Certain information included in this Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q that address activities, events, conditions or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business and these statements are not guarantees of future performance. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements may include the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “strategy,” “future,” “opportunity,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result” and similar expressions. Such forward-looking statements involve risks and uncertainties that may cause actual events, results or performance to differ materially from those indicated by such statements. Some of these risks are identified and discussed under Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016. These risk factors will be important to consider in determining future results and should be reviewed in their entirety. These forward-looking statements are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that the events, results or trends identified in these forward-looking statements will occur or be achieved. Forward-looking statements speak only as of the date they are made, and we do not undertake to update any forward-looking statement, except as required by law.

As used in this Quarterly Report on Form 10-Q, unless the context requires otherwise, (i) the terms “Company,” “we,” “us,” or “our” refer to WMIH Corp. (formerly WMI Holdings Corp.) and its subsidiaries on a consolidated basis; (ii) “WMIH” refers only to WMIH Corp., without regard to its subsidiaries; (iii) “WMIHC” refers only to WMI Holdings Corp., without regard to its subsidiaries; (iv) “WMMRC” means WM Mortgage Reinsurance Company, Inc. (a wholly-owned subsidiary of WMIH); and (v) “WMIIC” means WMI Investment Corp. (a wholly-owned subsidiary of WMIH).

There have been no significant changes to the valuation techniques and inputs ~~are not observable. The unobservable inputs reflect the Company’s own assumptions about the inputs that market participants would use.~~

Fair values are based on quoted prices in active markets when available (Level 1). The Company receives the quoted prices from a third party, nationally recognized pricing service. When quoted prices are not available,used by the Company utilizes a pricing service to determine an estimate of fair value. The fair value is generally estimated using current market inputs for similar financial instruments with comparable terms and credit quality, commonly referred to as matrix pricing (Level 2). These valuation techniques involve some level of management estimation and judgment. The Company recognizes transfers between levels in ~~the fair value hierarchy at the end of the reporting period.~~

~~Fixed-Maturity Securities~~

Fixed-maturity securities consist of U.S. Treasury securities, obligations of U.S. government sponsored agencies and domestic and foreign corporate debt securities. Fixed-maturity securities held in trust are for the benefit of the primary insurers as more fully described in Note 3: Insurance Activity. Investments in fixed-maturity securities are reported at their estimatedestimating fair values ~~and are classified as trading securities in accordance with applicable accounting guidance. Realized gains and losses on the sale~~ of ~~fixed-maturity securities are determined using the specific identification method~~Level 2 and ~~are reported as a component of net investment income within the condensed consolidated statement of operations.~~

~~Investments Held in Trust~~

Investments held in trust consist of cash equivalents, which include highly liquid overnight money market instruments, and fixed-maturity securities which are held in trust for the benefit of the primary insurers, as more fully described in Note 3: Insurance Activity and Note 4: Investment Securities, and are subject to the restrictions on distribution of net assets of subsidiaries as described below.

~~Third Party Restrictions on Distribution of Net Assets of Wholly-Owned Subsidiaries~~

The net assets of WMMRC are subject to restrictions on distribution from multiple sources, including the primary insurers who have approval control of distributions from the trust, and the Insurance Division of the State of Hawaii who has approval authority over distributions or intercompany advances. As more fully described in Note 14: Subsequent Events, a distribution from WMMRC to WMIH of up to $10.7 million was approved by the Insurance Division of the State of Hawaii on September 13, 2017.

~~Premium Recognition~~

Premiums assumed are earned on a daily pro-rata basis over the underlying policy terms. Premiums assumed relating to the unexpired portion of policies in force at the balance sheet date are recorded as unearned premiums. Unearned premiums also include a reserve for post default premium reserves. Post default premium reserves occur when a loan is in a default position and the servicer continues to advance the premiums. If the loan ultimately goes to claim, the premiums advanced during the period of default are subject to recapture. The Company records a default premium reserve based on information provided by the underlying mortgage insurers when they provide information on the default premium reserve separately from other reserves. The change in the post default premium reserve is reflected as a reduction or increase, as the case may be, in premiums assumed. The Company has recorded unearned premiums totaling $33 thousand and $0.3 million as of September 30, 2017 and December 31, 2016, respectively.

The Company recognizes premium deficiencies when there is a probable loss on an insurance contract. Premium deficiencies are recognized if the sum of the present value of expected losses and loss adjustment expenses, unamortized deferred acquisition costs, and maintenance costs, excluding intercompany charges, exceed expected future unearned premiums and anticipated investment income. Premium deficiency reserves have been recorded totaling $0.5 million and $0.3 million as of September 30, 2017 and December 31, 2016, respectively. Intercompany administrative costs are excluded from the computation of premium deficiencies.

The Company’s premium deficiency analysis was performed on a single book basis and includes all book years and reinsurance treaties aggregated together using assumptions based on the actuarial best estimates at the balance sheet date. The calculation for premium deficiency requires significant judgment and includes estimates of future expected premiums, claims, loss adjustment expenses and investment income as of the balance sheet date. To the extent ultimate losses are higher or premiums are lower than estimated, additional premium deficiency reserves may be required in the future.

~~Cash and Cash Equivalents~~

Cash and cash equivalents include cash on hand, amounts due from banks, U.S. Treasury bills and overnight investments. Except as described above in Investments Held in Trust, the Company considers all amounts that are invested in highly liquid overnight money market instruments to be cash equivalents. The Federal Deposit Insurance Corporation (“FDIC”) insures amounts on deposit with each financial institution up to limits as prescribed by law. The Company may hold funds with financial institutions in excess of the FDIC insured amount, however, the Company has not experienced any losses in such accounts and management believes it is not exposed to any significant credit risk on cash and cash equivalents.

~~Restricted Cash~~

Restricted cash includes (i) amounts held for the express purposes of paying principal, interest and related fees on the Runoff Notes (as defined in Note 7: Notes Payable) pursuant to the terms of the Indentures (as defined in Note 7: Notes Payable) and (ii) proceeds of the Series B Preferred Stock offering held in escrow.

~~Ceding Commission Expense~~

~~The Company is required to pay a ceding commission to certain primary insurers pursuant to certain reinsurance agreements.~~

~~Losses and Loss Adjustment Reserves~~

The losses and loss adjustment reserves include case basis estimates of reported losses and supplemental amounts for incurred but not reported (“IBNR”) losses. A default is considered the incident (e.g., the failure to make timely payment of mortgage payments) that may give rise to a claim for mortgage insurance. In establishing the losses and loss adjustment reserve, the Company based its estimates primarily on the ceded loss and loss adjustment reserves as provided by the primary mortgage guaranty carriers.

~~WMMRC has recorded reserves~~ at the ceded case reserves and IBNR loss levels established and reported by the primary mortgage guaranty carriers as of September 30, 2017 and December 31, 2016, respectively. Management believes that the recorded aggregate liability for unpaid losses and loss adjustment expenses at period end represents the Company’s best estimate, based upon the available data, of the amount necessary to cover the current cost of losses. However, due to the inherent uncertainty arising from fluctuations in the persistency rate of mortgage insurance claims, the Company’s size and lack of prior operating history, external factors such as future changes in regional or national economic conditions, judicial decisions, federal and state legislation related to mortgage restructuring and foreclosure restrictions, claims denials and coverage rescissions by primary carriers and other factors beyond the Company’s control, it is not presently possible to determine whether actual loss experience will conform to the assumptions used in determining the estimated amounts for such liability at the balance sheet date. Accordingly, the ultimate liability could be significantly higher or lower, as the case may be, than the amount indicated in the financial statements and there can be no assurance that the reserve amounts recorded will be sufficient. As adjustments to these estimates become necessary, such adjustments are reflected in current operations.

~~Loss Contract Reserve~~

A loss contract reserve relating to contractual obligations of WMMRC was established at March 19, 2012 as a result of applying fresh start accounting and in compliance with Accounting Standards Codification (“ASC”) 805-10-55-21 (b) (1) which defines a loss contract as “a contract in which the unavoidable costs of meeting the obligation under the contract exceed the economic benefits expected to be received under it.” The value of this reserve is analyzed quarterly and is adjusted accordingly. The adjustment (if any) to the reserve produces an expense or contra-expense in the condensed consolidated statements of operations.

~~Derivative Embedded Conversion Feature~~

~~The Company has recorded a derivative embedded conversion feature of the Series B Preferred Stock which is adjusted to its fair value as determined using~~ Level 3 ~~inputs described above under Fair Value Measurement. The change in fair value of the derivative embedded conversion feature is calculated at each reporting date~~assets and ~~recorded~~liabilities as ~~other income or other expense on the condensed consolidated statement of operations.~~

~~Other Liabilities~~

At September 30, 2017, the total balance of $13.8 million of other liabilities is comprised of $12.3 million of accrued fees relating to the Series B Preferred Stock offering, an accrual for professional fees and recurring business expenses currently payable of approximately $0.8 million and $0.7 million of accrued dividends relating to the Series B Preferred Stock. The accrued fees would be paid in the event of a Qualified Acquisition, as more fully described in Note 6: Service Agreements and Related Party Transactions.

~~Comprehensive Income~~

~~The Company has no comprehensive income other than the net income~~ disclosed in the ~~condensed consolidated statement of operations.~~

~~Net Income Per Common Share~~

~~In calculating earnings per share, the Company follows the two-class method, which distinguishes between the classes of securities based on the proportionate p~~articipation rights of each security type in the Company's undistributed income. The Series A Preferred Stock and the Series B Preferred Stock are treated as one class for purposes of applying the two-class method, because they have substantially equal rights and share equally on an as converted basis with respect to income available to WMIH common stockholders.

Basic net income per WMIH common share is computed by dividing net income attributable to WMIH’s common stockholders by the weighted-average number of common shares outstanding for the period after subtracting the weighted-average of any unvested restricted shares outstanding, as these are subject to repurchase. Basic net income attributable to common stockholders is computed by deducting preferred dividends and the basic calculation of undistributed earnings attributable to participating securities from net income.

Diluted net income per WMIH common share is computed by dividing net income attributable to WMIH’s common stockholders by the weighted-average number of common shares outstanding during the period after subtracting the weighted-average of any unvested restricted shares outstanding, as these are subject to repurchase, and adding any potentially dilutive WMIH common stock equivalents outstanding during the period. Diluted net income attributable to common stockholders is computed by deducting preferred dividends and the diluted calculation of undistributed earnings attributable to participating securities from net income.

If common stock equivalents exist, in periods where there is a net loss, diluted net loss per common share would be equal to or less than basic net loss per common share, since the effect of including any common stock equivalents would be antidilutive.

~~Equity-Based Compensation~~

On May 22, 2012, WMIH’s Board of Directors (the “Board” or “Board of Directors”) approved the Company’s 2012 Long-Term Incentive Plan (the “2012 Plan”) so that awards of restricted stock could be made to its non-employee directors and to have a plan in place for awards of equity based compensation to executives and others in connection with the Company’s operations and future strategic plans. A total of 2.0 million shares of WMIH’s common stock were initially reserved for future issuance under the 2012 Plan, which became effective upon the Board approval on May 22, 2012. On February 10, 2014, the Board approved and adopted a First Amendment to the 2012 Plan, pursuant to which the number of shares of WMIH’s common stock reserved and available for grants under the 2012 Plan was increased from 2.0 million shares to 3.0 million shares, and the terms of the 2012 Plan were modified to permit such an increase through action of the Board, except when stockholder approval is necessary to comply with any applicable law, regulation or rule of any stock exchange on which WMIH’s shares are listed, quoted or traded. On February 25, 2015, the number of shares authorized and available for awards under the 2012 Plan was increased from 3.0 million to 12.0 million shares of WMIH’s common stock, subject to approval of stockholders of WMIH. This approval was received at the Company’s Annual ~~Meeting of Stockholders~~Reports on April 28, 2015. The 2012 Plan provides for the granting of restricted shares and other cash and share based awards. The value of restricted stock is generally determined using the fair market value determined to be the trading price at the close of business on the respective date the awards were granted.

~~Income Taxes~~

The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the carrying amounts and tax bases of assets and liabilities and losses carried forward and tax credits. Deferred tax assets and liabilities are measured using enacted tax rates and laws applicable to the years in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to the extent that it is more likely than not that deferred tax assets will not be realized.

The Company recognizes the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Penalties and interest, of which there are none, would be reflected in income tax expense. Tax years are open to the extent the Company has net operating loss (“NOL”) carry-forwards available to be utilized currently.

~~Dividend Policy~~

~~WMIH has paid no dividends on its common stock on or after the Effective Date and currently has no plans to pay a dividend on its common stock.~~

WMIH has declared and paid $13.5 million and $18.0 million of dividends on its Series B Preferred Stock for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. Additionally, WMIH has accrued unpaid and undeclared dividends of $0.7 million, based on the Series B Preferred Stock 3% interest rate, as of both September 30, 2017 and December 31, 2016.

~~New Accounting Pronouncements~~

~~The Company has reviewed new accounting pronouncements issued between August 9, 2017, the filing date of our most recent prior~~ Form 10-Q, and the filing date of this Form 10-Q and has determined that no pronouncements issued are relevant to the Company, and/or have a material impact on the Company’s consolidated financial position, results of operations or disclosure requirements.

~~Note 3: Insurance Activity~~

The Company, through WMMRC, reinsures mortgage guaranty risks of mortgage loans originated by affiliates of the Company during the period from 1997 through 2008. WMMRC is (or was) a party to reinsurance agreements with UGRIC, GMIC, MGIC, PMI, Radian, RMIC and Triad. The agreements with UGRIC and Triad were placed into runoff effective May 31, 2008. The agreements with all other primary mortgage insurers were placed into runoff effective September 26, 2008. The reinsurance agreements with Triad, PMI and UGRIC were commuted on August 31, 2009, October 2, 2012 and April 3, 2014, respectively. On October 23, 2017, the reinsurance agreement with Radian was commuted and the related trust assets were released to WMMRC. For more information see Note 14: Subsequent Events.

All agreements between WMMRC and the primary mortgage insurers are on an excess of loss basis, except for a reinsurance treaty with GMIC during 2008, which is reinsured on a 50% quota share basis. Pursuant to the excess of loss reinsurance treaties, WMMRC reinsures a second loss layer which ranges from 5% to 10% of the risk in force in excess of the primary mortgage insurer’s first loss percentage which range from 4% to 5%. Each calendar year, or book year, is treated separately from other years when calculating losses. In return for accepting a portion of the risk, WMMRC receives, net of ceding commission, a percentage of the premium that ranges from 25% to 40%.

As security for the ceding insurers, WMMRC has entered into separate trust agreements with each of the primary mortgage insurance companies whereby a portion of the funds from premiums assumed are held in trust accounts for the benefit of each separate insurer. Pursuant to the terms of the reinsurance agreements, WMMRC is required to keep such assets in trust for a minimum of five years and is subject to claims for up to ten years from termination of obligations arising from the last year in which insurance business was written prior to runoff. Release of funds from the trust by WMMRC requires approval from the primary mortgage insurance companies.

~~Premiums assumed and earned are as follows for the periods ended September 30, 2017 and 2016, respectively:~~

Three months
ended
September 30, 2017

Three months
ended
September 30, 2016

Nine months
ended
September 30, 2017

Nine months
ended
September 30, 2016

Premiums assumed
$
342

$
739

$
866

$
1,963

Change in unearned premiums

2

47

237

463

Premiums earned
$
344

$
786

$
1,103

$
2,426

~~The components of the liability for losses and loss adjustment reserves are as follows as of September 30, 2017 and December 31, 2016, respectively:~~

September 30, 2017

December 31, 2016

Case-basis reserves
$
174

$
553

IBNR reserves

1

—

Premium deficiency reserves

530

258

Total losses and loss adjustment reserves
$
705

$
811

~~Losses and loss adjustment reserve activity are as follows for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively:~~

Nine months ended
September 30, 2017

Year ended
December 31, 2016

Balance at beginning of period
$
811

$
5,063

Incurred (released) - prior periods

207

(669
)
Paid or terminated - prior periods

(313
)

(3,583
)
Total losses and loss adjustment reserves
$
705

$
811

The loss contract reserve balance is analyzed and adjusted quarterly. The balance in the reserve was zero and $5.6 million as of September 30, 2017 and December 31, 2016, respectively. The value of this reserve decreased by $5.6 million during the nine months ended September 30, 2017 and decreased by $2.3 million during the nine months ended September 30, 2016. In periods during which a reduction in the loss contract reserve occurs, a corresponding decrease in expense is reflected in the condensed consolidated statement of operations for the respective period.

~~Note 4: Investment Securities~~

The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of total fixed-maturity securities and total fixed-maturity securities held in trust at September 30, 2017, are as follows:

September 30, 2017

Class of securities:
Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

U.S. government treasury securities
$
250

$
—

$
—

$
250

Obligations of U.S. government sponsored enterprises

2,749

—

(7
)

2,742

Corporate debt securities

3,683

—

(2
)

3,681

Foreign corporate debt securities

3,750

—

(1
)

3,749

Total fixed-maturity securities

10,432

—

(10
)

10,422

Less total unrestricted fixed-maturity securities

1,402

—

(2
)

1,400

Total fixed-maturity securities held in trust
$
9,030

$
—

$
(8
)

$
9,022

December 31, 2016

Class of securities:
Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

U.S. government treasury securities
$
249

$
—

$
—

$
249

Obligations of U.S. government sponsored enterprises

59,450

1

(80
)

59,371

Corporate debt securities

11,415

9

(9
)

11,415

Foreign corporate debt securities

5,798

5

(7
)

5,796

Total fixed-maturity securities

76,912

15

(96
)

76,831

Less total unrestricted fixed-maturity securities

47,635

—

(10
)

47,625

Total fixed-maturity securities held in trust
$
29,277

$
15

$
(86
)

$
29,206

~~Amortized cost and estimated fair value of fixed-maturity securities at September 30, 2017 by contractual maturity are as follows:~~

Amortized
Cost

Estimated
Fair Value

Maturity in:

2017
$
6,750

$
6,749

2018

3,682

3,673

Total fixed-maturity securities
$
10,432

$
10,422

~~Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.~~

~~Net investment income for the three and nine months ended September 30, 2017 and 2016, respectively, is summarized as follows:~~

Three months
ended
September 30, 2017

Three months
ended
September 30, 2016

Nine months
ended
September 30, 2017

Nine months
ended
September 30, 2016

Investment income:

Amortization of premium or discount on fixed-maturity securities
$
(32
)

$
(74
)

$
(108
)

$
(247
)
Investment income on fixed-maturity securities

72

233

403

792

Interest income on cash and cash equivalents

1,895

405

4,527

1,100

Realized net (loss) gain from sale of investments

(36
)

18

(63
)

19

Unrealized gain (loss) on trading securities held at period end

44

(84
)

67

83

Net investment income
$
1,943

$
498

$
4,826

$
1,747

~~The following table shows how the Company’s investments are categorized in accordance with fair value measurement, as of~~

~~September 30, 2017:~~

September 30, 2017

Level 1

Level 2

Level 3

Total

Class of securities:

U.S. government treasury securities
$
250

$
—

$
—

$
250

Obligations of U.S. government sponsored enterprises

1,497

1,245

—

2,742

Corporate debt securities

3,151

530

—

3,681

Foreign corporate debt securities

3,749

—

—

3,749

Total fixed-maturity securities

8,647

1,775

—

10,422

Money market funds

32,007

—

—

32,007

Total
$
40,654

$
1,775

$
—

$
42,429

~~The following table shows how the Company’s investments are categorized in accordance with fair value measurement, as of December 31, 2016:~~

December 31, 2016

Level 1

Level 2

Level 3

Total

Class of securities:

U.S. government treasury securities
$
249

$
—

$
—

$
249

Obligations of U.S. government sponsored enterprises

47,489

11,882

—

59,371

Corporate debt securities

7,033

4,382

—

11,415

Foreign corporate debt securities

5,796

—

—

5,796

Total fixed-maturity securities

60,567

16,264

—

76,831

Money market funds

4,548

—

—

4,548

Total
$
65,115

$
16,264

$
—

$
81,379

A review of the fair value hierarchy classifications of the Company’s investments is conducted quarterly. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications are reported as transfers in or transfers out of the applicable Level at the end of the calendar quarter in which the reclassifications occur. During the nine months ended September 30, 2017 and the year ended December 31, 2016, $0.9 million and $11.0 million, respectively, of investments were transferred from Level 2 to Level 1 as a result of improving market conditions for short-term and investment grade corporate securities.

January 1, 2017 to
September 30, 2017

January 1, 2016 to
December 31, 2016

Transfers
from Level 1 to
Level 2

Transfers
from Level 2
to Level 1

Transfers
from Level 1 to
Level 2

Transfers
from Level 2
to Level 1

Class of securities:

Corporate debt securities
$
—

$
901

$
—

$
5,737

Foreign corporate debt securities

—

—

—

5,295

Total transfers
$
—

$
901

$
—

$
11,032

~~Note 5: Income Taxes~~

For the nine months ended September 30, 2017, the Company recorded net income attributable to common and participating stockholders of approximately $21.4 million. The Company projects tax losses for the year ending December 31, 2017. Due to this projected tax loss and the existence of NOL carry-forwards which have a 100% valuation allowance recorded to reduce them to zero, the Company has not recorded an income tax expense or benefit for the nine months ended September 30, 2017. The Company recorded no income tax expense or benefit10-K for the year ended December 31, ~~2016 due to tax losses in that period.~~

2021.

All of these factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for our management to predict all such factors or to assess the effect of each such new factor on our business. Although we believe that the ~~Company experienced an “ownership change” (generally defined~~assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and any of these statements included herein may prove to be inaccurate. Given the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a ~~greater than 50% change (by value) in our equity ownership over a three-year period) on March 19, 2012, and our ability to use our pre-change of control NOLs and~~representation by us or any other pre-change tax attributes against our post-change income was limited. The Section 382 limitation is applied annually so as to limit the use of our pre-change NOLs to an amount that generally equals the value of our stock immediately before the ownership change multiplied by a designated federal long-term tax-exempt rate. Due to applicable limitations under Section 382 and a reduction of tax attributes due to cancellation of indebtedness, a portion of these NOLs were limited and will expire unused. We believeperson that the ~~total available~~results or conditions described in such statements, or our objectives and ~~utilizable NOL carry-forward at December 31, 2016 was approximately $6.0 billion. At September 30, 2017, there was no limitation on the use~~plans will be achieved. Please refer to Risk Factors and Management’s Discussion and Analysis of ~~these NOLs. These NOLs will begin to expire~~Financial Condition and Results of Operations, included in ~~2031. The Company’s ability to utilize the NOLs or realize any benefits related to the NOLs is subject to a number of risks. (See Part I-Item 1A. Risk Factors~~this report and in our Annual Report on Form 10-K for the year ended December 31, ~~2016).~~

The Company accounts for uncertain tax positions in accordance with the income tax accounting guidance. The Company has analyzed filing positions in the federal and state jurisdictions where it is required to file tax returns, as well as the open tax years in these jurisdictions. Tax years 2011 to present are subject to examination by the Internal Revenue Service. The Company believes that its federal income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain federal income tax positions have been recorded. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the provision for federal income taxes. The Company did not incur any federal income tax related interest income, interest expense or penalties for the nine months ended September 30, 2017 or for the year ended December 31, 2016.

~~Note 6: Service Agreements and Related Party Transactions~~

WMMRC has engaged a Hawaii-based service provider, Marsh Management Services, Inc., to provide accounting and related management services for its operations. In exchange for performing these services, WMMRC pays such service provider a management fee.

WMIH entered into an Investment Management Agreement and an Administrative Services Agreement with WMMRC on March 19, 2012. Each of these agreements was approved by WMMRC’s primary regulator, the Insurance Division of the State of Hawaii. Total amounts incurred under these agreements totaled $1.0 million and $1.0 million for the nine months ended September 30, 2017 and 2016, respectively. The expense and related income eliminate on consolidation. These agreements are described below.

Under the terms of such Investment Management Agreement, WMIH receives from WMMRC a fee equal to the product of (x) the ending dollar amount of assets under management during the calendar month in question and (y) .002 divided by 12. WMIH is responsible for investing the funds of WMMRC based on applicable investment criteria and subject to rules and regulations to which WMMRC is subject.

Under the terms of such Administrative Services Agreement, WMIH receives from WMMRC a fee of $110 thousand per month. WMIH is responsible for providing administrative services to support, among other things, supervision, governance, financial administration and reporting, risk management and claims management as may be necessary, together with such other general or specific administrative services that may be reasonably required or requested by WMMRC in the ordinary course of its business.

On March 22, 2012, WMIH and the WMI Liquidating Trust (the “Trust”) entered into a Transition Services Agreement (the “TSA”). Pursuant to the TSA, the Trust makes available certain services and employees. The TSA provides the Company with basic infrastructure and support services to facilitate the Company’s operations. The TSA, as amended, extends the term of the agreement through January 31, 2019, with automatic renewals thereafter for successive additional three-month terms, subject to non-renewal at the end of any additional term upon written notice by either party at least 30 days prior to the expiration of the additional term.

