UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  
__________________________________________________ 
FORM 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                       to                     
Commission file number: 001-35449
_________________________________________________________ 
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

Securities registered pursuant to Section 12(b) of the Act:
   Title of Each Class
 
  Name of each exchange on which registered
  Common Stock, $.01 par value per share
 
 New York Stock Exchange
 
 
 
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.          Yes  o  No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.         Yes o  No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                                  Yes x  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.                                                 x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12(b)-2 of the Exchange Act (check one)
Large Accelerated Filer   o
 
      Accelerated Filer     x
Non-Accelerated Filer    o     (Do not check if a  smaller reporting company.)
 
      Smaller reporting company   o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).        Yes  o   No x

Number of shares of common stock, $0.01 par value, outstanding as of January 31, 2016: 108,120,381

As of June 30, 2015 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately $663,509,128 based on the closing sale price of $16.80 as reported on the New York Stock Exchange.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our definitive Proxy Statement, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the Company's fiscal year-end, are incorporated by reference into Part III, Items 10-14 of this Annual Report on Form 10-K.


NATIONSTAR MORTGAGE HOLDINGS INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
 
 
 
Page   
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
 
 
 
 
 
 
Item 9.
Item 9A.
Item 9B.
 
 
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
 



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Table of Contents

PART I.
Item 1.   Business
The disclosures set forth in this item are qualified by Item 1A. Risk Factors and the section captioned "Caution Regarding Forward-Looking Statements" in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of this report and other cautionary statements set forth elsewhere in this report.

Company Description
Nationstar Mortgage Holdings Inc., a Delaware corporation formed in 2011, including wholly-owned subsidiaries (collectively, Nationstar or the Company), provides servicing, origination and transaction based services principally to single-family residences throughout the United States.

We are one of the largest residential loan servicers in the United States with a demonstrated track record of improving asset performance. In addition, we operate an integrated residential loan origination platform that is primarily focused on customer retention. Our Xome SM subsidiary offers an array of complementary services related to the purchase and disposition of residential real estate. Each of our services is described below in more detail.

Our success ultimately depends on working with customers, investors and regulators to deliver quality, compliant solutions that foster and preserve home ownership. Customers include all residential real estate market participants (e.g., homeowners, homebuyers, home sellers, investors, real estate agents). Investors principally include government sponsored entities (GSEs) such as the Federal National Mortgage Association (Fannie Mae or FNMA) and the Federal Home Loan Mortgage Corp (Freddie Mac or FHLMC), investors in private label securitizations, Government National Mortgage Association (Ginnie Mae or GNMA), as well as those that invest in mortgage servicing rights (MSRs) and hire us to subservice. We are regulated both at the Federal level and at the individual state level.

We conduct our operations through three operating segments: Servicing, Originations and Xome. For financial information concerning our reportable segments see Note 20, Business Segment Reporting, in the Consolidated Financial Statements.

Servicing
We are one of the largest residential mortgage servicers in the United States conducting operations through our Nationstar Mortgage and Champion Mortgage brands. As of December 31, 2015, we service 2.5 million customers with an aggregate outstanding principal balance in excess of $402.6 billion. As of December 31, 2015, we are the largest non-bank servicer and the fourth largest residential mortgage servicer.

Servicing primarily involves loan administration, payment processing, mortgage escrow account administration, collection of insurance premiums, response to homeowner inquiries, loss mitigation solutions including loan modifications and supervision of foreclosures and property dispositions on behalf of the owners of the loans. These activities generate reliable and recurring revenues and cash flows. Revenues primarily consist of servicing fees which are generally expressed as basis points of the outstanding unpaid principal balance (UPB) and ancillary revenues (e.g., late fees, modification fees, incentive fees). Our servicing portfolio may be segregated into the following components:

▪
MSRs - Fair Value consists of rights we own and record 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 we originate. We have elected to mark this portfolio to fair value each quarter. Due principally to servicer advance requirements, MSRs - Fair Value require capital and liquidity; however, such advances are generally financeable. Our rapid growth has been driven by the purchase and origination of MSRs. MSRs - Fair Value account for 86.8% of UPB of our total portfolio as of December 31, 2015 .

▪
Subservicing consists of forward residential mortgage loans we service on behalf of others who are MSR or mortgage owners; therefore, no subservicing asset is recorded in our consolidated financial statements. Since we are not the owner of the servicing rights, we have limited advance obligations and as a result the capital requirements are minimized. Subservicing accounts for 5.7% of UPB of our total portfolio as of December 31, 2015 .

▪
MSRs - LOCOM consists of rights to service reverse residential mortgage loans, owned by Fannie Mae, Ginnie Mae and private investors. We elected to record MSRs - LOCOM at the lower of cost or market. Similar to our MSR - Fair Value portfolio, we temporarily advance funds as required under the applicable servicing standards. Our MSRs - LOCOM portfolio accounts for 7.5% of our servicing portfolio as of December 31, 2015 .

MSRs - Fair Value consist of both 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

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marked at fair value that are interest rate sensitive, servicing values are typically correlated to interest rates such that when interest rates rise, the value of the servicing portfolio also increases principally as a result of expected lower prepayments. The value of 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.

For each loan we service, we utilize a customer-centric model designed to increase borrower repayment performance with a view towards home ownership preservation and to decrease borrower delinquencies and defaults on mortgage portfolios. Keys to this model include frequent borrower interactions and utilization of multiple loss mitigation strategies particularly in the early stages of a default. We train and empower our individual customer service representatives to find solutions that work for homeowners when circumstances allow. This commitment to continued home ownership helps preserve neighborhoods and therefore home values, as well as improves asset performance for our investors.

Capital Light Strategy
Since 2007, we have grown our servicing portfolio principally through the acquisition of MSRs and through our origination platform. We financed these acquisitions through the offering of equity and unsecured senior notes as well as financing transactions such as excess spread financing and mortgage servicing rights financing as further described in the notes to the consolidated financial statements. Through these financing transactions, we were able to substantially grow our MSR portfolio while utilizing less capital at reasonable returns.

During 2015, we continued our progress towards a more capital light strategy in a couple of ways. First, we sold $4.6 billion of MSRs at fair value while retaining subservicing rights. Second, in October 2015, we were awarded a significant private-label subservicing contract of approximately $55 billion in initial UPB to be the sole servicer for a leading financial institution. We expect the initial loans to board over the first half of 2016. The subservicing agreement and our origination platform should allow us to grow our MSR portfolio over 2016 with limited use of capital.

We now have multiple avenues from which to source MSRs. First, consistent with historical practice, we will continue to purchase MSRs to the extent our return thresholds are met. Additional sources to acquire MSRs that require limited or no capital to sustain and grow our portfolio include our origination platform, which is focused on customer retention, our new subservicing clients, who intends to substantially grow their portfolio over the coming years and lead generation through the Xome platform. In addition, we are actively pursuing additional subservicing contracts given our expanded private label subservicing capabilities.

Originations
We primarily originate conventional residential mortgage loans through both the Greenlight Financial Services (Greenlight) and Nationstar Mortgage brands. We are licensed and qualified to originate in all fifty states and the District of Columbia. As of September 30, 2015, we are the eighteenth ranked residential loan originator funding $18.0 billion.

We primarily market mortgage products to existing servicing customers and customers of homebuilders as well as participate in the correspondent market. Since 2012, we have been principally focused on refinance solutions for our existing servicing customers. We earn an up-front fee for processing the loan application which covers the costs of securing the loan application and underwriting. The loan origination market is sensitive to interest rate movements as typically loan applications increase as interest rates fall.

We believe an integrated originations platform provides us with a competitive advantage for several reasons including (i) a servicing portfolio retention source by providing refinancing services to existing servicing customers; (ii) an organic source of servicing assets at attractive returns; and (iii) a loss mitigation solution for servicing clients and customers by offering refinancing options to borrowers allowing them to lower their monthly payments which may lower their risk of defaulting.

We utilize warehouse facilities to fund originated loans. To both mitigate credit risk and minimize the capital required, we sell loans within approximately 30 days of funding while retaining the associated MSRs.

Xome
Xome (pronounced "Zome") is a residential real estate services and technology company created to perfect the residential real estate transaction experience for consumers and real estate professionals (including brokers and agents) through service offerings. Xome intends to enhance the real estate buying and selling experience through increased connectivity, transparency, convenience and speed throughout the entire transaction process. Xome is comprised of three business units:

▪
Xome Exchange is a national tech-enabled platform that efficiently manages and sells residential properties. In the last two years, Xome Exchange has sold over 40,000 properties and ranks as a top 5 site for residential real estate sales. Core services include traditional non-distressed sales, REO auctions, short sales and foreclosure trustee sales.


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▪
Xome Services connects the major touch points of the real estate transactions process by providing title, valuation, settlement and closing services to consumer and financial institutions. Xome Services includes our Title365 branded offerings. Over the last two years, Xome Services has completed over 560,000 title and close orders and more than 725,000 collateral valuation orders.

▪
Xome Technology and Support provides connectivity for the entire residential real estate market through technology development, data analytics and customer relationship management tools. Xome Technology contains diversified set of businesses including Real Estate Digital (MLS data and broker tools), Quantarium (cutting edge data analytics), GoPaperless (e-signature platform), Xome Signings (notary services), Cerulean (digital marketing) and Xome Labs (product/technology development incubation lab).

We believe that Xome is the only industry participant that has the data, content, services and technologies all together that facilitate and streamline the residential real estate transaction process both for consumers and financial institutions.

Corporate and Other
Corporate costs, including expenses related to executive salaries and other corporate functions that are not directly attributable to our operating segments are included in Corporate and Other. Corporate and Other also includes our legacy asset portfolio, which consists primarily of non-prime residential mortgage loans that we continue to service, most of which were originated from April to July 2007. In November 2009, the legacy assets were financed with nonrecourse debt that requires no additional capital or equity contributions. Finally, Corporate and Other includes interest expense associated with unsecured senior notes.

Competition
The residential real estate market is highly competitive. In addition, because of our broad array of services, we have a variety of competitors. Although having an integrated platform increases the number of competitors, we believe it provides us with a competitive advantage particularly as the residential real estate market continues to evolve.

The Servicing segment primarily competes against large commercial banks and savings institutions that have significantly greater resources and access to capital than we do, which provides them the benefit of a lower cost of funds. We also compete against other non-bank servicers. The ability to differentiate ourselves and increase competitiveness is largely dependent upon our customer centric servicing model and working effectively with regulators at both the Federal and state level.

In the Originations segment, we compete with financial institutions, mortgage bankers and mortgage lenders at the local, regional and national level. Many of these institutions have significantly greater resources and access to capital, which gives them the benefit of lower cost of funds. We face competition in such areas as mortgage loan offerings, rates, fees and customer service. We attempt to differentiate the value of our origination products primarily through our customer service, mortgage loan offerings, rates and fees. In addition, our Originations segment's ability to market to our existing servicing portfolio provides a significant advantage compared to other originators.

The Xome segment primarily competes with a few national vendors as well as a large number of regional and local providers of residential real estate service offerings. In addition, we compete with the numerous technology providers in the residential real estate industry. Since the Xome segment offers a diverse array of services, we cannot estimate our position in the market with any amount of certainty, but we believe we represent a small portion of very large-sized markets. In addition, our customers retain multiple providers and continuously evaluate our performance against various other competitors. Competitive factors in our Xome segment include the compliance, quality and timeliness of our services, the size and competence of our network of vendors and the breadth of the services we offer.

Employees
As of December 31, 2015 , we had approximately 6,740 employees, none of which were subject to a collective bargaining agreement.


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Additional Information
Our corporate website is located at www.nationstarmtg.com . We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) available free of charge through our website as soon as reasonably practicable after we electronically file the reports with, or furnish them to, the Securities and Exchange Commission (SEC). Our website also provides access to reports filed by our directors, executive officers and certain significant stockholders pursuant to Section 16 of the Exchange Act. In addition, our Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for the Chief Executive Officer and Senior Financial Officers, and charters for the standing committees of our Board of Directors are available on our website. The information on our website is not incorporated by reference into this report and is provided as an inactive textual reference only. In addition, the SEC maintains a website, www.sec.gov that contains reports, proxy and information statements and other information that we file electronically with the SEC.

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Item 1A.   Risk Factors

You should carefully consider the following risk factors together with all of the other information included in this report, including the financial statements and related notes, when deciding to invest in us. The risks and uncertainties described below could materially adversely affect our business, financial condition and results of operations in future periods and are not the only risks facing our Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods.

Financial, Credit and Liquidity Risks

Our earnings may decrease because of changes in prevailing interest rates.
Our profitability is directly affected by changes in prevailing interest rates. The following are certain material risks we face related to changes in interest rates:

Servicing:
•
a decrease in interest rates may increase prepayment speeds which may lead to (i) increased amortization expense; (ii) decrease in servicing fees; and (iii) decrease in the value of our MSRs;

•
Nationstar primarily originates fixed rate mortgage loans with a much smaller percentage of adjustable rate mortgage loan. Borrowers with adjustable rate mortgage loans are exposed to increased monthly payments when the related mortgage loan’s interest rate adjusts upward from an initial fixed rate or a low introductory rate, as applicable, to the rate computed in accordance with the applicable index and margin. Borrowers with adjustable rate mortgage loans seeking to refinance their mortgage loans to avoid increased monthly payments as a result of an upward adjustment of the mortgage loan’s interest rate may no longer be able to find available replacement loans at comparably low interest rates. This increase in borrowers’ monthly payments, together with any increase in prevailing market interest rates, may result in significantly increased monthly payments for borrowers with adjustable rate mortgage loans, which may cause delinquency, default and foreclosure. Increased mortgage defaults and foreclosures may adversely affect our business as they reduce the number of mortgages we service;

Originations:
•
an increase in interest rates could adversely affect our loan originations volume because refinancing an existing loan would be less attractive for homeowners and qualifying for a purchase money loan may be more difficult for consumers;

Other:
•
an increase in interest rates would increase the cost of servicing our outstanding debt, including our ability to finance servicing advances and loan originations; and

•
a decrease in interest rates could reduce our earnings from our custodial deposit accounts.

Any of the foregoing could adversely affect our business, financial condition and results of operation.

We use financial models and estimates in determining the fair value of certain assets, such as MSRs and if our estimates or assumptions prove to be incorrect, it may affect our earnings.
We use internal financial models that utilize, wherever possible, market participant data to value certain of our assets, including our MSRs, newly originated loans held for sale and investments in debt securities for purposes of financial reporting. These models are complex and use asset-specific collateral data and market inputs for interest and discount rates. In addition, the modeling requirements of MSRs are complex because of the high number of variables that drive cash flows associated with MSRs. Even if the general accuracy of our valuation models is validated, valuations are highly dependent upon the reasonableness of our assumptions and the predictability of the relationships that drive the results of the models. In determining value for MSRs we make certain assumptions, many of which are beyond our control, including, among other things:
•
the rates of prepayment and repayment within the underlying pools of mortgage loans;
•
projected rates of delinquencies, defaults and liquidations;

•
future interest rates;

•
our cost to service the loans;


6


•
ancillary revenues; and

•
amounts of future servicing advances.

If these assumptions or relationships prove to be inaccurate, if market conditions change or if errors are found in our models, the value of certain of our assets may decrease, which could impact our ability to satisfy minimum net worth covenants and borrowing conditions in our debt agreements and adversely affect our business, financial condition or results of operations.

Our hedging strategies may not be successful in mitigating our risks associated with interest rates.
We use various derivative financial instruments to provide a level of protection against interest rate risks, but no hedging strategy can protect us completely. The nature and timing of hedging transactions influence the effectiveness of these strategies. Poorly designed strategies, improperly executed and documented transactions or inaccurate assumptions could actually increase our risks and losses. In addition, hedging strategies involve transaction and other costs. Our hedging strategies and the derivatives that we use may not be able to adequately offset the risks of interest rate volatility and our hedging transactions may result in or magnify losses. Furthermore, interest rate derivatives may not be available on favorable terms or at all, particularly during economic downturns. Any of the foregoing risks could adversely affect our business, financial condition and results of operations.

We may be unable to obtain sufficient capital to operate our business.
Our financing strategy includes the use of significant leverage because in order to make servicing advances and fund originations, we require liquidity in excess of that generated by our operations. Accordingly, our ability to finance our operations depends on our ability to secure financing on acceptable terms and to renew or replace existing financings as they expire. Such financings may not be available on acceptable terms or at all. If we are unable to obtain such financings, we may need to raise the funds we require in the capital markets or through other means, any of which may increase our cost of funds.

We are generally required to renew our financing arrangements each year, which exposes us to refinancing and interest rate risks. Our ability to refinance existing debt and borrow additional funds is affected by a variety of factors including:

•
the available liquidity in the credit markets;

•
prevailing interest rates;

•
an event of default, a negative ratings action by a rating agency and limitations imposed on us under the indentures governing our current debt that contain restrictive covenants and borrowing conditions that may limit our ability to raise additional debt;

•
the strength of the lenders from which we borrow; and

•
limitations on borrowings on advance facilities imposed by the amount of eligible collateral pledged, which may be less than the borrowing capacity of the advance facility.

If we are unable to obtain sufficient capital on acceptable terms for any of the foregoing reasons, this could adversely affect our business, financial condition and results of operations.

Our substantial indebtedness may limit our financial and operating activities and our ability to incur additional debt to fund future needs.
We have substantial indebtedness. In addition, we and our subsidiaries are able to incur additional indebtedness in the future, subject to the limitations contained in the agreements governing our indebtedness. Although these agreements generally restrict us and our restricted subsidiaries from incurring additional indebtedness, these restrictions are subject to important exceptions and qualifications. If we or our subsidiaries incur additional debt, the related risks could be magnified and could limit our financial and operating activities.

Our current and any future indebtedness we incur could:

•
require us to dedicate a substantial portion of cash flow from operations to the payment of principal and interest on indebtedness, including indebtedness we may incur in the future, thereby reducing the funds available for other purposes;

•
make it more difficult for us to satisfy and comply with our obligations with respect to the unsecured senior notes;

•
subject us to increased sensitivity to increases in prevailing interest rates;

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•
place us at a competitive disadvantage to competitors with relatively less debt in economic downturns, adverse industry conditions or catastrophic external events; or

•
reduce our flexibility in planning for or responding to changing business, industry and economic conditions.

In addition, our substantial level of indebtedness could limit our ability to obtain additional financing on acceptable terms or at all to fund future acquisitions, working capital, capital expenditures, debt service requirements, general corporate and other purposes, which could have a material adverse effect on our business and financial condition. Our liquidity needs could vary significantly and may be affected by general economic conditions, industry trends, performance and many other factors outside of our control. Our substantial obligations could have other important consequences. For example, our failure to comply with the restrictive covenants in the agreements governing our indebtedness, which limit our ability to incur liens, to incur debt and to sell assets, could result in an event of default that, if not cured or waived, could harm our business or prospects and could result in our bankruptcy.

We may not realize all of the anticipated benefits of previous or potential future acquisitions.
Our ability to realize the anticipated benefits of previous or potential future acquisitions, including the acquisition of assets, will depend, in part, on our ability to scale-up to appropriately service any such assets, and integrate the businesses of such acquired companies with our business. The process of acquiring assets or companies may disrupt our business and may not result in the full benefits expected. The risks associated with acquisitions include, among others:

•
unknown or contingent liabilities;

•
unanticipated issues in integrating information, servicing practices, communications and other systems;

•
unanticipated incompatibility of purchasing, logistics, marketing and administration methods;

•
not retaining key employees; and

•
the diversion of management’s attention from ongoing business concerns.

In the event that we acquire a platform, we may elect to operate this platform in addition to our current platform for a period of time or indefinitely. Individually or collectively, these transactions could substantially increase the UPB, or alter the composition of our portfolio, of mortgage loans that we service or have an otherwise significant impact on our business. We can provide no assurances that we will enter into any such agreements or as to the timing of any potential acquisitions. Additionally, we may make potentially significant acquisitions which could expose us to greater risks than we currently experience in servicing our current portfolio and adversely affect our business, financial condition and results of operations. We also may not realize all of the anticipated benefits of potential future acquisitions, which could adversely affect our business, financial condition and results of operations.

Operational Risks

Servicing
A significant increase in delinquencies for the loans we service could have a significant impact on our revenues, expenses and liquidity and on the valuation of our MSRs as follows.

•
Revenue. An increase in delinquencies will result in lower revenue for loans we service for GSEs and Ginnie Mae because we only collect servicing fees from GSEs and Ginnie Mae for performing loans. Additionally, while increased delinquencies generate higher ancillary revenues, including late fees, these fees are not likely to be recoverable in the event that the related loan is liquidated. In addition, an increase in delinquencies lowers the interest income we receive on cash held in collection and other accounts.

•
Expenses. An increase in delinquencies will result in a higher cost to service due to the increased time and effort required to collect payments from delinquent borrowers and an increase in interest expense as a result of an increase in our advancing obligations.

•
Liquidity. An increase in delinquencies could also negatively impact our liquidity because of an increase in borrowings under advance facilities.


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•
Valuation of MSRs. We base the price we pay for MSRs on, among other things, our projections of the cash flows from the related pool of mortgage loans. Our expectation of delinquencies is a significant assumption underlying those cash flow projections. If delinquencies were significantly greater than expected, the estimated fair value of our MSRs could be diminished. If the estimated fair value of MSRs is reduced, we may not be able to satisfy minimum net worth covenants and borrowing conditions in our debt agreements and we could suffer a loss, which has a negative impact on our financial results.

An increase in delinquency rates could therefore adversely affect our business, financial condition and results of operations.

We may not be able to maintain or grow our business if we cannot acquire MSRs or enter into additional subservicing agreements on favorable terms.
Our servicing portfolio is subject to “run off,” meaning that mortgage loans serviced by us may be prepaid prior to maturity or repaid through standard amortization of principal. As a result, our ability to maintain the size of our servicing portfolio depends on our ability to acquire the right to service additional pools of residential mortgages, enter into additional subservicing agreements or to originate additional mortgages.

In addition, the FHFA’s Office of Inspector General (OIG) recommended enhanced GSE oversight of transfers of MSRs to non-bank servicers such as us. While we currently meet FHFA requirements, the FHFA could enact more stringent requirements or other federal or state agencies may enact additional requirements that are more stringent.

If we are unable to acquire MSRs or enter into additional subservicing agreements on terms favorable to us or at all, which could adversely affect our business, financial condition and results of operations.

We service higher risk loans, which are more expensive to service than conventional mortgage loans.
A certain percentage of the mortgage loans we service are higher risk loans, meaning that the loans are to less credit worthy borrowers or for properties the value of which has decreased. These loans are more expensive to service because they require more frequent interaction with customers and greater monitoring and oversight. Additionally, in connection with the ongoing mortgage market reform and regulatory developments, servicers of higher risk loans are subject to increased scrutiny by state and federal regulators and will experience higher compliance costs, which could result in a further increase in servicing costs. We may not be able to pass along any of the additional expenses we incur in servicing higher risk loans to our servicing clients. The greater cost of servicing higher risk loans, which may be further increased through regulatory reform, consent decrees or enforcement, could adversely affect our business, financial condition and results of operations.

We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances.
MSRs - Fair Value : During any period in which a borrower is not making payments, we are required under most of our servicing agreements to advance our own funds to meet contractual principal and interest remittance requirements for investors, pay property taxes and insurance premiums, legal expenses and other protective advances. We also advance funds to maintain, repair and market real estate properties on behalf of investors. As home values change, we may have to reconsider certain of the assumptions underlying our decisions to make advances, and in certain situations our contractual obligations may require us to make certain advances for which we may not be reimbursed. In addition when a mortgage loan serviced by us defaults or becomes delinquent, the repayment to us of the advance may be delayed until the mortgage loan is repaid or refinanced or liquidation occurs.

We have sold to New Residential and certain third-party investors rights to mortgage servicing rights and servicer advances related to certain loan pools. In connection with the transaction, New Residential purchased the equity of wholly-owned special purpose subsidiaries of Nationstar that issued limited recourse variable funding to finance the advances. We continue to service these loans. In the event that New Residential receives requests for advances in excess of amounts that New Residential or its co-investors are willing or able to fund, we are obligated to fund these advance requests. Since we have transferred the related advance facilities to New Residential, we may have to obtain other sources of financing which may not be available.

Our inability to fund these advances could result in a termination event under the applicable servicing agreement, an event of default under the advance facilities and a breach of our purchase agreement with New Residential. Our inability to fund these advance requests could adversely affect our business, financial condition and results of operations.

Reverse Mortgages : As a reverse mortgage servicer, we are also responsible for funding any draws due to borrowers in a timely manner, remitting to investors interest accrued and paying for interest shortfalls. Advances on reverse mortgages are typically greater than advances on forward residential mortgages. They are typically recovered upon weekly or monthly reimbursement or from sales in the market. In the event we receive requests for advances in excess of amounts we are able to fund, we may not be able to fund these advance requests, which could materially and adversely affect our business operations. A delay in our ability to

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collect an advance may adversely affect our liquidity, and our inability to be reimbursed for an advance could adversely affect our business, financial condition and results of operations.

Our counterparties may terminate our servicing rights and subservicing contracts.
The owners of the loans we service and the primary servicers of the loans we subservice, may, under certain circumstances, terminate our MSRs or subservicing contracts, respectively.

Agency Servicing : We are party to seller/servicer agreements and/or subject to guidelines and regulations (collectively, seller/servicer obligations) with one or more of the GSEs, FHA and Ginnie Mae. As is standard in the industry, under the terms of these seller/servicer agreements, the agencies have the right to terminate us as servicer of the loans we service on their behalf at any time and also have the right to cause us to sell the MSRs to a third party. These seller/servicer obligations include financial covenants that include capital requirements related to tangible net worth. To the extent that these capital requirements are not met, the applicable agency may suspend or terminate these agreements, which would prohibit us from further servicing these specific types of mortgage loans or being an approved servicer. If we are unable to meet these capital requirements, this could adversely affect our business, financial condition and results of operations.

Other Servicers : Under our subservicing contracts, the primary servicers for which we conduct subservicing activities have the right to terminate our subservicing rights with or without cause, with limited notice and neglible compensation. We expect to continue to acquire subservicing rights, which could exacerbate these risks.

If we were to have our servicing or subservicing rights terminated on a material portion of our servicing portfolio, this could adversely affect our business, financial condition and results of operations.
We service reverse mortgages, which subjects us to additional risks and could have a material adverse effect on our business, liquidity, financial condition and results of operations.
The reverse mortgage business is subject to substantial risks, including market, credit, interest rate, liquidity, operational, reputational and legal risks. Although foreclosures involving reverse mortgages generally occur less frequently than forward mortgages, loan defaults on reverse mortgages leading to foreclosures may occur if borrowers fail to maintain their property or fail to pay taxes or home insurance premiums. A general increase in foreclosure rates may adversely impact how reverse mortgages are perceived by potential customers and thus reduce demand for reverse mortgages. Additionally, we could become subject to negative headline risk in the event that loan defaults on reverse mortgages lead to foreclosures or evictions of elderly homeowners.

We could have a downgrade in our servicer ratings.
Standard & Poor’s, Moody’s and Fitch rate us as a residential loan servicer. Favorable ratings from these agencies are important to the conduct of our loan servicing business. Downgrades in servicer ratings could:

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adversely affect our ability to finance servicing advances and maintain our status as an approved servicer by Fannie Mae and Freddie Mac;

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lead to the early termination of existing advance facilities and affect the terms and availability of advance facilities that we may seek in the future;

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cause our termination as servicer in our servicing agreements that require that we maintain specified servicer ratings; and

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further impair our ability to consummate future servicing transactions.

All of the above could adversely affect our business, financial condition and results of operations.

Originations
We may not be able to continue to maintain the volumes in our loan originations business, which would adversely affect our ability to replenish our servicing business.
The volume of loans funded within our loan originations business is subject to multiple factors, including changes in interest rates and availability of government programs. Volume in our originations business is based in large part on the refinancing of existing mortgage loans that we service, which is highly dependent on interest rates and government mortgage modification programs and may decline if interest rates increase or these programs are terminated. If we are unable to maintain our loan originations volume then our business, financial condition and results of operations could be adversely affected.


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We may be required to indemnify or repurchase loans we sold, or will sell, if these loans fail to meet certain criteria or characteristics or under other circumstances .
The indentures governing our securitized pools of loans and our contracts with purchasers of our whole loans contain provisions that require us to indemnify or repurchase the related loans under certain circumstances. While our contracts vary, they contain provisions that require us to repurchase loans if:

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our representations and warranties concerning loan quality and loan circumstances are inaccurate, including representations concerning the licensing of a mortgage broker;

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we fail to secure adequate mortgage insurance within a certain period after closing;

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a mortgage insurance provider denies coverage;

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we fail to comply, at the individual loan level or otherwise, with regulatory requirements in the current dynamic regulatory environment; or

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the borrower fails to make certain initial loan payments due to the purchaser.We are subject to repurchase claims and may continue to receive claims in the future. If we are required to indemnify or repurchase loans that we originate or have previously originated and sell or securitize that result in losses that exceed our reserve, this could adversely affect our business, financial condition and results of operations.

Changes to government mortgage modification programs could adversely affect future incremental revenues.
Under the Home Affordable Refinance Program (HARP), the Home Affordable Modification Program (HAMP), the Making Home Affordable plan (MHA), and similar government programs, a participating servicer may be entitled to receive financial incentives in connection with any modification plans it enters into with eligible borrowers and subsequent success fees to the extent that a borrower remains current in any agreed upon loan modification.

HARP & HAMP: We participate in and dedicate numerous resources to HARP and HAMP. Changes in legislation or regulation regarding HARP, HAMP or any other government mortgage modification program or changes in the requirements necessary to qualify for refinancing mortgage loans may impact the extent to which we participate in and receive financial benefits from such programs, or may increase our operating costs and the expense of our participation in such programs. HARP and HAMP are scheduled to expire on December 31, 2016. If HARP or HAMP is not extended, this could decrease our revenues, which could adversely affect our business, financial condition and results of operations.

MHA: Under MHA, a participating servicer may receive a financial incentive to modify qualifying loans, in accordance with the plan’s guidelines and requirements. This program and the FHA’s negative equity refinance program allow us to refinance loans to existing borrowers who have little or negative equity in their homes. The FHA’s negative equity refinance program is scheduled to expire on December 31, 2016, and the expiration of that program or changes in legislation or regulations regarding that program or the MHA could reduce our volume of refinancing originations to borrowers with little or negative equity in their homes.

Changes to HAMP, HARP, the MHA and other similar programs could adversely affect our future incremental revenues.

We are highly dependent upon programs administered by GSEs such as Fannie Mae and Freddie Mac, and by Ginnie Mae to generate revenues through mortgage loan sales to institutional investors.
There are various proposals which deal with GSE reform, including winding down the GSEs and reducing or eliminating over time the role of the GSEs in guaranteeing mortgages and providing funding for mortgage loans, as well as proposals to implement reforms relating to borrowers, lenders and investors in the mortgage market, including reducing the maximum size of loans that the GSEs can guarantee, phasing in a minimum down payment requirement for borrowers, improving underwriting standards and increasing accountability and transparency in the securitization process. Thus, the long-term future of the GSEs is still in doubt.

Our ability to generate revenues through mortgage loan sales to institutional investors depends to a significant degree on programs administered by the GSEs, Ginnie Mae, and others that facilitate the issuance of MBS in the secondary market. These entities play a critical role in the residential mortgage industry and we have significant business relationships with many of them. Almost all of the conforming loans we originate qualify under existing standards for inclusion in guaranteed mortgage securities backed by one of these entities. We also derive other material financial benefits from these relationships, including the assumption of credit risk on loans included in such mortgage securities in exchange for our payment of guarantee fees and the ability to avoid certain loan inventory finance costs through streamlined loan funding and sale procedures. If it is not possible for us to complete the sale or securitization of certain of our mortgage loans due to changes in GSE and Ginnie Mae programs, we may lack liquidity under

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our mortgage financing facilities to continue to fund mortgage loans and our revenues and margins on new loan originations would be materially and negatively impacted.

Any discontinuation of, or significant reduction in, the operation of these GSEs and Ginnie Mae or any significant adverse change in the level of activity in the secondary mortgage market or the underwriting criteria of these GSEs or Ginnie Mae could materially and adversely affect our business, liquidity, financial position and results of operations.

Xome
We may not be able to fully or successfully implement the Xome real estate platform.
In June 2015, we launched the Xome real estate platform, along with related mobile applications, creating the foundation for a digital platform for residential real estate, with the goal of connecting every major touch point in the transaction process from finding a home to closing the transaction. Developing and implementing this technology and data enhanced solutions requires smarter and more effective investments in innovative technologies and services and carries the risks associated with any new service development and implementation effort, including cost overruns, delays in delivery and performance monitoring. We may not be effective in fully or successfully implementing or integrating technology that operates across multiple technologies and platforms, that is appealing to consumers, that adequately meets the demands of the marketplace and that achieves market acceptance. Any of these results would have a negative impact on our financial condition and results of operations.

Xome is subject to extensive government regulation at the federal, state and local levels and any failure to comply with existing new regulations may adversely impact us, our clients and our results of operations.
Xome is subject to licensing and regulation as a real estate broker, auctioneer, appraisal management company, title agent and/or insurance agent in a number of states and may be subject to new licensing and regulation as it expands service offerings. Xome is subject to audits and examinations that are conducted by federal and state regulatory authorities and, as a vendor, is also subject to similar audit requirements imposed upon its clients, including us. Our employees and subsidiaries may be required to be licensed by various state licensing authorities for the particular type of service provided and to participate in regular background checks, fingerprinting requirements and continuing education programs. We may incur significant ongoing costs to comply with governmental regulations and new laws and regulations may be adopted that prohibit us from engaging Xome as a vendor, which could adversely affect our business, financial condition and results of operations.

Xome participates in highly competitive markets and pressure from existing and new companies could adversely affect Xome’s businesses.
The markets for Xome’s services are very competitive and Xome’s success depends on its ability to continue to attract additional customers, consumers and real estate professionals to its mobile applications and websites. Xome’s existing and potential competitors include companies that operate, or could develop, national and local real estate mobile applications and websites. These companies could devote greater technical and other resources than we have available and leverage their existing user bases and proprietary technologies to provide products and services that end-users might view as superior to our offerings. Any of Xome’s future or existing competitors may introduce different products that provide solutions similar to our own but with either better user interfaces, branding and marketing resources, or at a lower price. In addition, the time and expense associated with switching from Xome’s competitors’ services and technologies to ours may limit Xome’s growth. If we are unable to continue to innovate and grow the number of end-users of Xome’s mobile applications and websites, we may not remain competitive or may face downward pricing pressures, and our business and financial performance could suffer.

Xome’s revenue from clients in the mortgage and real estate industries is affected by the strength of the economy and the housing market generally, including the volume of real estate transactions.
Real estate markets are subject to fluctuations, due to factors such as the relative relationship of supply to demand, the availability of alternative investment products, the unemployment rate, real wage increases, inflation and the general economic environment. An economic slowdown or recession, in addition to other non-economic factors such as an excess supply in properties, a change in consumer preferences towards rental properties or declining consumer confidence in the economy, could have a material adverse effect on values of residential real estate properties. The volume of mortgage origination, mortgage refinancing and residential real estate transactions is highly variable. The level of real estate transactions are primarily affected by the average price of real estate sales, the availability of funds to finance purchases, mortgage interest rates, consumer confidence in the economy and general economic factors affecting the real estate markets. Reductions in these transaction volumes could have a material adverse effect on Xome’s business, financial condition and results of operations.

We could have, appear to have or be alleged to have conflicts of interest with Xome.
Our subsidiary, Xome, provides services to us. This relationship could create, appear to create or be alleged to create conflicts of interest. By obtaining services from a subsidiary, there is risk of possible claims of collusion or claims that such services are not provided by Xome upon market terms. We have adopted policies, procedures and practices, and have also engaged an independent

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third party to conduct a pricing study to ensure that the fees charged are customary and reasonable. However, there can be no assurance that such measures will be effective in eliminating all conflicts of interest or that third parties will refrain from making such allegations.

Other Risks

Technology failures or cyber-attacks against us or our vendors could damage our business operations and increase our costs.
The financial services industry as a whole is characterized by rapidly changing technologies, and system disruptions and failures caused by fire, power loss, telecommunications failures, unauthorized intrusion (cyber-attack), computer viruses and disabling devices, natural disasters and other similar events may interrupt or delay our ability to provide services to our borrowers. Security breaches, acts of vandalism and developments in computer intrusion capabilities could result in a compromise or breach of the technology that we or our vendors use to protect our borrowers’ personal information and transaction data. Despite our efforts to ensure the integrity of our systems, it is possible that we may not be able to anticipate or implement effective preventive measures against all security breaches, especially because the techniques used change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources, including third parties such as persons involved with organized crime or associated with external service providers. Those parties may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to our data or that of our customers or clients. These risks may increase in the future as we continue to increase our reliance on the Internet and use of web-based product offerings and on the use of cybersecurity.

A successful penetration or circumvention of the security of our or our vendors’ systems or a defect in the integrity of our or our vendors’ systems or cybersecurity could cause serious negative consequences for our business, including significant disruption of our operations, misappropriation of our confidential information or that of our customers, or damage to our computers or operating systems and to those of our customers and counterparties. Any of the foregoing events could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation exposure and harm to our reputation, all of which could adversely affect our business, financial condition and results of operations.

We and our vendors have operations in India and/or the Philippines that could be adversely affected by changes in political or economic stability or by government policies.
We currently have operations located in India and expect to grow those operations, and we have reduced our costs by contracting with certain third parties with operations in India and the Philippines. These countries are subject to relatively higher degrees of political and social instability and may lack the infrastructure to withstand political unrest or natural disasters. The political or regulatory climate in the United States, or elsewhere, also could change so that it would not be lawful or practical for us to use international operations in the manner in which we currently use them. If we or our vendors had to curtail or cease operations in these countries and transfer some or all of these operations to another geographic area, we would incur significant transition costs as well as higher future overhead costs that could materially and adversely affect our results of operations. In many foreign countries, particularly in those with developing economies, it may be common to engage in business practices that are prohibited by laws and regulations applicable to us, such as The Foreign Corrupt Practices Act of 1977, as amended (“FCPA”). Any violations of the FCPA or local anti-corruption laws by us, our subsidiaries or our local agents, could have an adverse effect on our business and reputation and result in substantial financial penalties or other sanctions.

Our vendor relationships subject us to a variety of risks.
We have significant vendors that, among other things, provide us with financial, technology and other services to support our businesses. With respect to vendors engaged to perform activities required by the applicable servicing criteria, we assess compliance with the applicable servicing criteria for the applicable vendor (for Reg AB purposes, some vendors provide their own assessments and attestations) and are required to have procedures in place to provide reasonable assurance that the vendor’s activities comply in all material respects with servicing criteria applicable to the vendor. In the event that a vendor’s activities do not comply with the servicing criteria, it could negatively impact our servicing agreements. In addition, if our current vendors were to stop providing services to us on acceptable terms, including as a result of one or more vendor bankruptcies, we may be unable to procure alternatives from other vendors in a timely and efficient manner and on acceptable terms, or at all. Further, we may incur significant costs to resolve any such disruptions in service and this could adversely affect our business, financial condition and results of operations.

Our risk management policies and procedures may not be effective.
Our risk management framework seeks to mitigate risk and appropriately balance risk and return. We have established policies and procedures intended to identify, monitor and manage the types of risk to which we are subject, including credit risk, market and interest rate risk, liquidity risk, regulatory, legal and reputational risk. Although we have devoted significant resources to develop our risk management policies and procedures and expect to continue to do so in the future, these policies and procedures, as well as our risk management techniques such as our hedging strategies, may not be fully effective. There may also be risks that

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exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated. As regulations and markets in which we operate continue to evolve, our risk management framework may not always keep sufficient pace with those changes. If our risk management framework does not effectively identify or mitigate our risks, we could suffer unexpected losses and could be materially adversely affected.

Negative public opinion could damage our reputation and adversely affect our business.
Reputation risk, or the risk to our business, earnings and capital from negative public opinion, is inherent in our business. Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending and debt collection practices, technology failures, corporate governance, and actions taken by government regulators and community organizations in response to those activities. Negative public opinion can also result from media coverage, whether accurate or not. Negative public opinion can adversely affect our ability to attract and retain customers, trading counterparties and employees and can expose us to litigation and regulatory action. Although we take steps to minimize reputation risk in dealing with our customers and communities, this risk will always be present in our organization.

Regulatory and Legal Risks

We operate within a highly regulated industry on a federal, state and local level and our business results are significantly impacted by the laws and regulations to which we are subject.
As a national mortgage services firm, we are subject to extensive and comprehensive regulation under federal, state and local laws in the United States. These laws and regulations significantly affect the way that we do business and can restrict the scope of our existing businesses and limit our ability to expand our product offerings or to pursue acquisitions, or can make our costs to service or originate loans higher, which could impact our financial results.

Regulatory requirements or changes to existing requirements that the Consumer Financial Protection Bureau (CFPB) may promulgate could require changes in our business, result in increased compliance costs and impair the profitability of such business. For example, the CFPB adopted rules regarding the implementation of changes to mortgage origination and settlement forms currently required under the Truth in Lending Act and Real Estate Settlement Procedures Act of 1974 which required significant modifications and enhancements to our mortgage production processes and systems. In addition, potential expansion of the authority of state attorneys general to bring actions to enforce federal consumer protection legislation, as a result of the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd Frank Act), we could be subject to additional state lawsuits and enforcement actions, thereby further increasing our legal and compliance costs. The cumulative effect of these changes could result in a material impact on our earnings.

We could be subject to additional regulatory requirements or changes under the Dodd Frank Act beyond those currently proposed, adopted or contemplated, particularly given the ongoing heightened regulatory environment in which financial institutions operate. There also continues to be discussion of potential GSE reform which would likely affect markets for mortgages and mortgage securities in ways that cannot be predicted. In addition FHFA initiatives may be implemented by the GSEs that could materially effect the market for conventional and/or government insured loans. The heightened regulatory environment has resulted not only in a tendency toward more regulation, but toward the most prescriptive regulation as regulatory agencies have generally taken a conservative approach to rule making, interpretive guidance and their general ongoing supervisory authority.

The ongoing implementation of the Dodd Frank Act, including the implementation of the originations and servicing rules by the CFPB and the CFPB’s continuing examinations of our business, could increase our regulatory compliance burden and associated costs and place restrictions on our operations, which could in turn adversely affect our business, financial condition and results of operations.

In addition, certain regulators took steps to block the acquisition of MSRs by one of our competitors. It is possible that we could become subject to similar actions with respect to our acquisition of MSRs or other key business operations, which could adversely affect our business, financial condition and results of operations.

We are subject to numerous legal proceedings, federal, state or local governmental examinations and enforcement investigations. Some of these matters are highly complex and slow to develop, and results are difficult to predict or estimate.
Legal Proceedings : We are routinely and currently involved in a significant number of legal proceedings concerning matters that arise in the ordinary course of our business. There is no assurance that the number of legal proceedings will not increase in the future, and it is possible that one or more class actions may be certified against us. These legal proceedings range from actions involving a single plaintiff to putative class action lawsuits with potentially tens of thousands of class members. These actions and proceedings are generally based on alleged violations of consumer protection, securities, employment, contract, tort, common law fraud and numerous other laws, including the Equal Credit Opportunity Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Real Estate Settlement Procedures Act, Servicemember's Civil Relief Act, Telephone Consumer Protection Act,

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Truth in Lending Act, Financial Institutions Reform, Recovery, and Enforcement Act of 1989, unfair, deceptive or abusive acts or practices in violation of the Dodd-Frank Act, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Home Mortgage Disclosure Act, the Bankruptcy Code, False Claims Act and Making Home Affordable loan modification programs.

Additionally, along with others in our industry, we are subject to repurchase or indemnification claims and may continue to receive claims in the future, including from our Legacy Portfolio regarding alleged breaches of representation and warranties relating to the sale of mortgage loans or the placement of mortgage loans into securitization trusts or the servicing of loans included in securitization trusts. We are also subject to legal actions or proceedings related to loss sharing and indemnification provisions of our various acquisitions.

Litigation and other proceedings may require that we pay settlement costs, legal fees, damages, including punitive damages, penalties or other charges, or be subject to injunctive relief affecting our business practices, any or all of which could adversely affect our financial results. In particular, ongoing and other legal proceedings brought under state consumer protection statutes may result in a separate fine for each violation of the statute, which, particularly in the case of class action lawsuits, could result in damages substantially in excess of the amounts we earned from the underlying activities and that could have a material adverse effect on our liquidity, financial position and results of operations. The costs of responding to the investigations can be substantial.

Regulatory Matter s: Our business is subject to extensive regulation, investigations and reviews by various federal, state and local regulatory and enforcement agencies, including without limitation, the CFPB, the Securities and Exchange Commission, the Department of Justice, the US Trustee Program, the multistate coalition of mortgage banking regulators and various State Attorneys General. See “Legal Proceedings” below in Part I, Item 3. As a result, we are subject to various legal proceedings, regulatory examinations, inquiries and requests for documentation in the ordinary course of our business. We have historically had a number of open investigations with various State Attorneys General and other federal and state regulatory and enforcement agencies. We expect this trend will continue due to interest by regulators in mortgage banking generally and non-bank mortgage lenders and servicers specifically. We have seen a significant increase in these activities in recent periods and believe that violations of law will more frequently be met with enforcement actions, including the imposition of significant monetary and other sanctions, as compared to prior periods. Like many other companies in the mortgage industry, we are currently the subject of various federal and state regulatory and enforcement investigations, subpoenas, examinations and inquiries related to our residential loan servicing and origination practices, bankruptcy and collections practices, our financial reporting and other aspects of our businesses. Several large mortgage originators or servicers have been subject to similar matters, which have resulted in the payment of fines and penalties, changes to business practices and the entry of consent decrees or settlements. We continue to manage our response to each matter, but it is not possible for us to confidently or reliably predict the outcome of any of them, including predicting any possible losses resulting from any judgments or fines. Responding to these matters requires us to devote substantial legal and regulatory resources, resulting in higher costs which may adversely affect our cash flows.

To the extent that an examination or other regulatory engagement reveals a failure by us to comply with applicable law, regulation or licensing requirement this could lead to (i) loss of our licenses and approvals to engage in our servicing and orginations businesses, (ii) governmental investigations and enforcement actions, (iii) administrative fines and penalties and litigation, (iv) civil and criminal liability, including class action lawsuits, (v) breaches of covenants and representations under our servicing, debt or other agreements, (vi) inability to raise capital and (vii) inability to execute on our business strategy. Any of these occurrences could further increase our operating expenses and reduce our revenues, require us to change business practices and limit our ability to grow or otherwise materially and adversely affect our business, reputation, financial condition or results of operation.

Moreover, regulatory changes resulting from the Dodd-Frank Act and other regulatory changes such as the CFPB having its own examination and enforcement authority and the “whistle-blower” provisions of the Dodd-Frank Act could further increase the number of legal and regulatory enforcement proceedings against us. In addition, while we take numerous steps to prevent and detect employee misconduct, such as fraud, employee misconduct cannot always be deterred or prevented and could subject us to additional liability.

There are numerous federal, state and local laws and regulations in the mortgage industry.
Federal, state and local governments have recently proposed or enacted numerous laws, regulations and rules related to mortgage loans generally and loan modifications as well as foreclosure actions. These laws, regulations and rules may result in delays in the foreclosure process, reduced payments by borrowers, modification of the original terms of mortgage loans, permanent forgiveness of debt and increased servicing advances.

Due to the highly regulated nature of the residential mortgage industry, we are required to comply with a wide array of federal, state and local laws and regulations that regulate, among other things, the manner in which we conduct our servicing, originations and ancillary business and the fees we may charge. These regulations directly impact our business and require constant compliance,

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which includes enhancing our compliance program, procedures and controls, monitoring and internal and external audits. A failure in maintaining an effective compliance program or a material failure to comply with any of these laws or regulations could subject us to lawsuits or governmental actions, which could materially adversely affect our business, financial condition and results of operations.

In addition, there continue to be changes in legislation and licensing, which require technology changes and additional implementation costs for loan originators. We expect legislative changes will continue in the foreseeable future, which may increase our operating expenses.

When borrowers fail to provide hazard or flood insurance on their residences, the servicer of the loan is contractually obligated to place such insurance to protect the collateral and passes the premium costs onto the borrower. In the past, some of our subsidiaries earned commissions as licensed insurance agencies from the sale of lender-placed insurance on our portfolios. However, this practice has changed. As of June 1, 2014, the Company and/or its subsidiaries no longer earns commissions on lender-placed insurance on a borrower's residence. This change comports with the servicing guide announcement by Fannie Mae and Freddie Mac that excludes from reimbursement any lender-placed insurance commissions and revenue earned by entities related to the servicer, such as our subsidiaries. Similarly, the change also comports with proposed or issued regulations by Florida and New York regulators that prohibit collateral protection insurer from paying commissions to a mortgage servicer or its affiliate.

Furthermore, there continue to be changes in state laws that are adverse to mortgage servicers that increase costs and operational complexity of our business and impose significant penalties for violation.

Any of these changes in law could adversely affect our business, financial condition and results of operations.

Unlike competitors that are national banks, we are subject to state licensing and operational requirements that result in substantial compliance costs.
Because we are not a depository institution, we do not benefit from a federal exemption to state mortgage banking, loan servicing or debt collection licensing and regulatory requirements. We must comply with state licensing requirements and varying compliance requirements in all fifty states and the District of Columbia, and we are sensitive to regulatory changes that may increase our costs through stricter licensing laws, disclosure laws or increased fees or that may impose conditions to licensing that we or our personnel are unable to meet. In addition, we are subject to periodic examinations by state regulators, which can result in refunds to borrowers of certain fees earned by us, and we may be required to pay substantial penalties imposed by state regulators due to compliance errors. For example, the Company made refunds to certain borrowers in 2015 related to delays in consummating their loan modifications that were transferred from prior servicers. Future state legislation and changes in existing regulation may significantly increase our compliance costs or reduce the amount of ancillary revenues, including late fees, that we may charge to borrowers. This could make our business cost-prohibitive in the affected state or states and could materially affect our business.

Our business would be adversely affected if we lose our licenses.
Our operations are subject to regulation, supervision and licensing under numerous federal, state and local statutes, ordinances and regulations. In most states in which we operate, a regulatory agency regulates and enforces laws relating to mortgage servicing companies and mortgage originations companies such as us as well as regulating our ancillary service providers. These rules and regulations generally provide for licensing as a mortgage servicing company, mortgage originations company or third-party debt default specialist, title insurance agency, appraisal management company, licensed auctioneer, and other similar types of requirements as to the form and content of contracts and other documentation, licensing of our employees and employee hiring background checks, licensing of independent contractors with which we contract, restrictions on certain practices, disclosure and record-keeping requirements and enforcement of borrowers’ rights. We are subject to periodic examination by state regulatory authorities.

We believe that we maintain all material licenses and permits required for our current operations and are in substantial compliance with all applicable federal, state and local laws, rules, regulations and ordinances. We may not be able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory requirements could result in a default under our servicing or other agreements and have a material adverse effect on our operations. The states that currently do not provide extensive regulation of our businesses may later choose to do so, and if such states so act, we may not be able to obtain or maintain all requisite licenses and permits. The failure to satisfy those and other regulatory requirements could result in a default under our servicing agreements and have a material adverse effect on our operations. Furthermore, the adoption of additional, or the revision of existing, rules and regulations could adversely affect our business, financial condition and results of operations.


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We may incur increased litigation costs and related losses if a borrower, or class of borrowers, challenges the validity of a foreclosure action or if a court overturns a foreclosure.
We may incur costs if we are required to, or if we elect to, execute or re-file documents or take other action in our capacity as a servicer in connection with pending or completed foreclosures. We may incur increased litigation costs if the validity of a foreclosure action is challenged by a borrower or a class of borrowers under a variety of theories including, without limitation, standing, proper notice and statute of limitations. If a court dismisses or overturns a foreclosure because of errors or deficiencies in the foreclosure process, we may have liability to the loan owner, a borrower, title insurer or the purchaser of the property sold in foreclosure. These costs and liabilities may not be legally or otherwise reimbursable to us, particularly to the extent they relate to securitized mortgage loans. A significant increase in litigation costs could adversely affect our liquidity, and our inability to be reimbursed for an advance could adversely affect our business, financial condition and results of operations.

Residential mortgage foreclosure proceedings in certain states have been delayed due to lack of judicial resources and legislation, all of which could have a negative effect on our ability to liquidate loans timely and slow the recovery of advances and thus impact our earnings or liquidity.
In some states, such as New York, our industry has faced, and may continue to face, increased delays and costs caused by state law and local court rules and processes. In addition, California and Nevada have enacted Homeowner’s Bill of Rights legislation to establish mandatory loss mitigation practices for homeowners which cause delays in foreclosure proceedings. Delays in foreclosure proceedings could also require us to make additional servicing advances by drawing on our servicing advance facilities, or delay the recovery of advances, all or any of which could materially affect our earnings and liquidity and increase our need for capital.

Risks Related to the Ownership of our Common Stock

Our common stock price may experience substantial volatility which may affect your ability to sell our common stock at an advantageous price.
The market price of our shares of common stock has been and may continue to be volatile. For example, the closing market price of our common stock on the New York Stock Exchange fluctuated between $11.22 per share and $57.45 per share from 2013 through 2015 and may continue to fluctuate. The volatility may affect your ability to sell our common stock at an advantageous price. Market price fluctuations in our common stock may be due to reduced liquidity resulting from highly concentrated ownership of our common stock, acquisitions, dispositions or other material public announcements along with a variety of additional factors.

If the ownership of our common stock continues to be highly concentrated, it may prevent new investors from influencing significant corporate decisions and may result in conflicts of interest.
FIF HE Holdings LLC (FIF), which is primarily owned by certain private equity funds managed by an affiliate of Fortress Investment Group LLC (Fortress), owns approximately 66% of our outstanding common stock. As a result, FIF owns shares sufficient for the majority vote over all matters requiring a stockholder vote, including: the election of directors; mergers, consolidations and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; the amendment of our certificate of incorporation and our bylaws; and our winding up and dissolution. This concentration of ownership may delay, deter or prevent acts that would be favored by other stockholders. The interests of FIF may not always coincide with our interests or the interests of other stockholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of us. Also, FIF may seek to cause us to take courses of action that, in its judgment, could enhance its investment in us, but which might involve risks to other stockholders or adversely affect us or other stockholders. As a result, the market price of our common stock could decline or stockholders might not receive a premium over the then-current market price of our common stock upon a change in control. In addition, this concentration of share ownership may adversely affect the trading price of our common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders.

Certain provisions of our stockholders agreement with FIF (Stockholders Agreement), our amended and restated certificate of incorporation and our amended and restated bylaws could hinder, delay or prevent a change in control of us, which could adversely affect the price of our common stock.
These provisions provide for:

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a classified board of directors with staggered three-year terms;

•
removal of directors only for cause and only with the affirmative vote of at least 80% of the voting interest of stockholders entitled to vote (provided, however, that for so long as FIF and certain other affiliates of Fortress and permitted transferees (collectively, the Fortress Stockholders) beneficially own at least 40% of our issued and outstanding common stock, directors may be removed with or without cause with the affirmative vote of a majority of the voting interest of stockholders entitled to vote);


17


•
provisions in our amended and restated certificate of incorporation and amended and restated bylaws prevent stockholders from calling special meetings of our stockholders (provided, however, that for so long as the Fortress Stockholders beneficially own at least 25% of our issued and outstanding common stock, any stockholders that collectively beneficially own at least 25% of our issued and outstanding common stock may call special meetings of our stockholders);

•
advance notice requirements by stockholders with respect to director nominations and actions to be taken at annual meetings;

•
certain rights to the Fortress Stockholders with respect to the designation of directors for nomination and election to our board of directors, including the ability to appoint a majority of the members of our board of directors for so long as the Fortress Stockholders continue to beneficially own at least 40% of our issued and outstanding common stock;

•
no provision in our amended and restated certificate of incorporation or amended and restated bylaws for cumulative voting in the election of directors, which means that the holders of a majority of the outstanding shares of our common stock can elect all the directors standing for election;

•
our amended and restated certificate of incorporation and our amended and restated bylaws only permit action by our stockholders outside a meeting by unanimous written consent, provided, however, that for so long as the Fortress Stockholders beneficially own at least 25% of our issued and outstanding common stock, our stockholders may act without a meeting by written consent of a majority of our stockholders; and

•
under our amended and restated certificate of incorporation, our board of directors has authority to cause the issuance of preferred stock from time to time in one or more series and to establish the terms, preferences and rights of any such series of preferred stock, all without approval of our stockholders. Nothing in our amended and restated certificate of incorporation precludes future issuances without stockholder approval of the authorized but unissued shares of our common stock.

In addition, these provisions may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt that is opposed by FIF, our management or our board of directors. Public stockholders who might desire to participate in these types of transactions may not have an opportunity to do so, even if the transaction is favorable to stockholders. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change in control or change our management and board of directors and, as a result, may adversely affect the market price of our common stock and your ability to realize any potential change of control premium.

Certain of our stockholders have the right to engage or invest in the same or similar businesses as us.
Fortress has other investments and business activities in addition to their ownership of us. Under our amended and restated certificate of incorporation, FIF has the right, and has no duty to abstain from exercising such right, to engage or invest in the same or similar businesses as us, do business with any of our clients, customers or vendors or employ or otherwise engage any of our officers, directors or employees. If FIF or any of its officers, directors or employees acquire knowledge of a potential transaction that could be a corporate opportunity, they have no duty, to the fullest extent permitted by law, to offer such corporate opportunity to us, our stockholders or our affiliates.

