
180,989

 
100,249

 
80,796

 
362,034

 
21,809

 
—

 
383,843

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
24,639

 
15,267

 
—

 
39,906

 
3,646

 
222

 
43,774

Interest expense
 
(57,974
)
 
(14,386
)
 
(35
)
 
(72,395
)
 
(43,253
)
 
—

 
(115,648
)
Gain (loss) on interest rate swaps and caps
 
(801
)
 
—

 
—

 
(801
)
 
34

 
—

 
(767
)
Total other income (expense)
 
(34,136
)
 
881

 
(35
)
 
(33,290
)
 
(39,573
)
 
222

 
(72,641
)
Income (loss) before taxes
 
$
(105,788
)
 
$
58,978

 
$
31,628

 
$
(15,182
)
 
$
(59,185
)
 
$
—

 
$
(74,367
)
Depreciation and amortization
 
$
3,519

 
$
2,155

 
$
3,363

 
$
9,037

 
$
3,817

 
$
—

 
$
12,854

Total assets
 
9,395,852

 
1,965,961

 
260,175

 
11,621,988

 
1,020,380

 
—

 
12,642,368

  
 
 
For the three months ended March 31, 2014
 
 
Servicing
 
Originations
 
Solutionstar
 
Total Operating
Segments
 
Corporate and Other
 
Eliminations
 
Consolidated
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service related
 
$
262,047

 
$
14,048

 
$
64,999

 
$
341,094

 
$
995

 
$
(378
)
 
$
341,711

Net gain on mortgage loans held for sale
 
12,408

 
116,200

 
—

 
128,608

 
(672
)
 
—

 
127,936

Total revenues
 
274,455

 
130,248

 
64,999

 
469,702

 
323

 
(378
)
 
469,647

Total expenses
 
165,333

 
105,050

 
39,209

 
309,592

 
11,541

 
—

 
321,133

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
18,664

 
21,521

 
—

 
40,185

 
3,380

 
378

 
43,943

Interest expense
 
(80,799
)
 
(22,537
)
 
(54
)
 
(103,390
)
 
(53,210
)
 
—

 
(156,600
)
Gain (loss) on interest rate swaps and caps
 
2,556

 
—

 
—

 
2,556

 
265

 
—

 
2,821

Total other income (expense)
 
(59,579
)
 
(1,016
)
 
(54
)
 
(60,649
)
 
(49,565
)
 
378

 
(109,836
)
Income (loss) before taxes
 
$
49,543

 
$
24,182

 
$
25,736

 
$
99,461

 
$
(60,783
)
 
$
—

 
$
38,678

Depreciation and amortization
 
$
3,442

 
$
2,526

 
$
722

 
$
6,690

 
$
2,102

 
$
—

 
$
8,792

Total assets
 
8,949,596

 
2,089,677

 
156,617

 
11,195,890

 
436,673

 
—

 
11,632,563



34
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


17. Guarantor Financial Statement Information
As of March 31, 2015 , Nationstar Mortgage LLC and Nationstar Capital Corporation (1) (collectively, the Issuer), both wholly-owned subsidiaries of Nationstar, have issued $2.2 billion aggregate principal amount of unsecured senior notes which mature on various dates through June 1, 2022 . The unsecured senior notes are unconditionally guaranteed, jointly and severally, by all of Nationstar Mortgage LLC’s existing and future domestic subsidiaries other than its securitization and certain finance subsidiaries, certain other restricted subsidiaries, excluded restricted subsidiaries and subsidiaries that in the future Nationstar Mortgage LLC designates as unrestricted subsidiaries. All guarantor subsidiaries are 100% owned by Nationstar Mortgage LLC. Nationstar and its two direct wholly-owned subsidiaries are guarantors of the unsecured senior notes as well. Presented below are the condensed consolidating financial statements of Nationstar, Nationstar Mortgage LLC and the guarantor subsidiaries for the periods indicated.
In the condensed consolidating financial statements presented below, Nationstar allocates income tax expense to Nationstar Mortgage LLC as if it were a separate tax payer entity pursuant to ASC 740, Income Taxes.
(1) Nationstar Capital Corporation has no assets, operations or liabilities other than being a co-obliger of the unsecured senior notes.

NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING BALANCE SHEET
MARCH 31, 2015

 
Nationstar
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
786,154

 
$
752

 
$
28,870

 
$
—

 
$
815,776

Restricted cash
—

 
202,016

 
—

 
156,526

 
—

 
358,542

Mortgage servicing rights
—

 
3,032,982

 
—

 
—

 
—

 
3,032,982

Advances
—

 
2,470,305

 
—

 
10

 
—

 
2,470,315

Reverse mortgage interests
—

 
2,370,717

 
—

 
263,145

 
—

 
2,633,862

Mortgage loans held for sale
—

 
1,955,227

 
—

 
40,771

 
—

 
1,995,998

Mortgage loans held for investment, net
—

 
990

 
—

 
184,587

 
—

 
185,577

Property and equipment, net
—

 
113,116

 
835

 
17,918

 
—

 
131,869

Derivative financial instruments
—

 
99,117

 
—

 
4,250

 
—

 
103,367

Other assets
10,942

 
971,920

 
271,456

 
1,720,376

 
(2,060,614
)
 
914,080

Investment in subsidiaries
1,664,669

 
472,459

 
—

 
—

 
(2,137,128
)
 
—

Total assets
$
1,675,611

 
$
12,475,003

 
$
273,043

 
$
2,416,453

 
$
(4,197,742
)
 
$
12,642,368

Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
 
 
Unsecured senior notes
$
—

 
$
2,158,812

 
$
—

 
$
—

 
$
—

 
$
2,158,812

Advance facilities
—

 
238,096

 
—

 
1,645,216

 
—

 
1,883,312

Warehouse facilities
—

 
2,439,750

 
—

 
37,722

 
—

 
2,477,472

Payables and accrued liabilities
—

 
1,350,753

 
39

 
51,819

 
—

 
1,402,611

MSR related liabilities - nonrecourse
—

 
1,092,634

 
—

 
—

 
—

 
1,092,634

Derivative financial instruments
—

 
23,048

 
—

 
—

 
—

 
23,048

Mortgage servicing liabilities
—

 
58,599

 
—

 
—

 
—

 
58,599

Other nonrecourse debt
—

 
1,491,530

 
—

 
378,739

 
—

 
1,870,269

Payables to affiliates
—

 
1,957,112

 
923

 
102,579

 
(2,060,614
)
 
—

Total liabilities
—

 
10,810,334

 
962

 
2,216,075

 
(2,060,614
)
 
10,966,757

Total equity
1,675,611

 
1,664,669

 
272,081

 
200,378

 
(2,137,128
)
 
1,675,611

Total liabilities and equity
$
1,675,611

 
$
12,475,003

 
$
273,043

 
$
2,416,453

 
$
(4,197,742
)
 
$
12,642,368



35
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)



NATIONSTAR MORTGAGE HOLDINGS INC. CONSOLIDATING STATEMENT OF INCOME (LOSS) FOR THE THREE MONTHS ENDED MARCH 31, 2015
 
Nationstar
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Service related
$
—

 
$
102,179

 
$
(345
)
 
$
113,511

 
$
(222
)
 
$
215,123

Net gain on mortgage loans held for sale
—

 
156,847

 
—

 
10,147

 
—

 
166,994

Total Revenues
—

 
259,026

 
(345
)
 
123,658

 
(222
)
 
382,117

Expenses:
 
 
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
—

 
128,433

 
354

 
49,968

 
—

 
178,755

General and administrative
—

 
164,532

 
50

 
40,506

 
—

 
205,088

Total expenses
—

 
292,965

 
404

 
90,474

 
—

 
383,843

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
36,120

 
—

 
7,432

 
222

 
43,774

Interest expense
—

 
(99,867
)
 
—

 
(15,781
)
 
—

 
(115,648
)
Gain on interest rate swaps and caps
—

 
34

 
—

 
(801
)
 
—

 
(767
)
Gain/(loss) from subsidiaries
(48,315
)
 
23,209

 
—

 
—

 
25,106

 
—

Total other income (expense)
(48,315
)
 
(40,504
)
 
—

 
(9,150
)
 
25,328

 
(72,641
)
Income/(loss) before taxes
(48,315
)
 
(74,443
)
 
(749
)
 
24,034

 
25,106

 
(74,367
)
Income tax expense (benefit)
—

 
(27,525
)
 
—

 
—

 
—

 
(27,525
)
Net income/(loss)
(48,315
)
 
(46,918
)
 
(749
)
 
24,034

 
25,106

 
(46,842
)
Less: Net gain attributable to noncontrolling interests
—

 
1,397

 
—

 
76

 
—

 
1,473

Net income/(loss) excluding noncontrolling interests
$
(48,315
)
 
$
(48,315
)
 
$
(749
)
 
$
23,958

 
$
25,106

 
$
(48,315
)







36
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)



NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2015

 
Nationstar
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Operating activities:
 
 
 
 
 
 
 
 
 
 
 
Net income/(loss)
$
(48,315
)
 
$
(48,315
)
 
$
(749
)
 
$
23,958

 
$
25,106

 
$
(48,315
)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
 
 
 
 
 
 
 
 
 
 
 
(Gain)/loss from subsidiaries
48,315

 
(23,209
)
 
—

 
—

 
(25,106
)
 
—

Share-based compensation
—

 
5,524

 
—

 
—

 
—

 
5,524

Excess tax benefit from share-based compensation
—

 
(1,095
)
 
—

 
—

 
—

 
(1,095
)
Net gain on mortgage loans held for sale
—

 
(156,847
)
 
—

 
(10,147
)
 
—

 
(166,994
)
Mortgage loans originated and purchased, net of fees
—

 
(4,614,971
)
 
—

 
—

 
—

 
(4,614,971
)
Proceeds on sale of and payments of mortgage loans held for sale and held for investment
—

 
3,998,101

 
—

 
5,025

 
—

 
4,003,126

Gain (loss) on interest rate swaps and caps
—

 
(34
)
 
—

 
801

 
—

 
767

Depreciation and amortization
—

 
9,493

 
—

 
3,361

 
—

 
12,854

Amortization (accretion) of premiums/discounts
—

 
(1,494
)
 
—

 
(303
)
 
—

 
(1,797
)
Fair value changes in excess spread financing
—

 
13,114

 
—

 
—

 
—

 
13,114

Fair value changes and amortization/accretion of mortgage servicing rights
—

 
204,201

 
—

 
—

 
—

 
204,201

Fair value change in mortgage servicing rights liability
—

 
(4,386
)
 
—

 
—

 
—

 
(4,386
)
Changes in assets and liabilities:
 
 
 
 
 
 
 
 
 
 

Advances
—

 
93,149

 
—

 
2,287

 
—

 
95,436

Reverse mortgage interests
—

 
(258,916
)
 
—

 
78,123

 
—

 
(180,793
)
Other assets
5,442

 
380,635

 
1,199

 
(367,126
)
 
—

 
20,150

Payables and accrued liabilities
—

 
7,232

 
14

 
(4,374
)
 
—

 
2,872

Net cash attributable to operating activities
5,442

 
(397,818
)
 
464

 
(268,395
)
 
—

 
(660,307
)




37
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)



 
Nationstar
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Investing activities:
 
 
 
 
 
 
 
 
 
 
 
Property and equipment additions, net of disposals
—

 
(7,243
)
 
—

 
(4,750
)
 
—

 
(11,993
)
Purchase of forward mortgage servicing rights, net of liabilities incurred
—

 
(196,081
)
 
—

 
—

 
—

 
(196,081
)
Acquisitions, net
—

 
—

 
—

 
(31,276
)
 
—

 
(31,276
)
Net cash attributable to investing activities
—

 
(203,324
)
 
—

 
(36,026
)
 
—

 
(239,350
)
Financing activities:
 
 
 
 
 
 
 
 
 
 
 
Transfers (to)/from restricted cash, net
—

 
(24,925
)
 
—

 
(48,087
)
 
—

 
(73,012
)
Issuance of common stock, net of issuance cost
—

 
497,758

 
—

 
—

 
—

 
497,758

Debt financing costs
—

 
(1,549
)
 
—

 
—

 
—

 
(1,549
)
Increase (decrease) in advance facilities
—

 
(332,696
)
 
—

 
314,225

 
—

 
(18,471
)
Increase (decrease) in warehouse facilities
—

 
899,756

 
—

 
5,094

 
—

 
904,850

Proceeds from 2014-1 HECM Securitization
—

 
—

 
—

 
73,082

 
—

 
73,082

Repayment of 2014-1 HECM Securitization
—

 
—

 
—

 
(26,829
)
 
—

 
(26,829
)
Issuance of excess spread financing
—

 
52,957

 
—

 
—

 
—

 
52,957

Repayment of excess spread financing
—

 
(49,516
)
 
—

 
—

 
—

 
(49,516
)
Increase in participating interest financing in reverse mortgage interests
—

 
64,781

 
—

 
—

 
—

 
64,781

Repayment of nonrecourse debt–Legacy assets
—

 
(135
)
 
—

 
(3,138
)
 
—

 
(3,273
)
Excess tax benefit from share-based compensation
—

 
1,095

 
—

 
—

 
—

 
1,095

Redemption of shares for stock vesting
(5,442
)
 
—

 
—

 
—

 
—

 
(5,442
)
Net cash attributable to financing activities
(5,442
)
 
1,107,526

 
—

 
314,347

 
—

 
1,416,431

Net increase in cash and cash equivalents
—

 
506,384

 
464

 
9,926

 
—

 
516,774

Cash and cash equivalents at beginning of period
—

 
279,770

 
288

 
18,944

 
—

 
299,002

Cash and cash equivalents at end of period
$
—

 
$
786,154

 
$
752

 
$
28,870

 
$
—

 
$
815,776



38
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)



NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2014


 
Nationstar
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
279,770

 
$
288

 
$
18,944

 
$
—

 
$
299,002

Restricted cash
—

 
177,090

 
—

 
108,440

 
—

 
285,530

Mortgage servicing rights
—

 
2,961,321

 
—

 
—

 
—

 
2,961,321

Advances
—

 
2,544,065

 
—

 
2,297

 
—

 
2,546,362

Reverse mortgage interests
—

 
2,111,801

 
—

 
341,268

 
—

 
2,453,069

Mortgage loans held for sale
—

 
1,243,700

 
—

 
34,231

 
—

 
1,277,931

Mortgage loans held for investment, net
—

 
1,945

 
—

 
189,624

 
—

 
191,569

Property and equipment, net
—

 
114,903

 
835

 
13,873

 
—

 
129,611

Derivative financial instruments
—

 
87,911

 
—

 
3,140

 
—

 
91,051

Other assets
16,383

 
1,069,061

 
272,654

 
1,328,078

 
(1,808,947
)
 
877,229

Investment in subsidiaries
1,207,895

 
450,363

 
—

 
—

 
(1,658,258
)
 
—

Total Assets
$
1,224,278

 
$
11,041,930

 
$
273,777

 
$
2,039,895

 
$
(3,467,205
)
 
$
11,112,675

Liabilities and members’ equity
 
 
 
 
 
 
 
 
 
 
 
Advance facilities
$
—

 
$
570,792

 
$
—

 
$
1,330,991

 
$
—

 
$
1,901,783

Warehouse facilities
—

 
1,539,994

 
—

 
32,628

 
—

 
1,572,622

Unsecured senior notes
—

 
2,159,231

 
—

 
—

 
—

 
2,159,231

Payables and accrued liabilities
—

 
1,282,895

 
25

 
39,158

 
—

 
1,322,078

Payables to affiliates
—

 
1,683,606

 
894

 
124,447

 
(1,808,947
)
 
—

Derivative financial instruments
—

 
18,525

 
—

 
—

 
—

 
18,525

MSR related liabilities - nonrecourse
—

 
1,080,465

 
—

 
—

 
—

 
1,080,465

Mortgage servicing liabilities
—

 
65,382

 
—

 
—

 
—

 
65,382

Other nonrecourse debt
—

 
1,433,145

 
—

 
335,166

 
—

 
1,768,311

Total liabilities
—

 
9,834,035

 
919

 
1,862,390

 
(1,808,947
)
 
9,888,397

Total equity
1,224,278

 
1,207,895

 
272,858

 
177,505

 
(1,658,258
)
 
1,224,278

Total liabilities and equity
$
1,224,278

 
$
11,041,930

 
$
273,777

 
$
2,039,895

 
$
(3,467,205
)
 
$
11,112,675



39
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)



NATIONSTAR MORTGAGE HOLDINGS INC. CONSOLIDATING STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2014
 
Nationstar
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Service related
$
—

 
$
271,929

 
$
27,428

 
$
56,806

 
$
(14,452
)
 
$
341,711

Net gain on mortgage loans held for sale
—

 
113,889

 
—

 
(27
)
 
14,074

 
127,936

Total Revenues
—

 
385,818

 
27,428

 
56,779

 
(378
)
 
469,647

Expenses:
 
 
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
—

 
143,358

 
1,696

 
11,541

 
—

 
156,595

General and administrative
—

 
133,725

 
891

 
29,922

 
—

 
164,538

Total expenses
—

 
277,083

 
2,587

 
41,463

 
—

 
321,133

Other income / (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
39,710

 
—

 
3,855

 
378

 
43,943

Interest expense
—

 
(134,478
)
 
—

 
(22,122
)
 
—

 
(156,600
)
Gain/(loss) on interest rate swaps and caps
—

 
265

 
—

 
2,556

 
—

 
2,821

Gain / (loss) from subsidiaries
39,037

 
24,446

 
—

 
—

 
(63,483
)
 
—

Total other income / (expense)
39,037

 
(70,057
)
 
—

 
(15,711
)
 
(63,105
)
 
(109,836
)
Income before taxes
39,037

 
38,678

 
24,841

 
(395
)
 
(63,483
)
 
38,678

Income tax expense/(benefit)
15,001

 
—

 
—

 
—

 
—

 
15,001

Net Income/(loss)
24,036

 
38,678

 
24,841

 
(395
)
 
(63,483
)
 
23,677

Less: Net gain attributable to noncontrolling interests
—

 
(359
)
 
—

 
—

 
—

 
(359
)
Net income/(loss) excluding noncontrolling interests
$
24,036

 
$
39,037

 
$
24,841

 
$
(395
)
 
$
(63,483
)
 
$
24,036



 




40
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)



NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2014

 
 
Nationstar
 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Operating activities:
 
 
 
 
 
 
 
 
 
 
 
 
Net income/(loss)
 
$
24,036

 
$
39,037

 
$
24,841

 
$
(395
)
 
$
(63,483
)
 
$
24,036

Reconciliation of net income to net cash attributable to operating activities:
 
 
 
 
 
 
 
 
 
 
 
 
(Gain)/loss from subsidiaries
 
(39,037
)
 
(24,446
)
 
—

 
—

 
63,483

 
—

Share-based compensation
 
—

 
2,809

 
—

 
—

 
—

 
2,809

Excess tax benefit from share based compensation
 
—

 
(2,189
)
 
—

 
—

 
—

 
(2,189
)
Net (gain)/loss on mortgage loans held for sale
 
—

 
(113,889
)
 
—

 
27

 
(14,074
)
 
(127,936
)
Mortgage loans originated and purchased, net of fees
 
—

 
(5,402,512
)
 
—

 
(350
)
 
—

 
(5,402,862
)
Proceeds on sale of and payments of mortgage loans held for sale and held for investment
 
—

 
6,343,251

 
—

 
5,388

 
12,669

 
6,361,308

Gain (loss) on swaps and caps
 
—

 
(264
)
 
—

 
(2,557
)
 
—

 
(2,821
)
Depreciation and amortization
 
—

 
8,078

 
43

 
671

 
—

 
8,792

Amortization/accretion of premiums/discounts
 
—

 
10,465

 
—

 
(506
)
 
—

 
9,959

Fair value changes in excess spread financing
 
—

 
(3,369
)
 
—

 
—

 
—

 
(3,369
)
Fair value changes and amortization/accretion of mortgage servicing rights
 
—

 
78,687

 
—

 
—

 
—

 
78,687

Fair value change in mortgage servicing rights financing liability
 
—

 
(10,788
)
 
—

 
—

 
—

 
(10,788
)
Changes in assets and liabilities:
 
 
 
 
 
 
 
 
 
 
 


Advances
 
—

 
(205,816
)
 
—

 
254

 
—

 
(205,562
)
Reverse mortgage interests
 
—

 
(238,538
)
 
—

 
—

 
—

 
(238,538
)
Other assets
 
19,784

 
(1,230,274
)
 
(24,056
)
 
1,504,517

 
1,405

 
271,376

Payables and accrued liabilities
 
—

 
(120,082
)
 
(2,956
)
 
897

 
—

 
(122,141
)
Net cash attributable to operating activities
 
4,783

 
(869,840
)
 
(2,128
)
 
1,507,946

 
—

 
640,761


41
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)



 
 
Nationstar
 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Investing activities:
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment additions, net of disposals
 
—

 
(7,145
)
 
(65
)
 
(1,703
)
 
—

 
(8,913
)
Purchase of forward mortgage servicing rights, net of liabilities incurred
 
—

 
(93,092
)
 
—

 
—

 
—

 
(93,092
)
Proceeds from sale of servicer advances
 
—

 
182,871

 
—

 
—

 
—

 
182,871

Acquisitions, net
 
—

 
—

 
—

 
—

 
—

 
—

Net cash attributable to investing activities
 
—

 
82,634

 
(65
)
 
(1,703
)
 
—

 
80,866

Financing activities:
 
 
 
 
 
 
 
 
 
 
 
 
Transfers to/from restricted cash
 
—

 
18,914

 
—

 
85,311

 
—

 
104,225

Issuance of common stock, net of issuance costs
 
—

 
—

 
—

 
—

 
—

 
—

Debt financing costs
 
—

 
(2,050
)
 
—

 
—

 
—

 
(2,050
)
Increase (decrease) in advance facilities
 
—

 
1,206,683

 
—

 
(1,583,559
)
 
—

 
(376,876
)
Increase (decrease) in warehouse facilities
 
—

 
(598,280
)
 
—

 
—

 
—

 
(598,280
)
Issuance of excess spread financing
 
—

 
37,859

 
—

 
—

 
—

 
37,859

Repayment of excess servicing spread financing
 
—

 
(42,717
)
 
—

 
—

 
—

 
(42,717
)
Increase in participating interest financing in reverse mortgage interests
 
—

 
103,324

 
—

 
—

 
—

 
103,324

Proceeds from mortgage servicing rights financing
 
—

 
20,651

 
—

 
—

 
—

 
20,651

Repayment of nonrecourse debt–Legacy assets
 
—

 
—

 
—

 
(2,998
)
 
—

 
(2,998
)
Excess tax benefit from share-based compensation
 

 
2,189

 
—

 
—

 
—

 
2,189

Surrender of shares relating to stock vesting
 
(4,783
)
 
—

 
—

 
—

 
—

 
(4,783
)
Net cash attributable to financing activities
 
(4,783
)
 
746,573

 
—

 
(1,501,246
)
 
—

 
(759,456
)
Net increase in cash and cash equivalents
 
—

 
(40,633
)
 
(2,193
)
 
4,997

 
—

 
(37,829
)
Cash and cash equivalents at beginning of period
 
—

 
422,268

 
3,907

 
15,727

 
—

 
441,902

Cash and cash equivalents at end of period
 
$
—

 
$
381,635

 
$
1,714

 
$
20,724

 
$
—

 
$
404,073




18. Disclosures Related to Transactions with Affiliates of Fortress Investment Group LLC
Springleaf Home Equity, Inc.
Nationstar has several agreements to act as the loan subservicer for Springleaf Home Equity, Inc., formerly known as American General Home Equity, Inc., Springleaf General Financial Services of Arkansas, Inc., formerly known as American General Financial Services of Arkansas, Inc. and MorEquity, Inc. (collectively, Springleaf) totaling $1.9 billion in UPB for which Nationstar receives a monthly per loan subservicing fee and other performance incentive fees subject to the agreements with Springleaf. For the three

42
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


months ended March 31, 2015 and March 31, 2014, Nationstar recognized revenue of $0.2 million and $2.0 million , respectively, in additional servicing and other performance incentive fees related to these portfolios. At March 31, 2015 and December 31, 2014, Nationstar had an outstanding receivable from Springleaf of $0.1 million and $0.2 million , respectively, which was included as a component of other assets.

