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): August 12, 2016

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, 45th 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)

☐ 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))

Item 8.01. Other Events.

On August 12, 2016, New Residential Investment Corp. (the “Company”) filed with the Securities and Exchange Commission a prospectus supplement (the “Prospectus Supplement”) to the prospectus dated August 10, 2016 included in the Company’s automatic shelf registration statement on Form S-3ASR (No. 333-213058).  The Prospectus Supplement was filed for the purpose of registering the issuance of securities pursuant to the New Residential Investment Corp. Nonqualified Stock Option and Incentive Award Plan (the “Plan”) or in connection with resales from time to time by certain individuals who are eligible to receive such securities (collectively, the “Selling Stockholders”).

Specifically, the Prospectus Supplement registers: (i) 14,901,609 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) as to which awards may be granted under the Plan in the future, and (ii) 1,708,708 shares of the Company’s Common Stock as to which awards have previously been granted under the Plan. The Company will receive the exercise or purchase price of certain stock-based awards under the Plan if and when such awards are exercised or purchased for cash.  The Company will not receive any proceeds if the stock-based awards are exercised on a cashless basis.

In addition, the Prospectus Supplement registers 1,453,527 shares of Common Stock that may be offered for resale from time to time by individuals to whom the shares (i) have been or may be issued under the Plan (including, without limitation, in connection with the exercise of options) or (ii) would be issued upon the exercise of options granted in connection with the spin-off of the Company from Newcastle Investment Corp. on May 15, 2013. The Company will not receive any proceeds from the sale of its Common Stock by such individuals.

In connection with the filing of the Prospectus Supplement, the Company is filing an opinion of its counsel, Skadden, Arps, Slate, Meagher & Flom LLP, regarding the legality of the securities being registered, which opinion is attached as Exhibit 5.1 to this Current Report on Form 8-K.

On August 11, 2016, the Company filed a Current Report on Form 8-K (the “August 11 Form 8-K”) disclosing, among other things, the proposed acquisition of approximately $33 billion unpaid principal balance (“UPB”) of conventional mortgage servicing rights (“MSRs”) from Walter Investment Management Corp. (“Walter”) and approximately $35 billion UPB of MSRs representing substantially all of the assets of Walter Capital Opportunity, LP and its subsidiaries (collectively, “WCO”) and certain related assets of Walter, based on an agreement in principle, each as further described in the August 11 Form 8-K (the “Walter Transactions”).

On August 12, 2016, the Company filed a prospectus supplement (the “Capital Raise Prospectus Supplement”) to the prospectus dated August 10, 2016 included in the Company’s automatic shelf registration statement on Form S-3ASR (No. 333-213058) for an underwritten public offering of 20,000,000 shares of its Common Stock. The Capital Raise Prospectus Supplement included pro forma financial information of the Company that gives effect to the Walter Transactions and certain previously completed transactions. Attached hereto as Exhibit 99.1, and incorporated by reference into this Item 8.01, is such pro forma financial information. The Capital Raise Prospectus Supplement also included risk factors related to the Walter Transactions. Attached hereto as Exhibit 99.2, and incorporated by reference into this Item 8.01, are such risk factors.

Item 9.01. Financial Statements and Exhibits.

(b) Pro Forma Financial Information

The unaudited pro forma combined financial information of the Company as of and for the six months ended June 30, 2016 and for the year ended December 31, 2015, giving effect to the Walter Transactions and certain previously completed transactions, which are incorporated herein by reference.

(d)	Exhibits
5.1	Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
23.1	Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1)
99.1	Unaudited Pro Forma Combined Financial Information as of and for the six months ended June 30, 2016 and for the year ended December 31, 2015
99.2	Risks Related to the Walter Transactions

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/ Cameron D. MacDougall 

Cameron D. MacDougall

Secretary

Date: August 12, 2016

EXHIBIT INDEX

Exhibit Number	Exhibit
5.1	Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
23.1	Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1)
99.1	Unaudited Pro Forma Combined Financial Information as of and for the six months ended June 30, 2016 and for the year ended December 31, 2015
99.2	Risks Related to the Walter Transactions

EX-5.1

Exhibit 5.1

[OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP]

August 12, 2016

New Residential Investment Corp.

1345 Avenue of the Americas

New York, New York 10105

Re:	New Residential Investment Corp.
	Registration Statement on Form S-3
	(File No. 333-213058)

Ladies and Gentlemen:

We have acted as special counsel to New Residential Investment Corp., a Delaware corporation (the “Company”), in connection with the registration of up to 18,063,944 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), consisting of (i) 16,610,317 shares of Common Stock (the “Primary Shares”) of which (A) an aggregate of 14,901,609 shares may be issued upon the exercise of stock options to be granted under the New Residential Investment Corp. Nonqualified Stock Option and Incentive Award Plan (the “Plan”) and (B) an aggregate of 1,708,808 shares may be issued upon the exercise of stock options granted under the Plan; and (ii) an aggregate of 1,453,527 shares of Common Stock (the “Secondary Shares”) that (A) were issued or may be issued upon the exercise of stock options granted under the Plan; (B) may be issued upon the exercise of equitable adjustment stock options granted to certain security holders of Newcastle Investment Corp. (“Newcastle”) in connection with the May 15, 2013 spin-off (the “Spin-off”) of the Company from Newcastle (“Equitable Adjustment Stock Options”); or (C) were issued under the Plan.  The Primary Shares and Secondary Shares are collectively referred to herein as the “Shares.”

This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K of the General Rules and Regulations under the Act.

New Residential Investment Corp.

August 12, 2016

Page 2

In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of (a)  the Company's automatic shelf registration statement on Form S-3 (No. 333-213058) filed on August 10, 2016 by the Company (the “Registration Statement”) with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended, (the “Act”) relating to, among other things, the issuance and sale by the Company and the sale by selling stockholders, of Common Stock from time to time pursuant to Rule 415 of the General Rules and Regulations promulgated under the Act; (b) the Plan; (c) the Amended and Restated Certificate of Incorporation of the Company, as amended to date, as certified by the Secretary of State of Delaware; (d) the Amended and Restated Bylaws of the Company, as amended to date, certified by the Secretary of the Company; and (e) certain resolutions of the Board of Directors of the Company certified by the Secretary of the Company relating to the sale or resale (as the case may be) of the Shares and the Spin-off and the Equitable Adjustment Stock Options  and related matters.  We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such agreements, certificates and receipts of public officials, certificates of officers or other representatives of the Company and others, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinions set forth below, including those contained in the Secretary’s certificate referred to above.

In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified or photostatic copies, and the authenticity of the originals of such copies.  In making our examination of executed documents, we have assumed that the parties thereto, other than the Company, had the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and the execution and delivery by such parties of such documents and the validity and binding effect thereof on such parties. As to any facts material to the opinions expressed herein that we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of the Company and others and of public officials.

We do not express any opinion with respect to the law of any jurisdiction other than the Delaware General Corporation Law (the “DGCL”). The Shares may be sold from time to time on a delayed or continuous basis, and this opinion is limited to the laws, including the rules and regulations, as in effect on the date hereof, which laws are subject to change with possible retroactive effect.