In connection with implementing the Company’s Seventh Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code (as modified, the “Plan”), certain holders of specified “Allowed Claims” had the right to elect to receive such holder’s “Pro Rata Share of the Common Stock Allotment.” Essentially, the Plan defines the “Pro Rata Share of the Common Stock Allotment” as a pro rata share of ten million (10,000,000) shares of WMIH’s common stock (i.e. five percent (5%)) issued and outstanding on the Effective Date. Holders exercising the foregoing election did so in lieu of receiving (i) 50% of such holder’s interest in and to certain litigation proceeds that could be realized by the Trust on account of certain claims and causes of action asserted by the Trust as contemplated by the Plan (“Litigation Proceeds”), and (ii) some or all of the Runoff Notes to which such holder may be entitled (if such holder elected to receive Runoff Notes in accordance with the terms of the Plan).

If a holder exercised the election described above and, as a result of such election, received shares of WMIH’s common stock, then such holder’s share of Runoff Notes to which the election was effective (i.e., One Dollar ($1.00) of original principal amount of Runoff Notes for each share of WMIH’s common stock) were not issued. In addition, as a result of making the aforementioned election, such holders conveyed to WMIH, and WMIH retained an economic interest in Litigation Proceeds, if any, recovered by the Trust in connection with certain litigation brought by the Trust as contemplated by the Plan. Distributions, if any, to WMIH on account of the foregoing will be effected in accordance with the Plan and the court order confirming the Plan.

On or about October 14, 2014, the Trust filed a lawsuit in King County Superior Court in the State of Washington against 16 former directors and officers of WMI (the “D&O Litigation”). The Trust’s complaint alleged, among other things, that the defendants named therein breached their fiduciary duties to WMI and committed corporate waste and fraud by squandering WMI’s financial resources. In connection with the settlement of the D&O Litigation, during the year ended December 31, 2015, among the Trust, certain former directors and officers of WMI and certain insurance carriers that underwrote director and officer liability insurance policies for the benefit of WMI and its affiliates (including such former directors and officers), such insurance carriers agreed to pay the Trust $37.0 million, of which $3.0 million would be placed into a segregated reserve account (the “RSA Reserve”) to be administered by a third party pursuant to the terms of a Reserve Settlement Agreement (the “RSA”).

During the years ended December 31, 2016 and 2015, WMIH had other income of $123 thousand and $7.8 million, respectively, as a result of its receipt of net Litigation Proceeds related to the D&O Litigation. As of September 30, 2017, $1.5 million remained in the RSA Reserve. Under the RSA, funds are released from the RSA Reserve to the Trust if and when certain designated conditions are satisfied. If and when these funds are released to the Trust, and to the extent WMIH is entitled to receive such funds in accordance with the Plan, it is anticipated the Trust will make payments to WMIH in an amount equal to WMIH’s share of Litigation Proceeds as provided under the Plan. Due to the contingent nature of future distributions from the RSA Reserve, there can be no assurance that WMIH will receive any distributions from the remaining balance in the RSA Reserve in the future. During the nine months ended September 30, 2017, WMIH has recorded income from Litigation Proceeds of $123 thousand. As of September 30, 2017, WMIH has not received any Litigation Proceeds, other than as described above.

In preparation for the offering of the Series B Preferred Stock, WMIH engaged KKR Capital Markets LLC (“KCM”), an affiliate of KKR & Co. L.P., to act as a joint book-running manager for the Series B Preferred Stock offering. KCM also acted as an initial purchaser of the Series B Preferred Stock. During the year ended December 31, 2015, as a result of satisfying a post-closing covenant to reincorporate in the State of Delaware within 180 days following the closing of the Series B Preferred Stock offering, we paid $8.25 million to KCM. Upon consummation of a “Qualified Acquisition” (as such term is defined in Article VI of the Certificate of Incorporation), we will pay KCM an additional fee (the “KCM Deferred Fee”) of $8.25 million. We have recorded the KCM Deferred Fee in “other liabilities” on our condensed consolidated balance sheet and this amount was included in “accrued fees relating to Series B Preferred Stock issuance” on our condensed consolidated statements of cash flows.

~~Note 7: Notes Payable~~

On the Effective Date, WMIH issued $110.0 million aggregate principal amount of its 13% Senior First Lien Notes due 2030 (the “First Lien Notes”) under an indenture, dated as of March 19, 2012 (the “First Lien Indenture”), between WMIH and Wilmington Trust, National Association, as Trustee. Additionally, WMIH issued $20.0 million aggregate principal amount of its 13% Senior Second Lien Notes due 2030 (the “Second Lien Notes” and, together with the First Lien Notes, the “Runoff Notes”) under an indenture, dated as of March 19, 2012 (the “Second Lien Indenture” and, together with the First Lien Indenture, the “Indentures”), between WMIH and Law Debenture Trust Company of New York, as Trustee. On January 5, 2017, The Law Debenture Trust Company of New York notified WMIH that it had completed the transfer of substantially all of its corporate trust business to Delaware Trust Company, and that Delaware Trust Company had become the successor trustee under the Second Lien Indenture. The Runoff Notes were scheduled to mature on March 19, 2030 and pay interest quarterly.

The Runoff Notes were secured by, and had a specified priority in right of payment in, a securities or deposit account into which WMIH was required to deposit distributions it received of Runoff Proceeds (as defined in the Indentures) (the “Collateral Account”). WMIH agreed to cause WMMRC, while the Runoff Notes were outstanding, to deposit all distributions, dividends or other receipts in respect of Runoff Proceeds Distributions (as defined in the Indentures) on the date paid to WMIH in the Collateral Account established in accordance with the terms of the Indentures. On any interest payment date, payments were made from the Collateral Account and from any other Runoff Proceeds Distributions in the priority set forth in the Indentures. In connection with certain interest payments due and payable in respect of the First and Second Lien Notes, WMIH elected, consistent with the terms of the Indentures, to issue payment-in-kind notes in lieu of making such interest payments in cash when no cash was available.

~~As of April 15, 2015, the First Lien Notes were fully redeemed by the Company, and on April 27, 2015, the First Lien Indenture was satisfied and discharged.~~

Second Lien Note principal outstanding totaled zero and approximately $18.8 million as of September 30, 2017 and December 31, 2016, respectively. Approximately $18.8 million of Second Lien Note principal was paid during the nine months ended September 30, 2017, and $2.9 million of Second Lien Note principal was paid during the year ended December 31, 2016. Interest on Second Lien Notes paid in cash totaled approximately $2.0 million during each of the nine months ended September 30, 2017 and 2016. ~~As of September 29, 2017, the Second Lien Notes were fully redeemed by the Company, and on October 2, 2017, the Second Lien Indenture was satisfied and discharged.~~ As a result of the satisfaction and discharge of the Second Lien Indenture the Collateral Account was subsequently closed and remaining funds transferred to cash and cash equivalents to be used for general corporate purposes. For more information see Note 14: Subsequent Events.

~~Note 8: Financing Arrangements~~

As of September 30, 2017, the Company had no debt financing arrangements in place. As of December 31, 2016, the Company had no debt financing arrangements in place other than the Second Lien Notes which are described in Note 7: Notes Payable.

~~Note 9: Capital Stock and Derivative Instruments~~

On the Effective Date, all shares of common and preferred equity securities previously issued by WMI were cancelled and extinguished. As of the Effective Date, and pursuant to WMIHC’s Amended and Restated Articles of Incorporation (the “Articles”), WMIHC was authorized to issue up to 500,000,000 shares of common stock and up to 5,000,000 shares of blank check preferred stock, in one or more series, each with a par value of $0.00001 per share. 200,000,000 shares of common stock were issued by WMIHC pursuant to the Plan and in reliance on Section 1145 of the United States Bankruptcy Code on the Effective Date.

On the Reincorporation Date all shares of common and preferred equity securities previously issued by WMIHC automatically were converted into one share of the substantially similar common stock, Series A Preferred Stock or Series B Preferred Stock, as applicable, of WMIH. At the same time, each outstanding option, right or warrant to acquire shares of WMIH’s common stock was converted into an option, right or warrant to acquire an equal number of shares of WMIH’s common stock under the same terms and conditions as the original options, rights or warrants. As of the Reincorporation Date, and pursuant to the Certificate of Incorporation, WMIH is authorized to issue up to 3,500,000,000 shares of common stock and up to 10,000,000 shares of blank check preferred stock, in one or more series, each with a par value of $0.00001 per share.

All of the terms of the agreements described below and attributed to WMIH are also attributable to WMIHC relative to the various agreements and instruments prior to the Reincorporation Date. The references to WMIH are based on the date this Form 10-Q has been filed. The references would have been to WMIHC prior to the Reincorporation Date.

On January 30, 2014, WMIH entered into (i) an investment agreement, dated as of January 30, 2014 (the “Investment Agreement”), with KKR Fund Holdings L.P. (“KKR Fund”) and, for limited purposes, KKR Management Holdings L.P., and (ii) an investor rights agreement, dated as of January 30, 2014 (the “Investor Rights Agreement”), with KKR Fund. On January 30, 2014, pursuant to the Investment Agreement, WMIH issued 1,000,000 shares of its Series A Preferred Stock having the terms, rights, obligations and preferences contained in the Articles of Amendment of WMIH dated January 30, 2014 for a purchase price equal to $11.1 million and has issued to KKR Fund warrants to purchase, in the aggregate, 61.4 million shares of WMIH’s common stock, 30.7 million of which have an exercise price of $1.32 per share and 30.7 million of which have an exercise price of $1.43 per share (together, the “Warrants”).

The Series A Preferred Stock has rights substantially similar to those associated with WMIH’s common stock, with the exception of a liquidation preference, conversion rights and customary anti-dilution protections. The Series A Preferred Stock has a liquidation preference equal to the greater of (i) $10.00 per one million shares of Series A Preferred Stock plus declared but unpaid dividends on such shares and (ii) the amount that the holder would be entitled to in a relevant transaction had the Series A Preferred Stock been converted to common stock of WMIH. The Series A Preferred Stock is convertible at a conversion price of $1.10 per share into shares of common stock of WMIH either at the option of the holder or automatically upon transfer by KKR Fund to a non-affiliated party. As a result of the calculation of a beneficial conversion feature as required by ASC topic 470 - Debt a preferred deemed dividend of $9.5 million was recorded in conjunction with the issuance of the Series A Preferred Stock. This preferred deemed dividend resulted in an increase to our accumulated deficit, and an increase in additional paid in capital. Further, KKR Fund, as the holder of the Series A Preferred Stock and the Warrants, has received other rights pursuant to the Investor Rights Agreement as described below.

The Warrants have a five-year term from the date of issuance and are subject to customary structural adjustment provisions for stock splits, combinations, recapitalizations and other similar transactions. KKR Fund’s rights as a holder of the Series A Preferred Stock and the Warrants, and the rights of any subsequent holder that is an affiliate of KKR Fund (together with KKR Fund, the “Series A Holders”) are governed by the Investor Rights Agreement.

In accordance with the Investor Rights Agreement, except for the issuance of WMIH’s common stock in respect of the Warrants and the Series A Preferred Stock, KKR Fund and its affiliates shall not purchase or acquire any equity securities of WMIH or its subsidiaries without WMIH’s prior written consent, subject to certain exceptions.

The Investor Rights Agreement also provides the Series A Holders with registration rights, including three long form demand registration rights, unlimited short form demand registration rights and customary piggyback registration rights with respect to WMIH’s common stock (and WMIH’s common stock underlying the Series A Preferred Stock and the Warrants), subject to certain minimum thresholds, customary blackout periods and lockups of 180 days. On July 1, 2015, WMIH filed a shelf registration statement (the “Initial Registration Statement”) covering resales of Series B Preferred Stock and WMIH’s common stock issuable upon mandatory conversion of the Series B Preferred Stock. On November 23, 2015, WMIH amended the Initial Registration Statement to cover WMIH’s common stock issuable upon conversion of the Series A Preferred Stock and shares of WMIH’s common stock issuable upon exercise of warrants issued in connection with the issuance of our Series A Preferred Stock currently outstanding (as amended, the “Registration Statement”). The Registration Statement was declared effective under the Securities Act on November 25, 2015.

For as long as the Series A Holders beneficially own any shares of common stock of WMIH or Series A Preferred Stock or any of the Warrants, WMIH has agreed to provide customary Rule 144A information rights, to provide the Series A Holders with regular audited and unaudited financial statements and to allow the Series A Holders or their representatives to inspect WMIH’s books and records.

The foregoing description of (i) the Investor Rights Agreement is qualified in its entirety by reference to the Investor Rights Agreement, which was filed with the SEC as Exhibit 4.2 on Form 8-K on January 31, 2014, and incorporated by reference, (ii) the Warrants are qualified in their entirety by reference to the Form of Tranche A Warrant and Form of Tranche B Warrant, which were filed with the SEC as Exhibits 4.3 and 4.4, respectively, on Form 8-K on January 31, 2014, and incorporated by reference, (iii) the Series A Preferred Stock is qualified in its entirety by reference to the Articles of Amendment of WMIH dated January 30, 2014, which were filed with the SEC as Exhibit 4.5 on Form 8-K on January 31, 2014, and incorporated by reference, the Form of Series A Convertible Preferred Stock Certificate, which was filed with the SEC as Exhibit 4.6 on Form 8-K on January 31, 2014, and incorporated by reference, and the Certificate of Incorporation, which was filed with the SEC as Exhibit 3.1 on Form 8-K12G3 on May 13, 2015, and incorporated by reference, and (iv) the Investment Agreement is qualified in its entirety by reference to the Investment Agreement, which was filed with the SEC as Exhibit 10.1 on Form 8-K on January 31, 2014, and incorporated by reference.

On January 5, 2015, WMIH, in connection with an offering of 600,000 shares of its Series B Preferred Stock, filed with the Secretary of State of Washington Articles of Amendment of Articles of Incorporation (the “Articles of Amendment”) containing the Designation of Rights and Preferences of the 3% Series B Convertible Preferred Stock (the “Certificate of Designation”) creating the Series B Preferred Stock and designating the rights and preferences of the Series B Preferred Stock.

The foregoing descriptions of the Articles of Amendment and the Certificate of Designation are qualified in their entirety by the provisions of the Articles of Amendment and the Certificate of Designation, filed as Exhibits 3.1 and 4.1 to a Form 8-K on January 5, 2015, respectively, and incorporated by reference herein~~, and the Certificate of Incorporation, which was filed with the SEC as Exhibit 3.1 on Form 8-K12G3 on May 13, 2015, and incorporated by reference~~.

On January 5, 2015, in connection with the offering and pursuant to that certain Purchase Agreement, dated December 19, 2014 (the “Purchase Agreement”), by and among WMIH, Citigroup Global Markets Inc. (“Citi”) and KCM (KCM and Citi together, the “Initial Purchasers”), WMIH entered into a Registration Rights Agreement with the Initial Purchasers (the “Registration Rights Agreement”), pursuant to which WMIH has agreed that, subject to certain conditions, WMIH will use its reasonable efforts to (i) file a shelf registration statement covering resales of WMIH’s common stock issuable upon mandatory conversion of the Series B Preferred Stock no later than six months after January 5, 2015 (the “Issue Date”); (ii) file a shelf registration statement covering resales of the Series B Preferred Stock no later than one year after the Issue Date; and (iii) cause each of these shelf registration statements to be declared effective under the Securities Act. On July 1, 2015, WMIH filed the Initial Registration Statement covering resales of Series B Preferred Stock and shares of WMIH’s common stock issuable upon mandatory conversion of the Series B Preferred Stock. On November 23, 2015, WMIH amended the Initial Registration Statement to cover WMIH’s common stock issuable upon conversion of the Series A Preferred Stock and shares of WMIH’s common stock issuable upon exercise of warrants issued in connection with the issuance of our Series A Preferred Stock currently outstanding. ~~The Registration Statement was declared effective under the Securities Act on November 25, 2015.~~

The foregoing description of the Registration Rights Agreement is qualified in its entirety by the provisions of the Registration Rights Agreement, filed on Form 8-K on January 5, 2015, as Exhibit 10.1 and incorporated by reference herein.

On January 5, 2015, in connection with the offering and pursuant to the Purchase Agreement, WMIH entered into an Escrow Agreement (the “Escrow Agreement”) with Citibank, N.A., as Escrow Agent (the “Escrow Agent”), pursuant to which WMIH caused to be deposited with the Escrow Agent the amount of $598.5 million, representing the proceeds of the offering of Series B Preferred Stock less offering fees payable on the Issue Date but before payment of other offering fees and expenses (including fees contingent upon future events). These net proceeds have been, and will be, released from escrow from time to time to WMIH as instructed by WMIH in amounts necessary to (i) pay certain fees related to the offering that may become payable to the Initial Purchasers, (ii) finance WMIH’s efforts to explore and/or fund, in whole or in part, acquisitions, whether completed or not, including reasonable attorney fees and expenses related thereto, accounting expenses, due diligence and financial advisor fees and expenses, (iii) pay certain amounts that may become payable to the holders of the Series B Preferred Stock upon the occurrence of certain put events, (iv) pay certain amounts that would become payable to the holders of the Series B Preferred Stock upon a mandatory redemption of the Series B Preferred Stock, and (v) pay certain expenses related to the offering. The entire net proceeds will be released from escrow as instructed by WMIH upon consummation of a Qualified Acquisition (as defined in Article VI of the Certificate of Incorporation). If a Qualified Acquisition is not consummated by January 5, 2018, and no Acquisitions (as defined in Article VI of the Certificate of Incorporation) have been consummated such that all of the Series B Preferred Stock remains outstanding and has not been converted to WMIH’s common stock, the outstanding Series B Preferred Stock becomes redeemable. The aggregate redemption costs, assuming all 600,000 shares remain outstanding, of all of the Series B Preferred Stock is $600.0 million, plus accrued and unpaid dividends, if any, whether or not declared. As of September 30, 2017 and December 31, 2016, the balance remaining in the escrow account totaled approximately $577.2 million and $572.9 million, respectively. The foregoing description of the Escrow Agreement is qualified in its entirety by the provisions of the Escrow Agreement, filed on Form 8-K on January 5, 2015, as Exhibit 10.2 and incorporated by reference herein.

If the Series B Preferred Stock is redeemed or determined likely to be redeemed, the Company would be required to record a charge to earnings of approximately $97.8 million to accrete the value of the Series B Preferred Stock to the $600 million redemption value. The Company continues to pursue its business strategy of consummating an acquisition, and to explore potential financing and refinancing alternatives, and as of September 30, 2017, the Company has determined that recording for accretion to the Series B Preferred Stock’s redemption value is not required.

The Series B Preferred Stock are hybrid financial instruments that blend characteristics of both equity and debt securities. The terms of the Series B Preferred Stock provide for either redemption of the principal and interest for cash at maturity or in the event of certain predetermined circumstances (“Forward Component”) or mandatory conversion into WMIH’s common stock (“Embedded Conversion Feature” or “ECF”). The Series B Preferred Stock also embody contingent equity-linked share price protections on the ECF in the form of a variable conversion price based on a 20 trading day average of volume weighted-average price. Upon any conversion of Series B Preferred Stock in accordance with its terms, the Series B Preferred Stock shall convert based on the outstanding principal and accrued interest, subject to a floor of $1.75 per share of WMIH’s common stock and a maximum of $2.25 per share. As a result, the Company determined that the Series B Preferred Stock contain certain embedded derivative features. Management’s evaluation resulted in the conclusion that the compound derivative financial instrument required bifurcation and separately accounted for the embedded conversion feature option as a derivative. A derivative liability results primarily when the Company average stock price (as defined in the Certificate of Incorporation) exceeds the conversion price, including the ceiling conversion price of $2.25, as defined by the Certificate of Incorporation. A derivative asset results primarily when the Company’s average stock price is less than the conversion price, including the floor price of $1.75. The aggregate fair value of the embedded conversion feature was a liability of $66.2 million on the date of issuance of the Series B Preferred Stock. At September 30, 2017, September 30, 2016 and December 31, 2016, the fair value of the embedded conversion feature was an asset of $111.9 million, a liability of $58.3 million and an asset of $80.7 million, respectively. Any change in the fair value of the embedded conversion feature will constitute other income or expense, as the case may be, in the applicable reporting period. Upon conversion or redemption of the Series B Preferred Stock, any asset or liability related to the embedded conversion feature would be eliminated. During the year ended December 31, 2016, the fair value of the embedded conversion feature changed by $201.5 million and this change is included as other income in the condensed consolidated statement of operations for the year ended December 31, 2016. During the three and nine months ended September 30, 2017, the fair value of the derivative asset increased by $38.6 million and $31.2 million, respectively. During the three and nine months ended September 30, 2016, the fair value of the derivative liability increased by $16.2 million and decreased by $62.6 million, respectively. The change in fair value is included as other income or expense, as the case may be, in the condensed consolidated statement of operations for the respective periods.

On June 1, 2017 and on June 1, 2016, WMIH issued restricted stock grants to members of the Board totaling $0.4 million and $0.5 million, respectively, of aggregate fair value. The restricted shares noted above vest over a three-year period.

On May 15, 2015, WMIH issued restricted stock grants to our Chief Executive Officer, William C. Gallagher, and our Chief Operating Officer, Thomas L. Fairfield, in conjunction with employment agreements totaling $9.8 million of aggregate fair value (the “Exec Grants”) based on the $2.76 trading price of WMIH shares at the close of business on the date issued. ~~WMIH may be required to issue additional shares if the conversion price applicable to the Series B Preferred Stock is less than $2.25 per share.~~ ~~The Exec Grants~~ will vest in full and will be recognized as compensation expense upon the consummation of a Qualified Acquisition, subject to the executives continued employment with the Company until such time. The foregoing description of the restricted stock agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Gallagher Restricted Stock Agreement and the Fairfield Restricted Stock Agreement (the “Executive Agreements”), which were filed as Exhibit 10.3 and Exhibit 10.5, respectively, of Form 8-K12G3 filed on May 13, 2015 and incorporated herein by reference. The fair market value of the Exec Grants as of September 30, 2017 approximates $4.3 million as a result of the terms of the Executive Agreements which would result in additional share issuances if the value is below $2.25 per share limited to a maximum of shares based on a minimum conversion price of $1.75 per share. The stock price was $0.95 per share at the close of the market on September 30, 2017 and if the Exec Grants had vested then the minimum conversion price of $1.75 per share would have been utilized, therefore, a total of 1,015,874 additional shares (the “Exec Additional Shares”) would have been required to be issued, 507,937 additional shares each to both Mr. Gallagher and Mr. Fairfield.

~~The unamortized value related to the unvested restricted share grants totals $5.0 million and $7.7 million at September 30, 2017 and December 31, 2016, respectively.~~

The unamortized value of $5.0 million at September 30, 2017, if all are ultimately vested, would be amortized according to the following schedule. The fair value of the Exec Grants will vest and be recognized on the date of the consummation of a Qualified Acquisition. Additionally, any Exec Additional Shares required to be issued, would be issued and immediately vest on the date of the consummation of a Qualified Acquisition.

Amortization Schedule
(in thousands)

September 30, 2017 unamortized dollar value

4th quarter 2017

$
103

1st quarter 2018

98

2nd quarter 2018

71

3rd quarter 2018

71

4th quarter 2018

71

1st quarter 2019

66

2nd quarter 2019

36

3rd quarter 2019

36

4th quarter 2019

36

1st quarter 2020

31

Unamortized fair-value - subject to vesting schedule

619

Unamortized fair-value - event dependent

4,343

Total unamortized dollar value

4,962

Equity-based compensation totaled $0.4 million and $0.5 million for the nine months ended September 30, 2017 and September 30, 2016, respectively. The restricted stock awards were issued at the fair market value determined to be the trading price at the close of business on the respective date the awards were granted.

