Acquisitions

EverBank Net Assets

On October 30, 2013, the Company entered into a series of definitive agreements to purchase (i) certain private and GSE-backed MSRs and related servicer advances, (ii) sub-servicing rights for mortgage loans and (iii) a default servicing platform from EverBank, collectively referred to as the EverBank net assets. The agreements were structured such that ownership of the MSRs and related servicer advances and the sub-servicing rights for mortgage loans would transfer to the Company as credit owner consents were received, and the net assets associated with the default servicing platform would transfer when the data associated with the loans underlying the MSRs were boarded onto the Company’s servicing systems. The addition of EverBank's default servicing platform and employees to the Company's existing platform augmented both the Company's product capabilities and capacity, as well as extended its geographic diversity as it continues to execute on the opportunities for growth available in the specialty mortgage sector.

The agreements called for an estimated total purchase price of (i) $83.4 million for the MSRs, less net cash flows received on the underlying loans between October 30, 2013 and the date of legal transfer; (ii) par value of the related servicer advances; and (iii) $1.9 million associated with the default servicing platform. The Company paid $16.7 million of the estimated purchase price on October 30, 2013.

During March 2014, the Company received approvals to transfer MSRs and sub-servicing rights with an unpaid principal balance of approximately $16.5 billion. Accordingly, the Company paid an additional $44.7 million of the estimated purchase price and recorded MSRs at fair value of $58.7 million. The Company completed the transfer of the loans underlying the acquired MSRs onto the Company’s servicing systems and concurrently took possession of the associated servicer advances, resulting in additional payments by the Company of $152.5 million during the year. The remainder of the purchase price is recorded in payables and accrued liabilities on the consolidated balance sheet at December 31, 2014. The Company is no longer actively pursuing approvals for certain private investor-backed MSRs that have not been received.

The Company has accounted for this series of transactions as a business combination upon closing of the default servicing platform which occurred on May 1, 2014. As the acquired assets and assumed liabilities transferred at several dates, acquired assets and assumed liabilities for approved transactions were recorded on the dates the transfers to the Company occurred.

The purchase consideration was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. An allocation of the purchase price was made to major categories of assets and liabilities based on management’s estimates. The table below presents the purchase price allocation of the estimated acquisition date fair values of the assets acquired and the liabilities assumed (in thousands):



	Amount
Assets
Servicer and protective advances	$	163,160
Servicing rights	58,680
Premises and equipment	1,866
Total assets acquired	223,706

Liabilities
Payables and accrued liabilities	924
Total liabilities assumed	924
Fair value of net assets acquired	$	222,782

Servicer and protective advances acquired in connection with the acquisition of the EverBank net assets have gross contractual amounts receivable of $163.2 million, all of which are expected to be collected. The EverBank net assets have been allocated to the Servicing segment. The Company incurred acquisition-related expenses to acquire the EverBank net assets of $0.7 million during the year ended December 31, 2014, which are included in general and administrative expenses on the consolidated statement of comprehensive loss. Pro forma combined revenues, net income and earnings per share assuming the EverBank net assets acquisition had occurred on January 1, 2013 are not meaningful.

Pool of Fannie Mae MSRs

On December 10, 2013, the Company entered into an agreement with an affiliate of a national bank to acquire a pool of Fannie Mae MSRs and related servicer advances for an estimated purchase price of $330.0 million for the MSRs, less net cash flows received on the underlying loans between December 10, 2013 and the date of legal transfer. During the three months ended March 31, 2014, the Company completed the acquisition upon receipt of credit owner approval to transfer servicing, at which time the unpaid principal balance of the loans was $27.6 billion. The Company paid $165.0 million of the estimated purchase price in December 2013 and $161.8 million during the year ended December 31, 2014. The remaining purchase price of $3.2 million is recorded in payables and accrued liabilities on the consolidated balance sheet at December 31, 2014. The Company accounted for this transaction as an asset purchase.

ResCap Net Assets

On January 31, 2013, the Company (i) acquired the assets and assumed the liabilities relating to all of ResCap’s Fannie Mae MSRs and related servicer advances, and (ii) acquired ResCap’s mortgage originations and capital markets platforms, collectively referred to as the ResCap net assets, for an adjusted purchase price of $479.2 million. At closing, the ResCap Fannie Mae MSRs were associated with loans totaling $42.3 billion in unpaid principal balance. The Company made cash payments of $15.0 million in the fourth quarter of 2012 and $477.0 million on January 31, 2013. The Company was refunded $12.8 million for cash paid in excess of the adjusted purchase price during the fourth quarter of 2014. In connection with the acquisition, the Company acquired $491.4 million in assets and assumed $12.2 million in liabilities. The assets acquired included $175.1 million in servicer and protective advances, $242.6 million in servicing rights, $47.6 million in goodwill and $25.1 million in intangible assets and capitalized software. The ResCap net assets were allocated to the Servicing and Originations segments. Goodwill acquired was allocated in its entirety to the Originations segment. The acquisition of the ResCap net assets provided the Company with a fully integrated originations platform to complement and enhance its servicing business. The Company accounted for this transaction as a business combination.

