8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 7, 2015 (April 6, 2015)

New Residential Investment Corp.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

001-35777	45-3449660
(Commission File Number)	(IRS Employer Identification No.)

1345 Avenue of the Americas, 46th Floor New York, New York	10105
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (212) 479-3150

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

x Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Introductory Note

Initial Merger Agreement

As previously disclosed, on February 22, 2015, New Residential Investment Corp., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Initial Merger Agreement”) with Home Loan Servicing Solutions, Ltd., a Cayman Islands exempted company (“HLSS”), and Hexagon Merger Sub, Ltd., a Cayman Islands exempted company and a wholly owned subsidiary of the Company (“Merger Sub”), as filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on February 24, 2015. As described in more detail below, on April 6, 2015, the parties terminated the Initial Merger Agreement pursuant to the Termination Agreement (as defined below) and simultaneously entered into the Acquisition Agreement (as defined below).

The Initial Merger Agreement provided that, upon the terms and subject to the conditions set forth therein, Merger Sub would have merged with and into HLSS, with HLSS continuing as the surviving company and a wholly owned subsidiary of the Company, and at the effective time of the merger, each ordinary share of HLSS issued and outstanding immediately prior to the effective time (except as set otherwise forth in the Initial Merger Agreement), would have been automatically converted into the right to receive $18.25 in cash, without interest (the “Initial Merger”).

Conditions to the Consummation of the Initial Merger

Each party’s obligation to consummate the Initial Merger was subject to various conditions, including, without limitation, the accuracy of the other party’s representations and warranties, both as of the date of signing and closing. Among other representations and warranties to the Company, HLSS would have been required to represent as of the closing of the Initial Merger that it had filed all reports required to be filed with the SEC (including, for example, its Annual Report on Form 10-K for the year ended December 31, 2014 (the “Annual Report”)).

Each party’s obligation to consummate the Initial Merger was also subject to the other party’s compliance with its covenants and agreements contained in the Initial Merger Agreement. Among other covenants and agreements, HLSS agreed to provide notice to the Company within twenty-four (24) hours of becoming aware that HLSS was reasonably likely to receive a going concern qualification from its auditors with respect to its then-most recent fiscal year (a “Going Concern Qualification”). The Initial Merger Agreement specified that, upon the receipt by HLSS of a Going Concern Qualification, the Company would have the right to immediately terminate the Initial Merger Agreement.

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Events following the Entry into the Initial Merger Agreement

On March 3, 2015, HLSS filed a Form 12b-25 with the SEC, stating that HLSS required additional time to complete its Annual Report in order to complete an assessment of recent events related to HLSS’s business and determine the impact on HLSS’s financial statements and related disclosures. In this filing, HLSS also stated that it expected to file the Annual Report within the fifteen (15) day extension period under Rule 12b-25(b)(ii) of the Securities Exchange Act of 1934, as amended, or by March 17, 2015.

On March 18, 2015, HLSS filed a Current Report on Form 8-K with the SEC that disclosed that HLSS would need additional time to complete its Annual Report “to prepare information relating to its ability to operate as a going concern.” Also on March 18, 2015, The Nasdaq Stock Market LLC notified HLSS that it was no longer in compliance with Nasdaq Listing Rule 5250(c)(1) for continued listing because of the failure to timely file its Annual Report, and HLSS was given until May 18, 2015 to submit a plan to regain compliance.

While HLSS was preparing information relating to its ability to operate as a going concern, HLSS continued to work on a management plan that included the following elements:

• Negotiating certain commitments from various lenders for replacement advance financing, though never consummated;

• Selling its entire portfolio of re-performing loans for an immaterial gain and concurrently repaying the related borrowings in full;

• Marketing its Government National Mortgage Association early buy-out loan portfolios and extending the maturity of the related borrowings to allow for continued marketing;

• Working closely with its legal counsel to address BlueMountain’s allegations of default (described below), which it believes are without merit, and any potential impact of such allegations on its advance financing facilities; and

• Amending its senior secured term loan facility agreement to extend the deadline to furnish annual financial statements to April 10, 2015, to amend certain terms of cross default to its advance financing facilities and to permit an amendment to that certain Subservicing Agreement between HLSS Holdings, LLC (“HLSS Holdings”) and Ocwen Loan Servicing, LLC (together with Ocwen Financial Corporation and its subsidiaries, “Ocwen”), dated as of October 1, 2012 (the “Ocwen Subservicing Agreement”).

HLSS also began discussing with the Company whether an alternative transaction could be structured, if needed, to alleviate concerns about HLSS’s ability to operate as a going concern. HLSS also stated that the termination of the Initial Merger Agreement, in the absence of an alternative transaction, would increase the likelihood that it would receive a Going Concern Qualification.

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HLSS discussed with the Company the potential material adverse effects of receiving a Going Concern Qualification, including an event of default under both HLSS’s Senior Secured Term Loan Facility Agreement, dated as of June 27, 2013 (the “Term Loan”), and HLSS’s mortgage loan repurchase facility, each of which would, independently, cause an automatic event of default and amortization under HLSS’s advance financing facilities. The Company and HLSS, together with their respective legal and financial advisors, began to analyze and discuss a number of alternative transactions that could potentially be consummated in lieu of the Initial Merger.

On March 20, 2015, HLSS entered into an amendment to the Term Loan in order to extend to April 10, 2015, the deadline thereunder for HLSS to furnish its annual financial statements, and to amend certain terms of the cross-default to HLSS’s advance financing facilities. In addition, consent was granted thereunder to permit certain amendments to the Ocwen Subservicing Agreement.

Throughout the period following HLSS’s failure to timely file its Annual Report, HLSS and the Company, together with their respective advisors, engaged in extensive discussions and negotiations in an effort to find a mutually beneficial solution and in light of HLSS’s ongoing consideration of its ability to continue as a going concern. On April 6, 2015, HLSS provided formal notice to the Company that it was reasonably likely to receive a Going Concern Qualification, unless the parties entered into an alternative transaction.

Based on the shared expectation of the Company and HLSS that HLSS could not satisfy the conditions to the consummation of the Initial Merger set forth in the Initial Merger Agreement, HLSS and the Company finalized the terms of an alternative transaction (described below). The alternative transaction enabled HLSS to file the Annual Report, including an unqualified opinion of its auditors, on April 6, 2015.

On April 6, 2015, with the approval of their respective Boards of Directors, New Residential and HLSS, together with certain of their respective subsidiaries, entered into the Termination Agreement (providing for the termination of the Initial Merger Agreement) and simultaneously entered into the Acquisition Agreement.

Item 1.01 Entry into a Material Definitive Agreement.

Termination Agreement

As described above, on April 6, 2015, simultaneously with the execution of the Acquisition Agreement (as described below), the Company, HLSS and Merger Sub entered into a Termination Agreement (the “Termination Agreement”) to terminate (the “Termination”) the Initial Merger Agreement.

As a result of the Termination, in accordance with the terms of the Termination Agreement, (i) the Initial Merger Agreement was terminated (including provisions of the Initial Merger Agreement that by their terms would have otherwise survived a termination thereof) and (ii) the Company and Merger Sub, on the one hand, and HLSS, on the other hand, mutually released the other from any liability with respect to claims related to the Initial Merger Agreement or the transactions contemplated thereby.

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Acquisition Agreement

As described above, on April 6, 2015, the Company entered into a Share and Asset Purchase Agreement (the “Acquisition Agreement”) with HLSS, HLSS Advances Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the Company (“HLSS Advances”), and HLSS MSR-EBO Acquisition LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (together with HLSS Advances, the “Buyers”). Pursuant to the Acquisition Agreement, the Buyers acquired from HLSS substantially all of the assets of HLSS (including all of the issued share capital of HLSS’s first-tier subsidiaries) and assumed (and agreed to indemnify HLSS for) the liabilities of HLSS (together, the “Acquisition”) with the exception of the Term Loan, which was paid off as described below, other than post-closing liabilities in an amount upto the Retained Amount (as defined below), for aggregate consideration (net of certain transaction expenses being reimbursed by HLSS), consisting of approximately $1.007 billion in cash and 28,286,980 shares of common stock, par value $0.01 per share (representing 19.9% of the number of shares outstanding immediately prior to issuance) (“Company Common Stock”), of the Company delivered to HLSS in a private placement (the “Share Transfer”). The closing of the Acquisition (the “Acquisition Closing”) occurred simultaneously with the execution of the Acquisition Agreement. The Term Loan was paid off prior to closing the Acquisition.

The Acquisition Agreement includes certain customary post-closing covenants of the Company, the Buyers and HLSS. In addition, in connection with the Acquisition, the Board of Directors of HLSS also approved a wind down plan (the “Distribution and Liquidation Plan”), pursuant to which, as promptly as practicable after the date thereof, HLSS will endeavor to sell the shares of Company Common Stock received in the Acquisition and to distribute to HLSS shareholders the cash consideration from the Acquisition and the cash proceeds from the sale of shares of Company Common Stock; provided that under the terms of the Distribution and Liquidation Plan, HLSS will retain $50,000,000 of cash (the “Retained Amount”) for wind down costs (one or more such distributions, collectively, the “Distribution”).

Registration Rights Agreement

At the Acquisition Closing, the Company entered into a Registration Rights Agreement, dated as of April 6, 2015, with HLSS (the “Registration Rights Agreement”) providing HLSS with certain customary “demand” and “piggyback” registration rights in respect of Company Common Stock. Pursuant to the Registration Rights Agreement, HLSS may (i) during the period from the earlier of (x) the closing of the first underwritten offering of Company Common Stock following the Acquisition Closing, and (y) 10 business days after the Acquisition Closing, until the second anniversary of the Acquisition Closing, exercise up to two “demands” that the Company register under the Securities Act of 1933, as amended (the “Securities Act”), shares of Company Common Stock held by HLSS and (ii) cause the Company to include shares of

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Company Common Stock held by HLSS in certain public offerings of securities initiated by the Company or other stockholders of the Company, in each case subject to certain limitations and exceptions and customary provisions relating to indemnification and expenses.

Services Agreement

At the Acquisition Closing, HLSS Advances entered into a Services Agreement, dated as of April 6, 2015, with HLSS (the “Services Agreement”). Pursuant to the Services Agreement, HLSS Advances has agreed to manage the assets and affairs of HLSS in accordance with terms and conditions set forth therein and, in all cases, in accordance with the Distribution and Liquidation Plan. The Services Agreement provides that HLSS Advances will be responsible for the operations of HLSS and will perform (or cause to be performed) such services and activities relating to the assets and operations of HLSS as may be appropriate, including, among other things, administering the Distribution and Liquidation Plan and handling all claims, disputes or controversies in which HLSS is a party or may otherwise be involved. HLSS Advances will not be compensated by HLSS for its services under the Services Agreement but will be reimbursed by HLSS for expenses incurred on behalf of HLSS. The Services Agreement provides for an initial one-year term and, unless terminated, will be deemed renewed automatically on each anniversary of the Acquisition Closing for successive one-year periods. HLSS Advances may elect not to renew the Services Agreement upon written notice at least 60 days prior to an anniversary date of the Services Agreement. HLSS may terminate the Services Agreement upon 30 days’ written notice to HLSS Advances in the event of any act of fraud, misappropriation of funds, or embezzlement against HLSS or other willful violation of the Services Agreement by HLSS Advances or in the event of any gross negligence on the part of HLSS Advances in the performance of its duties thereunder.

New Merger Agreement

At the Acquisition Closing, the Company and Merger Sub entered into an Agreement and Plan of Merger, dated April 6, 2015, with HLSS (the “New Merger Agreement”), pursuant to which, upon the terms and subject to the conditions set forth therein (including the approval of HLSS’s shareholders), HLSS (which at the time of the New Merger (as defined below) will have previously sold substantially all of its assets and transferred all liabilities (with the exception of the Term Loan which was paid off prior to closing the Acquisition) to the Buyers, and is expected to have distributed the proceeds (other than the Retained Amount) received from such sale to HLSS shareholders and substantially wound-down its operations) will merge with and into Merger Sub, with Merger Sub continuing as the surviving company and a wholly owned subsidiary of the Company (the “New Merger”).

Pursuant to the New Merger Agreement, and upon the terms and conditions set forth therein, at the effective time of the New Merger (the “Effective Time”), each ordinary share of HLSS, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time (other than those shares of HLSS owned by the Company or any direct or indirect wholly-owned subsidiary of the Company and shares of HLSS as to which dissenters’ rights have been properly exercised), will be automatically converted into the right to receive (i) $0.704059 per share in cash, without interest, if all of the shares of Company Common Stock received in the Share Transfer have not been sold by HLSS pursuant to the Distribution and Liquidation Plan prior to

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the Effective Time, or (ii) (A) $0.704059 per share in cash, without interest, plus (B) 93.91% of the value of the shares of Company Common Stock received in the Share Transfer that have not been sold by HLSS pursuant to the Distribution and Liquidation Plan prior to the Effective Time, if all or a portion of such shares have not been sold by HLSS prior to the Effective Time, pro rata per each outstanding share of HLSS.

The New Merger Agreement contains certain customary representations and warranties made by each party, which are qualified by matters included in the Company’s and HLSS’s reports filed with the SEC prior to the date of the New Merger Agreement, as well as, in the case of HLSS, the confidential disclosures provided to the Company in connection with the New Merger Agreement. The Company and HLSS have agreed to various covenants regarding the conduct of HLSS’s business prior to the closing of the New Merger (the “New Merger Closing”), including covenants that HLSS shall not conduct any business except (i) as required by applicable law, (ii) as expressly required by the Distribution and Liquidation Plan consistent with the Services Agreement or (iii) as required to comply with its obligations pursuant to the Acquisition Agreement, the Registration Rights Agreement and the Services Agreement.

The New Merger does not require the approval of the Company’s shareholders. However, consummation of the New Merger is subject to, among other things: (i) approval of the New Merger by the requisite vote of HLSS’s shareholders (the “HLSS Shareholder Approval”), (ii) not more than 10% of HLSS’s issued and outstanding shares properly exercising appraisal rights as of the time immediately before the New Merger Closing and (iii) certain other customary closing conditions. Moreover, each party’s obligation to consummate the New Merger is subject to certain other conditions, including without limitation, (i) the accuracy of the other party’s representations and warranties and (ii) the other party’s compliance with its covenants and agreements contained in the New Merger Agreement (in each case subject to customary materiality qualifiers). In addition, the obligations of the Company and Merger Sub to consummate the New Merger are subject to the absence of any Company Material Adverse Effect (as defined in the New Merger Agreement).

The New Merger Agreement may be terminated by either party under certain circumstances, including, among others: (i) if the New Merger Closing has not occurred by the nine-month anniversary of the New Merger Agreement; (ii) if a court or other governmental entity has issued a final and non-appealable order prohibiting the New Merger Closing; (iii) if HLSS fails to obtain the HLSS Shareholder Approval; and (iv) upon a material uncured breach by the other party that would result in a failure of the conditions to the New Merger Closing to be satisfied.

Item 1.02 Termination of a Material Definitive Agreement.

The information set forth in Item 1.01 of this Current Report on Form 8-K with respect to the Termination is hereby incorporated into this Item 1.02 by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

The information set forth in Item 1.01 of this Current Report on Form 8-K with respect to the Acquisition is hereby incorporated into this Item 2.01 by reference.

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Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

Subsidiaries of HLSS acquired in the Acquisition have material outstanding indebtedness, consisting of two servicer advance financing facilities, a master repurchase facility to finance early buy-out (“EBO”) loans and a note facility to finance a note issued under the HSART facility (as defined below).

In addition, pursuant to a Master Servicing Rights Purchase Agreement among Ocwen Loan Servicing, LLC, HLLS and HLSS Holdings (the “Master Servicing Rights Purchase Agreement”), HLSS Holdings is required to purchase from Ocwen Loan Servicing, LLC all outstanding and future servicer advances arising under mortgage loans serviced by Ocwen Loan Servicing, LLC with an aggregate unpaid principal balance of approximately $160.8 billion. The purchase price payable to Ocwen Loan Servicing, LLC for such servicer advances is equal to the outstanding balance of such servicer advances. As of December 31, 2014, the outstanding balance of servicer advances held by HLSS Holdings and its subsidiaries equaled $6.1 billion. In addition, pursuant to the Master Servicing Rights Purchase Agreement, HLSS Holdings is required to pay to Ocwen Loan Servicing, LLC certain monthly and performance fees for servicing mortgage loans in respect of which HLSS Holdings and HLSS have acquired rights to servicing fee payments from Ocwen Loan Servicing, LLC.

Servicer Advance Financing Facilities

One servicer advance financing facility (the “HSART facility”) is a master trust financing facility with three series of outstanding variable funding notes and eight series of outstanding term notes. As of April 6, 2015, the aggregate outstanding principal balance of term notes is $2,863,000,000. Subject to limitations on the outstanding note principal balances based on the amount of eligible collateral in the HSART facility, as of April 6, 2015, the aggregate maximum principal balance that can be drawn on the variable funding notes issued under the HSART facility is equal to $4,350,000,000. If there is not sufficient outstanding collateral to support the outstanding term notes under the HSART facility, collections on the collateral securing the HSART facility may be required to cash collateralize the term notes prior to the date on which the term notes may be repaid or redeemed.

The variable funding notes issued under the HSART facility revolve until April 4, 2016 and will then become due and payable on the next payment date under the HSART facility unless extended. The outstanding term notes have differing terms and dates on which principal amounts are required to be paid. Those payment dates (the “expected repayment dates”) range from May 15, 2015 at the earliest (and then only for certain notes) to June 15, 2018 at the latest (and then only for certain notes).

The term notes are generally not permitted to be redeemed prior to their expected repayment dates unless an event of default, facility early amortization event or target amortization event applicable to those notes occurs. The variable funding notes are provided by

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Wells Fargo Bank, N.A., Credit Suisse and Barclay Bank PLC. The notes issued under the HSART facility can become due and payable prior to their related expected repayment dates and/or maturity dates if any event of default, target amortization event or facility early amortization event occurs. As of April 3, 2015, the outstanding obligations under the HSART facility equaled approximately $4,649,349,953.87. The weighted average interest rate of the notes under the HSART facility as of April 3, 2015 was equal to 1.85827%.

On January 23, 2015, counsel for BlueMountain Capital Management, LLC (“BlueMountain”), the purported investment manager to certain owners of the HSART facility term notes, sent a letter to HLSS Holdings, HLSS Service Advance Receivables Trust, as issuer, and Deutsche Bank, as among other things indenture trustee, alleging certain events of default had occurred and were continuing under the Sixth Amended and Restated Indenture, dated as of January 17, 2014, by and among HLSS Servicing Advance Receivables Trust, Deutsche Bank National Trust Company, HLSS Holdings, Ocwen Loan Servicing, LLC, Wells Fargo Securities, LLC and Credit Suisse AG, New York Branch, which governs HLSS’s notes issued by the HLSS Servicer Advance Receivables Trust (the “HSART Trust”). On February 17, 2015, HLSS’s subsidiary, HLSS Holdings, and HSART Trust entered an agreement (the “February 2015 HSART Agreement”) with Deutsche Bank National Trust Company (the “Indenture Trustee”) that it will not commence a judicial proceeding to seek judicial guidance regarding the allegations made in the BlueMountain letter before April 16, 2015. Further, HLSS Holdings has agreed to allow the Indenture Trustee to withhold from distribution certain excess funds that would otherwise be distributable to HSART Trust in an amount up to the Interest Accrual Differential (as defined in the February 2015 HSART Agreement) (or similar amount). The effect of this agreement will be to increase the amount deposited and held in debt service accounts by approximately $11.8 million per month.

On February 20, 2015, counsel to BlueMountain sent another letter alleging that additional events of default under the indenture governing notes issued by the HSART Trust had occurred and were continuing since its previous letter on January 23, 2015. The Company’s inability to resolve these issues favorably could result in a prolonged withholding of the excess funds by the Indenture Trustee, the forfeiture of such funds, the Company’s inability to purchase required servicer advances from Ocwen Loan Servicing, LLC with funds from the HSART facility or otherwise, and an increase in any replacement debt incurred to purchase such servicer advances, any of which could have a material adverse effect on the Company’s business, financial condition, liquidity and results of operations.

The other servicer advance facility (the “HSART II facility”) is a bilateral financing facility provided by Barclays Bank PLC. Subject to limitations on the outstanding note principal balances based on the amount of eligible collateral in the HSART II facility, the aggregate maximum principal balance that can be drawn on the variable funding notes issued under the HSART II facility is equal to $625,000,000. The variable funding notes issued under the HSART II facility revolve until December 3, 2015 and will then become due and payable on the next payment date under the HSART II facility unless extended. The notes issued under the HSART II facility can become due and payable prior to their related expected repayment dates and/or maturity dates if any event of default, target amortization event or facility early amortization event occurs. As of April 3, 2015, the outstanding obligations under the HSART II facility equaled approximately $524,968,291.88. The weighted average interest rate of the notes under the HSART II facility as of April 3, 2015 was equal to 1.78331%.

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Each of the HSART and HSART II facilities includes events of default, facility early amortization events and target amortization events, as applicable, including, without limitation, those related to the following matters (i) payment default, (ii) covenant violation by Ocwen Loan Servicing, LLC and HLSS Holdings, (iii) insolvency of Ocwen Loan Servicing, LLC and HLSS Holdings, (iv) representation and warranty breaches by the transaction parties, (v) financial covenants with respect to the Company and certain liquidity requirements with respect to Ocwen, (vi) cross-default with respect to HLSS, HLSS Holdings and Ocwen, (vii) material judgment default with respect to HLSS Holdings and Ocwen Loan Servicing, LLC, (viii) change of control with respect to Ocwen Loan Servicing, LLC and the Company, (ix) failure of collateral coverage, (x) failure of certain tests related to collateral performance, (xi) downgrades of the related notes by the applicable note rating agency and (xii) defaults with respect to matters relating to the Investment Company Act of 1940, as amended. The occurrence of any of the foregoing may cause the related notes to become due and payable prior to the scheduled maturity date and otherwise materially and adversely affect liquidity. After the occurrence of one of the foregoing events, all collections on the related collateral is generally required to be applied to repay the notes and future draws on any variable funding notes are generally not permitted. In addition, upon the occurrence of an event of default, subject to the terms of the facility documents, the notes may be accelerated.

Draws on the variable funding notes issued pursuant to the HSART facility and the HSART II facility and access to excess collections on the collateral securing the related variable funding notes and term notes are subject to a variety of conditions, including accuracy of representations, compliance with the transaction agreements, absence of defaults and satisfactory collateral coverage.

Default interest in an amount equal to 3.00% per annum of the outstanding balance of the notes issued under the HSART and HSART II notes accrues after the occurrence of an event of default under the applicable facility. In addition, the interest rate on any note issued under the HSART and HSART II notes is increased by 1.00% per annum if the particular note is not repaid or redeemed by its expected repayment date. The issuer of the notes under the HSART facility and the HSART II facility is required to pay an unused fee on any undrawn committed amounts in respect of any variable funding notes issued thereunder.

The collateral securing the HSART and HSART II facilities consists of rights to reimbursement for servicer advances and certain deferred servicing fees in respect of mortgage loans for which HLSS Holdings has acquired Rights to MSRs from Ocwen Loan Servicing, LLC. The maximum amount that may be outstanding under the HSART and HSART II facilities is subject to a borrowing base which is determined based on advance rates for the particular types of collateral and concentration limits.

For each of the HSART facility and the HSART II Facility, HLSS Holdings sells or contributes rights to payments for servicer advances and certain deferred servicing fees to a depositor entity (which is a wholly-owned subsidiary of HLSS Holdings) and the related depositor entity then sells or contributes such rights to payment to an issuer entity (which is a wholly-owned subsidiary of the depositor entity). The issuer entity then pledges such rights to payment to secure the payment of the related notes.

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Each of the depositor entities and the issuer entities is structured as a bankruptcy remote special purpose entity and is the sole owner of its respective assets. Creditors of each of the depositor entities and the issuer entities (including the holders of the related notes) have no recourse to any assets or revenues of the Company or HLSS Holdings other than to the limited extent of the Company’s or HLSS Holdings’ obligations with respect to various representations and warranties, covenants and indemnities under the related facility. These representations and warranties, covenants and indemnities include: (i) various representations and warranties as to the nature of the receivables and (ii) covenants to service and administer the collateral. Creditors of the Company and HLSS do not have recourse to any assets or revenues of either of the issuer entities or the depositor entities.

EBO Facility

Subsidiaries of HLSS acquired in the Acquisition finance certain of their Government National Mortgage Association EBO loans under a master repurchase agreement (the “EBO facility”) with Barclays Bank PLC and/or affiliates of Barclays Bank PLC. The obligations thereunder will become due and payable on May 1, 2015 unless extended. As of April 3, 2015, the outstanding obligations under the master repurchase agreement equaled approximately $486,827,627.37 and the weighted average interest rate thereunder was equal to 2.9529% per annum.