Based upon and subject to the foregoing, we are of the opinion that:

1.           The Primary Shares have been duly authorized by all necessary corporate action of the Company under the DGCL and, when issued in accordance with the Plan, will be validly issued, fully paid and nonassessable.

2.           The Secondary Shares (A) have been, in the case of Secondary Shares (i) issued upon the exercise of stock options granted under the Plan or (ii) issued under the Plan, and (B) will be, in the case of Secondary Shares issuable upon the exercise of outstanding stock options granted under the Plan or outstanding Equitable Adjustment Stock Options, validly issued, fully paid and nonassessable.

New Residential Investment Corp.

August 12, 2016

Page 3

In the rendering the foregoing opinion, we have assumed:

(a)           that each  agreement under which options are granted or awards of shares of Common Stock are made pursuant to the Plan is consistent with the Plan and has been duly authorized,  executed and delivered by the parties thereto (including the Company);

(b)           the due and proper exercise of any outstanding stock options granted under the Plan and outstanding Equitable Adjustment Stock Options in accordance with the terms thereof;

(c)           that the consideration received by the Company in respect of the issuance of all Shares has or will be as determined by the Board of Directors and was or will not be less than the par value of the Common Stock; and

(d)           that an appropriate account statement evidencing the Shares credited to the recipient’s account maintained with the Company’s transfer agent will be issued by the Company’s transfer agent and the issuance of the Shares will be properly recorded in the books and records of the Company.

We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement. We also consent to the reference to our firm under the caption “Legal Matters” in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission.

Very truly yours,

/s/ Skadden, Arps, Slate, Meagher & Flom LLP

MJS

EX-99.1

Exhibit 99.1

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined balance sheet as of June 30, 2016 and the unaudited pro forma combined statement of income for the six months ended June 30, 2016 are based on (i) the unaudited consolidated financial statements of New Residential Investment Corp. (“New Residential” or the “Company”), as of and for the six months ended June 30, 2016, (ii) the unaudited combined financial statements of SpringCastle America, LLC, SpringCastle Credit, LLC, SpringCastle Finance, LLC and SpringCastle Acquisition, LLC (collectively “SpringCastle” or "Consumer Loan Companies") for the three months ended March 31, 2016, (iii) the Purchase Agreement between New Residential and Walter, and (iv) the term sheet, the material terms of which have been agreed upon in principle, between New Residential and WCO.

The following unaudited pro forma combined statement of income for the year ended December 31, 2015 is based on (i) the audited consolidated financial statements of the Company for the year ended December 31, 2015, (ii) the unaudited consolidated financial statements of Home Loan Servicing Solutions, Ltd., (“HLSS”) as of and for the three months ended March 31, 2015, (iii) the audited combined financial statements of SpringCastle as of and for the year ended December 31, 2015, (iv) the Purchase Agreement between New Residential and Walter, and (v) the term sheet, the material terms of which have been agreed upon in principle, between New Residential and WCO.

The unaudited pro forma combined balance sheet as of June 30, 2016 gives effect to the Pro Forma Transactions (as defined below) as if the Pro Forma Transactions had occurred on June 30, 2016. The unaudited pro forma combined statements of income for the year ended December 31, 2015 and for the six months ended June 30, 2016 give effect to the Pro Forma Transactions as if they had occurred on January 1, 2015.

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 statements 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. In addition, the transactions with Walter and WCO, as described in the Pro Forma Transactions below, are subject to conditions, including entry into definitive documentation with respect to the WCO transaction.

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

• Our acquisition of MSRs and servicer advances from Walter and WCO;

• Our issuance of shares of common stock of the Company (“Common Stock Issuance”) to finance primarily the Walter and WCO transactions as well as general corporate purposes and which for purposes of this unaudited pro forma combined financial information reflects the issuance of 20,000,000 shares at the agreed upon price of  $13.98 per share, which assumes no exercise of the underwriter’s option;

• Our intended financing of unencumbered MSRs and servicer advances totaling $300 million, the proceeds from which will be utilized as consideration for the Walter and WCO transactions;

• Acquisition of all of the assets and liabilities of Home Loan Servicing Solutions, Ltd. and its subsidiaries (HLSS) on April 6, 2015 (the “HLSS Acquisition”) and related financing activities;

• The Company’s acquisition of a controlling financial interest in certain Consumer Loan Companies (the “SpringCastle Transaction”) on March 31, 2016; and,

• The continuing effect of the Pro Form Transactions described above on the management fee and incentive compensation fee payable to the Manager by the Company.

The effects of the HLSS Acquisition and related financing as well as the Springcastle Transaction are already reflected in the Company’s historical consolidated balance sheet as of June 30, 2016; accordingly, no pro forma balance sheet adjustments for those transactions are presented herein. The impact of the HLSS Acquisition and related financing activities are reflected in the Company’s unaudited and audited consolidated statement income for the six months ended June 30 2016 and for the period from April 6, 2015 through December 31, 2015; accordingly, pro forma adjustments in the unaudited pro forma combined statement of income for the year ended December 31, 2015 are only for the period from January 1, 2015 through April 5, 2015. In addition, the impact of the SpringCastle Transaction is reflected in the Company’s historical unaudited consolidated statements of income for the three months ended June 30, 2016; accordingly, resulting pro forma adjustments in the unaudited pro forma combined statements of income are for the three months ended March 31, 2016 and for the year ended December 31, 2015.

1

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 statements 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, 2015, as well as our unaudited consolidated financial statements filed on our Form 10-Q for the six months ended June 30, 2016, the unaudited consolidated financial statements of HLSS filed on Form 10-Q for the three months ended March 31, 2015, and the combined financial statements of SpringCastle. 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 does not contain any significant commitments and contingencies, nor does it reflect any synergies from the Pro Forma Transactions, 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.

2

New Residential Investment Corp.

