UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2014~~2015

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________________to _____________________

Commission File Number: 1-35431

Home Loan Servicing Solutions, Ltd.

(Exact name of registrant as specified in its charter)



Cayman Islands	98-0683664
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

Home Loan Servicing Solutions, Ltd.

c/o Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue

George Town, Grand Cayman KY1-9005

Cayman Islands

(Address of principal executive offices) (Zip Code)

(345) 945-3727

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

~~Indicate~~Large ~~by check mark whether the registrant is a large~~ accelerated filer, anx* ~~accelerated~~Accelerated filer, a¨ ~~non~~Non-accelerated filer or¨ a(Do ~~smaller~~not ~~reporting~~check ~~company. See~~if ~~the~~a ~~definitions of “large accelerated filer,” “accelerated filer” and “~~smaller reporting company”) inSmaller ~~Rule~~reporting ~~12b-2~~company ~~of the Exchange Act (Check one):~~¨

~~Large~~Indicate ~~accelerated~~by ~~filer~~check xmark ~~Accelerated~~whether ~~filer~~the ¨registrant ~~Non-accelerated~~is ~~filer~~a ¨shell company (Doas ~~not~~defined ~~check~~in ifRule a12b-2 ~~smaller~~of ~~reporting~~the ~~company~~Act). Yes ~~Smaller reporting company~~ ¨ No x*

~~Indicate~~Number byof ~~check~~Ordinary ~~mark~~Shares, ~~whether~~$0.01 ~~the~~par ~~registrant~~value, isoutstanding ~~a shell company (~~as ~~defined~~of inMay ~~Rule~~11, ~~12b-2~~2015: of71,016,771 ~~the Act)~~shares. ~~Yes ¨ No x~~

~~Number~~* ofAs ~~Ordinary Shares, $0.01 par value, outstanding as~~ of ~~October~~March 1631, ~~2014: 71,016,771 shares~~2015.

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EXPLANATORY NOTE

This Quarterly Report on Form 10-Q presents as of March 31, 2015 the business of Home Loan Servicing Solutions, Ltd. and its wholly owned subsidiaries (collectively referred to throughout as “HLSS”, “us”, “our”, “we”, or the “Company”). As discussed in Note 19, Subsequent Events, the following occurred after March 31, 2015:

•

On April 6, 2015, HLSS, HLSS Holdings, LLC (“HLSS Holdings”) and Ocwen Financial Corporation (together with its subsidiaries, collectively “Ocwen”) entered into an amendment to the Purchase Agreement (as defined in Note 1A) and the sale supplements (effective upon completion of the Asset Sale as defined in Note 1A) to, among other things, (i) obtain Ocwen's consent to the assignment by HLSS of its interest under the Purchase Agreement and each sale supplement, (ii) provide that HLSS Holdings will not become the named servicer in connection with any Rights to MSRs (as defined in Note 1A), or direct the replacement of Ocwen as named servicer, before April 6, 2017 except under certain limited circumstances, (iii) extend the scheduled term of Ocwen's servicing appointment under each sale supplement until the earlier of eight years from the date of such sale supplement and April 30, 2020, and (iv) provide that Ocwen will reimburse HLSS Holdings for certain increased financing costs resulting from servicer rating downgrades of Ocwen. In addition, under such amendment (x) Ocwen agreed to exercise any “clean-up call” rights under any servicing agreement related to Rights to MSRs only at the direction of HLSS Holdings and to sell to HLSS Holdings, on an “as-is” basis, the economic beneficial interest in the right to purchase the mortgage loans and other assets in the trust for each designated servicing agreement pursuant to such clean-up call rights and (y) HLSS Holdings agreed to pay to Ocwen a fee equal to 0.50% of the outstanding balance of the performing mortgage loans purchased in connection with any such exercise and to pay Ocwen’s related costs and expenses of exercise.

•

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

•

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

•

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negotiations) in which the Company is a party or may otherwise be involved and (iii) a Registration Rights Agreement to memorialize certain rights relating to the registration of shares of NRZ common stock to be held by the Company upon the closing of the Asset Sale. On the terms and subject to the conditions set forth in the New Merger Agreement, at the effective time of the New Merger (the “Effective Time”), each ordinary share, par value $0.01 per share, of the Company (the “Company Shares”) issued and outstanding immediately prior to the Effective Time (other than Company Shares owned by any direct or indirect wholly-owned subsidiary of NRZ (other than Merger Sub) or of Merger Sub and Company Shares as to which dissenters’ rights have been properly exercised) will be converted automatically into the right to receive the Merger Consideration. The parties’ obligations to consummate the New Merger are subject to certain closing conditions, including approval of the New Merger by the requisite vote of the shareholders, the absence of any legal restraints that would prohibit the consummation of the New Merger and other conditions customary for a transaction of this type. Each of us, NRZ and Merger Sub has made certain customary representations, warranties and covenants in the New Merger Agreement, including, among other things, covenants related to the conduct of our business during the interim period between the execution of the New Merger Agreement and the consummation of the New Merger. The New Merger Agreement provides for certain termination rights for both us and NRZ, including, if approval of the New Merger by the requisite vote of the shareholders is not obtained or if the New Merger is not consummated by the nine month anniversary of the date of the New Merger Agreement.


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


•	On April 10, 2015, we declared a distribution of $16.613 per ordinary share payable on April 27, 2015, to shareholders of record as of April 20, 2015.


•	On April 27, 2015, we distributed to our shareholders approximately $1.2 billion or $16.613 per ordinary share.

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HOME LOAN SERVICING SOLUTIONS, LTD.

FORM 10-Q

INDEX

		PAGE
PART I – FINANCIAL INFORMATION
Item 1.	Interim Condensed Consolidated Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets at September 30, 2014 and December 31, 2013	2
	Condensed Consolidated Balance Sheets at March 31, 2015 and December 31, 2014	2
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 and 2013 (Restated)	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2014 and 2013 (Restated)	4
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014	4
	Condensed Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, 2014 and 2013 (Restated)	5
	Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2015 and 2014	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013 (Restated)	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014	6
	Notes to Interim Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3236
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4454
Item 4.	Controls and Procedures	4655
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	4756
Item 1A.	Risk Factors	4756
Item 6.	Exhibits	5057
Signatures		5159

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PART I – FINANCIAL INFORMATION

ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (~~Unaudited~~UNAUDITED) (Prior to the Asset Sale discussed in Note 1A)

HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands, except share data)

	September 30, 2014			December 31, 2013
	March 31, 2015			December 31, 2014
Assets
Cash and cash equivalents	$	~~130~~181,~~160~~507		$	87210,~~896~~009
Match funded advances	65,~~100~~808,~~277~~796			6,~~387~~121,~~781~~595
Notes receivable – Rights to MSRs	~~618~~594,~~962~~417			~~633~~614,~~769~~465
Loans held for investment	832,413			—
Loans held for sale	421,257			—
Related party receivables	26,223			70,049
Loans held for investment	—			815,663
Deferred tax assets	1,024			1,024
Related party receivables	185,067			94,401
Other assets	243,286			130,153
Deferred tax assets	996			491
Total assets	$	7,952,345		$	7,310,672
Other assets	244,483			281,475
Total assets	$	7,436,523		$	8,138,099
Liabilities and Equity
Liabilities
Match funded liabilities	$	5,~~545~~274,~~636~~318		$	5,~~715~~624,~~622~~088
Other borrowings	1852,~~093,837~~419			~~343~~1,~~386~~182,328
Dividends payable	12,783			1012,~~653~~783
Income taxes payable	~~426~~148			~~682~~173
Deferred tax liabilities	~~1,189~~184			~~1,266~~491
Related party payables	8,~~517~~835			1014,~~732~~503
Other liabilities	1221,~~685~~377			1112,~~884~~454
Total liabilities	6,~~675~~170,~~073~~064			6,~~094~~846,~~225~~820
Commitments and Contingencies (See Note 18)
Equity
Equity – Ordinary shares, $.01 par value; 200,000,000 shares authorized; 71,016,771 shares issued and outstanding at September 30, 2014, and December 31, 2013	710			710
Equity – Ordinary shares, $0.01 par value; 200,000,000 shares authorized; 71,016,771 shares issued and outstanding at March 31, 2015 and December 31, 2014	710			710
Additional paid-in capital	1,210,~~207~~171			1,210,~~057~~300
Retained earnings	6456,~~773~~018			379,~~513~~133
Accumulated other comprehensive income, net of tax	1,582			2,167
Accumulated other comprehensive (loss) income, net of tax	(440		)	1,136
Total equity	1,~~277~~266,~~272~~459			1,~~216~~291,~~447~~279
Total liabilities and equity	$	7,~~952~~436,~~345~~523		$	78,~~310~~138,~~672~~099

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

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HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ~~(Dollars~~ ~~in thousands, except share data~~(UNAUDITED)

	Three Months				Nine Months
For the periods ended September 30,	2014		2013(Restated)		2014		2013(Restated)
Revenue
Interest income – notes receivable – Rights to MSRs	$	84,850	$	78,447	$	273,962	$	192,106
Interest income – other	12,118		697		22,869		896
Total interest income	96,968		79,144		296,831		193,002
Related party revenue	320		491		1,721		1,458
Total revenue	97,288		79,635		298,552		194,460
Operating expenses
Compensation and benefits	1,722		2,109		5,146		4,877
Related party expenses	390		228		1,258		680
General and administrative expenses	1,802		1,275		6,242		2,654
Total operating expenses	3,914		3,612		12,646		8,211
Income from operations	93,374		76,023		285,906		186,249
Other expense
Interest expense	44,146		36,080		121,658		74,356
Total other expense	44,146		36,080		121,658		74,356
Income before income taxes	49,228		39,943		164,248		111,893
Income tax expense	14		777		14		816
Net income	$	49,214	$	39,166	$	164,234	$	111,077
Earnings per share
Basic	$	0.69	$	0.55	$	2.31	$	1.80
Diluted	$	0.69	$	0.55	$	2.31	$	1.80
Weighted average shares outstanding
Basic	71,016,771		71,016,771		71,016,771		61,812,369
Diluted	71,018,542		71,016,771		71,016,771		61,812,369
Dividends declared per share	$	0.52	$	0.45	$	1.45	$	1.25

(Dollars in thousands, except share data)




For the three months ended March 31,	2015		2014
Revenue
Interest income – notes receivable – Rights to MSRs	$	71,206	$	102,538
Interest income – other	9,476		2,961
Total interest income	80,682		105,499
Related party revenue	50		628
Other revenue	1,440		—
Total revenue	82,172		106,127
Operating expenses
Compensation and benefits	2,078		1,599
Related party expenses	76		372
General and administrative expenses	16,286		2,285
Total operating expenses	18,440		4,256
Income from operations	63,732		101,871
Other expense
Interest expense	40,813		37,511
Unrealized loss on Loans held for sale	7,654		—
Total other expense	48,467		37,511
Income before income taxes	15,265		64,360
Income tax expense	5		—
Net income	$	15,260	$	64,360

Earnings per share
Basic	$	0.21	$	0.91
Diluted	$	0.21	$	0.91

Weighted average shares outstanding
Basic	71,016,771		71,016,771
Diluted	71,089,729		71,016,771

Dividends declared per share	$	0.54	$	0.45

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

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HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)(Dollars in thousands)

	Three Months						Nine Months
For the three months ended March 31,	2015			2014
For the periods ended September 30,	2014			2013(Restated)			2014			2013(Restated)
Net income	$	15,260		$	64,360
Net income	$	49,214		$	39,166		$	164,234		$	111,077
Other comprehensive loss, before tax:
Other comprehensive income (loss), before tax:
Change in the value of designated cash flow hedges	(2,389		)	(227		)
Change in the value of designated cash flow hedges	1,341			(1,592		)	(664		)	3,761
Total other comprehensive loss, before tax	(2,389		)	(227		)
Total other comprehensive income (loss), before tax	1,341			(1,592		)	(664		)	3,761
Income tax related to items of other comprehensive loss:
Income tax related to items of other comprehensive income (loss):
Tax benefit on change in the value of designated cash flow hedges	813			78
Tax benefit (expense) on change in the value of designated cash flow hedges	(610		)	604			79			(1,019		)
Total income tax benefit related to items of other comprehensive loss	813			78
Total income tax benefit (expense) related to items of other comprehensive income (loss)	(610		)	604			79			(1,019		)
Total other comprehensive loss, net of tax	(1,576		)	(149		)
Total other comprehensive income (loss), net of tax	731			(988		)	(585		)	2,742
Total comprehensive income	$	13,684		$	64,211
Total comprehensive income	$	49,945		$	38,178		$	163,649		$	113,819

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

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HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)(Dollars in thousands, except share data)

	Ordinary Shares			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss), ~~net~~Net of Tax			Total
	Shares	Amount
Balance at December 31, 2013	71,016,771	$	710	$	1,210,057		$	3,513		$	2,167		$	1,216,447
Balance at December 31, 2014	71,016,771	$	710	$	1,210,300		$	79,133		$	1,136		$	1,291,279
Net income	—	—		—			~~164~~15,~~234~~260			—			~~164~~15,~~234~~260
Other comprehensive loss, net of tax	—	—		—			—			(~~585~~1,576		)	(~~585~~1,576		)
Stock compensation	—	—		150			—			—			150
Share-based compensation	—	—		(129		)	(26		)	—			(155		)
Declaration of cash dividends ($1.45 per share)	—	—		—			(102,974		)	—			(102,974		)
Declaration of cash dividends ($0.54 per share)	—	—		—			(38,349		)	—			(38,349		)
Balance at September 30, 2014	71,016,771	$	710	$	1,210,207		$	64,773		$	1,582		$	1,277,272
Balance at March 31, 2015	71,016,771	$	710	$	1,210,171		$	56,018		$	(440	)	$	1,266,459

	Ordinary Shares			Additional Paid-in Capital		Retained Earnings ~~(Accumulated Deficit)(Restated)~~			Accumulated Other Comprehensive Income, ~~(Loss)~~Net ~~net~~ of Tax			Total~~(Restated)~~
	Shares	Amount
Balance at December 31, 2012	55,884,718	$	559	$	876,657	$	(2,761	)	$	(1,076	)	$	873,379
Balance at December 31, 2013	71,016,771	$	710	$	1,210,057	$	3,513		$	2,167		$	1,216,447
Net income (Restated)	—	—		—		111,077			—			111,077
Net income	—	—		—		64,360			—			64,360
Other comprehensive income, net of tax	—	—		—		—			2,742			2,742
Other comprehensive loss, net of tax	—	—		—		—			(149		)	(149		)
Issuance of ordinary shares, net of costs	15,132,053	151		333,385		—			—			333,536
Declaration of cash dividends ($0.45 per share)	—	—		—		(31,958		)	—			(31,958		)
Declaration of cash dividends ($1.25 per share)	—	—		—		(79,425		)	—			(79,425		)
Balance at March 31, 2014	71,016,771	$	710	$	1,210,057	$	35,915		$	2,018		$	1,248,700
Balance at September 30, 2013 (Restated)	71,016,771	$	710	$	1,210,042	$	28,891		$	1,666		$	1,241,309

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

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HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

For the nine months ended September 30,	2014			2013(Restated)
For the three months ended March 31,	2015			2014
Cash flows from operating activities
Net income	$	~~164~~15,~~234~~260		$	~~111~~64,~~077~~360
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of debt issuance costs	15,160			11,113
Amortization of Debt issuance costs	4,377			4,962
Accretion of original issue discount on other borrowings	563			197
Accretion of original issue discount on Other borrowings	185			185
Net accretion on Loans held for investment	(1,631		)	—
Net amortization of purchase premiums and discounts on Loans held for sale	183			—
Share-based compensation expense	150			—
Amortization of purchase premiums on Loans held for investment	—			448
Accretion of Loans held for sale	(1,595		)	—
Decrease (increase) in the fair value of Notes receivable – Rights to MSRs	3,679			(4,025		)
Unrealized loss on Loans held for sale	7,654			—
Net forfeitures of share-based compensation	(129		)	—
Changes in assets and liabilities:
Decrease in Match funded advances	~~287~~312,~~504~~799			~~662~~44,~~977~~384
Increase in debt service accounts	(15,806		)	(63,586		)
Decrease (increase) in debt service accounts	50,258			(3,077		)
Decrease in related party receivables	43,826			16,989
(Increase) decrease in related party receivables	(90,666		)	2,450
(Decrease) increase in related party payables	(2,215		)	32,315
Decrease in related party payables	(5,668		)	(2,847		)
(Increase) decrease in other assets	(14,922		)	834
Decrease (increase) in other assets	15,577			(2,645		)
Increase in other liabilities	734			7,729
Increase (decrease) in other liabilities	7,387			(428		)
Net cash provided by operating activities	~~477~~319,~~597~~301			~~779~~103,~~645~~767
Cash flows from investing activities
Purchase of Notes receivable – Rights to MSRs	—			(387,300		)
Reduction in Notes receivable – Rights to MSRs	16,369			—
Reduction in Notes receivable – Rights to MSRs	14,807			25,102
Purchase of Loans held for investment	—			(556,618		)
Purchase of Loans held for investment	(900,513		)	—
Repayments of GNMA EBO loans and RPLs	17,040			3,526
Proceeds from Loans held for investment	69,731			—
Proceeds from the sale of RPL portfolios	337,553			—
Cash used in advance financing receivables transaction	(86,206		)	—
Cash used in related party servicing advance financing transactions	—			(55,702		)
Cash from reduction in advance financing receivables	1,216			—
Cash proceeds from related party servicing advance financing transactions	5,412			—
Acquisition of advances in connection with the purchase of Residential Mortgage Assets	—			(3,492,489		)
Net cash provided by (used in) investing activities	376,374			(608,794		)
Net cash used in investing activities	(900,965		)	(3,854,687		)
Cash flows from financing activities
(Repayments of) proceeds from Match funded liabilities, net	(~~169~~349,~~986~~771		)	259,~~496,606~~558
Proceeds from Other borrowings	~~773~~2,~~798~~481			~~344~~472,~~750~~734
Payment of Other borrowings	(23332,~~910~~575		)	(875		)
Payment of debt issuance costs	(13,426		)	(23,025		)
Payment of Debt issuance costs	(5,963		)	(6,408		)
Proceeds from issuance of ordinary shares	—			334,390
Payment of dividends to shareholders	(38,349		)	(31,958		)
Payment of offering costs	—			(542		)
Net cash (used in) provided by financing activities	(724,177		)	493,051
Payment of dividends to shareholders	(100,844		)	(75,478		)
Net decrease in cash	(28,502		)	(11,976		)
Net cash provided by financing activities	465,632			3,075,826
Cash and cash equivalents, beginning of period	210,009			87,896
Net increase in cash	42,264			784
Cash and cash equivalents, end of period	$	181,507		$	75,920
Cash at beginning of period	87,896			76,048
Supplemental non-cash investing activities
Cash at end of period	$	130,160		$	76,832
Transfers of Loans held for sale to claims receivable from FHA	$	16,747		$	—
Increase in receivables in conjunction with the sale of RPL portfolios	16,824			—
Transfer of Loans held for investment to Loans held for sale	421,257			—
Supplemental non-cash financing activities
Dividends declared but not paid	$	12,783		$	10,653
Offering costs accrued but not paid	$	—		$	312
Debt issuance costs accrued but not paid	2			58
Debt issuance costs accrued but not paid	$	108		$	810

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

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HOME LOAN SERVICING SOLUTIONS, LTD. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

11A. ~~SUMMARY~~ OFORGANIZATION ~~SIGNIFICANT~~AND ~~ACCOUNTING~~RELATED ~~POLICIES~~PARTIES; REGULATORY ENVIRONMENT, OCWEN MATTERS AND RELATED CONTINGENCIES; OTHER RECENT DEVELOPMENTS

Organization and Related Parties

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

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

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

Regulatory Environment, Ocwen Matters and Related Contingencies

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

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


•	By regulatory actions taken against Ocwen;


•	By a default by Ocwen under its debt agreements;


•	By further downgrades in Ocwen's servicer rating;


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


•	If Ocwen were terminated as servicer under certain PSAs;


•	If Ocwen becomes subject to a bankruptcy proceeding; or


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

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

Ocwen Regulatory Matters

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


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

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•

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


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

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


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


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


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


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


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


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


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

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


•	Payment of $2.5 million;


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


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

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

Other Ocwen Matters

Standard & Poor’s (“S&P”), Moody’s Investors Service (“Moody’s”), Fitch Ratings Inc. (“Fitch”) and Morningstar, Inc. (“Morningstar”) rate Ocwen as a mortgage servicer. Each of these rating agencies has downgraded Ocwen’s servicer rating within the last six months. On January 29, 2015, Moody’s downgraded Ocwen’s servicer quality (“SQ”) assessment from “SQ3+” to “SQ3-” as a primary servicer of subprime residential loans and as a special servicer of residential mortgage loans. During February 2015, Fitch downgraded Ocwen's residential primary servicer rating for subprime products from “RPS3” to “RPS4,” and Morningstar downgraded its rating to “MOR RS3.” Three of these rating agencies currently have Ocwen’s ratings outlook as “negative” or “on review for downgrade.” Additionally, Ocwen is subject to quantitative and qualitative agency servicer rating criteria which may have subjective interpretations. Certain of our advance financing facilities (described further in Note 7) require that our servicers or subservicers maintain specified servicer ratings, and failure by our servicers or subservicers to maintain the minimum rating could result in adverse adjustments to our advance rates, liquidity and profitability. Failure to maintain minimum

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or specified ratings could adversely affect dealings with contractual counterparties, including GSEs and regulators. In addition, some PSAs also require that the servicer or subservicer maintain specified servicer ratings. The failure to maintain the specified rating could result in the termination of the servicer under such PSAs. If Ocwen is terminated as servicer, and if Ocwen is unable to make any applicable indemnification payments owed to us, we could lose a substantial portion or all of the value of the related Notes receivable – Rights to MSRs (see discussion of the BlueMountain allegations that follow).

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

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

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

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

•

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


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


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


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


•	Ocwen could discontinue servicing;


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


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

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

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

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

On February 17, 2015, HLSS Holdings and our wholly-owned subsidiary HLSS Servicer Advance Facility Transferor, LLC, the depositor to the HSART Trust (the “Depositor”), entered into an agreement (the “Agreement”) with the Indenture Trustee.

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

Management's Plan

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

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


•	Entering into the Old Merger Agreement with NRZ;


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


•	Selling our entire portfolio of re-performing loans (“RPLs”) for an immaterial gain and concurrently repaying the related borrowings in full;


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


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


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

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

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

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equal to approximately $1.0 billion plus 28,286,980 newly issued shares of NRZ common stock with a par value $0.01 per share. In conjunction with the Asset Sale, our senior secured term loan facility was retired.

Concurrently with the execution of the NRZ Purchase Agreement, our Board of Directors adopted and approved a plan of complete liquidation and dissolution (the “Liquidation Plan”), pursuant to which we will (1) cease our business activities other than such activities that are necessary to carry out the provisions of the Liquidation Plan, (2) pay or make adequate provision for operating expenses expected to be incurred through the completion of the Liquidation Plan and (3) distribute to our shareholders in one or more distributions, (a) the cash received by the Company in the Asset Sale and the net proceeds from the sale of NRZ common stock received by the Company in the Asset Sale, less (b) amounts used to pay the liabilities of the Company and less a reserve in the amount of $50 million that will be held by the Company at the discretion of the Board to ensure that the Company will be able to meet known and unknown liabilities up to the date of the consummation of the transactions contemplated by the New Merger (as defined below) or, if the transactions contemplated by the New Merger are not consummated, the date of the final liquidating distribution after settlement of the liabilities and to ensure that the Company has available resources in the event that it is necessary to enforce against third parties any contractual or other rights of the Company or its officers or directors. If the New Merger is consummated, our shares will be converted automatically into the right to receive $0.704059 per share in cash without interest (the “Merger Consideration”). If the New Merger is not consummated and post-closing expenses and liabilities do not exceed $50 million, it is anticipated that a further cash distribution will be made to shareholders.

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

On April 27, 2015, we distributed to our shareholders approximately $1.2 billion or $16.613 per ordinary share.

Other Recent Developments

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

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

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review our credit rating for potential upgrade subsequent to our announcement of the Old Merger Agreement on February 22, 2015.

On March 18, 2015, we received notification from The Nasdaq Stock Market LLC (“Nasdaq”) stating that the Company is no longer in compliance with Nasdaq Listing Rule 5250(c)(1) for continued listing due to the Company not having timely filed its Annual Report on Form 10-K for the year ended December 31, 2014. On April 29, 2015, our shares were delisted from Nasdaq and began being quoted on the OTC Pink Marketplace under the symbol “HLSSF.”

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

1B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Use of Estimates

We prepared the accompanying unaudited Interim Condensed Consolidated Financial Statements in conformity with the instructions of the ~~Securities and Exchange Commission (“~~SEC”) to Form 10-Q for interim financial statements. In our opinion, the accompanying unaudited financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. Material estimates that are particularly significant relate to our fair value measurements of Notes receivable – Rights to MSRs.

Principles of Consolidation

Our financial statements include the accounts of Home Loan Servicing Solutions, Ltd. and its wholly owned subsidiaries as well as four variable interest entities (“VIE”) of which we are the primary beneficiary. We eliminate intercompany accounts and transactions in consolidation.

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

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

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

~~Our~~As of March 31, 2015, our Loans held for ~~investment~~sale are in ~~two~~one ~~SPEs~~SPE along with the related Other borrowings (the "Mortgage Loans SPEs"). As of December 31, 2014, those loans were classified as Loans held for investment and were in two SPEs along with the related Other borrowings. We determined that these SPEs are VIEs of which we are the primary beneficiaries. The accounts of these SPEs are included in our Interim Condensed Consolidated Financial Statements. (See discussion of the reclassification of our loans to held for sale below.)

~~Loans~~Our ~~held~~whole ~~for~~loans ~~investment~~were ~~are~~ transferred to SPEs in exchange for cash, and the SPEs ~~issue~~issued debt collateralized by these loans. These transfers do not qualify for sale accounting because we retain control over the transferred assets. As a result, we account for these transfers as financings and classify the transferred loans on our Interim Condensed Consolidated Balance Sheet as Loans held for investment and the related liabilities as Other borrowings. We use collections on the Loans held for investment pledged to the SPEs to repay principal and to pay interest and the expenses of the SPEs. Holders of the debt issued by the SPEs can look beyond the assets of the SPEs for satisfaction of the debt and therefore have recourse against HLSS. It is our expectation that the

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sale and the related liabilities as Other borrowings. We use collections on our whole loans pledged to the SPEs to repay principal and to pay interest and the expenses of the SPEs. Holders of the debt issued by the SPEs can look beyond the assets of the SPEs for satisfaction of the debt and therefore have recourse against HLSS. It is our expectation that the cash flows of the SPEs will be sufficient to meet all claims of the debt holders. HLSS is responsible for making any principal or interest payments to the debt holders not covered by the cash flows of the SPEs.

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

At September 30, 2014	Match Funded Advance SPEs		Mortgage Loans SPEs		Total
At March 31, 2015	Match Funded Advance SPEs		Mortgage Loans SPEs		Total
Match funded advances	$	65,~~100~~808,~~277~~796	$	—	$	65,~~100~~808,~~277~~796
Loans held for investment	—		832,413		832,413
Loans held for sale	—		421,257		421,257
Related party receivables (1)	1592,~~352~~138		~~343~~6,051		1598,~~695~~189
Other assets (2)	~~126~~92,~~199~~109		~~108~~143,~~324~~523		~~234~~235,~~523~~632
Total assets	$	65,~~241~~993,~~828~~043	$	~~941~~570,~~080~~831	$	76,~~182~~563,~~908~~874
Match funded liabilities	$	5,~~545~~274,~~636~~318	$	—	$	5,~~545~~274,~~636~~318
Other borrowings (3)	—		~~726~~486,~~565~~828		~~726~~486,~~565~~828
Related party payables	—		134		134
Other liabilities	4,808		3,448		8,256
Other liabilities	4,937		1,900		6,837
Total liabilities	$	5,279,126	$	490,276	$	5,769,402
Total liabilities	$	5,550,573	$	728,599	$	6,279,172

At December 31, 2013	Match Funded Advance SPEs		Mortgage Loans SPEs		Total
At December 31, 2014	Match Funded Advance SPEs		Mortgage Loans SPEs		Total
Match funded advances	$	6,~~387~~121,~~781~~595	$	—	$	6,~~387~~121,~~781~~595
Loans held for investment	—		—815,663		—815,663
Related party receivables (1)	~~60,239~~—		—3,885		603,~~239~~885
Other assets (2)	~~119~~134,~~902~~955		—139,114		~~119~~274,~~902~~069
Total assets	$	6,~~567~~256,~~922~~550	$	—958,662	$	67,~~567~~215,~~922~~212
Match funded liabilities	$	5,~~715~~624,~~622~~088	$	—	$	5,~~715~~624,~~622~~088
Other borrowings (3)	—		—815,986		—815,986
Related party payables	—		—		—
Other liabilities	4,~~673~~951		—4,308		49,~~673~~259
Total liabilities	$	5,~~720~~634,~~295~~324	$	—821,088	$	56,~~720~~455,~~295~~412


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

(2) Other assets principally include debt service accounts, ~~debt~~claims ~~issuance~~receivable ~~costs~~from ~~and~~the ~~advances~~FHA weand ~~financed~~debt asissuance ~~part of asset acquisitions~~costs. See Note 6 for more information about our Other assets.