In the event that any of our directors and officers who is also a director, officer or employee of FIF acquires knowledge of a corporate opportunity or is offered a corporate opportunity, provided that this knowledge was not acquired solely in such person's capacity as our director or officer and such person acts in good faith, then to the fullest extent permitted by law such person is deemed to have fully satisfied such person's fiduciary duties owed to us and is not liable to us, if FIF pursues or acquires the corporate opportunity or if FIF does not present the corporate opportunity to us.

Additionally, we may continue to enter into transactions with Fortress and its affiliates such as selling a percentage of the excess cash flow generated from our MSRs or selling the rights to mortgage servicing rights, mortgage servicing rights and servicer advances related to loan pools. These transactions may not be as favorable to us as if they had been negotiated with an unaffiliated third party. Such transactions may present an actual, potential or perceived conflict of interest. Appropriately dealing with conflicts of interest is complex and difficult, and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential, actual or perceived conflicts of interest.

Item 1B.   Unresolved Staff Comments
None.

18
Table of Contents


Item 2.   Properties
The following table sets forth information relating to our primary facilities. In addition to the facilities listed in the table below, we also lease small offices throughout the United States.
 
Location
Owned /
Leased
Square     
Footage     
Principal executive office :
 
 
Coppell, Texas – Corporate Headquarters
Leased
175,585

Business operations and support offices:
 
 
Irving, Texas (1)
Leased
292,988

Lewisville, Texas (2)
Leased
241,387

Chandler, Arizona (3)
Leased
163,864

Irvine, California (4)
Leased
126,726

Highlands Ranch, Colorado (3)
Leased
31,375

Bellevue, Washington (5)
Leased
24,602

Chennai, India (6)
Leased
41,666

Newport Beach, California (7)
Leased
24,692

(1) Primarily supports our Originations segment
(2) Primarily supports our Servicing and Xome segments
(3) Primarily supports our Servicing segment
(4) Primarily supports our Originations segment
(5) Primarily supports our Xome Labs
(6) Primarily supports our Xome segment and NSM Corporate functions
(7) Primarily supports our Xome segment

We relocated our principal executive offices from Lewisville, Texas to Coppell, Texas in January 2015. We believe that our facilities are adequate for our current requirements and are being appropriately utilized. We periodically review our space requirements, and we believe we will be able to acquire new space and facilities as and when needed on reasonable terms. We also look to consolidate and dispose of facilities we no longer need, as and when appropriate.

Item 3.   Legal Proceedings

From time to time, we are party to various legal proceedings that have arisen in the normal course of conducting business, including putative class actions and other litigation. These actions and proceedings are generally based on alleged violations of consumer protection, securities, employment, contract, tort, common law fraud 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, Servicemembers' Civil Relief Act, Telephone Consumer Protection Act, Truth in Lending Act, Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) unfair, deceptive or abusive acts or practices in violation of the Dodd-Frank Act, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Home Mortgage Disclosure Act, the Bankruptcy Code, and False Claims Act. Additionally, along with others in our industry, we are subject to repurchase and indemnification claims and may continue to receive claims in the future, relating to the sale of mortgage loans and/or servicing of mortgage loan securitizations. Furthermore, the certification of any putative class action could substantially increase our exposure to damages. 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 18, Commitments and Contingencies.

Shareholder Litigation
On June 2, 2015, a shareholder class action complaint captioned City of St Clair Shores Police and Fire Retirement System v.
Nationstar Mortgage Holdings Inc., 15 Civ. 61170. (S.D. Fla.) was filed in the United States District Court for the Southern District of Florida against us and certain of our executive officers asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended. On October 16, 2015, an amended class action complaint was filed that adds (i) claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended and (ii) additional defendants, comprising our former Chief Financial Officer, certain directors and underwriters for our secondary public offering of our common stock on March 26, 2015. The amended

19
Table of Contents

complaint alleges that the offering materials contained materially false and misleading statements and material omissions regarding the negative impact of declining interest rates on our overall financial results and the contrasting impact of declining interest rates on our servicing business on the one hand and our originations business on the other. The amended complaint also alleges that between May 8, 2014 and May 4, 2015, the Company and certain of the individual defendants made materially false and misleading statements to investors designed to create the perception of growth in our originations business. The plaintiff seeks class certification for purchasers of our common stock and unspecified damages and other relief. We intend to vigorously defend the action.

Regulatory Matters

Nationstar is a state licensed, non-bank mortgage lender and servicer. Our business is subject to extensive regulation, investigations and reviews by various federal, state and local regulatory and enforcement agencies, including without limitation, the CFPB, the Securities and Exchange Commission, the Department of Justice, the US Trustee Program, the multistate coalition of mortgage banking regulators (the “MMC”) and the State Attorneys General. As a result, we are subject to various legal proceedings, regulatory examinations, inquiries and requests for documentation in the ordinary course of our business. Nationstar has historically had a number of open investigations with various State Attorneys General and other federal and state regulatory and enforcement agencies, and the Company expects this trend will continue due to interest in mortgage banking generally and non-bank mortgage lenders and servicers specifically by these regulators.

We have seen a significant increase in these activities in recent periods. Like many other companies in the mortgage industry, Nationstar is currently the subject of various federal and state regulatory and enforcement investigations, subpoenas, examinations and inquiries related to its residential loan servicing and origination practices, bankruptcy and collections practices and other aspects of its businesses. Several large mortgage originators or servicers have been subject to similar matters, which have resulted in the payment of fines and penalties, changes to business practices and which have resulted in the entry of consent decrees or settlements. Nationstar continues to manage its response to each matter, but it is not possible for the Company to confidently or reliably predict the outcome of any of them, including predicting any possible losses resulting from any judgments or fines. Responding to these matters requires us to devote substantial legal and regulatory resources, resulting in higher costs which may adversely affect our cash flows. Adverse results in any of these matters could further increase our operating expenses and reduce our revenues, require us to change business practices and limit our ability to grow and otherwise materially and adversely affect our business, reputation, financial condition or results of operation.

Item 4.   Mine Safety Disclosures
Not applicable.

20


PART II.
Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information and Stockholders
Our common stock has been traded on the New York Stock Exchange under the symbol “NSM” since March 8, 2012. Our initial public offering was priced at $14.00 per share on March 7, 2012. The following table sets forth for the quarters indicated the high and low sales prices of our common stock, as reported in the consolidated transaction reporting system.
 
 
Prices
 
 
High
 
Low
2015
 
 
 
 
Fourth quarter
 
$
15.78

 
$
10.80

Third quarter
 
$
19.74

 
$
13.64

Second quarter
 
$
26.58

 
$
16.24

First quarter
 
$
31.94

 
$
22.94

 
 
 
 
 
2014
 
 
 
 
Fourth quarter
 
$
37.00

 
$
26.06

Third quarter
 
$
35.99

 
$
29.35

Second quarter
 
$
37.95

 
$
26.76

First quarter
 
$
37.15

 
$
24.50


On January 31, 2016, there were 108,120,381 shares outstanding and 279 stockholders of record of Nationstar common stock. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions.
Dividends
We have never declared or paid cash dividends on our common stock and we currently do not expect to declare or pay any cash dividends in the foreseeable future. The timing and amount of any future dividends will be determined by the Board of Directors and will depend, among other factors, upon earnings, financial condition, cash requirements, the capital requirements of subsidiaries and investment opportunities at the time any such payment is considered. The indentures governing senior notes include restrictions on our ability to pay cash dividends on our common stock. Other finance arrangements may also, under certain circumstances, restrict our ability to pay cash dividends. In addition, we may also enter into credit agreements or other borrowing arrangements in the future that restrict or limit our ability to pay cash dividends on our common stock.

21


Issuer Purchases of Equity Securities

On December 17, 2015, Nationstar’s Board of Directors authorized a $150.0 million share repurchase program. Through the end of the fourth quarter of fiscal 2015, the Company has repurchased shares of its common stock having a value of approximately $11.1 million under this program. The number and average price of shares purchased are set forth in the table below.

(in thousands except Average Price Paid per Share)
Period
(a) Total Number of Shares (or Units) Purchased  
 
(b) Average Price Paid per Share (or Unit)
 
(c) 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
October 1, 2015 - October 31, 2015

806

(1)  
$
13.92

 
—

 
—

November 1, 2015 - November 30, 2015

3,500

(2)  
$
14.88

 
—

 
—

December 1, 2015 - December 31, 2015

1,170

(3)  
$
12.99

 
837

(4)  
$138,930
Total
5,476

 
 
 
837

 
$138,930

(1) The 806 thousand shares of common stock represent shares surrendered to Nationstar by certain employees in an amount equal to the amount of tax withheld to satisfy minimum statutory tax requirements in connection with the vesting of equity awards.
(2) Shares of common stock were repurchased by Nationstar from a Nationstar director to satisfy the director's tax obligations relating to the March 7, 2015 vesting of this restricted stock.
(3) Of the 1,170 thousand shares of common stock, 333 thousand shares represent shares surrendered to Nationstar by certain employees in an amount equal to the amount of tax withheld to satisfy minimum statutory tax requirements in connection with the vesting of equity awards.
(4) On December 17, 2015, Nationstar announced that its Board of Directors authorized the repurchase of up to $150.0 million of the registrant's outstanding common stock through December 16, 2016. As of December 31, 2015, 837 thousand shares (comprised of 504 thousand shares that settled during 2015 and 333 thousand share repurchases initiated during 2015 but settled during 2016) have been repurchased under this plan. On February 9, 2016, Nationstar’s Board of Directors authorized a $100.0 million increase to the original repurchase authorization for an aggregate repurchase authorization of $250.0 million under the Company’s share repurchase program. On February 11, 2016, we commenced a modified “Dutch auction” tender offer to purchase up to $100 million in cash of our common stock. The tender offer is contingent upon satisfaction of customary conditions. Repurchases under the tender offer will be part of our share repurchase program initiated December 17, 2015 and increased on February 9, 2016. We intend to fund the tender offer and related expenses with cash and cash equivalents.
Information Regarding the Tender Offer.  The information above relating to the tender offer is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any shares of our common stock. The solicitation and offer to buy our common stock is being made only pursuant to the Offer to Purchase, the Letter of Transmittal and the other offer materials that we have filed with the SEC and sent to our shareholders. Shareholders and investors are urged to read our Tender Offer Statement on Schedule TO, the Offer to Purchase, the related Letter of Transmittal and the other offer materials, as well as any amendments or supplements to the Schedule TO that we file with the SEC, because they contain important information, including various terms and conditions of the tender offer.

 

22


Performance Graph
The following graph shows a comparison of the cumulative total stockholder return for our common stock, S&P North American Financial Services Sector Index and S&P 500 Index from March 8, 2012 (the date our common stock began trading on the NYSE) through December 31, 2015. This data assumes an investment of $100 on March 8, 2012.
Item 6.   Selected Financial Data
The following financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Financial Statements and Supplementary Data.” The table below presents, as of and for the dates indicated, selected historical financial information for us (in thousands, except for earnings per share amounts). Note that the selected consolidated statements of operations and comprehensive income data for the years ended December 31, 2015 , 2014 and 2013 and the selected consolidated balance sheets data at December 31, 2015 and 2014 have been derived from our audited financial statements included elsewhere in this annual report. The selected consolidated statements of operations and comprehensive income data and other financial data for the years ended December 31, 2012 and 2011 and the selected consolidated balance sheets data at December 31, 2013 , 2012 and 2011 have been derived from Nationstar's audited consolidated financial statements that are not included in this Annual Report.
 

23


(amounts in thousands)
For the year ended
 
2015
 
2014
 
2013
 
2012
 
2011
Consolidated Balance Sheets Data:
Cash and cash equivalents
$
613,241

 
$
299,002

 
$
441,902

 
$
152,649

 
$
62,445

Advances, net
2,223,083

 
2,544,699

 
5,002,202

 
2,800,690

 
513,683

Mortgage servicing rights
3,366,973

 
2,961,321

 
2,503,162

 
635,860

 
251,050

Mortgage loans held for sale
1,429,691

 
1,277,931

 
2,603,380

 
1,480,537

 
458,626

Reverse mortgage interests (1)
7,514,323

 
2,453,069

 
1,547,471

 
752,355

 
—

Total assets
16,654,070

 
11,112,675

 
14,026,689

 
7,126,143

 
1,787,931

Advance facilities
1,646,123

 
1,901,783

 
4,550,424

 
2,563,086

 
446,432

Warehouse facilities
1,893,526

 
1,572,622

 
2,433,927

 
1,038,500

 
426,747

Unsecured senior notes
2,048,694

 
2,159,231

 
2,444,062

 
1,062,635

 
280,199

Other nonrecourse debt (2)
6,670,598

 
1,768,311

 
1,192,597

 
681,456

 
112,490

Total liabilities
14,886,693

 
9,888,397

 
13,036,791

 
6,368,461

 
1,506,622

Total equity (3)
1,767,377

 
1,224,278

 
989,898

 
757,682

 
281,309

 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Operations and Comprehensive Income Data:
Total revenues
$
1,988,635

 
$
1,973,068

 
$
2,086,985

 
$
984,315

 
$
377,841

Total expenses and impairments
1,687,579

 
1,357,691

 
1,402,278

 
582,045

 
306,183

Total other (expense) income
(246,881
)
 
(329,493
)
 
(338,453
)
 
(125,687
)
 
(50,771
)
Income before income tax expense
54,175

 
285,884

 
346,254

 
276,583

 
20,887

Total income tax expense
11,012

 
64,860

 
129,200

 
71,296

 
—

Net income
43,163

 
221,024

 
217,054

 
205,287

 
20,887

Less: Net gain attributable to noncontrolling interests
4,384

 
306

 
—

 
—

 
—

Change in fair value of designated cash flow hedges
—

 
(1,963
)
 
1,963

 
—

 
(1,071
)
Total comprehensive income
$
38,779

 
$
218,755

 
$
219,017

 
$
205,287

 
$
19,816

Earnings per share data:
 
 
 
 
 
 
 
 
 
     Basic earnings per share
$
0.38

 
$
2.47

 
$
2.43

 
$
2.41

 
$
0.30

     Dilutive earnings per share
$
0.37

 
$
2.45

 
$
2.40

 
$
2.40

 
$
0.30

 
 
 
 
 
 
 
 
 
 
Other Financial Data:
 
 
 
 
 
 
 
 
 
Net cash provided by / (used in):
 
 
 
 
 
 
 
 
 
Operating activities
$
417,826

 
$
1,080,209

 
$
(1,801,037
)
 
$
(1,958,116
)
 
$
(28,903
)
Investing activities
(5,589,571
)
 
233,307

 
(1,406,438
)
 
(2,157,292
)
 
(81,879
)
Financing activities
5,485,984

 
(1,456,316
)
 
3,496,728

 
4,205,612

 
152,004

(1) The 2015 increase in reverse mortgage interests was primarily due to the accounting treatment of $4.9 billion of assets acquired in the Generation Mortgage asset acquisition.  
(2) The 2015 increase in other nonrecourse debt was primarily due to the accounting treatment of $4.6 billion of liabilities assumed in the Generation Mortgage asset acquisition.  
(3) The $0.6 million increase in total equity was primarily the result of the sale of 17,500,000 common shares during the first quarter of 2015.  


24


Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the information contained in our consolidated financial statements, including the notes thereto. The following discussion contains, in addition to the historical information, forward-looking statements that include risks and uncertainties (see discussion of "Forward-Looking Statements" included elsewhere in this Annual Report on Form 10-K). Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those factors set forth under Item 1A. Risk Factors of this Annual Report on Form 10-K.

OVERVIEW

2015 Highlights

Provided below are highlights with respect to each of our operating segments.

Servicing

In 2015, total servicing fee revenue (as shown in Table 9) increased $62 million year over year driven by increases in base servicing fees which more than offset the decline in modification fees and ancillary revenue as the portfolio performance continues to improve. We focused on driving controllable costs out of our Servicing operations while improving the customer experience and exited the year with 5.1 adjusted basis points of Servicing profitability in the fourth quarter of 2015, versus 5.0 adjusted basis points for the fourth quarter of 2014. We experienced higher amortization, claims and litigation expenses throughout 2015, which negatively impacted our GAAP earnings year over year. While these elevated expenses and non-cash items affected our profitability, our cash flow generation improved.

As of September 30, 2015, we are the largest non-bank servicer and the fourth largest residential mortgage servicer. During the year, we acquired $71.8 billion in unpaid principal balance, a 74% increase in acquisitions over the prior year. Our ability to both win and obtain approvals for these transactions reflects our focus on providing quality core servicing. It is also this focus on the customer as well as compliance that led to us being awarded a marquis private-label subservicing contract of over $55 billion UPB from a leading diversified financial institution with a growing originations platform in October 2015.

In 2015, we welcomed 0.2 million customers to our platform and ended the year with approximately 2.5 million servicing customers. We remain committed to helping homeowners keep their homes and offered 64,995 solutions throughout the year such as loan modifications, collateral workouts and repayment plans during the year to our mortgage servicing customers faced with hardships. The delinquency rate on our MSR portfolio, measured as loans that are 60 or more days behind in payments, declined to 6.9% from 9.9% at the start of the year. In addition, we focused on providing all of our customers a better servicing experience. As such, we reduced customer complaints by 59% year over year.

Originations

Full year 2015 performance was strong with volume and earnings performance exceeding our initial expectations even as we navigated new requirements such as the TILA-RESPA Integrated Disclosures, commonly referred to as TRID. In fact, our Originations segment posted its best year since 2012 with $206 million in income before taxes. During the year we generated $18.0 billion in UPB for our servicing platform through our origination activities without utilizing any overall capital. In addition, we refinanced $5.0 billion in HARP loans, providing relief to 31,000 customers and improved our ability to compete in the FHA lending space.

Xome

Xome made strategic investments throughout the year in technologies and companies as it executed on its goal to perfect the residential real estate transaction experience for consumers and real estate professionals (including brokers and agents) through service offerings. During 2015, we launched the Xome real estate platform and related mobile apps, achieving over 1+ million downloads in five months with limited marketing spend. In addition, we greatly enhanced our existing servicing offerings through the acquisition of Experience I/Title365, Quantarium and GoPaperless. Overall, we increased revenue 43% to $437 million in 2015 with 33.9% coming from independent third parties.

25


2016 Core Initiatives

Servicing
Our core initiatives in 2016 for Servicing include:

▪
Delivering high quality, consistent operational earnings each quarter which for the year we believe will average between 5-7 basis points.
▪
Successfully board the recently awarded private-label subservicing arrangement.
▪
Generate incremental cash.
▪
Continue to focus on putting the “service” back in servicing for our customers as we endeavor to become the benchmark for customer service in the industry.
▪
Focus on continuing to be a top-rated servicer by the GSEs and enhancing our existing compliance framework.

Originations
Our core initiatives in 2016 for Originations include:

▪
Continue to deliver solid quarterly earnings based upon the origination of high quality loans.
▪
Increase customer retention across all major portfolio segments.
▪
Reduce costs to fulfill as we take advantage of the benefits of our single originations platform.
▪
Expand our offering of higher margin government lending and streamlined offerings.
▪
Continue to cost effectively replenish the MSR portfolio.

Xome
Our core initiatives in 2016 for Xome include:

▪
Focus on improving the profitability of core service offerings such as property disposition, title and collateral valuation.
▪
Continue to develop new technologies that connect the various residential real estate market participants in a seamless fashion.
▪
Improve overall margins.

Capital and Liquidity

We exit 2015 with strong fundamentals from a capital and liquidity perspective. From a regulatory perspective, we significantly exceed the capital and liquidity requirements principally promulgated by the FHFA. In addition, we had cash on hand of $613 million as of December 31, 2015 compared to $299 million as of the prior year end. During the fourth quarter, we repurchased $108.9 million worth of unsecured senior notes in the open market as well as 837,000 shares under our share repurchase program. As of December 31, 2015, we were in compliance with all covenants related to our borrowing facilities. From an equity standpoint, we ended the year with $1.8 billion of equity as of December 31, 2015, as compared to $1.2 billion in the prior year. We believe we have sufficient capital and liquidity to conduct and grow our operations.

For 2016, we currently expect our servicing platform to grow year over year as we board the recently awarded subservicing contract and execute within our originations segment. This growth will be achieved with the use of minimal, if any, capital which will allow us to deploy the cash generated in 2016 in various ways including share repurchases, additional debt repayment or portfolio expansion at attractive returns.

MSR Activity
During 2015, we paid $715 million for the acquisition of MSRs. We purchased MSRs and funded related advances primarily with 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. In addition, we completed the sale of MSRs associated with $4.6 billion in unpaid principal balance (UPB) and retained the subservicing. This sale of MSRs was with servicing retained, which allow us to maintain operational margin without the cost or risks associated with the advances.


26


Warehouse Facilities
As a result of the increased activity in our Originations segment, our Mortgage Loans Held for Sale increased to $1.4 billion as of December 31, 2015 compared to $1.3 billion as of December 31, 2014. As noted in footnote 10, this represents less than 50% of our overall warehouse capacity. We have sufficient warehouse capacity to support our Originations segment including anticipated growth.

Additional focus areas are provided below as we discuss the results of each of our segments.

RESULTS OF OPERATIONS

During 2015, we reclassified a small portion of Xome segment activity involved with loss recovery to the Servicing segment to better align with how the chief operating decision makers internally review and operate this business. All periods presented reflect this reclassification.

Consolidated Results

Table 1. Consolidated Operations
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Revenues - operational
 
$
2,101

 
$
1,899

 
$
1,859

Revenues - MTM
 
(112
)
 
74

 
228

Total revenues
 
1,989

 
1,973

 
2,087

Expenses
 
(1,688
)
 
(1,358
)
 
(1,402
)
Other income (expense), net
 
(247
)
 
(329
)
 
(339
)
Income before income tax expense
 
54

 
286

 
346

Income tax expense
 
11

 
65

 
129

Less: income attributable to noncontrolling interests
 
4

 
—

 
—

Change in value of designated cash flow hedge net of tax
 
—

 
(2
)
 
2

Net income attributable to Nationstar
 
$
39

 
$
219

 
$
219


2015 versus 2014
The impact of interest rate movements throughout the year which cause a write-down in the value of the MSR, partially offset by origination activities, as well as investments in the Xome platform were the primary drivers of reduced net income attributable to Nationstar for the year ended December 31, 2015.

From a core operational perspective, servicing income declined during 2015 when compared to the prior period principally as a result of higher legal and regulatory costs as well as higher claims losses that were generally the result of elongated foreclosure timeframes. Our Originations segment continued to benefit from the favorable interest rate environment posting its best year since 2012. Finally, Xome income is down year over year by $44.8 million due principally to investments in technology and corporate infrastructure, which did not begin until late fourth quarter 2014. In addition, Xome incurred $10.3 million more in depreciation and amortization during 2015 versus 2014 primarily due to 2015 acquisitions as well as a full year depreciation and amortization from 2014 acquisitions. Throughout 2015, we have invested over $140 million in Xome, including the development of the Xome.com website and related mobile apps, the build-out of offices in Seattle and Chennai, workflow/process improvements and multiple acquisitions.

2014 versus 2013
Revenues declined in the Servicing and Originations segments, partially offset by a more than doubling of revenues in our Xome segment. Consolidated expenses declined primarily due to lower Originations discussed under Table 3. Expenses below. Income tax expense declined due to lower pretax income and a lower effective tax rate stemming from a decrease in valuation allowance further discussed in Table 6. Income Taxes below.


27


Table 2. Revenues
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Servicing:
 
 
 
 
 
 
   Operational
 
$
1,314

 
$
1,233

 
$
1,144

   Amortization
 
(320
)
 
(220
)
 
(123
)
   Mark-to-market
 
(112
)
 
74

 
228

Total Servicing
 
882

 
1,087

 
1,249

Originations
 
666

 
579

 
712

Xome
 
437

 
306

 
135

Corporate and other, including eliminations
 
4

 
1

 
(9
)
Total revenues
 
$
1,989

 
$
1,973

 
$
2,087


2015 versus 2014
Servicing operational revenue was essentially flat during 2015 as improvements in core servicing fees were offset by amortization caused by the lower interest rate environment. The average UPB portfolio increased to $395.9 billion during 2015 from $379.8 billion during 2014. The lower interest rate environment also resulted in an overall decline attributable to mark-to-market changes for MSRs and related liabilities. Originations benefited from the lower interest rate environment, which resulted in higher funded volumes as well as a higher gain on sale percentage. Xome revenue increased significantly due to organic growth, particularly property sales, and due to three acquisitions during 2015, as well as a full year of Real Estate Digital, LLC acquired in May 2014.

2014 versus 2013
Revenues declined in both the Servicing and Originations segments, partially offset by a more than doubling of revenues in our Xome segment. For Servicing, revenue declined principally due to lower mark-to-market change on the value of our MSRs in 2014 compared to the 2013 period. This decline was partially offset by increases in total servicing fees earned on our servicing portfolio as a result of our higher average UPB in our total servicing portfolio. Revenues declined in our Originations segment during 2014 as we exited wholesale and distributed retail operations and focused on more profitable consumer direct operations. Xome grew principally as a result of increased property sales, title and collateral valuation orders.

Table 3. Expenses
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Servicing
 
$
787

 
$
705

 
$
613

Originations
 
469

 
390

 
590

Xome
 
359

 
184

 
106

Corporate and other, including eliminations
 
73

 
79

 
93

Total expenses
 
$
1,688

 
$
1,358

 
$
1,402


2015 versus 2014
Expenses increased in all segments relative to the comparable period. The increase in Servicing expense is primarily attributable to increased legal and regulatory expenses as well as increased operational expenses to support higher average UPB. The increase in Originations expense is primarily attributable to higher lock and funded volumes and increased compliance expense in advance of pending regulatory changes related to disclosures. Expenses increased in our Xome segment principally due to the growth in technology and service offerings including a significant increase in title operations, related investments in personnel, marketing, technology and infrastructure including operations in India.

2014 versus 2013
Consolidated expenses were down slightly primarily due to a decline in Origination expenses, partially offset by an increase in Servicing and Xome expenses. The Originations decline is due to exit from retail and wholesale businesses as well as a reduction in additional staff executed in late 2013 and early 2014 as well as the conversion to a single integrated platform.The Servicing increase is due to the relative growth in our UPB. Increase in our Xome segment is consistent with the increase in revenues as direct vendor costs associated with the fulfillment of customer orders increased due to a growth in order volumes.

28


Table 4. Other Income (Expense), Net
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Reverse interest income
 
$
268

 
$
80

 
$
52

Other interest income
 
83

 
100

 
145

Interest income
 
351

 
180

 
197

Reverse interest expense
 
(190
)
 
(31
)
 
(16
)
Advance interest expense
 
(55
)
 
(104
)
 
(157
)
Corporate debt interest expense
 
(160
)
 
(187
)
 
(166
)
Other interest expense
 
(200
)
 
(194
)
 
(200
)
Interest expense
 
(605
)
 
(516
)
 
(539
)
Gain on disposal of property
 
—

 
5

 
—

Gain on repurchase of unsecured senior notes
 
8

 
—

 
—

Gain (loss) on interest rate swaps and caps
 
(1
)
 
2

 
3

Total other income (expense)
 
$
(247
)
 
$
(329
)
 
$
(339
)

2015 versus 2014
Total other income (expense) improved during the year ended December 31, 2015, when compared with the year ended December 31, 2014, primarily due to lower advance interest expense due to lower average advance balances. This was also positively impacted by higher reverse interest income net of reverse interest expense which benefited from the Generation Mortgage asset acquisition during the second quarter of 2015.  Also impacting the decline was lower interest expense due to the repurchase of unsecured senior notes in July 2014 and the fourth quarter of 2015, lowering borrowing costs.

2014 versus 2013
Total other income (expense) of $329 million declined from $339 million incurred during 2013, which was primarily due to lower interest expense on unsecured senior notes, stemming from redemption of the 10.875% unsecured senior notes in July 2014.

Table 5. Income Before Income Tax Expense
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Servicing:
 
 
 
 
 
 
   Operational
 
$
417

 
$
376

 
$
343

   Amortization
 
(320
)
 
(220
)
 
(123
)
   Mark-to-market
 
(112
)
 
74

 
228

Total Servicing
 
(15
)
 
230

 
448

Originations
 
206

 
191

 
131

Xome
 
78

 
122

 
29

Corporate and other, including eliminations
 
(215
)
 
(257
)
 
(262
)
Total income before income tax expense
 
$
54

 
$
286

 
$
346


2015 versus 2014
The decrease in income before taxes for the year ended December 31, 2015 versus the year ended December 31, 2014 is driven primarily by the decrease in pre-tax income in our Servicing segment as a result of $186 million unfavorable mark-to-market adjustments on MSRs and an increase in amortization of $100 million year over year principally during the second and third quarters. Income before taxes for Xome declined in the current period principally due to increased expenses stemming from additional investments in technology and corporate infrastructure as well as increased amortization as a result of acquisitions. This was partially offset by higher Originations segment net income before taxes benefiting as a result of the lower interest rate environment. Also offsetting the decline was lower corporate and other expenses due to lower interest expense due to the repurchase and redemption of unsecured senior notes as well as lower losses on REO sold and lower direct Legacy portfolio related expenses, included in our corporate and other segment.

29



2014 versus 2013
Income before taxes declined from 2013 to 2014 principally as a result of revenue declines attributable to mark-to-market changes and increased amortization, which do not have an offsetting cost component and therefore directly impact margins. For the Originations segment, the focus on consumer direct operations and favorable interest rates as well as cost reduction initiatives resulted in a $60 million improvement in income before taxes although revenues declined substantially. Xome’s income before taxes grew both as a result of revenue growth as well as a greater mix of that revenue coming from property sales.

Table 6. Income Tax Expense
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Income tax expense
 
$
11

 
$
65

 
$
129


2015 versus 2014
During fiscal year 2015, income tax expense decreased $54 million as compared to fiscal year 2014. The effective tax rates for 2015 and 2014 were 20.3% and 22.7%, respectively. The decrease in income tax expense was primarily due to significantly lower pre-tax income of $54 million in 2015 as compared to $286 million in 2014. The lower effective tax rate in 2015 resulted from a partial release of the valuation allowance, as well as a deferred tax benefit arising from true-up adjustments to deferred taxes. Please refer to Note 13 of the Notes to Consolidated Financial Statements under Part II, Item 8: “Financial Statements and Supplementary Data” of this Form 10-K for further discussion of the components of the effective tax rate and income tax expense.

2014 versus 2013
During fiscal year 2014, income tax expense decreased $64 million as compared to fiscal year 2013. The effective tax rates for 2014 and 2013 were 22.7% and 37.3%, respectively. The decrease in income tax expense was due to lower pre-tax income of $286 million in 2014 as compared to $346 million in 2013, as well as a decrease in valuation allowance of $40.3 million. The lower effective tax rate in 2014 primarily resulted from the release of a significant portion of the valuation allowance, which accounted for approximately 14% of the decrease in the effective tax rate.

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

Our servicing portfolio generally generates reliable and recurring cash flows although earnings may vary period to period principally as a result of mark-to-market adjustments on our MSRs. In addition, our servicing portfolio provides a lead source to augment our Originations and Xome businesses. We have a proven track record of reducing portfolio delinquencies and ultimately extending the duration of our overall MSR loan pool, which in turn increases the future earnings potential of such loan pools. Our ability to deploy effective loss mitigation strategies, modify nonperforming loans, assist our existing customers with a refinance or new home purchase enables us to take advantage of MSR and subservicing opportunities that lead to replenishing and modestly growing our servicing portfolio. MSR opportunities come in the form of MSR retention on originated loans or bulk and flow opportunities.

Capital Light Strategy
Since 2007, we have grown our servicing portfolio principally through the acquisition of MSRs and through our origination platform. We financed these acquisitions through the offering of equity and unsecured senior notes as well as financing transactions such as excess spread financing and mortgage servicing rights financing as further described in the notes to the financial statements. Through these financing transactions, we were able to substantially grow our MSR portfolio while utilizing less capital at reasonable returns.

During 2015, we continued our progress towards a more capital light strategy in a couple of ways. First, we sold $4.6 billion of MSRs at fair value while retaining subservicing rights. Second, in October 2015, we were awarded a significant private-label subservicing contract of approximately $55 billion in initial UPB to be the sole servicer for a leading financial institution. We expect the initial loans to board over the first half of 2016. The subservicing agreement and our origination platform should allow us to grow our MSR portfolio over 2016 with limited use of capital.

30


We now have multiple avenues from which to source MSRs. First, consistent with historical practice, we will continue to purchase MSRs to the extent our return thresholds are met. Additional sources to acquire MSRs that require limited or no capital to sustain and grow our portfolio include our origination platform, which is focused on customer retention, our new subservicing client, who intends to substantially grow their portfolio over the coming years and lead generation through the Xome platform. In addition, we are actively pursuing additional subservicing contracts given our expanded private label subservicing capabilities

Our Nationstar Mortgage and Champion Mortgage brands together service approximately 2.5 million customers with an outstanding principal balance in excess of $397.7 billion. As of December 31, 2015, the outstanding principal balance consisted of approximately $372.7 billion in forward servicing and $29.9 billion in reverse servicing. We earn fees for collecting monthly mortgage payments from homeowners, processing those payments and passing them on to investors who ultimately own the mortgage.

Table 7. Servicing Operations
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
Revenues
 
 
 
 
 
 
   Operational
 
$
1,314

 
$
1,233

 
$
1,144

   Amortization
 
(320
)
 
(220
)
 
(123
)
   Other mark-to-market
 
(112
)
 
74

 
228

Total revenues
 
882

 
1,087

 
1,249

Expenses
 
(787
)
 
(705
)
 
(613
)
Total other income (expense), net
 
(110
)
 
(152
)
 
(188
)
Income (loss) before income tax expense
 
$
(15
)
 
$
230

 
$
448


2015 versus 2014
Base servicing fees, the principal component of operational revenues, increased due to higher average UPB and improved portfolio performance as evidenced by lower delinquency rates. We do not recognize servicing fees on delinquent loans with respect to GSEs or Ginnie Mae related servicing activities. Increases in amortization and other mark-to-market components were driven primarily by the low interest rate environment in 2015, which ultimately resulted in increased prepayments. Expenses increased as a result of higher litigation and claims amounts in the current year as we continued to work through the foreclosure pipeline.

2014 versus 2013
Servicing income before income tax expense declined primarily due to unfavorable mark-to-market changes on MSRs. Excluding mark-to-market changes, Servicing income before income tax expense increased due to relative growth in our average unpaid principal balance portfolio as a result of continued MSR acquisitions in excess of liquidations and principal payments during 2014 and 2013.


31

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 year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Balance at the beginning of the period
 
$
353,094

 
$
361,779

 
$
179,432

Additions:
 
 
 
 
 
 
     Originations (funded)
 
17,949

 
16,843

 
23,882

     Acquisitions
 
71,782

 
41,351

 
193,142

Deductions:
 
 
 
 
 
 
     Dispositions
 
(4,647
)
 
—

 
—

     Principal reductions and other
 
(11,417
)
 
(15,060
)
 
(7,517
)
     Voluntary reductions (1)
 
(47,597
)
 
(34,616
)
 
(36,466
)
     Involuntary reductions (2)
 
(10,482
)
 
(11,905
)
 
(11,042
)
     Net changes in loans serviced by others
 
(882
)
 
(5,298
)
 
20,348

Balance at the end of period
 
$
367,800

 
$
353,094

 
$
361,779


(1) Voluntary reductions are related to loans payoffs by customers.
(2) Involuntary reductions refer to chargeoffs of loans.

During the year ended December 31, 2015, our servicing portfolio's unpaid principal balance increased as a result of continued MSR acquisitions in excess of liquidations and principal payments, portions of which is currently reflected in net changes in loans serviced by others. Additionally, we acquired $18.0 billion of servicing rights through Originations during the year ended December 31, 2015.

32


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

Table 9. Servicing - Revenues
 
For the year ended December 31,
($ in millions)
 
2015
 
2014
 
2013
 
 
Amounts
bps (1)
 
Amounts
bps (1)
 
Amounts
bps (1)
MSR  Operational Revenue
 
 
 
 
 
 
 
 
 
Base servicing fees
 
$
1,077

27
 
$
1,011

27
 
$
802

27

Modification fees
 
62

2
 
68

2
 
60

2

Incentive fees
 
45

1
 
50

1
 
48

2

Late payment fees
 
70

2
 
65

2
 
59

2

Other ancillary revenue
 
208

5
 
227

6
 
206

7

Other revenues
 
38

1
 
28

1
 
—

—

Total MSR operational revenue
 
1,500

38
 
1,449

39
 
1,175

40

       Subservicing (2)
 
27

1
 
36

1
 
51

2

MSRs - LOCOM
 
88

2
 
68

1
 
56

2

Total servicing fee revenue
 
1,615

41
 
1,553

41
 
1,282

44

Amortization
 
 
 
 
 
 
 
 
 
MSR scheduled and prepayment amortization
 
(489
)
(12)
 
(363
)
(10)
 
(319
)
(11
)
Excess spread accretion
 
172

4
 
144

4
 
195

7

LOCOM amortization
 
(3
)
—
 
(1
)
—
 
1

—

Total amortization
 
(320
)
(8)
 
(220
)
(6)
 
(123
)
(4
)
MSR financing liability payments
 
(124
)
(3)
 
(165
)
(4)
 
(18
)
(1
)
Excess spread payments - principal
 
(177
)
(4)
 
(155
)
(4)
 
(120
)
(4
)
Total operational revenue
 
994

26
 
1,013

27
 
1,021

35

Mark-to-Market Revenue
 
 
 
 
 
 
 
 
 
MSR MTM (3)
 
(73
)
(2)
 
87

2
 
377

13

Excess spread / financing MTM
 
(39
)
(1)
 
(13
)
—
 
(149
)
(5
)
Total MTM revenue
 
(112
)
(3)
 
74

2
 
228

8

Total revenues - Servicing
 
$
882

23
 
$
1,087

29
 
$
1,249

43


(1) Calculated bps are as follows: Annualized $ amount/Average UPB X 10,000.
(2) Subservicing amounts includes amounts serviced for other MSR owners, whole loans serviced for other investors and our owned whole loans.
(3) MSR mark-to-market includes value changes related to MSRs and whole loan assets.

2015 versus 2014
During 2015, servicing fee revenue increased versus 2014. The key drivers of this increase were a $16.1 billion increase in the average unpaid principal balance of the servicing portfolio and improved portfolio delinquency. The 60 day delinquency rate declined from 9.9% as of December 31, 2014 to 6.9% as of December 31, 2015. However, the higher net amortization of MSR assets and a reduction in mark-to-market revenue resulted in an overall decrease of total servicing revenue in 2015. Both of these items are impacted by market interest rates. Lower market interest rates in 2015 caused higher prepayment rates which drives higher amortization. In addition, the expectation of higher prepayment rates in the future is the primary cause of lower mark-to-market revenue.


33

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

Table 10. Servicing Portfolio - Unpaid Principal Balances
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Average UPB:
 
 
 
 
 
 
MSRs - fair value
 
$
345,515

 
$
328,213

 
$
226,969

Subservicing and other (1)
 
20,820

 
23,154

 
36,471

MSRs - LOCOM
 
29,551

 
28,455

 
28,655

Total average UPB
 
395,886

 
379,822

 
292,095

 
 
 
 
 
 
 
Ending UPB:
 
 
 
 
 
 
MSRs - fair value
 
 
 
 
 
 
Agency
 
246,016

 
214,981

 
202,267

Non-agency
 
99,660

 
118,632

 
120,547

Total MSRs - fair value
 
345,676

 
333,613

 
322,814

 
 
 
 
 
 
 
Subservicing and other (1) :
 
 
 
 
 
 
Agency
 
18,059

 
15,008

 
22,208

Non-agency
 
4,065

 
4,473

 
16,757

Total subservicing
 
22,124

 
19,481

 
38,965

 
 
 
 
 
 
 
MSRs - LOCOM
 
29,855

 
27,982

 
29,093

Total ending UPB
 
$
397,655

 
$
381,076

 
$
390,872


(1) Subservicing and Other amounts include (i) loans we service for others, (ii) residential mortgage loans originated but have yet to be sold, and (iii) agency REO balances for which we own the mortgage servicing rights.

Information about modifications and workout units is presented in the table below.

Table 11. Modifications and Workout Units
 
For the year ended December 31,
 
 
2015
 
2014
 
2013
Modifications and workout units:
 
 
 
 
 
 
HAMP modifications
 
16,228

 
18,597

 
26,091

Non-HAMP modifications
 
24,731

 
32,274

 
12,870

Workouts
 
24,036

 
28,955

 
28,964

Total modification and workout units
 
64,995

 
79,826

 
67,925


Total modifications and workouts decreased during the year ended December 31, 2015 compared to the prior year comparable period primarily due to the overall performance of borrowers within the servicing portfolio continuing to improve as reflected in the table below.


34

Table 12. Key Performance Metrics - Forward Servicing Portfolio (1)
 
For the year ended December 31,
 
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Loan count-servicing
 
2,245,047

 
1,982,396

 
1,980,956

Average loan amount
 
$
162,375

 
$
167,467

 
$
169,569

Average coupon - credit sensitive (2)
 
4.6
%
 
4.7
%
 
4.9
%
Average coupon - interest sensitive (2)
 
4.1
%
 
4.1
%
 
3.9
%
60+ delinquent (% of loans) (3)
 
6.9
%
 
9.9
%
 
11.8
%
90+ delinquent (% of loans) (3)
 
6.4
%
 
9.3
%
 
11.2
%
120+ delinquent (% of loans) (3)
 
5.9
%
 
8.8
%
 
10.7
%
Total prepayment speed (12 month constant pre-payment rate)
 
15.6
%
 
13.3
%
 
17.9
%

(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.
(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.

The table below provides the expense break out between salaries, wages and benefits and general and administrative expenses in the Servicing segment. For the year ended December 31, 2015 versus the comparable periods in 2014 and 2013, expenses were up due to growth in forward and reverse loans serviced.

Table 13. Servicing - Expenses
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
Amounts
 
bps
 
Amounts
 
bps
 
Amounts
 
bps
Salaries, wages and benefits
 
$
265

 
7

 
$
289

 
8

 
$
276

 
9

General and administrative
 
522

 
13

 
416

 
11

 
337

 
12

Total expenses - Servicing
 
$
787

 
20

 
$
705

 
19

 
$
613

 
21


Salaries, wages and benefits continues to decline when measured in bps of UPB as a result of improved portfolio performance and investments in technology and other operational improvements.
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 year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
Amounts
 
bps
 
Amounts
 
bps
 
Amounts
 
bps
Operational costs (1)
 
$
192

 
5

 
$
143

 
4

 
$
72

 
3

Direct operating costs (2)
 
167

 
4

 
132

 
3

 
121

 
4

Offshoring costs
 
50

 
1

 
46

 
1

 
32

 
1

Corporate allocation charges
 
89

 
2

 
56

 
2

 
55

 
2

Subservicing
 
24

 
1

 
39

 
1

 
57

 
2

Total general and administrative expenses - Servicing
 
$
522

 
13

 
$
416

 
11

 
$
337

 
12


(1) Operational costs include compensatory fees, claims losses and similar expenses.
(2) Direct operating costs are normal costs of servicing, including filing fees, postage, delivery and similar expenses.


35

2015 versus 2014
During the year ended December 31, 2015 , the primary drivers of the increased general and administrative expense were higher operational costs, direct operating costs, and corporate allocation charges. Within the operational cost increase is a $38 million additional release of mortgage servicing liabilities which have an offsets in MSR other operational revenue and MSRs - LOCOM revenue. Corporate allocation charges were impacted by higher legal and regulatory costs. This was partially offset by lower salaries, wages and benefits due to lower staffing levels along with a decrease in subservicing expense as we boarded mortgage servicing that was previously subserviced.

2014 versus 2013
Expenses primarily increased as a result of additional general and administrative costs. Included within general and administrative in the 2014 period are one-time costs associated with entering into the MSR financing liability. In addition, we experienced an increase in settlements and compensatory fees consistent with the growth of the servicing portfolio at the end of 2013.

Table 15. Servicing - Other Income (Expense), Net
 
For the year ended December 31,
($ in millions)
 
2015
 
2014
 
2013
 
 
Amounts
bps
 
Amounts
bps
 
Amounts
bps
Reverse interest income
 
$
267

7

 
$
80

2

 
$
52

2

Other interest income
 
—

—

 
12

—

 
39

1

Interest income
 
267

7

 
92

2

 
91

3

Reverse interest expense
 
(190
)
(5
)
 
(31
)
(1
)
 
(16
)
(1
)
Advance interest expense
 
(55
)
(1
)
 
(104
)
(3
)
 
(160
)
(5
)
Other interest expense
 
(131
)
(3
)
 
(111
)
(3
)
 
(106
)
(4
)
Interest expense
 
(376
)
(9
)
 
(246
)
(7
)
 
(282
)
(10
)
Gain (loss) on interest rate swaps and cap
 
(1
)
(1
)
 
2

—

 
3

—

Total other income (expense) - Servicing
 
$
(110
)
(3
)
 
$
(152
)
(5
)
 
$
(188
)
(7
)
 
 
 
 
 
 
 
 
 
 
WAC - advance facilities
 
2.4
%
 
 
2.4
%
 
 
2.7
%
 
WAC - excess spread financing
 
9.0
%
 
 
9.1
%
 
 
9.2
%
 

2015 versus 2014
Total other income (expense) - servicing improved principally due to the expansion of our reverse platform during the year as a result of the Generation Mortgage acquisition as well as a significant reduction in advance interest expense. The reduction in advance interest expense was driven by lower outstanding advances.

2014 versus 2013
Total other income (expense) - servicing improved during 2014 versus 2013 primarily due to lower Advance interest expense stemming from lower Advance balances.

Originations Segment

Our Originations segment comprises both the Greenlight Loans and Nationstar Mortgage 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.


36

Table 16. Originations - Operations
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Revenues
 
$
666

 
$
579

 
$
712

Expenses
 
(469
)
 
(390
)
 
(590
)
Other income (expense), net
 
9

 
2

 
9

Income before income tax expense
 
$
206

 
$
191

 
$
131

Income before taxes margin
 
30.9
%
 
33.0
%
 
18.4
%

2015 versus 2014
Our Originations segment continued to benefit from a low interest rate environment which resulted in higher origination volumes. Our overall margins decreased due to increases in regulatory and compliance oversight costs, as well as a reduction in the gain on sale recognized on a per loan basis when compared to funded volumes. In addition, we incurred additional costs, particularly in the second half of the year, as we prepared for new disclosure rules associated with TRID. In total, we incurred $7 million of costs ($3 million in Q3 2015 and $4 million in Q4 2015) related to recent disclosure changes and similar matters.

2014 versus 2013
Both revenues and expenses decreased as a result of our exit from the retail and wholesale businesses as well as a reduction in additional staff executed in late 2013 and early 2014 consistent with the decline in origination volumes. In addition, the conversion to a single integrated platform during Q4 2014 and Q1 2015 helped to reduce our overhead costs.

Table 17. Originations - Revenues
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Service related
 
$
51

 
$
44

 
$
62

 
 
 
 
 
 
 
Gain on loans originated and sold
 
788

 
1,041

 
759

Fair value adjustment on loans held for sale
 
(315
)
 
(507
)
 
(69
)
Mark-to-market on locks and commitments (1)
 
(50
)
 
(201
)
 
(174
)
Provision for repurchases
 
(16
)
 
(23
)
 
(76
)
Capitalized servicing rights
 
208

 
225

 
210

Net gain on mortgage loans held for sale
 
615

 
535

 
650

 
 
 
 
 
 
 
Total revenues - Originations
 
$
666

 
$
579

 
$
712

 
 
 
 
 
 
 
Key Metrics
 
 
 
 
 
 
Consumer direct lock pull through adjusted volume (2)
 
$
11,305

 
$
9,808

 
$
16,136

Other locked pull through adjusted volume
 
7,100

 
6,378

 
10,468

Funded volume, total
 
17,971

 
16,890

 
23,778

Funded HARP volume, total
 
4,983

 
6,819

 
12,767

Recapture percentage
 
27.0
%
 
33.5
%
 
47.5
%
Purchase percentage of funded volume
 
26.0
%
 
28.0
%
 
17.0
%
Value of capitalized servicing
 
119 bps

 
127 bps

 
101 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.
(2) Actual versus expected funding from locks taken during the period.


37

2015 versus 2014
In evaluating performance, we combine net gain on mortgage loans held for sale and service related revenue. The increase in revenues of $87 million from $579 million in 2014 to $666 million in 2015 was primarily driven by the $2.2 billion increase in the total pull through adjusted lock volumes. Our volumes in 2015 benefited from a decreasing interest rate environment and a continued focus on the recapture of our portfolio customers. Our direct to consumer business remained at approximately 60% of total volume year over year and we continued to improve revenue and profitability margins in our other business lines.

2014 versus 2013
The company had total revenues of $579 million and $712 million during the years ended December 31, 2014 and December 31, 2013, respectively. The decrease was as a result of our exit from the retail and wholesale businesses executed in late 2013 and early 2014.

Table 18. Originations - Expenses
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Salaries, wages and benefits
 
$
282

 
$
249

 
$
323

General and administrative
 
187

 
141

 
267

Total expenses - Originations
 
$
469

 
$
390

 
$
590


2015 versus 2014
Salaries, wages and benefits increased during the year ended December 31, 2015 due to headcount growth aligned with higher lock and funded volumes. General and administrative expense was higher due to higher operating costs associated with the headcount growth, higher loan related costs as a result of increased volumes, and higher regulatory and compliance costs.

2014 versus 2013
Both Salaries, wages and benefits and General and administrative expenses decreased as a result of our exit from the retail and wholesale businesses as well as an additional reduction in staff in late 2013 and early 2014 consistent with the decline in origination volumes. In addition, the conversion to a single integrated platform helped to reduce our overhead costs.

Table 19. Originations - Other Income (Expense), Net
 
For the year ended December 31,
($ in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Interest income
 
$
68

 
$
72

 
$
88

Interest expense
 
(59
)
 
(70
)
 
(79
)
Other income (expense), net - originations
 
$
9

 
$
2

 
$
9

 
 
 
 
 
 
 
WA note rate - mortgage loans held for sale
 
4.1
%
 
4.5
%
 
4.1
%
WA cost of funds (excluding facility fees)
 
4.2
%
 
4.7
%
 
6.6
%

2015 versus 2014
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.

2014 versus 2013
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.


38

The activity of the outstanding repurchase reserves were as follows:

 Table 20. Repurchase Reserves
 
For the year ended December 31,
  (in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Repurchase reserves, beginning of period
 
$
29

 
$
41

 
$
19

Provisions
 
10

 
13

 
33

Charge-offs and releases
 
(13
)
 
(25
)
 
(11
)
Repurchase reserves, end of period
 
$
26

 
$
29

 
$
41


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 gain on mortgage loans held for sale.

Xome Segment
Table 21. Xome - Operations
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Revenues
 
$
437

 
$
306

 
$
135

Expenses
 
(359
)
 
(184
)
 
(106
)
Income before income tax expense
 
$
78

 
$
122

 
$
29

Income before taxes margin
 
17.8
%
 
39.9
%
 
21.5
%

In June 2015, we rebranded our Solutionstar segment as Xome (pronounced “Zome”) and launched the Xome real estate platform, along with related mobile applications. The launch of the Xome platform was a significant step in the transformation of the Xome segment from a provider of refinance and default related residential mortgage services to a provider of technology and data enhanced solutions to home buyers, home sellers, real estate professionals and companies engaged in the origination and/or servicing of mortgage loans.

Through our Xome platform, we intend to enhance the home buying and selling experience via smart investments in innovative technology and a sharp focus on customer service to make the home transaction experience simpler, more transparent and more accessible for all market participants. The Xome platform is a combination of a web platform and an easy to use mobile applications, giving customers instant access to over 80% of all active MLS listings in the United States.

During 2015, we continued to operate Homesearch.com, our Residential Real Estate exchange for distressed properties, 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. Revenues earned from Homesearch.com are included as a component of Xome Exchange.

With respect to our Xome Services, we are focused on the creation and delivery of high quality services (e.g., title and escrow, collateral valuation, asset management and disposition) 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 Title365, a significant investment in purchase and refinance

39

title related services with a major footprint in the California market. In addition, Title365 also added a significant amount of third party revenue from new customers.

Revenues increased in 2015 compared with 2014 due to our acquisitions of Experience 1 in January 2015 and Real Estate Digital 2014 and due to an increase in the number of properties sold on Homesearch.com coupled with an increase in the average selling price of the sold properties. Income Before Taxes decreased principally driven by our investments in technology initiatives, acquisition related compensation, increased depreciation and amortization as a result of the acquisition, and to a lesser extent the continued build-out of corporate support functions.

Revenues increased in 2014 compared 2013 driven by an increase in the volume of properties and percentage of properties sold on our on-line exchange, growth in volumes in Xome Services and to a lesser extent, our acquisition of Real Estate Digital in June 2014. Income Before Taxes increased due to the increase in revenue, partially offset by an increase in corporate support functions cost due to the build-out of these functions.
Table 22. Xome - Revenues
 
For the year ended December 31,
($ in millions, except metrics data)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Xome Exchange
 
$
179

 
$
140

 
$
50

Xome Services
 
230

 
152

 
85

Xome Technology and Support
 
28

 
14

 
—

Total revenues - Xome
 
$
437

 
$
306

 
$
135

 
 
 
 
 
 
 
Key Metrics
 
 
 
 
 
 
Properties sold
 
20,640

 
20,966

 
12,456

REO inventory at period end
 
8,426

 
9,062

 
7,433

Xome services completed orders
 
657,129

 
632,382

 
261,014

Percentage of revenue earned from third party customers
 
33.9
%
 
11.7
%
 
29.8
%

2015 versus 2014
During the year ended December 31, 2015, revenue related to Xome Exchange increased primarily due to an increase in average sales price of properties sold and the number of properties sold on Homesearch.com. In 2014 a portion of the property sales were completed on a vendor platform until we built and refined our exchange technology. Xome Services revenue growth was driven by our acquisition of Experience 1, the holding company for Title365, and related entities in January 2015, which contributed $105.5 million in additional revenue during the year ended December 31, 2015. Xome Technology and Support was principally driven by the acquisition of the Real Estate Digital in May 2014.

2014 versus 2013
Revenues related to Xome Exchange increased principally due to an increase in the total volume of property sold as well as percentage of properties sold via our on-line exchange versus traditional retail sales channels. Xome Services revenue increased primarily due to a growth in unit volumes with respect to broker price opinions, property reports and title and close services as a result of the expansion of existing client relationships. These increases were partially offset by a decline in appraisal services volume principally due to a market-wide decline in refinance transactions. Xome Technology and Support revenues consist of Real Estate Digital which was acquired in May 2014.

Table 23. Xome - Expenses
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Salaries, wages and benefits
 
$
185

 
$
72

 
$
36

General and administrative
 
174

 
112

 
70

Total expenses - Xome
 
$
359

 
$
184

 
$
106



40

2015 versus 2014
During the year ended December 31, 2015, the increase is due largely to a growth in personnel related costs principally driven by the acquisitions of Experience1 in January 2015 and our acquisition of Real Estate Digital in May 2014. Additionally, our personnel costs increased due to increased hirings to support our technology development initiatives and expansion of our services.

General and administrative costs increased primarily due to the acquisition of Title365 as well as marketing and technology costs associated with our Xome rebranding and launch of the Xome platform. We continue to make significant investments in engineering personnel to support our development objectives.

2014 versus 2013
The increase in expenses is consistent with the increase in revenues as direct vendor costs associated with the fulfillment of customer orders increased due to a growth in order volumes. In addition, the build-out of infrastructure to support our growth initiatives, including headcount growths, contributed to the increase. Direct vendor costs associated with fulfillment of customer orders also increased due to an increase in order volumes.

Table 24. Xome - Income (Loss) before Taxes
 
For the year ended December 31,
(in millions, except metrics data)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Xome Exchange
 
$
146

 
$
113

 
$
35

Xome Services
 
25

 
42

 
9

Xome Technology and Support
 
(93
)
 
(33
)
 
(15
)
Total income before income tax expense - Xome
 
$
78

 
$
122

 
$
29


Xome Exchange continued to improve year over year as we benefited from a growth in revenue against a stabilization of personnel, marketing and technology costs. Xome Services earnings was primarily impacted by increased amortization of $4.5 million as a result of acquisitions and the impact of the implementation of TRID in the fourth quarter, which is expected to push revenue into the first quarter of 2016. In addition, we had our highest title order volumes ever in November 2015 and December 2015, which increased expenses, however, revenue will not be recognized until the first half of 2016.

Table 25. Xome - Technology and Support - Income (Loss) before Taxes
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Technology
 
$
(43
)
 
$
(10
)
 
$
—

SaaS (1)
 
2

 
1

 
—

Marketing
 
(5
)
 
(3
)
 
—

Corporate Support and Other
 
(47
)
 
(21
)
 
(15
)
Total Xome Technology and Support - income (loss) before taxes
 
$
(93
)
 
$
(33
)
 
$
(15
)
(1) Our software as a service (“SaaS”) is a provider of integrated technology, media and data solutions to real estate franchisers, brokerages, real estate agents, MLS organizations and mortgage servicers.

The increased loss in Technology and Support was driven by our investment in technology initiatives. In 2015, we expanded our technology capabilities through investments in personnel, tools and facilities in Seattle and Chennai. The focus of our investments was Xome.com, the related mobile applications and development of proprietary order management and workflow systems in an effort to reduce our transactional costs in both Xome Exchange and Xome Services.  The increase loss in Corporate Support was principally due to $16 million of acquisition related compensation expenses and to a lesser extent the continued build-out of corporate support functions specific to Xome.