Walter & WCO Acquisition

Pro Forma Balance Sheet

	Historical New Residential Investment Corp. June 30, 2016		New Residential Equity Raise			New Residential New Financing			Acquisition of Walter Assets				Acquisition of WCO Assets				Total Pro Forma Adjustments		New Residential Pro Forma
Assets
Investments in:
Excess mortgage servicing rights, at fair value	$	1,475,418		—			—			—				—			$	—	$	1,475,418
Excess mortgage servicing rights, equity method investees, at fair value		199,145		—			—			—				—				—		199,145
Servicer advances, at fair value		6,513,274		—			—			—				—				—		6,513,274
Real estate securities, available-for-sale		4,554,657		—			—			—				—				—		4,554,657
Residential mortgage loans, held-for-investment		—		—			—			—				—				—		—
Residential mortgage loans, held-for-sale		824,002		—			—			—				—				—		824,002
Real estate owned		61,909		—			—			—				—				—		61,909
Consumer loans, held-for-investment		1,830,436		—			—			—				—				—		1,830,436
										—				—				—		—
Cash and cash equivalents		233,845		278,800	A		300,000	B		(240,000	)	C		(307,000	)	C		31,800		265,645
Restricted cash		168,043		—			—			—				—				—		168,043
Mortgage servicing rights		—					—			216,000		C		265,000		C		481,000		481,000
Servicer advances		—					—			24,000		C		42,000		C		66,000		66,000
Trades receivable		1,549,795		—			—			—				—				—		1,549,795
Deferred Tax Asset		189,641		—			—			—				—				—		189,641
Other assets		304,983		—			—			—				—				—		304,983
	$	17,905,148		278,800			300,000			—				—			$	578,800	$	18,483,948
Liabilities and Equity
Liabilities
Repurchase agreements	$	4,625,403		—			—			—				—			$	—	$	4,625,403
Notes payable		8,295,331		—			300,000	B		—				—				300,000		8,595,331
Trades payable		1,624,130		—			—			—				—				—		1,624,130
Due to affiliates		11,983		—			—			—				—				—		11,983
Dividends payable		106,027		—			—			—				—				—		106,027
Deferred tax liability		—		—			—			—				—				—		—
Accrued expenses and other liabilities		129,013		—			—			—				—				—		129,013
		14,791,887		—			300,000			—				—				300,000		15,091,887
Commitments and Contingencies
Equity
Common Stock, $0.01 par value, 2,000,000,000 shares authorized, 230,471,202 and 141,434,905 issued and outstanding at June 30, 2016 and December 31, 2015, respectively, Par		2,304		200	A		—			—				—			$	200	$	2,504
Additional paid-in capital		2,641,193		278,600	A		—			—				—				278,600		2,919,793
Retained earnings		117,144		—			—			—				—				—		117,144
Accumulated other comprehensive income, net of tax		50,799		—			—			—				—				—		50,799
Total New Residential stockholders' equity		2,811,440		278,800			—			—				—				278,800		3,090,240
Noncontrolling interests in equity of consolidated subsidiaries		301,821		—			—			—				—				—		301,821
Total Equity		3,113,261		278,800			—			—				—				278,800		3,392,061
Total Liabilities & Equity	$	17,905,148		278,800			300,000			—				—				578,800		18,483,948

3

New Residential Investment Corp.

Walter & WCO Acquisition

Pro Forma Income Statement

Twelve Months ended 12/31/2015

	Historical New Residential Investment Corp.			Historical Home Loan Servicing Solutions, Ltd.		Pro Forma Adjustments				Historical SpringCastle		Pro Forma Adjustments				Walter Pro Forma Adjustments				WCO Pro Forma Adjustments				NRZ Management & Incentive Fee Adjustment				Pro Forma Combined
	For the year ended December 31, 2015			For the three months ended March 31, 2015		For the three months ended March 31, 2015				For the year ended December 31, 2015		For the year ended December 31, 2015				For the year ended December 31, 2015				For the year ended December 31, 2015				For the year ended December 31, 2015				For the year ended December 31, 2015
Interest income	$	645,072			80,682		8,702		D		455,478		(91,606	)	I		—				—				—			$	1,098,328
Interest expense		274,013			40,813		633		E		87,000		(1,790	)	J		5,622		O		7,297		O		—				413,588
Net Interest Income		371,059			39,869		8,069				368,478		(89,816	)			(5,622	)			(7,297	)			—				684,740
Net Servicing Fee Income		—			—		—				—		—				25,037		P		33,940		P		—				58,977
Impairment
Other-than-temporary impairment (“OTTI”) on securities		5,788			—		—				—		—				—				—				—			$	5,788
Valuation provision on loans		18,596			—		—				67,936		—				—				—				—				86,532
		24,384			—		—				67,936		—				—				—				—				92,320
Net interest and servicing income after impairment		346,675			39,869		8,069				300,542		(89,816	)			19,415				26,643				—				651,397
Other Income
Related party revenue		—			50		(50	)	F		—		—				—				—				—			$	—
Other revenue		—			1,440		(1,440	)	F		—		—				—				—				—				—
Change in fair value of investments in excess mortgage servicing rights		38,643			—		—				—		—				—				—				—				38,643
Change in fair value of investments in excess mortgage servicing rights, equity method investees		31,160			—		—				—		—				—				—				—				31,160
Change in fair value of investments in servicer advances		(57,491	)		—		—				—		—				—				—				—				(57,491	)
Gain on consumer loans investment		43,954			—		—				—		(43,954	)	K		—				—				—				—
Gain on remeasurement of consumer loans investment		—			—		—				—		—
Gain on settlement of investments, net		(17,207	)		—		(18,100	)	G		—		—				—				—				—				(35,307	)
Other income		2,970			—		1,630		F		—		—				—				—				—				4,600
		42,029			1,490		(17,960	)			—		(43,954	)			—				—				—				(18,395	)
Operating Expenses
Compensation and benefits		—			2,078		(2,078	)	F		—		—				—				—				—			$	—
Related party expenses		—			76		(76	)	F		—		—				—				—				—				—
Unrealized loss on loans held for sale		—			7,654		—				—		—				—				—				—				7,654
General and administrative expenses		61,862			16,286		(17,281	)	F		—		7,531		L		—				—				—				68,398
Management fee to affiliate		33,475			—		—				—		—				—				—				10,877		R		44,352
Incentive compensation to affiliate		16,017			—		—				—		—				—				—				12,696		R		28,713
Loan servicing expense		6,469			—		(2,878	)	F		52,731		—				—				—				—				56,322
Other expense		—			—		—				7,531		(7,531	)	L		—				—				—				—
		117,823			26,094		(22,313	)			60,262		—				—				—				23,573				205,439
Income (Loss) Before Income Taxes		270,881			15,265		12,422				240,280		(133,770	)			19,415				26,643				(23,573	)			427,563
Income tax expense		(11,001	)		5		—		H		—		—		M		1,343		Q		82		Q		—				(9,570	)
Net Income (Loss)	$	281,882		$	15,260	$	12,422			$	240,280	$	(133,770	)		$	18,072			$	26,561			$	(23,573	)			437,133
Noncontrolling interests in Income (Loss) of Consolidated Subsidiaries	$	13,246			—		—				—		69,966		N		—				—				—			$	83,212
Net Income (Loss) Attributable to Common Stockholders	$	268,636		$	15,260	$	12,422			$	240,280	$	(203,736	)		$	18,072			$	26,561			$	(23,573	)		$	353,921
Net Income Per Share of Common Stock
Basic	$	1.34																									S	$	1.41
Diluted	$	1.32																									S	$	1.41
Weighted Average Number of Shares of Common Stock Outstanding
Basic		200,739,809																									S		250,474,796
Diluted		202,907,605																									S		250,689,233

4

New Residential Investment Corp.