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

Loans Held for ~~Investment and Related Accrued Income~~Sale

Effective March 31, 2015, we reclassified our Loans held for investment ~~consist~~to ofLoans ~~residential~~held ~~mortgage~~for ~~loans~~sale ~~acquired~~based ~~from~~on ~~others.~~a ~~The~~change ~~Company~~in ~~does~~management’s ~~not~~intention ~~originate~~and a decision to actively market the GNMA EBO loans for sale. ~~Each~~Loans ~~acquired~~held ~~loan~~for issale ~~evaluated~~are reported at ~~acquisition~~the tolower ~~determine~~of ifcost ~~the~~or ~~loan~~fair isvalue. ~~impaired~~As atof December 31, 2014, both the ~~time~~portfolio of ~~acquisition~~RPLs and GNMA EBO loans were classified as Loans held for investment based on management’s intent to hold these loans for investment. As further discussed below, we sold our RPL portfolios during the first quarter of 2015.

The Company evaluates purchased loans that are not deemed impaired upon acquisition in accordance with the provisions of Accounting Standards Codification ("ASC") ASC 310-20, Receivables - Nonrefundable Fees and Other Costs. The fair value premium or discount on these loans is amortized into interest income over the weighted average life of the loans using a level yield method. Interest income is accrued at the rate specified in the individual loan agreements based on the unpaid principal balance ("UPB"). 13

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~~For~~The ~~loans~~Company ~~accounted~~evaluates ~~for~~purchased ~~under~~loans ~~ASC~~that ~~310-20,~~are wenot ~~periodically~~deemed ~~evaluate~~impaired ~~whether~~upon ~~all~~acquisition ~~contractual~~in ~~payments~~accordance ~~will~~with bethe ~~collected~~provisions asof ~~scheduled~~Accounting ~~according~~Standards toCodification ~~the~~("ASC") ~~contractual~~310-20, ~~terms.~~Receivables We- ~~incorporate~~Nonrefundable ~~the~~Fees ~~probable~~and ~~recovery~~Other ofCosts. ~~such~~Only ~~payments~~our ~~resulting~~GNMA ~~from~~EBO ~~Federal~~loans ~~Housing~~are ~~Administration~~accounted ~~("FHA")~~for ~~insurance~~under inASC ~~this~~310-20; ~~analysis~~therefore, asinterest ~~applicable.~~income Weis ~~evaluate~~accrued ~~these~~at ~~loans~~the onamount athat ~~periodic~~we ~~basis~~are guaranteed to ~~ensure~~receive ~~the~~under ~~carrying~~either ~~value is~~ the ~~lower~~related ofpurchase ~~cost~~agreement or ~~fair~~by ~~value.~~the WeFederal ~~recognized~~Housing noAdministration ~~loan~~("FHA"), ~~impairments~~which ~~for~~is the ~~three~~amount ~~and~~of ~~nine~~interest ~~months~~we ~~ended~~ultimately ~~September 30,~~expect ~~2014~~to receive.

WeIn ~~periodically~~connection ~~evaluate~~with ~~whether~~the ~~our~~reclassification ~~Loans~~of ~~held~~the ~~for~~GNMA ~~investment,~~EBO ~~including individual~~ loans ~~and~~to ~~pools~~held offor ~~loans~~sale, ~~should~~we berecorded ~~placed~~a onvaluation ~~non-accrual~~allowance ~~status.~~of ~~All~~$7,654 ofto ~~our~~record ~~Loans~~the ~~held~~loans ~~for~~at ~~investment~~the ~~remained~~lower onof ~~accrual~~cost ~~status~~or ~~for~~fair ~~the~~value. Fair ~~three~~value ~~and~~was ~~nine~~determined ~~months~~by ~~ended~~reference ~~September 30,~~to ~~2014~~counterparty quotations.

~~The~~Effective ~~Company~~December ~~evaluates~~31, ~~purchased~~2014, ~~impaired~~we ~~loans~~adopted ~~in accordance with~~ the provisions of ~~ASC~~Accounting ~~310-30,~~Standards ~~Receivables~~Update ("ASU") 2014-04. ~~Loans~~This ~~and~~ASU ~~Debt~~requires ~~Securities~~that ~~Acquired~~when ~~with~~an ~~Deteriorated~~in ~~Credit~~substance ~~Quality.~~repossession ~~Purchased~~or ~~loans~~foreclosure ~~are~~occurs; that is, when a creditor should be considered ~~impaired~~to ifhave ~~there~~received isphysical ~~evidence~~possession of ~~credit~~residential ~~deterioration~~real ~~since~~estate ~~origination~~property ~~and~~collateralizing ifa itconsumer ismortgage ~~probable~~loan such that the loan receivable should be derecognized and the real estate property recognized. This amendment did not ~~all~~have ~~contractually~~a ~~required~~material ~~payments~~impact ~~will~~on beour ~~collected~~Interim Condensed Consolidated Financial Statements.

~~For~~Effective ~~impaired~~December ~~loans~~31, ~~accounted for under ASC 310-30~~2014, we ~~continue~~adopted tothe ~~estimate~~provisions ~~cash~~of ~~flows~~ASU ~~expected~~2014-14. ~~to be collected~~Therefore, ~~adjusted~~upon ~~for~~foreclosure ~~expected~~of ~~prepayments,~~GNMA onEBO ~~pools of~~ loans ~~sharing~~for ~~common risk characteristics~~ which ~~are~~we ~~treated~~have inmade ~~the~~or ~~aggregate~~intend ~~when~~to ~~applying~~make ~~various~~a ~~valuation~~claim ~~techniques.~~on Wethe ~~evaluate~~FHA atguarantee, ~~each~~we ~~balance~~reclassify ~~sheet date whether~~ the ~~present~~carrying ~~value~~amount of ~~our~~the ~~pools~~loan ofto ~~loans~~Claims ~~determined~~receivable ~~using~~from ~~the~~FHA, ~~effective~~which ~~interest~~is ~~rates~~recorded ~~has~~within ~~decreased~~Other ~~and,~~assets ifon ~~so,~~our ~~recognize~~Interim aCondensed ~~provision~~Consolidated ~~for~~Balance ~~loan loss~~Sheets. ~~For~~As ~~any~~a ~~increases~~result inof ~~cash~~our ~~flows~~adoption ~~expected~~of tothis ~~be collected~~ASU, we ~~reduce~~have ~~any~~classified ~~loss~~foreclosed ~~provisions~~properties ~~previously recorded, if applicable,~~ and ~~then~~outstanding ~~adjust~~FHA ~~the~~claims ~~amount~~as ofClaims ~~accretable~~receivable ~~yield~~from ~~recognized~~FHA onwithin aour ~~prospective~~Other ~~basis over the pool’s remaining life~~assets. WeSee ~~recognized~~Note no6 ~~provisions~~ for ~~loan~~further ~~loss nor any adjustments to the amount of the accretable yield for the three and nine months ended September 30, 2014~~information.

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

Recent Accounting Pronouncements

~~Accounting~~ASU ~~Standards~~2015-01, ~~Update~~Simplifying ~~(“ASU”)~~Income ~~2013-11~~Statement Presentation by Eliminating the Concept of Extraordinary Items. This ASU ~~provides~~eliminates ~~explicit~~the ~~guidance~~concept onof ~~the~~an ~~financial~~extraordinary ~~statement~~item ~~presentation~~from ofGAAP. To be considered an ~~unrecognized~~extraordinary ~~tax~~item ~~benefit~~under ~~when~~existing aGAAP, ~~net~~an ~~operating~~event ~~loss~~or ~~carryforward,~~transaction amust ~~similar~~be ~~tax~~unusual ~~loss~~in ornature aand ~~tax~~must ~~credit~~occur ~~exists~~infrequently. ~~Previously~~As a result, ~~there~~an ~~was~~entity ~~diversity~~will inno ~~practice~~longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; and ~~this~~(3) ~~ASU~~disclose isincome ~~expected~~taxes and earnings-per-share data applicable to ~~eliminate~~an extraordinary item. However, the ASU does not affect the reporting and disclosure requirements for an event that ~~diversity~~is unusual in ~~practice.~~nature ~~The~~or ~~amendments~~that inoccurs ~~this~~infrequently. ~~update~~The ~~are~~ASU is effective for ~~fiscal~~annual ~~years~~periods beginning after December 15, 2015, and interim periods within those ~~years~~annual periods, ~~beginning~~any ~~after~~may ~~December~~be ~~15,~~applied ~~2013~~prospectively or retrospectively to all prior periods presented in the financial statements. ~~Our~~Early adoption is permitted if the guidance is applied as of ~~this~~the ~~standard~~beginning ~~effective~~of ~~January~~the 1,annual ~~2014,~~period ~~did~~of adoption. The adoption of ASU 2015-01 is not expected to have a material impact on ~~our~~the Company’s Interim Condensed Consolidated Financial Statements.

ASU ~~2014~~2015-~~04.~~02, ~~The~~Amendments ~~objective~~to ofthe ~~this~~Consolidation Analysis. This ASU is intended to ~~reduce~~improve ~~diversity~~targeted byareas ~~clarifying~~of ~~when~~consolidation anguidance infor ~~substance~~legal ~~repossession~~entities orsuch ~~foreclosure~~as ~~occurs;~~limited ~~that~~partnerships, islimited liability corporations, ~~when~~and asecuritization ~~creditor~~structures ~~should~~(collateralized bedebt ~~considered~~obligations, tocollateralized ~~have~~loan ~~received~~obligations, ~~physical~~and ~~possession~~mortgage-backed ofsecurity ~~residential~~transactions). ~~real~~The ~~estate~~ASU ~~property~~focuses ~~collateralizing~~on athe ~~consumer~~consolidation ~~mortgage~~evaluation ~~loan~~for ~~such~~reporting organizations (public and private companies and not-for-profit organizations) that ~~the~~are ~~loan~~required ~~receivable~~to evaluate whether they should beconsolidate ~~derecognized~~certain ~~and~~legal entities. In addition to reducing the ~~real~~number ~~estate~~of ~~property~~consolidation ~~recognized~~models from four to two, the ASU places more emphasis on risk of loss when determining a controlling financial interest. ~~The~~A ~~amendments~~reporting organization may no longer have to consolidate a legal entity in ~~this~~certain ~~update~~circumstances based solely on its fee arrangement, when certain criteria are ~~effective~~met, ~~for~~reducing ~~fiscal~~the ~~years~~frequency of the application of related-party guidance when determining a controlling financial interest in a VIE, changing consolidation conclusions for public and ~~interim~~private ~~periods~~companies ~~within~~in ~~those~~several ~~years,~~industries that typically make use of limited partnerships or VIEs. The ASU will be effective for periods beginning after December 15, ~~2014~~2015, and early adoption is permitted, including adoption in an interim period. WeThe doadoption ~~not~~of ~~expect~~this ~~these~~ASU ~~amendments~~is not expected to have a material impact on ~~our~~the Company’s Interim Condensed Consolidated Financial Statements.

ASU ~~2014~~2015-0603, Simplifying the Presentation of Debt Issuance Costs. ~~This~~To simplify presentation of debt issuance costs, the amendments in this ASU ~~provides~~will ~~technical~~require ~~corrections~~that ~~and~~debt ~~improvements~~issuance tocosts ~~Accounting~~be ~~Standards~~presented ~~Codification~~in ~~glossary~~the ~~terms.~~balance ~~Our~~sheet ~~adoption~~as a direct deduction from the carrying amount of ~~this~~related ~~standard~~debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by these amendments. This ASU is effective ~~March~~for 14annual periods beginning after December 15, ~~2014~~2015, ~~did~~and ~~not~~interim ~~have~~periods awithin ~~material~~those annual periods, and early adoption is permitted. Had the Company adopted the provisions of this ASU as of March 31, 2015, the impact onto ~~our~~the Interim Condensed Consolidated ~~Financial~~Balance ~~Statements.~~Sheets would have

~~ASU 2014-~~14. The amendments in this ASU require that certain government-guaranteed mortgage loans, including those guaranteed by the FHA, be derecognized and that a separate other receivable be recognized upon foreclosure if certain conditions are met. Upon foreclosure on loans that meet these criteria, a separate receivable should be recorded based on the amount of the loan balance expected to be recovered from the guarantor. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. We do not expect these amendments to have a material impact on our Interim Condensed Consolidated Financial Statements.

ASU 2014-15. The amendments in this ASU provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments in this update are effective for fiscal years and interim periods ending after December 15, 2016. We do not expect these amendments to have a material impact on our Interim Condensed Consolidated Financial Statements.

Certain disclosures included in the Company’s Annual Report are not required to be included on an interim basis in the Company’s Quarterly Reports on Forms 10-Q. The Company has condensed or omitted these disclosures. Therefore, this Form 10-Q should be read in conjunction with the Company’s amended Annual Report on Form 10-K/A for the year ended December 31, 2013, which was filed with the SEC on August 18, 2014 (the "2013 Form 10-K/A").

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been to reduce Other assets and Total assets each by $18,294 (December 31, 2014: each by $16,706), to reduce Match funded liabilities by $14,085 (December 31, 2014: $11,534), to reduce Other borrowings by $4,209 (December 31, 2014: $5,172) and to reduce Total liabilities by $18,294 (December 31, 2014: $16,706). The ASU is not expected to have a material impact on the Company's Interim Condensed Consolidated Statements of Operations, Statements of Comprehensive Income, Statements of Changes in Equity or Statements of Cash Flows.

Certain disclosures included in the Company’s Annual Report are not required to be included on an interim basis in the Company’s Quarterly Reports on Forms 10-Q. The Company has condensed or omitted these disclosures. Therefore, this Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on April 6, 2015 (the "2014 Form 10-K").

2. ASSET ACQUISITIONS

OnWith ~~March 3,~~the ~~2014,~~exception weof ~~acquired~~servicing ~~Government~~advances ~~National~~purchased ~~Mortgage~~in ~~Association~~the ~~("GNMA")~~ordinary ~~loans~~course ~~with~~under ~~UPB~~existing ofagreements ~~$549,411 from Ocwen Financial Corporation (together~~ with ~~its subsidiaries, collectively "~~Ocwen~~"). Because these loans earn interest at a rate that is higher than current market rates~~, ~~the~~we ~~loans~~did ~~were~~not ~~purchased~~conduct atany aasset ~~premium~~acquisitions toduring ~~par, resulting in a total purchase price of $556,618. We amortize~~ the ~~purchase~~three ~~price~~months ~~premium~~ended ~~over~~March ~~the expected life of the portfolio using the interest method of accounting. These loans are insured by the FHA~~31, ~~making the collectability of the entire balance of these loans reasonably assured~~2015. ~~We account for these GNMA loans as Loans held for investment.~~

~~Ocwen~~On ~~initially~~March 3, 2014, we acquired ~~these~~GNMA EBO loans ~~through~~with ~~the~~UPB ~~GNMA~~of ~~early~~$549,411 ~~buy-out~~from ~~(“EBO”)~~Ocwen. ~~program,~~Because ~~which~~these ~~allows~~loans ~~servicers~~earn ofinterest ~~federally~~at ~~insured~~a orrate ~~guaranteed~~that ~~loans~~is tohigher ~~buy~~than ~~delinquent~~current ~~loans~~market ~~from~~rates, the ~~applicable~~loans ~~loan~~were ~~securitization~~purchased ~~pools.~~at Wea ~~also~~premium ~~financed~~to ~~the~~par, ~~GNMA~~resulting ~~EBO~~in ~~advances~~a ~~related~~total topurchase ~~the~~price ~~GNMA~~of ~~EBO loans~~$556,618. ~~and~~These weloans ~~account~~are ~~for~~insured ~~this~~by ~~arrangement~~the asFHA, amaking ~~financing~~the ~~transaction~~collectability ~~because~~of ~~Ocwen~~the ~~retained~~entire ~~title~~balance ~~and~~of ~~all~~these ~~other~~loans ~~rights~~reasonably ~~and~~assured. ~~rewards~~At ~~associated~~acquisition ~~with~~and ~~the~~at ~~GNMA~~December ~~EBO~~31, ~~advances. Collectively~~2014, ~~the~~we ~~purchase~~accounted offor these GNMA EBO loans ~~and~~as ~~financing~~Loans ofheld ~~the~~for ~~related~~investment. ~~advances~~Effective ~~are~~for ~~referred~~March to31, as2015, we reclassified the “GNMA EBO ~~Transaction.”~~loans to Loans held for sale.

~~Our~~Ocwen ~~GNMA~~initially ~~EBO~~acquired these loans ~~are~~through ~~in a Mortgage Loans SPE along with~~ the ~~related~~GNMA ~~financing~~early ~~facility~~buy-out ~~(the "EBO Facility")~~program, which isallows ~~more~~servicers ~~fully described in Note 8. The accounts~~ of ~~this~~federally ~~SPE~~insured ~~are~~or ~~included~~guaranteed inloans ~~our~~to ~~Interim~~buy ~~Condensed~~delinquent ~~Consolidated~~loans ~~Financial~~from ~~Statements. These transfers to~~ the ~~SPE~~applicable doloan ~~not~~securitization ~~qualify for sale accounting because we retain control over the transferred assets~~pools. AsWe aalso ~~result,~~financed ~~we account for these transfers as financings and classify~~ the ~~transferred~~ GNMA EBO ~~loans~~servicing onadvances ~~our Interim Condensed Consolidated Balance Sheet as Loans held for investment and the~~ related ~~liabilities~~to ~~as Other borrowings. We use collections on~~ the GNMA EBO loans, ~~pledged to the SPE to repay principal~~ and towe ~~pay~~account ~~interest~~for ~~and the expenses of the entity. The holders of the debt issued by~~ this ~~SPE~~arrangement ~~can~~as ~~look~~a ~~beyond~~financing ~~the~~transaction ~~assets~~because ofOcwen ~~the~~retained ~~SPE~~title ~~for~~and ~~satisfaction~~all ofother ~~the~~rights ~~debt~~ and ~~therefore~~rewards ~~have~~associated ~~recourse~~with ~~against~~the ~~HLSS. It is our expectation that, since our~~ GNMA EBO ~~loans~~servicing ~~are~~advances. ~~insured by the FHA~~Collectively, the ~~cash~~purchase ~~flows~~ of ~~this~~GNMA ~~SPE~~EBO ~~will~~loans beand ~~sufficient~~financing ~~to meet all claims~~ of the ~~debt~~related ~~holders.~~advances ~~HLSS~~are isreferred ~~responsible for making any principal or interest payments~~ to ~~the~~as ~~debt holders not covered by~~ the ~~cash~~“EBO ~~flows~~Pool of1 ~~the SPE~~Transaction.”

OnOur ~~June~~GNMA ~~27,~~EBO ~~2014,~~loans ~~HLSS~~are ~~purchased~~in a ~~portfolio~~Mortgage ofLoans ~~re-performing~~SPE ~~mortgage~~along ~~loans~~with the related financing facility (the "~~RPLs~~EBO Facility"), ~~from~~which ais ~~third~~more ~~party~~fully ~~seller~~described ~~with~~in aNote ~~UPB~~8. The accounts of ~~$396,939~~this ~~(the~~SPE ~~"RPL~~are ~~Transaction")~~included in our Interim Condensed Consolidated Financial Statements. ~~Because~~ ~~RPLs~~These ~~have~~transfers ~~historically~~to ~~experienced~~the ~~default~~SPE ~~conditions~~do not qualify for sale accounting because we retain control over the transferred assets. As a result, ~~are~~we ~~not~~account ~~insured~~for bythese ~~any~~transfers ~~agency~~as financings and ~~earn~~classify ~~interest~~the attransferred aGNMA ~~rate~~EBO ~~that~~loans ison ~~lower~~our ~~than~~Interim ~~current~~Condensed ~~market~~Consolidated ~~rates~~Balance Sheet as Loans held for sale (at December 31, 2014, as Loans held for investment) and the related liabilities as Other borrowings. We use collections on the GNMA EBO loans ~~were~~pledged ~~purchased~~to atthe aSPE ~~discount~~to ofrepay ~~par~~principal ~~equivalent~~and to ~~thirty~~pay ~~percent~~interest and the expenses of ~~UPB,~~the ~~resulting~~entity. inThe aholders ~~total~~of ~~purchase~~the ~~price~~debt issued by this SPE can look beyond the assets of ~~$276,248~~the SPE for satisfaction of the debt and therefore have recourse against HLSS. In ~~accordance~~It ~~with~~is ~~ASC~~our ~~310-30~~expectation that, wesince ~~will~~our ~~recognize~~GNMA EBO loans are insured by the ~~excess~~FHA, the cash flows ~~over~~of this SPE will be sufficient to meet all claims of the ~~purchase~~debt ~~price~~holders. asHLSS is responsible for making any principal or interest ~~income~~payments onto athe ~~level~~debt ~~yield~~holders ~~basis~~not covered by the cash flows of the SPE.

OnThe ~~July~~following ~~31,~~table ~~2014,~~summarizes ~~HLSS~~the ~~completed a follow-on~~ purchase ofprice ~~RPLs from a third party seller with a UPB~~ of ~~$92,908~~assets ~~(the~~we ~~"RPL~~acquired ~~Follow-on~~during ~~Transaction") under substantially~~ the ~~same~~three ~~terms~~months ~~and~~ended ~~conditions as the RPL Transaction. The total purchase price was $67~~March 31,~~647,~~ 2014 and wereconciles ~~will recognize~~ the ~~excess~~ cash ~~flows~~used ~~over~~to ~~the~~acquire ~~purchase~~such ~~price as interest income on a level yield basis in accordance with ASC 310-30.~~assets:

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



GNMA EBO loans purchase price (1)	$	556,618
Sources:
Cash on hand	$	83,884
Other borrowings	472,734
Total cash used	$	556,618

~~Our RPLs are in a Mortgage Loans SPE along with the related financing facility~~ (~~the “RPL Facility”~~1), ~~which is more fully described in Note 8.~~ The ~~accounts~~cash ofused ~~this SPE are included in our Interim Condensed Consolidated Financial Statements. The transfers~~ to ~~the~~purchase ~~SPE~~these ~~do not qualify for sale accounting because we retain control over the transferred~~ assets. Asis ashown ~~result,~~within we“Purchase ~~account~~of ~~for~~loans ~~these transfers as financing and classify the transferred RPLs on our Interim Condensed Consolidated Balance Sheet as Loans~~ held for investment” ~~and the related liabilities as Other borrowings. We use collections on the RPLs pledged to the SPE to repay principal and to pay interest and the expenses~~ of the ~~entity.~~2014 ~~The~~Interim ~~holders~~Condensed ofConsolidated ~~the~~Statement ~~debt issued by this SPE can look beyond the assets~~ of ~~the~~Cash ~~SPE for satisfaction of the debt and therefore have recourse against HLSS~~Flows. It is our expectation that the cash flows of this SPE will be sufficient to meet all claims of the debt holders. HLSS is responsible for making any principal or interest payments to the debt holders not covered by the cash flows of the SPE.

1015

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The following table summarizes the purchase price of assets we acquired during the nine months ended September 30, 2014 and reconciles the cash used to acquire such assets:

GNMA EBO loans purchase price (1)	$	556,618
RPL purchase price (1)	276,248
RPL follow-on purchase (1)	67,647
Total cash required	$	900,513
Sources:
Cash on hand	$	154,743
Other borrowings	745,770
Total cash used	$	900,513

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

During the nine months ended September 30, 2013, we executed three asset purchases from Ocwen wherein we used cash on hand and Match funded liabilities to purchase the following:

• The contractual right to receive the servicing fees related to mortgage servicing rights with UPB of approximately $109.8 billion, which we account for as Notes receivable - Rights to MSRs, and

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

The following table summarizes the purchase price of the assets we acquired from Ocwen during the nine months ended September 30, 2013 and reconciles the cash used to acquire such assets:

Notes receivable – Rights to MSRs	$	388,472
Match funded advances (1)	3,489,907
Purchase price, as adjusted	3,878,379
Cash paid to settle previous post-closing adjustments	1,410
Total cash required	$	3,879,789
Sources:
Cash on hand	$	739,597
Match funded liabilities	3,140,192
Total cash used	$	3,879,789

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

3. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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The three broad categories are:


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


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


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

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

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

Notes Receivable – Rights to MSRs

We established the value of the Notes receivable – Rights to MSRs based on appraisals prepared by independent valuation firms. These appraisals are prepared on a quarterly basis. Significant inputs into the valuation as of March 31, 2015 include the following:

• Discount rates reflecting the risk of earning the future income streams from the Notes receivable – Rights to MSRs ranging from 1514% to 22%;


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

• Mortgage loan prepayment projections ranging from 1213% to 2829% of the related mortgage lifetime projected prepayment rate; and


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

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

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

Loans Held for Sale

Effective March 31, 2015, we reclassified all of our Loans held for investment to Loans held for sale. Loans held for sale are reported at the lower of cost or fair market value, which was determined by reference to counterparty quotations. The fair value measurements for Loans held for sale were categorized as Level 3.

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Derivative Financial Instruments

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

12The following tables present assets by level within the fair value hierarchy that are measured at fair value on a recurring and non-recurring basis:



At March 31, 2015:	Fair Value		Level 1		Level 2		Level 3
Measured at fair value on a recurring basis:
Assets:
Notes receivable – Rights to MSRs	$	594,417	$	—	$	—	$	594,417
Derivative financial instruments	466		—		—		466
Total assets	$	594,883	$	—	$	—	$	594,883
Liabilities:
Derivative financial instruments	$	1,696	$	—	$	—	$	1,696
Total liabilities	$	1,696	$	—	$	—	$	1,696

Measured at fair value on a non-recurring basis:
Assets:
Loans held for sale	$	421,257	$	—	$	—	$	421,257



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

No transfers between levels occurred during the three months ended March 31, 2015 and March 31, 2014.

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

At September 30, 2014:	Fair Value		Level 1		Level 2		Level 3
Measured at fair value on a recurring basis:
Assets:
Notes receivable – Rights to MSRs	$	618,962	$	—	$	—	$	618,962
Derivative financial instruments	2,871		—		—		2,871
Total assets	$	621,833	$	—	$	—	$	621,833
Liabilities:
Derivative financial instruments	$	229	$	—	$	—	$	229
Total liabilities	$	229	$	—	$	—	$	229

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

No transfers between levels occurred during the three and nine months ended September 30, 2014, and September 30, 2013.