The EBO facility includes various events of default related to, among other things, the following matters: (i) payment default, (ii) covenant violations, (iii) insolvency of Ocwen Loan Servicing, LLC and the Company, (iv) representation and warranty breaches, (v) financial covenants with respect to the Company and certain liquidity requirements with respect to Ocwen, (vi) cross-default with respect to the Company, (vii) judgment default with respect to the Company, (viii) change of control with respect to the Company and (ix) failure of collateral coverage. The occurrence of any of the foregoing may cause the related notes to become due and payable prior to the scheduled maturity date and otherwise materially and adversely affect liquidity. After the occurrence of one of the foregoing events, all collections on the related collateral is generally required to be applied to repay the notes and future draws on any variable funding notes are generally not permitted. The amount that is permitted to be outstanding under the EBO facility is subject to the amount of eligible collateral pledged in the EBO facility. The Company guarantees all of the obligations under the EBO facility.

Note Facility

HLSS Holdings has entered into a financing arrangement with Credit Suisse for one of the notes issued under the HSART facility that is retained by HLSS Holdings. As of April 3, 2015, the outstanding obligations under such facility equaled approximately $25,645,000 and the weighted average interest rate thereunder was equal to 1.32325%. The Company guarantees all of the obligations under this facility.

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General

Ocwen is a party to substantially all of the financing agreements of HLSS’s subsidiaries acquired in connection with the acquisition, including the servicer advance facilities. The Company’s ability to obtain financing is dependent on Ocwen’s agreement to be a party to its financing agreements. If Ocwen does not agree to be a party to these financing agreements for any reason, HLSS may not be able to obtain financing on favorable terms or at all.

Breaches and other events with respect to Ocwen (including, without limitation, failure of Ocwen to satisfy certain financial tests, cross-default to other Ocwen indebtedness, Ocwen insolvency, Ocwen change of control and/or Ocwen judgment default) could cause certain or all of the financings in respect of assets acquired from HLSS to become due and payable prior to maturity. HLSS’s ability to obtain financing on such assets is dependent on Ocwen’s ability to satisfy various tests under such financing arrangements. The Company will be dependent on Ocwen as the servicer of the mortgage loans in respect of the Rights to MSRs, and Ocwen’s servicing practices may impact the value of certain of the Company’s assets.

Item 3.02 Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 of this Current Report on Form 8-K with respect to the Share Transfer is hereby incorporated into this Item 3.02 by reference.

The shares of Company Common Stock delivered to HLSS in connection with the Share Transfer were offered and sold in a private placement pursuant to Section 4(a)(2) of the Securities Act. The shares of Company Common Stock have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration under or an applicable exemption from such registration requirements. This Current Report on Form 8-K does not constitute an offer to sell, or a solicitation of an offer to purchase, the shares of Company Common Stock in any jurisdiction in which such offer or solicitation would be unlawful. No general solicitation was involved in connection with the offer and sale of such shares, and the Company relied upon the representations made by HLSS pursuant to the Acquisition Agreement in determining that such exemption was available.

Item 8.01 Other Events.

Press Release

On April 6, 2015, the Company and HLSS jointly issued a press release in connection with the transactions described herein. The full text of the press release is being filed herewith as Exhibit 99.1 and the information contained therein is incorporated by reference into this Item 8.01.

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Manager Awards

In connection with the Share Transfer, the Company granted, pursuant to and in accordance with the terms of its Nonqualified Stock Option and Incentive Award Plan, to an affiliate of FIG LLC, the Company’s manager (the “Manager”), options relating to 2,828,698 shares of Company Common Stock, representing 10% of the number of shares being delivered to HLSS. The options are fully vested as of the date of grant, become exercisable as to 1/30 of the shares to which the grant is subject on the first day of each of the 30 calendar months following the first month after the date of the grant, and expire on the tenth anniversary of the date of grant. These options will be settled in an amount of cash equal to the excess of the fair market value of a share of Company Common Stock on the date of exercise over the fair market value on the date of grant, unless a majority of the Company’s independent directors elects settlement in shares.

Ocwen Amendment and Consent

Pursuant to an amendment to the Master Servicing Rights Purchase Agreement executed in connection with the consummation of the Acquisition, such Master Servicing Rights Purchase Agreement and the related Sale Supplements were amended, among other things, to (i) obtain Ocwen’s consent to the assignment by HLSS of its interest under the Master Servicing Rights Purchase Agreement and each sale supplement thereto, (ii) provide that HLSS Holdings will not direct the replacement of Ocwen Loan Servicing, LLC as servicer before April 6, 2017 except under the circumstances described in the amendment, (iii) extend the scheduled term of Ocwen Loan Servicing, LLC’s servicing appointment under each sale supplement until the earlier of 8 years from the date of the related sale supplement and April 30, 2020 (subject to an agreement to commence negotiating in good faith for an extension of the contract term no later than six months prior to the end of the applicable term), and (iv) provide that Ocwen Loan Servicing, LLC will reimburse HLSS Holdings, subject to specified limits, in the event that HLSS Holdings incurs certain increased financing costs resulting from a future S&P servicer rating downgrade of Ocwen Loan Servicing, LLC. In addition, pursuant to such amendment Ocwen Loan Servicing, LLC agreed to sell to the Company the economic beneficial rights to any right of optional termination or “clean-up call” of any trust related to any servicing agreement in respect of Rights to MSRs and to exercise such rights only at the Company’s direction.

In connection with a typical optional termination or clean-up call in respect of a residential mortgage servicing agreement, the exercising party (or its designee) will generally purchase all of the outstanding serviced mortgage loans at a purchase price equal to the sum of (i) outstanding balance of such serviced loans, (ii) the fair market value of any serviced real estate owned (REO) properties, (iii) the outstanding related servicer advances and (iv) certain other costs and expenses. The Company agreed to pay Ocwen Loan Servicing, LLC a fee in an amount equal to 0.50% of the outstanding balance of the performing mortgage loans purchased in connection with any such exercise and to pay costs and expenses of Ocwen Loan Servicing, LLC in connection with any such exercise. Optional termination or clean up call rights generally may not be exercised until the outstanding principal balance of the serviced loans is reduced to a specified balance.

12

Forward Looking Statements

This Current Report on Form 8-K and the exhibits hereto may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements regarding the expected closing of the New Merger and the timing of the closing thereof. These statements are based on the current expectations and beliefs of Company management and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond the control of the Company, such as the consent of third parties. The Company can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” incorporated by reference in the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, which are available on the Company’s website (www.newresi.com).

Factors which could have a material adverse effect on the Company’s operations and future prospects include, but are not limited to, the following risks relating to the transactions described herein, including in respect of the satisfaction of closing conditions to the New Merger; unanticipated difficulties and/or expenditures relating to the transactions; uncertainties as to the timing of the New Merger; litigation relating to the transactions; the impact of the transactions on each party’s relationships with employees and third parties; and the inability to obtain, or delays in obtaining cost savings and synergies from the transactions. In addition, the risks to which HLSS’s business is subject, including those risks described in HLSS’s periodic reports filed with the SEC, could adversely affect the proposed transactions and the Company’s operations and future prospects.

New risks and uncertainties may also emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this Current Report on Form 8-K. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

Additional Information and Where to Find It

A meeting of the shareholders of HLSS will be announced to obtain shareholder approval of the New Merger. HLSS intends to file with the SEC a proxy statement and other relevant documents in connection with the New Merger. The definitive proxy statement will be sent or given to the shareholders of HLSS and will contain important information about the proposed transaction and related matters. HLSS’S SHAREHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT HLSS, NEW RESIDENTIAL AND THE PROPOSED TRANSACTION. Investors may obtain a free copy of these materials (when they are available) and other documents filed by HLSS with the SEC at the SEC’s website at www.sec.gov, at

13

HLSS’s website at www.HLSS.com or by sending a written request to HLSS at Home Loan Servicing Solutions, Ltd. c/o Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands, Attention: Secretary.

HLSS, the Company and their respective directors, executive officers and certain other members of management and employees may be deemed to be participants in soliciting proxies from the shareholders of HLSS in favor of the New Merger. Information regarding the persons who may, under the rules of the SEC, be considered to be participants in the solicitation of HLSS’s shareholders in connection with the proposed transaction, and any interest they have in the proposed transaction, will be set forth in the definitive proxy statement when it is filed with the SEC. Additional information regarding HLSS’s directors and officers is included in HLSS’s 2014 Form 10-K and the proxy statement for HLSS’s 2014 Annual Meeting of Shareholders filed with the SEC on April 17, 2014. Additional information regarding the Company’s directors and officers is included in the Company’s 2014 Form 10-K and the proxy statement for the Company’s 2014 Annual Meeting of Shareholders filed with the SEC on April 17, 2014.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired

The audited consolidated financial statements of HLSS as of December 31, 2014 and 2013 and for each of the years in the three-year period ended December 31, 2014 are filed herewith as Exhibit 99.2 and are incorporated in this Item 9.01(a) by reference.

(b) Pro Forma Financial Information

The unaudited pro forma condensed consolidated financial statements of the Company as of and for the year ended December 31, 2014, giving effect to the Acquisition, are filed herewith as Exhibit 99.3 and incorporated in this Item 9.01(b) by reference.

(d) Exhibits

Exhibit Number	Description
23.1	Consent of Deloitte & Touche LLP.
99.1	Press Release, dated April 6, 2015.
99.2	Home Loan Servicing Solutions, Ltd. Audited Financial Statements as of December 31, 2014 and 2013 and for each of the years in the three-year period ended December 31, 2014.
99.3	New Residential Investment Corp. Unaudited Pro Forma Combined Financial Information as of December 31, 2014 and for the year ended December 31, 2014.

14

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

NEW RESIDENTIAL INVESTMENT CORP.

(Registrant)

/s/ Jonathan Brown

Jonathan Brown

Interim Chief Financial Officer & Chief Accounting Officer

Date: April 7, 2015

15

EXHIBIT INDEX

Exhibit Number	Description
23.1	Consent of Deloitte & Touche LLP.
99.1	Press Release, dated April 6, 2015.
99.2	Home Loan Servicing Solutions, Ltd. Audited Financial Statements as of December 31, 2014 and 2013 and for each of the years in the three-year period ended December 31, 2014.
99.3	New Residential Investment Corp. Unaudited Pro Forma Combined Financial Information as of December 31, 2014 and for the year ended December 31, 2014.

16

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-196060 on Form S-3 of our reports dated April 6, 2015, relating to the consolidated financial statements of Home Loan Servicing Solutions, Ltd. and subsidiaries (the “Company”) (which report expresses an unqualified opinion and includes an explanatory paragraph related to material transactions with a significant related party and the sale of substantially all of the Company’s assets), and the effectiveness of its internal control over financial reporting, incorporated by reference in Exhibit 99.2 to the Current Report on Form 8-K of New Residential Investment Corporation dated April 7, 2015 and to the reference to us under the heading “Experts” in the prospectus supplement, which is part of such Registration Statement.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

April 7, 2015

EX-99.1

Exhibit 99.1

NEW RESIDENTIAL AND HLSS ANNOUNCE ENTRY INTO PURCHASE AGREEMENT AND TERMINATION OF MERGER AGREEMENT

New Residential Extends Servicing Contracts with Ocwen to Enhance Long-Term Partnership

NEW YORK, NEW YORK AND GEORGE TOWN, GRAND CAYMAN - (BUSINESS WIRE) - April 6, 2015 - New Residential Investment Corp. (NYSE: NRZ, “New Residential”, the “Company”) and Home Loan Servicing Solutions, Ltd. (NASDAQ: HLSS, “HLSS”) announced today that they have entered into a purchase agreement (the “Asset Purchase Agreement”), under which New Residential acquired substantially all of the assets, and assumed substantially all of the liabilities of HLSS (the “Asset Purchase”). Simultaneously, New Residential and HLSS mutually terminated the merger agreement originally announced on February 22, 2015.

Under the Asset Purchase Agreement, New Residential paid HLSS an equity purchase price of approximately $1.2 billion, or $17.08 per HLSS share on 71 million HLSS shares. With adjustments for cash and the repayment of HLSS debt, New Residential paid HLSS a total purchase price of approximately $1.4 billion, comprised of approximately $1 billion of cash and 28.2 million newly issued shares of New Residential. The Asset Purchase was approved by the Board of Directors of each company and did not require shareholder approval. The Asset Purchase was consummated concurrently with signing of the Asset Purchase Agreement.

Furthermore, New Residential has separately agreed to a multi-year extension of the servicing contracts with Ocwen Financial Corporation (NYSE: OCN, “Ocwen”), providing for a long-term partnership between New Residential and Ocwen.

In announcing this transaction, Michael Nierenberg, Chief Executive Officer of New Residential commented, “When it became evident that HLSS was unable to satisfy the merger conditions as originally expected, we worked collaboratively with HLSS management to structure this Asset Purchase to meet our mutual goals. We are extremely pleased to complete this milestone transaction; and we are excited for the opportunity to expand and strengthen our partnerships with both Nationstar Mortgage and Ocwen, the two largest non-bank servicers in the United States. The extension in servicing contracts with Ocwen will further solidify their position as one of New Residential’s preferred servicers and help promote a mutually beneficial partnership between the two companies. Looking ahead, we remain confident in our ability to generate strong returns for our shareholders and excel as one of the leading capital providers in the mortgage servicing business.”

John Van Vlack, Chief Executive Officer of HLSS stated, “Despite our efforts to pursue the merger as initially planned, certain circumstances prompted HLSS to pursue an Asset Purchase Agreement with New Residential. We believe this alternative transaction structure made the most sense for us as it allowed HLSS to file its financial results without a going concern qualification and provide the greatest certainty on funding new servicing advances. This transaction will also enable our shareholders to maximize value for their shares.”

In addition, Michael Bourque, Chief Financial Officer of Ocwen commented, “We are very pleased to have established a new partnership with New Residential. Our entry into a relationship with New Residential, which includes an extension of our servicing contracts, will not only help to secure the financing of Ocwen’s servicing business but also provide additional stability to the mortgage servicing industry. We look forward to a growing and productive relationship with our new financing partner.”

1

Advising New Residential on the Asset Purchase were Skadden, Arps, Slate, Meagher & Flom LLP, Sidley Austin LLP, and Maples and Calder as legal advisors. Advising HLSS on the Asset Purchase was Citi as financial advisor and Weil, Gotshal & Manges LLP and Walkers as legal advisors.

ABOUT NEW RESIDENTIAL

New Residential focuses on opportunistically investing in, and actively managing, investments related to residential real estate. The Company primarily targets investments in mortgage servicing related assets and other related opportunistic investments. New Residential is organized and conducts its operations to qualify as a real estate investment trust (“REIT”) for federal income tax purposes. The Company is managed by an affiliate of Fortress Investment Group LLC (NYSE: FIG), a global investment management firm.

ABOUT HOME LOAN SERVICING SOLUTIONS

Home Loan Servicing Solutions, Ltd. was formed to acquire mortgage servicing assets consisting of mortgage servicing rights, rights to fees and other income from servicing mortgage loans, and associated servicing advances. Its principal executive offices are located in the George Town, Cayman Islands.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements regarding the expansion and strengthening of our partnerships with both Nationstar Mortgage and Ocwen and their position as one of New Residential’s preferred servicers, our ability to generate strong returns and maximize value for our shareholders and excel as one of the leading capital providers in the mortgage servicing business, and the ability to secure the financing of Ocwen’s servicing business and to provide additional stability to the mortgage servicing industry. These statements are based on the current expectations and beliefs of management of each of New Residential and HLSS and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond the control of New Residential and HLSS. Neither New Residential nor HLSS can give any assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in each company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, which are available on each company’s website (www.newresi.com; www.HLSS.com). Factors which could have a material adverse effect on each company’s operations and future prospects include, but are not limited to, various risks relating to the Asset Purchase; unanticipated expenditures relating to the Asset Purchase; litigation relating to the Asset Purchase; the impact of the Asset Purchase on each company’s relationships with employees and third parties; the inability to obtain, or delays in obtaining cost savings and synergies from the Asset Purchase; and adverse developments involving Ocwen and its subsidiaries, including regulatory investigations and legal proceedings against Ocwen or others with whom it conducts business, counterparty concentration and default risks in Ocwen and the ability to favorably resolve the alleged events of default under the Sixth Amended and Restated Indenture, dated as of January 17, 2014, by and among HLSS Servicer Advance Receivables Trust, Deutsche Bank National Trust Company, HLSS Holdings, LLC, Ocwen Loan Servicing, LLC, and Wells Fargo Securities, LLC and Credit Suisse AG, New York Branch. In addition, new risks and uncertainties emerge from time to time, and it is not possible for New Residential or HLSS to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. New Residential and HLSS expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in their expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

2

CONTACTS

New Residential Investment Corp.

Investor Relations

212-479-3150

Home Loan Servicing Solutions, Ltd.

Investor Relations

678-784-3231

Source: New Residential Investment Corp. and Home Loan Servicing Solutions, Ltd.

3

EX-99.2

Exhibit 99.2

TABLE OF CONTENTS

	PAGE
Reports of Independent Registered Public Accounting Firm		2
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 2014 and 2013		5
Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012		6
Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012		7
Consolidated Statements of Changes in Equity for the years ended December 31, 2014, 2013 and 2012		8
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012		9
Notes to Consolidated Financial Statements		10

1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Home Loan Servicing Solutions, Ltd.:

We have audited the accompanying consolidated balance sheets of Home Loan Servicing Solutions, Ltd. and subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2014. 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1A to the consolidated financial statements, the Company conducts a substantial amount of its business with Ocwen Financial Corporation (“Ocwen”), a related party. Ocwen has been and is subject to a number of federal and state regulatory matters and there are other challenges and uncertainties that could have significant adverse effects on its business. Note 1A also discusses the implications of these matters to the Company and includes details of the sale of substantially all of the Company’s assets.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 6, 2015, expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

April 6, 2015

2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Home Loan Servicing Solutions, Ltd.:

We have audited the internal control over financial reporting of Home Loan Servicing Solutions Ltd. and subsidiaries (the “Company”) as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’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 that 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 by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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 the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the 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, the Company has maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2014, of the Company and our report dated April 6, 2015 expressed an unqualified opinion on those financial statements and

3

included an explanatory paragraph related to material transactions with a significant related party and the sale of substantially all of the Company’s assets.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

April 6, 2015

4

HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

	December 31, 2014		December 31, 2013
Assets
Cash and cash equivalents	$	210,009	$	87,896
Match funded advances		6,121,595		6,387,781
Notes receivable – Rights to MSRs		614,465		633,769
Loans held for investment		815,663		—
Related party receivables		94,401		70,049
Deferred tax assets		491		1,024
Other assets		281,475		130,153
Total assets	$	8,138,099	$	7,310,672
Liabilities and Equity
Liabilities
Match funded liabilities	$	5,624,088	$	5,715,622
Other borrowings		1,182,328		343,386
Dividends payable		12,783		10,653
Income taxes payable		173		682
Deferred tax liabilities		491		1,266
Related party payables		14,503		10,732
Other liabilities		12,454		11,884
Total liabilities		6,846,820		6,094,225
Commitments and Contingencies (See Note 18)
Equity
Equity – Ordinary shares, $.01 par value; 200,000,000 shares authorized; 71,016,771 shares issued and outstanding at December 31, 2014 and December 31, 2013		710		710
Additional paid-in capital		1,210,300		1,210,057
Retained earnings		79,133		3,513
Accumulated other comprehensive income, net of tax		1,136		2,167
Total equity		1,291,279		1,216,447
Total liabilities and equity	$	8,138,099	$	7,310,672

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

5

HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share data)

For the years ended December 31,	2014		2013		2012
Revenue
Interest income – notes receivable – Rights to MSRs	$	361,060	$	235,826	$	47,445
Interest income – other		36,446		2,195		109
Total interest income		397,506		238,021		47,554
Related party revenue		1,843		1,811		2,316
Other revenue		402		—		—
Total revenue		399,751		239,832		49,870
Operating expenses
Compensation and benefits		6,351		5,825		3,751
Related party expenses		2,349		1,400		755
General and administrative expenses		9,753		4,645		1,644
Total operating expenses		18,453		11,870		6,150
Income from operations		381,298		227,962		43,720
Other expense
Interest expense		163,698		110,071		24,057
Total other expense		163,698		110,071		24,057
Income before income taxes		217,600		117,891		19,663
Income tax expense		636		234		46
Net income	$	216,964	$	117,657	$	19,617
Earnings per share
Basic	$	3.05	$	1.83	$	1.14
Diluted	$	3.05	$	1.83	$	1.14
Weighted average shares outstanding
Basic		71,016,771		64,132,383		17,230,858
Diluted		71,020,808		64,132,383		17,230,858

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

6

HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

For the years ended December 31,	2014			2013			2012
Net income	$	216,964		$	117,657		$	19,617
Other comprehensive income (loss), before tax:
Change in the value of designated cash flow hedges		(2,147	)		4,382			(1,076	)
Total other comprehensive income (loss), before tax		(2,147	)		4,382			(1,076	)
Income tax related to items of other comprehensive income (loss):
Tax benefit (expense) on change in the value of designated cash flow hedges		1,116			(1,139	)		—
Total income tax benefit (expense) related to items of other comprehensive income (loss)		1,116			(1,139	)		—
Total other comprehensive income (loss), net of tax		(1,031	)		3,243			(1,076	)
Total comprehensive income	$	215,933		$	120,900		$	18,541

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

7

HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Dollars in thousands, except share data)

	Ordinary Shares				Additional Paid-in			Retained			Accumulated Other Comprehensive Income (Loss)
	Shares		Amount		Capital			Earnings			net of Tax			Total
Balance at December 31, 2011		20,000	$	—	$	300		$	(291	)	$	—		$	9
Net income		—		—		—			19,617			—		$	19,617
Other comprehensive loss, net of tax		—		—		—			—			(1,076	)	$	(1,076	)
Issuance of ordinary shares, net of costs		55,864,718		559		879,293			—			—		$	879,852
Declaration of cash dividends ($1.45 per share)		—		—		(2,936	)		(22,087	)		—		$	(25,023	)
Balance at December 31, 2012		55,884,718	$	559	$	876,657		$	(2,761	)	$	(1,076	)	$	873,379
Net income		—		—		—			117,657			—		$	117,657
Other comprehensive income, net of tax		—		—		—			—			3,243		$	3,243
Issuance of ordinary shares, net of costs		15,132,053		151		333,400			—			—		$	333,551
Declaration of cash dividends ($1.70 per share)		—		—		—			(111,383	)		—		$	(111,383	)
Balance at December 31, 2013		71,016,771	$	710	$	1,210,057		$	3,513		$	2,167		$	1,216,447
Net income		—		—		—			216,964			—			216,964
Other comprehensive loss, net of tax		—		—		—			—			(1,031	)		(1,031	)
Share-based compensation		—		—		243			(21	)		—			222
Declaration of cash dividends ($1.99 per share)		—		—		—			(141,323	)		—			(141,323	)
Balance at December 31, 2014		71,016,771	$	710	$	1,210,300		$	79,133		$	1,136		$	1,291,279

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

8

HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

For the years ended December 31,	2014			2013			2012
Cash flows from operating activities
Net income	$	216,964		$	117,657		$	19,617
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of debt issuance costs		19,543			16,950			6,960
Accretion of original issue discount on other borrowings		750			386			—
Net amortization of purchase premiums and discounts on Loans held for investment		4,909			—			—
Accretion of Loans held for investment		(9,575	)		—			—
Share-based compensation expense		243			—			—
Changes in assets and liabilities:
Decrease in Match funded advances		266,186			550,371			142,403
Increase in debt service accounts		(24,615	)		(36,134	)		(52,990	)
Decrease (increase) in related party receivables		59,756			(42,951	)		(28,271	)
Increase in related party payables		3,771			10,439			1,465
Increase in other assets		(22,004	)		(229	)		(26	)
Decrease (increase) in other liabilities		(959	)		8,920			1,490
Net cash provided by operating activities		514,969			625,409			90,648
Cash flows from investing activities
Purchase of Notes receivable – Rights to MSRs		—			(415,995	)		(316,622	)
Reduction in Notes receivable – Rights to MSRs		19,304			79,849			20,171
Purchase of Loans held for investment		(1,041,871	)		—			—
Repayments of Loans held for investment		121,311			—			—
Cash used in related party servicing advance financing transactions		(86,289	)		—			—
Cash proceeds from related party servicing advance financing transactions		2,181			—			—
Acquisition of advances in connection with the purchase of Residential Mortgage Assets		—			(3,842,536	)		(2,902,151	)
Net cash used in investing activities		(985,364	)		(4,178,682	)		(3,198,602	)
Cash flows from financing activities
(Repayments of) proceeds from Match funded liabilities, net		(91,534	)		3,024,800			2,332,486
Proceeds from Other borrowings		927,333			344,750			—
Payment of Other borrowings		(89,141	)		(1,750	)		—
Payment of debt issuance costs		(14,957	)		(28,794	)		(10,808	)
Proceeds from issuance of ordinary shares		—			334,390			885,457
Payment of offering costs		—			(839	)		(5,099	)
Payment of dividends to shareholders		(139,193	)		(107,436	)		(18,317	)
Net cash provided by financing activities		592,508			3,565,121			3,183,719
Net increase in cash		122,113			11,848			75,765
Cash and cash equivalents at beginning of period		87,896			76,048			283
Cash and cash equivalents at end of period	$	210,009		$	87,896		$	76,048
Supplemental cash flow information
Interest paid	$	141,817		$	119,428		$	31,094
Taxes paid		271			499			—
Supplemental non-cash investing activities
Increase in claims receivable from FHA	$	109,563		$	—		$	—
Supplemental non-cash financing activities
Dividends declared but not paid	$	12,783		$	10,653		$	6,706
Offering costs accrued but not paid		—			—			506
Debt issuance costs accrued but not paid		127			44			—

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

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HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands unless otherwise stated, except share data)

1A. ORGANIZATION AND RELATED PARTIES; REGULATORY ENVIRONMENT, OCWEN MATTERS AND RELATED CONTINGENCIES; OTHER RECENT DEVELOPMENTS

Organization and Related Parties

Home Loan Servicing Solutions, Ltd. and its wholly owned subsidiaries (collectively referred to throughout as “HLSS”, “us”, “our”, “we”, or the “Company”) are engaged in the business of acquiring assets whereby we acquire the rights to receive the servicing fees less compensation to the current servicer for their servicing activities (“Rights to MSRs”), servicing advances associated with our Rights to MSRs, whole loans held for investment, and other residential mortgage-related assets (“Residential Mortgage Assets”). We have not originated mortgage loans. We engaged Ocwen Financial Corporation (together with its subsidiaries, collectively “Ocwen”) and another residential mortgage loan servicer to service the mortgage loans underlying our Residential Mortgage Assets and therefore have not and do not intend to develop our own mortgage servicing platform.

