Schedule I Financial Information (As Restated)

12 Months Ended

Dec. 31, 2016

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent Company Only Disclosure

Walter Investment Management Corp.

Schedule I

Financial Information (As Restated, See Note 2)

(Parent Company Only)

(in thousands, except share and per share data)

	December 31,
	2016			2015
	(Restated)
ASSETS
Cash and cash equivalents	$	773		$	4,016
Restricted cash and cash equivalents	1,502			10,512
Residential loans at amortized cost, net	12,891			14,130
Receivables, net	97,424			11,465
Premises and equipment, net	1,181			1,559
Other assets	30,789			37,724
Due from affiliates, net	392,998			674,139
Investments in consolidated subsidiaries and VIEs	1,620,339			2,278,009
Total assets	$	2,157,897		$	3,031,554
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Payables and accrued liabilities	$	53,337		$	43,778
Corporate debt	2,129,000			2,156,944
Deferred tax liabilities, net	—			26,156
Total liabilities	2,182,337			2,226,878
Stockholders' equity (deficit):
Preferred stock, $0.01 par value per share:
Authorized - 10,000,000 shares
Issued and outstanding - 0 shares at December 31, 2016 and 2015	—			—
Common stock, $0.01 par value per share:
Authorized - 90,000,000 shares
Issued and outstanding - 36,391,129 and 35,573,405 shares at December 31, 2016 and 2015, respectively	364			355
Additional paid-in capital	596,067			591,454
Retained earnings (accumulated deficit)	(621,804		)	212,054
Accumulated other comprehensive income	933			813
Total stockholders' equity (deficit)	(24,440		)	804,676
Total liabilities and stockholders' equity (deficit)	$	2,157,897		$	3,031,554

Schedule I

Financial Information (As Restated, See Note 2)

(Parent Company Only)

(in thousands)

	For the Years Ended December 31,
	2016			2015			2014
	(Restated)
REVENUES
Interest income on loans	$	1,082		$	1,165		$	1,007
Other revenues	(1,914		)	3,563			1,456
Total revenues	(832		)	4,728			2,463
EXPENSES
Interest expense	144,170			147,752			147,633
General and administrative	67,583			35,654			32,198
Salaries and benefits	60,119			28,510			19,311
Depreciation and amortization	783			129			120
Corporate allocations	(119,953		)	(54,452		)	(46,764		)
Other expenses, net	621			(488		)	1,598
Total expenses	153,323			157,105			154,096
OTHER GAINS (LOSSES)
Net gains on extinguishments	14,662			4,660			—
Other net fair value losses	—			—			(54		)
Other	(979		)	12,076			—
Total other gains (losses)	13,683			16,736			(54		)
Loss before income taxes	(140,472		)	(135,641		)	(151,687		)
Income tax benefit	(5,224		)	(53,546		)	(49,405		)
Loss before equity in losses of consolidated subsidiaries and VIEs	(135,248		)	(82,095		)	(102,282		)
Equity in losses of consolidated subsidiaries and VIEs	(698,610		)	(181,095		)	(8,046		)
Net loss	$	(833,858	)	$	(263,190	)	$	(110,328	)
Comprehensive loss	$	(833,738	)	$	(262,772	)	$	(110,431	)

Schedule I

Financial Information

(Parent Company Only)

(in thousands)

	For the Years Ended December 31,
	2016			2015			2014
Cash flows used in operating activities	$	(204,359	)	$	(107,969	)	$	(74,452	)
Investing activities
Principal payments received on mortgage loans held for investment	940			828			535
Proceeds from sales of real estate owned, net	30			118			227
Purchases of premises and equipment	(595		)	(175		)	—
Decrease (increase) in restricted cash and cash equivalents	9,011			(6		)	4,246
Proceeds from sale of investment	—			14,376			—
Proceeds from sale of residual interests in Residual Trusts	—			189,513			—
Capital contributions to subsidiaries and VIEs	—			(9,072		)	(83,544		)
Returns of capital from subsidiaries and VIEs	10,991			27,309			76,214
Change in due from affiliates	126,883			(8,331		)	88,360
Other	309			2,656			(2,283		)
Cash flows provided by investing activities	147,569			217,216			83,755
Financing activities
Payments on corporate debt	—			(11,250		)	(15,000		)
Extinguishments and settlement of debt	(31,037		)	(79,877		)	—
Other debt issuance costs paid	(528		)	—			—
Repurchase of shares under stock repurchase plan	—			(28,065		)	—
Change in due to affiliates	85,801			11,553			(98,071		)
Other	(689		)	(754		)	6,921
Cash flows provided by (used in) financing activities	53,547			(108,393		)	(106,150		)
Net increase (decrease) in cash and cash equivalents	(3,243		)	854			(96,847		)
Cash and cash equivalents at the beginning of the year	4,016			3,162			100,009
Cash and cash equivalents at the end of the year	$	773		$	4,016		$	3,162

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

Notes to the Parent Company Financial Statements

1. Basis of Presentation

The financial information of the Parent Company should be read in conjunction with the Consolidated Financial Statements included in this report. These Parent Company financial statements reflect the results of operations, financial position and cash flows for the Parent Company and its consolidated subsidiaries and VIEs in which it is the primary beneficiary. These consolidated subsidiaries and VIEs are accounted for using the equity method of accounting.