Newcastle Investment Corp. (Newcastle)
Nationstar is the loan servicer for several securitized loan portfolios managed by Newcastle, which is managed by an affiliate of Fortress, for which Nationstar receives a monthly net servicing fee equal to 0.50%  per annum on the unpaid principal balance of the portfolios, which was $0.7 billion and $0.8 billion , as of March 31, 2015 and December 31, 2014, respectively. For the three months ended March 31, 2015 and 2014, Nationstar received servicing fees and other performance incentive fees of $0.9 million and $1.1 million , respectively.
New Residential Investment Corp. (New Residential)
Excess Spread Financing
Nationstar has entered into several agreements with certain entities formed by New Residential, in which New Residential and/or certain funds managed by Fortress own an interest (each a New Residential Entity), where Nationstar sold to the related New Residential Entity the right to receive a portion of the excess cash flow generated from certain acquired MSRs after receipt of a fixed basic servicing fee per loan. Nationstar retains the fixed base servicing fee, all ancillary revenues associated with servicing such MSRs and the retained portion of the excess servicing fee. Nationstar is the servicer of the loans and provides all servicing and advancing functions for the portfolio. The related New Residential Entity does not have prior or ongoing obligations associated with these MSR portfolios. Furthermore, should Nationstar refinance any loan in such portfolios, subject to certain limitations, Nationstar will be required to transfer the new loan or a replacement loan of similar economic characteristics into the portfolios. The new or replacement loan will be governed by the same terms set forth in the agreements described above.
In addition, as of March 31, 2015, Nationstar has paid $27.5 million to New Residential for delinquent service fees in advance of the contractual due date. This amount will be ultimately netted against future remittances as related to service fee amounts. This amount is recorded as an offset to outstanding excess spread financing in our financial statements.
The fair value on the outstanding liability related to these agreements was $1,047.6 million and $1,031.0 million at March 31, 2015 and December 31, 2014, respectively.

Mortgage Servicing Rights Financing Liability

In December 2013, Nationstar entered into a Master Servicing Rights Purchase Agreement and three related Sale Supplements (collectively, the Sale Agreement) with a joint venture entity (Purchaser) capitalized by New Residential in which New Residential and/or certain funds managed by Fortress own an interest. Under the Sale Agreement, Nationstar sold to the Purchaser the right to repayment on certain outstanding servicer advances outstanding on non-Agency mortgage loans. In addition, Nationstar also sold the right to receive the basic fee component on the related mortgage servicing rights, in exchange for the Purchaser remitting a portion of the basic fee to Nationstar in exchange for Nationstar continuing to service the mortgage loans. Nationstar will continue to act as named servicer under each servicing agreement until servicing is transferred to the Purchaser. Once the servicing is transferred under any servicing agreement to the Purchaser, Nationstar will subservice the applicable mortgage loans. While the transfer of the mortgage servicing rights to New Residential is intended to achieve the economic result of a sale of mortgage servicing rights, the Company accounts for the transactions as financings.
The fair value of the outstanding liability related to the Sale Agreement was $ 45.0 million and $49.4 million at March 31, 2015 and December 31, 2014, respectively.
As of March 31, 2015, Nationstar has transferred approximately $2.2 billion in servicer advances to the Purchaser in related supplemental agreements and received over $512.5 million in cash proceeds related to these transfers.

Other

In May 2014, Nationstar entered into a servicing arrangement with New Residential whereby Nationstar will service residential mortgage loans that New Residential and/or its various affiliates and trust entities acquire. The terms and fees of this servicing

43
NATIONSTAR MORTGAGE HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)


arrangement generally conform with industry standards for stand-alone residential mortgage loan servicing. For the three months ended March 31, 2015, Nationstar recognized revenue of $1.7 million related to these servicing arrangements.

19. Subsequent Events

Nationstar evaluated subsequent events through the date these consolidated financial statements were issued.

In April 2015, Nationstar entered into a Master Repurchase Agreement with a financial institution, which will expire in April 2016. This facility has a committed amount of $200.0 million . The MRA states that from time to time, Nationstar may enter into transactions in which Nationstar agrees to transfer to the financial services company certain mortgage loans or MBS against the transfer of funds by the financial institution, with a simultaneous agreement by the financial institution to transfer such mortgage loans to Nationstar at a certain date, or on demand by Nationstar, against the transfer of funds by Nationstar. The interest rate is LIBOR plus a spread of 1.50% to 1.60% which varies based on the underlying transferred collateral.



44


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management's discussion and analysis of financial condition and results of operations (MD&A) is a supplement to and should be read in conjunction with the accompanying unaudited consolidated financial statements.

OVERVIEW
We are an integrated servicer, originator and provider of transaction based services for residential mortgages in the United States. Our success depends on working with customers, investors and GSEs to deliver quality services and solutions that foster and preserve home ownership.

First Quarter 2015 Highlights
Some of the major highlights for the first quarter of 2015 include:

•
Completed equity offering for 17,500,000 shares of common stock, raising additional $499 million in cash proceeds.
•
Completed acquisition of Experience I, Inc., the holding company for Title365, Trusted Signing and technology subsidiaries XI Labs and XI Analytics. Experience I and subsidiaries are included in results of operations beginning in January 2015.
•
Completed acquisitions of mortgage servicing rights for over $24.0 billion in unpaid principal balance.
•
Provided over 16,500 solutions to our mortgage servicing customers, reflecting our continued commitment to foster and preserve homeownership.
•
Our delinquency rate, measured as loans that are 60 or more days behind in payments, declined to 8.8% from 9.9% at the start of the year.
•
Funded $4.2 billion in mortgage loans for the year, including $1.9 billion related to retaining customers from our servicing portfolio. Refinanced $1.2 billion in HARP loans, providing relief to 7,293 customers.

Capital and Liquidity

We had cash on hand of $815.8 million as of March 31, 2015 and $299.0 million as of December 31, 2014, respectively. In addition, we had total equity of $1,675.6 million as of March 31, 2015 and $1,224.3 million as of December 31, 2014, respectively. The significant increase in cash on hand and equity for the quarter ended March 31, 2015 was principally the result of completing an equity offering in March 2015 of 17.5 million shares, which raised $499 million in cash proceeds. We expect to utilize excess cash to pay for MSR purchases and other acquisitions. We believe we have sufficient capital and liquidity to conduct our operations, including the acquisition of new portfolios that meet our return requirements.
Purchase of Bulk MSRs
During the quarter, we completed the acquisition of bulk MSRs associated with $20.2 billion in unpaid principal balance (UPB). We purchased the MSRs via cash on hand and the use of additional excess spread financings with New Residential and funds managed by Fortress Investment Group, all of which are affiliated companies. For additional information see Note 2, Mortgage Servicing Rights and Related Liabilities.
During the quarter ending June 30, 2015, we expect to close additional bulk MSRs associated with approximately $27.2 billion in UPB and have commitments to purchase an additional $30.0 billion of MSRs that are awaiting execution of documentation and/or applicable regulatory approvals and other customary closing conditions. We expect to utilize cash on hand and additional excess spread financings to purchase these MSRs.
Warehouse facilities
As a result of the increased activity in our Originations segment, our Mortgage Loans Held for Sale increased to $1.996 billion as of March 31, 2015 compared to $1.278 billion as of December 31, 2014. We have sufficient warehouse capacity to support our Originations segment.
As further discussed in Note 8, Indebtedness, two of our warehouse facilities and one MBS facility contain profitability requirement covenants that were breached as of March 31, 2015 as a result of the decline in the fair value of our MSRs. We obtained waivers for the period ending March 31, 2015. As of March 31, 2015, we were in compliance with all other covenants related to our borrowing facilities.
Additional focus areas are provided below as we discuss the results of each of our segments.



45


RESULTS OF OPERATIONS

Consolidated Results
Table 1. Consolidated Operations
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Revenues
$
382

 
$
470

Expenses
(384
)
 
(321
)
Other income (expense), net
(72
)
 
(110
)
Income (loss) before taxes
(74
)
 
39

Income tax (benefit) expense
(27
)
 
15

Net income (loss) attributable to Nationstar
$
(47
)
 
$
24


The primary driver of the net loss for the period ended March 31, 2015 is additional negative mark-to-market adjustments of $155 million compared to the comparable 2014 period. Net income for our Originations segment and Solutionstar segment increased in the current quarter compared to the quarter ended March 31, 2014.
Table 2. Revenues
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Servicing
$
109

 
$
275

Originations
158

 
130

Solutionstar
112

 
65

Corporate and Other, including eliminations
3

 
—

Total revenues
$
382

 
$
470


Mark-to-market adjustments was the principal driver of the decline in revenues for the Servicing segment as well as the overall Company for the quarter ended March 31, 2015. Mark-to-market adjustments for the quarter ended March 31, 2015 were driven by the decline in interest rates since year end which resulted in both an increase in prepayments as well as a decline in the value of MSRs remaining on-balance sheet as of quarter end. Our Originations segment recorded higher revenues as a result of higher consumer direct locked volume and favorable marks on mortgage loans held for sale, both of which were driven by the favorable interest rate environment. Revenues increased for the Solutionstar segment primarily driven by the acquisition of Title 365 which contributed $23.3 million of revenue in the quarter as well as increased property sales compared to the first quarter of 2014.

Table 3. Expenses
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Servicing
$
(181
)
 
$
(165
)
Originations
(100
)
 
(105
)
Solutionstar
(81
)
 
(39
)
Corporate and Other, including eliminations
(22
)
 
(12
)
Total income before taxes
$
(384
)
 
$
(321
)

Expenses increased in total principally driven by the Solutionstar segment. This is a function of the growth in Solutionstar operations which resulted in increased headcount and the growth in Real Estate Services revenue (e.g., title, collateral valuation) which has higher associated vendor costs and an increase in technology spend. The increase in Servicing costs was principally driven by higher legal and compliance costs.



46


Table 4. Other income (expense), net
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Interest income
$
44

 
$
44

Interest expense
(115
)
 
(157
)
Gain (loss) on interest rate swaps and caps
(1
)
 
3

Total income (expense) before taxes
$
(72
)
 
$
(110
)

Other income (expense), net declined as a result of a decline in interest expense. Interest expense declined substantially in the Servicing segment as a result of a reduction in advances primarily as a result of the completion of the MSR Financing Liability transactions. Interest expense also declined in our Originations segment principally as a result of lower cost of borrowing on our warehouse facilities. Interest expense was lower for our Unsecured Senior Notes, included within Corporate and Other segment as a result of the redemption of notes in July 2014.

Table 5. Income (loss) before taxes
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Servicing
$
(106
)
 
$
50

Originations
59

 
24

Solutionstar
32

 
26

Corporate and Other, including eliminations
(59
)
 
(61
)
Total income (loss) before taxes
$
(74
)
 
$
39


The decline in income (loss) before taxes for our Servicing segment as well as overall was principally driven by the $155 million reduction in revenue in the servicing segment as a result of mark-to-market adjustments. Income before taxes for our Originations segment increased when compared to the first quarter 2014 as a result of higher lock volumes combined with higher sales volume as well as lower salary expenses. Income before taxes for Solutionstar increased as a result of increased property sales as well as the acquisition of Title 365, partially offset by increased corporate expenditures, including technology, as we invest in new products and services.

Table 6. Income taxes (benefit)
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Income taxes (benefit)
$
(27
)
 
$
15


The income tax benefit in the current period was primarily the result of MSR fair value marks. Our effective tax rate was 36.6% and 38.8% for the quarters ended March 31, 2015 and 2014, respectively.

Segment Results

Revenues generated on inter-segment services performed are valued based on estimated market value. Expenses are allocated to individual segments based on the estimated value of services performed, total revenue contributions, personnel headcount or the equity invested in each segment based on the type of expense allocated. Expenses for consolidated back-office operations and general overhead expenses such as executive administration and accounting are not allocated to the business segments.

 






Servicing Segment

47



Table 7. Servicing Operations
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Revenues
$
109

 
$
275

Expenses
(181
)
 
(165
)
Other income (expense), net
(34
)
 
(60
)
Income (loss) before taxes
$
(106
)
 
$
50

Income (loss) before taxes margin
(97.2
)%
 
18.2
%

Our Nationstar Mortgage and Champion Mortgage brands together service approximately 2.4 million customers with an outstanding principal balance in excess of $390 billion as of March 31, 2015. Whether servicing mortgages we originate or on behalf of others, our approach is a customer centric model that emphasizes borrower interaction to minimize complaints, improve loan performance and cure loan delinquencies. Our commitment is to preserve neighborhoods and communities principally through continued home ownership. We earn fees for collecting monthly mortgage payments from homeowners, processing those payments and passing them on to investors who ultimately own the mortgage.

Our servicing portfolio generates reliable and recurring cash flows although our earnings may vary period to period principally as a result of mark-to-market adjustments on our MSRs. Although mortgage loans by definition are an amortizing asset, our ability to deploy loss mitigation strategies, modify nonperforming loans, assist our existing customers with a refinance or new home purchase and take advantage of existing flow, correspondent and bulk opportunities generally allows us to replenish and modestly grow our servicing portfolio. We have a proven track record of reducing the delinquencies within portfolios and ultimately extending the duration of our overall MSR pool of loans which in turn increases the future earnings potential of such pools.

We generally acquire MSRs on a standalone basis or via a model in which financial partners co-invest in “excess MSRs.” Typically, we utilize cash on hand to pay for smaller acquisitions of MSRs; however, we believe we can access debt and equity markets for larger opportunities when prudent. We anticipate that current market and regulatory conditions will limit larger MSR purchases and will generally result in a preference by sellers to dispose of potentially more, but smaller, portfolios of $25 billion or less. Subservicing represents another means of growing our servicing business, as subservicing contracts are typically awarded on a no-cost basis and generally do not require substantial capital.

In 2015, we remain focused on resolving complaints timely and, more importantly, reducing the overall number of complaints. Finally, we will continue to invest in technology, people and procedures that should allow us to drive costs per loan lower and continue to improve the scalability of our operations.

The following table provides a rollforward of our forward servicing portfolio UPB, including loans subserviced for others:
Table 8. Forward Servicing Portfolio UPB Rollforward
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Balance at the beginning of the period
$
353,094

 
$
361,779

Additions:
 
 
 
Originations
4,209

 
4,744

Acquisitions
23,871

 
3,631

Deductions:
 
 
 
Principal reductions and other
(2,559
)
 
(2,416
)
Voluntary reductions
(9,887
)
 
(7,828
)
Involuntary reductions
(2,855
)
 
(2,675
)
Net changes in loans serviced by others
(3,031
)
 
(1,757
)
Balance at the end of period
$
362,842

 
$
355,478


The following table provides the composition of revenues for the Servicing segment for the periods presented as well as information useful in evaluating revenues:

48


Table 9. Servicing - Revenues
For the three months ended March 31,
 
2015
 
2014
($ in millions)
Amounts
bps (1)
 
Amounts
bps (1)
MSRs - Fair Value base servicing fees
$
211

22

 
$
215

22

Subservicing (2)
15

2

 
16

2

MSRs - LOCOM
19

2

 
14

1

Modification fees
12

1

 
19

2

Incentive fees
10

1

 
13

1

Late payment fees
18

2

 
18

2

Other revenues
29

3

 
32

3

Total service related revenue before MSR fair value adjustments
314

33

 
327

33

Fair value adjustments on MSRs - Fair Value
(210
)
(22
)
 
(78
)
(8
)
Fair value adjustments on excess spread financing
(13
)
(1
)
 
3

—

Fair value adjustments on MSR financing liability
4

—

 
11

1

Service related revenue
95

10

 
263

26

Net gain on mortgage loans held for sale
14

1

 
12

1

Total revenues
$
109

11

 
$
275

27


(1) Calculated bps are as follows: Annualized $ amount/Average UPB X 10000
(2) Subservicing amounts includes amounts serviced for other MSR owners, whole loans serviced for other investors and our owned whole loans.

Mark-to-market adjustments were the principal driver of the decline in revenues for the Servicing segment during the current quarter. Mark-to-market adjustments include the impact of scheduled payments and prepayments, as well as the impact of interest rates on the fair value of our MSRs, excess spread financing and MSR financing liability.

For the quarter ended March 31, 2015, we recorded $101 million in change in fair value associated with scheduled payments and prepayments which was an increase of $26 million over the same quarter ended 2014. The increase was principally driven by a decrease in interest rates which resulted in more borrowers who were current and had lower LTV ratios refinancing in the current period. In addition, we lowered the fair value of MSRs remaining on the balance sheet as of March 31, 2015 for similar borrowers included in our interest rate sensitive portfolio.

Base servicing fees remained relatively flat for the three month period ended March 31, 2015 to the comparable 2014 period. Modification fees and incentive fees were lower reflective of the decline in the 60 plus day delinquency rate from 11.1% as of March 31, 2014 as compared to 8.8% as of March 31, 2015. Other revenues declined as a result of a change in fees due to a new joint marketing agreement executed in September 2014.

For information regarding fair value adjustments, see the Mortgage Servicing Rights and Related Liabilities section provided below.

49


Table 10. Servicing Portfolio - Unpaid Principal Balances
For the three months ended March 31,
($ in millions)
2015
 
2014
Average UPB:
 
 
 
MSRs - Fair Value
$
338,366

 
$
324,614

Subservicing
19,602

 
34,015

MSRs - LOCOM
27,684

 
28,928

 
 
 
 
Ending UPB:
 
 
 
MSRs - Fair Value
 
 
 
Agency
229,213

 
202,527

Non-Agency
113,906

 
123,886

Total MSRs - Fair Value
343,119

 
326,413

 
 
 
 
Subservicing:
 
 
 
Agency
14,833

 
20,667

Non-Agency
4,890

 
8,398

Total Subservicing
19,723

 
29,065

 
 
 
 
MSRs - LOCOM
27,386

 
28,927


Our Servicing portfolio's average unpaid principal balance increased as a result of continued MSR acquisitions over the last year in excess of liquidations and principal payments. We closed on $23.9 billion in servicing acquisitions during the three month period ended March 31, 2015 and originated an additional $4.2 billion during the period.
Table 11. Modifications and Workout Units
For the three months ended March 31,
 
2015
 
2014
Modifications and Workout Units:
 
 
 
HAMP modifications
3,980

 
5,574

Non HAMP modifications
6,191

 
9,838

Workouts
6,361

 
7,405

Total Units
16,532

 
22,817


Total modifications and workouts decreased for the three month period ended March 31, 2015 compared to the prior year period as a result of our improved delinquencies reflected in the table below.
Table 12. Key performance metrics of our boarded forward servicing portfolio (1)
For the three months ended March 31,
 
2015
 
2014
Loan count-servicing
2,080,338

 
1,947,160

Average loan amount
$
165,762

 
$
169,150

Average coupon - Credit sensitive (2)
4.70
%
 
4.92
%
Average coupon - Interest sensitive (2)
4.02
%
 
3.99
%
60+ delinquent (% of loans) (3)
8.8
%
 
11.1
%
Total Prepayment speed (12 month constant pre-payment rate)
13.8
%
 
16.1
%

(1) Characteristics and key performance metrics of our servicing portfolio excludes UPB and loan counts acquired but not yet boarded and currently serviced by others.
(2) The weighted average coupon amounts for our credit and interest sensitive pools presented in the table above are only reflective of our owned forward MSR portfolio that is reported at fair value.

50


(3) Loan delinquency is based on the current contractual due date of the loan. In the case of a completed loan modification, delinquency is based on the modified due date of the loan.

For fair value adjustments, see Note 2, Mortgage Servicing Rights and Related Liabilities for further information.

Table 13. Servicing - Expenses
For the three months ended March 31,
 
2015
 
2014
($ in millions)
Amounts
bps (1)
 
Amounts
bps (1)
Salaries, wages and benefits
$
75

7

 
$
73

8

General and administrative
106

12

 
92

9

Expenses
$
181

19

 
$
165

17


(1) Calculated bps are as follows: Annualized $ amount/Average UPB X 10000

The table below provides additional detail on our total general and administrative expenses recorded in our Servicing segment.

Table 14. General and Administrative Expenses
For the three months ended March 31,
 
2015
 
2014
($ in millions)
Amounts
bps (1)
 
Amounts
bps (1)
Legal and regulatory costs (including claim losses)
$
42

4

 
$
31

3

Operational costs
28

3

 
21

2

Offshoring costs
12

1

 
11

1

Corporate allocation charges
16

2

 
17

2

Subservicing
8

1

 
12

1

Total general and administrative expenses - Servicing
$
106

11

 
$
92

9


(1) Calculated bps are as follows: Annualized $ amount/Average UPB X 10000

Total servicing expenses increased during the three month period ended March 31, 2015 primarily as a result of higher legal and regulatory losses combined with higher corporate overhead allocation charges compared to the same period in 2014. Higher corporate allocations was primarily driven by an internal reorganization. Increases in general and administrative expenses were partially offset by lower salaries, wages and benefits related to reduced average headcount.

Table 15. Servicing - Other Income (Expense), net
For the three months ended March 31,
 
2015
 
2014
($ in millions)
Amounts
bps (1)
 
Amounts
bps (1)
Interest income
$
25

3

 
$
18

2

Interest expense:
 
 
 
 
 
Advance facilities
(13
)
(1
)
 
(45
)
(5
)
Excess spread financings
(19
)
(2
)
 
(20
)
(2
)
Other interest expense
(26
)
(3
)
 
(16
)
(2
)
Interest expense, total
(58
)
(6
)
 
(81
)
(9
)
Gain (loss) on interest rate swaps and cap
(1
)
—

 
3

—

Other income (expense), net
$
(34
)
(3
)
 
$
(60
)
(7
)
 
 
 
 
 
 
WAC - Advance facilities
2.0
%
 
 
2.4
%
 
WAC - Excess spread financing
9.1
%
 
 
9.2
%
 

(1) Calculated bps are as follows: Annualized $ amount/Average UPB X 10000

51


We earn interest income principally on funds held in escrow (e.g., tax, insurance). In addition, to the extent reverse mortgages are part of a consolidated securitization, we earn interest income based upon the borrower interest rate applied to the HECM outstanding principal balance of mortgage loans. The principal driver of the increase in interest income relates to reverse mortgage interests.
Interest expense principally declined as a result of the decline in average advances outstanding for the periods presented. The decreases in advances are principally the result of the sale of advances to New Residential as part of the MSR Financing Liability transaction. See Note 2, Mortgage Servicing Rights and Related Liabilities, for further information.
Other interest expense consists of interest amounts owed related to our participating interest financing, compensating interest amounts paid on prepayments, and bank fees. The increase in other interest expense in the table above for the three month period ended March 31, 2015 was attributable to higher interest paid on our participating interest financing as a result of our higher average debt balance for the period. We paid $13.6 million in interest expense on our reverse mortgage portfolio for the three month period ended March 31, 2015 compared to $7.0 million in interest expense for the comparable 2014 period. In addition, we also paid higher interest expense on our


Originations Segment

Table 16. Originations - Operations
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Revenues
$
158

 
$
130

Expenses
(100
)
 
(105
)
Other income (expense), net
1

 
(1
)
Income before taxes
$
59

 
$
24

Income before taxes margin
37.3
%
 
18.5
%

Our originations segment comprises both the Greenlight Loans and Nationstar brands. We originate primarily conventional agency (GSE) and government-insured residential mortgage loans and, to mitigate credit risk, typically sell these loans within approximately 30 to 60 days while retaining the associated servicing rights. Our primary focus is assisting customers currently in our servicing portfolio with refinances or loans for new home purchases (or recapture). This increases our origination margins by reducing marketing and other costs to acquire customers as well as replenishment of our servicing portfolio.