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

	2014						2013
	2015						2014
For the three months ended September 30,	Notes receivable – Rights to MSRs			DerivativeFinancialInstruments			Notes receivable – Rights to MSRs			DerivativeFinancialInstruments
For the three months ended March 31,	Notes receivable – Rights to MSRs			DerivativeFinancialInstruments			Notes receivable – Rights to MSRs			DerivativeFinancialInstruments
Beginning balance	$	~~629~~614,~~579~~465		$	1,~~301~~159		$	~~440~~633,~~322~~769		$	43,~~277~~306
Purchases and reductions:
Purchases	—			—			~~239,850~~—			—
Reductions	(1016,~~617~~369		)	—			~~(17,763~~—		)	—
	(10,617		)	—			222,087			—
	(16,369		)	—			—			—
Changes in fair value :
Included in net income (1)	—(3,679		)	—			(24,~~588~~025		)	—
Included in other comprehensive income (2)	—			1(2,~~341~~389		)	—			(~~1,592~~227		)
	—			1,341			(2,588		)	(1,592		)
	(3,679		)	(2,389		)	4,025			(227		)
Transfers in or out of Level 3	—			—			—			—
Ending balance	$	~~618~~594,~~962~~417		$	2(1,~~642~~230	)	$	~~659~~637,~~821~~794		$	23,~~685~~079

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	2014						2013
For the nine months ended September 30,	Notes receivable – Rights to MSRs			DerivativeFinancialInstruments			Notes receivable – Rights to MSRs			DerivativeFinancialInstruments
Beginning balance	$	633,769		$	3,306		$	296,451		$	(1,076	)
Purchases and reductions:
Purchases	—			—			388,472			—
Reductions	(14,807		)	—			(25,102		)	—
	(14,807		)	—			363,370			—
Changes in fair value :
Included in net income (1)	—			—			—			—
Included in other comprehensive income (2)	—			(664		)	—			3,761
	—			(664		)	—			3,761
Transfers in or out of Level 3	—			—			—			—
Ending balance	$	618,962		$	2,642		$	659,821		$	2,685


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

(2) These pre-tax gains (losses) are attributable to derivatives still held at ~~September~~March 3031, ~~2014~~2015, and ~~September~~March 3031, ~~2013~~2014, respectively.

The following table shows the effect on the fair value of the Notes receivable – Rights to MSRs assuming adverse changes to certain key assumptions used in valuing these assets at ~~September~~March 3031, ~~2014~~2015, and December 31, ~~2013~~2014:

	~~Discount Rate~~	Discount Rate			~~Prepayment Speeds~~				~~Delinquency Rates~~	Prepayment Speeds						Delinquency Rates
	~~100 bps adverse change~~	100 bps adverse change			~~10% adverse change~~	200 bps adverse change			~~10% adverse change~~	10% adverse change			20% adverse change			10% adverse change			20% adverse change
At September 30, 2014:
At March 31, 2015:
Notes receivable – Rights to MSRs	$	~~(11,702~~$	)(9,716	)	$	~~(22,468~~$	)(19,287	)	$	~~(65,064~~$	)(17,257	)	$	(33,643	)	$	(54,091	)	$	(106,006	)
At December 31, 2014:
Notes receivable – Rights to MSRs		$	(10,061	)		$	(19,821	)		$	(17,719	)	$	(34,537	)	$	(55,410	)	$	(108,567	)

	Discount Rate			Prepayment Speeds			Delinquency Rates
	100 bps adverse change			10% adverse change			10% adverse change
At December 31, 2013:
Notes receivable – Rights to MSRs	$	(12,988	)	$	(22,537	)	$	(72,560	)

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

The following table provides additional quantitative information on our significant inputs used for valuing our Notes receivable – Rights to MSRs as of September 30, 2014, and December 31, 2013, respectively:18

At September 30, 2014:

Asset	Unobservable Input	Low		High		Weighted Average
Notes receivable – Rights to MSRs	Discount Rate	15	%	22	%	19	%
	Prepayment Speeds	12	%	28	%	18	%
	Delinquency Rates	15	%	35	%	25	%

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AtThe ~~December~~following table provides additional quantitative information on our significant inputs used for valuing our Notes receivable – Rights to MSRs as of March 31, ~~2013:~~2015, and December 31, 2014, respectively:

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

At March 31, 2015:



Asset	Unobservable Input	Low		High		Weighted Average
Notes receivable – Rights to MSRs	Discount Rate	14	%	22	%	19	%
	Prepayment Speeds	13	%	29	%	19	%
	Delinquency Rates	15	%	35	%	23	%

At December 31, 2014:



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

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

September 30, 2014

December 31, 2013

March 31, 2015

December 31, 2014

Carrying Value

Fair Value

Carrying Value

Fair Value

Financial assets:

Match funded advances

65,~~100~~808,~~277~~796

6,~~387~~121,~~781~~595

Loans held for investment

~~832,413~~—

—815,663

—822,298

Total financial assets

65,~~932~~808,~~690~~796

6,~~387~~937,~~781~~258

6,~~387~~943,~~781~~893

Financial liabilities:

Match funded liabilities

5,~~545~~274,~~636~~318

5,~~545~~255,~~596~~403

5,~~715~~624,~~622~~088

5,~~700~~618,~~934~~263

Other borrowings

1852,~~093,837~~419

1845,~~091,443~~818

~~343~~1,~~386~~182,328

~~346~~1,~~391~~167,267

Total financial liabilities

6,~~639~~126,~~473~~737

6,~~637~~101,~~039~~221

6,~~059~~806,~~008~~416

6,~~047~~785,~~325~~530

Match Funded Advances

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

Loans Held for Investment

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

Match Funded Liabilities

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

~~Other Borrowings~~19

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

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Other Borrowings

Other borrowings include a senior secured term loan facility, a facility to partially finance our EBO loans (the "EBO Facility"), a facility to partially finance our RPLs (the "RPL Facility") and a servicing advance note facility (the "Note Facility"). The fair value estimate of the senior secured term loan facility was determined by using broker quotes. We concluded that no adjustments were required to the quoted price. Trading is at a level that the Company believes broker quotes to be a reasonable representation of the current fair market value of this facility. The EBO Facility, the RPL Facility and the Note Facility are short term in nature, and the carrying values generally approximate the fair values. The fair value measurements for these facilities are categorized as Level 3. We repaid the RPL Facility in full on February 20, 2015 in conjunction with the sale of our RPL portfolios.

4. MATCH FUNDED ADVANCES

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

	September 30, 2014		December 31, 2013
	March 31, 2015		December 31, 2014
Principal and interest advances	$	2,~~584~~361,~~899~~161	$	2,~~632~~539,~~092~~532
Taxes and insurance advances	2,~~639~~654,~~700~~811		2,~~723~~748,~~390~~700
Corporate advances	~~875~~792,~~678~~824		1833,~~032,299~~363
	$	65,~~100~~808,~~277~~796	$	6,~~387~~121,~~781~~595

5. LOANS HELD FOR ~~INVESTMENT~~SALE

~~Our~~Effective March 31, 2015, we reclassified all of our Loans held for investment ~~relate~~ to ~~GNMA~~Loans ~~EBO~~held ~~loans~~for ~~and~~sale. ~~RPLs,~~Loans ~~which~~held for sale are ~~our~~reported ~~only~~at ~~classes~~the lower of ~~Loans~~cost ~~held~~or ~~for~~fair ~~investment~~market value and include only our GNMA EBO loans as of March 31, 2015.

	September 30, 2014		December 31, 2013
	March 31, 2015		December 31, 2014
GNMA EBO loans	$	490,454	$	—
Loans held for sale:
RPLs	341,959		—
GNMA EBO loans	$	421,257	$	—
Loans held for investment	$	832,413	$	—
Loans held for sale	$	421,257	$	—
Loans held for investment:
GNMA EBO loans	$	—	$	477,016
RPLs	—		338,647
Loans held for investment	$	—	$	815,663

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

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

GNMA EBO Loans

We ~~account~~initially accounted for our GNMA EBO loans as Loans held for investment under ASC 310-20, Receivables - Nonrefundable Fees and Other Costs. In accordance with ASC 310-20-30-5, these loans ~~are~~were initially recorded at the UPB plus or minus a purchase premium or discount, which is the amount we paid to purchase these loans. ~~The~~Effective ~~purchase~~March ~~premium~~31, is2015, ~~amortized~~we ~~into~~reclassified ~~interest~~these ~~income~~loans ~~using~~to ~~the~~Loans ~~interest~~held ~~method~~for ofsale, ~~accounting.~~which ~~These loans~~ are ~~FHA~~carried ~~insured,~~at ~~making~~ the ~~collectability~~lower of ~~the~~cost ~~entire~~or ~~balance~~fair ~~reasonably~~market ~~assured~~value. We evaluate whether all contractual payments will be collected as scheduled according to contractual terms, including the probable recovery of such payments from FHA insurance. There were no allowances for loan losses related to the GNMA EBO loans at September 30, 2014.

~~See~~During ~~Note~~the 2three months ended March 31, ~~Asset~~2015, ~~Acquisitions~~we recognized a decrease in the fair value of $7,654. At March 31, 2015, we maintained a valuation allowance of $7,654 for ~~further~~unrealized ~~discussion~~losses ~~the~~on our GNMA EBO ~~Transaction~~loans.

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At March 31, 2015, GNMA EBO loans with a total UPB of $267.4 million were in the process of foreclosure.

At March 31, 2015, we had outstanding and in-process claims on FHA guarantees of $98.7 million related to our GNMA EBO loans for which foreclosure has been completed and for which we have made or intend to make a claim on the FHA guarantee. We include these receivables in Other assets. See also Note 6, Other Assets.

RPLs

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

The RPLs were grouped into pools based on common risk characteristics, and the pools were recorded at their estimated fair values, which incorporated estimated credit losses at the acquisition date. The RPL pools ~~are~~were systematically reviewed by the Company to determine the risk of losses that may ~~exceed~~have exceeded those identified at the time of the acquisition. No individual RPLs were classified as nonperforming assets at ~~September~~any ~~30,~~time ~~2014~~while held by the Company as the loans ~~are~~were accounted for on a pooled basis, and the pools ~~are~~were considered to be performing. No RPL pools evaluated by the Company were determined to have experienced impairment in the estimated credit quality or cash flows since acquisition.

16The amount of the estimated cash flows expected to be received from the RPL pools in excess of the fair values recorded for the RPL pools was referred to as the accretable yield. The accretable yield was recognized as interest income over the estimated lives of the RPL pools. The Company made no adjustments to the accretable yield.

Changes in the carrying amount of the accretable yield for RPL pools were as follows for the three months ended March 31, 2015:



	Three months ended March 31, 2015
	Accretable Yield			Carrying Amount
Beginning balance	$	168,968		$	338,647
Additions	—			—
Accretable yield adjustments	—			—
Accretion	(1,595		)	1,595
Payments and other reductions, net	—			(3,588		)
Sale of RPL portfolios	(167,373		)	(336,654		)
Ending balance	$	—		$	—

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

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

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considered to be performing. No RPL pools evaluated by the Company were determined to have experienced impairment in the estimated credit quality or cash flows since acquisition.

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

Changes in the carrying amount of the accretable yield for RPL pools were as follows for the three and nine months ended September 30, 2014:

	Three months ended September 30, 2014						Nine months ended September 30, 2014
	Accretable Yield			Carrying Amount			Accretable Yield			Carrying Amount
Beginning balance	$	146,726		$	275,838		$	—		$	—
Additions	31,658			67,647			178,543			343,895
Accretable yield adjustments	—			—			—			—
Accretion	(4,600		)	4,600			(4,759		)	4,759
Payments and other reductions, net	—			(6,126		)	—			(6,695		)
Ending balance	$	173,784		$	341,959		$	173,784		$	341,959

The outstanding balance of RPLs, including outstanding principal, interest, fees, penalties and other amounts due, was $443.3 million at September 30, 2014.

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

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

See Note 2, Asset Acquisitions, for further discussion the RPL Transaction and the RPL Follow-on Transaction.

6. OTHER ASSETS

Other assets consisted of the following at the dates indicated:

	September 30, 2014		December 31, 2013
	March 31, 2015		December 31, 2014
Debt service accounts (1)	$	~~119~~78,~~716~~267	$	~~103~~128,~~910~~525
Advance financing receivables (2)	84,990		—
Claims receivable from FHA (2)	98,714		109,586
Debt issuance costs (3)	1918,~~539~~294		2116,~~165~~706
Accrued interest income (4)	1426,~~812~~334		—22,661
Interest-earning collateral deposits (5)	1,075		1,075
Purchase price holdback on RPL sale	16,824		—
Derivative financial instruments (6)	2,871		3,835
Interest-earning collateral deposits (5)	1,866		1,077
Other	283		168
Derivative financial instruments (6)	466		1,370
	$	243,286	$	130,153
Other	3,718		1,550
	$	244,483	$	281,475

(1) Under our advance funding facilities, we are contractually required to remit collections of Match funded advances to the trustee within two days of receipt. We do not use the collected funds to reduce the related Match funded liabilities until the payment dates specified in the indenture. The balance also includes amounts that we set aside to provide for possible shortfalls in the funds available to pay certain expenses and interest. Lastly, at March 31, 2015 this balance includes collections on our Loans held for sale (at December 31, 2014, collections on our Loans held for investment), which will be used to pay down a portion of our Other borrowings on the first funding date following quarter end.

17(2) Claims receivable from FHA relate to GNMA EBO loans for which foreclosure has been completed and for which we have made or intend to make a claim on the FHA guarantee.

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held for investment of $7,672, which will be used to pay down a portion of our Other borrowings on the first funding date following quarter end.

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


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

(4) Accrued interest income represents interest earned but not yet collected on our ~~Loans~~whole ~~held for investment~~loans.


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


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

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7. MATCH FUNDED LIABILITIES

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

						Balance Outstanding
Borrowing Type (1)	Interest Rate(2)	Maturity(3)	Amortization Date (3)	Unused Borrowing Capacity (4)		~~September~~March 3031, ~~2014 (5)~~2015		December 31, ~~2013~~2014
Series 2012 T2 Term Notes	199 – 494 bps	Oct. 2045	Oct. 2015	$	—	$	450,000	$	450,000
Series 2013 T1 Term Notes	90 – 249 bps	Jan. 2044	Jan. 2014	—		—		650,000
Series 2013 T1 Term Notes	150 – 323 bps	Jan. 2046	Jan. 2016	—		350,000		350,000
Series 2013 T1 Term Notes	229 – 446 bps	Jan. 2048	Jan. 2018	—		150,000		150,000
Series 2013 T2 Term Notes	115 – 239 bps	May 2044	May 2015	—		375,000		375,000
Series 2013 T3 Term Notes	179 – 313 bps	May 2046	May 2017	—		475,000		475,000
Series 2013 T4 Term Notes	118 – 232 bps	Aug. 2044	Aug. 2014	—		—		200,000
Series 2013 T5 Term Notes	198 – 331 bps	Aug. 2046	Aug. 2016	—		200,000		200,000
Series 2013 T6 Term Notes	129 – 223 bps	Sep. 2044	Sep. 2014	—		—		350,000
Series 2013 T7 Term Notes	198 – 302 bps	Nov. 2046	Nov. 2016	—		300,000		300,000
Series 2014 T1 Term Notes	124 – 229 bps	Jan. 2045	Jan. 2015	—		~~600,000~~—		—600,000
Series 2014 T2 Term Notes	222 – 311 bps	Jan. 2047	Jan. 2017	—		200,000		—200,000
Series 2014 T3 Term Notes	281 bps	Jun. 2048	Jun. 2018	—		363,000		—363,000
Series 2012 VF 1 Notes (6)	1-Month LIBOR + 110 – 340 bps	Aug. 2045	Aug. 2015	165,400		534,600		469,050
Series 2012 VF 1 Notes	1-Month LIBOR + 110 – 340 bps	Aug. 2045	Aug. 2015	171,218		628,782		556,327
Series 2012 VF 2 Notes (6)	1-Month LIBOR + 110 – 340 bps	Aug. 2045	Aug. 2015	165,400		534,600		469,050
Series 2012 VF 2 Notes	1-Month LIBOR + 110 – 340 bps	Aug. 2045	Aug. 2015	171,218		628,782		556,327
Series 2012 VF 3 Notes (6)	1-Month LIBOR + 110 – 340 bps	Aug. 2045	Aug. 2015	165,400		534,600		469,050
Series 2012 VF 3 Notes	1-Month LIBOR + 110 – 340 bps	Aug. 2045	Aug. 2015	171,218		628,782		556,327
Series 2013 VF 1 Notes (7)	1-Month LIBOR + 150 - 245 bps	Feb. 2045	Feb. 2015	71,164		478,836		514,972
Series 2013 VF 1 Notes	1-Month LIBOR + 150 - 245 bps	Feb. 2045	Dec. 2015	28		524,972		492,107
Class A Term Money Market Fund Note	1-Month LIBOR + 20 bps	Sep. 2014	Jan. 2014	—		—		265,000
				$	513,682	$	5,274,318	$	5,624,088
Class B Term Money Market Fund Note	275 bps	Sep. 2044	Sep. 2014	—		—		28,500
				$	567,364	$	5,545,636	$	5,715,622


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

18(2) The weighted average interest rate at March 31, 2015 was 1.85%. We pay interest monthly.

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(2) The weighted average interest rate at September 30, 2014, was 1.80%. We pay interest monthly.

(3)

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


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

~~(5)~~The Ondebt ~~January~~covenants ~~17,~~for ~~2014,~~our weadvance ~~completed~~facilities ~~the~~require ~~issuance~~that ofwe ~~$600,000~~maintain ofminimum ~~one-year~~levels ~~and~~of ~~$200,000~~liquid ofassets. ~~three-years~~Failure ~~term~~to ~~notes.~~comply Onwith ~~June~~these ~~18,~~covenants ~~2014,~~could weresult ~~completed~~in ~~the~~restrictions ~~issuance~~on ofnew ~~$400,000~~borrowings ofor ~~four-year~~the ~~term~~early ~~notes,~~termination of ~~which~~our weadvance ~~retained $37,000~~facilities.

~~(6)~~The Ondebt ~~July~~covenants ~~16,~~for ~~2014,~~our weadvance ~~entered~~facilities ~~into~~require ~~agreements~~us to ~~extend~~maintain total cash and excess borrowing capacity of the ~~amortization~~lesser ~~dates~~of $100,000 and the greater of ~~our~~$25,000 ~~Series~~or ~~2012~~0.01% ~~variable~~of ~~funding~~total ~~notes~~UPB tooutstanding ~~August~~plus 283.25% of total Match funded advances outstanding. The minimum cash and excess borrowing capacity requirement at March 31, 2015, was $100,000 which was exceeded by both our unrestricted cash of $183,373 (which includes our interest-earning collateral deposits) and our excess borrowing capacity of $513,682.

~~(7)~~Certain Onof ~~February~~our ~~14,~~financing ~~2014,~~facilities ~~the~~include ~~Series~~adverse ~~2013~~adjustments ~~variable~~to ~~funding~~our ~~notes~~advance ~~were~~rates ~~amended~~if tospecified ~~extend~~servicer ~~the~~or ~~amortization~~subservicer ~~and~~ratings ~~maturity~~are ~~dates~~not maintained, and failure by ~~one~~our ~~year~~servicers ~~and~~or subservicers to ~~reduce~~maintain the ~~interest~~minimum ~~rate~~rating ~~spreads~~could ~~compared~~result in adverse adjustments to ~~December~~our 31advance rates, ~~2013~~liquidity and profitability. In addition, some PSAs may also require that the servicer or subservicer maintain specified servicer ratings. The failure to maintain the specified rating may result in the termination of the

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servicer under such PSAs. Any such downgrade could have an adverse effect on our business, financing activities, financial condition or results of operations.

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

Analysis of Borrowing by Expected Maturity (1):

Year of Expected Maturity Date	As of ~~September~~March 3031, ~~2014~~2015
2014	$	—
2015	$	3,236,318
2015	3,507,636
2016	850,000
2017	675,000
2018 and thereafter	513,000
2018	513,000
Total	$	5,545,636
2019 and thereafter	—
Total	$	5,274,318


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

In conjunction with the Asset Sale, Home Loan Servicing Solutions, Ltd. ceased to be party to the Match funded liabilities.

8. OTHER BORROWINGS

Other borrowings consisted of the following at the dates indicated:

	September 30, 2014		December 31, 2013
	March 31, 2015		December 31, 2014
Senior secured term loan facility (1)	$	~~341~~339,~~324~~946	$	~~343~~340,~~386~~636
EBO Facility (2)	~~452~~486,~~258~~828		—544,513
RPL Facility (3)	~~274,306~~—		—271,473
Note Facility (4)	25,~~949~~645		—25,706
	$	1852,~~093,837~~419	$	~~343~~1,~~386~~182,328

(1) On June 27, 2013, we entered into a $350,000 senior secured term loan facility, which was issued at a discount to par. The senior secured term loan facility has a maturity date of June 27, 2020 and an interest rate of 1-Month LIBOR plus 350 bps, with a 1.00% LIBOR floor. As of ~~September~~March 3031, ~~2014~~2015, the interest rate on our senior secured term loan facility was 4.50%. This facility is carried net of an original issuance discount of $3,929. The senior secured term loan facility was repaid in full at par on April 6, 2015.

(2) On March 3, 2014, we entered into the EBO Facility to finance the purchase of our initial portfolio of GNMA EBO loans at an interest rate of 1-Month LIBOR plus 305 bps. ~~The~~On ~~facility~~October ~~has~~16, 2014, we amended the EBO Facility to increase the maximum principal balance to partially finance the purchase of a ~~maturity~~second ~~date~~pool of ~~March~~GNMA 2,EBO ~~2015~~loans ~~and~~at an interest rate of 1-Month LIBOR plus ~~305~~180 bps. This facility has a maturity date of May 1, 2015.

(3) On June 26, 2014, we entered into the RPL Facility to partially finance the purchase of our RPLs. The facility ~~has~~had a maturity date of ~~December~~June 26, 2014 and an interest rate of 1-Month LIBOR plus 250 bps. We repaid the RPL Facility in full on February 20, 2015 in conjunction with the sale of our RPL portfolios.

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

The weighted average interest rate for our Other borrowings was 3.4352% as of ~~September~~March 3031, ~~2014~~2015.

19The debt covenants for our Other borrowings require that we maintain minimum levels of liquid assets. Failure to comply with these covenants could result in restrictions on new borrowings or the early termination of our advance facilities.

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The debt covenants for our Other borrowings require us to maintain total cash and excess borrowing capacity of the lesser of $100,000 and the greater of $25,000 or 0.01% of total UPB outstanding plus 3.25% of total Match funded advances outstanding. The minimum cash and excess borrowing capacity requirement at March 31, 2015, was $100,000 which was exceeded by both our unrestricted cash of $183,373 (which includes our interest-earning collateral deposits) and our excess borrowing capacity of $513,682.

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

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


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


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

We had no unsecured indebtedness as of March 31, 2015 other than our senior secured term loan facility.

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

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

Year of Expected Payment Date	As of ~~September~~March 3031, ~~2014~~2015
2014	$	301,130
2015	$	515,098
2015	455,758
2016	3,500
2017	3,500
2018 and thereafter	334,250
2018	3,500
Total (2)	$	1,098,138
2019 and thereafter	330,750
Total (2)	$	856,348

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

(2) The total expected payments include the full face value of the senior secured term loan, which has a current ~~ordinary~~original issuance discount balance of $43,~~301~~929.

Immediately prior to the Asset Sale, we repaid our senior secured term loan facility in full at par. In conjunction with the Asset Sale, Home Loan Servicing Solutions, Ltd. ceased to be party to the Other borrowings.

9. ORDINARY SHARES

~~Changes~~As of March 31, 2015, we had authorized 200,000,000 ordinary shares, par value of $0.01, of which 71,016,771 were issued and outstanding. There were no changes in the number of ordinary shares issued during the ~~nine~~three months ended ~~September~~March 3031, ~~2014,~~2015 and ~~September 30, 2013, are represented in the table below:~~2014.

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

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

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

10. EARNINGS PER SHARE ("EPS")

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

2025

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The following table ~~presents~~reconciles the ~~computation~~numerators and denominators of ~~per~~the ~~share~~basic ~~earnings~~and diluted EPS for the three ~~and nine~~ months ended ~~September 30~~:

	Three months						Nine months
(In thousands, except per share data)	March 31, 2015								March 31, 2014
(In thousands, except per share data)	2014			2013			2014			2013
	Net Income			Shares		Earnings Per Share Amount			Net Income			Shares	Earnings Per Share Amount
Net income	$	49,214		$	39,166		$	164,234		$	111,077
Basic EPS:
Weighted average ordinary shares outstanding	71,016,771			71,016,771			71,016,771			61,812,369
Net income available to common shareholders	$	15,260		71,016,771					$	64,360		71,016,771
Weighted average potential dilutive ordinary shares	1,771			—			—			—
Less: Net income allocated to participating securities	(24		)	—					—			—
Average diluted ordinary shares	71,018,542			71,016,771			71,016,771			61,812,369
Adjusted net income available to common shareholders	15,236			71,016,771		$	0.21		64,360			71,016,771	$	0.91
Basic earnings per share	$	0.69		$	0.55		$	2.31		$	1.80
Dilutive Securities:
Diluted earnings per share	$	0.69		$	0.55		$	2.31		$	1.80
Plus: Net income allocated to participating securities	24			—					—			—
Stock options excluded from the computation of diluted EPS:
Less: Net income re-allocated to participating securities	(24		)	—					—			—
Anti-dilutive (1)	465,000			—			515,000			—
Incremental ordinary shares deemed outstanding	—			72,958					—			—
Market-based (2)	515,000			—			515,000			—
Diluted EPS:
Income allocated to common shares and assumed share conversions	$	15,236		71,089,729		$	0.21		$	64,360		71,016,771	$	0.91

(1At March 31, 2015, we excluded from our calculation of diluted EPS i) ~~These~~50,000 stock options that were anti-dilutive because their exercise price was greater than the average market price of our stock and ii) 50,000 stock options that are issuable upon the achievement of certain performance criteria related to our stock price and an annualized rate of return to investors. Note 14 provides details of our share-based compensation.

(2) Shares that are issuable upon the achievement of certain performance criteria related to our stock price and an annualized rate of return to investors. Note 14 provides details of our share-based compensation.

11. DERIVATIVE FINANCIAL INSTRUMENTS

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

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

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

Our interest rate swaps were terminated during April 2015 in conjunction with the Asset Sale.

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Interest Rate Management

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

The following tables provide information about our interest rate swaps at March 31, 2015, and December 31, 2014, respectively:



Purpose	Date Opened	Effective Date (1)	Maturity	We Pay		We Receive	Balance Sheet Location	Notional Amount		Fair Value
Designated as hedges (2) (3):
Hedge the effects of changes in 1-Month LIBOR	September 2012	September 2012	August 2017	0.5188	%	1-Month LIBOR	Other assets	$	58,345	$	466
Total asset derivatives designated as hedges as of March 31, 2015								$	58,345	$	466
Total asset derivatives as of March 31, 2015								$	58,345	$	466



Purpose	Date Opened	Effective Date (1)	Maturity	We Pay		We Receive	Balance Sheet Location	Notional Amount		Fair Value
Designated as hedges (2) (3):
Hedge the effects of changes in 1-Month LIBOR	March 2012	March 2012	March 2016	0.6325	%	1-Month LIBOR	Other liabilities	$	76,921	$	(220	)
Hedge the effects of changes in 1-Month LIBOR	May 2012	May 2012	May 2016	0.607	%	1-Month LIBOR	Other liabilities	15,538		(33		)
Hedge the effects of changes in 1-Month LIBOR	January 2013	January 2016	December 2017	1.3975	%	1-Month LIBOR	Other liabilities	338,009		(1,443		)
Total liability derivatives designated as hedges as of March 31, 2015								$	430,468	$	(1,696	)
Total liability derivatives as of March 31, 2015								$	430,468	$	(1,696	)



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

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Purpose	Date Opened	Effective Date (1)	Maturity	We Pay		We Receive	Balance Sheet Location	Notional Amount		Fair Value
Designated as hedges (2) (3):
Designated as hedges (3):
Hedge the effects of changes in 1-Month LIBOR	~~September~~March 2012	~~September~~March 2012	~~August~~March ~~2017~~2016	0.~~5188~~6325	%	1-Month LIBOR	Other ~~assets~~liabilities	$	9281,~~121~~506	$	~~1,767~~(209	)
Hedge the effects of changes in 1-Month LIBOR	~~January~~May ~~2013~~2012	~~January~~May ~~2016~~2012	~~December~~May ~~2017~~2016	10.~~3975~~6070	%	1-Month LIBOR	Other ~~assets~~liabilities	~~338~~17,~~009~~502		~~1,097~~(2		)
Hedge the effects of changes in 1-Month LIBOR	May 2012	May 2012	May 2016	0.6070	%	1-Month LIBOR	Other assets	19,795		7
Total liability derivatives designated as hedges as of December 31, 2014								$	99,008	$	(211	)
Total asset derivatives designated as hedges as of September 30, 2014								$	449,925	$	2,871
Total liability derivatives as of December 31, 2014								$	99,008	$	(211	)
Total asset derivatives as of September 30, 2014								$	449,925	$	2,871

Purpose	Date Opened	Effective Date (1)	Maturity	We Pay		We Receive	Balance Sheet Location	Notional Amount		Fair Value
Designated as hedges (2) (3):
Hedge the effects of changes in 1-Month LIBOR	March 2012	March 2012	March 2016	0.6325	%	1-Month LIBOR	Other liabilities	$	86,358	$	(229	)
Total liability derivatives designated as hedges as of September 30, 2014								$	86,358	$	(229	)
Total liability derivatives as of September 30, 2014								$	86,358	$	(229	)

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

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


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

(2) ~~Projected~~Our ~~net~~interest ~~settlements~~rate ~~for~~swaps were terminated during April 2015 in conjunction with the ~~next~~Asset ~~twelve~~Sale. ~~months~~The ~~total~~net ~~approximately~~settlements ~~$633~~upon oftermination ~~payments~~were $1,587 payable to the ~~counterparty~~counterparties.