~~A summary of WMIH’s restricted stock award activity for the nine months ended September 30, 2017 and year ended December 31, 2016 is presented below:~~

Number of restricted stock awards outstanding

Weighted-average grant date fair value

Aggregate fair value
(in thousands)

Outstanding—January 1, 2016

6,168,035

2.1230

13,095

Restricted stock awards granted during 2016

212,765

2.3500

500

Restricted stock awards released or forfeited during 2016

—

—

—

Outstanding—December 31, 2016

6,380,800

$
2.1306

$
13,595

Restricted stock awards granted during 2017

333,332

1.2000

400

Restricted stock awards released or forfeited during 2017

—

—

—

Outstanding—September 30, 2017

6,714,132

$
2.0844

$
13,995

WMIH has issued the total number of shares subject to the restricted stock grants, however, until vested they are subject to repurchase. Shares subject to repurchase totaled 4,053,640 on September 30, 2017 and 4,039,591 on December 31, 2016. The Exec Grants vest upon future events, and are not time specific, and for this reason we have used 1st quarter 2018 as the vesting date in the following table as this date corresponds with the Series B Preferred Stock potential redemption date. The shares subject to repurchase at September 30, 2017 will vest, assuming circumstances remain unchanged, according to the following schedule:

~~Vesting schedule of shares subject to repurchase~~	~~September 30, 2017 unvested shares~~
~~4th quarter 2017~~		—
~~1st quarter 2018~~		~~3,774,684~~
~~2nd quarter 2018~~		—
~~3rd quarter 2018~~		—
~~4th quarter 2018~~		—
~~1st quarter 2019~~		~~167,848~~
~~2nd quarter 2019~~		—
~~3rd quarter 2019~~		—
~~4th quarter 2019~~		—
~~1st quarter 2020~~		~~111,108~~
~~Total unvested shares~~		~~4,053,640~~

Pursuant to a restricted stock agreement, WMIH has the right, but not the obligation, to repurchase any unvested (but issued) shares of common stock subject to the restricted stock agreement at $0.0001 per share upon the termination of service in the case of a director, or in the case of the Exec Grants, on January 5, 2018 if the Series B Preferred Stock are redeemed or as a result of certain circumstances as defined by the terms of the Exec Grants.

~~A summary of WMIH’s restricted shares issued and subject to repurchase as of September 30, 2017 and December 31, 2016 is presented below:~~

~~Vesting schedule of shares subject to repurchase~~	~~Unvested shares~~
~~Shares subject to repurchase—January 1, 2016~~		~~4,197,396~~
~~Shares issued subject to vesting during 2016~~		~~212,765~~
~~Unvested shares repurchased during 2016~~		—
~~Shares vested during 2016~~		~~(370,570~~	)
~~Shares subject to repurchase—December 31, 2016~~		~~4,039,591~~
~~Shares issued subject to vesting during 2017~~		~~333,332~~
~~Unvested shares repurchased during 2017~~		—
~~Shares vested during 2017~~		~~(319,283~~	)
~~Shares subject to repurchase—September 30, 2017~~		~~4,053,640~~

On June 1, 2017 and June 1, 2016, WMIH issued 333,332 and 212,765 restricted stock grants, respectively, to members of the Board totaling $0.4 million and $0.5 million, respectively, of aggregate fair value. The share price was determined based on the closing sales price of $1.20 and $2.35 on the respective dates of the awards.

As of September 30, 2017 and December 31, 2016, 206,714,132 and 206,380,800, respectively, of WMIH’s common stock were issued and outstanding. As of September 30, 2017 and December 31, 2016, 1,000,000 shares of the Series A Preferred Stock were issued and outstanding. As of September 30, 2017 and December 31, 2016, 600,000 shares of the Series B Preferred Stock were issued and outstanding. As of September 30, 2017 and December 31, 2016, 61,400,000 warrants to purchase WMIH’s common stock were issued and outstanding.

~~See Note 12: Net Income Per Common Share~~2021 for further information on ~~shares used for EPS calculations.~~

~~Note 10: Pending Litigation~~

Asthese and other risk factors affecting us.

Table of ~~September 30, 2017, the Company was not a party to, or aware of, any pending legal proceedings or investigations requiring disclosure at this time.~~

Contents~~Note 11: Restriction on Distribution of Net Assets from Subsidiary~~

WMMRC has net assets totaling $17.7 million and $33.8 million as of September 30, 2017 and December 31, 2016, respectively. These net assets are not immediately available for distribution to WMIH due to restrictions imposed by trust agreements, and the requirement that the Insurance Division of the State of Hawaii must approve dividends from WMMRC. Prior to ~~September 29, 2017, when the Second Lien Notes were fully redeemed by the Company and October 2, 2017 when the Second Lien Indenture was satisfied and discharged~~, distributions from WMMRC to WMIH were further restricted by the terms of the Runoff Notes and Indentures described in Note 7: Notes Payable. As more fully described in Note 14: Subsequent Events, a distribution from WMMRC to WMIH of up to $10.7 million was approved by the Insurance Division of the State of Hawaii on September 13, 2017.

~~Note 12: Net Income (Loss) Per Common Share~~

In calculating earnings per share, the Company follows the two-class method, which distinguishes between the classes of securities based on the proportionate participation rights of each security type in the Company's undistributed income. The Series A Preferred Stock and the Series B Preferred Stock are treated as one class for purposes of applying the two-class method, because they have substantially equal rights and share equally on an as converted basis with respect to income available to WMIH common stockholders.

Basic net income per WMIH share attributable to common stockholders is computed by dividing net income attributable to WMIH’s common stockholders by the weighted-average number of common shares outstanding for the period after subtracting the weighted-average of any unvested restricted shares outstanding, as these shares are subject to repurchase. Basic net income attributable to common stockholders is computed by deducting preferred dividends and the basic calculation of undistributed earnings attributable to participating securities from net income.

Diluted net income per WMIH share is computed by dividing net income attributable to WMIH’s common stockholders for the period by the weighted-average number of common shares outstanding after subtracting the weighted-average of any incremental unvested restricted shares outstanding and adding any potentially dilutive common equivalent shares outstanding during the period, if dilutive. Potentially dilutive common equivalent shares are comprised of the incremental common shares issuable upon the exercise of warrants for WMIH’s common stock and the potential conversion of preferred shares to common shares and the dilutive effect of unvested restricted stock. Diluted net income attributable to common stockholders is computed by deducting preferred dividends and the diluted calculation of undistributed earnings attributable to participating securities from net income.

The dilutive effect of outstanding warrants and restricted stock subject to repurchase is reflected in diluted earnings per share by application of the treasury stock method. There would be no dilutive effects from any equity instruments for periods presented reflecting a net loss, therefore diluted net loss per share would be the same as basic net loss for periods that reflect a net loss attributable to common stockholders. Certain unvested restricted shares and convertible preferred stock are excluded from the calculation of diluted earnings per share until the non-market based contingency occurs.

~~The following table presents the calculation of basic net (loss) income per share~~ ~~for periods presented:~~

~~(in thousands, except per share data):~~

Three months
ended
September 30, 2017

Three months
ended
September 30, 2016

Nine months
ended
September 30, 2017

Nine months
ended
September 30, 2016

Numerator for basic net income (loss) per share:

Net income (loss)
$
38,411

$
(16,645
)

$
34,876

$
61,314

Less: Series B preferred stock dividends

(4,500
)

(4,500
)

(13,500
)

(13,500
)
Less: undistributed earnings attributed to participating securities (basic calculation)

(21,541
)

—

(13,581
)

(27,625
)
Basic net income (loss) attributable to common stockholders
$
12,370

$
(21,145
)

$
7,795

$
20,189

Denominator for basic net income (loss) per share:

Weighted-average shares outstanding

206,714,132

206,380,800

206,529,762

206,261,993

Weighted-average unvested restricted shares outstanding

(4,053,640
)

(4,039,591
)

(3,956,447
)

(4,014,718
)
Denominator for basic net income (loss) per share

202,660,492

202,341,209

202,573,315

202,247,275

Basic net income (loss) per share attributable to common stockholders
$
0.06

$
(0.10
)

$
0.04

$
0.10

~~The following table presents the calculation of diluted net (loss) income per share~~ ~~for periods presented:~~

~~(in thousands, except per share data):~~

Three months
ended
September 30, 2017

Three months
ended
September 30, 2016

Nine months
ended
September 30, 2017

Nine months
ended
September 30, 2016

Numerator for diluted net income (loss) per share:

Net income (loss)
$
38,411

$
(16,645
)

$
34,876

$
61,314

Less: Series B preferred stock dividends

(4,500
)

(4,500
)

(13,500
)

(13,500
)
Less: undistributed earnings attributed to participating securities (diluted calculation)

(21,541
)

—

(13,581
)

(26,241
)
Diluted net income (loss) attributable to common stockholders
$
12,370

$
(21,145
)

$
7,795

$
21,573

Denominator for diluted net income (loss) per share:

Weighted-average shares outstanding

206,714,132

206,380,800

206,529,762

206,261,993

Weighted-average unvested restricted shares outstanding

(4,053,640
)

(4,039,591
)

(3,956,447
)

(4,014,718
)
Effect of dilutive potential shares

10,065,629

—

10,065,629

35,327,739

Denominator for diluted net income (loss) per share

212,726,121

202,341,209

212,638,944

237,575,014

Diluted net income (loss) per share attributable to common stockholders
$
0.06

$
(0.10
)

$
0.04

$
0.09

The following table summarizes shares subject to exercise or vesting conditions as more fully described in Note 9: Capital Stock and Derivative Instruments. These shares could potentially be dilutive in future periods if we realize net income attributable to common and participating stockholders and the contingent or unvested stock is converted to WMIH common stock. The cash payment of $84.4 million, which would be received upon exercise of the warrants, has not been considered as an offset to the dilutive shares under warrants outstanding below.

Potential dilution to common stock

Minimum shares

Maximum shares

Restricted shares subject to vesting

4,053,640

4,053,640

Series A Preferred Stock

10,065,629

10,065,629

Warrants outstanding

61,400,000

61,400,000

Dilutive shares to be issued if Series B Preferred Stock conversion is below $2.25

—

1,015,872

Series B Preferred Stock

266,666,667

342,857,143

Potential dilutive shares if converted to common stock

342,185,936

419,392,284

~~Note 13:~~ ~~Fair Value Measurement~~

We use a fair-value approach to value certain assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. We use a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

•	~~Level 1 — Inputs to the valuation methodology are quoted prices for identical assets or liabilities traded in active markets;~~

•	Level 2 — Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market corroborated inputs; and

•	~~Level 3 — Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company’s own assumptions about the inputs that market participants would use.~~

Determining which category an asset or liability falls within the fair value accounting guidance hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter. Assets and liabilities measured at fair value on a recurring basis are summarized as follows:

~~The financial instrument that is measured at fair value on a recurring basis is summarized as follows as of September 30, 2017:~~

(in thousands)

Assets

Level 1

Level 2

Level 3

September 30, 2017

Derivative embedded conversion feature

$
—

$
—

$
111,877

$
111,877

~~The financial instrument that is measured at fair value on a recurring basis is summarized as follows as of December 31, 2016:~~

(in thousands)

Assets

Level 1

Level 2

Level 3

December 31, 2016

Derivative embedded conversion feature

$
—

$
—

$
80,651

$
80,651

~~The following table shows the change in Level 3 assets and liabilities measured at fair value on a recurring basis for the year ended December 31, 2016 and the nine months ended September 30, 2017:~~

Derivative asset (liability) embedded conversion feature
(in thousands)

Balance, January 1, 2016

$
(120,848
)
Unrealized gain on change in fair value

201,499

Balance, December 31, 2016

80,651

Unrealized gain on change in fair value

31,226

Balance, September 30, 2017

$
111,877

On January 5, 2015, WMIH raised $600.0 million of capital (less transaction costs) through the issuance of 600,000 shares of Series B Preferred Stock. The shares carry a liquidation preference of $1,000 per share, equal to the purchase price, and a mandatory redemption right three years from issuance date at a price equal to the purchase price, plus accrued dividends at 3% per annum.

~~The proceeds from the issuance of the Series B Preferred Stock are to be used to pursue strategic acquisitions. If one or more~~ acquisitions are made on or prior to January 5, 2018 (or such later time as may be permitted pursuant to the terms governing the Series B Preferred Stock), then some or all of such Series B Preferred Stock shall be mandatorily converted into common stock of ~~WMIH at a conversion price that is the lesser of:~~

~~$2.25 per share of WMIH common stock; and~~

~~ii)~~

the arithmetic average of daily volume weighted-average prices of WMIH’s common stock during the 20 trading day period ending on the trading day immediately preceding the public announcement by WMIH of its entry into a definitive agreement for such acquisition, subject to a floor of $1.75 per share of WMIH common stock.

The mandatory conversion feature of the Series B Preferred Stock is subject to fair value accounting and, in connection therewith, since the time of issuance, the Company has used a binomial lattice option model to determine fair value of the Series B Preferred Stock. The fair value of the Series B Preferred Stock embedded conversion feature is revalued each balance sheet date utilizing the binomial lattice option model. The fair value computations are reported in the condensed consolidated statement of operations as unrealized gain or (loss) on change in fair value of derivative embedded conversion feature, respectively.

Such binomial lattice option model utilizes several inputs to determine such fair value. Such inputs include WMIH’s common stock price as of each reporting date, as well as variable assumptions including, but not limited to, volatility of our stock price, the risk free interest rate, the probability that the Company consummates a Qualified Acquisition and the time of completing any such Qualified Acquisition.

As of September 30, 2017 the following variable assumptions were included in the binomial option model: expected stock price volatility over the term of the convertible preferred securities was estimated at 60%, as compared to 40% as of December 31, 2016; the risk-free interest rate was estimated at 1.1% as compared to 0.6% as of December 31, 2016; the probability of the Company consummating a Qualified Acquisition was estimated at 50% as compared with 90% as of December 31, 2016; and the anticipated timing of the Company consummating a Qualified Acquisition was estimated at 6 months from both September 30, 2017 and December 31, 2016.

The foregoing assumptions were adopted by the Company’s management in order to determine the market value of the embedded conversion feature applicable to the Series B Preferred Stock. Such assumptions necessarily involved and continue to involve the exercise of management’s judgement, as well as the judgement of the third party the Company uses in connection with the embedded derivative valuation process and for no other purpose. Such assumptions are monitored and adjusted from time to time. As assumptions and circumstances change, results may differ and past assumptions and valuations are not indicative of future assumptions or results.

Our reported net income attributable to common and participating stockholders (“Year to Date Net Income” or “Year to Date Net Loss”) was approximately $21.4 million for the nine months ended September 30, 2017. The change to our net income attributable to common and participating stockholders resulting from the calculation of the fair value of the embedded conversion feature is analyzed at the end of each reporting period to assess the impact of a 10% change to the various inputs and the result of each change to Year to Date Net Income is highlighted in the following scenarios. If the closing stock price of our common stock had been 10% lower, our Year to Date Net Income would have been approximately $17.7 million higher ($39.1 million). If the closing stock price of our common stock had been 10% higher, our Year to Date Net Income would have been approximately $17.6 million less ($3.8 million). If our volatility assumption on September 30, 2017 had been 10% lower, our Year to Date Net Income would have been approximately $3.0 million higher ($24.4 million). If our volatility assumption had been 10% higher, our Year to Date Net Income would have been approximately $3.3 million less ($18.1 million). If our probability of a transaction occurring assumption on September 30, 2017 had been 10% lower, our Year to Date Net Income would have been approximately $22.4 million less resulting in Year to Date Net Loss of $1.0 million. If our probability of a transaction occurring assumption had been 10% higher, our Year to Date Net Income would have been approximately $22.4 million higher ($43.8 million).

~~Note 14: Subsequent Events~~

On October 23, 2017, the reinsurance agreement with Radian was commuted and the related trust assets were released to WMMRC. On September 13, 2017, the Insurance Division of the State of Hawaii approved this commutation.

On September 13, 2017, the Insurance Division of the State of Hawaii approved a transfer of up to $10.7 million from funds which were held in trust at WMMRC as of September 30, 2017. As of the date of the filing of this Form 10-Q, these funds have not been transferred to WMIH; however, they are no longer held in trust and are available for general corporate purposes.

~~On October 2, 2017, the Second Lien Indenture was satisfied and discharged.~~ ~~As a result of the satisfaction and discharge of the Second Lien Indenture the~~ ~~Collateral~~ ~~Account was subsequently closed and remaining funds transferred to cash and cash equivalents to be used for general corporate purposes. For more information see Note 7: Notes Payable.~~

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~The following~~

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with ~~our~~the accompanying unaudited condensed consolidated financial statements and ~~the related notes, included~~ in ~~Item 1 of Part I of this Quarterly Report on Form 10-Q. The following is a discussion and analysis of~~conjunction with our results of operations for the three and nine months ended September 30, 2017 and 2016 and financial condition as of September 30, 2017 and December 31, 2016 (dollars in thousands, except share and per share data and as otherwise indicated).

References as used herein, unless the context requires otherwise, to (i) the “Company,” “we,” “us,” or “our” refer to WMIH Corp. (formerly WMI Holdings Corp.) and its subsidiaries on a consolidated basis; (ii) “WMIH” refers only to WMIH Corp., without regard to its subsidiaries; (iii) “WMIHC” refers only to WMI Holdings Corp., without regard to its subsidiaries; (iv) “WMMRC” refers to WM Mortgage Reinsurance Company, Inc. (a wholly-owned subsidiary of WMIH); and (v) “WMIIC” refers to WMI Investment Corp. (a wholly-owned subsidiary of WMIH).

~~FORWARD-LOOKING STATEMENTS AND INFORMATION~~

This quarterly report includes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact included in this report that address activities, events, conditions or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business and these statements are not guarantees of future performance. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements may include the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “strategy,” “future,” “opportunity,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result” and similar expressions. Such forward-looking statements involve risks and uncertainties that may cause actual events, results or performance to differ materially from those indicated by such statements. These risks are identified and discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016 under Risk Factors~~2021. The following discussion contains, in ~~Part I, Item 1A. These risk factors will be important~~addition to ~~consider in determining future results and should be reviewed in their entirety. These~~the historical information, forward-looking statements that include risks, assumptions and uncertainties that could cause actual results to differ materially from those anticipated by such statements.

Dollar amounts are ~~expressed~~reported in ~~good faith~~millions, except per share data and ~~we believe there is~~other key metrics, unless otherwise noted.

We have provided a ~~reasonable basis for them. However, there can be no assurance~~glossary of terms, which defines certain industry-specific and other terms that are used herein, at the ~~events, results or trends identified in these forward-looking statements will occur or be achieved. Forward-looking statements speak only as~~end of the ~~date they~~MD&A section.


Overview

We are ~~made,~~a leading servicer and originator of residential mortgage loans. Our purpose is to keep the dream of homeownership alive, and we do ~~not undertake~~this as a servicer by helping mortgage borrowers manage what is typically their largest financial asset, and by helping our investors maximize the returns from their portfolios of residential mortgages. We have a track record of significant growth, having expanded our servicing portfolio from $10 billion in 2009 to ~~update any forward-looking statement, except as required by law. Therefore, you should not rely on these statements being current~~$796 billion as of ~~any time~~March 31, 2022. We believe this track record reflects our strong operating capabilities, which include a low-cost servicing platform, strong loss mitigation skills, a commitment to compliance, a customer-centric culture, a demonstrated ability to retain customers, growing origination capabilities, and significant investment in technology.

Our strategy is to position the Company for sustainable long-term growth, drive improved efficiency and profitability, and generate a return on tangible equity of 12% or higher. Key strategic priorities include the following:

•Strengthen our balance sheet by building capital and liquidity, and managing interest rate and other ~~than~~forms of risk;

•Improve efficiency by driving continuous improvement in unit costs for Servicing and Originations segments, as well as by taking corporate actions to eliminate costs throughout the ~~time at which this document was filed~~organization;

•Grow our servicing portfolio to $1 trillion in UPB by acquiring new customers and retaining existing customers;

•Achieve a refinance recapture rate of 60%;

•Delight our customers and keep Mr. Cooper a great place for our team members to work;

•Reinvent the customer experience by acting as the customer’s advocate and by harnessing technology to deliver digital solutions that are personalized and friction-less;

•Sustain the talent of our people and the culture of our organization; and

•Maintain strong relationships with ~~the Securities~~agencies, investors, regulators, and ~~Exchange Commission.~~

~~OVERVIEW~~

~~Our Business Strategy~~other counterparties and ~~Operating Environment~~

~~WMIH Corp. (“WMIH”) is~~ a ~~corporation duly organized~~strong reputation for compliance and ~~existing under the laws~~customer service.

Impact of the ~~State of Delaware. On May 11, 2015, WMIH merged with its parent corporation, WMI Holdings Corp., a Washington corporation (“WMIHC”), with WMIH as~~COVID-19 Pandemic

We implemented the ~~surviving corporation in the merger (the “Merger”). The Merger occurred as part~~provisions of the ~~reincorporation of WMIHC from the State of Washington to the State of Delaware effective May 11, 2015 (the “Reincorporation Date”).~~

~~WMIH, formerly known as WMIHC~~Coronavirus Aid, Relief, and ~~Washington Mutual, Inc. (“WMI”), is the direct parent of WM Mortgage Reinsurance Company, Inc. (~~“~~WMMRC”) and WMI Investment Corp. (~~“~~WMIIC”)~~Economic Security Act (CARES Act), which ~~has no assets or liabilities. Since emergence from bankruptcy on March 19, 2012 (the “Effective Date”),~~makes available forbearance plans for up to eighteen months for borrowers under government and government agency mortgage programs, which we ~~have had limited operations other than WMMRC’s legacy reinsurance business, which is being operated~~extended to borrowers in ~~runoff mode. We continue to operate WMMRC’s business in runoff mode and~~ our primary strategic objective is to consummate one or more acquisitions of an operating business, either through a merger, purchase, business combination or other form of acquisition, and grow our business.

We continue to seek, identify and evaluate acquisition opportunities of varying sizes across an array of industries for the purpose of facilitating an acquisition by WMIH of one or more operating businesses. Our management team meets regularly with our Board of Directors (the “Board” or “Board of Directors”), the Finance Committee of the Board (the “Finance Committee”) and the Corporate Strategy and Development Committee of the Board (the “CS&D Committee”), as the case may be, to discuss and evaluate potential acquisition targets. During the nine months ended September 30, 2017 and the year ended December 31, 2016, the Finance Committee, the CS&D Committee and the Board of Directors met formally and informally numerous times to assess various opportunities. We have focused primarily on acquisition targets in the financial services industry, including targets with consumer finance, commercial finance, specialty finance, leasing and insurance operations. We also may review potential targets in other industries, such as information technology, industrials, business services, healthcare and other sectors.

~~On January 5, 2015,~~ ~~we announced that WMIH had~~ completed an offering (the “Series B Preferred Stock Financing”) of 600,000 shares of its 3% Series B Convertible Preferred Stock, par value $0.00001, liquidation preference $1,000 per share (the “Series B Preferred Stock”) in the amount of a~~ggregate gross proceeds equal to $600 million. Net proceeds of $598.5 million were deposited into an escrow account and have been, and will be, released from escrow to us from time to time in amounts needed to finance our efforts to explore and~~ ~~fund, in whole or in part, certain acquisitions, whether completed or not, including reasonable attorney fees and expenses, accounting expenses, due diligence and financial advisor fees and expenses. For further information on the Series B Preferred Stock Financing, see Note 9: Capital Stock and Derivative Instruments, to the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.~~

WMIH continues to evaluate acquisition opportunities and work with our strategic partner, an affiliate of KKR & CO. L.P. (together with its affiliates, “KKR”), to identify, consider and evaluate potential mergers, acquisitions, business combinations and other strategic opportunities.private label mortgage servicing portfolio. As of ~~September 30, 2017, and through the date~~March 31, 2022, approximately 1.2% of ~~the filing~~our customers were on a forbearance plan, down from a peak of this Form 10-Q, we had not entered into definitive documentation relating to an acquisition or consummated an acquisition. If we have not entered into definitive documentation relating to an Acquisition (as defined below), or consummated a Qualified Acquisition (as defined below), on or prior to January 5, 2018, we will be required to redeem all of the outstanding Series B Preferred Stock on January 5, 2018 (the “Series B Redemption Date”). A “Qualified Acquisition” means an Acquisition (as defined below) that, taken together, with prior Acquisitions (if any), collectively utilizes aggregate net proceeds of the Series B Preferred Stock Financing of $450 million. “Acquisition” means any acquisition by the Company (or any of its direct or indirect wholly-owned subsidiaries),7.2% in ~~a single transaction or a series of transactions, whether by purchase, merger or otherwise, of all or substantially all of the assets of, or equity interests~~July 2020. More customers are now exiting forbearance than are entering. We include loans in ~~or a business line, unit or division of, any person.~~

Assuming all 600,000 shares are outstanding on the Series B Redemption Date, the aggregate redemption cost will be $600.0 million, plus accrued and unpaid dividends, if any, whether or not declared. If, prior to the Series B Redemption Date, we publicly announce that we have entered into a definitive agreement for an Acquisition, the Series B Redemption Date will be extended to the earlier to occur of (i) July 5, 2018, and (ii) the day immediately following (x) the date such definitive agreement is terminated or (y) the date such Acquisition is closed. The consummation of an Acquisition would result in the mandatory conversion of some or all of the Series B Preferred Stock into common stock in accordance with provisions set forth in Article VI of the Certificate of Incorporation.

While we remain focused on identifying an Acquisition and executing definitive documentation relating to or consummating an Acquisition on or prior to the Series B Redemption Date we can provide no assurance that we will be able to do so and, if so, on what terms. In the event we are required to redeem the Series B Preferred Stock, our available cash, absent a new financing, will be substantially depleted and our ability to (i) utilize our net operating loss (“NOL”) carry-forward, (ii) access significant alternative uses of capital and (iii) to continue business operations would likely be significantly and adversely impaired.

