RECENT ACTIVITIES

These financial statements include a discussion of material events that have occurred subsequent to March 31, 2015 (referred to as “subsequent events”) through the issuance of these condensed consolidated financial statements. Events subsequent to that date have not been considered in these financial statements.

Excess MSRs

On April 16, 2015, New Residential invested the remaining $2.6 million to complete the acquisition of a 33.3% interest in the Excess MSR on a portfolio of Freddie Mac residential mortgage loans with an aggregate UPB of $8.4 billion. Fortress-managed funds and Nationstar each agreed to acquire a 33.3% interest in the Excess MSRs. Nationstar as servicer will perform all servicing and advancing functions, and retain the ancillary income, servicing obligations and liabilities as the servicer of the underlying loans in each of the portfolios. Under the terms of the investment, to the extent that any loans in the portfolio are refinanced by Nationstar, the resulting Excess MSRs are shared on a pro rata basis by New Residential, the Fortress-managed funds and Nationstar, subject to certain limitations.

On April 30, 2015, New Residential invested approximately $3.5 million to acquire a 33.3% interest in the Excess MSR on a portfolio of Fannie Mae residential mortgage loans with an aggregate UPB of $1.6 billion. Fortress-managed funds and Nationstar each agreed to acquire a 33.3% interest in the Excess MSRs. Nationstar as servicer will perform all servicing and advancing functions, and retain the ancillary income, servicing obligations and liabilities as the servicer of the underlying loans in each of the portfolios. Under the terms of the investment, to the extent that any loans in the portfolio are refinanced by Nationstar, the resulting Excess MSRs are shared on a pro rata basis by New Residential, the Fortress-managed funds and Nationstar, subject to certain limitations.

Servicer Advances

Subsequent to March 31, 2015 and prior to May 11, 2015, the Buyer funded a total of $363.4 million of servicer advances and recovered $552.0 million of existing servicer advances. Notes payable outstanding decreased by $170.0 million and restricted cash decreased approximately $0.5 million in relation to these fundings. Additionally, the Buyer paid $5.5 million to Nationstar as a contractual incentive fee.

Subsequent to March 31, 2015 and prior to May 11, 2015, New Residential funded a total of $41.0 million of SLS servicer advances and recovered $54.0 million of existing SLS servicer advances. Notes payable outstanding decreased by $11.4 million and restricted cash increased approximately $0.02 million in relation to these fundings.

Real Estate Securities

Subsequent to March 31, 2015, New Residential acquired Non-Agency RMBS with an aggregate face amount of approximately $73.3 million for approximately $58.6 million, financed with repurchase agreements. New Residential sold Agency RMBS with a face amount of $374.4 million and an amortized cost basis of approximately $391.0 million for approximately $394.6 million and recorded a gain of approximately $3.6 million. New Residential sold no Non-Agency RMBS. Subsequent to March 31, 2015, New Residential rolled $1.3 billion within various repurchase facilities to mature between May 2015 and July 2015.

Subsequent to March 31, 2015, New Residential financed an additional $190.0 million of Non-Agency RMBS within various repurchase facilities as a result of purchases. New Residential also rolled substantially all of its Non-Agency RMBS repurchase facilities to mature between May 2015 and August 2015.

Residential Mortgage Loans

Subsequent to March 31, 2015 and prior to May 11, 2015, New Residential sold a portfolio of performing residential mortgage loans with a UPB of approximately $268.7 million for net proceeds of $282.2 million.

Subsequent to March 31, 2015 and prior to May 11, 2015, New Residential sold a portfolio of non-performing residential mortgage loans with a UPB of approximately $22.1 million for net proceeds of $19.5 million.

Derivatives

Subsequent to March 31, 2015, New Residential entered into two separate interest rate swap agreements with a single counterparty totaling a $500 million notional amount to further hedge a portion of its interest rate exposure.

Corporate Activities

On March 16, 2015, New Residential’s board of directors declared a first quarter 2015 dividend of $0.38 per common share or $53.7 million, which was paid on April 30, 2015 to stockholders of record as of March 26, 2015.

Subsequent to March 31, 2015, New Residential paid off the outstanding secured corporate loan with Credit Suisse First Boston Mortgage Capital LLC, an affiliate of Credit Suisse Securities (USA) LLC for approximately $100.0 million.