(3) There was an unrealized pre-tax gain of $~~1,341~~466 and an unrealized pre-tax loss of $~~664~~1,696 related to our interest rate swaps included in AOCI for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2014, respectively~~2015. There was an unrealized pre-tax ~~loss~~gain of $13,~~592~~523 and an unrealized pre-tax ~~gain~~loss of $~~3,761~~444 related to our interest rate swaps included in AOCI for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2013, respectively~~2014. Given the current and expected effectiveness of our hedging arrangements, we do not expect any reclassifications from AOCI into earnings associated with hedging ineffectiveness related to these hedging arrangements during the next twelve months.

The following table summarizes our use of derivatives during the ~~nine~~three months ended ~~September~~March 3031:

	2014			2013
	2015			2014
Notional balance at beginning of period	$	~~953~~510,~~195~~905		$	~~414~~953,~~631~~195
Additions	—			~~645,052~~—
Maturities	~~(71,122~~—		)	—
Terminations	—			—
Amortization	(~~345~~22,~~790~~092		)	(67144,~~898~~937		)
Notional balance at end of period	$	~~536~~488,~~283~~813		$	~~991~~808,~~785~~258

We recognize the right to reclaim cash collateral or the obligation to return cash collateral as part of our hedge agreements. At ~~September~~March 3031, ~~2014~~2015, we have the right to reclaim cash collateral of $1,~~075~~866 and ~~are~~had ~~obligated~~no obligation to return cash collateral ~~of $2,820~~ as part of our hedge agreements. At December 31, ~~2013~~2014, we had the right to reclaim cash collateral of $1,~~075~~077 and were obligated to return cash collateral of $31,~~500~~370 as part of our hedge agreements.

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12. INTEREST INCOME

Interest Income – Notes Receivable – Rights to MSRs

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

23The following table shows how we calculated Interest income – notes receivable – Rights to MSRs for the three months ended March 31:

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	Three Months
	2015			2014
Servicing fees collected	$	180,297		$	189,157
Subservicing fee payable to Ocwen	(90,942		)	(90,644		)
Net servicing fees retained by HLSS	89,355			98,513
Reduction in Notes receivable – Rights to MSRs	(16,369		)	—
Servicing transfers (1)	1,899			—
Increase (decrease) in the fair value of Notes receivable – Rights to MSRs	(3,679		)	4,025
	$	71,206		$	102,538

~~The~~(1) ~~following~~Ocwen ~~table~~is ~~shows~~required ~~how~~to wereimburse ~~calculated~~us ~~Interest~~in ~~income~~the –event ~~notes~~of ~~receivable~~a –transfer ~~Rights~~of toservicing ~~MSRs~~at ~~for~~predetermined ~~the~~contractual ~~three~~rates. ~~and~~These ~~nine~~amounts ~~months~~represent ~~ended~~amounts ~~September~~payable ~~30:~~by Ocwen related to servicing transfers.

	Three Months						Nine Months
	2014			2013			2014			2013
Servicing fees collected	$	177,113		$	200,838		$	551,960		$	431,795
Subservicing fee payable to Ocwen	(83,634		)	(102,040		)	(265,179		)	(214,587		)
Net servicing fees retained by HLSS	93,479			98,798			286,781			217,208
Reduction in Notes receivable – Rights to MSRs	(10,617		)	(17,763		)	(14,807		)	(25,102		)
Servicing transfers (1)	1,988			—			1,988			—
Increase (decrease) in the fair value of Notes receivable – Rights to MSRs	—			(2,588		)	—			—
	$	84,850		$	78,447		$	273,962		$	192,106

(1) Ocwen is required to reimburse us in the event of a transfer of servicing at predetermined contractual rates.

Interest Income – Other

Additional sources of revenue for us are the interest we earn on our GNMA EBO loans, interest we earn on our RPLs, financing of GNMA EBO and other advances and interest we earn on operating bank accounts and the custodial account balances related to the mortgage loans serviced that are not included in our Interim Condensed Consolidated Balance Sheets. The following table shows our Interest income – other for the three ~~and nine~~ months ended ~~September~~March 3031:

	Three Months				~~Nine Months~~
	2014		2013		2014		2013
	2015		2014
Loan interest (1)	$	97,~~811~~408	$	—1,784	$	~~17,365~~	$	—
Advance financing interest (2)	~~989~~1,027		—202		~~2,143~~		—
Bank account interest	1,~~318~~041		~~697~~975		~~3,361~~		~~896~~
	$	129,~~118~~476	$	~~697~~2,961	$	~~22,869~~	$	~~896~~

(1) Represents interest earned ~~at the stated note rate~~ on ~~each individual~~ GNMA EBO ~~loan, net of the amortization of the purchase premium on our GNMA EBO and other~~ loans ~~using the interest method of accounting,~~ and the accretion of the accretable yield on our pools of RPLs ~~using the interest method of accounting~~.

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

~~13. INTEREST EXPENSE~~29

The following table presents the components of Interest expense for the three and nine months ended September 30:

	Three Months				Nine Months
	2014		2013		2014		2013
Match funded liabilities	$	28,580	$	27,108	$	82,536	$	57,793
Other borrowings	9,732		4,214		23,016		4,423
Amortization of debt issuance costs	5,600		4,426		15,160		11,113
Interest rate swaps	234		332		946		1,027
	$	44,146	$	36,080	$	121,658	$	74,356

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13. INTEREST EXPENSE

The following table presents the components of Interest expense for the three months ended March 31:



	2015		2014
Match funded liabilities	$	27,281	$	26,830
Other borrowings	8,987		5,323
Amortization of debt issuance costs	4,378		4,962
Interest rate swaps	167		396
	$	40,813	$	37,511

14. SHARE-BASED COMPENSATION

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

The Plan iswas administered by the Compensation Committee, which ~~may~~could authorize the award of options, restricted shares, share appreciation rights, performance awards or other share-based awards to our employees of an amount not exceeding 2,000,000 ordinary shares, in aggregate. ~~Currently,~~Other ~~other~~ than share options with vesting terms, the Compensation Committee ~~does~~did not ~~expect to~~ grant ~~any~~ restricted shares, share appreciation rights, performance awards or other share-based awards under the Plan. Each ~~option~~ award under the Plan ~~is,~~was ~~and will be,~~ evidenced by a written award agreement between the participant and HLSS. The award agreement ~~describes~~described the award and ~~states~~stated the terms and conditions to which the award iswas subject.

~~Outstanding~~Shares ~~share-based~~issued ~~compensation~~under ~~currently~~the ~~consists~~Plan ofmay ~~stock~~have ~~option~~been ~~grants~~from ~~that~~shares ~~are~~acquired aunder ~~combination~~the ofCompany's ~~service-based~~share ~~and~~repurchase program, shares acquired through open market~~-based~~ ~~options~~purchases or newly issued shares.

~~Service~~Outstanding share-~~Based~~based ~~Options.~~compensation ~~These~~consisted ~~options are granted at fair value on the date~~ of ~~grant.~~stock ~~The~~option ~~options~~grants ~~generally~~that ~~vest~~were ~~evenly~~a incombination ~~four annual increments beginning with the first anniversary~~ of ~~the~~service-based ~~agreement date,~~ and ~~the options generally expire on the earlier of 10 years after the date of grant or following termination of service. A total of 515,000 service~~market-based ~~awards were outstanding at September 30, 2014~~options.

~~Market~~Service-Based Options. These options ~~are~~were ~~subject~~granted toat ~~market-based~~fair ~~vesting. One-fourth~~value ~~of the options will vest immediately~~ on the ~~first~~ date as of ~~which~~grant. ~~both~~The ofoptions ~~the~~generally ~~following~~vested ~~market-based~~evenly ~~criteria~~in ~~have~~four ~~been~~annual ~~met: i)~~increments ~~the~~beginning ~~per~~with ~~share price must be equal to or exceed 1.25 times~~ the ~~strike~~first ~~price~~anniversary ~~and ii) investors must achieve a 12.5% annualized rate~~ of ~~return from~~ the agreement date, ~~based~~and on the ~~strike~~options ~~price~~generally ~~and~~expired ~~dividends~~on ~~received. Thereafter,~~ the ~~remaining~~earlier ~~options~~of ~~will~~10 ~~vest~~years ~~evenly~~after onthe ~~each~~date of ~~the~~grant ~~next~~or ~~three~~following ~~anniversaries~~termination of ~~the initial date of vesting~~service. A total of ~~515~~50,000 ~~market~~service-based awards were outstanding at ~~September~~March 3031, ~~2014~~2015.

~~Both Service~~Market-Based Options. ~~and~~These ~~Market~~options were subject to market-~~Based~~based ~~Options~~vesting. One-fourth ~~that~~of ~~are~~the options would have vested ~~and~~immediately ~~outstanding~~on ~~will~~the befirst ~~entitled~~date toas ~~receive~~of ~~payments~~which ~~equal~~both toof the ~~amount~~following ofmarket-based criteria had been met: i) the ~~then~~per ~~current~~share ~~dividend~~price aswas ifbe equal to or exceed 1.25 times the ~~underlying~~strike ~~shares~~price ~~were~~and ~~issued~~ii) atinvestors achieved a 12.5% annualized rate of return from the ~~ex-dividend~~agreement date based on the strike price and dividends received. Thereafter, Nothe ~~expense~~remaining ~~related~~options towould ~~this~~have ~~feature~~vested ~~was~~evenly ~~recognized~~on ~~during~~each of the ~~period~~next ~~ending~~three ~~September~~anniversaries 30of the initial date of vesting. A total of 50,000 ~~2014~~market-based awards were outstanding at March 31, 2015.

~~The~~Both ~~fair~~Service-Based ~~value~~Options ofand ~~the Service~~Market-Based Options ~~was~~that ~~determined~~were ~~using~~vested ~~the~~and ~~Black-Scholes~~outstanding ~~option~~were ~~pricing~~entitled ~~model,~~to ~~and~~receive apayments ~~lattice~~equal ~~(binomial)~~to ~~model~~the ~~was~~amount ~~used~~of tothe ~~determine~~then ~~the~~current ~~fair~~dividend ~~value~~as ofif the ~~Market-Based~~underlying ~~Options~~shares ~~using~~were issued at the ~~following~~ex-dividend ~~assumptions~~date. asWe recognized $26 of reductions to Retained earnings related to this feature during the ~~grant~~three ~~date:~~months ended March 31, 2015.

	For the nine months ended September 30, 2014
	Black-Scholes		Binomial
Risk-free interest rate	2.13	%	0.13% - 3.23%
Expected stock price volatility	19.62	%	19.62	%
Expected dividend yield	7.82	%	7.82	%
Expected option life (in years)	6.5		2.7 - 3.5
Contractual life (in years)	10		10
Fair Value	$0.87 - $1.27		$0.53 - $1.43

The fair value of the Service-Based Options was determined using the Black-Scholes option pricing model, and a lattice (binomial) model was used to determine the fair value of the Market-Based Options as of the grant date. No awards were granted for the three months ended March 31, 2015 or 2014.

~~Share~~The net benefit from forfeitures of share-based compensation ~~expense~~was $129. Share-based compensation is ~~recorded~~recognized net of an estimated forfeiture rate of 4%.

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A summary of option activity under the Plan for the ~~nine~~three months ended ~~September~~March 3031, ~~2014,~~2015 is presented below.

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (1)
Outstanding at December 31, 2013	—		$	—	0	$	—
Outstanding at December 31, 2014	1,280,000		$	22.51	9.1	$	—
Granted	~~1,280,000~~—		~~22.90~~—
Exercised	—		—
Forfeited or expired	(~~250~~1,180,000	)	2322.1246
Outstanding at September 30, 2014	1,030,000		$	22.85	9.2	$	—
Outstanding at March 31, 2015	100,000		$	23.12	8.7	$	—
Exercisable at September 30, 2014	—		$	—	0	$	—
Exercisable at March 31, 2015	12,500		$	23.12	8.7	$	—


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

~~The weighted-average grant-date fair value of options granted during 2014 is $0.75 per share.~~ As of ~~September~~March 3031, ~~2014~~2015, the Company ~~has~~had $~~0.6~~37 ~~million~~ of total unrecognized compensation expense related to non-vested share option awards granted under the Plan. The total expense iswas expected to be recognized over the weighted-average requisite service period of 3.1 years. No shares vested during the ~~period~~three months ended ~~September~~March 3031, ~~2014~~2015.

No option awards, whether vested or non-vested, were outstanding for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2014, and no option activity occurred during this period.

During February 2015, as consideration for participation under the Change in Control Retention Bonus and Severance Plan, certain participants in the Plan agreed to unconditionally relinquish any and all rights that the Participant possessed under the Plan and agreed to the cancellation of such Participant’s stock options.

On April 6, 2015, the Plan was terminated in conjunction with the Asset Sale.

15. INCOME TAXES

Income taxes were provided for based upon the tax laws and rates in the countries in which we conduct operations and earn related income. Our effective tax rate for the three ~~and nine~~ months ended ~~September~~March 3031, 2015 and 2014, was 0.0% and 0.0%, respectively (2.~~2% and~~ ~~0.9% for the three and nine months ended September 30, 2013, respectively).~~ We are a Cayman Islands exempted company, and the Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. As of ~~September~~March 3031, ~~2014~~2015, the Company did not have any unrecognized tax benefits related to the current period or any previous period. We recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We did not accrue interest or penalties associated with any unrecognized tax benefits, nor was any interest expense or penalty recognized during the period or in previous periods.

16. BUSINESS SEGMENT REPORTING

Our business strategy focuses on acquiring ~~mortgage~~Rights ~~servicing~~to ~~rights~~MSRs and the related servicing advances, Loans held for investment and other residential mortgage-related assets. As of ~~September~~March 3031, ~~2014~~2015, we operate a single reportable business segment that holds Residential Mortgage Assets.

17. RELATED PARTY TRANSACTIONS

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

As the named servicer, Ocwen remains obligated to perform as servicer under the related pooling and servicing agreements ("PSAs"), and we are required to pay Ocwen a monthly fee for the servicing activities it performs. We are also required to purchase any servicing advances that Ocwen is required to make pursuant to such PSAs. 31

Ocwen is also the named servicer on the GNMA EBO loans and RPLs, and we are required to pay Ocwen a monthly fee for the servicing activities it performs.

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OnWe ~~May~~acquired 1,all ~~2014,~~of weour ~~entered~~Notes ~~into~~receivable an– ~~agreement~~Rights ~~with Ocwen~~ to ~~finance~~MSRs ~~servicing advances totaling $20,157~~ and toour ~~finance~~EBO ~~future~~Pool ~~advances.~~1 WeTransaction ~~account~~loans ~~for~~from ~~these receivables as Other assets in the Interim Condensed Consolidated Balance Sheets~~Ocwen. WeRefer ~~receive~~to ~~interest~~Note ~~income~~2 onfor ~~these receivables at~~ a ~~rate~~description of ~~1-month~~our ~~LIBOR~~recent ~~plus~~acquisitions ~~550~~from ~~bps~~Ocwen. ~~We record this interest income as Interest income – other in the Interim Condensed Consolidated Statements of Operations.~~

InAs ~~addition~~the tonamed servicer of the ~~acquisition~~loans ofunderlying ~~Residential~~our ~~Mortgage~~Notes ~~Assets~~receivable ~~described~~– inRights ~~Note~~to 2MSRs, Ocwen remains obligated to perform as servicer under the ~~following~~related ~~table~~PSAs, ~~summarizes~~and ~~our~~we ~~transactions~~are ~~with~~required to pay Ocwen a monthly fee for the ~~three~~servicing ~~and~~activities ~~nine~~it ~~months~~performs. ~~ended~~We ~~September~~are ~~30:~~also required to purchase any servicing advances that Ocwen is required to make pursuant to such PSAs.

	Three Months						Nine Months
	2014			2013			2014			2013
Servicing fees collected	$	177,113		$	200,838		$	551,960		$	431,795
Subservicing fee payable to Ocwen	(83,634		)	(102,040		)	(265,179		)	(214,587		)
Net servicing fees retained by HLSS (1)	93,479			98,798			286,781			217,208
Servicing advances purchased from Ocwen in the ordinary course of business	$	3,958,104		$	3,590,458		$	10,829,858		$	5,111,443

Ocwen is also the named servicer on the GNMA EBO loans and RPLs, and we are required to pay Ocwen a monthly fee for the servicing activities it performs.

We provide financing of certain servicing advances to Ocwen. In conjunction with the EBO Pool 1 Transaction on May 3, 2014, we agreed to finance $20,157 of servicing advances for Ocwen and to finance future advances. We receive interest income on these receivables at a rate of 1-month LIBOR plus 450 to 550 bps. We record this interest income as Interest income – other in the Interim Condensed Consolidated Statements of Operations. During the three months ended March 31, 2015 and 2014, we earned interest income on financing of servicing advances of $1,027 and $0, respectively. Ocwen owed us $335 for interest accrued on financing of servicing advances as of March 31, 2015.

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



	2015			2014
Servicing fees collected	$	180,297		$	189,157
Subservicing fee payable to Ocwen	(90,942		)	(90,644		)
Net servicing fees retained by HLSS (1)	89,355			98,513

Servicing advances purchased from Ocwen in the ordinary course of business	$	3,501,183		$	3,503,375


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

Our Notes receivable – Rights to MSRs resulted from transactions with Ocwen. At ~~September~~March 3031, ~~2014~~2015, as a result of servicing activities related to our Notes receivable – Right to MSRs, Ocwen owed us $5,~~837~~649 for servicing fees collected but not remitted to us, and we owed Ocwen $5,860 for the subservicing fee earned by Ocwen in ~~September~~March ~~2014~~2015. Ocwen owed us $343 for interest accrued on financing of servicing advances as of September 30, 2014. During the three and nine months ended September 30, 2014, we earned interest income on financing of servicing advances of $989 and $2,143 ($0 during the three and nine months ended September 30, 2013). Lastly, our Notes receivable – Rights to MSRs resulted from transactions with Ocwen.

Ocwen Professional Services Agreement

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

At ~~September~~March 3031, ~~2014~~2015, Ocwen owed us $~~827~~0 for professional services provided pursuant to the Professional Services Agreement. During the three ~~and nine~~ months ended ~~September~~March 3031, 2015 and 2014, we earned fees of $~~320~~50 and $1628,~~721~~ ~~($491 and $1~~respectively,~~458~~ ~~during the three and nine months ended September 30, 2013)~~ for services provided to Ocwen pursuant to the Professional Services Agreement. Additionally, during the three ~~and nine~~ months ended ~~September~~March 3031, 2015 and 2014, we incurred fees of $~~131~~0 and $~~510~~154, ~~($30 and $90 during the three and nine months ended September 30~~respectively, ~~2013)~~ for services received from Ocwen pursuant to the Professional Services Agreement.

Altisource Administrative Services Agreement

We have an administrative services agreement with Altisource (“Altisource Administrative Services Agreement”) that ~~requires~~enables Altisource to provide certain administrative services to us. Services provided to us under this agreement may include human resources administration (benefit plan design, recruiting, hiring and training and compliance support), legal and regulatory compliance support services, general business consulting, corporate services (facilities management, security and travel services), finance and accounting support services (financial analysis, financial reporting and tax services), risk management services, vendor management and other related services. The services Altisource provides to us under this agreement are on an as-needed basis, and the fees we pay Altisource are based on the actual costs incurred by them plus an additional markup of 15%. During the three and nine months ended September 30, 2014, we incurred fees of $259 and $748 ($178 and $530 during the three and nine months ended September 30, 2013) for services provided to us pursuant to the Altisource Administrative Services Agreement.

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vendor management and other related services. The services Altisource provides to us under this agreement are on an as-needed basis, and the fees we pay Altisource are based on the actual costs incurred by them plus an additional markup of 15%. During the three months ended March 31, 2015 and 2014, we incurred fees of $76 and $218, respectively, for services provided to us pursuant to the Altisource Administrative Services Agreement.

Receivables from and Payables to Related Parties

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

	September 30, 2014		December 31, 2013
	March 31, 2015		December 31, 2014
Servicing fees collected (1)	$	5,837	$	8,482
Servicing advance financing receivables (1)	$	78,695	$	84,107
Professional services (2)	827		655
Servicing fees collected (2)	5,649		5,686
Advance collections (3)	15,352		60,239
Professional services (3)	—		33
Receivable from servicing transfers (4)	1,988		—
Advance collections (4)	92,138		—
Other	2,219		673
Loan collections in transit (5)	1,687		3,885
Receivables from Ocwen	$	26,223	$	70,049
Receivable from servicing transfers (6)	1,899		—
Subservicing fees payable (5)	$	5,860	$	8,114
Other	4,999		690
Professional services (2)	290		354
Receivables from Ocwen	$	185,067	$	94,401
Other	2,134		2,181
Subservicing fees payable (7)	$	5,860	$	7,999
Payables to Ocwen	$	8,284	$	10,649
Advance purchases (8)	—		5,285
Payables to Altisource	$	233	$	83
Other	2,937		1,133
Payables to Ocwen	$	8,797	$	14,417
Payables to Altisource	$	38	$	86

(1) ~~Ocwen~~We isprovided ~~required~~financing to ~~remit~~Ocwen tofor us servicing ~~fees it collects on our behalf within two business days~~advances. ~~The~~We ~~amount~~receive ~~due~~interest ~~from~~income ~~Ocwen~~ at ~~September~~a ~~30,~~rate ~~2014, represents servicing fees collected but not remitted at the end~~ of ~~the~~1-Month ~~month.~~LIBOR Weplus ~~record~~a ~~servicing~~spread ~~fees~~ranging wefrom ~~collect~~450 ~~less~~bps ~~the subservicing fee we pay~~ to ~~Ocwen~~550 ~~less the reduction in Notes receivable – Rights to MSRs as Interest income as shown in Note 12~~bps.

(2) Ocwen is required to remit to us servicing fees it collects on our behalf within two business days. The ~~respective~~amount ~~amounts~~due ~~are~~from ~~for~~Ocwen ~~professional~~at ~~services~~March ~~provided~~31, ~~that~~2015, ~~were~~represents ~~outstanding~~servicing asfees collected but not remitted at the end of the ~~dates~~month. ~~indicated~~We record servicing fees we collect less the subservicing fee we pay to Ocwen less the reduction in Notes receivable – Rights to MSRs as Interest income as shown in Note 12.

(3) ~~Upon~~The ~~collection,~~respective ~~Ocwen~~amounts isare ~~contractually~~for ~~obligated~~professional toservices ~~remit~~provided ~~Match funded advance collections to pay down our Match funded liabilities. This receivable represents the portion of Match funded advance collections~~ that were ~~in-transit~~outstanding ~~to pay down our Match funded liabilities~~ as of the dates indicated.

(4) Upon collection, Ocwen is ~~required~~contractually obligated to ~~reimburse~~remit usMatch infunded advance collections to pay down our Match funded liabilities. This receivable represents the ~~event~~portion of aMatch ~~transfer~~funded ofadvance ~~servicing~~collections atthat ~~predetermined~~were ~~contractual~~in-transit ~~rates~~to pay down our Match funded liabilities as of the dates indicated.

(5) ~~The~~Upon ~~base~~collection, ~~fee~~Ocwen ~~and~~is ~~performance~~contractually ~~fee,~~obligated ifto ~~any,~~remit ~~that~~collections ~~comprise~~of ~~the~~our ~~subservicing~~Loans ~~fees~~held ~~payable~~for ~~are~~sale ~~calculated~~or ~~and~~Loans ~~paid~~held for investment to ~~Ocwen~~a ~~within~~custodial ~~three~~account. ~~business~~This ~~days~~receivable ~~following~~represents the ~~end~~portion of these collections that were not yet deposited into the ~~month~~custodial account.


(6)	Ocwen is required to reimburse us in the event of a transfer of servicing at predetermined contractual rates.


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


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

18. COMMITMENTS AND CONTINGENCIES

WeThe ~~may~~following bematerial ~~party~~potential ~~to various~~ claims, ~~legal~~lawsuits, ~~actions~~ and ~~complaints~~other ~~arising in the ordinary course of business. We monitor our legal matters~~proceedings, ~~including advice from external legal counsel, and periodically perform assessments~~ of ~~these~~which ~~matters~~the ~~for~~Company ~~potential~~is ~~loss accrual and disclosure. There are~~ currently ~~no probable matters outstanding that~~aware, inare ~~the~~as ~~opinion of management, will have a material effect on our Interim Condensed Consolidated Balance Sheets, Statements of Operations and Statements of Cash Flows~~follows. ~~There~~The ~~are~~Company ~~also~~has ~~currently~~not noaccrued ~~reasonably~~losses ~~possible~~in ~~matters~~connection ~~outstanding~~with ~~that,~~these inlegal ~~the~~contingencies ~~opinion~~because of management, ~~will~~does ~~have~~not abelieve ~~material~~there ~~effect~~is onprobable ~~our Interim Condensed Consolidated Balance Sheets, Statements of Operations~~ and ~~Statements~~reasonably ofestimable ~~Cash Flows~~loss.

OnThree ~~September~~putative ~~15,~~class ~~2014~~action welawsuits ~~received~~have abeen ~~subpoena~~filed ~~from~~against the ~~SEC~~Company ~~requesting~~and ~~that we provide~~ certain ~~information~~of ~~related~~its tocurrent ~~our~~and ~~prior~~former ~~accounting~~officers ~~conventions for~~ and ~~valuations~~directors ~~of our Notes receivable - Rights to MSRs that resulted~~ in the ~~restatement~~United ~~described~~States inDistrict ~~Part~~Court I,for ~~Item~~the I,Southern ~~“Interim~~District ~~Condensed~~of ~~Consolidated~~New ~~Financial~~York ~~Statements~~entitled: -(i) ~~Note~~Oliveira ~~20, Restatement”~~v. WeHome ~~are~~Loan ~~cooperating~~Servicing ~~with the SEC in this matter.~~

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Solutions, Ltd., et al., No. 15-CV-652 (S.D.N.Y.), filed on January 29, 2015; (ii) Berglan v. Home Loan Servicing Solutions, Ltd., et al., No. 15-CV-947 (S.D.N.Y.), filed on February 9, 2015; and (iii) W. Palm Beach Police Pension Fund v. Home Loan Servicing Solutions, Ltd., et al., No. 15-CV-1063 (S.D.N.Y.), filed on February 13, 2015. On April 2, 2015, these lawsuits were consolidated into a single action, which is referred to as the “New York Action.” On April 28, 2015, lead plaintiff, lead counsel and liaison counsel were appointed in the New York Action.