41

Corporate and Other

Table 26. Corporate and Other - Operations
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Revenues
 
$
4

 
$
1

 
$
(9
)
Expenses
 
(73
)
 
(79
)
 
(93
)
Other income (expense), net
 
(146
)
 
(179
)
 
(160
)
Total income (loss) before income tax expense - Corporate and Other
 
$
(215
)
 
$
(257
)
 
$
(262
)


Table 27. Income Before Income Tax Expense Components
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Interest expense unsecured senior notes
 
$
(160
)
 
$
(187
)
 
$
(166
)
Legacy
 
1

 
(2
)
 
(4
)
Other corporate
 
(56
)
 
(68
)
 
(92
)
Total income (loss) before income tax expense - Corporate and Other
 
$
(215
)
 
$
(257
)
 
$
(262
)

Our Corporate and Other reporting unit consists of (1) net income from our Legacy portfolio consisting of non-prime and nonconforming residential mortgage loans transferred to a securitization trust in 2009 that was structured as a secured borrowing resulting in our carrying the securitized loans as mortgage loans on our consolidated balance sheets and recognizing the asset backed certificates acquired by third parties as nonrecourse debt, (2) interest expense on our unsecured senior notes; and, (3) corporate expenses that are not directly attributable to our operating segments.

2015 versus 2014
Our Interest expense on unsecured senior notes declined during the year ended December 31, 2015 versus the comparable periods primarily due to the redemption of $285 million of notes in July 2014. Also impacting the decrease was the repurchase of $108.9 million in unsecured senior notes during the fourth quarter of 2015. Other corporate costs favorably declined due to reduced direct servicing expenses for the Legacy portfolio, lower losses on REO properties sold and lower losses on inventory loans.

2014 versus 2013
Our Interest expense on unsecured senior notes increased during 2014 reflecting a full year of interest expense on notes issued during 2013. Other corporate expenses decreased reflecting corporate restructuring and other cost savings initiatives which was instituted during the fourth quarter of 2013, combined with lower salaries, incentive compensation and benefits as a result of lower headcount and profitability.

Table 28. Legacy Portfolio
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Performing - UPB
 
$
178

 
$
197

 
$
217

Nonperforming (90+ delinquency) - UPB
 
71

 
77

 
85

REO - estimated fair value
 
4

 
2

 
2

Total legacy portfolio
 
$
253

 
$
276

 
$
304



42

Table 29. Corporate and Other - Expenses
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Salaries, wages and benefits
 
$
30

 
$
34

 
$
44

General and administrative
 
43

 
45

 
49

Total expenses - Corporate and Other
 
$
73

 
$
79

 
$
93


2015 versus 2014
Expenses decreased for the year ended December 31, 2015 versus 2014 due to lower REO losses, lower losses on inventory loans and lower servicing expense in our Legacy portfolio partially offset by higher compensation and related expenses due to an organizational restructuring in the first half of 2015.

2014 versus 2013
The decrease in total expenses was primarily due to our corporate restructuring and other cost savings initiatives which was instituted during the fourth quarter of 2013, combined with lower salaries, incentive compensation and benefits as a result of lower headcount.

Table 30. Corporate and Other - Other Income (Expense), Net
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Interest income, legacy portfolio
 
$
14

 
$
15

 
7

Interest expense, legacy portfolio
 
(8
)
 
(9
)
 
(3
)
Interest expense on unsecured senior notes
 
(159
)
 
(187
)
 
(166
)
Other
 
7

 
3

 
2

Other expense, net - Corporate and Other
 
$
(146
)
 
$
(178
)
 
(160
)
 
 
 
 
 
 
 
WAC - unsecured senior notes
 
7.3
%
 
7.6
%
 
7.5
%

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 a result of mortgage loans transferred to a securitization trust that was structured as a 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. These loans were transferred on October 1, 2009, from mortgage loans held for sale to a held-for-investment classification at fair value on the transfer date. This structure resulted in carrying the securitized loans as mortgages on our consolidated balance sheet and recognizing the asset-backed certificates acquired by third parties 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.

2015 versus 2014
Other income (expense), net includes interest expense associated with our unsecured senior notes and the interest income and expense from our Legacy portfolio. The favorable decline in Other income (expense) for the year ended December 31, 2015 versus the comparable period in 2014 is primarily due to the redemption of $285 million of notes in July 2014. Also impacting the decrease was the redemption of $108.9 million of unsecured senior notes during the fourth quarter of 2015.

2014 versus 2013
The decrease in total expenses and impairments was primarily due to our corporate restructuring and other cost savings initiatives which was instituted during the fourth quarter of 2013, combined with lower salaries, incentive compensation and benefits as a result of lower headcount and profitability.



43

MORTGAGE SERVICING RIGHTS AND RELATED LIABILITIES

Table 31. MSRs and Related Liabilities
 
December 31, 2015
 
December 31, 2014
(in millions)
 
UPB
 
Carrying Amount
 
Weighted Avg. Coupon
 
UPB
 
Carrying Amount
 
Weighted Avg. Coupon
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
$
246,016

 
$
2,462

 
4.4
%
 
$
214,980

 
$
1,986

 
4.5
%
Non-agency
 
99,660

 
896

 
4.5
%
 
118,633

 
964

 
4.7
%
Total MSRs - fair value
 
345,676

 
3,358

 
4.5
%
 
333,613

 
2,950

 
4.6
%
Subservicing and other (1)
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
18,059

 
N/A

 
N/A

 
15,008

 
N/A

 
N/A

Non-agency
 
4,065

 
N/A

 
N/A

 
4,473

 
N/A

 
N/A

Total subservicing and other
 
22,124

 
N/A

 
N/A

 
19,481

 
N/A

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
MSRs - LOCOM (2)
 
29,855

 
9

 
N/A

 
27,982

 
11

 
N/A

Total servicing portfolio unpaid principal balance
 
$
397,655

 
$
3,367

 
N/A

 
$
381,076

 
$
2,961

 
N/A


(1) Subservicing and other amounts include (1) loans we service for other, (2) residential mortgage loans originated but have yet to be sold, and (3) agency REO balances for which we own the mortgage servicing rights.
(2) MSRs - LOCOM carrying amount is reported net of $25.3 million and $65.4 million mortgage servicing liabilities as of December 31, 2015 and 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, servicing values are typically 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 consists of higher delinquency single-family non-conforming residential forward mortgage loans in private label securitizations.

Table 32. Fair Value MSR Valuation
 
December 31, 2015
 
December 31, 2014
(in millions)
 
UPB
 
Carrying Amount
 
Bps
 
UPB
 
Carrying Amount
 
Bps
 
 
 
 
 
 
 
 
 
 
 
 
 
MSRs - Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
Credit sensitive
 
$
224,334

 
$
2,017

 
90

 
$
241,770

 
$
1,920

 
79

Interest sensitive - agency
 
121,342

 
1,341

 
111

 
91,843

 
1,030

 
112

Total MSRs - fair value
 
$
345,676

 
$
3,358

 
97

 
$
333,613

 
$
2,950

 
88


The fair value of our credit sensitive portfolio declined in dollars principally due to amortization. On a bps basis, our credit sensitive pool increased in value due to improved performance as evidenced by lower delinquency. The fair value of our interest sensitive portfolio was flat year over year on a bps basis, but increased in dollar base due to acquisitions and origination activities, net of amortization.


44


The following table provides information on the fair value of our owned forward MSR portfolio:

Table 33. MSRs - Fair Value, Roll Forward
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
 
 
 
 
Fair value at the beginning of the period
 
$
2,950

 
$
2,488

Additions:
 
 
 
 
Servicing resulting from transfers of financial assets
 
222

 
238

Purchases of servicing assets
 
730

 
471

Sale of servicing assets
 
(46
)
 
—

Changes in fair value:
 
 
 
 
Due to changes in valuation inputs or assumptions used in the valuation model:
 
 
 
 
        Credit sensitive
 
36

 
243

        Interest sensitive
 
(94
)
 
(155
)
Other changes in fair value:
 
 
 
 
Scheduled principal payments
 
(76
)
 
(84
)
Prepayments
 
 
 
 
   Voluntary prepayments
 
 
 
 
        Credit sensitive
 
(204
)
 
(224
)
        Interest sensitive
 
(138
)
 
(61
)
   Involuntary prepayments
 
 
 
 
 Credit sensitive
 
(21
)
 
37

 Interest sensitive
 
(1
)
 
(3
)
Fair value at the end of the period
 
$
3,358

 
$
2,950


We used the following weighted average assumptions in estimating the fair value of MSRs for the dates indicated:

Table 34. MSRs - Fair Value, Weighted Average Assumptions
 
December 31, 2015
 
December 31, 2014
 
 
 
 
 
Credit Sensitive MSRs
 
 
 
 
Discount rate
 
11.6
%
 
12.0
%
Total prepayment speeds
 
16.5
%
 
18.6
%
Expected weighted-average life (years)
 
5.9 years

 
5.4 years

 
 
 
 
 
Interest Sensitive MSRs
 
 
 
 
Discount rate
 
9.1
%
 
9.1
%
Total prepayment speeds
 
12.4
%
 
11.3
%
Expected weighted average life (years)
 
6.1 years

 
6.5 years


Discount rate reductions for credit sensitive MSRs are attributable primarily to lower yields on new acquisitions driving down the weighted average rate. Prepayment speed reduction and weighted-average life improvement for credit sensitive MSR is attributable to collateral improvement. Prepayment speed increase and weighted-average life decline for interest sensitive MSR is attributable to net market interest rate reductions period over period.

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.

45


Total prepayment speeds represent 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 that existed for the majority (or larger portion) of the year, we adjusted our total prepayment speeds, primarily in our interest rate sensitive portfolio, as refinance volume continues to drive high prepayments. 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 3, Mortgage Servicing Rights and Related Liabilities and Note 22, 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, 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 3, 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.




46

Table 35. Excess Spread Financing
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
 
 
 
 
Fair value at the beginning of the period
 
$
1,031

 
$
986

Additions:
 
 
 
 
  New financings
 
385

 
171

Deductions:
 
 
 
 
  Settlements
 
(210
)
 
(184
)
Fair value changes:
 
 
 
 
  Credit sensitive
 
41

 
64

  Interest sensitive
 
(15
)
 
(6
)
Fair value at the end of the period
 
$
1,232

 
$
1,031

 
 
 
 
 
Weighted-Average Assumptions:
 
 
 
 
Mortgage prepayment speeds
 
11.6
%
 
12.5
%
Average life of mortgage loans
 
5.9 years

 
5.6 years

Discount rate
 
11.2
%
 
11.5
%
 
 
 
 
 
Credit Sensitive:
 
 
 
 
Mortgage prepayment spreads
 
16.5
%
 
18.6
%
Average life of mortgage loans
 
5.9 years

 
5.4 years

Discount rate
 
11.6
%
 
12
%
 
 
 
 
 
Interest Sensitive:
 
 
 
 
Mortgage prepayment spreads
 
12.4
%
 
11.3
%
Average life of mortgage loans
 
6.1 years

 
6.5 years

Discount rate
 
9.1
%
 
9.1
%

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 base 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.

Credit sensitive value improved in 2015 as compared to 2014 due to longer expected average life of mortgage loans related to the improved performance of collateral. Interest sensitive value decreased in 2015 as compared to 2014, due to the shorter expected average life of mortgage loans as a result of faster expected prepayment speeds due to the market interest rate reduction period over period.



47

Table 36. MSRs Financing Liability - Rollforward
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
 
 
 
 
Fair value at the beginning of the period
 
$
49

 
$
30

Additions:
 
 
 
 
    New financings
 
—

 
52

Deductions:
 
 
 
 
    Settlements
 
—

 
—

Changes in fair value: (1)
 
 
 
 
    Due to changes in valuation inputs or assumptions used in the valuation model
 
25

 
(11
)
    Other changes in fair value
 
(5
)
 
(22
)
Fair value at the end of the period
 
$
69

 
$
49

 
 
 
 
 
Weighted-Average Assumptions:
 
 
 
 
Advance financing rates
 
3.0
%
 
2.8
%
Annual advance recovery rates
 
20.9
%
 
27.6
%

(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 December 31, 2015 and December 31, 2014 being advance financing rates and advance recovery rates. The liability value increased as a result of the increase in expected advance financing rates and decreased in expected annual advance recovery rates.

Fair value changes in our mortgage servicing rights financing liability also impact service related revenues. In conjunction with
the excess spread financing 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 base fee component on the related MSRs. We continue to service the loans in exchange for a portion of the base 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 37. Leveraged Portfolio Characteristics
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
 
 
 
 
Owned forward servicing portfolio - unencumbered
 
$
89,435

 
$
93,673

Owned forward servicing portfolio - transferred to New Residential
 
256,241

 
239,940

Subserviced forward servicing portfolio and other
 
22,124

 
19,481

Total unpaid principal balance
 
$
367,800

 
$
353,094


Our encumbered forward servicing portfolio consists of residential mortgage loans included within our Excess Spread Financing transactions and our MSR Financing Liability. Subserviced and Other amounts include (1) loans we service for others, (2) residential mortgage loans originated but have yet to be sold, and (3) agency REO balances for which we own the mortgage servicing rights.


48

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 38. Reverse Portfolio Characteristics
 
For the year ended December 31,
(Ending UPB and Average loan amount in $ millions)
 
2015
 
2014
 
 
 
 
 
Loan count
 
176,272

 
159,704

Ending unpaid principal balance
 
$
29,855

 
$
27,982

Average loan amount
 
$
169,371

 
$
175,211

Average coupon
 
3.2
%
 
2.9
%
Average borrower age
 
77

 
79


We acquire reverse MSRs and funded unsecuritized advances from third parties. Reverse mortgages (known as Home Equity Conversion Mortgages or HECMs) provide seniors (62 and older) with a loan secured by their home. We record the assets acquired and obligations assumed initially at fair value on the acquisition date, which include 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. The year over year increase in UPB and ending principal amount are a result of the $4.9 billion Generation mortgage transaction.

Subsequent to the acquisition date, we use the lower of cost or market to report 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 assessment, there was no impairment on this asset as of December 31, 2015 or December 31, 2014.

Changes In Financial Position

Table 39. Assets
 
For the year ended December 31,
 
 
2015
 
2014
 
% Change
(in millions)
 
 
 
 
 
 
Cash and cash equivalents
 
$
613

 
$
299

 
105.1
 %
Mortgage servicing rights
 
3,367

 
2,961

 
13.7
 %
Advances
 
2,223

 
2,545

 
(12.7
)%
Reverse mortgage interests
 
7,514

 
2,453

 
206.3
 %
Mortgage loans held for sale
 
1,430

 
1,278

 
11.9
 %
Other assets
 
1,507

 
1,578

 
(4.5
)%
Total assets
 
$
16,654

 
$
11,114

 
49.8
 %

Our total assets as of December 31, 2015 increased to $16.6 billion. The increase was primarily due to the $4.9 billion acquisition of reverse mortgage interests from Generation Mortgage during the second quarter of 2015. We also had an increase in our mortgage loans held for sale as a result of the continued low interest rate environment which drove increased origination activity. Cash increased as a result of our equity offering in the first quarter of 2015 as well as an increase in operational cash flows. Our advance balances declined principally due to a decline in the delinquency rates of the portfolio.


49

Table 40. Liabilities and Stockholders' Equity
 
For the year ended December 31,
 
 
2015
 
2014
 
% Change
(in millions)
 
 
 
 
 
 
Unsecured senior notes
 
$
2,049

 
$
2,159

 
(5.1
)%
Advance facilities
 
1,646

 
1,902

 
(13.5
)%
Warehouse facilities
 
1,894

 
1,573

 
20.4
 %
MSR related liabilities - nonrecourse
 
1,301

 
1,080

 
20.5
 %
Other nonrecourse debt
 
6,671

 
1,768

 
277.3
 %
Other liabilities
 
1,326

 
1,407

 
(5.8
)%
Total liabilities
 
14,887

 
9,889

 
50.5
 %
Total stockholders' equity attributable to Nationstar
 
1,767

 
1,224

 
44.4
 %
Total liabilities and stockholders' equity
 
$
16,654

 
$
11,113

 
49.9
 %

Total liabilities and stockholders' equity increased to $16.6 billion as of December 31, 2015. Advance facilities decreased by $256 million during 2015 due to increased recoveries of advances. Warehouse facilities increased by $321 million to support growth initiatives. The increase in other nonrecourse debt was primarily the result of the financing of our reverse mortgage acquisition from Generation Mortgage included during the second quarter of 2015. Total equity increased primarily as a result of the equity raise of $498 million during the first quarter of 2015.

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 finalized such requirements in the second quarter of 2015 and the requirements became effective December 31, 2015.

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

Minimum Capital Ratio
▪
Tangible Net Worth/Total Assets greater than 6%. Tangible Net Worth comprises total equity less goodwill, intangible assets, affiliate receivables and certain pledged assets.

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.

In addition, Fannie Mae or Freddie Mac may require capital ratios in excess of stated requirements. As of December 31, 2015, we were in compliance with all regulatory capital and liquidity standards as well as covenants within our financing instruments.

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.


50

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 capacity with existing borrowing 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. During the third quarter of 2014, we redeemed $285 million of unsecured 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. During the fourth quarter of 2015, we redeemed $108.9 million of multiple tranches of unsecured senior notes due between 2018 and 2022. We will continue to optimize the use of balance sheet cash to avoid unnecessary interest carrying costs.

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 GSEs and secondary market investors that are subject to change and may be subject to additional capital requirements in connection with future acquisitions. See Note 17, 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 41. Cash
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
 
 
 
 
Cash and cash equivalents
 
$
613

 
$
299


Our cash and cash equivalents balance increased to $613 million as of December 31, 2015, as we utilized cash generated from the operations principally to invest and originate in new MSRs.

Table 42. Operating Cash Flow
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Net income attributable to Nationstar
 
$
39

 
$
221

 
$
217

Other non cash adjustments to net income
 
(1,303
)
 
(3,360
)
 
(1,325
)
Origination activity
 
1,390

 
4,389

 
(167
)
Changes in working capital
 
292

 
(170
)
 
(526
)
Net cash attributable to operating activities
 
$
418

 
$
1,080

 
$
(1,801
)

2015 vs. 2014
The $662 million decrease in cash provided by operating activities during the 2015 period was primarily due to:

•
The decrease in cash proceeds of $3.0 billion from origination activity primarily due to the timing of cash outflows from originating loans, cash inflows from securitizing and selling loans.
•
The increase in cash proceeds of $462 million from changes in working capital is primarily due to increased sales of reverse mortgage real estate owned, which was impacted by the Generation Mortgage asset acquisition.

2014 vs. 2013
The $2,881 million increase in cash provided by operating activities during the 2014 period was primarily due to:


51

•
The increase in cash proceeds of $2.0 billion is primarily due to the timing of cash outflows from originating loans, cash inflows from securitizing and selling loans and cash outflows from repurchases of loans and foreclosures out of Ginnie Mae securitizations.
•
The increase in cash proceeds of $596 million is primarily due cash inflows from advances due to management focus on recouping advances faster.

Our business is subject to extensive regulation, investigations and reviews by various federal, state and local regulatory and enforcement agencies. We are also subject to various legal proceedings in the ordinary course of our business. Addressing these regulations, reviews and legal proceedings and implementing any resulting remedial measures may require us to devote substantial resources to legal and regulatory compliance or to make other changes to our business practices, resulting in higher costs which may adversely affect our cash flows.

Table 43. Investing Cash Flows
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Purchase of reverse mortgage interests, net of participations sold
 
$
(4,816
)
 
$
—

 
$
—

Purchase of forward mortgage servicing rights, net of liabilities incurred
 
(715
)
 
(471
)
 
(1,527
)
Proceeds on sale of servicer advances
 
—

 
768

 
277

All other
 
(59
)
 
(64
)
 
(156
)
Net cash attributable to investing activities
 
$
(5,590
)
 
$
233

 
$
(1,406
)

2015 vs. 2014
We used $5.6 billion for investing activities during the year ended December 31, 2015. The increase in cash used during 2015 was primarily due to a $4.9 billion acquisition of reverse mortgage interests from Generation Mortgage during the second quarter of 2015 mostly offset by a corresponding financing inflow. Additionally, we received $768 million from the sale of servicer advances during 2014, which did not reoccur during 2015. Furthermore, we spent $244 million more on forward MSR purchases during 2015 than 2014.

2014 vs. 2013
Our investing activities provided $233 million and used $1.4 billion during the year ended December 31, 2014 and December 31, 2013, respectively. The increase in cash provided during 2014 was primarily due to $1.5 billion spent on forward MSR purchases in connection with rapid growth during 2013, which was $1.0 billion higher than the $471 million spent during 2014. Also, we received $491 million more from the sale of servicer advances in 2014 versus 2013.

Table 44. Financing Cash Flow
 
For the year ended December 31,
(in millions)
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Increase in participating interest financing in reverse mortgage interests
 
$
4,541

 
$
353

 
$
535

Issuance and (repayment) of advance, warehouse and senior unsecured notes
 
(67
)
 
(2,396
)
 
2,539

HECM securitizations
 
399

 
259

 
—

Excess spread and MSR liability financing
 
175

 
40

 
653

2015 equity raise
 
498

 
—

 
—

Restricted cash activity
 
(47
)
 
291

 
(233
)
All other
 
(12
)
 
(3
)
 
3

Net cash attributable to financing activities
 
$
5,486

 
$
(1,456
)
 
$
3,497


2015 vs. 2014
Our financing activities provided $5.5 billion and used $1.5 billion of cash flow during 2015 and 2014, respectively. The primary drivers were:

52

•
$4.6 billion of reverse mortgage financing liabilities incurred due to the Generation Mortgage reverse mortgage asset acquisition.
•
Issuance and repayment of advance, warehouse and senior unsecured notes used $73 million during 2015 versus $2.4 billion during 2014. The 2015 activity was primarily comprised of $321 million, net provided by warehouse facilities, $256 million, net used to pay down advance facilities, $109 million used to pay down senior unsecured notes, $17 million debt financing cost and $12 million to pay down non-recourse debt, legacy assets. The $2.4 billion used during 2014 was primarily comprised of $1.2 billion, net to pay down advance facilities, $861 million, net to pay down warehouse facilities, $285 million used to redeem senior unsecured notes, $15 million to pay down non recourse debt legacy assets and $13 million debt financing cost.
•
We received $498 million from the issuance of 17.5 million common shares during the first quarter of 2015.
•
We issued two HECM reverse mortgage securitizations during 2015 producing $399 million, net versus $259 million, net from a HECM securitization during 2014.

2014 vs. 2013
The $4,953 million decrease in cash flows from our financing activities was primarily the result of the following:
•
We issued net debt of $2.5 billion during 2013 connected with rapid growth of the business including $1.5 billion of MSR asset acquisitions.
•
We made net debt payments of $2.2 billion during 2014. This included the redemption of $285 million of senior unsecured notes.
•
We entered excess spread and MSR liability financing agreements and received $653 million, net during 2013 versus receiving $40 million, net during 2014.

Capital Resources

Capital Structure and Debt

Table 45. Debt
 
December 31, 2015

 
December 31, 2014

(in millions)
 
 
 
 
Advance facilities
 
$
1,646

 
$
1,902

Warehouse facilities
 
1,894

 
1,573

Unsecured senior notes
 
2,049

 
2,159


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 of December 31, 2015, we are in compliance with its financial covenants on its borrowing arrangements and credit facilities. These covenants generally relate to Nationstar’s tangible net worth, liquidity reserves and leverage requirements.

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 speed affect the size of servicing advance balances along with stop advance policies. As part of our normal course of our 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. 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. At December 31, 2015 , our maximum unfunded advance obligation related to these reverse mortgage loans was approximately $3.2 billion .

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

53

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 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 6.5% to 9.6%. We redeemed all of our outstanding 10.8% unsecured 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. Additionally, during the fourth quarter of 2015, we repurchased $108.9 million of unsecured senior notes with interest rates ranging from 6.5% to 9.6% at a discount which resulted in a gain of $8.2 million.

As of December 31, 2015, the expected maturities of Nationstar's unsecured senior notes based on contractual maturities are as follows (in millions):

Table 46. Contractual Maturities - Unsecured Senior Notes
 
 
Year
 
Amount
2016
 
$
—

2017
 
—

2018
 
475

2019
 
363

2020
 
400

Thereafter
 
810

Total
 
$
2,048



54

Table 47. Contractual Obligations
The table below sets forth our contractual obligations, excluding our legacy asset securitized debt, our excess spread financing, MSR financing and our participating interest financing at December 31, 2015 (in millions):
 
Less than 1 Year
 
1-3 Years

 
3-5 Years
 
More than 5 Years  
 
Total     
Unsecured senior notes
$
—

 
$
475

 
$
763

 
$
811

 
$
2,049

Interest expense from unsecured senior notes
157

 
314

 
198

 
69

 
738

MBS advance financing facility
82

 
—

 
—

 
—

 
82

Nationstar agency advance financing facility (VFN)
310

 
—

 
—

 
—

 
310

Nationstar mortgage advance receivable trust (VFN)
335

 
—

 
—

 
—

 
335

MBS advance financing facility (2012)
50

 
—

 
—

 
—

 
50

MBS servicer advance facility (2014)
106

 
—

 
—

 
—

 
106

Nationstar agency advance receivables trust
—

 
763

 
 
 
 
 
763

$1.3 billion warehouse facility
634

 
—

 
—

 
—

 
634

$1.0 billion warehouse facility
545

 
 
 
 
 
 
 
545

$500 million warehouse facility
175

 
—

 
—

 
—

 
175

$500 million warehouse facility
257

 
—

 
—

 
—

 
257

$350 million warehouse facility
98

 
—

 
—

 
—

 
98

$200 million warehouse facility
9

 
—

 
—

 
—

 
9

$300 million warehouse facility
23

 


 


 


 
23

$200 million warehouse facility
45

 


 


 


 
45

$125 million warehouse facility
53

 
—

 
—

 
—

 
53

$100 million warehouse facility
55

 
—

 
—

 
—

 
55

Lease obligations
41

 
50

 
33

 
13

 
137

Total
$
2,975

 
$
1,602

 
$
994

 
$
893

 
$
6,464

Since senior unsecured notes are long-term liabilities, only their estimated interest expenses which are based on a fixed rate on the senior unsecured notes are included in this table. Estimated interest expense on the advance and warehouse debt is excluded due to the short-term nature of these facilities.
In addition to the above contractual obligations, we have also been involved with several securitizations, which were structured as secured borrowings. These structures resulted in us carrying the securitized loans as mortgages on our consolidated balance sheet and recognizing the asset-backed certificates acquired by third parties as nonrecourse debt. The timing of the principal payments on this nonrecourse debt is dependent on the payments received on the underlying mortgage loans and liquidation of REO. For more information regarding our indebtedness, see Note 10, Indebtedness, in the Consolidated Financial Statements which is incorporated herein.

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 determined to be Level 3 as discussed in Note 14 and valuation and reserves 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. Fair value measurements considered to be Level 3 representing estimated values based on significant unobservable inputs include (i) the valuation of MSRs, (ii) the valuation of excess spread financing and (iii) the valuation of mortgage servicing rights financing liability.

55


Fair Value Measurements
MSRs at Fair Value
We recognize MSRs related to all existing forward residential mortgage loans transferred to a third party in a transfer that meets the requirements for sale accounting. Additionally, we may acquire the rights to service forward residential mortgage loans through the purchase of these rights from third parties. We apply fair value accounting to this class of MSRs, with all changes in fair value recorded as a charge or credit to servicing related revenue in the consolidated statements of operations and comprehensive income. We estimate the fair value of these MSRs 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.
We use internal financial models that use market participant data to value these MSRs. These models are complex and use asset specific collateral data and market inputs for interest and discount rates. In addition, the modeling requirements of MSRs are complex because of the high number of variables that drive cash flows associated with MSRs. Even if the general accuracy of our valuation models is validated, valuations are highly dependent upon the reasonableness of our assumptions and the predictability of the relationships that drive the results of the models. On a quarterly basis, we obtain external market valuations from independent third party MSR valuation experts in order to validate the reasonableness of our internal valuation.
Excess Spread Financing
In conjunction with the acquisition of certain of our MSRs, we entered into a sale and assignment agreement, which we account for as financings with New Residential, whereby we sell the right to receive a portion of the excess cash flow generated from a certain underlying MSR portfolio after receipt of a fixed base servicing fee per loan. We retain all ancillary revenues associated with servicing the portfolio and the remaining portion of the excess cash flow after receipt of the fixed base servicing fee. We measure this financing arrangement at fair value to more accurately represent the future economic performance of the acquired MSRs and related excess servicing financing, with all changes in fair value recorded as a charge or credit to servicing related revenue in the consolidated statements of operations and comprehensive income. We estimate the fair value of this financing using a process that combines the use of a discounted cash flow model and analysis of current market data based on the value of the underlying MSRs. 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, and average life.
In addition, should we refinance any loan in the portfolios, subject to certain limitations, we may 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 and drives the recapture rate assumption.
Mortgage Servicing Rights Financing Liability
From time to time, we will enter into certain transactions with third parties to sell certain mortgage servicer rights and servicer advances under specified terms. When these transfers qualify for sale treatment, we derecognize the transferred assets on our consolidated balance sheet. We have determined that for a portion of these transactions, the related mortgage servicing rights sales are contingent upon the receipt of consents from various third parties. Until these required consents are obtained, legal ownership of the mortgage servicing rights continues to reside with the Company. We continue to account for the mortgage servicing rights on our consolidated balance sheet. Consequently, we record a mortgage servicing rights financing liability associated with this financing transaction.

We have elected to measure MSR financing agreements at fair value, with all changes in fair value recorded as a charge or credit to servicing related revenue in the consolidated statement of operations and comprehensive income. The fair value of MSR financing is 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 being advance financing rates and advance recovery rates.
Valuation of Deferred Tax Assets
Our provision for income taxes is calculated using the liability method, which requires the recognition of deferred income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain changes in the valuation allowance. We provide a valuation allowance against deferred tax assets if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining the adequacy of the valuation allowance, we consider all forms of evidence, including: (1) historic earnings or losses; (2) the ability to realize deferred tax assets through carry back to prior periods; (3) anticipated taxable income resulting from the reversal of taxable temporary differences; (4) tax planning strategies; and (5) anticipated future earnings exclusive of the reversal of taxable temporary differences.

56


Reserves for Loan Origination and Servicing Activity
Nationstar provides for reserves in connection with loan origination and loan servicing activities which are charged to earnings. Reserves on loan origination activities primarily include reserves for the repurchase of loans from government sponsored entities, Ginnie Mae, and third-party investors primarily due to delinquency or foreclosure and are initially recorded upon sale of the loan to a third party with subsequent reserves recorded based on repurchase demands. The provision for reserves associated with loan origination activities is a component of net gain on sale of loans held for sale. 
In connection with loan servicing activities, Nationstar records reserves principally for advance curtailment, interest claims, compensatory fees and mortgage insurance claims. Servicing reserves for receivables associated with loans that have been liquidated out of the servicing portfolio are recorded as a contra-receivable based on the nature of the underlying collateral and whether amounts have been claimed from various servicing counterparties. Servicing reserves associated with loans that have not yet been liquidated from the servicing portfolio are recorded as a component of the MSR fair value via the cost to service assumption. The provision for loan servicing activities is a component of either servicing related revenue or general and administrative expenses based on whether or not the underlying loan collateral has been liquidated from the servicing portfolio.
Nationstar utilizes internal models to estimate reserves for loan origination and loan servicing activities. Key assumptions used in these models include but are not limited to interest rates, borrower characteristics, historical losses, current delinquencies, time to a foreclosure sale, characteristics of a mortgage loan or pool, estimated costs of foreclosure action, future tax payments, the value of the underlying property net of carrying costs, commissions and closing costs and other Nationstar and macro-economic factors. On a quarterly basis, management corroborates these assumptions using third party data.
OTHER MATTERS

Recent Accounting Developments

See Note 1, Description of Business and Basis of Presentation, in the Consolidated Financial Statements in Item 8 Financial Statements and Supplementary Data which is incorporated herein for details of recently issued accounting pronouncements and their expected impact on our consolidated financial statements.

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 inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Variable Interest Entities and Off Balance Sheet Arrangements

See Note 12, 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 unconsolidated balances details of their impact on our consolidated financial statements.

Derivatives

See Note 9, 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.


57

Item 7A.   Quantitative and Qualitative Disclosures about Market Risk
We are exposed to a variety of market risks that include interest rate risk, consumer credit risk and counterparty credit risk.
Interest Rate Risk
Changes in interest rates affect our operations primarily as follows:
Servicing Segment
 
•
an increase in interest rates would increase our costs of servicing our outstanding debt, including our ability to finance servicing advances
•
a decrease (increase) in interest rates would generally increase (decrease) prepayment rates and may require us to report a decrease (increase) in the value of our MSRs
•
a change in prevailing interest rates could impact our earnings from our custodial deposit accounts
•
an increase in interest rates could generate an increase in delinquency, default and foreclosure rates resulting in an increase in both operating expenses and interest expense and could cause a reduction in the value of our assets

Originations Segment
 
•
a substantial and sustained increase in prevailing interest rates could adversely affect our loan originations volume because refinancing an existing loan would be less attractive to a borrower and qualifying for a loan may be more difficult
•
an increase in interest rates would increase our costs of servicing our outstanding debt, including our ability to finance loan originations
We actively manage the risk profiles of interest rate lock commitments (IRLCs) and mortgage loans held for sale on a daily basis and enter 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, we enter into forward sales of MBS to deliver mortgage loan inventory to investors.
Consumer Credit Risk
We sell our loans on a nonrecourse basis. We also provide representations and warranties to purchasers and insurers of the loans sold that typically are in place for the life of the loan. In the event of a breach of these representations and warranties, we may be required to repurchase a mortgage loan or indemnify the purchaser, and any subsequent loss on the mortgage loan may be borne by us. If there is no breach of a representation and warranty provision, we have no obligation to repurchase the loan or indemnify the investor against loss. The outstanding UPB of loans sold by us represents the maximum potential exposure related to representation and warranty provisions.
We maintain a reserve for losses on loans repurchased or indemnified as a result of breaches of representations and warranties on our sold loans. Our loss estimate is based on our most recent data regarding loan repurchases and indemnity payments, actual credit losses on repurchased loans, recovery history, among other factors. Our assumptions are affected by factors both internal and external in nature. Internal factors include, among other things, level of loan sales, as well as to whom the loans are sold, the expectation of credit loss on repurchases and indemnifications, our success rate at appealing repurchase demands and our ability to recover any losses from third parties. External factors that may affect our estimate include, among other things, the overall economic condition in the housing market, the economic condition of borrowers, the political environment at investor agencies and the overall U.S. and world economy. Many of the factors are beyond our control and may lead to judgments that are susceptible to change.
In adverse market conditions, loans may decrease in value due to an increase in delinquencies, borrower defaults and nonpayments. In addition, property values may experience losses at liquidation due to extensions in foreclosure and REO sales timelines as well as home price depreciation.
Counterparty Credit Risk
We are exposed to counterparty credit risk in the event of non-performance by counterparties to various agreements. Although most credit facilities and warehouse lines are committed, the Company may experience a disruption in operations due to a lender withholding a funding of a borrowing requested on the respective credit facility. We monitor the credit ratings of our counterparties and do not anticipate losses due to counterparty non-performance.

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Sensitivity Analysis
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 a discounted cash flow 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 and market discount rates. 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 used December 31, 2015 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. These sensitivities are hypothetical and presented for illustrative purposes only. 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.
The following table summarizes the estimated change in the fair value of our assets and liabilities sensitive to interest rates as of December 31, 2015 given hypothetical instantaneous parallel shifts in the yield curve:

Table 48. Change in Fair Value
December 31, 2015
(in thousands)
Down 25 bps
 
Up 25 bps      
Increase (decrease) in assets
 
 
 
Mortgage loans held for sale
$
14,812

 
$
(17,202
)
Mortgage servicing rights – fair value
(199,230
)
 
191,764

Derivative financial instruments:
—

 
—

Interest Rate Lock Commitments
12,908

 
(18,086
)
Total change in assets
(171,510
)
 
156,476

Increase (decrease) in liabilities
 
 
 
Derivative financial instruments:
 
 
 
Interest rate swaps and caps
—

 
—

Forward MBS trades
25,617

 
(29,809
)
Mortgage servicing rights liability
7,682

 
(7,864
)
Excess spread financing (at fair value)
(76,128
)
 
75,289

Total change in liabilities
(42,829
)
 
37,616

Total, net change
$
(128,681
)
 
$
118,860



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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. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances and we are under no obligation to and express disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.

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 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;
• delays in our ability to collect or be reimbursed for servicing advances;
• our ability to obtain sufficient capital to operate our business;
• changes in prevailing interest rates;
• servicing of reverse mortgages;
• changes in our business relationships or changes in servicing guidelines with Fannie Mae, Freddie Mac and
Ginnie Mae;
• our ability to fully or successfully implement the Xome real estate platform;
•
increased legal and regulatory examinations and enforcement investigations and proceedings, compliance requirements and related costs;
• loss of our licenses.

All of the factors are difficult to predict, contain uncertainties that may materially affect actual results, and may be beyond our control. New factors emerge from time to time, and it is not possible for our management to predict all such factors or to assess the effect of each such new factor on our business. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore any of these statements included herein may prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Please refer to Item 1A. Risk Factors and the Business and MD&A sections of this report for further information on these and other factors affecting us.



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Item 8.   Financial Statements and Supplementary Data
Index to Consolidated Financial Statements:
 
Consolidated Balance Sheets  as of December 31, 2015 and 2014
Consolidated Statements of Operations and Comprehensive Income  for the Years Ended December 31, 2015, 2014 and 2013
Consolidated Statements of Stockholders’ Equity  for the Years Ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows  for the Years Ended December 31, 2015, 2014 and 2013

61


Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of
Nationstar Mortgage Holdings Inc.

We have audited the accompanying consolidated balance sheets of Nationstar Mortgage Holdings Inc. (the Company) as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nationstar Mortgage Holdings Inc. at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Nationstar Mortgage Holdings Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2016 expressed an unqualified opinion thereon.


/s/ Ernst & Young LLP

Dallas, Texas
March 1, 2016


62

Consolidated Financial Statements
NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
 
 
December 31,
2015
 
December 31,
2014
Assets
 
 
 
Cash and cash equivalents
$
613,241

 
$
299,002

Restricted cash
332,105

 
285,530

Mortgage servicing rights, $3,358,327 and $2,949,739 at fair value, respectively
3,366,973

 
2,961,321

Advances, net
2,223,083

 
2,544,699

Reverse mortgage interests
7,514,323

 
2,453,069

Mortgage loans held for sale
1,429,691

 
1,277,931

Mortgage loans held for investment, net of allowance for loan losses of $3,549 and $3,531, respectively
173,650

 
191,569

Property and equipment, net of accumulated depreciation of $92,834 and $69,721, respectively
142,836

 
129,611

Derivative financial instruments
99,199

 
91,051

Other assets
758,969

 
878,892

Total assets
$
16,654,070

 
$
11,112,675

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Unsecured senior notes
$
2,048,694

 
$
2,159,231

Advance facilities
1,646,123

 
1,901,783

Warehouse facilities
1,893,526

 
1,572,622

Payables and accrued liabilities
1,296,387

 
1,322,078

MSR related liabilities - nonrecourse
1,300,782

 
1,080,465

Mortgage servicing liabilities
25,260

 
65,382

Derivative financial instruments
5,323

 
18,525

Other nonrecourse debt
6,670,598

 
1,768,311

Total liabilities
14,886,693

 
9,888,397

Commitments and contingencies (Note 18)

 

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, 109,826 shares and 90,999 shares issued, respectively
1,084

 
910

Additional paid-in-capital
1,104,972

 
587,446

Retained earnings
681,838

 
643,059

Treasury shares at cost; 989 and 602 shares, respectively
(29,780
)
 
(12,433
)
Accumulated other comprehensive income
—

 
—

Total Nationstar stockholders' equity
1,758,114

 
1,218,982

Noncontrolling interest
9,263

 
5,296

Total stockholders' equity
1,767,377

 
1,224,278

Total liabilities and stockholders' equity
$
16,654,070

 
$
11,112,675

See accompanying notes to the consolidated financial statements.

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Table of Contents

NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(amounts in thousands, except earnings per share data)
 
 
For the year ended December 31,
 
2015
 
2014
 
2013
Revenues:
 
 
 
 
 
Service related
$
1,304,760

 
$
1,375,862

 
$
1,384,222

Net gain on mortgage loans held for sale
683,875

 
597,206

 
702,763

Total revenues
1,988,635

 
1,973,068

 
2,086,985

Expenses:
 
 
 
 
 
Salaries, wages and benefits
762,568

 
642,936

 
679,637

General and administrative
925,011

 
714,755

 
722,641

Total expenses
1,687,579

 
1,357,691

 
1,402,278

Other income (expenses):
 
 
 
 
 
Interest income
350,755

 
179,592

 
197,220

Interest expense
(605,223
)
 
(516,387
)
 
(538,805
)
Gain on disposal of property
—

 
4,898

 
—

Gain on repurchase of unsecured senior notes
8,237

 
—

 
—

Gain (loss) on interest rate swaps and caps
(650
)
 
2,404

 
3,132

Total other income (expense)
(246,881
)
 
(329,493
)
 
(338,453
)
Income before income tax expense
54,175

 
285,884

 
346,254

Income tax expense
11,012

 
64,860

 
129,200

Net income
43,163

 
221,024

 
217,054

Less: net income attributable to noncontrolling interests
4,384

 
306

 
—

Net income attributable to Nationstar
38,779

 
220,718

 
217,054

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

 
(1,963
)
 
$
1,963

Total comprehensive income
$
38,779

 
$
218,755

 
$
219,017

Net income per common share attributable to common stockholders:
 
 
 
 
 
Basic
$
0.38

 
$
2.47

 
$
2.43

Diluted
$
0.37

 
$
2.45

 
$
2.40

Weighted average shares of common stock outstanding:
 
 
 
 
 
       Basic
103,248

 
89,521

 
89,415

       Dilutive effect of stock awards
532

 
499

 
853

       Diluted
103,780

 
90,020

 
90,268

Dividends declared per share
$
—

 
$
—

 
$
—

See accompanying notes to the consolidated financial statements.

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Table of Contents

NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(amounts in thousands)
 
Number of Shares
 
Amount
 
Common Stock
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Treasury Shares Amount
 
Common Shares Held by Subsidiary
 
Accumulated Other Comprehensive Income
 
Total Nationstar Stockholders'
Equity
 
Non-controlling Interests
 
Total Equity
As of December 31, 2012
90,460

 
$
905

 
$
556,056

 
$
205,287

 
$
—

 
$
(4,566
)
 
$
—

 
$
757,682

 
$
—

 
$
757,682

Shares issued under incentive plan
82

 
3

 
(3
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

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

 
—

 
—

 
—

 
—

 
—

 
1,963

 
1,963

 
—

 
1,963

Share-based compensation
—

 
—

 
10,574

 
—

 
—

 
—

 
—

 
10,574

 
—

 
10,574

Excess tax benefit from share-based compensation
—

 
—

 
4,579

 
—

 
—

 
—

 
—

 
4,579

 
—

 
4,579

Shares acquired by Nationstar related to incentive compensation awards
—

 
—

 
—

 
—

 
(6,944
)
 
—

 
—

 
(6,944
)
 
—

 
(6,944
)
Shares canceled
(212
)
 
(2
)
 
(4,564
)
 
—

 
—

 
4,566

 
—

 
—

 
—

 
—

Contributions from joint venture members to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
4,990

 
4,990

Net income
—

 
—

 
—

 
217,054

 
—

 
—

 
—

 
217,054

 
—

 
217,054

As of 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

As of December 31, 2014
91,601

 
910

 
587,446

 
643,059

 
(12,433
)
 
—

 
—

 
1,218,982

 
5,296

 
1,224,278

Shares (including forfeitures) issued under incentive plan
1,229

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Acquisition on noncontrolling interest in subsidiaries
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(417
)
 
(417
)
Share-based compensation
—

 
—

 
19,521

 
—

 
—

 
—

 
—

 
19,521

 
—

 
19,521

Stock offering
17,500

 
174

 
497,583

 
—

 
—

 
—

 
—

 
497,757

 
—

 
497,757

Excess tax benefit from share based compensation
—

 
—

 
422

 
—

 
—

 
—

 
—

 
422

 
—

 
422

Shares acquired by Nationstar related to incentive compensation awards
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Repurchase of common stock
(504
)
 
—

 
—

 
—

 
(17,347
)
 
—

 
—

 
(17,347
)
 
—

 
(17,347
)
Net income
—

 
—

 
—

 
38,779

 
—

 
—

 
—

 
38,779

 
4,384

 
43,163

As of December 31, 2015
109,826

 
$
1,084

 
$
1,104,972

 
$
681,838

 
$
(29,780
)
 
$
—

 
$
—

 
$
1,758,114

 
$
9,263

 
$
1,767,377

See accompanying notes to the consolidated financial statements.

65
Table of Contents

NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
 
 
For the year ended December 31,
 
2015
 
2014
 
2013
Operating activities
 
 
 
 
 
Net income attributable to Nationstar
$
38,779

 
$
220,718

 
$
217,054

Reconciliation of net income to net cash attributable to operating activities, net of effect of acquisitions:
 
 
 
 
 
Noncontrolling interest
4,384

 
306

 
—

Share-based compensation
19,521

 
18,565

 
10,574

Gain on disposal of property
—

 
(4,898
)
 
—

Gain on repurchase of unsecured senior notes
(8,237
)
 
—

 
—

Excess tax benefit from share based compensation
(422
)
 
(2,243
)
 
(4,579
)
Loss on foreclosed real estate and other
—

 
10,288

 
13,316

Net gain on mortgage loans held for sale
(683,875
)
 
(597,206
)
 
(702,763
)
Mortgage loans originated and purchased, net of fees
(17,971,304
)
 
(17,137,520
)
 
(24,059,757
)
Repurchases of loans and foreclosures out of Ginnie Mae securitizations
(1,865,347
)
 
(3,692,199
)
 
(1,426,860
)
Proceeds on sale of and payments of mortgage loans held for sale and held for investment
20,045,420

 
22,123,973

 
24,595,051

(Gain) loss on interest swaps and caps
650

 
(2,404
)
 
(6,080
)
Cash settlement on derivative financial instruments
—

 
1,352

 
(4,544
)
Depreciation and amortization
53,497

 
40,166

 
26,615

Amortization (accretion) of premiums (discounts)
(11,671
)
 
13,330

 
52,531

Fair value changes in excess spread financing
25,631

 
57,554

 
73,333

Fair value changes and amortization (accretion) of mortgage servicing rights
459,803

 
233,537

 
(59,101
)
Fair value changes mortgage servicing rights financing liability
19,266

 
(33,279
)
 
—

Changes in assets and liabilities:
 
 
 
 
 
Advances
323,279

 
324,182

 
(465,775
)
Reverse mortgage interests
(245,570
)
 
(1,002,142
)
 
(751,609
)
Other assets
270,595

 
528,112

 
44,237

Payables and accrued liabilities
(56,573
)
 
(19,983
)
 
647,320

Net cash attributable to operating activities
417,826

 
1,080,209

 
(1,801,037
)
Investing activities
 
 
 
 
 
Property and equipment additions, net of disposals
(57,042
)
 
(56,405
)
 
(48,859
)
Purchase of forward mortgage servicing rights, net of liabilities incurred
(714,842
)
 
(471,249
)
 
(1,527,645
)
Sale of forward mortgage service rights
43,793

 
—

 
—

Purchase of reverse mortgage interests, net of participations sold
(4,815,684
)
 
—

 
—

Proceeds on sale of servicer advances
—

 
768,449

 
277,455

Proceeds from sale of building
—

 
10,412

 
—

Purchase of reverse mortgage servicing rights and interests
—

 
—

 
(19,189
)
Acquisitions, net of cash acquired
(45,796
)
 
(18,000
)
 
(88,200
)
Net cash attributable to investing activities
(5,589,571
)
 
233,207

 
(1,406,438
)
  Continued on following page.
See accompanying notes to the consolidated financial statements.  

66
Table of Contents


NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands) (Continued)  
 
For the year ended December 31,
 
2015
 
2014
 
2013
Financing activities
 
 
 
 
 
Transfers (to) from restricted cash, net
(46,575
)
 
290,803

 
(232,695
)
Issuance of unsecured senior notes, net
—

 
—

 
1,365,244

Repayment / redemption of unsecured senior notes
(102,533
)
 
(285,000
)
 
—

Issuance of common stock, net of issuance costs
497,757

 
—

 
—

Debt financing costs
(17,363
)
 
(13,067
)
 
(53,529
)
Increase (decrease) in warehouse facilities
320,904

 
(861,305
)
 
1,395,427

Increase (decrease) in advance facilities
(255,660
)
 
(1,221,206
)
 
(154,677
)
Proceeds from HECM securitizations
559,757

 
269,033

 
—

Repayment of HECM securitizations
(161,221
)
 
(9,750
)
 
—

Issuance of excess spread financing
385,637

 
171,317

 
753,002

Repayment of excess spread financing
(210,217
)
 
(184,246
)
 
(130,355
)
Increase in participating interest financing in reverse mortgage interests
4,540,828

 
352,945

 
535,216

Proceeds from mortgage servicing rights financing
—

 
52,835

 
29,874

Repayment of nonrecourse debt – legacy assets
(12,817
)
 
(15,429
)
 
(13,404
)
Excess tax benefit from share-based compensation
422

 
2,243

 
4,579

Surrender of shares relating to stock vesting
(6,224
)
 
(5,489
)
 
(6,944
)
Repurchase of treasury shares
(6,711
)
 
—

 
—

Contributions from joint venture member to noncontrolling interests
—

 
—

 
4,990

Net cash attributable to financing activities
5,485,984

 
(1,456,316
)
 
3,496,728

Net increase (decrease) in cash and cash equivalents
314,239

 
(142,900
)
 
289,253

Cash and cash equivalents at beginning of period
299,002

 
441,902

 
152,649

Cash and cash equivalents at end of period
$
613,241

 
$
299,002

 
$
441,902

Supplemental disclosures of cash activities
 
 
 
 
 
Cash paid for interest expense
$
430,555

 
$
515,152

 
$
441,333

Net cash paid for income taxes
30,209

 
1,781

 
114,454

Supplemental disclosures of non-cash activities
 
 
 
 
 
Claims made to third parties
60,518

 
166,278

 
423,324

See accompanying notes to the consolidated financial statements.  

67



Notes to Consolidated Financial Statements
(All Amounts in Thousands, unless otherwise stated)

1. Description of Business and Basis of Presentation

Description of Business
Nationstar Mortgage Holdings Inc. (Nationstar or the Company), a Delaware corporation, earns fees through the delivery of servicing, origination and transaction based services principally to single-family residences throughout the United States.

Basis of Presentation
The Company follows generally accepted accounting principles in the United States of America (GAAP). The significant accounting policies described below, together with the other notes that follow, are an integral part of the consolidated financial statements.

Basis of Consolidation
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 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 on consolidated entities have been eliminated. Business combinations are included in the consolidated financial statements from their respective dates of acquisitions. 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. Nationstar evaluated subsequent events through the date these consolidated financial statements were issued.

Use of Estimates
The preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates due to factors such as adverse changes in the economy, increases in interest rates, changes in prepayment assumptions, declines in home prices or discrete events adversely affecting specific borrowers, and such differences could be material.

Reclassifications
Certain prior-period amounts have been reclassified to conform to the current-period presentation. The primary reclassifications were the result of new accounting guidance (see Subtopic 310-40 below) which impacted the presentation of Reverse Mortgage Interests. As a result, the Company transferred amounts included within Other Assets into Reverse Mortgage Interests both on the Consolidated Balance Sheets and Consolidated Statement of Cash Flows for all periods presented.

Recent Accounting Guidance Adopted
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, $69.4 million from the prior year was reclassified to be in conformity with the current year presentation. The adoption of ASU 2014-14 was limited to balance sheet reclassification, and did not impact the Company's financial condition, liquidity or results of operations.

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 the current and prior year in the Mortgage Loans Held for Sale and Investment footnote. The adoption of ASU 2014-04 did not impact the Company's financial condition, liquidity or results of operations.

Accounting Standards Update No 2014-11, Transfers and Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures (ASU 2014-11), was created to provide greater disclosure in reference to repurchase agreements and similar transactions. Under ASC 2014-11, repurchase-to-maturity transactions are accounted for as secured borrowings and

68


eliminates existing guidance for repurchase financings. In addition, new disclosures are required for (1) certain transactions accounted for as secured borrowings and (2) transfers accounted for as sales when the transferor also retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. This amendment update is effective for year-end periods beginning after December 15, 2014 and early application is not permitted. The adoption of ASU 2014-11 did not have a material impact on our financial condition, liquidity or results of operations.

Recent Accounting Guidance Not Yet Adopted
Accounting Standards Update No 2014-09, Revenue from Contracts with Customers (ASU 2014-09), provides guidance for revenue recognition. This ASU 2014-09’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects consideration to which the company expects to be entitled in exchange for those goods or services. The guidance was originally effective for annual reporting periods of public entities beginning on or after December 15, 2016, including interim periods within that reporting period. To allow entities additional time to implement systems, gather data and resolve implementation questions, the FASB issued ASU No. 2015-14, Revenue From Contracts with Customers – Deferral of the Effective Date , in August 2015, to defer the effective date of ASU No. 2014-09 for one year. The company is currently assessing the potential impact of the adoption of ASU 2014-09 on the consolidated financial statements.

Accounting Standards Update 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 operations.

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 a 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.

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.

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 adoption of ASU 2015-12 is not expected to have a material impact on our financial condition, liquidity or results of operations.

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 adoption of ASU 2015-03 will be limited to balance sheet reclassification, and will not impact the Company's financial condition, liquidity or results of operations. Also, ASU 2015-15 Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements further expands ASU 2015-03 for presentation and disclosure in the financial statements. ASU 2015-15 amends Subtopic 835-30 to include that the SEC would not object to the deferral and presentation of debt issuance costs as an asset and subsequent amortization of the deferred costs over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement.

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.

69


This amendment is effective for annual periods beginning after December 15, 2015. The adoption of ASU 2015-05 is not expected to have a material impact on our financial condition, liquidity or results of operations.

Accounting Standards Update 2016-02, Lease, requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to today’s accounting. For calendar-year public business entities and certain calendar-year not-for-profit entities and employee benefit plans, the guidance is effective in 2019, and interim periods within that year.

2. Significant Accounting Policies
The following summarizes the significant accounting policies of Nationstar applied in the preparation of the accompanying consolidated financial statements.

Cash and Cash Equivalents
Cash and cash equivalents include unrestricted cash on hand and other highly liquid investments having an original maturity of less than three months.

Restricted Cash
Restricted cash comprises three components. With respect to Originations, restricted cash includes (i) principal received from borrowers on originated loans pledged to a warehouse facility and (ii) guarantee fees collected on behalf and payable to either Fannie Mae or Freddie Mac on a monthly basis. With respect to Servicing, the restricted cash  includes cash received from borrowers or investors on loans pledged to advance facilities. In addition, the Servicing restricted cash relates to advance facilities structured as special purposes entities.
Advances, Net
The Company will advance funds when the borrower fails to meet contractual payments (e.g., principal, interest, property taxes, insurance). The Company will also advance funds to maintain, report and market foreclosed real estate properties on behalf of investors. Advances are recovered from borrowers for reinstated and performing loans and from investors for foreclosed loans. Per the servicing agreements, the Company is only obligated to advance funds to extent that such advances are recoverable.

Nationstar may also acquire servicer advances in conjunction with the acquisition of Mortgage Servicing Rights (MSRs). Acquired servicer advances are recorded at their relative fair value amounts on the acquisition date, and any recorded discounts are accreted into interest income on a cost recovery method as the related servicer advances are recovered either through repayment from the borrower, liquidation of the underlying mortgage loans, or through a modification and recovery of the outstanding servicer advance balance from the securitization trust.

When Nationstar has determined that, based on all available information, it is probable that a loss has been incurred, and that all contractual amounts due will not be recovered, an impairment is recognized through the recording of a valuation allowance. Any changes to the valuation allowance are recorded through general and administrative expenses.

Mortgage Loans Held for Sale
Nationstar has elected to measure newly originated prime residential mortgage loans held for sale at fair value. Nationstar estimates fair value by evaluating a variety of market indicators, including recent trades and outstanding commitments, calculated on an aggregate basis. In connection with Nationstar’s election to measure newly originated prime residential mortgage loans held for sale at fair value, Nationstar is not permitted to defer the loan originations fees, net of direct loan originations costs associated with these loans. In addition, the Company may at times repurchase loans that were previously transferred to Ginnie Mae if that loan meets certain criteria, including being delinquent greater than 90 days. Nationstar has also elected to measure these repurchased loans at fair value.
At times, Nationstar may acquire loans that it services through the exercise of clean-up calls. These loans are carried at the lower of cost or fair value.
Mortgage Loans Held for Investment, Net
Mortgage loans held for investment primarily consist of nonconforming or subprime mortgage loans securitized which serve as collateral for the issued debt. These loans were transferred in 2009 from mortgage loans held for sale at fair value on the transfer date, as determined by the present value of expected future cash flows, with no valuation allowance recorded. The difference between the undiscounted cash flows expected and the investment in the loan is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at transfer are recognized as a yield adjustment or as a loss accrual or a valuation allowance. Increases in expected

70


cash flows subsequent to the transfer are recognized prospectively through adjustment of the yield on the loans over the remaining life. Decreases in expected cash flows subsequent to transfer are recognized as a valuation allowance.

