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NEW RESIDENTIAL INVESTMENT CORP. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

May 15, 2014

Management's discussion and analysis of financial condition and results of operations is intended to help the reader understand the results of operations and financial condition of New Residential. The following should be read in conjunction with the unaudited consolidated financial statements and notes thereto included herein, and with Part II, Item 1A, "Risk Factors."

GENERAL

New Residential is a publicly traded REIT (NYSE: NRZ) primarily focused on investing in residential mortgage related assets. We became an independent public company following our spin-off from Newcastle on May 15, 2013. We are externally managed by an affiliate of Fortress. Our goal is to drive strong risk-adjusted returns primarily through investments in servicing related assets, residential securities and loans and other investments including, but not limited to, Excess MSRs, servicer advances, real estate securities and real estate loans. Our investment guidelines are purposefully broad to enable us to make investments in a wide array of assets in diverse markets, including non-real estate related assets such as consumer loans. We generally target assets that generate significant current cash flows and/or have the potential for meaningful capital appreciation. We aim to generate attractive returns for our stockholders without the excessive use of financial leverage. Our portfolio is currently composed of servicing related assets, residential securities and loans and other investments. Our asset allocation and target assets may change over time, depending on our Manager's investment decisions in light of prevailing market conditions. The assets in our portfolio are described in more detail below under "-Our Portfolio." Market CONsiderations Various market factors, which are outside of our control, affect our results of operations and financial condition. One such factor is developments in the U.S. residential housing market, which we believe are generating significant investment opportunities. Since the 2008 financial crisis, the residential mortgage industry has been undergoing major structural changes that are transforming the way mortgages are originated, owned and serviced. Historically, the majority of the approximately $10 trillion mortgage market has been serviced by large banks, which generally focus on conventional mortgages with low delinquency rates. This has allowed for low-cost routine payment processing and required minimal borrower interaction. Following the credit crisis, the need for "high-touch" specialty servicers, such as Nationstar, increased as loan performance declined, delinquencies rose and servicing complexities broadened. Specialty servicers have proven more willing and better equipped to perform the operationally intensive activities (e.g., collections, foreclosure avoidance and loan workouts) required to service credit-sensitive loans. Since 2010, banks have sold or committed to sell MSRs totaling more than $1 trillion. An MSR provides a mortgage servicer with the right to service a pool of mortgages in exchange for a portion of the interest payments made on the underlying mortgages. This amount typically ranges from 25 to 50 bps multiplied by the UPB of the mortgages. Approximately 77% of MSRs were owned by banks as of the fourth quarter of 2013, according to Inside Mortgage Finance. We expect this number to decline as banks face pressure to reduce their MSR exposure as a result of heightened capital reserve requirements under Basel III, regulatory scrutiny and a more challenging servicing environment. As a result, we believe the volume of MSR sales is likely to be substantial for some period of time. We estimate that MSRs on approximately $200 - 300 billion of mortgages are currently for sale, which would require a capital investment of approximately $2 - 3 billion based on current pricing dynamics. We believe that non-bank servicers who are constrained by capital limitations, such as Nationstar, will continue to sell a portion of the Excess MSRs or other servicing assets, such as advances. We also estimate that approximately $1 - 2 trillion of MSRs could be sold over the next several years. In addition, approximately $1.2 trillion of new loans are expected to be created annually, according to the Mortgage Bankers Association. We believe this creates an opportunity to enter into "flow arrangements," whereby loan originators agree to sell Excess MSRs on newly originated loans on a recurring basis (often monthly or quarterly). We believe that MSRs are being sold at a discount to historical pricing levels, although increased competition for these assets has driven prices higher recently. There can be no assurance that we will make additional investments in Excess MSRs or that any future investment in Excess MSRs will generate returns similar to the returns on our original investments in Excess MSRs. 38

Beginning in April 2012, we began to invest in RMBS as a complement to our Excess MSR portfolio. As of the fourth quarter of 2013, approximately $7 trillion of the $10 trillion of residential mortgages outstanding had been securitized, according to Inside Mortgage Finance. Approximately $6 trillion were Agency RMBS according to Inside Mortgage Finance, which are securities issued or guaranteed by a U.S. Government agency, such as Ginnie Mae, or by a GSE, such as Fannie Mae or Freddie Mac. The balance has been securitized by either public trusts or PLS, and are referred to as Non-Agency RMBS. Since the onset of the financial crisis in 2007, there has been significant volatility in the prices for Non-Agency RMBS, which resulted from a widespread contraction in capital available for this asset class, deteriorating housing fundamentals, and an increase in forced selling by institutional investors (often in response to rating agency downgrades). While the prices of these assets have started to recover from their lows, from time to time there may be opportunities to acquire Non-Agency RMBS at attractive risk-adjusted yields, with the potential for upside if the U.S. economy and housing market continue to strengthen. We believe the value of existing Non-Agency RMBS may also rise if the number of buyers returns to pre-2007 levels. Furthermore, we believe that in many Non-Agency RMBS vehicles there is a meaningful discrepancy between the value of the Non-Agency RMBS and the recovery value of the underlying collateral. We intend to pursue opportunities to structure transactions that would enable us to realize this difference. We actively monitor the market for Non-Agency RMBS and our portfolio to determine when to strategically purchase and sell Non-Agency RMBS from time to time. We currently expect that the size of our Non-Agency portfolio will fluctuate depending primarily on our Manager's assessment of expected yields and alternative investment opportunities. The primary causes of mark-to-market changes in our RMBS portfolio are changes in interest rates and credit spreads. Interest rates have risen significantly in recent months and may continue to increase, although the timing of any further increases is uncertain. In periods of rising interest rates, the rates of prepayments and delinquencies with respect to mortgage loans generally decline. Generally, the value of our Excess MSRs is expected to increase when interest rates rise or delinquencies decline, and the value is expected to decrease when interest rates decline or delinquencies increase, due to the effect of changes in interest rates on prepayment speeds and delinquencies. However, prepayment speeds and delinquencies could increase even in the current interest rate environment, as a result of, among other things, a general economic recovery, government programs intended to foster refinancing activity or other reasons, which could reduce the value of our investments. Moreover, the value of our Excess MSRs is subject to a variety of factors, as described under "Risk Factors." In the first quarter of 2014, the fair value of our investments in Excess MSRs (directly and through equity method investees) increased by approximately $3.6 million and the weighted average discount rate of the portfolio remained relatively unchanged at 12.5%. We do not expect changes in interest rates to have a meaningful impact on the net interest spread of our Agency ARM and Non-Agency portfolios. Our RMBS are primarily floating rate or hybrid (i.e., fixed to floating rate) securities, which we generally finance with floating rate debt. Therefore, while rising interest rates will generally result in a higher cost of financing, they will also result in a higher coupon payable on the securities. The net interest spread on our Agency ARM RMBS portfolio as of March 31, 2014 was 1.19%, compared to 0.94% as of December 31, 2013. The net interest spread on our Non-Agency RMBS portfolio as of March 31, 2014 was 2.67%, compared to 2.83% as of December

31, 2013.



In November 2013, we made our first investment in non-performing loans. We are seeing substantial volumes of distressed residential mortgage loan sales.

Credit performance also affects the value of our portfolio. Higher rates of delinquency and/or defaults can reduce the value of our Excess MSRs, Non-Agency RMBS, Agency RMBS and loan portfolios. For our Excess MSRs on Agency portfolios and our Agency RMBS, delinquency and default rates have an effect similar to prepayment rates. Our Excess MSRs on Non-Agency portfolios are not affected by delinquency rates because the servicer continues to advance principal and interest until a default occurs on the applicable loan; defaults have an effect similar to prepayments. For our Non-Agency RMBS and loans, higher default rates can lead to greater loss of principal. Credit spreads continued to decrease, or "tighten," in the first quarter of 2014 relative to the fourth quarter of 2013, which has had a favorable impact on the value of our securities and loan portfolio. Credit spreads measure the yield relative to a specified benchmark that the market demands on securities and loans based on such assets' credit risk. For a discussion of the way in which interest rates, credit spreads and other market factors affect us, see "Quantitative and Qualitative Disclosures About Market Risk." The value of our consumer loan portfolio is influenced by, among other factors, the U.S. macroeconomic environment, and unemployment rates in particular. We believe that losses are highly correlated to unemployment; therefore, we expect that an improvement in unemployment rates would support the value of our investment, while deterioration in unemployment rates would result in a decline in its value. 39 OUR Portfolio Our portfolio is currently composed of servicing related assets, residential securities and loans and other investments, as described in more detail below. Our asset allocation and target assets may change over time, depending on our Manager's investment decisions in light of prevailing market conditions. The assets in our portfolio are described in more detail below. Percentage of Weighted Amortized Total Average Outstanding Cost Basis Amortized Carrying Life (years) Face Amount (A) Cost Basis Value (B) Investments in: Excess MSRs (C) $ 252,038,364$ 584,822 9.1 % $ 680,011 6.1 Servicer Advances (C) 3,430,473 3,457,385 53.9 % 3,457,385 3.2 Agency ARM RMBS 1,085,447 1,162,098 18.1 % 1,162,650 4.3 Non-Agency RMBS 1,780,864 1,173,195 18.3 % 1,182,571 8.4 Residential Mortgage Loans 57,818 34,045 0.6 % 34,045 3.6 Consumer Loans (C) 3,098,138 N/A N/A 231,422 3.2 Total/ Weighted Average $ 261,491,104$ 6,411,545 100.0 % $ 6,748,084 4.6 Reconciliation to GAAP total assets: Cash and restricted cash 175,102 Derivative assets 45,040 Other assets 30,608 GAAP total assets $ 6,998,834 (A) Net of impairment.



(B) Weighted average life is based on the timing of expected principal reduction

on the asset.

(C) The outstanding face amount of Excess MSRs, servicer advances, and consumer

loans is based on 100% of the face amount of the underlying residential

mortgage loans, currently outstanding advances, and consumer loans respectively. Servicing Related Assets Excess MSRs As of March 31, 2014, we had approximately $680.0 million estimated carrying value of Excess MSRs (held directly and through joint ventures). As of March 31, 2014, our completed investments represent an effective 33% to 80% interest in the Excess MSRs (held either directly or through joint ventures) on pools of mortgage loans with an aggregate UPB of approximately $252.0 billion. Nationstar is the servicer of the loans underlying all of our investments in Excess MSRs to date, and it earns a basic fee in exchange for providing all servicing functions. In addition, Nationstar retains a 20% to 35% interest in the Excess MSRs and all ancillary income associated with the portfolios. In our capacity as owner of the Excess MSR, we do not have any servicing duties, liabilities or obligations associated with the servicing of the portfolios underlying any of our Excess MSRs. However, we, through co-investments made by our subsidiaries, may separately agree to do so and have separately purchased the servicer advances, including the right to receive the basic fee component of related MSRs, on the Non-Agency portfolios (Pools 5, 10, 12, 17 and 18) underlying our Excess MSR investments. See "-Servicer Advances" below. Each of our Excess MSR investments to date is subject to a recapture agreement with Nationstar. Under the recapture agreements, we are generally entitled to a pro rata interest in the Excess MSRs on any initial or subsequent refinancing by Nationstar of a loan in the original portfolio. In other words, we are generally entitled to a pro rata interest in the Excess MSRs on both (i) a loan resulting from a refinancing by Nationstar of a loan in the original portfolio, and (ii) a loan resulting from a refinancing by Nationstar of a previously recaptured

loan. 40 The tables below summarize the terms of our investments in Excess MSRs completed as of March 31, 2014.



Summary of Direct Excess MSR Investments as of March 31, 2014

MSR Component(A) Excess MSR Interest in Initial UPB Current UPB Excess MSR Purchase Carrying Investment Date (bn) (bn)(B) Loan Type(C) MSR (bps) Excess MSR (bps) (%) Price (mm) Value (mm) Pool 1 Dec-11 $ 9.9$ 6.6 GSE 32 bps 26 bps 65 % $ 43.7$ 41.5 Pool 2 Jun-12 10.4 7.7 GSE 30 22 65 % 42.3 40.3 Pool 3 Jun-12 9.8 7.6 GSE 30 22 65 % 36.2 37.9 Pool 4 Jun-12 6.3 4.9 GSE 26 17 65 % 15.4 17.5 Pool 5(D) Jun-12 47.6 35.8 PLS 33 14 80 % 151.5 147.7

Pool 11 (direct portion)(E) May-13 -

0.5 GSE 25 19 67 % 2.4 2.6 Pool 12(D) Sep-13 5.4 5.0 PLS 50 26 40 % 17.4 17.5 Pool 17(D) Jan-14 8.1 8.1 PLS 34 19 33 % 19.1 19.1 Pool 18(D) Nov-13 9.2 8.5 PLS 37 16 40 % 17.0 17.6

Total/Weighted Average $ 106.7 $

84.7 33 bps 18 bps $ 345.0$ 341.7



(A) The MSR is a weighted average as of March 31, 2014, and the Excess MSR

represents the difference between the weighted average MSR and the basic fee

(which fee remains constant).

(B) As of March 31, 2014.

(C) "GSE" refers to loans in Fannie Mae or Freddie Mac securitizations. "PLS"

refers to loans in private label securitizations.

(D) Pool in which we also invested in related servicer advances, including the

basic fee component of the related MSR as of March 31, 2014 (Note 6 to our

consolidated financial statements included herein).

(E) A portion of our investment in Pool 11 was made as a direct investment, and

the remainder was made as an investment through a joint venture accounted

for as an equity method investee, as described in the chart below. The direct investment in Pool 11 includes loans that, upon refinancing by a third-party, became serviced by Nationstar and subject to a 67% Excess MSR owned by us. Summary Excess MSR Investments Through Equity Method Investees as of March 31, 2014 MSR Component(A) NRZ Interest Investee Commitment/ in Interest in NRZ Effective Investee Investment Initial UPB Current UPB Excess MSR Investee Excess MSR (%) Ownership Carrying Date (bn) (bn)(B) Loan Type(C) MSR (bps) (bps) (%) (D) (%)(D) Value (mm) Pool 6 Jan-13 $ 13.0$ 9.6 GM 40 bps 25 bps 50 % 67 % 33.5 % $ 55.4 Pool 7 Jan-13 38.0 30.6 GSE 26 15 50 % 67 % 33.5 % 123.8 Pool 8 Jan-13 17.6 13.5 GSE 28 19 50 % 67 % 33.5 % 67.5 Pool 9 Jan-13 33.8 29.7 GM 39 22 50 % 67 % 33.5 % 157.6 Pool 10(E) Jan-13 75.6 66.7 PLS 34 11 50 % 67-77 % 33.5-38.5 % 201.8 Pool 11 (indirect portion)(F) May-13 22.8 17.3 GSE 25 15 50 % 67 % 33.5 % 67.6 Total/Weighted Average $ 200.8$ 167.4 32 bps 16 bps $ 673.7



(A) The MSR is a weighted average as of March 31, 2014, and the Excess MSR

represents the difference between the weighted average MSR and the basic fee

(which fee remains constant).