As previously disclosed, the Finance Committee is authorized, among other things, (i) to review the long-term financial structure, objectives and policies of the Company, and to make recommendations to the Board regarding such structure, objectives and policies, if appropriate, (ii) to evaluate the financing requirements of the Company and management’s proposed financing and refinancing plans and to recommend to the Board those actions, authorizations, filings and applications necessary and appropriate to enable management to execute such plans and (iii) to consider and make recommendations to the Board regarding the terms, timing, amount and other material factors (e.g., potential dilution of existing shareholders and the impact of any financing or restructuring on the Company’s tax attributes under Section 382 of the Code),forbearance related to the ~~possible restructuring or amendment~~CARES Act, whereby no payments have been received from borrowers for greater than 90 days, in loans subject to repurchase rights from Ginnie Mae in other assets and payables and other liabilities on a gross basis. The balance decreased to $1,003 as of ~~the Company’s outstanding equity securities, issuance~~March 31, 2022 from $1,301 as of ~~new equity securities in one or more private or public transactions, redemption of outstanding securities, or other transactions~~December 31, 2021. See liquidity discussion related to the ~~Company’s outstanding securities, capital structure~~COVID-19 pandemic in Liquidity and Capital Resources section in MD&A.

Anticipated Trends

In the first quarter of 2022, our servicing portfolio continued to grow due to strong execution across all channels, primarily through MSR acquisitions and subservicing. We expect to see continued portfolio growth in 2022, at a measured pace of acquisition for the remainder of the year. We completed servicing acquisitions of $81 billion in UPB in the first quarter of 2022. In addition, we expect the servicing segment to benefit from rising interest rates, including lower amortization expense and increased interest income, partially offset by increased interest expense.

Table of Contents

Our Originations segment produced declining funding volumes as interest rates increased, with a channel mix shifting to direct-to-consumer in the first quarter of 2022. Although the direct-to-consumer channel continues to generate strong margins, we expect origination profit margins to compress quarter-over-quarter in the second quarter of 2022 and overall expect our margins to gradually decline towards the historical average as a result of continued pricing pressure and lower funding volumes.

In 2022, the inflation rate has continued to increase. Inflationary pressures may limit a borrower’s disposable income, which can decrease customers’ ability to enter mortgage transactions. Inflationary pressures, along with supply chain disruptions, may also increase our operation costs. However, we believe changes in interest rates historically have a greater impact on our financial results than changes in the inflation rate. While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or ~~fundraising to meet the Company’s future liquidity and capital resources needs, in each case~~extent as the ~~Finance Committee deems appropriate.~~

In connection with the foregoing, and as has previously been disclosed, the Finance Committee has retained financial advisors to help the Company assess its overall capital structure and liquidity requirements and to develop potential financing alternatives. As part of these efforts, as of the date of this report, the Finance Committee and its advisers are engaged in discussions relating to, among other things, a possible restructuring or amendment of the Series B Preferred Stock. We can provide no assurance we will be able to restructure, amend or refinance the Series B Preferred Stock and, if so, on what terms.

With respect to our current operations, the Company currently operates a single business through its subsidiary, WMMRC, whose sole activity is the reinsurance of mortgage insurance policies. WMMRC has been operated in runoff mode since September 26, 2008. Since that date, WMMRC has not underwritten any new policies (and by extension any new risk). WMMRC, through predecessor companies, began reinsuring risks in 1997 and continued reinsuring risks through September 25, 2008.

All of WMMRC’s reinsurance agreements are on an excess of loss basis, except for a reinsurance treaty with Genworth Mortgage Insurance Corporation during 2008, which is reinsured on a 50% quota share basis. Pursuant to the excess of loss reinsurance treaties, WMMRC reinsures a second loss layer which ranges from 5% to 10% of the risk in force in excess of the primary mortgage insurer’s first loss percentages which range from 4% to 5%. Each calendar year, or book year, is treated separately from other years when calculating losses. In return for accepting a portion of the risk, WMMRC receives, net of ceding commission, a percentage of the premium that ranges from 25% to 40%.

WMMRC previously commuted three reinsurance agreements, one each, in 2009, 2012 and 2014, respectively, and the related trust assets were distributed in accordance with the commutation agreements. On October 23, 2017, the reinsurance agreement with Radian was commuted and the related trust assets were released to WMMRC. On September 13, 2017, the Insurance Division of the State of Hawaii approved this commutation and a distribution of up to $10.7 million to WMIH. As of the date of the filing of this Form 10-Q, this distribution has not yet been completed. For more information see Note 14: Subsequent Events to the condensed consolidated financial statements ~~in Item 1 of Part I of this Quarterly Report on Form 10-Q~~. We also may seek opportunities to extract excess capital through commutation of one or more of WMMRC’s remaining reinsurance agreements or otherwise, with a view toward accelerating the distribution of trust assets in excess of the amounts needed to pay claims.

Beginning in 2006, the U.S. housing market and related credit markets experienced a multi-year downturn. During that period, housing prices declined materially, credit guidelines tightened, delays in mortgage servicing and foreclosure activities occurred, and deterioration in the credit performance of mortgage loans occurred. In addition, the macro-economic environment during that period demonstrated limited economic growth, stubbornly high unemployment, and limited median wage gains. Beginning in 2012, home prices began to rise again. The current outlook for the housing market is optimistic with low interest rates, steady employment growth, increased household formation rates and less restrictive credit conditions. Nevertheless, WMMRC’s operating environment remains somewhat uncertain as much of its results over the next two years will be directly affected by the inventory of pending defaulted mortgages at its ceding companies arising primarily from mortgages originated in calendar years 2007 and 2008. However, its financial exposure to that environment has been materially reduced as the remaining net aggregate risk exposure has decreased due to the runoff nature of its operations.

~~Our Financial Information~~

~~The financial information in this Quarterly Report on Form 10-Q has been derived from our condensed consolidated financial statements.~~

~~Critical Accounting Policies~~

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), which requires management to make estimates and assumptions that affect reported and disclosed amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. We believe that the critical accounting policies set forth in the accompanying condensed consolidated financial statements describe the more significant judgments and estimates used in the preparation of our condensed consolidated financial statements. These accounting policies pertain to premium revenues and risk transfer, valuation of investments, loss and loss adjustment expense reserves, our values under fresh start accounting, the resulting loss contract reserve and the valuation of the derivative instrument relating to the embedded conversion feature of the Series B Preferred Stock. If actual events differ significantly from the underlying judgments or estimates used by management in the application of these accounting policies, there could be a material effect on our results of operations and financial condition.

Recently issued accounting standards and their impact on the Company have been presented under “New Accounting Pronouncements” in Note 2: Significant Accounting Policies to the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

~~Segments~~

The Company manages its business on the basis of one operating segment, mortgage reinsurance, in accordance with GAAP. Within the mortgage reinsurance segment, our current risks arise solely from the reinsurance of mortgage insurance policies that were placed on certain residential mortgage loans prior to the bankruptcy of WMI. The majority of these policies were required by mortgage lenders as a stipulation to approve the mortgage loans. The mortgage insurance policies protect the beneficiaries of the policy from all or a portion of default-related losses.

~~Overview of Revenues and Expenses~~

Because WMIH has no current significant operations of its own, its cash flow is derived almost entirely from earnings on its investment portfolio, and payments it receives from, and dividends paid by, WMMRC. All dividends received by WMIH from

WMMRC that constituted Runoff Proceeds, historically, were required to be distributed to holders of WMIH’s Second Lien Notes in accordance with the terms of the Second Lien Indenture as described below in this Item 2 under “Notes Payable.” As of September 29, 2017, the Second Lien Notes were fully redeemed by the Company and the Second Lien Indenture was satisfied and discharged, therefore future distributions from WMMRC to WMIH will be available for general corporate purposes.

~~WMMRC’s revenues consist primarily of the following:~~

~~net premiums earned on reinsurance contracts;~~

inflation rate.

~~positive changes to (and corresponding releases from) loss reserves; and~~

~~net investment income and net gains (losses) on WMMRC’s investment portfolio.~~

~~WMMRC’s expenses consist primarily of the following:~~

~~underwriting expenses; and~~

~~general and administrative expenses.~~

Results of Operations ~~for the three and nine months ended September 30, 2017 and September 30, 2016~~

~~For the three and nine months ended September 30, 2017, we reported a net operating loss~~


Table 1. Consolidated Operations


	Three Months Ended March 31,
	2022		2021		Change
Revenues - operational(1)	$	499	$	894	$	(395)
Revenues - mark-to-market	553		365		188
Total revenues	1,052		1,259		(207)
Total expenses	338		454		(116)
Total other income (expenses), net	152		(80)		232
Income from continuing operations before income tax expense	866		725		141
Less: Income tax expense	208		166		42
Net income from continuing operations	$	658	$	559	$	99

(1)Revenues - operational consists of $0.3 million and net operating income of $3.5 million, respectively. This compares to net operating losses of $0.4 million and $1.3 million for the three and nine months ended September 30, 2016, respectively. The components that gave rise to a net operating loss fortotal revenues, excluding mark-to-market.

During the three months ~~and net operating~~ended March 31, 2022, income ~~for the nine months ended September 30, 2017 and net operating losses for the three and nine months ended September 30, 2016 are summarized~~from continuing operations before income tax expense increased to $866 from $725 in ~~the tables below under the Net Income (Loss) section.~~2021. The ~~most significant variances between the comparative three month periods ended September 30, 2017 and September 30, 2016 include (i) increased revenue of approximately $1.0 million, (ii)~~increase was primarily driven by an increase in ~~general~~total other income (expenses), net and ~~administrative expense~~favorable mark-to-market adjustments. Total other income (expenses), net increased primarily due to completion of ~~$0.8 million, (iii)~~the Sagent Transaction, which resulted in a ~~minimal change~~$223 gain in ~~interest expense of $0.1 million, (iv)~~2022. Meanwhile, the increase in favorable mark-to-market adjustments from our Servicing segment was offset by a ~~net~~ decrease in ~~underwriting expense of $0.2 million~~revenues from our Originations segment due to lower origination volumes, both primarily driven by higher mortgage rates in 2022. See further discussions in Note 2, Dispositions, in the Notes to the Condensed Consolidated Financial Statements and ~~(v) a reduction~~the Segment Results section of the ~~loss contract reserve of $0.2 million~~MD&A.

The effective tax rate for continuing operations during the three months ended ~~September 30, 2017 versus a reduction~~March 31, 2022 was 24.0% as compared to 22.8% in 2021. The change in effective tax rate is primarily attributable to the impact of ~~$0.5 million during~~quarterly discrete tax items relative to income before taxes for the ~~same~~respective period, ~~in 2016.~~ including the excess tax benefit from stock-based compensation and prior period tax credits.

Segment Results

Our operations are conducted through two segments: Servicing and Originations.

•The ~~loss contract reserve decrease, during~~Servicing segment performs operational activities on behalf of investors or owners of the ~~three~~underlying mortgages, including collecting and ~~nine months ended September 30, 2017, is attributed primarily~~disbursing borrower payments, investor reporting, customer service, modifying loans where appropriate to ~~changes~~help borrowers stay current, and when necessary performing collections, foreclosures, and the sale of REO.

•The Originations segment originates residential mortgage loans through our direct-to-consumer channel, which provides refinance options for our existing customers, and through our correspondent channel, which purchases or originates loans from mortgage bankers.

Refer to Note 16, Segment Information, in the expected timing of assets being released from trust accounts held at WMMRC which are discounted to present value. When assets are expected to be released from trust earlier than anticipated, a smaller present value discount is appliedNotes to the ~~loss contract reserve, thus reducing~~Condensed Consolidated Financial Statements for a summary of segment results.

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Servicing Segment

The Servicing segment’s strategy is to generate income by growing the ~~reserve. For more information see Note 14: Subsequent Events~~portfolio and maximizing the servicing margin. We believe several competitive strengths have been critical to our long-term growth as a servicer, including our low-cost platform, our skill in mitigating losses for investors, our commitment to strong customer service and regulatory compliance, our history of successfully boarding new loans, and the ~~condensed consolidated financial statements~~ability to retain existing customers by offering attractive refinance options. We believe that our operational capabilities are reflected in ~~Part I, Item~~our strong servicer ratings.

Table 2. Servicer Ratings

Fitch(1)

Moody’s(2)

S&P(3)

Rating date

May 2021

February 2021

December 2020

Residential

RPS2

SQ2-

Above Average

Master Servicer

RMS2+

SQ2

Above Average

Special Servicer

RSS2

SQ2-

Above Average

Subprime Servicer

RPS2

SQ2-

Above Average

(1)Fitch Rating Scale of 1 (Highest Performance) to 5 (Low/No Proficiency)

(2)Moody’s Rating Scale of ~~this Quarterly Report on Form 10-Q.~~ SQ1 (Strong Ability/Stability) to SQ5 (Weak Ability/Stability)

(3)S&P Rating Scale of Strong to Weak

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The ~~most significant variances between~~following tables set forth the ~~comparative nine month periods ended September 30, 2017~~results of operations for the Servicing segment:

Table 3. Servicing Segment Results of Operations


	Three Months Ended March 31,
	2022				2021				Change
	Amt			bps(1)	Amt			bps(1)	Amt			bps
Revenues
Operational	$	365		19	$	370		24	$	(5)		(5)
Amortization, net of accretion	(202)			(11)	(167)			(11)	(35)			—
Mark-to-market	553			30	365			24	188			6
Total revenues	716			38	568			37	148			1
Expenses
Salaries, wages and benefits	75			4	66			4	9			—
General and administrative
Servicing support fees	11			1	21			2	(10)			(1)
Corporate and other general and administrative expenses	26			1	30			2	(4)			(1)
Foreclosure and other liquidation related expenses (recoveries), net	6			—	(12)			(1)	18			1
Depreciation and amortization	5			—	5			—	—			—
Total general and administrative expenses	48			2	44			3	4			(1)
Total expenses	123			6	110			7	13			(1)
Other income (expense)

Other interest income	19			1	23			1	(4)			—

Advance interest expense	(6)			—	(9)			(1)	3			1
Other interest expense	(48)			(3)	(62)			(3)	14			—
Interest expense	(54)			(3)	(71)			(4)	17			1

Total other expenses, net	(35)			(2)	(48)			(3)	13			1
Income before income tax expense	$	558		30	$	410		27	$	148		3

Weighted average cost - advance facilities	2.4		%		3.0		%		(0.6)		%
Weighted average cost - excess spread financing	9.0		%		9.0		%		—		%

(1)Calculated basis points (“bps”) are as follows: Annualized dollar amount/Total average UPB X 10000.

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Table 4. Servicing - Revenues


	Three Months Ended March 31,
	2022			2021			Change
	Amt		bps(1)	Amt		bps(1)	Amt		bps
MSR Operational Revenue
Base servicing fees	$	272	15	$	224	15	$	48	—
Modification fees(2)	5		—	6		—	(1)		—
Incentive fees(2)	—		—	1		—	(1)		—
Late payment fees(2)	15		1	15		1	—		—
Other ancillary revenues(2)	42		2	142		9	(100)		(7)
Total MSR operational revenue	334		18	388		25	(54)		(7)
Base subservicing fees and other subservicing revenue(2)	69		3	65		4	4		(1)

Total servicing fee revenue	403		21	453		29	(50)		(8)
MSR financing liability costs	(5)		—	(7)		—	2		—
Excess spread payments and portfolio runoff	(33)		(2)	(76)		(5)	43		3
Total operational revenue	365		19	370		24	(5)		(5)
Amortization, Net of Accretion
MSR amortization	(235)		(13)	(243)		(16)	8		3
Excess spread accretion	33		2	76		5	(43)		(3)


Total amortization, net of accretion	(202)		(11)	(167)		(11)	(35)		—
Mark-to-Market Adjustments
MSR MTM	798		43	521		34	277		9
MTM Adjustments(3)	(146)		(8)	(125)		(8)	(21)		—
Excess spread / financing MTM	(99)		(5)	(31)		(2)	(68)		(3)
Total MTM adjustments	553		30	365		24	188		6
Total revenues - Servicing	$	716	38	$	568	37	$	148	1

(1)Calculated basis points (“bps”) are as follows: Annualized dollar amount/Total average UPB X 10000.

(2)Certain ancillary and ~~September 30, 2016 include (i) an increase in~~other non-base fees related to subservicing operations are separately presented as other subservicing revenues.In addition, other subservicing revenue of approximately $1.7 million, (ii) an increase in general and administrative expense of $1.0 million (iii) a reduction in interest expense of $0.2 million, (iv) a net decrease in underwriting expense of $0.6 million and (v) a reduction of the loss contract reserve of $5.6 million during the nine months ended September 30, 2017 versus a reduction of $2.3 million during the same period in 2016.

For the three months ended September 30, 2017, we reported net income attributable to common and participating stockholders of $33.9 million compared to a net loss attributable to common and participating stockholders of $21.1 million for the three months ended ~~September 30, 2016. This $55.0 million reduction~~March 31, 2022 includes revenue related to an interim subserviced portfolio that transferred on April 1, 2022. See further discussions in ~~net loss attributable~~Note 2, Dispositions, in the Notes to ~~common~~the Condensed Consolidated Financial Statements.

(3)MTM Adjustments includes the impact of negative modeled cash flows which have been transferred to reserves on advances and ~~participating stockholders, when comparing~~other receivables. The negative modeled cash flows relate to advances and other receivables associated with inactive and liquidated loans that are no longer part of the MSR portfolio. The impact of negative modeled cash flows was $6 and $12 during the three months ended ~~September 30, 2017 to~~March 31, 2022 and 2021, respectively. In addition, MTM Adjustments included a negative $140 and $113 impact from MSR hedging activities during the three months ended ~~September 30, 2016, is~~March 31, 2022 and 2021, respectively.

Servicing Segment Revenues

The following provides the changes in revenues for the Servicing segment:

Servicing- Other ancillary revenue decreased during the three months ended March 31, 2022 as compared to 2021 primarily due to a decrease from early-buyout revenues associated with loans bought out of GNMA securitization, modified and redelivered following GNMA guidelines driven by a decrease in mortgage loans remaining in forbearance program in 2022, partially offset by an increase in base servicing fees primarily due to a greater servicing UPB portfolio in 2022.

MSR amortization decreased during the ~~result~~three months ended March 31, 2022 as compared to 2021, primarily due to lower prepayments driven by higher mortgage rates in 2022, partially offset by a higher average MSR UPB.

MSR MTM increased and excess spread and financing MTM decreased during the three months ended March 31, 2022 compared to 2021, primarily due to an increase in mortgage rates in 2022 compared to 2021.

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Subservicing - There were no material changes for Subservicing fees during the three months ended March 31, 2022 as compared to 2021.

Servicing Segment Expenses

Total expenses increased during the three months ended March 31, 2022 as compared to 2021, primarily driven by a change in ~~fair value~~foreclosure and other liquidation related expenses (recoveries), net. We had foreclosure and other liquidation related recoveries, net in 2021 due to the release of ~~an embedded derivative. This embedded derivative was recorded~~loss reserves on servicing advances as a result of loan modification programs related to COVID-19 pandemic compared to foreclosure and other liquidation related expenses, net in 2022, partially offset by lower servicing support fees.

Servicing Segment Other Income (Expenses), net

Total other expenses, net decreased during the ~~variable conversion feature~~three months ended March 31, 2022 as compared to 2021, primarily due to a decrease in other interest expense due to lower compensating interest expense and bank fees.

Table 5. Servicing Portfolio - Unpaid Principal Balances (1)


								Three Months Ended March 31,
								2022		2021
Average UPB
MSRs								$	356,092	$	281,519
Subservicing and other(2)								393,120		335,230
Total average UPB								$	749,212	$	616,749

	March 31, 2022					March 31, 2021
	UPB		Carrying Amount		bps	UPB		Carrying Amount		bps
MSRs
Agency	$	377,225	$	5,635	149	$	234,589	$	2,965	126
Non-agency	34,615		371		107	41,439		389		94
Total MSRs	411,840		6,006		146	276,028		3,354		122

Subservicing and other(2)
Agency	372,080		N/A			338,064		N/A
Non-agency	11,879		N/A			14,417		N/A
Total subservicing and other	383,959		N/A			352,481		N/A

Total ending balance	$	795,799	$	6,006		$	628,509	$	3,354

MSRs UPB Encumbrance								March 31, 2022		March 31, 2021
MSRs - unencumbered								$	291,167	$	121,311
MSRs - encumbered(3)								120,673		154,717
MSRs UPB								$	411,840	$	276,028

(1)The March 31, 2022 UPB excludes retained reverse mortgage UPB of an interim subserviced portfolio of $4 billion that transferred on April 1, 2022, and a retained portfolio with carrying amount of $53. See further discussion in Note 2, Dispositions, to the Notes to the Condensed Consolidated Financial Statements.

(2)Subservicing and other includes (i) loans we service for others, (ii) residential mortgage loans originated but have yet to be sold, and (iii) agency REO balances for which we own the mortgage servicing rights.

(3)The encumbered MSRs consist of residential mortgage loans included within our ~~Series B Preferred Stock~~excess spread financing transactions and MSR financing liability.

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The following tables provide a rollforward of our MSR and subservicing and other portfolio UPB:


Table 6. Servicing and Subservicing and Other Portfolio UPB Rollforward


	Three Months Ended March 31, 2022						Three Months Ended March 31, 2021
	MSR		Subservicing and Other		Total		MSR		Subservicing and Other		Total
Balance - beginning of period	$	339,208	$	370,520	$	709,728	$	271,189	$	336,513	$	607,702
Additions:
Originations	10,610		—		10,610		23,623		1,504		25,127
Acquisitions / Increase in subservicing(1)	79,386		36,471		115,857		4,647		53,318		57,965
Deductions:
Dispositions	(19)		(4,988)		(5,007)		(50)		(1,130)		(1,180)
Principal reductions and other	(3,567)		(3,368)		(6,935)		(2,702)		(3,231)		(5,933)
Voluntary reductions(2)	(13,606)		(14,656)		(28,262)		(20,474)		(34,455)		(54,929)
Involuntary reductions(3)	(105)		(20)		(125)		(133)		(38)		(171)
Net changes in loans serviced by others	(67)		—		(67)		(72)		—		(72)
Balance - end of period	$	411,840	$	383,959	$	795,799	$	276,028	$	352,481	$	628,509

(1)Includes transfers to/from Subservicing and Other.

(2)Voluntary reductions are related to loan payoffs by customers.

(3)Involuntary reductions refer to loan chargeoffs.

During the three months ended March 31, 2022, our MSR UPB increased primarily due to acquisitions, partially offset by voluntary reductions. During the three months ended March 31, 2022, our subservicing and other portfolio UPB increased primarily due to portfolio growth from our subservicing clients, partially offset by voluntary reductions.

The table below summarizes the overall performance of the servicing and subservicing portfolio:


Table 7. Key Performance Metrics - Servicing and Subservicing Portfolio(1)


	March 31, 2022			March 31, 2021
Loan count(2)	3,873,434			3,373,173
Average loan amount(3)	$	205,452		$	186,328
Average coupon - agency(4)	3.5		%	4.0		%
Average coupon - non-agency(4)	4.3		%	4.4		%
60+ delinquent (% of loans)(5)	2.5		%	5.3		%
90+ delinquent (% of loans)(5)	2.2		%	4.9		%
120+ delinquent (% of loans)(5)	2.0		%	4.6		%

	Three Months Ended March 31,
	2022			2021
Total prepayment speed (12-month constant prepayment rate)	14.8		%	30.8		%

(1)Characteristics and key performance metrics of our servicing portfolio exclude UPB, and loan counts acquired but not yet boarded and currently serviced by others.

(2)As of March 31, 2022 and 2021, loan count includes 46,444 and 154,194 loans in forbearance related to the CARES Act, respectively.

(3)Average loan amount is presented in whole dollar amounts.

(4)The weighted average coupon amounts presented in the table above are only reflective of our owned MSR portfolio that is reported at fair value.

(5)Loan delinquency is based on the current contractual due date of the loan. In the case of a completed loan modification, delinquency is based on the modified due date of the loan. Loan delinquency includes loans in forbearance.

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Delinquency is an assumption in determining the mark-to-market adjustment and is a key indicator of MSR portfolio performance. Delinquent loans contribute to lower MSR values due to higher costs to service and increased carrying costs of advances. Delinquency rates have continued to decrease as the COVID-19 pandemic’s effect on the macroeconomic environment declines. We do not anticipate a significant increase in foreclosures in excess of pre-pandemic levels due to the effectiveness of the forbearance programs in place and the historically high levels of equity that borrowers have accrued which provides borrowers with additional options.


Table 8. MSRs Loan Modifications and Workout Units


	Three Months Ended March 31,
	2022	2021	Change
Modifications(1)	18,417	15,635	2,782
Workouts(2)	14,081	18,341	(4,260)
Total modifications and workout units	32,498	33,976	(1,478)

(1)Modifications consist of agency programs, including forbearance options under the CARES Act, designed to adjust the terms of the loan (e.g., reduced interest rates).