52


Table 17. Originations - Revenues
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Service related
$
7

 
$
14

 
 
 
 
Gain on loans sold
183

 
194

Fair value mark-to-market on loans held for sale
(51
)
 
(155
)
Mark-to-market on locks and commitments (1)
(21
)
 
26

Provision for repurchases
(4
)
 
(7
)
Capitalized servicing rights
44

 
58

Net gain on mortgage loans held for sale
151

 
116

 
 
 
 
Total revenues
$
158

 
$
130

 
 
 
 
Key Metrics
 
 
 
Consumer Direct Locked Volume
$
2,984

 
$
2,651

Other Locked Volume
1,558

 
1,548

Funded Volume, Total
4,209

 
4,744

Funded HARP Volume, Total
1,181

 
2,445

Recapture percentage
24.0
%
 
46.0
%
Purchase percentage of funded volume
24.0
%
 
28.0
%
Value of Capitalized Servicing
118 bps

 
107 bps


(1) Mark-to-market on locks and commitments includes our fair value mark-to-market adjustments on our IRLCs, forward loan commitments, and any associated pair-off amounts.

In evaluating performance, we combine gain on loans sold and fair value mark-to-market adjustments on loans held for sale. When considered together, the Company had net gains of $132 million for the quarter ended March 31, 2015, versus $39 million for the comparable quarter. The increase was primarily driven by higher consumer direct locked volume and favorable marks on mortgage loans held for sale, both of which were driven by a favorable interest rate environment in the quarter.

Revenues were also positively impacted by secondary and capital market gains, which include both securitization and derivative gains. Funded HARP volumes continued to decline as expected.

During the quarter, we recaptured 24.0% of voluntary repayments, which principally reflects increased repurchase activity as a result of declining interest rates. The 24% recapture rate equated to 92% recapture of economics associated with voluntary prepayments on the servicing portfolio and generated approximately $22 million of new cash proceeds.

Table 18. Originations - Expenses
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Salaries, wages and benefits
$
69

 
$
67

General and administrative
31

 
38

Expenses
$
100

 
$
105


Salaries, wages and benefits was flat for the periods presented, but declined as a percentage of locked volumes as a result of increased productivity.

53


Table 19. Originations - Other Income (Expense), net
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Interest income
$
15

 
$
22

Interest expense
(14
)
 
(23
)
Other income (expense), net
1

 
$
(1
)
 
 
 
 
WAC - Mortgage loans held for sale
4.1
%
 
4.6
%
WAC - Warehouse facilities
2.4
%
 
2.8
%

Interest income relates principally to Mortgage Loans Held for Sale. Interest expense is associated with the warehouse facilities utilized to originate new loans. Interest income principally declined as a result of lower coupon rates on originated loans. Interest expense declined principally as a result of lower costs of borrowing.

Indemnification Reserves

The activity of the outstanding repurchase reserves were as follows:
Table 20. Repurchase Reserves
For the three months ended March 31,
 
2015
 
2014
Repurchase reserves, beginning of period
$
29

 
$
41

Provisions
4

 
7

Charge-offs
(3
)
 
(4
)
Repurchase reserves, end of period
$
30

 
$
44


The provision for repurchases represents estimate of losses to be incurred on the repurchase or indemnification of purchasers of loans. Certain sale contracts and GSE standards require us to repurchase a loan or indemnify the purchaser or insurer for losses if a borrower fails to make initial loan payments or if the accompanying mortgage loan fails to meet certain customary representations and warranties, such as the manner of origination, the nature and extent of underwriting standards.

In the event of a breach of the representations and warranties, we may be required to either repurchase the loan or indemnify the purchaser for losses it sustains on the loan. In addition, an investor may request that we refund a portion of the premium paid on the sale of mortgage loans if a loan is prepaid within a certain amount of time from the date of sale. We record a provision for estimated repurchases, loss indemnification and premium recapture on loans sold, which is charged to net gain on mortgage loans held for sale.

In 2012, a selling representation and warranty framework was introduced by the GSEs that helps address concerns of loan sellers with respect to loan repurchase risk. Under the framework, which was enhanced in 2014, the GSEs will not exercise its remedies, including the issuance of repurchase requests, for breaches of certain selling representations and warranties if a mortgage meets certain eligibility requirements. In general, for loans sold to GSEs on or after January 1, 2013, repurchase risk for HARP loans is lowered if the borrower stays current in the loan for 12 months and representation and warranty risks are limited for non-HARP loans that stay current for 36 months.

After evaluating the enhanced framework, the composition of loans originated, quality control standards, historical repurchase requests and the passage of time, we reduced our repurchase reserve during the fourth quarter of 2014 to reflect loans where the repurchase provision expired and to reflect our best estimate of possible future requests. We believe the analysis used to evaluate future expected repurchase exposure is appropriate and our period-end repurchase reserve balance is adequate.

Solutionstar Segment


54


Table 21. Solutionstar - Operations
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Revenues
$
113

 
$
65

Expenses
(81
)
 
(39
)
Other income (expense), net
—

 
—

Income before taxes
$
32

 
$
26

Income before taxes margin
28.3
%
 
40.0
%

We are engaged in the transformation of Solutionstar from a provider of refinance and default related residential mortgage services to a provider of technology and data enhanced solutions to homebuyers, home sellers, real estate agents and companies engaged in the origination and/or servicing of mortgage loans. Through our Solutionstar segment, we intend to enhance the home buying experience via smart investments in innovative technology and services to make the home purchase experience simpler, more transparent and more accessible for all market participants.

HomeSearch.com SM , our Residential Real Estate exchange, is designed to increase transparency, reduce fraud risk and provide better execution for property sales as evidenced generally by higher sales price and lower average days to sell compared to traditional sales. We intend to utilize new technologies integrated with timely, relevant and accurate data to empower our customers whether they are a homeowner, homebuyer, seller or the agents that serve them. The search function of HomeSearch.com SM was expanded throughout 2014 both with respect to functionality and complement of accurate, timely residential listings.

With respect to our Real Estate Services, we are focused on the creation and delivery of high quality services (e.g., title and close, collateral valuation, asset management) for purchase, refinance and default transactions. Our primary focus to date has been to serve existing third-party customers and capture refinance and default transactions generated by our servicing and originations platform. Today, significant opportunity still exists with respect to penetration of our own operations and current customers. In addition, in January 2015, we completed the acquisition of Title 365, our first significant investment in purchase title related services. In addition, Title 365 also added a significant amount of third party revenue.

HomeSearch.com SM allows customers to seamlessly purchase distressed properties online. As a result of the success of this platform, we are expanding HomeSearch.com SM to include the ability to buy or sell distressed and non-distressed properties. To reflect the increased functionality, the site has been rebranded and will soon launch as Xome.com (Xome). Xome will contain a web platform and easy to use mobile-application, giving customers instant access to over 75% of all active MLS listings in the United States. The Xome portal assists customers through each step of the process from finding an agent, searching for a property, obtaining a mortgage, to closing the transaction. Unlike traditional real estate transactions that can be complicated, Xome customers will be effortlessly guided through the process, all while a dedicated customer service specialist is available to answer any questions.

Table 22. Solutionstar - Revenues
For the three months ended March 31,
($ in millions)
2015
 
2014
 
 
 
 
Revenues
 
 
 
Real Estate Exchange
$
49

 
$
27

Real Estate Services
63

 
38

Total Revenues
$
112

 
$
65

 
 
 
 
Key Metrics
 
 
 
Properties sold
5,483

 
4,538

REO inventory at period end
9,114

 
8,532

HomeSearch.com SM  registered users
191,953

 
17,079

3rd party business %
31
%
 
18
%

Revenue related to Real Estate Exchange grew principally due to an increase in the volume of properties sold as well as our acquisition of Real Estate Digital in the second quarter of 2014.

55


Real Estate Services revenue growth was primarily driven by our acquisition of Experience 1, Title 365 and related entities in January 2015 which contributed $23.3 million in additional revenues for the quarter ended March 31, 2015.
Table 23. Solutionstar - Expenses
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Salaries, wages and benefits
$
44

 
$
12

General and administrative
37

 
27

Expenses
$
81

 
$
39


The increase in expenses is due largely to an increase in personnel related costs driven by our acquisitions of Experience 1 and Real Estate Digital and expansion of our service offerings as well as investment in corporate functions. General and administrative costs increased primarily due to higher revenue from our Real Estate Services group. In addition, we continue to build-out the infrastructure to support our growth initiatives, including investing in technology.

Corporate and Other
Table 24. Corporate and Other - Operations
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Revenues
$
2

 
$
—

Expenses
(22
)
 
(12
)
Other income (expense), net
(39
)
 
(49
)
Income (loss) before taxes
$
(59
)
 
$
(61
)

Table 25. Income before taxes components
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Unsecured Senior Notes
$
(40
)
 
$
(50
)
Legacy
(3
)
 
(3
)
Other Corporate
(16
)
 
(8
)
Income (loss) before taxes
$
(59
)
 
$
(61
)

Our Corporate and Other reporting unit consists of non-prime and nonconforming residential mortgage loans that were primarily originated prior to July 2007. Revenues and expenses are related to mortgage loans transferred to a securitization trust in 2009 that was structured as secured borrowings resulting in carrying the securitized loans as mortgage loans on our consolidated balance sheets and recognizing the asset-backed certificates as nonrecourse debt.

We also include certain non-allocated corporate expenses, principally interest expense on Unsecured Senior Notes as well as the administrative costs of executive management and other corporate functions that are not directly attributable to our operating segments.


56


Table 26. Legacy Portfolio
As of March 31,
(in millions)
2015
 
2014
 
 
 
 
Performing - UPB
$
194

 
$
210

Nonperforming (90+ Delinquency) - UPB
75

 
88

REO - Estimated Fair Value
2

 
3

Total Legacy Portfolio
$
271

 
$
301

 
Table 27. Corporate and Other - Expenses
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Salaries, wages and benefits
$
9

 
$
4

General and administrative
13

 
8

Expenses
$
22

 
$
12


The increase in expenses in our Corporate and Other was primarily the result of higher losses on REO liquidations in the period compared to the prior year period, combined with higher technology spend to enhance our corporate infrastructure. For the three month period ended March 31, 2015, we realized $5.8 million in losses from REO liquidations, as compared to $0.6 million for the comparable 2014 period. In addition, during the 2014 period we recorded a true-up to our annual bonus accrual for corporate personnel.

Table 28. Corporate and Other - Other income (expense), net
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Interest income
$
4

 
$
3

Interest expense
(43
)
 
(52
)
Gain (loss) on interest rate swaps and cap
—

 
—

Other income (expense), net
$
(39
)
 
$
(49
)
 
 
 
 
WAC - Unsecured senior notes
7.3
%
 
7.8
%

Interest income is limited to amounts earned for funds on deposit and the interest earned on our mortgage loans held for investment previously securitized in 2009. Interest expense is principally associated with the Unsecured Senior Notes which are discussed in Note 8, Indebtedness.

Other income (expense), net principally includes interest expense associated with our Unsecured Senior Notes. The decline in Other income (expense) for the three month period ended March 31, 2015 was the result of lower average outstanding balance on our Unsecured Senior Notes as a result of the redemption of $285 million in July 2014.


MORTGAGE SERVICING RIGHTS AND RELATED LIABILITIES

MSRs - Fair Value consists of rights we own to service traditional forward residential mortgage loans owned by both agencies and non-agencies. As of March 31, 2015, agency loans consisted of $229.2 billion in UPB with a carrying amount of $2,031.6 million. Non-agency loans consisted of $113.9 billion in UPB with a carrying amount of $990.6 million. The weighted average coupon rate for agency loans was 4.45% versus 4.63% for non-agency loans as of March 31, 2015. As of December 31, 2014 agency loans consisted of $215.3 billion in UPB with a carrying amount of $986.5 million. Non-agency loans consisted of $118.3 billion in UPB with a carrying amount of $1,963.3 million.

MSRs - LOCOM, which consists of rights to service reverse residential mortgage loans primarily owned by Fannie Mae consists of $11.4 billion and $11.2 billion in UPB with a carrying amount of $10.8 million and $11.5 million as of March 31, 2015 and

57


December 31, 2014, respectively. We also carry a mortgage servicing rights liability carried at LOCOM, which consists of the obligation to service reverse residential mortgage loans primarily owned by Ginnie Mae, with a total of $14.4 billion and $14.0 billion in UPB and a carrying amount of $58.6 million and $65.4 million as of March 31, 2015 and December 31, 2014, respectively.

 
As of March 31,
Table 29. MSRs and Related Liabilities
2015
 
2014
(in millions)
UPB
 
Carrying Amount
 
UPB
 
Carrying Amount
 
 
 
 
 
 
 
 
MSRs - Fair Value
 
 
 
 
 
 
 
Credit Sensitive
 
 
 
 
 
 
 
  Agency
$
127,346

 
$
1,012

 
$
139,340

 
$
990

  Non-agency
113,906

 
990

 
123,886

 
852

  Total Credit Sensitive
241,252

 
2,002

 
263,226

 
1,842

Interest Sensitive - Agency
101,867

 
1,020

 
63,187

 
735

Total MSRs - Fair Value
$
343,119

 
$
3,022

 
$
326,413

 
$
2,577

 
 
 
 
 
 
 
 
Subservicing (1)
 
 
 
 
 
 
 
Agency
14,833

 
N/A

 
20,667

 
N/A

Non-agency
4,890

 
N/A

 
8,398

 
N/A

Total Subservicing
19,723

 
 
 
29,065

 
 
 
 
 
 
 
 
 
 
MSRs - LOCOM (2)
27,386

 
11

 
28,927

 
14

Total servicing portfolio unpaid principal balance
$
390,228

 
$
3,033

 
$
384,405

 
$
2,591


(1) Subservicing amounts include residential mortgage loans originated but have yet to be sold to third party market investors and agency REO balances for which we own the mortgage servicing rights.

(2) Our MSRs - LOCOM also includes approximately $58.6 million and $65.4 million of mortgage servicing liabilities carried at amortized cost as of March 31, 2015 and March 31, 2014, respectively.

Our servicing portfolio consists of credit sensitive MSRs, primarily acquired through bulk acquisitions, and interest rate sensitive MSRs, principally consisting of MSRs acquired via flow transactions or transferred from our origination activities. For MSRs marked at fair value that are interest rate sensitive, typically servicing values are correlated to interest rates such that when interest rates rise, the value of the servicing portfolio also increases principally as a result of lower prepayments. Credit sensitive MSRs are less influenced by movement in interest rates and more influenced by changes in loan performance factors which impact involuntary prepayment speeds.

We assess whether acquired portfolios are more credit sensitive or interest sensitive in nature on the date of acquisition. As part of the assessment, we consider numerous factors in making this assessment, with the primary factors consisting of the overall portfolio delinquency characteristics, portfolio seasoning, and residential mortgage loan composition. Interest sensitive portfolios typically consist of single-family conforming residential forward mortgage loans serviced for GSEs or other third-party investors. Credit sensitive portfolio primarily consist of higher delinquency single-family non-conforming residential forward mortgage loans in private label securitizations.


58


 
As of March 31,
Table 30. Fair Value MSR Valuation
2015
 
2014
($ in millions)
UPB
 
Carrying Amount
Bps
 
UPB
 
Carrying Amount
Bps
 
 
 
 
 
 
 
 
 
 
MSRs - Fair Value
 
 
 
 
 
 
 
 
 
Credit Sensitive
$
241,252

 
$
2,002

83

 
$
263,226

 
$
1,842

70

Interest Sensitive - Agency
101,867

 
1,020

100

 
63,187

 
735

116

Total MSRs - Fair Value
$
343,119

 
$
3,022

88

 
$
326,413

 
$
2,577

79


The value in our credit sensitive fair value MSRs increased as a result of the overall portfolio performance which led to decreased delinquencies in this portfolio. The value in our interest sensitive fair value MSRs decrease is consistent with our increased prepayment assumptions as a result of the lower interest rate environment.

The following table provides information on the fair value of our owned forward MSR portfolio:
Table 31. MSRs - Fair Value, Rollforward
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Fair value at the beginning of the period
$
2,950

 
$
2,488

Additions:
 
 
 
Servicing retained from whole loan sales
44

 
58

Purchases of servicing assets
238

 
109

Changes in fair value:
 
 
 
Due to changes in valuation inputs or assumptions used in the valuation model
(109
)
 
(3
)
Other changes in fair value:
 
 
 
Scheduled principal payments
(23
)
 
(18
)
Prepayments (1)
(78
)
 
(57
)
Fair value at the end of the period
$
3,022

 
$
2,577

(1) Prepayment amounts presented above include voluntary and involuntary liquidations.
In the fourth quarter of 2014, we revised our approach in calculating Other Changes in Fair Value in the above rollforward. Under the revised approach, we began incorporating voluntary principal payments, which were previously included as a component in the Due to changes in valuation inputs or assumptions line, as a component of Other changes in fair value in Table 31. We have reclassified the amounts presented in the March 31, 2014 rollforward to conform to the current presentation. While amounts were reclassed in the 2014 period, there was no impact to net income or to the total changes in fair value in the prior period.
We used the following weighted average assumptions in estimating the fair value of MSRs for the dates indicated:
 
As of March 31,
Table 32. MSRs - Fair Value, weighted average assumptions
2015
 
2014
 
 
 
 
Credit Sensitive MSRs
 
 
 
Discount rate
11.79
%
 
13.69
%
Total prepayment speeds
18.14
%
 
20.65
%
Expected weighted-average life (years)
5.74 years

 
4.64 years

Interest Sensitive MSRs
 
 
 
Discount rate
9.08
%
 
9.54
%
Total prepayment speeds
14.12
%
 
10.52
%
Expected weighted average life (years)
5.63 years

 
7.06 years



59


The discount rate is used to determine the present value of estimated future net servicing income, which is based on the required rate of return market investors would expect for an asset with similar risk characteristics. We determine the discount rate through review of recent market transactions as well as comparing our discount rate to those utilized by third party valuation specialists. Total prepayment speeds represents the annual rate at which borrowers are forecasted to repay their mortgage loan principal, which includes estimates for both voluntary and involuntary borrower liquidations. The expected weighted-average life represents the total expected years in which we expect to service the MSR.

As a result of the lower interest rate environment, we adjusted our total prepayment speeds, primarily in our interest rate sensitive portfolio. The higher prepayment speeds were slightly offset by decreases in our expected prepayment speeds related to our credit sensitive portfolio as a result of our improved portfolio performance and overall lower delinquencies.

Excess Spread Financing

As further disclosed in Note 2, Mortgage Servicing Rights and Related Liabilities and Note 18, Disclosures Related to Transactions with Affiliates of Fortress Investment Group LLC, we entered into sale and assignment agreements treated as financing arrangements whereby the acquirer has the right to receive a specified percentage of the excess cash flow generated from an MSR.

The servicing fees associated with an MSR for both book and tax purposes can be segregated into (i) a base servicing fee and (ii) an excess servicing fee. The base servicing fee, along with ancillary income and other revenues, is meant to cover costs incurred to service the specified pool plus a reasonable margin. The remaining servicing fee is considered excess. We will then 'sell' a percentage of the excess fee, typically 67% for agency MSRs, as a method for efficiently financing acquired MSRs. Excess Spread Financings are presently applicable only to acquired MSRs; however, they can be entered into at any time for both acquired and originated MSRs. To date, the acquirer has been New Residential and certain funds managed by Fortress Investment Group, all of which are affiliated companies.

The impact on future revenues and capital resources from executed Excess Spread Agreements varies principally due to (i) prepayment speeds and (ii) our ability to recapture prepayments through the origination platform. In Note 2, Mortgage Servicing Rights and Related Liabilities, we disclose the range of assumptions for prepayment speeds, average life, discount rate and recapture rate. In addition, we provide sensitivities for discount rate and prepayment speeds.

Table 33. Excess Spread Financing
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Fair value at the beginning of the period
$
1,031

 
$
986

Additions:
 
 
 
  New financings
53

 
38

Deductions:
 
 
 
  Settlements
(50
)
 
(43
)
  Fair Value Changes
13

 
(3
)
Fair value at the end of the period
$
1,047

 
$
978

 
 
 
 
Weighted-average assumptions:
 
 
 
Mortgage prepayment speeds
11.9
%
 
10.2
%
Average life of mortgage loans
5.80 years

 
4.60 years

Discount rate
11.4
%
 
13.4
%

Another component of our service related revenues is the fair value changes in our excess spread financings. In conjunction with various MSR acquisitions, we have entered into sale and assignment agreements, which we account for as financings, whereby we sell the right to receive a portion of the excess cash flow generated from certain underlying MSR portfolios, including taking into consideration recapture for loans modified or otherwise disposed, after receipt of a fixed basic servicing fee per loan. We measure these financing arrangements at fair value. The fair value on excess spread financing is based on the present value of future expected discounted cash flows with the discount rate approximately current market value for similar financial instruments.




60


Mortgage Servicing Rights Financing Liability

Table 34. MSRs Financing Liability - Rollforward
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Fair value at the beginning of the period
$
49

 
$
30

Additions:
 
 
 
New financings
—

 
21

Deductions:
 
 
 
Changes in fair value (1) :
(4
)
 
(11
)
Fair value at the end of the period
$
45

 
$
40

 
 
 
 
Weighted-average assumptions:
 
 
 
Advance financing rates
2.72
%
 
2.40
%
Annual advance recovery rates
24.91
%
 
24.24
%

(1) The changes in fair value related to our MSRs financing liability primarily relate to both scheduled and unscheduled principal payments reflected in the underlying MSRs offset by fair value model assumption changes.
We estimate fair value of the MSR financing liability based on the present value of future expected discounted cash flows with the discount rate approximating current market value for similar financial instruments. The cash flow assumptions and prepayment assumptions used in the model are based on various factors, with the key assumptions at March 31, 2015 and March 31, 2014 being advance financing rates and advance recovery rates.