An allowance for loan losses is established by recording a provision for loan losses in the consolidated statements of operations and comprehensive income when management believes a loss has occurred on a loan held for investment. When management determines that a loan held for investment is partially or fully uncollectible, the estimated loss is charged against the allowance for loan losses. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.
Reverse Mortgage Interests
Reverse mortgages (known as Home Equity Conversion Mortgages or HECMs) provide seniors (62 and older) with a loan secured by their home. Nationstar records acquired reverse mortgage interests assets and obligations assumed at relative fair value on the acquisition date. Any premium or discount associated with the recording of the funded advances is accreted into interest income as the underlying HECMs are liquidated.

Nationstar is obligated in its capacity as servicer to fund future borrower obligations, which include fees paid to taxing authorities for borrowers' unpaid taxes and insurance, mortgage insurance premiums and payments made to borrowers for line of credit draws on reverse mortgages. In addition, Nationstar capitalizes the servicing fees and interest income it earns for servicing the reverse mortgage interests. These payments funded by Nationstar are recorded as reverse mortgage interests on the Company's consolidated balance sheets. Nationstar includes the cash outflow from funding these payments as operating activities as a component of reverse mortgage interests. The securitization cash inflow is reported as a financing activity as a component of the change in interest financing and reverse mortgage interests in the consolidated statements of cash flows.

Nationstar receives a monthly servicing fee, which is recorded as either interest income or servicing fee income on the consolidated statements of operations and comprehensive income based upon if the related advance was either funded by or acquired by Nationstar. Interest income is accrued monthly based upon the borrower interest rate applied to the HECM outstanding principal balance of reverse mortgage interests. Interest expense on the participating interest financing is accrued monthly based upon the underlying HMBS rates and is recorded to interest expense in the consolidated statements of operations and comprehensive income.

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 .

When Nationstar determines that a loss on the balance of the reverse mortgage interests is probable and that the carrying balance may be partially or fully uncollectible, reserves are established by recording a provision which is include in general and administrative expenses of the consolidated statements of operations and comprehensive income.

Mortgage Servicing Rights (MSRs)
Nationstar recognizes the rights to service mortgage loans for others, or MSRs, as assets whether purchased or as a result of the sale of loans Nationstar originates. Nationstar initially record all of our MSRs at fair value. MSRs related to reverse mortgages are subsequently measured at lower of cost or market (LOCOM).

For MSRs recorded at fair value, the fair value of the MSRs is based upon the present value of the expected future net cash flows related to servicing these loans. Nationstar receives a base servicing fee ranging from 0.21% to 0.50% annually on the remaining outstanding principal balances of the loans. The servicing fees are collected from investors. Nationstar determines the fair value of the MSRs by the use of a discounted cash flow model that incorporates prepayment speeds, delinquencies, discount rate, ancillary revenues and other assumptions (including costs to service) that management believes are consistent with the assumptions other similar market participants use in valuing the MSRs. The nature of the forward loans underlying the MSRs affects the assumptions used in the cash flow models. Nationstar obtains third-party valuations quarterly to assess the reasonableness of the fair value calculated by the cash flow model.

Additionally, Nationstar owns servicing rights for reverse mortgage loans. For this class of servicing rights, Nationstar applies the amortization method (or LOCOM) 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 service related revenue. The expected period of the estimated net servicing income is based, in part, on the expected prepayment period of the underlying reverse mortgages. 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. These risk characteristics include loan type (fixed or adjustable rate), term and interest rate. 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.

71



MSR Related Liabilities - Nonrecourse
Excess Spread Financing
In conjunction with Nationstar's acquisition of certain mortgage servicing rights on various pools of residential mortgage loans (the Portfolios), Nationstar has entered into sale and assignment agreements that are accounted for as financings, with the total proceeds being recorded as a component of MSR related liabilities - nonrecourse on the consolidated balance sheets. Nationstar determines the effective interest rate on these liabilities and allocates total payments between interest expense and a portion as a reduction to the total outstanding liability. Under these agreements, Nationstar sold to a third party the right to receive a portion of the excess cash flow generated from the Portfolios after receipt of a fixed base servicing fee per loan.

Nationstar has elected to measure the outstanding financings related to the excess spread financing agreements at fair value with all changes in fair value recorded as a charge or credit to service related revenue in the consolidated statements of operations and comprehensive income. The fair value on excess spread financing is based on the present value of future expected discounted cash flows with the discount rate approximating current market value for similar financial instruments.

Mortgage Servicing Rights Financing
From time to time, Nationstar will enter into certain transactions with third parties to sell certain mortgage servicer rights and servicer advances under specified terms. Nationstar evaluates these transactions to determine if they are sales or structured financing arrangements. When these transfers qualify for sale treatment, Nationstar derecognizes the transferred assets on its consolidated balance sheets. Nationstar has determined that for a portion of these transactions, the related mortgage servicing rights sales are contingent on the receipt of consents from various third parties. Until these required consents are obtained, legal ownership of the mortgage servicing rights continues to reside with the Company. Nationstar continues to account for the mortgage servicing rights on its consolidated balance sheets. In addition, Nationstar records a mortgage servicing rights financing liability associated with this financing transaction. Counterparty payments related to this financing arrangement are recorded as an adjustment to the Company's service related revenues.

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 service related revenue in the consolidated statements of operations and comprehensive income. The fair value on mortgage servicing right financings is based on the present value of future expected discounted cash flows with the discount rate approximating current market value for similar financial instruments.

Participating Interest Financing
Nationstar periodically securitizes certain of these funded advances through issuance of Home Equity Conversion Mortgage Backed Securities (HMBS) to third-party security holders which are guaranteed by GNMA. These transfers of funded advances into HMBS are accounted for as secured borrowings with the HMBS presented as participating interest financing included within other nonrecourse debt on the Company's consolidated balance sheets. Issue premiums and/or discounts are deferred as a component of the participating interest financing and amortized to interest expense over the life of the HMBS on an effective interest method.

Property and Equipment, Net
Property and equipment, net is comprised of land, building, furniture, fixtures, leasehold improvements, computer software, and computer hardware. These assets are stated at cost less accumulated depreciation. Repairs and maintenance are expensed as incurred which is include in general and administrative expenses in the consolidated statements of operations and comprehensive income. Depreciation, which includes depreciation and amortization on capital leases, is recorded using the straight-line method over the estimated useful lives of the related assets. Cost and accumulated depreciation applicable to assets retired or sold are eliminated from the accounts, and any resulting gains or losses are recognized at such time through a charge or credit to general and administrative expenses. Costs to internally develop computer software are capitalized during the development stage and include external direct costs of materials and servicer as well as employee costs related to time spent on the project. We periodically review our property and equipment when events or changes in circumstances indicates that the carrying amount of our property and equipment might not be recoverable under the recoverability test, whereby the expected future undiscounted cash flows from the assets are estimated and compared with the carrying amount of the assets. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the assets, an impairment loss is recorded. The impairment loss is measured by comparing the fair value of the assets with their carrying amounts. Fair value is determined based on discounted cash flow. We did not record any impairment losses to our property and equipment during 2015, 2014 and 2013.

Nationstar evaluates all leases at inception to determine if they meet the criteria for a capital lease. A capital lease is recorded as an acquisition of property or equipment at an amount equal to the present value of minimum lease payments at the date of inception. Assets acquired under a capital lease are depreciated on a straight-line basis in accordance with the Company's normal depreciation policy over the lease term and are included in property and equipment, net, on the balance sheet. A corresponding liability is

72


recorded representing an obligation to make lease payments which is included in payables and accrued liabilities in the consolidated balance sheet. Lease payments are allocated between interest expense and reduction of obligation.

Leases that do not meet capital lease criteria are accounted for as operating leases. Rental expense on operating leases is recognized on a straight-line basis over the lease term which is include in general and administrative expenses in the consolidated statements of operations and comprehensive income. Leasehold improvements are amortized over the shorter of the lease terms of the respective leases or the estimated useful lives of the related assets.

Variable Interest Entities
In the normal course of business, Nationstar enters into various types of on- and off-balance sheet transactions with special purpose entities (SPEs), which primarily consists of securitization trusts established for a limited purpose. Generally, these SPEs are formed for the purpose of securitization transactions in which Nationstar transfers assets to an SPE, which then issues to investors various forms of debt obligations supported by those assets. In these securitization transactions, Nationstar typically receives cash and/or other interests in the SPE as proceeds for the transferred assets. Nationstar will typically retain the right to service the transferred receivables and to repurchase the transferred receivables from the SPE if the outstanding balance of the receivables falls to a level where the cost exceeds the benefits of servicing the transferred receivables.

The Company evaluates its interests in each SPE for classification as a Variable Interest Entity (VIE). When an SPE meets the definition of a VIE and the Company determines that Nationstar is the primary beneficiary, the Company includes the SPE in its consolidated financial statements.
 
Nationstar consolidates SPEs connected with both forward and reverse mortgage activity. See Note 12, Securitization Financings for more information on Nationstar SPEs and Note 10 - Indebtedness for certain debt activity connected with SPEs.

Securitizations and Asset Backed Financing Arrangements
Nationstar or its subsidiaries have been a transferor in connection with a number of securitizations and asset-backed financing arrangements. The Company has continuing involvement with the financial assets of the securitizations and the asset-backed financing arrangements. The Company has aggregated these transactions into two groups: (1) securitizations of residential mortgage loans accounted for as sales and (2) financings of advances on loans serviced for others accounted for as secured borrowings.
 
Securitizations Treated as Sales
Nationstar’s continuing involvement typically includes acting as servicer for the mortgage loans held by the trust and holding beneficial interests in the trust. Nationstar’s responsibilities as servicer include, among other things, collecting monthly payments, maintaining escrow accounts, providing periodic reports and managing insurance in exchange for a contractually specified servicing fee. The beneficial interests held consist of both subordinate and residual securities that were retained at the time of securitization. These securitizations generally do not result in consolidation of the VIE as the beneficial interests that are held in the unconsolidated securitization trusts have no value and no potential for significant cash flows in the future. In addition, at December 31, 2015, the Company had no other significant assets in its consolidated financial statements related to these trusts. The Company has no obligation to provide financial support to unconsolidated securitization trusts and has provided no such support. The creditors of the trusts can look only to the assets of the trusts themselves for satisfaction of the debt issued by the trusts and have no recourse against the assets of Nationstar. The general creditors of Nationstar have no claim on the assets of the trusts. The Company’s exposure to loss as a result of its continuing involvement with the trusts is limited to the carrying values, if any, of our investments in the residual and subordinate securities of the trusts, the MSRs that are related to the trusts and the advances to the trusts. Nationstar considers the probability of loss arising from our advances to be remote because of their position ahead of most of the other liabilities of the trusts. See Note 4, Advances, and Note 3, Mortgage Servicing Rights and Related Liabilities, for additional information regarding advances and MSRs.
 
Financings
We transfer advances on loans serviced for others to SPEs in exchange for cash. Nationstar consolidates these SPEs because the transfers do not qualify for sales accounting treatment or because Nationstar is the primary beneficiary of the VIE.
 
These VIEs issue debt supported by collections on the transferred advances. Nationstar made these transfers under the terms of its advance facility agreements. Nationstar classifies the transferred advances on its consolidated balance sheets as advances and the related liabilities as advance facilities and other nonrecourse debt. The SPEs use collections of the pledged advances to repay principal and interest and to pay the expenses of the entity. Holders of the debt issued by these entities can look only to the assets of the entities themselves for satisfaction of the debt and have no recourse against Nationstar.


73


Nationstar has issued pools of HMBS to third-party investors collateralized by advances on the related HECM loans. These transactions are accounted for as secured borrowings within reverse mortgage interests and the related financing included in other nonrecourse debt in the consolidated financial statements of Nationstar.

Occasionally, Nationstar will transfer reverse mortgage interests into private securitization trusts (Reverse Trusts). Nationstar evaluates these Reverse Trusts to determine whether they meet the definition of a Variable Interest Entity (VIE), and when the Reverse Trust meets the definition of a VIE and the Company determines that it is the primary beneficiary, Nationstar will include the assets and liabilities of the Reverse Trust in its consolidated financial statements, with the securitized reverse mortgage interests being retained on its balance sheet and recognizing the issued securities in other nonrecourse debt. The reverse mortgage interests are carried at amortized cost, less an allowance for probable loss.

Derivative Financial Instruments
Nationstar recognizes all derivatives on its consolidated balance sheets at fair value. On the date the Company enters into a derivative contract, it designates and documents each derivative contract as either a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge) or a derivative instrument not designated as a hedging instrument. To qualify for hedge accounting, a derivative must be highly effective at reducing the risk associated with the exposure being hedged. Nationstar assesses and documents quarterly the extent to which a derivative has been and is expected to continue to be effective in offsetting the changes in the fair value or the cash flows of the hedged item. To assess effectiveness, Nationstar uses statistical methods, such as regression analysis, as well as non-statistical methods including dollar-offset analysis.

For a fair value hedge, Nationstar records changes in the fair value of the derivative and, to the extent that it is effective, changes in the fair value of the hedged asset or liability attributable to the hedged risk, in the same financial statement category as the hedged item on the face of the statement of operations and comprehensive income (loss). For a cash flow hedge, to the extent that it is effective, Nationstar records changes in the estimated fair value of the derivative in other comprehensive income. Nationstar subsequently reclassifies these changes in estimated fair value to net income in the same period, or periods, that the hedged transaction affects earnings and in the same financial statement category as the hedged item. For a derivative instrument not designated as a hedging instrument, the Company reports changes in the fair values in current period other income (expense), net, on our consolidated statements of operations and comprehensive income. The Company currently has no derivatives designated as a hedging instrument.

Goodwill and Intangible Assets
Goodwill is initially recorded as the excess of purchase price over fair value of identifiable net assets acquired in a business combination and subsequently evaluated for impairment. Nationstar tests goodwill for impairment at least annually, as of October 1st and more often if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its net carrying value. Nationstar has the option of performing a qualitative assessment of impairment to determine whether any further quantitative testing for impairment is necessary. Factors that the Company considers in the qualitative assessment include the Company's overall financial performance, general economic conditions, conditions of the industry and market in which it operates, regulatory developments, and cost factors.

Nationstar may also choose a two-step quantitative test to evaluate goodwill for impairment. Under the two-step impairment test, Nationstar first compares the estimated fair value of each reporting unit with its estimated net carrying value (including goodwill). Nationstar derives the fair value of reporting units based on valuation techniques and assumptions that Nationstar believes market participants would use (discounted cash flow valuation methodology). In the second step, Nationstar compares the implied fair value of the reporting unit's goodwill with its carrying amount. The implied fair value of goodwill is determined in the step two test by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation used in a business combination. Any residual fair value after this allocation represents the implied fair value of the reporting unit's goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value, then an impairment loss is recognized in the amount of excess.

Intangible assets that are determined to have an indefinite life are not amortized, but are required to be evaluated at least annually for impairment. If the carrying value of an individual indefinite-lived intangible asset exceeds its fair value as determined by its discounted cash flow, such individual indefinite-lived intangible asset is written down by the amount of excess.

Nationstar amortizes finite lived intangible assets acquired in a business combination over their estimated useful life. On an annual basis, the Company evaluates whether there has been a change in the estimated useful life or if certain impairment indicators exist.

74


Loans Subject to Repurchase Rights from Ginnie Mae
For certain forward 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.
Interest Income
Interest income is recognized using the interest method. Revenue accruals for individual loans are suspended and accrued amounts reversed when the mortgage loan becomes contractually delinquent for 90 days or more. Delinquency payment status is based on the most recently received payment from the borrower. The accrual is resumed when the individual mortgage loan becomes less than 90 days contractually delinquent. For individual loans that have been modified, a period of six timely payments is required before the loan is returned to an accrual basis. Interest income also includes (1) interest earned on custodial cash deposits associated with the mortgage loans serviced and (2) originations income, net of originations costs and other revenues derived from the origination of mortgage loans, which is recognized over the life of a mortgage loan held for investment or recognized when the related loan is sold to a third party purchaser.
Revenues
Nationstar recognizes revenue from the services provided when the revenue is realized or realizable and earned, which is generally when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. Generally, the contract terms for these services are relatively short in duration, and Nationstar recognizes revenue as the services are performed either on a per unit or a fixed price basis.

Service related revenues include contractually specified servicing fees, late charges, prepayment penalties and other ancillary revenues. Nationstar recognizes servicing and ancillary revenues as they are earned, which is generally upon collection of the payments from the borrower.

In addition, Nationstar also receives various fees in the course of providing servicing on its various portfolios. These fees include modification fees for modifications performed outside of government programs, modification fees for modifications pursuant to various government programs, and incentive fees for servicing performance on specific GSE portfolios. Fees recorded on modifications of mortgage loans held for investment performed outside of government programs are deferred and recognized as an adjustment to the loans held for investment. These fees are accreted into interest income as an adjustment to the loan yield over the life of the loan. Fees recorded on modifications of mortgage loans serviced by Nationstar for others are recognized on collection and are recorded as a component of service related revenues. Fees recorded on modifications pursuant to various government programs are recognized when Nationstar has completed all necessary steps and the loans have performed for the minimum required time frame to establish eligibility for the fee. Revenue earned on modifications pursuant to various government programs is included as a component of service related revenues. Incentive fees for servicing performance on specific GSE portfolios are recognized as various incentive standards are achieved and are recorded as a component of service related revenues.

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 Home Equity Conversion Mortgages (HECMs) subsequent to the acquisition of the rights to service these loans.
Net Gain on Mortgage Loans Held for Sale
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (i) the assets have been isolated from Nationstar, (ii) the transferee has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (iii) Nationstar does not maintain effective control over the transferred assets through either (a) an agreement that entitles and obligates Nationstar to repurchase or redeem them before their maturity or (b) the ability to unilaterally cause the holder to return specific assets.

Loan securitizations structured as sales, as well as whole loan sales and the resulting gains on such sales, net of any accrual for recourse obligations, are reported in operating results during the period in which the securitization closes or the sale occurs.
Reserves for Loan Origination and Servicing Activity
Nationstar provides for reserves in connection with loan origination and loan servicing activities which are charged to earnings. Reserves on loan origination activities primarily include reserves for the repurchase of loans from government sponsored entities, Ginnie Mae, and third-party investors primarily due to delinquency or foreclosure and are initially recorded upon sale

75


of the loan to a third party with subsequent reserves recorded based on repurchase demands. The provision for reserves associated with loan origination activities is a component of net gain on sale of loans held for sale. 
In connection with loan servicing activities, Nationstar records reserves principally for advance curtailment, interest claims, compensatory fees and mortgage insurance claims. Servicing reserves for receivables associated with loans that have been liquidated out of the servicing portfolio are recorded as a contra-receivable based on the nature of the underlying collateral and whether amounts have been claimed from various servicing counterparties. Servicing reserves associated with loans that have not yet been liquidated from the servicing portfolio are recorded as a component of the MSR fair value via the cost to service assumption. The provision for loan servicing activities is a component of either servicing related revenue or general and administrative expenses based on whether or not the underlying loan collateral has been liquidated from the servicing portfolio.
Nationstar utilizes internal models to estimate reserves for loan origination and loan servicing activities. Key assumptions used in these models include but are not limited to interest rates, borrower characteristics, historical losses, current delinquencies, time to a foreclosure sale, characteristics of a mortgage loan or pool, estimated costs of foreclosure action, future tax payments, the value of the underlying property net of carrying costs, commissions and closing costs and other Nationstar and macro-economic factors. On a quarterly basis, management corroborates these assumptions using third party data.
Share-Based Compensation Expense
Share-based compensation is recognized as an expense in the consolidated statements of operations and comprehensive income, based on the fair values of the shared -based payments on the grant date. The amount of compensation is measured at the fair value of the awards when granted and this cost is expensed over the required service period, which is normally the vesting period of the award, and is included as a component of salaries, wages and benefits in the consolidated statements of operations and comprehensive income.

Advertising Costs
Advertising costs are expensed as incurred and are included as part of general and administrative expenses. Nationstar incurred advertising costs of $60.6 million , $41.6 million , and $53.6 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Income Taxes
Deferred taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates that will apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.
The Company regularly reviews the carrying amount of its deferred tax assets to determine if the establishment of a valuation allowance is necessary. If based on the available evidence, it is more likely than not that all or a portion of the Company's deferred tax assets will not be realized in future periods, a deferred tax valuation allowance is established. Consideration is given to various positive and negative factors that could affect the realization of the deferred tax assets.

In evaluating this available evidence, management considers, among other things, historical financial performance, expectation of future earnings, the ability to carry back losses to recoup taxes previously paid, length of statutory carryforward periods, experience with operating loss and tax credit carryforwards which may expire unused, tax planning strategies and timing of reversals of temporary differences. The Company's evaluation is based on current tax laws as well as management's expectations of future performance.

The Company is subject to the income tax laws of the U.S., its states and municipalities. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. The Company has adopted accounting guidance related to uncertainty in income taxes. The guidance prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under the guidance, tax positions shall initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. In establishing a provision for income tax expense, the Company must make judgments and interpretations about the application of these inherently complex tax laws within the framework of existing GAAP. The Company recognizes interest and penalties related to uncertain tax positions in general and administrative expenses. At December 31, 2015 and 2014, the Company did not have any amounts recorded with respect to uncertainty in income taxes.

76


Earnings Per Share
Basic net income per share is computed based on the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed based on the weighted-average number of common shares plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares represent outstanding restricted stock.

3. Mortgage Servicing Rights (MSR) and Related Liabilities
MSRs and Related Liabilities
For the year ended December 31,
 
2015
 
2014
MSRs - fair value
$
3,358,327

 
$
2,949,739

MSRs - LOCOM
8,646

 
11,582

Mortgage servicing rights
3,366,973

 
2,961,321

 
 
 
 
Mortgage servicing liabilities
25,260

 
65,382

 
 
 
 
Excess spread financing - fair value
1,232,086

 
1,031,035

Mortgage servicing rights financing liability - fair value
68,696

 
49,430

MSR related liabilities (nonrecourse)
$
1,300,782

 
$
1,080,465


Mortgage Servicing Rights - Fair Value
MSRs - 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.

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 for agency and non-agency investors.

The following table provides a breakdown of the total credit and interest sensitive unpaid principal balances (UPBs) for Nationstar's forward owned MSRs.
 
December 31, 2015
 
December 31, 2014
 
UPB
 
Fair Value
 
UPB
 
Fair Value
Credit sensitive
$
224,334,415

 
$
2,016,617

 
$
241,769,601

 
$
1,919,290

Interest sensitive
121,341,842

 
1,341,710

 
91,843,044

 
1,030,449

Total
$
345,676,257

 
$
3,358,327

 
$
333,612,645

 
$
2,949,739



77


The activity of MSRs carried at fair value is as follows for the dates indicated:
 
For the year ended December 31,
MSRs - Fair Value
2015
 
2014
Fair value at the beginning of the period
$
2,949,739

 
$
2,488,283

Additions:
 
 
 
Servicing resulting from transfers of financial assets
221,762

 
238,292

Purchases of servicing assets
729,984

 
470,543

Dispositions:
 
 
 
       Dispositions
(46,168
)
 
—

Changes in fair value:
 
 
 
Due to changes in valuation inputs or assumptions used in the valuation model
(58,150
)
 
87,434

Other changes in fair value
(438,840
)
 
(334,813
)
Fair value at the end of the period
$
3,358,327

 
$
2,949,739


Servicing resulting from transfers of financial assets comprises the fair value of the newly originated MSRs at the time the loan is funded and securitized. During the third quarter of 2015, Nationstar disposed of MSRs with an unpaid principal balance of $4.6 billion and was retained as the subservicer for the sold assets. The Company evaluated the sale accounting requirements related to this transaction given the continued involvement as the subservicer.

Nationstar used the following weighted average assumptions in estimating the fair value of MSRs for the dates indicated:
Credit Sensitive
December 31, 2015
 
December 31, 2014
Discount rate
11.6
%
 
12.0
%
Total prepayment speeds
16.5
%
 
18.6
%
Expected weighted-average life
5.9 years

 
5.4 years

 
 
 
 
Interest Sensitive
December 31, 2015
 
December 31, 2014
Discount rate
9.1
%
 
9.1
%
Total prepayment speeds
12.4
%
 
11.3
%
Expected weighted-average life
6.1 years

 
6.5 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 December 31, 2015 and 2014:

 
Discount Rate
 
Total Prepayment
Speeds
 
100 bps
Adverse
Change
200 bps
Adverse
Change
 
10%
Adverse
Change
20%
Adverse
Change
December 31, 2015
 
 
 
 
 
 Mortgage servicing rights
$
(123,115
)
$
(237,779
)
 
$
(132,277
)
$
(253,028
)
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. Also, the changes in the fair value of Nationstar's excess spread financing liability partially offsets the change in the fair value of Nationstar's mortgage servicing rights.


78


MSRs - Lower of Cost or Market (LOCOM)
Nationstar owns the right to service certain reverse mortgage MSRs with an unpaid principal balance of $29.9 billion and $28.0 billion as of December 31, 2015 and December 31, 2014, respectively. Nationstar carries these mortgage servicing rights at the lower of cost or market and performs an impairment analysis at the end of each reporting period. In determining fair value for the purpose of impairment, Nationstar utilizes a variety of assumptions, with the primary assumptions being discount rates, prepayment speeds, home price index, collateral values and the expected weighted average life. At December 31, 2015 and December 31, 2014, no impairment was identified.

The activity of MSRs carried at amortized cost is as follows for the date indicated:
 
For the year ended December 31,
 
2015
 
2014
 
Assets
 
Liabilities
 
Assets
 
Liabilities
Activity of MSRs - LOCOM
 
 
 
 
 
 
 
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
(2,936
)
 
(40,122
)
 
(3,297
)
 
(17,139
)
Balance at end of the period
$
8,646

 
$
25,260

 
$
11,582

 
$
65,382

Fair value at end of period
$
28,962

 
$
9,137

 
$
34,225

 
$
55,388


For the years ended December 31, 2015 and 2014, the Company accreted $40.1 million and $17.1 million , respectively, of the mortgage servicing liability. The increase in amortization/accretion was primarily due to an increase in realized REO losses during 2015. 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 order to finance the acquisition of certain MSRs on various pools of residential mortgage loans (the Portfolios), Nationstar entered into multiple 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 base servicing fee per loan. Nationstar has elected fair value accounting for these financing agreements.

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 a retained portion of the excess servicing fee. Nationstar continues to be the servicer of the Portfolios and provides all servicing and advancing functions.

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 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 sale and assignment agreement described above which is the primary driver of the recapture rate assumption.


79


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
For the year ended December 31, 2015
 
 
 
 
 
 
 
Low
7.4
%
 
4.2 years
 
8.5
%
 
6.8
%
High
17.1
%
 
7.8 years
 
14.1
%
 
30.0
%
Weighted-average
11.6
%
 
5.9 years
 
11.2
%
 
17.7
%
For the year ended December 31, 2014
 
 
 
 
 
 
 
Low
6.2
%
 
4.0 years
 
8.5
%
 
6.7
%
High
19.4
%
 
7.1 years
 
14.2
%
 
31.3
%
Weighted-average
12.5
%
 
5.6 years
 
11.5
%
 
16.8
%

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
For the year ended December 31, 2015
 
 
 
 
 
 
 
Excess spread financing
$
41,806

 
$
86,791

 
$
36,530

 
$
76,373

For the year ended 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.

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
From December 2013 through June 2014, Nationstar entered into agreements to sell a contractually specified base fee component of certain MSRs and servicer advances under specified terms to New Residential and certain unaffiliated third-parties. 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 sheets. Consequently, Nationstar records a MSRs financing liability associated with this transaction. See Note 22, Disclosures Related to Transactions with Affiliates of Fortress Investment Group LLC for additional information.

Nationstar elected to measure the mortgage servicing rights financing liability at fair value with all changes in fair value recorded as a charge or credit to servicing related revenue in the consolidated statements of operations and comprehensive income. The weighted average assumptions used in the valuation of mortgage servicing rights financing liability were as follows:
 
December 31, 2015
 
December 31, 2014
Advance financing rates
3.0
%
 
2.8
%
Annual advance recovery rates
20.9
%
 
27.6
%

80




The following table provides a breakout of revenue associated with servicing assets and liabilities.
 
For the year ended December 31,
Service Fee Income
2015
 
2014
 
2013
Contractually specified servicing fees
$
1,166,415

 
$
1,123,820

 
$
926,949

Incentive and modification income
106,778

 
128,993

 
107,839

Late fees
69,565

 
64,616

 
59,365

Other service-related income
128,402

 
128,176

 
120,854

Remittances to counterparties for contractual transfer of servicing assets
(301,044
)
 
(319,902
)
 
(148,338
)
Mark-to-market
(115,356
)
 
56,168

 
246,101

Amortization
(240,052
)
 
(158,721
)
 
(126,625
)
Total servicing fee income
$
814,708

 
$
1,023,150

 
$
1,186,145


4. Advances, Net
 
December 31, 2015
 
December 31, 2014
Agency
$
1,396,176

 
$
1,810,472

Non-agency
826,907

 
734,227

Total advances, net
$
2,223,083

 
$
2,544,699


Servicing advances on agency securities 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.
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.
Nationstar accretes purchase discounts related to specific advances into interest income as the related servicer advances are recovered. During the years ended December 31, 2015 , 2014 and 2013 the Company accreted $2.4 million , $12.2 million and $31.1 million , respectively, of the purchase discounts from recovered servicer advances. As of December 31, 2015 , there is $2.7 million that Nationstar expects to accrete into future interest income from remaining purchase discounts.

As of December 31, 2015 and December 31, 2014 , Nationstar carried an allowance for uncollectible servicer advances of $ 29.9 million and $9.2 million , respectively. Advances balances are reflected net of these reserves.

5. Reverse Mortgage Interests
 
December 31, 2015
 
December 31, 2014
Participating interests
$
5,864,329

 
$
1,363,225

Other interests securitized
682,137

 
341,268

Unsecuritized interests
987,990

 
752,801

Reserve for servicing losses
(20,133
)
 
(4,225
)
Total reverse mortgage interests
$
7,514,323

 
$
2,453,069


Participating interests consists of Nationstar HECM loans and related advances that have been securitized through the issuance of Home Equity Conversion Mortgage Backed Securities (HMBS) guaranteed by Ginnie Mae to third party security holders.

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 and concluded that they meet the definition of a VIE and Nationstar is the primary beneficiary. Accordingly, these transactions are treated as secured borrowings and both the reverse mortgage interests

81


and the related indebtedness are retained on Nationstar’s balance sheet. See Note 10, Indebtedness and Note 12, Securitizations and Financing for additional information.

Unsecuritized interests consist primarily of the following: (1) $581.3 million related to repurchased Ginnie Mae HECMs; (2) $139.8 million related to HECM-related receivables; (3) $123.1 million related to claims accounts receivable; (4) $83.3 million related to funded borrower draws not yet securitized; (5) $31.6 million related to participating interests and advance receivable on an acquired HECM portfolio; (6) $24.1 million related to foreclosed assets; and (7) $4.8 million related to the HECM service fees receivable.
Under the Ginnie Mae 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 routinely securitizes eligible reverse mortgage interests. These transactions are treated as secured borrowings with both the reverse mortgage interests and related indebtedness retained on Nationstar’s balance sheet. See Note 10, Indebtedness for additional information.

During May 2015, the Company entered into an asset acquisition and paid $192.9 million funded from cash on hand to Generation Mortgage and received $4.9 billion of UPB assets and $4.6 billion of assumed liabilities. Nationstar recorded both the asset and corresponding liability gross for HMBS securities previously issued by Generation Mortgage as an assumed liability recorded to nonrecourse debt.

Reserves for servicing losses are reflected through the Company's provision for losses and consist of (1) Financial and (2) Operational losses related to servicing of HECM loans.  Financial exposure comprises of cost of doing business related to servicing the HECM product and include statutory items specific to investor types.  Whereas Operational losses are defined as un-reimbursable debenture interest curtailments imposed for missed foreclosure timelines.  The Company assesses allowance for loss based on expected net realizable value of outstanding foreclosure claims and assessed prior servicer operational claims.

6. 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 or new home purchases (referred to as recapture). Generally, all newly originated mortgage loans held for sale are securitized and transferred to GSEs or delivered to third-party purchasers shortly after origination on a servicing-retained basis.

Mortgage loans held for sale consist of the following for the dates indicated:
 
December 31, 2015
 
December 31, 2014
Mortgage loans held for sale – unpaid principal balance
$
1,373,607

 
$
1,218,596

Mark-to-market adjustment (1)
56,084

 
59,335

Total mortgage loans held for sale
$
1,429,691

 
$
1,277,931

(1) The mark-to-market adjustment is reflected in net gain on mortgage loans held for sale in our consolidated statements of operations and comprehensive income.

Nationstar accrues interest income as earned. Nationstar places loans on non-accrual status after any portion of principal or interest has been delinquent for more than 90 days. When Nationstar places a loan on non-accrual status, Nationstar reverses the interest that had been accrued but not yet received.

The total UPB of mortgage loans held for sale on non-accrual status was as follows for the dates indicated:
 
December 31, 2015
 
December 31, 2014
Mortgage Loans Held for Sale - Unpaid Principal Balance
UPB
 
Fair Value
 
UPB
 
Fair Value
Non-accrual
$
31,390

 
$
28,996

 
$
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:

82


Mortgage Loans Held for Sale - Unpaid Principal Balance
December 31, 2015
 
December 31, 2014
Foreclosure
$
16,174

 
$
17,493


A reconciliation of the changes in mortgage loans held for sale for the dates indicated is presented in the following table:
 
For the year ended
 
December 31, 2015
 
December 31, 2014
Mortgage loans held for sale – beginning balance
$
1,277,931

 
$
2,603,380

Mortgage loans originated and purchased, net of fees
17,971,304

 
16,910,185

Repurchase of loans out of Ginnie Mae securitizations
1,827,202

 
3,648,120

Claims made to third parties (1)
(60,780
)
 
(169,630
)
Proceeds on sale of and payments of mortgage loans held for sale
(20,026,079
)
 
(22,105,165
)
Gain on sale of mortgage loans (2)
440,113

 
391,041

Mortgage loans held for sale – ending balance
$
1,429,691

 
$
1,277,931


(1) This is comprised of claims made on certain government guaranteed mortgage loans upon foreclosure based on the adoption of ASU 2014-14.
(2) The gain on sale of mortgage loans is reflected in net gain on mortgage loans held for sale on our consolidated statements of operations and comprehensive income.

Nationstar 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 re-pool into new Ginnie Mae securitizations or to otherwise sell to third-party investors. Included in mortgage loans originated and purchased, net of fees are loans repurchased out of Ginnie Mae pools primarily in connection with loan modifications and loan resolution activity as part of Nationstar's contractual obligations as the servicer of the loans.

Mortgage loans held for investment, net
Mortgage loans held for investment, net as of the dates indicated include:
 
December 31, 2015
 
December 31, 2014
Mortgage loans held for investment, net – unpaid principal balance
$
250,033

 
$
276,820

Transfer discount:
 
 
 
Accretable
(14,631
)
 
(15,503
)
Non-accretable
(58,203
)
 
(66,217
)
Allowance for loan losses
(3,549
)
 
(3,531
)
Total mortgage loans held for investment, net
$
173,650

 
$
191,569


The changes in accretable yield on loans transferred to mortgage loans held for investment, net were as follows:
 
For the year ended
Accretable Yield
December 31, 2015
 
December 31, 2014
Balance at the beginning of the period
$
15,503

 
$
17,362

Accretion
(2,727
)
 
(2,955
)
Reclassifications from nonaccretable discount
1,855

 
1,096

Balance at the end of the period
$
14,631

 
$
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 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 $1.9 million and $1.1 million of transfer discount from non-accretable yield for the

83


years ended December 31, 2015 and December 31, 2014 , respectively. 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 LTVs 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. 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
December 31, 2015
 
December 31, 2014
Foreclosure
$
41,406

 
$
52,769


7. Property and Equipment, Net
Property and equipment, net, and the corresponding ranges of estimated useful lives were as follows.
 
December 31, 2015
 
December 31, 2014
 
  Range of Estimated  
Useful Life
Furniture, fixtures and equipment
$
40,123

 
$
39,561

 
3 - 5 years
Capitalized software costs
102,187

 
72,673

 
5 years
Long-term capital leases - computer equipment
49,782

 
48,451

 
5 years
Leasehold improvements
13,043

 
16,638

 
3 - 5 years
Software in development and other
29,700

 
21,174

 
 
 
234,835

 
198,497

 
 
Less: Accumulated depreciation and amortization
(92,834
)
 
(69,721
)
 
 
Plus: Land
835

 
835

 
 
Total property and equipment, net
$
142,836

 
$
129,611

 
 

Total depreciation and amortization on property and equipment was $46.1 million , $36.8 million and $26.6 million for the years ended December 31, 2015, 2014, and 2013, respectively. Nationstar has entered into various lease agreements for computer equipment which are classified as capital leases. All of the capital leases expire over the next five years. A majority of these lease agreements contain bargain purchase options.

As of December 31, 2015 , future minimum payments for Nationstar's capital leases is presented in table below:
Future Minimum Lease Payments
2016
$
8,852

2017
2,503

2018
190

Thereafter
—

Total future lease payments
11,545

Less: Imputed interest
(191
)
Net capital lease liability
$
11,354



84

8. Other Assets
Other assets consist of the following:
 
December 31, 2015
 
December 31, 2014
Receivables from trusts, agencies and prior servicers, net (1)
$
229,452

 
$
386,166

Accrued revenues
180,036

 
154,436

Loans subject to repurchase right from Ginnie Mae
117,163

 
131,592

Goodwill
71,141

 
54,701

Intangible assets
49,869

 
19,622

Deferred financing costs
42,850

 
46,986

Prepaid expenses
19,800

 
9,837

Receivables from affiliates, net
7,510

 
4,713

Real estate owned (REO), net
3,595

 
1,625

Other
37,553

 
69,214

Total other assets
$
758,969

 
$
878,892


(1) Net of reserves against receivables from agencies and prior servicers in the amounts of $98.8 million and $107.6 million as of December 31, 2015 and 2014, respectively.
Receivables from trusts, agencies and prior services, net is primarily comprised of prior servicer receivables and custodial receivables acquired in asset acquisitions.

Accrued revenues is primarily comprised of service fees earned but not received.
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 $117.2 million at December 31, 2015 and $131.6 million at December 31, 2014 .

Acquisitions
In January 2015, Xome Holdings LLC, a wholly owned subsidiary of Nationstar, acquired Experience 1, Inc., the holding company for Title365, Xome Signing (previously known as Trusted Signing), and technology subsidiaries Xome Labs (previously known as X1 Labs) and Xome Analytics (previously known as X1 Analytics) (collectively, Title365), a title agency and technology services provider for title insurance and escrow services. The total consideration was $35.9 million in cash. Related to the acquisition, the Company recorded $20.3 million in goodwill and $19.1 million in intangible assets as well as $ 3.5 million of other net liabilities. The recognized intangible assets primarily relate to customer relationships, trade names and technology.

In May 2015, Xome acquired Quantarium, LLC, a real estate analytics company that has developed industry-leading automated home valuation models utilizing advanced statistical methods and complex proprietary algorithms. Total consideration paid was $12.0 million . In June 2015, Xome acquired substantially all of the assets of GoPaperless Solutions, a leader in digital signature and document management Software-as-a-Service solutions. GoPaperless was integrated into the Xome platform during the fourth quarter. Total consideration paid was $2.0 million . Related to the acquisitions, the Company recorded an additional $3.4 million in goodwill and $10.4 million in intangible assets as well as $0.2 million of other net assets.

Additionally, during 2015 the Company finalized the accounting for a 2014 acquisition which resulted in a $7.3 million reclassification between intangible assets and goodwill.


85

Goodwill and Intangible Assets
The following table presents changes in the carrying amount of goodwill for the periods indicated:

 
December 31, 2015
 
December 31, 2014
Balance at beginning of period
$
54,701

 
$
38,820

Goodwill acquired during the period
23,738

 
15,881

Goodwill reclassification during the period
(7,298
)
 
—

Balance at end of period
$
71,141

 
$
54,701


The following tables present our intangible assets for the periods indicated:
 
December 31, 2015
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Weighted Average Remaining Life in Years

$
26,600

 
$
(5,675
)
 
$
20,925

 
7.7
Customer relationships
20,090

 
(3,318
)
 
16,772

 
6.6
Purchased intangible software
12,590

 
(1,416
)
 
11,174

 
5.9
Licenses
557

 
—

 
557

 
Indefinite
Noncompete agreement
450

 
(17
)
 
433

 
3.1
Trademark
8

 
—

 
8

 
Indefinite
Total
$
60,295

 
$
(10,426
)
 
$
49,869

 
6.9
 
December 31, 2014
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Weighted Average Remaining Life in Years
Trade name
$
18,595

 
$
(2,934
)
 
$
15,661

 
8.4
Customer relationships
4,143

 
(747
)
 
3,396

 
8.2
Licenses
557

 
—

 
557

 
Indefinite
Trademark
8

 
—

 
8

 
Indefinite
Total
$
23,303

 
$
(3,681
)
 
$
19,622

 
8.4
Nationstar recognized $7.4 million , $2.3 million , and $1.4 million of amortization expense during the years ended December 31, 2015 , 2014 , and 2013 , respectively. The following table presents the estimated aggregate amortization expense for the periods indicated:

For the year ending December 31,
2016
$
7,337

2017
7,272

2018
7,272

2019
7,088

2020
6,843

Thereafter
13,492

Total future amortization expense
$
49,304



86

9. Derivative Financial Instruments

Derivatives instruments utilized by Nationstar primarily include interest rate lock commitments (IRLCs), Loan Purchase Commitments (LPCs), Forward MBS trades, Eurodollar futures, interest rate swap agreements and interest rate caps. 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 in the consolidated balance sheets. The changes in value on forward sales of MBS and forward sale commitments are recorded as a charge or credit to net gain on mortgage loans held for sale.

Associated with the Company's derivatives is $3.9 million and $9.8 million in collateral deposits on derivative instruments recorded in payables and accrued liabilities and other assets on the Company's balance sheets as of December 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.

Nationstar occasionally enters 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. 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. Eurodollar futures are accounted for as derivatives and recorded at fair value in derivative financial instruments. Realized and unrealized changes in fair value are recorded as a charge or credit to net gain on mortgage loans held for sale.

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. Interest rate swaps are accounted for as derivative financial instruments. 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 operations and comprehensive income. Unrealized losses on designated interest rate derivatives are separately disclosed under operating activities in the consolidated statements of cash flows.

During the second quarter of 2015, Nationstar entered into two interest rate caps with notional values of $800 million and $400 million , respectively, to mitigate interest rate risk associated with servicing advance facilities. Expenses associated with interest
rate caps are recorded as a gain/(loss) on interest rate swaps and caps in Nationstar's consolidated statements of operation and comprehensive income. During the fourth quarter of 2015, the Company entered into a $100 million interest rate cap. The interest rate caps expire during 2016. The Company has not elected hedge accounting related to to these agreements.


87

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:

 
Expiration
Dates
 
Outstanding
Notional
 
Fair
Value
 
Recorded
Gains /
(Losses)
For the year ended December 31, 2015
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Mortgage loans held for sale
 
 
 
 
 
 
 
Loan sale commitments
2016
 
$
175,570

 
$
252

 
$
256

Derivative financial instruments
 
 
 
 
 
 
 
IRLCs
2016
 
2,767,927

 
89,138

 
1,236

Forward MBS trades
2016
 
1,665,894

 
6,123

 
5,839

LPCs
2016
 
387,891

 
3,872

 
1,873

Interest rate swaps and caps
2016-2017
 
845,876

 
506

 
(359
)
Eurodollar futures
2016-2021
 
176,000

 
60

 
59

Liabilities
 
 
 
 
 
 
 
Derivative financial instruments
 
 
 
 
 
 
 
IRLCs
2016
 
2,304

 
5

 
2

       Forward MBS trades
2016
 
1,807,418

 
3,746

 
14,614

LPCs
2016
 
314,047

 
1,454

 
(1,406
)
Interest rate swaps and caps
2016-2017
 
12,543

 
542

 
(439
)
Eurodollar futures
2016-2021
 
95,000

 
76

 
(69
)
 
 
 
 
 
 
 
 
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

Forward MBS trades
2015
 
2,958,700

 
18,360

 
(15,055
)
LPCs
2015
 
30,494

 
48

 
1,641

Interest rate swaps and caps  
2015 - 2017
 
105,681

 
103

 
731

Eurodollar futures
2015-2017
 
80,000

 
7

 
(7
)


88

10. Indebtedness
Notes Payable
 
 
 
 
 
 
 
 
 
December 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

 
$
82,208

 
$
89,221

 
$
363,014

 
$
418,126

Securities repurchase facility (2011)  (1)
LIBOR +3.50%
 
90 day revolving
 
Nonrecourse debt - legacy assets
 
—

 
—

 
—

 
34,613

 
55,603

Nationstar agency advance financing facility (1)
LIBOR+1.20% to 3.75%
 
December 2016
 
Servicing advance receivables
 
500,000

 
310,316

 
364,352

 
805,706

 
885,115

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

 
50,000

 
69,942

 
42,472

 
50,758

Nationstar mortgage advance receivable
trust  
LIBOR+2.00%
 
June 2016
 
Servicing advance receivables
 
500,000

 
335,408

 
394,100

 
419,170

 
471,243

MBS servicer advance facility (2014)
LIBOR+3.50%
 
August 2016
 
Servicing advance receivables
 
125,000

 
105,657

 
185,392

 
79,084

 
138,010

Nationstar servicer advance receivables trust 2014 - BC  (3)
LIBOR+1.50% to 3.00%
 
November 2015
 
Servicing advance receivables
 
—

 
—

 
—

 
106,115

 
121,030

Nationstar Agency Advance Receivables Trust (4)
LIBOR + 2.00 %
 
October 2017
 
Servicing advance receivables
 
1,400,000

 
762,534

 
822,504

 
—

 
—

Securities repurchase facility (2014) (6)
LIBOR+1.50% to 2.00%
 
November 2017
 
Securities
 
—

 
—

 
—

 
51,609

 
74,525

 
 
 
 
 
 
 
 
 
$
1,646,123

 
$
1,925,511

 
$
1,901,783

 
$
2,214,410

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 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 2016
 
Mortgage loans or MBS
 
$
1,300,000

 
$
633,694

 
$
677,775

 
$
663,167

 
$
697,257

$1.0 billion warehouse facility
LIBOR+1.75% to 3.25%
 
June 2016
 
Mortgage loans or MBS
 
1,000,000

 
544,951

 
621,526

 
307,294

 
320,285

$500 million warehouse facility
LIBOR+1.75% to 2.75%
 
September 2016
 
Mortgage loans or MBS
 
500,000

 
174,702

 
178,923

 
176,194

 
179,994

$500 million warehouse facility
LIBOR+ 2.00% to 2.50%
 
November 2016
 
Mortgage loans or MBS
 
500,000

 
257,479

 
274,497

 
183,290

 
192,990

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

 
97,790

 
111,541

 
210,049

 
223,849

$200 million warehouse facility
LIBOR+1.50%
 
April 2016
 
Mortgage loans or MBS
 
200,000

 
8,531

 
9,052

 
—

 
—

$300 million Warehouse Facility
LIBOR + 2.25%
 
December 2016
 
Mortgage loans or MBS
 
300,000

 
23,014

 
27,769

 
—

 
—

$200 million Warehouse Facility
LIBOR + 2.75% to 3.875%
 
November 2016
 
Mortgage loans or MBS
 
200,000

 
45,106

 
50,083

 
—

 
—

$75 million warehouse facility (HCM) (5)
LIBOR+ 2.25% to 2.875%
 
October 2016
 
Mortgage loans or MBS
 
75,000

 
53,102

 
59,563

 
23,949

 
29,324

$100 million warehouse facility (HCM)
LIBOR + 2.50% to 2.75%
 
November 2016
 
Mortgage loans or MBS
 
100,000

 
55,157

 
60,581

 
8,679

 
9,044

 
 
 
 
 
 
 
 
 
$
1,893,526

 
$
2,071,310

 
$
1,572,622

 
$
1,652,743

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage loans
 
 
 
 
 
 
 
$
1,542,663

 
$
1,681,352

 
$
1,196,956

 
$
1,241,043

Reverse mortgage interests
 
 
 
 
 
 
 
$
350,863

 
$
389,958

 
$
375,666

 
$
411,700


89

(1) This facility was refinanced as part of the $1.0 billion warehouse facility
(2) 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 2.1% and a weighted average term of 5 years .
(3) During the fourth quarter of 2015, Nationstar elected to refinance the collateral in the Nationstar servicer advance receivables trust 2014-BC (NSART) into the Nationstar mortgage advance receivables trust (NMART) utilizing excess capacity. Terms were unchanged for NMART and NSART was closed as a result.
(4) During the fourth quarter of 2015, Nationstar created a new variable interest entity called the Nationstar Advance Agency Receivables Trust, with $1.4 billion of borrowing capacity.
(5) This facility is a sublimit of the $1.3 billion facility specific to Home Community Mortgage (HCM).
(6) This facility was reclassed from advance to warehouse during 2015.
Unsecured Senior Notes
A summary of the balances of unsecured senior notes is presented below:
 
December 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
362,750

 
378,555

$400 million face value, 7.875% interest rate payable semi-annually, due October 2020
400,448

 
400,541

$600 million face value, 6.500% interest rate payable semi-annually, due July 2021
596,955

 
605,135

$300 million face value, 6.500% interest rate payable semi-annually, due June 2022
213,541

 
300,000

Total
$
2,048,694

 
$
2,159,231


Nationstar repurchased $108.9 million in principal amount of outstanding notes during the fourth quarter of 2015 at a discount resulting in a gain of $8.2 million . The repurchase price included the principal amount of the note, plus accrued and unpaid interest.

The indentures for the unsecured senior notes contain various covenants and restrictions that limit the ability to incur additional indebtedness, pay dividends, make certain investments, create liens, consolidate, merge or sell substantially all of their 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 unsecured 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 unsecured senior notes with the net proceeds of certain equity offerings at a 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.

90

As of December 31, 2015 , the expected maturities of Nationstar's unsecured senior notes based on contractual maturities are as follows:
Year
Amount
2015
$
—

2016
—

2017
—

2018
475,000

2019
362,750

Thereafter
1,210,944

Total
$
2,048,694

Other Nonrecourse Debt

A summary of the balances of other nonrecourse debt is presented below:
 
December 31, 2015
 
December 31, 2014
Participating interest financing
$
5,947,407

 
$
1,433,145

2014-1 HECM securitization
226,851

 
259,328

2015-1 HECM securitization
222,495

 
—

2015-2 HECM securitization
209,030

 
—

Nonrecourse debt - legacy assets
64,815

 
75,838

Total
$
6,670,598

 
$
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 GSEs. Nationstar has accounted for the securitization 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 through securitization of advances on the HECM loans. The increase in participating interest financing and related reverse mortgage interests during the year ended December 31, 2015 is due to the Generation Mortgage asset acquisition. See Note 5, Reverse Mortgage Interests for additional information in connection with the Generation Mortgage asset acquisition. The interest rate is based on the underlying HMBS rate with a range of 0.5% to 7.0% .

HECM Securitizations
From time to time, Nationstar securitizes its interests in reverse mortgages. The transactions 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 transactions provide Nationstar with access to liquidity for the acquired non-performing HECM loan portfolio, ongoing servicing fees, and potential residual returns. The transactions are structured as secured borrowings with the reverse mortgage loans included in the consolidated financial statements as reverse mortgage interests and the related financing included in other nonrecourse debt.

During December 2014, Nationstar Mortgage LLC completed the securitization of approximately $343.6 million in Nationstar HECM Loan Trust 2014-1 Mortgage Backed Securities. The notes were issued under two separate classes, comprised of Class A Notes and Class M Notes. As part of the securitizations, 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. During the first quarter 2015, the Company sold the remaining retained portions of the Class A and Class M notes for total proceeds of $73.1 million .

During June 2015, Nationstar Mortgage LLC completed the securitization of approximately $269.4 million in Nationstar HECM Loan Trust 2015-1 Mortgage Backed Securities. The notes were issued under two separate classes, comprised of Class A Notes

91

and Class M Notes. This transaction was accounted for as a secured borrowing. The notes have a final maturity date of May 2018. No portion of the notes were retained by the Company as of December 31, 2015.

During November 2015, Nationstar Mortgage LLC completed the securitization of approximately $217.3 million in Nationstar HECM Loan Trust 2015-2 Mortgage Backed Securities. The notes were issued under three separate classes, comprised of Class A Notes, Class M1 Notes and Class M2 Notes. This transaction was accounted for as a secured borrowing. The notes have a final maturity date of November 2025. No portion of the notes were retained by the Company as of December 31, 2015.

Nonrecourse Debt – Legacy Assets
During November 2009, Nationstar completed the securitization of approximately $222.0 million of Asset Backed Securities (ABS), which was accounted for as a secured borrowing. This structure resulted in Nationstar carrying the securitized mortgage
loans on it’s consolidated balance sheet and recognizing the asset-backed certificates acquired by third parties as nonrecourse debt of $64.8 million at December 31, 2015 and $75.8 million at December 31, 2014. 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 $242.4 million and $268.2 million at December 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 loans was $75.4 million and $88.2 million at December 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. At December 31, 2015, Nationstar was in compliance with its financial covenants.

Nationstar is required to maintain a minimum tangible net worth of at least $681.7 million as of each quarter-end related to its outstanding Master Repurchase Agreements on its outstanding repurchase facilities. At December 31, 2015, Nationstar was in compliance with these minimum tangible net worth requirements.

11. Payables and Accrued Liabilities
Payables and accrued liabilities consist of the following:
 
December 31, 2015

 
December 31, 2014

Payables to servicing and subservicing investors
$
483,535

 
$
329,306

Loans subject to repurchase from Ginnie Mae
117,163

 
131,592

Accrued bonus and payroll
96,381

 
85,366

Payables to GSEs
87,748

 
67,311

Taxes
81,102

 
96,237

Payable to insurance carriers and insurance cancellation reserves
69,936

 
163,381

Accrued interest
61,071

 
59,708

Repurchase reserves
26,404

 
29,165

Payables to securitization trusts
24,910

 
99,137

MSR purchases payable including advances
21,851

 
45,697

Other
226,286

 
215,178

Total payables and accrued liabilities
$
1,296,387

 
$
1,322,078


Payable to servicing and subservicing investors, Payables to GSEs, and Payables to securitization trusts
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.


92

Loans subject to repurchase from Ginnie Mae
See Note 8, Other Assets for a description of assets and liabilities related to loans subject to repurchase from Ginnie Mae.

Repurchase reserves
The activity of the outstanding repurchase reserves were as follows:
 
December 31,
 
2015
 
2014
Repurchase reserves, beginning of period
$
29,165

 
$
40,695

Provision
9,781

 
12,556

Charge-offs and release
(12,542
)
 
(24,086
)
Repurchase reserves, end of period
$
26,404

 
$
29,165


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 Nationstar 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, Nationstar 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. Nationstar records 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. For loans sold to GSEs on or after January 1, 2013, repurchase risk for HARP loans is lowered if the borrower stays current on 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, Nationstar reduced the repurchase reserve by $2.8 million during 2015 to reflect loans where the repurchase provision expired and to reflect the best estimate of probable future requests.

As of December 31, 2015 , the Company believes the analysis used to evaluate future expected repurchase exposure is appropriate and the period-end repurchase reserve balance is adequate.

12. Securitizations and Financings

Variable Interest Entities (VIEs)
In the normal course of business, Nationstar enters into various types of on- and off-balance sheet transactions with special purpose entities (SPEs) determined to be a VIE, which primarily consists of securitization trusts established for a limited purpose. Generally, these SPEs are formed for the purpose of securitization transactions in which Nationstar transfers assets to an SPE, which then issues to investors various forms of debt obligations supported by those assets. In these securitization transactions, Nationstar typically receives cash and/or other interests in the SPE as proceeds for the transferred assets. Nationstar will typically retain the right to service the transferred receivables and to repurchase the transferred receivables from the SPE if the outstanding balance of the receivables falls to a level where the cost exceeds the benefits of servicing the transferred receivables. All debt obligations issued from the VIEs is non-recourse to Nationstar.

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.

Nationstar has determined that the SPEs created in connection with the (i) Nationstar Home Equity Loan Trust 2009-A, (ii) Nationstar Mortgage Advance Receivables Trust, (iii) Nationstar Agency Advance Financing Trust (NAAFT), (iv) Nationstar Advance Agency Receivables Trust (NAART) should be consolidated as Nationstar is the primary beneficiary. Also, Nationstar

93

consolidated three reverse mortgage SPEs which are (v) Nationstar HECM Loan Trust 2014-1, (vi) Nationstar HECM Loan Trust 2015-1 and (vii) Nationstar HECM Loan Trust 2015-2 and it is the primary beneficiary.

During the third quarter of 2015, the NAAFT variable financing capacity was reduced from $1.2 billion to $900 million to lower the cost of borrowing and diversify the lending base.

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:

 
December 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
$
94,361

 
$
36,089

 
$
90,068

 
$
15,578

Reverse mortgage interests
—

 
6,546,466

 
—

 
1,704,492

Advances
1,580,966

 
—

 
1,477,388

 
—

Mortgage loans held for investment, net
172,810

 
—

 
189,456

 
—

Derivative financial instruments
7

 
—

 
865

 
—

Other assets
4,538

 
—

 
2,678

 
—

Total assets
$
1,852,682

 
$
6,582,555

 
$
1,760,455

 
$
1,720,070

Liabilities
 
 
 
 
 
 
 
Advance facilities
$
1,408,258

 
$
—

 
$
1,330,991

 
$
—

Payables and accrued liabilities
2,116

 
665

 
1,596

 
186

Nonrecourse debt–legacy assets
64,815

 
—

 
75,838

 
—

2014-1 HECM securitization
—

 
226,851

 
—

 
259,328

2015-1 HECM securitization
—

 
222,495

 
—

 
—

2015-2 HECM securitization
—

 
209,030

 
—

 
—

Participating interest financing
—

 
5,947,407

 
—

 
1,433,145

Total liabilities
$
1,475,189

 
$
6,606,448

 
$
1,408,425

 
$
1,692,659


Securitizations Treated as Sales
When Nationstar sells mortgage loans in securitization transactions that are 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. The three reverse HECM securitizations as well as the participating interest financing represent secured borrowings.