Walter & WCO Acquisition

Pro Forma Income Statement

Six Months ended 6/30/2016

	Historical New Residential Investment Corp.			Historical SpringCastle		Pro Forma Adjustments				Walter Pro Forma Adjustments				WCO Pro Forma Adjustments				NRZ Management & Incentive Fee Adjustment				Pro Forma Combined
	For the six months ended June 30, 2016			For the three months ended March 31, 2016		For the three months ended March 31, 2016				For the six months ended June 30, 2016				For the six months ended June 30, 2016				For the six months ended June 30, 2016				For the six months ended June 30, 2016
Interest income	$	467,513			100,131		(13,218	)	I		—				—				—			$	554,426
Interest expense		181,913			19,654		(195	)	J		2,811		O		3,648		O		—				207,832
Net Interest Income		285,600			80,477		(13,023	)			(2,811	)			(3,648	)			—				346,594
Net Servicing Fee Income		—			—		—				11,032		P		15,271		P		—			$	26,303
Impairment
Other-than-temporary impairment (“OTTI”) on securities		6,073			—		—				—				—				—			$	6,073
Valuation provision on loans		23,570			14,043		—				—				—				—				37,613
		29,643			14,043		—				—				—				—				43,686
Net interest income after impairment		255,957			66,434		(13,023	)			8,221				11,622				—				329,211
Other Income
Change in fair value of investments in excess mortgage servicing rights		(7,337	)		—		—				—				—				—			$	(7,337	)
Change in fair value of investments in excess mortgage servicing rights, equity method investees		2,347			—		—				—				—				—				2,347
Change in fair value of investments in servicer advances		(17,278	)		—		—				—				—				—				(17,278	)
Gain on consumer loans investment		9,943			—		(9,943	)	K		—				—				—				—
Gain on remeasurement of consumer loans investment		71,250			—		(71,250	)	K		—				—				—				—
Gain on settlement of investments, net		(27,211	)		—		—				—				—				—				(27,211	)
Other income		(19,515	)		—		—				—				—				—				(19,515	)
		12,199			—		(81,193	)			—				—				—				(68,994	)
Operating Expenses
General and administrative expenses		19,305			—		1,668		L		—				—				—			$	20,973
Management fee to affiliate		20,016			—		—				—				—				2,160		R		22,176
Incentive compensation to affiliate		6,125			—		—				—				—				5,057		R		11,182
Loan servicing expense		15,850			11,571		—				—				—				—				27,421
Other expense		—			1,668		(1,668	)	L		—				—				—				—
		61,296			13,239		—				—				—				7,217				81,752
Income (Loss) Before Income Taxes		206,860			53,195		(94,216	)			8,221				11,622				(7,217	)		$	178,465
Income tax expense		(2,705	)		—		—		M		422		Q		506		Q		—				(1,778	)
Net Income (Loss)	$	209,565		$	53,195	$	(94,216	)		$	7,799			$	11,117			$	(7,217	)			180,243
Noncontrolling interests in Income (Loss) of Consolidated Subsidiaries	$	29,177			—		18,680		N		—				—				—			$	47,857
Net Income (Loss) Attributable to Common Stockholders	$	180,388		$	53,195	$	(112,896	)		$	7,799			$	11,117			$	(7,217	)		$	132,386
Net Income Per Share of Common Stock
Basic	$	0.78																			S	$	0.53
Diluted	$	0.78																			S	$	0.53
Weighted Average Number of Shares of Common Stock Outstanding
Basic		230,474,796																			S		250,474,796
Diluted		230,689,233																			S		250,689,233

5

NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION

Walter Transactions

On August 8, 2016, New Residential Investment Corp. (“New Residential” or “Company”) and Walter Investment Management Corp. (“Walter”) entered into an agreement (“Purchase Agreement”) for the purchase and sale of approximately $33 billion UPB of seasoned conventional mortgage servicing rights (“MSRs”) and $24 million in servicer advances for a purchase price of approximately $240 million.

In addition, New Residential, Walter and Walter Capital Opportunity, LP have agreed in principle for the purchase and sale of substantially all of the assets of Walter Capital Opportunity, LP and its subsidiaries (“WCO”), along with certain related assets owned by Walter, which collectively, represent approximately $35 billion UPB of MSRs and $42 million in servicer advances for a purchase price of approximately $307 million.

Pro Forma Adjustments for Unaudited Pro Forma Combined Balance Sheet as of June 30, 2016

Walter Transactions

A. Reflects the issuance of approximately 20,000,000 shares of common stock in a public offering with net proceeds of approximately $278.8 million. In connection with the offering, we will issue to our Manager options relating to shares of our common stock, representing 10% of the number of shares being offered, pursuant to our Nonqualified Stock Option and Incentive Award Plan.

B. Reflects the impact of New Residential entering into new financing arrangements of $300 million on unencumbered MSRs and servicer advances in contemplation of the Walter and WCO asset acquisitions. Specifically, New Residential expects the following terms for the financing:

• LIBOR plus 300 basis points and 90% loan-to-value ratio (“LTV”) on Servicer Advances; and,

• LIBOR plus 400 basis point and 50% LTV on MSRs.

A change of 1/8 percent in the interest rate associated with the variable rate borrowings would result in an additional annual interest expense of approximately $1.6 million (in the case of an increase in the rate) or an annual reduction of interest expense of approximately $(1.6) million (in the case of a decrease in the rate).

C. Reflects the acquisition of MSRs and servicer advances from Walter and WCO for the purchase price of $240 million and $307 million, respectively, which will be funded via the sources described in A and B above. New Residential will acquire MSRs and servicer advances with a fair value based on an estimated settlement date of September 30, 2016 of $481 million ($216 million for Walter, $265 million for WCO) and $66 million ($24 million for Walter, $42 million for WCO), respectively.

Pro Forma Adjustments for the Unaudited Pro Forma Combined Statement of Income for the year ended December 31, 2015 and for the six months ended June 30, 2016

Home Loan Servicing Solutions, Ltd.

New Residential acquired all of the assets and liabilities of Home Loan Servicing Solutions, Ltd. and its subsidiaries on April 6, 2015 and for purposes of the presentation of the pro forma combined statement of income for the year ended December 31, 2015, have included pro forma income for HLSS for the three months ended March 31, 2015 and the five day period from April 1, 2015 through April 5, 2015.

D. The adjustment to Interest income reflects the effective interest income earned on the portfolio of Excess MSRs of $20.2 million and Servicer advances of $69.4 million for the period from January 1, 2015 through April 5, 2015, had the portfolios been acquired by the Company as of January 1, 2015 at their estimated fair market values.

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 prior to the close of the HLSS Acquisition:

• Eliminate Interest income of $8.1 million for the three months ended March 31, 2015 related to the sale of residential mortgage loans sold by the Company; and

• Eliminate Interest income of $1.6 million for the three months ended March 31, 2015 related to the February 2015 sale of HLSS’s portfolio of RPLs.

6

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

Interest income adjustments	For January 1, 2015 through April 5, 2015
Eliminate Interest income related to the sale of residential mortgage loans sold by the Company		(8.1	)
Eliminate Interest income related to the sale of HLSS’s portfolio of RPLs		(1.6	)
Eliminate historical Interest income HLSS		(71.2	)
Add: HLSS Interest income estimated from January 1 through April 5, 2015		89.6
Total pro forma adjustments	$	8.7

E. The adjustment to Interest expense reflects the refinancing of the liabilities incurred in connection with the HLSS Acquisition and for which refinancing terms were agreed upon with the bank counterparties on April 6, 2015. In addition, the adjustment reflects the Interest expense on the new indebtedness of $698.2 million comprising the HLSS seller financing of $385.2 million and debt raised by the Company of $313.0 million in connection with the HLSS Acquisition.