In December 2013, we agreed to sell to a joint venture entity capitalized by New Residential, an affiliated party, and other independent third-party investors certain advances and the associated MSRs for non-agency mortgage loans held in private label securities, including the right to receive the basic service fee component. We are not a party to the joint venture. For accounting purposes, the advances associated with the transaction are treated as sold whereas the MSRs associated with the transaction are treated as a financing.

We believe the Mortgage Servicing Rights Financing Liability structure is most appropriate for MSRs associated with non-agency securities that have significant advance requirements. Non-agency securities are in limited supply in the current market and as a result, we may not utilize this structure again in the near future.

Fair value changes in our mortgage servicing rights financing liability also impact service related revenues. In conjunction with this servicing acquisition structure, we entered into several sale agreements on our outstanding advances whereby we sold the right to repayment on outstanding private label servicer advances. We also sold the right to receive the basic fee component on the related MSRs. We continue to service the loans in exchange for a portion of the basic fee. We measure these financings at fair value.
The following table provides an overview of our forward servicing portfolio and amounts that have been previously transferred to our co-invest partners for the periods indicated.
Table 35. Leveraged Portfolio Characteristics
March 31,
(in millions)
2015
 
2014
 
 
Owned forward servicing portfolio - unencumbered
$
104,877

 
$
76,151

Owned forward servicing portfolio - encumbered
238,242

 
250,262

Subserviced forward servicing portfolio
19,723

 
29,065

Total unpaid principal balance
$
362,842

 
$
355,478


Our encumbered forward servicing portfolio consists of residential mortgage loans included within our Excess Spread Financing transactions and our MSR Financing Liability.


61


MSRs - LOCOM
The table below provides detail of the characteristics and key performance metrics of our reverse servicing portfolio, which is included in MSRs - LOCOM, at the periods indicated:

Table 36. Reverse Portfolio Characteristics
For the three months ended March 31,
($ in millions, except for average loan amount)
2015
 
2014
 
 
 
 
Loan count
156,968

 
166,041

Ending unpaid principal balance
$
27,386

 
$
28,927

Average loan amount
$
174,471

 
$
174,219

Average coupon
2.97
%
 
2.97
%
Average borrower age
81

 
77

We acquired reverse MSRs and funded but unsecuritized advances from third parties. We recorded the assets acquired and obligations assumed at fair value on the acquisition date, which included the funded advances and a servicing asset or liability, net of cash paid or received. Any premium or discount associated with the recording of the funded advances is accreted into interest income as the underlying HECMs are liquidated.

We use the lower of cost or market to value reverse MSRs with the capitalized cost of the MSRs amortized in proportion and over the period of the estimated net future servicing income and recognized as an adjustment to servicing fee income for our reverse MSRs.

This class of MSRs is periodically evaluated for impairment. For purposes of measuring impairment, MSRs are stratified based on predominant risk characteristics of the underlying serviced loans. Impairment, if any, represents the excess of amortized cost of an individual stratum over its estimated fair value and is recognized through a valuation allowance. Based on our computations, there was no impairment on this asset as of March 31, 2015 or December 31, 2014.



Analysis of Items on Consolidated Balance Sheet

Table 38. Assets
March 31, 2015
 
December 31, 2014
 
% Change
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
816

 
$
299

 
173
 %
Mortgage servicing rights
3,033

 
2,961

 
2
 %
Advances
2,470

 
2,546

 
(3
)%
Reverse mortgage interests
2,634

 
2,453

 
7
 %
Mortgage loans held for sale
1,996

 
1,278

 
56
 %
Other assets
1,693

 
1,576

 
7
 %
Total assets
$
12,642

 
$
11,113

 
14
 %

Our total assets as of March 31, 2015 increased to $12.6 billion. The increase was primarily the result of our March 2015 equity offering in which we raised over $498 million in cash proceeds. We also saw an increase in our mortgage loans held for sale as we originated over $4.2 billion in mortgage loans during the three month period ended March 31, 2015 as a result of the low interest rate environment.

62


Table 39. Liabilities and Stockholders' Equity Analysis
March 31, 2015
 
December 31, 2014
 
% Change
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Unsecured senior notes
$
2,159

 
$
2,159

 
—
 %
Advance facilities
1,883

 
1,902

 
(1
)%
Warehouse facilities
2,477

 
1,573

 
57
 %
MSR related liabilities - nonrecourse
1,093

 
1,080

 
1
 %
Other liabilities
3,355

 
3,174

 
6
 %
Total liabilities
10,967

 
9,888

 
11
 %
Total equity
1,675

 
1,224

 
37
 %
Total liabilities and equity
$
12,642

 
$
11,112

 
14
 %

Total liabilities and equity increased to $12.6 billion as of March 31, 2015. This increase was primarily the result of an increase in total equity from our March 2015 equity offering, in which we sold 17,500,000 shares of our common stock and raised $499 million in capital. In addition, we also leveraged our outstanding warehouse facilities during the period as a result of our increase in our mortgage loans held for sale balance.

CAPITAL AND LIQUIDITY

In January 2015, the Federal Housing Finance Agency (FHFA) proposed new minimum financial eligibility requirements for Fannie Mae and Freddie Mac Seller/Servicers. The proposed minimum financial requirements include net worth, capital ratio and liquidity criteria. FHFA anticipates finalizing such requirements in the second quarter of 2015 and that the requirements will be effective six months after they are finalized.

Proposed Minimum Net Worth
▪
Base of $2.5 million plus 25 basis points of UPB for total loans serviced.

Proposed Minimum Capital Ratio
▪
Tangible Net Worth/Total Asset greater than 6%.

Proposed Minimum Liquidity
▪
3.5 basis points of total Agency servicing (Fannie Mae, Freddie Mac, Ginnie Mae) plus
▪
Incremental 200 basis points of total nonperforming Agency, measured as 90+ delinquencies, servicing in excess of 6% of the total Agency servicing UPB
▪
Allowable assets for liquidity may including: cash and cash equivalents (unrestricted), available for sale or held for trading investment grade securities (e.g., Agency MBS, Obligations of GSEs, US Treasury Obligations); and unused/available portion of committed servicing advance lines.

Liquidity
Sources and Uses of Cash

Our primary sources of funds for liquidity include: (i) servicing fees and ancillary revenues; (ii) payments received from sale or securitization of loans; (iii) proceeds received from the sale of mortgage loans held for sale; (iv) payments from the liquidation or securitization of our outstanding participating interests in reverse mortgage loans; (v) lines of credit, other secured borrowings and the unsecured senior notes; and (vi) payments received in connection with the sale of advance receivables and excess spread.

Our primary uses of funds for liquidity include: (i) funding of servicing advances; (ii) originations of loans; (iii) payment of interest expenses; (iv) payment of operating expenses; (v) repayment of borrowings; (vi) payments for acquisitions of MSRs; and (vii) scheduled and unscheduled draws on our serviced reverse residential mortgage loans.

We believe that our cash flows from operating activities, as well as existing facilities, provide us with adequate resources to fund our anticipated ongoing cash requirements. We anticipate that future debt maturities will be funded with cash and cash equivalents, cash flow from operating activities and, if necessary, future access to capital markets. In the third quarter of 2014, we redeemed $285 million of senior notes that were due in July of 2015 as cash flow from operations improved and our access to credit on favorable terms continues to expand. We continue to optimize the use of balance sheet cash to avoid unnecessary interest carry costs.

63



We intend to continue to seek opportunities to acquire loan servicing portfolios and/or businesses that engage in loan servicing and/or loan originations. Any future acquisitions could require substantial additional capital in excess of cash from operations. We are also subject to capital requirements from GSE's and secondary market investors that are subject to change and may be subject to additional capital requirements in connection with future acquisitions. See Note 13, Capital Requirements. If needed, we would expect to finance the necessary capital through a combination of additional issuances of equity, corporate indebtedness, asset backed acquisition financing and/or cash from operations.

We may continue to access external financing from time to time depending on our cash requirements, assessments of current and anticipated market conditions and after-tax cost of capital. Our access to capital markets can be impacted by factors outside our control, including economic conditions, however, we believe that our strong cash flows, balance sheet and existing facilities provide us adequate access to funding given our expected cash needs.

Cash Flows

Table 40. Cash
As of March 31,
(in millions)
2015
 
2014
 
 
 
 
Cash and cash equivalents
$
816

 
$
404


Our cash balance increased to $816 million as of March 31, 2015 from $404 million as of March 31, 2014, primarily due to higher cash inflows in our financing activities, offset by lower cash inflows from operating and investing activities. In March 2015, we completed an equity offering in which we sold $17.5 million shares of our common stock and raised approximately $499 million in cash proceeds.

Table 41. Operating Cash Flow
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Net cash attributable to operating activities
$
(660
)
 
$
641


Our operating activities used $661 million during the three months ended March 31, 2015 and provided $617 million for the same period in the prior year. The decrease in operating cash flows during the 2015 period was primarily the net result of:

•
The decrease in cash proceeds of $2,358 million from the timing on proceeds received from the sale of our residential mortgage loans and payments received on mortgage loans. This decrease was offset by lower cash outflows from the originations and purchase of residential mortgage loans during the current period. We originated and purchased $4,615 million in residential mortgage loans during the three month period ended three months ended March 31, 2015, compared to $5,403 million in mortgage originations and purchases for the comparable 2014 period.

•
An increase of $232 million cash inflows from working capital primarily due to increased recoveries on servicer advances.

Table 42. Investing Cash Flows
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Net cash attributable to investing activities
(239
)
 
$
81


Our investing activities used $239 million and provided $81 million for the three months ended March 31, 2015 and 2014, respectively. The increase in cash outflows was related to increased cash outflows for the purchase of forward mortgage servicing rights of $103 million and our acquisition of Title 365 for $31 million.

Table 43. Financing Cash Flow
For the three months ended March 31,
(in millions)
2015
 
2014
 
 
 
 
Net cash attributable to financing activities
1,416

 
$
(759
)

64



Our financing activities provided $1,417 million and used $759 million of cash flow during the three months ended March 31, 2015 and 2014, respectively. The increase was primarily attributable to increased cash flows of $1.9 billion from outstanding warehouse and advance facilities combined with an increase of $499 million in cash proceeds from the issuance of common stock in March 2015.

Capital Resources

Capital Structure and Debt
Table 44. Debt
 
As of March 31,
(in millions)
 
2015
 
2014
 
 
 
 
 
Advance facilities
 
$
1,883

 
$
2,756

Warehouse facilities
 
2,477

 
1,836

Unsecured senior notes
 
2,159

 
2,444


Financial Covenants
Our advance and warehouse facilities contain various financial covenants which primarily relate to tangible net worth amounts, liquidity reserves, leverage requirements, and profitability requirements . As a result of the decrease in interest rates during the three month period ended March 31, 2015, we recorded a charge to service related revenues related to the changes in fair value associated with our mortgage servicing rights recorded at fair value. As a result of the charge, we were unable to meet the profitability requirements in two of our outstanding warehouse facilities and one of our MBS advance facilities. We asked for, and received, a waiver from these financial institutions on these profitability requirements. With the exception of this waiver, we were in compliance with all other required financial covenants as of March 31, 2015.

Advance facilities
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 meet contractual principal and interest payments for certain investors and to pay taxes, insurance, foreclosure costs and various other items that are required to preserve the assets being serviced. Delinquency rates and prepayment speeds affect the size of servicing advance balances along with stop advance policies. As part of our normal course of business, we borrow money to fund servicing advances. We rely upon several counterparties to provide us with financing facilities to fund a portion of our servicing advances. In 2013 and 2014 , we sold approximately $2.5 billion of servicer advances to New Residential Investment Corp. (New Residential) and others. Pursuant to the terms of our agreements with New Residential, for these pools of loans, New Residential now has the obligation to fund future advances on the related loans. We also sold the related notes payable facilities associated with financing these advances.

As servicer for reverse mortgage loans, among other things, we are required to make advances to borrowers. We typically hold the participation interests, which are made up of the related advances for approximately 30 days while we pool the participation interests into a government securitization.

Warehouse facilities
Loan origination activities generally require short-term l iquidity in excess of that generated by our operations. The loans we originate are financed through several warehouse lines on a short-term basis. We typically hold the loans for approximately 30 days and then sell the loans or place them in government securitizations and repay the borrowings under the warehouse lines. Our ability to fund current operations depends upon our ability to secure these types of short-term financings on acceptable terms and to renew or replace the financings as they expire.

Unsecured senior notes
From 2010 through 2013, we completed offerings of $2.4 billion of unsecured senior notes, with maturity dates ranging from April 2015 to June 2022. We pay interest semi-annually to the holders of these notes at interest rates ranging from 6.500% to 10.875%. We redeemed all of our outstanding 10.875% Senior Notes due 2015 on July 25, 2014 (the Redemption Date) at a redemption price of 100% of the principal amount of the notes, plus accrued and unpaid interest on the notes redeemed to, but not including, the Redemption Date. The remaining unsecured notes pay interest ranging from 6.500% to 9.625% with maturity dates ranging from August 2018 to June 2022.


65


As of March 31, 2015, the expected maturities of Nationstar's unsecured senior notes based on contractual maturities are as follows (in millions):
Table 45. Contractual Maturities - Unsecured Senior Notes
 
 
Year
 
Amount
2015
 
$
—

2016
 
—

2017
 
—

2018
 
475

2019
 
375

Thereafter
 
1,300

Total
 
$
2,150




CRITICAL ACCOUNTING POLICIES
Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. In particular, we have identified four policies that, due to the judgment, estimates and assumptions inherent in those policies, are critical to an understanding of our consolidated financial statements. These policies relate to fair value measurements, particularly those valued using significant unobservable inputs including (i) the valuation of MSRs, (ii) the valuation of excess spread financing, and (iii) the valuation of mortgage servicing rights financing liability, and valuation of deferred tax assets. We believe that the judgment, estimates and assumptions used in the preparation of our consolidated financial statements are appropriate given the factual circumstances at the time. However, given the sensitivity of our consolidated financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in our results of operations or financial condition. For further information on our critical accounting policies, please refer to our Annual Report on Form 10-K for the year ended December 31, 2014. There have been no material changes to our critical accounting policies since December 31, 2014.

Recent Accounting Developments
See Note 1, Nature of Business and Basis of Presentation, of the notes to the consolidated financial statements for details of recently issued accounting pronouncements and their expected impact on our consolidated financial statements, which is incorporated herein.

Impact of Inflation and Changing Prices
Our consolidated financial statements and notes thereto presented herein have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike most industrial companies, nearly all of our assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflations. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Contractual Obligations
There were no material changes to our outstanding contractual obligations as of March 31, 2015, from amounts previously disclosed in on our Form 10-K filed on February 27, 2015.



Variable Interest Entities and Off Balance Sheet Arrangements

66


See Note 10, Securitizations and Financings, in the Consolidated Financial Statements in Item 8 Financial Statements and Supplementary Data, which is incorporated herein, for a summary of Nationstar's transactions with VIEs and details of their impact on our consolidated financial statements.
Derivatives
See Note 7, Derivative Financial Instruments, in the Consolidated Financial Statements in Item 8 Financial Statements and Supplementary Data, which is incorporated herein, for a summary of Nationstar's derivative transactions.

CAUTIONS REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the U.S. federal securities laws. These forward-looking statements include, without limitation, statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts. When used in this discussion, the words "anticipate," "appears," "believe," "foresee," "intend," "should," "expect," "estimate," "project," "plan," "may," "could," "will," "are likely" and similar expressions are intended to identify forward-looking statements. These statements involve predictions of our future financial condition, performance, plans and strategies, and are thus dependent on a number of factors including, without limitation, assumptions and data that may be imprecise or incorrect. Specific factors that may impact performance or other predictions of future actions have, in many but not all cases, been identified in connection with specific forward-looking statements.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to:

•
our ability to refinance existing loans and maintain our loan originations volume;
•
our ability to increase recapture voluntary prepayments related to our existing servicing portfolio;
•
our ability to maintain or grow the size of our servicing portfolio;
•
our ability to successfully enhance the home buying experience;
•
the success of our customer-for-life initiatives;
•
delays in our ability to collect or be reimbursed for servicing advances;
•
our ability to obtain sufficient capital to meet our financing requirements;
•
changes in prevailing interest rates;
•
changes in our business relationships or changes in guidelines with Fannie Mae, Freddie Mac and Ginnie Mae;
•
our ability to effectively develop, market, sell and implement new technology;
•
increased legal and regulatory proceedings and related costs; and
•
loss of our licenses.
 




67


Item 3. Quantitative and Qualitative Disclosures about Market Risk
Refer to the discussion of market risks included in Part II, Item 7A of our Form 10-K filed February 27, 2015, which is herein incorporated by reference. There has been no material change in the types of market risks faced by us since December 31, 2014.
We assess our market risk based on changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential impact on fair values based on hypothetical changes (increases and decreases) in interest rates.
We use a duration-based model in determining the impact of interest rate shifts on our loan portfolio, certain other interest-bearing liabilities measured at fair value and interest rate derivatives portfolios. The primary assumption used in these models is that an increase or decrease in the benchmark interest rate produces a parallel shift in the yield curve across all maturities.
We utilize discounted cash flows and analysis to determine the fair value of MSRs and the impact of parallel interest rate shifts on MSRs. The primary assumptions in this model are prepayment speeds, market discount rates and cost to service. However, this analysis ignores the impact of interest rate changes on certain material variables, such as the benefit or detriment on the value of future loan originations, non-parallel shifts in the spread relationships between MBS, swaps and U.S. Treasury rates and changes in primary and secondary mortgage market spreads. For mortgage loans, IRLCs and forward delivery commitments on MBS, we rely on a model in determining the impact of interest rate shifts. In addition, for IRLCs, the borrower’s propensity to close their mortgage loans under the commitment is used as a primary assumption.
Our total market risk is influenced by a wide variety of factors including market volatility and the liquidity of the markets. 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 the complex market reactions that normally would arise from the market shifts modeled.
We use market rates on our instruments to perform the sensitivity analysis. The estimates are based on the market risk sensitive portfolios described in the preceding paragraphs and assume instantaneous, parallel shifts in interest rate yield curves. 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. We do not believe that on the whole that our estimated net changes to the fair value of our assets and liabilities at March 31, 2015 would be materially different than previously presented.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (Exchange Act), as of March 31, 2015.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2015, our disclosure controls and procedures are effective. Disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit 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 our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2015, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

68



PART II – OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material changes or additions to the legal proceedings previously disclosed under "Legal Proceedings" included in our Annual Report on Form 10-K filed with the SEC on February 27, 2015. From time to time, we are party to various legal proceedings that have arisen in the normal course of conducting business. In addition, in the ordinary course of business the Company and its subsidiaries can be or are involved in governmental and regulatory examinations, information gathering requests, investigations and proceedings. Although the outcome of these proceedings cannot be predicted with certainty, management does not currently expect any of the proceedings pending against us, individually or in the aggregate, to have a material effect on our business, financial condition and results of operations (see Note 14 - Commitments and Contingencies).
Item 1A. Risk Factors
There have been no material changes or additions to the risk factors previously disclosed under “Risk Factors” included in our Annual Report on Form 10-K filed with the SEC on February 27, 2015.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchase of Equity Securities By the Issuer and Affiliated Purchasers
(shares in thousands)
Period
(a) Total Number of Shares (or Units) Purchased   1
 
(b) Average Price Paid per Share (or Unit)
 
(b) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
 
(d) Maximum Number (or Appropriate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Program
January 1, 2015 - January 31, 2015

—

 
$
—

 
—

 
—

February 1, 2015 - February 28, 2015

—

 
$
—

 
—

 
—

March 1, 2015 - March 31, 2015

196,715

 
$
29.43

 
—

 
—

Total
196,715

 


 
—

 
—


(1) The 196,715 shares of common stock of Nationstar reported herein represent the surrender of these shares to Nationstar in an amount equal to the amount of tax withheld by Nationstar in satisfaction of the withholding obligations of certain employees in connection with the vesting of restricted shares. As of the date of this report, Nationstar has no publicly announced plans or programs to repurchase Nationstar common stock.

Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.


69



Item 6. Exhibits
 
 
 
Incorporated by Reference
 
Exhibit Number
Description
Form
File No.
Exhibit
Filing Date
Filed or Furnished Herewith
 
 
 
 
 
 
 
10.1
Amendment No. 4, dated as of January 27, 2015 to the Series 2013-VF1 Indenture Supplement, dated as of January 31, 2013 to the Fourth Amended and Restated Indenture, dated as of January 31, 2013, between Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, and Barclays Bank PLC, as administrative agent and as sole noteholder of the Class A-VF1 variable funding notes, the Class B-VF1 variable funding notes, the Class C-VF1 variable funding notes and the Class D-VF1 variable funding notes




X
 
 
 
 
 
 
 
10.2
Amendment No. 5, dated as of January 30, 2015 to the Series 2013-VF1 Indenture Supplement, dated as of January 31, 2013 to the Fourth Amended and Restated Indenture, dated as of January 31, 2013, between Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, and Barclays Bank PLC, as administrative agent and as sole noteholder of the Class A-VF1 variable funding notes, the Class B-VF1 variable funding notes, the Class C-VF1 variable funding notes and the Class D-VF1 variable funding notes




X
 
 
 
 
 
 
 
10.3
Amendment Number Ten, dated March 26, 2015, to the Amended and Restated Master Repurchase Agreement, dated as of May 17, 2013, among Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC




X
 
 
 
 
 
 
 
10.4**
Nationstar Mortgage Holdings Inc. Amended and Restated 2012 Incentive Compensation Plan, dated as of February 24, 2015




X
 
 
 
 
 
 
 
10.5**
Form of Restricted Stock Unit Agreement for Employees under the Amended and Restated 2012 Incentive Compensation Plan




X
 
 
 
 
 
 
 
10.6**
Nationstar Mortgage Holdings Inc. Executive Management Incentive Plan, dated as of March 31, 2015
8-K
001-35449
10.1
4/2/2015

 
 
 
 
 
 
 
31.1
Certification by Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002




X
 
 
 
 
 
 
 
31.2
Certification by Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002




X
 
 
 
 
 
 
 
32.1
Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




X
 
 
 
 
 
 
 
32.2
Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




X

70


 
 
Incorporated by Reference
 
Exhibit Number
Description
Form
File No.
Exhibit
Filing Date
Filed or Furnished Herewith
 
 
 
 
 
 
 
101.INS
XBRL Instance Document




X
 
 
 
 
 
 
 
101.SCH
XBRL Taxonomy Extension Schema Document




X
 
 
 
 
 
 
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document




X
 
 
 
 
 
 
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document




X
 
 
 
 
 
 
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document




X
 
 
 
 
 
 
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document




X

**
Management contract, compensatory plan or arrangement.





71


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.

 
 
NATIONSTAR MORTGAGE HOLDINGS INC.
 