(B) As of March 31, 2014.

(C) "GM" refers to loans in Ginnie Mae securitizations. "GSE" refers to loans in

Fannie Mae or Freddie Mac securitizations. "PLS" refers to loans in private

label securitizations.

(D) The equity method investee purchased an additional interest in a portion of

Pool 10. Investee interest in Excess MSR and NRZ effective ownership in

Pool 10 represent the range of ownership interests in the pool.

(E) Pool in which we also invested in related servicer advances, including the

basic fee component of the related MSR as of March 31, 2013 (Note 6 to our

consolidated financial statements included herein).

(F) A portion of our investment in Pool 11 was made as a direct investment and

the remainder was made as an investment through a joint venture accounted

for as an equity method investee, as described in the chart above. 41



The tables below summarize the terms of our investments in Excess MSRs that were not yet completed as of May 12, 2014:

Summary of Pending Excess MSR



Investments (Committed but Not Closed)

MSR Component(A) NRZ Excess NRZ Direct MSR Interest in Interest in Initial Commitment Initial Current Loan Excess Investee Excess Investment Date UPB (bn) UPB (bn)(B) Type(C) MSR (bps) MSR (bps) (%) MSR (%) (mm)(D) Pool 13 (Direct Investment) Nov-13 $ 6.1 $ 6.1 GSE 25 bps 19 bps N/A 33 % $ 14.5 Pool 15 (Direct Investment) Nov-13 2.2 2.2 GSE 37 27 N/A 33 % 6.3 Pool 20 (Direct Investment) Apr-14 0.7 0.7 GSE 42 32 N/A 33 % 2.3 Total/Weighted Average $ 9.0 $ 9.0 29 bps 22 bps $ 23.1



(A) The MSR is a weighted average as of the commitment date, and the Excess MSR

represents the difference between the weighted average MSR and the basic fee

(which fee remains constant).

(B) As of commitment date.

(C) "PLS" refers to loans in private label securitizations. "GSE" refers to

loans in Fannie Mae or Freddie Mac securitizations.

(D) The actual amount invested will be based on the UPB at the time of close. Summary of Excess MSR Investments



closed subsequent to March 31, 2014

MSR Component(A) NRZ Excess NRZ Direct MSR Current Interest in Interest in Initial Commitment Initial UPB Loan Excess Investee Excess Investment Date UPB (bn) (bn)(B) Type(C) MSR (bps) MSR (bps) (%) MSR (%) (mm)(D) Pool 14 (Direct Investment) Nov-13 $ 1.0$ 1.0 GSE 25 19 N/A 33 % $ 2.4 Pool 16 (Direct Investment) Nov-13 1.5 1.5 GSE 27 17 N/A 33 % 2.9 Pool 19 (Direct Investment) Apr-14 10.4 10.4 GSE 25 19 N/A 33 % 28.7 $ 12.9$ 12.9 25 bps 19 bps $ 34.0 42 The following table summarizes the collateral characteristics of the loans underlying our direct Excess MSR investments as of March 31, 2013 (dollars in thousands): Collateral Characteristics Current Original Current WA FICO Score Adjustable Rate Carrying Principal Principal Number of WA Maturity

Average Loan Mortgage % 1 Month CPR 1 Month CRR 1 Month CDR 1 Month Amount Balance Balance Loans (A) WA Coupon (months) Age (months) (B) (C) (D) (E) Recapture Rate Pool 1 Original Pool$ 26,918$ 9,940,385$ 4,964,917 37,172 672 5.5 % 274 89 21.0 % 25.4 % 22.4 % 3.9 % 42.4 % Recaptured Loans 8,524 - 1,661,472 8,947 727 4.4 % 319 10 - 1.8 % 1.5 % 0.2 % 7.7 % Recapture Agreements 6,019 - - - - - - - - - - - - 41,461 9,940,385 6,626,389 46,119 686 5.2 % 285 69 15.7 % 19.5 % 17.2 % 3.0 % 33.7 % Pool 2 Original Pool 27,791 10,383,891 6,429,723 34,178 668 4.7 % 319 77 11.0 % 17.6 % 12.9 % 5.4 % 42.0 % Recaptured Loans 6,598 - 1,259,767 6,624 732 4.4 % 319 8 - 2.3 % 2.3 % - - Recapture Agreements 5,969 - - - - - - - - - - - - 40,358 10,383,891 7,689,490 40,802 678 4.7 % 319 66 9.2 % 15.1 % 11.2 % 4.5 % 35.1 % Pool 3 Original Pool 27,702 9,844,114 6,807,396 42,792 677 4.0 % 285 101 42.0 % 16.6 % 12.6 % 4.5 % 39.0 % Recaptured Loans 4,128 - 788,237 4,841 722 4.4 % 315 7 - 1.9 % 1.9 % - - Recapture Agreements 6,065 - - - - - - - - - - - - 37,895 9,844,114 7,595,633 47,633 682 4.1 % 288 91 37.6 % 15.0 % 11.5 % 4.0 % 35.0 % Pool 4 Original Pool 12,466 6,250,549 4,720,539 23,804 678 3.3 % 304 92 59.0 % 13.3 % 6.6 % 7.1 % 37.3 % Recaptured Loans 1,139 - 219,506 1,131 736 4.5 % 328 7 - 2.4 % 2.4 % - - Recapture Agreements 3,897 - - - - - - - - - - - - 17,502 6,250,549 4,940,045 24,935 681 3.3 % 305 89 56.4 % 12.8 % 6.4 % 6.8 % 35.7 % Pool 5 Original Pool (F) 141,693 47,572,905 35,780,280 155,613 658 4.3 % 285 97 53.0 % 10.5 % 5.0 % 5.8 % 1.9 % Recaptured Loans 274 - 43,680 185 755 3.8 % 315 7 2.0 % 0.1 % 0.1 % - - Recapture Agreements 5,735 - - - - - - - - - - - - 147,702 47,572,905 35,823,960 155,798 658 4.3 % 285 97 52.9 % 10.5 % 5.0 % 5.8 % 1.9 % Pool 11 (direct portion)(G) Original Pool - - - - - - - - - - - - - Recaptured Loans 2,369 - 444,667 2,733 - 4.2 % 306 8 - 1.0 % 1.0 % - - Recapture Agreements 280 - - - - - - - - - - - - 2,649 - 444,667 2,733 - 4.2 % 306 8 - 1.0 % 1.0 % - - Pool 12 Original Pool (F) 17,164 5,375,157 4,992,898 40,495 597 5.7 % 311 100 33.0 % 9.7 % 2.9 % 7.0 % 2.9 % Recaptured Loans 16 - 6,031 44 684 4.3 % 281 3 - - - - - Recapture Agreements 328 - - - - - - - - - - - - 17,508 5,375,157 4,998,929 40,539 597 5.7 % 311 100 33.0 % 9.7 % 2.9 % 7.0 % 2.9 % Pool 17 Original Pool (F) 18,471 8,088,574 8,096,010 33,572 692 4.5 % 258 98 44.0 % 8.8 % 6.8 % 2.1 % 0.2 % Recaptured Loans - - 429 2 777 4.3 % 323 1 - - - - - Recapture Agreements 598 - - - - - - - - - - - - 19,069 8,088,574 8,096,439 33,574 692 4.5 % 258 98 44.0 % 8.8 % 6.8 % 2.1 % 0.2 % Pool 18 Original Pool (F) 16,784 9,238,001 8,462,896 42,318 673 4.9 % 241 108 50.0 % 11.4 % 8.0 % 3.8 % 0.7 % Recaptured Loans 1 - 530 4 698 5.0 % 288 1 - - - - - Recapture Agreements 775 - - - - - - - - - - - - 17,560 9,238,001 8,463,426 42,322 673 4.9 % 241 108 50.0 % 11.4 % 8.0 % 3.8 % 0.7 % Total/Weighted Average $ 341,704$ 106,693,576$ 84,678,978 434,455 663 4.5 % 284 92 42.3 % 12.0 % 7.5 % 4.8 % 12.1 % Continued on next page. 43 Collateral Characteristics Real Uncollected Delinquency 30 Delinquency 60 Delinquency 90+ Loans in Estate Loans in Payments (H) Days (H) Days (H) Days (H) Foreclosure Owned Bankruptcy Pool 1 Original Pool 9.5 % 5.7 % 1.9 % 1.6 % 3.9 % 1.3 % 2.9 % Recaptured Loans 0.6 % 0.5 % 0.1 % 0.2 % 0.1 % - 0.1 % Recapture Agreements - - - - - - - 7.3 % 4.4 % 1.4 % 1.2 % 2.9 % 1.0 % 2.2 % Pool 2 Original Pool 13.5 % 4.7 % 1.9 % 1.7 % 6.3 % 2.5 % 5.1 % Recaptured Loans 0.9 % 0.6 % 0.1 % 0.1 % 0.1 % - 0.2 % Recapture Agreements - - - - - - - 11.5 % 4.1 % 1.6 % 1.5 % 5.3 % 2.1 % 4.3 % Pool 3 Original Pool 12.3 % 4.4 % 1.2 % 1.1 % 6.1 % 2.6 % 3.4 % Recaptured Loans 0.6 % 0.8 % 0.1 % - - - 0.2 % Recapture Agreements - - - - - - - 11.1 % 4.0 % 1.1 % 1.0 % 5.5 % 2.3 % 3.1 % Pool 4 Original Pool 14.2 % 3.4 % 1.5 % 1.4 % 7.9 % 2.7 % 4.2 % Recaptured Loans 0.6 % 0.5 % 0.1 % - - - 0.1 % Recapture Agreements - - - - - - - 13.6 % 3.3 % 1.4 % 1.3 % 7.6 % 2.5 % 4.0 % Pool 5

Original Pool (F) 22.5 % 10.1 % 2.2 % 4.4 % 11.9 % 2.4 % 4.7 % Recaptured Loans - - - - - - - Recapture Agreements - - - - - - - 22.5 % 10.1 % 2.2 % 4.3 % 11.9 % 2.4 % 4.7 % Pool 11 (direct portion)(G) Original Pool - - - - - - - Recaptured Loans 5.1 % 12.9 % 0.5 % 0.2 % 0.1 % - - Recapture Agreements - - - - - - - 5.1 % 12.9 % 0.5 % 0.2 % 0.1 % - - Pool 12 Original Pool (F) 31.2 % 11.2 % 3.8 % 5.6 % 17.2 % 2.9 % 5.4 % Recaptured Loans 46.3 % 46.3 % - - - - - Recapture Agreements - - - - - - - 31.2 % 11.2 % 3.8 % 5.6 % 17.2 % 2.9 % 5.4 % Pool 17 Original Pool (F) 17.1 % 12.4 % 2.2 % 1.5 % 8.4 % 1.5 % 3.5 % Recaptured Loans - - - - - - - Recapture Agreements - - - - - - - 17.1 % 12.4 % 2.2 % 1.5 % 8.4 % 1.5 % 3.5 % Pool 18 Original Pool (F) 25.0 % 3.6 % 1.2 % 9.0 % 10.8 % 1.2 % 4.9 % Recaptured Loans - - - - - - - Recapture Agreements - - - - - - - 25.0 % 3.6 % 1.2 % 9.0 % 10.8 % 1.2 % 4.9 % Total/Weighted Average 18.9 % 7.8 % 1.9 % 3.6 % 9.6 % 2.1 % 4.2 %



(A) The WA FICO score is based on the weighted average of information provided

by the loan servicer on a monthly basis. The loan servicer generally updates

the FICO score on a monthly basis. Weighted averages exclude collateral

information for which collateral data was not available as of the report

date.

(B) Adjustable Rate Mortgage % represents the percentage of the total principal

balance of the pool that corresponds to adjustable rate mortgages.

(C) 1 Month CPR, or the constant prepayment rate, represents the annualized rate

of the prepayments during the month as a percentage of the total principal

balance of the pool.

(D) 1 Month CRR, or the voluntary prepayment rate, represents the annualized

rate of the voluntary prepayments during the month as a percentage of the

total principal balance of the pool. 44



(E) 1 Month CDR, or the involuntary prepayment rate, represents the annualized

rate of the involuntary prepayments (defaults) during the month as a

percentage of the total principal balance of the pool.

(F) Pool in which we also invested in related servicer advances, including the

basic fee component of the related MSR as of March 31, 2014 (Note 6 to our

consolidated financial statements included herein).

(G) A portion of our investment in Pool 11 was made as a direct investment, and

the remainder was made as an investment through a joint venture accounted

for as an equity method investee, the collateral of which is described in

the chart below. The direct investment in Pool 11 includes loans that, upon

refinancing by a third-party, became serviced by Nationstar and subject to a

67% Excess MSR owned by us.