Interest expense is calculated as if the liabilities were assumed or outstanding at January 1, 2015 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. 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	%	May 9, 2016
Variable Funding Notes	Floating (1M LIBOR + 2.65%)		4,228.6		2.82	%	February 27, 2016
Total		$	6,028.6		2.58	%

All of the new indebtedness of $698.2 million is variable rate funding. The refinanced liabilities consist of the remaining variable rate funding of $3,530.4 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 acquisition accounting as of the closing date. As a result, the amortization of historical deferred financing costs is excluded from the unaudited pro forma combined statements of income for the three months ended March 31, 2015.

The Company refinanced the variable funding notes in the Match funded liabilities with a variable interest rate with the terms set out in the table above based on the terms agreed upon with the bank counterparties on April 6, 2015. A change of 1/8 percent in the interest rate associated with the variable rate borrowings would result in an additional annual interest expense of approximately $3.85 million (in the case of an increase in the rate) or an annual reduction of interest expense of approximately $(3.85) million (in the case of a decrease in the rate).

The additional Interest expense of $0.6 million for January 1, 2015 through April 5, 2015, represents the net interest expense and amortization of commitment fees on the refinancing and the new indebtedness incurred, as well as elimination of Interest expense related to the Term loan facility, repurchase agreement collateralized by reperforming loans sold and related deferred financing costs and derivatives not assumed in the HLSS Acquisition, and elimination of historical NRZ interest expense related to financing for loans sold.

7

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

	For January 1, 2015 through April 5, 2015
Elimination of historical HLSS interest expense related to the Match funded liabilities		(31.0	)
Add: HLSS Interest expense for new indebtedness and refinancing		37.8
Add: Interest expense related to new indebtedness incurred by the Company for the HLSS Acquisition		2.1
Add: Deferred financing costs amortization on HLSS refinancing and the Company’s new indebtedness		1.4
Total additional interest expense from refinancing and new indebtedness		10.3
Elimination of historical HLSS Interest expense due to the repayment of Term loan facility (Refer to note E)		(4.1	)
Elimination of historical HLSS Interest expense related to the repaid reperforming loans liability		(1.0	)
Elimination of historical HLSS Interest expense related to deferred financing costs and derivatives		(0.5	)
Elimination of historical NRZ interest expense related to financing for loans sold		(4.1	)
Total eliminations of historical Interest expense		(9.7	)
Total pro forma adjustments	$	0.6

F. Certain amounts in the historical statement of income of HLSS have been reclassified to conform to the Company’s presentation. In addition, certain non-recurring costs of both the Company and HLSS have been removed from the historical statement of income. These reclassifications and adjustments are as follows:

• Related party revenue of $0.05 million and Other revenue of $1.4 million for the three months ended March 31, 2015, respectively, to Other income, net.

• Compensation and benefits of $2.1 million and Related party expenses of $0.08 million for the three months ended March 31, 2015 to General and administrative expenses.

• The Company and HLSS incurred $4.4 million and $13.1 million of transaction costs in relation to the HLSS Acquisition in the three months ended March 31, 2015, respectively. These transaction costs are non-recurring in nature and have been removed from General and administrative expenses in the pro forma financial information.

In addition, the following amounts in the statement of income of the Company were directly attributable to residential mortgage loans sold by the Company and therefore, have been eliminated:

• Losses within Other income of $0.1 million, each for the three months ended March 31, 2015;

• General and administrative expenses of $1.9 million for the three months ended March 31, 2015; and

• Loan servicing expense of $2.9 million for the three months ended March 31, 2015.

G. In conjunction with the transaction, the Company sold various pools of loans which were consummated prior to and subsequent to March 31, 2015. For loans sold prior to March 31, 2015, the Company recognized a gain of $18.1 million which was reflected in its historical financial statements. For the purposes of this pro forma financial information, the gain has been removed as this represents a non-recurring event.

H. 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 HLSS Acquisition. With respect to the HLSS Acquisition, the Company acquired the taxable subsidiaries of HLSS through the Company’s taxable REIT subsidiaries and those subsidiaries 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.

8

SpringCastle

As a result of the SpringCastle Transaction on March 31, 2016, New Residential obtained a controlling financial interest in the Consumer Loan Companies, which triggered the application of the acquisition model in ASC No. 805 and consolidation of all of the assets and the related liabilities of the Consumer Loan Companies. For purposes of the presentation of the pro forma combined statement of income for the year ended December 31, 2015 and six months ended June 30, 2016, New Residential has included pro forma income for the Consumer Loan Companies for the year ended December 31, 2015 and three months ended March 31, 2016.

I. The adjustment to interest income reflects i) the impact of NRZ earning contractual interest on the acquired UPB rather than the Historical SpringCastle UPB and ii) the net accretion of the Company’s purchase discount or premium and accretable yield for the consumer loan portfolios accounted for under ASC 310-20 and ASC 310-30, respectively, had the portfolios been acquired by the Company as of January 1, 2015.

J. The net adjustments to interest expense of $1.8 million and $0.2 million for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively, reflect 1) the elimination of historical SpringCastle amortization of deferred financing costs and original issue discount of $2.5 million and $0.5 million for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively, and 2) the amortization of $0.7 million and $0.3 million of the Company’s debt discount at acquisition using the interest method in accordance with ASC 310-20 for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively, had the Bonds Payable been assumed by the Company as of January 1, 2015.

K. Reflects the elimination of the Company’s gain on consumer loans investment representing its historical share of SpringCastle’s cumulative earnings that exceeded cumulative cash distributions. Given the SpringCastle Transaction and the Company’s consolidation of SpringCastle’s assets and liabilities, these gains are replaced with interest income and interest expense on the underlying assets and liabilities as described in I and J above. In addition, for the six months ended June 30, 2016, reflects the elimination of the Company’s gain on remeasurement of its existing equity ownership in SpringCastle at acquisition as it represents a nonrecurring gain that would not have a continuing impact on the combined entity.

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

• Other expense of $7.5 million and $1.7 million to General and administrative expenses for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively.

M. 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 on a pro forma basis.

N. Reflects the recognition of the non-controlling interest in income of SpringCastle as a consolidated subsidiary.

Walter Transactions

O. The adjustment to Interest expense reflects the Interest expense for the year ended December 31, 2015 and the six months ended June 30, 2016 on the new indebtedness of $300 million comprising $241 million and $59 million on unencumbered MSRs and servicer advances to be entered into in contemplation of the Walter and WCO acquisitions.

P. New Residential’s subsidiary, New Residential Mortgage LLC, is in the process of becoming fully eligible to own Non-Agency and Agency MSRs and is currently qualified to own Non-Agency MSRs in 49 U.S. states and is an approved Fannie Mae Servicer and FHA Lender. As a result, New Residential has included pro forma adjustments to present the income recognized on the Walter and WCO assets as Net servicing fee income.