(2)Workouts consist of other loss mitigation options designed to assist borrowers and keep them in their homes, but do not adjust the terms of the loan. Workouts exclude loans which did not miss a contractual payment during forbearance related to the CARES Act.

Total modifications during the three months ended March 31, 2022 increased compared to 2021 primarily due to an increase in modifications related to loans impacted by the COVID-19 pandemic. Total workouts during the three months ended March 31, 2022 decreased compared to 2021 primarily due to a decrease in customers who were exiting forbearance plans, as there were fewer customers in forbearance.

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Servicing Portfolio and Related Liabilities

The following table sets forth the activities of MSRs:

Table 9. MSRs - Fair Value Rollforward


	Three Months Ended March 31,
	2022		2021
Fair value - beginning of period	$	4,223	$	2,703
Additions:
Servicing retained from mortgage loans sold	200		288
Purchases of servicing rights	1,015		67
Dispositions:
Sales of servicing assets	(4)		(2)
Changes in fair value:
Due to changes in valuation inputs or assumptions used in the valuation model (MSR fair value MTM):
Agency	776		372
Non-agency	22		149
Changes in valuation due to amortization:
Scheduled principal payments	(43)		(24)
Prepayments
Voluntary prepayments
Agency	(177)		(207)
Non-agency	(14)		(11)
Involuntary prepayments
Agency	(1)		(1)
Non-agency	—		—
Other changes(1)	9		20
Fair value - end of period	$	6,006	$	3,354

(1)Amounts primarily represent negative fair values reclassified from the MSR asset to reserves as underlying loans are removed from the MSR and other reclassification adjustments.

See Note 3, Mortgage Servicing Rights and Related Liabilities and Note 13, Fair Value Measurements, in the Notes to the Condensed Consolidated Financial Statements, for additional information regarding the range of assumptions and sensitivities related to the fair value measurement of MSRs as of March 31, 2022 and December 31, 2021.

Excess Spread Financing

As further disclosed in Note 3, Mortgage Servicing Rights and Related Liabilities,in the Notes to the Condensed Consolidated Financial Statements, we have entered into sale and assignment agreements treated as financing arrangements whereby the acquirer has the right to receive a specified percentage of the excess cash flow generated from an MSR.

The servicing fees associated with an MSR can be segregated into (i) a base servicing fee and (ii) an excess servicing fee. The base servicing fee, along with ancillary income and other revenues, is designed to cover costs incurred to service the specified pool plus a reasonable margin. The remaining servicing fee is considered excess. We sell a percentage of the excess fee as a method for efficiently financing acquired MSRs and the purchase of loans. We do not currently utilize these transactions as a primary source of financing due to the availability of lower cost sources of funding.

Excess spread financings are recorded at fair value, and the impact of fair value adjustments varies primarily due to (i) prepayment speeds (ii) recapture rates and (iii) discount rates. See Note 3, Mortgage Servicing Rights and Related Liabilities and Note 13, Fair Value Measurements, in the Notes to the Condensed Consolidated Financial Statements, for additional information regarding the range of assumptions and sensitivities related to the measurement of the excess spread financing liability as of March 31, 2022 and December 31, 2021.

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The following table sets forth the change in the excess spread financing:

Table 10. Excess Spread Financing - Rollforward


	Three Months Ended March 31,
	2022		2021
Fair value - beginning of period	$	768	$	934
Additions:
New financings	—		—
Deductions:
Settlements and repayments	(32)		(41)
Changes in fair value:
Agency	73		38
Non-agency	6		3
Fair value - end of period	$	815	$	934

Originations Segment

The strategy of our Originations segment is to originate or acquire new loans for the servicing portfolio at a more attractive cost than purchasing MSRs in bulk transactions and to retain our existing customers by providing them with attractive refinance options. The Originations segment plays a strategically important role because its profitability is typically counter cyclical to that of the Servicing segment. Furthermore, by originating or acquiring loans at a more attractive cost than would be the case in bulk MSR acquisitions, the Originations segment improves our overall profitability and cash flow. Our Originations segment is one way that we help underserved consumers access the financial markets. In the three months ended March 31, 2022, our total originations included loans for 8,728 customers with low FICOs (<660), 14,592 customers with income below the U.S. median household income, 7,312 first-time homebuyers, and 3,176 veterans. During this time period, we originated a total of 9,979 Ginnie Mae loans, which are designed for first-time homebuyers and low- and moderate-income borrowers, comprising $2.4 billion in total proceeds. Once these loans are originated, these underserved borrowers become our servicing customers.

The Originations segment includes two channels:

•Our direct-to-consumer (“DTC”) lending channel relies on our call centers, website and mobile apps, specially trained teams of licensed mortgage originators, predictive analytics and modeling utilizing proprietary data from our servicing portfolio to reach our existing customers who may benefit from a new mortgage. Depending on borrower eligibility, we will refinance existing loans into conventional, government or non-agency products. Through lead campaigns and direct marketing, the direct-to-consumer channel seeks to convert leads into loans in a cost-efficient manner.

•Our correspondent lending channel acquires newly originated residential mortgage loans that have been underwritten to investor guidelines. This includes both conventional and government-insured loans that qualify for inclusion in securitizations that are guaranteed by the GSEs. Our correspondent lending channel enables us to replenish servicing portfolio run-off typically at a better rate of return than traditional bulk or flow acquisitions.

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The following tables set forth the results of operations for the Originations segment:


Table 11. Originations Segment Results of Operations


	Three Months Ended March 31,
	2022			2021			Change
Revenues
Service related, net - Originations(1)	$	42		$	43		$	(1)
Net gain on mortgage loans held for sale
Net gain on loans originated and sold(2)	119			278			(159)
Capitalized servicing rights(3)	163			274			(111)
Total net gain on mortgage loans held for sale	282			552			(270)
Total revenues	324			595			(271)
Expenses
Salaries, wages and benefits	121			167			(46)
General and administrative
Loan origination expenses	20			27			(7)
Corporate and other general administrative expenses	17			20			(3)
Marketing and professional service fees	12			13			(1)
Depreciation and amortization	4			4			—
Total general and administrative	53			64			(11)
Total expenses	174			231			(57)
Other income (expenses)
Interest income	17			23			(6)
Interest expense	(12)			(25)			13

Total other income (expense), net	5			(2)			7
Income before income tax expense	$	155		$	362		$	(207)

Weighted average note rate - mortgage loans held for sale	3.4		%	2.9		%	0.5		%
Weighted average cost of funds (excluding facility fees)	2.1		%	2.2		%	(0.1)		%

(1)Service related revenues, net - Originations refers to fees collected from customers for originated loans and from other lenders for loans purchased through the correspondent channel, and includes loan application, underwriting and other similar fees.

(2)Net gain on loans originated and sold represents the gains and losses from the origination, purchase, and sale of loans and related derivative instruments. Gain from the origination and sale of loans are affected by the volume and margin of our originations activity and impacted by fluctuations in mortgage rates.

(3)Capitalized servicing rights represent the fair value attributed to mortgage servicing rights at the time in which they are retained in connection with the sale of loans during the period.

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Table 12. Originations - Key Metrics


	Three Months Ended March 31,
	2022			2021			Change
Key Metrics
Consumer direct lock pull through adjusted volume(1)	$	6,746		$	10,322		$	(3,576)
Other locked pull through adjusted volume(1)	3,586			12,945			(9,359)
Total pull through adjusted lock volume	$	10,332		$	23,267		$	(12,935)
Funded volume	$	11,573		$	25,133		$	(13,560)
Volume of loans sold	$	13,690		$	26,311		$	(12,621)
Recapture percentage(2)	37.4%			31.0%			6.4%
Refinance recapture percentage(3)	50.3%			36.5%			13.8%
Purchase as a percentage of funded volume	22.7%			12.2%			10.5%
Value of capitalized servicing on retained settlements	167 bps			128 bps			39 bps

Originations Margin
Revenue	$	324		$	595		$	(271)
Pull through adjusted lock volume	$	10,332		$	23,267		$	(12,935)
Revenue as a percentage of pull through adjusted lock volume(4)	3.14		%	2.56		%	0.58		%

Expenses(5)	$	169		$	233		$	(64)
Funded volume	$	11,573		$	25,133		$	(13,560)
Expenses as a percentage of funded volume(6)	1.46		%	0.93%			0.53		%

Originations Margin	1.68		%	1.63		%	0.05		%

(1)Pull through adjusted volume represents the expected funding from locks taken during the period.

(2)Recapture percentage includes new loan originations for both purchase and refinance transactions where borrower retention and/or property retention occur as a result of a loan payoff from our servicing portfolio. Excludes loans we are contractually unable to solicit.

(3)Refinance recapture percentage includes new loan originations for refinance transactions where borrower retention and property retention occurs as a result of a loan payoff from our servicing portfolio. Excludes loans we are contractually unable to solicit.

(4)Calculated on pull-through adjusted lock volume as revenue is ~~reflected on our condensed consolidated statements~~recognized at the time of ~~operations as the~~loan lock.

(5)Expenses include total expenses and total other income or(expenses), net.

(6)Calculated on funded volume as expenses are incurred based on closing of the loan.

Income before income tax expense ~~item, “change in fair value of derivative - embedded conversion feature”~~ ~~which resulted in $38.6 million of other income~~decreased for the three months ended ~~September 30, 2017,~~March 31, 2022 as compared to ~~other expense of $16.2 million~~2021 primarily due to a decrease in total revenues from net gain on loans originated and sold and a decrease in capitalized servicing rights. The Originations Margin for the three months ended ~~September 30, 2016. This item is solely attributable~~March 31, 2022 increased as compared to 2021 primarily due to a ~~change~~higher ratio of revenue as a percentage of pull through adjusted lock volume driven by higher margins from a shift in ~~fair value~~channel mix from correspondent to DTC, partially offset by higher expenses as a percentage of the derivative–embedded conversion feature and is a non-cash item. Fluctuations in the price of WMIH’s common stock directly impact the fair value of the derivative instrument. The fair value of this derivative instrument is analyzed each period and should not be relied upon to produce changes of this magnitude on an on-going basis as it could also result in a non-cash expense or benefit in future periods. The fair value of the embedded conversion feature will become equity upon conversion of the Series B Preferred Stock, or be reduced to zero upon redemption of the Series B Preferred Stock, as the case may be. For additional details on the derivative–embedded conversion feature, see Note 9: Capital Stock and Derivative Instruments and Note 13: Fair Value Measurement to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition to this change, several other items had a favorable impact on earningsfunded volume. DTC channel mix for the three months ended ~~September 30, 2017, including~~March 31, 2022 was 65% compared to 44% in 2021.

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Originations Segment Revenues

Total revenues decreased during the three months ended March 31, 2022 compared to 2021 primarily driven by a decline in net ~~revenues~~gain on loans originated and sold and a decrease in capitalized servicing rights. Revenues from net gain on loans originated and sold decreased in connection with lower favorable mark-to-market adjustments on loans derivatives and hedges, partially offset by a lower unfavorable mark-to-market on interest ~~expense. Our revenues increased~~rate locks and loan commitments and fair value adjustment on loans held for sale. Additionally, the decrease in capitalized servicing rights was primarily driven by lower origination volumes, partially offset by an increase in value of capitalized servicing retained on settlements due to higher mortgage rates in 2022. There were no material changes for repurchase reserves.

Originations Segment Expenses

Total expenses during the three months ended March 31, 2022 decreased when compared to 2021 primarily due to ~~improved earnings on our investment portfolio including~~a decline in salaries, wages and benefits expense, and loan origination expenses. Salaries, wages and benefits expense declined in 2022 primarily due to decreased headcount in the ~~restricted cash equivalents. Interest expense decreased~~direct-to-consumer channel as a result of lower origination volumes. Loan origination expenses declined in 2022 primarily due to cost reduction initiatives and decreased origination volumes.

Originations Segment Other Income (Expenses), Net

Interest income relates primarily to mortgage loans held for sale. Interest expense is associated with the ~~reduction~~warehouse facilities utilized to finance newly originated loans. The change in total other income (expense), net, during the three months ended March 31, 2022 as compared to 2021 was primarily due to a decrease in interest expense driven by lower funded volume.

Corporate/Other

Corporate/Other represents unallocated overhead expenses, including the costs of executive management and other corporate functions that are not directly attributable to our ~~Runoff~~ operating segments, and interest expense on our unsecured senior notes. In the third quarter of 2021, we began presenting the Xome financial results under Corporate/Other due to the sale of our Title, Valuation and Field Services businesses. Prior period amounts have been updated to reflect the change in segment presentation. Xome continues to operate its REO exchange business, which facilitates the sale of foreclosed properties. See Note ~~balances discussed~~16, Segment Information, for further ~~below.~~ details on the change in reportable segments.

The ~~loss contract reserve~~following table set forth the selected financial results for Corporate/Other:


Table 13. Corporate/Other Selected Financial Results


	Three Months Ended March 31,
	2022		2021		Change
Corporate/Other - Operations
Total revenues	$	12	$	96	$	(84)
Total expenses	41		113		(72)
Interest expense	40		30		10
Other income, net	222		—		222

Key Metrics
Average exchange inventory under management	14,170		14,210		(40)

Total revenues and total expenses decreased ~~by $0.2 million~~during the three months ended March 31, 2022 as compared to 2021 primarily due to sale of our Title, Valuations and Field Services businesses in 2021.

Interest expense increased in the three months ended ~~September 30, 2017,~~March 31, 2022 as compared to ~~$0.5 million~~2021 primarily due to the issuance of the unsecured senior notes due 2031 in the fourth quarter of 2021.

The change in other income, net, in the three months ended ~~September 30, 2016, resulting~~March 31, 2022 as compared to 2021 was primarily a result of the $223 gain recorded in ~~a positive improvement~~the first quarter of 2022 upon completion of the Sagent Transaction.

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Liquidity and Capital Resources

We measure liquidity by unrestricted cash and availability of borrowings on our MSR facilities and other facilities. We held cash and cash equivalents on hand of $579 as of March 31, 2022 compared to ~~operating income. Underwriting expenses were lower on a comparative basis, primarily due to smaller increases in premium deficiency reserves in~~$895 as of December 31, 2021. During the three months ended ~~September 30, 2017~~March 31, 2022, we bought back 721 thousand shares of our outstanding common stock for a total cost of $35 as ~~compared~~part of our stock repurchase program. We have sufficient borrowing capacity to ~~increases~~support our operations. During the three months ended March 31, 2022, we temporarily increased borrowing on our MSR facilities by $530 to fund MSR acquisitions. As of March 31, 2022, total borrowing capacity was $16,500, of which $11,695 was unused.

The economic impact of the COVID-19 pandemic could continue to result in ~~premium deficiency reserves~~an increase in servicing advances and liquidity demands related to the utilization of forbearance programs offered by the CARES Act. Forbearance rates have declined since the peak during the second of quarter of 2020. As of March 31, 2022, our total advance facility capacity was $1,175, of which $589 remained unused. For more information on our advance facilities, see Note 9, Indebtedness in the Notes to the Condensed Consolidated Financial Statements.

Sources and Uses of Cash

Our primary sources of funds for liquidity include: (i) servicing fees and ancillary revenues; (ii) advance and warehouse facilities, other secured borrowings and the unsecured senior notes; and (iii) payments received in connection with the sale of excess spread.

Our primary uses of funds for liquidity include: (i) funding of servicing advances; (ii) originations of loans; (iii) payment of interest expenses; (iv) payment of operating expenses; (v) repayment of borrowings and repurchases or redemptions of outstanding indebtedness; (vi) payments for acquisitions of MSRs; and (vii) payment of our technology expenses.

We believe that our cash flows from operating activities, as well as capacity through existing facilities, provide adequate resources to fund our anticipated ongoing cash requirements. We rely on these facilities to fund operating activities. As the facilities mature, we anticipate renewal of these facilities will be achieved. Future debt maturities will be funded with cash and cash equivalents, cash flow from operating activities and, if necessary, future access to capital markets. We continue to optimize the use of balance sheet cash to avoid unnecessary interest carrying costs.

In addition, derivative instruments are used as part of the overall strategy to manage exposure to market risks primarily associated with fluctuations in interest rates related to originations. See Note 8, Derivative Financial Instruments, in the Notes to the Condensed Consolidated Financial Statements in Item 1, Financial Statements and Supplementary Data, which is incorporated herein for a summary of our derivative transactions.

In the normal course of business, we enter into various types of on- and off-balance sheet transactions with special purpose entities (“SPEs”) determined to be variable interest entities (“VIEs”), which primarily consist of securitization trusts established for a limited purpose. Generally, these SPEs are formed for the purpose of securitization transactions in which we transfer assets to an SPE, which then issues to investors various forms of debt obligations supported by those assets. In these securitization transactions, we typically receive cash and/or other interests in the SPE as proceeds for the transferred assets. See Note 10, Securitizations and Financings, in the Notes to the Condensed Consolidated Financial Statements in Item 1, Financial Statements and Supplementary Data, which is incorporated herein for a summary of our transactions with VIEs and unconsolidated balances, and details of their impact on our condensed consolidated financial statements.

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Cash Flows

The table below presents cash flows information:

Table 14. Cash Flows


	Three Months Ended March 31,
	2022		2021		Change
Net cash attributable to:
Operating activities	$	926	$	(76)	$	1,002
Investing activities	(964)		(82)		(882)
Financing activities	(294)		180		(474)
Net (decrease) increase in cash, cash equivalents, and restricted cash	$	(332)	$	22	$	(354)

Operating activities

Our operating activities generated cash of $926 during the three months ended ~~September 30, 2016 as further described below~~March 31, 2022 compared to cash used of $76 in ~~this Item 2 of Part I, under “Losses or Benefits Incurred and Losses and Loss Adjustment Expenses.”~~

~~For the nine months ended September 30, 2017, we reported net income~~2021. The change in cash attributable to ~~common and participating stockholders of $21.4 million~~operating activities was primarily related to continuing operations, driven by $880 in cash generated from originations net sale activities in 2022 compared to ~~net income attributable to common and participating stockholders~~$421 of ~~$47.8 million for the nine months ended September 30, 2016. This $26.4 million decline~~cash used in net income attributable to common and participating stockholders, when comparing the nine months ended September 30, 2017 to the nine months ended September 30, 2016, is primarily the result of the change in fair value of an embedded derivative. This embedded derivative was recorded2021, as a result of higher sales proceeds and loan payment proceeds from mortgage loans held for sale on lower volume of mortgage loans originated and purchased for sale, partially offset by the ~~variable conversion feature~~decrease in ~~our Series B Preferred Stock and the change~~cash generated of $137 from working capital in ~~fair value is reflected on our condensed consolidated statements of operations as the other income or expense item “change in fair value of derivative embedded conversion feature”~~ ~~which resulted in $31.2 million of other income for the nine months ended September 30, 2017,~~2022 compared to ~~other income~~$371 in 2021.

Investing activities

Our investing activities used cash of $62.6 million for the nine months ended September 30, 2016. This item is solely attributable to a change in fair value of the derivative embedded conversion feature, which is further described above. In addition to this change, the other large variance was the positive impact from the loss contract reserve decreasing by $5.6 million for the nine months ended September 30, 2017, as compared to $2.3 million in the same period in 2016.

The total revenue for the three and nine months ended September 30, 2017 was $2.3 million and $5.9 million, respectively, compared to revenue of $1.3 million and $4.2 million, respectively, for the three and nine months ended September 30, 2016. The increase in revenue is attributable to improved earnings on our investment portfolio including the restricted cash equivalents, however, WMMRC continues to experience decreasing premium revenue due to operating in runoff mode. In addition, because WMMRC is operating in runoff mode, we expect premiums-earned revenue to continue to decrease, as no new business is being undertaken.

~~Underwriting expenses (defined as losses and loss adjustment expenses and ceding commission expenses) decreased by $0.2 million to a $0.1 million expense for~~$964 during the three months ended ~~September 30, 2017~~March 31, 2022 compared to ~~an expense~~cash used of ~~$0.3 million~~$82 in 2021. The increase in cash used in investing activities was primarily related to continuing operations, driven by $965 in cash used for the purchase of mortgage servicing rights in 2022 compared to $69 of cash used in 2021.

Financing activities

Our financing activities used cash of $294 during the three months ended ~~September 30, 2016. Underwriting expenses decreased by $0.6 million to a $0.3 million expense for the nine months ended September 30, 2017~~March 31, 2022 compared to ~~an expense~~cash generated of ~~$0.9 million for the nine months ended September 30, 2016. This decrease~~$180 in 2021. The change in cash attributable to financing activities was primarily the result of the $0.5 million and $1.0 million additional premium deficiency reserves which were recorded during the three and nine months ended September 30, 2016, respectively, compared to a minimal change and a $0.2 million increase in the premium deficiency reserve during the three and nine months ended September 30, 2017, respectively. These changes in expense are related to ~~the operation~~continuing operations, driven by a net repayment of ~~WMMRC~~$204 in runoff mode and the corresponding decrease in revenues and the change in premium deficiency reserves as further described below in this Item 2 of Part I under “Losses or Benefits Incurred and Losses and Loss Adjustment Expenses.” As more fully described in Note 2: Significant Accounting Policies to the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, due to the current condition of the mortgage insurance market, WMMRC has recorded reserves based on ceded case reserves and incurred but not recorded (“IBNR”) loss levels established and reported by the primary mortgage guaranty carriers as of each reporting period. Management believes that its estimate of aggregate liability for unpaid losses and loss adjustment expenses as of September 30, 2017 represents its best estimate, based upon the available data, of the amount necessary to cover the current cost of losses.

As of September 30, 2017, the loss contract reserve was analyzed and determined to have a value of zero compared to $5.6 million at December 31, 2016. The value of the loss contract reserve decreased by $0.2 million and $5.6 million, respectively, during the three and nine months ended September 30, 2017 and decreased by $0.5 million and $2.3 million during the three and nine months ended September 30, 2016, respectively. Consequently, there was a related reduction of expenses due to the change in value of the loss contract reserve for the three and nine months ended September 30, 2017. The loss contract reserve was established at a value of $63.1 million on March 19, 2012 as a result of our reorganization. The loss contract reserve decrease during the three and nine months ended September 30, 2017 is attributed primarily to changes in the expected timing of assets being released from trust accounts held at WMMRC. For more information see Note 14: Subsequent Events to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~For the three and nine months ended September 30, 2017, our investment portfolio reported net investment income of $1.9 million and $4.8 million, respectively, as~~2022 compared to net ~~investment income~~borrowing of ~~$0.5 million~~$608 in 2021 on our advance and ~~$1.7 million, respectively, for the three and nine months ended September 30, 2016. The increase~~warehouse facilities, partially offset by cash used of $35 to repurchase outstanding shares of our common stock in ~~investment income is primarily the result of higher short term interest rates during 2017~~2022 compared to ~~2016. The components~~$148 in 2021.

Capital Resources

Capital Structure and Debt

We require access to external financing resources from time to time depending on our cash requirements, assessments of current and anticipated market conditions and after-tax cost of capital. If needed, we believe additional capital could be raised through a combination of issuances of equity, corporate indebtedness, asset-backed acquisition financing and/or cash from operations. Our access to capital markets can be impacted by factors outside our control, including economic conditions.

Financial Covenants

Our credit facilities contain various financial covenants, which primarily relate to required tangible net worth amounts, liquidity reserves, leverage requirements, and profitability requirements. These covenants are measured at our operating subsidiary, Nationstar Mortgage LLC. As of March 31, 2022, we were in compliance with our required financial covenants.

Seller/Servicer Financial Requirements

We are also subject to net worth, liquidity and capital ratio requirements established by the Federal Housing Finance Agency (“FHFA”) for Fannie Mae and Freddie Mac Seller/Servicers, and Ginnie Mae for single family issuers, as summarized below. These requirements apply to our operating subsidiary, Nationstar Mortgage, LLC.

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Minimum Net Worth

▪FHFA - a net worth base of $2.5 plus 25 basis points of outstanding UPB for total loans serviced.

▪Ginnie Mae - a net worth equal to the base of $2.5 plus 35 basis points of the ~~investment income~~issuer’s total single-family effective outstanding obligations.

Minimum Liquidity

•FHFA - 3.5 basis points of total Agency Mortgage Servicing UPB plus incremental 200 basis points of total nonperforming Agency, measured at 90+ delinquencies, servicing in excess of 6% total Agency servicing UPB.

•Ginnie Mae - the greater of $1 or 10 basis points of our outstanding single-family MBS.

Minimum Capital Ratio

▪FHFA and Ginnie Mae - a ratio of Tangible Net Worth to Total Assets greater than 6%.

Secured Debt to Gross Tangible Asset Ratio

•Ginnie Mae - a secured debt to gross tangible asset ratios no greater than 60%.

As of March 31, 2022, we were in compliance with our seller/servicer financial requirements for FHFA and Ginnie Mae.