Details of the securitization structured as a sale are shown below for the periods indicated:
 
Sale Date
 
Net Bond Proceeds
 
Carrying Value of Loans Sold
 
Gain Recognized
Nationstar Mortgage-Backed Notes, Series 2013-A
2013
 
$
164,297

 
$
158,204

 
$
6,093


For the periods presented, Nationstar only sold mortgage loans in securitization transactions that were structured as sales for the year ended December 31, 2013. The gain on sale of the 2013 securitization was included in the Originations segment within the net gain on mortgage loans held for sale as revenue.

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:

94

 
December 31, 2015
 
December 31, 2014
Total collateral balances
$
3,113,784

 
$
3,258,472

Total certificate balances
2,810,903

 
3,297,256


Nationstar has not retained any variable interests in the unconsolidated securitization trusts that were outstanding as of December 31, 2015, 2014, or 2013, 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:
Principal Amount of Loans 60 Days or More Past Due
December 31, 2015
 
December 31, 2014

Unconsolidated securitization trusts
$
727,879

 
$
861,419


 
For the year ended December 31,
Credit Losses
2015
 
2014
 
2013
Unconsolidated securitization trusts
$
215,983

 
$
275,726

 
$
251,076


Certain cash flows received from securitization trusts related to the transfer of mortgage loans accounted for as sales for the dates indicated were as follows:
 
For the year ended December 31,
 
2015
 
2014
 
2013
 
Servicing Fees
Received
 
Loan
Repurchases
 
Servicing Fees
Received
 
Loan
Repurchases
 
Servicing Fees
Received
 
Loan
Repurchases  
Unconsolidated securitization trusts
$
24,233

 
$
—

 
$
28,284

 
$
—

 
$
29,151

 
$
—


13. Income Taxes

The components of income tax expense (benefit) on continuing operations were as follows:
 
For the year ended December 31,
2015
 
2014
 
2013
Current
 
 
 
 
 
    Federal
$
59,218

 
$
46,381

 
$
4,636

    State
3,534

 
7,608

 
(1,059
)
 
62,752

 
53,989

 
3,577

 
 
 
 
 
 
Deferred
 
 
 
 
 
    Federal
(50,426
)
 
6,360

 
114,466

    State
(1,314
)
 
4,511

 
11,157

 
(51,740
)
 
10,871

 
125,623

Total
$
11,012

 
$
64,860

 
$
129,200



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Income tax expense differs from the amounts computed by applying the U.S. federal corporate tax rate of 35% as follows for the period indicated:

 
For the year ended December 31,
 
2015
 
2014
 
2013
Tax Expense at Federal Statutory Rate
$
18,961

 
35.0
 %
 
$
100,058

 
35.0
 %
 
$
121,186

 
35.0
%
    Effect of:
 
 
 
 
 
 
 
 
 
 
 
        State taxes, net of federal benefit
(208
)
 
(0.4
)%
 
8,330

 
2.9
 %
 
5,465

 
1.6
%
Noncontrolling interest
(1,488
)
 
(2.7
)%
 
(126
)
 
—
 %
 
42

 
—
%
Increase/(decrease) of valuation allowance
(3,273
)
 
(6.1
)%
 
(40,275
)
 
(14.1
)%
 
1,099

 
0.3
%
Deferred adjustments
(5,484
)
 
(10.1
)%
 
(1,477
)
 
(0.5
)%
 
1,046

 
0.3
%
Current payable adjustments
2,209

 
4.0
 %
 
(2,058
)
 
(0.8
)%
 
—

 
—
%
Other, net
295

 
0.6
 %
 
408

 
0.2
 %
 
362

 
0.1
%
Total income tax expense
$
11,012

 
20.3
 %
 
$
64,860

 
22.7
 %
 
$
129,200

 
37.3
%

The primary reasons for the significant variation in the expected tax rate and the actual tax rate are the partial release of the deferred tax valuation allowance that was previously recorded against the Company’s loss carryforwards, the elimination of the book income of the KB Homes joint venture, and adjustments resulting from an analysis of the deferred taxes. As a result of the analysis performed by management, a deferred true-up of $5.5 million tax benefit was recorded. In addition , a current payable true-up adjustment of $2.2 million tax expense was recorded. The Company released a federal valuation allowance in the amount of $3.8 million in 2015 and a federal valuation allowance in the amount of $44.2 million in 2014. Excluding the release of the valuation allowance, the Company’s effective tax rate would have been 26.4% for the year ended December 31, 2015 and 36.8% for the year ended December 31, 2014. Deferred income tax amounts at December 31, 2015 and 2014, reflect the effect of basis differences in assets and liabilities for financial reporting and income tax purposes and tax attribute carryforwards.

The Company regularly reviews the carrying amount of its deferred tax assets to determine if a valuation allowance is necessary. If based on the available evidence, it is more likely than not that all or a portion of the Company's deferred tax assets will not be realized in future periods, a valuation allowance is established. Management considers all available evidence, both positive and negative, in evaluating the need for a valuation allowance. Significant judgment is required in assessing future earnings trends and the timing of reversals of temporary differences. The Company's evaluation is based on current tax laws as well as management's expectations of future performance.

At the date of the Company's initial public offering, the Company was in a three year cumulative loss and the Company concluded it was not more likely than not that the net operating loss ("NOL") would be used. Accordingly, a valuation allowance was recorded against deferred tax assets. The Company has generated significant pre-tax income over the past three years, as well as increasing the size of its servicing portfolio over that same time period. As a result, $44.2 million of the valuation allowance recorded against deferred tax assets was released in the year ended December 31, 2014. In August 2015, the Company amended its 2012 and 2013 federal tax returns to characterize $16.5 million in losses arising from loan modifications and REO liquidation in its Legacy portfolio (primarily consisting of subprime mortgage loans originated in the latter portion of 2006 and 2007 or acquired from Nationstar's predecessor) as ordinary losses. Approximately $5.0 million of these losses are limited by IRC Section 382 as a result of the Company's reorganization in March 2012. The remaining post reorganization NOL of $11.5 million may be offset against the Company's ordinary income without limitation. As a result, the Company has released $4.0 million of the valuation allowance recorded against the deferred tax asset that was previously characterized as a capital loss carryforward. The Company has not released the valuation allowance recorded against the remaining $5.0 million pre-reorganization loss because it is expected to expire unutilized. An additional $0.5 million of net operating losses related to the 2009 amended federal tax return increased the valuation allowance by $0.2 million , since these losses are also limited by IRC Section 382. Accordingly, a federal valuation allowance of $2.2 million remains associated with these NOL carryforwards as of December 31, 2015.

In January 2015, the Company completed the acquisition of Experience 1, Inc. As a result of the acquisition, the Company recorded an additional $5.0 million of deferred tax liabilities as part of the purchase price allocation for deferred taxes. These deferred tax liabilities are the primary cause of the Company’s change from a net deferred tax asset in 2014 related to goodwill and intangible assets to a net deferred tax liability in 2015. The Company also recorded an additional valuation allowance of $0.8 million against some of the acquired federal and state NOL carryforwards due to significant uncertainty with respect to the Company’s ability to utilize these assets in future periods.


96


Temporary differences and carryforwards that give rise to deferred tax assets and liabilities are comprised of the following:
 
For the year ended December 31,
2015
 
2014
Deferred Tax Assets
 
 
 
    Effect of:
 
 
 
                   Loss carryforwards (federal, state & capital)
$
63,957

 
$
67,799

                   Loss reserves
56,587

 
41,467

                   Reverse mortgage premiums
25,903

 
26,227

                   Rent expense
6,218

 
2,138

                   Restricted share based compensation
8,848

 
7,806

                   Accruals
14,603

 
3,354

                   Goodwill and intangible assets
—

 
994

                   Other, net
9,066

 
9,201

Total deferred tax assets
185,182

 
158,986

 
 
 
 
Deferred Tax Liabilities
 
 
 
                   MSR amortization and mark-to-market, net
(197,763
)
 
(228,987
)
                   Depreciation and amortization, net
(38,477
)
 
(32,564
)
                   Prepaid assets
(2,549
)
 
(889
)
                   Goodwill and intangible assets
(5,565
)
 
—

Total deferred tax liabilities
(244,354
)
 
(262,440
)
Valuation allowance
(3,907
)
 
(6,391
)
Net deferred tax liability
$
(63,079
)
 
$
(109,845
)

The Company has federal NOL carryforwards (pre-tax) of approximately $175.4 million and $164.6 million at December 31, 2015 and 2014 , respectively. It is expected that the federal NOL carryforwards will begin to expire in 2027, if unused. The Company also has immaterial state NOL carryforwards that will begin to expire in 2015, if unused. The Company has recorded a valuation allowance against the NOL carryforwards that are expected to expire. The amount of the state NOLs varies by state based on whether the NOL is derived from the pre-apportioned federal NOL or calculated based on the apportioned federal NOL. The federal NOL is limited under Sections 382 and 383 of the Internal Revenue Code as a result of a reorganization that occurred in advance of the Company's initial public offering. The annual limitation is approximately $11 million . The Company expects that future income will be sufficient to utilize all net operating losses generated subsequent to the initial public offering in 2012.

The Company files income tax returns in the U.S. federal jurisdiction and numerous U.S. state jurisdictions. As of December 31, 2015, the Company is no longer subject to U.S. federal income tax examinations for tax years prior to 2012.

14. 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

97


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. Nationstar has elected to carry these loans at fair value. See Note 6, Mortgage Loan Held for Sale and Investment for more information.
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 models, Nationstar classifies these valuations as Level 3 in the fair value disclosures. See Note 6, Mortgage Loan Held for Sale and Investment for more information.
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. See Note 3, Mortgage Servicing Rights and Related Liabilities for more information.
Advances, net (Level 3) - We value advances at their net realizable value, which generally approximates fair value, because advances have no stated maturity, are generally realized within a relatively short period of time and do not bear interest. See Note 4, Advances, Net for more information.
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. See Note 5, Reverse Mortgage Interests for more information.
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 underling 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

98


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. See Note 9, Derivative Financial Instruments for more information.
Advance Facilities and Warehouse Facilities (Level 2) – 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. See Note 10, Indebtedness for more information.
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. See Note 10, Indebtedness for more information.
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. See Note 10, Indebtedness for more information.
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 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. 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. See Note 3, Mortgage Servicing Rights and Related Liabilities for more information.
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 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. As these prices are derived from a combination of internally developed valuation models based on the value of the underlying MSRs, Nationstar classifies these valuations as Level 3 in the fair value disclosures. See Note 3, Mortgage Servicing Rights and Related Liabilities for more information.
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. See Note 3, Mortgage Servicing Rights and Related Liabilities, and Note 10, Indebtedness for more information.
HECM Securitization (Level 3) – Nationstar estimates fair value of the nonrecourse debt related to 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. See Note 10, Indebtedness for more information.

99


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:
 
 
 
December 31, 2015
 
 
 
Recurring Fair Value Measurements
 
Total Fair Value
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Mortgage loans held for sale (1)
$
1,429,691

 
$
—

 
$
1,429,691

 
$
—

Mortgage servicing rights (1)
3,358,327

 
—

 
—

 
3,358,327

Derivative financial instruments:
 
 
 
 
 
 
 
IRLCs
89,138

 
—

 
89,138

 
—

       Forward MBS trades
6,123

 
—

 
6,123

 
—

       LPCs
3,872

 
—

 
3,872

 
—

Interest rate swaps and caps
506

 
—

 
506

 
—

Eurodollar futures
60

 
—

 
60

 
—

Total assets
$
4,887,717

 
$
—

 
$
1,529,390

 
$
3,358,327

Liabilities
 
 
 
 
 
 
 
Derivative financial instruments
 
 
 
 
 
 
 
IRLCs
$
5

 
$
—

 
$
5

 
$
—

Interest rate swaps and caps
542

 
—

 
542

 
—

       Forward MBS trades
3,746

 
—

 
3,746

 
—

       LPCs
1,454

 
—

 
1,454

 
—

Eurodollar futures
76

 
—

 
76

 
—

Mortgage servicing rights financing
68,696

 
—

 
—

 
68,696

Excess spread financing
1,232,086

 
—

 
—

 
1,232,086

Total liabilities
$
1,306,605

 
$
—

 
$
5,823

 
$
1,300,782

 
 
 
 
 
 
 
 
 
 
 
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

Other assets:
 
 
 
 
 
 
 
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 and caps
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


100


(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 year ended December 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
(496,990
)
 
25,631

 
19,266

Included in other comprehensive income
—

 
—

 
—

Purchases, issuances, sales and settlements
 
 
 
 
 
Purchases
729,984

 
—

 
—

Issuances
221,762

 
385,637

 
—

Sales
—

 
—

 
—

Settlements
—

 
(210,217
)
 
—

Dispositions
(46,168
)
 
—

 
—

Ending balance
$
3,358,327

 
$
1,232,086

 
$
68,696



 
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


101


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

 
December 31, 2015
 
Carrying
Amount
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Financial assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
613,241

 
$
613,241

 
$
—

 
$
—

Restricted cash
332,105

 
332,105

 
—

 
—

Mortgage loans held for sale
1,429,691

 
—

 
1,429,691

 
—

Mortgage loans held for investment, net
173,650

 
—

 
—

 
174,147

Advances, net
2,223,083

 
—

 
—

 
2,223,083

Reverse mortgage interests
7,514,323

 
—

 
—

 
7,705,475

Derivative financial instruments
99,199

 
—

 
99,199

 
—

Financial liabilities
 
 
 
 
 
 
 
Unsecured senior notes
2,048,694

 
1,911,777

 
—

 
—

Advance facilities
1,646,123

 
—

 
1,646,123

 
—

Warehouse facilities
1,893,526

 
—

 
1,893,526

 
—

Derivative financial instruments
5,323

 
—

 
5,323

 
—

Excess spread financing
1,232,086

 
—

 
—

 
1,232,086

Mortgage servicing rights financing liability
68,696

 
—

 
—

 
68,696

Nonrecourse debt - legacy assets
64,815

 
—

 
—

 
74,264

Participating interest financing
5,947,407

 
—

 
6,091,285

 
—

2014-1 HECM securitization
226,851

 
—

 
—

 
298,048

2015-1 HECM securitization
222,495

 
—

 
—

 
275,223

2015-2 HECM securitization
209,030

 
—

 
—

 
249,507

 
 
 
 
 
 
 
 
 
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

Advances, net
2,544,699

 
 
 
 
 
2,544,699

Reverse mortgage interests
2,453,069

 
—

 
—

 
2,502,157

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


102

15. Employee Benefits
Nationstar has a defined contribution plan (401(k) plan) that covers all full-time employees. Nationstar matches 100% of participant contributions, up to 2% and 50% of the next 4% of each participant’s total eligible annual base compensation. Matching contributions totaled approximately $12.4 million , $11.5 million , and $11.1 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively.

16. Share-Based Compensation and Equity
Nationstar adopted the 2012 Incentive Compensation Plan (2012 Plan), that offers equity-based awards to certain key employees of Nationstar, consultants, and non-employee directors. The following table summarizes information about the equity based awards under the 2012 Plan for the periods indicated:
Equity based awards
Shares
 

Grant Date Fair Value, per share
 
Remaining Contractual Term (in years) (1)
Restricted stock outstanding at December 31, 2012
1,293
 
 
 
 
Grants issued in 2013
307
 
$37.88
 
0.2
Forfeited
(56)
 
$20.46
 
 
Vested
(310)
 
 
 
 
Shares surrendered to treasury to pay taxes
(168)
 
 
 
 
Restricted stock outstanding at December 31, 2013
1,066
 
 
 
 
Grants issued in 2014
1,042
 
$31.65
 
1.6
Forfeited
(151)
 
$28.01
 
 
Vested
(354)
 
 
 
 
Shares surrendered to treasury to pay taxes
(174)
 
 
 
 
Restricted stock outstanding at December 31, 2014
1,429
 
 
 
 
Grants issued in 2015
1,446
 
$23.03
 
2.3
Forfeited
(336)
 
$27.58
 
 
Vested
(456)
 
 
 
 
Shares surrendered to treasury to pay taxes
(246)
 
 
 
 
Restricted stock outstanding at December 31, 2015
1,837
 
 
 
 
Restricted stock unvested and expected to vest
1,563
 
 
 
 
Restricted stock vested and payable at December 31, 2015
—
 
 
 
 
(1) Remaining contractual term is as of December 31, 2015.
The following table summarizes the vesting schedule of equity-based restricted stock grants:
 
2016
 
2017
 
2018
 
2019
Restricted stock expected to vest
668
 
488
 
332
 
75
Nationstar recognizes share-based compensation using an accelerated method. Total share-based compensation expense for service based equity awards, net of forfeitures, for both the 2012 Plan and the predecessor plan recognized for the years ended December 31, 2015, 2014, and 2013 was $19.5 million , $18.6 million , and $10.6 million , respectively. Nationstar expects to recognize $15.0 million of compensation expense in 2016, $7.0 million in 2017, and $2.2 million in 2018, and $0.4 million in 2019 for unvested equity based awards related to the 2012 Plan. The weighted average remaining term for unvested shares is 1.3 years and the weighted average vested share price was $21.40 .

During 2015, 2014, and 2013, Nationstar net settled shares surrendered in connection with minimum statutory requirements. Nationstar paid $6.2 million , $5.5 million and $6.9 million during 2015, 2014 and 2013, respectively, accounted for as an increase of Treasury Shares in the statement of financial position.

During 2015 , excluding forfeitures, certain employees of Xome were granted 267 thousand stock appreciation rights (SARs) which can be settled in cash or units of Xome Holdings LLC (at the election of Xome). The SARs generally vest over three years and

103


have a ten year term. The SARs become exercisable upon a liquidity event at Xome which includes a change in control or an initial public offering of Xome. The Company did not recognize expense related to the share-based awards during 2015 .

Equity
During March 2015, Nationstar completed an equity offering of 17.5 million shares for a total of $497.8 million in cash proceeds. Nationatar used and intends to continue to use the net proceeds from this offering for general corporate purposes.
On December 17, 2015, Nationstar announced that its Board of Director's authorized the repurchase of up to $150.0 million of the registrant's outstanding common stock through December 16, 2016. As of December 31, 2015, 837 thousand shares (comprised of 504 thousand shares that settled during 2015 and 333 thousand share repurchases initiated during 2015 but settled during 2016) have been repurchased under this plan. On February 9, 2016, Nationstar’s Board of Directors authorized a $100.0 million increase to the original repurchase authorization for an aggregate repurchase authorization of $250.0 million under the Company’s share repurchase program.
On February 11, 2016, Nationstar announced a Board-authorized tender offer via a modified Dutch auction to repurchase up to $100 million of common stock. The tender offer is contingent upon satisfaction of customary conditions. Additional information about the tender offer, is set forth in Part II, Item 5 under "Issuer Purchases of Equity Securities."

17. 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 agreements, the most restrictive of these requires Nationstar to maintain a minimum adjusted net worth balance of $1.2 billion . As of December 31, 2015 , Nationstar was in compliance with its selling and servicing capital requirements.

18. 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 punitive class actions and other litigation. These actions and proceedings are generally based on alleged violations of consumer protection, securities, employment, contract, tort, common law fraud and other numerous laws, including, without limitation, the Equal Credit Opportunity Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Real Estate Settlement Procedures Act, Servicemember’s Civil Relief Act, Telephone Consumer Protection Act, Truth in Lending Act, Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), unfair, deceptive or abusive acts or practices in violation of the Dodd-Frank Act, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Home Mortgage Disclosure Act and the Bankruptcy Code, False Claims Act and Making Home Affordable (MHA) loan modification programs. Additionally, along with others in our industry, the Company is subject to repurchase and indemnification claims and may continue to receive claims in the future, including from its Legacy Portfolio regarding alleged breaches of representation and warranties relating to the sale of mortgage loans or the placement of mortgage loans into securitization trusts or the servicing of mortgage loans securitizations. The Company is also subject to legal actions or proceedings related to loss sharing and indemnification provisions of our 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.

Nationstar’s business is subject to extensive regulation, investigations and reviews by various federal, state and local regulatory and enforcement agencies, including without limitation, the CFPB, the Securities and Exchange Commission, the Department of Justice, the US Trustee Program, the multistate coalition of mortgage banking regulators and the State Attorneys General. As a result, Nationstar is subject to various legal proceedings, regulatory examinations, inquiries and requests for documentation in the ordinary course of our business. Nationstar has historically had a number of open investigations with various State Attorneys

104

General and other regulators. Nationstar expects this trend will continue due to interest in mortgage banking generally and non-bank mortgage lenders and servicers specifically. Nationstar has seen a significant increase in these activities in recent periods and believes that violations of law will more frequently be met with enforcement actions, including the imposition of significant monetary and other sanctions. Like many other companies in the mortgage industry, Nationstar is currently the subject of various regulatory investigations, subpoenas, examinations and inquiries related to its residential loan servicing and origination practices, bankruptcy and collections practices, its financial reporting and other aspects of its businesses. Several large mortgage originators or servicers have been subject to similar matters, which have resulted in the payment of fines and penalties, changes to business practices and which have resulted in the entry of consent decrees or settlements. Nationstar continues to manage its response to each matter, but it is not possible to confidently or reliably predict the outcome of any of them, including predicting any possible losses resulting from any judgments or fines. Responding to these matters requires Nationstar to devote substantial legal and regulatory resources, resulting in higher costs and lower net cash flows.

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 probable and estimable. If, at the time of evaluation, the loss contingency is not both probable and reasonably estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and reasonably estimable. Once the matter is deemed to be both probable and reasonably 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 legal settlements and the fees paid to external legal service providers, of $53.7 million , $29.2 million , and $20.4 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively, were included in general and administrative expense on the consolidated statements of operations and comprehensive income.

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 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 $16.6 million to $50.7 million in excess of the accrued liability (if any) related to those matters as of December 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 adverse effect on the consolidated financial condition of the Company, although the outcome of such proceedings could be material to the Company’s operating results and cash flows 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.
During the course of a routine regulatory examination during 2015, the Company agreed with a regulator to make refunds of approximately $16.2 million to certain borrowers related to delays in consummating their loan modifications that were transferred from prior servicers from 2012 through February 2015. The Company will be seeking recourse for some portion of these charges from various counterparties. While the Company has made changes to certain practices regarding the transfer of loan modifications, there can be no assurance that additional amounts will not be assessed as restitution to the borrowers or as a penalty.


105

Operating Lease Commitments
In 2014, Nationstar entered into a lease agreement for its corporate office located at Coppell, Texas. The lease term is for seven and a half years, with an early termination option available after the completion of five years . The lease agreement also provides a tenant improvement allowance as a lease incentive to apply against tenant improvement costs.

Nationstar leases various office facilities under non-cancelable lease agreements with primary terms extending through 2022. These lease agreements generally provide for market-rate renewal options, and may provide for escalations in minimum rentals over the lease term. Rental expense incurred during 2015, 2014 and 2013 was $21.2 million , $22.1 million and $27.4 million , respectively. Minimum annual rental commitments for office leases with unrelated parties and with initial or remaining terms of one year or more, net of sublease payments, are presented below.
Year
Amount
2016
$
28,637

2017
24,837

2018
22,847

2019
18,689

2020 and thereafter
28,156

Total
$
123,166


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 9, Derivative Financial Instruments.
Nationstar has certain MSRs related to approximately $29.9 billion of UPB 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 December 31, 2015 , the Company’s maximum unfunded advance obligation related to these MSRs was approximately $3.2 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.

19. Restructuring Charges
To respond to the decreased demand in the mortgage loan originations market and other market conditions, Nationstar periodically initiates programs to reduce costs and improve operating effectiveness. These programs include the closing of offices and the termination of portions of Nationstar’s workforce. As part of these plans, Nationstar incurs lease and other contract termination costs.
Nationstar recorded restructuring charges related to canceled lease expenses of $0.1 million , $(0.6) million , and $4.1 million for the years ended December, 2015, 2014 , and 2013 , respectively are reflected in general and administrative expenses.

Due to increased productivity per employee and economies of scale in the Servicing segment, Nationstar began consolidating certain locations in November 2013. During 2015, Nationstar continued to right-size Servicing, Originations and Xome operations and personnel. The Company recorded restructuring charges of $12.4 million , $0 , and $8.8 million for the years ended December 31, 2015, 2014 and 2013, respectively. These were all related to employee severance that is reflected in salaries, wages and benefits. The following table summarizes, by category, the Company’s restructuring charges activity for the periods indicated below.
 

106

 
Liability 
Balance at January 1
 
Restructuring        
Adjustments
 
Restructuring        
Settlements
 
Liability 
Balance at December 31
For the year ended December 31, 2015
 
 
 
 
 
 
 
Restructuring charges:
 
 
 
 
 
 
 
Employee severance and other
$
—

 
$
12,408

 
$
(3,475
)
 
$
8,933

Lease terminations
3,979

 
100

 
(3,229
)
 
850

Total
$
3,979

 
$
12,508

 
$
(6,704
)
 
$
9,783

 
 
 
 
 
 
 
 
For the year ended December 31, 2014
 
 
 
 
 
 
 
Restructuring charges:
 
 
 
 
 
 
 
Employee severance and other
$
4,650

 
$
—

 
$
(4,650
)
 
$
—

Lease terminations
8,636

 
(581
)
 
(4,076
)
 
3,979

Total
$
13,286

 
$
(581
)
 
$
(8,726
)
 
$
3,979

 
 
 
 
 
 
 
 
For the year ended December 31, 2013
 
 
 
 
 
 
 
Restructuring charges:
 
 
 
 
 
 
 
Employee severance and other
$
—

 
$
8,765

 
$
(4,115
)
 
$
4,650

Lease terminations
7,186

 
4,108

 
(2,658
)
 
8,636

Total
$
7,186

 
$
12,873

 
$
(6,773
)
 
$
13,286


20. Business Segment Reporting
Nationstar’s segments are based upon Nationstar’s organizational structure which 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 or 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.
In the second quarter of 2014, Nationstar realigned its business segment reporting structure as a result of the change in the Chief Operating Decision Maker. While this financial data reflects the change in the Company's reportable segments described below, including the historical data presented for comparison purposes, the Company has not revised or restated its historical financial statements for any period. The realignment principally involved the separation of the former ‘Servicing’ segment into two segments and the reclassification of previously allocated corporate costs, including interest costs related to Nationstar’s unsecured senior debt, into the Corporate and Other segment. Corporate costs included within the Corporate and Other segment include expenses related to certain executive salaries and other corporate functions that are not directly attributable to our operating segments.
During the second quarter of 2015, Nationstar reclassified a small portion of Xome segment activity involved with loss recovery to the Servicing segment to better align with how management is operating this business. All periods presented reflect this reclassification. Nationstar reclassified $9.2 million and $6.6 million of operating income from the Xome segment to the Servicing segment earned during 2014 and 2013, respectively.

107

The following tables are a presentation of financial information by segment for the periods indicated:
 
 
For the year ended December 31, 2015
 
Servicing
 
Originations
 
Xome
 
Total Operating
Segments
 
Corporate and Other
 
Eliminations
 
Consolidated
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
Service related
$
814,708

 
$
50,752

 
$
436,980

 
$
1,302,440

 
$
2,760

 
$
(440
)
 
$
1,304,760

Net gain on mortgage loans held for sale
67,258

 
614,959

 
—

 
682,217

 
1,658

 
—

 
683,875

Total revenues
881,966

 
665,711

 
436,980

 
1,984,657

 
4,418

 
(440
)
 
1,988,635

Total expenses
787,683

 
469,092

 
358,271

 
1,615,046

 
72,533

 
—

 
1,687,579

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
267,538

 
67,734

 
33

 
335,305

 
15,010

 
440

 
350,755

Interest expense
(376,483
)
 
(58,271
)
 
(113
)
 
(434,867
)
 
(170,356
)
 
—

 
(605,223
)
Gain on repurchase of unsecured senior notes
—

 
—

 
—

 
—

 
8,237

 
—

 
8,237

Gain (loss) on interest rate swaps and caps
(710
)
 
—

 
—

 
(710
)
 
60

 
—

 
(650
)
Total other income (expense)
(109,655
)
 
9,463

 
(80
)
 
(100,272
)
 
(147,049
)
 
440

 
(246,881
)
Income (loss) before taxes
$
(15,372
)
 
$
206,082

 
$
78,629

 
$
269,339

 
$
(215,164
)
 
$
—

 
$
54,175

Depreciation and amortization
$
21,171

 
$
12,163

 
$
13,449

 
$
46,783

 
$
6,714

 
$
—

 
$
53,497

Total assets
14,255,583

 
1,400,982

 
303,676

 
15,960,241

 
693,829

 
—

 
16,654,070

 
 
For the year ended December 31, 2014
 
Servicing
 
Originations
 
Xome
 
Total Operating
Segments
 
Corporate and Other
 
Eliminations
 
Consolidated
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
Service related
$
1,023,150

 
$
43,954

 
$
305,488

 
$
1,372,592

 
$
4,713

 
$
(1,443
)
 
$
1,375,862

Net gain on mortgage loans held for sale
64,506

 
535,273

 
—

 
599,779

 
(2,573
)
 
—

 
597,206

Total revenues
1,087,656

 
579,227

 
305,488

 
1,972,371

 
2,140

 
(1,443
)
 
1,973,068

Total expenses
705,017

 
390,497

 
181,727

 
1,277,241

 
80,450

 


 
1,357,691

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
91,713

 
72,031

 
—

 
163,744

 
14,405

 
1,443

 
179,592

Interest expense
(246,099
)
 
(70,237
)
 
(360
)
 
(316,696
)
 
(199,691
)
 
—

 
(516,387
)
Gain on sale of property
—

 
—

 
—

 
—

 
4,898

 
—

 
4,898

Gain (loss) on interest rate swaps and caps
1,672

 
—

 
—

 
1,672

 
732

 
—

 
2,404

Total other income (expense)
(152,714
)
 
1,794

 
(360
)
 
(151,280
)
 
(179,656
)
 
1,443

 
(329,493
)
Income (loss) before taxes
$
229,925

 
$
190,524

 
$
123,401

 
$
543,850

 
$
(257,966
)
 
$
—

 
$
285,884

Depreciation and amortization
$
14,047

 
$
9,642

 
$
3,680

 
$
27,369

 
$
12,797

 
$
—

 
$
40,166

Total assets
8,796,962

 
1,400,880

 
195,619

 
10,393,461

 
719,214

 
—

 
11,112,675



108

 
For the year ended December 31, 2013
 
Servicing
 
Originations
 
Xome
 
Total Operating
Segments
 
Corporate and Other
 
Eliminations
 
Consolidated
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
Service related
$
1,186,145

 
$
62,011

 
$
135,950

 
$
1,384,106

 
$
1,750

 
$
(1,634
)
 
$
1,384,222

Net gain on mortgage loans held for sale
61,624

 
650,357

 
—

 
711,981

 
(9,218
)
 
—

 
702,763

Total revenues
1,247,769

 
712,368

 
135,950

 
2,096,087

 
(7,468
)
 
(1,634
)
 
2,086,985

Total expenses and impairments
613,084

 
589,986

 
108,633

 
1,311,703

 
90,575

 
—

 
1,402,278

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
90,913

 
87,713

 
—

 
178,626

 
16,960

 
1,634

 
197,220

Interest expense
(279,501
)
 
(79,106
)
 
(264
)
 
(358,871
)
 
(179,934
)
 
—

 
(538,805
)
Contract termination fees
—

 
—

 
—

 
—

 
—

 
—

 
—

Loss on equity method investments
—

 
—

 
—

 
—

 
—

 
—

 
—

Gain (loss) on interest rate swaps and caps
1,856

 
—

 
—

 
1,856

 
1,276

 
—

 
3,132

Total other income (expense)
(186,732
)
 
8,607

 
(264
)
 
(178,389
)
 
(161,698
)
 
1,634

 
(338,453
)
Income (loss) before taxes
$
447,953

 
$
130,989

 
$
27,053

 
$
605,995

 
$
(259,741
)
 
$
—

 
$
346,254

Depreciation and amortization
$
14,955

 
$
6,569

 
$
1,161

 
$
22,685

 
$
3,930

 
$
—

 
$
26,615

Total assets
9,980,274

 
2,777,928

 
30,615

 
12,788,817

 
1,237,872

 
—

 
14,026,689


21.  Guarantor Financial Statement Information
As of December 31, 2015 , Nationstar Mortgage LLC and Nationstar Capital Corporation (1) (collectively, the Issuer), both wholly owned subsidiaries of Nationstar, have issued $2.0 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.

109

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

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

 
$
597,303

 
$
558

 
$
15,380

 
$
—

 
$
613,241

Restricted cash
—

 
198,726

 
3

 
133,376

 
—

 
332,105

Mortgage servicing rights
—

 
3,366,973

 
—

 
—

 
—

 
3,366,973

Advances
—

 
2,223,039

 
—

 
44

 
—

 
2,223,083

Reverse mortgage interests
—

 
6,832,186

 
—

 
682,137

 
—

 
7,514,323

Mortgage loans held for sale
—

 
1,304,219

 
—

 
125,472

 
—

 
1,429,691

Mortgage loans held for investment, net
—

 
840

 
—

 
172,810

 
—

 
173,650

Property and equipment, net
—

 
113,228

 
868

 
28,740

 
—

 
142,836

Derivative financial instruments
—

 
95,681

 
—

 
3,518

 
—

 
99,199

Other assets
3,444

 
836,704

 
303,452

 
1,496,640

 
(1,881,271
)
 
758,969

Investment in subsidiaries
1,768,319

 
509,475

 
—

 
—

 
(2,277,794
)
 
—

Total assets
$
1,771,763

 
$
16,078,374

 
$
304,881

 
$
2,658,117

 
$
(4,159,065
)
 
$
16,654,070

Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
 
 
Unsecured senior notes
$
—

 
$
2,048,694

 
$
—

 
$
—

 
$
—

 
$
2,048,694

Advance facilities
—

 
237,865

 
—

 
1,408,258

 
—

 
1,646,123

Warehouse facilities
—

 
1,785,266

 
—

 
108,260

 
—

 
1,893,526

Payables and accrued liabilities
4,386

 
1,222,268

 
927

 
68,806

 
—

 
1,296,387

MSR related liabilities - nonrecourse
—

 
1,300,782

 
—

 
—

 
—

 
1,300,782

Mortgage servicing liabilities
—

 
25,260

 
—

 
—

 
—

 
25,260

Derivative financial instruments
—

 
5,323

 
—

 
—

 
—

 
5,323

Other nonrecourse debt
—

 
5,947,407

 
—

 
723,191

 
—

 
6,670,598

Payables to affiliates
—

 
1,737,190

 
1,031

 
143,050

 
(1,881,271
)
 
—

Total liabilities
4,386

 
14,310,055

 
1,958

 
2,451,565

 
(1,881,271
)
 
14,886,693

Total equity
1,767,377

 
1,768,319

 
302,923

 
206,552

 
(2,277,794
)
 
1,767,377

Total liabilities and equity
$
1,771,763

 
$
16,078,374

 
$
304,881

 
$
2,658,117

 
$
(4,159,065
)
 
$
16,654,070







110

NATIONSTAR MORTGAGE HOLDINGS INC. CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2015
 
Nationstar
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Revenues
 
 
 
 
 
 
 
 
 
 
 
Service related
$
—

 
$
846,221

 
$
17,390

 
$
441,149

 

 
$
1,304,760

Net gain on mortgage loans held for sale
—

 
640,051

 
—

 
43,824

 
—

 
683,875

Total revenues
—

 
1,486,272

 
17,390

 
484,973

 
—

 
1,988,635

Expenses
 
 
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
—

 
540,052

 
4,791

 
217,725

 
—

 
762,568

General and administrative
—

 
737,168

 
3,248

 
184,595

 
—

 
925,011

Total expenses
—

 
1,277,220

 
8,039

 
402,320

 
—

 
1,687,579

Other income/(expense)
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
310,809

 
—

 
39,946

 

 
350,755

Interest expense
—

 
(534,097
)
 
—

 
(71,126
)
 
—

 
(605,223
)
Gain on debt repurchase
—

 
8,237

 
—

 
—

 
—

 
8,237

Gain on interest rate swaps and caps
—

 
60

 
—

 
(710
)
 
—

 
(650
)
Gain/(loss) from subsidiaries
38,779

 
59,862

 
—

 
—

 
(98,641
)
 
—

Total other income/(expense)
38,779

 
(155,129
)
 
—

 
(31,890
)
 
(98,641
)
 
(246,881
)
Income/(loss) before taxes
38,779

 
53,923

 
9,351

 
50,763

 
(98,641
)
 
54,175

Income tax expense/(benefit)
—

 
11,002

 
—

 
10

 
—

 
11,012

Net income/(loss)
38,779

 
42,921

 
9,351

 
50,753

 
(98,641
)
 
43,163

Less: net gain attributable to noncontrolling interests
—

 
4,142

 
—

 
242

 
—

 
4,384

Net income/(loss) excluding noncontrolling interests
$
38,779

 
$
38,779

 
$
9,351

 
$
50,511

 
$
(98,641
)
 
$
38,779












111

NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2015
 
Nationstar
 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Operating Activities
 
 
 
 
 
 
 
 
 
 
 
Net income/(loss)
$
38,779

 
$
38,779

 
$
9,351

 
$
50,511

 
$
(98,641
)
 
$
38,779

Reconciliation of net income to net cash attributable to operating activities, net of effect of acquisitions:
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interest
—

 
4,142

 
—

 
242

 
—

 
4,384

(Gain)/loss from subsidiaries
(38,779
)
 
(59,862
)
 
—

 
—

 
98,641

 
—

Share-based compensation
—

 
12,299

 
66

 
7,156

 
—

 
19,521

Gain on repurchase of unsecured senior notes
—

 
(8,237
)
 
—

 
—

 
—

 
(8,237
)
Net tax effect of stock grants
—

 
(422
)
 
—

 
—

 
—

 
(422
)
Loss on foreclosed real estate and other
—

 
—

 
—

 
—

 
—

 
—

Gain on mortgage loans held for sale
—

 
(638,963
)
 
—

 
(44,912
)
 
—

 
(683,875
)
Mortgage loans originated and purchased, net of fees
—

 
(16,827,026
)
 
—

 
(1,144,278
)
 
—

 
(17,971,304
)
Repurchases of loans and foreclosures out of Ginnie Mae securitizations
—

 
(1,865,347
)
 
—

 
—

 
—

 
(1,865,347
)
Proceeds on sale of and payments of mortgage loans held for sale
—

 
18,927,555

 
—

 
1,117,865

 
—

 
20,045,420

(Gain)/loss on derivatives including ineffectiveness
—

 
(60
)
 
—

 
710

 
—

 
650

Cash settlement on derivative financial instruments
—

 
—

 
—

 
—

 
—

 
—

Depreciation and amortization
—

 
40,024

 
7

 
13,466

 
—

 
53,497

Amortization/(accretion) of premiums/(discounts)
—

 
(7,993
)
 
—

 
(3,678
)
 
—

 
(11,671
)
Fair value changes in excess spread financing
—

 
25,631

 
—

 
—

 
—

 
25,631

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

 
459,803

 
—

 
—

 
—

 
459,803

Fair value change in mortgage servicing rights financing liability
—

 
19,266

 
—

 
—

 
—

 
19,266

Changes in assets and liabilities:
 
 
 
 
 
 
 
 
 
 
 
Advances
—

 
321,026

 
—

 
2,253

 
—

 
323,279

Reverse mortgage interests
—

 
95,299

 
—

 
(340,869
)
 
—

 
(245,570
)
Other assets
12,935

 
388,543

 
(10,010
)
 
(120,873
)
 
—

 
270,595

Payables and accrued liabilities
—

 
(67,140
)
 
902

 
9,665

 
—

 
(56,573
)
Net cash attributable to operating activities
12,935

 
857,317

 
316

 
(452,742
)
 
—

 
417,826









112

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

 
(36,497
)
 
(43
)
 
(20,502
)
 
—

 
(57,042
)
Purchase of forward mortgage servicing rights, net of liabilities incurred
—

 
(714,842
)
 
—

 
—

 
—

 
(714,842
)
Purchases of reverse mortgage servicing rights and interests
—

 
(4,815,684
)
 
—

 
—

 
—

 
(4,815,684
)
Sale of forward service rights
—

 
43,793

 
—

 
—

 
—

 
43,793

Acquisitions, net
—

 
—

 
—

 
(45,796
)
 
—

 
(45,796
)
Net cash attributable to investing activities
—

 
(5,523,230
)
 
(43
)
 
(66,298
)
 
—

 
(5,589,571
)
Financing Activities
 
 
 
 
 
 
 
 
 
 
 
Transfers (to)/from restricted cash, net
—

 
(21,636
)
 
(3
)
 
(24,936
)
 
—

 
(46,575
)
Repayment of unsecured senior notes
—

 
(102,533
)
 
—

 
—

 
—

 
(102,533
)
Issuance of common stock, net of issuance cost
—

 
497,757

 
—

 
—

 
—

 
497,757

Debt financing costs
—

 
(17,363
)
 
—

 
—

 
—

 
(17,363
)
Increase (decrease) warehouse facilities
—

 
245,272

 
—

 
75,632

 
—

 
320,904

Increase (decrease) advance facilities
—

 
(332,927
)
 
—

 
77,267

 
—

 
(255,660
)
Proceeds from HECM Securitizations
—

 
—

 
—

 
559,757

 
—

 
559,757

Repayment of HECM Securitizations
—

 
—

 
—

 
(161,221
)
 
—

 
(161,221
)
Issuance of excess spread financing
—

 
385,637

 
—

 
—

 
—

 
385,637

Repayment of excess spread financing
—

 
(210,217
)
 
—

 
—

 
—

 
(210,217
)
Increase in participating interest financing in reverse mortgage interests
—

 
4,540,828

 
—

 
—

 
—

 
4,540,828

Proceeds from mortgage service rights financing
—

 
—

 
—

 
—

 
—

 
—

Repayment of nonrecourse debt–Legacy assets
—

 
(1,794
)
 
—

 
(11,023
)
 
—

 
(12,817
)
Net tax benefit for stock grants issued
—

 
422

 
—

 
—

 
—

 
422

Redemption of shares for stock vesting
(6,224
)
 
—

 
—

 
—

 
—

 
(6,224
)
Repurchase of treasury shares
(6,711
)
 
—

 
—

 
—

 
—

 
(6,711
)
Net cash attributable to financing activities
(12,935
)
 
4,983,446

 
(3
)
 
515,476

 
—

 
5,485,984

Net increase/(decrease) in cash
—

 
317,533

 
270

 
(3,564
)
 
—

 
314,239

Cash and cash equivalents at beginning of period
—

 
279,770

 
288

 
18,944

 
—

 
299,002

Cash and cash equivalents at end of period
$
—

 
$
597,303

 
$
558

 
$
15,380

 
$
—

 
$
613,241



113

NATIONSTAR MORTGAGE HOLDINGS INC
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2014
 
Nationstar
 
Issuer
(Parent)
 
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
—

 
2,542,402

 
—

 
2,297

 
—

 
2,544,699

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

 
1,070,724

 
272,654

 
1,328,078

 
(1,808,947
)
 
878,892

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
 
 
 
 
 
 
 
 
 
 
 
Unsecured senior notes
$
—

 
$
2,159,231

 
$
—

 
$
—

 
$
—

 
$
2,159,231

Advance facilities
—

 
570,792

 
—

 
1,330,991

 
—

 
1,901,783

Warehouse facilities
—

 
1,539,994

 
—

 
32,628

 
—

 
1,572,622

Payables and accrued liabilities
—

 
1,282,895

 
25

 
39,158

 
—

 
1,322,078

MSR related liabilities - nonrecourse
—

 
1,080,465

 
—

 
—

 
—

 
1,080,465

Mortgage servicing liabilities
—

 
65,382

 
—

 
—

 
—

 
65,382

Derivative financial instruments
—

 
18,525

 
—

 
—

 
—

 
18,525

Other nonrecourse debt
—

 
1,433,145

 
—

 
335,166

 
—

 
1,768,311

Payables to affiliates
—

 
1,683,606

 
894

 
124,447

 
(1,808,947
)
 
—

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




114

NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2014

 
 
Nationstar
 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Revenues
 
 
 
 
 
 
 
 
 
 
 
Service related
$
—

 
$
1,030,214

 
$
47,588

 
$
297,869

 
$
191

 
$
1,375,862

Net gain on mortgage loans held for sale
—

 
583,790

 
—

 
13,416

 
—

 
597,206

Total Revenues
—

 
1,614,004

 
47,588

 
311,285

 
191

 
1,973,068

Expenses
 
 
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
—

 
556,047

 
4,404

 
82,485

 
—

 
642,936

General and administrative
—

 
587,327

 
1,872

 
125,556

 
—

 
714,755

Total expenses
—

 
1,143,374

 
6,276

 
208,041

 
—

 
1,357,691

Other income/(expense)
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
158,508

 
—

 
21,275

 
(191
)
 
179,592

Interest expense
—

 
(460,781
)
 
—

 
(55,606
)
 
—

 
(516,387
)
Gain on disposal of property
—

 
4,898

 
—

 
—

 
—

 
4,898

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

 
732

 
—

 
1,672

 
—

 
2,404

Gain/(loss) from subsidiaries
220,718

 
111,897

 
—

 
—

 
(332,615
)
 
—

Total other income/(expense)
220,718

 
(184,746
)
 
—

 
(32,659
)
 
(332,806
)
 
(329,493
)
Income before taxes
220,718

 
285,884

 
41,312

 
70,585

 
(332,615
)
 
285,884

Income tax expense/(benefit)
—

 
64,860

 
—

 
—

 
—

 
64,860

Net Income/(loss)
220,718

 
221,024

 
41,312

 
70,585

 
(332,615
)
 
221,024

Less: Net gain attributable to noncontrolling interests
—

 
306

 
—

 
—

 
—

 
306

Net income/(loss) excluding noncontrolling interests
$
220,718

 
$
220,718

 
$
41,312

 
$
70,585

 
$
(332,615
)
 
$
220,718


115

NATIONSTAR MORTGAGE HOLDINGS INC
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2014  
 
Nationstar
 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Operating activities
 
 
 
 
 
 
 
 
 
 
 
Net income/(loss)
$
220,718

 
$
220,718

 
$
41,312

 
$
70,585

 
$
(332,615
)
 
$
220,718

Reconciliation of net income to net cash attributable to operating activities, net of effect of acquisitions:
 
 
 
 
 
 
 
 
 
 
 
(Gain)/loss from subsidiaries
(220,718
)
 
(111,897
)
 
—

 
—

 
332,615

 
—

Noncontrolling interest
—

 
306

 
—

 
—

 
—

 
306

Share-based compensation
—

 
18,565

 
—

 
—

 
—

 
18,565

Gain on disposal of property
—

 
(4,898
)
 
—

 
—

 
—

 
(4,898
)
Excess benefit from share-based compensation
—

 
(2,243
)
 
—

 
—

 
—

 
(2,243
)
Loss on foreclosed real estate
—

 
3,099

 
—

 
7,189

 
—

 
10,288

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

 
(583,790
)
 
—

 
(13,416
)
 
—

 
(597,206
)
Mortgage loans originated and purchased, net of fees
—

 
(17,137,520
)
 
—

 
—

 
—

 
(17,137,520
)
Repurchases of loans and foreclosures out of Ginnie Mae securitizations
—

 
(3,692,199
)
 
—

 
—

 
—

 
(3,692,199
)
Proceeds on sale of and payments of mortgage loans held for sale
—

 
22,129,587

 
—

 
(5,614
)
 
—

 
22,123,973

Gain (loss) on derivatives including interest rate swaps and caps
—

 
(732
)
 
—

 
(1,672
)
 
—

 
(2,404
)
Cash settlement on derivative financial instruments
—

 
—

 
—

 
1,352

 
—

 
1,352

Depreciation and amortization
—

 
36,381

 
88

 
3,697

 
—

 
40,166

Amortization (accretion) of premiums/(discounts)
—

 
15,520

 
—

 
(2,190
)
 
—

 
13,330

Fair value changes in excess spread financing
—

 
57,554

 
—

 
—

 
—

 
57,554

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

 
233,537

 
—

 
—

 
—

 
233,537

Fair value change in mortgage servicing rights financing liability
—

 
(33,279
)
 
—

 
—

 
—

 
(33,279
)
Changes in assets and liabilities:
 
 
 
 
 
 
 
 
 
 


Advances
—

 
327,470

 
—

 
(3,288
)
 
—

 
324,182

Reverse mortgage interests
—

 
(626,034
)
 
—

 
(376,108
)
 
—

 
(1,002,142
)
Other assets
5,489

 
(1,613,831
)
 
(39,029
)
 
2,206,946

 
(31,463
)
 
528,112

Payables and accrued liabilities
—

 
(71,071
)
 
(5,925
)
 
25,550

 
31,463

 
(19,983
)
Net cash attributable to operating activities
5,489

 
(834,757
)
 
(3,554
)
 
1,913,031

 
—

 
1,080,209


116

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

 
(41,739
)
 
(68
)
 
(14,598
)
 
—

 
(56,405
)
Proceeds from sale of building
—

 
10,412

 
—

 
—

 
—

 
10,412

Purchase of forward mortgage servicing rights, net of liabilities incurred
—

 
(471,249
)
 
—

 
—

 
—

 
(471,249
)
Proceeds from sale of servicer advances
—

 
768,449

 
—

 
—

 
—

 
768,449

Business acquisitions, net
—

 
(15,854
)
 
—

 
(2,146
)
 
—

 
(18,000
)
Net cash attributable to investing activities
—

 
250,019

 
(68
)
 
(16,744
)
 
—

 
233,207

Financing activities
 
 
 
 
 
 
 
 
 
 
 
Transfers (to)/from restricted cash
—

 
118,617

 
3

 
172,183

 
—

 
290,803

Redemption of unsecured senior notes
—

 
(285,000
)
 
—

 
—

 
—

 
(285,000
)
Debt financing costs
—

 
(13,067
)
 
—

 
—

 
—

 
(13,067
)
Increase (decrease) in advance facilities
—

 
—

 
—

 
(1,221,206
)
 
—

 
(1,221,206
)
Increase (decrease) in warehouse facilities
—

 
226,596

 
—

 
(1,087,901
)
 
—

 
(861,305
)
Proceeds from 2014-1 HECM Securitization
—

 
—

 
—

 
269,033

 
—

 
269,033

Repayment of 2014-1 HECM Securitization
—

 
—

 
—

 
(9,750
)
 
—

 
(9,750
)
Issuance of excess spread financing
—

 
171,317

 
—

 
—

 
—

 
171,317

Repayment of excess servicing spread financing
—

 
(184,246
)
 
—

 
—

 
—

 
(184,246
)
Increase in participating interest financing in reverse mortgage interests
—

 
352,945

 
—

 
—

 
—

 
352,945

Proceeds from mortgage servicing rights financing
—

 
52,835

 
—

 
—

 
—

 
52,835

Repayment of nonrecourse debt–Legacy assets
—

 
—

 
—

 
(15,429
)
 
—

 
(15,429
)
Excess tax benefit from share-based compensation
—

 
2,243

 
—

 
—

 
—

 
2,243

Redemption of shares for stock vesting
(5,489
)
 
—

 
—

 
—

 
—

 
(5,489
)
Net cash attributable to financing activities
(5,489
)
 
442,240

 
3

 
(1,893,070
)
 
—

 
(1,456,316
)
Net increase in cash and cash equivalents
—

 
(142,498
)
 
(3,619
)
 
3,217

 
—

 
(142,900
)
Cash and cash equivalents at beginning of period
—

 
422,268

 
3,907

 
15,727

 
—

 
441,902

Cash and cash equivalents at end of period
$
—

 
$
279,770

 
$
288

 
$
18,944

 
$
—

 
$
299,002




117

NATIONSTAR MORTGAGE LLC
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2013

 
 
Nationstar
 
Issuer
 
Guarantor
  (Subsidiaries)  
 
Non-Guarantor   (Subsidiaries)  
 
Eliminations  
 
Consolidated  
Revenues
 
 
 
 
 
 
 
 
 
 
 
Service related
$
—

 
$
1,211,717

 
$
129,689

 
$
101,704

 
$
(58,888
)
 
$
1,384,222

Net gain on mortgage loans held for sale
—

 
645,509

 
—

 
—

 
57,254

 
702,763

Total Revenues
—

 
1,857,226

 
129,689

 
101,704

 
(1,634
)
 
2,086,985

Expenses
 
 
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
—

 
637,794

 
12,534

 
29,309

 
—

 
679,637

General and administrative
—

 
612,307

 
3,630

 
75,859

 
—

 
691,796

Occupancy
—

 
29,121

 
431

 
1,293

 
—

 
30,845

Total expenses
—

 
1,279,222

 
16,595

 
106,461

 
—

 
1,402,278

Other income / (expense)
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
179,445

 
—

 
16,141

 
1,634

 
197,220

Interest expense
—

 
(420,214
)
 
—

 
(118,591
)
 
—

 
(538,805
)
Gain/(loss) on interest rate swaps and caps
—

 
1,012

 
—

 
2,120

 
—

 
3,132

Gain / (loss) from subsidiaries
217,054

 
8,007

 
—

 
—

 
(225,061
)
 
—

Total other income / (expense)
217,054

 
(231,750
)
 
—

 
(100,330
)
 
(223,427
)
 
(338,453
)
Income before taxes
217,054

 
346,254

 
113,094

 
(105,087
)
 
(225,061
)
 
346,254

Income tax expense/(benefit)
—

 
129,200

 
—

 
—

 
—

 
129,200

Net income/(loss)
$
217,054

 
$
217,054

 
$
113,094

 
$
(105,087
)
 
$
(225,061
)
 
$
217,054


118

NATIONSTAR MORTGAGE LLC
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2013

 
 
Nationstar
 
Issuer
 
Guarantor
 (Subsidiaries) 
 
Non-
Guarantor
 (Subsidiaries) 
 
Eliminations  
 
Consolidated  
Operating activities
 
 
 
 
 
 
 
 
 
 
 
Net income/(loss)
$
217,054

 
$
217,054

 
$
113,094

 
$
(105,087
)
 
$
(225,061
)
 
$
217,054

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities, net of effect of acquisitions:
 
 
 
 
 
 
 
 
 
 
 
Gain/(loss) from subsidiaries
(217,054
)
 
(8,007
)
 
—

 
—

 
225,061

 
—

Share-based compensation
—

 
10,574

 
—

 
—

 
—

 
10,574

Net tax effect of stock grants
—

 
(4,579
)
 
—

 
—

 
—

 
(4,579
)
Loss on foreclosed real estate and other
—

 
7,317

 
—

 
5,999

 
—

 
13,316

(Gain) on mortgage loans held for sale
—

 
(645,509
)
 
—

 
—

 
(57,254
)
 
(702,763
)
Mortgage loans originated and purchased, net of fees
—

 
(24,059,757
)
 
—

 
—

 
—

 
(24,059,757
)
Repurchases of loans and foreclosures out of Ginnie Mae securitizations
—

 
(1,426,860
)
 
—

 
—

 
—

 
(1,426,860
)
Proceeds on sale of and payments of mortgage loans held for sale
—

 
24,524,472

 
—

 
13,325

 
57,254

 
24,595,051

(Gain)/loss on derivatives including ineffectiveness
—

 
(3,415
)
 
—

 
(2,665
)
 
—

 
(6,080
)
Cash settlement on derivative financial instruments
—

 
—

 
—

 
(4,544
)
 
—

 
(4,544
)
Depreciation and amortization
—

 
25,479

 
979

 
157

 
—

 
26,615

Amortization/accretion of premiums/(discounts)
—

 
56,348

 
—

 
(3,817
)
 
—

 
52,531

Fair value changes in excess spread financing
—

 
73,333

 
—

 
—

 
—

 
73,333

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

 
(59,101
)
 
—

 
—

 
—

 
(59,101
)
Changes in assets and liabilities:
 
 
 
 
 
 
 
 
 
 

Advances
—

 
(4,497,046
)
 
—

 
4,031,271

 
—

 
(465,775
)
Reverse mortgage interests
—

 
(751,609
)
 
—

 
—

 
—

 
(751,609
)
Other assets
2,365

 
5,395,861

 
(113,703
)
 
(5,257,613
)
 
17,327

 
44,237

Payables and accrued liabilities
—

 
650,287

 
4,135

 
10,225

 
(17,327
)
 
647,320

Net cash attributable to operating activities
2,365

 
(495,158
)
 
4,505

 
(1,312,749
)
 
—

 
(1,801,037
)

119

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

 
(45,138
)
 
(999
)
 
(2,722
)
 
—

 
(48,859
)
Purchase of reverse mortgage rights and interests
—

 
(19,189
)
 
—

 
—

 
—

 
(19,189
)
Purchase of forward mortgage servicing rights, net of liabilities incurred
—

 
(1,527,645
)
 
—

 
—

 
—

 
(1,527,645
)
Loan repurchases from Ginnie Mae
—

 
—

 
—

 
—

 
—

 
—

Proceeds from sales of REO
—

 
—

 
—

 
—

 
—

 
—

Proceeds from sale of servicer advances
—

 
277,455

 
—

 
—

 
—

 
277,455

Acquisitions, net
—

 
(88,200
)
 
—

 
—

 
—

 
(88,200
)
Net cash attributable to investing activities
—

 
(1,402,717
)
 
(999
)
 
(2,722
)
 
—

 
(1,406,438
)
Financing activities
 
 
 
 
 
 
 
 
 
 
 
Transfers to/from restricted cash
—

 
(199,600
)
 
—

 
(33,095
)
 
—

 
(232,695
)
Issuance of unsecured notes, net
—

 
1,365,244

 
—

 
—

 
—

 
1,365,244

Debt financing costs
—

 
(53,529
)
 
—

 
—

 
—

 
(53,529
)
Increase (decrease) in warehouse facilities
—

 
(136,947
)
 
—

 
1,532,374

 
—

 
1,395,427

Increase (decrease) in advance facilities
—

 
—

 
—

 
(154,677
)
 
—

 
(154,677
)
Issuance of excess spread financing
—

 
753,002

 
—

 
—

 
—

 
753,002

Repayment of excess servicing spread financing
—

 
(130,355
)
 
—

 
—

 
—

 
(130,355
)
Issuance of participating interest financing in reverse mortgage interests
—

 
535,216

 
—

 
—

 
—

 
535,216

Proceeds from mortgage servicing rights financing
 
 
29,874

 
 
 
 
 
 
 
29,874

Repayment of nonrecourse debt–Legacy assets
—

 
—

 
—

 
(13,404
)
 
—

 
(13,404
)
Contributions from joint venture member to noncontrolling interest
—

 
4,990

 
 
 
 
 
 
 
4,990

Net tax benefit for stock grants issued
4,579

 
—

 
—

 
—

 
—

 
4,579

Redemption of shares for stock vesting
(6,944
)
 
—

 
—

 
—

 
—

 
(6,944
)
Net cash attributable to financing activities
(2,365
)
 
2,167,895

 
—

 
1,331,198

 
—

 
3,496,728

Net increase/(decrease) in cash
—

 
270,020

 
3,506

 
15,727

 
—

 
289,253

Cash and cash equivalents at beginning of period
—

 
152,248

 
401

 
—

 
—

 
152,649

Cash and cash equivalents at end of period
$
—

 
$
422,268

 
$
3,907

 
$
15,727

 
$
—

 
$
441,902



120

22. Disclosures Related to Transactions with Affiliates of Fortress Investment Group LLC
Newcastle Investment Corp.
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 , $0.8 billion and $0.9 billion , as of December 31, 2015, 2014, and 2013, respectively. For the years ended 2015, 2014 and 2013, Nationstar received servicing fees and other performance incentive fees of $3.5 million , $4.1 million and $4.6 million , respectively.
New Residential Investment Corp.
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 base servicing fee per loan. Nationstar retains all ancillary revenues associated with servicing such MSRs and the remaining portion of the excess cash flow after receipt of the fixed base 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 December 31, 2015, Nationstar had recorded $30.7 million of delinquent service fees that were paid to New Residential in advance of the contractual due date. This amount will be ultimately recouped from borrowers or netted against future remittances as related to service fee amounts. This amount is recorded as a reduction to outstanding excess spread financing in our financial statements.
The fair value on the outstanding liability related to these agreements was $1.2 billion and $1.0 billion at December 31, 2015 and 2014, respectively.