Adjustment reflects the total Net servicing fee income that would have been generated for the year ended December 31, 2015 and for the six months ended June 30, 2016, had the MSRs been acquired by the Company from Walter and WCO as of January 1, 2015 at their estimated fair market values. Net servicing fee income is comprised of the following components:

Net Servicing Fee Income	Year ended 12/31/2015 (in Thousands)			Six months ended 6/30/2016 (in Thousands)
Servicing & Ancillary Fees	$	167,871		$	73,422
Minus Sub-servicing Expense		(40,730	)		(19,135	)
Minus MSR amortization		(68,164	)		(27,984	)
Total	$	58,977		$	26,303

9

Q. Reflects the additional tax expense as a result of the Company’s acquisition of MSRs from Walter and WCO, the base portion of which will be held in a taxable REIT subsidiary (“TRS”) and subject to tax expense.

Management & Incentive Fee

R. Represents additional management fees as a result of the Pro Forma Transactions pursuant to the management agreement, under which the Company pays 1.5% of its 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

Management Fee Calculation	For year ended December 31, 2015
2015 Share issuances, net of underwriter and other related fees		1,311,137
2016 Share issuance, net of underwriter and other related fees		278,800
Base pro forma management fee of 1.5% of share issuance		1.50	%
% Adjustment to Annualize management fee on 2015 Share issuances		0.3404
Pro Forma Adjustment for 2015 Share issuance		6,695
Pro Forma Adjustment for 2016 Share issuance		4,182
Pro Forma Adjustment		10,877

Management Fee Calculation	For six months ended June 30, 2016 (in Thousands)
Share issuance, net of underwriter and other related fees		278,800
Base pro forma management fee of 1.5% of share issuance		1.50	%
Pro Forma Adjustment	$	2,160

Incentive Compensation Adjustment

Reflects an adjustment to the Incentive Compensation of $12.7 million and $5.1 million for the year ended December 31, 2015 and for the six months ended June 30, 2016, respectively, related to the pro forma adjustments to the statement of income and the impact of the share issuance by the Company on the incentive compensation threshold.

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

Pro forma basic and diluted earnings (loss) per common share attributable to common stockholders has been calculated based on the number of shares assumed to be outstanding, due to its continuing impact to the management fees and incentive compensation. The calculation assumes that 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, 2015
	Net income (in Thousands)		Shares	Per share amount
Earnings per share, basic	$	353,921	250,474,796	$	1.41
Earnings per share, diluted	$	353,921	250,689,233	$	1.41

	For the six months ended June 30, 2016
	Net income (in Thousands)		Shares		Per share amount
Earnings per share, basic	$	132,386		250,474,796	$	0.53
Earnings per share, diluted	$	132,386		250,689,233	$	0.53

10

	As of December 31, 2015
	Historical		Shares issued in the transactions		Pro Forma Total
Weighted-average shares outstanding, basic		200,739,809		49,734,987		250,474,796
Weighted-average shares outstanding, diluted(1)		202,907,605		47,781,628		250,689,233

	As of June 30, 2016
	Historical		Shares issued in the transactions		Pro Forma Total
Weighted-average shares outstanding, basic		230,474,796		20,000,000		250,474,796
Weighted-average shares outstanding, diluted(1)		230,689,233		20,000,000		250,689,233

(1) In connection with the offering, we will issue to our Manager options relating to shares of our common stock, representing 10% of the number of shares being offered, pursuant to our Nonqualified Stock Option and Incentive Award Plan. 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.

11

EX-99.2

Exhibit 99.2

Risks Related to the Walter Transactions

The purchase of approximately $33 billion UPB of conventional MSRs by the Company from Walter may not close.

The Company and Walter have announced an agreement for the purchase and sale of approximately $33 billion UPB of MSRs for a purchase price of approximately $215 million. The transaction contains terms, representations and warranties, covenants and indemnification provisions, and is subject to conditions precedent, such as regulatory and GSE approvals. Accordingly, we cannot provide any assurance that all of these conditions will be satisfied. If any of the conditions are not satisfied, the transaction may not close.

The Company has no legal obligation to and may not purchase the $35 billion UPB of MSRs of WCO.

The Company has agreed in principle to purchase substantially all of the assets of WCO along with certain related assets owned by Walter, which, collectively, represent approximately $35 billion UPB of MSRs for a purchase price of approximately $264 million. This agreement in principle is not legally binding and neither Walter nor the Company has a legal obligation to complete this purchase. The transaction, which is subject to negotiation and execution of definitive documentation, is expected to contain the same general terms, including terms, representations and warranties, covenants and indemnification provisions, and be subject to the same conditions precedent, such as regulatory and GSE approvals, as the flow and bulk agreement for the purchase and sale of MSRs (the “Purchase Agreement”) between a wholly-owned subsidiary of the Company, New Residential Mortgage LLC (“NRM”), and Ditech Financial LLC (“Ditech”). There can be no assurance that definitive documentation will be entered into on the terms described herein, or at all.

The Company has no legal obligation to and may not purchase the MSRs of newly-originated or newly-acquired residential mortgage loans under the forward flow agreement.

The Company, through its wholly-owned subsidiary, NRM, has entered into a forward flow arrangement with Walter to acquire MSRs of newly-originated or newly-acquired residential mortgage loans. However, this agreement is subject to the parties’ mutual agreement on pricing. Should the parties fail to agree on pricing, the Company has no legal obligation to and may not acquire any MSRs under the forward flow agreement. In addition, the completion of the purchase is subject to various conditions and we cannot provide assurance that all of these conditions will be satisfied. If the conditions are not satisfied, the transaction may not close.

Our business and the value of our assets could be materially and adversely affected if Walter is unable to adequately perform its duties as a result of, among other things:

• its failure to comply with applicable laws and regulation;

• its failure to maintain sufficient liquidity or access to sources of liquidity;

• its failure to perform its loss mitigation obligations;

• its failure to perform adequately in its external audits;

• a failure in or poor performance of its operational systems or infrastructure;

• regulatory or legal scrutiny regarding any aspect of a its operations, including, but not limited to, servicing practices and foreclosure processes lengthening foreclosure timelines;

• its failure to subservice the mortgage loans related to any MSRs acquired by us in accordance with applicable laws, requirements or our subservicing agreement with Walter; or

• any other reason.

1

We rely heavily on mortgage servicers to achieve our investment objectives and have no direct ability to influence their performance.

The value of the assets we may acquire pursuant to the Walter Transactions will be dependent on the satisfactory performance of Walter’s servicing obligations under our subservicing agreement with Walter. Our duties and obligations with respect to the MSRs and advances that we may acquire from Walter are defined through contractual agreements with the related GSEs, generally referred to as Servicing Guides (the “Servicing Guidelines”). Our investment in MSRs is subject to all of the terms and conditions of the applicable Servicing Guidelines. Under the Servicing Guidelines, a servicer may be terminated by the applicable GSE for any reason, “with” or “without” cause, for all or any portion of the loans being serviced for such GSE. We will be the legal owner of the MSRs acquired from Walter and, as our subservicer, Walter will perform all daily servicing obligations. If Walter does not perform in accordance with the Servicing Guides or our subservicing agreement, or otherwise ceases to be viewed by the GSEs as a credible servicer, we may be terminated by a GSE and may lose all, or a portion of, our investments serviced by Walter.