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

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

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

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19. SUBSEQUENT EVENTS

Subsequent to our balance sheet date of ~~September~~March 3031, ~~2014~~2015:

• On ~~October~~April 106, ~~2014~~2015, weHLSS, ~~paid~~HLSS ~~cash~~Holdings ~~dividends~~and Ocwen entered into an amendment to the Purchase Agreement and the sale supplements (effective upon completion of ~~$12~~the Asset Sale) to,~~783~~ among other things, (i) obtain Ocwen's consent to the assignment by HLSS of its interest under the Purchase Agreement and each sale supplement, (ii) provide that HLSS Holdings will not become the named servicer in connection with any Rights to MSRs, or $0direct the replacement of Ocwen as named servicer, before April 6, 2017 except under certain limited circumstances, (iii) extend the scheduled term of Ocwen's servicing appointment under each sale supplement until the earlier of eight years from the date of such sale supplement and April 30, 2020, and (iv) provide that Ocwen will reimburse HLSS Holdings for certain increased financing costs resulting from servicer rating downgrades of Ocwen.18 ~~per~~In ~~ordinary~~addition, ~~share~~under such amendment (x) Ocwen agreed to exercise any “clean-up call” rights under any servicing agreement related to Rights to MSRs only at the direction of HLSS Holdings and to sell to HLSS Holdings, on an “as-is” basis, the economic beneficial interest in the right to purchase the mortgage loans and other assets in the trust for each designated servicing agreement pursuant to such clean-up call rights and (y) HLSS Holdings agreed to pay to Ocwen a fee equal to 0.50% of the outstanding balance of the performing mortgage loans purchased in connection with any such exercise and to pay Ocwen’s related costs and expenses of exercise.

• On ~~October~~April 166, ~~2014~~2015, weto ~~purchased~~best address concerns relating to our ability to operate as a ~~portfolio~~going concern and the associated impact on our business on an expedited basis, we agreed with NRZ and Merger Sub to terminate the Old Merger Agreement and immediately complete the Asset Sale. The Asset Sale was made in accordance with the terms and conditions of the NRZ Purchase Agreement. In connection with the Asset Sale, among other things, (i) HLSS MSR-EBO ~~loans~~acquired ~~from~~substantially all of the assets of the Company (including all of the issued share capital of Luxco 1B) and (ii) HLSS Advances acquired all of the issued share capital of Luxco 1A and assumed substantially all of the liabilities of the Company, including certain post-closing liabilities of the Company. In exchange, the Company received an ~~unrelated~~amount ~~third~~in ~~party~~cash ~~with~~equal ato ~~total~~approximately ~~UPB~~$1.0 billion plus 28,286,980 newly issued shares of NRZ common stock with a par value $~~142~~0.501 ~~million~~per share. In conjunction with the Asset Sale, ~~and~~our senior secured term loan facility was retired.

• OnConcurrently ~~October~~with 16the execution of the NRZ Purchase Agreement, ~~2014~~our Board of Directors adopted and approved the Liquidation Plan, pursuant to which we ~~declared~~will (1) cease our business activities other than such activities that are necessary to carry out the provisions of the Liquidation Plan, (2) pay or make adequate provision for operating expenses expected to be incurred through the completion of the Liquidation Plan and (3) distribute to our shareholders in one or more distributions, (a) ~~monthly~~the ~~dividend~~cash received by the Company in the Asset Sale and the net proceeds from the sale of NRZ common stock received by the Company in the Asset Sale, less (b) amounts used to pay the liabilities of the Company and less a reserve in the amount of $~~0.18~~50 ~~per~~million ~~ordinary~~that ~~share~~will ~~with~~be ~~respect~~held by the Company at the discretion of the Board to ~~October~~ensure that the Company will be able to meet known and unknown liabilities up to the date of the consummation of the transactions contemplated by the New Merger or, ~~November~~if the transactions contemplated by the New Merger are not consummated, the date of the final liquidating distribution after settlement of the liabilities and ~~December~~to ~~2014~~ensure that the Company has available resources in the event that it is necessary to enforce against third parties any contractual or other rights of the Company or its officers or directors. If the New Merger is consummated, our shares will be converted automatically into the right to the Merger Consideration. If the New Merger is not consummated and post-closing expenses and liabilities do not exceed $50 million, it is anticipated that a further cash distribution will be made to shareholders.

20• Immediately following the closing of the Asset Sale contemplated by the NRZ Purchase Agreement, we entered into: (i) the New Merger Agreement with NRZ and Merger Sub, pursuant to which, among other things, the Company will be merged with and into Merger Sub, with the Company ceasing its corporate existence and Merger Sub surviving the New Merger, (ii) a Services Agreement, pursuant to which HLSS Advances Acquisition Corp. ~~RESTATEMENT~~will provide us with certain services following the consummation of the Asset Sale, including, among other things, handling (including defending, prosecuting or resolving) all claims, disputes or controversies (including any litigation, arbitration, governmental investigations or inquiries or any other proceedings or negotiations) in which the Company is a party or may otherwise be involved and (iii) a Registration Rights Agreement to memorialize certain rights relating to the registration of shares of NRZ common stock to be held by the Company upon the closing of the Asset Sale. On the terms and subject to the conditions set forth in the New Merger Agreement, at the Effective Time each of the Company Shares issued and outstanding immediately prior to the Effective Time (other than Company Shares owned by any direct or indirect wholly-owned subsidiary of NRZ (other than Merger Sub) or of Merger Sub and Company Shares as to which dissenters’ rights have been properly exercised) will be converted automatically into the right to receive the Merger Consideration. The parties’ obligations to consummate the New Merger are subject to certain closing conditions,

Subsequent to the filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 with the SEC on February 6, 2014, we determined that the Notes receivable – Rights to MSRs and related interest income were materially misstated due to the fact that we did not adjust the Notes receivable – Rights to MSRs to the best estimate of fair value. As a result, the following financial statement amounts have been restated from amounts previously reported.35

The following table summarizes the effects of the restatement on the consolidated balance sheet as of December 31, 2013 (as restated on the 2013 Form 10-K/A).

	December 31, 2013
(In thousands)	As Previously Reported		Adjustments			As Restated
Notes Receivable – Rights to MSRs	$	651,060	$	(17,291	)	$	633,769
All other assets	6,676,903		—			6,676,903
Total assets	$	7,327,963	$	(17,291	)	$	7,310,672
Total liabilities	$	6,094,225	$	—		$	6,094,225
Retained earnings	20,804		(17,291		)	3,513
All other equity	1,212,934		—			1,212,934
Total equity	1,233,738		(17,291		)	1,216,447
Total liabilities and equity	$	7,327,963	$	(17,291	)	$	7,310,672

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~~The~~including ~~following~~approval ~~table~~of ~~summarizes~~the New Merger by the ~~effects~~requisite vote of the ~~restatement~~shareholders, on the ~~consolidated~~absence ~~statements~~of any legal restraints that would prohibit the consummation of ~~operations~~the New Merger and other conditions customary for ~~the~~a ~~three~~transaction of this type. Each of us, NRZ and ~~nine~~Merger ~~months~~Sub ~~ended~~has ~~September~~made 30certain customary representations, ~~2013~~warranties and covenants in the New Merger Agreement, including, among other things, covenants related to the conduct of our business during the interim period between the execution of the New Merger Agreement and the consummation of the New Merger. The New Merger Agreement provides for certain termination rights for both us and NRZ, including, if approval of the New Merger by the requisite vote of the shareholders is not obtained or if the New Merger is not consummated by the nine month anniversary of the date of the New Merger Agreement.

	Three months ended September 30, 2013
(In thousands)	As Previously Reported		Adjustments		As Restated
Interest income – notes receivable – Rights to MSRs	$	74,204	$	4,243	$	78,447
Interest income – other	697		—		697
Total interest income	74,901		4,243		79,144
Related party revenue	491		—		491
Total revenue	75,392		4,243		79,635
Operating expenses	3,612		—		3,612
Income from operations	71,780		4,243		76,023
Other expense
Interest expense	36,080		—		36,080
Total other expense	36,080		—		36,080
Income before income taxes	35,700		4,243		39,943
Income tax expense	777		—		777
Net income	$	34,923	$	4,243	$	39,166
Earnings per share
Earnings per share	$	0.49	$	0.06	$	0.55
Diluted earnings per share	$	0.49	$	0.06	$	0.55


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

	Nine months ended September 30, 2013
(In thousands)	As Previously Reported		Adjustments		As Restated
Interest income – notes receivable – Rights to MSRs	$	168,626	$	23,480	$	192,106
Interest income – other	896		—		896
Total interest income	169,522		23,480		193,002
Related party revenue	1,458		—		1,458
Total revenue	170,980		23,480		194,460
Operating expenses	8,211		—		8,211
Income from operations	162,769		23,480		186,249
Other expense
Interest expense	74,356		—		74,356
Total other expense	74,356		—		74,356
Income before income taxes	88,413		23,480		111,893
Income tax expense	816		—		816
Net income	$	87,597	$	23,480	$	111,077
Earnings per share
Earnings per share	$	1.42	$	0.38	$	1.80
Diluted earnings per share	$	1.42	$	0.38	$	1.80


•	On April 10, 2015, we declared a distribution of $16.613 per ordinary share payable on April 27, 2015, to shareholders of record as of April 20, 2015.

30• On April 27, 2015, we distributed to our shareholders approximately $1.2 billion or $16.613 per ordinary share.

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The following table summarizes the effects of the restatement on the consolidated statements of comprehensive income for the three and nine months ended September 30, 2013.

	Three months ended September 30, 2013
(In thousands)	As Previously Reported			Adjustments		As Restated
Net income	$	34,923		$	4,243	$	39,166
Total other comprehensive income, net of tax	(988		)	—		(988		)
Total comprehensive income	$	33,935		$	4,243	$	38,178

	Nine months ended September 30, 2013
(In thousands)	As Previously Reported		Adjustments		As Restated
Net income	$	87,597	$	23,480	$	111,077
Total other comprehensive income, net of tax	2,742		—		2,742
Total comprehensive income	$	90,339	$	23,480	$	113,819

The following table summarizes the effects of the restatement on the consolidated statement of cash flows for the nine months ended September 30, 2013.

	Nine months ended September 30, 2013
(In thousands)	As Previously Reported			Adjustments			As Restated
Net income	$	87,597		$	23,480		$	111,077
All other operating cash flows	668,568			—			668,568
Net cash provided by operating activities	756,165			23,480			779,645
Reduction in Notes receivable – Rights to MSRs	48,582			(23,480		)	25,102
All other investing cash flows	(3,879,789		)	—			(3,879,789		)
Net cash used in investing activities	(3,831,207		)	(23,480		)	(3,854,687		)
Net cash provided by financing activities	3,075,826			—			3,075,826
Net decrease in cash and cash equivalents	784			—			784
Cash and cash equivalents at beginning of period	76,048			—			76,048
Cash and cash equivalents at end of period	$	76,832		—			$	76,832

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands unless otherwise stated, except share data)

FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. ~~All~~Forward-looking statements, ~~other~~are ~~than~~not ~~statements~~guarantees ofand ~~historical~~involve ~~facts~~a ~~included~~number inof ~~this~~assumptions, ~~report~~risks ~~including,~~and ~~without~~uncertainties ~~limitation,~~that ~~statements~~could ~~regarding~~cause ~~our~~actual ~~financial~~results ~~position,~~to ~~business~~differ ~~strategy~~materially. ~~and~~Important ~~other~~factors ~~plans~~that ~~and~~could ~~objectives~~cause ~~for~~actual ~~our~~results ~~future~~to ~~operations~~differ materially include, but are ~~forward-looking~~not ~~statements.~~limited to, the following:

~~These~~• ~~forward-looking~~Our ~~statements~~ordinary ~~include~~shares ~~declarations regarding our management’s beliefs and current expectations. In some cases, you can identify forward-looking statements by terminology such as “~~may,” ~~“will,”~~continue ~~"might,"~~to ~~“should,”~~trade ~~“could,”~~even ~~"would,"~~though ~~“intend,”~~we ~~“consider,”~~are ~~“expect,”~~in ~~“foresee,” “plan,” “anticipate,” “believe,” “estimate,” “predict” or “continue” or~~ the ~~negative~~process of ~~such~~winding ~~terms or other comparable terminology. Such statements are not guarantees of future performance as they are subject to certain assumptions~~down, ~~inherent risks~~ and ~~uncertainties~~distributions ~~in predicting future results and conditions that could cause the actual results~~ to ~~differ~~shareholders ~~materially~~may ~~from~~be ~~those~~below ~~projected~~any intrading ~~these forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to, the following:~~price;

• ~~Assumptions~~The ~~about~~amount of the ~~availability~~final ofdistribution and our ability to ~~make~~cease ~~acquisitions~~reporting ofdepends ~~Residential~~upon ~~Mortgage~~whether ~~Assets from Ocwen or others on terms consistent with~~ our ~~business~~shareholders ~~and~~approve ~~economic~~the ~~model~~New Merger;

• ~~Estimates~~The ~~regarding~~ability ~~prepayment~~to ~~speeds,~~close ~~default~~the ~~rates,~~New ~~delinquency~~Merger ~~rates,~~on ~~severity,~~the ~~servicing~~proposed ~~advances,~~terms ~~amortization~~and ofwithin ~~Notes~~the ~~receivable~~anticipated –time ~~Rights to MSRs~~period, ~~custodial~~or ~~account~~at ~~balances~~all, ~~interest~~which ~~income,~~is ~~operating~~dependent ~~costs,~~on ~~interest~~the ~~costs~~parties’ ~~and~~ability ~~other~~to ~~drivers~~satisfy ofcertain ~~our~~closing ~~results~~conditions;

• The ~~potential~~exact ~~for~~amount ~~fluctuations~~or intiming ~~the valuation~~ of ~~our~~any ~~Notes~~final ~~receivable~~distribution ~~– Rights~~ to ~~MSRs~~our ~~and Loans held for investment~~shareholders;

• The ~~impact~~ability ~~of the change in our accounting convention related~~ to ~~the~~maintain ~~valuation of~~ our ~~Notes~~passive ~~receivable~~foreign -investment ~~Rights~~company to(“PFIC”) ~~MSRs and timing and cost of the remediation of a related material weakness in our internal control over financial reporting as described in Part II, Item 4, "Controls and Procedures~~status;"

• ~~Assumptions~~Government ~~regarding~~regulations ~~the availability of refinancing options for subprime~~ and ~~Alt-A borrowers~~policies;

• ~~Expectations~~General ~~regarding~~economic ~~incentive fees in our servicing contract~~ and ~~the~~market ~~stability of our net servicing fee revenue~~conditions; and

• ~~Assumptions~~Other ~~about~~risks detailed in the ~~effectiveness~~Company's ofreports ~~our~~and ~~hedging~~filings ~~strategy;~~with the SEC.

•You ~~Assumptions~~should ~~regarding~~not ~~amount~~place ~~and~~undue ~~timing~~reliance on such forward-looking statements, which speak only as of ~~additional~~their ~~debt~~dates. The Company undertakes no obligation to update or ~~equity~~revise ~~offerings;~~forward-looking statements, whether as a result of new information, future events or otherwise.

•For ~~Assumptions~~more ~~related~~information toon ~~sources~~the uncertainty of ~~liquidity,~~forward-looking ~~our~~statements ~~ability~~see toPart ~~fund~~I, ~~servicing~~Item ~~advances~~1A, ~~our~~“Risk ~~ability~~Factors” toof ~~pursue~~the ~~new~~Company's ~~asset~~Annual ~~classes~~Report ~~and~~on Form 10-K filed with the ~~adequacy~~SEC ofon ~~our~~April ~~financial~~6, ~~resources;~~2015.

~~• Assumptions regarding our financing strategy, advance rate, costs and other other terms for financing new asset classes;~~36

• Assumptions regarding margin calls on financing facilities;

• Changes in rating methodologies by our rating agencies and our ability to obtain or maintain ratings of our financing facilities;

• Our status with respect to legal ownership of the rights to mortgage servicing rights we acquired from Ocwen;

• Our ability to pay monthly dividends;

• The performance of Ocwen as mortgage servicer;

• Our competitive position;

• Our dependence on the services of our senior management team;

• Regulatory investigations and future legal proceedings against us;

• Regulatory investigations and legal proceedings against Ocwen, Altisource or others with whom we may conduct business;

• Uncertainty related to future government regulation and housing policies;

• Assumptions regarding our tax rate and decisions by taxing authorities; and

• General economic and market conditions.

All forward-looking statements are subject to certain risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results, performance or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements. Important factors that could cause or contribute to such difference include those risks specific to our business detailed within this report and our other reports and filings with the SEC, including our amended Annual Report on Form 10-K/A for the year ended December 31, 2013, filed with the SEC on August 18, 2014 (the "2013 Form 10-K/A"). You should not place undue reliance on such forward-looking statements, which speak only as of their dates. We undertake no obligation to update or revise forward-looking statements¸ whether as a result of new information, future events or otherwise. You should carefully consider the risk factors described under the heading “Risk Factors” within our 2013 Form 10-K/A, Part II, Item 1A.

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INTRODUCTION

The following discussion of our results of operations and changes in financial condition and liquidity should be read in conjunction with our Interim Condensed Consolidated Financial Statements and the related notes, all included elsewhere in this report on Form 10-Q for the three months ended ~~September~~March 3031, ~~2014~~2015 and ~~within~~with our ~~2013~~2014 Form 10-K/A.

~~The~~Events ~~financial~~Prior ~~information included herein related~~ to ~~the~~March ~~2013 consolidated financial statements has been restated for the effects of the adjustment described in Part I~~31, ~~Item I, “Interim Condensed Consolidated Financial Statements - Note 20, Restatement”.~~2015

~~OVERVIEW~~We are dependent on Ocwen as the subservicer for the Notes receivable – Rights to MSRs, and Ocwen’s servicing practices may impact the value of certain of our assets. Ocwen has been and is subject to certain federal and state regulatory matters and other challenges and uncertainties associated with its business. We may be adversely impacted:

~~Strategic~~• ~~Priorities~~By regulatory actions taken against Ocwen;

~~Now~~• inBy ~~our~~a ~~third~~default year of operations, we intend to continue to execute upon our chief objective, which is to acquire Residential Mortgage Assets. During the current period, we expanded our Residential Mortgage Asset portfolio by ~~acquiring GNMA EBO loans from~~ Ocwen, byunder ~~financing~~its ~~additional~~debt servicing advances for Ocwen and by acquiring RPLs from a third party seller. In addition to our current asset classes, we may explore opportunities for investments in other Residential Mortgage Assets that we believe will provide an attractive risk-adjusted yield.agreements;

We• ~~expect~~By tofurther ~~finance~~downgrades ~~future asset acquisitions~~ in ~~two~~Ocwen's ~~ways:~~servicer rating;

• ~~Invest~~If ~~cash~~Ocwen ~~flow~~fails ~~from~~to ~~operations~~ensure inits ~~excess~~servicing advances comply with the terms of ~~our~~its ~~dividend~~PSAs; ~~and~~

• ~~Issue~~If ~~additional~~Ocwen ~~debt~~were orterminated ~~equity~~as toservicer ~~allow~~under uscertain ~~to execute larger purchases.~~PSAs;

~~Ocwen~~• ~~stated~~If ~~that~~Ocwen itbecomes ~~has~~subject ~~servicing assets with approximately $60 billion of UPB as of September 30, 2014 that are similar~~ to ~~the~~a ~~assets~~bankruptcy ~~that~~proceeding; ~~HLSS currently holds. Although we cannot guarantee that future transactions will occur, we believe that HLSS is an attractive source of financing for these assets.~~ or

~~Changes~~• If Ocwen fails to meet its obligations or is deemed to be in ~~Results~~default under the indenture governing Notes issued by the HSART Trust, including the allegations of ~~Operations~~certain ~~Summary~~events of default related to the Ocwen servicer downgrade and other regulatory matters by BlueMountain.

~~The~~A ~~following~~summary ~~table~~of ~~summarizes~~such ~~our~~matters, ~~condensed~~the ~~consolidated~~related ~~operating~~impact ~~results~~on ~~for~~our business and the ~~three~~Company's ~~and~~plan ~~nine~~to ~~months~~address ~~ended~~such ~~September~~matters ~~30:~~are as follows.

	Three Months				Nine Months
	2014		2013		2014		2013
Revenue	$	97,288	$	79,635	$	298,552	$	194,460
Operating expenses	3,914		3,612		12,646		8,211
Income from operations	93,374		76,023		285,906		186,249
Interest expense	44,146		36,080		121,658		74,356
Income before income taxes	49,228		39,943		164,248		111,893
Income tax expense	14		777		14		816
Net income	$	49,214	$	39,166	$	164,234	$	111,077

Ocwen Regulatory Matters

~~Three~~Ocwen ~~and~~has ~~Nine~~publicly ~~Months~~announced ~~Ended September 30~~that, ~~2014 versus 2013. Revenue primarily includes interest income recorded~~ on ~~Notes~~December ~~receivable~~19, ~~– Rights to MSRs. Our 2014 Interest income exceeds~~ 2013, ~~Interest~~Ocwen ~~income~~reached ~~because~~an ~~our~~agreement ~~average~~involving ~~UPB for~~ the ~~three and nine months ended September 30~~CFPB, ~~2014,~~various ~~was~~state ~~$168.2~~attorneys ~~billion~~general and ~~$173.1~~other ~~billion,~~agencies ~~respectively,~~that ~~compared~~regulate tothe ~~average~~mortgage ~~UPB~~servicing ~~of $138.2 billion and $112.1 billion~~industry, ~~respectively,~~which ~~for~~agreement ~~the~~was ~~same~~approved ~~periods~~by inconsent ~~2013.~~judgment Inby ~~addition, lower prepayment speeds for~~ the ~~UPB tied to our Notes receivable – Rights to MSRs contributed to greater Interest income during 2014~~U. ~~Average prepayment speeds were 10~~S.7% ~~and~~District ~~10.9%~~Court for the ~~three~~District ~~and~~of ~~nine~~Columbia ~~months~~on ~~ended~~February ~~September 30~~26, 2014,. ~~respectively,~~According ~~compared~~ to ~~13.1%~~Ocwen's ~~for each of the same periods in 2013. We recorded an increase in interest income of $7~~disclosure,~~674~~ ~~and $37,764 for~~ the ~~three~~key ~~and~~elements ~~nine months ended September 30, 2014, respectively, as a result~~ of ~~changes in~~ the ~~fair~~agreement ~~value~~are ~~of our Notes receivable – Rights to MSRs. We recognized an increase in interest income of $4,243 and $23,480 for three and nine months ended September 30, 2013, respectively,~~ as afollows: ~~result of changes in the fair value of our Notes receivable – Rights to MSRs. Lastly, the interest earned on our~~

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

•


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

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


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


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


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


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


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


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


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

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~~Loans~~On ~~held~~January ~~for~~23, ~~investment~~2015, ~~during~~Ocwen announced that it had reached a settlement agreement with the ~~three~~CA ~~and~~DBO ~~nine~~in ~~months~~relation ~~ended~~to ~~September 30~~an action dated October 3, 2014, ~~contributed~~in to the ~~increase~~State inof ~~interest~~California. ~~income~~According asto ~~they~~Ocwen's ~~represent~~disclosure, athe ~~new~~key ~~class~~elements of ~~Residential~~the ~~Mortgage~~agreement ~~Assets~~are ~~for~~as ~~2014.~~follows:

~~Operating~~• ~~expenses~~Payment ~~increased period over period primarily because the scale~~ of ~~our business significantly increased as a result of various Residential Mortgage Asset purchases~~$2.5 ~~Operating expenses are primarily comprised of Compensation and benefits, Related party expenses and General and administrative expenses.~~ million;

~~For~~• ~~the~~Engagement ~~three~~of ~~months~~an ~~ended~~independent ~~September~~auditor ~~30, 2014 and 2013, Compensation and benefits declined primarily due~~ to ~~our~~assess ~~average~~Ocwen’s ~~headcount~~compliance ~~period~~with ~~over~~laws ~~period declining to 12 from 18, respectively. For the nine months ended September 30, 2014~~ and ~~2013,~~regulations ~~Compensation~~impacting ~~and~~California ~~benefits~~borrowers ~~increased~~for ~~slightly~~a ~~while our average headcount~~ period ~~over~~of ~~period~~at ~~remained~~least ~~consistent~~two atyears; ~~sixteen.~~and

~~Related~~• ~~party~~Prevention ~~expenses~~of ~~result~~Ocwen from ~~the~~acquiring ~~Ocwen~~additional ~~Professional~~mortgage ~~Services~~servicing ~~Agreement~~rights ~~and~~for ~~the~~loans ~~Altisource~~secured ~~Administrative~~in ~~Services~~the ~~Agreement.~~State ~~The~~of ~~increases~~California inuntil ~~Related~~the ~~party~~CA ~~expenses~~DBO ~~primarily~~is ~~related~~satisfied tothat ~~increased~~Ocwen ~~use~~can ofsatisfactorily ~~business~~respond ~~strategy~~to ~~and~~the ~~tax~~requests ~~services~~for asinformation ~~part~~and ofdocumentation made in the ~~Ocwen~~course ~~Professional~~of ~~Services~~a ~~Agreement.~~regulatory exam.

~~The~~According ~~increase~~to inOcwen's ~~General~~public ~~and~~disclosure, ~~administrative~~on ~~expenses~~April is28, ~~primarily~~2014, ~~related~~Ocwen received a letter from the staff of the New York Regional Office of the SEC informing Ocwen that the SEC was conducting an investigation relating to ~~bank~~Ocwen ~~fees~~and ~~associated~~making ~~with~~a ~~our~~request ~~custodial~~for ~~accounts,~~voluntary ~~tax~~production of documents and ~~legal~~information ~~expenses~~relating ~~related~~to the April 22, 2014 surrender of certain options to ~~our~~purchase ~~research~~its common stock by Mr. Erbey, its former Executive Chairman, including the 2007 Equity Incentive Plan and ~~pursuit~~the related option grant and surrender documents. On June 12, 2014, Ocwen received a subpoena from the SEC requesting production of ~~new~~various ~~investment~~documents ~~opportunities~~relating ~~and~~to ~~costs~~its ~~associated~~business dealings with HLSS, Altisource, Altisource Asset Management Corporation AAMC and Residential and the ~~restatement~~interests of ~~previously~~its ~~issued~~directors ~~financial~~and ~~statements~~executive officers in these companies. Ocwen has also disclosed that it received an additional subpoena from the SEC related to its amendments to its Annual Report on ~~August~~Form 1810-K for the fiscal year ended December 31, 2013 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.

Increases in interest expense period over period were primarily due to increases in average Match funded liabilities outstanding. For the three months ended September 30, 2014 and 2013, interest expense increased by $9.2 million due to increases in the average outstanding Match fund liabilities to $5.6 billion from $4.2 billion, respectively, and due to increases in the weighted average interest rates on those liabilities to 1.83% from 1.70%, respectively. For the nine months ended September 30, 2014 and 2013, interest expense increased by $52.3 million due to increases in the average outstanding Match fund liabilities to $5.7 billion from $3.6 billion, respectively, which was partially offset by a decrease in the weighted average interest rate on these liabilities to 1.74% from 1.91%, respectively. Additionally, we incurred interest expense on our Other ~~borrowings~~Ocwen ~~during the three and nine months ended September 30, 2014 which were not outstanding during the same periods in 2013.~~Matters

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


•	A sale of Residential Mortgage Assets or other assets could be re-characterized in an Ocwen bankruptcy proceeding as a financing secured by such Residential Mortgage Assets. If such a recharacterization occurs, the validity or priority of our security interest in the Residential Mortgage Assets or other assets could be challenged in a bankruptcy proceeding of

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Ocwen. If the sale of Residential Mortgage Assets or other assets is recharacterized as a secured financing, payments made by Ocwen to us prior to Ocwen commencing its bankruptcy proceeding could be challenged and subject to recovery as preferential transfers;


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


•	The Purchase Agreement could be rejected in an Ocwen bankruptcy proceeding;


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


•	Ocwen could discontinue servicing;


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


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

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

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

On February 17, 2015, HLSS Holdings and the Depositor entered into the Agreement with the Indenture Trustee. Pursuant to the Agreement, the parties agreed, among other things, that during the term of the Agreement the Indenture Trustee will not commence a judicial proceeding to seek judicial guidance regarding the allegations made in the BlueMountain letter prior to April 15, 2015, and HLSS Holdings and the Depositor agreed to allow the Indenture Trustee to withhold from distribution certain excess funds that would otherwise be distributable to the Depositor in an amount up to the Interest Accrual Differential for the related interest accrual period under the HSART Trust indenture. The “Interest Accrual Differential” means, with respect to any interest accrual period under the HSART Trust indenture beginning with the interest accrual period relating to the February 17, 2015 monthly payment date thereunder and any class of HSART Trust notes issued prior to January 17, 2014, an amount equal to the excess of (a) the Non-FAE Rate plus 3.00% per annum over (b) the related interest accrual for such class of notes at the Non-FAE Rate. The Depositor and HLSS Holdings subsequently agreed to allow the Indenture Trustee to withhold on the same basis with respect to HSART Trust notes issued on or after January 17, 2014. The effect of this agreement will be to increase the amount deposited and held in Debt service accounts by approximately $11.8 million per month. In conjunction with the Asset Sale, Home Loan Servicing Solutions, Ltd. disposed of its interest in HLSS Holdings and the Depositor.