 
 
May 7, 2015
 
/s/ Jay Bray
Date
 
Jay Bray
Chief Executive Officer
(Principal Executive Officer)
 
 
 
May 7, 2015
 
/s/ Robert D. Stiles
Date
 
Robert D. Stiles
Chief Financial Officer
(Principal Accounting and Financial Officer)


72



Exhibit Index
 
 
Incorporated by Reference
 
Exhibit Number
Description
Form
File No.
Exhibit
Filing Date
Filed or Furnished Herewith
 
 
 
 
 
 
 
10.1
Amendment No. 4, dated as of January 27, 2015 to the Series 2013-VF1 Indenture Supplement, dated as of January 31, 2013 to the Fourth Amended and Restated Indenture, dated as of January 31, 2013, between Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, and Barclays Bank PLC, as administrative agent and as sole noteholder of the Class A-VF1 variable funding notes, the Class B-VF1 variable funding notes, the Class C-VF1 variable funding notes and the Class D-VF1 variable funding notes




X
 
 
 
 
 
 
 
10.2
Amendment No. 5, dated as of January 30, 2015 to the Series 2013-VF1 Indenture Supplement, dated as of January 31, 2013 to the Fourth Amended and Restated Indenture, dated as of January 31, 2013, between Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, and Barclays Bank PLC, as administrative agent and as sole noteholder of the Class A-VF1 variable funding notes, the Class B-VF1 variable funding notes, the Class C-VF1 variable funding notes and the Class D-VF1 variable funding notes




X
 
 
 
 
 
 
 
10.3
Amendment Number Ten, dated March 26, 2015, to the Amended and Restated Master Repurchase Agreement, dated as of May 17, 2013, among Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC




X
 
 
 
 
 
 
 
10.4**
Nationstar Mortgage Holdings Inc. Amended and Restated 2012 Incentive Compensation Plan, dated as of February 24, 2015




X
 
 
 
 
 
 
 
10.5**
Form of Restricted Stock Unit Agreement for Employees under the Amended and Restated 2012 Incentive Compensation Plan




X
 
 
 
 
 
 
 
10.6**
Nationstar Mortgage Holdings Inc. Executive Management Incentive Plan, dated as of March 31, 2015
8-K
001-35449
10.1
4/2/2015

 
 
 
 
 
 
 
31.1
Certification by Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002




X
 
 
 
 
 
 
 
31.2
Certification by Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002




X
 
 
 
 
 
 
 
32.1
Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




X
 
 
 
 
 
 
 

73


 
 
Incorporated by Reference
 
Exhibit Number
Description
Form
File No.
Exhibit
Filing Date
Filed or Furnished Herewith
32.2
Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




X
 
 
 
 
 
 
 
101.INS
XBRL Instance Document




X
 
 
 
 
 
 
 
101.SCH
XBRL Taxonomy Extension Schema Document




X
 
 
 
 
 
 
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document




X
 
 
 
 
 
 
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document




X
 
 
 
 
 
 
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document




X
 
 
 
 
 
 
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document




X

**
Management contract, compensatory plan or arrangement.


74

Exhibit 10.1





 

NATIONSTAR AGENCY ADVANCE FUNDING TRUST,
as Issuer,
THE BANK OF NEW YORK MELLON,
as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary,
and
BARCLAYS BANK PLC,
as Administrative Agent

and consented to by:

BARCLAYS BANK PLC

as sole Noteholder of the Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes
__________
AMENDMENT NO. 4
dated as of January 27, 2015
to the
SERIES 2013-VF1 INDENTURE SUPPLEMENT
dated as of January 31, 2013
to the
FOURTH AMENDED AND RESTATED INDENTURE,
dated as of January 31, 2013
__________
NATIONSTAR AGENCY ADVANCE FUNDING TRUST, ADVANCE RECEIVABLES BACKED NOTES, SERIES 2013-VF1
 


1

Amendment No. 4 TO SERIES 2013-VF1 INDENTURE SUPPLEMENT
This Amendment No. 4, dated as of January 27, 2015 (this “ Amendment ”), to the Series 2013-VF1 Indenture Supplement, dated as of January 31, 2013 (as amended by that certain Amendment No. 1, dated as of May 21, 2013, as further amended by that certain Amendment No. 2, dated as of October 15, 2013, as further amended by that certain Amendment No. 3, dated as of October 14, 2014 and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture Supplement ”) to that certain Fourth Amended and Restated Indenture, dated as of January 31, 2013 (as amended by that certain Amendment No. 1, dated as of April 22, 2014 and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), is entered into by and among NATIONSTAR AGENCY ADVANCE FUNDING TRUST, a statutory trust organized under the laws of the State of Delaware (the “ Issuer ”), THE BANK OF NEW YORK MELLON, a New York banking corporation, as trustee (the “ Indenture Trustee ”), as calculation agent (the “ Calculation Agent ”), as paying agent (the “ Paying Agent ”), and as securities intermediary (the “ Securities Intermediary ”), NATIONSTAR MORTGAGE LLC, a Delaware limited liability company (“ Nationstar ”), BARCLAYS BANK PLC (“ Barclays ”), a public limited company formed under the laws of England and Wales, as administrative agent (the “ Administrative Agent ”), and consented to by Barclays, as sole Noteholder of the Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes (collectively, the “ Notes ”) issued pursuant to the Indenture Supplement (in such capacity, the “ Noteholder ”). Capitalized terms used herein but not otherwise defined shall have the meanings given to such terms in the Indenture or the Indenture Supplement, as applicable.
WHEREAS, Section 12.2 of the Indenture provides, among other things, that subject to the terms and provisions of each Indenture Supplement with respect to any amendment of such Indenture Supplement, the parties to the Indenture may at any time enter into an amendment to the Indenture, including any Indenture Supplement, with prior notice to the Note Rating Agency and the consent of Noteholders of more than 50% (by Class Invested Amount) of each Series or Class of Notes affected by such amendment of the Indenture, including any Indenture Supplement, for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of the Indenture, of modifying in any manner the rights of the Holders of the Notes of each such Series or Class under the Indenture or any Indenture Supplement, upon delivery of an Issuer Tax Opinion and, pursuant to Section 12.3 of the Indenture, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by the Indenture and that all conditions precedent thereto have been satisfied (the “ Authorization Opinion ”); provided , however , that no such amendment will modify any of the enumerated provisions set forth in Section 12.2 without the consent of the Noteholder of each Outstanding Note affected thereby;
WHEREAS, Section 12(b) of the Indenture Supplement provides that notwithstanding any provisions to the contrary in Section 6.10 or Article XII of the Indenture, no supplement, amendment or indenture supplement entered into with respect to the issuance of a new Series of Notes or pursuant to the terms and provisions of Section 12.2 of the Indenture may, without the consent of 100% of the Series 2013-VF1 Notes, supplement, amend or revise any term or provision of the Indenture Supplement;


WHEREAS, the parties hereto desire to amend the Indenture Supplement as described below in connection with the Noteholder selling to Credit Suisse AG, Cayman Islands Branch and GIFS Capital Company, LLC a portion of the Variable Funding Notes held by the Noteholder pursuant to the CS Assignment Agreement (as defined herein);
WHEREAS, this Amendment is not effective until the execution and delivery of this Amendment by the parties hereto and the delivery of the Issuer Tax Opinion and the Authorization Opinion;
WHEREAS, the Noteholder owns 100% of the Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes, which are the only Outstanding Notes issued pursuant to the Indenture Supplement; and
NOW, THEREFORE, in consideration of the premises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
Section 1. Amendments to the Indenture Supplement . Subject to the satisfaction of the conditions precedent in Section 3 below, effective upon the payment of the Assignor Purchase Price Payment (as defined in the CS Assignment Agreement), the following amendments shall occur with respect to the enumerated sections and provisions of the Indenture Supplement:

(a) Section 2 of the Indenture Supplement is hereby amended by deleting the definition of “ Administrative Agent ” in its entirety and replacing it with the following:

“ Administrative Agent ” means, for so long as the Series 2013-VF1 Notes have not been paid in full: (i) with respect to the provisions of this Indenture Supplement, Barclays Bank PLC, Credit Suisse AG, New York Branch or any Affiliate or successor thereto; and (ii) with respect to the provisions of the Base Indenture, and notwithstanding the terms and provisions of any other Indenture Supplement, together, Barclays Bank PLC, Credit Suisse AG, New York Branch, and such other parties as set forth in any other Indenture Supplement, or a respective Affiliate or any respective successor thereto. For the avoidance of doubt, reference to “it” or “its” with respect to the Administrative Agent in the Base Indenture shall mean “them” and “their,” and reference to the singular therein in relation to the Administrative Agent shall be construed as if plural.

(b) Section 2 of the Indenture Supplement is hereby amended by deleting the definition of “ Commercial Paper Notes ” in its entirety and replacing it with the following:

“ Commercial Paper Notes ” means with respect to each Conduit Purchaser, the short-term promissory notes issued or to be issued by or on behalf of such Conduit Purchaser in the United States commercial paper market.
(c) Section 2 of the Indenture Supplement is hereby amended by deleting the definition of “ Corporate Trust Office ” in its entirety and replacing it with the following:

2

“ Corporate Trust Office ” means with respect to the Series 2013-VF1 Notes, the office of the Indenture Trustee (or The Bank of New York Mellon in any of its capacities) at which at any particular time its corporate trust business will be administered, which office at the date hereof is located at (i) for purposes other than final payment or note transfers, 101 Barclay Street, Floor 7W, New York, New York 10286, Attention: Nationstar Agency Advance Funding Trust, Series 2013-VF1, and (ii) for purposes of final payment and note transfers, 2001 Bryan Street, 9 th Floor, Dallas, TX 75201, Attention: Transfers, Nationstar 2013-VF1.
(d) Section 2 of the Indenture Supplement is hereby amended by deleting the definition of “ Cost of Funds Rate ” in its entirety and replacing it with the following:

“ Cost of Funds Rate ” means (a) with respect to Note Balances held by the CS Purchaser Group (as defined in the CS Assignment Agreement) for which Credit Suisse is designated as the Administrative Agent, the CS Cost of Funds Rate, (b) with respect to Note Balances held by the Committed Purchaser or any Conduit Purchaser for which Barclays is designated as the Administrative Agent, the Barclays Cost of Funds Rate, (c) with respect to Note Balances held by any other asset-backed commercial conduit “Cost of Funds Rate” specified in the applicable instrument pursuant to which such Person purchases any such Note Balance and consented to in writing by the Administrator, or (d) with respect to Note Balances held by any other Person, One-Month LIBOR.
(e) Section 2 of the Indenture Supplement is hereby amended by deleting the definition of “ Program Support Agreement ” in its entirety and replacing it with the following:

“ Program Support Agreement ” means any agreement entered into by any Program Support Provider providing for the issuance of one or more letters of credit for the account of such Conduit Purchaser, the issuance of one or more surety bonds for which a Conduit Purchaser is obligated to reimburse the applicable Program Support Provider for any drawings thereunder, the sale by such Conduit Purchaser to any Program Support Provider of the aggregate outstanding Note Balance (or portions thereof or participations therein) and/or the making of loans and/or other extensions of credit to such Conduit Purchaser in connection with such Conduit Purchaser’s commercial paper program, together with any letter of credit, surety bond or other instrument issued thereunder.
(f) Section 2 of the Indenture Supplement is hereby amended by deleting the definition of “ Program Support Provider ” in its entirety and replacing it with the following:

“ Program Support Provider ” means any Person now or hereafter extending credit or having a commitment to extend credit to or for the account of, or to make purchases from, a Conduit Purchaser or issuing a letter of credit, surety bond or other instrument to support any obligations arising under or in connection with such Conduit Purchaser’s commercial paper program.
(g) Section 2 of the Indenture Supplement is hereby amended by deleting the definitions of “ CP Rate ” and “ Conduit Holder ” in their entirety:

3

(h) Section 2 of the Indenture Supplement is hereby amended by adding the following definitions of in the proper alphabetical order:

“ Barclays Commercial Paper Rate ” means with respect to any Conduit Purchaser for which Barclays acts as Conduit Administrative Agent for any Interest Accrual Period (or any portion thereof), the per annum rate equivalent to the weighted average cost (as determined by Barclays, and which shall include commissions of placement agents and dealers not to exceed 0.05% of the face amount of the applicable Commercial Paper Notes, incremental carrying costs incurred with respect to such Commercial Paper Notes maturing on dates other than those on which corresponding funds are received by such Conduit Purchaser, other borrowings by such Conduit Purchaser (other than under any Program Support Agreement) and any other costs associated with the issuance of such Commercial Paper Notes) of or related to the issuance of Commercial Paper Notes that are allocated, in whole or in part to the funding of any Note Balances of the Series 2013-VF1 Notes; provided, however, that if any component of such rate is a discount rate, in calculating the Barclays Commercial Paper Rate for such Interest Accrual Period (or such portion thereof), any Conduit Purchaser (or the related Administrative Agent on its behalf) shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum.
“ Barclays Cost of Funds Rate ” means, (i) for any Interest Accrual Period during which any VFN Principal Balance of Series 2013-VF1 Notes is held by a Committed Purchaser for which Barclays acts as sponsor, administrative agent or manager, as applicable, and has funded its interest on balance sheet, at the sole and absolute discretion of such Committed Purchaser, either One-Month LIBOR or the cost of funding such interest on balance sheet, (ii) for any Interest Accrual Period Interest Accrual Period during which any VFN Principal Balance of Series 2013-VF1 Notes is held by a Conduit Purchaser for which Barclays acts as sponsor, administrative agent or manager, as applicable, a rate per annum equal to the applicable Barclays Commercial Paper Rate, (iii) for any Interest Accrual Period during which any VFN Principal Balance of Series 2013-VF1 Notes is held by a Conduit Purchaser for which Barclays acts as sponsor, administrative agent or manager, as applicable, to the extent it does not fund its Note Balance during such period by issuing asset-backed commercial paper, (A) One-Month LIBOR plus (B) 1.00% per annum; provided , that with respect to clause (i) and (iii) above, if a Eurodollar Disruption Event has occurred and is continuing, the “Barclays Cost of Funds Rate” shall be the Base Rate plus 1.00% per annum; it being understood that the decision of how to fund its Note Balances will be in the good faith discretion of the related Noteholder, Conduit Purchaser or Committed Purchaser, as applicable, and the Indenture Trustee may assume the full Note Balance held by a Conduit Purchaser for which Barclays acts as sponsor, administrative agent or manager, as applicable, is funded by issuance of asset-backed commercial paper unless otherwise notified in writing by Barclays, as Administrative Agent.
Barclays Note Purchase Agreement ” means that Note Purchase Agreement, dated as of January 31, 2013 (as amended, supplemented, or otherwise modified from time to time), by and among the Issuer, the Depositor, the Indenture Trustee, Nationstar and Barclays Bank PLC, as the Administrative Agent and purchaser.

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“ Committed Purchaser ” means any purchaser of a Class (or portion thereof) of a Series 2013-VF1 Note which is designated as a “Committed Purchaser” or as “Purchaser” on the signature pages to a VF1 Note Purchase Agreement.
“ Conduit Administrative Agent ” means any Person appointed as a Conduit Administrative Agent or Administrative Agent in a VF1 Note Purchase Agreement.
“ Conduit Purchaser ” means (i) any Purchaser which is designated as a “Conduit Purchaser” or a “Conduit Holder” on the signature pages to a VF1 Note Purchase Agreement and (ii) any Purchaser which is designated as a “Conduit Purchaser” on the signature pages of any assignment agreement pursuant to which it becomes a party to a VF1 Note Purchase Agreement.
“ Credit Suisse ” means Credit Suisse AG, New York Branch.
“ CS Assignment Agreement ” means that Assignment Agreement, dated as of January 27, 2015, by and among Credit Suisse AG, New York Branch, as Assignee Administrative Agent and Assignor Conduit Administrative Agent, Credit Suisse, Cayman Islands Branch, as Assignee Committed Purchaser, GIFS Capital Company, LLC, as Assignee Conduit Purchaser and Barclays Bank PLC, as Assignor Administrative Agent and as Assignor Purchaser and acknowledged and agreed to by the Issuer, the Indenture Trustee, Nationstar and the Depositor.
“ CS Commercial Paper Rate ” means with respect to each Interest Accrual Period and each Conduit Purchaser for which Credit Suisse acts as sponsor, administrative agent or manager, as applicable, the per annum rate equivalent to the weighted average cost related to the issuance of related Commercial Paper Notes for such Interest Accrual Period (such costs as reasonably determined by Credit Suisse as sponsor for such Conduit Purchaser, and which shall include (without duplication) the fees and commissions of placement agents and dealers, incremental carrying costs incurred with respect to such Commercial Paper Notes, other borrowings by such Conduit Purchaser and any other costs associated with the issuance of such Commercial Paper Notes); provided, that if any component of such per annum rate is a discount rate, in calculating the “CS Commercial Paper Rate”, the related Conduit Administrative Agent shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum. The related Conduit Administrative Agent shall deliver to the Administrator, the Calculation Agent and the Indenture Trustee the CS Commercial Paper Rate with respect to the Series 2013-VF1 Variable Funding Notes held by such Conduit Purchasers, if applicable, by no later than the Business Day prior to the Determination Date and the determination of the applicable CS Commercial Paper Rate by the related Conduit Administrative Agent shall be binding absent manifest error.
“ CS Cost of Funds Rate” means, for any day of any Interest Accrual Period, (a) to the extent a Conduit Purchaser for which Credit Suisse acts as sponsor, administrative agent or manager, as applicable, has funded its interest in any Series 2013-VF1 Variable Funding Note through the issuance of Commercial Paper Notes, the CS Commercial Paper Rate applicable to such Conduit Purchaser and (b) to the extent a Committed

5

Purchaser for which Credit Suisse acts as sponsor, administrative agent or manager, as applicable, has funded its interest on balance sheet, at the sole and absolute discretion of such Committed Purchaser, either One-Month LIBOR or the cost of funding such interest on balance sheet.
“ Fee Letter ” means, collectively, that certain Fee Letter Agreement, dated January 27, 2015, among Credit Suisse, the Administrator and the Issuer.
“ Governmental Authority ” means the United States of America, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and having jurisdiction over the applicable Person.
“ Increased Costs ” has the meaning assigned to such term in Section 9 of this Indenture Supplement.
“ LIBOR Index Rate ” means for a one-month period, the rate per annum (rounded upward, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a one-month period, which appears on the LIBOR01 Page as of 11:00 a.m. (London, England time) on the date that is two (2) Business Days before the commencement of such one-month period.
“ LIBOR Rate ” means with respect to any Interest Accrual Period with respect to which interest is to be calculated by reference to the “LIBOR Rate”, (a) the LIBOR Index Rate for a one-month period, if such rate is available, and (b) if the LIBOR Index Rate cannot be determined, the arithmetic average of the rates of interest per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) at which deposits in U.S. Dollars in immediately available funds are offered to the related Administrative Agent at 11:00 a.m. (London, England time) two (2) Business Days before the beginning of such one-month period by three (3) or more major banks in the interbank eurodollar market selected by such Administrative Agent for delivery on the first day of and for a period equal to such one-month period and in an amount equal or comparable to the principal amount of the portion of the Note Balance on which the LIBOR Rate is being calculated.
“ LIBOR01 Page ” means the display designated as “LIBOR01 Page” on the Reuters Service (or such other page as may replace the LIBOR01 Page on that service or such other service as may be nominated by the ICE Benchmark Administration as an information vendor for the purpose of displaying ICE Benchmark Administration interest settlement rates for U.S. Dollar deposits).
“ Note Maximum Principal Balance ” means, with respect to the Class A-VF1, Class B-VF1, Class C-VF1 and Class D-VF1 Variable Funding Notes, the amount set forth on Exhibit A or, in the case of each such Class on any date, a lesser amount calculated pursuant to a written agreement between the Servicer, the Administrator and each Administrative Agent; provided that the aggregate of the Note Maximum Principal Balances for each Class shall not exceed the Maximum VFN Principal Balance for such Class.

6

“ Transaction Documents ” means, in addition to the documents set forth in the definition thereof in the Base Indenture, this Indenture Supplement, the VF1 Note Purchase Agreements and the Fee Letter, each as amended, supplemented, restated or otherwise modified from time to time.”
“ VF1 Note Purchase Agreement ” means each of the CS Assignment Agreement and the Barclays Note Purchase Agreement.
(i) Section 6 of the Indenture Supplement is hereby amended by adding the following paragraphs at the end of such section:

The Administrative Agents and the Issuer further confirm that the Series 2013-VF1 Notes shall be held by the Noteholders in the Note Maximum Principal Balance indicated on Exhibit A . The Issuer and the Administrative Agents hereby direct the Indenture Trustee to authenticate the Series 2013-VF1 Notes in the names of the Noteholders and the Note Maximum Principal Balances set forth on Exhibit A . For the avoidance of doubt, the parties hereto hereby agree that, in accordance with the terms and provisions of the VF1 Note Purchase Agreements, each Administrative Agent may act as agent of each Noteholder (or “purchaser”, howsoever denominated) party to such Administrative Agent’s VF1 Note Purchase Agreement in respect of the related 2013-VF1 Notes designated on Exhibit A and shall determine the allocation of “Additional Note Balances” (as such term is defined in the VF1 Note Purchase Agreement, if applicable) or VFN Principal Balance increases to be funded by each such Noteholder (or purchaser) related to such Administrative Agent.
Notwithstanding anything to the contrary in Section 4.3(b)(iii) of the Base Indenture, (i) VFN draws on any Funding Date in respect of the Series 2013-VF1 Variable Funding Notes are required to be made on a pro rata basis among the Notes of each Class based on the related Note Maximum Principal Balance of the Notes of such Class and the respective amounts that can be drawn under each Class and Series pursuant to Section 4.3(b) of the Base Indenture, and (ii) VFN draws on any other Series of VFNs shall be made on a pro rata basis with the Series 2013-VF1 Notes. The VFN draws in respect of the Series 2013-VF1 Variable Funding Notes shall be made in accordance with the instructions provided in the related Funding Certification. For the avoidance of doubt, any funding of any VFN draws by a Conduit Purchaser shall be provided in the sole discretion of such Conduit Purchaser.
(j) Section 7 of the Indenture Supplement is hereby amended by deleting such section in its entirety and replacing it with the following:

(a)      At least one (1) Business Day prior to each Determination Date, the Administrative Agent shall calculate the Note Interest Rate for the related Interest Accrual Period (in the case of the Series 2013-VF1 Variable Funding Notes using the Commercial Paper Rates determined by the related Conduit Administrative Agents, as applicable, and One-Month LIBOR as determined by each Administrative Agent in accordance with Section 7(b) below) and the Interest Payment Amount for the Series

7

2013-VF1 Notes for the upcoming Payment Date, and include a report of such amount in the related Payment Date Report.
(b)      On each LIBOR Determination Date, each Administrative Agent will determine the London Interbank Offered Rate (“ LIBOR ”) quotations for one-month Eurodollar deposits (“ One-Month LIBOR ”) for the succeeding Interest Accrual Period for the related Series 2013-VF1 Notes on the basis of the LIBOR Rate.
(c)      The establishment of the applicable Commercial Paper Rate by the related Conduit Administrative Agent and One-Month LIBOR by the related Administrative Agent and the Administrative Agent’s subsequent calculation of the Note Interest Rate on the Series 2013-VF1 Variable Funding Notes for the relevant Interest Accrual Period, in the absence of manifest error, will be final and binding.
(k) Section 8 of the Indenture Supplement is hereby amended by deleting such section in its entirety and replacing it with the following:

(a)      If any Regulatory Change or other change of requirement of any law, rule, regulation or order applicable to a Noteholder of a Series 2013-VF1 Variable Funding Note (a “Requirement of Law”) or any change in the interpretation or application thereof or compliance by such Noteholder with any request or directive (whether or not having the force of law) from any central bank or other governmental authority made subsequent to the date hereof:
(1)      shall subject such Noteholder to any tax of any kind whatsoever with respect to its Series 2013-VF1 Variable Funding Note (excluding income taxes, branch profits taxes, franchise taxes or similar taxes imposed on such Noteholder as a result of any present or former connection between such Noteholder and the United States, other than any such connection arising solely from such Noteholder having executed, delivered or performed its obligations or received a payment under, or enforced, this Indenture Supplement or any U.S. federal withholding taxes imposed under Code sections 1471 through 1474 as of the date of this Indenture Supplement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any regulations or official interpretations thereunder and any agreements entered into under section 1471(b) of the Code) or change the basis of taxation of payments to such Noteholder in respect thereof; shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, or other extensions of credit by, or any other acquisition of funds by, any office of such Noteholder which is not otherwise included in the determination of the Note Interest Rate hereunder; or
(2)      shall impose, modify or hold applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, or credit extended or participated by, or any other acquisition of funds by, any office of such Noteholder which is not otherwise included in the determination of the Note Interest Rate hereunder; or

8

(3)      shall have the effect of reducing the rate of return on such Noteholder’s capital or on the capital of such Noteholder’s holding company, if any, as a consequence of this Indenture Supplement, in the case of the Series 2013-VF1 Variable Funding Notes, the VF1 Note Purchase Agreement, or the Series 2013-VF1 Variable Funding Notes to a level below that which such Noteholder or such Noteholder’s holding company could have achieved but for such Requirements of Law (other than any Regulatory Change, Requirement of Law, interpretation or application thereof, request or directive with respect to taxes) (taking into consideration such Noteholder’s policies and the policies of such Noteholder’s holding company with respect to capital adequacy); or
(4)      shall impose on such Noteholder or the London interbank market any other condition, cost or expense (other than with respect to taxes) affecting this Indenture Supplement, in the case of the Series 2013-VF1 Variable Funding Notes, the VF1 Note Purchase Agreement or the Series 2013-VF1 Variable Funding Notes or any participation therein; or
(5)      shall impose on such Noteholder any other condition;
and the result of any of the foregoing is to increase the cost to such Noteholder, by an amount which such Noteholder deems to be material (collectively or individually, “Increased Costs”), of continuing to hold its Series 2013-VF1 Variable Funding Note, of maintaining its obligations with respect thereto, or to reduce any amount due or owing hereunder in respect thereof, or to reduce the amount of any sum received or receivable by such Noteholder (whether of principal, interest or any other amount) or (in the case of any change in a Requirement of Law regarding capital adequacy or liquidity requirements or in the interpretation or application thereof or compliance by such Noteholder or any Person controlling such Noteholder with any request or directive regarding capital adequacy or liquidity requirements (whether or not having the force of law) from any governmental or quasi-governmental authority made subsequent to the date hereof) shall have the effect of reducing the rate of return on such Noteholder’s or such controlling Person’s capital as a consequence of its obligations as a Noteholder of a Variable Funding Note to a level below that which such Noteholder or such controlling Person could have achieved but for such adoption, change or compliance (taking into consideration such Noteholder’s or such controlling Person’s policies with respect to capital adequacy) by an amount deemed by such Noteholder to be material, then, in any such case, such Noteholder shall invoice the Administrator for such additional amount or amounts as calculated by such Noteholder in good faith as will compensate such Noteholder for such increased cost or reduced amount, and such invoiced amount shall be payable to such Noteholder on the Payment Date following the next Determination Date following such invoice, in accordance with Section 4.5(a)(1)(ii) or Section 4.5(a)(2)(ii) of the Base Indenture, as applicable; provided, however, that any amount of Increased Costs in excess of the Increased Costs Limit shall be payable to such Noteholder in accordance with Section 4.5(a)(1)(ix) or Section 4.5(a)(2)(iv) of the Base Indenture, as applicable.
(b)      Each Support Party (as such term is defined in a VF1 Note Purchase Agreement, if applicable) shall be entitled to receive additional payments and indemnification

9

pursuant to this Section 8 as though it were a Committed Purchaser and such Section applied to its interest in or commitment to acquire an interest in the Series 2013-VF1 Variable Funding Notes; provided, that such Support Party shall not be entitled to additional payments pursuant to this Section 8 by reason of Requirements of Law which occurred prior to the date it became a Support Party; provided, further, that such Support Party shall be entitled to receive additional amounts pursuant to this Section 8 only to the extent that its related Conduit Purchaser would have been entitled to receive such amounts in the absence of Support Advances (as such term is defined in a VF1 Note Purchase Agreement, if applicable) from such Support Party. The provisions of this Section 8 shall apply to each Conduit Administrative Agent and to such of their Affiliates as may from time to time administer, make referrals to or otherwise provide services or support to the Conduit Purchasers (in each case as though such Conduit Administrative Agent or Affiliate were a Conduit Purchaser and such Section applied to its administration of or other provisions of services or support to such Conduit Purchaser in connection with the transactions contemplated by this Agreement), whether as an administrator, administrative agent, referral agent, managing agent or otherwise.
(l) Section 12 of the Indenture Supplement is hereby amended by adding the following new subsection (c) at the end thereof:

(c)      Notwithstanding any provisions to the contrary in Article XII of the Base Indenture or Section 12 of this Indenture Supplement, no supplement or amendment entered into with respect to this Indenture Supplement is effective without the consent of 100% of the Noteholders of the Series 2013-VF1 Notes.
(m) The Indenture Supplement is hereby amended by adding “Exhibit A” attached hereto.

Section 2. Noteholder Consent .

In its capacity as Note Registrar, the Indenture Trustee confirms that the Note Register reflects Barclays Bank PLC as the sole Noteholder of all Notes currently Outstanding under the Indenture Supplement. Such Noteholder’s consent to the terms of this Amendment is evidenced by its signature hereto.
Section 3. Conditions to Effectiveness of this Amendment .
    
This Amendment shall become effective on the date (the “ Effective Date ”) upon the latest to occur of the following:

(a) the execution and delivery of this Amendment by all parties hereto;

(b) prior notice to the Note Rating Agency;

(c) the delivery of an Issuer Tax Opinion; and

(d) the delivery of an Opinion of Counsel to the effect that the execution of this Amendment is authorized by the Indenture and all conditions precedent have been satisfied.

10

Section 4. Effect of Amendment . Except as expressly amended and modified by this Amendment, all provisions of the Indenture Supplement and the Indenture shall remain in full force and effect and all such provisions shall apply equally to the terms and conditions set forth herein. This Amendment shall become effective on the Effective Date and shall not be effective for any period prior to the Effective Date. After this Amendment becomes effective, all references in the Indenture Supplement or the Indenture to “this Indenture Supplement,” “this Indenture,” “hereof,” “herein” or words of similar effect referring to such Indenture Supplement and Indenture shall be deemed to be references to the Indenture Supplement or the Indenture, as applicable, as amended by this Amendment. This Amendment shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Indenture Supplement or the Indenture other than as set forth herein. This Amendment shall constitute an Act of each of the Noteholders of the Series 2013-VF1 Notes.

Section 5. Representations and Warranties . Barclays hereby represents and warrants that as of the date hereof (i) it is the sole Noteholder of each of the Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes, (ii) it is duly authorized to deliver this certification to the Indenture Trustee, (iii) such power has not been granted or assigned to any other Person, and (iv) the Indenture Trustee may conclusively rely upon this certification. For the avoidance of doubt, this Amendment shall be effective before the assignment of any interests in the Series 2013-VF1 Notes contemplated by the CS Assignment Agreement.

Section 6. Entire Agreement . The Indenture and the Indenture Supplement, as amended by this Amendment, constitute the entire agreement among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating to such subject matter.

Section 7. Successors and Assigns . This Amendment shall be binding upon the parties hereto and their respective successors and assigns.

Section 8. Section Headings . The various headings and sub-headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or the Indenture or any provision hereof or thereof.

Section 9. GOVERNING LAW . THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PROVISIONS THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 10. Recitals . The statements contained in the recitals to this Amendment shall be taken as the statements of the Issuer, and the Indenture Trustee (in each capacity) assumes no

11

responsibility for their correctness. The Indenture Trustee makes no representation as to the validity or sufficiency of this Amendment (except as may be made with respect to the validity of its own obligations hereunder). In entering into this Amendment, the Indenture Trustee shall be entitled to the benefit of every provision of the Indenture and the Indenture Supplement relating to the conduct of or affecting the liability of or affording protection to the Indenture Trustee.

Section 11. Owner Trustee Limitation of Liability . It is expressly understood and agreed by the parties hereto that (a) this Amendment is executed and delivered by Wilmington Trust, National Association, not individually or personally, but solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as a personal representation, undertaking and agreement by Wilmington Trust, National Association but is made and intended for the purpose of binding only the Issuer, (c) nothing herein contained shall be construed as creating any liability on Wilmington Trust, National Association, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall Wilmington Trust, National Association be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Amendment.

Section 12. Counterparts . This Amendment may be executed in one or more counterparts and by the different parties hereto on separate counterparts, including without limitation counterparts transmitted by facsimile or other electronic transmission, each of which, when so executed, shall be deemed to be an original and such counterparts, together, shall constitute one and the same agreement.

[signature pages follow]







12

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.
NATIONSTAR AGENCY ADVANCE FUNDING TRUST , as Issuer

By: Wilmington Trust, National Association, not in its individual capacity but solely as Owner Trustee

By:
/s/ Melinda Morales Romay ___
Name: Melinda Morales Romay
Title: Banking Officer





[Amendment No. 4 to the Series 2013-
VF1 Indenture Supplement]


THE BANK OF NEW YORK MELLON , as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary and not in its individual capacity
By:
/s/ Michael D. Commisso______________
Name: Michael D. Commisso
Title: Vice President

[Amendment No. 4 to the Series 2013-
VF1 Indenture Supplement]


NATIONSTAR MORTGAGE LLC , as Administrator and as Servicer
By :__/s/ Amar Patel_________________
Name: Amar Patel
Title: Executive Vice President

[Amendment No. 4 to the Series 2013-
VF1 Indenture Supplement]


BARCLAYS BANK PLC , as Administrative Agent
By :__/s/ Joseph O’Doherty________________
Name: Joseph O’Doherty
Title: Managing Director

[Amendment No. 4 to the Series 2013-
VF1 Indenture Supplement]


ACKNOWLEDGED, AGREED AND CONSENTED TO BY:

BARCLAYS BANK PLC ,

as sole Noteholder of the Nationstar Agency Advance Funding Trust, Advance Receivables Backed Notes, Series 2013-VF1 Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes

By:      /s/ Joseph O’Doherty         

Name:      Joseph O’Doherty         

Title:      Managing Director         


[Amendment No. 4 to the Series 2013-
VF1 Indenture Supplement]



Exhibit A

Class
Note #
Noteholder
Related Administrative Agent
Note Maximum Principal Balance
A-VF1
4
Credit Suisse AG, New York Branch, solely in its capacity as Administrative Agent on behalf of Credit Suisse AG, Cayman Islands Branch, as Committed Purchaser, and GIFS Capital Company, LLC, as Conduit Purchaser
Credit Suisse AG, New York Branch
$235,963,555
 
3
BARCLAYS BANK PLC
Barclays Bank PLC
$471,927,111
B-VF1
4
Credit Suisse AG, New York Branch, solely in its capacity as Administrative Agent on behalf of Credit Suisse AG, Cayman Islands Branch, as Committed Purchaser, and GIFS Capital Company, LLC, as Conduit Purchaser
Credit Suisse AG, New York Branch
$14,558,222
 
3
BARCLAYS BANK PLC
Barclays Bank PLC
$29,116,445
C-VF1
4
Credit Suisse AG, New York Branch, solely in its capacity as Administrative Agent on behalf of Credit Suisse AG, Cayman Islands Branch, as Committed Purchaser, and GIFS Capital Company, LLC, as Conduit Purchaser
Credit Suisse AG, New York Branch
$7,927,556
 
3
BARCLAYS BANK PLC
Barclays Bank PLC
$15,855,111
D-VF1
4
Credit Suisse AG, New York Branch, solely in its capacity as Administrative Agent on behalf of Credit Suisse AG, Cayman Islands Branch, as Committed Purchaser, and GIFS Capital Company, LLC, as Conduit Purchaser
Credit Suisse AG, New York Branch
$8,217,333
 
3
BARCLAYS BANK PLC
Barclays Bank PLC
$16,434,667



Ex. A-1


Exhibit 10.2





NATIONSTAR AGENCY ADVANCE FUNDING TRUST,
as Issuer,
THE BANK OF NEW YORK MELLON,
as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary,
and
BARCLAYS BANK PLC,
as Administrative Agent

and
CREDIT SUISSE AG, NEW YORK BRANCH,
as Administrative Agent

and consented to by:

BARCLAYS BANK PLC

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH

and

GIFS CAPITAL COMPANY, LLC

as Noteholders of the Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes
AMENDMENT NO. 5
dated as of January 30, 2015
to the
SERIES 2013-VF1 INDENTURE SUPPLEMENT
dated as of January 31, 2013
to the
FOURTH AMENDED AND RESTATED INDENTURE,
dated as of January 31, 2013
NATIONSTAR AGENCY ADVANCE FUNDING TRUST, ADVANCE RECEIVABLES BACKED NOTES, SERIES 2013-VF1
 


Amendment No. 5 TO SERIES 2013-VF1 INDENTURE SUPPLEMENT
This Amendment No. 5, dated as of January 30, 2015 (this “ Amendment ”), to the Series 2013-VF1 Indenture Supplement, dated as of January 31, 2013 (as amended by that certain Amendment No. 1, dated as of May 21, 2013, as further amended by that certain Amendment No. 2, dated as of October 15, 2013, as further amended by that certain Amendment No. 3, dated as of October 14, 2014, as further amended by that certain Amendment No. 4, dated as of January 27, 2015, and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture Supplement ”) to that certain Fourth Amended and Restated Indenture, dated as of January 31, 2013 (as amended by that certain Amendment No. 1, dated as of April 22, 2014 and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “ Indenture ”), is entered into by and among NATIONSTAR AGENCY ADVANCE FUNDING TRUST, a statutory trust organized under the laws of the State of Delaware (the “ Issuer ”), THE BANK OF NEW YORK MELLON, a New York banking corporation, as trustee (the “ Indenture Trustee ”), as calculation agent (the “ Calculation Agent ”), as paying agent (the “ Paying Agent ”), and as securities intermediary (the “ Securities Intermediary ”), NATIONSTAR MORTGAGE LLC, a Delaware limited liability company (“ Nationstar ”), BARCLAYS BANK PLC (“ Barclays ”), as administrative agent and CREDIT SUISSE AG, NEW YORK BRANCH, as administrative agent (each of Barclays and Credits Suisse, the “ Administrative Agent ”) and consented to by Barclays, as Noteholder of the Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes (collectively, the “ Notes ”) issued pursuant to the Indenture Supplement, GIFS CAPITAL COMPANY, LLC (“ GIFS ”), as Noteholder of the Notes and CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (“ CSCIB ”), as Noteholder of the Notes (each of Barclays, GIFS and CSCIB in such capacity, a “ Noteholder ” and collectively, the “ Noteholders ”). Capitalized terms used herein but not otherwise defined shall have the meanings given to such terms in the Indenture or the Indenture Supplement, as applicable.
WHEREAS, Section 12.2 of the Indenture provides, among other things, that subject to the terms and provisions of each Indenture Supplement with respect to any amendment of such Indenture Supplement, the parties to the Indenture may at any time enter into an amendment to the Indenture, including any Indenture Supplement, with prior notice to the Note Rating Agency and the consent of Noteholders of more than 50% (by Class Invested Amount) of each Series or Class of Notes affected by such amendment of the Indenture, including any Indenture Supplement, for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of the Indenture, of modifying in any manner the rights of the Holders of the Notes of each such Series or Class under the Indenture or any Indenture Supplement, upon delivery of an Issuer Tax Opinion and, pursuant to Section 12.3 of the Indenture, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by the Indenture and that all conditions precedent thereto have been satisfied (the “ Authorization Opinion ”); provided , however , that no such amendment will modify any of the enumerated provisions set forth in Section 12.2 without the consent of the Noteholder of each Outstanding Note affected thereby;
WHEREAS, Section 12(b) of the Indenture Supplement provides that notwithstanding any provisions to the contrary in Section 6.10 or Article XII of the Indenture, no supplement,
amendment or indenture supplement entered into with respect to the issuance of a new Series of Notes or pursuant to the terms and provisions of Section 12.2 of the Indenture may, without the consent of


100% of the Series 2013-VF1 Notes, supplement, amend or revise any term or provision of the Indenture Supplement;
WHEREAS, Section 12(c) of the Indenture Supplement provides that notwithstanding any provisions to the contrary in Article XII of the Indenture or Section 12 of the Indenture Supplement, no supplement or amendment entered into with respect to the Indenture Supplement is effective without the consent of 100% of the Noteholders of the Series 2013-VF1 Notes;
WHEREAS, the parties hereto desire to amend the Indenture Supplement as described below to increase the Maximum VFN Principal Balances and adjust the related Note Maximum Principal Balances of the Notes;
WHEREAS, this Amendment is not effective until the execution and delivery of this Amendment by the parties hereto and the delivery of the Issuer Tax Opinion and the Authorization Opinion;
WHEREAS, the Noteholders collectively own 100% of the Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes, which are the only Outstanding Notes issued pursuant to the Indenture Supplement; and
NOW, THEREFORE, in consideration of the premises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
Section 1. Amendments to the Indenture Supplement . Subject to the satisfaction of the conditions precedent in Section 4 below, the following amendments shall occur with respect to the enumerated sections and provisions of the Indenture Supplement:

(a) Section 2 of the Indenture Supplement is hereby amended by deleting the definition of “ Maximum VFN Principal Balance ” in its entirety and replacing it with the following:
    
“Maximum VFN Principal Balance” means, (i) for Class A-VF1, $1,061,835,999, (ii) for Class B-VF1, $65,512,000, (iii) for Class C-VF1, $35,674,001, and (iv) for Class D-VF1, $36,978,000 or, in the case of each such Class on any date, a lesser amount calculated pursuant to a written agreement between the Servicer, the Administrator and each Administrative Agent.

(b)    Exhibit A of the Indenture Supplement is hereby amended by deleting such Exhibit A in its entirety and replacing it with Exhibit A attached hereto.

Section 2. Noteholder Consent .

In its capacity as Note Registrar, the Indenture Trustee confirms that the Note Register reflects that collectively Barclays, GIFS and CSCIB as the sole Noteholders of all Notes

2




currently Outstanding under the Indenture Supplement. Such Noteholders’ consent to the terms of this Amendment is evidenced by its signature hereto.

Section 3.      Increase of Maximum VFN Principal Balance and Note Maximum Principal Balance . The parties hereto agree that the amendments contained in this Amendment to increase the Maximum VFN Principal Balances and the related Note Maximum Principal Balances of the Notes shall not constitute an issuance of “new Notes” as described in Section 6.10 of the Indenture, and the conditions precedent of Section 6.10(b) with respect to the issuance of “new Notes” of the Indenture shall not be applicable.
Section 4.      Conditions to Effectiveness of this Amendment .
This Amendment shall become effective on the date (the “ Effective Date ”) upon the latest to occur of the following:
(a)    the execution and delivery of this Amendment by all parties hereto;
(b)    prior notice to the Note Rating Agency;
(c)    the delivery of an Issuer Tax Opinion; and
(d)    the delivery of an Opinion of Counsel to the effect that the execution of this Amendment is authorized by the Indenture and all conditions precedent have been satisfied.

Section 5.     Effect of Amendment . Except as expressly amended and modified by this Amendment, all provisions of the Indenture Supplement and the Indenture shall remain in full force and effect and all such provisions shall apply equally to the terms and conditions set forth herein. This Amendment shall become effective on the Effective Date and shall not be effective for any period prior to the Effective Date. After this Amendment becomes effective, all references in the Indenture Supplement or the Indenture to “this Indenture Supplement,” “this Indenture,” “hereof,” “herein” or words of similar effect referring to such Indenture Supplement and Indenture shall be deemed to be references to the Indenture Supplement or the Indenture, as applicable, as amended by this Amendment. This Amendment shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Indenture Supplement or the Indenture other than as set forth herein. This Amendment shall constitute an Act of each of the Noteholders of the Series 2013-VF1 Notes.

Section 6.     Representations and Warranties . Each of Barclays, GIFS and CSCIB hereby represents and warrants that as of the date hereof (i) that Barclays, GIFS and CSCIB are collectively the sole Noteholders of each of the Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes, (ii) it is duly authorized to deliver this certification to the Indenture Trustee, (iii) such power has not been granted or assigned to any other Person, and (iv) the Indenture Trustee may conclusively rely upon this certification.

Section 7.     Entire Agreement . The Indenture and the Indenture Supplement, as amended by this Amendment, constitute the entire agreement among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating to such subject matter.

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Section 8.     Successors and Assigns . This Amendment shall be binding upon the parties hereto and their respective successors and assigns.

Section 9.     Section Headings . The various headings and sub-headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or the Indenture or any provision hereof or thereof.

Section 10.     GOVERNING LAW . THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PROVISIONS THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 11.     Recitals . The statements contained in the recitals to this Amendment shall be taken as the statements of the Issuer, and the Indenture Trustee (in each capacity) assumes no responsibility for their correctness. The Indenture Trustee makes no representation as to the validity or sufficiency of this Amendment (except as may be made with respect to the validity of its own obligations hereunder). In entering into this Amendment, the Indenture Trustee shall be entitled to the benefit of every provision of the Indenture and the Indenture Supplement relating to the conduct of or affecting the liability of or affording protection to the Indenture Trustee.

Section 12.     Owner Trustee Limitation of Liability . It is expressly understood and agreed by the parties hereto that (a) this Amendment is executed and delivered by Wilmington Trust, National Association, not individually or personally, but solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as a personal representation, undertaking and agreement by Wilmington Trust, National Association but is made and intended for the purpose of binding only the Issuer, (c) nothing herein contained shall be construed as creating any liability on Wilmington Trust, National Association, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall Wilmington Trust, National Association be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Amendment.

Section 13.    Counterparts. This Amendment may be executed in one or more counterparts and by the different parties hereto on separate counterparts, including without limitation counterparts

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transmitted by facsimile or other electronic transmission, each of which, when so executed, shall be deemed to be an original and such counterparts, together, shall constitute one and the same agreement.