We entered into various agreements with Ocwen and Altisource Portfolio Solutions, S.A. (“Altisource”) in connection with our Initial Public Offering on March 5, 2012. William C. Erbey, our founder and the former Chairman of our Board of Directors, was also the Chairman of the Board of Directors of Ocwen and Altisource until January 16, 2015.

We conduct a substantial amount of business with Ocwen and are heavily reliant on Ocwen and Altisource in the conduct of our operations. Conflicts may arise between us and Ocwen or Altisource because of the ongoing agreements we have with them or because of the nature of our respective businesses. Our results of operations may have differed significantly from our reported results if we did not have agreements in place with Ocwen and Altisource. See Note 17 for further discussion.

Regulatory Environment, Ocwen Matters and Related Contingencies

Ocwen has been and is subject to certain federal and state regulatory matters and other challenges and uncertainties associated with its business.

We are dependent on Ocwen as the subservicer for the Notes receivable – Rights to MSRs, and Ocwen’s servicing practices may impact the value of certain of our assets. We may be adversely impacted:

• By regulatory actions taken against Ocwen;

• By a default by Ocwen under its debt agreements;

• By further downgrades in Ocwen’s servicer rating;

• If Ocwen fails to ensure its servicing advances comply with the terms of its pooling and servicing agreements (“PSAs”);

• If Ocwen were terminated as servicer under certain PSAs;

• If Ocwen becomes subject to a bankruptcy proceeding; or

• If Ocwen fails to meet its obligations or is deemed to be in default under the indenture governing Notes issued by the HSART Trust (as defined below), including the allegations of certain events of default related to the Ocwen servicer downgrade and other regulatory matters by BlueMountain Capital Management LLC (“BlueMountain”).

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A summary of such matters, the related impact on our business and the Company’s plan to address such matters are as follows.

Ocwen Regulatory Matters

Ocwen has publicly announced that, on December 19, 2013, Ocwen reached an agreement involving the Consumer Financial Protection Bureau (“CFPB”), various state attorneys general and other agencies that regulate the mortgage servicing industry, which agreement was approved by consent judgment by the U.S. District Court for the District of Columbia on February 26, 2014. According to Ocwen’s disclosure, the key elements of the agreement are as follows:

• A commitment by Ocwen to service loans in accordance with specified servicing guidelines and to be subject to oversight by an independent national monitor for three years;

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• A payment of $127.3 million to a consumer relief fund to be disbursed by an independent administrator to eligible borrowers. In May 2014, Ocwen satisfied this obligation with regard to the consumer relief fund, $60.4 million of which is the responsibility of former owners of certain servicing portfolios acquired by Ocwen pursuant to indemnification and loss sharing provisions in the applicable agreements; and

• A commitment by Ocwen to continue its principal forgiveness modification programs to delinquent and underwater borrowers in an aggregate amount of $2.0 billion over three years.

On December 22, 2014, Ocwen announced that it had reached a settlement agreement with the New York Department of Financial Services (the “NY DFS”) related to investigations into Ocwen’s mortgage servicing practices in the State of New York. According to Ocwen’s disclosure, the key elements of the agreement are as follows:

• Payment of $100 million to the NY DFS to be used by the State of New York for housing, foreclosure relief and community redevelopment programs;

• Payment of $50 million as restitution to certain New York borrowers;

• Installation of a NY DFS Operations Monitor to review and assess the adequacy and effectiveness of Ocwen’s operations for a period of two years, which may be extended another twelve months at the option of the NY DFS;

• Requirements that Ocwen will not share any common officers or employees with any related party and will not share risk, internal audit or vendor oversight functions with any related party;

• Requirements that certain Ocwen employees, officers and directors be recused from negotiating or voting to approve certain transactions with a related party;

• Resignation of Ocwen’s Chairman of the Board from the Board of Directors of Ocwen and at related companies, including HLSS; and

• Restrictions on Ocwen’s ability to acquire new mortgage servicing rights.

On January 23, 2015, Ocwen announced that it had reached a settlement agreement with the California Department of Business Oversight (“CA DBO”) in relation to an action dated October 3, 2014, in the State of California. According to Ocwen’s disclosure, the key elements of the agreement are as follows:

• Payment of $2.5 million;

• Engagement of an independent auditor to assess Ocwen’s compliance with laws and regulations impacting California borrowers for a period of at least two years; and

• Prevention of Ocwen from acquiring additional mortgage servicing rights for loans secured in the State of California until the CA DBO is satisfied that Ocwen can satisfactorily respond to the requests for information and documentation made in the course of a regulatory exam.

According to Ocwen’s public disclosure, on April 28, 2014, Ocwen received a letter from the staff of the New York Regional Office of the SEC informing Ocwen that the SEC was conducting an investigation relating to Ocwen and making a request for voluntary production of documents and information relating to the April 22, 2014 surrender of certain options to purchase its common stock by Mr. Erbey, its former Executive Chairman, including the 2007 Equity Incentive Plan and the related option grant and surrender documents. On June 12, 2014, Ocwen received a subpoena from the SEC requesting production of various documents relating to its business dealings with HLSS, Altisource, Altisource Asset Management Corporation (“AAMC”) and Altisource Residential Corporation (“Residential”) and the interests of its directors and executive officers in these companies. Ocwen has also disclosed that it received an additional subpoena from the SEC related to its amendments to its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.

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Other Ocwen Matters

Standard & Poor’s (“S&P”), Moody’s Investors Service (“Moody’s”), Fitch Ratings Inc. (“Fitch”) and Morningstar, Inc. (“Morningstar”) rate Ocwen as a mortgage servicer. Each of these rating agencies has downgraded Ocwen’s servicer rating within the last six months. On January 29, 2015, Moody’s downgraded Ocwen’s servicer quality (“SQ”) assessment from “SQ3+” to “SQ3-” as a primary servicer of subprime residential loans and as a special servicer of residential mortgage loans. During February 2015, Fitch downgraded Ocwen’s residential primary servicer rating for subprime products from “RPS3” to “RPS4,” and Morningstar downgraded its rating to “MOR RS3.” Three of these rating agencies currently have Ocwen’s ratings outlook as “negative” or “on review for downgrade.” Additionally, Ocwen is subject to quantitative and qualitative agency servicer rating criteria which may have subjective interpretations. Certain of our advance financing facilities (described further in Note 7) require that our servicers or subservicers maintain specified servicer ratings, and failure by our servicers or subservicers to maintain the minimum rating could result in adverse adjustments to our advance rates, liquidity and profitability. Failure to maintain minimum or specified ratings could adversely affect dealings with contractual counterparties, including GSEs and regulators. In addition, some PSAs also require that the servicer or subservicer maintain specified servicer ratings. The failure to maintain the specified rating could result in the termination of the servicer under such PSAs. If Ocwen is terminated as servicer, and if Ocwen is unable to make any applicable indemnification payments owed to us, we could lose a substantial portion or all of the value of the related Notes receivable – Rights to MSRs (see discussion of the BlueMountain allegations that follow).

During February and March 2015, Ocwen received two notices of servicer termination affecting four separate PSAs underlying our Notes receivable – Rights to MSRs due to servicer rating downgrades. While we believe the financial impact of the termination of servicing under these four PSAs would be immaterial to our overall financial condition, Ocwen could be subject to further terminations as a result of its failure to maintain required minimum servicer ratings, which could have an adverse effect on our business, financing activities, financial condition and results of operations.

Additionally, if Ocwen fails to ensure its servicing advances comply with the terms of the PSAs, then any such improperly made servicing advances may not be eligible for financing under our advance financing facilities and/or may not be reimbursable by the related securitization trusts or other owners of the mortgage loans. Ocwen may be unwilling or unable to make indemnification payments for losses we incur related to unrecoverable advances.

Our advance financing facilities and certain Other borrowings have cross default provisions to Ocwen’s senior secured term facility, and there may occur an event of default under Ocwen’s senior secured debt facility.

If Ocwen becomes subject to a bankruptcy proceeding, our business could be materially and adversely impacted by potential court rulings or other actions or events, including, but not limited to, the following:

• A sale of Residential Mortgage Assets or other assets could be re-characterized in an Ocwen bankruptcy proceeding as a financing secured by such Residential Mortgage Assets. If such a recharacterization occurs, the validity or priority of our security interest in the Residential Mortgage Assets or other assets could be challenged in a bankruptcy proceeding of Ocwen. If the sale of Residential Mortgage Assets or other assets is recharacterized as a secured financing, payments made by Ocwen to us prior to Ocwen commencing its bankruptcy proceeding could be challenged and subject to recovery as preferential transfers;

• Payments made to us by Ocwen, or obligations incurred by Ocwen to us, could be challenged as fraudulent conveyances;

• The purchase agreement with Ocwen pursuant to which we may agree to purchase mortgage servicing rights, associated servicing advances and other related assets from Ocwen from time to time (the “Purchase Agreement”) could be rejected in an Ocwen bankruptcy proceeding;

• A bankruptcy court could stay a transfer of servicing to another servicer;

• Ocwen could discontinue servicing;

• The automatic stay under the United States Bankruptcy Code may prevent the ongoing receipt of servicing fees or other amounts due; or

• A bankruptcy of Ocwen defaults our advance financing facilities and negatively impacts our ability to continue to purchase servicing advances.

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In addition, Ocwen has disclosed that certain of its debt facilities will mature during 2015. If Ocwen is not able to repay or refinance these obligations as they come due, Ocwen may become the subject of a bankruptcy proceeding.

Any of the foregoing events could have a material adverse effect on our financial condition and operating results.

On January 23, 2015, counsel to BlueMountain, which has represented that it is the investment manager of funds that hold certain Series 2012-T2 and Series 2013-T3 Notes (the “Notes”, which are more fully described in Note 7) issued by HLSS Servicer Advance Receivables Trust (the “HSART Trust”), sent a letter to HLSS Holdings, LLC (“HLSS Holdings”), the HSART Trust, Ocwen and Deutsche Bank National Trust Company (the “Indenture Trustee”), asserting certain alleged events of default under the indenture governing Notes issued by the HSART Trust. BlueMountain has publicly stated that it has taken a “short position” on behalf of certain funds in the stock of HLSS and Ocwen. On February 20, 2015, counsel to BlueMountain sent another letter asserting certain alleged events of default under the indenture governing Notes issued by the HSART Trust. The alleged defaults are related to the Ocwen servicer downgrade and other regulatory matters described above. An event of default under the HSART Trust could result in the revolving facilities within HSART Trust to cease revolving, which would impact our ability to fund the purchase of advances.

On February 17, 2015, HLSS Holdings and our wholly-owned subsidiary HLSS Servicer Advance Facility Transferor, LLC, the depositor to the HSART Trust (the “Depositor”), entered into an agreement (the “Agreement”) with the Indenture Trustee. Pursuant to the Agreement, the parties agreed, among other things, that during the term of the Agreement the Indenture Trustee will not commence a judicial proceeding to seek judicial guidance regarding the allegations made in the BlueMountain letter prior to April 15, 2015, and HLSS Holdings and the Depositor agreed to allow the Indenture Trustee to withhold from distribution certain excess funds that would otherwise be distributable to the Depositor in an amount up to the Interest Accrual Differential for the related interest accrual period under the HSART Trust indenture. The “Interest Accrual Differential” means, with respect to any interest accrual period under the HSART Trust indenture beginning with the interest accrual period relating to the February 17, 2015 monthly payment date thereunder and any class of HSART Trust notes issued prior to January 17, 2014, an additional 3.00% per annum over the effective interest rate. The Depositor and HLSS Holdings subsequently agreed to allow the Indenture Trustee to withhold on the same basis with respect to HSART Trust notes issued on or after January 17, 2014. The effect of this agreement will be to increase the amount deposited and held in Debt service accounts by approximately $11.8 million per month.

Management’s Plan

On February 22, 2015, we entered into an Agreement and Plan of Merger (the “Old Merger Agreement”) with New Residential Investment Corp., a Delaware corporation (“NRZ”), and Hexagon Merger Sub, Ltd., a Cayman Islands exempted company and a wholly-owned subsidiary of NRZ (“Merger Sub”), pursuant to which, subject to the satisfaction or waiver of certain conditions, Merger Sub would merge with and into us (the “Old Merger”).

During the month of February 2015, our management developed a management plan that included the following elements:

• Entering into the Old Merger Agreement with NRZ;

• Negotiating certain commitments from various lenders for replacement advance financing, though never consummated;

• Selling our entire portfolio of RPLs for an immaterial gain and concurrently repaying the related borrowings in full;

• Marketing our Government National Mortgage Association (“GNMA”) early buy-out (“EBO”) loan portfolios and extending the maturity of the related borrowings to allow for continued marketing;

• Working closely with our legal counsel to address BlueMountain’s allegations of default, which we believe are without merit, and any potential impact of such allegations on our advance financing facilities; and

• Amending our senior secured term loan facility agreement to extend the deadline to furnish annual financial statements to April 10, 2015, to amend certain terms of cross default to our advance financing facilities and to permit an amendment to the subservicing agreement with Ocwen (the “Subservicing Agreement”).

On April 6, 2015, HLSS, HLSS Holdings and Ocwen entered into an amendment to the Purchase Agreement and the sale supplements (effective upon completion of the Asset Sale described below) to, among other things, (i) obtain Ocwen’s consent to the assignment by HLSS of its interest under the Purchase Agreement and each sale supplement, (ii) provide that HLSS Holdings will not become the named servicer in connection with any Rights to MSRs, or direct the replacement of Ocwen as named servicer, before April 6, 2017 except under certain limited circumstances, (iii) extend the scheduled term of Ocwen’s servicing appointment under each sale supplement until the earlier of 8 years from the date of such sale supplement and April 30, 2020, and (iv) provide that Ocwen will reimburse HLSS Holdings for certain increased financing costs resulting from servicer rating downgrades of Ocwen. In addition, under such amendment (x) Ocwen agrees to exercise any “clean-up call” rights under any servicing agreement related to Rights to MSRs only at the direction of HLSS and to sell to HLSS, on an “as-is” basis, the economic beneficial interest in the right to purchase the mortgage loans and other assets in the trust for each designated servicing agreement pursuant to such clean-up call rights and (y) HLSS agrees to pay to Ocwen a fee equal to 0.50% of the outstanding balance of the performing mortgage loans purchased in connection with any such exercise and to pay Ocwen’s related costs and expenses of exercise.

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On April 6, 2015, to best address concerns relating to our ability to operate as a going concern and the associated impact on our business on an expedited basis, we agreed with NRZ and Merger Sub to terminate the Old Merger Agreement and immediately complete the sale of substantially all of our assets (the “Asset Sale”). The Asset Sale was made in accordance with the terms and conditions of a Share and Asset Purchase Agreement entered into on April 6, 2015 (the “NRZ Purchase Agreement”) between us, NRZ, MSR-EBO Acquisitions LLC (“HLSS MSR-EBO”) and HLSS Advances Acquisition Corp. (“HLSS Advances”). In connection with the Asset Sale, among other things, (i) HLSS MSR-EBO acquired substantially all of the assets of the Company (including all of the issued share capital of HLSS Luxco 1B S.à r.l. (“Luxco 1B”)) and (ii) HLSS Advances acquired all of the issued share capital of HLSS Luxco 1A S.à r.l. (“Luxco 1A”) and assumed substantially all of the liabilities of the Company, including certain post-closing liabilities of the Company. In exchange, the Company received an amount in cash equal to $1.0 billion plus 28,286,980 newly issued shares of NRZ common stock with a par value $0.01 per share. In conjunction with the Asset Sale, our senior secured term loan facility was retired.

Concurrently with the execution of the NRZ Purchase Agreement, our Board of Directors adopted and approved a plan of complete liquidation and dissolution (the “Liquidation Plan”), pursuant to which we will (1) cease our business activities other than such activities that are necessary to carry out the provisions of the Liquidation Plan, (2) pay or make adequate provision for operating expenses expected to be incurred through the completion of the Liquidation Plan and (3) distribute to our shareholders in one or more distributions, (a) the cash received by the Company in the Asset Sale and the net proceeds from the sale of NRZ common stock received by the Company in the Asset Sale, less (b) amounts used to pay the liabilities of the Company and less a reserve in the amount of $50 million that will be held by the Company at the discretion of the Board to ensure that the Company will be able to meet known and unknown liabilities up to the date of the consummation of the transactions contemplated by the New Merger (as defined below) or, if the transactions contemplated by the New Merger are not consummated, the date of the final liquidating distribution after settlement of the liabilities and to ensure that the Company has available resources in the event that it is necessary to enforce against third parties any contractual or other rights of the Company or its officers or directors. If the New Merger is consummated, our shares will be converted automatically into the right to receive $0.69 per share in cash without interest (the “Merger Consideration”). If the New Merger is not consummated and post-closing expenses and liabilities do not exceed $50 million, it is anticipated that a further cash distribution will be made to shareholders.

Immediately following the closing of the Asset Sale contemplated by the NRZ Purchase Agreement, we entered into: (i) an Agreement and Plan of Merger (the “New Merger Agreement”) with NRZ and Merger Sub, pursuant to which, among other things, the Company will be merged with and into Merger Sub (the “New Merger”), with the Company ceasing its corporate existence and Merger Sub surviving the New Merger, (ii) a Services Agreement, pursuant to which HLSS Advances Acquisition Corp. will provide us with certain services following the consummation of the Asset Sale, including, among other things, handling (including defending, prosecuting or resolving) all claims, disputes or controversies (including any litigation, arbitration, governmental investigations or inquiries or any other proceedings or negotiations) in which the Company is a party or may otherwise be involved and (iii) a Registration Rights Agreement to memorialize certain rights relating to the registration of shares of NRZ common stock to be held by the Company upon the closing of the Asset Sale. On the terms and subject to the conditions set forth in the New Merger Agreement, at the effective time of the New Merger (the “Effective Time”), each ordinary share, par value $0.01 per share, of the Company (the “Company Shares”) issued and outstanding immediately prior to the Effective Time (other than Company Shares owned by any direct or indirect wholly-owned subsidiary of NRZ (other than Merger Sub) or of Merger Sub and Company Shares as to which dissenters’ rights have been properly exercised) will be converted automatically into the right to receive the Merger Consideration. The parties’ obligations to consummate the New Merger are subject to certain closing conditions, including approval of the New Merger by the requisite vote of the shareholders, the absence of any legal restraints that would prohibit the consummation of the New Merger and other conditions customary for a transaction of this type. Each of us, NRZ and Merger Sub has made certain customary representations, warranties and covenants in the New Merger Agreement, including, among other things, covenants related to the conduct of our business during the interim period between the execution of the New Merger Agreement and the consummation of the New Merger. The New Merger Agreement provides for certain termination rights for both us and NRZ, including, if approval of the New Merger by the requisite vote of the shareholders is not obtained or if the New Merger is not consummated by the nine month anniversary of the date of the New Merger Agreement.

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Other Recent Developments

On September 15, 2014, the Company received a subpoena from the SEC requesting that it provide certain information related to the Company’s prior accounting conventions for and valuations of our Notes receivable – Rights to MSRs that resulted in the restatement of our consolidated financial statements for the years ended December 31, 2013 and 2012 and for the quarter ended March 31, 2014 during August 2014. On December 22, 2014, the Company received a subpoena from the SEC requesting that it provide information related to certain governance documents and transactions and certain communications regarding the same. The Company is cooperating with the SEC in these matters.

As a result of Ocwen’s settlement agreement with the NY DFS, on January 16, 2015, William C. Erbey stepped down as non-executive Chairman of the Board of Directors of the Company, Ocwen, Altisource, AAMC and Residential. Concurrently, Robert J. McGinnis was appointed as non-executive Chairman of HLSS.

On January 14, 2015, our Moody’s credit rating was downgraded to B3/Negative and on January 16, 2015, S&P affirmed its credit rating of B+ but downgraded our outlook from Stable to Negative. On February 24, 2015, Moody’s announced that it would review our credit rating for potential upgrade subsequent to our announcement of the Old Merger Agreement on February 22, 2015.

On March 18, 2015, we received notification from The Nasdaq Stock Market LLC (“Nasdaq”) stating that the Company is no longer in compliance with Nasdaq Listing Rule 5250(c)(1) for continued listing due to the Company not having timely filed its Annual Report on Form 10-K for the year ended December 31, 2014.

On March 23, 2015, the Company received a subpoena from the SEC requesting that it provide information concerning communications between the Company and certain investment advisors and hedge funds. The SEC also requested documents relating to the Company’s structure, certain governance documents and any investigations or complaints connected to trading in the Company’s securities. The Company is cooperating with the SEC in this matter.

1B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Use of Estimates

We prepared the accompanying audited Consolidated Financial Statements in conformity with US GAAP, which requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. Material estimates that are particularly significant relate to our fair value measurements of Notes receivable – Rights to MSRs. Prior to our IPO on March 5, 2012 we were a developmental stage company. Therefore, our results for the year ended December 31, 2012 do not reflect a full twelve months of operations and are not fully comparable to the results for the year ended December 31, 2014 or 2013.

Principles of Consolidation

Our financial statements include the accounts of HLSS and its wholly owned subsidiaries as well as four variable interest entities (“VIEs”) of which we are the primary beneficiary. We eliminate intercompany accounts and transactions in consolidation.

We evaluate each special purpose entity (“SPE”) for classification as a VIE. When an SPE meets the definition of a VIE and we determine that HLSS is the primary beneficiary, we include the SPE in our Consolidated Financial Statements.

Our Match funded advances are in two SPEs along with related Match funded liabilities (the “Match Funded Advance SPEs”). We determined that these SPEs are VIEs of which we are the primary beneficiaries. The accounts of these SPEs are included in our Consolidated Financial Statements.

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Match funded advances on loans serviced for others result from our transfers of residential loan servicing advances to SPEs in exchange for cash. The SPEs issue debt supported by collections on the transferred advances. We made these transfers under the terms of our advance facility agreements. These transfers do not qualify for sale accounting because we retain control over the transferred assets. As a result, we account for these transfers as financings and classify the transferred advances on our Consolidated Balance Sheet as Match funded advances and the related liabilities as Match funded liabilities. We use collections on the Match funded advances pledged to the SPEs to repay principal and to pay interest and the expenses of the SPEs. Holders of the debt issued by the SPEs can look only to the assets of the entity itself for satisfaction of the debt and have no recourse against HLSS.

Our Loans held for investment are in two SPEs along with related Other borrowings (the “Mortgage Loans SPEs”). We determined that these SPEs are VIEs of which we are the primary beneficiaries. The accounts of these SPEs are included in our Consolidated Financial Statements.

Loans held for investment are transferred to SPEs in exchange for cash, and the SPEs issue debt collateralized by these loans. These transfers do not qualify for sale accounting because we retain control over the transferred assets. As a result, we account for these transfers as financings and classify the transferred loans on our Consolidated Balance Sheet as Loans held for investment and the related liabilities as Other borrowings. We use collections on the Loans held for investment pledged to the SPEs to repay principal and to pay interest and the expenses of the SPEs. Holders of the debt issued by the SPEs can look beyond the assets of the SPEs for satisfaction of the debt and therefore have recourse against HLSS. It is our expectation that the cash flows of the SPEs will be sufficient to meet all claims of the debt holders. HLSS is responsible for making any principal or interest payments to the debt holders not covered by the cash flows of the SPEs.

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The following tables summarize the assets and liabilities of our consolidated SPEs at the dates indicated:

At December 31, 2014	Match Funded Advance SPEs		Mortgage Loans SPEs		Total
Match funded advances	$	6,121,595	$	—	$	6,121,595
Loans held for investment		—		815,663		815,663
Related party receivables (1)		—		3,885		3,885
Other assets (2)		134,955		139,114		274,069
Total assets	$	6,256,550	$	958,662	$	7,215,212
Match funded liabilities	$	5,624,088	$	—	$	5,624,088
Other borrowings (3)		—		815,986		815,986
Related party payables		5,285		794		6,079
Other liabilities		4,951		4,308		9,259
Total liabilities	$	5,634,324	$	821,088	$	6,455,412
At December 31, 2013	Match Funded Advance SPEs		Mortgage Loans SPEs		Total
Match funded advances	$	6,387,781	$	—	$	6,387,781
Loans held for investment		—		—		—
Related party receivables (1)		60,239		—		60,239
Other assets (2)		119,902		—		119,902
Total assets	$	6,567,922	$	—	$	6,567,922
Match funded liabilities	$	5,715,622	$	—	$	5,715,622
Other borrowings (3)		—		—		—
Related party payables		—		—		—
Other liabilities		4,673		—		4,673
Total liabilities	$	5,720,295	$	—	$	5,720,295

(1) Related party receivables principally include Match funded advance collections that were in-transit to pay down our Match funded liabilities as of each presented period. See Note 17 for more information about our Related party receivables.