The accompanying Parent Company financial statements have been prepared in accordance with GAAP. The preparation of these Parent Company financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These Parent Company financial statements include certain intercompany allocations to its subsidiaries that management believes have been made on a reasonable basis. These costs primarily include executive salaries and other centralized business functions. Refer to Note 31 to the Consolidated Financial Statements for additional information on intercompany allocations.

2. Restatement of Previously Issued Consolidated Financial Statements

The restatement of the Parent Company's audited consolidated financial statements results from an error in the calculation of the valuation allowance on the net deferred tax assets balance. In determining the amount of the valuation allowance in the Original Filing, an error was made that resulted in the double-counting of expected future taxable income associated with the projected reversals of taxable temporary differences (i.e., deferred tax liabilities). Accordingly, the Parent Company has revised its calculation to reflect the removal of the duplicative amounts, and reevaluated all sources of estimated future taxable income used to assess the recoverability of deferred tax assets under GAAP after taking into account both positive and negative evidence through the issuance date of the restated financial statements to consider the effect of the error.

The determination of the need for a valuation allowance in deferred tax assets under GAAP is highly judgmental and requires the subjective weighting of both positive and negative evidence relating to expectations about the recoverability of those assets. Management has reevaluated both positive and negative evidence through the issuance date of the restated financial statements regarding the use of all sources of future taxable income on the recoverability of its deferred tax assets after correcting for the duplication error. While judgments and estimates made at the time of the Original Filing, using then-available facts and circumstances, are considered to be reasonable and appropriate, the revised analysis has resulted in management's conclusion as of the restatement issuance date that only reversals of deferred tax liabilities and/or net operating loss carrybacks when available should be used as a source of income to recover its deferred tax assets.

Based on the revised calculation and analysis, the Parent Company concluded that the valuation allowance on the deferred tax assets should be increased by $27.3 million, which reduces the net deferred tax assets that are expected to be realized in the future. The impact of the adjustment was to reduce the Parent Company's overall net deferred tax assets balance by increasing the valuation allowance, and reducing the tax benefit recorded in the previously issued consolidated statement of comprehensive loss. The Parent Company financial statements included in this Amended Filing have been restated as of and for the year ended December 31, 2016 to reflect the adjustment described above. The following table presents the effect of the restatement.

The following table presents the relevant balance sheet lines of the Parent Company as previously reported, restatement adjustments, and the Parent Company balance sheet as restated as of December 31, 2016 (in thousands):

	December 31, 2016
	As Previously Reported			Restatement Adjustments			As Restated
Deferred tax assets, net	$	27,310		$	(27,310	)	$	—
Investments in consolidated subsidiaries and VIEs	1,897,729			(277,390		)	1,620,339
Total assets	2,462,597			(304,700		)	2,157,897
Accumulated deficit	$	(317,104	)	$	(304,700	)	$	(621,804	)
Total stockholders' equity (deficit)	280,260			(304,700		)	(24,440		)
Total liabilities and stockholders' equity (deficit)	2,462,597			(304,700		)	2,157,897

The following table presents the relevant statement of comprehensive loss lines of the Parent Company as previously reported, restatement adjustments, and the Parent Company statement of comprehensive loss as restated for the year ended December 31, 2016 (in thousands):

	For the Year Ended December 31, 2016
	As Previously Reported			Restatement Adjustments			As Restated
Income tax expense (benefit)	$	(32,534	)	$	27,310		$	(5,224	)
Loss before equity in losses of consolidated subsidiaries and VIEs	(107,938		)	(27,310		)	(135,248		)
Equity in losses of consolidated subsidiaries and VIEs	(421,220		)	(277,390		)	(698,610		)
Net loss	(529,158		)	(304,700		)	(833,858		)
Comprehensive loss	$	(529,038	)	$	(304,700	)	$	(833,738	)

3. Corporate Debt

Corporate debt is comprised of secured term loans, convertible senior subordinated notes, and unsecured senior notes. In addition, the Parent Company has a $100.0 million senior secured revolving credit facility of which $12.2 million was available after reductions for issued letters of credit as of December 31, 2016. Refer to Note 24 to the Consolidated Financial Statements for additional information on corporate debt.

4. Supplemental Disclosures of Cash Flow Information

The Company’s supplemental disclosures of cash flow information are summarized as follows (in thousands):

	For the Years Ended December 31,
	2016		2015			2014
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	123,369	$	128,913		$	132,422
Cash paid (received) for taxes	61,289		(3,318		)	(6,067		)
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Servicing rights capitalized upon deconsolidation of Residual Trusts	—		3,133			—
Real estate owned acquired through foreclosure	806		783			671
Residential loans originated to finance the sale of real estate owned	540		1,466			1,657
Contributions to subsidiaries	68,637		28,249			19,143
Distributions from subsidiaries	14,727		7,469			183

5. Guarantees

Refer to Note 32 to the Consolidated Financial Statements for certain guarantees made by the Parent Company in regards to Ditech Financial and RMS. In addition to these guarantees, all obligations of Ditech Financial and RMS under master repurchase agreements and certain servicing advance facilities are guaranteed by the Parent. The Parent also guarantees certain subsidiary obligations such as agreements to perform servicing in accordance with contract terms.