[signature pages follow]










































5






IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.
NATIONSTAR AGENCY ADVANCE FUNDING TRUST , as Issuer
By: Wilmington Trust, National Association, not in its individual capacity but solely as Owner Trustee
By: /s/ Melinda Morales Romay______
Name: Melinda Morales Romay
Title: Banking Officer

[Amendment No. 5 to the Series 2013-
VF1 Indenture Supplement]






THE BANK OF NEW YORK MELLON , as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary and not in its individual capacity
By:
    /s/ Michael D. Commisso
Name: Michael D. Commisso
Title: Vice President





































[Amendment No. 5 to the Series 2013-
VF1 Indenture Supplement]








NATIONSTAR MORTGAGE LLC , as Administrator and as Servicer
By : /s/ Amar Patel _____________
Name: Amar Patel
Title: Executive Vice President










































[Amendment No. 5 to the Series 2013-
VF1 Indenture Supplement]












BARCLAYS BANK PLC , as Administrative Agent
By:_ /s/ Joseph O’Doherty _______
Name: Joseph O’Doherty
Title: Managing Director








































[Amendment No. 5 to the Series 2013-
VF1 Indenture Supplement]





                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
CREDIT SUISSE AG, NEW YORK BRANCH , as Administrative Agent
By: _/s/ Oliver Nisenson _____________
Name: Oliver Nisenson
Title: Director



By: _/s/ Robbin W. Conner ____________
Name: Robbin W. Conner
Title: Director





















[Amendment No. 5 to the Series 2013-
VF1 Indenture Supplement]





ACKNOWLEDGED, AGREED AND CONSENTED TO BY:

BARCLAYS BANK PLC ,

as Noteholder of the Nationstar Agency Advance Funding Trust, Advance Receivables Backed Notes, Series 2013-VF1 Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes

By:     /s/ Joseph O’Doherty          

Name:     Joseph O’Doherty          

Title:     Managing Director          





































[Amendment No. 5 to the Series 2013-
VF1 Indenture Supplement]







GIFS CAPITAL COMPANY, LLC ,

as Noteholder of the Nationstar Agency Advance Funding Trust, Advance Receivables Backed Notes, Series 2013-VF1 Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes


By:     /s/ Thomas J. Irvin         

Name:     Thomas J. Irvin         

Title:     Manager             



































[Amendment No. 5 to the Series 2013-
VF1 Indenture Supplement]






CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH ,

as Noteholder of the Nationstar Agency Advance Funding Trust, Advance Receivables Backed Notes, Series 2013-VF1 Class A-VF1 Variable Funding Notes, the Class B-VF1 Variable Funding Notes, the Class C-VF1 Variable Funding Notes and the Class D-VF1 Variable Funding Notes



By:     /s/ Oliver Nisenson         

Name:     Oliver Nisenson         

Title:     Authorized Signatory         



By:     /s/ Robbin Conner                 

Name:     Robbin Conner         

Title:     Authorized Signatory          























Exhibit A

[Amendment No. 5 to the Series 2013-
VF1 Indenture Supplement]



Class
Note #
Noteholder
Related Administrative Agent
Note Maximum Principal Balance
A-VF1
6
Credit Suisse AG, New York Branch, solely in its capacity as Administrative Agent on behalf of Credit Suisse AG, Cayman Islands Branch, as Committed Purchaser, and GIFS Capital Company, LLC, as Conduit Purchaser
Credit Suisse AG, New York Branch
$353,945,333
 
5
BARCLAYS BANK PLC
Barclays Bank PLC
$707,890,666
B-VF1
6
Credit Suisse AG, New York Branch, solely in its capacity as Administrative Agent on behalf of Credit Suisse AG, Cayman Islands Branch, as Committed Purchaser, and GIFS Capital Company, LLC, as Conduit Purchaser
Credit Suisse AG, New York Branch
$21,837,333
 
5
BARCLAYS BANK PLC
Barclays Bank PLC
$43,674,667
C-VF1
6
Credit Suisse AG, New York Branch, solely in its capacity as Administrative Agent on behalf of Credit Suisse AG, Cayman Islands Branch, as Committed Purchaser, and GIFS Capital Company, LLC, as Conduit Purchaser
Credit Suisse AG, New York Branch
$11,891,334
 
5
BARCLAYS BANK PLC
Barclays Bank PLC
$23,782,667
D-VF1
6
Credit Suisse AG, New York Branch, solely in its capacity as Administrative Agent on behalf of Credit Suisse AG, Cayman Islands Branch, as Committed Purchaser, and GIFS Capital Company, LLC, as Conduit Purchaser
Credit Suisse AG, New York Branch
$12,326,000

[Amendment No. 5 to the Series 2013-
VF1 Indenture Supplement]


 
 
 
 
 
 
5
BARCLAYS BANK PLC
Barclays Bank PLC
$24,652,000


[Amendment No. 5 to the Series 2013-
VF1 Indenture Supplement]


Exhibit 10.3


AMENDMENT NUMBER TEN
to the
AMENDED AND RESTATED
MASTER REPURCHASE AGREEMENT
dated as of May 17, 2013
among
BARCLAYS BANK PLC,
SUTTON FUNDING LLC
and
NATIONSTAR MORTGAGE LLC
This AMENDMENT NUMBER TEN (this “ Amendment ”) is made as of this 26th day of March 2015, by and among Barclays Bank PLC (a “ Purchaser ” and “ Agent ”), Sutton Funding LLC (a “ Purchaser ”) and Nationstar Mortgage LLC (“ Seller ”), to that certain Amended and Restated Master Repurchase Agreement, dated as of May 17, 2013 (as amended by Amendment Number One to the Master Repurchase Agreement, dated as of July 18, 2013, Amendment Number Two to the Master Repurchase Agreement, dated as of July 24, 2013, Amendment Number Three to the Master Repurchase Agreement, dated as of September 20, 2013, Amendment Number Four to the Master Repurchase Agreement, dated as of November 4, 2013, Amendment Number Five to the Master Repurchase Agreement, dated as of November 13, 2013, Amendment Number Six to the Master Repurchase Agreement, dated as of November 25, 2013, Amendment Number Seven to the Master Repurchase Agreement, dated as of January 14, 2014, Amendment Number Eight to the Master Repurchase Agreement, dated as of August 21, 2014, and Amendment Number Nine to the Master Repurchase Agreement, dated as of October 20, 2014,by and among Purchasers and Seller, and as further amended, restated, supplemented or otherwise modified from time to time, the “ Repurchase Agreement ”), by and among Seller and Purchasers.
WHEREAS, Purchasers, Agent and Seller have agreed to amend the Repurchase Agreement as more particularly set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and for the mutual covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. Amendments . Notwithstanding the monthly commitment fee amount payable under the Repurchase Agreement (as set forth in Amendment Number Nine, dated as of October 20, 2014), effective as of April 1, 2015, Seller and Purchasers agree that from April 2015 to September 2015, inclusive, the commitment fee installment shall be an amount equal to $969,791.67, due and payable by Seller on the 20 th day of each such month or if such day is not a Business Day, the Business Day immediately preceding such 20th day of the month, in immediately available funds and otherwise in accordance with Section 2 of the Pricing Side Letter.

SECTION 2. Fees and Expenses . Seller agrees to pay to Purchasers all fees and out of pocket expenses incurred by Purchasers and Agent in connection with this Amendment, including all reasonable fees and out of pocket costs and expenses of the legal counsel to Purchasers and Agent incurred in connection with this Amendment, in accordance with Section 23(a) of the Repurchase Agreement.

SECTION 3. Defined Terms . Any terms capitalized but not otherwise defined herein should have the respective meanings set forth in the Repurchase Agreement.



SECTION 4. Limited Effect . Except as amended hereby, the Repurchase Agreement shall continue in full force and effect in accordance with its terms. Reference to this Amendment need not be made in the Repurchase Agreement or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Repurchase Agreement, any reference in any of such items to the Repurchase Agreement being sufficient to refer to the Repurchase Agreement as amended hereby.

SECTION 5. Representations . In order to induce Purchasers and Agent to execute and deliver this Amendment, Seller hereby represents to Purchasers and Agent that as of the date hereof, (i) Seller is in full compliance with all of the terms and conditions of the Program Documents and remains bound by the terms thereof, and (ii) no Default or Event of Default has occurred and is continuing under the Program Documents.

SECTION 6. Governing Law . This Amendment and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of New York, without regard to principles of conflicts of laws (other than Sections 5-1401 and 5‑1402 of the New York General Obligations Law which shall be applicable).

SECTION 7. Counterparts . For the purpose of facilitating the execution of this Amendment, and for other purposes, this Amendment may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. The parties intend that faxed signatures and electronically imaged signatures such as .pdf files shall constitute original signatures and are binding on all parties. The original documents shall be promptly delivered, if requested.

[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
















- -2 -

IN WITNESS WHEREOF, Purchasers, Agent and Seller have caused their names to be duly signed to this Amendment by their respective officers thereunto duly authorized, all as of the date first above written.



BARCLAYS BANK PLC,
Purchaser and Agent


By:___ /s/ Ellen V Kiernan __________________
Name: Ellen V Kiernan
Title: Director


SUTTON FUNDING LLC,
Purchaser


By:_ /s/ Joseph O’Doherty ___________________
Name: Joseph O’Doherty
Title: Managing Director


NATIONSTAR MORTGAGE LLC,
Seller



By:__ /s/ Jeffrey M. Neufeld __________________
Name: Jeffrey M. Neufeld
Title: Senior Vice Preisdent and Treasurer



Amendment Number Ten to A&R Master Repurchase Agreement



Exhibit 10.4


NATIONSTAR MORTGAGE HOLDINGS INC.
AMENDED AND RESTATED
2012 INCENTIVE COMPENSATION PLAN


The Nationstar Mortgage Holdings Inc. 2012 Incentive Compensation Plan (the “Plan”) was established by Nationstar Mortgage Holdings Inc., a Delaware corporation (the “Company”), effective as of February 24, 2012, and the Company amends and restates the Plan effective as of February 24, 2015.

1.      Purpose of the Plan
This Plan is intended to promote the interests of Nationstar and its shareholders by providing employees, consultants and directors of the Company, who are largely responsible for the management, growth and protection of the business of the Company, with incentives and rewards to encourage them to continue in the service of the Company and with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company.
2.      Definitions
As used in the Plan or in any instrument governing the terms of any Award, the following definitions apply to the terms indicated below:
(a)
“Award” means one or more Stock Incentive Awards and Cash-Based Awards, collectively.

(b)
“Board of Directors” means the Board of Directors of Nationstar.

(c)
“Cash-Based Award” means an award granted pursuant to Section 8 of the Plan.

(d)
“Change in Control” has the meaning assigned to such term in Section 19 of the Plan.

(e)
“Code” means the Internal Revenue Code of 1986, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder.

(f)
“Committee” means the Compensation Committee of the Board of Directors or such other committee as the Board of Directors shall appoint from time to time to administer the Plan and to otherwise exercise and perform the authority and functions assigned to the Committee under the terms of the Plan.

(g)
“Common Stock” means Nationstar’s Common Stock, $0.01 par value per share, or any other security into which the common stock shall be changed pursuant to the adjustment provisions of Section 10 of the Plan.

(h)
“Company” means Nationstar and all of its Subsidiaries, collectively.
(i)
“Covered Employee” means any person who is an executive officer of Nationstar at the time as of which reference to this definition is made.


Exhibit 10.4



(j)
“Effective Date” means February 24, 2012.

(k)
“Exchange Act” means the Securities Exchange Act of 1934, as amended.

(l)
“Fair Market Value” means, with respect to a share of Common Stock, as of the applicable date of determination (i) the average of the high and low sales prices on the immediately preceding business day of a share of Common Stock as reported on the principal securities exchange on which shares of Common Stock are then listed or admitted to trading or (ii) if not so reported, the average of the closing bid and ask prices on the immediately preceding business day as reported on the National Association of Securities Dealers Automated Quotation System or (iii) if not so reported, as furnished by any member of the National Association of Securities Dealers, Inc. selected by the Committee. In the event that the price of a share of Common Stock shall not be so reported, the Fair Market Value of a share of Common Stock shall be determined by the Committee in its sole discretion.

(m)
“Incentive Pool” means an amount available to be paid to one or more Participants as Performance-Based Compensation, which amount is determined in accordance with Section 162(m) of the Code.

(n)
“Nationstar” means Nationstar Mortgage Holdings Inc., a Delaware corporation and any successor thereto.

(o)
“Other Stock-Based Award” means an award granted to a Participant pursuant to Section 7 of the Plan.

(p)
“Participant” means a director, employee or consultant of the Company who is eligible to participate in the Plan and to whom one or more Awards have been granted pursuant to the Plan and, following the death of any such Person, his successors, heirs, executors and administrators, as the case may be.

(q)
“Performance-Based Compensation” means compensation that satisfies the requirements of Section 162(m) of the Code for deductibility of remuneration paid to Covered Employees.

(r)
“Performance Measures” means such measures as are described in Section 9 on which performance goals are based in order to qualify certain Awards granted hereunder as Performance-Based Compensation.

(s)
“Performance Percentage” means the factor determined pursuant to a Performance Schedule that is to be applied to a Target Award or Incentive Pool and that reflects actual performance compared to the Performance Target.


2


Exhibit 10.4


(t)
“Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award that is intended to qualify as Performance-Based Compensation. Performance Periods may be overlapping.

(u)
“Performance Schedule” means a schedule or other objective method for determining the applicable Performance Percentage to be applied to each Target Award or Incentive Pool.

(v)
“Performance Target” means performance goals and objectives with respect to a Performance Period.

(w)
“Person” means a “person” as such term is used in Section 13(d) and 14(d) of the Exchange Act, including any “group” within the meaning of Section 13(d)(3) under the Exchange Act.

(x)
“Plan” means this Nationstar 2012 Incentive Compensation Plan, as it may be amended from time to time.

(y)
“Securities Act” means the Securities Act of 1933, as amended.

(z)
“Stock Incentive Award” means a Stock Option or Other Stock-Based Award granted pursuant to the terms of the Plan.

(aa)
“Stock Option” means a stock option to purchase shares of Common Stock granted to a Participant pursuant to Section 6.

(bb)
“Subsidiary” means any “subsidiary” within the meaning of Rule 405 under the Securities Act.

(cc)
“Target Award” means a Cash-Based Award of a specific dollar amount or portion of an Incentive Pool, determined by the Committee, pursuant to Performance Measures as described in Section 9 of the Plan.

(dd)
“Voting Securities” means, at any time, Nationstar’s then outstanding voting securities.

3.     Stock Subject to the Plan and Limitations on Cash-Based Awards

(a)      Stock Subject to the Plan
The maximum number of shares of Common Stock that may be covered by Awards granted under the Plan shall not exceed 5,200,000 shares of Common Stock in the aggregate, subject, during the term of the Plan, to annual increases of 150,000 shares of Common Stock on each anniversary of the Effective Date. The shares referred to in the preceding sentences of this paragraph shall in each case be subject to adjustment as provided in Section 10 and the following provisions of this Section 3. Shares of Common Stock issued under the Plan may be either


3


Exhibit 10.4


authorized and unissued shares or treasury shares, or both, at the sole discretion of the Committee.
For purposes of the preceding paragraph, shares of Common Stock covered by Awards shall only be counted as used to the extent they are actually issued and delivered to a Participant (or such Participant’s permitted transferees as described in the Plan) pursuant to the Plan. For purposes of clarity, in accordance with the preceding sentence if an Award is settled for cash or if shares of Common Stock are withheld to pay the exercise price of a Stock Option or to satisfy any tax withholding requirement in connection with an Award, only the shares issued (if any), net of the shares withheld, will be deemed delivered for purposes of determining the number of shares of Common Stock that are available for delivery under the Plan. In addition, if shares of Common Stock are issued subject to conditions which may result in the forfeiture, cancellation or return of such shares to the Company, any portion of the shares forfeited, cancelled or returned shall be treated as not issued pursuant to the Plan. In addition, if shares of Common Stock owned by a Participant (or such Participant’s permitted transferees as described in the Plan) are tendered (either actually or through attestation) to the Company in payment of any obligation in connection with an Award, the number of shares tendered shall be added to the number of shares of Common Stock that are available for delivery under the Plan. Shares of Common Stock covered by Awards granted pursuant to the Plan in connection with the assumption, replacement, conversion or adjustment of outstanding equity-based awards in the context of a corporate acquisition or merger (within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual) shall not count as used under the Plan for purposes of this Section 3.
(b)     Individual Award Limits
Subject to adjustment as provided in Section 10 of the Plan, the maximum number of shares of Common Stock that may be covered by Awards granted under the Plan to any single Participant in any calendar year shall not exceed 3,000,000 shares. The amount payable to any Participant with respect to any calendar year for all Cash-Based Awards for which the Performance Period is not longer than one year shall not exceed $20,000,000. The amount payable to any Participant with respect to any calendar year for all Cash-Based Awards for which the Performance Period is longer than one year shall not exceed $20,000,000. For purposes of the preceding sentences, the phrase “amount payable with respect to any calendar year” means the amount of cash, or value of other property, required to be paid based on the achievement of applicable Performance Measures during a Performance Period that ends in a calendar year, disregarding any deferral pursuant to the terms of a deferred compensation plan or agreement.

4.     Administration of the Plan
The Plan shall be administered by a Committee of the Board of Directors consisting of two or more persons, each of whom qualifies as a “non-employee director” (within the meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act), an “outside director” within


4


Exhibit 10.4


the meaning of Treasury Regulation Section 1.162-27(e)(3) and as “independent” within the meaning of any applicable stock exchange or similar regulatory authority. The Committee shall, consistent with the terms of the Plan, from time to time designate those employees and consultants of the Company who shall be granted Awards under the Plan and the amount, type and other terms and conditions of such Awards. All of the powers and responsibilities of the Committee under the Plan may be delegated by the Committee, in writing, to any subcommittee thereof. In addition, the Committee may from time to time authorize a subcommittee consisting of one or more members of the Board of Directors (including members who are employees of the Company) or employees of Nationstar or one of its Subsidiaries to grant Awards to persons who are not “executive officers” of Nationstar (within the meaning of Rule 16a-1 under the Exchange Act), including grants to employees of its Subsidiaries, subject to such restrictions and limitation as the Committee may specify. In addition, the Board of Directors may, consistent with the terms of the Plan, from time to time grant Awards to Directors.
The Committee shall have full discretionary authority to administer the Plan, including discretionary authority to interpret and construe any and all provisions of the Plan and the terms of any Award (and any agreement evidencing any Award) granted thereunder and to adopt and amend from time to time such rules and regulations for the administration of the Plan as the Committee may deem necessary or appropriate. Without limiting the generality of the foregoing, the Committee shall determine whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment. The employment of a Participant with the Company shall be deemed to have terminated for all purposes of the Plan if such Participant is employed by or provides services to a Person that is a Subsidiary of the Company and such Person ceases to be a Subsidiary of the Company, unless the Committee determines otherwise. Decisions of the Committee shall be final, binding and conclusive on all parties.
Upon the occurrence of a Change in Control, the Committee shall have full discretionary authority to (i) accelerate the vesting of any Award, and/or (ii) provide for payment of any Award.
On or after the date of grant of an Award under the Plan, the Committee may (i) accelerate the date on which any such Award becomes vested, exercisable or transferable, as the case may be, (ii) extend the term of any such Award, including, without limitation, extending the period following a termination of a Participant’s employment during which any such Award may remain outstanding, (iii) waive any conditions to the vesting, exercisability or transferability, as the case may be, of any such Award or (iv) provide for the payment of dividends or dividend equivalents with respect to any such Award; provided , that the Committee shall not have any such authority to the extent that the grant of such authority would cause any tax to become due under Section 409A of the Code.
No member of the Committee shall be liable for any action, omission, or determination relating to the Plan, and Nationstar shall indemnify and hold harmless each member of the Committee and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated against any cost or


5


Exhibit 10.4


expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any action, omission or determination relating to the Plan, unless, in either case, such action, omission or determination was taken or made by such member, director or employee in bad faith and without reasonable belief that it was in the best interests of the Company.
5.      Eligibility
The Persons who shall be eligible to receive Awards pursuant to the Plan shall be those employees and consultants of the Company and directors whom the Committee shall select from time to time, including those key employees (including officers of Nationstar, whether or not they are directors) who are largely responsible for the management, growth and protection of the business of the Company. Each Award granted under the Plan shall be evidenced by an instrument in writing in form and substance approved by the Committee.
6.      Stock Options
The Committee may from time to time grant Stock Options, subject to the following terms and conditions:
(a)      Exercise Price
The exercise price per share of Common Stock covered by any Stock Option shall be not less than 100% of the Fair Market Value of a share of Common Stock on the date on which such Stock Option is granted. Each Stock Option granted hereunder is intended to be a non-qualified Stock Option and is not intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code.
(b)      Term and Exercise of Stock Options
(1)      Each Stock Option shall become vested and exercisable on such date or dates, during such period and for such number of shares of Common Stock as shall be determined by the Committee on or after the date such Stock Option is granted; provided , however that no Stock Option shall be exercisable after the expiration of ten years from the date such Stock Option is granted; and, provided , further , that each Stock Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan or in the agreement evidencing such Stock Option.
(2)      Each Stock Option may be exercised in whole or in part; provided , however that no partial exercise of a Stock Option shall be for an aggregate exercise price of less than $1,000. The partial exercise of a Stock Option shall not cause the expiration, termination or cancellation of the remaining portion thereof.
(3)      A Stock Option shall be exercised by such methods and procedures as the Committee determines from time to time, including without limitation through net physical settlement or other method of cashless exercise.


6


Exhibit 10.4


(4)      Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of a Participant, only by the Participant; provided , however that the Committee may permit Stock Options to be sold, pledged, assigned, hypothecated, transferred, or disposed of, on a general or specific basis, subject to such conditions and limitations as the Committee may determine.
(c)      Effect of Termination of Employment or Other Relationship
The agreement evidencing the award of each Stock Option shall specify the consequences with respect to such Stock Option of the termination of the employment, service as a director or other relationship between the Company and the Participant holding the Stock Option.
7.      Other Stock-Based Awards
The Committee may grant equity-based or equity-related awards not otherwise described herein in such amounts and subject to such terms and conditions as the Committee shall determine. Without limiting the generality of the preceding sentence, each such Other Stock-Based Award may (i) involve the transfer of actual shares of Common Stock to Participants, either at the time of grant or thereafter, or payment in cash or otherwise of amounts based on the value of shares of Common Stock, (ii) be subject to performance-based and/or service-based conditions, (iii) be in the form of stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units, (iv) be designed to comply with applicable laws of jurisdictions other than the United States and (v) be designed to qualify as Performance-Based Compensation; provided , that each Other Stock-Based Award shall be denominated in, or shall have a value determined by reference to, a number of shares of Common Stock that is specified at the time of the grant of such award.
8.      Cash-Based Awards
The Committee may grant Cash-Based Awards with respect to any Performance Period, subject to the terms and conditions of the Plan. Cash-Based Awards may be settled in cash or in other property, including shares of Common Stock, provided that the term “Cash-Based Award” shall exclude any Stock Option or Other Stock-Based Award. Cash-Based Awards may be designed to qualify as Performance-Based Compensation. Without limiting the generality of the foregoing, a Cash-Based Award may provide for Target Awards based on allocation among Participants of an Incentive Pool.
9.      Performance-Based Compensation
(a)      Calculation
The amount payable with respect to an Award that is intended to qualify as Performance-Based Compensation shall be determined in any manner permitted by Section 162(m) of the Code.