In order to realize any value on our MSRs under such circumstances, among other things, a new servicer must be willing to pay for the right to service the applicable mortgage loans while assuming responsibility for the liabilities associated with origination and prior servicing of such mortgage loans. In addition, any payment received from a successor servicer will be applied first to pay the GSE for all of its claims and costs associated with the servicing of the mortgage loans.

We have significant counterparty concentration risk in Walter.

If the Walter Transactions are consummated, a material portion of our MSR portfolio will be subserviced by Walter. If Walter’s servicing performance deteriorates, or in the event that Walter files for bankruptcy or if Walter is unwilling or unable to continue to subservice MSRs for us, our expected returns on these investments would be severely impacted. We closely monitor Walter’s mortgage servicing performance and overall operating performance, financial condition and liquidity, as well as its compliance with applicable regulations and GSE servicing guidelines. We have various information, access and inspection rights in our agreements with Walter that enable us to monitor their financial and operating performance and credit quality, which we periodically evaluate and discuss with Walter’s management. However, we have no direct ability to influence Walter’s performance, and our diligence cannot prevent, and may not even help us anticipate, a severe deterioration of Walter’s servicing performance on our MSR portfolio.

The level of indebtedness at Walter could adversely affect its financial ability, limit its ability to service our loans effectively and expose us to operating and financial risk.

Walter has material debt obligations today and may incur additional indebtedness in the future, each of which could have materially adverse consequences to Walter, including increasing its vulnerability to economic downturns or its ability to sustain adverse changes in general economic, industry, competitive conditions, government regulations and rating agency actions. Additionally, Walter may not be able to generate sufficient cash from operations to service its indebtedness and may not be able to extend or refinance its indebtedness. The inability of Walter to service its indebtedness either through cash flows from operations or refinancing of its debt could impair its ability to service our loans effectively or could result in the incurrence of capital expenditure which could impair the value of our MSRs and advances. As a result, we may elect to, or could be required by the GSEs to, transfer servicing of our MSRs serviced by Walter to another subservicer, which may result in significant cost and may negatively impact the value of our MSRs.

2

Our ability to finance assets serviced by Walter may depend on Walter’s cooperation with our lenders and compliance with certain covenants.

If we choose to finance some or all of the MSRs or servicer advances that may be serviced by Walter, we will be subject to substantial operational risks associated with Walter in connection with any such financing. In our current financing facilities for Excess MSRs and servicer advances, the failure of the related servicer to satisfy various covenants and tests can result in an amortization event and/or an event of default. Our lenders may require us to include similar provisions in any financing we obtain relating to the MSRs and servicer advances serviced by Walter. If we decide to finance such assets, we will not have direct ability to control Walter’s compliance with any such covenants and tests and the failure of Walter to satisfy any such covenants or tests could result in a partial or total loss on our investment. Some lenders may be unwilling to finance any assets subserviced by Walter or any of its subsidiaries under any circumstances.

Furthermore, our ability to obtain financing for the servicer advances related to mortgage loans serviced by Walter may be dependent on Walter’s agreement to be a party to such financing agreements. If Walter does not agree to be a party to such financing agreements for any reason, we may not be able to obtain financing on favorable terms or at all.

A bankruptcy of Walter could materially and adversely affect us.

A sale of MSRs and servicer advances from Walter could be re-characterized as a pledge of such assets in a bankruptcy proceeding. We believe that Walter’s transfer to us of MSRs and servicer advances pursuant to the Walter Transactions, will constitute a sale of such assets, in which case such assets would not be part of Walter’s bankruptcy estate. A bankruptcy trustee, or any other party in interest in a bankruptcy proceeding, however, might assert that MSRs and servicer advances transferred to us were not sold to us but were instead pledged to us as security for Walter’s obligation to repay amounts paid by us to Walter pursuant to the related purchase agreement. If such assertion were successful, all or part of the MSRs and servicer advances transferred to us pursuant to the related purchase agreement would constitute property of Walter’s bankruptcy estate, and our rights against Walter would be those of a secured creditor with a lien on such assets. Under such circumstances, cash proceeds generated from our collateral would constitute “cash collateral” under the provisions of the U.S. bankruptcy laws. Under U.S. bankruptcy laws, the servicer could not use our cash collateral without either (a) our consent or (b) approval by the bankruptcy court, subject to providing us with “adequate protection” under the U.S. bankruptcy laws.

If such a recharacterization occurs, the validity or priority of our security interest in the MSRs and servicer advances acquired from Walter could be challenged in a bankruptcy proceeding of Walter. If the purchases pursuant to the related purchase agreement are recharacterized as secured financings as set forth above, we nevertheless created and perfected security interests with respect to the MSRs that we may have purchased from Walter by including a pledge of collateral in the related purchase agreement and filing financing statements in appropriate jurisdictions. Nonetheless, our security interests may be challenged and ruled unenforceable, ineffective or subordinated by a bankruptcy court. If this were to occur, then Walter’s obligations to us with respect to purchased MSRs and servicer advances would be deemed unsecured obligations, payable from unencumbered assets to be shared among all of Walter’s unsecured creditors. In addition, even if the security interests are found to be valid and enforceable, if a bankruptcy court determines that the value of the collateral is less than Walter’s underlying obligations to us, the difference between such value and the total amount of such obligations will be deemed an unsecured “deficiency” claim and the same result will occur with respect to such unsecured claim. In addition, even if the security interest is found to be valid and enforceable, Walter would have the right to use the proceeds of our collateral subject to either (a) our consent or (b) approval by the bankruptcy court, subject to providing us with “adequate protection” under U.S. bankruptcy laws. Walter also would have the ability to confirm a chapter 11 plan over our objections if the plan complied with the “cramdown” requirements under U.S. bankruptcy laws.

Even if we are successful in arguing that we own the MSRs and servicer advances purchased under the purchase agreement with Walter, we may need to seek relief in the bankruptcy court to obtain turnover and payment of amounts relating to such assets, and there may be difficulty in recovering payments in respect of such assets that may have been commingled with other funds of Walter.

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The Subservicing Agreement with Walter could be rejected in a bankruptcy proceeding.

If Walter were to file, or to become the subject of, a bankruptcy proceeding under the United States Bankruptcy Code or similar state insolvency laws, Walter (as debtor-in-possession in the bankruptcy proceeding) or the bankruptcy trustee could reject its subservicing agreement with us and terminate Walter’s obligation to service the MSRs or servicer advances in which we have an investment. Any claim we have for damages arising from the rejection of a subservicing agreement would be treated as a general unsecured claim for purposes of distributions from Walter’s bankruptcy estate.

Any purchase agreement pursuant to which we purchase MSRs or servicer advances from Walter could be rejected in a bankruptcy proceeding of Walter.

Walter (as debtor-in-possession in the bankruptcy proceeding) or a bankruptcy trustee appointed in Walter’s bankruptcy proceeding could seek to reject our subservicing agreement with Walter and thereby terminate Walter’s obligation to service the MSRs and servicer advances transferred pursuant to our subservicing agreement. If the bankruptcy court approved the rejection, we would have a claim against Walter for any damages from the rejection and the resulting transfer of servicing of our MSRs to another subservicer may result in significant cost and may negatively impact the value of our MSRs.