(H) Uncollected Payments represents the percentage of the total principal

balance of the pool that corresponds to loans for which the most recent

payment was not made. Delinquency 30 Days, Delinquency 60 Days and

Delinquency 90+ Days represent the percentage of the total principal balance

of the pool that corresponds to loans that are delinquent by 30-59 days,

60-89 days or 90 or more days, respectively. The following table summarizes the collateral characteristics as of March 31, 2014 of the loans underlying Excess MSR investments made through joint ventures accounted for as equity method investees (dollars in thousands). For each of these pools, we own a 50% interest in an entity that invested in a 67% to 77% interest in the Excess MSRs. Collateral Characteristics NRZ Effective WA Adjustable Current Original Current Ownership FICO Rate 1 Month Carrying Principal Principal Principal Number Score WA Maturity Average Loan Mortgage % 1 Month 1 Month 1 Month CDR Recapture Amount Balance Balance Balance of Loans (A) WA Coupon (months) Age (months) (B) CPR (C) CRR (D) (E) Rate Pool 6

Original Pool$ 40,851$ 12,987,190$ 8,648,504 33.3 % 62,442 660 5.6 % 298 61 - 33.3 % 16.6 % 0.1 % 61.1 % Recaptured Loans 5,410 - 979,734 33.3 % 5,957 713 3.8 % 351 6 - 2.1 % 2.1 % - - Recapture Agreements 9,165 - - 33.3 % - - - - - - - - - - 55,426 12,987,190 9,628,238 68,399 665 5.4 % 304 55 - 30.2 % 15.3 % 0.1 % 54.9 % Pool 7 Original Pool 88,368 37,965,199 28,326,818 33.3 % 209,936 680 4.9 % 284 91 23.0 % 16.9 % 14.4 % 2.9 % 34.0 % Recaptured Loans 10,922 - 2,247,368 33.3 % 14,386 711 4.6 % 300 4 - 1.8 % 1.7 % 0.1 % - Recapture Agreements 24,498 - - 33.3 % - - - - - - - - - - 123,788 37,965,199 30,574,186 224,322 682 4.9 % 285 84 21.3 % 15.8 % 13.5 % 2.7 % 31.5 % - Pool 8 -

Original Pool 45,656 17,622,118 11,753,885 33.3 % 80,594 691 5.2 % 294 79 15.0 % 22.4 % 19.4 % 3.8 % 37.7 % Recaptured Loans 8,750 - 1,793,347 33.3 % 10,192 726 4.6 % 303 5 - 1.3 % 1.3 % - - Recapture Agreements 13,050 - - 33.3 % - - - - - - - - - - 67,456 17,622,118 13,547,232 90,786 696 5.1 % 295 69 13.0 % 19.6 % 17.0 % 3.3 % 32.7 % Pool 9 Original Pool 120,987 33,799,700 28,871,283 33.3 % 218,603 681 5.0 % 295 54 4.0 % 18.4 % 14.5 % 4.5 % 23.4 % Recaptured Loans 4,889 - 833,693 33.3 % 5,419 630 4.4 % 349 20 - 0.1 % 0.1 % - - Recapture Agreements 31,743 - - 33.3 % - - - - - - - - - - 157,619 33,799,700 29,704,976 224,022 680 5.0 % 297 53 3.9 % 17.9 % 14.1 % 4.4 % 22.7 % Pool 10 Original Pool (F) 194,485 75,574,361 66,564,742 33.3-38.5% 357,695 670 4.8 % 259 100 50.0 % 10.4 % 6.6 % 4.0 % 0.9 % Recaptured Loans 86 - 17,646 33.3-38.5% 77 743 4.4 % 276 2 5.0 % - - - - Recapture Agreements 7,304 - - 33.3-38.5% - - - - - - - - - - 201,875 75,574,361 66,582,388 357,772 670 4.8 % 259 100 50.0 % 10.4 % 6.6 % 4.0 % 0.9 % Pool 11 (indirect portion)(G) Original Pool 50,480 22,817,213 17,168,549 33.3 % 122,411 620 5.1 % 295 73 4.0 % 13.7 % 11.8 % 2.1 % 6.8 % Recaptured Loans 736 - 153,817 33.3 % 863 680 5.0 % 317 3 - 1.8 % 1.8 % - - Recapture Agreements 16,338 - - 33.3 % - - - - - - - - - - 67,554 22,817,213 17,322,366 123,274 621 5.1 % 295 72 4.0 % 13.6 % 11.7 % 2.1 % 6.7 % Total/ Weighted Average $ 673,718$ 200,765,781$ 167,359,386 1,088,575 671 4.9 % 280 81 25.9 % 14.9 % 11.0 % 3.4 % 16.7 % Continued on next page. 45 Collateral Characteristics Real Uncollected Delinquency 30 Delinquency 60 Delinquency 90+ Loans in Estate Loans in Payments (H) Days (H) Days (H) Days (H) Foreclosure Owned Bankruptcy Pool 6 Original Pool 10.0 % 5.6 % 1.6 % 1.1 % 5.0 % 1.2 % 2.3 % Recaptured Loans 0.8 % 0.7 % 0.2 % 0.2 % 0.1 % 0.0 % 0.1 % Recapture Agreements - - - - - - - 9.7 % 5.4 % 1.6 % 1.1 % 4.8 % 1.1 % 2.2 % Pool 7 Original Pool 14.6 % 3.8 % 1.0 % 1.6 % 8.6 % 1.9 % 3.8 % Recaptured Loans 0.7 % 0.6 % 0.1 % 0.1 % 0.1 % - 0.1 % Recapture Agreements - - - - - - - 14.0 % 3.7 % 1.0 % 1.6 % 8.3 % 1.9 % 3.7 % Pool 8 Original Pool 11.3 % 3.6 % 1.2 % 1.7 % 5.6 % 1.6 % 3.7 % Recaptured Loans 0.5 % 0.5 % 0.1 % 0.1 % 0.1 % - 0.1 % Recapture Agreements - - - - - - - 10.9 % 3.4 % 1.2 % 1.6 % 5.2 % 1.5 % 3.4 % Pool 9 Original Pool 7.4 % 3.9 % 1.1 % 1.0 % 3.9 % 0.4 % 1.6 % Recaptured Loans 5.9 % 1.9 % 1.1 % 3.8 % 0.1 % - 0.1 % Recapture Agreements - - - - - - - 7.4 % 3.9 % 1.1 % 1.1 % 3.9 % 0.4 % 1.5 % Pool 10 Original Pool (F) 27.4 % 5.3 % 1.7 % 9.7 % 14.7 % 1.6 % 4.9 % Recaptured Loans - - - - - - - Recapture Agreements - - - - - - - 26.3 % 5.3 % 1.7 % 9.7 % 14.7 % 1.6 % 4.9 % Pool 11 (indirect portion)(G) Original Pool 13.9 % 13.2 % 1.9 % 2.1 % 5.6 % 1.6 % 2.5 % Recaptured Loans 0.7 % 1.3 % - - 0.1 % - 0.1 % Recapture Agreements - - - - - - - 13.4 % 13.2 % 1.9 % 2.1 % 5.5 % 1.6 % 2.5 % Total/Weighted Average 16.5 % 5.4 % 1.4 % 4.4 % 8.9 % 1.4 % 3.5 %



(A) The WA FICO score is based on the weighted average of information provided

by the loan servicer on a monthly basis. The loan servicer generally updates

the FICO score on a monthly basis.

(B) Adjustable Rate Mortgage % represents the percentage of the total principal

balance of the pool that corresponds to adjustable rate mortgages.

(C) 1 Month CPR, or the constant prepayment rate, represents the annualized rate

of the prepayments during the month as a percentage of the total principal

balance of the pool. 46



(D) 1 Month CRR, or the voluntary prepayment rate, represents the annualized

rate of the voluntary prepayments during the month as a percentage of the

total principal balance of the pool.

(E) 1 Month CDR, or the involuntary prepayment rate, represents the annualized

rate of the involuntary prepayments (defaults) during the month as a

percentage of the total principal balance of the pool.

(F) Pool in which we also invested in related servicer advances, including the

basic fee component of the related MSR as of March 31, 2014 (Note 6 to our

consolidated financial statements included herein).

(G) A portion of our investment in Pool 11 was made as a direct investment and

the remainder was made as an investment through a joint venture accounted

for as an equity method investee, the collateral of which is described in

the chart above.

(H) Uncollected Payments represents the percentage of the total principal

balance of the pool that corresponds to loans for which the most recent

payment was not made. Delinquency 30 Days, Delinquency 60 Days and

Delinquency 90+ Days represent the percentage of the total principal balance

of the pool that corresponds to loans that are delinquent by 30-59 days,

60-89 days or 90 or more days, respectively. Servicer Advances



In December 2013, we made our first investment in servicer advances, referred to as Transaction 1. We made the investment through the Buyer, a joint venture entity capitalized by us and certain third-party co-investors.

In Transaction 1, the Buyer acquired from Nationstar Mortgage LLC ("Nationstar") approximately $3.2 billion of outstanding servicer advances (including deferred servicing fees) and the basic fee component of the related MSRs on Non-Agency mortgage loans with an aggregate UPB of approximately $54.6 billion. In exchange, the Buyer (i) paid approximately $3.2 billion (the "Initial Purchase Price"), and (ii) agreed to purchase future servicer advances related to the loans at par. The Initial Purchase Price is equal to the value of the discounted cash flows from the outstanding and future advances and from the basic fee. We previously acquired an interest in the Excess MSRs related to these loans, which are in Pools 10, 17 and 18. See above "-Our Portfolio-Servicing Related Assets-Excess MSRs." The Buyer funded the Initial Purchase Price with approximately $2.8 billion of debt and $0.4 billion of equity, excluding working capital. As of March 31, 2014, the Buyer had settled approximately $3.2 billion of servicer advances related to Transaction 1, which represents substantially all of Transaction 1.



See "-Call Right" below for a discussion of Transaction 2.

Nationstar remains the named servicer under the related servicing agreements and continues to perform all servicing duties for the underlying loans. The Buyer has the right, but not the obligation, to become the named servicer, subject to obtaining consents and ratings agency letters required for a formal change of the named servicer. In exchange for Nationstar's performance of servicing duties, the Buyer pays Nationstar the Servicing Fee and, in the event that the aggregate cash flows from the advances and the basic fee generate the Targeted Return on the Buyer's invested equity, the Performance Fee. Nationstar is majority owned by private equity funds managed by an affiliate of our manager. For more information about the fee structure, see below. The following is a summary of the investments in servicer advances, including the right to the basic fee component of the related MSRs, made by the Buyer, which we consolidate (dollars in thousands): Three Months Ended March 31, March 31, 2014 2014 Change in Fair Amortized Carrying Weighted Weighted Average Value Recorded in Cost Basis Value (A) Average Yield Life (Years)(B) Other Income Servicer Advances $ 3,457,385$ 3,457,385 5.8 % 3.2 -



(A) Carrying value represents the fair value of the investment in servicer

advances, including the basic fee component of the related MSRs.

(B) Weighted Average Life represents the weighted average expected timing of the

receipt of expected net cash flows for this investment. 47



The following is additional information regarding the servicer advances, and related financing, of the Buyer, which we consolidate as of March 31, 2014 (dollars in thousands):

Loan-to-Value Cost of Funds (B) Servicer Advances to UPB of UPB of Underlying Underlying Outstanding Residential Carrying Value Residential Servicer Mortgage of Notes Mortgage Loans Advances Loans Payable Gross Net (A) Gross Net Servicer advances (C) $ 79,687,268$ 3,430,473 4.3 % $ 3,142,292 91.6 % 90.6 % 3.0 % 2.2 %



(A) Ratio of face amount of borrowings to value of servicer advance collateral,

net of an interest reserve maintained by the Buyer.

(B) Annualized measure of the cost associated with borrowings. Gross Cost of

Funds primarily includes interest expense and facility fees. Net Cost of

Funds excludes facility fees.

(C) The following types of advances comprise the investment in servicer

advances: March 31, 2014 Principal and interest advances $ 1,615,067 Escrow advances (taxes and insurance advances) 1,393,014 Foreclosure advances 422,392 Total $ 3,430,473 As of As of As of 12/31/13 03/31/14 5/5/2014 (D) Advances Purchased $ 2,687,813$ 4,252,654$ 4,870,156 Activity Since Purchase (26,683 ) (822,181 ) (1,073,851 ) Ending Advance Balance $ 2,661,130$ 3,430,473$ 3,796,305 Net Debt (A) $ 2,357,440$ 3,107,685$ 3,435,858 Total Equity Invested (B) $ 363,324$ 587,574$ 674,009

Distributions Since Purchase $ - $ 172,732



$ 172,732

Net Equity Invested (B) $ 363.324$ 414,842



$ 501,277

New Residential's Equity % in Buyer (C) 31.8 % 33.5 %

42.2 %

Co-investors' Equity % in Buyer (C) 68.2 % 66.5 %

57.8 %



(A) Outstanding debt net of restricted cash.

(B) Includes working capital.

(C) Based on cash basis equity.

(D) Includes new capital contribution of $86 million on May 2, 2014.

Call Right

In Transaction 1, the Buyer also acquired the right, but not the obligation (the "Call Right"), to purchase additional servicer advances, including the basic fee component of the related MSRs, on terms substantially similar to the terms of Transaction 1. As in Transaction 1, (i) the purchase price for the servicer advances, including the basic fee, will be the outstanding balance of the advances at the time of purchase and (ii) the Buyer will be obligated to purchase future servicer advances on the related loans. As of March 31, 2014, the remaining outstanding balance of the advances subject to the Call Right was approximately $1.4 billion and the UPB of the related loans was approximately $42.8 billion (an approximately $750 million balance of the advances, with a UPB of the related loans of approximately $30.8 billion, were outstanding as of May 5, 2014). We previously acquired an interest in the Excess MSRs related to these loans, which are in Pools 5, 10 and 12. See above "-Our Portfolio-Servicing Related Assets-Excess MSRs." The Call Right expires on June 30, 2014. The Buyer exercised the Call Right, in part, in Transaction 2. The outstanding balance of the servicer advances subject to the portion of the Call Right that was exercised was approximately $1.1 billion as of the exercise dates, 48 February 28, 2014 and March 7, 2014. On May 2, 2014, $617.5 of the remaining portion of the outstanding balance of the servicer advances subject to the Call Right was exercised. If the Buyer exercises the Call Right in full, it expects to fund the total purchase price with approximately $2.5 billion of debt and $0.3 billion of equity, excluding working capital. As of March 31, 2014, the Buyer has settled $1.1 billion of advances related to Transaction 2, which was financed with approximately $0.9 billion of debt. The remaining balance of the Call Right is expected to be settled in the second quarter of 2014. There can be no assurance that the remainder of the Call Right will be settled. The servicer advances subject to the Call Right cannot be purchased unless and until the related financings are repaid or renegotiated or until the related collateral is released in accordance with the terms of such financings (which would require the consent of various third parties.) For more information about the financing, see "-Liquidity and Capital Resources-Debt

Obligations." The Buyer We, through a wholly owned subsidiary, are the managing member of the Buyer. As of March 31, 2014, we owned approximately 33.5% of the Buyer, which corresponds to a $139.0 million equity investment (net of distributions). On May 2, 2014, we have funded another $86.4 million and have brought our current ownership to approximately 42%. At the expiry of the Call Right and the settlement of the associated advances, we expect to own approximately 45-50% of the Buyer. As noted above, there can be no assurance that the Call Right will be settled

in full.