(2) Other assets principally include debt service accounts, claims receivable from the FHA and debt issuance costs. See Note 6 for more information about our Other assets.

(3) Other borrowings include the carrying value of our borrowings to acquire Loans held for investment. See Note 8 for more information about our Other borrowings.

Cash and Cash Equivalents

Cash and cash equivalents include interest-bearing demand deposits with financial institutions with original maturities of 90 days and less. There were no restrictions on the use of our cash and cash equivalents balances as of December 31, 2014 and 2013.

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Servicing Activities and Match Funded Advances

Residential mortgage loan servicers manage the billing, collections and loss mitigation activities associated with mortgage loans that are originated by banks or other lenders. Servicers send borrowers monthly account statements, collect monthly mortgage payments, remit such payments to the owner of the mortgage loan, answer customer service inquiries and maintain custodial accounts to hold borrower payments of principal and interest and amounts received from borrowers to pay real estate taxes and insurance with respect to the properties securing the mortgage loans and pay such real estate taxes and insurance premiums from the custodial accounts. A servicer also remits collections on the mortgage loans from the custodial accounts to the trustee of the applicable securitization trust to make payments on the related mortgage-backed securities and prepares and delivers monthly and annual reports to the trustee. A servicer may also be required to advance its own funds to cover shortfalls in collections of principal and interest from borrowers, to pay property and casualty insurance premiums and real estate taxes on a property and to cover the costs associated with protecting or foreclosing on a property. If borrowers become delinquent on loans, the servicer generally may conduct loss mitigation activities to reduce loan delinquencies and losses by working with borrowers to collect payments and modify loans or enforce the lenders’ remedies, which may include initiating foreclosure procedures and selling the properties.

We are obligated to purchase the servicing advances made by Ocwen pursuant to the PSAs as part of the purchase agreements related to our Rights to MSRs acquired from Ocwen. Servicing advances serve as collateral under the terms of our advance facilities, and we therefore classify the servicing advances we purchase from Ocwen as Match funded advances.

Match funded advances generally fall into one of three categories:

• “Principal and Interest Advances” are cash payments made by the servicer to the owner of the mortgage loan to cover scheduled payments of principal and interest on a mortgage loan that have not been paid on a timely basis by the borrower.

• “Taxes and Insurance Advances” are cash payments made by the servicer to third parties on behalf of the borrower for real estate taxes and insurance premiums on the property that have not been paid on a timely basis by the borrower.

• “Corporate Advances” are cash payments made by the servicer to third parties for the costs and expenses incurred in connection with the foreclosure, preservation and sale of the mortgaged property, including attorneys’ and other professional fees.

Match funded advances are usually reimbursed from amounts received with respect to the related mortgage loan, including payments from the borrower or amounts received from the liquidation of the property securing the loan which is referred to as “loan level recovery.” Servicers generally have the right to cease making servicing advances on a loan if they determine that advances are not recoverable at the loan level. With respect to the Rights to MSRs that we own, Ocwen makes this determination in accordance with its stop advance policy. In the event that loan level recovery is not sufficient to reimburse the servicer in full for servicing advances made with respect to a mortgage loan, most of our PSAs provide that the servicer is entitled to be reimbursed from collections received with respect to other loans in the same securitized mortgage pool which is referred to as “pool level recovery.” We do not receive interest on Match funded advances.

We may record a charge to earnings to the extent that we believe Match funded advances are uncollectable or for which we are not able to obtain indemnification from Ocwen (we recorded no such charges for the years ended December 31, 2014, 2013, or 2012) under the provisions of each servicing contract taking into consideration the projected collections under the applicable loan or pool relative to the Match funded advances outstanding and the projected future Match funded advances. However, the servicer is generally only obligated to advance funds to the extent that it believes the advances are recoverable from expected proceeds from the loan. Ocwen assesses collectability using proprietary cash flow projection models which incorporate a number of different factors, depending on the characteristics of the mortgage loan or pool, including, for example, time to a foreclosure sale, estimated costs of foreclosure action, future property tax payments and the value of the underlying property net of carrying costs, commissions and closing costs.

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Notes Receivable – Rights to MSRs and Related Interest Income

In connection with our purchase of the Rights to MSRs we received all the rights and rewards of ownership of mortgage servicing rights absent the necessary approvals required to allow us to become the named servicer under the applicable PSAs. Accounting Standards Codification (“ASC”) 860, Transfers and Servicing, specifically prohibits accounting for a transfer of servicing rights as a sale if legal title to such servicing rights has not passed to the purchaser. As a result, we are required to account for the purchase of the Rights to MSRs as a financing transaction. We initially recorded the Notes receivable – Rights to MSRs at the purchase price of the Rights to MSRs. At each reporting date, we determine the fair value and adjust the carrying value of the Notes receivable – Rights to MSRs to this amount. Our Notes receivable – Rights to MSRs include a concentration in subprime and Alt-A assets. The total unpaid principal balance (“UPB”) underlying our Notes receivable – Rights to MSRs was $160,785,280 and $180,403,280 as of December 31, 2014 and 2013, respectively.

Interest income – notes receivable – Rights to MSRs represents the servicing fees earned on the underlying mortgage servicing rights less any amounts due to Ocwen for the servicing activities that it performs. In addition, Interest income – notes receivable – Rights to MSRs is reduced by amortization of the Notes receivable – Rights to MSRs and is increased or decreased by incremental changes in the fair value of the Note receivable – Rights to MSRs. Interest income is our primary source of income.

Ocwen is the named servicer for the mortgage loans underlying the Rights to MSRs and therefore receives the servicing fees associated with the mortgage servicing rights; however, Ocwen pays these servicing fees to us under the terms of the related purchase agreements and sale supplements specific to each asset purchase. We pay Ocwen a monthly base fee equal to 12% of the servicing fees collected each month. The monthly base fee payable to Ocwen varies from month to month based on the level of collections of principal and interest for the mortgage loans serviced. Ocwen also receives a performance based incentive fee to the extent the servicing fee revenue that it collects for any given month exceeds the sum of the monthly base fee and the retained fee.

The amount, as expressed in terms of basis points of the average UPB of the mortgage loans serviced, used to calculate the retained fee is a contractually agreed upon amount. If we do not receive an amount equal to the retained fee in any given month, as expressed in terms of basis points of the average UPB of the mortgage loans serviced, this creates a shortfall in our targeted gross servicing margin. Should this occur, Ocwen will not earn a performance based incentive fee for any month that there is such a shortfall, or in any subsequent month, until we have recovered such shortfall from amounts that would otherwise be available to pay future performance based incentive fees to Ocwen.

As determined by the terms of the various sale supplements with respect to each mortgage servicing right, the performance based incentive fee payable in any month will be reduced by an amount equal to one month LIBOR + 275 bps per annum of the amount of any such excess servicing advances if the advance ratio exceeds a predetermined level for that month.

See Note 12 for more information about how we calculate Interest income – notes receivable – Rights to MSRs.

Loans Held for Investment and Related Interest Income

Loans held for investment consist of residential mortgage loans acquired from others during 2014. Each acquired loan is evaluated at acquisition to determine if the loan is impaired at the time of acquisition.

The Company evaluates purchased loans that are not deemed impaired upon acquisition in accordance with the provisions of ASC 310-20, Receivables – Nonrefundable Fees and Other Costs. The fair value premium or discount on these loans is amortized into interest income over the weighted average life of the loans using a level yield method. At December 31, 2014, only our GNMA EBO loans, a portion of which we acquired from Ocwen, are accounted for under ASC 310-20; therefore, interest income is accrued at the amount that we are guaranteed to receive under either the related purchase agreement or by the Federal Housing Administration (“FHA”), which is the amount of interest we ultimately expect to receive.

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For loans accounted for under ASC 310-20, we periodically evaluate whether all contractual payments will be collected as scheduled according to the contractual terms. We incorporate the probable recovery of such payments resulting from the FHA insurance in this analysis, as applicable. We recognized no loan impairments for the year ended December 31, 2014.

We periodically evaluate whether our Loans held for investment, including individual loans and pools of loans, should be placed on non-accrual status. All of our Loans held for investment remained on accrual status for the year ended December 31, 2014.

The Company evaluates purchased impaired loans in accordance with the provisions of ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected. At December 31, 2014, only our portfolio of re-performing loans (“RPLs”) are accounted for under ASC 310-30.

For loans accounted for under ASC 310-30, we periodically estimate cash flows expected to be collected, adjusted for expected prepayments, on pools of loans sharing common risk characteristics which are treated in the aggregate when applying various valuation techniques. We evaluate at each balance sheet date whether the present value of our pools of loans determined using the effective interest rates has decreased and, if so, recognize a provision for loan loss. For any increases in cash flows expected to be collected, we reduce any loss provisions previously recorded, if applicable, and then adjust the amount of accretable yield recognized on a prospective basis over the pool’s remaining life. We recognized no provisions for loan loss nor any adjustments to the amount of the accretable yield for the year ended December 31, 2014.

We record interest income on our Loans held for investment as a component of Interest income – other in our Consolidated Statement of Operations. See Note 12 for additional information on our interest income.

Effective December 31, 2014, we adopted the provisions of Accounting Standards Update (“ASU”) 2014-04. This ASU requires that when an in substance repossession or foreclosure occurs; that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. This amendment did not have a material impact on our Consolidated Financial Statements.

Effective December 31, 2014, we adopted the provisions of ASU 2014-14. Therefore, upon foreclosure of GNMA EBO loans for which we have made or intend to make a claim on the FHA guarantee, we reclassify the carrying amount of the loan to Claims receivable from FHA, which is recorded within Other assets on our Consolidated Balance Sheets. As a result of our adoption of this ASU, we have classified $109,586 of foreclosed properties and outstanding FHA claims as Claims receivable from FHA within our Other assets. See Note 6 for further information.

On February 20, 2015, we sold our RPL portfolio to an unrelated third party purchaser. See Note 19 for further information regarding this transaction.

Derivative Financial Instruments

We are party to interest rate swap agreements that we recognize on our Consolidated Balance Sheet at fair value within Other assets and Other liabilities. On the date we entered into our interest rate swap agreements, we designated and documented them as hedges of the variable cash flows payable for floating rate interest expense on our borrowings (cash flow hedge). To qualify for hedge accounting, a derivative must be highly effective at reducing the risk associated with the hedged exposure. In addition, the documentation must include the risk management objective and strategy. We periodically assess and document the derivatives’ effectiveness and expected effectiveness in offsetting the changes in the fair value or the cash flows of the hedged items. To assess effectiveness, we use statistical methods, such as regression analysis, as well as nonstatistical methods including dollar-offset analysis. For a cash flow hedge, to the extent that it is effective, we record changes in the estimated fair value of the derivative in accumulated other comprehensive income (“AOCI”.) We subsequently reclassify 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.

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If a derivative instrument in a cash flow hedge is terminated or the hedge designation is removed, we reclassify related amounts in AOCI into earnings in the same period or periods during which the cash flows that were hedged affect earnings. In a period where we determine that it is probable that a hedged forecasted transaction will not occur, such as variable-rate interest payments on debt that has been repaid in advance, any related amounts in AOCI are reclassified into earnings in that period.

We do not apply offsetting as part of our accounting for derivative assets and liabilities and the related collateral amounts.

See Notes 3 and 11 for additional information regarding our interest rate swap agreements.

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Match Funded Liabilities

Substantially all of our outstanding Match funded advances are pledged to advance financing facilities. Match funded liabilities are a form of non-recourse debt that are collateralized by our Match funded advances. Our Match funded liability balance is driven primarily by the level of servicing advances and the advance borrowing rate which is defined as the collateral value of servicing advances divided by total servicing advances. The advance borrowing rates, which are different for each of six advance types, were set at levels that enabled each class of notes issued pursuant to the advance financing facilities to meet rating agency criteria. In addition, we are able to pledge deferred servicing fees as collateral for our Match funded liabilities.

Under the terms of the related indenture, the SPEs created in connection with the Match funded liabilities are subject to various qualitative and quantitative covenants. We believe that we are currently in compliance with the following covenants:

• Restrictions on future investments and indebtedness;

• Restrictions on sale or assignment of Match funded advances; and

• Monitoring and reporting of various specified transactions or events, including specific reporting on defined events affecting collateral underlying the indenture.

See Note 7 for additional information regarding our Match funded liabilities.

Other Borrowings

Other borrowings consists of financing arrangements that are collateralized by assets other than our Match funded advances, including our senior secured term loan facility, which is collateralized by the general assets of HLSS, and three other financing facilities, which are collateralized by specific assets. The senior term loan facility was issued at a discount to par, and this original issue discount is being accreted into Interest expense over the life of the facility. The remaining Other borrowings were issued at par. See Note 8 for additional information regarding our Other borrowings.

Interest Income – Other

Interest income – other consists of interest we earn on our operating bank accounts, the custodial account balances related to the mortgage loans serviced which are not included in our Consolidated Balance Sheets, and interest earned on our Loans held for investment (as described above under the header “Loans Held for Investment and Related Interest Income”). When we acquire Notes receivable – Rights to MSRs, we also acquire the right to earn interest income on all custodial account balances associated with the related PSAs. See Note 12 for additional information on our interest income.

Related Party Revenue

Related party revenue consists of amounts due to us from Ocwen under the terms of the Ocwen Professional Services Agreement. Under the Ocwen Professional Services Agreement, we receive revenue for providing certain services to Ocwen, which may include valuation and analysis of mortgage servicing rights, capital markets activities, advance financing management, treasury management, legal services and other similar services. We recognize revenue under the Ocwen Professional Services Agreement based on actual costs incurred plus an additional markup of 15%. See Note 17 for more information regarding our related party transactions.

Operating Expenses

Our operating expenses consist largely of Compensation and benefits for our employees. In addition, we incur General and administrative expenses for facilities, technology, communication, bank fees and other expenses typical of public companies, including audit, legal and other professional fees.

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Related Party Expenses

Related party expenses consist of administrative services pursuant to the Altisource Administrative Services Agreement and the services provided by Ocwen to us under the Ocwen Professional Services Agreement. See Note 17 for more information regarding our related party transactions.

Interest Expense

We primarily finance servicing advances with Match funded liabilities that accrue interest. Interest expense also includes interest incurred on our Other borrowings, amortization of debt issuance costs and net interest payable on our interest rate swaps.

Interest expense is sensitive to the Match funded advance balance, which is driven primarily by the delinquency rates and the amount of UPB serviced. The speed at which delinquent loans are resolved affects our Interest expense. For example, slower resolution of delinquencies will result in higher servicing advance balances and higher Interest expense. In order to mitigate the Interest expense impact of higher servicing advance balances, we reduce the performance based servicing fee payable to Ocwen in any month in which the advance ratio exceeds a predetermined level for that month. Periodic issuances of fixed rate term notes also helps to protect us from the risk of rising interest rates. We earn Interest income at market interest rates on the custodial account balances related to the mortgage loans serviced, which are not included in our Consolidated Balance Sheets. Lastly, we use interest rate swaps to hedge a portion of our variable interest rate exposure. See Notes 3 and 11 for additional information regarding our interest rate swap agreements.

Income Taxes

We were incorporated as an exempted company in the Cayman Islands which currently does not levy income taxes on individuals or companies. We also maintain operating subsidiaries subject to corporate taxation in the United States and Luxembourg.

We expect to be treated as a PFIC under U.S. federal income tax laws with respect to our investing activities. With the exception of our U.S. subsidiaries, we do not expect to be treated as engaged in a trade or business in the U.S. and thus do not expect to be subject to U.S. federal income taxation on the majority of our earnings.

We account for income taxes using the asset and liability method, which requires the recognition of Deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. See Note 15 for more information regarding our Income taxes.

Basic and Diluted Earnings Per Share (“EPS”)

Basic EPS is computed by dividing reported Net income available to ordinary shareholders by weighted average number of ordinary shares outstanding during each period. Net income available to ordinary shareholders is calculated using the two-class method, which is an earning allocation method for computing EPS when an entity’s capital structure includes ordinary shares and participating securities. The two-class method determines EPS based on dividends declared on ordinary shares and participating securities (i.e., distributed earnings) and participation rights of participating securities in any undistributed earnings. The application of the two-class method is required because the Company’s vested stock options that contain a non-forfeitable right to dividends or dividend equivalents.

Diluted EPS is computed by dividing reported Net income by the sum of the weighted average ordinary shares and all potential dilutive ordinary shares outstanding during the period. Potential dilutive ordinary shares includes incremental ordinary shares deemed outstanding from the assumed exercise of stock options.

See Note 10 for additional information regarding our basic and diluted EPS.

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Dividends

When our Board of Directors declares cash dividends, we record Dividends payable and charge Retained earnings for the total amount of the dividends declared. If we lack sufficient Retained earnings to pay the full amount of dividends declared, we charge the excess amount to Additional paid-in capital.

Recent Accounting Pronouncements

ASU 2013-11. This ASU provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit exists. Previously, there was diversity in practice, and this ASU is expected to eliminate that diversity in practice. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Our adoption of this standard effective January 1, 2014, did not have a material impact on our Consolidated Financial Statements.

ASU 2014-06. This ASU provides technical corrections and improvements to Accounting Standards Codification glossary terms. Our adoption of this standard, effective March 14, 2014, did not have a material impact on our Consolidated Financial Statements.

ASU 2014-15. The amendments in this ASU provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments in this update are effective for fiscal years and interim periods ending after December 15, 2016.

2. ASSET ACQUISITIONS

On March 3, 2014, we acquired GNMA EBO loans with UPB of $549,411 from Ocwen. Because these loans earn interest at a rate that is higher than current market rates, the loans were purchased at a premium to par, resulting in a total purchase price of $556,618. We amortize the purchase price premium over the expected life of the portfolio using the interest method of accounting. These loans are insured by the FHA, making the collectability of the entire balance of these loans reasonably assured. We account for these GNMA loans as Loans held for investment.

Ocwen initially acquired these loans through the GNMA EBO program, which allows servicers of federally insured or guaranteed loans to buy delinquent loans from the applicable loan securitization pools. We also financed the GNMA EBO advances related to the GNMA EBO loans, and we account for this arrangement as a financing transaction because Ocwen retained title and all other rights and rewards associated with the GNMA EBO advances. Collectively, the purchase of GNMA EBO loans and financing of the related advances are referred to as the “EBO Pool 1 Transaction.”

On October 16, 2014, HLSS purchased a portfolio of EBO loans from an unrelated third party with a total UPB of $142,532. The loans were purchased at a discount to par, resulting in a total purchase price of $141,358. In accordance with ASC 310-20, we will recognize the excess cash flows over the purchase price as interest income on a level yield basis. These loans are insured by the FHA, making the collectability of the entire balance of these loans reasonably assured. The purchase of these EBO loans are referred to as the “EBO Pool 2 Transaction.” We account for these GNMA loans as Loans held for investment.

Our GNMA EBO loans are in a Mortgage Loans SPE along with the related financing facility (the “EBO Facility”), which is more fully described in Note 8. The accounts of this SPE are included in our Consolidated Financial Statements. These transfers to the SPE do not qualify for sale accounting because we retain control over the transferred assets. As a result, we account for these transfers as financings and classify the transferred GNMA EBO loans on our Consolidated Balance Sheet as Loans held for investment and the related liabilities as Other borrowings. We use collections on the GNMA EBO loans pledged to the SPE to repay principal and to pay interest and the expenses of the entity. The holders of the debt issued by this SPE can look beyond the assets of the SPE for satisfaction of the debt and therefore have recourse against HLSS. It is our expectation that, since our GNMA EBO loans are insured by the FHA, the cash flows of this SPE will be sufficient to meet all claims of the debt holders. HLSS is responsible for making any principal or interest payments to the debt holders not covered by the cash flows of the SPE.

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On June 27, 2014, HLSS purchased a portfolio of RPLs from a third party seller with a UPB of $396,939 (the “RPL Transaction”). Because RPLs have historically experienced default conditions, are not insured by any agency and earn interest at a rate that is lower than current market rates, the loans were purchased at a discount of par equivalent to thirty percent of UPB, resulting in a total purchase price of $276,248. These loans were purchased credit impaired. In accordance with ASC 310-30, we will recognize the excess cash flows over the purchase price as interest income on a level yield basis. We account for these RPLs as Loans held for investment.

On July 31, 2014, HLSS completed a follow-on purchase of RPLs from a third party seller with a UPB of $92,908 (the “RPL Follow-on Transaction”) under substantially the same terms and conditions as the RPL Transaction. The total purchase price was $67,647, and we will recognize the excess cash flows over the purchase price as interest income on a level yield basis in accordance with ASC 310-30. We account for these RPLs as Loans held for investment.

Ocwen serviced the RPLs prior to the RPL Transaction and the RPL Follow-on Transaction, and Ocwen remains the servicer subsequent to the acquisitions.

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Our RPLs are in a Mortgage Loans SPE along with the related financing facility (the “RPL Facility”), which is more fully described in Note 8. The accounts of this SPE are included in our Consolidated Financial Statements. The transfers to the SPE do not qualify for sale accounting because we retain control over the transferred assets. As a result, we account for these transfers as financing and classify the transferred RPLs on our Consolidated Balance Sheet as Loans held for investment and the related liabilities as Other borrowings. We use collections on the RPLs pledged to the SPE to repay principal and to pay interest and the expenses of the entity. The holders of the debt issued by this SPE can look beyond the assets of the SPE for satisfaction of the debt and therefore have recourse against HLSS. It is our expectation that the cash flows of this SPE will be sufficient to meet all claims of the debt holders. HLSS is responsible for making any principal or interest payments to the debt holders not covered by the cash flows of the SPE.

The following table summarizes the purchase price of assets we acquired during the year ended December 31, 2014 and reconciles the cash used to acquire such assets:

EBO Pool 1 loans purchase price (1)	$	556,618
EBO Pool 2 loans purchase price (1)		141,358
RPL purchase price (1)		276,248
RPL follow-on purchase (1)		67,647
Total cash required	$	1,041,871
Sources:
Cash on hand	$	171,103
Other borrowings		872,923
Purchase price hold-backs (2)	$	(2,155	)
Total cash used	$	1,041,871

(1) The cash used to purchase these assets is shown within “Purchase of loans held for investment” of the Consolidated Statement of Cash Flows.

(2) Purchase price hold-backs represent amounts due upon clearance of certain loan level conditions related to our EBO Pool 2 Transaction. This amount was outstanding and recorded within Other liabilities at December 31, 2014.

During the year ended December 31, 2013, we executed three asset purchases from Ocwen wherein we used cash on hand and Match funded liabilities to purchase the following:

• The contractual right to receive the servicing fees related to mortgage servicing rights with UPB of approximately $119.7 billion, which we account for as Notes receivable – Rights to MSRs, and

• The outstanding servicing advances associated with the related pooling and servicing agreements.

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The following table summarizes the purchase price of the assets we acquired from Ocwen during the year ended December 31, 2013 and reconciles the cash used to acquire such assets:

Notes receivable – Rights to MSRs	$	417,167
Match funded advances (1)		3,839,954
Purchase price, as adjusted		4,257,121
Cash paid to settle previous post-closing adjustments		1,410
Total cash required	$	4,258,531
Sources:
Cash on hand	$	807,268
Match funded liabilities		3,451,263
Total cash used	$	4,258,531

(1) The cash used to purchase these assets is shown within the “Acquisition of advances in connection with the purchase of Residential Mortgage Assets” of the Consolidated Statement of Cash Flows.

3. FAIR VALUE OF FINANCIAL INSTRUMENTS

We estimate fair value based on a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assessment of the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs to valuation techniques into three broad levels and gives the highest priority to Level 1 inputs and the lowest to Level 3 inputs.

The three broad categories are:

• Level 1: Quoted prices in active markets for identical assets or liabilities;

• Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and

• Level 3: Unobservable inputs for the asset or liability.

Where available, we utilize quoted market prices or observable inputs rather than unobservable inputs to determine fair value. We classify assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement.

We describe the methodologies that we use and key assumptions that we make to assess the fair value of instruments in more detail below.

Notes Receivable – Rights to MSRs

We established the value of the Notes receivable – Rights to MSRs based on appraisals prepared by independent valuation firms. These appraisals are prepared on a quarterly basis. Significant inputs into the valuation as of December 31, 2014 include the following:

• Discount rates reflecting the risk of earning the future income streams from the Notes receivable – Rights to MSRs ranging from 14% to 22%;

• Interest rate used for calculating the cost of financing servicing advances of 1-Month LIBOR plus 3.50%;

• Mortgage loan prepayment projections ranging from 13% to 29% of the related mortgage lifetime projected prepayment rate; and

• Delinquency rate projections ranging from 15% to 35% of the aggregate unpaid balance of the underlying mortgage loans.