Subsequent to March 31, 2015, New Residential entered into a $165.0 million secured corporate loan with Barclays maturing in April 2016. The loan bears interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 5.00% until July 2015, after which the loan bears interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 8.00%. The loan contains customary covenants and event of default provisions.

Subsequent to March 31, 2015, New Residential issued a $219.4 million secured corporate note maturing in April 2017. The loan bears interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 5.25% until May 2016, after which the loan bears interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 7.25%. The loan contains customary covenants and event of default provisions.

On February 22, 2015, New Residential entered into an Agreement and Plan of Merger (the “Initial Merger Agreement”) with Home Loan Servicing Solutions, Ltd., a Cayman Islands exempted company (“HLSS”) and Hexagon Merger Sub, Ltd., a Cayman Islands exempted company and a wholly owned subsidiary of New Residential (“Merger Sub”). As described in more detail below, on April 6, 2015, the parties terminated the Initial Merger Agreement pursuant to the Termination Agreement (as defined below) and simultaneously entered into the Acquisition Agreement (as defined below).

The Initial Merger Agreement provided that, upon the terms and subject to the conditions set forth therein, Merger Sub would have merged with and into HLSS, with HLSS continuing as the surviving company and a wholly owned subsidiary of New Residential, and at the effective time of the merger, each ordinary share of HLSS issued and outstanding immediately prior to the effective time (except as set otherwise forth in the Initial Merger Agreement), would have been automatically converted into the right to receive $18.25 in cash, without interest (the “Initial Merger”). Each party’s obligation to consummate the Initial Merger was subject to, among other conditions, the other party’s compliance with its covenants and agreements contained in the Initial Merger Agreement. Among other covenants and agreements, HLSS agreed to provide notice to New Residential within twenty-four hours of becoming aware that HLSS was reasonably likely to receive a going concern qualification from its auditors with respect to its then-most recent fiscal year (a “Going Concern Qualification”). The Initial Merger Agreement specified that, upon the receipt by HLSS of a Going Concern Qualification, New Residential would have the right to immediately terminate the Initial Merger Agreement.

On April 6, 2015, HLSS provided formal notice to New Residential that it was reasonably likely to receive a Going Concern Qualification, unless the parties entered into an alternative transaction. Based on the shared expectation of New Residential and HLSS that HLSS could not satisfy the conditions to the consummation of the Initial Merger set forth in the Initial Merger Agreement, HLSS and New Residential finalized the terms of an alternative transaction (described below). The alternative transaction enabled HLSS to file its annual report, including an unqualified opinion of its auditors, on April 6, 2015. On April 6, 2015, with the approval of their respective Boards of Directors, New Residential and HLSS, together with certain of their respective subsidiaries, entered into a Termination Agreement (the “Termination Agreement”) (providing for the termination of the Initial Merger Agreement) and simultaneously entered into a Share and Asset Purchase Agreement (the “Acquisition Agreement”).

The parties to the Acquisition Agreement included New Residential, HLSS, HLSS Advances Acquisition Corp., a Delaware corporation and wholly owned subsidiary of New Residential (“HLSS Advances”), and HLSS MSR-EBO Acquisition LLC, a Delaware limited liability company and wholly owned subsidiary of New Residential (together with HLSS Advances, the “Buyers”). Pursuant to the Acquisition Agreement, the Buyers acquired from HLSS substantially all of the assets of HLSS (including all of the issued share capital of HLSS’s first-tier subsidiaries) and assumed (and agreed to indemnify HLSS for) the liabilities of HLSS (together, the “Acquisition”), other than post-closing liabilities in an amount up to the Retained Amount (as defined below), for aggregate consideration (net of certain transaction expenses being reimbursed by HLSS), consisting of approximately $1.007 billion in cash and 28,286,980 shares of common stock, par value $0.01 per share (“New Residential Common Stock”), of New Residential delivered to HLSS in a private placement. The closing of the Acquisition (the “Acquisition Closing”) occurred simultaneously with the execution of the Acquisition Agreement.

The Acquisition Agreement includes certain customary post-closing covenants of New Residential, the Buyers and HLSS. In addition, the Board of Directors of HLSS also approved a wind down plan (the “Distribution and Liquidation Plan”), pursuant to which HLSS sold the shares of New Residential Common Stock received in the Acquisition on April 8, 2015 and distributed to HLSS shareholders the cash consideration from the Acquisition and the cash proceeds from the sale of shares of New Residential Common Stock; provided that under the terms of the Distribution and Liquidation Plan, HLSS retained $50.0 million of cash (the “Retained Amount”) for wind down costs.