Since we have a Ginnie Mae single-family servicing portfolio that exceeds $75 billion in UPB, we are ~~more fully described below~~also required to obtain an external primary servicer rating and issuer credit ratings from two different rating agencies and receive a minimum rating of a B or its equivalent. We are permitted to satisfy minimum liquidity requirements using a combination of AAA rated government securities that are marked to market in ~~this Item 2~~addition to cash and certain cash equivalents.

In addition, Fannie Mae or Freddie Mac may require capital ratios in excess of ~~Part I, under “Net Investment Income.”~~

~~General and Administrative Expenses~~

~~For~~stated requirements. Refer to Note 14, Capital Requirements, in the three and nine months ended September 30, 2017 our general and administrative expenses totaled $2.1 million and $5.9 million, respectively, compared to $1.4 million and $4.9 million for the three and nine months ended September 30, 2016. General and administrative expenses primarily increased due to expenses related to assistance with transaction sourcing and debt and equity restructuring activities.

~~Interest Expense~~

~~For the three and nine months ended September 30, 2017, we incurred $0.6 million and $1.8 million, respectively, of interest expense on the Second Lien~~ Notes ~~which is further described below in this Item 2 of Part I, under “Notes Payable.” This compares to $0.6 million and $2.0 million of interest expense, all of which related~~ to the ~~Second Lien Notes, which was incurred during the three~~Condensed Consolidated Financial Statements for additional information.

Table 15. Debt


	March 31, 2022		December 31, 2021
Advance facilities principal amount	$	586	$	614
Warehouse facilities principal amount	3,419		4,125
MSR facilities principal amount	800		270
Unsecured senior notes principal amount	2,700		2,700

Advance Facilities

As part of our normal course of business, we borrow money to fund servicing advances. Our servicing agreements require that we advance our own funds to meet contractual principal and ~~nine months ended September 30, 2016, respectively. The~~ interest ~~related to Second Lien Notes decreased primarily due to the reduction of Second Lien Note principal balances by $18.8 million during the nine months ended September 30, 2017~~payments for certain investors, and ~~by $2.9 million during the year ended December 31, 2016. Because sufficient Runoff Proceeds have not always been available~~ to pay ~~accrued~~taxes, insurance, foreclosure costs and various other items that are required to preserve the assets being serviced. Delinquency rates and prepayment speeds affect the size of servicing advance balances, and we exercise our ability to stop advancing principal and interest onwhere the ~~Runoff Notes,~~pooling and servicing agreements permit, where the advance is deemed to be non-recoverable from future proceeds. These servicing requirements affect our liquidity. We rely upon several counterparties to provide us with financing facilities to fund a portion of our ~~obligation~~servicing advances. As of March 31, 2022, we had a total borrowing capacity of $1,175, of which we could borrow an additional $589.

Warehouse and MSR Facilities

Loan origination activities generally require short-term liquidity in excess of amounts generated by our operations. The loans we originate are financed through several warehouse lines on a short-term basis. We typically hold the loans for approximately 30 days and then sell or place the loans in government securitizations in order to repay the borrowings under the warehouse lines. Our ability to fund current operations depends upon our ability to secure these types of short-term financings on acceptable terms and to renew or replace the financings as they expire. As of March 31, 2022, we had a total borrowing capacity of $15,325 for warehouse and MSR facilities, of which we could borrow an additional $11,106.

Unsecured Senior Notes

In 2021, we completed an offering of an unsecured senior note with a maturity date of 2031. We pay interest onsemi-annually to the ~~Runoff Notes has been satisfied using the “pay-in-kind” or “PIK” feature available under the Indentures. The accrued~~holders of these notes at interest ~~is converted~~rates ranging from 5.125% to ~~PIK Notes at the next payment date if there is not sufficient cash available to satisfy the required interest payment.~~ 6.000%. For ~~the nine months ended September 30, 2017 and 2016, no PIK Notes were issued in satisfaction of~~more information regarding our ~~obligation to pay interest on the Second Lien Notes. For the nine months ended September 30, 2017 and September 30, 2016, respectively, $2.0 million and $2.0 million, of interest was paid in cash.~~

~~Unrealized Gain (Loss) on Change in Fair Value of Derivative~~

~~The fair value of the derivative embedded conversion feature is revalued each reportable balance sheet date with the decrease or increase in fair value being reported~~indebtedness, see Note 9, Indebtedness, in the consolidated statements of operations as unrealized gain or (loss) on change in fair value of derivative embedded conversion feature, respectively. The primary factors affecting the fair value of the embedded conversion feature are the probability of occurrence and timing of a Qualified Acquisition, our stock price and our stock price volatility. During the three and nine months ended September 30, 2017, the fair value of the asset increased by $38.6 million and $31.2 million, respectively, and unrealized income was recorded. During the three and nine months ended September 30, 2016, the fair value of the liability increased by $16.2 million and decreased by $62.6 million, respectively, resulting in the recognition of a respective unrealized loss and gain.

~~Net Income (Loss)~~

The net operating (loss) income for the three and nine months ended September 30, 2017 totaled an operating loss of $0.3 million and operating income of $3.5 million, respectively, compared to net operating losses of $0.4 million and $1.3 million, respectively, for the three and nine months ended September 30, 2016.

For the three and nine months ended September 30, 2017, we reported net income attributable to common and participating stockholders of $33.9 million and $21.4 million, respectively. This result compares to net loss attributable to common and participating stockholders of $21.1 million and net income attributable to common and participating stockholders $47.8 million, for the three and nine months ended September 30, 2016, respectively.

The primary factors impacting the change in net operating (loss) income and the change in net income (loss) attributable to common and participating stockholders for the three and nine months ended September 30, 2017 comparedNotes to the ~~results for~~Condensed Consolidated Financial Statements.

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Contractual Obligations

As of March 31, 2022, no material changes to our outstanding contractual obligations were made from the ~~three and nine months ended September 30, 2016, are summarized in the tables below.~~

Three months ended September 30, 2017 versus three months ended September 30, 2016 summary of change in net operating (loss) income and net income (loss) attributable to common and participating stockholders (in thousands):

Three months
ended
September 30, 2017

Three months
ended
September 30, 2016

Percentage change favorable
(unfavorable)

Dollar value change
favorable
(unfavorable)

Net revenues
$
2,287

$
1,284

78
%

$
1,003

Underwriting expense (net)

92

258

64
%

166

General and administrative expenses

2,117

1,357

(56
%)

(760
)
Loss contract reserve reduction

(210
)

(565
)

(63
%)

(355
)
Interest expense

579

636

9
%

57

Net operating (loss)

(291
)

(402
)

28
%

111

Other income

123

—

N/A

123

Unrealized gain (loss) on change in value of derivative embedded conversion feature

38,579

(16,243
)

338
%

54,822

Redeemable convertible series B preferred stock dividends

(4,500
)

(4,500
)

0
%

—

Net income (loss) attributable to common and participating stockholders
$
33,911

$
(21,145
)

260
%

$
55,056

Nine months ended September 30, 2017 versus nine months ended September 30, 2016 summary of change in net operating (loss) and net income attributable to common and participating stockholders (in thousands):

Nine months
ended
September 30, 2017

Nine months
ended
September 30, 2016

Percentage change favorable
(unfavorable)

Dollar value change
favorable
(unfavorable)

Net revenues
$
5,929

$
4,173

42
%

$
1,756

Underwriting expenses (net)

344

936

63
%

592

General and administrative expenses

5,915

4,878

(21
%)

(1,037
)
Loss contract reserve reduction

(5,645
)

(2,362
)

139
%

3,283

Interest expense

1,788

1,994

10
%

206

Net operating income (loss)

3,527

(1,273
)

377
%

4,800

Other income

123

—

N/A

123

Unrealized gain on change in fair value of derivative liability - embedded conversion feature

31,226

62,587

(50
%)

(31,361
)
Redeemable convertible series B preferred stock dividends

(13,500
)

(13,500
)

0
%

—

Net income attributable to common and participating stockholders
$
21,376

$
47,814

(55
%)

$
(26,438
)

~~Comprehensive Income~~

~~The Company has no comprehensive income other than the net income~~amounts previously disclosed in ~~the condensed consolidated statement of operations.~~

~~Premiums Earned~~

The majority of WMMRC’s reinsurance contracts require premiums to be written and earned monthly. In a few cases, the premiums earned reflect the pro rata inclusion into income of premiums written over the life of the reinsurance contracts. Details of premiums earned are provided in the following table:

For the three and nine months ended September 30, 2017, premiums earned totaled $0.3 million and $1.1 million, respectively, a decrease of $0.5 million and $1.3 million, respectively, when compared to premiums earned of $0.8 million and $2.4 million, respectively, for the three and nine months ended September 30, 2016. The Company’s premiums earned are expected to continue to decrease due to WMMRC operating in runoff mode.

~~Losses or Benefits Incurred and Losses and Loss Adjustment Expenses~~

Losses incurred include losses paid and changes in loss reserves, including reserves for IBNR losses, premium deficiency reserves net of actual and estimated loss recoverable amounts. Details of net losses or benefits incurred for the three and nine months ended September 30, 2017 and September 30, 2016, respectively, are provided in the following table:

Three months
ended
September 30, 2017

Three months
ended
September 30, 2016

Nine months
ended
September 30, 2017

Nine months
ended
September 30, 2016

Losses and loss adjustment expense
$
48

$
183

$
207

$
702

We establish reserves for each contract based on estimates of the ultimate cost of all losses including losses incurred but not reported. These estimated reserves are based on reports received from ceding companies, industry data and historical experience as well as our own actuarial estimates. Quarterly, we review these estimates on a contract by contract basis and adjust the estimates as we deem necessary based on updated information and our internal actuarial estimates.

For the three and nine months ended September 30, 2017, the loss ratios were 14% and 19%, respectively, compared to loss ratios of 23% and 29%, respectively, for the three and nine months ended September 30, 2016. The loss or benefit ratio is calculated by dividing incurred benefit or losses for the period by earned premiums. The ratio provides a measure of underwriting profit or loss. Loss reinsurance contracts (which represent the significant majority of our loss exposure) are generally structured with limits set on the aggregate amount of losses that can be incurred over the life of such contract. Upon reaching such limits, no additional losses may be realized under the terms of the contract. Nevertheless, even when applicable contract limits are reached, revenues from premiums collected continue to be ceded for the remaining life of the contract. Beginning in 2013, a majority of WMMRC’s reinsurance arrangements for the 2006 through 2008 book years reached their respective loss limits. As a result, WMMRC does not expect to incur any additional losses for those book years; however, WMMRC may continue to realize revenues from those book years, to the extent premiums are ceded therefrom.

~~The components of the liability for losses and loss adjustment reserves are as follows at September 30, 2017 and December 31, 2016, respectively:~~

September 30, 2017

December 31, 2016

Case-basis reserves
$
174

$
553

IBNR reserves

1

—

Premium deficiency reserves

530

258

Total losses and loss adjustment reserves
$
705

$
811

~~Losses and loss adjustment reserve activity are as follows for the periods ended September 30, 2017 and December 31, 2016, respectively:~~

~~Net Investment Income~~

The increase in investment income during the three and nine months ended September 30, 2017 compared to the same periods in 2016 is primarily the result of higher short term interest rates during 2017 as compared to 2016. A summary of our net investment income for the periods ended September 30, 2017 and 2016, respectively, is as follows:

~~Federal Income Taxes~~

The Company has no current tax expense or liability due as a result of its tax loss position for periods ended September 30, 2017, September 30, 2016 and December 31, 2016. More detailed information regarding the Company’s tax position including NOL carry-forwards is provided in Note 6: Income Taxes to the consolidated financial statements in Item 8 of the Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021.

Critical Accounting Policies and Estimates

Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and ~~in Note 5: Income Taxes~~other subjective assessments. In particular, we have identified the following policies that, due to the judgment, estimates and assumptions inherent in those policies, are critical to an understanding of our condensed consolidated financial statements. These policies relate to fair value measurements, particularly those determined to be Level 3 as discussed in Note 13, Fair Value Measurements, in the Notes to the Condensed Consolidated Financial Statements and valuation and realization of deferred tax assets. We believe that the judgment, estimates and assumptions used in the preparation of our condensed consolidated financial statements are appropriate given the factual circumstances at the time. However, given the sensitivity of these critical accounting policies on our condensed consolidated financial statements, the use of other judgments, estimates and assumptions could result in ~~Part I, Item 1~~material differences in our results of ~~this Quarterly Report~~operations or financial condition. Fair value measurements considered to be Level 3 representing estimated values based on ~~Form 10-Q.~~

The Company files a consolidated federal income tax return. Pursuant to a tax sharing agreement, WMMRC’s federal income tax liability is calculated on a separate return basis determined by applying 35% to taxable income, in accordance with the provisions of the Internal Revenue Code (the “Code”) that apply to mortgage insurance companies. WMIH, as WMMRC’s parent, pays federal income taxes on behalf of WMMRC and settles the federal income tax obligation on a current basis in accordance with the tax sharing agreement. WMMRC made no tax payments to WMIH during the periods ended September 30, 2017 and December 31, 2016 associated with the Company’s tax liability from the current or preceding periods.

~~Deferred federal income taxes arise from temporary differences between~~significant unobservable inputs primarily include (i) the valuation of ~~assets~~MSRs, (ii) the valuation of excess spread financing, and ~~liabilities as determined for financial reporting purposes~~(iii) the valuation of IRLCs. For further information on our critical accounting policies and ~~income tax purposes. Temporary differences principally relate~~estimates, please refer to ~~discounting of loss reserves, recognition of unearned premiums, changes in value of loss contract reserves and embedded derivatives, net operating losses and unrealized gains and losses~~the Company’s Annual Reports on ~~investments.~~

We believe WMIH experienced an ownership change under Section 382 of the Code in connection with its bankruptcy plan becoming effective. Prior to emergence from bankruptcy, WMI abandoned the stock of Washington Mutual Bank, thereby generating a worthless stock deduction of approximately $8.37 billion, which gave rise to a NOL carry-forwardForm 10-K for the year ended December 31, ~~2012. We believe that the total available~~2021. There have been no material changes to our critical accounting policies and ~~utilizable NOL carry-forward at~~estimates since December 31, 2016 was approximately $6.0 billion and at September 30, 2017 we believe that there was no limit under Section 382 of the Code on the use of these NOLs. As of September 30, 2017 and December 31, 2016, the Company recorded a valuation allowance equal to 100% of the net deferred federal income tax asset due to uncertainty regarding the Company’s ability to realize these benefits in the future.

On November 2, 2017, the Ways and Means Committee of the U.S. House of Representatives introduced a bill containing various amendments to the Internal Revenue Code, including, among other things changes to corporate income tax rates and certain provisions governing NOLs. There can be no assurance that the bill will be approved in its current form or at all and the final form of any tax legislation that is enacted could contain provisions that adversely affect the utility or potential value of the Company’s NOLs.

~~Investments~~

~~General~~

We hold investments at both WMIH and WMMRC and the two portfolios consist entirely of fixed income instruments, excluding funds in overnight money market funds, totaling $10.4 million and $76.8 million as of September 30, 2017 and December 31, 2016, respectively. The Company held $577.2 million and $572.9 million of restricted cash from the Series B Preferred Stock Financing in its escrow account at September 30, 2017 and December 31, 2016, respectively.

The value of the consolidated Company’s total cash and investments decreased during the nine months ended September 30, 2017. Cash and investments, which excludes restricted cash of $577.2 million and $573.3 million at September 30, 2017 and December 31, 2016, respectively, totaled $42.8 million and $81.5 million at September 30, 2017 and December 31, 2016, respectively. The primary factors that contributed to this decrease in investments were (i) the payment of a total of $13.5 million in Series B Preferred Stock cash dividends during the nine months ended September 30, 2017; and (ii) the redemption in full of the $18.8 million of Second Lien Notes which were outstanding at December 31, 2016, and the payment of related interest of approximately $2.0 million.

We work with investment broker dealers and, in the case of WMMRC, collateral trustees, in determining whether a market for a financial instrument is active or inactive. We regularly obtain indicative pricing from market makers and from multiple dealers and compare the level of pricing variances as a way to observe market liquidity for certain investment securities. We also obtain trade history and live market quotations from publicly quoted sources, such as Bloomberg, for trade volume and frequency observation. While we obtain market pricing information from broker dealers, the ultimate fair value of our investments is based on portfolio statements provided by financial institutions that hold our accounts.

During the nine months ended September 30, 2017 and the year ended December 31, 2016, we transferred $0.9 million and $11.0 million, respectively, of corporate securities that mature within 12 months from Level 2 to Level 1, due to improved liquidity in capital markets for those securities. Please refer to Note 4: Investment Securities to the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, for additional information regarding our investment securities.

~~WMIH~~

WMIH’s investments are valued at fair value and any unrealized gains or losses are reflected in net investment income in the condensed consolidated statements of income. At September 30, 2017 and at December 31, 2016, WMIH had zero and $45.0 million, respectively, of investments in obligations of U.S. government sponsored enterprises, all of which will mature within the respective next 12 months. WMIH also had $25.0 million and $2.1 million in cash and cash equivalents at September 30, 2017 and December 31, 2016, respectively.

~~WMMRC~~

WMMRC’s investments are valued at fair value and any unrealized gains or losses are reflected in net investment income in the condensed consolidated statements of operations. At September 30, 2017, approximately 89% of WMMRC’s cash and investments were held in four trusts for the benefit of primary mortgage insurers with whom WMMRC established agreements to reinsure private mortgage insurance risk. The total portfolio, excluding funds in overnight money market instruments, was valued at approximately $10.4 million and $31.9 million at September 30, 2017 and December 31, 2016, respectively. At September 30, 2017, approximately 90% of the portfolio consisted of securities that will mature within the next 12 months and the remainder of the securities will mature between one and two years from September 30, 2017. WMMRC also had $7.3 million in cash and cash equivalents at September 30, 2017.

~~Liquidity and Capital Resources~~

~~General~~

WMIH is organized as a holding company and has limited operations of its own. With respect to its own operations, WMIH’s continuing cash needs are limited to the payment of general and administrative expenses, costs related to possible acquisitions, dividends on the Series B Preferred Stock and, prior to the redemption thereof, principal and interest payments on the Second Lien Notes described below in this Item 2 of Part I, under “Notes Payable.” ~~As of September 29, 2017, the Second Lien Notes were fully redeemed by the Company and, as of October 2, 2017, the Second Lien Indenture was satisfied and discharged.~~

Our significant business operations are conducted through our wholly-owned reinsurance subsidiary, WMMRC, which formerly underwrote risks associated with our mortgage reinsurance programs, but has been operated in runoff and has not written any new business since September 26, 2008. There are restrictions on WMMRC’s ability to pay dividends which are described in more detail below. WMIH does not currently expect to pay dividends on its common shares.

WMMRC may seek opportunities to commute one or more of its remaining reinsurance agreements, with a view toward accelerating the distribution of trust assets in excess of the amount needed to pay claims. Any such distributions would be available for general corporate purposes. ~~There can be no assurance that any such commutations will be consummated, or if so, on what terms.~~

In regard to the Series B Preferred Stock, we are required (if and when declared by our Board and until the Series B Preferred Stock is converted, redeemed or repurchased) to pay cumulative regular dividends out of funds legally available therefor at an annual rate of 3% per share of the liquidation preference of $1,000 per share of Series B Preferred Stock. WMIH has declared and paid $13.5 million, $13.5 million and $18.0 million of dividends on its Series B Preferred Stock during the nine months ended September 30, 2017 and 2016 and the year ended December 31, 2016, respectively, and has accrued an additional $0.7 million of dividends based on the 3% interest rate during each of the periods ended September 30, 2017 and 2016 and the year ended December 31, 2016, respectively.

The repayment of $18.8 million of Second Lien Notes and the $13.5 million in dividends on our Series B Preferred Stock were our largest uses of cash during the nine months ended September 30, 2017. The Second Lien Notes have been paid in full, however, the dividend obligation is likely to continue to be a significant financial obligation of the Company until we either consummate a Qualified Acquisition or redeem or repurchase the Series B Preferred Stock.

Unless we consummate a Qualified Acquisition, or enter into a definitive agreement to consummate an Acquisition (or the Series B Redemption Date is extended in accordance with the terms of the Series B Preferred Stock), we will be required to redeem the Series B Preferred Stock on the Series B Redemption Date. Consummation of an Acquisition would cause the conversion into common stock of shares of Series B Preferred Stock having an aggregate liquidation preference equal to the cash proceeds utilized in the Acquisition (unless the Acquisition is a Qualified Acquisition, in which case all of the Series B Preferred Stock would be converted into common stock). The redemption of the Series B Preferred Stock would substantially deplete our available cash for acquisitions and business operations; could have a material adverse effect on our financial condition; and could adversely impact our ability to continue business operations. While we continue to work diligently to identify and consummate an Acquisition, there can be no assurance that we will consummate, or enter into a definitive agreement to consummate, an Acquisition prior to the Series B Redemption Date.

In connection with the foregoing, and because we are mindful of the adverse consequences that could result upon a redemption of the Series B Preferred Stock, our Finance Committee and management have been working with financial advisors in an effort to amend and extend the terms of the Series B Preferred Stock. We can provide no assurance we will be able to restructure, amend or refinance the Series B Preferred Stock and, if so, on what terms. For additional information regarding the foregoing, please see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Our Business Strategy and Operating Environment”.

~~Liquidity Management~~

The objective of liquidity management is to ensure the Company has the continuing ability to maintain cash flows that are adequate to fund operations and meet obligations and other commitments on a timely and cost-effective basis. The Company establishes and maintains liquidity guidelines for WMIH as well as for WMMRC, its principal operating subsidiary. Funds held by WMMRC are not available to WMIH to satisfy its liquidity needs. Any dividend or payment by WMMRC to WMIH must be approved by the Insurance Division of the State of Hawaii. In light of the restrictions on dividends2021.

Other Matters

Recent Accounting Developments

Below lists recently issued accounting pronouncements applicable to ~~WMMRC, WMIH’s principal sources of liquidity are its unrestricted investments, investment income derived from these investments~~us but not yet adopted.

Accounting Standards Update 2020-04 and fees paid to WMIH by WMMRC with respect to services provided pursuant to the two services agreements approved by the Insurance Division of the State of Hawaii. Additionally, WMIH also has approximately $577.2 million of restricted cash held in escrow, which was received by WMIH in connection with the Series B Preferred Stock Financing. Because of the runoff nature of WMMRC’s business,2021-01, collectively implemented as discussed above, all cash available to WMMRC is primarily used to pay reinsurance losses and loss adjustment expenses, ceding commissions, dividends to WMIH to pay interest and principal obligations on the Runoff Notes (prior to the full redemption which occurred on September 29, 2017), and general and administrative expenses.

The Company monitors operating activities, forecasts liquidity needs and adjusts composition of investment securities in order to address liquidity needs. The Company currently has negative monthly cash flows primarily due to loss expenses at WMMRC, general and administrative costs and dividend payments on the Series B Preferred Stock. As a result, the Company maintains a very high quality and short duration investment portfolio in order to match its liability profile at both levels of the consolidated organization.

WMMRC has net assets totaling $17.7 million and $33.8 million as of September 30, 2017 and December 31, 2016, respectively. These net assets are not immediately available for distribution to WMIH due to restrictions imposed by the trust arrangements referenced above, and the requirement that the Insurance Division of the State of Hawaii must approve dividends from WMMRC. Distributions from WMMRC to WMIH were, prior to full redemption on September 29, 2017, further restricted by the terms of the Runoff Notes described in Note 7: Notes Payable to the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q. Additionally, as more fully described in Note 14: Subsequent Events to the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, a distribution from WMMRC to WMIH of up to $10.7 million was approved by the Insurance Division of the State of Hawaii on September 13, 2017.

~~Capital Structure and Management~~

WMIH’s capital structure consists of stockholders’ equity, Series B Preferred Stock proceeds held in escrow which is classified as mezzanine and no term debt as of September 30, 2017. We issued term debt of $130.0 million represented by the Runoff Notes on the Effective Date. The First Lien Notes were redeemed in their entirety on April 15, 2015 and the First Lien Indenture was satisfied and discharged on April 27, 2015. The Second Lien Notes were redeemed in their entirety on September 29, 2017 and the Second Lien Indenture was satisfied and discharged on October 2, 2017

On the Effective Date, all shares of common and preferred equity securities previously issued by WMI were cancelled and extinguished. Prior to reincorporation, WMIH was authorized to issue up to 500,000,000 shares of common stock and up to 5,000,000 shares of preferred stock, each with a par value of $0.00001 per share. Upon reincorporation in Delaware, which is more fully described in Note 1: The Company and its Subsidiaries to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, and pursuant to WMIH’s Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”), WMIH is authorized to issue up to 3,500,000,000 shares of common stock and up to 10,000,000 shares of preferred stock, each with a par value of $0.00001 per share. As of September 30, 2017, 206,714,132 shares of WMIH’s common stock were issued and outstanding, and 1,600,000 shares of its preferred stock were issued and outstanding.