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The independent valuation firms reviewed the collateral attributes and the historical payment performance of the underlying mortgage servicing portfolio and compared them with similar mortgage servicing portfolios and with standard industry mortgage performance benchmarks to arrive at the assumptions set forth above. The selected collateral attributes and performance comparisons utilized were the voluntary prepayment performance, delinquency and foreclosure performance, operational cost comparison, average loan balance, weighted average coupon and note rate distribution, loan product type classification, geographic distribution and servicing advance behavior.

The unobservable inputs that have the most significant effect on the fair value of Notes receivable – Rights to MSRs are the mortgage loan prepayment rate projections and delinquency rate projections; however, any significant increase (decrease) in discount rates, interest rates, mortgage loan prepayment projections or delinquency rate projections, each in isolation, would result in a substantially lower (higher) valuation.

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Derivative Financial Instruments

Our derivatives are not exchange-traded, and therefore quoted market prices or other observable inputs are not available. The fair value of our interest rate swap agreements is based on certain information provided by third-party pricing sources. Third-party valuations are derived from proprietary models based on inputs that include yield curves and contractual terms such as fixed interest rates and payment dates. We have not adjusted the information obtained from the third-party pricing sources; however, we review this information to ensure that it provides a reasonable basis for estimating fair value. Our review is designed to identify information that appears stale, information that has changed significantly from the prior period and other indicators that the information may not be accurate. We determined that potential credit and counterparty risks had an immaterial impact on the valuation of our derivatives. See Note 11 for additional information on our derivative financial instruments.

The following tables present assets by level within the fair value hierarchy that are measured at fair value on a recurring basis:

At December 31, 2014:	Fair Value		Level 1		Level 2		Level 3
Measured at fair value on a recurring basis:
Assets:
Notes receivable – Rights to MSRs	$	614,465	$	—	$	—	$	614,465
Derivative financial instruments		1,370		—		—		1,370
Total assets	$	615,835	$	—	$	—	$	615,835
Liabilities:
Derivative financial instruments	$	211	$	—	$	—	$	211
Total liabilities	$	211	$	—	$	—	$	211
At December 31, 2013:	Fair Value		Level 1		Level 2		Level 3
Measured at fair value on a recurring basis:
Assets:
Notes receivable – Rights to MSRs	$	633,769	$	—	$	—	$	633,769
Derivative financial instruments		3,835		—		—		3,835
Total assets	$	637,604	$	—	$	—	$	637,604
Liabilities:
Derivative financial instruments	$	529	$	—	$	—	$	529
Total liabilities	$	529	$	—	$	—	$	529

No transfers between levels occurred during the year ended December 31, 2014, and December 31, 2013.

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The following tables present reconciliations of the fair value and changes in fair value of our Level 3 assets and liabilities that we measure at fair value on a recurring basis:

	2014						2013
For the years ended December 31,	Notes receivable – Rights to MSRs			Derivative Financial Instruments			Notes receivable – Rights to MSRs			Derivative Financial Instruments
Beginning balance	$	633,769		$	3,306		$	296,451		$	(1,076	)
Purchases and reductions:
Purchases		—			—			417,167			—
Reductions		(19,304	)		—			(79,849	)		—
		(19,304	)		—			337,318			—
Changes in fair value:
Included in net income (1)		—			—			—			—
Included in other comprehensive income (2)		—			(2,147	)		—			4,382
		—			(2,147	)		—			4,382
Transfers in or out of Level 3		—			—			—			—
Ending balance	$	614,465		$	1,159		$	633,769		$	3,306

(1) At each reporting date, we determine the fair value of our Notes receivable – Rights to MSRs and adjust the carrying value to this amount. These changes in fair value are included in Interest income in the Consolidated Statements of Operations. See Note 12 for additional information regarding our Interest income.

(2) These pre-tax gains (losses) are attributable to derivatives still held at December 31, 2014 and December 31, 2013, respectively.

The following table shows the effect on the fair value of the Notes receivable – Rights to MSRs assuming adverse changes to certain key assumptions used in valuing these assets at December 31, 2014 and December 31, 2013:

	Discount Rate						Prepayment Speeds						Delinquency Rates
	100 bps adverse change			200 bps adverse change			10% adverse change			20% adverse change			10% adverse change			20% adverse change
At December 31, 2014:
Notes receivable – Rights to MSRs	$	(10,061	)	$	(19,821	)	$	(17,719	)	$	(34,537	)	$	(55,410	)	$	(108,567	)
At December 31, 2013:
Notes receivable – Rights to MSRs	$	(12,988	)	$	(35,551	)	$	(22,537	)	$	(41,021	)	$	(72,560	)	$	(144,085	)

This sensitivity analysis above assumes a change is made to one key input while holding all other inputs constant. As many of these inputs are correlated, a change in one input will likely impact other inputs, which would ultimately impact the overall valuation.

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The following table provides additional quantitative information on our significant inputs used for valuing our Notes receivable – Rights to MSRs as of December 31, 2014, and December 31, 2013, respectively:

At December 31, 2014:

Asset	Unobservable Input	Low			High			Weighted Average
Notes receivable – Rights to MSRs	Discount Rate		14	%		22	%		19	%
	Prepayment Speeds		13	%		29	%		19	%
	Delinquency Rates		15	%		35	%		25	%

At December 31, 2013:

Asset	Unobservable Input	Low			High			Weighted Average
Notes receivable – Rights to MSRs	Discount Rate		15	%		22	%		20	%
	Prepayment Speeds		12	%		28	%		19	%
	Delinquency Rates		15	%		35	%		25	%

Presented below are the carrying values and fair value estimates of financial instruments not carried at fair value at the dates indicated:

	December 31, 2014		December 31, 2014		December 31, 2013		December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Match funded advances	$	6,121,595	$	6,121,595	$	6,387,781	$	6,387,781
Loans held for investment		815,663		822,298		—		—
Total financial assets	$	6,937,258	$	6,943,893	$	6,387,781	$	6,387,781
Financial liabilities:
Match funded liabilities	$	5,624,088	$	5,618,263	$	5,715,622	$	5,700,934
Other borrowings		1,182,328		1,167,267		343,386		346,391
Total financial liabilities	$	6,806,416	$	6,785,530	$	6,059,008	$	6,047,325

Match Funded Advances

The carrying value of our Match funded advances approximates fair value. This is because our Match funded advances have no stated maturity, generally are realized within a relatively short period of time and do not bear interest. The fair value measurements for Match funded advances are categorized as Level 3.

Loans Held for Investment

The fair value estimate of these loans was determined by using internal cash flow models that require us to make assumptions regarding various inputs, including default rates, delinquency rates, interest rates and prepayment speeds. Additionally, we make assumptions related to severity for our RPLs. The fair value measurements for Loans held for investment are categorized as Level 3.

Match Funded Liabilities

Match funded liabilities include various series of term notes, variable funding notes and other fixed rate liabilities. The fair value estimate of the Company’s term notes and other fixed rate liabilities was determined by using broker quotes. We concluded that no adjustments were required to the quoted prices. The level of trading, both in number of trades and amount of term notes traded, is at a level that the Company believes broker quotes to be a reasonable representation of the current fair market value of the term notes. All other Match funded liabilities are short term in nature, and the carrying value generally approximates the fair value. The fair value measurements for Match funded liabilities are categorized as Level 3.

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Other Borrowings

Other borrowings include a senior secured term loan facility, EBO Facility, RPL Facility and a servicing advance note facility (the “Note Facility”). The fair value estimate of the senior secured term loan facility was determined by using broker quotes. We concluded that no adjustments were required to the quoted price. Trading is at a level that the Company believes broker quotes to be a reasonable representation of the current fair market value of this facility. The EBO Facility, the RPL Facility and the Note Facility are short term in nature, and the carrying values generally approximate the fair values. The fair value measurements for these facilities are categorized as Level 3.

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4. MATCH FUNDED ADVANCES

Match funded advances on residential loans are comprised of the following at the dates indicated:

	December 31, 2014		December 31, 2013
Principal and interest advances	$	2,539,532	$	2,632,092
Taxes and insurance advances		2,748,700		2,723,390
Corporate advances		833,363		1,032,299
	$	6,121,595	$	6,387,781

5. LOANS HELD FOR INVESTMENT

Our Loans held for investment relate to GNMA EBO loans and RPLs, which are our only classes of Loans held for investment.

	December 31, 2014		December 31, 2013
GNMA EBO loans	$	477,016	$	—
RPLs		338,647		—
Loans held for investment	$	815,663	$	—

Upon acquisition, the Company reviews Loans held for investment to determine if there is evidence of credit deterioration since origination in accordance with the provisions of ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Any loan acquired is considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected.

We account for acquired Loans held for investment that are not deemed to be impaired at acquisition under ASC 310-20, Receivables – Nonrefundable Fees and Other Costs.

GNMA EBO Loans

We account for our GNMA EBO loans under ASC 310-20, Receivables – Nonrefundable Fees and Other Costs. In accordance with ASC 310-20-30-5, these loans are recorded at the UPB plus or minus a purchase premium or discount, which is the amount we paid to purchase these loans. Purchase premiums and discounts are amortized or accreted into interest income on a level yield basis. These loans are FHA insured, making the collectability of the entire balance reasonably assured. We evaluate whether all contractual payments will be collected as scheduled according to contractual terms, including the probable recovery of such payments from FHA insurance. There were no allowances for loan losses related to the GNMA EBO loans at December 31, 2014.

At December 31, 2014, GNMA EBO loans with a total UPB of $290.8 million were in the process of foreclosure.

At December 31, 2014, we had outstanding and in-process claims on FHA guarantees of $109.6 million related to our GNMA EBO loans for which foreclosure has been completed and for which we have made or intend to make a claim on the FHA guarantee. We include these receivables in Other assets. See also Note 6, Other Assets.

See Note 2, Asset Acquisitions, for further discussion the GNMA EBO acquisitions.

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RPLs

We account for our RPLs under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. The Company evaluated all of the loans purchased in the RPL Transaction in accordance with the provisions of ASC 310-30, and all RPLs were deemed to be impaired loans at acquisition. The RPLs are not insured against loss, and the borrowers, all of which have been previously delinquent, may be more likely to be in economic distress, to have become unemployed or bankrupt or to otherwise be unable or unwilling to make payments when due. Also, a portion of these loans feature future step-ups in the required payment.

The RPLs were grouped into pools based on common risk characteristics, and the pools were recorded at their estimated fair values which incorporated estimated credit losses at the acquisition date. The RPL pools are systematically reviewed by the Company to determine the risk of losses that may exceed those identified at the time of the acquisition. No individual RPLs were classified as nonperforming assets at December 31, 2014 as the loans are accounted for on a pooled basis, and the pools are considered to be performing. No RPL pools evaluated by the Company were determined to have experienced impairment in the estimated credit quality or cash flows since acquisition.

The amount of the estimated cash flows expected to be received from the RPL pools in excess of the fair values recorded for the RPL pools is referred to as the accretable yield. The accretable yield is recognized as interest income over the estimated lives of the RPL pools. To date, the Company has made no adjustments to the accretable yield.

Changes in the carrying amount of the accretable yield for RPL pools were as follows for the year ended December 31, 2014:

	Accretable Yield			Carrying Amount
Beginning balance	$	—		$	—
Additions		178,543			343,895
Accretable yield adjustments		—			—
Accretion		(9,575	)		9,575
Payments and other reductions, net		—			(14,823	)
Ending balance	$	168,968		$	338,647

At December 31, 2014, the outstanding balance of RPLs, including outstanding principal, interest, fees, penalties and other amounts due, was $481.6 million.

At the acquisition date of June 27, 2014, the loans acquired in the RPL Transaction had contractually required payments receivable of $622.1 million and a fair value of $276.2 million. The cash flows expected to be collected were $423.1 million at the acquisition date.

At the acquisition date of July 31, 2014, the loans acquired in the RPL Follow-on Transaction had contractually required payments receivable of $144.8 million and a fair value of $67.6 million. The cash flows expected to be collected were $99.5 million at the acquisition date.

At December 31, 2014, RPLs with a total UPB of $1.6 million were in the process of foreclosure. No foreclosures of RPLs were completed during the year ended December 31, 2014.

See Note 2, Asset Acquisitions, for further discussion our RPL acquisitions.

On February 20, 2015, we sold our RPL portfolio to an unrelated third party purchaser. See Note 19 for further information regarding this transaction.

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6. OTHER ASSETS

Other assets consisted of the following at the dates indicated:

	December 31, 2014		December 31, 2013
Debt service accounts (1)	$	128,525	$	103,910
Claims receivable from FHA (2)		109,586		—
Accrued interest income (3)		22,661		—
Debt issuance costs (4)		16,706		21,165
Derivative financial instruments (5)		1,370		3,835
Interest-earning collateral deposits (6)		1,077		1,075
Other		1,550		168
	$	281,475	$	130,153

(1) Under our advance funding facilities, we are contractually required to remit collections of Match funded advances to the trustee within two days of receipt. We do not use the collected funds to reduce the related Match funded liabilities until the payment dates specified in the indenture. The balance also includes amounts that we set aside to provide for possible shortfalls in the funds available to pay certain expenses and interest. Lastly, this balance includes collections on our Loans held for investment of $3,667, which will be used to pay down a portion of our Other borrowings on the first funding date following year end.

(2) Claims receivable from FHA relate to GNMA EBO loans for which foreclosure has been completed and for which we have made or intend to make a claim on the FHA guarantee.

(3) Accrued interest income represents interest earned but not yet collected on our Loans held for investment.

(4) Debt issuance costs relate to Match funded liabilities and Other borrowings. We amortize these costs to the earlier of the scheduled amortization date, contractual maturity date or prepayment date of the debt.

(5) See Notes 3 and 11 for more information regarding our use of derivatives.

(6) Interest-earning collateral deposits represent cash collateral held by our counterparty as part of our interest rate swap agreements.

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7. MATCH FUNDED LIABILITIES

Match funded liabilities are comprised of the following at the dates indicated:

						Balance Outstanding
Borrowing Type (1)	Interest Rate (2)	Maturity (3)	Amortization Date (3)	Unused Borrowing Capacity (4)		December 31, 2014 (5)		December 31, 2013
Series 2012 T2 Term Notes	199 – 494 bps	Oct. 2045	Oct. 2015	$	—	$	450,000	$	450,000
Series 2013 T1 Term Notes	90 – 249 bps	Jan. 2044	Jan. 2014		—		—		650,000
Series 2013 T1 Term Notes	150 – 323 bps	Jan. 2046	Jan. 2016		—		350,000		350,000
Series 2013 T1 Term Notes	229 – 446 bps	Jan. 2048	Jan. 2018		—		150,000		150,000
Series 2013 T2 Term Notes	115 – 239 bps	May 2044	May 2015		—		375,000		375,000
Series 2013 T3 Term Notes	179 – 313 bps	May 2046	May 2017		—		475,000		475,000
Series 2013 T4 Term Notes	118 – 232 bps	Aug. 2044	Aug. 2014		—		—		200,000
Series 2013 T5 Term Notes	198 – 331 bps	Aug. 2046	Aug. 2016		—		200,000		200,000
Series 2013 T6 Term Notes	129 – 223 bps	Sep. 2044	Sep. 2014		—		—		350,000
Series 2013 T7 Term Notes	198 – 302 bps	Nov. 2046	Nov. 2016		—		300,000		300,000
Series 2014 T1 Term Notes (6)	124 – 229 bps	Jan. 2045	Jan. 2015		—		600,000		—
Series 2014 T2 Term Notes	222 – 311 bps	Jan. 2047	Jan. 2017		—		200,000		—
Series 2014 T3 Term Notes	281 bps	Jun. 2048	Jun. 2018		—		363,000		—
Series 2012 VF 1 Notes (7)	1-Month LIBOR + 110 - 340 bps	Aug. 2045	Aug. 2015		143,673		556,327		469,050
Series 2012 VF 2 Notes (7)	1-Month LIBOR + 110 - 340 bps	Aug. 2045	Aug. 2015		143,673		556,327		469,050
Series 2012 VF 3 Notes (7)	1-Month LIBOR + 110 - 340 bps	Aug. 2045	Aug. 2015		143,673		556,327		469,050
Series 2013 VF 1 Notes (8)	1-Month LIBOR + 150 - 245 bps	Feb. 2045	Feb. 2015		57,893		492,107		514,972
Class A Term Money Market Fund Note	1-Month LIBOR + 20 bps	Sep. 2014	Jan. 2014		—		—		265,000
Class B Term Money Market Fund Note	275 bps	Sep. 2044	Sep. 2014		—		—		28,500
				$	488,912	$	5,624,088	$	5,715,622

(1) Each term note and variable funding note issuance has four classes, an A, B, C, and D class, with the exception of the Series 2014 T3 Term Notes which have only an A and B class. The Series 2014 T3 Class B Term Notes may be exchanged for notes in three separate classes: BX, CX and DX.

(2) The weighted average interest rate at December 31, 2014, was 1.79%. We pay interest monthly.

(3) The amortization date is the date on which the revolving period ends under each advance facility note and repayment of the outstanding balance must begin if the note is not renewed or extended. The maturity date is the due date for all outstanding balances. After the amortization date, all collections that represent the repayment of Match funded advances pledged to the facilities must be applied to reduce the balance of the note outstanding, and any new advances are ineligible to be financed.

(4) Our unused borrowing capacity is available to us if we have additional eligible collateral to pledge and meet other borrowing conditions. We pay a 0.50% or 0.625% fee on the unused borrowing capacity, which varies by facility.

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(5) On January 17, 2014, we completed the issuance of $600,000 of one-year and $200,000 of three-years term notes. On June 18, 2014, we completed the issuance of $400,000 of four-year term notes, of which we retained $37,000.

(6) See Note 19 for further information regarding the repayment of the 2014 T1 Term Notes.

(7) On July 16, 2014, we entered into agreements to extend the amortization dates of our Series 2012 variable funding notes to August 28, 2015.

(8) On February 14, 2014, the Series 2013 variable funding notes were amended to extend the amortization and maturity dates by one year and to reduce the interest rate spreads compared to December 31, 2013.

The debt covenants for our advance facilities require that we maintain minimum levels of liquid assets. Failure to comply with these covenants could result in restrictions on new borrowings or the early termination of our advance facilities. We were in compliance with these covenants as of December 31, 2014.

The debt covenants for our advance facilities require us to maintain total cash and excess borrowing capacity of the lesser of $100,000 and the greater of $25,000 or 0.01% of total UPB outstanding plus 3.25% of total Match funded advances outstanding. The minimum cash and excess borrowing capacity requirement at December 31, 2014, was $100,000 which was exceeded by both our unrestricted cash of $211,086 (which includes our interest-earning collateral deposits) and our excess borrowing capacity of $488,912.

Certain of our financing facilities include adverse adjustments to our advance rates if specified servicer or subservicer ratings are not maintained, and failure by our servicers or subservicers to maintain the minimum rating could result in adverse adjustments to our advance rates, liquidity and profitability. In addition, some PSAs may also require that the servicer or subservicer maintain specified servicer ratings. The failure to maintain the specified rating may result in the termination of the servicer under such PSAs. Any such downgrade could have an adverse effect on our business, financing activities, financial condition or results of operations.

See Note 1 for discussion of a downgrade in our credit rating, the alleged events of default of certain of the advance funding facilities and cross default provisions to Ocwen’s senior secured term facility within our advance funding facilities and EBO Facility, further discussed in Note 8.

Analysis of Borrowing by Expected Maturity (1):

Year of Expected Maturity Date	As of December 31, 2014
2015	$	3,586,088
2016		850,000
2017		675,000
2018		513,000
2019 and thereafter		—
Total	$	5,624,088

(1) The expected maturity date is the date on which the revolving period ends under each advance facility note and repayment of the outstanding balance must begin if the note is not renewed or extended.

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8. OTHER BORROWINGS

Other borrowings consisted of the following at the dates indicated:

	December 31, 2014		December 31, 2013
Senior secured term loan facility (1)	$	340,636	$	343,386
EBO Facility (2)		544,513		—
RPL Facility (3)		271,473		—
Note Facility (4)		25,706		—
	$	1,182,328	$	343,386

(1) On June 27, 2013, we entered into a $350,000 senior secured term loan facility, which was issued at a discount to par. The senior secured term loan facility has a maturity date of June 27, 2020, and an interest rate of 1-Month LIBOR plus 350 bps, subject to a 1.00% LIBOR floor. As of December 31, 2014, the interest rate on our senior secured term loan facility was 4.50%. This facility is carried net of an original issuance discount of $4,114 and $4,864 as of December 31, 2014 and 2013, respectively.

(2) On March 3, 2014, we entered into the EBO Facility to finance the purchase of our EBO Pool 1 loans at an interest rate of 1-Month LIBOR plus 305 bps. On October 16, 2014, we amended the EBO Facility to increase the maximum principal balance to partially finance the purchase of our EBO Pool 2 loans at an interest rate of 1-Month LIBOR plus 180 bps. The facility has a maturity date of March 2, 2015. On February 27, 2015, the maturity date was extended to May 1, 2015. During this extension we intend to actively market the portfolio.

(3) On June 26, 2014, we entered into the RPL Facility to finance the purchase of our RPLs. The facility has a maturity date of June 26, 2015, and an interest rate of 1-Month LIBOR plus 250 bps. In conjunction with our sale of the RPL portfolio on February 20, 2015, the RPL Facility was terminated in accordance with the its terms of agreement. See Note 19.

(4) On June 24, 2014, we entered into the Note Facility to partially finance the purchase of $37,000 of notes retained as part of the Series 2014 T3 Term Note issuance on June 18, 2014. The Note Facility matures quarterly with a next maturity date of March 23, 2015. The Note Facility has an interest rate of 1-Month LIBOR plus 115 bps. We intend to renew this facility at each maturity date.

The weighted average interest rate for our Other borrowings was 3.30% as of December 31, 2014.

The debt covenants for our Other borrowings require that we maintain minimum levels of liquid assets. Failure to comply with these covenants could result in restrictions on new borrowings or the early termination of these facilities. We were in compliance with these covenants as of December 31, 2014.

The debt covenants for our Other borrowings require us to maintain total cash and excess borrowing capacity of the lesser of $100,000 and the greater of $25,000 or 0.01% of total UPB outstanding plus 3.25% of total Match funded advances outstanding. The minimum cash and excess borrowing capacity requirement at December 31, 2014, was $100,000 which was exceeded by both our unrestricted cash of $211,086 (which includes our interest-earning collateral deposits) and our excess borrowing capacity of $488,912.

The debt covenants for our senior secured term loan facility place restrictions on other unsecured indebtedness, require a minimum debt to tangible equity ratio of less than 6 to 1, minimum borrowing base coverage ratio of 1.5 to 1 and mandate the delivery of certified financial reports to our lender. Should we be deemed to be in default under the provisions of our senior secured term loan facility the unpaid principal amount of and accrued interest on the senior secured term loan facility would immediately become due.

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Under the provisions of our senior secured term loan facility our restrictions on unsecured indebtedness include:

• Unsecured indebtedness not to exceed the greater of 0.75% of consolidated total assets or $50,000; and

• Unsecured indebtedness under any working capital facility in an outstanding principal amount not to exceed $50,000 at any time.

We had no unsecured indebtedness as of December 31, 2014 other than our senior secured term loan facility.

See Note 1 for a discussion of a downgrade in our credit rating and cross default provisions to Ocwen’s senior secured term facility contained within our debt agreements.

Analysis of Other Borrowing by Expected Repayment Date (1):

Year of Expected Payment Date	As of December 31, 2014
2015	$	845,192
2016		3,500
2017		3,500
2018		3,500
2019 and thereafter		330,750
Total (2)	$	1,186,442

(1) The EBO Facility, the RPL Facility and the Note Facility expected payment dates are based on the current outstanding balance and maturity date of these facilities.

(2) The total expected payments include the full face value of the senior secured term loan, which has a current original issuance discount balance of $4,114.

9. ORDINARY SHARES

Changes in the number of ordinary shares issued during the year ended December 31, 2014, and December 31, 2013, are represented in the table below:

	2014		2013
Ordinary shares issued – beginning balance		71,016,771		55,884,718
Issuance of new ordinary shares		—		15,132,053
Ordinary shares issued – ending balance		71,016,771		71,016,771

On January 22, 2013, the underwriters exercised a portion of their over-allotment option from our December 24, 2012, offering of ordinary shares in the amount of 970,578 ordinary shares. We received net proceeds of $17,633 from the over-allotment exercise.

On June 26, 2013, we issued 13,000,000 of our ordinary shares, and an additional 1,161,475 of ordinary shares were issued in connection with the exercise of the underwriters’ over-allotment option. The total gross proceeds from the issuance of these additional shares to HLSS were $325,714. After deducting underwriting discounts, commissions and expenses payable by HLSS, the aggregate net proceeds we received were $315,918.

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10. EARNINGS PER SHARE

Basic EPS is computed by dividing reported Net income available to ordinary shareholders by weighted average number of ordinary shares outstanding during each period. Diluted EPS is computed by dividing reported Net income by the sum of the weighted average ordinary shares and all potential dilutive ordinary shares outstanding during the period. Potential dilutive ordinary shares includes ordinary share equivalents consisting of incremental ordinary shares deemed outstanding from the assumed exercise of stock options.