Walter could discontinue servicing or may be unwilling to continue servicing for us.

Upon a discontinuance or bankruptcy of Walter, because we do not and in the future may not have the employees, servicing platforms, or technical resources necessary to service mortgage loans, we would need to engage an alternate subservicer which may not be readily available on acceptable terms or at all.

Walter has been and is subject to certain federal and state regulatory matters and certain other litigation.

Walter and its subsidiaries have been and continue to be subject to regulatory and governmental examinations, information requests and subpoenas, inquiries, investigations and threatened legal actions and proceedings. In connection with formal and informal inquiries, Walter receives numerous requests, subpoenas and orders for documents, testimony and information in connection with various aspects of Walter’s activities, including whether certain of Walter’s residential loan servicing and originations practices, bankruptcy practices and other aspects of its business comply with applicable laws and regulatory requirements. Walter cannot provide any assurance as to the outcome of any of the aforementioned actions, proceedings or inquiries, or that such outcomes will not have a material adverse effect on Walter’s reputation, business, prospects, results of operations, liquidity or financial condition.

Below are descriptions of certain regulatory and litigation matters that Walter has disclosed publicly:

• In April 2015, Walter announced that its wholly owned mortgage subservicing subsidiary, Ditech, entered into a stipulated order with the Federal Trade Commission (“FTC”) and the Consumer Financial Protection Bureau (“CFPB”) to resolve allegations resulting from an investigation by the FTC and CFPB that started in 2010 and continued into 2015 (“Stipulated Order”). According to Walter’s disclosure, the key elements to the Stipulated Order included injunctive relief, including establishing a data integrity program and a home preservation program, as well as payments of (i) $18 million for alleged misrepresentations relating to payment methods that entail convenience fees; (ii) $30 million for alleged misrepresentations related primarily to the time it would take to review short sale requests and for alleged delays in processing loan modifications in servicing transfers; and (iii) a $15 million civil money penalty. Ditech remains subject to various ongoing obligations under the terms of the Stipulated Order, including requirements relating to data integrity testing, loan transfer practices, consumer disclosure practices, record-keeping, and compliance reporting and monitoring.

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• Walter has received various subpoenas for testimony and documents, motions for examinations pursuant to Federal Rule of Bankruptcy Procedure 2004, and other information requests from certain Offices of the United States Trustees, acting through trial counsel in various federal judicial districts, seeking information regarding an array of Walter’s policies, procedures and practices in servicing loans to borrowers who are in bankruptcy and Walter’s compliance with bankruptcy laws and rules. The information has been provided in response to these subpoenas and requests and Walter’s management have met with representatives of certain Offices of the United States Trustees to discuss various issues that have arisen in the course of these inquiries, including compliance with bankruptcy laws and rules. The outcome of the aforementioned proceedings and investigations cannot be predicted, which could result in requests for damages, fines, sanctions, or other remediation. Walter could face further legal proceedings in connection with these matters, and may seek to enter into one or more agreements to resolve these matters. Any such agreement may require Walter to pay fines or other amounts for alleged breaches of law and to change or otherwise remediate Walter’s business practices.

• From time to time, Walter has received and may in the future receive subpoenas and other information requests from federal and state governmental and regulatory agencies that are examining or investigating Walter. Walter and certain of its current or former officers have received subpoenas from the SEC requesting documents, testimony and/or other information in connection with an investigation concerning trading in Walter’s securities. Walter and the aforementioned officers are cooperating with the investigation. Walter cannot provide any assurance as to the outcome of the aforementioned investigations or that such outcomes will not have a material adverse effect on Walter’s reputation, business, prospects, results of operations, liquidity or financial condition.

• Since mid-2014, Walter has received subpoenas for documents and other information requests from the offices of various state attorneys general who have, as a group and individually, been investigating Walter’s mortgage servicing practices. According to Walter’s public filings, Walter has provided information in response to these subpoenas and requests and has had discussions with representatives of the states involved in the investigations to explain Walter’s practices. Walter may seek to reach an agreement to resolve these matters with one or more states. Any such agreement may include, among other things, enhanced servicing standards, monitoring and testing obligations, injunctive relief and payments for remediation, consumer relief, penalties and other amounts. Walter cannot predict whether litigation or other legal proceedings will be commenced by one or more states in relation to these investigations.

• Walter is involved in litigation, including putative class actions, and other legal proceedings concerning, among other things, lender-placed insurance, private mortgage insurance, bankruptcy practices, employment practices, the Consumer Financial Protection Act, the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, and other federal and state laws and statutes.

• On August 28, 2015, Walter’s wholly owned subsidiary, Reverse Mortgage Solutions, Inc. (“RMS”), received a Civil Investigative Demand (“CID”) from the CFPB to produce certain documents and answer questions relating to RMS’s marketing and provision of reverse mortgage products and services. According to Walter’s public filings, RMS has been cooperating with the CFPB by responding to the CID, and the CFPB investigation staff have advised RMS that they are considering seeking authority from the Director of the CFPB to institute an enforcement action against RMS in relation to potential violations by RMS of consumer financial protection laws and regulations. Walter has reported that RMS has provided a response to the CFPB denying these allegations.

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• Walter has also disclosed that RMS has received (i) a subpoena from the Office of Inspector General of the U.S. Department of Housing and Urban Development requiring RMS to produce documents and other materials relating to, among other things, the origination, underwriting and appraisal of reverse mortgages for the time period since January 1, 2005, and (ii) a letter from the New York Department of Financial Services requesting information on RMS’s reverse mortgage servicing business in New York.

• On June 17, 2016, the Walter’s board of directors received a letter from a stockholder demanding that the board of directors assert legal claims against certain current and former directors and officers of Walter. The stockholder alleged that these directors and officers breached their fiduciary duties by failing to oversee Walter’s operations and internal controls regarding its loan servicing, loan origination, reverse mortgage and financial reporting practices. According to Walter’s public filings, Walter’s board of directors has appointed an evaluation committee to consider the demand letter and the matters raised therein.

The outcome of all of Walter’s regulatory matters and other legal proceedings is uncertain, and it is possible that adverse results in such proceedings (which could include restitution, penalties, punitive damages and injunctive relief affecting Walter’s business practices) and the terms of any settlements of such proceedings could have a material adverse effect on Walter’s reputation, business, prospects, results of operations, liquidity or financial condition. In addition, governmental and regulatory agency examinations, inquiries and investigations may result in the commencement of lawsuits or other proceedings against Walter or its personnel. Although Walter has historically been able to resolve the preponderance of its ordinary course litigations on terms it considered favorable and without a material effect, this pattern may not continue and, in any event, individual cases could have unexpected materially adverse outcomes, requiring payments or other expenses in excess of amounts already accrued. Walter cannot predict whether or how any legal proceeding will affect Walter’s business relationship with actual or potential customers, Walter’s creditors, rating agencies and others. In addition, cooperating in, defending and resolving these legal proceedings consume significant amounts of management time and attention and could cause Walter to incur substantial legal, consulting and other expenses and to change Walter’s business practices, even in cases where there is no determination that Walter’s conduct failed to meet applicable legal or regulatory requirements.

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