Ally Bank Net Assets

On March 1, 2013, the Company acquired the correspondent lending and wholesale broker businesses of Ally Bank for a cash payment of $0.1 million. In connection with the acquisition, the Company acquired $1.5 million in assets, primarily including $1.2 million in intangible assets and $0.1 million in goodwill, and assumed $1.4 million in payables and accrued liabilities. The Ally Bank net assets were allocated to the Originations segment. The acquisition of the Ally Bank net assets has allowed the Company to pursue correspondent lending opportunities using the capabilities resident in the ResCap originations platform. This acquisition was accounted for as a business combination.

The amount of revenues and net income related to the ResCap net assets and Ally Bank net assets included in the Company’s consolidated statement of comprehensive income from the date of acquisition through December 31, 2013 were $743.5 million and $195.1 million, respectively.

The Company incurred acquisition-related expenses to acquire the ResCap net assets and the Ally Bank net assets of $3.0 million during the year ended December 31, 2013, which are included in general and administrative expenses on the consolidated statement of comprehensive income.

Bank of America Asset Purchase

On January 31, 2013, the Company purchased Fannie Mae MSRs from BOA for total consideration of $495.7 million, all of which was paid as of December 31, 2013. At closing, the Fannie Mae MSRs were associated with loans totaling $84.4 billion in unpaid principal balance. As part of the asset purchase agreement, BOA provided sub-servicing on an interim basis while the loan servicing was transferred in tranches to the Company’s servicing systems. As each tranche was boarded, the Company was also obligated to purchase the related servicer advances associated with the boarded loans. The Company purchased $740.7 million of servicer advances as part of the asset purchase agreement. All servicing transfers were completed by December 2013, at which time BOA ceased to be the sub-servicer.

Reverse Mortgage Solutions, Inc.

On November 1, 2012, the Company acquired all of the outstanding shares of RMS for a total consideration of $136.3 million. Based in Spring, Texas, RMS provides a full suite of services to the reverse mortgage sector, including servicing, loan origination and securitization, and other ancillary services. The purchase price for the acquisition included a cash payment of $95.0 million and $41.3 million in shares of the Company's stock. The cash payment included $9.0 million of restricted cash that was payable to sellers of RMS and was recognized in payables and accrued liabilities on the consolidated balance sheets at December 31, 2014. In connection with the acquisition, the Company acquired $5.6 billion in assets, primarily including $5.3 billion in reverse loans and $130.0 million in goodwill, and assumed $5.5 billion in liabilities, primarily including $5.3 billion in HMBS related obligations. The acquisition of RMS resulted in the establishment of the Reverse Mortgage segment. The acquisition of RMS positioned the Company as a full-service provider in the reverse mortgage servicing sector with new growth opportunities and represents an extension of the Company’s fee-for-service business model. The Company accounted for this transaction as a business combination.

The amount of revenues and net income included in the Company’s consolidated statement of comprehensive loss associated with RMS for the period from the date of acquisition through December 31, 2012 were $13.6 million and $1.9 million, respectively. The Company incurred acquisition-related expenses to acquire RMS of $2.8 million during the year ended December 31, 2012, which are included in general and administrative expenses on the consolidated statement of comprehensive loss.

Security One Lending

On December 31, 2012, in connection with the execution of a stock purchase agreement, the Company agreed to acquire all of the outstanding shares of S1L. Based in San Diego, California, S1L was primarily a retail and wholesale reverse mortgage loan originator. S1L had a long-standing relationship with RMS since S1L had been delivering loans using RMS’s technology and RMS acquired a significant amount of S1L’s reverse origination production. The purchase price consisted of $20.0 million in cash paid on December 31, 2012 and contingent earn-out payments to be paid in cash of up to $10.9 million dependent on the achievement of certain designated performance targets over the twelve months following the acquisition. These targets were achieved and the contingent earn-out payment was settled in 2014. In connection with the acquisition, the Company acquired $128.4 million in assets, primarily including $98.4 million in reverse loans and $8.8 million in goodwill, and assumed $102.3 million in liabilities primarily including $89.4 million in warehouse borrowings. The net assets of S1L were allocated to the Reverse Mortgage segment.

The acquisition of S1L enhanced RMS’s position as an issuer of reverse mortgage product, while also significantly increasing RMS’s retail origination presence. The Company obtained effective control over S1L through an economic closing on December 31, 2012. A legal closing subsequently occurred on April 30, 2013. The economic closing required acquisition method accounting in accordance with the authoritative accounting guidance for business combinations.