Mortgage Servicing Rights Financing Liability
During 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 servicer advances outstanding on non-agency mortgage loans. In addition, Nationstar also sold the right to receive the base fee component on the related mortgage servicing rights, in exchange for the Purchaser remitting a portion of the base fee to Nationstar in exchange for Nationstar continuing to service the mortgage loans. 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.
Special purpose subsidiaries of Nationstar previously issued approximately $2.1 billion of nonrecourse variable funding notes (the Notes) to finance the advances funded or acquired by Nationstar. The Notes were issued through two wholly-owned special purpose entities (the Issuers) pursuant to two servicer advance facilities. Pursuant to the Sale Agreement, New Residential purchased the outstanding equity of the wholly-owned special purpose entities of Nationstar that own the Issuers (the Depositors). On the sale date, New Residential and Nationstar amended and restated the transaction documents for each facility. Under these amended and restated transaction documents for each facility, Nationstar will continue to sell future service advances to New Residential, and New Residential will sell the new servicer advances to the Depositors.
In December 2013, Nationstar received approximately $307.3 million in cash proceeds from the Sale Agreement. The fair value of the outstanding liability related to the Sale Agreement was $68.7 million and $49.4 million at December 31, 2015 and December 31, 2014, respectively.
Nationstar did not enter into any additional supplemental agreements with the Purchaser in 2015.

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. For the years ended December 31, 2015 and 2014, Nationstar recognized revenue of $4.0 million and $3.3 million related to these servicing arrangements, respectively. In 2015, Nationstar performed services for New Residential related to a series of trust collapses on call rights solely owned by New Residential. For the year ended December 31, 2015, Nationstar earned revenue of $0.5 million for these services.

121


In February 2013, Nationstar acquired certain fixed and adjustable rate reverse mortgage loans with an unpaid principal balance totaling $83.1 million for a purchase price of $50.2 million . In conjunction with this acquisition, Nationstar entered into an agreement with NIC Reverse Loan LLC, a subsidiary of New Residential, to sell a participating interest amounting to 70% of the acquired reverse mortgage loans. Both Nationstar and NIC Reverse Loan LLC are entitled to the related percentage interest of all amounts received with respect to the reverse mortgage loans, net of payments of servicing fees and the reimbursement to Nationstar of servicing advances. Nationstar receives a fixed payment per loan for servicing these reverse mortgage loans. Nationstar records these reverse mortgage loans as reverse mortgage interests on the Company's consolidated balance sheets.
Springleaf Home Equity, Inc.
In prior years, Nationstar entered into 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 $2.0 billion for which Nationstar received a monthly per loan subservicing fee and other performance incentive fees subject to the agreements with Springleaf. Springleaf Home Equity, Inc. was a subsidiary of Springleaf Holdings, Inc., which was primarily owned by certain private equity funds managed by an affiliate of Fortress.  On November 15, 2015, Springleaf Holdings, Inc. completed its acquisition of OneMain Financial Holdings, LLC, and has changed its corporate name from Springleaf Holdings, Inc. to OneMain Holdings, Inc. For the years ended December 31, 2015, 2014, and 2013, Nationstar recognized revenue of $1.3 million , $5.3 million and $8.1 million , respectively, in additional servicing and other performance incentive fees related to these portfolios. At December 31, 2014, Nationstar had an outstanding receivable from Springleaf of $0.2 million , which was included as a component of other assets. There were no amounts outstanding as of December 31, 2015.

In August 2014, Nationstar entered into a Mortgage Servicing Rights Purchase and Sale Agreement with Springleaf Finance Corporation and MorEquity, Inc., whereby Nationstar agreed to purchase certain servicing rights related to loans previously subserviced for Springleaf. Under the terms of this Mortgage Servicing Rights Purchase and Sale Agreement, Nationstar purchased the servicing rights related to a pool of loans with an aggregate UPB of approximately $4.8 billion . The purchase price related to this Mortgage Servicing Rights Purchase and Sale Agreement was approximately $38.8 million .

23. Quarterly Financial Data (Unaudited)
The following is a summary of the quarterly consolidated results of operations for the period indicated (amounts in thousands except per share amounts:
 
2015
 
First
Quarter 
 
Second
Quarter 
 
Third
Quarter 
 
Fourth
Quarter 
Service related
$
215,123

 
$
457,723

 
$
211,311

 
$
420,603

Net gain on mortgage loans held for sale
166,994

 
163,886

 
185,872

 
167,123

Total revenues
382,117

 
621,609

 
397,183

 
587,726

Total expenses
383,843

 
440,985

 
446,221

 
416,530

Total other income/(expense)
(72,641
)
 
(60,613
)
 
(63,186
)
 
(50,441
)
Income (loss) before taxes
(74,367
)
 
120,011

 
(112,224
)
 
120,755

Income taxes (benefit)
(27,525
)
 
44,171

 
(47,295
)
 
41,661

Net income (loss)
(46,842
)
 
75,840

 
(64,929
)
 
79,094

Less: net income attributable to noncontrolling interests
1,473

 
1,281

 
1,413

 
217

Net income (loss) attributable to Nationstar
$
(48,315
)
 
$
74,559

 
$
(66,342
)
 
$
78,877

Earnings per share attributable to common shareholders:
 
 
 
 
 
 
 
     Basic
$
(0.54
)
 
$
0.69

 
$
(0.62
)
 
$
0.85

     Diluted
$
(0.54
)
 
$
0.69

 
$
(0.62
)
 
$
0.84



122

 
2014
 
First
Quarter 
 
Second
Quarter 
 
Third
Quarter 
 
Fourth
Quarter 
Service related
$
327,663

 
$
362,916

 
$
351,070

 
$
334,213

Net gain on mortgage loans held for sale
141,984

 
186,817

 
153,254

 
115,151

Total revenues
469,647

 
549,733

 
504,324

 
449,364

Total expenses and impairments
321,133

 
346,711

 
327,224

 
362,623

Total other income/(expense)
(109,836
)
 
(97,434
)
 
(67,521
)
 
(54,702
)
Income before taxes
38,678

 
105,588

 
109,579

 
32,039

Income tax expense (benefit)
15,001

 
38,941

 
(1,700
)
 
12,618

Net income
23,677

 
66,647

 
111,279

 
19,421

Less: net income (loss) attributable to noncontrolling interests
(359
)
 
192

 
54

 
419

Net income attributable to Nationstar
$
24,036

 
$
66,455

 
$
111,225

 
$
19,002

Earnings per share attributable to common shareholders:
 
 
 
 
 
 
 
     Basic
$
0.27

 
$
0.74

 
$
1.23

 
$
0.22

     Diluted
$
0.27

 
$
0.74

 
$
1.22

 
$
0.21


24. Subsequent Events

In January 2016, the Company's Board of Directors approved the plan to change the brand name for the Company's servicing and origination business to Mr. Cooper in the summer of 2016. Therefore, Greenlight trade name is not expected to be used by the Company after June 2016, and the Company revised the useful life of Greenlight trade name to six months and started amortizing it over the period from January to June 2016, which is the revised remaining useful life. Greenlight trade name's carrying value as of December 31, 2015 was $13.7 million .

On February 9, 2016, Nationstar’s Board of Directors authorized a $100 million increase to the original repurchase authorization for an aggregate repurchase authorization of $250 million under the Company’s share repurchase program.

On February 11, 2016, Nationstar announced a Board-authorized tender offer via a modified Dutch auction to repurchase up to $100 million of common stock. The tender offer is contingent upon satisfaction of customary conditions. Additional information about the tender offer, is set forth in Part II, Item 5 under "Issuer Purchases of Equity Securities.".

A leading financial institution with a growing servicing platform awarded us a $55 billion subservicing contract that is on track for boarding through 2016.

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.


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Table of Contents

Item 9A.    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 December 31, 2015.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 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.
Management’s Report on Internal control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined by Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act.  Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015.  In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organization of the Treadway Commission (COSO) in Internal Control-Integrated 2013 Framework.  A control system, no matter how well conceived, implemented and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met.  Because of such inherent limitations, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.  Based on our assessment and those criteria, our management concluded that our internal control over financial reporting was effective as of December 31, 2015.
Our independent registered public accounting firm has audited the effectiveness of our internal control over financial reporting as of December 31, 2015 as stated in their report, dated March 1, 2016, which appears herein.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 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.



124
Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of
Nationstar Mortgage Holdings Inc.

We have audited Nationstar Mortgage Holdings Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Nationstar Mortgage Holdings Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Nationstar Mortgage Holdings Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2015 consolidated financial statements of Nationstar Mortgage Holdings Inc. and our report dated March 1, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Dallas, Texas
March 1, 2016

Item 9B.    Other Information

None.


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Table of Contents

PART III.
Item 10.   Directors, Executive Officers and Corporate Governance

Information required by Item 10 is included under the captions "Executive Officers," “Board of Directors,” “Election of Directors,” “Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company's definitive proxy statement for the 2016 Annual Meeting of Stockholders (Proxy Statement), which will be filed with the SEC within 120 days of the Company's fiscal year-end and is incorporated herein by reference.

Item 11. Executive Compensation

Information required by Item 11 is included under the captions "Committees of the Board of Directors", "Executive Compensation", and "Compensation Committee Report" in the Proxy Statement, which will be filed with the SEC within 120 days of the Company's fiscal year-end and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information required by Item 12 is included under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement, which will be filed with the SEC within 120 days of the Company's fiscal year-end and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information required by Item 13 is included under the captions “Certain Relationships and Related Party Transactions” and “Board of Directors” in the Proxy Statement, which will be filed with the SEC within 120 days of the Company's fiscal year-end and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services.

Information required by Item 14 under the caption “Audit Function” in the Proxy Statement, which will be filed with the SEC 120 days of the Company's fiscal year-end and is incorporated herein by reference.

Item 15. Exhibits and Financial Statement Schedules
Documents filed as part of this Annual Report on Form 10-K:


1.
Financial Statements:
Our consolidated financial statements at December 31, 2015 and 2014 and for each of the three years in the period ended December 31, 2015 and the notes thereto, together with the report of the independent registered public accounting firm on those consolidated financial statements are filed within Item 8 in Part II as part of this Annual Report on Form 10-K.
2.
Financial Statement Schedules:
No financial statement schedules are presented since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and accompanying notes.











EXHIBITS

126

 
 
Incorporated by Reference
Filed or Furnished Herewith
Exhibit Number
Description
Form
File No.
Exhibit
Filing Date
 
 
 
 
 
 
 
2.1+
Master Servicing Rights Purchase Agreement, dated as of December 17, 2013, between Nationstar Mortgage LLC and Advance Purchaser LLC
8-K
001-35449
2.1
12/23/2013
 
 
 
 
 
 
 
 
2.2+
Sale Supplement (Shuttle 1), dated as of December 17, 2013, between Nationstar Mortgage LLC and Advance Purchaser LLC
8-K
001-35449
2.2
12/23/2013
 
 
 
 
 
 
 
 
2.3+
Sale Supplement (Shuttle 2), dated as of December 17, 2013, between Nationstar Mortgage LLC and Advance Purchaser LLC
8-K
001-35449
2.3
12/23/2013
 
 
 
 
 
 
 
 
2.4+
Sale Supplement (First Tennessee), dated as of December 17, 2013, between Nationstar Mortgage LLC and Advance Purchaser LLC
8-K
001-35449
2.4
12/23/2013
 
 
 
 
 
 
 
 
3.1
Amended and Restated Certificate of Incorporation of Nationstar Mortgage Holdings Inc.
S-1/A
333-174246
3.1
2/24/2012
 
 
 
 
 
 
 
 
3.2
Amended and Restated Bylaws of Nationstar Mortgage Holdings Inc.
S-1/A
333-174246
3.2
2/24/2012
 
 
 
 
 
 
 
 
4.1
Form of Stock Certificate
S-1/A
333-174246
4.8
2/24/2012
 
 
 
 
 
 
 
 
4.2
Stockholders Agreement, dated as of February 17, 2012, between Nationstar Mortgage Holdings Inc. and FIF HE Holdings LLC
S-1/A
333-174246
4.1
2/24/2012
 
 
 
 
 
 
 
 
4.3
Indenture, dated as of September 24, 2012, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.1
9/24/2012
 
 
 
 
 
 
 
 
4.4
First Supplemental Indenture, dated as of September 28, 2012, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.2
9/28/2012
 
 
 
 
 
 
 
 
4.5
Second Supplemental Indenture, dated as of December 10, 2012, between Champion Mortgage LLC and Wells Fargo Bank, National Association, as trustee
10-K
001-35449
4.12
3/15/2013
 
 
 
 
 
 
 
 
4.6
Indenture, dated as of April 25, 2012, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.1
4/25/2012
 
 
 
 
 
 
 
 
4.7
First Supplemental Indenture, dated as of July 24, 2012, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.2
7/24/2012
 
 
 
 
 
 
 
 
4.8
Second Supplemental Indenture, dated as of August 9, 2012, among Nationstar Mortgage Holdings Inc., Nationstar Sub1 LLC, Nationstar Sub2 LLC and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.2
8/9/2012
 
 
 
 
 
 
 
 
4.9
Third Supplemental Indenture, dated as of December 10, 2012, between Champion Mortgage LLC and Wells Fargo Bank, National Association, as trustee
10-K
001-35449
4.16
3/15/2013
 
 
 
 
 
 
 
 

127
Table of Contents

4.10
Indenture, dated as of February 7, 2013, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.1
2/7/2013
 
 
 
 
 
 
 
 
4.11
First Supplemental Indenture, dated as of March 26, 2013, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.2
3/26/2013
 
 
 
 
 
 
 
 
4.12
Indenture, dated as of May 31, 2013, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.1
5/31/2013
 
 
 
 
 
 
 
 
4.13
Fourth Amended and Restated Indenture, dated January 31, 2013, among Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, Nationstar Mortgage LLC, as servicer and as administrator, and Barclays Bank PLC, as administrative agent
8-K
001-35449
10.1
2/6/2013
 
 
 
 
 
 
 
 
4.14
Amendment No. 1 to the Fourth Amended and Restated Indenture, dated April 22, 2014, among Nationstar Agency Advance Funding Trust, the issuer, The Bank of New York Mellon, as indenture trustee, Nationstar Mortgage LLC, as administrator and Barclays Bank PLC, as administrative agent
10-Q
001-35449
4.4
5/9/2014
 
4.15
Amendment No. 2 to the Fourth Amended and Restated Indenture, dated May 5, 2015, among Nationstar Agency Advance Funding Trust, the issuer, The Bank of New York Mellon, as indenture trustee, Nationstar Mortgage LLC, as administrator and Barclays Bank PLC, as administrative agent and Credit Suisse AG, New York Branch, as administrative agent
10-Q
001-35449
4.1
8/3/2015
 
 
 
 
 
 
 
 
4.16
Amendment No. 3 to the Fourth Amended and Restated Indenture, dated June 26, 2015, among Nationstar Agency Advance Funding Trust, the issuer, The Bank of New York Mellon, as indenture trustee, Nationstar Mortgage LLC, as administrator and Barclays Bank PLC, as administrative agent and Credit Suisse AG, New York Branch, as administrative agent
10-Q
001-35449
4.2
8/3/2015
 
 
 
 
 
 
 
 
4.17
Amended and Restated Series 2013-VF1 Indenture Supplement, dated December 15, 2015 to Fourth Amended and Restated Indenture, dated January 31, 2013, among Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, Nationstar Mortgage LLC, as administrator and as servicer, and Barclays Bank PLC, as administrative agent
 
 
 
 
X
 
 
 
 
 
 
 
4.18
Series 2013-T1 Indenture Supplement to Fourth Amended and Restated Indenture, dated January 31, 2013, among Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, Nationstar Mortgage LLC, as administrator and as servicer, and Barclays Bank PLC, as administrative agent
8-K
001-35449
10.3
2/6/2013
 
 
 
 
 
 
 
 

128
Table of Contents

4.19
Series 2013-T2 Indenture Supplement to Fourth Amended and Restated Indenture, dated January 31, 2013, among Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, Nationstar Mortgage LLC, as administrator and as servicer, and Barclays Bank PLC, as administrative agent
8-K
001-35449
10.4
2/6/2013
 
 
 
 
 
 
 
 
4.20
Indenture, dated as of July 22, 2013, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.1
7/22/2013
 
 
 
 
 
 
 
 
4.21
Form of Global Note for $250 million aggregate principal amount of 6.500% Senior Notes due 2018 (included in Exhibit 4.20 above)
8-K
001-35449
4.2
7/22/2013
 
 
 
 
 
 
 
 
4.22
First Supplemental Indenture, dated September 26, 2013, to Indenture, dated July 22, 2013, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors named therein and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.2
9/26/2013
 
 
 
 
 
 
 
 
4.23
Form of Global Note for $225 million aggregate principal amount of 6.500% Senior Notes due 2018 (included in Exhibit 4.22 above)
8-K
001-35449
4.3
9/26/2013
 
 
 
 
 
 
 
 
10.1
Amended and Restated Receivables Pooling Agreement, dated January 31, 2013, between Nationstar Agency Advance Funding LLC (depositor) and Nationstar Agency Advance Funding Trust (issuer)
8-K
001-35449
10.5
2/6/2013
 
 
 
 
 
 
 
 
10.2
Receivables Pooling Agreement, dated as of June 7, 2013, between Nationstar Advance Funding III LLC and Nationstar Mortgage Advance Receivables Trust
8-K
001-35449
10.1
6/11/2013
 
 
 
 
 
 
 
 
10.3
Amended and Restated Receivables Sale Agreement, dated January 31, 2013, between Nationstar Mortgage LLC (receivables seller and servicer) and Nationstar Agency Advance Funding LLC (depositor)
8-K
001-35449
10.6
2/6/2013
 
 
 
 
 
 
 
 
10.4
Assignment, Assumption and Recognition Agreement, dated October 9, 2015, between Nationstar Agency Advance Funding Trust (assignor), Nationstar Agency Advance Receivables Trust (assignee), Nationstar Agency Advance Funding LLC (assignor depositor), Nationstar Agency Advance Funding II LLC (assignee depositor), Nationstar Mortgage LLC (seller), Barclays Bank PLC and Credit Suisse AG, New York Branch (assignor administrative agents) and JPMorgan Chase Bank, N.A. (assignee administrative agent)
 
 
 
 
X
 
 
 
 
 
 
 
10.5
Receivables Sale Agreement, dated as of June 7, 2013, between Nationstar Mortgage LLC and Nationstar Advance Funding III LLC
8-K
001-171370
10.2
6/11/2013
 
 
 
 
 
 
 
 
10.6
Amendment and Waiver, dated February 21, 2012, to the Master Repurchase Agreement, dated March 25, 2011, and the Mortgage Loan Participation Purchase and Sale Agreement, dated March 25, 2011, between Barclays Bank, PLC and Nationstar Mortgage LLC
10-K
001-35449
10.13
3/15/2013
 
 
 
 
 
 
 
 

129
Table of Contents

10.7
Amended and Restated Master Repurchase Agreement, dated May 17, 2013, between Barclays Bank PLC, as purchaser and agent, Sutton Funding LLC, as purchaser, and Nationstar Mortgage LLC, as seller
10-Q
001-35449
10.10
8/12/2013
 
 
 
 
 
 
 
 
10.8
Amendment Number One, dated July 18, 2013, to the Amended and Restated Master Repurchase Agreement, dated as of May 17, 2013, between Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.14
11/14/2013
 
 
 
 
 
 
 
 
10.9
Amendment Number Two, dated July 24, 2013, to the Amended and Restated Master Repurchase Agreement, dated as of May 17, 2013, between Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.15
11/14/2013
 
 
 
 
 
 
 
 
10.10
Amendment Number Three, dated September 20, 2013, to the Amended and Restated Master Repurchase Agreement, dated as of May 17, 2013, between Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.16
11/14/2013
 
 
 
 
 
 
 
 
10.11
Amendment Number Four, dated November 4, 2013, to the Amended and Restated Master Repurchase Agreement, dated as of May 17, 2013, between Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-K
001-35449
10.22
2/28/2014
 
 
 
 
 
 
 
 
10.12
Amendment Number Five, dated November 13, 2013, 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
10-K
001-35449
10.23
2/28/2014
 
 
 
 
 
 
 
 
10.13
Amendment Number Six, dated November 25, 2013 to the Amended and Restated Master Repurchase Agreement among Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.1
5/9/2014
 
 
 
 
 
 
 
 
10.14
Amendment Number Seven, dated January 14, 2014 to the Amended and Restated Master Repurchase Agreement among Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.2
5/9/2014
 
 
 
 
 
 
 
 
10.15
Amendment Number Eight, dated August 21, 2014 to the Amended and Restated Master Repurchase Agreement among Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.1
11/07/2014
 
 
 
 
 
 
 
 
10.16
Amendment Number Nine, dated October 20, 2014, 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
10-Q
001-35449
10.2
11/07/2014
 
 
 
 
 
 
 
 
10.17
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
10-Q
001-35449
10.3
05/07/2015
 
 
 
 
 
 
 
 
10.18
Amendment Number Eleven, dated May 17, 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
 
 
 
 
 
 
 

130
Table of Contents

10.19
Mortgage Loan Participation Purchase and Sale Agreement, dated March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-K
001-35449
10.18
3/15/2013
 
 
 
 
 
 
 
 
10.20
Amendment Number One, dated February 29, 2012, to the Mortgage Loan Participation Purchase and Sale Agreement, dated March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-K
001-35449
10.19
3/15/2013
 
 
 
 
 
 
 
 
10.21
Amendment Number Two, dated August 28, 2012, to the Mortgage Loan Participation Purchase and Sale Agreement, dated March 25, 2011, among Barclays Bank PLC and Nationstar Mortgage LLC
10-K
001-35449
10.20
3/15/2013
 
 
 
 
 
 
 
 
10.22
Amendment Number Three, dated December 24, 2012, to the Mortgage Loan Participation Purchase and Sale Agreement, dated March 25, 2012, between Barclays Bank PLC and Nationstar Mortgage LLC
10-K
001-35449
10.21
3/15/2013
 
 
 
 
 
 
 
 
10.23
Amendment Number Four, dated July 18, 2013, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-Q
001-35449
10.11
11/14/2013
 
 
 
 
 
 
 
 
10.24
Amendment Number Five, dated July 24, 2013, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-Q
001-35449
10.12
11/14/2013
 
 
 
 
 
 
 
 
10.25
Amendment Number Six, dated September 20, 2013, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-Q
001-35449
10.13
11/14/2013
 
 
 
 
 
 
 
 
10.26
Amendment Number Seven, dated August 21, 2014, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011 between Barclays Bank PLC and Nationstar Mortgage LLC
10-Q
001-35449
10.3
11/07/2014
 
 
 
 
 
 
 
 
10.27
Amendment Number Eight, dated October 20, 2014, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-Q
00135449
10.4
11/07/2014
 
 
 
 
 
 
 
 
10.28
Amendment Number Nine, dated October 19, 2015, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
 
 
 
 
X
 
 
 
 
 
 
 
10.29
Future Spread Agreement for FNMA Mortgage Loans, dated March 6, 2012, between Nationstar Mortgage LLC and NIC MSR II LLC
8-K
333-171370
10.3
3/6/2012
 
 
 
 
 
 
 
 
10.30
Second Amended and Restated Current Excess Servicing Spread Acquisition Agreement for Non-Agency Mortgage Loans, dated as of September 10, 2013, between Nationstar Mortgage LLC and NIC MSR II LLC
10-Q
001-35449
10.9
11/14/2013
 
 
 
 
 
 
 
 
10.31
Second Amended and Restated Future Spread Agreement for Non-Agency Mortgage Loans, dated as of September 10, 2013, between Nationstar Mortgage LLC and NIC MSR II LLC
10-Q
001-35449
10.10
11/14/2013
 
 
 
 
 
 
 
 

131
Table of Contents

10.32
Future Spread Agreement for Non-Agency Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XIII LLC
10-K
001-35449
10.45
3/15/2013
 
 
 
 
 
 
 
 
10.33
Current Excess Servicing Spread Acquisition Agreement for Non-Agency Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XIII LLC
10-K
001-35449
10.46
3/15/2013
 
 
 
 
 
 
 
 
10.34
Future Spread Agreement for FHLMC Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR IX LLC
10-K
001-35449
10.47
3/15/2013
 
 
 
 
 
 
 
 
10.35
Current Excess Servicing Spread Acquisition Agreement for FHLMC Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR IX LLC
10-K
001-35449
10.48
3/15/2013
 
 
 
 
 
 
 
 
10.36
Future Spread Agreement for FNMA Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR X LLC
10-K
001-35449
10.49
3/15/2013
 
 
 
 
 
 
 
 
10.37
Current Excess Servicing Spread Acquisition Agreement for FNMA Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR X LLC
10-K
001-35449
10.50
3/15/2013
 
 
 
 
 
 
 
 
10.38
Future Spread Agreement for GNMA Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XI LLC
10-K
001-35449
10.51
3/15/2013
 
 
 
 
 
 
 
 
10.39
Current Excess Servicing Spread Acquisition Agreement for GNMA Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XI LLC
10-K
001-35449
10.52
3/15/2013
 
 
 
 
 
 
 
 
10.40
Future Spread Agreement for Non-Agency Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XII LLC
10-K
001-35449
10.53
3/15/2013
 
 
 
 
 
 
 
 
10.41
Amended and Restated Future Spread Agreement for Non-Agency Mortgage Loans, dated as of September 10, 2013, between Nationstar Mortgage LLC and MSR XII LLC
10-Q
001-35449
10.8
11/14/2013
 
 
 
 
 
 
 
 
10.42
Current Excess Servicing Spread Acquisition Agreement for Non-Agency Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XII LLC
10-K
001-35449
10.54
3/15/2013
 
 
 
 
 
 
 
 
10.43
Amended and Restated Current Excess Servicing Spread Acquisition Agreement for Non-Agency Mortgage Loans, dated as of September 10, 2013, between Nationstar Mortgage LLC and MSR XII LLC
10-Q
001-35449
10.7
11/14/2013
 
 
 
 
 
 
 
 
10.44**
Offer Letter and Acceptance, dated as of March 31, 2014, between Nationstar Mortgage Holdings Inc. and Robert Stiles
10-K
001-35449
10.45
02/26/2015
 
 
 
 
 
 
 
 
10.45**
Offer Letter and Acceptance, dated as of June 24, 2015, by and between Nationstar Mortgage LLC and Anthony L. Ebers
 
 
 
 
X
 
 
 
 
 
 
 
10.46**
Offer Letter, dated as of July 6, 2015, by and between Nationstar Mortgage LLC and Michael R. Rawls
 
 
 
 
X
 
 
 
 
 
 
 

132
Table of Contents

10.47**
Separation Agreement and Release of All Claims, dated as of November 23, 2015, by and between Nationstar Mortgage Holdings Inc. and Kal Raman
8-K
001-35449
10.1
11/30/2015
 
 
 
 
 
 
 
 
10.48**
Nationstar Mortgage Holdings Inc. Amended and Restated 2012 Incentive Compensation Plan
10-Q
001-35449
10.4
05/07/2015
 
 
 
 
 
 
 
 
10.49**
Form of Restricted Stock Grant Agreement for Employees (IPO) under the 2012 Incentive Compensation Plan
8-K
001-35449
10.1
11/16/2012
 
 
 
 
 
 
 
 
10.50**
Form of Restricted Stock Grant Agreement for Employees under the 2012 Incentive Compensation Plan
8-K
001-35449
10.2
11/16/2012
 
 
 
 
 
 
 
 
10.51**
Form of Restricted Stock Grant Agreement for Non-Employee Directors (IPO) under the 2012 Incentive Compensation Plan
8-K
001-35449
10.3
11/16/2012
 
 
 
 
 
 
 
 
10.52**
Form of Restricted Stock Grant Agreement for Non-Employee Directors under the 2012 Incentive Compensation Plan
8-K
001-35449
10.4
11/16/2012
 
 
 
 
 
 
 
 
10.53**
Form of Restricted Stock Unit Agreement for Non-Employee Directors under the 2012 Incentive Compensation Plan
10-Q
001-35449
10.6
11/07/2014
 
 
 
 
 
 
 
 
10.54**
Form of Amended and Restated Restricted Stock Unit Agreement for Non-Employee Directors under the Amended and Restated 2012 Incentive Compensation Plan
 
 
 
 
X
 
 
 
 
 
 
 
10.55**
Form of Restricted Stock Unit Agreement for Employees under the Amended and Restated 2012 Incentive Compensation Plan
10-Q
001-35449
10.5
05/07/2015
 
 
 
 
 
 
 
 
10.56**
Form of Cash Award Agreement for Employees under the 2012 Incentive Compensation Plan
10-K
001-35449
10.80
3/15/2013
 
 
 
 
 
 
 
 
10.57**
Nationstar Mortgage LLC Executive Management Incentive Plan, dated as of March 31, 2015
8-K
001-35449
10.1
04/02/2015
 
 
 
 
 
 
 
 
10.58**
Form of Indemnification Agreement with directors and officers
S-1/A
333-174246
10.52
2/24/2012
 
 
 
 
 
 
 
 
12.1
Computation of Ratio of Earnings to Fixed Charges
 
 
 
 
X
 
 
 
 
 
 
 
21.1
Subsidiaries of the Registrant
 
 
 
 
X
 
 
 
 
 
 
 
23.1
Consent of Ernst & Young LLP
 
 
 
 
X
 
 
 
 
 
 
 
31.1
Certification by Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934 and 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) under the Securities Exchange Act of 1934 and 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
 
 
 
 
 
 
 
 101.INS
XBRL Instance Document
 
 
 
 
X
 
 
 
 
 
 
 

133
Table of Contents

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


+
The schedules and other attachments referenced in this exhibit have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or attachment will be furnished supplementary to the Securities and Exchange Commission upon request.

**
Management contract, compensatory plan or arrangement.


134
Table of Contents

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Nationstar Mortgage Holdings Inc.
            
By: /s/ Jay Bray
Jay Bray
Chief Executive Officer
March 1, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 
/s/ Jay Bray
March 1, 2016
Jay Bray, Chief Executive Officer and Director (Principal Executive Officer)
 
 
 
/s/ Robert D. Stiles
March 1, 2016
Robert D. Stiles, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
 
 
 
/s/ Wesley R. Edens
March 1, 2016
Wesley R. Edens, Director and Chairman
 
 
 
/s/ Robert Gidel
March 1, 2016
Robert Gidel, Director
 
 
 
/s/ Roy Guthrie
March 1, 2016
Roy Guthrie, Director
 
 
 
/s/ Brett Hawkins
March 1, 2016
Brett Hawkins, Director
 
 
 
/s/ Michael D. Malone
March 1, 2016
Michael D. Malone, Director
 

EXHIBIT INDEX
 
 
Incorporated by Reference
Filed or Furnished Herewith
Exhibit Number
Description
Form
File No.
Exhibit
Filing Date
 
 
 
 
 
 
 
2.1+
Master Servicing Rights Purchase Agreement, dated as of December 17, 2013, between Nationstar Mortgage LLC and Advance Purchaser LLC
8-K
001-35449
2.1
12/23/2013
 
 
 
 
 
 
 
 
2.2+
Sale Supplement (Shuttle 1), dated as of December 17, 2013, between Nationstar Mortgage LLC and Advance Purchaser LLC
8-K
001-35449
2.2
12/23/2013
 
 
 
 
 
 
 
 
2.3+
Sale Supplement (Shuttle 2), dated as of December 17, 2013, between Nationstar Mortgage LLC and Advance Purchaser LLC
8-K
001-35449
2.3
12/23/2013
 
 
 
 
 
 
 
 
2.4+
Sale Supplement (First Tennessee), dated as of December 17, 2013, between Nationstar Mortgage LLC and Advance Purchaser LLC
8-K
001-35449
2.4
12/23/2013
 
 
 
 
 
 
 
 
3.1
Amended and Restated Certificate of Incorporation of Nationstar Mortgage Holdings Inc.
S-1/A
333-174246
3.1
2/24/2012
 
 
 
 
 
 
 
 
3.2
Amended and Restated Bylaws of Nationstar Mortgage Holdings Inc.
S-1/A
333-174246
3.2
2/24/2012
 
 
 
 
 
 
 
 
4.1
Form of Stock Certificate
S-1/A
333-174246
4.8
2/24/2012
 
 
 
 
 
 
 
 
4.2
Stockholders Agreement, dated as of February 17, 2012, between Nationstar Mortgage Holdings Inc. and FIF HE Holdings LLC
S-1/A
333-174246
4.1
2/24/2012
 
 
 
 
 
 
 
 
4.3
Indenture, dated as of September 24, 2012, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.1
9/24/2012
 
 
 
 
 
 
 
 
4.4
First Supplemental Indenture, dated as of September 28, 2012, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.2
9/28/2012
 
 
 
 
 
 
 
 
4.5
Second Supplemental Indenture, dated as of December 10, 2012, between Champion Mortgage LLC and Wells Fargo Bank, National Association, as trustee
10-K
001-35449
4.12
3/15/2013
 
 
 
 
 
 
 
 
4.6
Indenture, dated as of April 25, 2012, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.1
4/25/2012
 
 
 
 
 
 
 
 
4.7
First Supplemental Indenture, dated as of July 24, 2012, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.2
7/24/2012
 
 
 
 
 
 
 
 
4.8
Second Supplemental Indenture, dated as of August 9, 2012, among Nationstar Mortgage Holdings Inc., Nationstar Sub1 LLC, Nationstar Sub2 LLC and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.2
8/9/2012
 
 
 
 
 
 
 
 
4.9
Third Supplemental Indenture, dated as of December 10, 2012, between Champion Mortgage LLC and Wells Fargo Bank, National Association, as trustee
10-K
001-35449
4.16
3/15/2013
 
 
 
 
 
 
 
 
4.10
Indenture, dated as of February 7, 2013, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.1
2/7/2013
 
 
 
 
 
 
 
 
4.11
First Supplemental Indenture, dated as of March 26, 2013, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.2
3/26/2013
 
 
 
 
 
 
 
 
4.12
Indenture, dated as of May 31, 2013, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.1
5/31/2013
 
 
 
 
 
 
 
 
4.13
Fourth Amended and Restated Indenture, dated January 31, 2013, among Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, Nationstar Mortgage LLC, as servicer and as administrator, and Barclays Bank PLC, as administrative agent
8-K
001-35449
10.1
2/6/2013
 
 
 
 
 
 
 
 
4.14
Amendment No. 1 to the Fourth Amended and Restated Indenture, dated April 22, 2014, among Nationstar Agency Advance Funding Trust, the issuer, The Bank of New York Mellon, as indenture trustee, Nationstar Mortgage LLC, as administrator and Barclays Bank PLC, as administrative agent
10-Q
001-35449
4.4
5/9/2014
 
4.15
Amendment No. 2 to the Fourth Amended and Restated Indenture, dated May 5, 2015, among Nationstar Agency Advance Funding Trust, the issuer, The Bank of New York Mellon, as indenture trustee, Nationstar Mortgage LLC, as administrator and Barclays Bank PLC, as administrative agent and Credit Suisse AG, New York Branch, as administrative agent
10-Q
001-35449
4.1
8/3/2015
 
 
 
 
 
 
 
 
4.16
Amendment No. 3 to the Fourth Amended and Restated Indenture, dated June 26, 2015, among Nationstar Agency Advance Funding Trust, the issuer, The Bank of New York Mellon, as indenture trustee, Nationstar Mortgage LLC, as administrator and Barclays Bank PLC, as administrative agent and Credit Suisse AG, New York Branch, as administrative agent
10-Q
001-35449
4.2
8/3/2015
 
 
 
 
 
 
 
 
4.17
Amended and Restated Series 2013-VF1 Indenture Supplement, dated December 15, 2015 to Fourth Amended and Restated Indenture, dated January 31, 2013, among Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, Nationstar Mortgage LLC, as administrator and as servicer, and Barclays Bank PLC, as administrative agent
 
 
 
 
X
4.18
Series 2013-T1 Indenture Supplement to Fourth Amended and Restated Indenture, dated January 31, 2013, among Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, Nationstar Mortgage LLC, as administrator and as servicer, and Barclays Bank PLC, as administrative agent
8-K
001-35449
10.3
2/6/2013
 
 
 
 
 
 
 
 
4.19
Series 2013-T2 Indenture Supplement to Fourth Amended and Restated Indenture, dated January 31, 2013, among Nationstar Agency Advance Funding Trust, as issuer, The Bank of New York Mellon, as indenture trustee, calculation agent, paying agent and securities intermediary, Nationstar Mortgage LLC, as administrator and as servicer, and Barclays Bank PLC, as administrative agent
8-K
001-35449
10.4
2/6/2013
 
 
 
 
 
 
 
 
4.20
Indenture, dated as of July 22, 2013, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors thereto and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.1
7/22/2013
 
 
 
 
 
 
 
 
4.21
Form of Global Note for $250 million aggregate principal amount of 6.500% Senior Notes due 2018 (included in Exhibit 4.22 above)
8-K
001-35449
4.2
7/22/2013
 
 
 
 
 
 
 
 
4.22
First Supplemental Indenture, dated September 26, 2013, to Indenture, dated July 22, 2013, by and among Nationstar Mortgage LLC, Nationstar Capital Corporation, the guarantors named therein and Wells Fargo Bank, National Association, as trustee
8-K
001-35449
4.2
9/26/2013
 
 
 
 
 
 
 
 
4.23
Form of Global Note for $225 million aggregate principal amount of 6.500% Senior Notes due 2018 (included in Exhibit 4.22 above)
8-K
001-35449
4.3
9/26/2013
 
 
 
 
 
 
 
 
10.1
Amended and Restated Receivables Pooling Agreement, dated January 31, 2013, between Nationstar Agency Advance Funding LLC (depositor) and Nationstar Agency Advance Funding Trust (issuer)
8-K
001-35449
10.5
2/6/2013
 
 
 
 
 
 
 
 
10.2
Receivables Pooling Agreement, dated as of June 7, 2013, between Nationstar Advance Funding III LLC and Nationstar Mortgage Advance Receivables Trust
8-K
001-35449
10.1
6/11/2013
 
 
 
 
 
 
 
 
10.3
Amended and Restated Receivables Sale Agreement, dated January 31, 2013, between Nationstar Mortgage LLC (receivables seller and servicer) and Nationstar Agency Advance Funding LLC (depositor)
8-K
001-35449
10.6
2/6/2013
 
 
 
 
 
 
 
 
10.4
Assignment, Assumption and Recognition Agreement, dated October 9, 2015, between Nationstar Agency Advance Funding Trust (assignor), Nationstar Agency Advance Receivables Trust (assignee), Nationstar Agency Advance Funding LLC (assignor depositor), Nationstar Agency Advance Funding II LLC (assignee depositor), Nationstar Mortgage LLC (seller), Barclays Bank PLC and Credit Suisse AG, New York Branch (assignor administrative agents) and JPMorgan Chase Bank, N.A. (assignee administrative agent)
 
 
 
 
X
 
 
 
 
 
 
 
10.5
Receivables Sale Agreement, dated as of June 7, 2013, between Nationstar Mortgage LLC and Nationstar Advance Funding III LLC
8-K
001-171370
10.2
6/11/2013
 
 
 
 
 
 
 
 
10.6
Amendment and Waiver, dated February 21, 2012, to the Master Repurchase Agreement, dated March 25, 2011, and the Mortgage Loan Participation Purchase and Sale Agreement, dated March 25, 2011, between Barclays Bank, PLC and Nationstar Mortgage LLC
10-K
001-35449
10.13
3/15/2013
 
 
 
 
 
 
 
 
10.7
Amended and Restated Master Repurchase Agreement, dated May 17, 2013, between Barclays Bank PLC, as purchaser and agent, Sutton Funding LLC, as purchaser, and Nationstar Mortgage LLC, as seller
10-Q
001-35449
10.10
8/12/2013
 
 
 
 
 
 
 
 
10.8
Amendment Number One, dated July 18, 2013, to the Amended and Restated Master Repurchase Agreement, dated as of May 17, 2013, between Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.14
11/14/2013
 
 
 
 
 
 
 
 
10.9
Amendment Number Two, dated July 24, 2013, to the Amended and Restated Master Repurchase Agreement, dated as of May 17, 2013, between Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.15
11/14/2013
 
 
 
 
 
 
 
 
10.10
Amendment Number Three, dated September 20, 2013, to the Amended and Restated Master Repurchase Agreement, dated as of May 17, 2013, between Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.16
11/14/2013
 
 
 
 
 
 
 
 
10.11
Amendment Number Four, dated November 4, 2013, to the Amended and Restated Master Repurchase Agreement, dated as of May 17, 2013, between Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-K
001-35449
10.22
2/28/2014
 
 
 
 
 
 
 
 
10.12
Amendment Number Five, dated November 13, 2013, 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
10-K
001-35449
10.23
2/28/2014
 
 
 
 
 
 
 
 
10.13
Amendment Number Six, dated November 25, 2013 to the Amended and Restated Master Repurchase Agreement among Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.1
5/9/2014
 
 
 
 
 
 
 
 
10.14
Amendment Number Seven, dated January 14, 2014 to the Amended and Restated Master Repurchase Agreement among Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.2
5/9/2014
 
 
 
 
 
 
 
 
10.15
Amendment Number Eight, dated August 21, 2014 to the Amended and Restated Master Repurchase Agreement among Barclays Bank PLC, Sutton Funding LLC and Nationstar Mortgage LLC
10-Q
001-35449
10.1
11/07/2014
 
 
 
 
 
 
 
 
10.16
Amendment Number Nine, dated October 20, 2014, 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
10-Q
001-35449
10.2
11/07/2014
 
 
 
 
 
 
 
 
10.17
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
10-Q
001-35449
10.3
05/07/2015
 
 
 
 
 
 
 
 
10.18
Amendment Number Eleven, dated May 17, 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
 
 
 
 
 
 
 
10.19
Mortgage Loan Participation Purchase and Sale Agreement, dated March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-K
001-35449
10.18
3/15/2013
 
 
 
 
 
 
 
 
10.20
Amendment Number One, dated February 29, 2012, to the Mortgage Loan Participation Purchase and Sale Agreement, dated March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-K
001-35449
10.19
3/15/2013
 
 
 
 
 
 
 
 
10.21
Amendment Number Two, dated August 28, 2012, to the Mortgage Loan Participation Purchase and Sale Agreement, dated March 25, 2011, among Barclays Bank PLC and Nationstar Mortgage LLC
10-K
001-35449
10.20
3/15/2013
 
 
 
 
 
 
 
 
10.22
Amendment Number Three, dated December 24, 2012, to the Mortgage Loan Participation Purchase and Sale Agreement, dated March 25, 2012, between Barclays Bank PLC and Nationstar Mortgage LLC
10-K
001-35449
10.21
3/15/2013
 
 
 
 
 
 
 
 
10.23
Amendment Number Four, dated July 18, 2013, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-Q
001-35449
10.11
11/14/2013
 
 
 
 
 
 
 
 
10.24
Amendment Number Five, dated July 24, 2013, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-Q
001-35449
10.12
11/14/2013
 
 
 
 
 
 
 
 
10.25
Amendment Number Six, dated September 20, 2013, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-Q
001-35449
10.13
11/14/2013
 
 
 
 
 
 
 
 
10.26
Amendment Number Seven, dated August 21, 2014, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011 between Barclays Bank PLC and Nationstar Mortgage LLC
10-Q
001-35449
10.3
11/07/2014
 
 
 
 
 
 
 
 
10.27
Amendment Number Eight, dated October 20, 2014, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
10-Q
00135449
10.4
11/07/2014
 
 
 
 
 
 
 
 
10.28
Amendment Number Nine, dated October 19, 2015, to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011, between Barclays Bank PLC and Nationstar Mortgage LLC
 
 
 
 
X
 
 
 
 
 
 
 
10.29
Future Spread Agreement for FNMA Mortgage Loans, dated March 6, 2012, between Nationstar Mortgage LLC and NIC MSR II LLC
8-K
333-171370
10.3
3/6/2012
 
 
 
 
 
 
 
 
10.30
Second Amended and Restated Current Excess Servicing Spread Acquisition Agreement for Non-Agency Mortgage Loans, dated as of September 10, 2013, between Nationstar Mortgage LLC and NIC MSR II LLC
10-Q
001-35449
10.9
11/14/2013
 
 
 
 
 
 
 
 
10.31
Second Amended and Restated Future Spread Agreement for Non-Agency Mortgage Loans, dated as of September 10, 2013, between Nationstar Mortgage LLC and NIC MSR II LLC
10-Q
001-35449
10.10
11/14/2013
 
 
 
 
 
 
 
 
10.32
Future Spread Agreement for Non-Agency Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XIII LLC
10-K
001-35449
10.45
3/15/2013
 
 
 
 
 
 
 
 
10.33
Current Excess Servicing Spread Acquisition Agreement for Non-Agency Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XIII LLC
10-K
001-35449
10.46
3/15/2013
 
 
 
 
 
 
 
 
10.34
Future Spread Agreement for FHLMC Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR IX LLC
10-K
001-35449
10.47
3/15/2013
 
 
 
 
 
 
 
 
10.35
Current Excess Servicing Spread Acquisition Agreement for FHLMC Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR IX LLC
10-K
001-35449
10.48
3/15/2013
 
 
 
 
 
 
 
 
10.36
Future Spread Agreement for FNMA Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR X LLC
10-K
001-35449
10.49
3/15/2013
 
 
 
 
 
 
 
 
10.37
Current Excess Servicing Spread Acquisition Agreement for FNMA Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR X LLC
10-K
001-35449
10.50
3/15/2013
 
 
 
 
 
 
 
 
10.38
Future Spread Agreement for GNMA Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XI LLC
10-K
001-35449
10.51
3/15/2013
 
 
 
 
 
 
 
 
10.39
Current Excess Servicing Spread Acquisition Agreement for GNMA Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XI LLC
10-K
001-35449
10.52
3/15/2013
 
 
 
 
 
 
 
 
10.40
Future Spread Agreement for Non-Agency Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XII LLC
10-K
001-35449
10.53
3/15/2013
 
 
 
 
 
 
 
 
10.41
Amended and Restated Future Spread Agreement for Non-Agency Mortgage Loans, dated as of September 10, 2013, between Nationstar Mortgage LLC and MSR XII LLC
10-Q
001-35449
10.8
11/14/2013
 
 
 
 
 
 
 
 
10.42
Current Excess Servicing Spread Acquisition Agreement for Non-Agency Mortgage Loans, dated as of January 6, 2013, between Nationstar Mortgage LLC and MSR XII LLC
10-K
001-35449
10.54
3/15/2013
 
 
 
 
 
 
 
 
10.43
Amended and Restated Current Excess Servicing Spread Acquisition Agreement for Non-Agency Mortgage Loans, dated as of September 10, 2013, between Nationstar Mortgage LLC and MSR XII LLC
10-Q
001-35449
10.7
11/14/2013
 
 
 
 
 
 
 
 
10.44**
Offer Letter and Acceptance, dated as of March 31, 2014, between Nationstar Mortgage Holdings Inc. and Robert Stiles
10-K
001-35449
10.45
02/26/2015
 
 
 
 
 
 
 
 
10.45**
Offer Letter and Acceptance, dated as of June 24, 2015, by and between Nationstar Mortgage LLC and Anthony L. Ebers
 
 
 
 
X
 
 
 
 
 
 
 
10.46**
Offer Letter, dated as of July 6, 2015, by and between Nationstar Mortgage LLC and Michael R. Rawls
 
 
 
 
X
 
 
 
 
 
 
 
10.47**
Separation Agreement and Release of All Claims, dated as of November 23, 2015, by and between Nationstar Mortgage Holdings Inc. and Kal Raman
8-K
001-35449
10.1
11/30/2015
 
 
 
 
 
 
 
 
10.48**
Nationstar Mortgage Holdings Inc. Amended and Restated 2012 Incentive Compensation Plan
10-Q
001-35449
10.4
05/07/2015
 
 
 
 
 
 
 
 
10.49**
Form of Restricted Stock Grant Agreement for Employees (IPO) under the 2012 Incentive Compensation Plan
8-K
001-35449
10.1
11/16/2012
 
 
 
 
 
 
 
 
10.50**
Form of Restricted Stock Grant Agreement for Employees under the 2012 Incentive Compensation Plan
8-K
001-35449
10.2
11/16/2012
 
 
 
 
 
 
 
 
10.51**
Form of Restricted Stock Grant Agreement for Non-Employee Directors (IPO) under the 2012 Incentive Compensation Plan
8-K
001-35449
10.3
11/16/2012
 
 
 
 
 
 
 
 
10.52**
Form of Restricted Stock Grant Agreement for Non-Employee Directors under the 2012 Incentive Compensation Plan
8-K
001-35449
10.4
11/16/2012
 
 
 
 
 
 
 
 
10.53**
Form of Restricted Stock Unit Agreement for Non-Employee Directors under the 2012 Incentive Compensation Plan
10-Q
001-35449
10.6
11/07/2014
 
 
 
 
 
 
 
 
10.54**
Form of Amended and Restated Restricted Stock Unit Agreement for Non-Employee Directors under the Amended and Restated 2012 Incentive Compensation Plan
 
 
 
 
X
 
 
 
 
 
 
 
10.55**
Form of Restricted Stock Unit Agreement for Employees under the Amended and Restated 2012 Incentive Compensation Plan
10-Q
001-35449
10.5
05/07/2015
 
 
 
 
 
 
 
 
10.56**
Form of Cash Award Agreement for Employees under the 2012 Incentive Compensation Plan
10-K
001-35449
10.80
3/15/2013
 
 
 
 
 
 
 
 
10.57**
Nationstar Mortgage LLC Executive Management Incentive Plan, dated as of March 31, 2015
8-K
001-35449
10.1
04/02/2015
 
 
 
 
 
 
 
 
10.58**
Form of Indemnification Agreement with directors and officers
S-1/A
333-174246
10.52
2/24/2012
 
 
 
 
 
 
 
 
12.1
Computation of Ratio of Earnings to Fixed Charges
 
 
 
 
X
 
 
 
 
 
 
 
21.1
Subsidiaries of the Registrant
 
 
 
 
X
 
 
 
 
 
 
 
23.1
Consent of Ernst & Young LLP
 
 
 
 
X
 
 
 
 
 
 
 
31.1
Certification by Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934 and 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) under the Securities Exchange Act of 1934 and 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
 
 
 
 
 
 
 
 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



+
The schedules and other attachments referenced in this exhibit have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or attachment will be furnished supplementary to the Securities and Exchange Commission upon request.

**
Management contract, compensatory plan or arrangement.




135
Exhibit 4.17


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

__________

SERIES 2013-VF1
AMENDED AND RESTATED INDENTURE SUPPLEMENT
Dated as of December 15, 2015
to
FOURTH AMENDED AND RESTATED INDENTURE
Dated as of January 31, 2013
(as amended by Amendment No. 1, dated as of April 22, 2014, as further amended by Amendment No. 2, dated as of May 5, 2015, and as further amended by Amendment No. 3, dated as of June 26, 2015)
__________
ADVANCE RECEIVABLES BACKED NOTES,
SERIES 2013-VF1




TABLE OF CONTENTS
         
 
 
PAGE
Section 1.
Creation of Series 2013-VF1 Notes
3
Section 2.
Defined Terms
4
Section 3.
Forms of Series 2013-VF1 Notes
23
Section 4.
Collateral Value Exclusions
23
Section 5.
General Reserve Account
24
Section 6.
Payments; Note Balance Increases; Early Maturity
24
Section 7.
Determination of Note Interest Rate and LIBOR
25
Section 8.
Increased Costs
25
Section 9.
Series Reports
27
Section 10.
Conditions Precedent Satisfied
29
Section 11.
Representations and Warranties
29
Section 12.
Amendments
29
Section 13.
Counterparts
30
Section 14.
Entire Agreement
30
Section 15.
Limited Recourse
30
Section 16.
Owner Trustee Limitation of Liability
30
Section 17.
Barclays Cap Payment Amount
31
Section 18.
Consent and Acknowledgment of Amendments
31

- i -


THIS AMENDED AND RESTATED SERIES 2013-VF1 INDENTURE SUPPLEMENT (this “ Indenture Supplement ”), dated as of December 15, 2015 (the “ Closing Date ”), is made 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 ”), as Administrator on behalf of the Issuer (the “ Administrator ”), as Servicer under the Designated Servicing Agreements (the “ Servicer ”), and BARCLAYS BANK PLC (“ Barclays ”), a public limited company formed under the laws of England and Wales, as Administrative Agent (as defined below), and consented and agreed to by Barclays as Noteholder of the Series 2013-VF1 Notes. This Indenture Supplement relates to and is executed pursuant to that certain Fourth Amended and Restated Indenture (as amended by Amendment No. 1 thereto, dated as of April 22, 2014, as further amended by Amendment No. 2 thereto, dated as of May 5, 2015, as further amended by Amendment No. 3 thereto, dated as of June 26, 2015, and as may be further amended, supplemented, restated or otherwise modified from time to time, the “ Base Indenture ”) supplemented hereby, dated as of January 31, 2013, among the Issuer, the Servicer, the Administrator and the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary and the Administrative Agent, all the provisions of which are incorporated herein as modified hereby and shall be a part of this Indenture Supplement as if set forth herein in full (the Base Indenture as so supplemented by this Indenture Supplement being referred to as the “ Indenture ”).
Capitalized terms used and not otherwise defined herein shall have the respective meanings given them in the Base Indenture.
RECITALS OF THE ISSUER
WHEREAS, the Issuer entered into an Indenture Supplement, dated as of January 31, 2013 (as amended by Amendment No. 1 thereto, dated as of May 21, 2013, as further amended by Amendment No. 2 thereto, dated as of October 15, 2013, as further amended by Amendment No. 3 thereto, dated as of October 14, 2014, as further amended by Amendment No. 4 thereto, dated as of January 27, 2015, as further amended by Amendment No. 5 thereto, dated as of January 30, 2015, as further amended by Amendment No. 6 thereto, dated as of May 5, 2015, as further amended by Amendment No. 7 thereto, dated as of June 26, 2015, and as further amended by Amendment No. 8 thereto, dated as of October 9, 2015, and as further, amended, supplemented, restated or otherwise modified from time to time, the “ Original Indenture Supplement ”), among the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent and the Securities Intermediary, Nationstar and Barclays, as Administrative Agent. Under the Original Indenture Supplement, the Issuer duly authorized the issuance of a Series of Notes, the Nationstar Agency Advance Funding Trust 2013-VF1 Advance Receivables Backed Notes, Series 2013-VF1 Notes (the “ Series 2013-VF1 Notes ”).