On January 30, 2014, pursuant to an Investment Agreement, WMIH issued 1,000,000 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”) for a purchase price of $11.1 million and warrants to purchase 61,400,000 shares of WMIH’s common stock, 30,700,000 of which have an exercise price of $1.32 per share and 30,700,000 of which have an exercise price of $1.43 per share. The Series A Preferred Stock has rights substantially similar to those associated with WMIH’s common stock, with the exception of a liquidation preference, conversion rights and customary anti-dilution protections. The Series A Preferred Stock has a liquidation preference equal to the greater of (i) $10.00 per one million shares of Series A Preferred Stock plus declared but unpaid dividends on such shares and (ii) the amount that the holder would be entitled to in a relevant transaction had the Series A Preferred Stock been converted to common stock of WMIH. The Series A Preferred Stock is convertible at a conversion price of $1.10 per share into shares of common stock of WMIH, either at the option of the holder or automatically upon transfer by KKR Fund Holdings L.P. (“KKR Fund”) to a non-affiliated party. As a result of the calculation of a beneficial conversion feature as required by Accounting Standards Codification ~~470, a preferred deemed dividend~~Topic 848 (“ASC 848”), Reference Rate Reform provide temporary optional expedients and exceptions for applying generally accepted accounting principles to contract modifications, hedge accounting and other transactions affected by the transitioning away from reference rates that are expected to be discontinued, such as interbank offered rates and LIBOR. If LIBOR ceases to exist or if the methods of ~~$9.5 million~~calculating LIBOR change from current methods for any reasons, interest rates on our floating rate loans, obligation derivatives, and other financial instruments tied to LIBOR rates, may be affected and need renegotiation with its lenders. In January 2021, ASU 2021-01 was ~~recorded~~issued to clarify that all derivatives instruments affected by changes to the interests’ rates used for discounting, margining alignment due to reference rate reform are in ~~conjunction with the issuance~~scope of ASC 848. ASU 2020-04 and ASU 2021-01 were effective March 2020 and January 2021, respectively, for contract modifications, existing hedging relationships and other impacted transactions through December 31, 2022. The guidance in ASU 2020-04 and ASU 2021-01 is optional and may be elected over time as reference rate reform activities occur. We have not elected to apply any of the ~~Series~~ amendments through March 31, 2022 and are currently assessing the impact of ASU 2020-04 and ASU 2021-01 on our consolidated financial statements.

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GLOSSARY OF TERMS

This Glossary of Terms defines some of the terms that are used throughout this report and does not represent a complete list of all defined terms used.

Advance Facility. A ~~Preferred Stock. This preferred deemed dividend resulted~~secured financing facility to fund advance receivables which is backed by a pool of mortgage servicing advance receivables made by a servicer to a certain pool of mortgage loans.

Agency. Government entities guaranteeing the mortgage investors that the principal amount of the loan will be repaid; the Federal Housing Administration, the Department of Veterans Affairs, the US Department of Agriculture and Ginnie Mae (and collectively, the “Agencies”)

Agency Conforming Loan. A mortgage loan that meets all requirements (loan type, maximum amount, LTV ratio and credit quality) for purchase by Fannie Mae, Freddie Mac, or insured by the FHA, USDA or guaranteed by the VA or sold into Ginnie Mae.

Asset-Backed Securities (“ABS”). A financial security whose income payments and value is derived from and collateralized (or “backed”) by a specified pool of underlying receivables or other financial assets.

Bulk acquisitions or purchases. MSR portfolio acquired on non-retained basis through an open market bidding process.

Base Servicing Fee. The servicing fee retained by the servicer, expressed in basis points, in an ~~increase to our accumulated deficit and an increase~~excess MSR arrangement in ~~additional paid in capital. Further, KKR Fund, as~~exchange for the ~~holder~~provision of servicing functions on a portfolio of mortgage loans, after which the ~~Series A Preferred Stock~~servicer and the ~~warrants, has received other rights pursuant to~~co-investment partner share the ~~Investor Rights Agreement as more fully described in~~ ~~Note 9: Capital Stock and Derivative Instruments to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.~~

On January 5, 2015, WMIH announced that it had completed the Series B Preferred Stock Financing and issued 600,000 shares of Series B Preferred Stock for aggregate gross proceeds of $600.0 million, pursuant to the Purchase Agreement with Citigroup Global Markets Inc. and KKR Capital Markets LLC (together the “Initial Purchasers”). In connection with the Series B Preferred Stock Financing, WMIH entered into an Escrow Agreement (the “Escrow Agreement”) with Citibank, N.A., as Escrow Agent, pursuant to which WMIH caused to be deposited with the Escrow Agent the amount of $598.5 million representing the net proceeds of the Series B Preferred Stock Financing less offeringexcess fees payable on January 5, 2015 but before payment of other offering fees and expenses (including fees contingent upon future events). These net proceeds will be released from escrow from time to time to WMIH as instructed by WMIH in amounts necessary to, among other things, explore and/or fund, in whole or in part, acquisitions, whether completed or not. The entire net proceeds will be released from escrow as instructed by WMIH as needed to consummate a Qualified Acquisition.

In connection with the Series B Preferred Stock Financing, WMIH filed with the Secretary of State of Washington Articles of Amendment of Articles of Incorporation (the “Articles of Amendment”) containing the Certificate of Designation creating the Series B Preferred Stock and designating the rights and preferences of the Series B Preferred Stock. Holders of shares of the Series B Preferred Stock are entitled to receive, when, as and if declared, cumulative regular dividends at an annual rate of 3% per share of the liquidation preference of $1,000 per share of Series B Preferred Stock, payable in cash. On each date that WMIH closes any Acquisition, outstanding shares of Series B Preferred Stock having an aggregate liquidation preference equal to the net proceeds of the offering utilized in such Acquisition (as defined below), on a pro rata ~~basis,~~basis.

Conventional Mortgage Loans. A mortgage loan that is not guaranteed or insured by the FHA, the VA or any other government agency. Although a conventional loan is not insured or guaranteed by the government, it can still follow the guidelines of GSEs and be sold to the GSEs.

Correspondent lender, lending channel or relationship. A correspondent lender is a lender that funds loans in their own name and then sells them off to larger mortgage lenders. A correspondent lender underwrites the loans to the standards of an investor and provides the funds at close.

Delinquent Loan. A mortgage loan that is 30 or more days past due from its contractual due date.

Department of Veterans Affairs (“VA”). The VA is a cabinet-level department of the U.S. federal government, which guarantees certain home loans for qualified borrowers eligible for securitization with GNMA.

Direct-to-consumer originations (“DTC”). A type of mortgage loan origination pursuant to which a lender markets refinancing and purchase money mortgage loans directly to selected consumers through telephone call centers, the Internet or other means.

Excess Servicing Fees. In an excess MSR arrangement, the servicing fee cash flows on a portfolio of mortgage loans after payment of the base servicing fee.

Excess Spread. MSRs with a co-investment partner where the servicer receives a base servicing fee and the servicer and co-investment partner share the excess servicing fees. This co-investment strategy reduces the required upfront capital from the servicer when purchasing or investing in MSRs.

Federal National Mortgage Association (“Fannie Mae” or “FNMA”). FNMA was federally chartered by the U.S. Congress in 1938 to support liquidity, stability, and affordability in the secondary mortgage market, where existing mortgage-related assets are purchased and sold. Fannie Mae buys mortgage loans from lenders and resells them as mortgage-backed securities in the secondary mortgage market.

Federal Housing Administration (“FHA”). The FHA is a U.S. federal government agency within the Department of Housing and Urban Development (HUD). It provides mortgage insurance on loans made by FHA-approved lenders in compliance with FHA guidelines throughout the United States.

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Federal Housing Finance Agency (“FHFA”). A U.S. federal government agency that is the regulator and conservator of Fannie Mae and Freddie Mac and the regulator of the 12 Federal Home Loan Banks.

Federal Home Loan Mortgage Corporation (“Freddie Mac” or “FHLMC”). Freddie Mac was chartered by Congress in 1970 to stabilize the nation’s residential mortgage markets and expand opportunities for homeownership and affordable rental housing. Freddie Mac participates in the secondary mortgage market by purchasing mortgage loans and mortgage-related securities for investment and by issuing guaranteed mortgage-related securities.

Forbearance.An agreement between the mortgage servicer or lender and borrower for a temporary postponement of mortgage payments. It is a form of repayment relief granted by the lender or creditor in lieu of forcing a property into foreclosure.

Government National Mortgage Association (“Ginnie Mae” or “GNMA”). GNMA is a self-financing, wholly owned U.S. Government corporation within HUD. Ginnie Mae guarantees the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans - mainly loans insured by the FHA or guaranteed by the VA. Ginnie Mae securities are the only MBS to carry the full faith and credit guarantee of the U.S. federal government.

Government-Sponsored Enterprise (“GSE”). Certain entities established by the U.S. Congress to provide liquidity, stability and affordability in residential housing. These agencies are Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks.

Interest Rate Lock Commitments (“IRLC”). Agreements under which the interest rate and the maximum amount of the mortgage loan are set prior to funding the mortgage loan.

Loan Modification. Temporary or permanent modifications to loan terms with the borrower, including the interest rate, amortization period and term of the borrower’s original mortgage loan. Loan modifications are usually made to loans that are in default, or in imminent danger of defaulting.

Loan-to-Value Ratio (“LTV”). The unpaid principal balance of a mortgage loan as a percentage of the total appraised or market value of the property that secures the loan. An LTV over 100% indicates that the UPB of the mortgage loan exceeds the value of the property.

Lock period. A set of periods of time that a lender will ~~automatically convert into shares~~guarantee a specific rate is set prior to funding the mortgage loan.

Loss Mitigation. The range of ~~WMIH’s common stock.~~servicing activities provided by a servicer in an attempt to minimize the losses suffered by the owner of a defaulted mortgage loan. Loss mitigation techniques include short-sales, deed-in-lieu of foreclosures and loan modifications, among other options.

Mortgage-Backed Securities (“MBS”). A type of asset-backed security that is secured by a group of mortgage loans.

Mortgage Servicing Right (“MSRs”). The right and obligation to service a loan or pool of loans and to receive a servicing fee as well as certain ancillary income. MSRs may be bought and sold, resulting in the transfer of loan servicing obligations. MSRs are designated as such when the benefits of servicing the loans are expected to adequately compensate the servicer for performing the servicing.

MSR Facility. A line of credit backed by mortgage servicing rights that is used for financing purposes. In addition, on the date WMIH closes a Qualified Acquisition, all outstanding shares of Series B Preferred Stock will automatically convert into shares of WMIH’s common stock. Each date that WMIH closes an Acquisition (including a Qualified Acquisition) willcertain cases, these lines may be a ~~“Mandatory Conversion Date.” Unless the Series B Preferred Stock has been previously repurchased~~sub-limit of another warehouse facility or alternatively exist on a stand-alone basis. These facilities allow for same or next day draws at the ~~option~~request of the borrower.

Non-Conforming Loan. A mortgage loan that does not meet the standards of eligibility for purchase or securitization by Fannie Mae, Freddie Mac or Ginnie Mae.

Originations. The process through which a ~~holder~~ lender provides a mortgage loan to a borrower.

Pull through adjusted lock volume. Represents the expected funding from locks taken during the period.

Prepayment Speed. The rate at which voluntary mortgage prepayments occur or are projected to occur. The statistic is calculated on an annualized basis and expressed as a percentage of the outstanding principal balance.

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Primary Servicer. The servicer that owns the right to service a mortgage loan or pool of mortgage loans. This differs from a subservicer, which has a contractual agreement with the primary servicer to service a mortgage loan or pool of mortgage loans in exchange for a subservicing fee based upon portfolio volume and characteristics.

Prime Mortgage Loan. Generally, a high-quality mortgage loan that meets the ~~occurrence of certain put events~~underwriting standards set by Fannie Mae or ~~mandatorily converted, WMIH will redeem all outstanding shares of Series B Preferred Stock, if any, on the Series B Redemption Date, which~~Freddie Mac and is ~~the third anniversary of January 5, 2015 (or January 5, 2018). The reincorporation of WMIH from the State of Washington to the State of Delaware resulted~~eligible for purchase or securitization in the ~~increase of~~secondary mortgage market. Prime Mortgage loans generally have lower default risk and are made to borrowers with excellent credit records and a monthly income at least three to four times greater than their monthly housing expenses (mortgage payments plus taxes and other debt payments) as well as significant other assets. Mortgages not classified as prime mortgage loans are generally called either sub-prime or Alt-A.

Private Label Securitizations. Securitizations that do not meet the size of its Board of Directors from 7 to up to 11 members and increased WMIH’s authorized number of shares of common stock in an amount sufficient to permit the conversion of all shares of Series B Preferred Stock (collectively, the “Reincorporation”criteria set by Fannie Mae, Freddie Mac or Ginnie Mae.

Real Estate Owned (”REO”).

The foregoing transactions pertaining to the Series A Preferred Stock and Series B Preferred Stock are more fully described in Note 9: Capital Stock and Derivative Instruments to the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

~~WMIH may, subject to market conditions, determine to incur additional indebtedness or raise additional equity capital in connection with undertaking one or more acquisitions.~~

While WMIH is not subject to regulatory capital requirements, WMMRC is required to comply with various solvency and liquidity requirements pursuant to the insurance laws of the State of Hawaii. WMMRC is required to maintain minimum capital and surplus requirements of an amount established under applicable Hawaii law and deemed appropriateProperty acquired by the Insurance Division of the State of Hawaii. As of September 30, 2017, management believes that WMMRC is compliant with applicable statutory solvency, liquidity and minimum capital and surplus requirements. The payment of dividends by WMMRC is subject to statutory restrictions imposed by Hawaii insurance laws and regulations and requires approval from the Insurance Division of the State of Hawaii. In addition, the Second Lien Indenture, prior to the discharge and release on September 29, 2017, imposed restrictions on WMMRC business activities. During the nine months ended September 30, 2017 and the year ended December 31, 2016, WMMRC paid $16.0 million and $5.7 million, respectively, in dividends to WMIH.

~~On the Effective Date, WMI and WMIIC (together, the “Debtors”) (and now the~~ ~~WMI Liquidating Trust (the “Trust”)~~servicer on behalf of the ~~Debtors) continued~~owner of a mortgage loan or pool of mortgage loans, usually through foreclosure or a deed-in-lieu of foreclosure on a defaulted loan. The servicer or a third-party real estate management firm is responsible for selling the REO. Net proceeds of the sale are returned to ~~dispute whether~~ the ~~interests~~owner of ~~certain former~~the related loan or loans. In most cases, the sale of REO does not generate enough to pay off the balance of the loan underlying the REO, causing a loss to the owner of the related mortgage loan.

Recapture. Voluntarily prepaid loans that are expected to be refinanced by the related servicer.

Refinancing. The process of working with existing borrowers to refinance their mortgage loans. By refinancing loans for borrowers we currently service, we retain the servicing rights, thereby extending the longevity of the servicing cash flows.

Reverse Mortgage Loan. A reverse mortgage loan, most commonly a Home Equity Conversion Mortgage, enables seniors to borrow against the value of their home, and no payment of principal or interest is required until the death of the borrower or the sale of the home. These loans are designed to go through the foreclosure and claim process to recover loan balance.

Servicing. The performance of contractually specified administrative functions with respect to a mortgage loan or pool of mortgage loans. Duties of a servicer typically include, among other things, collecting monthly payments, maintaining escrow accounts, providing periodic monthly statements to the borrower and monthly reports to the loan owners or their agents, managing insurance, monitoring delinquencies, executing foreclosures (as necessary), and remitting fees to guarantors, trustees and service providers. A servicer is generally compensated with a specific fee outlined in the contract established prior to the commencement of the servicing activities.

Servicing Advances. In the course of servicing loans, servicers are required to make advances that are reimbursable from collections on the related mortgage loan or pool of loans. There are typically three types of servicing advances: P&I Advances, T&I Advances and Corporate Advances.

(i) P&I Advances cover scheduled payments of principal and interest that have not been timely paid by borrowers. P&I Advances serve to facilitate the cash flows paid to holders of ~~“Equity Interests”~~securities issued by the residential MBS trust. The servicer is not the insurer or ~~“Claims” (in each case as those terms are defined~~guarantor of the MBS and thus has the right to cease the advancing of P&I, when the servicer deems the next advance nonrecoverable.

(ii) T&I Advances pay specified expenses associated with the preservation of a mortgaged property or the liquidation of defaulted mortgage loans, including but not limited to property taxes, insurance premiums or other property-related expenses that have not been timely paid by borrowers in order for the lien holder to maintain its interest in the ~~Company’s Seventh Amended Joint Plan~~property.

(iii) Corporate Advances pay costs, fees and expenses incurred in foreclosing upon, preserving defaulted loans and selling REO, including attorneys’ and other professional fees and expenses incurred in connection with foreclosure and liquidation or other legal proceedings arising in the course of ~~Affiliated Debtors Pursuant to Chapter 11 of~~servicing the ~~United States Bankruptcy Code (as modified, the “Plan”)) against the Debtors should be allowed. As a result, pursuant~~defaulted mortgage loans.

Servicing Advances are reimbursed to the Plan, on the Effective Date, a “Disputed Equity Escrow” (as defined in the Plan) was created for the benefit of each holder of a “Disputed Equity Interest” (as defined in the Plan). Such Disputed Equity Escrow was created to hold shares of WMIH’s common stock (as well as any dividends, gains or income attributable in respect of such common stock) allocable, on a pro rata basis, to each holder of such a Disputed Equity Interestservicer if and when ~~such Disputed Equity Interest becomes an “Allowed Equity Interest” (as such term~~the borrower makes a payment on the underlying mortgage loan at the time the loan is ~~defined~~modified or upon liquidation of the underlying mortgage loan but are primarily the responsibility of the investor/owner of the loan. The types of servicing advances that a servicer must make are set forth in its servicing agreement with the ~~Plan). All such Equity Interests~~owner of the mortgage loan or pool of mortgage loans. In some instances, a servicer is allowed to cease Servicing Advances, if those advances will ~~constitute Disputed Equity Interests pursuant~~not be recoverable from the property securing the loan.

Table of Contents

Subservicing. Subservicing is the process of outsourcing the duties of the primary servicer to a third-party servicer. The third-party servicer performs the servicing responsibilities for a fee and is typically not responsible for making servicing advances, which are subsequently reimbursed by the primary servicer. The primary servicer is contractually liable to the ~~Plan until such time, or from time to time, as each Disputed Equity Interest has been compromised and settled or allowed or disallowed by a final order~~owner of the ~~bankruptcy court.~~

~~The liquidating trustee~~loans for the activities of the ~~Trust, William Kosturos (the “Liquidating Trustee”~~subservicer.

Unpaid Principal Balance (“UPB”), acts as escrow agent with respect to the Disputed Equity Escrow. As of December 31, 2016, 1,546,294 shares of WMIH’s common stock were held in the Disputed Equity Escrow. Until such time as all of WMIH’s common stock has been distributed from the Disputed Equity Escrow in accordance with the Plan (e.g., as a result of all “Disputed Equity Claims” (as such term is defined in the Plan) becoming Allowed Equity Interests or all Disputed Equity Claims being disallowed), the Liquidating Trustee is vested with the authority to exercise voting or consent rights with respect to such stock; provided, however, that the Liquidating Trustee is obligated to vote or consent, as the case may be, as to such stock in the same proportion as all other holders of WMIH’s common stock have voted or consented, in each case on an issue-by-issue basis. . The Trust has no right to or entitlement in any shares of WMIH’s common stock held in the Disputed Equity Escrow. Additionally, WMIH does not have any right to, or interest in, any shares of its common stock held by the Disputed Equity Escrow.

~~Notes Payable~~

~~On the Effective Date, WMIH issued $110.0 million aggregate principal~~ amount of ~~its 13% Senior First Lien Notes due 2030 (the “First Lien Notes”) under an Indenture, dated as~~principal outstanding on a mortgage loan or a pool of March 19, 2012 (the “First Lien Indenture”), between WMIH and Wilmington Trust, National Association, as Trustee. In addition, WMIH issued $20.0 million aggregate principal amount of its 13% Senior Second Lien Notes due 2030 (the “Second Lien Notes” and,mortgage loans. UPB is used together with the ~~First Lien Notes,~~servicing fees and ancillary incomes as a means of estimating the ~~“Runoff Notes”) under an Indenture, dated as~~future revenue stream for a servicer.

U.S. Department of ~~March 19, 2012 (the “Second Lien Indenture” and, together with~~Agriculture (“USDA”). The USDA is a cabinet-level department of the ~~First Lien Indenture,~~U.S. federal government, which guarantees certain home loans for qualified borrowers.

Warehouse Facility. A type of line of credit facility used to temporarily finance mortgage loan originations to be sold in the ~~“Indentures”), between WMIH and Law Debenture Trust Company of New York, as Trustee.~~ ~~On January 5, 2017, we were notified by The Law Debenture Company of New York that it had completed~~secondary market. Pursuant to a warehouse facility, a loan originator typically agrees to transfer to a counterparty certain mortgage loans against the transfer of ~~substantially all of its corporate trust business~~funds by the counterpart, with a simultaneous agreement by the counterpart to ~~Delaware Trust Company, and that Delaware Trust Company had become~~transfer the ~~successor trustee under the Second Lien Indenture. The First Lien Notes were redeemed in their entirety on April 15, 2015, and the First Lien Indenture was satisfied and discharged on April 27, 2015.~~ ~~The Second Lien Notes~~ ~~were redeemed in their entirety on September 29, 2017, and the Second Lien Indenture was satisfied and discharged on October 2, 2017.~~

~~Contractual Obligations, Commitments and Contingencies~~

WMMRC has engaged a Hawaii-based service provider, Marsh Management Services Inc., to provide accounting and related management services for its operations. In exchange for performing these services, WMMRC pays such service provider a management fee.

~~On March 19, 2012, WMIH entered into an Investment Management Agreement with WMMRC. Under the terms of this agreement, WMIH receives a fee from WMMRC equal~~loans back to the ~~product~~originator at a date certain, or on demand, against the transfer of ~~(x) the ending dollar amount of assets under management during the calendar month in question and (y) .002 divided by 12. WMIH is responsible for investing the~~ funds of WMMRC based on applicable investment criteria and subject to rules and regulations to which WMMRC is subject. The Investment Management Agreement has been approved by the Insurance Division of the State of Hawaii.

On March 19, 2012, WMIH entered into an Administrative Services Agreement with WMMRC. Under the terms of this agreement, WMIH receives from WMMRC a fee of $110 thousand per month. WMIH is responsible for providing administrative services to support, among other things, supervision, governance, financial administration and reporting, risk management and claims management as may be necessary, together with such other general or specific administrative services that may be reasonably required or requested by WMMRC in the ordinary course of its business. The Administrative Services Agreement has been approved by the Insurance Division of the State of Hawaii.

Total amounts incurred under the Investment Management Agreement and Administrative Services Agreement totaled $1.0 million and $1.0 million for the nine months ended September 30, 2017 and 2016, respectively. The expense and related income eliminate on consolidation.

On March 22, 2012, WMIH and the WMI Liquidating Trust (the “Trust”) entered into a Transition Services Agreement (the “TSA”). Pursuant to the TSA, the Trust makes available certain services and employees to the Company. The TSA provided the Company with office space (prior to the Company entering into its own lease) for its current employees and continues to provide basic infrastructure and support services to facilitate the Company’s operations. The TSA as amended, extends the term of the agreement through January 31, 2018, with automatic renewals thereafter for successive additional three-month terms, subject to non-renewal at the end of any additional term upon written notice by either party at least 30 days prior to the expiration of the additional term.

In connection with implementing the Plan, certain holders of specified “Allowed Claims” had the right to elect to receive such holder’s “Pro Rata Share of the Common Stock Allotment.” Essentially, the Plan defines the “Pro Rata Share of the Common Stock Allotment” as a pro rata share of ten million (10,000,000) shares of WMIH’s common stock (i.e. five percent (5%)) issued and outstanding on the Effective Date. Holders exercising the foregoing election did so in lieu of receiving (i) 50% of such holder’s interest in and to certain litigation proceeds that could be realized by the Trust on account of certain claims and causes of action asserted by the Trust as contemplated by the Plan (“Litigation Proceeds”), and (ii) some or all of the Runoff Notes to which such holder may be entitled (if such holder elected to receive Runoff Notes in accordance with the terms of the Plan).

On or about October 14, 2014, the Trust filed a lawsuit in King County Superior Court in the State of Washington against 16 former directors and officers of WMI (the “D&O Litigation”). The Trust’s complaint alleged, among other things, that the defendants named therein breached their fiduciary duties to WMI and committed corporate waste and fraud by squandering WMI’s financial resources. In connection with the settlement of the D&O Litigation, during the year ended December 31, 2015, among the Trust, certain former directors and officers of WMI and certain insurance carriers that underwrote director and officer liability insurance policies for the benefit of WMI and its affiliates (including such former directors and officers), such insurance carriers agreed to pay the Trust $37.0 million, of which $3.0 million was placed into a segregated reserve account (the “RSA Reserve”) to be administered by a third party pursuant to the terms of a Reserve Settlement Agreement (the “RSA”).