At the Acquisition Closing, HLSS Advances entered into a Services Agreement, dated as of April 6, 2015, with HLSS (the “Services Agreement”). Pursuant to the Services Agreement, HLSS Advances has agreed to manage the assets and affairs of HLSS in accordance with terms and conditions set forth therein and, in all cases, in accordance with the Distribution and Liquidation Plan. The Services Agreement provides that HLSS Advances will be responsible for the operations of HLSS and will perform (or cause to be performed) such services and activities relating to the assets and operations of HLSS as may be appropriate, including, among other things, administering the Distribution and Liquidation Plan and handling all claims, disputes or controversies in which HLSS is a party or may otherwise be involved. HLSS Advances will not be compensated by HLSS for its services under the Services Agreement but will be reimbursed by HLSS for expenses incurred on behalf of HLSS.

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

Pursuant to the New Merger Agreement, and upon the terms and conditions set forth therein, at the effective time of the New Merger (the “Effective Time”), each ordinary share of HLSS, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time (other than those shares of HLSS owned by New Residential or any direct or indirect wholly-owned subsidiary of New Residential and shares of HLSS as to which dissenters’ rights have been properly exercised), will be automatically converted into the right to receive $0.704059 per share in cash, without interest.

The New Merger does not require the approval of New Residential’s shareholders. However, consummation of the New Merger is subject to, among other things: (i) approval of the New Merger by the requisite vote of HLSS’s shareholders; (ii) not more than 10% of HLSS’s issued and outstanding shares properly exercising appraisal rights as of the time immediately before the closing of the New Merger (the “New Merger Closing”); and (iii) certain other customary closing conditions. Moreover, each party’s obligation to consummate the New Merger is subject to certain other conditions, including without limitation, (i) the accuracy of the other party’s representations and warranties and (ii) the other party’s compliance with its covenants and agreements contained in the New Merger Agreement (in each case subject to customary materiality qualifiers). In addition, the obligations of New Residential and Merger Sub to consummate the New Merger are subject to the absence of any Company Material Adverse Effect (as defined in the New Merger Agreement). The New Merger Agreement may be terminated by either party under certain circumstances, including, among others: (i) if the New Merger Closing has not occurred by the nine-month anniversary of the New Merger Agreement; (ii) if a court or other governmental entity has issued a final and non-appealable order prohibiting the New Merger Closing; (iii) if HLSS fails to obtain the HLSS Shareholder Approval; and (iv) upon a material uncured breach by the other party that would result in a failure of the conditions to the New Merger Closing to be satisfied.

Unaudited Supplemental Pro Forma Financial Information - The following table presents unaudited pro forma combined Interest Income and Income (Loss) Before Incomes Taxes for the three months ended March 31, 2014 and 2015 prepared as if the Acquisition of HLSS had been consummated on January 1, 2014.



	Three Months Ended March 31,
	2015		2014
	(unaudited)		(unaudited)
Pro Forma
Interest income	$	165,055	$	176,989
Income (Loss) Before Income Taxes	71,465		103,683

The 2015 unaudited supplemental pro forma financial information has been adjusted to exclude, and the 2014 unaudited supplemental pro forma financial information has been adjusted to include, approximately $17.8 million of acquisition-related costs incurred by New Residential and HLSS in 2015. The unaudited supplemental pro forma financial information has not been adjusted for transactions other than the Acquisition, or for the conforming of accounting policies. The unaudited supplemental pro forma financial information does not include any anticipated synergies or other anticipated benefits of the Acquisition and, accordingly, the unaudited supplemental pro forma financial information is not necessarily indicative of either future results of operations or results that might have been achieved had the Acquisition occurred on January 1, 2014.

In April 2015, New Residential issued 29,213,020 shares of its common stock in a public offering at a price to the public of $15.25 per share for net proceeds of approximately $436.1 million. One of New Residential’s executive officers participated in this offering and purchased 250,000 shares at the public offering price. For the purpose of compensating the Manager for its successful efforts in raising capital for New Residential, in connection with this offering and the New Residential Common Stock issued in the Acquisition, New Residential granted options to the Manager to purchase 5,750,000 shares of New Residential’s common stock at a price of $15.25, which had a fair value of approximately $8.9 million as of the grant date. The assumptions used in valuing the options were: a 2.02% risk-free rate, a 6.71% dividend yield, 24.04% volatility and a 10 year term.