WHEREAS, Section 12.2 of the Base Indenture provides, among other things, that subject to the terms and provisions of the Original Indenture Supplement with respect to any amendment of the Original Indenture Supplement, the parties to the Base Indenture may at any time enter into




an amendment to the Base Indenture, including the Original 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 Base Indenture, including the Original Indenture Supplement, for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of the Base Indenture, of modifying in any manner the rights of the Holders of the Notes of each such Series or Class under the Base Indenture or the Original Indenture Supplement, upon delivery of an Issuer Tax Opinion and, pursuant to Section 12.3 of the Base Indenture, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by the Base 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 of the Base Indenture without the consent of the Noteholder of each Outstanding Note affected thereby;
WHEREAS, Section 12(b) of the Original Indenture Supplement provides that notwithstanding any provisions to the contrary in Section 6.10 or Article XII of the Base 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 Base Indenture may, without the consent of 100% of the Series 2013-VF1 Notes, supplement, amend or revise any term or provision of the Original Indenture Supplement;
WHEREAS, Section 12(c) of the Original Indenture Supplement provides that notwithstanding any provisions to the contrary in Article XII of the Base Indenture or Section 12 of the Original Indenture Supplement, no supplement or amendment entered into with respect to the Original Indenture Supplement is effective without the consent of 100% of the Noteholders of the Series 2013-VF1 Notes;
WHEREAS, Barclays 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 Original Indenture Supplement;
WHEREAS, the Issuer, the Indenture Trustee, the Administrator, the Servicer, the Administrative Agent and 100% of the Noteholders of the Series 2013-VF1 Notes, hereby agree that pursuant to this Indenture Supplement, the Original Indenture Supplement continues in full force and effect as amended hereby and except with respect to the terms that have been amended pursuant to this Indenture Supplement, all obligations of the Issuer and the Indenture Trustee under the Original Indenture Supplement will remain outstanding and continue in full force and effect, unpaid, unimpaired and undischarged, and all liens created under the Original Indenture Supplement will continue in full force and effect, unimpaired and undischarged, having the same perfection and priority for payment and performance of the obligations of the Issuer and the Indenture Trustee as were in place under the Original Indenture Supplement;

WHEREAS, the parties hereto desire to amend and restate the Original Indenture Supplement as described below to make certain changes with respect to the Original Indenture Supplement;

2


    

WHEREAS, notice to the Note Rating Agency of this Indenture Supplement has been provided;

WHEREAS, this Indenture Supplement is not effective until the execution and delivery of this Indenture Supplement by the parties hereto and the delivery of the Issuer Tax Opinion and the Authorization Opinion;
WHEREAS, all things necessary to make this Indenture Supplement a valid agreement of the Issuer, in accordance with its terms, have been done; and

The Issuer duly authorized the issuance of a Series of Notes, the Series 2013-VF1 Notes (the “ Series 2013-VF1 Notes ”). The parties entered into the Original Indenture Supplement to document the terms of the issuance of the Series 2013-VF1 Notes pursuant to the Base Indenture, which provides for the issuance of Notes in multiple series from time to time.

3


Section 1. Creation of Series 2013-VF1 Notes.
As of the Issuance Date, the Series 2013-VF1 Notes, were issued pursuant to the Base Indenture and the Original Indenture Supplement, known as “Nationstar Agency Advance Funding Trust 2013-VF1 Advance Receivables Backed Notes, Series 2013-VF1 Notes.” The Series 2013-VF1 Notes are not and shall not be subordinated to any other Series of Notes. The Series 2013-VF1 Notes are issued in four (4) Classes of Variable Funding Notes (Class A-VF1, Class B-VF1, Class C-VF1, and Class D-VF1), with the Initial Note Balances, Maximum VFN Principal Balances, Stated Maturity Dates, Revolving Period, Note Interest Rates, Expected Repayment Dates and other terms as specified in this Indenture Supplement, known as the Advance Receivables Backed Notes, Series 2013-VF1. The Series 2013-VF1 Notes are secured by the Trust Estate Granted to the Indenture Trustee pursuant to the Base Indenture. The Indenture Trustee shall hold the Trust Estate as collateral security for the benefit of the Noteholders of the Series 2013-VF1 Notes and all other Series of Notes issued under the Indenture as described therein. In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Base Indenture, the terms and provisions of this Indenture Supplement shall govern to the extent of such conflict.
Section 2.      Defined Terms.
With respect to the Series 2013-VF1 Notes and in addition to or in replacement for the definitions set forth in Section 1.1 of the Base Indenture, the following definitions shall be assigned to the defined terms set forth below:
“ 90+ Day Delinquent Loan ” has the meaning assigned to such term in the defined term “Market Value.”
“ 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 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 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.
“ Advance Rates ” means
(A) from the date hereof until the date of the Term Note Redemption, with respect to each Receivable related to any Class of Series 2013-VF1 Notes, the percentage amount based on the Advance Type of such Receivable, as set forth below, subject to amendment by mutual agreement of the Administrative Agent and the Administrator, and with consultation with each Note Rating Agency; provided , that in the event that the Servicer’s sub-prime servicer rating is reduced below “Average” by S&P, the Advance Rates applicable to the Receivables related to such Class of Notes shall be equal to the Advance Rates set forth below prior to such ratings reduction minus 5.00%;

4


and provided , further , that the Advance Rate for any Receivable related to any Class of Notes shall be zero if such Receivable is not a Facility Eligible Receivable; provided , further , on any date of determination, the Advance Rate applicable to each Corporate Advance Receivable and Escrow Advance Receivable shall equal the product of (a) the applicable Advance Rate listed in the table below multiplied by (b) 100% minus the arithmetic average of the Deficient Documentation Percentages (as such term is defined in that certain Designation Letter, dated as of December 23, 2014 (the “ 12-23 Designation Letter ”) provided in each of the three most recent Deficient Documentation Percentage Reports (as defined in the 12-23 Designation Letter) delivered; provided , that , in the event of any reduction in the Advance Rates because of this paragraph, such reduction shall not be effective in an amount to independently cause the occurrence of a Facility Early Amortization Event pursuant to clause (iv) of the definition thereof set forth in the Indenture until the thirtieth day after the effective date of such reduction (but such reduction shall be effective for all other purposes of the Indenture (including the determination of whether the Funding Conditions are satisfied on any date)):
Advance Type / Class of Notes
Class A-VF1
Class B-VF1
Class C-VF1
Class D-VF1
Delinquency Advances
96.00%
97.25%
97.75%
98.00%
Non-Judicial Escrow Advances
68.00%
82.50%
84.75%
90.75%
Judicial Escrow Advances
59.25%
72.50%
75.75%
87.25%
Non-Judicial Corporate Advances
68.00%
82.50%
84.75%
90.75%
Judicial Corporate Advances

and  
59.25%
72.50%
75.75%
87.25%;


(B) on and after the date of the Term Note Redemption, with respect to each Receivable related to any Class of Series 2013-VF1 Notes, the percentage amount based on the Advance Type of such Receivable, as set forth below, subject to amendment by mutual agreement of the Administrative Agent and the Administrator; provided , that the Advance Rate for any Receivable related to any Class of Notes shall be zero if such Receivable is not a Facility Eligible Receivable; provided , further , on any date of determination, the Advance Rate applicable to each Corporate Advance Receivable and Escrow Advance Receivable shall equal the product of (a) the applicable Advance Rate listed in the table below multiplied by (b) 100% minus the arithmetic average of the Deficient Documentation Percentages (as such term is defined in that certain Designation Letter, dated as of December 23, 2014 (the “ 12-23 Designation Letter ”) provided in each of the three most recent Deficient Documentation Percentage Reports (as defined in the 12-23 Designation Letter) delivered; provided , that , in the event of any reduction in the Advance Rates because of this paragraph, such reduction shall not be effective in an amount to independently cause the occurrence of a Facility Early Amortization Event pursuant to clause (iv) of the definition thereof set forth in the Indenture until the thirtieth day after the effective date of such reduction (but such reduction shall be effective for all other purposes of the Indenture (including the determination of whether the Funding Conditions are satisfied on any date)); provided , further , in no event shall the Facility Advance Rate at any time be greater than 95.00%, and the Advance Rates with respect to the Series 2013-VF1 Notes shall be temporarily reduced pro rata solely to the extent necessary to cause the Facility Advance Rate to not exceed 95.00%:

5


Advance Type / Class of Notes
Class A-VF1
Class B-VF1
Class C-VF1
Class D-VF1
Delinquency Advances
96.00%
97.25%
97.75%
98.00%
Non-Judicial Escrow Advances
71.93%
87.27%
89.65%
96.00%
Judicial Escrow Advances
63.83%
78.11%
81.61%
94.00%
Non-Judicial Corporate Advances
71.93%
87.27%
89.65%
96.00%
Judicial Corporate Advances

63.83%
78.11%
81.61%
94.00%

“ Advance Ratio ” means, as of any date of determination with respect to any Designated Pool, the ratio (expressed as a percentage), calculated as of the last day of the calendar month immediately preceding the calendar month in which such date occurs, of (i) the related PSA Stressed Non-Recoverable Advance Amount on such date over (ii) the aggregate monthly scheduled principal and interest payments for the calendar month immediately preceding the calendar month in which such date occurs with respect to all non-delinquent Mortgage Loans in such Designated Pool, serviced pursuant to the related Designated Servicing Agreement.
“ Allocable Portion ” means, with respect to any Class of Notes and a particular Noteholder, a fraction, (a) the numerator of which is equal to the VFN Principal Balance of the Class of Notes held by such Noteholder, and (b) the denominator of which is equal to the aggregate VFN Principal Balance of such Class of Notes.
“ Applicable Rating ” means
(A) from the Issuance Date and until the Term Note Redemption, the rating assigned to each Class of the Series 2013-VF1 Notes by S&P, as the Note Rating Agency, as set forth below:
(i)      Class A-VF1: AAA(sf);
(ii)      Class B-VF1: AA(sf);
(iii)      Class C-VF1: A(sf); and
(iv)      Class D-VF1: BBB (sf); and
(B) on and after the date of the Term Note Redemption, none.
“ Barclays Cap Payment Amounts ” means,
(A) from the date hereof until the date of the Term Note Redemption, with respect to the Allocable Portion of any Class of Notes with respect to which Barclays (or any permitted assignee thereof) is the Noteholder, for any Interest Accrual Period, such amounts constituting the difference between (a) the Interest Payment Amounts that would be payable for such Allocable Portion based on the Note Interest Rate determined without regard to the applicable Maximum Rate and (b) the Interest Payment Amounts for such Allocable Portion; and
(B) on and after the date of the Term Note Redemption, none.

6


“ Barclays Cap Payment Holder ” means,
(A) from the date hereof until the date of the Term Note Redemption,
(i)    in respect of the portion of the Barclays Cap Payment Amount attributable to the Class A-VF1 Notes, Barclays Bank PLC;

(ii)    in respect of the portion of the Barclays Cap Payment Amount attributable to the Class B-VF1 Notes, Barclays Bank PLC;

(iii)    in respect of the portion of the Barclays Cap Payment Amount attributable to the Class C-VF1 Notes, Barclays Bank PLC; and

(iv)    in respect of the portion of the Barclays Cap Payment Amount attributable to the Class D-VF1 Notes, Barclays Bank PLC;

or, in any case, any permitted assignee or transferee thereof so long as such permitted assignee satisfies all of the transfer restrictions with respect to the Notes set forth in the Base Indenture and the Note Purchase Agreement, mutadis mutandis; and

(B) on and after the date of the Term Note Redemption, none.
“ 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

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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 Derivative Agreement ” means, with respect to the Series 2013-VF1 Notes with respect to which Barclays is the Noteholder, the interest rate “cap” hedging arrangement to be entered into on or before June 26, 2015 and, any replacement therefor in accordance with such agreements and the terms thereof, which shall be a “Derivative Agreement” for purposes of the Base Indenture solely in respect of the Series 2013-VF1 Notes with respect to which Barclays is the Noteholder. The “Cap Rate” thereunder shall equal the Maximum Rate. The related Derivative Counterparty shall be the “Floating Rate Payer” thereunder. The Issuer shall be the “Fixed Rate Payer” thereunder. The “Notional Amount” thereunder shall be determined by the Derivative Counterparty and the Issuer. There shall be no “Barclays Derivative Agreement” on and after the date of the Term Note Redemption.
“ Barclays Derivative Agreement Account ” means, the segregated non-interest bearing trust account or accounts, each of which shall be an Eligible Account, established and maintained for the benefit of the Barclays Cap Payment Holders pursuant to Section 17 and entitled “The Bank of New York Mellon, as Indenture Trustee for the Nationstar Agency Advance Funding Trust Advance Receivables Backed Notes, Barclays Derivative Agreement Account – Series 2013-VF1.
“ Base Indenture ” has the meaning assigned to such term in the Preamble.
“ Base Rate ” means, on any date, a fluctuating rate of interest per annum equal to the higher of (i) the Prime Rate on such date and (ii) the Federal Funds Rate on such date plus 0.50%.
“ Capital Lease Obligations ” means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Indenture, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.
“ Cash Equivalents ” means  (a) Securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of ninety (90) days or less from the date of acquisition and overnight bank deposits of any commercial bank having capital and surplus in excess of $500,000,000 unless otherwise approved by the Administrative Agent in writing in its sole discretion, (c) repurchase obligations of any commercial

8


bank satisfying the requirements of clause (b) of this definition, having a term of not more than seven (7) days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by S&P or P‑1 or the equivalent thereof by Moody’s and in either case maturing within ninety (90) days after the day of acquisition, (e) securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s, (f) securities with maturities of ninety (90) days or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (b) of this definition or, (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition.
“ Change of Control ” means, at any time, (a) less than 100% of Nationstar’s equity securities are owned, directly or indirectly, by Nationstar Mortgage Holdings Inc. (“ NMH ”), (b) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person and its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than one or more Permitted Holders, becomes the “beneficial owner” (as defined in Rules 13(d)‑3 and 13(d)‑5 under such Act), of more than the greater of (x) 35% of the then-outstanding voting power of NMH’s voting equity interests and (y) the percentage of the then-outstanding voting power of NMH’s voting equity interests owned, in the aggregate, directly or indirectly, beneficially and of record, by the Permitted Holders, determined after such person’s or group’s most recent acquisition of outstanding voting power of NMH’s voting equity interests; unless the Permitted Holders have, at such time, the right or the ability by voting power, contract or otherwise to elect or designate for election at least a majority of NMH’s board of directors, or (c) a sale of all or substantially all of the assets of Nationstar.
“ Class A-VF1 Variable Funding Notes ” means, the Variable Funding Notes, Class A-VF1 Variable Funding Notes, issued hereunder by the Issuer, having an aggregate VFN Principal Balance of no greater than the applicable Maximum VFN Principal Balance.
“ Class B-VF1 Variable Funding Notes ” means, the Variable Funding Notes, Class B-VF1 Variable Funding Notes, issued hereunder by the Issuer, having an aggregate VFN Principal Balance of no greater than the applicable Maximum VFN Principal Balance.
“ Class C-VF1 Variable Funding Notes ” means, the Variable Funding Notes, Class C-VF1 Variable Funding Notes, issued hereunder by the Issuer, having an aggregate VFN Principal Balance of no greater than the applicable Maximum VFN Principal Balance.
“ Class D-VF1 Variable Funding Notes ” means, the Variable Funding Notes, Class D-VF1 Variable Funding Notes, issued hereunder by the Issuer, having an aggregate VFN Principal Balance of no greater than the applicable Maximum VFN Principal Balance.
“ Closing Date ” has the meaning assigned to such term in the Preamble.

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“ Coefficient ” means, for each Class of the Series 2013-VF1 Notes, 0.08%.
“ 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.
“ 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.
“ Constant ” means, for the Series 2013-VF1 Notes, 1.00%.
“ 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.
“ Cost of Funds Rate ” means (a) 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, (b) 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 (c) with respect to Note Balances held by any other Person, One-Month LIBOR.
“ CRD ” means the Capital Requirements Directive, as amended by Article 122a (effective as of January 1, 2011) and as the same may be further amended, restated or otherwise modified.
“ Default Rate ” means, with respect to any Interest Accrual Period, for each Class of Notes, the then applicable Note Interest Rate (without regard to the proviso in the definition of “Note Interest Rate” in the Base Indenture) plus 3.00% per annum.
“ Derivative Agreement Account ” means, the segregated non-interest bearing trust account or accounts, each of which shall be an Eligible Account, established and maintained for the benefit of the Cap Payment Holders pursuant to Section 17 and entitled “The Bank of New York Mellon,

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as Indenture Trustee for the Nationstar Agency Advance Funding Trust Advance Receivables Backed Notes, Derivative Agreement Account – Series 2013-VF1.
“ Eurodollar Disruption Event ” means any of the following: (i) a good faith determination by any Noteholder of the Series 2013-VF1 Notes that it would be contrary to law or to the directive of any central bank or other governmental authority (whether or not having the force of law) for such Noteholder to obtain United States dollars in the London interbank market to fund or maintain any portion of the Note Balances of such Notes during any Interest Accrual Period, (ii) a good faith determination by any Noteholder of the Series 2013-VF1 Notes that the interest rates offered on deposits of United States dollars to such Noteholder in the London interbank market does not accurately reflect the cost to such Noteholder of purchasing, funding or maintaining any portion of the Note Balances of the Notes during any Interest Accrual Period, or (iii) the inability of any Noteholder of the Series 2013-VF1 Notes to obtain United States dollars in the London interbank market to fund or maintain any portion of the Note Balances of such Notes for such Interest Accrual Period.
“ Expected Repayment Date ” means, for each Class of the Series 2013-VF1 Notes, (A) if the Term Note Redemption does not occur before December 13, 2016, December 13, 2016, and (B) if the Term Note Redemption occurs before December 13, 2016, January 15, 2017.
“ Expense Rate ” means, as of any date of determination, with respect to the Series 2013-VF1 Notes, the percentage equivalent of a fraction, (i) the numerator of which equals the sum of (1) the product of the Series Allocation Percentage for such Series multiplied by (1) the aggregate amount of Fees due and payable by the Issuer on the next succeeding Payment Date plus (2) the product of the Series Allocation Percentage for such Series multiplied by any expenses payable or reimbursable by the Issuer on the next succeeding Payment Date, up to the applicable Expense Limit, if any, prior to any payments to the Noteholders of the Series 2013-VF1 Notes, pursuant to the terms and provisions of this Indenture Supplement, the Base Indenture or any other Transaction Document that have been invoiced to the Indenture Trustee and the Administrator, plus (3) the aggregate amount of related Series Fees payable by the Issuer on the next succeeding Payment Date and (ii) the denominator of which equals the sum of the outstanding Note Balances of all Series 2013-VF1 Notes at the close of business on such date.
“ Facility Advance Rate ” means, at any time, the aggregate Collateral Value of all Facility Eligible Receivables that have positive Advance Rates for the Series 2013-VF1 Notes, divided by the aggregate Receivable Balances of all Facility Eligible Receivables that have positive Advance Rates for the Series 2013-VF1 Notes. Such Facility Advance Rate shall be calculated by the Administrator and confirmed by the Calculation Agent.
“ Federal Funds Rate ” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the federal funds rates as quoted by the Administrative Agent and confirmed in Federal Reserve Board Statistical Release H. 15 (519) or any successor or substitute publication selected by the Administrative Agent (or, if such day is not a Business Day, for the next preceding Business Day), or if, for any reason, such rate is not available on any day, the rate determined, in the sole opinion of the Administrative Agent, to be the rate at

11


which federal funds are being offered for sale in the national federal funds market at 9:00 a.m. (New York City time).
“ Fee Letter ” means, that certain Fee Letter Agreement, dated December 15, 2015 (as amended, restated, supplemented or otherwise modified from time to time), among Barclays, the Administrator and the Issuer.
“ General Reserve Required Amount ” means with respect to any Payment Date or Interim Payment Date, as the case may be, for the Series 2013-VF1 Notes, an amount equal to on any Payment Date or Interim Payment Date four month’s interest calculated at the applicable Senior Rate on the Note Balance of each Class of Series 2013-VF1 Notes as of such Payment Date or Interim Payment Date, as the case may be.
“ 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.
“ Increased Costs Limit ” means for each Noteholder of a Series 2013-VF1 Note, such Noteholder’s pro rata percentage (based on the Note Balance of such Noteholder’s Series 2013-VF1 Notes) of 0.10% of the average aggregate Note Balance for all Classes of Series 2013-VF1 Notes Outstanding for any twelve-month period.
“ Indebtedness ” means, for any Person:  (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (c) indebtedness of others secured by an Adverse Claim on the Property of such person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such person; (e) obligations of such Person under Capital Lease Obligations; (f) obligations of such Person under repurchase agreements or like arrangements; (g) indebtedness of others guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (i) indebtedness of general partnerships of which such Person is a general partner; and (j) any other indebtedness of such Person by a note, bond, debenture or similar instrument.
“ Index ” means, for any Class of the Series 2013-VF1 Notes, One-Month LIBOR, the Cost of Funds Rate or the Base Rate, as specified for such Class in the definition of “Note Interest Rate.”

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“ Initial Note Balance ” means, for any Note or for any Class of Notes, the Note Balance of such Note upon issuance, or, in the case of the Series 2013-VF1 Notes, an amount determined by the Administrative Agent, the Issuer and the Administrator on the Issuance Date.
For the avoidance of doubt, the requirement for minimum bond denominations in Section 6.2 of the Base Indenture shall not apply in the case of the Series 2013-VF1 Notes.
“ Initial Payment Date ” means March 15, 2013.
“ Interest Accrual Period ” means, for the Series 2013-VF1 Notes and any Payment Date, the period beginning on the immediately preceding Payment Date (or, in the case of the first Payment Date with respect to any Class, the Issuance Date) and ending on the day immediately preceding the current Payment Date. The Interest Payment Amount for the Series 2013-VF1 Notes on any Payment Date shall be determined based on the actual number of days in the Interest Accrual Period.
“ Interest Day Count Convention ” means the actual number of days in the related Interest Accrual Period divided by 360.
“ Interim Payment Date ” means, with respect to the Series 2013-VF1 Notes, up to four dates each calendar month provided that the Issuer provides the Holders of the Series 2013-VF1 Notes and the Indenture Trustee at least two (2) Business Days prior notice, or if any such date is not a Business Day, the next succeeding Business Day to the extent any such day occurs during the Revolving Period, and any other date otherwise agreed to between the Issuer and the Holders of the Series 2013-VF1 Notes.
“ Issuance Date ” means January 31, 2013.
“ LIBOR ” has the meaning assigned such term in Section 7 of this Indenture Supplement.
“ LIBOR Determination Date ” means for each Interest Accrual Period, the second London Banking Day prior to the commencement of such Interest Accrual Period.
“ 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

13


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).
“ Limited Funding Date ” means any Business Day that is not a Payment Date or Interim Payment Date, at a time when no Facility Early Amortization Event shall have occurred and shall be continuing, which date is designated by the Administrator on behalf of the Issuer to the Indenture Trustee and the Administrative Agent in writing no later than 9:00 a.m. Eastern Time two (2) Business Days prior to such date; provided, that the Administrator shall have delivered a Funding Certification in accordance with Section 4.3(a) of the Indenture for such date, and provided, further that no fundings may be made under a Variable Funding Note on such date and no payments on any Notes shall be made on such date; provided, further, that no more than five (5) Limited Funding Dates may be designated by the Administrator on behalf of the Issuer in any calendar month.
“ Liquidity ” means, as of any date, the sum of (a) the Receivables Seller’s Unrestricted Cash and (b) the aggregate amount of unused committed capacity available to the Receivables Seller (taking into account applicable haircuts) under mortgage loan warehouse and servicer advance facilities (other than the facilities provided under that certain Master Repurchase Agreement, dated as of March 25, 2011, between Barclays Bank PLC, as purchaser and agent, and Nationstar Mortgage LLC, as seller) for which the Receivables Seller has unencumbered collateral eligible to be pledged thereunder.
“ Liquidity Facility ” means any liquidity back-stop facility which may be utilized by a Noteholder of a Class to fund some or all of its disbursements on any such Class of the Notes.
“Liquidity Provider ” means any financial institution, rated at least “A‑1” by S&P and “P‑1” by Moody’s, who provides a Liquidity Facility.
“ London Banking Day ” means any day on which commercial banks and foreign exchange markets settle payment in both London and New York City.
“ Margin ” means, for each Class of the Series 2013-VF1 Notes, the per annum rate set forth or determined as described below:
(A) from the date hereof and until the date of the Term Note Redemption,
(i) Class A-VF1: 1.76%;

(ii) Class B-VF1: 2.41%;

(iii) Class C-VF1: 3.66%; and


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(iv) Class D-VF1: 4.91%;

provided, however, that the weighted average Margin shall not be lower than 2.15% at any time; and

(B) on and after the date of the Term Note Redemption,

(i) Class A-VF1: 2.00%;

(ii) Class B-VF1: 2.00%;

(iii) Class C-VF1: 2.00%; and

(iv) Class D-VF1: 2.00%.

“ Market Value ” means, as of any date of determination with respect to a Designated Pool, the value of such property (determined by the Servicer in accordance with the Freddie Mac Guide or the Fannie Mae Guide, as applicable) or the appraised value of the Mortgaged Property obtained in connection with its origination, if no updated valuation has been required under the Freddie Mac Guide or the Fannie Mae Guide, as applicable; provided , that such value shall equal zero for a mortgage loan that was 90 or more days Delinquent (a “ 90+ Day Delinquent Loan ”) and the related valuation is more than 210 days old.
“ Market Value Ratio ” means, as of any date of determination with respect to a Designated Pool, the ratio (expressed as a percentage) of (i) the aggregate of the Receivable Balance of all Facility Eligible Receivables related to such Designated Pool on such date over (ii) the aggregate Market Value of the Mortgaged Properties and REO Properties for the Mortgage Loans in such Designated Pool on such date.
“ Master Repurchase Agreement " means the Master Repurchase Agreement, dated as of March 25, 2011, between Barclays Bank PLC, as purchaser and agent, and Nationstar, as seller.
“ Maximum Rate ” means (A) from the date hereof and until the Term Note Redemption, 0.75% per annum , and (B) on and after the date of the Term Note Redemption, none.
“ Maximum VFN Principal Balance ” means, (A) from the date hereof and until the date of the Term Note Redemption, (i) for Class A-VF1, $309,840,000, (ii) for Class B-VF1, $46,184,000, (iii) for Class C-VF1, $10,072,000, and (iv) for Class D-VF1, $33,904,000 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 the Administrative Agent, and (B) on and after the date of the Term Note Redemption, (i) for Class A-VF1, $289,100,000, (ii) for Class B-VF1, $55,680,000, (iii) for Class C-VF1, $12,530,000, and (iv) for Class D-VF1, $42,690,000 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 the Administrative Agent.


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“ Monthly Reimbursement Rate ” means, as of any date of determination, the arithmetic average of the fractions (expressed as percentages), determined for each of the three (3) most recently concluded calendar months, obtained by dividing (i) the aggregate Advance Reimbursement Amounts collected by the Servicer and deposited into the Trust Accounts during such month by (ii) the sum, for each Freddie Mac Pool or Fannie Mae Pool, of the highest Receivable Balance of the related Receivables during such calendar month relating to Advances funded by the Servicer in respect of such Freddie Mac Pool or Fannie Mae Pool.
“ Net Proceeds Coverage Percentage ” means, for any Payment Date, the percentage equivalent of a fraction, (i) the numerator of which equals the amount of Collections on Receivables deposited into the Collection and Funding Account during the related Monthly Advance Collection Period, and (ii) the denominator of which equals the aggregate average outstanding Note Balances of all Outstanding Notes during such Monthly Advance Collection Period.
“ Net Worth ” means,  with respect to any Person, such Person’s assets minus such Person’s liabilities, each determined in accordance with GAAP.
“ Note Interest Rate ” means, with respect to any Interest Accrual Period for each Class of Notes, (x) prior to the Expected Repayment Date, the rates described below:
(i) Class A-VF1: the sum of (A) (1) from the date hereof until the Term Note Redemption the lesser of (I) the Cost of Funds Rate for such Interest Accrual Period and (II) the Maximum Rate and (2) on and after the date of the Term Note Redemption, the Cost of Funds Rate plus (B) the applicable Margin;
(ii) Class B-VF1: the sum of (A) (1) from the date hereof until the Term Note Redemption the lesser of (I) the Cost of Funds Rate for such Interest Accrual Period and (II) the Maximum Rate and (2) on and after the date of the Term Note Redemption, the Cost of Funds Rate plus (B) the applicable Margin;
(iii) Class C-VF1: the sum of (A) (1) from the date hereof until the Term Note Redemption the lesser of (I) the Cost of Funds Rate for such Interest Accrual Period and (II) the Maximum Rate and (2) on and after the date of the Term Note Redemption, the Cost of Funds Rate plus (B) the applicable Margin; and
(iv) Class D-VF1: the sum of (A) (1) from the date hereof until the Term Note Redemption the lesser of (I) the Cost of Funds Rate for such Interest Accrual Period and (II) the Maximum Rate and (2) on and after the date of the Term Note Redemption, the Cost of Funds Rate plus (B) the applicable Margin;
or (y) from and after the Expected Repayment Date, if the Notes of any Class have not been refinanced, the interest rate applicable to such Class pursuant to clause (x) above, plus 1.00%. For the avoidance of doubt, the “Note Interest Rate” for the Series 2013-VF1 Notes is subject to the definition of “Note Interest Rate” in the Base Indenture.

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“ Note Rating Agency ” means, (A) from the date hereof until the Term Note Redemption, for the Series 2013-VF1 Notes, S&P, and (B) on and after the date of the Term Note Redemption, for the Series 2013-VF1 Notes, none.
“ One-Month LIBOR ” shall have the meaning assigned such term in Section 7 of this Indenture Supplement.
“ Permitted Holders ” means Fortress Investment Group LLC and any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, Fortress Investment Group LLC. For purposes of this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative of the foregoing.
“ Prime Rate ” means the rate announced by the Administrative Agent from time to time as its prime rate in the United States, such rate to change as and when such designated rate changes. The Prime Rate is not intended to be the lowest rate of interest charged by the Administrative Agent in connection with extensions of credit to debtors.
“ 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.
“ 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.
“ Property ” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.
“ PSA Stressed Non-Recoverable Advance Amount ” means as of any date of determination and with respect to any Designated Pool, the sum of:
(i)      for all Mortgage Loans that are current as of such date, the greater of (A) zero and (B) the excess of (1) Total Advances related to such Mortgage Loans on such date over (2) (x) in the case of Mortgage Loans secured by a first lien, the product of 50% and the sum of all of the Market Values for the related Mortgaged Property or (y) in the case of Mortgage Loans secured by a second or more junior lien, zero; and

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(ii)      for all Mortgage Loans that are delinquent as of such date, but not related to property in foreclosure or REO Property, the greater of (A) zero and (B) the excess of (i) Total Advances related to such Mortgage Loans on such date over (ii) (x) in the case of Mortgage Loans secured by a first lien, the product of 50% and the sum of all of the Market Values for the related Mortgaged Property or (y) in the case of Mortgage Loans secured by a second or more junior lien, zero; and
(iii)      for all Mortgage Loans that are related to properties in foreclosure, the greater of (A) zero and (B) the excess of (1) Total Advances related to such Mortgage Loans on such date over (2) (x) in the case of Mortgage Loans secured by a first lien, the product of 50% and the sum of all of the Market Values for the related Mortgaged Property or (y) in the case of Mortgage Loans secured by a second or more junior lien, zero; and
(iv)      for all REO Properties, the greater of (A) zero and (B) the excess of (1) Total Advances related to such REO Properties on such date over (2) (x) in the case of REO Properties previously secured by a first lien Mortgage Loan, the product of 50% and the sum of all of the Market Values for such REO Properties or (y) in the case of REO Properties previously secured by a second or more junior lien Mortgage Loan, zero.
“ Redemption Percentage ” means, for the Series 2013-VF1 Notes, 10%.
“ Reference Banks ” has the meaning assigned to such term in Section 7 of the Indenture Supplement.
“ Reserve Interest Rate ” has the meaning assigned to such term in Section 7 of the Indenture Supplement.
“ Senior Margin ”: means, for each Class of the Series 2013-VF1 Notes:
(a)      from the date hereof until the date of the Term Note Redemption, the percentage listed below for such Class:
(i)      Class A-VF1: 1.60% per annum ;
(ii)      Class B-VF1: 2.25% per annum ;
(iii)      Class C-VF1: 3.50% per annum ; and
(iv)      Class D-VF1: 4.75% per annum ; and
(b)      on and after the date of the Term Note Redemption: 0.0%.
“ Senior Rate ” means, for each Class of the Series 2013-VF1 Notes:
(1)      from the date hereof until the date of the Term Note Redemption, the sum of (a) the lesser of (I) the Cost of Funds Rate, (II) One-Month LIBOR and (III) the Maximum Rate plus (b) the Senior Margin for such Class; and

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(2)      on and after the date of the Term Note Redemption, the Note Interest Rate.
“ Series 2013-VF1 Note Balance ” means the aggregate Note Balance of the Series 2013-VF1 Notes.
“ Specified Indebtedness ” means accounts payable or other liabilities of Nationstar or any of its Subsidiaries arising in connection with the obligation of Nationstar to purchase servicing advance reimbursement rights and deferred servicing fees from Bank of America, N.A. in connection with the transaction agreed upon on or about January 6, 2013 between Nationstar and Bank of America, N.A. for Nationstar's acquisition of approximately $215 billion of residential mortgage servicing rights and certain other assets from Bank of America, N.A.
“ Specified Indebtedness Amount ” means, as of any time prior to January 1, 2014, an amount equal to the amount of any Specified Indebtedness on such date.
“ Stated Maturity Date ” means, for each Class of the Series 2013-VF1 Notes, thirty (30) years following the end of the related Revolving Period.
“ Stressed Interest Rate ” means, for any Class of Series 2013-VF1 Notes as of any date the sum of (i) the sum of (x) (1) from the date hereof until the Term Note Redemption the lesser of (a) the per annum index on the basis of which such Class’s interest rate is determined for the current Interest Accrual Period and (b) the Maximum Rate and (2) on and after the date of the Term Note Redemption, the per annum index on the basis of which such Class’s interest rate is determined for the current Interest Accrual Period, and (y) such Class’s Constant and (z) the product of (I) such Class’s Coefficient and (II) Stressed Time, plus (ii) the weighted average per annum aggregate Margin of all Outstanding Classes of such Series.
“ Stressed Time ” means, as of any date of determination for any Class of Series 2013-VF1 Notes, the percentage equivalent of a fraction, the numerator of which is one (1), and the denominator of which equals the related Stressed Time Percentage for such Class times the Monthly Reimbursement Rate on such date.
“ Stressed Time Percentage ” means (A) from the date hereof and until the Term Note Redemption: (i) for the Class A-VF1: 12.66% per annum , (ii) for the Class B-VF1: 16.92% per annum , (iii) for the Class C-VF1: 18.47% per annum and (iv) for the Class D-VF1: 28.64% per annum and (B) on and after the date of the Term Note Redemption: (i) for the Class A-VF1: 13.05% per annum , (ii) for the Class B-VF1: 18.96% per annum , (iii) for the Class C-VF1: 21.55% per annum and (iv) for the Class D-VF1: 48.57% per annum .
“ T2 Term Notes ” means the Series 2013-T2 Term Notes, issued pursuant to the Series 2013-T2 Indenture Supplement, dated as of January 31, 2013 (as amended by Amendment No. 1 thereto, dated as of May 5, 2015), by and among the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer and Barclays, as Administrative Agent.

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“ Tangible Net Worth ” means, with respect to any Person at any date of determination, (i) the Net Worth of such Person and its consolidated Subsidiaries, determined in accordance with GAAP, minus (ii) all intangibles determined in accordance with GAAP (including, without limitation, goodwill, capitalized financing costs and capitalized administration costs but excluding originated and purchased mortgage servicing rights and retained residual securities) and any and all advances to, investments in and receivables held from Affiliates; provided , however , that the non-cash effect (gain or loss) or any mark-to-market adjustments made directly to stockholders’ equity for fluctuation of the value of financial instruments as mandated under the Statement of Financial Accounting Standards No. 133 (or any successor statement) shall be excluded from the calculation of Tangible Net Worth.
“ Target Amortization Amounts ” means, for each Class of the Series 2013-VF1 Notes, (i) if (x) clause (A) of the definition of “Target Amortization Event” has occurred or (y) the Series 2013-VF1 Notes is the only Series of Notes Outstanding when a Target Amortization Event occurs for the Series 2013-VF1 Notes, 100% of the Note Balance of such Class at the close of business on the last day of its Revolving Period, payable on the next succeeding Business Day and (ii) if other Series of Notes are Outstanding when a Target Amortization Event occurs with respect to the Series 2013-VF1 Notes, an amount equal to 1/3 of the outstanding VFN Principal Balance of such Class at the close of business on the last day of its Revolving Period, payable on each of the first three Payment Dates following the occurrence of such Target Amortization Event; provided, however, if any other Series of Notes is issued with Target Amortization Amounts that are payable in fewer than three (3) months, the Target Amortization Amounts for the Series 2013-VF1 Notes shall be payable over such shorter period provided for such other Series of Notes; provided , however , regardless of whether another Target Amortization Event has previously occurred, if the Target Amortization Event described in clause (A) of the definition thereof occurs, the Target Amortization Amount described in clause (i)(x) above is payable in full on the next succeeding Business Day.
“ Target Amortization Event ” for the Series 2013-VF1 Notes, means the earlier of (A) the related Expected Repayment Date or (B) the occurrence of any of the following conditions or events, which is not waived by 100% of the Noteholders of the Series 2013-VF1 Notes:
(i)      on any Payment Date, the arithmetic average of the Net Proceeds Coverage Percentage determined for such Payment Date and the two preceding Payment Dates is less than five times the percentage equivalent of a fraction (A) the numerator of which equals the sum of the accrued Interest Payment Amounts for each Class of all Outstanding Notes on such date and (B) the denominator of which equals the aggregate average Note Balances of each Class of Outstanding Notes during the related Monthly Advance Collection Period;
(ii)      the occurrence of one or more Servicer Termination Events with respect to Designated Pools under the related Designated Servicing Agreements representing 15% or more (by Mortgage Loan balance as of the date of termination) of all the Designated Pools then included in the Collateral;
(iii)      the Monthly Reimbursement Rate is less than 8.00%;

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(iv)      the rating assigned to any Class of Notes is reduced below the Applicable Rating assigned to such Class of Notes; for the avoidance of doubt, if the Applicable Rating is “none,” then there can be no occurrence of such condition or event under this clause (iv).
(v)      [RESERVED];
(vi)      [RESERVED];
(vii)      the Servicer’s Tangible Net Worth is at any time less than or equal to $350,000,000;
(viii)      (A) at any time prior to January 1, 2014 when any Specified Indebtedness is outstanding, the Servicer's Total Indebtedness to Tangible Net Worth exceeds 15:1 or the Servicer's Total Net Indebtedness to Tangible Net Worth exceeds 12:1, or (B) at any other time, the ratio of the Servicer's Total Indebtedness to Tangible Net Worth exceeds 12:1;
(ix)      the Servicer’s Liquidity is less than $45,000,000 as of the last day of any calendar month;
(x)      an event of default under the Master Repurchase Agreement, for so long as any indebtedness under such Master Repurchase Agreement has not been repaid in full and such Master Repurchase Agreement has not been terminated;
(xi)      the occurrence of a Change of Control;
(xii)      any failure by the Administrator to deliver any Determination Date Administrator Report pursuant to Section 3.2 of the Base Indenture which continues unremedied for a period of five (5) Business Days after a Responsible Officer of the Administrator shall have obtained actual knowledge of such failure, or shall have received written or electronic notice from the Indenture Trustee or any Noteholder of such failure;
(xiii)      the Issuer, the Receivables Seller, the Servicer, the Depositor or the Administrator shall breach or default in the due observance or performance of any of its covenants or agreements in this Indenture Supplement, the Base Indenture, or any other Transaction Document (subject to any cure period provided therein), other than an obligation of the Receivables Seller to make an Indemnity Payment following a breach of a representation or warranty with respect to such Receivable pursuant to Section 4(b) of the Receivables Sale Agreement, and any such default shall continue for a period of two (2) Business Days after the earlier to occur of (i) actual discovery by a Responsible Officer of the Issuer, the Receivables Seller, the Servicer, the Depositor or the Administrator, as applicable, or (ii) the date on which written or electronic notice of such failure, requiring the same to be remedied, shall have been given from the Indenture Trustee or any Noteholder to a Responsible Officer of the Issuer, the Receivables Seller, the Servicer, the Depositor or the Administrator; provided , that a breach of Section 6(b) of the Receivables Sale Agreement, or Section 7(b) of the Receivables Pooling Agreement (prohibiting the Receivables Seller, the Servicer or the Depositor, as applicable, from causing or permitting

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Insolvency Proceedings with respect to the Depositor or the Issuer, as applicable) shall constitute an automatic Target Amortization Event;
(xiv)      if any representation or warranty of the Issuer, the Receivables Seller, the Servicer, the Depositor or the Administrator made in this Indenture Supplement, the Base Indenture, or any other Transaction Document (other than under Section 4(b) of the Receivables Sale Agreement) shall prove to have been breached in any material respect as of the time when the same shall have been made or deemed made, and, if capable of remedy by payment of an Indemnity Payment or otherwise, continues uncured and unremedied for a period of five (5) days after the earlier to occur of (i) actual discovery by a Responsible Officer of the Issuer, the Receivables Seller, the Servicer, the Depositor or the Administrator, as applicable, or (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to a Responsible Officer of the Issuer, the Receivables Seller, the Servicer, the Depositor or the Administrator, as applicable, and would have a material adverse effect on the rights or interests of the Noteholders;
(xv)      (i) a final judgment or judgments for the payment of money in excess of $50,000 in the aggregate shall be rendered against the Depositor or the Issuer by one or more courts, administrative tribunals or other bodies having jurisdiction over them, or (ii) a final judgment or judgments for the payment of money in excess of $15,000,000 in the aggregate shall be rendered against the Receivables Seller or the Administrator by one or more courts, administrative tribunals or other bodies having jurisdiction over them and the same shall not be discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within sixty (60) days from the date of entry thereof and the Receivables Seller or Administrator, as applicable, shall not, within said period of sixty (60) days, or such longer period during which execution of the same shall have been stayed or bonded, appeal therefrom and cause the execution thereof to be stayed during such appeal;
(xvi)      any person shall be appointed as Independent Manager of the Depositor without prior notice having been given to and without the written acknowledgement by the Administrative Agent that such person conforms, to the satisfaction of the Administrative Agent in its reasonable discretion, to the criteria set forth herein in the definition of “Independent Manager”;
(xvii)      the Administrator shall fail to make any payment (whether of principal or interest or otherwise) in respect of any other indebtedness with an amount in excess of $15,000,000, when and as the same shall become due and payable (including the passage of any applicable grace period); or
(xviii)      any event or condition occurs and, while continuing, results in any indebtedness of the Administrator with an amount in excess of $15,000,000 becoming due prior to its scheduled maturity or that enables or permits (including the passage of any applicable grace period) the holder or holders of any such indebtedness or any trustee or agent on its or their behalf to cause any such indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity.

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“ Term Note Redemption ” means, (i) the redemption or payment in full of the T2 Term Notes and (ii) the withdrawal of the ratings by the Note Rating Agency in respect of the Series 2013-VF1 Notes.
“ Total Advances ” means, with respect to any date of determination with respect to any Mortgage Loans, the sum of all outstanding amounts of all outstanding Advances related to Facility Eligible Receivables funded by the Servicer out of its own funds or with respect to such Mortgage Loans on such date.
“ Total Indebtedness ” means, with respect to any Person, for any period, (i) the aggregate Indebtedness of such person and its Subsidiaries during such period minus (ii) the amount of any non-recourse debt (including any securitization debt).
“ Total Net Indebtedness ” means, with respect to any Person, for any period, (i) the aggregate Indebtedness of such Person and its Subsidiaries during such period minus (ii) the amount of any non-recourse debt (including any securitization debt) and minus (iii) the Specified Indebtedness Amount.
“ 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 Agreement and the Fee Letter, each as amended, supplemented, restated or otherwise modified from time to time.
“ Trigger Advance Rate ” means, for any Class within the Series 2013-VF1 Notes, as of any date, the rate equal to (1) 100% minus (2) the product of (a) one twelfth of the Stressed Interest Rate for such Class, plus the related Expense Rate as of such date, multiplied by (b) the related Stressed Time for such Class as of such date.
“ Undrawn Fee Rate ” means, with respect to each Class of the Series 2013-VF1 Notes and for each Interest Accrual Period,
(A) from the date hereof until the date of the Term Note Redemption, 0.25% per annum ; and
(B) on and after the date of the Term Note Redemption:
(i)      if the daily average of the VFN Principal Balance during such Interest Accrual Period is less than 100% but greater than or equal to 50% of the daily average Maximum VFN Principal Balance during such period and for each Interest Accrual Period, 0.25% per annum ;
(ii)      if the daily average of the VFN Principal Balance during such Interest Accrual Period is less than 50% but greater than or equal to 25% of the daily average Maximum VFN Principal Balance during such period, 0.55% per annum; and
(iii)      if the daily average of the VFN Principal Balance during such Interest Accrual Period is less than or equal to 25% of the daily average Maximum VFN Principal Balance during such period and for each Interest Accrual Period, 1.00% per annum.

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“ Unrestricted Cash ” means, as of any date of determination, the sum of (i) the Receivables Seller’s cash, (ii) the Receivables Seller’s Cash Equivalents that are not, in either case, subject to an Adverse Claim in favor of any Person or that are not required to be reserved by the Receivables Seller in a restricted escrow arrangement or other similarly restricted arrangement pursuant to a contractual agreement or requirement of law.
“ VF1 Note Purchase Agreement ” means that Note Purchase Agreement, dated as of January 31, 2013 (as may be amended, restated, 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.
Section 3.      Forms of Series 2013-VF1 Notes.
The form of the Rule 144A Definitive Note and of the Regulation S Definitive Notes that may be used to evidence the Series 2013-VF1 Variable Funding Notes in the circumstances described in Section 5.4(c) of the Base Indenture are attached to the Base Indenture as Exhibits A-2 and A-4 , respectively.
Section 4.      Collateral Value Exclusions.
For purposes of calculating “Collateral Value” in respect of the Series 2013-VF1 Notes, the Collateral Value shall be zero for any Receivable that:
(i)      is attributable to any Designated Pool to the extent that the related Receivable Balance, when added to the aggregate Receivable Balance already outstanding with respect to such Designated Pool, would cause the related Advance Ratio to be equal to or greater than 100%;
(ii)      is not a Facility Eligible Receivable; or
(iii)      is attributable to any Designated Pool to the extent that the related Receivable Balance, when added to the aggregate Receivable Balance already outstanding with respect to such Designated Pool, would cause the related Market Value Ratio to exceed 25%.
Section 5.      General Reserve Account.
In accordance with the terms and provisions of this Section 5 and Section 4.6 of the Base Indenture, the Indenture Trustee shall establish and maintain a General Reserve Account with respect to the Series 2013-VF1 Notes, which shall be an Eligible Account, for the benefit of the Series 2013-VF1 Noteholders.
Section 6.      Payments; Note Balance Increases; Early Maturity.
The Paying Agent shall make payments of interest on the Series 2013-VF1 Notes on each Payment Date in accordance with Section 4.5 of the Base Indenture and any payments of interest, Cumulative Interest Shortfall Amounts, Fees or Increased Costs allocated to the Series 2013-VF1 Notes shall be paid first to the Class A-VF1 Variable Funding Notes, thereafter to the Class B-VF1

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Variable Funding Notes, thereafter to the Class C-VF1 Variable Funding Notes and thereafter to the Class D-VF1 Variable Funding Notes. The Paying Agent shall make payments of principal on the Series 2013-VF1 Notes on each Interim Payment Date and each Payment Date in accordance with Sections 4.4 and 4.5, respectively, of the Base Indenture (at the option of the Issuer in the case of requests during the Revolving Period for the Series 2013-VF1 Notes). The Note Balance of each Class of the Series 2013-VF1 Notes may be increased from time to time on certain Funding Dates in accordance with the terms and provisions of Section 4.3 of the Base Indenture, but not in excess of the related Maximum VFN Principal Balance.
Notwithstanding anything to the contrary contained herein or in the Base Indenture, the Issuer may, upon at least five Business Days’ prior written notice to the Administrative Agent, redeem in whole or in part, and/or terminate and cause retirement of any of the Series 2013-VF1 Notes at any time using proceeds of issuance of new Notes
The Series 2013-VF1 Notes are also subject to optional redemption in accordance with the terms of Section 13.1 of the Base Indenture.
Any payments of principal allocated to the Series 2013-VF1 Notes during a Full Amortization Period shall be applied in the following order of priority, first, to the Class A-VF1 Variable Funding Notes, until their Note Balance has been reduced to zero, second, to the Class B-VF1 Variable Funding Notes until their Note Balance has been reduced to zero, third , to the Class C-VF1 Variable Funding Notes, until their Note Balance has been reduced to zero, and fourth , to the Class D-VF1 Variable Funding Notes, until their Note Balance has been reduced to zero.
The Administrative Agent and the Noteholder of 100% of the Outstanding Notes further confirm that that the Series 2013-VF1 Notes No. 11 authenticated on the Closing Date pursuant to this Indenture Supplement shall be issued in the name of “Barclays Bank PLC, as Administrative Agent,” and the Administrative Agent and the Noteholder of 100% of the Outstanding Notes hereby direct the Indenture Trustee to authenticate the Series 2013-VF1 Notes No. 11 in the name of “Barclays Bank PLC, as Administrative Agent.”
For the avoidance of doubt, the failure pay any Target Amortization Amount when due, as described in the definition thereof, shall constitute an Event of Default.
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 related Maximum VFN Principal Balances 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.
Section 7.      Determination of Note Interest Rate and LIBOR.

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(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 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.
Section 8.      Increased Costs.
(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

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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
(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)(iv) 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.

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(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 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.
Section 9.      Series Reports.
(a)      Series Calculation Agent Report . The Calculation Agent shall deliver a report of the following items together with each Calculation Agent Report pursuant to Section 3.1 of the Base Indenture to the extent received from the Servicer, with respect to the Series 2013-VF1 Notes:
(i)      the Advance Ratio for each Designated Pool, and whether the Advance Ratio for such Designated Pool exceeds 100%;
(ii)      the Market Value Ratio for each Designated Pool, and whether the Market Value Ratio for such Designated Pool exceeds 25%;
(iii)      a list of each Target Amortization Event for the Series 2013-VF1 Notes and presenting a yes or no answer beside each indicating whether each such Target Amortization Event has occurred as of the end of the Monthly Advance Collection Period preceding the upcoming Payment Date or the Advance Collection Period preceding the upcoming Interim Payment Date.
(iv)      whether any Receivable, or any portion of the Receivables, attributable to a Designated Pool, has zero Collateral Value by virtue of the definition of “Collateral Value” or Section  4 of this Indenture Supplement;
(v)      a calculation of the Net Proceeds Coverage Percentage in respect of each of the three preceding Monthly Advance Collection Periods (or each that has occurred since the date of this Indenture Supplement, if less than three), and the arithmetic average of the three;
(vi)      the Monthly Reimbursement Rate for the upcoming Payment Date or Interim Payment Date;

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(vii)      whether any Target Amortization Amount that has become due and payable has been paid;
(viii)      the PSA Stressed Non-Recoverable Advance Amount for the upcoming Payment Date or Interim Payment Date; and
(ix)      the Trigger Advance Rate for each Class; and
(x)      the aggregate amount paid pursuant to the Barclays Derivative Agreement in the Barclays Derivative Agreement Account and the Barclays Cap Payment Amounts with respect to each Class of the Series 2013-VF1 Notes.
In addition to the information provided in the above Calculation Agent Report, to the extent the following information is specifically provided to the Calculation Agent by Nationstar, the Calculation Agent shall promptly, from time to time, provide such other financial or non-financial information, documents, records or reports with respect to the Receivables or the condition or operations, financial or otherwise, of Nationstar, including any information available to Nationstar, as the Administrator or any Noteholder of a Series 2013-VF1 Note may from time to time reasonably request in order to assist the Administrative Agent or such Noteholder in complying with the requirements of Article 122a(4) and (5) of the CRD as may be applicable to the Administrative Agent or such Noteholder of a Series 2013-VF1 Note.
(b)      Series Payment Date Report . In conjunction with each Payment Date Report, the Indenture Trustee shall also report the Stressed Time Percentage.
(c)      Limitation on Indenture Trustee Duties . The Indenture Trustee shall have no independent duty to verify: (i) Tangible Net Worth, (ii) the occurrence of any of the events described in clause (ii), (iv), (vii), (viii) and (ix) of the definition of “Target Amortization Event,” or (iii) compliance with clause (vi) of the definition of “Facility Eligible Servicing Agreement.”
Section 10.      Conditions Precedent Satisfied.
The Issuer hereby represents and warrants to the Noteholders of the Series 2013-VF1 Notes and the Indenture Trustee that, as of the related Issuance Date, each of the conditions precedent set forth in the Base Indenture, including but not limited to those conditions precedent set forth in Section 6.10(b) and Article XII thereof and Section 12 hereof, as applicable, have been satisfied.
Section 11.      Representations and Warranties.
The Issuer, the Administrator, the Servicer and the Indenture Trustee hereby restate as of the related Issuance Date, or as of such other date as is specifically referenced in the body of such representation and warranty, all of the representations and warranties set forth in Sections 9.1, 10.1 and 11.14, respectively, of the Base Indenture.
Section 12.      Amendments.

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(a)      Notwithstanding any provisions to the contrary in Article XII of the Base Indenture, and in addition to and otherwise subject to the provisions set forth in Sections 12.1 and 12.3 of the Base Indenture, without the consent of the Noteholders of any Notes or any other Person but with the consent of the Issuer (evidenced by its execution of such amendment), the Indenture Trustee, the Administrator, the Servicer, and the Administrative Agent, and with prior notice to the applicable Note Rating Agency, at any time and from time to time, upon delivery of an Issuer Tax Opinion and upon delivery by the Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that the Issuer reasonably believes that such amendment will not have an Adverse Effect, may amend this Indenture Supplement for any of the following purposes: (i) to correct any mistake or typographical error or cure any ambiguity, or to cure, correct or supplement any defective or inconsistent provision herein or any other Transaction Document; (ii) to take any action necessary to maintain the rating currently assigned by the applicable Note Rating Agency and/or to avoid such Class of Notes being placed on negative watch by such Note Rating Agency; or (iii) to amend any other provision of this Indenture Supplement.
(b)      Notwithstanding any provisions to the contrary in Section 6.10 or Article XII of the Base 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 Base Indenture may, without the consent of 100% of the Series 2013-VF1 Notes, supplement, amend or revise any term or provision of this Indenture Supplement.
(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.
Section 13.      Counterparts.
This Indenture Supplement may be executed in any number of counterparts, by manual or facsimile signature, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.
Section 14.      Entire Agreement.
This Indenture Supplement, together with the Base Indenture incorporated herein by reference, constitutes 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 15.      Limited Recourse.
Notwithstanding any other terms of this Indenture Supplement, the Series 2013-VF1 Notes, any other Transaction Documents or otherwise, the obligations of the Issuer under the Series 2013-VF1 Notes, this Indenture Supplement and each other Transaction Document to which it is a party are limited recourse obligations of the Issuer, payable solely from the Trust Estate, and following realization of the Trust Estate and application of the proceeds thereof in accordance with the terms

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of this Indenture Supplement, none of the Noteholders of Series 2013- VF1 Notes, the Indenture Trustee or any of the other parties to the Transaction Documents shall be entitled to take any further steps to recover any sums due but still unpaid hereunder or thereunder, all claims in respect of which shall be extinguished and shall not thereafter revive. No recourse shall be had for the payment of any amount owing in respect of the Series 2013- VF1 Notes or this Indenture Supplement or for any action or inaction of the Issuer against any officer, director, employee, shareholder, stockholder or incorporator of the Issuer or any of their successors or assigns for any amounts payable under the Series 2013-VF1 Notes or this Indenture Supplement. It is understood that the foregoing provisions of this Section 15 shall not (a) prevent recourse to the Trust Estate for the sums due or to become due under any security, instrument or agreement which is part of the Trust Estate or (b) save as specifically provided therein, constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Series 2013- VF1 Notes or secured by this Indenture Supplement. It is further understood that the foregoing provisions of this Section 15 shall not limit the right of any Person to name the Issuer as a party defendant in any proceeding or in the exercise of any other remedy under the Series 2013- VF1 Notes or this Indenture Supplement, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.
Section 16.      Owner Trustee Limitation of Liability.
It is expressly understood and agreed by the parties hereto that (a) this Indenture Supplement 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, (d) Wilmington Trust, National Association has made no investigation as to the accuracy or completeness of any representations and warranties made by the Issuer in this Amendment, and (e) 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 Indenture Supplement or the other Transaction Documents.
Section 17.      Barclays Cap Payment Amount.
In accordance with the terms and provisions of this Section 17(a) and Section 4.1 of the Base Indenture, the Indenture Trustee shall establish and maintain a Barclays Derivative Agreement Account for the benefit of the Barclays Cap Payment Holders. If the Barclays Derivative Agreement Account loses its status as an Eligible Account, the funds in such account shall be moved to an account that qualifies as an Eligible Account within fourteen (14) days. The Indenture Trustee shall

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deposit and withdraw available amounts from the Barclays Derivative Agreement Account pursuant to, and to the extent required by, this Section 17(a) .
On each Payment Date, the Indenture Trustee shall remit any amounts paid by the Derivative Counterparty in respect of the Barclays Derivative Agreement to the Barclays Cap Payment Holders and the Depositor, as applicable, in the following order of priority: (i) first, to the Barclays Cap Payment Holder in respect of the Class A-VF1 Variable Funding Notes, an amount equal to the Barclays Cap Payment Amount for the Class A-VF1 Variable Funding Notes for the prior Interest Accrual Period; (ii) second, to the Barclays Cap Payment Holder in respect of the Class B-VF1 Variable Funding Notes, an amount equal to the Barclays Cap Payment Amount for the Class B-VF1 Variable Funding Notes for the prior Interest Accrual Period; (iii) third, to the Barclays Cap Payment Holder in respect of the Class C-VF1 Variable Funding Notes, an amount equal to the Barclays Cap Payment Amount for the Class C-VF1 Variable Funding Notes for the prior Interest Accrual Period; (iv) fourth, to the Barclays Cap Payment Holder in respect of the Class D-VF1 Variable Funding Notes, an amount equal to the Barclays Cap Payment Amount for the Class D-VF1 Variable Funding Notes for the prior Interest Accrual Period; and (v) fifth, with respect to any amounts remaining, to the Depositor as holder of the Owner Trust Certificate.
Notwithstanding any of the foregoing, the Issuer shall not be responsible for the payment of any amounts in respect of the Barclays Derivative Agreement and the Derivative Counterparty shall not be entitled to any rights, benefits or privileges under the Base Indenture or any other Transaction Document other than as set forth in the Barclays Derivative Agreement.
Section 18.      Consent and Acknowledgment of Amendments.
Barclays, in its capacity as Noteholder under the Original Indenture Supplement, has consented to this Indenture Supplement, and Barclays confirms that (i) it is the sole Noteholder under the Original Indenture Supplement of all the Outstanding Notes related to the Series 2013-VF1 Notes with the right to instruct the Indenture Trustee, (ii) it is authorized to deliver this Indenture Supplement, such power has not been granted or assigned to any other person and the Indenture Trustee may rely upon such certification, and (iii) it acknowledges and agrees that the amendments effected by this Indenture Supplement shall become effective on the Closing Date.