Management's Plan

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

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


•	Entering into the Old Merger Agreement with NRZ;


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


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


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


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


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

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On March 3, 2015, we filed a Form 12b-25 indicating that additional time to complete our Annual Report on Form 10-K for the year ended December 31, 2014 was necessary in order to complete the assessment of recent events related to our business and determine the impact on our financial statements and related disclosures.

On March 18, 2015, we filed a Form 8-K indicating that we required additional time to prepare information related to our ability to operate as a going concern and to provide such information to our auditors for the purposes of their audit of our financial statements for the year ended December 31, 2014.

Developments After March 31, 2015

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

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

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

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Effective Time each of the Company Shares issued and outstanding immediately prior to the Effective Time (other than Company Shares owned by any direct or indirect wholly-owned subsidiary of NRZ (other than Merger Sub) or of Merger Sub and Company Shares as to which dissenters’ rights have been properly exercised) will be converted automatically into the right to receive the Merger Consideration. The parties’ obligations to consummate the New Merger are subject to certain closing conditions, including approval of the New Merger by the requisite vote of the shareholders, the absence of any legal restraints that would prohibit the consummation of the New Merger and other conditions customary for a transaction of this type. Each of us, NRZ and Merger Sub has made certain customary representations, warranties and covenants in the New Merger Agreement, including, among other things, covenants related to the conduct of our business during the interim period between the execution of the New Merger Agreement and the consummation of the New Merger. The New Merger Agreement provides for certain termination rights for both us and NRZ, including, if approval of the New Merger by the requisite vote of the shareholders is not obtained or if the New Merger is not consummated by the nine month anniversary of the date of the New Merger Agreement.

On April 27, 2015, we distributed to our shareholders approximately $1.2 billion or $16.613 per ordinary share.

Other Recent Developments

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

On March 18, 2015, we received notification from Nasdaq stating that the Company is no longer in compliance with Nasdaq Listing Rule 5250(c)(1) for continued listing due to the Company not having timely filed its Annual Report on Form 10-K for the year ended December 31, 2014. On April 29, 2015, our shares were delisted from Nasdaq and began being quoted on the OTC Pink Marketplace under the symbol “HLSSF.”

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The following discussion of results of operations is as of March 31, 2015 and prior to the Asset Sale.

Changes in Results of Operations Summary

The following table summarizes our condensed consolidated operating results for the three months ended March 31:



	Three Months
	2015		2014
Revenue	$	82,172	$	106,127
Operating expenses	18,440		4,256
Income from operations	63,732		101,871
Interest expense	48,467		37,511
Income before income taxes	15,265		64,360
Income tax expense	5		—
Net income	$	15,260	$	64,360

Three Months Ended March 31, 2015 versus 2014. Revenue primarily includes interest income recorded on Notes receivable – Rights to MSRs and interest earned on whole loans. Our Interest income from our Notes receivable – Rights to MSRs decreased by $31,332 for the three months ended March 31, 2015 compared to same period in 2014 due to a decrease in the average UPB underlying our Notes receivable – Rights to MSRs for the three months ended March 31, 2015 to $158.4 billion from $178.0 billion for the same period in 2014. In addition, higher prepayment speeds for the UPB tied to our Notes receivable – Rights to MSRs contributed to decreased Interest income during 2015; average prepayment speeds were 10.6% for the three months ended March 31, 2015 compared to 9.9% for the same period in 2014. We also recorded a decrease in Interest income of $3,679 for the three months ended March 31, 2015 as a result of changes in the fair value of our Notes receivable – Rights to MSRs compared to an increase of $20,686 for same period in 2014. Lastly, the interest earned on our whole loan portfolios during the three months ended March 31, 2015 contributed to the increase in interest income due to increased average UPB on whole loans.

Operating expenses are primarily comprised of Compensation and benefits, Related party expenses and General and administrative expenses. Compensation and benefits increased due to increased senior headcount and costs associated with the Change in Control Retention Bonus and Severance Plan. General and administrative expenses increased period over period primarily because of increased legal and professional services fees associated with the Old Merger, the Asset Sale and the New Merger. The increases in Compensation and benefits and General and administrative expenses was partially offset by a decrease in Related party expenses due to decreased use of services under both the Ocwen Professional Services Agreement and the Altisource Administrative Services Agreement.

Increases in interest expense period over period were primarily due to increases in the weighted average rate paid on Match funded liabilities and increases in the average balance of Other borrowings outstanding, partially offset by decreases in the average balance of Match funded liabilities outstanding and a decrease in the weighted average rate paid on Other borrowings. For the three months ended March 31, 2015, the average outstanding balance of Match fund liabilities decreased to $5.4 billion from $5.7 billion for the same period in 2014 while the weighted average interest rates on those liabilities increased to 1.80% from 1.66% for the same period in 2014. For the three months ended March 31, 2015, the average outstanding balance of Other borrowings increased to $1.0 billion from $0.5 billion for the same period in 2014 while the weighted average interest rates on those liabilities decreased to 3.41% from 4.13% for the same period in 2014.

Our tax expense for both periods was largely impacted by our status as a Cayman Islands exempted company. The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation.

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Summary Operating Information

We operate the business as a single reportable segment: Residential Mortgage Assets. For purposes of our internal management reporting, we separately report the components of Interest income – notes receivable – Rights to MSRs, which include Servicing fee revenue, Servicing expense, Amortization of Notes receivable – Rights to MSRs and Change in fair value of Notes receivable – Rights to MSRs. We provide a reconciliation of our reported results to our internal management reporting for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2014~~2015 and ~~September~~March 3031, ~~2013,~~2014 in the following tables.

We executed our agreements with Ocwen with the intent that we would receive the total amount of the servicing fees collected and that we would pay Ocwen a subservicing fee that is determined based on its collections and advance ratio performance. We evaluate our operating performance and manage our business considering servicing fees collected, subservicing fees paid, amortization of Notes receivable – Rights to MSRs and changes in fair value of Notes receivable – Rights to MSRs, and we maintain our internal management reporting on this basis. The following table presents our consolidated results of operations in accordance with GAAP reconciled to our internally reported financial results.

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Our total revenue, total operating expenses and income from operations as presented in our Management Reporting shown below should be considered in addition to, and not as a substitute for, total revenue, total operating expenses and income from operations determined in accordance with GAAP.

	Condensed Consolidated Results (GAAP)		Adjustments			Management Reporting (Non-GAAP)
For the three months ended September 30, 2014
For the three months ended March 31, 2015
Revenue
Servicing fee revenue (1)	$	—	$	~~177~~180,~~113~~297		$	~~177~~180,~~113~~297
Interest income – notes receivable – Rights to MSRs (2)	8471,~~850~~206		(8471,~~850~~206		)	—
Interest income – other	129,~~118~~476		—			129,~~118~~476
Related party revenue	~~320~~50		—			~~320~~50
Total revenue	97,288		92,263			189,551
Other revenue	1,440		—			1,440
Total revenue	82,172		109,091			191,263
Operating expenses
Compensation and benefits	12,~~722~~078		—			12,~~722~~078
Servicing expense (3)	—		8390,~~634~~942			8390,~~634~~942
Amortization of Notes receivable – Rights to MSRs (4)	—		1614,~~303~~470			1614,~~303~~470
Change in fair value of Notes receivable – Rights to MSRs (5)	—		(73,~~674~~679		)	(73,~~674~~679		)
Related party expenses	~~390~~76		—			~~390~~76
General and administrative expenses	116,~~802~~286		—			116,~~802~~286
Total operating expenses	318,~~914~~440		92109,~~263~~091			96127,~~177~~531
Income from operations	$	9363,~~374~~732	$	—		$	9363,~~374~~732

	Condensed Consolidated Results (GAAP)		Adjustments			Management Reporting (Non-GAAP)
For the nine months ended September 30, 2014
Revenue
Servicing fee revenue (1)	$	—	$	551,960		$	551,960
Interest income – notes receivable – Rights to MSRs (2)	273,962		(273,962		)	—
Interest income – other	22,869		—			22,869
Related party revenue	1,721		—			1,721
Total revenue	298,552		277,998			576,550
Operating expenses
Compensation and benefits	5,146		—			5,146
Servicing expense (3)	—		265,179			265,179
Amortization of Notes receivable – Rights to MSRs (4)	—		50,583			50,583
Change in fair value of Notes receivable – Rights to MSRs (5)	—		(37,764		)	(37,764		)
Related party expenses	1,258		—			1,258
General and administrative expenses	6,242		—			6,242
Total operating expenses	12,646		277,998			290,644
Income from operations	$	285,906	$	—		$	285,906

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	Condensed Consolidated Results (GAAP)(Restated)		Adjustments			Management Reporting (Non-GAAP)
	Condensed Consolidated Results (GAAP)		Adjustments			Management Reporting (Non-GAAP)
For the three months ended September 30, 2013
For the three months ended March 31, 2014
Revenue
Servicing fee revenue (1)	$	—	$	~~200~~189,~~838~~157		$	~~200~~189,~~838~~157
Interest income – notes receivable – Rights to MSRs (2)	78102,~~447~~538		(78102,~~447~~538		)	—
Interest income – other	~~697~~2,961		—			~~697~~2,961
Related party revenue	~~491~~628		—			~~491~~628
Total revenue	79106,~~635~~127		~~122~~86,~~391~~619			~~202~~192,~~026~~746
Operating expenses
Compensation and benefits	21,~~109~~599		—			21,~~109~~599
Servicing expense (3)	—		~~102~~90,~~040~~644			~~102~~90,~~040~~644
Amortization of Notes receivable – Rights to MSRs (4)	—		2416,~~594~~661			2416,~~594~~661
Change in fair value of Notes receivable – Rights to MSRs (5)	—		(420,~~243~~686		)	(420,~~243~~686		)
Related party expenses	~~228~~372		—			~~228~~372
General and administrative expenses	12,~~275~~285		—			12,~~275~~285
Total operating expenses	34,~~612~~256		~~122~~86,~~391~~619			~~126~~90,~~003~~875
Income from operations	$	76101,~~023~~871	$	—		$	76101,~~023~~871

	Condensed Consolidated Results (GAAP)(Restated)		Adjustments			Management Reporting (Non-GAAP)
For the nine months ended September 30, 2013
Revenue
Servicing fee revenue (1)	$	—	$	431,795		$	431,795
Interest income – notes receivable – Rights to MSRs (2)	192,106		(192,106		)	—
Interest income – other	896		—			896
Related party revenue	1,458		—			1,458
Total revenue	194,460		239,689			434,149
Operating expenses
Compensation and benefits	4,877		—			4,877
Servicing expense (3)	—		214,587			214,587
Amortization of Notes receivable – Rights to MSRs (4)	—		48,582			48,582
Change in fair value of Notes receivable – Rights to MSRs (5)	—		(23,480		)	(23,480		)
Related party expenses	680		—			680
General and administrative expenses	2,654		—			2,654
Total operating expenses	8,211		239,689			247,900
Income from operations	$	186,249	$	—		$	186,249


(1)	Servicing fee revenue reflects servicing fees received under our agreements with Ocwen.

(2)

Interest income – notes receivable – Rights to MSRs represents the net amount of servicing fees received less servicing fees paid, amortization of the Notes receivable – Rights to MSRs and changes in the fair value of Notes receivable – Rights to MSRs. We exclude this interest income from our Management Reporting and instead report the individual components, including Servicing fee revenue, Servicing expense, Amortization of Notes receivable – Rights to MSRs and Change in fair value of Notes receivable – Rights to MSRs.

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(3)	Servicing expense reflects the fee we incurred under the agreements with Ocwen.


(4)	Amortization of Notes receivable – Rights to MSRs reflects reductions in the value of the Notes receivable – Rights to MSRs based on the run-off of the portfolio.


(5)	Our methodology of determining the fair value of Notes receivable – Rights to MSRs is described in Part I, Item I, "Interim Condensed Consolidated Financial Statements – Note 3, Fair Value of Financial Instruments." In our Interim Condensed Consolidated Statements of Operations, we record changes in fair value as a component of Interest income – notes receivable – Rights to MSRs.

Three ~~and Nine~~ months ended ~~September~~March 3031, ~~2014~~2015 versus ~~2013~~2014. Servicing fee revenue ~~increased~~decreased period over period because we owned the servicing rights for ~~significantly~~lower ~~greater~~ average UPB during ~~2014~~2015. Servicing fee revenue is a function of principal and interest collected during the period and the contractual servicing fee rate. Average UPB for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2014~~2015 was $~~168~~158.24 billion ~~and $173.1 billion, respectively,~~ compared to $~~138~~178.20 billion ~~and $112.1 billion, respectively,~~ for the same ~~periods~~period in ~~2013~~2014.

The servicing expense paid to Ocwen during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2014~~2015 included base fees of $1621,~~302~~635 and ~~$61,284, respectively, and~~ incentive fees of $6269,~~381 and $198,944, respectively~~307. The servicing expense paid to Ocwen during the comparable ~~2013~~2014 ~~periods~~period included base fees of $2422,~~101~~699 and ~~$51,781, respectively, and~~ incentive fees of $7767,~~939 and $162,806, respectively~~945. The difference is primarily attributable to ~~increased~~lower average UPB period over period, ~~and~~which towas offset by incentive fee reductions in ~~2014~~2015 as a result of excess servicing advances. We are compensated for the cost of excess servicing advances because the performance-based incentive fee payable to Ocwen in any month is reduced by an amount equal to 1-Month LIBOR plus 275 bps per annum of the amount of any such excess servicing advances when the advance ratio exceeds a predetermined level for that month. Amortization of Notes receivable – Rights to MSRs relates to reduction in UPB due to portfolio run-off and is greater during ~~2014~~2015 due to ~~larger~~higher ~~average~~prepayment ~~UPB~~speeds in 2015. Lastly, there was ana ~~increase~~decrease in the fair value of the Notes receivable -– Rights to MSRs for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2014~~2015 of $73,~~674~~679 ~~and $37,764, respectively,~~ compared to an increase of $420,~~243~~686 ~~and $23,480~~ for the same ~~periods~~period in ~~2013, respectively~~2014.

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~~The~~In ~~following~~evaluating ~~table~~our ~~provides~~performance, ~~selected~~our ~~statistics~~management ~~related~~considers toour Core earnings, which is a non-GAAP financial measure. In calculating Core earnings, we remove the impact of changes in the fair value of our Notes receivable – Rights to MSRs asand our Loans held for sale from Net income. In addition, we have excluded certain non-recurring expenses associated with the Old Merger, the Asset Sale and the New Merger. We believe that Core earnings provides a meaningful measure of ~~September~~our ~~30:~~profitability by removing the non-cash impacts of changes in the fair value of our Residential Mortgage Assets and significant non-recurring expenses from Net income, which improves comparability of our results of operations from period to period. The following table reconciles our Net income and EPS to our Core earnings and Core earnings per share for the three months ended March 31:

(In thousands, except for loan count data)	2014			2013			% Change
For the three months ended March 31:	2015			2014
Residential Assets Serviced
Net income	$	15,260		$	64,360
Unpaid principal balance:
Adjustments
Performing loans (1)	$	134,891,705		$	144,026,950		-6	%
Change in fair value of Notes receivable – Rights to MSRs	3,679			(20,686		)
Non-performing loans	27,428,527			29,568,935			-7	%
Change in fair value of Loans held for sale	7,654			—
Non-performing real estate	3,203,599			2,952,222			9	%
Non-recurring costs associated with strategic transactions	13,156			—
Total residential assets serviced	165,523,831			176,548,107			-6	%
Core earnings (Non-GAAP)	$	39,749		$	43,674
Percent of total UPB:
Basic Earnings per Share	$	0.21		$	0.91
Non-performing residential assets serviced	18.5		%	18.4		%	1	%
Adjustments
Number of:
Change in fair value of Notes receivable – Rights to MSRs	0.05			(0.30		)
Performing loans (1)	907,662			935,349			-3	%
Change in fair value of Loans held for sale	0.11			—
Non-performing loans	137,835			146,507			-6	%
Non-recurring costs associated with strategic transactions	0.19			—
Non-performing real estate	17,349			15,918			9	%
Basic Core Earnings per Share (Non-GAAP)	$	0.56		$	0.61
Total number of residential assets serviced	1,062,846			1,097,774			-3	%
Diluted Earnings per Share	$	0.21		$	0.91
Percent of total number:
Adjustments
Non-performing residential assets serviced	14.6		%	14.8		%	-1	%
Change in fair value of Notes receivable – Rights to MSRs	0.05			(0.30		)
Change in fair value of Loans held for sale	0.11			—
Non-recurring costs associated with strategic transactions	0.19			—
Diluted Core Earnings per Share (Non-GAAP)	$	0.56		$	0.61

~~(1)~~Non-GAAP ~~Performing~~financial ~~loans~~measures ~~include~~have ~~those~~inherent ~~loans~~limitations, ~~that~~are not required to be uniformly applied and are ~~current~~not oraudited. ~~have~~Although ~~been~~non-GAAP ~~delinquent~~financial ~~for~~measures ~~less~~are ~~than~~frequently 90used ~~days~~by stakeholders in ~~accordance~~the ~~with~~evaluation ~~their~~of ~~original~~a ~~terms~~company, they have limitations as analytical tools and ~~those~~should ~~loans~~not ~~for~~be ~~which~~considered ~~borrowers~~in ~~are~~isolation ~~making~~or ~~scheduled~~as ~~payments~~a ~~under~~substitute ~~loan~~for ~~modification,~~analyses ~~forbearance~~of orresults ~~bankruptcy~~as ~~plans~~reported under GAAP. ~~Performing~~In ~~loans~~particular, ~~also~~a ~~include~~measure ~~loans~~of ~~for~~earnings ~~which~~that weexcludes ~~have~~certain ~~master~~items ~~servicing~~does ~~rights~~not represent the amount that ~~are~~effectively ~~reported~~accrues ~~based~~directly onto ~~scheduled~~shareholders ~~UPB~~(i.e., Wethese ~~consider~~items ~~all~~are ~~other~~included ~~loans~~in toearnings beand ~~non-performing~~shareholders’ equity).

~~The following table provides selected portfolio statistics related to our Notes receivable – Rights to MSRs for the three months ended September 30:~~ 45

(In thousands, except for loan count data)	2014			2013			% Change
Average residential assets serviced		$168,391,612			$179,880,557		-6	%
Prepayment speed (average CPR) (1)	10.2		%	13.7		%	-26	%
Average number of residential assets serviced	1,073,247			1,125,374			-5	%

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The following table presents the components of our Interest income - notes receivable - Rights to MSRs in both dollars and as a percentage of average UPB:



	2015					2014
	Dollars			Basis Points of Average UPB		Dollars			Basis Points of Average UPB
Servicing fees collected	$	180,297		11.38		$	189,157		10.63
Subservicing fees payable to Ocwen	(90,942		)	(5.74	)	(90,644		)	(5.09	)
Net servicing fees retained by HLSS	89,355			5.64		98,513			5.54
Amortization of Notes receivable – Rights to MSRs (1)	(14,470		)	(0.91	)	(16,661		)	(0.94	)
Change in fair value of Notes receivable – Rights to MSRs (2)	(3,679		)	(0.23	)	$	20,686		1.16
	$	71,206		4.50		$	102,538		5.76


(1)	Amortization of Notes receivable – Rights to MSRs reflects reductions in the value of the Notes receivable – Rights to MSRs based on the run-off of the portfolio.


(2)	Our methodology of determining the fair value of Notes receivable – Rights to MSRs is described in Part I, Item 1, "Interim Condensed Consolidated Financial Statements – Note 3, Fair Value of Financial Instruments." In our Interim Condensed Consolidated Statements of Operations, we record changes in fair value as a component of Interest income – notes receivable – Rights to MSRs.

Three months ended March 31, 2015 versus 2014. Our Servicing fees collected and Subservicing fees payable to Ocwen decreased period over period primarily because our average UPB for the three months ended March 31, 2015 and 2014 decreased to $158.4 billion from $178.0 billion, respectively, while Servicing fees collected increased in basis points of average UPB due to increases in prepayment speeds for the three months ended March 31, 2015 to 10.6% from 9.9% for the same period in 2014. Subservicing fees payable to Ocwen increased in total dollars and in basis points of average UPB due to lower contractual retained fee rates and due to the pass-through of higher collections in excess of the retained fee.

Amortization of Notes Receivable – Rights to MSRs decreased in total dollars and as a percentage of average UPB due to the lower average UPB during the three months ended March 31, 2015 compared to the same period in 2014, partially offset by higher average prepayment speeds for the UPB tied to our Notes receivable – Rights to MSRs, which increased to 10.6% for the three months ended March 31, 2015 from 9.9% for the same period in 2014.

The Changes in the fair value of Notes receivable – Rights to MSRs are based on appraisals prepared by independent valuation firms. Factors that attributed to the decrease in fair value during 2015 include adjustments to the assumptions used by the valuation firms, including the discount rates applied ranging from 14% to 22% (2014: 15% to 22%), the interest rate used for calculating the cost of servicing advances of 1-Month LIBOR plus 3.50% (2014: 1-month LIBOR plus 3.50%), the prepayment projections over the lifetime of the portfolio ranging from 13% to 29% (2014: 12% to 28%) and the delinquency rate projections of the portfolio ranging from 15% to 35% (2014: 15% to 35%) and changes to the mix of assets underlying our Notes receivable – Rights to MSRs.

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The following table provides selected statistics related to our Notes receivable – Rights to MSRs as of March 31 (1):



(In thousands, except for loan count data)	2015			2014			% Change
Residential Assets Serviced
Unpaid principal balance:
Performing loans (2)	$	129,697,462		$	141,325,033		-8	%
Non-performing loans	23,274,426			31,075,264			-25	%
Non-performing real estate	3,286,606			3,366,449			-2	%
Total residential assets serviced	$	156,258,494		$	175,766,746		-11	%

Percent of total UPB:
Non-performing residential assets serviced	17.0		%	19.6		%	-13	%

Number of:
Performing loans (2)	881,691			946,997			-7	%
Non-performing loans	117,985			156,963			-25	%
Non-performing real estate	18,226			18,445			-1	%
Total number of residential assets serviced	1,017,902			1,122,405			-9	%

Percent of total number:
Non-performing residential assets serviced	13.4		%	17.5		%	-23	%


(1)	This table only includes the UPB related to our Notes receivable - Rights to MSRs.

(2)

Performing loans include those loans that are current or have been delinquent for less than 90 days in accordance with their original terms and those loans for which borrowers are making scheduled payments under loan modification, forbearance or bankruptcy plans. Performing loans also include loans for which we have master servicing rights that are reported based on scheduled UPB. We consider all other loans to be non-performing.

The following table provides selected portfolio statistics related to our Notes receivable – Rights to MSRs for the three months ended March 31:



(In thousands, except for loan count data)	2015			2014			% Change
Average residential assets serviced		$158,368,860			$177,977,591		-11	%
Prepayment speed (average CPR) (1)	10.6		%	9.9		%	7	%
Average number of residential assets serviced	1,027,468			1,133,082			-9	%


(1)	The conditional prepayment rate ("CPR") is equal to the proportion of the principal of a pool of loans, assumed to be paid off, in each period.

~~The following table provides selected portfolio statistics related to our Notes receivable – Rights to MSRs for the nine months ended September 30:~~ 47

(In thousands, except for loan count data)	2014			2013			% Change
Average residential assets serviced		$173,325,891			$120,142,592		44	%
Prepayment speed (average CPR) (1)	10.3		%	13.0		%	-21	%
Average number of residential assets serviced	1,096,194			781,551			40	%

(1) The CPR is equal to the proportion of the principal of a pool of loans, assumed to be paid off, in each period.

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The following tables provide information regarding changes in our portfolio of Notes receivable – Rights to MSRs serviced for the three ~~and nine~~ months ended ~~September~~March 3031:

(In thousands, except for loan count data)	UPB			Loan Count
Servicing portfolio at June 30, 2014	$	170,808,759		1,088,562
Servicing portfolio at December 31, 2014	$	160,785,280		1,040,488
Additions	—			—
Runoff	(43,~~545~~970,~~839~~816		)	(2219,~~028~~131	)
Servicing transfers	(~~739~~555,~~089~~970		)	(3,~~688~~455	)
Servicing portfolio at September 30, 2014	$	165,523,831		1,062,846
Servicing portfolio at March 31, 2015	$	156,258,494		1,017,902

(In thousands, except for loan count data)	UPB			Loan Count
Servicing portfolio at December 31, 2013	$	180,403,208		1,148,193
Additions	—			—
Runoff	(144,~~140~~636,~~288~~462		)	(8125,~~659~~788	)
Servicing transfers	(739,089		)	(3,688	)
Servicing portfolio at March 31, 2014	$	175,766,746		1,122,405
Servicing portfolio at September 30, 2014	$	165,523,831		1,062,846

(In thousands, except for loan count data)	UPB			Loan Count
Servicing portfolio at June 30, 2013	$	99,912,023		654,701
Additions	83,300,984			498,273
Runoff	(6,664,900		)	(55,200	)
Servicing portfolio at September 30, 2013	$	176,548,107		1,097,774

(In thousands, except for loan count data)	UPB			Loan Count
Servicing portfolio at December 31, 2012	$	79,360,874		549,949
Additions	109,833,116			632,913
Runoff	(12,645,883		)	(85,088	)
Servicing portfolio at September 30, 2013	$	176,548,107		1,097,774

Change in Financial Condition Summary

The overall ~~increase~~decrease in total assets of $~~641~~701,~~673~~576 and total liabilities of $~~580~~676,~~848~~756 during the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, primarily resulted from:

• The ~~completion~~sale of ~~the~~RPLs ~~GNMA~~on ~~EBO~~February ~~loan~~20, ~~purchase~~2015 ~~from~~and ~~Ocwen~~the ~~totaling~~concurrent ~~$556,618~~retirement of the RPL Facility; and

• ~~The~~We ~~creation~~received of$312,799 ~~the~~in ~~EBO~~net ~~Facility,~~Match ~~which~~funded ~~increased~~advance ~~total~~remittances and had net repayments of Match funded liabilities byof $~~472~~349,~~734;~~771.

•Our ~~Financing~~assets at March 31, 2015 include Notes receivable – Rights to MSRs which had a balance of ~~servicing~~$594,417 ~~advances~~representing ~~related~~8.0% of total assets at March 31, 2015. Notes receivable – Rights to MSRs are carried at fair value which is determined based on appraisals prepared by independent valuation firms and which require the ~~GNMA~~use ~~EBO~~of ~~Transaction~~significant unobservable inputs. The most significant assumptions used in the appraisals as of ~~$55~~March 31,~~702;~~ 2015 are:

• ~~Financing~~Discount rates reflecting the risk of ~~other~~earning ~~servicing~~the ~~advances~~future ~~for~~income ~~Ocwen~~streams ofranging ~~$20,157~~from 14% to 22%;

• Acquisitions of RPL loans from an unrelated third party totaling $343,895;

• The creation of the RPL Facility, which increased total liabilities by $275,116;

• An increase in the fair value of our Notes receivable – Rights to MSRs of $37,764; and

• We received $287,504 in Match funded advance remittances and had net repayments of Match funded liabilities of $169,986.