The following is a summary of our interests in the Buyer's equity:

March 31, 2014 Required equity (A)(B) $ 508,539 Working capital (A)(B) 79,035 Other 12,994 Distributions (172,732 ) Total GAAP equity (B) $ 427,836



GAAP equity attributable to New Residential $ 143,501 New Residential's GAAP ownership

33.5 %



(A) Equity on which the Buyer applies its specified return.

(B) Capital held at the Buyer to invest in additional servicer advances and

provide compensating balances for financing facilities. In the event that any member does not fund its capital contribution, each other member has the right, but not the obligation, to make pro rata capital contributions in excess of its stated commitment, provided that any member's decision not to fund any such capital contribution will result in a reduction of its membership percentage. Servicing Fee Nationstar remains the named servicer under the applicable servicing agreements and will continue to perform all servicing duties for the related mortgage loans. The Buyer has the right, but not the obligation, to become the named servicer, subject to obtaining consents and ratings agency letters required for a formal change of the named servicer. In exchange for its services, the Buyer will pay Nationstar a monthly Servicing Fee representing a portion of the amounts from the purchased basic fee. The Servicing Fee is equal to a fixed percentage (the "Servicing Fee Percentage") of the amounts from the purchased basic fee. The Servicing Fee Percentage as of March 31, 2014 is equal to approximately 9.2%, which is equal to (i) 2 basis points divided by (ii) the basic fee, which is 21.8 basis points on a weighted average basis as of March 31, 2014. 49 Targeted Return The Targeted Return and the Performance Fee are designed to achieve three objectives: (i) provide a reasonable risk-adjusted return to the Buyer based on the expected amount and timing of estimated cash flows from the purchased basic fee and advances, with both upside and downside based on the performance of the investment, (ii) provide Nationstar with a sufficient fee to compensate it for acting as servicer, and (iii) provide Nationstar with an incentive to effectively service the underlying loans. The Targeted Return implements these objectives by allocating payments in respect of the purchased basic fee between the Buyer and Nationstar. The amount available to satisfy the Targeted Return is equal to: (i) the amounts from the purchased basic fee, minus (ii) the Servicing Fee ("Net Collections"). The Buyer will retain the amount of Net Collections necessary to achieve the Targeted Return. Amounts in excess of the Targeted Return will be used to pay the Performance Fee. The Targeted Return, which is payable monthly, is generally equal to (i) 14% multiplied by (ii) the Buyer's total invested capital. Total invested capital is generally equal to the sum of the Buyer's (i) equity in advances as of the beginning of the prior month, plus (ii) working capital (equal to a percentage of the equity as of the beginning of the prior month), plus (iii) equity and working capital contributed during the course of the prior month. The Targeted Return is calculated after giving effect to (i) interest expense on the advance financing, (ii) other expenses and fees of the Buyer and its subsidiaries related to financing facilities, (iii) write-offs on account of any non-recoverable servicer advances, and (iv) any shortfall with respect to a prior month in the satisfaction of the Targeted Return. Performance Fee The Performance Fee is calculated as follows. Pursuant to a Master Servicing Rights Purchase Agreement and related Sale Supplements, Net Collections is divided into two subsets: the "Retained Amount" and the "Surplus Amount." If the amount necessary to achieve the Targeted Return is equal to or less than the Retained Amount, then 50% of the excess Retained Amount (if any) and 100% of the Surplus Amount is paid to Nationstar as the Performance Fee. If the amount necessary to achieve the Targeted Return is greater than the Retained Amount but less than Net Collections, then 100% of the excess Surplus Amount is paid to Nationstar as a Performance Fee.



Residential Securities and Loans

Real Estate Securities

As of March 31, 2014, we had approximately $2.9 billion face amount of real estate securities, including $1.1 billion of Agency ARM RMBS and $1.8 billion of Non-Agency RMBS. These investments were financed with repurchase agreements with an aggregate face amount of approximately $1.1 billion for Agency ARM RMBS and approximately $883.0 million for Non-Agency RMBS. As of March 31, 2014, a total face amount of $900.0 million of our Non-Agency portfolio was serviced by Nationstar. The total UPB of the loans underlying these Nationstar serviced Non-Agency RMBS was approximately $12.2 billion as of March 31, 2014. On March 6, 2014, Merrill Lynch, Pierce, Fenner & Smith Incorporated and we entered into an agreement pursuant to which we agreed to purchase approximately $625 million face amount of Non-Agency residential mortgage securities for approximately $553 million. The purchased securities represent 75% of the mezzanine and subordinate tranches of a securitization previously sponsored by Springleaf. The securitization, including the purchased securities, is collateralized by residential mortgage loans with a face amount of approximately $0.9 billion.

Subsequent to March 31, 2014, we acquired Agency ARM RMBS with an aggregate face amount of approximately $223.9 million for approximately $238.1 million, financed with repurchase agreements. Furthermore, we acquired Non-Agency RMBS with an aggregate face amount of approximately $50.7 million for approximately $14.2 million, financed with repurchase agreements. We sold no Agency ARM RMBS and sold Non-Agency RMBS with a face amount of $207.1 million and an amortized cost basis of approximately $138.5 million for approximately $145.0 million and recorded a gain of $6.5 million. 50 Agency ARM RMBS



The following table summarizes our Agency ARM RMBS portfolio as of March 31, 2014 (dollars in thousands):

Gross Unrealized Outstanding Outstanding Amortized Carrying Repurchase Asset Type Face Amount Cost Basis(A) Gains Losses Value(A)(B) Agreements

Agency ARM RMBS $ 1,085,447$ 1,153,504$ 4,131$ (3,579 )$ 1,154,057$ 1,117,592



(A) Amortized cost basis and carrying value exclude $8.6 million of principal

receivables as of March 31, 2014.

(B) Fair value, which is equal to carrying value for all securities.

The following table summarizes the reset dates of our Agency ARM RMBS portfolio as of March 31, 2014 (dollars in thousands):

Weighted Average Periodic Cap Amortized Percentage of Number of Outstanding Cost Basis Total Amortized Carrying



1st Coupon Subsequent Coupon Lifetime Months to

Months to Next Reset (A) Securities Face Amount

(B) Cost Basis Value (B) Coupon Margin

Adjustment (C) Adjustment (D) Cap (E) Reset (F) 1 - 12 78 $ 673,603$ 716,617 62.1 % $ 716,720 3.0 % 1.8 % N/A (G) 2.0 % 9.8 % 7 13 - 24 26 294,346 312,778 27.1 % 313,264 3.4 % 1.8 % 5.0 % 2.0 % 8.5 % 17 25 - 36 5 117,498 124,109 10.8 % 124,073 3.3 % 1.8 % 5.0 % 2.0 % 8.3 % 25 Total/Weighted Average 109 $ 1,085,447$ 1,153,504 100.0 % $ 1,154,057 3.2 % 1.8 % 5.0 % 2.0 % 9.3 % 12



(A) Of these investments, 89.0% reset based on 12 month LIBOR index, 2.1% reset

based on 6 month LIBOR Index, 0.5% reset based on 1 month LIBOR, and 8.4%

reset based on the 1 year Treasury Constant Maturity Rate. After the initial

fixed period, 97.4% of these securities will reset annually and 2.6% will

reset semi-annually.

(B) Amortized cost basis and carrying value exclude $8.6 million of principal

receivables as of March 31, 2014.

(C) Represents the maximum change in the coupon at the end of the fixed rate

period.

(D) Represents the maximum change in the coupon at each reset date subsequent to

the first coupon adjustment.

(E) Represents the maximum coupon on the underlying security over its life.

(F) Represents recurrent weighted average months to the next interest rate

reset.

(G) Not applicable as 57 of the securities (66% of the current face of this

category) are past the first coupon adjustment period. The remaining 21

securities (34% of the current face of this category) have a maximum change

in the coupon of 5.0% at the end of the fixed rate period.



The following table summarizes the characteristics of our Agency ARM RMBS portfolio and of the collateral underlying our Agency ARM RMBS as of March 31, 2014 (dollars in thousands):

51 Collateral Agency ARM RMBS Characteristics Characteristics Weighted Amortized Percentage of Average Number of Outstanding Cost Basis Total Amortized Carrying Life Vintage (A) Securities Face Amount (B) Cost Basis Value (B) (Years) 3 Month CPR (C) Pre-2006 26 $ 139,853$ 148,236 12.9 % $ 149,105 5.4 10.5 % 2006 6 30,538 32,699 2.8 % 32,646 4.1 19.4 % 2007 15 79,151 84,199 7.3 % 84,266 4.8 21.3 % 2008 8 62,054 65,776 5.7 % 66,146 6.7 6.6 % 2009 8 70,296 75,452 6.5 % 75,264 3.8 19.9 % 2010 27 324,083 344,591 29.9 % 344,660 3.9 25.4 % 2011 14 229,801 242,861 21.1 % 243,082 3.8 18.6 % 2012 and later 5 149,671 159,690 13.8 % 158,888 3.8 21.8 % Total/Weighted Average 109 $ 1,085,447$ 1,153,504 100.0 % $ 1,154,057 4.3 19.6 %



(A) The year in which the securities were issued.

(B) Amortized cost basis and carrying value exclude $8.6 million of principal

receivables as of March 31, 2014.

(C) Three month average constant prepayment rate.

The following table summarizes the net interest spread of our Agency ARM RMBS portfolio as of March 31, 2014:

Net Interest Spread (A)

Weighted Average Asset Yield 1.53 % Weighted Average Funding Cost 0.34 % Net Interest Spread 1.19 %



(A) The entire Agency ARM RMBS portfolio consists of floating rate securities.

See table above for details on rate resets. Non-Agency RMBS The following table summarizes our Non-Agency RMBS portfolio as of March 31, 2014 (dollars in thousands): Gross Unrealized Outstanding Outstanding Amortized Carrying Repurchase Asset Type Face Amount Cost Basis Gains Losses Value(A) Agreements Non-Agency RMBS (B) $ 1,573,433$ 1,171,035$ 14,902$ (5,586 )$ 1,180,351$ 883,002 Other ABS 207,431 2,160 60 - 2,220 - Non-Agency RMBS $ 1,780,864$ 1,173,195$ 14,962

$ (5,586 )$ 1,182,571$ 883,002



(A) Fair value, which is equal to carrying value for all securities. (B) Excludes Other ABS securities representing 0.2% of the carrying value of the

Non-Agency RMBS portfolio.



The following tables summarize the characteristics of our Non-Agency RMBS portfolio and of the collateral underlying our Non-Agency RMBS as of March 31, 2014 (dollars in thousands):

52 Non- Agency RMBS Characteristics (A) Average Minimum Percentage of Weighted Rating Number of Outstanding Amortized Total Amortized Principal Excess Average Life Vintage (B) (C) Securities Face Amount Cost Basis Cost Basis Carrying Value Subordination (D) Spread (E) (Years) Pre 2004 CCC 50 $ 86,634$ 59,099 5.0 % $ 60,681 17.4 % 1.9 % 6.3 2004 D 16 85,709 64,986 5.5 % 67,272 18.3 % 3.6 % 9.7 2005 C 10 131,080 102,163 8.7 % 102,585 10.5 % 2.0 % 10.0 2006 C 20 358,589 225,620 19.4 % 226,240 2.5 % 3.6 % 15.0 2007 and later CCC 24 911,421 719,167 61.4 % 723,573 19.9 % 2.1 % 5.8 Total/Weighted Average CC 120 $ 1,573,433$ 1,171,035 100.0 % $ 1,180,351 14.9 % 2.5 % 8.5 Collateral Characteristics (A)(F) Average Loan Collateral Cumulative Vintage (B) Age (years) Factor (G) 3 month CPR (H) Delinquency (I) Losses to Date Pre 2004 11.9 0.06 9.3 % 14.1 % 3.4 % 2004 9.8 0.07 9.5 % 17.9 % 3.7 % 2005 10.7 0.14 8.7 % 19.0 % 10.3 % 2006 7.9 0.23 9.8 % 30.9 % 25.8 % 2007 and later 8.3 0.45 13.7 % 8.4 % 13.6 % Total / WA 8.7 0.33 11.9 % 15.2 % 15.0 %



(A) Excludes Other ABS securities representing 0.2% of the carrying value of the

Non-Agency RMBS portfolio.

(B) The year in which the securities were issued.

(C) Ratings provided above were determined by third party rating agencies,

represent the most recent credit ratings available as of the reporting date

and may not be current. This excludes the ratings of the collateral

underlying four bonds which are no longer rated and four bonds for which we

were unable to obtain rating information. We had no assets that were on negative watch for possible downgrade by at least one rating agency as of March 31, 2014.



(D) The percentage of the outstanding face amount of securities and residual

interests that is subordinate to our investments.

(E) The current amount of interest received on the underlying loans in excess of

the interest paid on the securities, as a percentage of the outstanding

collateral balance for the quarter ended March 31, 2014.

(F) The weighted average loan size of the underlying collateral is $181.8

thousand. This excludes the collateral underlying one bond, due to

unavailable information.

(G) The ratio of original UPB of loans still outstanding.

(H) Three month average constant prepayment rate and default rates.

(I) The percentage of underlying loans that are 90+ days delinquent, or in

foreclosure or considered REO.



The following table sets forth the geographic diversification of the loans underlying our Non-Agency RMBS as of March 31, 2014 (dollars in thousands):

Outstanding Face Percentage of Total Geographic Location (A) Amount Outstanding Western U.S. $ 452,630 28.8 % Southeastern U.S. 437,365 27.8 % Northeastern U.S. 301,484 19.1 % Midwestern U.S. 248,757 15.8 % Southwestern U.S. 93,646 6.0 % Other (B) 39,551 2.5 % $ 1,573,433 100.0 % 53



(A) Excludes Other ABS securities representing 0.2% of the carrying value of the

Non-Agency RMBS portfolio.

(B) Represents collateral for which we were unable to obtain geographical

information.