IN WITNESS WHEREOF , Nationstar Agency Advance Funding Trust, as Issuer, Nationstar Mortgage LLC (as Administrator and as Servicer), The Bank of New York Mellon, as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, and Barclays Bank PLC, as Administrative Agent, have caused this Indenture Supplement relating to the Series 2013-VF1 Notes, to be duly executed by their respective officers thereunto duly authorized and their respective signatures duly attested all as of the day and year first above written.



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NATIONSTAR AGENCY ADVANCE FUNDING TRUST , as Issuer
By: Wilmington Trust, National Association,
not in its individual capacity but solely as
Owner Trustee
 
By:     /s/ Adam B. Scozzafava    
Name:     Adam B. Scozzafava       
Title:     Vice President          
 
 
 
 
 
 
 

[Nationstar Agency Advance Funding Trust – Series 2013-VF1 Amended and Restated Indenture Supplement]



NATIONSTAR MORTGAGE LLC ,
as Administrator and as Servicer
By:     /s/ Jeffrey M. Neufeld       
Name:     Jeffrey M. Neufeld       
Title:     Senior Vice President and Treasurer    


 
BARCLAYS BANK PLC ,
as Administrative Agent
By:     /s/ Michael Commisso    
Name:     Michael Commisso       
Title:     Vice President          

 
THE BANK OF NEW YORK MELLON , as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary and not in its individual capacity
 
 
By:     /s/ Anthony Beshara       
Name:     Anthony Beshara       
Title:     Director          

 
 
 
 


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

[Nationstar Agency Advance Funding Trust – Series 2013-VF1 Amended and Restated Indenture Supplement]



By:     /s/ Anthony Beshara        

Name:     Anthony Beshara        

Title:     Director            



[Nationstar Agency Advance Funding Trust – Series 2013-VF1 Amended and Restated Indenture Supplement]
Exhibit 10.4

ASSIGNMENT, ASSUMPTION AND RECOGNITION AGREEMENT
THIS ASSIGNMENT, ASSUMPTION AND RECOGNITION AGREEMENT, dated October 9, 2015 (the “ Agreement ”), by and among Nationstar Agency Advance Funding Trust, a Delaware statutory trust (the “ Assignor ” or “ Assignor Issuer ”), Nationstar Agency Advance Receivables Trust, a Delaware statutory trust (the “ Assignee ” or “ Assignee Issuer ”), Nationstar Agency Advance Funding LLC, a Delaware limited liability company (the “ Assignor Depositor ”), Nationstar Agency Advance Funding II LLC, a Delaware limited liability company (the “ Assignee Depositor ”), Nationstar Mortgage LLC, a Delaware limited liability company (“ Nationstar ” or the “ Seller ”), Barclays Bank PLC (“ Barclays ”), as an administrative agent under the Assignor Indenture, Credit Suisse AG, New York Branch (“ Credit Suisse ”), as an administrative agent under the Assignor Indenture (Credit Suisse and Barclays are collectively referred to herein as the “ Assignor Administrative Agents ”) and JPMorgan Chase Bank, N.A., as the administrative agent under the Assignee Indenture (the “ Assignee Administrative Agent ”). Unless otherwise specified, capitalized terms used herein but not defined shall have the meanings set forth in the Assignor Indenture, the Assignee Indenture, the Receivables Sale Agreement and the Receivables Pooling Agreement (each as defined below).
WHEREAS, pursuant to the Amended and Restated Receivables Sale Agreement, dated as of January 31, 2013, by and among the Seller and the Assignor Depositor (as may be amended, restated, supplemented or otherwise modified from time to time, the “ Receivables Sale Agreement ”), the Seller sold and/or contributed certain Receivables to the Assignor Depositor on a continuing basis;
WHEREAS, pursuant to the Amended and Restated Receivables Pooling Agreement, dated as of January 31, 2013, by and between the Assignor Depositor and the Assignor (as may be amended, restated, supplemented or otherwise modified from time to time, the “ Receivables Pooling Agreement ”), the Assignor Depositor sold and/or contributed such Receivables to the Assignor immediately following the transfer thereof pursuant to the Receivables Sale Agreement;
WHEREAS, Nationstar and the Assignor Depositor made certain representations and warranties with respect to such Receivables pursuant to the Receivables Sale Agreement and the Receivables Pooling Agreement, as applicable;
WHEREAS, pursuant to the Fourth Amended and Restated Indenture, dated as of January 31, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “ Assignor Indenture ”), among the Assignor, as issuer, The Bank of New York Mellon (“ BNY Mellon ”), as the indenture trustee (the “ Assignor Indenture Trustee ”), calculation agent, paying agent and securities intermediary, Nationstar, as administrator and as servicer, and the Assignor Administrative Agents, the Assignor pledged all of its right, title and interest in the Assignor Receivables (as defined below) to the Assignor Indenture Trustee;
WHEREAS, pursuant to the Assignor Indenture, the Assignor issued the Series 2013-VF1 Notes (the “ Assignor VF1 Notes ”), the Series 2013-T2 Notes (the “ Assignor T2 Notes ” and together with the Assignor VF1 Notes, the “ Assignor Notes ”);



WHEREAS, pursuant to the Indenture, dated as of October 9, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “ Assignee Indenture ”), among the Assignee Issuer, as issuer, BNY Mellon, as the indenture trustee (the “ Assignee Indenture Trustee ”), calculation agent, paying agent, custodian and securities intermediary, Nationstar, as administrator and as servicer, and the Assignee Administrative Agent, the Assignee or the Assignee Indenture Trustee on the Assignee’s behalf, simultaneously with the funding of certain notes thereunder (the “ Assignee Notes ”), shall transfer funds in accordance with the Flow of Funds Wire Instructions attached hereto as Schedule II (the “ Assignor Purchase Price Payment ”) in cash to the Assignor Indenture Trustee as consideration for the Assignor Receivables in accordance with the terms of the Closing Agreement (the “ Closing Agreement ”), dated as of the date hereof, among the parties hereto;
WHEREAS, in connection with the delivery of the Assignor Purchase Price Payment, the Assignor Indenture Trustee will release all liens, security interests, charges, encumbrances or other claims related to the Assignor Receivables as required by the Assignor Indenture;
NOW THEREFORE, for valuable consideration the receipt and sufficiency of which hereby are acknowledged, and of the mutual covenants herein contained, the parties hereto hereby agree as follows:
1.
Assignment and Conveyance .
In consideration for the Assignor Purchase Price Payment paid to the Assignor Indenture Trustee, the Assignor hereby conveys, sells, grants, transfers and assigns to the Assignee all of the right, title and interest of the Assignor, as purchaser, in, to and under all of the Assignor’s right, title and interest in and to: (i) any and all of the Aggregate Receivables now in existence or otherwise in existence at the close of business on October 9, 2015 (the “ Cut-off Date ”) through the date hereof (collectively, the “ Existing Receivables ”) related to the Servicing Agreements listed on Schedule I attached hereto (the “ Assignee-Bound Servicing Agreements ”) and all moneys due thereon or paid thereunder or in respect thereof; (ii) all right, title and interest of the Assignor as assignee of the Seller and the Assignor Depositor to the contractual rights to payment on the aggregate Existing Receivables under each Assignee-Bound Servicing Agreement and all related documents, instruments and agreements pursuant to which the Seller acquired, or acquired an interest in, any of the aggregate Existing Receivables; (iii) all books, records and documents relating to the aggregate Existing Receivables in any medium, including without limitation paper, tapes, disks and other electronic media; (iv) all other moneys, securities, reserves and other property now or at any time in the possession of the Assignor Indenture Trustee or its bailee, agent or custodian and relating to any of the Existing Receivables; and (v) all proceeds of the foregoing of every kind and nature whatsoever, including, without limitation, all proceeds of the conversion thereof, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property that at any time constitute all or part of or are included in the proceeds of the foregoing ((i) through (v), collectively, the “ Assignor Receivables ”).

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The Assignor specifically reserves and does not assign to the Assignee hereunder any and all right, title and interest in, to and under or any obligations of the Assignor with respect to any property which is not included in the Assignor Receivables. Other than with respect to the Assignee-Bound Servicing Agreements listed on Schedule I attached hereto, this Agreement shall not constitute consent or approval by the Assignor Administrative Agents for the removal of Designated Servicing Agreements and Receivables pursuant to Section 2.1(c) of the Assignor Indenture or Section 2(d) of the Receivables Sale Agreement. Each of the Assignor Administrative Agents reserves its rights of approval and consent, in its sole discretion, with respect to future requests for removal of Designated Servicing Agreements. None of the Assignor Administrative Agents have waived any such rights and nothing in this Agreement and no delay on the part of any Assignor Administrative Agent in exercising any such rights should, or shall, be construed as a waiver of any such rights.
2.
Recognition of the Seller and the Assignor Depositor .
The Seller and the Assignor Depositor hereby acknowledge and agree that on and after the date hereof (i) the Assignee will be the owner of the Assignor Receivables, (ii) the Seller and the Assignor Depositor shall look solely to the Assignee for performance of any obligations of the Assignor insofar as they relate to the enforcement of the representations, warranties and covenants with respect to the Existing Receivables in the Receivables Sale Agreement or the Receivables Pooling Agreement, as applicable, and (iii) the Assignee shall have all the rights and remedies available to the Assignor, insofar as they relate to the Existing Receivables under the Receivables Sale Agreement and the Receivables Pooling Agreement, as applicable, including, without limitation, the remedies with respect to breaches of representations and warranties set forth in the Receivables Sale Agreement and the Receivables Pooling Agreement, as applicable, and shall be entitled to enforce all of the obligations of the Seller and the Assignor Depositor thereunder insofar as they relate to the Existing Receivables. Neither the Seller, the Assignor Depositor nor the Assignor shall amend or agree to amend, modify, waive, or otherwise alter any of the terms or provisions of the Receivables Sale Agreement or the Receivables Pooling Agreement which amendment, modification, waiver or other alteration would in any way adversely affect the Existing Receivables, the Seller’s performance under the Receivables Sale Agreement or the Assignor Depositor’s performance under the Receivables Pooling Agreement with respect to the Existing Receivables without the prior written consent of the Assignee and the Assignee Administrative Agent.
3. Representations and Warranties of the Seller .
The Seller warrants and represents to the Assignor and the Assignee as of the date hereof that:
(a) The Seller is a limited liability company duly organized and validly existing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted, and had at all relevant times, and now has and so long as any Notes (as defined in the Assignor Indenture) are outstanding, will continue to have, power, authority and legal right to acquire, own, hold, transfer, assign and convey the Assignor Receivables.

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(b) The Seller has and will continue to have all requisite limited liability company power and authority to execute, deliver and perform its obligations under this Agreement and has and will continue to have all requisite limited liability company power and authority to perform its obligations under the Receivables Sale Agreement. The execution and delivery of this Agreement by the Seller, and the execution and delivery of the Receivables Sale Agreement by the Seller, the performance by the Seller of its obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby have each been duly authorized by the Seller and no further limited liability company action or other actions are required to be taken by the Seller in connection therewith. Each of this Agreement and the Receivables Sale Agreement has been, or when delivered will have been, duly executed and delivered and constitutes the legal, valid and binding obligation of the Seller, enforceable against the Seller, in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or similar laws and by equitable principles.
(c) All approvals, authorizations, consents, orders or other actions of any persons or of any governmental body or official required in connection with the execution and delivery by the Seller of this Agreement and the Receivables Sale Agreement, the performance by the Seller of the transactions contemplated by this Agreement and the Receivables Sale Agreement and the fulfillment by the Seller of the terms hereof and thereof, including without limitation, the transfer of the Assignor Receivables from the Seller to the Assignee have been obtained.
(d) Neither the execution, delivery and performance of this Agreement, nor the consummation by the Seller of the transactions contemplated hereby nor the fulfillment of or compliance with the terms and conditions of this Agreement (A) will violate the organizational documents of the Seller, (B) will constitute a default (or an event which, with notice or lapse of time or both, would constitute a default), or result in a breach or acceleration of, any material indenture, agreement or other material instrument to which the Seller or any of its Affiliates is a party or by which it or any of them is bound, or which may be applicable to the Seller, (C) constitutes a default (whether with notice or lapse of time or both), or results in the creation or imposition of any Adverse Claim (as defined in the Assignor Indenture) upon any of the property or assets of the Seller under the terms of any of the foregoing, or (D) violates any statute, ordinance or law or any rule, regulation, order, writ, injunction or decree of any court or of any public, governmental or regulatory body, agency or authority applicable to the Seller or its properties.
(e) There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or to the Seller’s knowledge, threatened, against the Seller, which would draw into question the validity of this Agreement or the Receivables Sale Agreement, or which, either in any one instance or in the aggregate, would materially and adversely affect the ability of the Seller to perform its obligations under this Agreement or the Receivables Sale Agreement.
(f) The Seller is solvent.

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The Seller hereby represents and warrants, for the benefit of the Assignor and the Assignee, that the representations and warranties set forth in Section 4(b) of the Receivables Sale Agreement were true and correct with respect to each Existing Receivable as of the date of conveyance of such Existing Receivable to the Assignor Depositor. The Seller further represents and warrants, for the benefit of the Assignor, the Assignor Depositor, the Assignee Issuer and the Assignee Depositor, that upon discovery of any breach of the Seller’s representations, warranties or covenants that pertain to an Existing Receivable, the Assignee shall be entitled to the remedies for breach set forth in Section 4(d) of the Receivables Sale Agreement, dated as of October 9, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “ Assignee Receivables Sale Agreement ”), by and between the Seller, as receivables seller and as servicer, and the Assignee Depositor (subject to cure provisions set forth therein).
4.
Representation and Warranties of the Assignor Depositor .
The Assignor Depositor warrants and represents to the Assignor and the Assignee as of the date hereof that:
(a)      The Assignor Depositor is a limited liability company duly organized and validly existing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted, and had at all relevant times, and now has and so long as any Notes (as defined in the Assignor Indenture) are outstanding, will continue to have, power, authority and legal right to acquire, own, hold, transfer, assign and convey the Assignor Receivables.
(b)      The Assignor Depositor has and will continue to have all requisite limited liability company power and authority to execute, deliver and perform its obligations under this Agreement and has and will continue to have all requisite limited liability company power and authority to perform its obligations under the Receivables Sale Agreement and the Receivables Pooling Agreement. The execution and delivery of this Agreement by the Assignor Depositor, and the execution and delivery of the Receivables Sale Agreement and the Receivables Pooling Agreement by the Assignor Depositor, the performance by the Assignor Depositor of its obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby have each been duly authorized by the Assignor Depositor and no further limited liability company action or other actions are required to be taken by the Assignor Depositor in connection therewith. Each of this Agreement, the Receivables Sale Agreement and the Receivables Pooling Agreement has been, or when delivered will have been, duly executed and delivered and constitutes the legal, valid and binding obligation of the Assignor Depositor, enforceable against the Assignor Depositor, in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or similar laws and by equitable principles.
(c)      All approvals, authorizations, consents, orders or other actions of any persons or of any governmental body or official required in connection with the execution and delivery by Nationstar of this Agreement, the Receivables Sale Agreement and the Receivables Pooling Agreement, the performance by the Assignor Depositor of the

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transactions contemplated by this Agreement, the Receivables Sale Agreement and the Receivables Pooling Agreement and the fulfillment by the Assignor Depositor of the terms hereof and thereof, including without limitation, the transfer of the Assignor Receivables from the Assignor Depositor to the Assignee have been obtained.
(d)      Neither the execution, delivery and performance of this Agreement, nor the consummation by the Assignor Depositor of the transactions contemplated hereby nor the fulfillment of or compliance with the terms and conditions of this Agreement (A) will violate the organizational documents of the Assignor Depositor, (B) will constitute a default (or an event which, with notice or lapse of time or both, would constitute a default), or result in a breach or acceleration of, any material indenture, agreement or other material instrument to which the Assignor Depositor or any of its Affiliates is a party or by which it or any of them is bound, or which may be applicable to the Assignor Depositor, (C) constitutes a default (whether with notice or lapse of time or both), or results in the creation or imposition of any Adverse Claim (as defined in the Assignor Indenture) upon any of the property or assets of the Assignor Depositor under the terms of any of the foregoing, or (D) violates any statute, ordinance or law or any rule, regulation, order, writ, injunction or decree of any court or of any public, governmental or regulatory body, agency or authority applicable to the Assignor Depositor or its properties.
(e)      There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or to the Assignor Depositor’s knowledge, threatened, against the Assignor Depositor, which would draw into question the validity of this Agreement, the Receivables Sale Agreement or the Receivables Pooling Agreement, or which, either in any one instance or in the aggregate, would materially and adversely affect the ability of the Seller to perform its obligations under this Agreement, the Receivables Sale Agreement or the Receivables Pooling Agreement.
(f)      The Assignor Depositor is solvent.
Upon discovery of any breach of the Assignor Depositor’s representations, warranties or covenants that pertain to an Existing Receivable, the Assignee shall be entitled to the remedies for breach set forth in Section 5 of the Receivables Pooling Agreement, dated as of October 9, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “ Assignee Receivables Pooling Agreement ”), by and between the Assignee Depositor, as depositor, and the Assignee Issuer, as issuer (subject to cure provisions set forth therein).
5.
Representations and Warranties of the Assignor .
The Assignor warrants, represents and covenants that, as of the date hereof:
(a)      The Assignor is duly organized and validly existing as a statutory trust and is in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted.

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(b)      The Assignor has and will continue to have the power and authority to execute and deliver this Agreement and the Receivables Pooling Agreement, and to carry out their respective terms; and the execution, delivery and performance by the Assignor of this Agreement and the Receivables Pooling Agreement has been duly authorized by all necessary action of the Assignor. Each of this Agreement and the Receivables Pooling Agreement constitutes a legal, valid and binding obligation of the Assignor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditors’ rights generally or by general equity principles.
(c)      All approvals, authorizations, consents, orders or other actions of any persons or of any governmental body or official required in connection with the execution and delivery by the Assignor of this Agreement, the performance by the Assignor of the transactions contemplated by this Agreement, and the fulfillment by the Assignor of the terms hereof, including without limitation, the transfer of the Assignor Receivables from the Assignor to the Assignee have been obtained.
(d)      The execution and delivery by the Assignor of this Agreement and the consummation of the transactions contemplated by this Agreement and the fulfillment of the terms of this Agreement do not conflict with, result in any breach of any of the terms or provisions of, or constitute (with or without notice or lapse of time or both) a default under the organizational documents of the Assignor or any indenture, agreement or other material instrument to which the Assignor is a party or by which it is bound, or result in the creation or imposition of any Adverse Claim (as defined in the Assignor Indenture) upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than the Assignor Indenture), or violate any law, order, judgment, decree, writ, injunction, award, determination, rule or regulation applicable to the Assignor of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Assignor or its properties, which breach, default, conflict, Adverse Claim (as defined in the Assignor Indenture) or violation could reasonably be expected to have an Adverse Effect (as defined in the Assignor Indenture).
(e)      There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or to the Assignor’s knowledge, threatened, against or affecting the Assignor which would draw into question the validity of this Agreement or the Receivables Pooling Agreement, or which, either in any one instance or in the aggregate, would materially and adversely affect the ability of the Assignor to perform its obligations under this Agreement or the Receivables Pooling Agreement.
(f)      The Assignor is solvent.
6. Representations and Warranties of the Assignee .
The Assignee warrants, represents and covenants that, as of the date hereof:

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(a)      The Assignee is duly organized and validly existing as a statutory trust and is in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted.
(b)      The Assignee has and will continue to have the power and authority to execute and deliver this Agreement, and to carry out its terms; and the execution, delivery and performance by the Assignee of this Agreement has been duly authorized by all necessary action of the Assignee. This Agreement constitutes a legal, valid and binding obligation of the Assignee enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditors’ rights generally or by general equity principles.
(c)      All approvals, authorizations, consents, orders or other actions of any persons or of any governmental body or official required in connection with the execution and delivery by the Assignee of this Agreement, the performance by the Assignee of the transactions contemplated by this Agreement, and the fulfillment by the Assignee of the terms hereof have been obtained.
(d)      The execution and delivery by the Assignee of this Agreement and the consummation of the transactions contemplated by this Agreement and the fulfillment of the terms of this Agreement do not conflict with, result in any breach of any of the terms or provisions of, or constitute (with or without notice or lapse of time or both) a default under the organizational documents of the Assignee or any indenture, agreement or other material instrument to which the Assignee is a party or by which it is bound, or result in the creation or imposition of any Adverse Claim (as defined in the Assignor Indenture) upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than the Assignor Indenture), or violate any law, order, judgment, decree, writ, injunction, award, determination, rule or regulation applicable to the Assignee of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Assignee or its properties, which breach, default, conflict, Adverse Claim (as defined in the Assignor Indenture) or violation could reasonably be expected to have an Adverse Effect (as defined in the Assignor Indenture).
(e)      There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or to the Assignee’s knowledge, threatened, against or affecting the Assignee which would draw into question the validity of this Agreement, or which, either in any one instance or in the aggregate, would materially and adversely affect the ability of the Assignee to perform its obligations under this Agreement.
(f)      The Assignee is solvent.
7. Intention of the Parties .

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It is the intention of the parties hereto that, other than for U.S. federal income tax purposes, each transfer and assignment contemplated by this Agreement shall constitute an absolute sale of the Assignor Receivables from the Assignor to the Assignee and that the Assignor Receivables shall not be part of the Assignor’s estate or otherwise be considered property of the Assignor in the event of the bankruptcy, receivership, insolvency, liquidation, conservatorship or similar proceeding relating to the Assignor or any of its property. Except as set forth below, it is not intended that any amounts available for reimbursement or payments of Assignor Receivables be deemed to have been assigned by the Assignor to the Assignee to secure a debt or other obligation of the Assignor. In the event that (A) the transfer and assignment of Assignor Receivables by the Assignor is deemed by a court or applicable regulatory, administrative or other governmental body contrary to the express intent of the parties to constitute a pledge rather than a sale and assignment of the Assignor Receivables or (B) if amounts available now or in the future for reimbursement or payment of any aggregate Assignor Receivables are held to be property of the Assignor or loans to the Assignor, or (C) if for any reason this Agreement is held or deemed to be a financing or some other similar arrangement or agreement, then: (i) this Agreement is and shall be a security agreement within the meaning of Articles 8 and 9 of the Relevant UCC; (ii) the Assignee shall be treated as having a first priority, perfected security interest in and to, and lien on, the Assignor Receivables transferred and assigned to the Assignee hereunder; (iii) the agreement of the Assignor hereunder to sell, assign, convey and transfer the Assignor Receivables shall be a grant by the Assignor to the Assignee of, and the Assignor does hereby grant to the Assignee a security interest in all of the Assignor’s property and right (including the power to convey title thereto), title, and interest, whether now owned or hereafter acquired, in and to the Assignor Receivables. The possession by the Assignee or its agent of notes and such other goods, money, documents or such other items of property as constitute instruments, money, negotiable documents or chattel paper, and the filing of Form UCC-1, shall be “possession by the secured party,” or possession by a purchaser or a person designated by such secured party, for purposes of perfecting the security interest pursuant to the Relevant UCC of any applicable jurisdiction; and notifications to persons holding such property, and acknowledgments, receipts or confirmations from persons holding such property, shall be notifications to, or acknowledgments, receipts or confirmations from, financial intermediaries, bailees or agents (as applicable) of any such holder for the purpose of perfecting such security interest under applicable law.
Notwithstanding anything to the contrary in this Agreement, any security interest granted to Assignee is subject and subordinate, in each and every respect, to all rights, powers, and prerogatives of Freddie Mac under and in connection with (i) the terms and conditions of the Consent under and as defined in the Assignor Indenture and the Consent under and as defined in the Assignee Indenture (as each may be amended from time to time, collectively, the “ Consent Agreement ”), with respect to the “Reimbursement Assignments and Pledge” of the “Reimbursement Rights” (as each such terms is defined in the respective Consent Agreement), by and among the parties named therein, (ii) the terms and conditions of the Purchase Documents as defined in the Freddie Mac Guide, other than as set forth pursuant to the express terms and provisions of each respective Consent Agreement, and (iii) all claims of Freddie Mac arising out of or relating to any and all breaches, defaults and outstanding obligations of any issuer with respect to the financing transactions described in each respective Consent Agreement, individually or collectively, as debtor, to Freddie Mac.


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8. Security Interest .
The Assignor shall, to the extent consistent with this Agreement, take such actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in (i) any of the aggregate Existing Receivables, (ii) the amounts reimbursable or payable now or in the future by or with respect to the Mortgage Pools in respect of any of the aggregate Existing Receivables or (iii) the other property set forth in the Assignor Receivables, such security interest would be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of this Agreement. The Assignor shall execute such documents and instruments as the Assignee may reasonably request from time to time in order to effectuate the foregoing and shall return to the Assignee the executed copy of such documents and instruments. Without limiting the generality of the foregoing, the Assignor shall forward for filing, or shall cause to be forwarded for filing, at the expense of the Assignor, all filings necessary to maintain the effectiveness of any original filings necessary under the UCC to perfect the Assignee’s security interest described above, including without limitation (x) UCC continuation statements, and (y) such other statements as maybe occasioned by (1) any change of name or identity of the Assignor (such preparation and filing shall be at the expense of the Assignor, if occasioned by a change in such party’s name) or (2) any change of location of the place of business or the chief executive office of the Assignor.
9. No Petition .
Each of the Assignor Administrative Agents, the Assignee Administrative Agent, the Assignor Depositor, the Assignee Depositor, the Assignor, the Assignee and Nationstar by entering into this Agreement and by accepting its rights as a third party beneficiary hereunder, each Noteholder (as defined in the Assignor Indenture or the Assignee Indenture, as applicable), by accepting a Note (as defined in the Assignor Indenture or the Assignee Indenture, as applicable) and each Note Owner (as defined in the Assignor Indenture or the Assignee Indenture, as applicable) by accepting a Note or a beneficial interest in a Note agrees that it will not at any time prior to the date which is one year and one day, or, if longer, the applicable preference period then in effect, after the payment in full of all the Notes issued under either the Assignor Indenture or the Assignee Indenture, institute against the Assignor Depositor, the Assignee Depositor, the Assignor Issuer or the Assignee Issuer, or join in any institution against the Assignor Depositor, the Assignee Depositor, the Assignor Issuer or the Assignee Issuer of any receivership, insolvency, bankruptcy or other similar proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Assignor Notes, the Assignee Notes, this Agreement, the Assignor Indenture or the Assignee Indenture; provided , however , that nothing contained herein shall prohibit or otherwise prevent the Assignor Indenture Trustee or the Assignee Indenture Trustee from filing proofs of claim in any such proceeding.

10. Consent
Pursuant to Section 2.1(c)(ii)(A) of the Assignor Indenture, each Assignor Administrative Agent hereby consents to the sale of Assignor Receivables pursuant to this Agreement. Each of the Assignor Administrative Agents reserves its rights of approval and consent in its sole discretion with respect to future requests for removal of Designated Servicing Agreements. None of the

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Assignor Administrative Agents have waived any such rights and nothing in this Agreement and no delay on the part of the Assignor Administrative Agents in exercising any such rights should or shall be construed as a waiver of any such rights. The Assignor Depositor and the Assignee Depositor as the respective sole Certificateholders of the Assignor Issuer and Assignee Issuer (the “ Certificateholders ”) hereby authorize and direct each Owner Trustee to execute on behalf of the Assignor Issuer and Assignee Issuer (the “ Trusts ”) this Agreement and the Closing Agreement and any additional agreements or documents in connection with the foregoing necessary to consummate the transactions contemplated thereby, and the signatories hereto consent to the foregoing. The Certificateholders hereby certify that the above referenced actions are duly authorized pursuant to and in accordance with the Trust Agreements of the Trusts. In addition, the Certificateholders agree that all action taken by each Owner Trustee hereunder is covered by the fee and indemnification provision set forth in the Trust Agreements of the Trusts and that Wilmington Trust, National Association, shall be fully indemnified by the Certificateholders in connection with action taken pursuant hereto. This Section 10 shall be deemed to be effective immediately prior to the sale of the Assignor Receivables. Nationstar represents and warrants to the other parties hereto that it has given notice of the removal of the Assignee-Bound Servicing Agreements from the Assignor Indenture.
 

11. Miscellaneous .
(a) This Agreement and any claim, controversy or dispute arising under or related to or in connection with this Agreement, the relationship of the parties hereto, and/or the interpretation and enforcement of the rights and duties of the parties hereto shall be governed by and construed in accordance with the laws of the State of New York (without reference to the conflicts of law principles thereof other than Sections 5-1401 and 5-1402 of the New York General Obligations Law).
(b) This Agreement may not be amended except by an instrument in writing signed by all the parties hereto and with the written consent of the Assignee Administrative Agent. In addition, so long as the Notes (as defined in the Assignee Indenture) are outstanding, this Agreement may not be amended unless either (x) the majority of all Noteholders shall have consented thereto or (y) (i) the amendment is for a purpose for which the Assignee Indenture could be amended without the consent of the Assignee Administrative Agent and (ii) Nationstar shall have delivered to the Assignee Indenture Trustee an officer’s certificate to the effect that Nationstar reasonably believes that any such amendment could not have a material Adverse Effect (as defined in the Assignee Indenture) and is not reasonably expected to have a material Adverse Effect (as defined in the Assignee Indenture) on the Noteholders (as defined in the Assignee Indenture) of the Notes (as defined in the Assignee Indenture) at any time in the future. Any such amendment requested by Nationstar shall be at its own expense. Nationstar shall promptly notify each Note Rating Agency of any amendment of this Agreement, and shall furnish a copy of any such amendment to each such Note Rating Agency.

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(c) This Agreement shall inure to the benefit of the successors and assigns of the parties hereto. Any entity into which the Assignor, the Assignee, the Assignor Indenture Trustee, the Assignee Indenture Trustee, the Assignor Depositor, the Assignee Depositor or the Seller may be merged or consolidated in accordance with the terms and provisions of the “ Transaction Documents ” (as defined in the Assignee Indenture) shall, without the requirement for any further writing, be deemed the Assignor, the Assignee, the Assignor Indenture Trustee, the Assignee Indenture Trustee, the Assignor Depositor, the Assignee Depositor or the Seller, respectively, hereunder.
(d) Each of this Agreement, the Receivables Sale Agreement and the Receivables Pooling Agreement shall survive the conveyance of the Existing Receivables and the assignment of the Receivables Sale Agreement (to the extent assigned hereunder) and Receivables Pooling Agreement (to the extent assigned hereunder) by Assignor to Assignee and nothing contained herein shall supersede or amend the terms of the Receivables Sale Agreement or the Receivables Pooling Agreement.
(e) The parties hereto acknowledge and agree that the Assignee Administrative Agent and any other “ Secured Party ” (as such term is defined in the Assignee Indenture) is an intended third party beneficiary of this Agreement.
(f) This Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original and all such counterparts shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic transmission will be effective as delivery of a manually executed counterpart hereof.
(g) In the event that any provision of this Agreement conflicts with any provision of the Receivables Sale Agreement or the Receivables Pooling Agreement with respect to the Existing Receivables, the terms of this Agreement shall control.
(h) It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust, National Association, not individually or personally but solely as trustee of the Assignee and Assignor, 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 Assignee or Assignor is made and intended not as personal representations, undertakings and agreements by Wilmington Trust, National Association, but is made and intended for the purpose of binding only the Assignee, (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 Assignee or Assignor or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Assignee or Assignor under this Agreement or any other related documents.

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(i) Without limiting the Assignor’s or the Seller’s obligations hereunder or under any other document, Assignor and the Seller agree to identify all collections on the Assignor Receivables that were received by the Assignor or the Seller during the period beginning on the Cut-off Date through and including the date hereof and to transfer such amounts to the Collection and Funding Account under the Assignee Indenture as soon as practicably possible (but, in any event, no later than the funding date under the Assignor Indenture immediately following the date hereof).


[SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized signatories as o f the date first above written .

NATIONSTAR AGENCY ADVANCE FUNDING TRUST , as Assignor

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


By:     /s/ Adam B. Scozzafava            
Name:    Adam B. Scozzafava
Title:    Vice President


    

Signature Page to
NAAFT-NAART
Assignment, Assumption and Recognition Agreement


NATIONSTAR MORTGAGE LLC , as Seller


By:     /s/ Richard Delgado                
Name:    Richard Delgado
Title:    Senior Vice President


    

Signature Page to
NAAFT-NAART
Assignment, Assumption and Recognition Agreement


NATIONSTAR AGENCY ADVANCE FUNDING LLC , as Assignor Depositor


By:     /s/ Richard Delgado                
Name:    Richard Delgado
Title:    Senior Vice President

Signature Page to
NAAFT-NAART
Assignment, Assumption and Recognition Agreement


NATIONSTAR AGENCY ADVANCE FUNDING II LLC , as Assignee Depositor


By:     /s/ Richard Delgado                
Name:    Richard Delgado
Title:    Senior Vice President

Signature Page to
NAAFT-NAART
Assignment, Assumption and Recognition Agreement


NATIONSTAR AGENCY ADVANCE RECEIVABLES TRUST , as Assignee Issuer

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


By:     /s/ Adam B. Scozzafava            
Name: Adam B. Scozzafava    
Title:    Vice President



Signature Page to
NAAFT-NAART
Assignment, Assumption and Recognition Agreement



BARCLAYS BANK PLC , as an Assignor Administrative Agent


By:     /s/ Anthony Beshara                
Name:    Anthony Beshara
Title: Director


Signature Page to
NAAFT-NAART
Assignment, Assumption and Recognition Agreement


CREDIT SUISSE AG, NEW YORK BRANCH , as an Assignor Administrative Agent


By:     /s/ Jason Muncy            
Name:     Jason Muncy            
Title:     Vice President            





Signature Page to
NAAFT-NAART
Assignment, Assumption and Recognition Agreement

JPMORGAN CHASE BANK, N.A. , as Assignee Administrative Agent


By:     /s/ Jonathan P. Davis                
Name:    Jonathan P. Davis
Title: Executive Director

Signature Page to
NAAFT-NAART
Assignment, Assumption and Recognition Agreement

Acknowledged by:

THE BANK OF NEW YORK MELLON , as Assignor Indenture Trustee and as Assignee Indenture Trustee


By:     /s/ Michael D. Commisso            
Name:    Michael D. Commisso
Title: Vice President


By:     /s/ Michael D. Commisso            
Name:    Michael D. Commisso
Title: Vice President

Signature Page to
NAAFT-NAART
Assignment, Assumption and Recognition Agreement

SCHEDULE I

ASSIGNEE-BOUND SERVICING AGREEMENTS


Freddie Mac :

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Freddie Mac serviced for Freddie Mac under Seller/Servicer Number 160135, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $3,276,304,387 and include 84,472 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Freddie Mac serviced for Freddie Mac under Seller/Servicer Number 157336, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $19,145,870,468 and include 94,640 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Freddie Mac serviced for Freddie Mac under Seller/Servicer Number 157360, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $6,664,574,954 and include 30,220 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Freddie Mac serviced for Freddie Mac under Seller/Servicer Number 176734, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $6,329,594,280 and include 59,847 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Freddie Mac serviced for Freddie Mac under Seller/Servicer Number 176750, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $1,780,492,680 and include 9,835 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Freddie Mac serviced for Freddie Mac under Seller/Servicer Number 177891, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $787,237,272 and include 4,453 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Freddie Mac serviced for Freddie Mac under Seller/Servicer Number 152360, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $27,672,616,339 and include 10,3119 Mortgage Loans as of August 31, 2015.

Fannie Mae:

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-016-4, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $5,080,432,771 and include 33,222 Mortgage Loans as of August 31, 2015.




The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-019-9, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $7,468,458,144 and include 45,216 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-015-6, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $823,372,726 and include 5,109 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-012-1, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $7,303,331 and include 48 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-011-3, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $3,263,209,238 and include 22,261 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-027-0, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $135,371,607 and include 1,027 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-025-3, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $11,712,651 and include 133 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-024-5, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $1,377,830 and include 30 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-023-7, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $1,758,198,194 and include 19,147 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-022-9, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $11,212 and include 1 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-021-0, which Pool consists



of Mortgage Loans with an aggregate unpaid principal balance of $5,476,064 and include 124 Mortgage Loans as of August 31, 2015.

The Servicing Agreements of Nationstar Mortgage LLC related to the Pool of Mortgage Loans subject to the Fannie Mae serviced for Fannie Mae under Seller/Servicer Number 24147-020-2, which Pool consists of Mortgage Loans with an aggregate unpaid principal balance of $24,441,540 and include 480 Mortgage Loans as of August 31, 2015.




SCHEDULE II

FLOW OF FUNDS WIRE INSTRUCTIONS

[attached]



Exhibit 10.18

AMENDMENT NUMBER ELEVEN

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 ELEVEN (this “ Amendment ”) is made as of this 19th day of October 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, Amendment Number Nine to the Master Repurchase Agreement, dated as of October 20, 2014, and Amendment Number Ten to the Master Repurchase Agreement, dated as of March 26, 2015, 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. Effective as of October 19, 2015 (the “Effective Date”), the Repurchase Agreement is hereby amended as follows:
(a)      Section 2 of the Repurchase Agreement is hereby amended by deleting the defined term “Maturity Date” in its entirety and replacing it with the following:
“ Maturity Date ” means October 17, 2016.
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. In addition, as a condition precedent to the effectiveness of this Amendment, Seller agrees to pay to Purchasers a fee in an amount equal to $7,768,750, which fee shall be fully earned and non-refundable on the Effective Date and payable in twelve (12) equal monthly installments, with the first installment to be paid on the Effective Date





and the remaining monthly installments to be paid on the 20th day of each subsequent 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 3. REO . Seller shall, as soon as practicable but no later than January 31, 2016, (i) take all actions necessary to fully establish a special purpose entity (the “REO Subsidiary”) that will hold REO Properties related to foreclosures of HECM Buyout Loans, (ii) transfer any REO Property then subject to a Transaction to the REO Subsidiary, (iii) deliver to Purchaser the certificate representing 100% beneficial ownership interest in the REO Subsidiary and (iv) execute an amendment to the Repurchase Agreement in furtherance of the foregoing.
SECTION 4. Defined Terms . Any terms capitalized but not otherwise defined herein should have the respective meanings set forth in the Repurchase Agreement.
SECTION 5. 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 6. 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 7. 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 8. 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.
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- 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 Kierman
Name: Ellen Kierman
Title: Director
SUTTON FUNDING LLC,
Purchaser
By: /s/ Arvind Mohan
Name: Arvind Mohan
Title: Approved Signatory
NATIONSTAR MORTGAGE LLC,
Seller
By: /s/ Richard Delgado
Name: Richard Delgado
Title: Senior Vice President



Amendment Number Eleven to A&R Master Repurchase Agreement

Exhibit 10.28


AMENDMENT NUMBER NINE

to the
MORTGAGE LOAN PARTICIPATION PURCHASE AND SALE AGREEMENT
dated as of March 25, 2011
between
BARCLAYS BANK PLC
and
NATIONSTAR MORTGAGE LLC
This AMENDMENT NUMBER NINE (this “ Amendment ”) is made as of this 19th day of October, 2015, by and between Barclays Bank PLC (“ Purchaser ” and “ Agent ”) and Nationstar Mortgage LLC (“ Seller ”), to that certain Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 25, 2011 (as amended by that certain (i) Amendment and Waiver, dated as of February 17, 2012, (ii) Amendment Number One to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of February 29, 2012, (iii) Amendment Number Two to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of August 28, 2012, (iv) Amendment Number Three to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of December 24, 2012, (v) Amendment Number Four to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of July 18, 2013, (vi) Amendment Number Five to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of July 24, 2013, (vii) Amendment Number Six to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of September 20, 2013, (viii) Amendment Number Seven to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of August 21, 2014, and (ix) Amendment Number Eight to the Mortgage Loan Participation Purchase and Sale Agreement, dated as of October 20, 2014, each by and between Purchaser and Seller, and as further amended, restated, supplemented or otherwise modified from time to time, the “ Purchase Agreement ”), by and between Purchaser and Seller.
WHEREAS, Purchaser, Agent and Seller have agreed to amend the Purchase 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 . Effective as of October 19, 2015 (the “ Effective Date ”), the Purchase Agreement is hereby amended as follows:
(a) Section 1 of the Purchase Agreement is hereby amended by deleting the defined term “Maturity Date” in its entirety and replacing it with the following:
“ Maturity Date ” means October 17, 2016.
SECTION 2. Fees and Expenses . Seller agrees to pay to Purchaser all fees and out of pocket expenses incurred by Purchaser and Agent in connection with this Amendment, including all reasonable fees and out of pocket costs and expenses of the legal counsel to Purchaser and Agent incurred in connection with this Amendment, in accordance with Section 21 of the Purchase Agreement. In addition, as a condition precedent to the effectiveness of this Amendment, Seller shall have paid to Purchaser the fee set forth in Section 2 of Amendment Number Eleven to the Master Repurchase Agreement, dated as of the date hereof, by and among Seller, Purchaser and Sutton Funding LLC.




SECTION 3. Defined Terms . Any terms capitalized but not otherwise defined herein should have the respective meanings set forth in the Purchase Agreement.
SECTION 4. Limited Effect . Except as amended hereby, the Purchase Agreement shall continue in full force and effect in accordance with its terms. Reference to this Amendment need not be made in the Purchase 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 Purchase Agreement, any reference in any of such items to the Purchase Agreement being sufficient to refer to the Purchase Agreement as amended hereby.
SECTION 5. Representations . In order to induce Purchaser and Agent to execute and deliver this Amendment, Seller hereby represents to Purchaser 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, (ii) no default or event of default has occurred and is continuing under the Program Documents, and (iii) no Servicing Termination Event has occurred and is continuing under the Purchase Agreement.
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.

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- 2 -


IN WITNESS WHEREOF, Purchaser, 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 Kiernan
Name: Ellen Kiernan
Title: Director
NATIONSTAR MORTGAGE LLC,
Seller
By: /s/ Richard Delgado
Name: Richard Delgado
Title: Senior Vice President

Amendment Number Nine to Mortgage Loan Participation Purchase and Sale Agreement
1



Exhibit 10.45
June 24, 2015

Tony Ebers
Via E-Mail
Dear Tony:
Welcome to Nationstar Mortgage, LLC! We look forward to you joining our team. This letter will confirm our offer and your acceptance to join our team as Executive Vice President Originations.  You will report directly to me. The details of our offer are outlined below.

Position Title:
Executive Vice President Originations
    
Annual Base Salary:
You will be paid a bi-weekly salary of $17,308, which is equivalent to $450,000 on an annualized basis.
Bonus Opportunity:
You will be eligible to participate in the Executive Management Incentive Plan (EMIP). Your maximum annual bonus opportunity will be $2,500,000. Your target bonus will be 80% of your maximum bonus opportunity or $2,000,000. Your bonus will be based on achieving Company, business unit and individual performance goals established by the CEO. For 2015 your bonus is guaranteed to be not less than $1,200,000. In addition, you must be actively employed by Nationstar on the day the bonus is paid to receive an award.
Sign-On Bonus:
You will receive a sign-on bonus of $1,000,000 which will be paid within 30 days of your start date. You must be actively employed with Nationstar to receive the sign-on bonus. Should you voluntarily terminate employment with Nationstar without good reason within 12 months of your employment date, you will be required to reimburse Nationstar for the pro-rata portion of the sign-on bonus.

Sign-On Equity:
You will receive a Long Term Incentive award of $1,500,000 of restricted stock units of Nationstar Mortgage Holdings Inc., subject to the approval of the Compensation Committee of the Board of Directors. The units will be granted on the first day of the month following your hire date and will vest equally over three years.

Long Term Incentive Opportunity:
You will receive an annual equity award valued at $450,000. Your award will be granted in March 2016. Each award will vest equally over three years from the grant date. The award is subject to continued employment with Nationstar and approval by the Compensation Committee of the Board of Directors.

Relocation:
You are eligible to participate in Nationstar's Executive Homeowner Relocation Program with a maximum benefit of $375,000. You will be contacted by a relocation consultant from our relocation partner, Sirva, who will provide you with information about your relocation benefits and will support you with all the logistics throughout your move. Typically Nationstar provides tax assistance for most relocation expenses that are taxable to you in the form of a tax gross up. You will be required to reimburse Nationstar 100% of the relocation benefits you received if you voluntarily terminate employment within one year of your start date and you will be required to reimburse 50% of the relocation benefits you receive if you voluntarily terminate employment within two years of your start date.

2




Severance:
Should Nationstar terminate your employment without cause, you will be entitled to severance payment of twelve (12) months of your current salary plus a pro rata portion of your bonus at target; accrued benefits; and continuation of Executive’s coverage under the Company’s medical plan until the earlier of the period of time it takes executive to become eligible for the medical benefits program of a new employer or 12 months from the date of such termination, subject to providing Nationstar and their affiliates, as applicable, with a signed release of claims in a form adopted by such company from time to time, which shall contain reasonable and customary terms and conditions. Severance shall be paid bi-weekly in accordance with standard payroll practices.
Non-Solicit:
You agree that during the period of your employment and for the twelve (12) month period immediately following the date of your termination of employment with Nationstar for any reason, you shall not, directly or indirectly, solicit or induce any officer, director, employee, agent or consultant of Nationstar or any of their successors, assigns, subsidiaries or affiliates to terminate his, her or its employment or other relationship with Nationstar or any of their successors, assigns, subsidiaries or affiliates, or otherwise encourage any such person or entity to leave or sever his, her or its employment or other relationship with Nationstar or any of their successors, assigns, subsidiaries or affiliates, for any other reason.
Vacation:
Effective in 2015, you will receive four (4) weeks paid vacation.
Non-Competition:
You agree that while employed by Nationstar and for the twelve (12) month period immediately following your termination of employment, you shall not directly or indirectly, either as principal, agent, employee, employer, consultant, partner or shareholder in excess of five percent (5%) of a publicly traded corporation, corporate officer or director, or in any other representative capacity, engage or otherwise participate in any manner or fashion in any business that is in competition in any manner whatsoever with the lending business of Nationstar and its subsidiaries or of any other business in which Nationstar or its subsidiaries is engaged in at the time of your termination of employment, or which is part of Nationstar’s Developing Business, within states in which Nationstar is engaged in such business or Developing Business. For purposes of the foregoing, “Developing Business” shall mean the new business concepts and services Nationstar has developed and is in the process of developing during your employment with Nationstar. You further agree that this restrictive covenant is reasonable as to duration, terms and geographical area and that the same protects the legitimate interests of Nationstar and its respective affiliates, imposes no undue hardship on you, is not injurious to the public, and that any violation of this of this restrictive covenant shall be specifically enforceable in any court with jurisdiction upon short notice. Following termination of employment with Nationstar, or affiliate, should you subsequently accept employment with a competitor, as defined above, you agree to forfeit Severance as defined in the Severance section of this offer letter.
Employment at Will :
Nothing herein constitutes an offer of employment for any definite period of time. The employment relationship is "at-will" which affords you and Nationstar the right to terminate the relationship at any time for no reason or any reason.
Anticipated Start Date:
TBD
At Nationstar Mortgage, we believe our employees are our most important assets.  As such, we will commit to providing you with an environment which provides you with an opportunity to become involved, to apply your skills and talents, and to make a difference.

Should you accept employment with Nationstar, you will be eligible for a maximum of 20 vacation days annually, earned and accrued on a per pay-period basis. On the first day of the month following your first day of employment, you will be eligible to participate in a variety of health and welfare plans including medical, dental, life, disability, sick leave, vacation,

3


and paid holidays. You will also be eligible to participate in the Nationstar 401(k) retirement plan. More information about these benefits will be provided to you during New Hire Orientation.

If you have or had any agreement or contract with any previous employer or any other entity that would restrict or impair your ability to work for Nationstar, call upon its customers, or prospective customers, or assist Nationstar in recruiting employees, you must immediately notify us. Also, please be advised that Nationstar prohibits all employees from using trade secrets or other confidential information (verbal, written, electronics or otherwise) they may have acquired from any prior employer. Nationstar also prohibits employees from bringing any former employer’s confidential information on to Nationstar’s property, including its computer systems, databases, and company-owned or paid-for equipment. If you have any proprietary or confidential information of any prior employer, you are required to retain the same. However, you are not to use that information in any way in your job at Nationstar.

This offer is contingent upon the following:

•
Proof of eligibility and employment authorization in accordance with governmental (I-9) requirements,
•
Obtaining satisfactory criminal, employment, and education background checks,
•
Completing all new hire paperwork, which you will receive in the days after you sign and
date this letter.

Tran, we look forward to you playing a vital role at Nationstar. Please feel free to contact me if you have any questions.

Sincerely,

/s/ Jay Bray

Jay Bray
Chief Executive Officer, Nationstar Mortgage




I, Tony Ebers, accept and agree to all the terms and conditions contained in this offer letter.


/s/ Tony Ebers         ______________________________
Tony Ebers    Date



I understand and agree that if I am hired by Nationstar Mortgage or any affiliate of Nationstar Mortgage that my employment relationship with Nationstar Mortgage or any affiliate of Nationstar Mortgage to whom I may hereafter be assigned, will be as an “employee at-will.”  Nationstar Mortgage retains the right to terminate my employment relationship at any time with or without cause, without notice, and without incurring any liability to me.  I further understand and agree that any agreement providing for a term of employment or any agreement restricting or limiting the right of Nationstar Mortgage or any affiliate to terminate my employment relationship for just cause is not binding, unless such an agreement is made in writing and signed by the CEO of Nationstar Mortgage and me. This offer is contingent upon successful completion of a background investigation.

1



Exhibit 10.46
July 6, 2015

Mike Rawls
Dear Mike:
Congratulations on your promotion to the Executive Vice President of Servicing effective June1, 2015. I wanted to take this opportunity to formally lay out the compensation details of your new position

    
Annual Base Salary:
Your base salary will be increased from $350,000 to $375,000.
Bonus Opportunity:
You will be eligible to participate in the Executive Management Incentive Plan (EMIP). Your maximum annual bonus opportunity will be increased from 250% to 300%. This means that your target bonus opportunity will be increasing from $525,000 to $675,000.
Off-Cycle Equity:
You will receive a Long Term Incentive award of $150,000 of restricted stock units of Nationstar Mortgage Holdings Inc., subject to the approval of the Compensation Committee of the Board of Directors. The units will be granted on the first day of the month following your hire date and will vest equally over three years.

Long Term Incentive Opportunity:
Beginning in 2016, you will be eligible for an increased annual equity award target commensurate with the rest of the Executive Committee.


Severance:
Should Nationstar terminate your employment without cause (to include a Change in Control), you will be entitled to severance payment of twelve (12) months of your current salary plus a pro rata portion of your current year bonus at target; accrued benefits; and continuation of Executive’s coverage under the Company’s medical plan until the earlier of the period of time it takes executive to become eligible for the medical benefits program of a new employer or 12 months from the date of such termination, subject to providing Nationstar and their affiliates, as applicable, with a signed release of claims in a form adopted by such company from time to time, which shall contain reasonable and customary terms and conditions. Severance shall be paid bi-weekly in accordance with standard payroll practices.

Mike, we look forward to you playing this vital role at Nationstar. Please feel free to contact me if you have any questions.

Sincerely,

/s/ Jay Bray

Jay Bray
Chief Executive Officer, Nationstar Mortgage

Exhibit 10.54



FORM OF NATIONSTAR MORTGAGE HOLDINGS INC.
AMENDED & RESTATED RESTRICTED STOCK UNIT AGREEMENT

Grantee:
Grant Date:
Number of Restricted Stock Units:
General Vesting Schedule: Ratably over 3 years from the Grant Date

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. The Company may elect to settle Restricted Stock Units granted herein in (i) shares of Common Stock, (ii) an amount in cash equal to the Fair Market Value of a share Common Stock on the date of vesting or (iii) a combination thereof.

2. Vesting . 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; 33.3% of the Restricted Stock Units shall vest on the second anniversary of the Grant Date; and 33.4% of the Restricted Stock Units shall vest on the third anniversary of the Grant Date; provided that the Grantee remains continuously a member of the Board of Directors of the Company through the vesting date. Notwithstanding the foregoing, (i) in the event that the Grantee’s service as a member of the Board of Directors 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 service 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. No fractional shares shall be issuable upon settlement, and the number of shares to be issued shall be rounded up to the nearest whole share.

For purposes of this Agreement, “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.


1

Exhibit 10.54



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. Deferral Election . The Grantee may elect to defer the date the Restricted Stock Units and any associated dividend equivalents are converted into shares of Common Stock or cash, as applicable, and delivered to Grantee by completing and submitting to the Company a deferral election form as approved by the Committee no later than December 31 of the calendar year preceding the Grant Date. The election shall apply only to the Restricted Stock Units under this Agreement and a new election must be made for any future grants of Restricted Stock Units under the Plan. The Committee may, in its sole discretion, establish further rules and procedures for such deferral elections.

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 service as a member of the Board of Directors of the Company ends for any reason, shall immediately be forfeited on such date.

6. 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.

7. Incorporation of the Plan . 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.

8. 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.


2

Exhibit 10.54



9. 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.

3

Exhibit 10.54





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]


4


Exhibit 12.1


RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth information regarding our ration of earnings to fixed charges for each of the periods shown. For purposes of calculating this ratio, (i) earnings consist of income (loss) from continuing operations before provision (benefit) for income taxes and fixed charges and (ii) fixed charges consist of interest expense, which includes amortization of deferred financing charges, and imputed interest on our lease obligations. The interest component of rent was determined based on an estimate of a reasonable interest factor at the inception of the leases.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011
 
2012
 
2013
 
2014
 
2,015
Calculation of income/(loss) from continuing operations before income taxes and fixed charges
 
 
 
 
 
 
 
 
 
 
Net income from continuing operations
 
$
20,887

 
$
205,287

 
$
217,054

 
$
221,024

 
$
43,163

Income tax expense
 
—

 
71,296

 
129,200

 
64,860

 
11,012

Loss from equity method investments
 
107

 
14,571

 
—

 
—

 
—

Fixed Charges
 
109,039

 
202,470

 
547,781

 
523,649

 
612,280

Earnings as adjusted
 
$
130,033

 
$
493,624

 
$
894,035

 
$
809,533

 
$
666,455

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Calculation of fixed charges
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
$
105,375

 
$
197,308

 
$
538,805

 
$
516,387

 
$
605,223

 
Interest on lease obligations
 
3,664

 
5,162

 
9,148

 
7,262

 
7,057

Total fixed charges
 
$
109,039

 
$
202,470

 
$
547,953

 
$
523,649

 
$
612,280

 
 
 
 
 
 
 
 
 
 
 
 
Calculation of Earnings to Fixed Charges
 
1.19

 
2.44

 
1.63

 
1.55

 
1.09

 
 
 
 
 
 
 
 
 
 
 
 
Coverage deficiencies
 
—

 
—

 
—

 
—

 
—






Exhibit 21.1

Subsidiaries of Registrant

 
 
 
 
 
 
 
Subsidiaries
 
Jurisdiction of Organization
 
 
Nationstar Sub1 LLC
 
Delaware
 
 
Nationstar Mortgage LLC
 
Delaware
 
 





Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1)
Registration Statement (Form S-3 No. 333-202397) of Nationstar Mortgage Holdings Inc., and

(2)
Registration Statement (Form S-8 No. 333-183332) pertaining to the 2012 Incentive Compensation Plan of Nationstar Mortgage Holdings Inc.;

of our reports dated March 1, 2016, with respect to the consolidated financial statements of Nationstar Mortgage Holdings Inc., and the effectiveness of internal control over financial reporting of Nationstar Mortgage Holdings Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2015.

/s/ Ernst & Young LLP

Dallas, Texas
March 1, 2016





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 annual report on Form 10-K for the year ended December 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:
March 1, 2016
 
 
 
/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 annual report on Form 10-K for the year ended December 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:
March 1, 2016
 
 
 
/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 annual report of Nationstar Mortgage Holdings Inc. (the “Company”) on Form 10-K for the year ended December 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:
March 1, 2016
 
/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 annual report of Nationstar Mortgage Holdings Inc. (the “Company”) on Form 10-K for the year ended December 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:
March 1, 2016
 
/s/ Robert D. Stiles
 
Robert D. Stiles
 
Chief Financial Officer