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Our assets at September 30, 2014 include Notes receivable – Rights to MSRs which had a balance of $618,962 representing 7.8% of total assets at September 30, 2014. Notes receivable – Rights to MSRs are carried at fair value which is determined based on an appraisals prepared by independent valuation firms and requires the use of significant unobservable inputs. The most significant assumptions used in the appraisals as of September 30, 2014 are:

• Discount rates reflecting the risk of earning the future income streams ranging from 15% to 22%;


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

• Mortgage loan prepayment projections ranging from 1213% to 2829% of the related mortgage lifetime projected prepayment rate; and


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

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LIQUIDITY AND CAPITAL RESOURCES

WeOn ~~define~~April 6, ~~liquidity~~2015, to best address concerns relating to our ability to operate as ~~unencumbered~~a ~~cash~~going ~~balances~~concern ~~plus~~and ~~unused,~~the ~~collateralized~~associated ~~financing~~impact ~~capacity.~~on ~~Our~~our ~~liquidity~~business ason ofan ~~September 30~~expedited basis, ~~2014~~we asagreed ~~measured~~with byNRZ ~~cash~~and Merger Sub to terminate the Old Merger Agreement and ~~available~~immediately ~~credit,~~complete the Asset Sale. The Asset Sale was ~~$130,160,~~made ain ~~decrease~~accordance with the terms and conditions of ~~$30,813~~the ~~from~~NRZ ~~December 31,~~Purchase ~~2013~~Agreement. AtIn ~~September 30,~~connection ~~2014~~with ~~our~~the ~~cash~~Asset ~~position~~Sale, ~~was~~among ~~$130~~other things,~~160~~ ~~compared~~(i) toHLSS ~~$87,896~~MSR-EBO atacquired ~~December 31,~~substantially ~~2013.~~all Weof ~~had~~the noassets ~~collateralized~~of ~~available~~the ~~capacity~~Company at(including ~~September 30,~~all ~~2014~~of ~~compared~~the toissued ~~$73,077~~share atcapital ~~December 31~~of Luxco 1B) and (ii) HLSS Advances acquired all of the issued share capital of Luxco 1A and assumed substantially all of the liabilities of the Company, ~~2013~~including certain post-closing liabilities of the Company. ~~Regarding~~In exchange, the ~~investment~~Company ofreceived an amount in cash equal to approximately $1.0 billion plus 28,286,980 ~~our~~newly ~~investment~~issued ~~policies~~shares ~~emphasize~~of ~~principal~~NRZ ~~preservation~~common ~~and~~stock ~~availability~~with bya ~~limiting~~par value $0.01 per share. In conjunction with the ~~investment~~Asset toSale, ~~demand~~our ~~deposit~~senior ~~accounts.~~secured term loan facility was retired.

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

On April 27, 2015, we distributed to our shareholders approximately $1.2 billion or $16.613 per ordinary share.

Liquidity (Prior to Asset Sale)

We define liquidity as unencumbered cash balances plus unused, collateralized financing capacity. Our liquidity as of March 31, 2015 as measured by cash and available credit, was $181,507, a decrease of $28,502 from December 31, 2014. At March 31, 2015 our cash position was $181,507 compared to $210,009 at December 31, 2014. We had no collateralized available capacity at March 31, 2015 and December 31, 2014. Regarding the investment of cash, our investment policies emphasize principal preservation and availability by limiting the investment to demand deposit accounts.

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Investment policy and funding strategy. Our primary sources of funds for near-term liquidity are:


•	Interest income – notes receivable – Rights to MSRs;

• Proceeds from liquidation of Loans held for ~~investment~~sale;


•	Proceeds from Match funded liabilities; and


•	Proceeds from Other borrowings.

Potential long-term sources of liquidity include proceeds from the issuance of debt or equity.

Our primary uses of funds are:


•	Payments for advances in excess of collections on our existing servicing portfolio;


•	Payments of interest and operating costs;


•	Purchases of Residential Mortgage Assets; and


•	Repayments of borrowings.

In managing our liquidity position, our primary focus is on maintaining sufficient cash and unused borrowing capacity to meet our advancing obligations, pay expenses and purchase additional Residential Mortgage Assets. We regularly monitor and project our cash position and borrowing capacity, and we consider this in sizing asset purchases.

At ~~September~~March 3031, ~~2014~~2015, $~~567~~513,~~364~~682 of our total maximum borrowing capacity on our advance facilities remained unused. We maintain unused borrowing capacity for three reasons:


•	As a protection should advances increase due to increased delinquencies;


•	As capacity to retire our term notes as they mature; and


•	To provide capacity for the acquisition of additional Residential Mortgage Assets.

40Outlook. We believe that our cash balance and unused advance financing capacity are sufficient to meet foreseeable requirements. Immediately prior to the Asset Sale, we repaid our senior secured term loan facility in full at par. In conjunction with the Asset Sale, HLSS MSR-EBO and HLSS Advances assumed substantially all of the liabilities of the Company, including certain post-closing liabilities of the Company. Refer also to discussions within Part I, Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments,” which is incorporated herein by reference.

Debt and Match funded liability summary. As of March 31, 2015, we had $513,682 of unused borrowing capacity on our advance facilities. Our ability to continue to pledge collateral under our advance facilities depends on the performance of the collateral. Currently, the large majority of our collateral qualifies for financing. The debt covenants for our advance facilities, senior secured term loan facility, the EBO Facility, the Note Facility and the RPL Facility (collectively, our “Facilities”) require that we maintain minimum levels of liquid assets. Failure to comply with these covenants could result in restrictions on new borrowings or the early termination of our Facilities. We believe we are in compliance with these covenants and do not expect them to restrict our activities.

During the three months ended March 31, 2015, we amended our Series 2012 variable funding notes to modify the advance rates and to increases the maximum principal balance by $300 million in aggregate for the period commencing January 15, 2015 and ending April 15, 2015. In addition, we modified the Series 2013 variable funding notes (i) to extend the expected repayment date from February 13, 2015 to December 3, 2015, (ii) to incorporate additional designated servicing agreements as collateral, and (iii) to set the maximum principal balance at $525 million and to prescribe the circumstances whereby the maximum principal balance will be increased by $100 million to $625 million for a period of six months and, after the expiration of such period, then reduced to $550 million. Further, we extended the maturity date of the EBO Facility from March 2, 2015 to May 1, 2015. Lastly, we modified our senior secured term loan facility to extend the deadline to furnish annual financial statements to April 10, 2015, to amend certain terms of cross-default to our advance financing facilities, and to obtain consent to permit certain amendments to our subservicing agreement with Ocwen.

During the three months ended March 31, 2015, we redeemed $600.0 million of term notes, and we repaid the RPL Facility in full in conjunction with the sale of the RPL portfolios on February 20, 2015.

See Part I, Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments,” for discussion of a downgrade in our credit rating, the alleged events of default of certain of the advance funding facilities and cross default provisions to Ocwen’s senior secured term facility within our advance funding facilities and EBO Facility.

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~~Outlook. We~~Immediately ~~believe~~prior ~~that~~to the Asset Sale, we repaid our ~~cash~~senior ~~balance~~secured ~~and~~term ~~unused~~loan ~~advance~~facility ~~financing~~in ~~capacity~~full ~~are~~at ~~sufficient~~par. In conjunction with the Asset Sale, Home Loan Servicing Solutions, Ltd. ceased to ~~meet~~be ~~foreseeable~~party ~~requirements~~to the Match funded liabilities and Other borrowings.

Debt and Match funded liability summary. As of September 30, 2014, we had $567,364 of unused borrowing capacity on our advance facilities. Our ability to continue to pledge collateral under our advance facilities depends on the performance of the collateral. Currently, the large majority of our collateral qualifies for financing. The debt covenants for our advance facilities, senior secured term loan facility, the EBO Facility, the Note Facility and the RPL Facility (collectively, our “Facilities”) require that we maintain minimum levels of liquid assets. Failure to comply with these covenants could result in restrictions on new borrowings or the early termination of our Facilities. We believe we are in compliance with these covenants and do not expect them to restrict our activities.

During the nine months ended September 30, 2014, we issued three series of term notes with a combined balance of $1,200,000. In addition, we renewed our Series 2013 variable funding notes to reduce the cost of borrowing and extend the term by one year, and we extended the amortization date of our Series 2012 variable funding notes by one year. We also retired term notes of $1,494,500. We entered into the EBO Facility to partially finance our purchase of GNMA EBO loans. The EBO Facility had an outstanding balance of $452,258 at September 30, 2014. We entered into the Note Facility to partially finance $37,000 of notes retained as part of the Series 2014 T3 Term Note issuance on June 18, 2014. The Note Facility had an outstanding balance of $25,949 at September 30, 2014. Lastly, we entered into the RPL Facility to partially finance our purchase of RPLs. The RPL Facility had an outstanding balance of $274,306 at September 30, 2014.

During the three months ended September 30, 2014, we used available capacity on our variable funding notes to repay $843.5 million of term notes.

Liquidity Risk. We are exposed to liquidity risk should the cash required to make new advances pursuant to servicing contracts and our agreements with Ocwen exceed the amount of advance repayments. In general, we finance our operations through operating cash flows and have advance financing facilities in place with sufficient capacity to cover the majority of cash required to make new advances. However, our Facilities contain borrowing conditions that, if not met, could affect our ability to borrow on new advances and affect our liquidity.

We are also exposed to liquidity risk related to our Loans held for ~~investment~~sale. We have leveraged our Loans held for ~~investment~~sale acquired to date in repurchase agreements with maturities of one year or less which we expect to renew upon maturity. Repurchase agreements are subject to margin calls that could adversely affect our liquidity by requiring us to repay a portion of the outstanding borrowing.

~~Cash~~ ~~flows~~Refer ~~for~~also ~~the~~to ~~nine~~discussions ~~months~~within ~~ended~~Part ~~September~~I, ~~30.~~Item ~~The~~2, ~~following~~“Management's ~~table~~Discussion ~~presents~~and aAnalysis ~~summary~~ of ~~our~~Financial ~~cash~~Condition ~~flows~~and ~~for~~Results ~~the~~of ~~nine~~Operations ~~months~~– ~~ended~~Recent ~~September~~Developments,” ~~30:~~which is incorporated herein by reference.

	2014			2013
Net income	$	164,234		$	111,077
Adjustments for non-cash items	14,242			11,310
Changes in assets and liabilities	299,121			657,258
Cash flows from operating activities	477,597			779,645
Cash flows from investing activities	(900,965		)	(3,854,687		)
Cash flows from financing activities	465,632			3,075,826
Net increase in cash	42,264			784
Cash at beginning of period	87,896			76,048
Cash at end of period	$	130,160		$	76,832

Cash flows for the three months ended March 31. The following table presents a summary of our cash flows for the three months ended March 31:

Nine months ended September 30, 2014. Our operating activities provided $477,597 of cash. Components of operating cash flows included amounts provided by a decrease in assets and liabilities of $299,121 and by our Net income of $164,234, adjusted for amortization of debt issuance costs of $15,160, accretion of our original issuance discount related to our senior secured term loan facility of $563, net accretion of our loan purchase premium and discount of $1,631 and share-based compensation expense of $150. The primary contributors to the changes in assets and liabilities were reductions in Match funded advances of $287,504 and Related party receivables of $43,826, offset by increases in debt service accounts of $15,806 and a



	2015			2014
Net income	$	15,260		$	64,360
Adjustments for non-cash items	14,354			1,570
Changes in assets and liabilities	289,687			37,837
Cash flows from operating activities	319,301			103,767
Cash flows from investing activities	376,374			(608,794		)
Cash flows from financing activities	(724,177		)	493,051
Net decrease in cash	(28,502		)	(11,976		)
Cash at beginning of period	210,009			87,896
Cash at end of period	$	181,507		$	75,920

41Three months ended March 31, 2015. Our operating activities provided $319,301 of cash. Components of operating cash flows included amounts provided by a decrease in assets and liabilities of $289,687 and by our Net income of $15,260, adjusted for amortization of debt issuance costs of $4,377, accretion of our original issuance discount related to our senior secured term loan facility of $185, net amortization of our whole loan purchase premiums and discounts of $183, accretion of the accretable yield on our RPLs of $1,595, a decrease in the fair value of the Notes receivable – Rights to MSRs of $3,679 and an increase in the unrealized loss on our GNMA EBO loan portfolios of $7,654 and the benefit from net forfeitures of share-based compensation expense of $129. The primary contributors to the changes in assets and liabilities were reductions in Match funded advances of $312,799 and debt service accounts of $50,258, offset by an increase in Related party receivables of $90,666 and a decrease in Related party payables of $5,668. The remainder of the changes in assets and liabilities relates to a net decrease in cash flows from operations due to movements in other assets and other liabilities of $22,964, primarily attributable to increases in our accrued interest income on GNMA EBO loans and the purchase price holdback on the sale of our RPL portfolios.

The primary driver of the increase in Related party receivables was attributable to the change in Match funded advance collections due from Ocwen of $92,138. The decrease in Related party payables was primarily attributable to the decrease in subservicing fees payable to Ocwen of $2,139 and a decrease in advances made by Ocwen that we had not yet purchased of $5,285. A portion of our Match funded advance collections of $312,799 were immediately used to pay down our outstanding Match funded liabilities. Refer to the financing activities discussion below for more details regarding Match funded liability cash movements during the current period. Lastly, the decrease in debt service accounts primarily relates to the timing of payments made to the trustees of our advance financing facilities. The trustees release these funds to pay down our Match funded liabilities on scheduled funding dates.

Our investing activities provided $376,374 of cash during the three months ended March 31, 2015 which primarily related to the sale of RPLs to a third party buyer for a total purchase price of $337,553. In addition, we received $17,040 from repayments

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~~decrease in Related party payables~~ of ~~$2,215.~~our ~~The~~GNMA ~~remainder~~EBO ofloans ~~the~~and ~~changes~~our inRPLs, ~~assets~~ and ~~liabilities~~we ~~relates~~received to$5,412 afrom ~~net~~the ~~decrease~~recovery inof ~~cash~~advance ~~flows~~financing ~~from~~receivables. ~~operations~~Finally, ~~due~~we tohad ~~movements~~a reduction in ~~other~~Notes ~~assets~~receivable ~~and~~– ~~other~~Rights ~~liabilities~~to MSRs of $1416,~~188,~~369 ~~primarily~~due ~~attributable~~ to anprincipal ~~increase~~reductions infrom ~~accrued~~runoff ~~interest~~in ~~income~~the ~~related~~UPB toof ~~our~~the ~~Loans~~mortgage ~~held~~loans ~~for investment~~serviced.

~~The~~Our ~~primary~~financing ~~driver~~activities ofused ~~the~~$724,177 ~~decrease~~of incash. ~~Related~~We ~~party~~had ~~receivables~~net ~~was~~payments ~~attributable~~ to ~~the change in~~ Match funded ~~advance~~liabilities ~~collections due from Ocwen~~ of $44349,~~887.~~771 ~~The~~during ~~decrease in Related party payables was primarily attributable to~~ the ~~decrease~~period. inIn ~~subservicing~~addition, ~~fees~~we ~~payable~~received ~~to Ocwen of~~ $2,~~254.~~481 Aof ~~portion~~proceeds offrom our ~~Match~~Other ~~funded advance collections of $287~~borrowings,~~504~~ ~~were~~offset ~~immediately~~by ~~used~~the torepayments ~~pay~~of ~~down~~ our ~~outstanding~~Other ~~Match~~borrowings ~~funded~~of ~~liabilities.~~332,575, ~~Refer~~including to the ~~financing~~repayment ~~activities~~in ~~discussion~~full ~~below~~of ~~for~~our ~~more~~RPL ~~details~~Facility ~~regarding~~in ~~Match~~conjunction ~~funded~~with ~~liability~~the ~~cash~~sale ~~movements~~of ~~during~~our ~~the~~RPL ~~current period~~portfolios. ~~Lastly,~~We ~~the~~also ~~increase~~used cash in ~~debt service accounts primarily relates to payments made to~~ the ~~trustees~~payment of ~~our~~debt ~~advance~~issuance ~~financing~~costs ~~facilities~~of $5,963. ~~The~~Lastly, ~~trustees~~we ~~release~~paid ~~these~~dividends ~~funds~~of ~~to pay down our Match funded liabilities on scheduled funding dates~~$38,349.

Three months ended March 31, 2014. Our ~~investing~~operating activities ~~used~~provided $~~900~~103,~~965~~767 of cash. ~~during~~Components ~~the~~of ~~nine~~operating ~~months~~cash ~~ended~~flows ~~September 30,~~included ~~2014~~amounts ~~which~~provided ~~primarily~~by ~~related~~changes toin ~~our~~assets ~~acquisition~~and liabilities of ~~GNMA~~$37,837 ~~EBO~~and ~~loans~~by ~~from~~our ~~Ocwen~~Net ~~and~~income ~~RPLs~~of ~~from~~$64,360, aadjusted ~~third~~for ~~party~~amortization ~~seller.~~of Wedebt ~~paid~~issuance costs of $~~556~~4,~~618~~962 ~~for~~and ~~the~~accretion ~~GNMA~~of ~~EBO~~our ~~loans~~original ~~and~~issuance ~~$343,895~~discount ~~for~~related ~~the~~to ~~RPLs. These~~our ~~acquisitions~~senior ~~were~~secured ~~partially~~term ~~offset~~loan byfacility ~~reductions~~ of $~~69,731~~185. ~~from~~The primary contributors to the ~~repayment~~changes ofin ~~certain~~assets ~~Loans~~and ~~held~~liabilities ~~for~~were ~~investment.~~reductions Inin ~~addition,~~Match wefunded ~~used~~advances of $8644,~~206~~384 ofand ~~cash~~decreases toin ~~finance~~Related ~~servicing~~party ~~advances~~receivables of $2,450 offset by increases in debt service accounts of $13,~~216~~077 ~~received~~and ~~from~~increases ~~the~~in ~~recovery~~related ofparty ~~advance~~payables ~~financing~~of ~~receivables~~$(2,847). ~~Finally,~~The weremainder ~~had~~of athe ~~reduction~~changes in ~~Notes~~assets ~~receivable~~and –liabilities ~~Rights~~relates to ~~MSRs~~a ofnet ~~$14,807~~increase ~~due~~in tocash ~~principal~~flows ~~reductions~~ from ~~runoff~~operations due to movements in ~~the~~other ~~UPB~~assets ofand ~~the~~other ~~mortgage~~liabilities ~~loans~~of ~~serviced~~$(3,073).

~~Our~~The ~~financing~~primary ~~activities~~driver ~~provided $465,632~~ of ~~cash.~~the Wechange ~~had~~in ~~net~~Related ~~payments~~party toreceivables was Match funded ~~liabilities~~advance collections due from Ocwen of $~~169~~21,~~986~~265. ~~during~~Increases ~~the~~in ~~period.~~related Weparty ~~received~~payables ~~$773,798~~were inprimarily ~~proceeds~~attributable ~~from~~to ~~our~~subservicing ~~Other~~fees ~~borrowings~~payable to ~~help~~Ocwen ~~fund~~of ~~our~~$4,212 ~~GNMA~~for ~~EBO~~March 31, ~~loan~~2014, ~~and~~subservicing ~~RPL~~activity ~~purchases~~ and toan ~~partially~~amount ~~finance~~due ~~our~~to ~~retention~~Ocwen of a$27,668 ~~portion~~for ofadvances made on our ~~2014~~behalf T3as ~~Term~~of ~~Notes~~March 31, 2014. ~~These~~The ~~amounts~~collection ~~were~~of ~~offset~~Match byfunded ~~payments~~advances of ~~debt~~$44,384 ~~issuance~~was ~~costs~~used ofto pay down $13643,~~426~~585 ~~and~~of ~~payments~~our Match funded liabilities, which resulted in net cash provided of $2319,~~910~~392. onRefer ~~our~~to ~~Facilities~~the financing activities discussion below for more details regarding Match funded liability cash movements during the period. ~~Additionally~~Lastly, wethe ~~paid~~increase ~~dividends~~in debt service accounts primarily relates to payments made to the trustees of ~~$100,844~~our advance financing facilities. The trustees release these funds to pay down our Match funded liabilities on scheduled funding dates.

~~Nine months ended September 30, 2013.~~ Our ~~operating~~investing activities ~~provided~~used $~~779~~608,~~645~~794 of cash. ~~Components~~during ofthe ~~operating cash flows included amounts provided by changes in assets and liabilities of $657~~period,~~258~~ ~~and~~which byprimarily ~~our Net income of $111,077, adjusted for amortization of debt issuance costs of $11,113 and accretion of our original issuance discount~~ related to our ~~senior~~acquisition ~~secured term loan facility~~ of ~~$197.~~Rights ~~The primary contributors~~ to ~~the~~MSRs ~~changes in assets~~ and ~~liabilities~~related ~~were reductions in~~ Match funded advances ofassociated ~~$662,977~~with ~~and~~two ~~decreases~~asset inpurchases ~~Related~~from ~~party~~Ocwen. ~~receivables~~We ofpaid $16387,~~989~~300 ~~offset~~to byOcwen ~~increases~~for inNotes ~~debt~~receivable ~~service~~– ~~accounts~~Rights ofto ~~$63,586~~MSRs and ~~increases~~$3,492,489 infor ~~related~~Match ~~party~~funded ~~payables~~advances. ~~of $32~~Finally,~~315.~~ ~~The~~we ~~remainder~~had ofa ~~the~~reduction ~~changes~~ in ~~assets~~Notes ~~and~~receivable ~~liabilities~~– ~~relates~~Rights to aMSRs ~~net~~of ~~increase~~$0 ~~in cash flows from operations~~ due to ~~movements~~UPB inrunoff ~~other assets and other liabilities of $8,563~~.

~~The~~Our ~~primary~~financing ~~driver~~activities ofprovided ~~the~~$493,051 ~~change~~of incash. ~~Related~~New ~~party~~ordinary ~~receivables~~share ~~was~~issuances ~~Match~~during ~~funded~~the ~~advance~~period ~~collections~~provided ~~due~~$0 ~~from~~of ~~Ocwen~~cash, net of underwriting fees. We borrowed $213,~~265.~~140,192 ~~Increases~~on inour ~~related~~Match ~~party~~funded ~~payables~~advance ~~were~~financing ~~primarily~~facility ~~attributable~~related to ~~subservicing~~our ~~fees~~asset ~~payable~~purchases tofrom Ocwen ~~of $4~~,~~212~~ ~~for~~and ~~September 30~~overall, ~~2013,~~we ~~subservicing~~had ~~activity~~net ~~and~~proceeds anfrom ~~amount~~Match ~~due~~funded toliabilities ~~Ocwen~~ of $2759,~~668~~558 ~~for~~during ~~advances~~the ~~made~~period. onWe ~~our~~received ~~behalf~~$472,734 asin ofproceeds ~~September 30,~~in ~~2013.~~connection ~~The~~with ~~collection~~the issuance of ~~Match~~debt ~~funded~~under ~~advances~~our ofsenior ~~$662,977~~secured ~~was~~term ~~used~~loan facility to ~~pay~~help ~~down~~fund ~~$643,585~~our ofFollow ~~our~~On ~~Match~~3 ~~funded~~purchase ~~liabilities,~~from ~~which~~Ocwen. These ~~resulted~~amounts inwere ~~net~~offset ~~cash~~by ~~provided~~payments of ~~$19,392.~~debt ~~Refer~~issue tocosts ~~the~~totaling ~~financing~~$6,408 ~~activities~~and ~~discussion~~a ~~below~~quarterly ~~for~~principal ~~more~~payment ~~details~~of ~~regarding~~$875 ~~Match~~on ~~funded~~our ~~liability~~senior ~~cash~~secured ~~movements~~term ~~during~~loan ~~the period~~facility. ~~Lastly~~Additionally, ~~the~~we ~~increase~~paid individends ~~debt~~equal ~~service accounts primarily relates~~ to ~~payments made to the trustees of our advance financing facilities~~$31,958. ~~The~~Finally, ~~trustees~~we ~~release~~paid ~~these~~offering ~~funds~~costs toof ~~pay~~$0 ~~down~~associated with our ~~Match~~issuance ~~funded~~of ~~liabilities~~ordinary onshares ~~scheduled~~during ~~funding~~the ~~dates~~period.

Our investing activities used $3,854,687 of cash during the period, which primarily related to our acquisition of Rights to MSRs and related Match funded advances associated with two asset purchases from Ocwen. We paid $387,300 to Ocwen for Notes receivable – Rights to MSRs and $3,492,489 for Match funded advances. Finally, we had a reduction in Notes receivable – Rights to MSRs of $25,102 due to UPB runoff .

Our financing activities provided $3,075,826 of cash. New ordinary share issuances during the period provided $334,390 of cash, net of underwriting fees. We borrowed $3,140,192 on our Match funded advance financing facility related to our asset purchases from Ocwen, and overall, we had net proceeds from Match funded liabilities of $2,496,606 during the period. We received $344,750 in proceeds in connection with the issuance of debt under our senior secured term loan facility to help fund our Follow On 3 purchase from Ocwen. These amounts were offset by payments of debt issue costs totaling $23,025 and a quarterly principal payment of $875 on our senior secured term loan facility. Additionally, we paid dividends equal to $75,478. Finally, we paid offering costs of $542 associated with our issuance of ordinary shares during the period.

TOTAL EQUITY

Total equity amounted to $1,~~277~~266,~~272~~459 at ~~September~~March 3031, ~~2014~~2015, as compared to $1,~~216~~291,~~447~~279 at December 31, ~~2013~~2014. This ~~increase~~decrease of $6024,~~825~~820 is primarily due to net income of $~~164~~15,~~234~~260, offset by dividends declared of $~~102~~38,~~974~~349. In addition, we recorded reductions of $~~150~~155 in relation to share-based compensation and $1,576 of unrealized losses (net of tax) on interest rate swaps that we designated as cash flow hedges.

42DIVIDENDS AND DISTRIBUTIONS

During 2015, we declared the following dividends:



Record Date	Payment Date	Amount per Ordinary Share
January 30, 2015	February 10, 2015	$0.18
February 27, 2015	March 10, 2015	$0.18
March 31, 2015	April 10, 2015	$0.18

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~~share-based~~On ~~compensation~~April ~~expense~~27, ~~and~~2015, ~~$585~~we paid a liquidating distribution in the aggregate amount of ~~unrealized~~approximately ~~losses~~$1.2 billion or $16.613 per share (~~net~~the of"Distribution ~~tax~~Amount") to holders of record at the close of business on ~~interest~~April ~~rate~~20, ~~swaps~~2015. ~~that~~The weDistribution ~~designated~~Amount asrepresented the net proceeds received by the Company in connection with the Asset Sale, less a cash ~~flow~~reserve ~~hedges~~in the amount of $50 million.

~~DIVIDENDS~~If the New Merger is consummated, our shares will be converted automatically into the right to receive $0.704059 per share in cash without interest, being the Merger Consideration. If the New Merger is not consummated and post-closing expenses and liabilities do not exceed $50 million, it is anticipated that a further cash distribution will be made to shareholders.

We intend to distribute approximately 90 percent of our earnings over time in the form of monthly cash dividends. During 2014, we declared the following dividends:

Record Date	Payment Date	Amount per Ordinary Share
January 31, 2014	February 10, 2014	$0.15
February 28, 2014	March 10, 2014	$0.15
March 31, 2014	April 10, 2014	$0.15
April 30, 2014	May 12, 2014	$0.16
May 30, 2014	June 10, 2014	$0.16
June 30, 2014	July 10, 2014	$0.16
July 31, 2014	August 11, 2014	$0.16
August 29, 2014	September 10, 2014	$0.18
September 30, 2014	October 10, 2014	$0.18
October 31, 2014	November 10, 2014	$0.18
November 28, 2014	December 10, 2014	$0.18
December 31, 2014	January 12, 2015	$0.18

CONTRACTUAL OBLIGATIONS, OFF-BALANCE SHEET ARRANGEMENTS AND OTHER MATTERS

Contractual Obligations

We believe that we have adequate resources to fund all unfunded commitments to the extent required and to meet all contractual obligations as they come due. Such contractual obligations include payments on our Other borrowings and operating leases.