The following table summarizes the net interest spread of our Non-Agency RMBS portfolio as of March 31, 2014:

Net Interest Spread (A) Weighted Average Asset Yield 4.65 % Weighted Average Funding Cost 1.98 % Net Interest Spread 2.67 %



(A) The Non-Agency RMBS portfolio consists of 76.1% floating rate securities and

23.9% fixed rate securities. Excludes Other ABS securities representing 0.2%

of the carrying value of the Non-Agency RMBS portfolio. Real Estate Loans



Residential Mortgage Loans

As of March 31, 2014, we had approximately $57.8 million outstanding face amount of residential mortgage loans. In February 2013, we invested approximately $35.1 million to acquire a 70% interest in the mortgage loans. Nationstar co-invested pari passu with us in 30% of the mortgage loans and is the servicer of the loans, performing all servicing and advancing functions, and retaining the ancillary income, servicing obligations and liabilities as the servicer. In the fourth quarter of 2013, we invested approximately $92.7 million in a pool of residential mortgage loans with a UPB of approximately $170.1 million. The investment was financed with $60.1 million under a $300.0 million master repurchase agreement with RBS. On March 28, 2014, we invested approximately $3.8 million in a pool of residential mortgage loans with a UPB of approximately $7.0 million. The investment was financed with a $2.5 million master repurchase agreement with RBS. These acquisitions are accounted for as "linked transactions" (derivatives), as described in Note 10 to our consolidated financial statements included in this report. On January 15, 2014, we purchased a portfolio of non-performing residential mortgage loans with a UPB of approximately $65.6 million at a price of approximately $33.7 million. To finance this purchase, on January 15, 2014, we entered into a $25.3 million repurchase agreement with Credit Suisse Securities (USA) LLC, which matures on January 14, 2015. Borrowings under the agreement bear interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 3.00%. The agreement contains customary covenants and event of default provisions. This acquisition is accounted for as a linked transaction, as described in Note 10 to our consolidated financial statements included in this report. On April 8, 2014, we agreed to purchase from an affiliate of Natixis a portfolio of non-performing and re-performing residential mortgage loans with a UPB of approximately $93 million for a price of approximately $67 million. We expect to finance approximately 70% of the purchase price with a repurchase agreement. The purchase is expected to settle in the second quarter of 2014, although there can be no assurance that the transaction will be completed as expected or at all. On April 11, 2014, we agreed to purchase from JPMorgan Chase Bank, N.A. a portfolio of non-performing residential mortgage loans with a UPB of approximately $525 million for a price of approximately $392 million. We expect to finance approximately 75% of the purchase price with a repurchase agreement. The purchase is expected to settle in the second quarter of 2014, although there can be no assurance that the transaction will be completed as expected or at all.



The following table summarizes the characteristics of our reverse mortgage loans as of March 31, 2013 (dollars in thousands):

Weighted Average Weighted Maturity Floating Rate Outstanding



Average Coupon (Years) as a % of Face

Face Amount Loan Count (A) (B) Amount Reverse Mortgage Loans (C) $ 57,818 321 5.1 % 3.6 21.7 % 54



(A) Represents the stated interest rate on the loans. Accrued interest on

reverse mortgage loans is generally added to the principal balance and paid

when the loan is resolved.

(B) The weighted average maturity is based on the timing of expected principal

reduction on the assets.

(C) 80% of these loans have reached a termination event. As a result, the

borrower can no longer make draws on these loans. Other Consumer Loans On April 1, 2013, we completed, through newly formed limited liability companies (together, the "Consumer Loan Companies"), a co-investment in a portfolio of consumer loans with a UPB of approximately $4.2 billion as of December 31, 2012. The portfolio included over 400,000 personal unsecured loans and personal homeowner loans originated through subsidiaries of HSBC Finance Corporation. The Consumer Loan Companies acquired the portfolio from HSBC Finance Corporation and its affiliates. We invested approximately $250 million for 30% membership interests in each of the Consumer Loan Companies. Of the remaining 70% of the membership interests, Springleaf, which is majority-owned by Fortress funds managed by our Manager, acquired 47% and an affiliate of Blackstone Tactical Opportunities Advisors LLC acquired 23%. Springleaf acts as the managing member of the Consumer Loan Companies. After a servicing transition period, Springleaf became the servicer of the loans and provides all servicing and advancing functions for the portfolio. The Consumer Loan Companies initially financed $2.2 billion ($1.4 billion outstanding as of March 31, 2014) of the approximately $3.0 billion purchase price with asset-backed notes that have a maturity of April 2021, and pay a coupon of 3.75%. In September 2013, the Consumer Loan Companies issued and sold an additional $0.4 billion of asset-backed notes for 96% of par. These notes are subordinate to the debt issued in April 2013, have a maturity of December 2024, and pay a coupon of 4%. Subsequent to March 31, 2014, we paid down approximately $7.5 million of the master repurchase agreement secured by our ownership interest in the consumer loan companies.



The table below summarizes the collateral characteristics of the consumer loans as of March 31, 2014 (dollars in thousands):

Collateral Characteristics 3 Month Weighted Weighted Average Average Average Personal Personal Original Weighted Expected Charge- Unsecured Loans Homeowner Loans Number of FICO Average Adjustable Average Loan Life Delinquency 30 Delinquency 60 Delinquency 90+ off Rate 3 Month 3 Month UPB % % Loans Score (A) Coupon Rate Loan % Age (months) (Years) Days (B) Days (B) Days (B) (C) CRR (D) CDR (E)

Consumer Loans $ 3,098,138 67.5 % 32.5 %

323,570 634 18.1 % 10.3 % 106 3.2 3.4 % 1.9 % 5.1 % 9.6 % 15.4 % 10.3 %



(A) Weighted average original FICO score represents the FICO score at the time

the loan was originated.

(B) Delinquency 30 Days, Delinquency 60 Days and Delinquency 90+ Days represent

the percentage of the total principal balance of the pool that corresponds

to loans that are delinquent by 30-59 days, 60-89 days or 90 or more days,

respectively.

(C) 3 Month weighted average charge-off rate represents the loans charged-off

during the three months as a percentage of total principal balance of the

pool.

(D) 3 Month CRR, or the voluntary prepayment rate, represents the annualized

rate of the voluntary prepayments during the three months as a percentage of

the total principal balance of the pool.

(E) 3 Month CDR, or the involuntary prepayment rate, represents the annualized

rate of the involuntary prepayments (defaults) during the three months as a

percentage of the total principal balance of the pool. 55



APPLICATION OF CRITICAL ACCOUNTING POLICIES

Management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that could affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Actual results could differ from these estimates. Management believes that the estimates and assumptions utilized in the preparation of the consolidated financial statements are prudent and reasonable. Actual results historically have been in line with management's estimates and judgments used in applying each of the accounting policies described below, as modified periodically to reflect current market conditions. The following is a summary of our accounting policies that are most affected by judgments, estimates and

assumptions. Excess MSRs Upon acquisition, we elected to record each investment in Excess MSRs at fair value. We elected to record our investments in Excess MSRs at fair value in order to provide users of the financial statements with better information regarding the effects of prepayment risk and other market factors on the Excess MSRs. GAAP establishes a framework for measuring fair value of financial instruments and a set of related disclosure requirements. A three-level valuation hierarchy has been established based on the transparency of inputs to the valuation of a financial instrument as of the measurement date. The three levels are defined as follows:



Level 1-Quoted prices in active markets for identical instruments.

Level 2-Valuations based principally on other observable market parameters, including:

Quoted prices in active markets for similar instruments,

Quoted prices in less active or inactive markets for identical or similar

instruments,

Other observable inputs (such as interest rates, yield curves, volatilities,

prepayment speeds, loss severities, credit risks and default rates), and

Market corroborated inputs (derived principally from or corroborated by

observable market data).



Level 3-Valuations based significantly on unobservable inputs.

The level in the fair value hierarchy within which a fair value measurement or disclosure in its entirety is based on the lowest level of input that is significant to the fair value measurement or disclosure in its entirety.

Our Excess MSRs are categorized as Level 3 under the GAAP hierarchy. The inputs used in the valuation of Excess MSRs include prepayment speed, delinquency rate, recapture rate, excess mortgage servicing amount and discount rate. The determination of estimated cash flows used in pricing models is inherently subjective and imprecise. The methods used to estimate fair value may not result in an amount that is indicative of net realizable value or reflective of future fair values. Changes in market conditions, as well as changes in the assumptions or methodology used to determine fair value, could result in a significant increase or decrease in fair value. Management validates significant inputs and outputs of our models by comparing them to available independent third party market parameters and models for reasonableness. We believe the assumptions we use are within the range that a market participant would use, and factor in the liquidity conditions in the markets. Any changes to the valuation methodology will be reviewed by management to ensure the changes are appropriate. In order to evaluate the reasonableness of its fair value determinations, management engages an independent valuation firm to separately measure the fair value of its Excess MSRs pools. The independent valuation firm determines an estimated fair value range based on its own models and issues a "fairness opinion" with this range. Management compares the range included in the opinion to the values generated by its internal models. For Excess MSRs acquired prior to the current quarter, the fairness opinion relates to the valuation at the current quarter end date. For Excess MSRs acquired during the current quarter, the fairness opinion relates to the valuation at the time of acquisition. To date, we have not made any significant valuation adjustments as a result of

these fairness opinions. 56

For Excess MSRs acquired during the current quarter, we revalue the Excess MSRs at the quarter end date if a payment is received between the acquisition date and the end of the quarter. Otherwise, Excess MSRs acquired during the current quarter are carried at their amortized cost basis if there has been no change in assumptions since acquisition. Investments in Excess MSRs are aggregated into pools as applicable; each pool of Excess MSRs is accounted for in the aggregate. Interest income for Excess MSRs is accreted using an effective yield or "interest" method, based upon the expected income from the Excess MSRs through the expected life of the underlying mortgages. Changes to expected cash flows result in a cumulative retrospective adjustment, which will be recorded in the period in which the change in expected cash flows occurs. Under the retrospective method, the interest income recognized for a reporting period would be measured as the difference between the amortized cost basis at the end of the period and the amortized cost basis at the beginning of the period, plus any cash received during the period. The amortized cost basis is calculated as the present value of estimated future cash flows using an effective yield, which is the yield that equates all past actual and current estimated future cash flows to the initial investment. In addition, our policy is to recognize interest income only on Excess MSRs in existing eligible underlying mortgages. Under the fair value election, the difference between the fair value of Excess MSRs and their amortized cost basis is recorded as "Change in fair value of investments in excess mortgage servicing rights," as applicable. Fair value is generally determined by discounting the expected future cash flows using discount rates that incorporate the market risks and liquidity premium specific to the Excess MSRs, and therefore may differ from their effective yields.



The following tables summarize the estimated change in fair value of our interests in the Excess MSRs owned directly as of March 31, 2014 given several parallel shifts in the discount rate, prepayment rate, delinquency rate and recapture rate (dollars in thousands):

Fair value at March 31, 2014 $ 341,704 Discount rate shift in % -20% -10% 10% 20% Estimated fair value $ 373,543$ 356,846$ 327,908$ 315,297 Change in estimated fair value: Amount $ 31,838$ 15,141$ (13,797 )$ (26,408 ) % 9.3 % 4.4 % -4.0 % -7.7 % Prepayment rate shift in % -20% -10% 10% 20% Estimated fair value $ 370,632$ 355,661$ 328,659$ 316,454 Change in estimated fair value: Amount $ 28,927$ 13,956$ (13,046 )$ (25,251 ) % 8.5 % 4.1 % -3.8 % -7.4 % Delinquency rate shift in % -20% -10% 10% 20% Estimated fair value $ 345,985$ 343,842$ 339,558$ 337,415 Change in estimated fair value: Amount $ 4,280$ 2,137$ (2,147 )$ (4,290 ) % 1.3 % 0.6 % -0.6 % -1.3 % Recapture rate shift in % -20% -10% 10% 20% Estimated fair value $ 335,264$ 338,449$ 344,809$ 347,727 Change in estimated fair value: Amount $ (6,441 )$ (3,256 )$ 3,104$ 6,022 % -1.9 % -1.0 % 0.9 % 1.8 % 57 The following tables summarize the estimated change in fair value of our interests in the Excess MSRs owned through equity method investees as of March 31, 2014 given several parallel shifts in the discount rate, prepayment rate, delinquency rate and recapture rate (dollars in thousands): Fair value at March 31, 2014 $ 338,307 Discount rate shift in % -20% -10% 10% 20% Estimated fair value $ 371,364$ 353,980$ 324,049$ 311,088 Change in estimated fair value: Amount $ 33,057$ 15,673$ (14,258 )$ (27,219 ) % 9.8 % 4.6 % -4.2 % -8.0 % Prepayment rate shift in % -20% -10% 10% 20% Estimated fair value $ 365,567$ 351,470$ 325,927$ 314,324 Change in estimated fair value: Amount $ 27,260$ 13,163$ (12,380 )$ (23,983 ) % 8.1 % 3.9 % -3.7 % -7.1 % Delinquency rate shift in % -20% -10% 10% 20% Estimated fair value $ 343,836$ 341,060$ 335,509$ 332,736 Change in estimated fair value: Amount $ 5,529$ 2,753$ (2,798 )$ (5,571 ) % 1.6 % 0.8 % -0.8 % -1.6 % Recapture rate shift in % -20% -10% 10% 20% Estimated fair value $ 327,204$ 332,685$ 344,009$ 349,860 Change in estimated fair value: Amount $ (11,103 )$ (5,622 )$ 5,702$ 11,553 % -3.3 % -1.7 % 1.7 % 3.4 % The sensitivity analysis is hypothetical and should be used with caution. In particular, the results are calculated by stressing a particular economic assumption independent of changes in any other assumption; in practice, changes in one factor may result in changes in another, which might counteract or amplify the sensitivities. Also, changes in the fair value based on a 10% variation in an assumption generally may not be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Servicer Advances We account for investments in servicer advances, which include the basic fee component of the related MSR (the "servicer advance investments"), as financial instruments, since we are not a licensed mortgage servicer. We have elected to account for the servicer advance investments at fair value. Accordingly, we estimate the fair value of the servicer advance investments at each reporting date and reflect changes in the fair value of the servicer advance investments as gains or losses. We initially recorded the servicer advance investments at the purchase price paid, which we believe reflects the value a market participant would attribute to the investments at the time of our purchase. We recognize interest income from our servicer advance investments using the interest method, with adjustments to the yield applied based 58 upon changes in actual or expected cash flows under the retrospective method. The servicer advances are not interest-bearing, but we accrete the effective rate of interest applied to the aggregate cash flows from the servicer advances and the basic fee component of the related MSR. We categorize servicer advance investments under Level 3 of the GAAP hierarchy described above under "-Application of Critical Accounting Policies-Excess MSRs," since we use internal pricing models to estimate the future cash flows related to the servicer advance investments that incorporate significant unobservable inputs and include assumptions that are inherently subjective and imprecise. In order to evaluate the reasonableness of its fair value determinations, management engages an independent valuation firm to separately measure the fair value of its servicer advances investment. The independent valuation firm determines an estimated fair value range based on its own models and issues a "fairness opinion" with this range. Our estimations of future cash flows include the combined cash flows of all of the components that comprise the servicer advance investments: existing advances, the requirement to purchase future advances and the right to the basic fee component of the related MSR. The factors that most significantly impact the fair value include (i) the rate at which the servicer advance balance declines, which we estimate is approximately $700.0 million per year on average over the weighted average life of the investment held as of March 31, 2014, (ii) the duration of outstanding servicer advances, which we estimate is approximately nine months on average for an advance balance at a given point in time (not taking into account new advances made with respect to the pool), and (iii) the UPB of the underlying loans with respect to which we have the obligation to make advances and own the basic fee component. As described above, we recognize income from servicer advance investments in the form of (i) interest income, which we reflect as a component of net interest income and (ii) changes in the fair value of the servicer advances, which we reflect as a component of other income. We remit to Nationstar a portion of the basic fee component of the MSR related to our servicer advance investments as compensation for acting as servicer, as described in more detail under "-Our Portfolio-Servicing Related Assets-Servicer Advances." Our interest income is recorded net of the servicing fee owed to Nationstar.