The following table reconciles the numerators and denominators of the basic and diluted EPS for the years ended:

(In thousands, except per share data)	2014							2013						2012
	Net Income			Shares		Earnings Per Share Amount		Net Income		Shares		Earnings Per Share Amount		Net Income		Shares		Earnings Per Share Amount
Basic EPS:
Net income available to common shareholders	$	216,964			71,016,771			$	117,657		64,132,383			$	19,617		17,230,858
Less: Net income allocated to participating securities		(30	)		—				—		—				—		—
Adjusted net income available to common shareholders		216,934			71,016,771	$	3.05		117,657		64,132,383	$	1.83		19,617		17,230,858	$	1.14
Dilutive Securities:
Plus: Net income allocated to participating securities		30			—				—		—				—		—
Less: Net income re-allocated to participating securities		(30	)		—				—		—				—		—
Incremental ordinary shares deemed outstanding		—			4,037				—		—				—		—
Diluted EPS:
Income allocated to common shares and assumed share conversions	$	216,934			71,020,808	$	3.05	$	117,657		64,132,383	$	1.83	$	19,617		17,230,858	$	1.14

At December 31, 2014, we excluded from our calculation of diluted EPS i) 523,750 stock options that were anti-dilutive because their exercise price was greater than the average market price of our stock and ii) 640,000 stock options that are issuable upon the achievement of certain performance criteria related to our stock price and an annualized rate of return to investors. No stock options were outstanding for the years ended December 31, 2013 or 2012. Note 14 provides details of our share-based compensation.

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11. DERIVATIVE FINANCIAL INSTRUMENTS

We are party to interest rate swap agreements that we recognize on our Consolidated Balance Sheet at fair value within Other assets and Other liabilities. On the date we entered into the interest rate swap agreements, we designated and documented them as hedges of the variable cash flows payable for floating rate interest expense on our borrowings (cash flow hedge). To qualify for hedge accounting, a derivative must be highly effective at reducing the risk associated with the hedged exposure. In addition, the documentation must include the risk management objective and strategy. On a quarterly basis we assess and document the derivatives’ effectiveness and expected effectiveness in offsetting the changes in the fair value or the cash flows of the hedged items. To assess effectiveness, we use statistical methods, such as regression analysis, as well as nonstatistical methods including dollar-offset analysis. For a cash flow hedge, to the extent that it is effective, we record changes in the estimated fair value of the derivative in accumulated other comprehensive income (“AOCI”). We subsequently reclassify these changes in estimated fair value to net income in the same period that the hedged transaction affects earnings and in the same financial statement category as the hedged item.

If a derivative instrument in a cash flow hedge is terminated or the hedge designation is removed, we reclassify related amounts in AOCI into earnings in the same period during which the cash flows that were hedged affect earnings. In a period where we determine that it is probable that a hedged forecasted transaction will not occur, such as variable-rate interest payments on debt that has been repaid in advance, any related amounts in AOCI are reclassified into earnings in that period.

Because our current derivative agreements are not exchange-traded, we are exposed to credit loss in the event of nonperformance by the counterparty to the agreement. We control this risk through counterparty credit monitoring procedures including financial analysis, dollar limits and other monitoring procedures. The notional amounts of our contracts do not represent our exposure to credit loss. See Note 3 for additional information regarding our use of derivatives.

Interest Rate Management

We executed a hedging strategy designed to mitigate the impact of changes in variable interest rates on the excess of interest rate sensitive liabilities over interest rate sensitive assets. We entered into interest rate swaps to hedge against the effects of a change in 1-Month LIBOR.

The following tables provide information about our interest rate swaps at December 31, 2014, and December 31, 2013, respectively:

Purpose	Date Opened	Effective Date (1)	Maturity	We Pay			We Receive	Balance Sheet Location	Notional Amount		Fair Value
Designated as hedges (2) (3):
Hedge the effects of changes in 1-Month LIBOR	September 2012	September 2012	August 2017		0.5188	%	1-Month LIBOR	Other assets	$	73,888	$	877
Hedge the effects of changes in 1-Month LIBOR	January 2013	January 2016	December 2017		1.3975	%	1-Month LIBOR	Other assets		338,009		493
Total asset derivatives designated as hedges as of December 31, 2014									$	411,897	$	1,370
Total asset derivatives as of December 31, 2014									$	411,897	$	1,370

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Purpose	Date Opened	Effective Date (1)	Maturity	We Pay			We Receive	Balance Sheet Location	Notional Amount		Fair Value
Designated as hedges (2) (3):
Hedge the effects of changes in 1-Month LIBOR	May 2012	May 2012	May 2016		0.6070	%	1-Month LIBOR	Other liabilities		17,502		(2	)
Hedge the effects of changes in 1-Month LIBOR	March 2012	March 2012	March 2016		0.6325	%	1-Month LIBOR	Other liabilities	$	81,506	$	(209	)
Total liability derivatives designated as hedges as of December 31, 2014									$	99,008	$	(211	)
Total liability derivatives as of December 31, 2014									$	99,008	$	(211	)

Purpose	Date Opened	Effective Date (1)	Maturity	We Pay			We Receive	Balance Sheet Location	Notional Amount		Fair Value
Designated as hedges (3):
Hedge the effects of changes in 1-Month LIBOR	September 2012	September 2012	August 2017		0.5188	%	1-Month LIBOR	Other assets	$	177,056	$	1,084
Hedge the effects of changes in 1-Month LIBOR	January 2013	January 2016	December 2017		1.3975	%	1-Month LIBOR	Other assets		338,009		2,751
Total asset derivatives designated as hedges as of December 31, 2013									$	515,065	$	3,835
Total asset derivatives as of December 31, 2013									$	515,065	$	3,835

Purpose	Date Opened	Effective Date (1)	Maturity	We Pay			We Receive	Balance Sheet Location	Notional Amount		Fair Value
Designated as hedges (3):
Hedge the effects of changes in 1-Month LIBOR	March 2012	March 2012	March 2016		0.6325	%	1-Month LIBOR	Other liabilities	$	102,522	$	(364	)
Hedge the effects of changes in 1-Month LIBOR	May 2012	May 2012	May 2016		0.6070	%	1-Month LIBOR	Other liabilities		28,565		(25	)
Hedge the effects of changes in 1-Month LIBOR	January 2013	January 2014	July 2014		0.3375	%	1-Month LIBOR	Other liabilities		307,043		(140	)
Total liability derivatives designated as hedges as of December 31, 2013									$	438,130	$	(529	)
Total liability derivatives as of December 31, 2013									$	438,130	$	(529	)

(1) The effective date of the swap is the date from which monthly net settlements begin to be computed.

(2) Projected net settlements for the next twelve months total approximately $564 of payments to the counterparty.

(3) There was an unrealized pre-tax loss of $2,147 related to our interest rate swaps included in AOCI for the year ended December 31, 2014. There was an unrealized pre-tax gain of $4,382 related to our interest rate swaps included in AOCI for the year ended December 31, 2013. Given the current and expected effectiveness of our hedging arrangements, we do not expect any reclassifications from AOCI into earnings associated with hedging ineffectiveness related to these hedging arrangements during the next twelve months.

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The following table summarizes our use of derivatives during the year ended December 31:

	2014			2013
Notional balance at beginning of period	$	953,195		$	414,631
Additions		—			645,052
Maturities		(29,278	)		—
Terminations		—			—
Amortization		(413,012	)		(106,488	)
Notional balance at end of period	$	510,905		$	953,195

We recognize the right to reclaim cash collateral or the obligation to return cash collateral as part of our hedge agreements. At December 31, 2014, we have the right to reclaim cash collateral of $1,077 and are obligated to return cash collateral of $1,370 as part of our hedge agreements. At December 31, 2013, we had the right to reclaim cash collateral of $1,075 and were obligated to return cash collateral of $3,500 as part of our hedge agreements.

12. INTEREST INCOME

Interest Income – Notes Receivable – Rights to MSRs

Our primary source of revenue is the fees we are entitled to receive in connection with the servicing of mortgage loans. We account for these fees as interest income.

The following table shows how we calculated Interest income – notes receivable – Rights to MSRs for the year ended December 31:

	2014			2013			2012
Servicing fees collected	$	736,123		$	633,377		$	117,789
Subservicing fee payable to Ocwen		(357,747	)		(317,702	)		(50,173	)
Net servicing fees retained by HLSS		378,376			315,675			67,616
Reduction in Notes receivable – Rights to MSRs		(19,304	)		(79,849	)		(20,171	)
Servicing transfers (1)		1,988			—			—
	$	361,060		$	235,826		$	47,445

(1) Ocwen is required to reimburse us in the event of a transfer of servicing at predetermined contractual rates. These amounts represent receipts from Ocwen related to servicing transfers.

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Interest Income – Other

Additional sources of revenue for us are the interest we earn on our GNMA EBO loans, interest we earn on our RPLs, financing of GNMA EBO and other advances and interest we earn on operating bank accounts and the custodial account balances related to the mortgage loans serviced that are not included in our Consolidated Balance Sheets. The following table shows our Interest income – other for the year ended December 31:

	2014		2013		2012
Loan interest (1)	$	28,671	$	—	$	—
Advance financing interest (2)		3,233		—		—
Bank account interest		4,542		2,195		109
	$	36,446	$	2,195	$	109

(1) Represents interest earned on GNMA EBO loans, net of the amortization or accretion of the purchase premium or discount on our GNMA EBO loans, and the accretion of the accretable yield on our pools of RPLs.

(2) Represents interest earned on servicing advance financing we provided to Ocwen at a rate of 1-Month LIBOR plus a spread ranging from 450 bps to 550 bps.

13. INTEREST EXPENSE

The following table presents the components of Interest expense for the year ended December 31:

	2014		2013		2012
Match funded liabilities	$	109,726	$	83,137	$	16,158
Other borrowings		33,285		8,627		—
Amortization of debt issuance costs		19,543		16,950		6,960
Interest rate swaps		1,144		1,357		939
	$	163,698	$	110,071	$	24,057

14. SHARE-BASED COMPENSATION

On December 5, 2013, the Board of Directors of HLSS adopted the 2013 Equity Incentive Plan (the “Plan”), subject to the approval of the shareholders. At the Annual Meeting of Shareholders on May 13, 2014, the shareholders approved the Plan.

The Plan is administered by the Compensation Committee, which may authorize the award of options, restricted shares, share appreciation rights, performance awards or other share-based awards to our employees of an amount not exceeding 2,000,000 ordinary shares, in aggregate. Currently, other than share options with vesting terms, the Compensation Committee does not expect, but retains the right at their sole discretion, to grant restricted shares, share appreciation rights, performance awards or other share-based awards under the Plan. Each award under the Plan is, and will be, evidenced by a written award agreement between the participant and HLSS. The award agreement describes the award and states the terms and conditions to which the award is subject.

Shares issued under the Plan may be from shares acquired under the Company’s share repurchase program, shares acquired through open market purchases or newly issued shares.

Outstanding share-based compensation currently consists of stock option grants that are a combination of service-based and market-based options.

Service-Based Options. These options are granted at fair value on the date of grant. The options generally vest evenly in four annual increments beginning with the first anniversary of the agreement date, and the options generally expire on the earlier of 10 years after the date of grant or following termination of service. A total of 640,000 service-based awards were outstanding at December 31, 2014.

Market-Based Options. These options are subject to market-based vesting. One-fourth of the options will vest immediately on the first date as of which both of the following market-based criteria have been met: i) the per share price must be equal to or exceed 1.25 times the strike price and ii) investors must achieve a 12.5% annualized rate of return from the agreement date based on the strike price and dividends received. Thereafter, the remaining options will vest evenly on each of the next three anniversaries of the initial date of vesting. A total of 640,000 market-based awards were outstanding at December 31, 2014.

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Both Service-Based Options and Market-Based Options that are vested and outstanding will be entitled to receive payments equal to the amount of the then current dividend as if the underlying shares were issued at the ex-dividend date. We recognized $21 of reductions to Retained earnings related to this feature during the year ending December 31, 2014.

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The fair value of the Service-Based Options was determined using the Black-Scholes option pricing model, and a lattice (binomial) model was used to determine the fair value of the Market-Based Options using the following assumptions as of the grant date:

	December 31, 2014
	Black-Scholes	Binomial
Risk-free interest rate	1.87% - 2.13%	0.12% - 3.23%
Expected stock price volatility	19.62% - 21.95%	19.62% - 21.95%
Expected dividend yield	7.82% - 8.72%	7.82% - 8.72%
Expected option life (in years)	6.5	2.7 - 3.8
Contractual life (in years)	10	10
Fair value	$0.87 - $1.27	$0.53 - $1.43

Share-based compensation expense of $243 for the year ended December 31, 2014 is recorded net of an estimated forfeiture rate of 4%.

A summary of option activity under the Plan for the year ended December 31, 2014, is presented below.

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (1)
Outstanding at December 31, 2013		—		$	—		0.0	$	—
Granted		1,530,000			22.61
Exercised		—			—
Forfeited or expired		(250,000	)		23.12
Outstanding at December 31, 2014		1,280,000		$	22.51		9.1	$	—
Exercisable at December 31, 2014		116,250		$	23.12		8.9	$	—

(1) Intrinsic value represents the difference between the Company’s closing stock price and the exercise price multiplied by the number of options outstanding and exercisable at a price below that closing price.

The weighted-average grant-date fair value of options granted during 2014 is $0.76 per share. As of December 31, 2014, the Company has $657 of total unrecognized compensation expense related to non-vested share option awards granted under the Plan. The total expense is expected to be recognized over the weighted-average requisite service period of 2.8 years. 116,250 shares vested during the year ended December 31, 2014.

No option awards, whether vested or non-vested, were outstanding for the year ended December 31, 2013, and no option activity occurred during this period.

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15. INCOME TAXES

Income taxes were provided for based upon the tax laws and rates in the countries in which we conduct operations and earn related income. Our effective tax rate was 0.3% for the year ended December 31, 2014 (0.2% for the year ended December 31, 2013 and 0.2% for the year ended December 31, 2012). We are a Cayman Islands exempted company, and the Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation.

The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities 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 and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The sources of income (loss) before income taxes for the years ended December 31, 2014, 2013 and 2012 were as follows:

	2014			2013		2012
U.S. operations	$	(11,728	)	$	4,057	$	(3,430	)
Non-U.S. operations		229,328			113,834		23,093
	$	217,600		$	117,891	$	19,663

The components of the income tax provision for the years ended December 31, 2014, 2013 and 2012 consisted of the following:

	2014			2013			2012
Current:
United States
Federal	$	—		$	920		$	—
State		64			193			46
Non-U.S.		561			17			—
Current income tax provision	$	625		$	1,130		$	46
Deferred:
United States
Federal	$	(25	)	$	(790	)	$	—
State		35			(106	)		—
Non-U.S.		1			—			—
Deferred income tax (benefit)		11			(896	)		—
Total income tax provision	$	636		$	234		$	46

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The significant components of the Company’s deferred tax assets and liabilities at December 31, 2014 and 2013 consisted of the following:

	2014			2013
Deferred tax assets:
NOL carryforwards	$	2,822		$	25
Accruals		1,412			999
Total deferred tax assets		4,234			1,024
Valuation allowance		(3,743	)		—
Net deferred tax assets	$	491		$	1,024
Deferred tax liabilities:
Interest rate derivatives	$	414		$	1,139
Debt issuance costs		76			127
Other		1			—
Total deferred tax liabilities	$	491		$	1,266

Below is a reconciliation of the changes in our valuation allowance during 2014 and 2013:

	2014		2013
Beginning balance	$	—	$	1,755
Additions		3,743		—
Release of NOL carryforwards		—		(1,755	)
Ending balance	$	3,743	$	—

As of December 31, 2014 the Company has NOL carryforwards of $7,734 and $7,882, for both U.S. federal and state and local tax purposes. As of December 31, 2013 the Company had NOL carryforwards of $0 and $3,816, for both U.S. federal and state and local tax purposes (2012: $2,827 and $3,776). These carryforwards are available to offset future taxable income until they begin to expire in 2034 and 2024, respectively. The Company had no tax credit carryforwards for the years ended December 31, 2014, 2013, and 2012.

The Company conducts periodic evaluations of positive and negative evidence to determine whether it is more likely than not that some or all of the deferred tax assets will not be realized in future periods. Among the factors considered in this evaluation are estimates of future taxable income, future reversals of temporary differences, tax character and the impact of tax planning strategies that may be implemented, if warranted. As a result of these evaluations, the Company determined as of December 31, 2014 a valuation allowance of $3,743 needed to be recorded against its deferred tax assets.

Reconciliations of the statutory U.S. federal income tax rate to the Company’s effective income tax rate for the years ended December 31, 2014, 2013 and 2012 are as follows:

	2014			2013			2012
Statutory rate		34.0	%		34.0	%		34.0	%
State and local income taxes		(0.1	)%		0.1	%		(0.7	%)
Benefit of Non-U.S. operations(1)		(35.6	)%		(32.8	%)		(39.9	%)
Increase (decrease) in valuation allowance		1.9	%		(1.0	%)		6.8	%
Other		0.1	%		(0.1	%)		—	%
Effective tax rate per Consolidated Statements of Operations		0.3	%		0.2	%		0.2	%

(1) The majority of our earnings are at Home Loan Servicing Solutions, Ltd., a Cayman Islands entity, which is not engaged in a U.S. trade or business and therefore is not subject to U.S. federal income taxation.

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The Company recognizes the tax benefit from an uncertain tax position only if it is more likely that not that the tax position will be sustained on examination by the taxing authorities. As of December 31, 2014 and 2013, the Company did not have any unrecognized tax benefits related to the current year or any previous year, nor has management identified any. Our policy is that we will recognize interest and penalties accrued on any unrecognized tax benefits as a component of Income tax expense. We did not accrue interest or penalties associated with any unrecognized tax benefits, nor were any interest expenses or penalties recognized during the current year or in previous years.

Our U.S. subsidiaries file annual income tax returns in the U.S. federal jurisdiction and various U.S. state jurisdictions. The Company and its subsidiaries remain subject to examination for all periods since inception. The Company asserts that as of December 31, 2014, the unremitted earnings of its non-Cayman Islands subsidiaries are permanently reinvested for purposes of ASC 740-30 and that the Company has the intent and ability to reinvest such earnings in each respective non-Cayman Islands jurisdiction. Determination of the amount of unrecognized deferred tax liability is not practicable because of the fact that there is a significant amount of uncertainty with respect to the tax impact of the remittance of any earnings due to the judgment required to analyze withholding tax and other indirect tax consequences that could arise from the distribution of foreign earnings.

16. BUSINESS SEGMENT REPORTING

Our business strategy focuses on acquiring Rights to MSRs and the related servicing advances, Loans held for investment and other residential mortgage-related assets. As of December 31, 2014, we operate a single reportable business segment that holds Residential Mortgage Assets.

17. RELATED PARTY TRANSACTIONS

We entered into various agreements with Ocwen and Altisource in connection with our Initial Public Offering on March 5, 2012. William C. Erbey, our founder and the former Chairman of our Board of Directors, was also the Chairman of the Board of Directors of Ocwen and Altisource until January 16, 2015.

We acquired all of our Notes receivable – Rights to MSRs and our EBO Pool 1 Transaction loans from Ocwen. Refer to Note 2 for a description of our recent acquisitions from Ocwen and others.

As the named servicer of the loans underlying our Notes receivable – Rights to MSRs, Ocwen remains obligated to perform as servicer under the related PSAs, and we are required to pay Ocwen a monthly fee for the servicing activities it performs. We are also required to purchase any servicing advances that Ocwen is required to make pursuant to such PSAs.

Ocwen is also the named servicer of the EBO Pool 1 Transaction loans and RPLs with an aggregate UPB of $934,906, and we are required to pay Ocwen a monthly fee for the servicing activities it performs. During the year ended December 31, 2014, we incurred servicing fees of $896 on the Loans held for investment serviced by Ocwen ($0 for the years ended December 31, 2013 and 2012).

In connection with the EBO Pool 1 Transaction, we are entitled under the terms of the related purchase agreement to receive interest at the interest rates of the underlying loans less the servicing fee paid to Ocwen, and we paid a premium of $7,207 at acquisition for this right. To the extent that interest due under the terms of the underlying loans is not collected from the borrower, from liquidation of the collateral or from FHA claims, Ocwen is obligated to pay the remaining unpaid interest less the servicing fee. During 2014, Ocwen made $108 of such payments to us. At December 31, 2014, the maximum potential amount of such payments was $10,555.

We provide financing of certain servicing advances to Ocwen. In conjunction with the EBO Pool 1 Transaction on March 3, 2014, we agreed to finance $55,702 of servicing advances for Ocwen and to finance future advances. On May 1, 2014, we entered into another agreement with Ocwen to finance servicing advances totaling $20,157 and to finance future advances. We receive interest income on these receivables at a rate of 1-month LIBOR plus a spread ranging from 450 to 550 bps. We record this interest income as Interest income – other in the Consolidated Statements of Operations. During the year ended December 31,

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2014, we earned interest income on financing of servicing advances of $3,233 ($0 during the year ended December 31, 2013, and $0 during the year ended December 31, 2012). Ocwen owed us $364 and $0 for interest accrued on financing of servicing advances as of December 31, 2014 and 2013.

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The following table summarizes our transactions with Ocwen related to our Notes receivable – Rights to MSRs for the year ended December 31:

	2014			2013			2012
Servicing fees collected	$	736,123		$	633,377		$	117,789
Subservicing fee payable to Ocwen		(357,747	)		(317,702	)		(50,173	)
Net servicing fees retained by HLSS (1)		378,376			315,675			67,616
Servicing advances purchased from Ocwen in the ordinary course of business	$	14,815,773		$	8,781,034		$	1,303,955

(1) Net servicing fees retained by HLSS are included in the Consolidated Statements of Operations as a component of Interest income. See Note 12 for additional information regarding our Interest income.

Our Notes receivable – Rights to MSRs resulted from transactions with Ocwen. At December 31, 2014 and 2013, as a result of servicing activities related to our Notes receivable – Right to MSRs, Ocwen owed us $5,686 and $8,482, respectively, for servicing fees collected but not remitted to us, and we owed Ocwen $7,999 and $8,114, respectively, for the subservicing fee earned by Ocwen.

Ocwen Professional Services Agreement

We have a professional services agreement with Ocwen (“Professional Services Agreement”) that enables us to provide certain services to Ocwen and for Ocwen to provide certain services to us. Services provided by us under this agreement may include valuation and analysis of mortgage servicing rights, capital markets activities, advance financing management, treasury management, legal services and other similar services. Services provided by Ocwen under this agreement may include business strategy, legal, tax, licensing and regulatory compliance support services, risk management services and other similar services. The services provided by the parties under this agreement are on an as-needed basis, and the fees represent actual costs incurred plus an additional markup of 15%.

At December 31, 2014 and 2013, Ocwen owed us $33 and $655 for professional services provided pursuant to the Professional Services Agreement. During the year ended December 31, 2014, we earned fees of $1,843 ($1,811 during the year ended December 31, 2013 and $2,316 during the year ended December 31, 2012) for services provided to Ocwen pursuant to the Professional Services Agreement. Additionally, during the year ended December 31, 2014, we incurred fees of $463 ($555 during the year ended December 31, 2013 and $100 during the year ended December 31, 2012) for services received from Ocwen pursuant to the Professional Services Agreement.

Altisource Administrative Services Agreement

We have an administrative services agreement with Altisource (“Altisource Administrative Services Agreement”) that enables Altisource to provide certain administrative services to us. Services provided to us under this agreement may include human resources administration (benefit plan design, recruiting, hiring and training and compliance support), legal and regulatory compliance support services, general business consulting, corporate services (facilities management, security and travel services), finance and accounting support services (financial analysis, financial reporting and tax services), risk management services, vendor management and other related services. The services Altisource provides to us under this agreement are on an as-needed basis, and the fees we pay Altisource are based on the actual costs incurred by them plus an additional markup of 15%. During the year ended December 31, 2014, we incurred fees of $990 ($845 during the year ended December 31, 2013 and $655 during the year ended December 31, 2012) for services provided to us pursuant to the Altisource Administrative Services Agreement.

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Receivables from and Payables to Related Parties

The following table summarizes amounts receivable from and payable to related parties at the dates indicated:

	December 31, 2014		December 31, 2013
Servicing advance financing receivables (1)	$	84,107	$	—
Servicing fees collected (2)		5,686		8,482
Professional services (3)		33		655
Advance collections (4)		—		60,239
Loan collections in transit (5)		3,885		—
Other		690		673
Receivables from Ocwen	$	94,401	$	70,049
Subservicing fees payable (6)	$	7,999	$	8,114
Professional services (3)		—		354
Advance purchases (7)		5,285		—
Other		1,133		2,181
Payables to Ocwen	$	14,417	$	10,649
Payables to Altisource	$	86	$	83

(1) We provided financing to Ocwen for servicing advances. We receive interest income at a rate of 1-Month LIBOR plus a spread ranging from 450 bps to 550 bps.

(2) Ocwen is required to remit to us servicing fees it collects on our behalf within two business days. The amount due from Ocwen at December 31, 2014, represents servicing fees collected but not remitted at the end of the month. We record servicing fees we collect less the subservicing fee we pay to Ocwen less the reduction in Notes receivable – Rights to MSRs as Interest income as shown in Note 12.