We exclude our Match funded liabilities from our contractual obligations because they represent non-recourse debt that has been collateralized by Match funded advances which are not available to satisfy general claims against HLSS. Holders of the notes issued by the Match Funded Advance SPEs have no recourse against any assets other than the Match funded advances that serve as collateral for the securitized debt.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, we ~~entered~~did ~~into~~not ~~the~~enter ~~EBO~~into ~~Facility,~~any ~~the~~significant ~~RPL~~contractual ~~Facility~~obligations ~~and~~or ~~the~~off-balance ~~Note~~sheet ~~Facility.~~arrangements ~~See~~that ~~Part I,~~require ~~Item 1,~~ongoing ~~“Interim~~future ~~Condensed Consolidated Financial Statements — Note 8, Other Borrowings” for additional information regarding the contractual obligations under these facilities~~payments.

Off-Balance Sheet Arrangements

In the normal course of business, we may engage in transactions with a variety of financial institutions and other companies that we do not reflect on our Interim Condensed Consolidated Balance Sheet. We are subject to potential financial loss if the counterparties to our off-balance sheet transactions are unable to complete an agreed-upon transaction. We seek to limit counterparty risk through financial analysis, dollar limits and other monitoring procedures. We may also entered into non-cancelable operating leases principally for our office facilities.

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Derivatives. We record all derivative transactions at fair value on our Interim Condensed Consolidated Balance Sheet. We use these derivatives primarily to manage our interest rate risk. The notional amounts of our derivative contracts do not reflect our exposure to credit loss.

Involvement with SPEs. We use SPEs in the financing of our Match funded advances and Loans held for investment. We use securitization facilities to finance these assets. The SPEs to which these assets are transferred in these securitization transactions are included in our Interim Condensed Consolidated Financial Statements because we are the primary beneficiary of the SPEs, which are also VIEs. The holders of the debt of the Match Funded Advance SPEs can look only to the assets of the SPEs for satisfaction of the debt and have no recourse against HLSS. The holders of the debt of the Mortgage Loans SPEs have recourse against HLSS if the assets of the SPE are not able to satisfy the debt of the SPE.

VIEs. If we determine that we are the primary beneficiary of a VIE, we report the VIE in our Interim Condensed Consolidated Financial Statements. As of ~~September~~March 3031, ~~2014~~2015, all of our VIEs are fully consolidated.

Related Parties

We have entered into various agreements with Ocwen and Altisource. William C. Erbey, our founder and the former Chairman of our Board of Directors, iswas also the Chairman of the Board of Directors of Ocwen and Altisource.

For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2014~~2015, we earned servicing fees of $~~177~~180,~~113 and $551~~297,~~960,~~ ~~respectively,~~ of which we paid subservicing fees to Ocwen of $8390,~~634 and $265,179, respectively~~942. For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2013~~2014, we earned servicing fees of $~~200~~189,~~838 and $431~~157,~~795,~~ ~~respectively,~~ of which we paid subservicing fees to Ocwen of $~~102~~90,~~040 and $214,587, respectively~~644.

At ~~September~~March 3031, ~~2014~~2015, Ocwen owed us $~~827~~0 for professional services provided pursuant to the Professional Services Agreement. During the three ~~and nine~~ months ended ~~September~~March 3031, ~~2014~~2015 we earned fees of $~~320~~50 ~~and $1,721, respectively,~~ for services provided to Ocwen pursuant to the Professional Services Agreement (compared to $491 and $1,458 for the same periods in 2013). Additionally, during the three and nine months ended September 30, 2014, we incurred expenses of $131 and $510 for services received from Ocwen pursuant to the Professional Services Agreement (compare to $30 and $90 for the same periods in 2013). Revenue and expenses from the Professional Services Agreement are included within Related party revenue and Related party expenses, respectively.

During the three and nine months ended September 30, 2014, we incurred expenses of $259 and $748 for services provided to us pursuant to the Altisource Administrative Services Agreement (compared to $178 and $530 for the same periods in 2013). We reported these amounts within Related party expenses for each period then ended. 53

WeTable ~~use~~of actual costs incurred plus a 15% mark-up for our revenues and expenses related to our Professional Services Agreement with Ocwen and for expenses related to our Altisource Administrative Services Agreement. See Part I, Item 1, "Interim Condensed Consolidated Financial Statements - Note 17, Related Party Transactions" for more information regarding our related party transactions.Contents

Professional Services Agreement (compared to $628 for the same period in 2014). Additionally, during the three months ended March 31, 2015, we incurred expenses of $0 for services received from Ocwen pursuant to the Professional Services Agreement (compare to $154 for the same period in 2014). Revenue and expenses from the Professional Services Agreement are included within Related party revenue and Related party expenses, respectively.

During the three months ended March 31, 2015, we incurred expenses of $76 for services provided to us pursuant to the Altisource Administrative Services Agreement (compared to $218 for the same period in 2014). We reported these amounts within Related party expenses for each period then ended.

We use actual costs incurred plus a 15% mark-up for our revenues and expenses related to our Professional Services Agreement with Ocwen and for expenses related to our Altisource Administrative Services Agreement. See Part I, Item 1, "Interim Condensed Consolidated Financial Statements – Note 17, Related Party Transactions" for more information regarding our related party transactions.

CRITICAL ACCOUNTING POLICIES

~~There~~Except as described in Part I, Item I, “Interim Condensed Consolidated Financial Statements – Note 1B, Summary of Significant Accounting Policies” in relation to our reclassification of our Loans held for investment to Loans held for sale, there were no significant changes to the accounting policies that we believe are the most critical to an understanding of our results of operations and financial condition that are disclosed in our ~~2013~~2014 Form 10-K/A.

RECENT ACCOUNTING DEVELOPMENTS

See Part I, Item 1, “Interim Condensed Consolidated Financial Statements —– Note 11B, Summary of Significant Accounting Policies —– Recent Accounting Pronouncements.”

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (~~DOLLARS~~Dollars INin ~~THOUSANDS~~thousands)

Market risk includes liquidity risk and interest rate risk. Market risk also reflects the risk of decline in the valuation of financial instruments and the collateral underlying loans. Our Investment Committee reviews significant transactions that may impact market risk and is authorized to utilize a wide variety of techniques and strategies to manage market risk including, in particular, interest rate risk.

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Liquidity Risk

See the Part I, Item 2, “Liquidity and Capital Resources” ~~section~~ for additional discussion of liquidity and related risks.

Interest Rate Risk

Interest rate risk is a function of (i) the timing and (ii) the dollar amount of assets and liabilities that re-price at various points in time. We are exposed to interest rate risk to the extent that our interest rate sensitive liabilities mature or re-price at different speeds, or different bases, than our interest-earning assets.

Our primary strategy to manage the impact of changes in interest rates is to borrow at fixed rates on the term notes in our Match funded liability structure. We also receive the floating rate interest earned on custodial account balances related to the mortgage loans serviced under our subservicing agreement with Ocwen. Further, we executed a hedging strategy aimed at mitigating the impact of changes in variable interest rates within a certain period based on the projected excess of interest rate sensitive liabilities over interest rate sensitive assets. Future variances between the projected excess of interest rate sensitive liabilities over interest rate sensitive assets and actual results could cause us to become over-hedged or under-hedged. Lastly, we are partially compensated for the cost of excess servicing advances because the performance-based incentive fee payable to Ocwen in any month will be reduced by an amount equal to 1-Month LIBOR plus 275 bps per annum of the amount of any such excess servicing advances if the advance ratio exceeds a predetermined level for that month.

If interest rates increase by 1% on our variable-rate borrowing and interest-earning account balances, we estimate a net positive impact of approximately $10,221 resulting from an increase of $15,584 in annual interest income compared to an increase of $4,364 in annual interest expense based on September 30, 2014, balances. 54

	September 30, 2014
Variable-rate borrowings outstanding (1)	$	1,264,170
Fixed-rate borrowings outstanding	3,463,000
Custodial account balances (2)	1,326,813
Notional balance of interest rate swaps (2) (3)	198,274

(1) A portion of this balance is attributable to our senior secured term loan facility which has an interest rate of 1-Month LIBOR plus 3.50% with a 1.00% LIBOR floor. We also include the outstanding balance of our EBO Facility and RPL Facility which have an interest rate of 1-Month LIBOR plus 3.05% and plus 2.50%, respectively. We use the EBO Facility and the RPL Facility to finance our Loans held for investment which are primarily fixed rate loans. Because we finance our fixed rate Loans held for investment using variable rate borrowings, we face interest rate risk related to our Loans held for investment in a rising interest rate environment; however, this risk is partially offset by the interest earned on our variable rate custodial account balances. This balance also includes the Note Facility, which has an interest rate of 1-Month LIBOR plus 1.15%. Lastly, we adjusted this balance to exclude financing of advances over the predetermined advance ratio for the month of September 2014.

(2) Excluded from our Interim Condensed Consolidated Balance Sheet.

(3) This amount relates to the non-forward starting interest rate swaps that we use to hedge our exposure to rising interest rates on a portion of our outstanding variable-rate borrowings.

Our Interim Condensed Consolidated Balance Sheet at September 30, 2014, includes $130,160 of interest-earning cash accounts and $1,075 of interest-earning collateral accounts.

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If interest rates increase by 1% on our variable-rate borrowing and interest-earning account balances, we estimate a net positive impact of approximately $11,881 resulting from an increase of $15,584 in annual interest income compared to an increase of $2,603 in annual interest expense based on March 31, 2015 balances.



	March 31, 2015
Variable-rate borrowings outstanding (1)	$	690,183
Fixed-rate borrowings outstanding	2,863,000
Custodial account balances (2)	1,005,469
Notional balance of interest rate swaps (2) (3)	488,813

(1)

A portion of this balance is attributable to our senior secured term loan facility, which has an interest rate of 1-Month LIBOR plus 3.50% with a 1.00% LIBOR floor. We also include the outstanding balance of our EBO Facility, which has an interest rate of 1-Month LIBOR plus 3.05%. We use the EBO Facility to partially finance our GNMA EBO loans, which are primarily fixed rate loans. Because we finance our fixed rate GNMA EBO loans using variable rate borrowings, we face interest rate risk related to our GNMA EBO loans in a rising interest rate environment; however, this risk is partially offset by the interest earned on our variable rate custodial account balances. This balance also includes the Note Facility, which has an interest rate of 1-Month LIBOR plus 1.15%. Lastly, we adjusted this balance to exclude financing of advances over the predetermined advance ratio because the performance-based incentive fee payable to Ocwen in any month will be reduced by an amount equal to 1-Month LIBOR plus 275 bps per annum of the amount of any such excess servicing advances if the advance ratio exceeds a predetermined level for that month.


(2)	Custodial account balances represent collections related to our Rights to MSRs that earn interest at a variable rate. These balances are in transit to the owners of the mortgage loans underlying our Rights to MSRs and are therefore excluded from our Interim Condensed Consolidated Balance Sheet.


(3)	This amount relates to the non-forward starting interest rate swaps that we use to hedge our exposure to rising interest rates on a portion of our outstanding variable-rate borrowings. This amount is excluded from our Interim Condensed Consolidated Balance Sheet.

Our Interim Condensed Consolidated Balance Sheet at March 31, 2015, includes $181,507 of interest-earning cash accounts and $1,866 of interest-earning collateral accounts.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's filings under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and to ensure that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of ~~the~~our ~~design and operation of the Company's~~ disclosure controls and procedures (as defined in ~~Rule~~Rules 13a-15(e) orand 15d-15(e) ofunder the Securities Exchange Act) as of ~~September~~March 3031, ~~2014~~2015. Based ~~upon~~on ~~that~~this evaluation, our Chief Executive Officer and inChief ~~connection~~Financial ~~with~~Officer ~~the~~concluded ~~restatements~~that ~~described~~as inof ~~Note~~March 2031, 2015 our disclosure controls and procedures (1) were designed and functioning effectively to ~~the~~ensure ~~accompanying~~that ~~condensed~~material ~~consolidated~~information ~~financial~~relating ~~statements~~to HLSS, ~~management~~including ~~has~~its ~~determined~~consolidated ~~that~~subsidiaries, is made known to our Chief Executive Officer and Chief Financial Officer by others within those entities particularly during the ~~Company's~~period ~~disclosure~~in ~~controls~~which this report was being prepared and ~~procedures~~(2) were ~~not~~operating ~~effective~~effectively asin ofthat ~~September~~they ~~30,~~provided ~~2014~~reasonable ~~solely~~assurance asthat ainformation ~~result~~required ofto abe ~~material~~disclosed ~~weakness~~by HLSS in the ~~design~~reports ofthat it files or submits under the ~~Company's~~Securities ~~controls~~Exchange ~~related~~Act toof ~~determining~~1934 (i) is recorded, processed, summarized and reported within the ~~fair~~time ~~value~~three ofmonths ended specified in the ~~Notes~~SEC’s ~~receivable~~rules –and ~~Rights~~forms toand ~~MSRs~~(ii) ~~associated~~accumulated ~~with~~and communicated to management, including the ~~restatement~~Chief ~~which~~Executive ~~had~~Officer ~~not~~or ~~been~~Chief ~~remediated~~Financial Officer, as ofappropriate, ~~September~~to ~~30,~~allow ~~2014~~timely decisions regarding disclosure.

WeNo ~~are~~change ~~committed~~in toour ~~a strong~~ internal control ~~environment~~over ~~and~~financial ~~are~~reporting ~~currently~~(as ~~taking~~defined ~~steps~~in toRules ~~remediate this material weakness. Immediately following the filing of our 2013 10~~13a-~~K/A,~~15(f) ~~management commenced steps to establish an internal cash flow model to evaluate changes in fair value of our Notes receivable – Rights to MSRs,~~ and ~~this~~15d-15(f) ~~model~~under ~~will~~the beSecurities ~~reconciled~~Exchange toAct) ~~valuations~~occurred ~~provided~~during ~~by independent third parties. We will also include~~ the ~~effect~~fiscal ofquarter ~~fair~~ended ~~value~~March ~~adjustments~~31, in2015 ~~accounting~~that ~~for~~has ~~our~~materially ~~Notes receivable – Rights to MSRs. Additionally~~affected, weor ~~will perform reconciliations of data underlying the valuation models provided to independent valuation firms to ensure the data~~ is ~~accurate.~~reasonably Welikely ~~intend~~ to ~~complete~~materially ~~remediation~~affect, ~~during 2014. We believe that this remediation action will represent significant improvement in~~ our internal control ~~environment~~over financial reporting.

There have been no changes in our internal control over financial reporting that have occurred during the fiscal quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.55

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Part I, Item 1, “Interim Condensed Consolidated Financial Statements —– Note 18, Commitments and Contingencies," for information regarding legal proceedings as of March 31, 2015.

ITEM 1A. RISK FACTORS

~~There~~As ~~have~~of March 31, 2015, there had been no material changes in our risk factors from those disclosed ~~under~~in "our 2014 Form 10-K, Part I, Item 1A., ~~Risk~~where ~~Factors"~~we ~~included~~include ina discussion of our ~~2013~~principal ~~Form~~risks ~~10-K/A~~and ~~except~~uncertainties asthat ~~set~~affect ~~forth~~or ~~below~~could affect our business operations.

Governmental bodies may restrict our transactions with related parties or institute policies that adversely affect Ocwen’s business which could increase our operating expenses, reduce our revenues or otherwise adversely affect our business, financial condition, results of operations and ability to grow.56

Our business strategy, including our asset purchase strategy, may be affected by regulatory considerations. The recent trend among federal, state and local lawmakers and regulators has been toward increasing laws, regulations and investigative proceedings with regard to residential mortgage servicing. Our success in part depends on our ability to purchase additional Residential Mortgage Assets from parties like Ocwen and engage high quality mortgage servicers, like Ocwen, to service these assets. If regulators restrict any aspect of our or Ocwen’s business strategy, including Ocwen’s ability to transact business with us, we may be required to alter our strategy, which could include revisions to our Residential Mortgage Asset purchase plans or changes with respect to our mortgage servicing arrangements. Any restrictions imposed on Ocwen’s ability to transact business with us could have a material adverse impact on our business. Ocwen has disclosed that it is subject to a number of federal and state regulatory investigations, examinations, inquiries and requests for information that have resulted or could, in the future, result in adverse regulatory action against Ocwen. One or more of such regulatory actions or Ocwen’s failure to comply with any commitments it makes with respect to such regulatory actions could adversely affect Ocwen’s business or impose additional requirements or restrictions on its activities. Regulatory action against Ocwen could increase our operating expenses, reduce our revenues or otherwise adversely affect our business, financial condition, results of operations and ability to grow.

Servicing issues in our portfolio of Loans held for investment could adversely impact our claims against FHA insurance and result in our reliance on servicer indemnifications which could increase the risk of losses.

We rely on Ocwen to service our GNMA EBO loans in a manner that supports our ability to make claims to the FHA for shortfalls on these loans. If servicing issues result in the curtailment of FHA insurance claims, we will only have recourse against Ocwen for any shortfall. If Ocwen is unable to make indemnification payments owed to us under this circumstance, we could incur losses. Additional discussion of our credit risk related to Ocwen that affect or could affect our business operations is included under "Item 1A. Risk Factors" within our 2013 Form 10-K/A.

Assumptions related to the valuations of our re-performing residential mortgage loans that were acquired may not reflect actual results in ways that materially and adversely affect our operating results.

We have acquired re-performing residential mortgage loans that are not insured against loss. We develop assumptions regarding re-default rates, delinquency rates, interest rates, prepayment speeds and severity in determining the purchase price we will pay for these loans. Even though these loans are acquired at a discount to the UPB, actual results may be materially different from our assumptions, and this may cause us to incur material losses. Further, delays in the timeline to complete foreclosures of non-performing loans could increase our exposure to carrying costs and changes in the cost and availability of financing. Borrowers on re-performing loans, all of which have been previously delinquent, may be more likely to be in economic distress, to have become unemployed or bankrupt or to otherwise be unable or unwilling to make payments when due. Also, a portion of these loans feature future step-ups in the required payment which could cause a greater than expected increase in re-default rates and could reduce our profitability and cash flows.

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The properties underlying Loans held for investment that we acquire through foreclosure may contain unknown environmental defects which could increase our risk of loss.

Environmental protection laws that apply to properties that secure or underlie our Loans held for investment could diminish the value of the properties and result in losses. We may also be exposed to environmental liabilities with respect to properties of which we become a direct or indirect owner or to which we take title which could adversely affect our business and financial results.

Changes in financing terms for our Loans held for investment may adversely affect our return on our investments and may reduce our liquidity.

We have leveraged our Loans held for investment acquired to date in repurchase agreements with maturities of one year or less. Repurchase agreements generally allow the counterparties to determine the market value of the collateral and are subject to margin calls that could adversely affect our liquidity by requiring us to repay a portion of the outstanding borrowing. To the extent that we do not have sufficient cash to satisfy a margin call, this may require the liquidation of assets at a disadvantageous time which could cause us to incur losses. Should market conditions or asset performance expectations deteriorate, we may not be able to refinance our repurchase facilities or enter into longer-term securitization facilities as planned and could result in reduced advance rates, higher interest rates or other changes in terms that could adversely impact our results of operations and liquidity.

Our borrowings collateralized by Loans held for investment require that we make certain representations and warranties that, if determined to be inaccurate, could require us to repurchase loans or cover losses.

Our financing facilities require us to make certain representations and warranties regarding the Loans held for investment that collateralize the borrowings. Although we perform due diligence on the Loans held for investment that we acquire, certain representations and warranties that we make in respect of such loans may ultimately be determined to be inaccurate. In the event of a breach of a representation or warranty, we may be required to repurchase affected loans, make indemnification payments to certain indemnified parties or address any claims associated with such breach. Further, we may have limited or no recourse against the seller from whom we purchased the loans. Such recourse may be limited due to a variety of factors including, the absence of a representation or warranty from the seller corresponding to the representation provided by us or the contractual expiration thereof.

Our ability to borrow may be adversely affected by the suspension or delay of the rating of our notes by the credit agency providing the ratings.

The majority of our advance facility notes are rated by one rating agency, and this agency may suspend rating notes while it reviews its policies for rating for such notes. Rating agency delays may result in our inability to obtain timely ratings on new notes which could adversely impact the availability of borrowings, interest rates, advance rates or other terms which could adversely affect our results of operations and liquidity. Further, if we are unable to secure ratings from other agencies, limited investor demand for unrated notes could result in further adverse changes to our liquidity and profitability.

The restatement of our consolidated financial statements resulting from a material weakness in internal control over financial reporting and related events may consume time and resources and could negatively impact our stock price.

As discussed in our 2013 10-K/A and Part I, Item I, “Interim Condensed Consolidated Financial Statements - Note 20, Restatement,” we have restated our consolidated financial statements for the years ended December 31, 2013 and 2012, including the quarterly periods within, to correct errors in the valuation and the related effect on amortization of our Notes receivable - Rights to MSRs that resulted from a material weakness in our internal control over financial reporting.

Because of inherent limitations, internal control over financial reporting may not prevent or detect material misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may deteriorate. The cost of remediation could result in substantial expense and a diversion of time and resources. Further, the costs and expenses related to our remediation efforts may affect our financial condition and operating results and may negatively impact our stock price. If we are unable to successfully remediate this material weakness and to do so in a timely manner, investors may lose confidence in our reported financial information which could lead to a decline in our stock price, limit our ability to access the capital markets in the future and require us to incur additional costs to improve our internal control systems and procedures.

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On September 15, 2014 we received a subpoena from the SEC requesting that we provide certain information related to our prior accounting conventions for and valuations of our Notes receivable - Rights to MSRs that resulted in the restatement. We are cooperating with the SEC in this matter. We cannot guarantee that we will not receive further regulatory inquiries or be subject to litigation regarding our restated financial statements or matters relating thereto or that the existing inquiry, or, should they occur, any future regulatory inquiries or litigation will not consume internal resources, result in additional legal and consulting costs or negatively impact our stock price.

We include a discussion of all other principal risks and uncertainties that affect or could affect our business operations within our 2013 Form 10-K/A.

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ITEM 6. EXHIBITS

Exhibit Index

10.1	Amendment No.4 dated as of July 16, 2014, to the Second Amended and Restated Series 2012-VF1 Indenture Supplement dated as of August 30, 2013, to the Sixth Amended and Restated Indenture, dated as of January 17, 2014. Incorporated by reference to the registrant's Current Report on Form 8-K filed on July 17, 2014.
2.1	Agreement and Plan of Merger, dated as of February 22, 2015, by and among Home Loan Servicing Solutions, Ltd., New Residential Investment Corp. and Hexagon Merger Sub, Ltd. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on February 23, 2015.
10.2	Amendment No.4 dated as of July 16, 2014, to the Second Amended and Restated Series 2012-VF2 Indenture Supplement dated as of August 30, 2013, to the Sixth Amended and Restated Indenture, dated as of January 17, 2014. Incorporated by reference to the registrant's Current Report on Form 8-K filed on July 17, 2014.
2.2	Share and Asset Purchase Agreement, dated as of April 6, 2015, by and among Home Loan Servicing Solutions, Ltd., MSR-EBO Acquisition LLC, HLSS Advances Acquisition Corp. and New Residential Investment Corp. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on April 13, 2015.
10.3	Amendment No.4 dated as of July 16, 2014, to the Second Amended and Restated Series 2012-VF3 Indenture Supplement dated as of August 30, 2013, to the Sixth Amended and Restated Indenture, dated as of January 17, 2014. Incorporated by reference to the registrant's Current Report on Form 8-K filed on July 17, 2014.
2.3	Plan of Complete Liquidation and Dissolution, dated as of April 6, 2015. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on April 13, 2015.
10.4	Amendment No. 2 to the Master Repurchase Agreement among HLSS Mortgage Master Trust, Barclays Bank PLC and Home Loan Servicing Solutions, Ltd. dated as of October 16, 2014. Incorporated by reference to the registrant's Current Report on Form 8-K filed on October 16, 2014.
2.4	Agreement and Plan of Merger, dated as of April 6, 2015, by and among Home Loan Servicing Solutions, Ltd., New Residential Investment Corp. and Hexagon Merger Sub, Ltd. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on April 13, 2015.
11.1	Computation of earnings per share. Incorporated by reference from “PART I – FINANCIAL INFORMATION; ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)” on page 3 herein.
2.5	Services Agreement, dated as of April 6, 2015, by and among Home Loan Servicing Solutions, Ltd. and HLSS Advances Acquisition Corp. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on April 13, 2015.
31.1	Certification of the Chief Executive Officer pursuant to Section 312 of the Sarbanes-Oxley Act of 2002 (filed herewith)
2.6	Registration Rights Agreement, dated as of April 6, 2015, by and among Home Loan Servicing Solutions, Ltd. and New Residential Investment Corp. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on April 13, 2015.
31.2	Certification of the Chief Financial Officer pursuant to Section 312 of the Sarbanes-Oxley Act of 2002 (filed herewith)
2.7	Termination Agreement, dated as of April 6, 2015, by and among Home Loan Servicing Solutions, Ltd., New Residential Investment Corp. and Hexagon Merger Sub, Ltd. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on April 13, 2015.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
10.1	Amendment No. 6 to the Second Amended and Restated Series 2012-VF1 Indenture Supplement dated as of August 30, 2013 and the Second Amended and Restated Note Purchase Agreement dated as of August 30, 2013. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on January 15, 2015.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
10.2	Amendment No. 6 to the Second Amended and Restated Series 2012-VF2 Indenture Supplement dated as of August 30, 2013 and the Second Amended and Restated Note Purchase Agreement dated as of August 30, 2013. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on January 15, 2015.
101.INS	XBRL Instance Document (filed herewith)
10.3	Amendment No. 6 to the Second Amended and Restated Series 2012-VF3 Indenture Supplement dated as of August 30, 2013 and the Second Amended and Restated Note Purchase Agreement dated as of August 30, 2013. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on January 15, 2015.
101.SCH	XBRL Taxonomy Extension Schema Document (filed herewith)
10.4	Third Amended and Restated Indenture by and among HLSS Servicer Advance Receivables Trust II; Deutsche Bank National Trust Company; HLSS Holdings, LLC; Ocwen Loan Servicing, LLC and Barclays Bank PLC. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on January 21, 2015.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)
10.5	Third Amended and Restated Indenture Supplement by and among HLSS Servicer Advance Receivables Trust II; Deutsche Bank National Trust Company; HLSS Holdings, LLC; Ocwen Loan Servicing, LLC and Barclays Bank PLC. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on January 21, 2015.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)
10.6	Agreement with Deutsche Bank National Trust Company dated February 17, 2015. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on February 18, 2015.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (filed herewith)
10.7	Home Loan Servicing Solutions, Ltd. Change in Control Retention Bonus and Severance Plan. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on February 23, 2015.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)
10.8	Mortgage Loan Purchase and Sale Agreement by and among HLSS Mortgage Master Trust II and Securitized Mortgage Asset Loan Trust 2015-1 dated February 20, 2015. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on February 23, 2015.
10.9	Amendment No. 4 to Master Repurchase Agreement among HLSS Mortgage Master Trust, Barclays Bank PLC, Sutton Funding LLC and Home Loan Servicing Solutions, Ltd. dated as of February 27, 2015. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on March 3, 2015.
10.10	Consent, Waiver and Amendment among Home Loan Servicing Solutions, Ltd., certain subsidiaries of Home Loan Servicing Solutions, Ltd., JPMorgan Chase Bank, N.A. and each lender from time to time party thereto dated as of March 20, 2015. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on March 23, 2015.

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10.11	Amendment No. 2 to the Master Servicing Rights Purchase Agreement and Sale Supplements, dated as of April 6, 2015, by and among Ocwen Loan Servicing, LLC, HLSS Holdings, LLC, Home Loan Servicing Solutions, Ltd. and HLSS MSR-EBO Acquisition LLC. Incorporated by reference to the Registrant's Current Report on Form 8-K filed on April 13, 2015.

11.1	Computation of earnings per share. Incorporated by reference from “PART I – FINANCIAL INFORMATION; ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)” on page 3 herein.

31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.INS	XBRL Instance Document (filed herewith)

101.SCH	XBRL Taxonomy Extension Schema Document (filed herewith)

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)

101.LAB	XBRL Taxonomy Extension Label Linkbase Document (filed herewith)

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)

* Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K under the Exchange Act.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		HOME LOAN SERVICING SOLUTIONS, LTD.
Date:	~~October~~May 1611, ~~2014~~2015	By:/s/ James E. Lauter
		James E. Lauter
		Chief Financial Officer and Chief Accounting Officer
		(On behalf of the Registrant and as its principal financial officer)

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