Real Estate Securities (RMBS)

Our Non-Agency RMBS and Agency ARM RMBS are classified as available-for-sale. As such, they are carried at fair value, with net unrealized gains or losses reported as a component of accumulated other comprehensive income, to the extent impairment losses are considered temporary, as described below. We expect that any RMBS we acquire will be categorized under Level 2 or Level 3 of the GAAP hierarchy described above under "-Application of Critical Accounting Policies-Excess MSRs," depending on the observability of the inputs. Fair value may be based upon broker quotations, counterparty quotations, pricing service quotations or internal pricing models. The significant inputs used in the valuation of our securities include the discount rate, prepayment speeds, default rates and loss severities, as well as other variables. The determination of estimated cash flows used in pricing models is inherently subjective and imprecise. The methods used to estimate fair value may not be indicative of net realizable value or reflective of future fair values. Changes in market conditions, as well as changes in the assumptions or methodology used to determine fair value, could result in a significant increase or decrease in fair value. Management validates significant inputs and outputs of our models by comparing them to available independent third party market parameters and models for reasonableness. We believe the assumptions we use are within the range that a market participant would use, and factor in the liquidity conditions in the markets. Any changes to the valuation methodology will be reviewed by management to ensure the changes are appropriate. We must also assess whether unrealized losses on securities, if any, reflect a decline in value that is other-than-temporary and, if so, record an other-than-temporary impairment through earnings. A decline in value is deemed to be other-than-temporary if (i) it is probable that we will be unable to collect all amounts due according to the contractual terms of a security that was not impaired at acquisition (there is an expected credit loss), or (ii)

if we 59

have the intent to sell a security in an unrealized loss position or it is more likely than not that we will be required to sell a security in an unrealized loss position prior to its anticipated recovery (if any). For the purposes of performing this analysis, we will assume the anticipated recovery period is until the expected maturity of the applicable security. Also, for securities that represent beneficial interests in securitized financial assets within the scope of ASC 325-40, whenever there is a probable adverse change in the timing or amounts of estimated cash flows of a security from the cash flows previously projected, an other-than-temporary impairment will be deemed to have occurred. Our Non-Agency RMBS acquired with evidence of deteriorated credit quality for which it was probable, at acquisition, that we would be unable to collect all contractually required payments receivable, fall within the scope of ASC 310-30, as opposed to ASC 325-40. All of our other Non-Agency RMBS, those not acquired with evidence of deteriorated credit quality, fall within the scope of ASC 325-40. Income on these securities is recognized using a level yield methodology based upon a number of cash flow assumptions that are subject to uncertainties and contingencies. Such assumptions include the rate and timing of principal and interest receipts (which may be subject to prepayments and defaults). These assumptions are updated on at least a quarterly basis to reflect changes related to a particular security, actual historical data, and market changes. These uncertainties and contingencies are difficult to predict and are subject to future events, and economic and market conditions, which may alter the assumptions. For securities acquired at a discount for credit losses, we recognize the excess of all cash flows expected over our investment in the securities as Interest Income on a "loss adjusted yield" basis. The loss-adjusted yield is determined based on an evaluation of the credit status of securities, as described in connection with the analysis of impairment above. Real Estate Loans We invest in loans, including but not limited to, residential mortgage loans. Loans for which we have the intent and ability to hold for the foreseeable future, or until maturity or payoff, are classified as held-for-investment. Loans are presented in the consolidated balance sheet at cost net of any unamortized discount (or gross of any unamortized premium). We determine at acquisition whether loans will be aggregated into pools based on common risk characteristics (credit quality, loan type, and date of origination or acquisition); loans aggregated into pools are accounted for as if each pool

were a single loan.



Income on these loans is recognized similarly to that on our securities using a level yield methodology and is subject to similar uncertainties and contingencies, which are also analyzed on at least a quarterly basis.

Valuation of Derivatives We financed certain investments with the same counterparty from which we purchased those investments, and we accounted for the contemporaneous purchase of the investments and the associated financings as linked transactions. Accordingly, we recorded a non-hedge derivative instrument on a net basis. We also enter into various economic hedges. Changes in market value of non-hedge derivative instruments and economic hedges are recorded as "Other Income" in the Consolidated Statements of Income. Impairment of Loans To the extent that they are classified as held-for-investment, we must periodically evaluate each of these loans or loan pools for possible impairment. Impairment is indicated when it is deemed probable that we will be unable to collect all amounts due according to the contractual terms of the loan, or for loans acquired at a discount for credit losses, when it is deemed probable that we will be unable to collect as anticipated. Upon determination of impairment, we would establish a specific valuation allowance with a corresponding charge to earnings. We continually evaluate our loans receivable for impairment. Our residential mortgage loans are aggregated into pools for evaluation based on like characteristics, such as loan type and acquisition date. Pools of loans are evaluated based on criteria such as an analysis of borrower performance, credit ratings of borrowers, loan to value ratios, the estimated value of the underlying collateral, the key terms of the loans and historical and anticipated trends in defaults and loss severities for the type and seasoning of loans being evaluated. This information is used to estimate provisions for estimated unidentified incurred losses on pools of loans. Significant judgment is required in determining impairment and in estimating the resulting loss 60 allowance. Furthermore, we must assess our intent and ability to hold our loan investments on a periodic basis. If we do not have the intent to hold a loan for the foreseeable future or until its expected payoff, the loan must be classified as "held for sale" and recorded at the lower of cost or estimated value. Investment Consolidation The analysis as to whether to consolidate an entity is subject to a significant amount of judgment. Some of the criteria considered are the determination as to the degree of control over an entity by its various equity holders, the design of the entity, how closely related the entity is to each of its equity holders, the relation of the equity holders to each other and a determination of the primary beneficiary in entities in which we have a variable interest. These analyses involve estimates, based on the assumptions of management, as well as judgments regarding significance and the design of entities. Variable interest entities ("VIEs") are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.



Our investments in Non-Agency RMBS are variable interests. We monitor these investments and analyze the potential need to consolidate the related securitization entities pursuant to the VIE consolidation requirements.

These analyses require considerable judgment in determining whether an entity is a VIE and determining the primary beneficiary of a VIE since they involve subjective determinations of significance, with respect to both power and economics. The result could be the consolidation of an entity that otherwise would not have been consolidated or the de-consolidation of an entity that otherwise would have been consolidated. We have not consolidated the securitization entities that issued our Non-Agency RMBS. This determination is based, in part, on our assessment that we do not have the power to direct the activities that most significantly impact the economic performance of these entities, such as if we owned a majority of the currently controlling class. In addition, we are not obligated to provide, and have not provided, any financial support to these entities. We have not consolidated the entities in which we hold a 50% interest that made an investment in Excess MSRs. We have determined that the decisions that most significantly impact the economic performance of these entities will be made collectively by us and the other investor in the entities. In addition, these entities have sufficient equity to permit the entities to finance their activities without additional subordinated financial support. Based on our analysis, these entities do not meet any of the VIE criteria. We have invested in servicer advances, including the basic fee component of the related MSRs, through the Buyer, of which we are the managing member. The Buyer was formed through cash contributions by us and third-parties in exchange for membership interests. As of May 5, 2014, we owned an approximately 42% interest in the Buyer, and the third-party investors owned the remaining membership interests. Through our managing member interest, we direct substantially all of the day-to-day activities of the Buyer. The third-party investors do not possess substantive participating rights or the power to direct the day-to-day activities that most directly affect the operations of the Buyer. In addition, no single third-party investor, or group of third-party investors, possesses the substantive ability to remove us as the managing member of the Buyer. We have determined that the Buyer is a voting interest entity. As a result of our managing member interest, which represents a controlling financial interest, we consolidate the Buyer and its wholly owned subsidiaries and reflect membership interests in the Buyer held by third parties as noncontrolling interests.



Investments in Equity Method Investees

We account for our investment in the Consumer Loan Companies pursuant to the equity method of accounting because we can exercise significant influence over the Consumer Loan Companies, but the requirements for 61

consolidation are not met. Our share of earnings and losses in these equity method investees is included in "Earnings from investments in consumer loans, equity method investees" on the Consolidated Statements of Income. Equity method investments are included in "Investments in consumer loans, equity method investees" on the Consolidated Balance Sheets. The Consumer Loan Companies classify their investments in consumer loans as held-for-investment, as they have the intent and ability to hold for the foreseeable future, or until maturity or payoff. The Consumer Loan Companies record the consumer loans at cost net of any unamortized discount or loss allowance. The Consumer Loan Companies determined at acquisition that these loans would be aggregated into pools based on common risk characteristics (credit quality, loan type, and date of origination or acquisition); the loans aggregated into pools are accounted for as if each pool were a single loan. We account for our investments in equity method investees that are invested in Excess MSRs pursuant to the equity method of accounting because we can exercise significant influence over the investees, but the requirements for consolidation are not met. We have elected to measure our investments in equity method investees which are invested in Excess MSRs at fair value. The equity method investees have also elected to measure their investments in Excess MSRs at

fair value. Income Taxes

Our financial results are generally not expected to reflect provisions for current or deferred income taxes. We intend to operate in a manner that allows us to qualify for taxation as a REIT. As a result of our expected REIT qualification, we do not generally expect to pay U.S. federal or state and local corporate level taxes. Many of the REIT requirements, however, are highly technical and complex. If we were to fail to meet the REIT requirements, we would be subject to U.S. federal, state and local income and franchise taxes, and we would face a variety of adverse consequences. See "Risk Factors - Risks Related to Our Taxation as a REIT." We have made certain investments, particularly our investments in servicer advances, through TRSs and are subject to regular corporate income taxes on these investments. Our investments through TRSs did not generate any material taxable income in 2013.



RECENT ACCOUNTING PRONOUNCEMENTS

The FASB has recently issued or discussed a number of proposed standards on such topics as consolidation, financial statement presentation, revenue recognition, financial instruments and hedging. Some of the proposed changes are significant and could have a material impact on our reporting. We have not yet fully evaluated the potential impact of these proposals, but will make such an evaluation as the standards are finalized. 62 RESULTS OF OPERATIONS

The following table summarizes the changes in our results of operations for the three months ended March 31, 2014 compared to the three months ended March 31, 2013 (dollars in thousands). Our results of operations are not necessarily indicative of our future performance, particularly because we were not an independent public company until May 15, 2013. Three Months Ended March 31, Increase (Decrease) 2014 2013 Amount % Interest income $ 71,490$ 16,191$ 55,299 341.5 % Interest expense 38,997 899 38,098 4237.8 % Net Interest Income 32,493 15,292 17,201 112.5 % Impairment Other-than-temporary impairment ("OTTI") on securities 328 - 328 N.M. Valuation allowance on loans 164 - 164 N.M. 492 - 492 N.M. Net interest income after impairment 32,001 15,292 16,709 109.3 % Other Income Change in fair value of investments in excess mortgage servicing rights 6,602 1,858 4,744 255.3 % Change in fair value of investments in excess mortgage servicing rights, equity method investees 6,374 969 5,405 557.8 % Earnings from investments in consumer loans, equity method investees 16,360 - 16,360 N.M. Gain on settlement of securities 4,357 - 4,357 N.M. Other income 1,357 - 1,357 N.M. 35,050 2,827 32,223 1139.8 % Operating Expenses General and administrative expenses 2,075 2,719 (644 ) -23.7 % Management fee allocated by Newcastle - 2,325 (2,325 ) -100.0 % Management fee to affiliate 4,486 - 4,486 N.M. Incentive compensation to affiliate 3,338 - 3,338 N.M. 9,899 5,044 4,855 N.M. Income (Loss) Before Income Taxes 57,152 13,075 44,077 337.1 % Income tax expense 287 - 287 N.M. Net Income (Loss) $ 56,865$ 13,075$ 43,790 334.9 % Noncontrolling Interests in Income (Loss) of Consolidated Subsidiaries $ 8,093 $ - $ 8,093 N.M. Net Income (Loss) Attributable to Common Shareholders $ 48,772$ 13,075$ 35,697 273.0 % Interest Income



Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Interest income increased by $55.3 million primarily due to increases in interest income as a result of new investments in servicing related assets and real estate securities.

Interest Expense



Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Interest expense increased by $38.1 million due to repurchase agreements and notes payable financing entered into since March 2013 on our servicer advances, real estate securities and loans, and other investments.