(3) The respective amounts are for professional services provided that were outstanding as of the dates indicated.

(4) Upon collection, Ocwen is contractually obligated to remit Match funded advance collections to pay down our Match funded liabilities. This receivable represents the portion of Match funded advance collections that were in-transit to pay down our Match funded liabilities as of the dates indicated.

(5) Upon collection, Ocwen is contractually obligated to remit collections of our Loans held for investment to a custodial account. This receivable represents the portion of these collections that were not yet deposited into the custodial account.

(6) The base fee and performance fee, if any, that comprise the subservicing fees payable are calculated and paid to Ocwen within three business days following the end of the month.

(7) We are contractually obligated to reimburse advances made by Ocwen. This payable represents the portion of advance payments due to Ocwen on advances made by them.

18. COMMITMENTS AND CONTINGENCIES

The following material potential claims, lawsuits, and other proceedings, of which the Company is currently aware, are as follows. The Company has not accrued losses in connection with these legal contingencies because management does not believe there is probable and reasonably estimable loss.

Three putative class action lawsuits have been filed against the Company and certain of its current and former officers and directors in the United States District Court for the Southern District of New York entitled: (i) Oliveira v. Home Loan Servicing Solutions, Ltd., et al., No. 15-CV-652 (S.D.N.Y.), filed on January 29, 2015; (ii) Berglan v. Home Loan Servicing Solutions, Ltd., et al., No. 15-CV-947 (S.D.N.Y.), filed on February 9, 2015; and (iii) W. Palm Beach Police Pension Fund v. Home Loan Servicing Solutions, Ltd., et al., No. 15-CV-1063 (S.D.N.Y.), filed on February 13, 2015. These three lawsuits are collectively referred to as the “New York Actions.”

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The New York Actions name as defendants HLSS, former HLSS Chairman William C. Erbey, HLSS Director, President, and Chief Executive Officer John P. Van Vlack, and HLSS Chief Financial Officer James E. Lauter. The New York Actions assert causes of action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on certain public disclosures made by the Company relating to our relationship with Ocwen. These actions allege that HLSS misled investors by failing to disclose, among other things, the extent of HLSS’s dependence on Ocwen, information regarding governmental investigations of Ocwen’s business practices, and the Company’s own purportedly inadequate internal controls. The Company intends to vigorously defend the New York Actions.

Two shareholder derivative actions have been filed purportedly on behalf of Ocwen Financial Corporation naming as defendants the Company and certain current and former directors and officers of Ocwen, including former HLSS Chairman William C. Erbey, entitled (i) Sokolowski v. Erbey, et al., No. 9:14-CV-81601 (S.D. Fla.), filed on December 24, 2014 (the “Sokolowski Action”), and (ii) Mocavage v. Faris, et al., No. 2015CA003244 (Fla. Palm Beach Cty. Ct.), filed on March 20, 2015 (collectively, with the Sokolowski Action, the “Ocwen Derivative Actions”). The original complaint in the Sokolowski Action named as defendants certain current and former directors and officers of Ocwen, including former HLSS Chairman William C. Erbey. On February 11, 2015, plaintiff in the Sokolowski Action filed an amended complaint naming additional defendants, including HLSS. The Ocwen Derivative Actions assert a cause of action for aiding and abetting certain alleged breaches of fiduciary duty under Florida law against HLSS and others, and claims that HLSS (i) substantially assisted Ocwen’s alleged wrongful conduct by purchasing Ocwen’s mortgage servicing rights and (ii) received improper benefits as a result of its business dealings with Ocwen due to Mr. Erbey’s purported control over both HLSS and Ocwen. Additionally, the Sokolowski Action asserts a cause of action for unjust enrichment against HLSS and others. The Company intends to vigorously defend the Ocwen Derivative Actions.

On March 11, 2015, plaintiff David Rattner filed a shareholder derivative action purportedly on behalf of the Company entitled Rattner v. Van Vlack, et al., No. 2015CA002833 (Fla. Palm Beach Cty. Ct.) (the “HLSS Derivative Action”). The lawsuit names as defendants HLSS directors John P. Van Vlack, Robert J. McGinnis, Kerry Kennedy, Richard J. Lochrie, and David B. Reiner (collectively, the “Director Defendants”), New Residential Investment Corp., and Hexagon Merger Sub, Ltd. The HLSS Derivative Action alleges that the Director Defendants breached their fiduciary duties of due care, diligence, loyalty, honesty and good faith and the duty to act in the best interests of the Company under Cayman law and claims that the Director Defendants approved a proposed merger with New Residential Investment Corp. that (i) provided inadequate consideration to the Company’s shareholders, (ii) included unfair deal protection devices, (iii) and was the result of an inadequate process due to conflicts of interest. The Company intends to vigorously defend the HLSS Derivative Action.

On September 15, 2014, the Company received a subpoena from the SEC requesting that it provide certain information related to the Company’s prior accounting conventions for and valuations of our Notes receivable – Rights to MSRs that resulted in the restatement of our consolidated financial statements for the years ended December 31, 2013 and 2012 and for the quarter ended March 31, 2014 during August 2014. On December 22, 2014, the Company received a subpoena from the SEC requesting that it provide information related to certain governance documents and transactions and certain communications regarding the same. The Company is cooperating with the SEC in these matters.

On March 23, 2015, the Company received a subpoena from the SEC requesting that it provide information concerning communications between the Company and certain investment advisors and hedge funds. The SEC also requested documents relating to the Company’s structure, certain governance documents and any investigations or complaints connected to trading in the Company’s securities. The Company is cooperating with the SEC in this matter.

See Note 1 for discussion of a downgrade in our credit rating, the alleged events of default of certain of the advance funding facilities and cross default provisions to Ocwen’s senior secured term facility within our advance funding facilities and EBO Facility.

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19. SUBSEQUENT EVENTS

Subsequent to our balance sheet date of December 31, 2014:

• On January 9, 2015, we declared a monthly dividend of $0.18 per ordinary share with respect to January, February and March 2015;

• On January 12, 2015, we paid cash dividends of $12,783 or $0.18 per ordinary share;

• On January 15, 2015, we amended the Series 2012 VF 1 Notes, the Series 2012 VF 2 Notes, and the Series 2012 VF 3 Notes i) to increase the maximum principal balance of each note by $100 million for the period commencing January 15, 2015, and ending April 15, 2015, and ii) to modify the advance rate for each of the notes until certain criteria are met;

• On January 19, 2015, we amended the Series 2013 VF 1 Notes i) to extend the expected repayment date of the notes from February 13, 2015, to December 3, 2015, ii) to incorporate additional designated servicing agreements as collateral for the notes, and iii) to set the maximum principal balance of the notes at $525 million and to prescribe the circumstances whereby the maximum principal balance of the notes will be increased by $100 million to $625 million for a period of six months and, after the expiration of such period, then reduced to $550 million; and

• On February 10, 2015, we paid cash dividends of $12,783 or $0.18 per ordinary share;

• On February 20, 2015, we sold our RPL portfolio to an unrelated third party purchaser for a total purchase price of $337.6 million, subject to a 5% holdback pending completion of the purchaser’s due diligence. A portion of the sale proceeds were used to terminate the RPL Facility. We recognized an immaterial gain on this sale.

• On February 22, 2015, we entered into the Old Merger Agreement with NRZ and Merger Sub, pursuant to which, subject to the satisfaction or waiver of certain conditions, Merger Sub would merge with and into us.

• On February 27, 2015, we amended the EBO Facility to extend the maturity date to May 1, 2015.

• During the month of February 2015, our management developed a management plan that included the following elements:

• Entering into the Old Merger Agreement with NRZ;

• Negotiating certain commitments from various lenders for replacement advance financing, though never consummated;

• Selling our entire portfolio of RPLs for an immaterial gain and concurrently repaying the related borrowings in full;

• Marketing our GNMA EBO loan portfolios and extending the maturity of the related borrowings to allow for continued marketing;

• Working closely with our legal counsel to address BlueMountain’s allegations of default, which we believe are without merit, and any potential impact of such allegations on our advance financing facilities; and

• Amending our senior secured term loan facility agreement to extend the deadline to furnish annual financial statements to April 10, 2015, to amend certain terms of cross default to our advance financing facilities and to permit an amendment to the Ocwen Subservicing Agreement.

• On March 10, 2015, we paid cash dividends of $12,783 or $0.18 per ordinary share;

• On March 20, 2015, we entered into the Amendment to our senior secured term loan facility agreement. Pursuant to the Amendment, the deadline for the Company to furnish its annual financial statements was extended to April 10, 2015, and certain terms of cross default to the Company’s advance financing facilities were amended. In addition, consent was granted to permit certain amendments to the Ocwen Subservicing Agreement.

• On April 6, 2015, HLSS, HLSS Holdings and Ocwen entered into an amendment to the Purchase Agreement and the sale supplements (effective upon completion of the Asset Sale described below) to, among other things, (i) obtain Ocwen’s consent to the assignment by HLSS of its interest under the Purchase Agreement and each sale supplement, (ii) provide that HLSS Holdings will not become the named servicer in connection with any Rights to MSRs, or direct the replacement of Ocwen as named servicer, before April 6, 2017 except under certain limited circumstances, (iii) extend the scheduled term of Ocwen’s servicing appointment under each sale supplement until the earlier of 8 years from the date of such sale supplement and April 30, 2020, and (iv) provide that Ocwen will reimburse HLSS Holdings for certain increased financing costs resulting from servicer rating downgrades of Ocwen. In addition, under such amendment (x) Ocwen agrees to exercise any “clean-up call” rights under any servicing agreement related to Rights to MSRs only at the direction of HLSS and to sell to HLSS, on an “as-is” basis, the economic beneficial interest in the right to purchase the mortgage loans and other assets in the trust for each designated servicing agreement pursuant to such clean-up call rights and (y) HLSS agrees to pay to Ocwen a fee equal to 0.50% of the outstanding balance of the performing mortgage loans purchased in connection with any such exercise and to pay Ocwen’s related costs and expenses of exercise.

• On April 6, 2015, to best address concerns relating to our ability to operate as a going concern and the associated impact on our business on an expedited basis, we agreed with NRZ and Merger Sub to terminate the Old Merger Agreement and

55

immediately complete the Asset Sale. The Asset Sale was made in accordance with the terms and conditions of the NRZ Purchase Agreement. In connection with the Asset Sale, among other things, (i) HLSS MSR-EBO acquired substantially all of the assets of the Company (including all of the issued share capital of Luxco 1B) and (ii) HLSS Advances acquired all of the issued share capital of Luxco 1A and assumed substantially all of the liabilities of the Company, including certain post-closing liabilities of the Company. In exchange, the Company received an amount in cash equal to $1.0 billion plus 28,286,980 newly issued shares of NRZ common stock with a par value $0.01 per share. In conjunction with the Asset Sale, our senior secured term loan facility was retired.

56

• Concurrently with the execution of the NRZ Purchase Agreement, our Board of Directors adopted and approved the Liquidation Plan, pursuant to which we will (1) cease our business activities other than such activities that are necessary to carry out the provisions of the Liquidation Plan, (2) pay or make adequate provision for operating expenses expected to be incurred through the completion of the Liquidation Plan and (3) distribute to our shareholders in one or more distributions, (a) the cash received by the Company in the Asset Sale and the net proceeds from the sale of NRZ common stock received by the Company in the Asset Sale, less (b) amounts used to pay the liabilities of the Company and less a reserve in the amount of $50 million that will be held by the Company at the discretion of the Board to ensure that the Company will be able to meet known and unknown liabilities up to the date of the consummation of the transactions contemplated by the New Merger or, if the transactions contemplated by the New Merger are not consummated, the date of the final liquidating distribution after settlement of the liabilities and to ensure that the Company has available resources in the event that it is necessary to enforce against third parties any contractual or other rights of the Company or its officers or directors. If the New Merger is consummated, our shares will be converted automatically into the right to the Merger Consideration. If the New Merger is not consummated and post-closing expenses and liabilities do not exceed $50 million, it is anticipated that a further cash distribution will be made to shareholders.

• Immediately following the closing of the Asset Sale contemplated by the NRZ Purchase Agreement, we entered into: (i) the New Merger Agreement with NRZ and Merger Sub, pursuant to which, among other things, the Company will be merged with and into Merger Sub, with the Company ceasing its corporate existence and Merger Sub surviving the New Merger, (ii) a Services Agreement, pursuant to which HLSS Advances Acquisition Corp. will provide us with certain services following the consummation of the Asset Sale, including, among other things, handling (including defending, prosecuting or resolving) all claims, disputes or controversies (including any litigation, arbitration, governmental investigations or inquiries or any other proceedings or negotiations) in which the Company is a party or may otherwise be involved and (iii) a Registration Rights Agreement to memorialize certain rights relating to the registration of shares of NRZ common stock to be held by the Company upon the closing of the Asset Sale. On the terms and subject to the conditions set forth in the New Merger Agreement, at the Effective Time each of the Company Shares issued and outstanding immediately prior to the Effective Time (other than Company Shares owned by any direct or indirect wholly-owned subsidiary of NRZ (other than Merger Sub) or of Merger Sub and Company Shares as to which dissenters’ rights have been properly exercised) will be converted automatically into the right to receive the Merger Consideration. The parties’ obligations to consummate the New Merger are subject to certain closing conditions, including approval of the New Merger by the requisite vote of the shareholders, the absence of any legal restraints that would prohibit the consummation of the New Merger and other conditions customary for a transaction of this type. Each of us, NRZ and Merger Sub has made certain customary representations, warranties and covenants in the New Merger Agreement, including, among other things, covenants related to the conduct of our business during the interim period between the execution of the New Merger Agreement and the consummation of the New Merger. The New Merger Agreement provides for certain termination rights for both us and NRZ, including, if approval of the New Merger by the requisite vote of the shareholders is not obtained or if the New Merger is not consummated by the nine month anniversary of the date of the New Merger Agreement.

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EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.

The following unaudited pro forma combined balance sheet as of December 31, 2014 and the unaudited pro forma combined statement of income for the year ended December 31, 2014 are based on (i) the audited consolidated financial statements of New Residential Investment Corp., or the Company, as of and for the year ended December 31, 2014 and (ii) the audited consolidated financial statements of Home Loan Servicing Solutions, Ltd., or HLSS as of and for the year ended December 31, 2014.

The unaudited pro forma combined balance sheet as of December 31, 2014 gives effect to the Pro Forma Transactions (as defined below) as if the Pro Forma Transactions had occurred on December 31, 2014. The unaudited pro forma combined statement of income for the year ended December 31, 2014 gives effect to the Pro Forma Transactions as if they had occurred on January 1, 2014.

The historical financial information has been adjusted in the unaudited pro forma combined financial information to give effect to pro forma events that are (i) directly attributable to the Pro Forma Transactions, (ii) factually supportable and, (iii) with respect to the unaudited pro forma combined statement of income, are expected to have a continuing impact on the combined results. However, such adjustments are estimates based on certain assumptions and may not prove to be accurate. Information regarding these adjustments is subject to risks and uncertainties that could cause actual results to differ materially from our unaudited pro forma combined financial information.

The unaudited pro forma combined financial information and accompanying notes present the impact of the following (collectively the “Pro Forma Transactions”):

• Our acquisition of substantially all of the assets and assumption of the related liabilities from HLSS including all of the issued share capital of HLSS’s first-tier subsidiaries (the “Acquisition”);

• The issuance by us of approximately 28,286,980 shares of common stock of the Company at a price of $15.28 per share to HLSS in consideration for the Acquisition, in addition to cash consideration of $1,006.9 million;

• The completion of sales of certain loan portfolios by the Company and HLSS in contemplation of the Acquisition, and the use of the proceeds from the Company’s loan sales to fund the Acquisition;

• The refinancing of certain liabilities assumed in the Acquisition with the existing lenders of such liabilities, as well as repayment of certain liabilities assumed in the Acquisition;

• The receipt by us of approximately $665.0 million proceeds as a result of indebtedness incurred in contemplation of the Acquisition; and

• Following the Pro Forma Transactions described above, the management fee and the incentive compensation fee payable to the Manager by the Company.

In the opinion of management, all adjustments necessary to reflect the effects of the transactions described in the notes to the unaudited pro forma combined balance sheet and unaudited pro forma combined statement of income have been included and are based upon available information and assumptions that we believe are reasonable.

The unaudited pro forma combined financial information is provided for informational and illustrative purposes only and should be read in conjunction with the Notes thereto and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and our audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2014, as well as the audited consolidated financial statements of HLSS filed as Exhibit 99.2 to this Current Report on Form 8-K. The unaudited pro forma combined financial information does not contain any significant commitments and contingencies, including litigation, and does not purport to reflect our results of operations or financial condition had the Pro Forma Transactions occurred at an earlier date. The unaudited pro forma combined financial information also should not be considered representative of our future financial condition or results of operations.

1

UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF DECEMBER 31, 2014

(dollars in thousands, except share and per share data)

	Historical New Residential Investment Corp. As of December 31, 2014		Historical Home Loan Servicing Solutions, Ltd. As of December 31, 2014		Pro forma Adjustments As of December 31, 2014				Pro Forma Combined As of December 31, 2014
Assets
Investments in:
Notes receivable - Rights to MSRs	$	—	$	614,465	$	(614,465	)	A,B	$	—
Match funded advances		—		6,121,595		(6,121,595	)	A,B		—
Excess mortgage servicing rights, at fair value		417,733		—		835,354		A,B		1,253,087
Excess mortgage servicing rights, equity method investees, at fair value		330,876		—		—				330,876
Servicer advances, at fair value		3,270,839		—		5,893,180		A,B		9,164,019
Real estate securities, available-for-sale		2,463,163		—		—				2,463,163
Residential mortgage loans, held-for-investment		47,838		815,663		(815,663	)	A,B,C		47,838
Residential mortgage loans, held-for-sale		1,126,439		—		(424,769	)	A,D		701,670
Real estate owned		61,933		—		(17,907	)	D		44,026
Consumer loans, equity method investees		—		—		—				—
Cash and cash equivalents		212,985		210,009		(306,615	)	C,D,E,F,I		116,379
Restricted cash		29,418		—		—				29,418
Derivative assets		32,597		—		—				32,597
Related party receivables		—		94,401		(94,401	)	A,B		—
Deferred tax assets		—		491		(491	)	A,B		—
Other assets		99,869		281,475		104,033		A,B,F		485,377
	$	8,093,690	$	8,138,099	$	(1,563,339	)		$	14,668,450
Liabilities and Equity
Liabilities
Match funded liabilities	$	—	$	5,624,088	$	(5,624,088	)	A,B	$	—
Other borrowings		—		1,182,328		(1,182,328	)	A,B		—
Repurchase agreements		3,149,090		—		(707,990	)	D		2,441,100
Notes payable		2,913,209		—		6,793,180		A,B,C,F,I		9,706,389
Trades payable		2,678		—		—				2,678
Due to affiliates		57,424		—		—				57,424
Dividends payable		53,745		12,783		—				66,528
Deferred tax liability		15,114		491		—				15,605
Income taxes payable		—		173		(173	)	A,B		—
Related party payables		—		14,503		(14,503	)	A,B		—
Accrued expenses and other liabilities		52,505		12,454		44,676		A,B,J		109,635
	$	6,243,765	$	6,846,820	$	(691,226	)		$	12,399,359
Commitments and Contingencies
Equity
Common stock, $0.01 par value; 2,000,000,000 shares authorized on a pro forma basis; 169,721,885 shares issued and outstanding on a pro forma basis	$	1,414	$	710	$	(427	)	G,H	$	1,697
Additional paid-in capital		1,328,587		1,210,300		(778,371	)	G,H		1,760,516
Retained earnings		237,769		79,133		(92,179	)	G,H,J		224,723
Accumulated other comprehensive income		28,319		1,136		(1,136	)	G		28,319
Total stockholders’ equity		1,596,089		1,291,279		(872,113	)			2,015,255
Noncontrolling interests in equity of consolidated subsidiaries		253,836		—		—				253,836
Total equity		1,849,925		1,291,279		(872,113	)			2,269,091
Total Liabilities and Equity	$	8,093,690	$	8,138,099	$	(1,563,339	)		$	14,668,450

See notes to unaudited pro forma combined financial information

2

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2014

(dollars in thousands, except share and per share data)

	Historical New Residential Investment Corp. For the year ended December 31, 2014		Historical Home Loan Servicing Solutions, Ltd. For the year ended December 31, 2014		Pro Forma Adjustments For the year ended December 31, 2014				Pro Forma Combined For the year ended December 31, 2014
Interest income	$	346,857	$	397,506	$	(220,149	)	K	$	524,214
Interest expense		140,708		163,698		22,072		L		326,478
Net Interest Income		206,149		233,808		(242,221	)			197,736
Impairment
Other-than-temporary impairment (“OTTI”) on securities		1,391		—		—				1,391
Valuation provision on loans and real estate owned		9,891		—		—				9,891
		11,282		—		—				11,282
Net interest income after impairment		194,867		233,808		(242,221	)			186,454
Other Income
Related party revenue		—		1,843		(1,843	)	M		—
Other revenue		—		402		(402	)	M		—
Change in fair value of investments in excess mortgage servicing rights		41,615		—		—				41,615
Change in fair value of investments in excess mortgage servicing rights, equity method investees		57,280		—		—				57,280
Change in fair value of investments in servicer advances		84,217		—		205,840		K		290,057
Earnings from investments in consumer loans, equity method investees		53,840		—		—				53,840
Gain on consumer loans investments		92,020		—		—				92,020
Gain on settlement of investments, net		35,487		—		—				35,487
Other income, net		10,629		—		2,245		M		12,874
		375,088		2,245		205,840				583,173
Operating Expenses
Compensation and benefits		—		6,351		(6,351	)	M		—
Related party expenses		—		2,349		(2,349	)	M		—
General and administrative expenses		27,001		9,753		8,700		M		45,454
Management fee allocated by Newcastle		—		—		—				—
Management fee to affiliate		19,651		—		6,483		N		26,134
Incentive compensation to affiliate		54,334		—		(19,800	)	N		34,534
Loan servicing expense		3,913		—		—				3,913
		104,899		18,453		(13,317	)			110,035
Income (Loss) Before Income Taxes		465,056		217,600		(23,064	)			659,592
Income tax expense		22,957		636		—		O		23,593
Net Income (Loss)	$	442,099	$	216,964	$	(23,064	)		$	635,999
Noncontrolling Interests in Income (Loss) of Consolidated Subsidiaries	$	89,222	$	—	$	—			$	89,222
Net Income (Loss) Attributable to Common Stockholders	$	352,877	$	216,964	$	(23,064	)		$	546,777
Income Per Share of Common Stock
Basic	$	2.59						P	$	3.32
Diluted	$	2.53						P	$	3.26
Weighted Average Number of Shares of Common Stock Outstanding
Basic		136,472,865						P		164,759,845
Diluted		139,565,709						P		167,852,689

See notes to unaudited pro forma combined financial information

3

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

HLSS Transaction

On April 6, 2015, the Company acquired substantially all of the assets and assumed the related liabilities of HLSS, including all of the issued share capital of HLSS’s first-tier subsidiaries, for aggregate consideration consisting of $1,006.9 million in cash and 28,286,980 unregistered shares of the Company’s common stock, par value $0.01 per share, issued to HLSS in a private placement pursuant to the Share and Asset Purchase Agreement (the “APA”).

The purchase price allocation within this unaudited pro forma combined financial information is based upon a purchase price of $1,439.1 million, inclusive of the cash consideration and the fair value of the unregistered common stock issued. The fair value of the common stock at the date of the acquisition was $15.28 per share which is the Company’s closing price per share as of April 2, 2015. The fair value of the unregistered shares is not expected to be materially different from that of registered shares based on the assumption that the shares are expected to be registered shortly after the close of the Acquisition.

The purchase consideration is summarized as follows:

The Company’s closing price per share on April 2, 2015	$	15.28
The Company’s share issuance to HLSS		28,286,980
Share issuance consideration	$	432,225,054
Cash consideration	$	1,006,874,946
Total purchase consideration	$	1,439,100,000

The unaudited pro forma combined financial information was prepared using the acquisition method of accounting and was based on the historical financial statements of the Company and HLSS. Accordingly, the assets acquired and liabilities assumed are recorded at their acquisition date fair values. Such acquisition value was not materially different from the purchase price paid in consideration of acquiring substantially all of the assets and assuming the related liabilities of HLSS in accordance with ASC 805.

The major assets to be acquired and liabilities to be assumed from HLSS include Excess mortgage servicing rights, Servicer advances, Residential mortgage loans, held-for-sale and Notes payable. Their estimated acquisition date fair values are set forth below (in millions):

Excess mortgage servicing rights (Refer to note A)	$	835.4
Servicer advances (Refer to note A)		5,893.2
Residential mortgage loans, held-for-sale (Refer to notes A and D)		472.2
Notes payable (Refer to notes C and I) (1)	$	6,128.2

⁽¹⁾  The Notes payable consist of the Match funded liabilities of $5,558.0 ($5,624.1 reflected in the audited balance sheet of HLSS as of December 31, 2014, less $66.1 funded by HLSS related to the sale of re-performing loans (“RPL”)) and Other borrowings of $570.2 ($1,182.3 reflected in the audited balance sheet of HLSS as of December 31, 2014, less the repayment of the Senior secured term loan facility of $340.6 and the repayment of the RPL Facility of $271.5).