7


Exhibit 10.4


(b)      Discretionary Reduction
The Committee may, in its discretion, reduce or eliminate the amount payable to any Participant with respect to an Award that is intended to qualify as Performance-Based Compensation, based on such factors as the Committee may deem relevant, but the Committee may not increase any such amount above the amount established in accordance with the relevant Performance Schedule. For purposes of clarity, the Committee may exercise the discretion provided for by the foregoing sentence in a non-uniform manner among Participants.
(c)      Performance Measures
The performance goals upon which the payment or vesting of any Award (other than Stock Options and stock appreciation rights) to a Covered Employee that is intended to qualify as Performance-Based Compensation depends shall relate to one or more of the following Performance Measures: (i) net income or operating net income (before or after taxes, interest, depreciation, amortization, and/or nonrecurring/unusual items), (ii) return on assets, return on capital, return on equity, return on economic capital, return on other measures of capital, return on sales or other financial criteria, (iv) revenue or net sales, (v) gross profit or operating gross profit, (vi) cash flow, (vii) productivity or efficiency ratios, (viii) share price or total shareholder return, (ix) earnings per share, (x) budget and expense management, (xi) customer and product measures, including market share, high value client growth, and customer growth, (xii) working capital turnover and targets, (xiii) margins, and (xiv) economic value added or other value added measurements, and (xv) any other measure of financial performance that can be determined pursuant to U.S. generally accepted accounting principles, or any combination of any of the foregoing, in any such case (x) considered absolutely or relative to historic performance or relative to one or more other businesses and (y) determined for the Company or any business unit or division thereof.
Within 90 days after the beginning of a Performance Period, and in any case before 25% of the Performance Period has elapsed, the Committee shall establish (a) Performance Targets for such Performance Period, (b) Target Awards for each Participant, and (c) Performance Schedules for such Performance Period.
The measurement of any Performance Measure(s) may exclude the impact of charges for restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of accounting changes, each as defined by generally accepted accounting principles and as identified in the Company’s audited financial statements, including the notes thereto. Any Performance Measure(s) may be used to measure the performance of the Company or a Subsidiary as a whole or any business unit of the Company or any Subsidiary or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or a published or special index that the Committee, in its sole discretion, deems appropriate.
Nothing in this Section 9 is intended to limit the Committee’s discretion to adopt conditions with respect to any Award that is not intended to qualify as Performance-Based Compensation that relate to performance other than the Performance Measures. In addition, the


8


Exhibit 10.4


Committee may, subject to the terms of the Plan, amend previously granted Awards in a way that disqualifies them as Performance-Based Compensation.
10.      Adjustment Upon Certain Changes
(a) Shares Available for Grants
In the event of any change in the number of shares of Common Stock outstanding by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, the maximum aggregate number of shares of Common Stock with respect to which the Committee may grant Awards and the maximum aggregate number of shares of Common Stock with respect to which the Committee may grant Awards to any individual Participant in any year shall be appropriately adjusted by the Committee. In the event of any change in the number of shares of Common Stock outstanding by reason of any other similar event or transaction, the Committee may, to the extent deemed appropriate by the Committee, make such adjustments in the number and class of shares of Common Stock with respect to which Awards may be granted.
(b)
Increase or Decrease in Issued Shares Without Consideration
Subject to any required action by the shareholders of Nationstar, in the event of any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or consolidation of shares of Common Stock or the payment of a stock dividend (but only on the shares of Common Stock), or any other increase or decrease in the number of such shares effected without receipt or payment of consideration by the Company, the Committee may, to the extent deemed appropriate by the Committee, adjust the number of shares of Common Stock subject to each outstanding Award and the exercise price per share of Common Stock of each such Award.
(c)
Certain Mergers
Subject to any required action by the shareholders of Nationstar, in the event that Nationstar shall be the surviving corporation in any merger, consolidation or similar transaction as a result of which the holders of shares of Common Stock receive consideration consisting exclusively of securities of such surviving corporation, the Committee may, to the extent deemed appropriate by the Committee, adjust each Award outstanding on the date of such merger or consolidation so that it pertains and applies to the securities which a holder of the number of shares of Common Stock subject to such Award would have received in such merger or consolidation.
(d)
Certain Other Transactions
In the event of (i) a dissolution or liquidation of Nationstar, (ii) a sale of all or substantially all of the Company’s assets (on a consolidated basis), (iii) a merger, consolidation or similar transaction involving Nationstar in which Nationstar is not the surviving corporation or (iv) a merger, consolidation or similar transaction involving Nationstar in which Nationstar is


9


Exhibit 10.4


the surviving corporation but the holders of shares of Common Stock receive securities of another corporation and/or other property, including cash, the Committee shall, in its sole discretion, have the power to:
(i) cancel, effective immediately prior to the occurrence of such event, each Award (whether or not then exercisable), and, in full consideration of such cancellation, pay to the Participant to whom such Award was granted an amount in cash, for each share of Common Stock subject to such Award equal to the value, as determined by the Committee in its reasonable discretion, of such Award, provided that with respect to any outstanding Stock Option such value shall be equal to the excess of (A) the value, as determined by the Committee in its reasonable discretion, of the property (including cash) received by the holder of a share of Common Stock as a result of such event over (B) the exercise price of such Stock Option; or
(ii) provide for the exchange of each Award (whether or not then exercisable or vested) for an Award with respect to, as appropriate, some or all of the property which a holder of the number of shares of Common Stock subject to such Award would have received in such transaction and, incident thereto, make an equitable adjustment as determined by the Committee in its reasonable discretion in the exercise price of the Award, or the number of shares or amount of property subject to the Award or, if appropriate, provide for a cash payment to the Participant to whom such Award was granted in partial consideration for the exchange of the Award.
(e)
Other Changes
In the event of any change in the capitalization of Nationstar or corporate change other than those specifically referred to in paragraphs (b), (c) or (d), the Committee may make such adjustments in the number and class of shares subject to Awards outstanding on the date on which such change occurs and in such other terms of such Awards as the Committee may consider appropriate.
(f)      Cash-Based Awards
In the event of any transaction or event described in this Section 10, including without limitation any corporate change referred to in paragraph (e) hereof, the Committee may, in its sole discretion, make such adjustments in any Performance Schedule, Performance Target or Target Award, and in such other terms of any Cash-Based Awards, as the Committee may consider appropriate in respect of such transaction or event, provided that such adjustment is consistent with the requirements of Section 162(m) of the Code and the regulations thereunder.


10


Exhibit 10.4


(g)
No Other Rights
Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger or consolidation of Nationstar or any other corporation. Except as expressly provided in the Plan, no issuance by Nationstar of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares or amount of other property subject to, or the terms related to, any Award.
(h)     Savings Clause

No provision of this Section 10 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code.
11.      Rights Under the Plan
No person shall have any rights as a stockholder with respect to any shares of Common Stock covered by or relating to any Award granted pursuant to the Plan until the date of the issuance of a stock certificate or of the entry on the Company’s books with respect to such shares. Except as otherwise expressly provided in Section 10 hereof, no adjustment of any Award shall be made for dividends or other rights for which the record date occurs prior to the date such stock certificate is issued or book entry is made. Nothing in this Section 11 is intended, or should be construed, to limit authority of the Committee to cause the Company to make payments based on the dividends that would be payable with respect to any share of Common Stock if it were issued or outstanding, or from granting rights related to such dividends.
The Company shall not have any obligation to establish any separate fund or trust or other segregation of assets to provide for payments under the Plan. To the extent any person acquires any rights to receive payments hereunder from the Company, such rights shall be no greater than those of an unsecured creditor.
12.      No Special Employment Rights; No Right to Award
(a) Nothing contained in the Plan or any Award shall confer upon any Participant any right with respect to the continuation of his employment by or service to the Company or interfere in any way with the right of the Company at any time to terminate such employment or service or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Award.
(b) No person shall have any claim or right to receive an Award hereunder. The Committee’s granting of an Award to a Participant at any time shall neither require the Committee to grant an Award to such Participant or any other Participant or other person at any time nor preclude the Committee from making subsequent grants to such Participant or any other Participant or other person.


11


Exhibit 10.4


13.      Securities Matters

(a)      Nationstar shall be under no obligation to effect the registration pursuant to the Securities Act of any shares of Common Stock to be issued hereunder or to effect similar compliance under any state laws. Notwithstanding anything herein to the contrary, Nationstar shall not be obligated to cause to be issued or delivered any certificates evidencing shares of Common Stock pursuant to the Plan unless and until Nationstar is advised by its counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Common Stock are traded. The Committee may require, as a condition to the issuance and delivery of certificates evidencing shares of Common Stock pursuant to the terms hereof, that the recipient of such shares make such covenants, agreements and representations, and that such certificates bear such legends, as the Committee deems necessary or desirable.

(b)      The exercise of any Stock Option granted hereunder shall only be effective at such time as counsel to Nationstar shall have determined that the issuance and delivery of shares of Common Stock pursuant to such exercise is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Common Stock are traded. Nationstar may, in its sole discretion, defer the effectiveness of an exercise of a Stock Option hereunder or the issuance or transfer of shares of Common Stock pursuant to any Award pending or to ensure compliance under federal or state securities laws. Nationstar shall inform the Participant in writing of its decision to defer the effectiveness of the exercise of a Stock Option or the issuance or transfer of shares of Common Stock pursuant to any Award. During the period that the effectiveness of the exercise of a Stock Option has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto.

14.      Withholding Taxes

(a)      Cash Remittance

Whenever shares of Common Stock are to be issued upon the exercise of a Stock Option or the grant or vesting of an Award, and whenever any amount shall become payable in respect of any Award, Nationstar shall have the right to require the Participant to remit to Nationstar in cash an amount sufficient to satisfy federal, state and local withholding tax requirements, if any, attributable to such exercise, grant, vesting or payment prior to the delivery of any certificate or certificates or the entry on the Company’s books for such shares or the effectiveness of the lapse of such restrictions or making of such payment. In addition, upon the exercise or settlement of any Award in cash, or any payment with respect to any Award, Nationstar shall have the right to withhold from any payment required to be made pursuant thereto an amount sufficient to satisfy the federal, state and local withholding tax requirements, if any, attributable to such exercise, settlement or payment.

(b)      Stock Remittance


12


Exhibit 10.4


At the election of the Participant, subject to the approval of the Committee, when shares of Common Stock are to be issued upon the exercise, grant or vesting of an Award, the Participant may tender to Nationstar a number of shares of Common Stock having a Fair Market Value at the tender date determined by the Committee to be sufficient to satisfy the minimum federal, state and local withholding tax requirements, if any, attributable to such exercise, grant or vesting but not greater than the minimum withholding obligations. Such election shall satisfy the Participant’s obligations under Section 14(a) hereof, if any.

(c)      Stock Withholding

At the election of the Participant, subject to the approval of the Committee, when shares of Common Stock are to be issued upon the exercise, grant or vesting of an Award, Nationstar shall withhold a number of such shares having a Fair Market Value at the exercise date determined by the Committee to be sufficient to satisfy the minimum federal, state and local withholding tax requirements, if any, attributable to such exercise, grant or vesting but not greater than the minimum withholding obligations. Such election shall satisfy the Participant’s obligations under Section 14(a) hereof, if any.

15.      Amendment or Termination of the Plan

The Board of Directors may at any time suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided , however , that to the extent that any applicable law, regulation or rule of a stock exchange requires shareholder approval in order for any such revision or amendment to be effective, such revision or amendment shall not be effective without such approval. The preceding sentence shall not restrict the Committee’s ability to exercise its discretionary authority hereunder pursuant to Section 4 hereof, which discretion may be exercised without amendment to the Plan. No provision of this Section 15 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code. Except as expressly provided in the Plan, no action hereunder may, without the consent of a Participant, reduce the Participant’s rights under any previously granted and outstanding Award. Nothing in the Plan shall limit the right of the Company to pay compensation of any kind outside the terms of the Plan.
16.      No Obligation to Exercise

The grant to a Participant of an Award shall impose no obligation upon such Participant to exercise such Award.


13


Exhibit 10.4


17.      Transfers Upon Death

Upon the death of a Participant, outstanding Awards granted to such Participant may be exercised only by the executors or administrators of the Participant’s estate or by any person or persons who shall have acquired such right to exercise by will or by the laws of descent and distribution. No transfer by will or the laws of descent and distribution of any Award, or the right to exercise any Award, shall be effective to bind Nationstar unless the Committee shall have been furnished with (a) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the transfer and (b) an agreement by the transferee to comply with all the terms and conditions of the Award that are or would have been applicable to the Participant and to be bound by the acknowledgements made by the Participant in connection with the grant of the Award.

18.      Expenses and Receipts

The expenses of the Plan shall be paid by Nationstar. Any proceeds received by Nationstar in connection with any Award will be used for general corporate purposes.

19.      Definition of Change in Control .
As used in any instrument governing the terms of any Award, the term “Change in Control” means the occurrence of any of the following, provided that any of the following actions by Fortress Investment Group LLC or its affiliates shall not constitute a Change in Control:
(i)      any one person, or more than one person acting as a group (as defined under U.S. Department of Treasury Regulation (“Treasury Regulation”) § 1.409A-3(i)(5)(v)(B)) acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company;
(ii)      any one person, or more than one person acting as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30 percent or more of the total voting power of the stock of the Company;
(iii)      a majority of members of the Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors before the date of the appointment or election.
The foregoing clauses (i) through (iii) shall be interpreted in a manner that is consistent with the Treasury Regulations promulgated pursuant to Section 409A of the Code so that all, and only, such transactions or events that could qualify as a “change in control event” within the meaning of Treasury Regulation § 1.409A-3(i)(5)(i) will be deemed to be a Change in Control for purposes of this Plan.


14


Exhibit 10.4



20.      Governing Law

The Plan and the rights of all persons under the Plan shall be construed and administered in accordance with the laws of the State of New York without regard to its conflict of law principles.

21.      Term of Plan

No grants of Awards may be made under the Plan after February 24, 2021.























15



NATIONSTAR MORTGAGE HOLDINGS INC.
RESTRICTED STOCK UNIT AGREEMENT

Grantee: __________________________
Grant Date: _________________________
Number of Restricted Stock Units: ___________________
General Vesting Schedule: Ratably over 3 years

1. Grant of Restricted Stock Units . Pursuant to, and subject to, the terms and conditions set forth herein and in the 2012 Incentive Compensation Plan (the “ Plan ”), Nationstar Mortgage Holdings Inc. (the “ Company ”) hereby grants to Grantee the number of restricted stock units (“ Restricted Stock Units ”) set forth above. Each Restricted Stock Unit granted hereby entitles the Grantee to receive one share of Common Stock of the Company.

2.     Vesting; Settlement . The Restricted Stock Units shall become vested as follows: 33.3% of the Restricted Stock Units shall vest on the first anniversary of the [Grant Date][date of hire]; 33.3% of the Restricted Stock Units shall vest on the second anniversary of the [Grant Date][date of hire]; and 33.4% of the Restricted Stock Units shall vest on the third anniversary of the [Grant Date][date of hire]; provided that (i) the Grantee remains continuously employed by the Company and in good standing through each such applicable vesting date or (ii) the Grantee’s employment has terminated by reason of Retirement and Grantee has not breached the restrictive covenants set forth in Section 4. Notwithstanding the foregoing, (i) in the event that the Grantee’s employment ends on account of the Grantee’s death or Disability at any time, all unvested Restricted Stock Units not previously forfeited shall immediately vest on such date employment ends and (ii) in the event of a Change in Control, all unvested Restricted Stock Units not previously forfeited shall vest on such Change in Control. The Restricted Stock Units will be settled no later than the thirtieth (30 th ) day following the vesting thereof as set forth in this Section 2. The Grantee shall have no rights as a shareholder with respect to the shares of Common Stock of the Company underlying the Restricted Stock Units until settlement thereof.

3.     Dividend Equivalents . The Grantee shall not be entitled to any Dividend Equivalents with respect to the Restricted Stock Units to reflect any dividends payable on shares of Common Stock.

4.     Restrictive Covenants . In consideration for the Restricted Stock Units, Grantee agrees that during the period commencing on the date hereof and ending on the settlement date, Grantee shall not directly or indirectly, either as a principal, agent, employee, employer, consultant, partner, shareholder of a closely held corporation or shareholder in excess of five (5%) percent of a publicly traded corporation, corporate officer or director, or in any other individual or representative capacity, engage or otherwise participate in any manner or fashion in any business that is in competition in any manner whatsoever with the mortgage and real estate services businesses of the Company or of any other business in which the Company is engaged or which is part of the Company’s Developing Business, within states in which the Company is engaged in such business or Developing Business. In addition, from and after the date hereof until the later of (i) the settlement date or (ii) the twelve (12) month period immediately following Grantee’s termination of employment with the Company or its



subsidiaries for any reason , Grantee covenants and agrees not to directly or indirectly, solicit or induce any officer, director, employee, agent, independent contractor or consultant or client of the Company to terminate his, her or its employment or other relationship with the Company, or otherwise encourage any such person or entity to leave or sever his, her or its employment or other relationship with the Company for any reason. Further, from and after the date hereof until the later of (i) the settlement date or (ii) the twelve (12) month period immediately following Grantee’s termination of employment with the Company or its subsidiaries for any reason, Grantee agrees that Grantee shall not make any disparaging or defamatory comments regarding the Company or its directors, officers, executives or employees, or, after termination of Grantee’s employment relationship with the Company, make any such comments concerning any aspect of the termination of their relationship. The obligations of Grantee under this subparagraph shall not apply to disclosures required by applicable law, regulation or order of any court or governmental agency, provided Grantee shall promptly notify the Company in writing of any such obligation. The Grantee further covenants and agrees that these restrictive covenants are reasonable as to duration, terms and geographical area and that the same protect the legitimate interests of the Company, impose no undue hardship on Grantee, are not injurious to the public, and that any violation of these restrictive covenants shall be specifically enforceable in any court with jurisdiction in the matter.
5.     Forfeiture . Subject to the provisions of the Plan and Section 2 of this Agreement, Restricted Stock Units which have not become vested on the date the Grantee’s employment ends for any reason, shall immediately be forfeited on such date. Furthermore, the termination of the Grantee’s employment by the Company for Cause, including a deemed termination for Cause or the failure of Grantee to comply with Section 4 hereof will result in the forfeiture of all unsettled Restricted Stock Units without consideration therefor, and the Grantee shall cease to have any rights with respect thereto.

6.     Withholding Tax . The Grantee hereby agrees that the Company shall have the right pursuant to Section 14 of the Plan to require the Grantee to remit to the Company in cash or withhold from any payment required to be made with respect to the Restricted Stock Units, an amount sufficient to satisfy any federal, state and local withholding and employment tax requirements that become payable in respect of the Restricted Stock Units. The Company hereby approves any election that may be made by the Grantee pursuant to Sections 14(b) and 14(c) of the Plan, which approval is subject revocation at any time by any duly authorized officer of the Company.
7.     Section 409A of the Code . Notwithstanding any provision of this Agreement to the contrary, this Agreement is intended to provide for a grant of deferred compensation that is compliant with Section 409A of the Code and related regulations and United States Department of the Treasury pronouncements (“ Section 409A ”). Any ambiguous provisions will be construed in a manner that is compliant with or exempt from the application of Section 409A. If a provision of this Agreement would result in the imposition of an applicable tax under Section 409A, such provision may be reformed to avoid imposition of the applicable tax.

8.     Incorporation of the Plan and Definitions . All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein. If there is any conflict between the terms and conditions of the Plan and this Agreement, the terms and
conditions of this Agreement, as interpreted by the Board of Directors or the Committee shall govern. Unless otherwise indicated herein, all capitalized terms used herein shall have the meanings given to such terms in the Plan. For purposes of this Agreement:

“Cause” shall mean (i) the Grantee’s conviction of, guilty plea or plea of nolo contendere concerning or confession of any felony, (ii) any act of misappropriation or fraud committed by the Grantee in connection with the Company’s or its subsidiaries’ or affiliates’ businesses, (iii) any material breach of any reasonable and lawful rule or directive of the Company (including without limitation cooperation with any regulatory investigations, inquiries or third party litigation) or any obligation the Grantee has to the Company pursuant to an agreement or otherwise, (iv) the gross or willful neglect of duties or gross misconduct by the Grantee, or (v) the use of drugs or excessive use of alcohol to the extent that any of such uses in the Company’s good faith determination materially interferes with the performance of Grantee’s duties. Following the Grantee’s termination of employment for any reason other than a termination by the Company for Cause, if the Company reasonably and in good faith determines that the Grantee’s employment could have been terminated by the Company for Cause, or the Grantee violates any post-termination obligations that he or she may have to the Company, the Grantee’s employment shall be deemed to have been terminated for Cause for purposes of this Agreement.
“Developing Business” shall mean the new business concepts and services the Company has developed and is in the process of developing during the Grantee’s employment with the Company.
“Disability” shall mean (i) “Disability” as defined in such Grantee’s written contract of Employment or engagement, if any, as may be in effect at the time of the occurrence of any acts or omissions that may constitute “Disability”; or (ii), in the case of any Grantee who is not party to any such written contract or whose written contract does not contain a definition of “Disability,” a mental or physical condition which, with or without reasonable accommodations, renders a Grantee permanently unable or incompetent to carry out the responsibilities he or she held or tasks and duties to which he or she was assigned at the time the condition was incurred, with such determination to be made by the Committee on the basis of such medical and other competent evidence as the Committee in its sole discretion shall deem relevant.
“Retirement” shall mean (i) the Grantee (a) if an Executive Vice President, provided at least six months written notice to the Company of his or her intention to retire prior to the date of his or her retirement or (b) if a Senior Vice President or Vice President, provided at least three months written notice of his or her intention to retire prior to the date of his or her retirement (the “Notice Period”), (ii) the Grantee met the Retirement Criteria at the commencement of the Notice Period and (iii) the Grantee remained employed with the Company during the Notice Period and sustained a level of performance during the Notice Period that would not be a basis of a termination for Cause.
“Retirement Criteria” shall mean the Grantee’s termination of employment with the Company if Grantee’s (i) age plus (ii) his or her years of service with the Company is equal to or greater than 70; provided that Grantee must (a) be at least 55 years of age and (b) have at least 5 years of service with the Company.

2



9.     Integration . This Agreement and the Plan contain the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and in the Plan. This Agreement and the Plan supersede all prior agreements and understandings between the parties with respect to its subject matter.

10.     Grantee Acknowledgment . The Grantee hereby acknowledges receipt of a copy of the Plan. The Grantee hereby acknowledges that all decisions, determinations and interpretations of the Board, or a Committee thereof, in respect of the Plan, this Agreement and this Award of Restricted Stock Units shall be final and conclusive.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Grantee has hereunto signed this Agreement on the Grantee’s own behalf, thereby representing that the Grantee has carefully read and understands this Agreement and the Plan as of the day and year first written above.
Acknowledged and Accepted:
___________________________
[Grantee]






3


Exhibit 31.1

Certification Pursuant to Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
I, Jay Bray, certify that:

1.
I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2015 of Nationstar Mortgage Holdings Inc.;
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 15(d) - 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.

 
 
 
Date:
May 07, 2015
 
 
 
/s/ Jay Bray
 
 
 
Jay Bray
 
 
 
Chief Executive Officer






Exhibit 31.2
Certification Pursuant to Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
I, Robert D. Stiles, certify that:

1.
I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2015 of Nationstar Mortgage Holdings Inc.;
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.


 
 
 
Date:
May 07, 2015
 
 
 
/s/ Robert D. Stiles
 
 
 
 Robert D. Stiles
 
 
 
Chief Financial Officer







Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Nationstar Mortgage Holdings Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jay Bray, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1)
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:
May 07, 2015
 
/s/ Jay Bray
 
Jay Bray
 
Chief Executive Officer





Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Nationstar Mortgage Holdings Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert D. Stiles, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1)
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:
May 07, 2015
 
/s/ Robert D. Stiles
 
Robert D. Stiles
 
Chief Financial Officer