Other than Temporary Impairment ("OTTI") on Securities

Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

63

The other-than-temporary impairment on securities increased by $0.3 million due to the recognition of impairment on certain of our Non-Agency RMBS securities during the three months ended March 31, 2014.



Valuation Allowance on Loans

Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

The valuation allowance on loans increased by $0.2 million due to the recognition of loan losses on our residential mortgage loans during the three months ended March 31, 2014.

Change in Fair Value of Investments in Excess Mortgage Servicing Rights

Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

The change in fair value of investments in excess mortgage servicing rights increased $4.7 million due to the acquisition of new investments in 2013 and 2014 and subsequent net increases in value.

Change in Fair Value of Investments in Excess Mortgage Servicing Rights, Equity Method Investees

Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

The change in fair value of investments in excess mortgage servicing rights, equity method investees increased $5.4 million due to the acquisition of these investments in 2013 and subsequent net increases in value.



Earnings from Investments in Consumer Loans, Equity Method Investees

Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Earnings from investments in consumer loans, equity method investees increased $16.4 million due to the acquisition of these investments in the second quarter of 2013 and subsequent income recognized by the investees.



Gain on Settlement of Securities

Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Gain on settlement of securities increased by $4.3 million due to the sale of Agency ARM RMBS and Non-Agency RMBS during the three months ended March 31, 2014.

Other Income



Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Other income increased by $1.4 million primarily due to an unrealized gain on derivatives and linked transactions accounted for as derivatives during the three months ended March 31, 2014.

General and Administrative Expenses

Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

General and administrative expenses decreased by $0.6 million primarily due to a non-recurring deal expense of $2.0 million related to our investment in consumer loans, equity method investees that was incurred during the three months ended March 31, 2013, partially offset by an increase in expenses incurred to maintain and monitor our increasing asset base. 64



Management Fee Allocated by Newcastle

Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Management fee allocated by Newcastle decreased $2.3 million due to the management agreement becoming effective on May 15, 2013 and no management fees being allocated subsequent to that date.

Management Fee to Affiliate

Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Management fee to affiliate increased $4.5 million as a result of the management agreement becoming effective on May 15, 2013.

Incentive Compensation to Affiliate

Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Incentive compensation to affiliate increased $3.3 million as a result of the management agreement becoming effective on May 15, 2013 and subsequent investment performance.

Income Tax Expense



Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Income tax expense increased $0.3 million due to the acquisition of servicer advances held in a taxable subsidiary in the fourth quarter of 2013 and subsequent taxable income recognized.

Noncontrolling Interests in Income (Loss) of Consolidated Subsidiaries

Three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Noncontrolling interest in income (loss) of consolidated subsidiaries increased $8.1 million due to the acquisition of investments in servicer advances held by a less than wholly owned subsidiary at the end of the fourth quarter of the year ended December 31, 2013 and subsequent income recognized.



LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, and other general business needs. Additionally, to maintain our status as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our REIT taxable income. We note that a portion of this requirement may be able to be met in future years through stock dividends, rather than cash, subject to limitations based on the value of our stock. Our primary sources of funds for liquidity generally consist of cash provided by operating activities (primarily income from our investments in Excess MSRs, servicer advances, RMBS and residential mortgage loans), sales of and repayments from our investments, potential debt financing sources, including securitizations, and the issuance of equity securities, when feasible and appropriate. Our primary uses of funds are the payment of interest, management fees, incentive compensation, outstanding commitments and other operating expenses, and the repayment of borrowings, as well as dividends. Our primary sources of financing currently are notes payable and repurchase agreements, although we may also pursue other sources of financing such as securitizations and other secured and unsecured forms of borrowing. As of March 31, 2014, we had outstanding repurchase agreements with an aggregate face amount of approximately $142.5 million to finance our ownership interest in each of the consumer loan companies, approximately $883.0 million to finance $1.5 billion face amount of Non-Agency RMBS and approximately $1.1 billion to finance $1.1 billion face 65 amount of Agency ARM RMBS. The financing of our entire RMBS portfolio, which generally has 30 to 90 day terms, is subject to margin calls. Under repurchase agreements, we sell a security to a counterparty and concurrently agree to repurchase the same security at a later date for a higher specified price. The sale price represents financing proceeds and the difference between the sale and repurchase prices represents interest on the financing. The price at which the security is sold generally represents the market value of the security less a discount or "haircut," which can range broadly, for example from 4%-5% for Agency ARM RMBS to between 15% and 40% for Non-Agency RMBS. During the term of the repurchase agreement, the counterparty holds the security as collateral. If the agreement is subject to margin calls, the counterparty monitors and calculates what it estimates to be the value of the collateral during the term of the agreement. If this value declines by more than a de minimis threshold, the counterparty could require us to post additional collateral (or "margin") in order to maintain the initial haircut on the collateral. This margin is typically required to be posted in the form of cash and cash equivalents. Furthermore, we may, from time to time, be a party to derivative agreements or financing arrangements that may be subject to margin calls based on the value of such instruments. We seek to maintain adequate cash reserves and other sources of available liquidity to meet any margin calls resulting from decreases in value related to a reasonably possible (in the opinion of management) change in interest rates. Our ability to obtain borrowings and to raise future equity capital is dependent on our ability to access borrowings and the capital markets on attractive terms. Our Manager's senior management team has extensive long-term relationships with investment banks, brokerage firms and commercial banks, which we believe will enhance our ability to source and finance asset acquisitions on attractive terms and access borrowings and the capital markets at attractive levels. As of March 31, 2014, we have sufficient liquid assets, which include unrestricted cash and Agency ARM RMBS, to satisfy all of our short-term recourse liabilities. With respect to the next twelve months, we expect that our cash on hand combined with our cash flow provided by operations will be sufficient to satisfy our anticipated liquidity needs with respect to our current investment portfolio, including related financings, potential margin calls and operating expenses. While it is inherently more difficult to forecast beyond the next twelve months, we currently expect to meet our long-term liquidity requirements through our cash on hand and, if needed, additional borrowings, proceeds received from repurchase agreements and other financings, proceeds from equity offerings and the liquidation or refinancing of our assets. These short-term and long-term expectations are forward-looking and subject to a number of uncertainties and assumptions, including those described under "-Market Considerations" as well as "Risk Factors." If our assumptions about our liquidity prove to be incorrect, we could be subject to a shortfall in liquidity in the future, and this shortfall may occur rapidly and with little or no notice, which could limit our ability to address the shortfall on a timely basis and could have a material adverse effect on our business. Our cash flow provided by operations differs from our net income due to these primary factors: (i) accretion of discount or premium on our residential securities and loans, (ii) unrealized gains or losses on our Excess MSRs owned directly and through equity method investees, (iii) the difference between (a) accretion and unrealized gains and losses recorded with respect to our servicer advance investments and (b) cash received therefrom, and (iv) other-than-temporary impairment, if any. In addition, cash received by our consumer loan joint ventures is currently required to be used to repay the related debt and is therefore not available to fund other cash needs. In addition to the information referenced above, the following factors could affect our liquidity, access to capital resources and our capital obligations. As such, if their outcomes do not fall within our expectations, changes in these factors could negatively affect our liquidity.



Access to Financing from Counterparties - Decisions by investors,

counterparties and lenders to enter into transactions with us will depend upon

a number of factors, such as our historical and projected financial

performance, compliance with the terms of our current credit arrangements,

industry and market trends, the availability of capital and our investors',

counterparties' and lenders' policies and rates applicable thereto, and the

relative attractiveness of alternative investment or lending opportunities.

Recent conditions and events have limited the array of capital resources

available. Our business strategy is dependent upon our ability to finance

certain of our investments at rates that provide a positive net spread. 66



Impact of Expected Repayment or Forecasted Sale on Cash Flows - The timing of

and proceeds from the repayment or sale of certain investments may be different

than expected or may not occur as expected. Proceeds from sales of assets are

unpredictable and may vary materially from their estimated fair value and their

carrying value. Further, the availability of investments that provide similar

returns to those repaid or sold investments is unpredictable and returns on new

investments may vary materially from those on existing investments. Debt Obligations The following table presents certain information regarding our debt obligations: March 31, 2014 (A) Collateral Weighted Weighted Weighted Final Average Average Average Outstanding Stated Funding Life Amortized Life



Debt Obligations/ Collateral Month Issued Face Amount Carrying Value Maturity Cost (Years) Outstanding Face Cost Basis Carrying Value (Years) Repurchase Agreements (B) Agency ARM RMBS (C)

Various $ 1,117,592$ 1,117,592 Jun-14 0.34 % 0.3 $ 1,085,447$ 1,153,504$ 1,154,057 4.3 Apr-14 to Non-Agency RMBS (D) Various 883,002 883,002 Oct-14 1.98 % 0.1 1,501,192 1,156,794 1,163,721 8.8 Consumer Loans (E) Jan-14 142,500 142,500 Jun-14 4.16 % 0.3 N/A N/A 231,422 3.2 Total Repurchase Agreements 2,143,094 2,143,094 1.27 % 0.2 Notes Payable Secured Corporate Loan (F) Dec-13 69,055 69,055 May-14 4.16 % 0.2 35,823,960 124,379 147,702 6.0 Sep-14 to Servicer Advances (G) Various 3,142,292 3,142,292 Mar-17 3.01 % 1.2 3,430,473 3,457,385 3,457,385 3.2 Residential Mortgage Loans (H) Dec-13 23,458

23,458 Sep-14 3.41 % 0.5 57,818 34,045 34,045 3.6 Total Notes Payable 3,234,805 3,234,805 3.03 % 1.1 Total $ 5,377,899$ 5,377,899 2.33 % 0.8



(A) Excludes debt related to linked transactions (Note 10).

(B) These repurchase agreements had approximately $0.7 million of associated

accrued interest payable as of March 31, 2014.

(C) The counterparties of these repurchase agreements are Mizuho ($160.8

million), Morgan Stanley ($160.5 million), Daiwa ($315.0 million) and

Jefferies ($481.3 million) and were subject to customary margin call

provisions.

(D) The counterparties of these repurchase agreements are Barclays

($34.7 million), Credit Suisse ($132.3 million), Royal Bank of Scotland

($42.5 million), Bank of America ($459.9 million), Goldman Sachs ($83.3

million), UBS ($74.6 million) and Royal Bank of Canada ($55.7 million) and

were subject to customary margin call provisions. All of the Non-Agency

repurchase agreements have LIBOR-based floating interest rates. Includes

$103.2 million borrowed under a master repurchase agreement, which bears

interest at one-month LIBOR plus 1.75%.

(E) The repurchase agreement is payable to Credit Suisse and bears interest

equal to one-month LIBOR plus 4.0%.

(F) The loan bears interest equal to one-month LIBOR plus 4.0%. The outstanding

face of the collateral represents the UPB of the residential mortgage loans

underlying the Excess MSRs that secure this corporate loan.

(G) The notes bore interest equal to the sum of (i) a floating rate index rate

equal to one-month LIBOR or a cost of funds rate, as applicable, and (ii) a

margin ranging from 1.3% to 2.5%.

(H) The note is payable to Nationstar and bears interest equal to one-month

LIBOR plus 3.25%.



Certain of the debt obligations included above are obligations of our consolidated subsidiaries, which own the related collateral. In some cases, including servicer advances, such collateral is not available to other creditors of ours.

The following table provides additional information regarding our short-term borrowings (dollars in thousands). All of the Agency ARM RMBS repurchase agreements and $792.6 million face amount of the Non-Agency RMBS repurchase agreements have full recourse to us, while $90.4 million face amount of the Non-Agency RMBS repurchase agreements is non-recourse debt. The weighted average differences between the fair value of the assets and the face amount of available financing for the Agency ARM RMBS repurchase agreements and Non-Agency RMBS repurchase agreements were 4.0% and 24.0%, respectively, during the three months ended March 31, 2014. Additional short-term borrowings are noted in

the table and descriptions below. 67 Three Months March 31, 2014 (A) Weighted Outstanding Average Balance at Average Daily Maximum Daily March 31, Amount Amount Interest 2014 Outstanding (B) Outstanding Rate Repurchase Agreements Agency ARM RMBS $ 1,117,592$ 1,192,924$ 1,332,954 0.37 % Non-Agency RMBS 883,002 516,675 883,002 1.90 % Consumer Loans 142,500 149,726 150,000 4.16 % Notes Payable Secured Corporate Loan 69,055 71,839 75,000 4.16 % Servicer Advances 2,644,492 2,817,373 3,386,396 2.29 % Residential Mortgage Loans 23,458 22,943 23,458 3.41 % Total/Weighted Average $ 4,880,099$ 4,771,480$ 5,850,810 1.86 %



(A) Note this excludes debt related to linked transactions. See Note 10 to the

consolidated financial statements included in this report for additional

information on linked transactions.

(B) Represents the average for the period the debt was outstanding.