Excess mortgage servicing rights

The fair value of Excess mortgage servicing rights acquired of $835.4 million was estimated using a discounted cash flow model that includes assumptions that are inherently subjective and unobservable. Significant inputs used in the valuations include expectations of prepayment rates, the excess mortgage servicing amount of the underlying mortgage loans and discount rates that market participants would use in determining the fair values of Excess mortgage servicing rights on similar pools of residential mortgage loans.

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The values of Excess mortgage servicing rights are sensitive to changes in the discount rate and prepayment rate assumptions. The Company performed sensitivity analyses on the aforementioned assumptions as follows:

Discount rates

The Company valued the Excess mortgage servicing rights with a discount rate of 12.0%. A 50 basis point increase/(decrease) in the discount rate assumption would result in an approximately $13.0 million (decrease)/increase in the value of the Excess mortgage servicing rights, respectively. Such increase/(decrease) in the discount rate assumption would result in an approximately $2.1 million increase/(decrease) to annual income on the Excess mortgage servicing rights, respectively, since a change in the initial discount rate would change the total amount of accretable yield on these rights.

Prepayment rates

The Company valued the Excess mortgage servicing rights with a conditional prepayment assumption of 11.0%. A 50 basis point increase/(decrease) in the prepayment rate assumption would result in an approximately $16.0 million (decrease)/increase in the value of the Excess mortgage servicing rights, respectively. Such increase/(decrease) in the prepayment assumption would result in an approximately $1.9 million (decrease)/increase to annual income on the Excess mortgage servicing rights, respectively.

Servicer advances

The fair value of Servicer advances, including the base component of the related mortgage servicing right, of $5,893.2 million was estimated based on a discounted cash flow model that includes assumptions that are inherently subjective and unobservable. The factors that most significantly impact the fair value include (i) the rate at which the servicer advance balance changes over the term of the investment, (ii) the UPB of the underlying loans with respect to which the Company has the obligation to make advances and owns the base component of the related mortgage servicing right, which in turn is driven by prepayment speeds and (iii) the percentage of delinquent loans with respect to which the Company owns the base component of the mortgage servicing right. Significant inputs used in the valuation include the assumptions used to establish the aforementioned cash flows and discount rates that market participants would use in determining the fair values of Servicer advances.

The value of the Servicer advances is sensitive to changes in the discount rate, and the assumption of the amount of outstanding advances in relation to the unpaid principal balance (“UPB”) of the underlying loans. The Company performed sensitivity analyses on the aforementioned assumptions as follows:

Discount rates

The Company valued the Servicer advances with a discount rate of 5.4%. A 40 basis point increase/(decrease) in the discount rate assumption would result in an approximately $48.6 million (decrease)/increase in the value of the Servicer advances, respectively. The increase/(decrease) in the discount rate assumption would result in an approximately $17.5 million increase/(decrease) to annual income on the Servicer advances, respectively, since a change in initial discount rate would change the total amount of accretable yield on these rights.

Servicer advances / UPB

The Company valued the Servicer advances with a weighted average ratio of outstanding Servicer advances to UPB of 1.5% A 20 basis point increase/(decrease) in this assumption would result in an approximately $45.0 million (decrease)/increase in the value of the Servicer advances, respectively. Such increase/(decrease) would result in an approximately $41.2 million increase/(decrease) to annual income on the Servicer advances, respectively.

5

Residential mortgage loans held-for-sale

Residential mortgage loans, held-for-sale of $472.2 million represent Government National Mortgage Association (“GNMA”) early buy-out (“EBO”) loans acquired from HLSS (“EBO Loans”). EBO Loans are guaranteed by the Federal Housing Administration (“FHA”) and as such the fair value of the loans was estimated using a discounted cash flow model incorporating such guarantee. Other assets include Claims receivable from the FHA related to GNMA EBO loans for which foreclosure has been completed and for which claims have been made on the FHA guarantee of $109.6 million. The FHA receivable is short term in nature and the carrying value generally approximates fair value.

Notes payable

Match funded liabilities of $5,624.1 million include various series of notes, variable funding notes and other fixed rate liabilities. The fair value of these notes was estimated using broker quotes and discounted cash flow models.

Other Borrowings included in Notes payable of $1,182.3 million include a senior secured term loan facility, an EBO facility, a Re-performing Loan (“RPL”) facility and a servicer advance note facility (the “Note Facility”). The fair value estimate of the senior secured term loan facility was determined by using a combination of broker quotes and discounted cash flow models. The EBO facility, RPL facility and Note Facility are short term in nature and the carrying values generally approximate fair value.

At this time the Company has not finalized a detailed valuation of the assets acquired and liabilities assumed as part of the Acquisition, and accordingly, the unaudited pro forma combined financial information was prepared using a preliminary allocation of the estimated or actual purchase prices based on assumptions and estimates, which are subject to material changes. Additionally, the Company has not yet completed all of the analysis necessary to identify additional items that could significantly impact the purchase price allocation or the assumptions and adjustments made in preparation of this unaudited pro forma combined financial information. The Acquisition accounting will be completed within the required measurement period in accordance with the accounting guidance on business combinations, but in no event later than one year following the completion of the Acquisition.

Upon completion of a final detailed valuation analysis, there may be additional increases or decreases to the recorded book values of assets and liabilities associated with the Acquisition, including, but not limited to, commitments and contingencies that will give rise to future expenses that are not reflected in this unaudited pro forma combined financial information. Accordingly, once the necessary analyses is completed and the final purchase price and purchase price allocation is determined, actual results may differ materially from the information presented in this unaudited pro forma combined financial information.

The unaudited pro forma combined financial information does not contain any significant commitments and contingencies, including litigation described elsewhere in the Company’s prospectus supplement dated April 7, 2015, based upon the preliminary valuation discussed therein. The results of any additional facts and circumstances that materialize subsequent to the preparation of this unaudited pro forma combined financial information may differ materially from the information presented herein.

Additionally, the unaudited pro forma combined statement of income does not reflect the cost of any integration activities or synergies that may be derived from any integration activities, both of which may have a material impact on the results of operations in periods following the completion of the Acquisition.

Conformity of Accounting Policies

Certain assets and liabilities and related processes of HLSS are expected to be integrated with those of the Company. This integration includes a review by the Company of HLSS’s accounting policies. As a result of that review, the Company may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements. At this time, the Company is not aware of any differences that would have a material impact on the combined financial statements that have not been adjusted for in the pro forma financial information (Please refer to note B). Accounting policy differences may be identified after completion of the Acquisition.

6

Pro Forma Adjustments for the Unaudited Pro Forma Combined Balance Sheet as of December 31, 2014

A. In accordance with ASC 805, Management has performed a preliminary allocation of the purchase price to HLSS’s assets and liabilities in the accompanying unaudited pro forma combined financial information based on estimates. The final allocation of purchase price may differ materially from the pro forma amounts included herein. The preliminary allocation of the purchase consideration is as follows (in millions):

	Purchase Price Allocation			Historical		Fair Value / Other Pro Forma Adjustment
Cash and cash equivalents	$	48.6		$	210.0	$	(161.4	)*
Servicer advances		5,893.2			6,121.6		(228.4	)
Excess mortgage servicing rights		835.4			614.5		220.9
Residential mortgage loans, held-for-sale		472.2			477.0		(4.8	)
Related party receivables		94.4			94.4		—
Deferred tax assets		0.5			0.5		—
Other assets		263.4			281.5		(18.1	)
Total assets acquired	$	7,607.7		$	7,799.5	$	(191.8	)
Match funded liabilities	$	5,558.0	**	$	5,624.1	$	(66.1	)
Other borrowings		570.2	***		1,182.3		(612.1	)
Dividends payable		12.8			12.8		—
Deferred tax liability		0.5			0.5		—
Income taxes payable		0.2			0.2		—
Related party payables		14.5			14.5		—
Accrued expenses and other liabilities		12.4			12.4		—
Total liabilities assumed	$	6,168.6		$	6,846.8	$	(678.2	)
Estimated fair value of net assets acquired	$	1,439.1

* Reflects the Cash and cash equivalents not acquired in the Acquisition. Please refer to note E.

** Amounts stated are after the funding of $66.1 from HLSS into the Match funded liabilities as a result of the proceeds from the RPL sale reflected in note C.

*** Amounts stated are after the repayment of the RPL liability of $271.5 and the HLSS Senior secured term loan facility of $340.6 as reflected in notes C and I, respectively.

B. Certain amounts in the historical balance sheet of HLSS have been reclassified to conform to the Company’s presentation and the details of these reclassifications are as follows:

• The Match funded advances of $6,121.6 million and the Notes receivable—Rights to MSRs of $614.5 million have been reclassified to Servicer advances, at fair value and Excess mortgage servicing rights, at fair value. The Match funded advances and the Notes receivable—Rights to MSRs were fair valued as a part of the preliminary allocation of purchase price for $5,893.2 million in Servicer advances, at fair value and for $835.4 million in Excess mortgage servicing rights, at fair value. This results in a net fair value adjustment to Servicer advances, at fair value of $(228.4) million and a net fair value adjustment to Excess mortgage servicing rights, at fair value of $220.9 million reflected in note A;

• EBO loans of $477.0 million have been reclassified from Residential mortgage loans, held-for-investment to Residential mortgage loans, held-for-sale. The EBO loans were fair valued as a part of the preliminary allocation of purchase price for $472.2 million resulting in a net fair value adjustment of $(4.8) million reflected in notes A and D;

• Related party receivables of $94.4 million and Deferred tax assets of $0.5 million have been reclassified to Other assets;

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• The historical HLSS deferred financing costs of $16.7 million included in Other assets were fair valued as a part of the preliminary allocation of purchase price to $0.0 resulting in a net fair value adjustment of $(16.7) million reflected in note F;

• The Match funded liabilities of $5,624.1 million have been reclassified to Notes payable, $66.1 million was deducted as a result of the liquidity obtained by HLSS from the sales of RPL’s discussed in note C below;

• The Senior secured term loan facility, EBO facility, RPL facility and Note facility of $1,182.3 million have been reclassified from Other borrowings to Notes payable (Refer to notes A and B); and

• Income taxes payable of $0.2 million and Related party payables of $14.5 million have been reclassified to Accrued expenses and other liabilities.

The movements in Other assets can be summarized as follows (in millions):

Reclassifications
Reclassification of related party receivables	$	94.4
Reclassification of deferred tax assets		0.5
Total Reclassifications	$	94.9
Add:
Capitalization of refinanced deferred financing costs (Refer to note F)		27.2
Fair value / Other Pro Forma adjustments
HLSS settlement of derivatives (Refer to note E, F and I)		(1.4	)
Fair value adjustment of historical HLSS deferred financing costs (Refer to notes A and F)		(16.7	)
Total Fair value adjustments	$	(18.1	)
Total movement in Other assets	$	104.0

C. Reflects the impact in Notes payable of sales of RPLs for $337.6 million by HLSS subsequent to December 31, 2014, prior to the close of the Acquisition. The RPLs sold by HLSS were not acquired and the related liabilities were not assumed in the Acquisition. The carrying value of the loans was $338.6 million as of December 31, 2014 resulting in a loss of $1.0 million. The loss was not reflected in the unaudited pro forma combined statement of income as the loss is not recurring in nature.

The pro forma loss on sale has been calculated based on the historical carrying value of the Residential mortgage loans, held-for-investment as at December 31, 2014. When the sale of the HLSS’ RPLs was closed, the actual carrying value of the Residential mortgage loans, held-for-investment may have been different and may result in a materially different gain / loss.

With the proceeds of the sale, HLSS repaid the RPL liability of $271.5 million, reflected in Notes payable, resulting in a net cash inflow of $66.1 million. The net cash inflow was utilized by HLSS to fund part of the Match funded liabilities of $5,624.1 million as of December 31, 2014.

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D. Reflects the impact of sales of certain Residential mortgage loans, held-for-sale and Real estate owned for $931.9 million by the Company subsequent to December 31, 2014 in contemplation of the Acquisition and the use of the resulting proceeds to fund the Acquisition. The carrying value of the Residential mortgage loans, held-for-sale and Real estate owned was $914.9 million as of December 31, 2014 resulting in a gain of $17.0 million. The gain was not reflected in the unaudited pro forma combined statement of income as the gain is not recurring in nature. A reconciliation of the pro forma gain on sale is as follows (in millions):

Sales proceeds			$	931.9
Carrying value of Residential mortgage loans, held-for-sale	$	897.0
Carrying value of Real estate owned	$	17.9
Total carrying value				914.9
Pro forma gain on sale			$	17.0

The pro forma gain on sale has been calculated based on the historical carrying value of the Residential mortgage loans, held-for-sale and the Real estate owned as at December 31, 2014. When the actual sale was closed, the carrying value of the Residential mortgage loans, held-for-sale and the Real estate owned was different and would have resulted in a materially different gain/loss.

The sales proceeds were used for a Repurchase agreement pay down of $708.0 million resulting in a net cash increase of $223.9 million. These remaining proceeds were used for the Acquisition.

The pro forma adjustments in the Residential mortgage loans, held-for-sale can be summarized as follows (in millions):

Reclassification and fair value adjustment of HLSS EBOs included in residential mortgage loans, held-for-investment (see note B)	$	472.2
Residential loans sold by the Company		(897.0	)
Total	$	(424.8	)

E. Reflects the elimination of HLSS Cash and cash equivalents not acquired in the Acquisition pursuant to the APA. The movements in pro forma Cash and cash equivalents can be summarized as follows (in millions):

HLSS proceeds from sale of loans (Refer to note C)	$	337.6
HLSS repayment of the RPL liability (Refer to note C)		(271.5	)
Cash applied to Match funded liabilities from the HLSS RPL sale (Refer to note C)		(66.1	)
HLSS opening balance Cash and cash equivalents not acquired in the Acquisition		(161.4	)
HLSS repayment of senior secured term loan facility (Refer to note I)		(340.6	)
HLSS settlement of derivatives (Refer to notes B, F and I)		1.4
HLSS derivatives settlement cash not acquired in the Acquisition		(1.4	)
The Company’s historical Cash and cash equivalents used for the Acquisition		(1.3	)
The Company’s proceeds from sale of loans (Refer to note D)		931.9
The Company’s pay down on Repurchase agreements (Refer to note D)		(708.0	)
Deferred financing costs (Refer to note F)		(27.2	)
Total	$	(306.6	)

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F. Reflects the elimination of historical HLSS Deferred financing costs of $16.7 million and the settlement of the HLSS derivatives of $1.4 million (Refer to notes B, E and I) pursuant to ASC 805 and the recognition of Deferred financing costs of $27.2 million as a result of the refinancing of the liabilities contemplated in connection with the Acquisition and for which refinancing terms were agreed upon with the bank counterparties on April 2, 2015. Please refer to note L for the related impact on the unaudited pro forma combined statement of income.

Fair value adjustment of historical HLSS deferred financing costs (Refer to notes A and B)	$	(16.7	)
HLSS settlement of loan related derivatives (Refer to notes B, E and I)		(1.4	)
New deferred financing costs (commitment fees) to be paid to the bank counterparties and capitalized		27.2

Reflects the new indebtedness for $665.0 million contemplated by the Company in connection with the Acquisition and for which financing terms were agreed upon with the bank counterparties on April 2, 2015.

The terms agreed upon with the bank counterparties for the refinanced liabilities and the new indebtedness mentioned above are included in note L.

G. Reflects the equity impact of the pro forma adjustments. Please refer to the table below for a summary of the movements included in the Company’s Equity:

(Millions of dollars)	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Noncontrolling interests in equity of consolidated subsidiaries		Total Equity
New Residential Investment Corp. historical equity as of December 31, 2014	$	1.4		$	1,328.6		$	237.8		$	28.3		$	1,596.1		$	253.8	$	1,849.9
Addition of HLSS historical equity as of December 31, 2014		0.7			1,210.3			79.1			1.1			1,291.2			—		1,291.2
Elimination of HLSS historical equity		(0.7	)		(1,210.3	)		(79.1	)		(1.1	)		(1,291.2	)		—		(1,291.2	)
Share issuance (Refer to note H)		0.3			431.9			—			—			432.2			—		432.2
Transaction costs (Refer to note J)		—			—			(30.0	)		—			(30.0	)		—		(30.0	)
The Company’s net gain on sale of Residential mortgage loans and Real estate owned (Refer to note D)		—			—			17.0			—			17.0			—		17.0
Pro forma combined equity as of December 31, 2014	$	1.7		$	1,760.5		$	224.8		$	28.3		$	2,015.3		$	253.8	$	2,269.1

H. Reflects the issuance on April 6, 2015 of approximately 28,286,980 shares of common stock of the Company at a price of $15.28 per share to HLSS in consideration for the Acquisition. The fair value of the common stock was estimated using a value of $15.28 per share which was the Company’s last closing price per share available as of April 2, 2015. The fair value of the unregistered shares is not expected to be materially different of that of registered shares based on the assumption that the shares are expected to be registered shortly after the close of the Acquisition.

I. Reflects the impact of the repayment of the HLSS Senior secured term loan facility in the amount of $340.6 million. In addition to the repayment of the loan, the related derivatives of $1.4 million included in Other assets were settled (Refer to notes B, E and F).

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The following summarizes the components of pro forma adjustments in the Notes payable (in millions):

Addition of HLSS Match funded liabilities (Refer to note B)	$	5,624.1
Addition of HLSS Other liabilities (Refer to note B)		1,182.3
HLSS repayment of RPL liability (Refer to note C)		(271.5	)
Cash applied to Match funded liabilities from the HLSS RPL sale (Refer to note C)		(66.1	)
Repayment of HLSS Senior secured term loan facility		(340.6	)
New indebtedness incurred by the Company as part of the Acquisition (Refer to note F)		665.0
Total	$	6,793.2

J. Reflects costs of $30.0 million incurred by the Company directly attributable to the Acquisition. These costs consist of third party legal, consulting and accounting fees.

Pro Forma Adjustments for the Unaudited Pro Forma Combined Statement of Income for the year ended December 31, 2014

K. The adjustment to Interest income reflects the effective interest income earned on the portfolio of Excess mortgage servicing rights of $88.7 million and Servicer advances of $103.0 million had the portfolios been acquired by the Company as of January 1, 2014 at their estimated fair market values. Additionally, the adjustment reflects the reclassification of fair value changes in Excess mortgage servicing rights to conform with the Company’s accounting policies.

Interest income also reflects, on a pro forma basis, the interest income of $22.9 million that would have been earned on the EBO loans had they been acquired as of January 1, 2014. The pro forma adjustment to record the additional interest income is $4.3 million.

Interest income was adjusted on a pro forma basis to reflect the reversal of Interest income that was related to the following sales of loan portfolios by the Company and HLSS subsequent to December 31, 2014 and prior to the close of the Acquisition:

• Eliminate Interest income of $9.0 million related to the sale of residual mortgage loans sold by the Company; and

• Eliminate Interest income of $9.6 million related to the sale of HLSS’s portfolio of RPLs.

The following summarizes the components of pro forma adjustments to Interest income (in millions):

Eliminate historical Interest income on the acquired EBO loans of HLSS	$	(18.6	)
Add: Full year Interest income on acquired EBO loans of HLSS		22.9
Eliminate Interest income related to the sale of residual mortgage loans sold by the Company		(9.0	)
Eliminate Interest income related to the sale of HLSS’s portfolio of RPLs		(9.6	)
Eliminate historical Interest income of HLSS		(397.5	)
Add: HLSS Interest income based on the Company’s accounting policies		191.7
Total	$	(220.1	)

L. The adjustment to Interest expense reflects the refinancing of the liabilities contemplated in connection with the Acquisition and for which refinancing terms were agreed upon with the bank counterparties on April 2, 2015. In addition, the adjustment reflects the Interest expense on the new indebtedness for $665.0 million contemplated by the Company in connection with the Acquisition and for which financing terms have been agreed upon with the bank counterparties (Refer to note F).

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Interest expense is calculated as if the liabilities were assumed or outstanding at January 1, 2014 at their estimated fair values under the terms of the financing that would have been in place at that time and assumptions as to the amount of variable funding necessary over such period. Please refer to the table below for a summary of the terms (in millions):

	Coupon	Principal		Weighted Average Interest Rate			Weighted Average Maturity
Term Loan Facility	Fixed	$	1,800.0		2.03	%		5/9/2016
Variable Funding Notes	Floating (1M LIBOR + 2.65%)		4,195.6		2.82	%		2/27/2016
Total		$	5,995.6		2.58	%

All of the new indebtedness of $665.0 million is variable funding. The refinanced liabilities consist of the remaining variable funding of $3,530.6 million and the fixed term loan facility of $1,800.0 million.

The refinancing for purposes of the combined pro forma financial information was considered a modification with the existing lenders, and all historical deferred financing costs are eliminated in applying purchase price accounting as of the Acquisition date. As a result, the amortization of historical deferred financing costs is excluded from the unaudited pro forma combined statement of income for the year ended December 31, 2014.

The Company refinanced the variable funding notes in the Match funded liabilities with a variable interest rate with the terms stated in the table above based on the terms agreed upon with the bank counterparties on April 2, 2015. A change of 1/8% in the interest rate associated with the variable rate borrowings would result in an additional annual interest expense of approximately $3.7 million (in the case of an increase in the rate) or an annual reduction of interest expense of approximately $(3.7) million (in the case of a decrease in the rate).

The additional Interest expense of $44.5 million represents the additional interest expense and amortization of commitment fees on the refinancing and the new indebtedness incurred. In addition, the interest expense of $22.4 million related to the HLSS RPL liability and the Senior secured term loan facility that was repaid prior to the close of this Acquisition, has been excluded.

The following summarizes the pro forma adjustment in the Interest expense (in millions):

Exclusion of historical HLSS Interest expense related to the Match funded liabilities	$	(109.7	)
Add: Refinanced HLSS Interest expense related to the Match funded liabilities		136.4
Add: Interest expense related to new indebtedness incurred by the Company for the Acquisition		7.8
Add: Deferred financing costs amortization on refinancing of the Match funded liabilities		10.0
Total additional interest expense from refinancing and new indebtedness		44.5
Exclusion of historical HLSS Interest expense due to the repayment of Term Loan Facility (Refer to note I)		(16.5	)
Exclusion of historical HLSS Interest expense related to the repaid RPL liability (Refer to note C)		(3.7	)
Exclusion of historical HLSS Interest expense related deferred financing costs		(2.2	)
Total exclusion of historical HLSS Interest expense		(22.4	)
Total	$	22.1

M. Certain amounts in the historical statement of income of HLSS have been reclassified to conform to the Company’s presentation and the details of these reclassifications are as follows:

• Related party revenue of $1.8 million and Other revenue of $0.4 million to Other income, net.

• Compensation and benefits of $6.4 million and Related party expenses of $2.3 million to General and administrative expenses.

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N. Represents additional management fees as a result of the Acquisition pursuant to the management agreement, according to which the Company pays 1.5% of our Gross Equity, as defined in the management agreement, assuming the underwriter does not exercise their option to purchase additional shares of our common stock.

Management Fee Adjustment

	Year ended December 31, 2014
Share issuance as consideration to HLSS	$	432.2
Base pro forma management fee of 1.5% of share issuance		6.5
Pro forma adjustment	$	6.5

Incentive Compensation Adjustment

Reflects an adjustment to the Incentive Compensation of $(19.8) million related to the pro forma adjustments to the statement of income and the impact of this share issuance by the Company to HLSS on the incentive compensation threshold.

O. The Company intends to continue to qualify as a REIT under the requirements of the Internal Revenue Code, and as a result, the Company’s direct income tax expense is expected to be minimal. Consequently, no additional adjustment to pro forma Income tax expense has been made with respect to the Acquisition. With respect to the Acquisition, the Company acquired the taxable subsidiaries of HLSS by the Company’s Taxable REIT subsidiaries (“TRS”) and are therefore subject to federal income taxes at corporate rates on the taxable basis carried over from HLSS. However, no pro forma adjustment for income tax expense has been reflected in the pro forma statement of income as incremental taxable income is projected to be minimal.

P. Pro Forma Earnings (Loss) Per Share Attributable to Common Stockholders

Pro forma basic earnings (loss) per common share attributable to common stockholders has been calculated based on the number of shares assumed to be outstanding, assuming such shares were outstanding for the full period presented.

The following table sets forth the computation of unaudited pro forma basic and diluted earnings (loss) per share attributable to common stockholders (in thousands, except per share data):

	Year ended December 31, 2014
	Net income		Shares		Per share amount
Earnings per share, basic		546,777		164,759,845		3.32
Earnings per share, diluted		546,777		167,852,689		3.26

Shares utilized in the calculation of pro forma basic and diluted earnings (loss) per share attributable to common stockholders are as follows:

	Year ended December 31, 2014
	Historical		Shares issued in the equity raise (Refer to note H)*		Pro Forma Total
Weighted-average shares outstanding, basic		136,472,865		28,286,980		164,759,845
Weighted-average shares outstanding, diluted		139,565,709		28,286,980		167,852,689

* The Company expects to issue approximately 2.8 million options to the Manager pursuant to the management agreement in connection with this share issuance to HLSS. However, this does not impact diluted shares outstanding since the assumed strike price and the assumed market value for purposes of computing the treasury stock method are both equal to the share issue price.

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