In March 2014, all of the notes issued pursuant to one servicer advance facility and a portion of the notes issued pursuant to another servicer advance facility were repaid with the proceeds of new notes issued pursuant to an advance receivables trust (the "NRART Master Trust") established by the Buyer with a number of financial institutions. The NRART Master Trust issued variable funding notes ("VFNs") with borrowing capacity of up to $1.1 billion. The VFNs generally bear interest at a rate equal to the sum of (i) LIBOR or a cost of funds rate plus (ii) a spread of 1.375% to 2.5% depending on the class of the notes. The expected repayment date of the VFNs is March 2015. The NRART Master Trust also issued approximately $1.0 billion of term notes (the "Term Notes") to institutional investors. The Term Notes generally bear interest at approximately 2.0% and have expected repayment dates in March 2015 and March 2017. The VFNs and the Term Notes are secured by servicer advances, and the financing is nonrecourse to the Buyer, except for customary recourse provisions. On May 2, 2014, the Buyer received $86.4 million from us to fund the purchase of $617.5 million of additional servicer advances, which were financed with a new note issued to Morgan Stanley bearing interest at a rate equal 2.10% and maturing in May 2016. As of May 2, 2014, the principal balance of this note was approximately $580.5 million. On March 31, 2014, we obtained approximately $415 million in financing from Merrill Lynch, Pierce, Fenner & Smith Incorporated (a wholly-owned subsidiary of Bank of America) to settle our purchase of approximately $625 million face amount of Non-Agency RMBS for approximately $553 million, which represents 75% of the mezzanine and subordinate tranches of a securitization previously sponsored by an affiliate of Springleaf. The securitization is collateralized by residential mortgage loans with a face amount of approximately $0.9 billion. Merrill Lynch, Pierce, Fenner & Smith Incorporated purchased the remaining 25% of the mezzanine and subordinate tranches on the securitization on the same terms as our purchase. On January 15, 2014, we entered into a $25.3 million repurchase agreement with Credit Suisse Securities (USA) LLC which matures on January 14, 2015. Borrowings under the agreement bear interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 3.00%. The agreement contains customary covenants and event of default provisions, including event of default provisions triggered by a 50% equity decline as of the end of the corresponding period in the prior fiscal year, or a 35% equity decline as of the end of the quarter immediately preceding the most recently completed fiscal quarter and a four-to-one indebtedness to tangible net worth provision. On January 8, 2014, we financed all of our ownership interest in each of the Consumer Loan Companies under a $150.0 million master repurchase agreement with Credit Suisse Securities (USA) LLC, which matures on June 30, 2014. Borrowings under the facility bear interest equal to the sum of (i) a floating rate index rate equal to one-month LIBOR and (ii) a margin of 4.00%. The facility contains customary covenants and event of default provisions. 68 Maturities



Our debt obligations as of March 31, 2014, as summarized in Note 11 to our consolidated financial statements, had contractual maturities as follows (in thousands):

Year Nonrecourse Recourse (A)



Total

April 1 through December 31, 2014 $ 1,633,561$ 2,145,202$ 3,778,763 2015 1,101,336 - 1,101,336 2016 - - - 2017 497,800 - 497,800 $ 3,232,697$ 2,145,202$ 5,377,899



(A) Excludes recourse debt related to linked transactions. Refer to Note 10 to

our consolidated financial statements included herein. Borrowing Capacity



The following table represents our borrowing capacity as of March 31, 2014:

Borrowing Balance Available Debt Obligations/ Collateral Collateral Type Capacity Outstanding Financing Repurchase Agreements Residential Mortgage Loans (A) Real Estate Loans $ 300,000$ 59,190$ 240,810 Notes Payable Secured Corporate Loan Excess MSRs 75,000 69,055 5,945 Servicer Advances (B) Servicer Advances 4,647,900 3,142,292 1,505,608 $ 5,022,900$ 3,270,537$ 1,752,363



(A) Financing related to linked transaction. See Note 10 to the consolidated

financial statements included in this report for additional information on

linked transactions.

(B) Our unused borrowing capacity is available to us if we have additional

eligible collateral to pledge and meet other borrowing conditions. Covenants



We were in compliance with all of our debt covenants as of March 31, 2014.

Stockholders' Equity Common Stock



Approximately 5.3 million shares of our common stock were held by Fortress, through its affiliates, and its principals as of March 31, 2014.

As of March 31, 2014, our outstanding options corresponding to Newcastle options issued prior to 2011 had a weighted average strike price of $15.49 and our outstanding options corresponding to Newcastle options issued in 2011, 2012 and 2013 (as well as options issued by us to our directors in 2013) had a weighted average strike price of $4.16. Our outstanding options as of March 31, 2014

were summarized as follows: 69 March 31, 2014 Issued Prior Issued in to 2011 2011 - 2014 Total Held by the Manager 1,257,305 13,975,333 15,232,638 Issued to the Manager and subsequently transferred to certain of the Manager's employees 446,470 4,711,000



5,157,470

Issued to the independent directors 2,000 10,000

12,000 Total 1,705,775 18,696,333 20,402,108

In April 2014, we issued 27,750,000 shares of our common stock in a public offering at a price to the public of $6.10 per share for net proceeds of approximately $164.1 million. One of our executive officers participated in this offering and purchased an additional 1,000,000 shares at the public offering price for net proceeds of approximately $6.1 million. For the purpose of compensating the Manager for its successful efforts in raising capital for us, in connection with this offering, we granted options to the Manager to purchase 2,875,000 shares of our common stock at a price of $6.10, which had a fair value of approximately $1.4 million as of the grant date. The assumptions used in valuing the options were: a 2.87% risk-free rate, a 12.584% dividend yield, 25.66% volatility and a 10 year term.



Subsequent to March 31, 2014, an employee of the Manager exercised 215,000 options with a weighted average exercise price of $2.81 on May 7, 2014. Upon exercise, 215,000 shares of our common stock were issued.

Accumulated Other Comprehensive Income (Loss)

During the three months ended March 31, 2014, our accumulated other comprehensive income (loss) changed due to the following factors (in thousands): Total Accumulated Other Comprehensive Income

Accumulated other comprehensive income, December 31, 2013 $



3,214

Net unrealized gain (loss) on securities



10,878

Reclassification of net realized (gain) loss on securities into earnings (4,164 ) Accumulated other comprehensive income, March 31, 2014 $

9,928 Our GAAP equity changes as our real estate securities portfolio is marked to market each quarter, among other factors. The primary causes of mark to market changes are changes in interest rates and credit spreads. During the three months ended March 31, 2014, we recorded unrealized gains on our real estate securities primarily caused by a net tightening of credit spreads. We recorded OTTI charges of $0.3 million with respect to real estate securities and realized gains of $4.5 million on sales of real estate securities.



See "- Market Considerations" above for a further discussion of recent trends and events affecting our unrealized gains and losses as well as our liquidity.

Common Dividends We are organized and intend to conduct our operations to qualify as a REIT for U.S. federal income tax purposes. We intend to make regular quarterly distributions to holders of our common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its taxable income. We intend to make regular quarterly distributions of all or substantially all of our taxable income to holders of our common stock out of assets legally 70

available for this purpose, if and to the extent authorized by our board of directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our repurchase agreements and other debt payable. If our cash available for distribution is less than our taxable income, we could be required to sell assets or raise capital to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities. We make distributions based on a number of factors, including an estimate of taxable earnings per common share. Dividends distributed and taxable and GAAP earnings will typically differ due to items such as fair value adjustments, differences in premium amortization and discount accretion, and non-deductible general and administrative expenses. Our quarterly dividend per share may be substantially different than our quarterly taxable earnings and GAAP earnings per share. Common Dividends Declared for the Period Ended Paid Amount Per Share March 31, 2014 April 2014 $ 0.175 Cash Flow Operating Activities



We did not have any cash balance during periods prior to April 5, 2013, which is the first date Newcastle contributed cash to us. All of its cash activity occurred in Newcastle's accounts during these periods.

Net cash flow provided by operating activities increased approximately $2.1 million for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013 as New Residential did not have a cash balance as of March 31, 2013. Operating cash flows for the three months ended March 31, 2014 primarily consisted of net interest income received of $14.4 million and distributions of earnings from equity method investees of $11.9 million, partially offset by incentive compensation and management fees paid to the Manager of $18.8 million, additional restricted cash of $1.3 million and other outflows of approximately $4.1 million that primarily consists of general and administrative costs. Investing Activities Cash flows used in investing activities were $1.4 billion for the three months ended March 31, 2014. Investing activities during the three months ended March 31, 2014 consisted primarily of the acquisition of excess mortgage servicing rights, servicer advances and real estate securities and loans, net of principal repayments from servicer advances, Agency RMBS and Non-Agency RMBS as well as proceeds from the sale of Agency RMBS and Non-Agency RMBS. Financing Activities

Cash flows provided by financing activities were approximately $1.3 billion during the three months ended March 31, 2014. No cash flow from financing activities was recorded prior to the date of contribution of cash by Newcastle to us. Financing activities during the three months ended March 31, 2014 consisted primarily of borrowings net of repayments under debt obligations, and capital contributions net of distributions from noncontrolling interests in the equity of a consolidated subsidiary. 71



INTEREST RATE, CREDIT AND SPREAD RISK

We are subject to interest rate, credit and spread risk with respect to our investments. These risks are further described in "Quantitative and Qualitative Disclosures About Market Risk."

OFF-BALANCE SHEET ARRANGEMENTS

On April 1, 2013, we completed the consumer loan purchase through a number of joint venture companies. The purchase price of approximately $3.0 billion was financed with approximately $2.2 billion ($1.4 billion outstanding as of March 31, 2014) of asset-backed notes within such companies. These notes have an interest rate of 3.75% and a maturity of April 2021. In September 2013, the joint ventures issued and sold an additional $0.4 billion of asset-backed notes for 96% of par. These notes are subordinate to the debt issued in April 2013, have a maturity of December 2024 and pay a coupon of 4%. We have a 30% membership interest in the Consumer Loan Companies and do not consolidate them. We also had approximately $84.7 million of repurchase agreements as of March 31, 2014 in transactions accounted for as "linked transactions." See Note 10 to our consolidated financial statements included in this report. We did not have any other off-balance sheet arrangements. We did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, or special purpose or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes, other than the joint venture entities. Further, we have not guaranteed any obligations of unconsolidated entities or entered into any commitment and do not intend to provide additional funding to any such entities. CONTRACTUAL OBLIGATIONS Our contractual obligations as of March 31, 2014 included all of the material contractual obligations referred to in our annual report on Form 10-K for the year ended December 31, 2013, excluding debt that was repaid as described in "-Liquidity and Capital Resources-Debt Obligations."



In addition, we executed the following material contractual obligations during the three months ended March 31, 2014:

Servicer Advance Securitization - As described in Note 11 to our consolidated

financial statements, we prepaid all of the notes issued pursuant to one

servicer advance facility and a portion of the notes issued pursuant to another

servicer advance facility using proceeds of new notes issued pursuant to the

NRART Master Trust.

Non-Agency RMBS Repurchase Agreement - As described in Note 11 to our

consolidated financial statements, we obtained approximately $415 million in

financing from Merrill Lynch, Pierce, Fenner & Smith Incorporated to settle our

purchase of approximately $625 million face amount of Non-Agency residential

mortgage securities for approximately $553 million, which represents 75% of the

mezzanine and subordinate tranches of a securitization previously sponsored by

an affiliate of Springleaf.

Consumer Loan Repurchase Agreement - As described in Note 11 to our

consolidated financial statements, we financed all of our ownership interest in

each of the Consumer Loan Companies under a $150.0 million master repurchase

agreement with Credit Suisse Securities (USA) LLC.

Servicer Advance Transaction 2 - We exercised the call right in Transaction 2

and financed the outstanding balance of the servicer advances subject to the

portion of the Call Right that was exercised using additional borrowings from

existing facilities. INFLATION Virtually all of our assets and liabilities are financial in nature. As a result, interest rates and other factors affect our performance more so than inflation, although inflation rates can often have a meaningful influence over the direction 72



of interest rates. Furthermore, our financial statements are prepared in accordance with GAAP and our distributions are determined by our board of directors primarily based on our taxable income, and, in each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation. See "-Quantitative and Qualitative Disclosure About Market Risk-Interest Rate Risk" below.

CORE EARNINGS We have four primary variables that impact our operating performance: (i) the current yield earned on our investments, (ii) the interest expense incurred under the debt incurred to finance our investments, (iii) our operating expenses and (iv) our realized and unrealized gain or losses, including any impairment, on our investments. "Core earnings" is a non-GAAP measure of our operating performance excluding the fourth variable above and adjusting the earnings from the consumer loan investment to a level yield basis. It is used by management to gauge our current performance without taking into account: (i) realized and unrealized gains and losses, which although they represent a part of our recurring operations, are subject to significant variability and are only a potential indicator of future economic performance; (ii) incentive compensation paid to our Manager; and (iii) non-capitalized deal inception costs. While incentive compensation paid to our Manager may be a material operating expense, we exclude it from core earnings because (i) from time to time, a component of the computation of this expense will relate to items (such as gains or losses) that are excluded from core earnings, and (ii) it is impractical to determine the portion of the expense related to core earnings and non-core earnings, and the type of earnings (loss) that created an excess (deficit) above or below, as applicable, the incentive compensation threshold. To illustrate why it is impractical to determine the portion of incentive compensation expense that should be allocated to core earnings, we note that, as an example, in a given period, we may have core earnings in excess of the incentive compensation threshold but incur losses (which are excluded from core earnings) that reduce total earnings below the incentive compensation threshold. In such case, we would either need to (a) allocate zero incentive compensation expense to core earnings, even though core earnings exceeded the incentive compensation threshold, or (b) assign a "pro forma" amount of incentive compensation expense to core earnings, even though no incentive compensation was actually incurred. We believe that neither of these allocation methodologies achieves a logical result. Accordingly, the exclusion of incentive compensation facilitates comparability between periods and avoids the distortion to our non-GAAP operating measure that would result from the inclusion of incentive compensation that relates to non-core earnings. With regard to non-capitalized deal inception costs, management does not view these costs as part of our core operations. Non-capitalized deal inception costs are generally legal and valuation service costs, as well as other professional service fees, incurred when we acquire certain investments. These costs are recorded as general and administrative expenses in our statements of income. Management believes that the adjustments to compute "core earnings" specified above allow investors and analysts to readily identify the operating performance of the assets that form the core of our activity, assist in comparing the core operating results between periods, and enable investors to evaluate our current performance using the same measure that management uses to operate the business. The primary differences between core earnings and the measure we use to calculate incentive compensation relate to (i) realized gains and losses (including impairments) and (ii) non-capitalized deal inception costs. Both are excluded from core earnings and included in our incentive compensation measure. Unlike core earnings, our incentive compensation measure is intended to reflect all realized results of operations. Core earnings does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income as an indicator of our operating performance or as an alternative to cash flow as a measure of our liquidity and is not necessarily indicative of cash available to fund cash needs. For a further description of the difference between cash flow provided by operations and net income, see "-Liquidity and Capital Resources" above. Our calculation of core earnings may be different from the calculation used by other companies and, therefore, comparability may be limited. Set forth below is a reconciliation of core earnings to the most directly comparable GAAP financial measure (dollars in thousands): 73 Three Months Ended March 31, 2014 2013



Net income (loss) attributable to common stockholders $ 48,772

$ 13,075 Impairment 492 - Other Income (35,050 ) (2,827 )

Incentive compensation to affiliate 3,338 - Non-capitalized deal inception costs - 2,478 Core earnings of equity method investees: Excess mortgage servicing rights 9,225

2,546 Consumer loans 14,987 - Core Earnings $ 41,764$ 15,272


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