During the year ended December 31, 2016 and 2015, WMIH had other income of $123 thousand and $7.8 million, respectively, as a result of its receipt of its share of net Litigation Proceeds related to the D&O Litigation. As of September 30, 2017, $1.5 million remained in the RSA Reserve. Under the RSA, funds are released from the RSA Reserve to the Trust if and when certain designated conditions are satisfied. If and when these funds are released to the Trust, and to the extent WMIH is entitled to receive such funds in accordance with the Plan, it is anticipated the Trust will make payments to WMIH in an amount equal to WMIH’s shareoriginator.

Table of Litigation Proceeds as provided under the Plan. Due to the contingent nature of future distributions from the RSA Reserve, there can be no assurance that WMIH will receive any distributions from the remaining balance in the RSA Reserve in the future. During the nine months ended September 30, 2017, WMIH has recorded income from Litigation Proceeds of $123 thousand. As of September 30, 2017, WMIH had not received any Litigation Proceeds, other than as described above.

As a member of the Litigation Subcommittee of the Trust, Mr. Willingham, who serves as a WMIH Board member and Chairman of the WMIH Audit Committee, participates in overseeing the prosecution of recovery claims by the Trust.

As a result of the Company’s reorganization in bankruptcy, an intangible asset was identified related to reinsurance contracts which were held by WMMRC. The contracts were evaluated to determine whether the value attributable to such contracts was either above market or in a loss contract position. After taking such evaluation into consideration, a loss contract reserve totaling $63.1 million was recorded on the Effective Date. The reserve will be evaluated at each reporting date for changes to its value. As of September 30, 2017 and December 31, 2016, the loss contract reserve was analyzed and determined to have a value of zero and $5.6 million, respectively. The value of this reserve decreased by $5.6 million during the nine months ended September 30, 2017 and decreased by $2.3 million during the nine months ended September 30, 2016. The value of this reserve has been reduced to zero, primarily due to the extraction of cash proceeds from WMMRC occurring earlier than initially projected and the elimination of the higher cost of capital associated with the Runoff Notes which have now been paid in their entirety. For additional information see Note 2: Significant Accounting Policies in Item 1 of Part I of this Quarterly Report on Form 10-Q.

ContentsAs of January 30, 2014, pursuant to the terms and conditions of the Investment Agreement, WMIH sold to KKR Fund 1,000,000 shares of Series A Preferred Stock, having the terms, rights, obligations and preferences contained in the Certificate of Incorporation, for a purchase price equal to $11.1 million and issued to KKR Fund warrants to purchase, in the aggregate, 61.4 million shares of WMIH’s common stock, 30.7 million of which have an exercise price of $1.32 per share and 30.7 million of which have an exercise price of $1.43 per share (together, the “Warrants”). KKR Fund’s rights as a holder of the Series A Preferred Stock and the Warrants, and the rights of any subsequent holder that is an affiliate of KKR Fund (together with KKR Fund, the “Holders”) are governed by the Investor Rights Agreement. The Investor Rights Agreement provides the Holders with registration rights, including three long form demand registration rights, unlimited short form demand registration rights and customary piggyback registration rights with respect to WMIH’s common stock (and WMIH’s common stock underlying the Series A Preferred Stock and the Warrants), subject to certain minimum thresholds, customary blackout periods and lockups of 180 days. On July 1, 2015, WMIH filed a shelf registration statement (the “Initial Registration Statement”) covering resales of Series B Preferred Stock and WMIH’s common stock issuable upon mandatory conversion of the Series B Preferred Stock. On November 23, 2015, WMIH amended the Initial Registration Statement to cover WMIH’s common stock issuable upon conversion of the Series A Preferred Stock and shares of WMIH’s common stock issuable upon exercise of warrants issued in connection with the issuance of our Series A Preferred Stock currently outstanding (as amended, the “Registration Statement”). The Registration Statement was declared effective under the Securities Act on November 25, 2015. Moreover, for as long as the Holders beneficially own any shares of common stock of WMIH or Series A Preferred Stock or any of the Warrants, WMIH has agreed to provide customary Rule 144A information rights, to provide the Holders with regular audited and unaudited financial statements and to allow the Holders or their representatives to inspect WMIH’s books and records. For further information on the Investment Agreement and the Investor Rights Agreement, see Note 8: Financing Arrangements and Note 9: Capital Stock and Derivative Instruments, to the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

In conjunction with the Series B Preferred Stock Financing, the Company is contractually committed to make certain fee payments if future events occur. These fees are recorded and presented on our condensed consolidated balance sheets as other liabilities. At September 30, 2017, the total balance of $13.8 million of other liabilities is comprised of $12.3 million of accrued fees relating to the Series B Preferred Stock Financing, an accrual for professional fees currently payable of approximately $0.8 million, $0.7 million of accrued dividends relating to the Series B Preferred Stock and several small accruals for recurring business expenses.

~~Off-Balance Sheet Financing Arrangements~~

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk.~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~We are principally exposed~~

Refer to ~~three types~~the discussion included in Part II, Item 7A of ~~market risk:~~

~~interest rate risk;~~

~~credit risk; and~~

~~liquidity risk.~~

~~There have been no material changes to our market risks as disclosed in~~ our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2021. There have been no material changes in the types of market risks faced by us since December 31, 2021. Our market risks include the broad effects of the COVID-19 pandemic. While the pandemic’s effect on the macroeconomic environment has yet to be fully determined and could continue for months or years, the pandemic and governmental programs created as a response to the pandemic, has affected and will continue to affect our business, financial conditions and results of operations.

Sensitivity Analysis

We assess our market risk based on changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential impact on fair values based on hypothetical changes (increases and decreases) in interest rates.

We use a duration-based model in determining the impact of interest rate shifts on our loan portfolio, certain other interest-bearing liabilities measured at fair value and interest rate derivatives portfolios. The primary assumption used in these models is that an increase or decrease in the benchmark interest rate produces a parallel shift in the yield curve across all maturities.

We utilize a discounted cash flow analysis to determine the fair value of MSRs and the impact of parallel interest rate shifts on MSRs. The discounted cash flow model incorporates prepayment speeds, discount rate, costs to service, delinquencies, ancillary revenues, recapture rates and other assumptions that management believes are consistent with the assumptions that other similar market participants use in valuing the MSRs. The key assumptions to determine fair value include prepayment speed, discount rate and cost to service. However, this analysis ignores the impact of interest rate changes on certain material variables, such as the benefit or detriment on the value of future loan originations, non-parallel shifts in the spread relationships between MBS, swaps and U.S. Treasury rates and changes in primary and secondary mortgage market spreads. For mortgage loans, IRLCs and forward delivery commitments on MBS, we rely on a model in determining the impact of interest rate shifts. In addition, the primary assumption used for IRLCs, is the borrower’s propensity to close their mortgage loans under the commitment.

Our total market risk is influenced by a wide variety of factors including market volatility and the liquidity of the markets. There are certain limitations inherent in the sensitivity analysis presented, including the necessity to conduct the analysis based on a single point in time and the inability to include the complex market reactions that normally would arise from the market shifts modeled.

We used March 31, 2022 market rates on our instruments to perform the sensitivity analysis. The estimates are based on the market risk sensitive portfolios described in the preceding paragraphs and assume instantaneous, parallel shifts in interest rate yield curves. These sensitivities are hypothetical and presented for illustrative purposes only. Changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in fair value may not be linear.

Table of Contents

The following table summarizes the estimated change in the fair value of our assets and liabilities sensitive to interest rates as of March 31, 2022 given hypothetical instantaneous parallel shifts in the yield curve. Actual results could differ materially.

Table 16. Change in Fair Value


	March 31, 2022
	Down 25 bps		Up 25 bps
Increase (decrease) in assets
Mortgage servicing rights at fair value	$	(198)	$	177
Mortgage loans held for sale at fair value	21		(23)
Derivative financial instruments:
Interest rate lock commitments	22		(25)
Forward MBS trades	(51)		56
Total change in assets	(206)		185
Increase (decrease) in liabilities
Mortgage servicing rights financing at fair value	(2)		2
Excess spread financing at fair value	(19)		17
Derivative financial instruments:
Interest rate lock commitments	(12)		13
Forward MBS trades	5		(6)
Total change in liabilities	(28)		26
Total, net change	$	(178)	$	159

~~Item 4.~~

~~Controls and Procedures.~~

Item 4.Controls and Procedures

Evaluation of ~~disclosure controls~~Disclosure Controls and ~~procedures.~~

Procedures

Our management, ~~has evaluated, under the supervision and~~ with the participation of our Chief Executive Officer and ~~Interim~~ Chief Financial Officer, evaluated the effectiveness of ~~the~~our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of ~~the Company~~1934, as amended (“Exchange Act”), as of ~~September 30, 2017.~~ March 31, 2022.

Based on ~~that~~this evaluation, our Chief Executive Officer and ~~Interim~~ Chief Financial Officer ~~have~~ concluded that, as of ~~September 30, 2017, the~~March 31, 2022, our disclosure controls and procedures ~~(as defined~~are effective. Disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in ~~Rules 13a-15(e) and 15d-15(e)~~reports that we file or submit under the Exchange ~~Act) were effective in ensuring that information required to be disclosed by the Company in reports the Company files or submits under the Exchange Act:~~

~~(1)~~Act is recorded, processed, summarized, and reported within the time periods specified in the ~~Securities and Exchange Commission~~SEC’s rules and forms, and

~~(2)~~ that such information is accumulated and communicated to ~~the Company’s~~our management, including ~~the Company’s principal executive~~our Chief Executive Officer and ~~principal financial officers, or persons performing similar functions,~~Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control ~~Over~~over Financial Reporting

~~There was~~

During the three months ended March 31, 2022, no ~~change~~changes in ~~the Company’s~~our internal control over financial reporting ~~(as~~occurred that ~~term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during its most recent fiscal quarter that has~~have materially affected, or isare reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Table of Contents

PART ~~II—~~II – OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings.~~

Item 1.Legal Proceedings

For a description of ~~September 30, 2017, the Company was not a party to, or aware of, any pending~~our material legal proceedings, ~~or investigations requiring disclosure at~~see Note 15, Commitments and Contingencies, of the Notes to the Condensed Consolidated Financial Statements within Part I, Item 1. Financial Statements, of this ~~time.~~

Form 10-Q.

~~Item 1A.~~

~~Risk Factors.~~

Item 1A.Risk Factors

~~In addition~~

There have been no material changes or additions to the ~~information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the~~risk factors ~~discussed in “Part I-Item 1A. Risk~~previously disclosed under “Risk Factors” included in our Annual Report on Form 10-K filed for the year ended December 31, ~~2016. There have been no material changes~~2021.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

In 2021, our Board of Directors authorized a stock repurchase plan that allows the repurchase of up to $500 of our outstanding common stock. During the three months ended March 31, 2022, we repurchased shares of our common stock at a total cost of $35 under our share repurchase program. The number and average price of shares purchased are set forth in ~~our risk factors from those disclosed in such Annual Report.~~the table below:


Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Appropriate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Program
January 2022	—	$	—	—	$	252
February 2022	110	$	50.22	110	$	246
March 2022	611	$	47.61	611	$	217
Total	721			721

Item 3. Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

None.

Table of Contents

Item 6.Exhibits

~~Item 6.~~

Incorporated by Reference

Exhibit
Number

Description

Form

File No.

Exhibit

Filing Date

Filed or Furnished Herewith

10.1**

Form of 2022 Grant Notice and Restricted Stock Unit Award Agreement-Employee (No Retirement Provision)~~Exhibits.~~

10.2**

Form of 2022 Performance Stock Unit Agreement – Employee (S tandard Retirement Provision)

10.3**

Form of 2022 Performance Stock Unit Agreement – Employee (Special Retirement Provision)

10.4**

Offer Letter, dated as of April 21, 2022 by and between the Company and Jaime Gow

31.1

Certification by Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification by Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

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

32.2

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

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101.)

~~The following exhibits are filed~~

** Management, contract, compensatory plan or ~~incorporated by reference as part~~arrangement.

Table of ~~this Quarterly Report on Form 10-Q.~~

Contents

Incorporated by reference

Exhibit
Number

Exhibit Description
Form

Exhibit

Filing Date

Filed Herewith

3.1

Amended and Restated Certificate of Incorporation of WMIH Corp.

8-K12G3

3.1

5/13/15

��

3.2

Amended and Restated Bylaws of WMIH Corp.

8-K12G3

3.2

5/13/15

12.1

Statement Regarding Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends

X

31.1

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X

31.2

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X

32.1

Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

X

101.INS

XBRL Instance Document.

X

101.SCH

XBRL Taxonomy Extension Schema Document.

X

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

X

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

X

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

X

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

X

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	~~WMIH CORP.~~
		~~(Registrant)~~ MR. COOPER GROUP INC.
~~Dated: November 9, 2017~~		~~By:~~	~~/s/ William C. Gallagher~~
April 28, 2022		~~Name:~~	~~William C. Gallagher~~ /s/ Jay Bray
Date		~~Title:~~	Jay Bray Chief Executive Officer (Principal Executive Officer)
~~Dated: November 9, 2017~~		~~By:~~	~~/s/ Timothy F. Jaeger~~
April 28, 2022		~~Name:~~	~~Timothy F. Jaeger~~ /s/ Jaime Gow
Date		~~Title:~~	~~Interim~~Jaime Gow Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer)

~~Delaware~~	~~91-1653725~~
Delaware		91-1653725
(State or other jurisdiction of ~~incorporation)~~ incorporation or organization)		(~~IRS~~I.R.S. Employer Identification No.)
~~800 FIFTH AVENUE, SUITE 4100~~ ~~SEATTLE, WASHINGTON~~			~~98104~~
8950 Cypress Waters Blvd, Coppell, TX		75019
(Address of principal executive offices)		(Zip Code)

(469) 549-2000
Registrant’s telephone number, including area code


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	COOP	The Nasdaq Stock Market

~~Common Stock $0.00001 par value~~		~~206,714,132~~
~~(Class)~~						~~(Outstanding at November 1, 2017)~~

	Page
PART I –		FINANCIAL INFORMATION
Item 1.		Financial Statements	3
		Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	3
		Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended March, 2022 and 2021	4
		Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the Three Months Ended March 31, 2022 and 2021	5
		Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2022 and 2021	6
		Notes to Condensed Consolidated Financial Statements (unaudited).		3 8
		1. Nature of Business and Basis of Presentation	8
		2. Dispositions	9
		3. Mortgage Servicing Rights and Related Liabilities	10
		4. Advances and Other Receivables	12
		5. Mortgage Loans Held for Sale	13
		6. Loans Subject to Repurchase from Ginnie Mae	14
		7. Goodwill and Intangible Assets	14
		8. Derivative Financial Instruments	14
		9. Indebtedness	16
		10. Securitizations and Financings	17
		11. Earnings Per Share	18
		12. Income Taxes	19
		13. Fair Value Measurements	20
		14. Capital Requirements	23
		15. Commitments and Contingencies	23
		16. Segment Information	25
Item 2. ~~Management’s~~		Management's Discussion and Analysis of Financial Condition and Results of Operations		29 28
Item 3.		Quantitative and Qualitative Disclosures about Market Risk		45 49
Item 4.		Controls and ~~Procedures.~~Procedures		45 50

PART II –		OTHER INFORMATION
Item 1.		Legal Proceedings		46 51
Item 1A.		Risk Factors.		46 51
Item ~~6. Exhibits~~. 2.		Unregistered Sales of Equity Securities and Use of Proceeds	47 51
~~SIGNATURES~~ Item 3.		Defaults Upon Senior Securities	48 51
Item 4.		Mine Safety Disclosures	51
Item 5.		Other Information	51
Item 6.		Exhibits	52

	September 30, 2017		December 31, 2016 ⁽¹⁾
ASSETS:
Investments held in trust:
Fixed-maturity securities	$	9,022	$	29,206
Cash equivalents held in trust		6,804		2,176
Total investments held in trust		15,826		31,382
Cash and cash equivalents		25,542		2,491
Fixed-maturity securities		1,400		47,625
Restricted cash		577,220		573,347
Derivative asset - embedded conversion feature		111,877		80,651
Accrued investment income		109		187
Other assets		764		507
Total assets	$	732,738	$	736,190
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Liabilities:
Notes payable - principal	$	—	$	18,774
Notes payable - interest		—		203
Losses and loss adjustment reserves		705		811
Losses payable		29		53
Unearned premiums		33		270
Accrued ceding commissions		57		22
Loss contract reserve		—		5,645
Other liabilities		13,774		14,063
Total liabilities		14,598		39,841
Commitments and contingencies
Redeemable convertible series B preferred stock, $0.00001 par value; 600,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016; aggregate liquidation preference of $600,000,000 as of September 30, 2017 and December 31, 2016		502,213		502,213
Stockholders’ equity:
Convertible series A preferred stock, $0.00001 par value; 1,000,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016; aggregate liquidation preference of $10 as of September 30, 2017 and December 31, 2016		—		—
Common stock, $0.00001 par value; 3,500,000,000 authorized; 206,714,132 and 206,380,800 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		2		2
Additional paid-in capital		108,830		108,415
Retained earnings		107,095		85,719
Total stockholders’ equity		215,927		194,136
Total liabilities, redeemable convertible preferred stock and stockholders’ equity	$	732,738	$	736,190

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

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


	March 31, 2022		December 31, 2021
	(unaudited)
Assets
Cash and cash equivalents	$	579	$	895
Restricted cash	130		146
Mortgage servicing rights at fair value	6,006		4,223
Advances and other receivables, net of reserves of $152 and $167, respectively	1,044		1,228
Mortgage loans held for sale at fair value	3,593		4,381
Property and equipment, net of accumulated depreciation of $107 and $122, respectively	75		98
Deferred tax assets, net	794		991
Other assets	2,269		2,242

Total assets	$	14,490	$	14,204

Liabilities and Stockholders’ Equity
Unsecured senior notes, net	$	2,670	$	2,670
Advance and warehouse facilities, net	4,795		4,997
Payables and other liabilities	2,203		2,392
MSR related liabilities - nonrecourse at fair value	845		778

Total liabilities	10,513		10,837
Commitments and contingencies (Note 15)	0		0
Preferred stock at $0.00001 - 10 million shares authorized, zero shares issued, zero shares outstanding; aggregate liquidation preference of zero	—		—
Common stock at $0.01 par value - 300 million shares authorized, 93.2 million shares issued	1		1
Additional paid-in-capital	1,085		1,116
Retained earnings	3,537		2,879
Treasury shares at cost - 19.3 million and 19.4 million shares, respectively	(647)		(630)
Total Mr. Cooper stockholders’ equity	3,976		3,366
Non-controlling interests	1		1
Total stockholders’ equity	3,977		3,367
Total liabilities and stockholders’ equity	$	14,490	$	14,204

	Three months ended September 30, 2017			Three months ended September 30, 2016			Nine months ended September 30, 2017			Nine months ended September 30, 2016
Revenues:
Premiums earned	$	344		$	786		$	1,103		$	2,426
Net investment income		1,943			498			4,826			1,747
Total revenues		2,287			1,284			5,929			4,173
Operating expenses:
Losses and loss adjustment expense		48			183			207			702
Ceding commission expense		44			75			137			234
General and administrative expense		2,117			1,357			5,915			4,878
Loss contract reserve reduction		(210	)		(565	)		(5,645	)		(2,362	)
Interest expense		579			636			1,788			1,994
Total operating expenses		2,578			1,686			2,402			5,446
Net operating (loss) income		(291	)		(402	)		3,527			(1,273	)
Other (income) expense:
Other (income)		(123	)		—			(123	)		—
Unrealized (gain) loss on change in fair value of derivative embedded conversion feature		(38,579	)		16,243			(31,226	)		(62,587	)
Total other (income) expense		(38,702	)		16,243			(31,349	)		(62,587	)
Income (loss) before income taxes		38,411			(16,645	)		34,876			61,314
Income tax expense (benefit)		—			—			—			—
Net income (loss)		38,411			(16,645	)		34,876			61,314
Redeemable convertible series B preferred stock dividends		(4,500	)		(4,500	)		(13,500	)		(13,500	)
Net income (loss) attributable to common and participating stockholders	$	33,911		$	(21,145	)	$	21,376		$	47,814
Basic net income (loss) per share attributable to common stockholders (Note 12)	$	0.06		$	(0.10	)	$	0.04		$	0.10
Shares used in computing basic net income (loss) per share		202,660,492			202,341,209			202,573,315			202,247,275
Diluted net income (loss) per share attributable to common stockholders (Note 12)	$	0.06		$	(0.10	)	$	0.04		$	0.09
Shares used in computing diluted net income (loss) per share		212,726,121			202,341,209			212,638,944			237,575,014

	Series B Redeemable Convertible Preferred Stock				Series A Convertible Preferred Stock				Common Stock
	Shares		Amount		Shares		Amount		Shares		Amount		Additional paid-in capital		(Accumulated deficit) retained earnings			Total stockholders’ equity
Balance at January 1, 2016		600,000		502,213		1,000,000		—		206,168,035		2		107,757		(97,981	)		9,778
Net income		—		—		—		—		—		—		—		201,700			201,700
Redeemable convertible series B preferred stock dividends		—		—		—		—		—		—		—		(18,000	)		(18,000	)
Issuance of common stock under restricted stock compensation arrangement		—		—		—		—		212,765		—		—		—			—
Equity-based compensation		—		—		—		—		—		—		658		—			658
Balance at December 31, 2016		600,000		502,213		1,000,000		—		206,380,800		2		108,415		85,719			194,136
Net income		—		—		—		—		—		—		—		34,876			34,876
Redeemable convertible series B preferred stock dividends		—		—		—		—		—		—		—		(13,500	)		(13,500	)
Issuance of common stock under restricted stock compensation arrangement		—		—		—		—		333,332		—		—		—			—
Equity-based compensation		—		—		—		—		—		—		415		—			415
Balance at September 30, 2017		600,000	$	502,213		1,000,000	$	—		206,714,132	$	2	$	108,830	$	107,095		$	215,927


	Preferred Stock			Common Stock
	Shares (in thousands)	Amount		Shares (in thousands)	Amount		Additional Paid-in Capital		Retained Earnings		Treasury Share Amount		Total Mr. Cooper Stockholders’ Equity		Non-controlling Interests		Total Stockholders’ Equity
Balance at January 1, 2021	1,000	$	—	89,457	$	1	$	1,126	$	1,434	$	(58)	$	2,503	$	1	$	2,504
Shares issued / (surrendered) under incentive compensation plan	—	—		1,183	—		(19)		—		—		(19)		—		(19)
Share-based compensation	—	—		—	—		6		—		—		6		—		6
Repurchase of common stock	—	—		(4,505)	—		—		—		(148)		(148)		—		(148)
Net income	—	—		—	—		—		561		—		561		—		561
Balance at March 31, 2021	1,000	$	—	86,135	$	1	$	1,113	$	1,995	$	(206)	$	2,903	$	1	$	2,904

Balance at January 1, 2022	—	$	—	73,777	$	1	$	1,116	$	2,879	$	(630)	$	3,366	$	1	$	3,367
Shares issued / (surrendered) under incentive compensation plan	—	—		850	—		(39)		—		18		(21)		—		(21)
Share-based compensation	—	—		—	—		8		—		—		8		—		8
Repurchase of common stock	—	—		(721)	—		—		—		(35)		(35)		—		(35)

Net income	—	—		—	—		—		658		—		658		—		658
Balance at March 31, 2022	—	$	—	73,906	$	1	$	1,085	$	3,537	$	(647)	$	3,976	$	1	$	3,977

	Nine months ended September 30, 2017			Nine months ended September 30, 2016
Cash flows from operating activities:
Net income	$	34,876		$	61,314
Adjustments to reconcile net income to net cash (used in) operating activities:
Amortization of premium or discount on fixed maturity securities		108			247
Net realized loss (gain) on sale of investments		63			(19	)
Unrealized (gain) on trading securities		(67	)		(83	)
Unrealized (gain) on derivative embedded conversion feature		(31,226	)		(62,587	)
Equity-based compensation		415			484
Changes in assets and liabilities:
Accrued investment income		78			(18	)
Other assets		(257	)		(270	)
Cash equivalents held in trust		(4,628	)		1,358
Restricted cash		(3,873	)		(1,476	)
Losses and loss adjustment reserves		(106	)		(2,733	)
Losses payable		(24	)		(395	)
Unearned premiums		(237	)		(463	)
Accrued ceding commission expense		35			(8	)
Accrued interest on notes payable		(203	)		(24	)
Loss contract reserve		(5,645	)		(2,362	)
Other liabilities		(289	)		(626	)
Total adjustments		(45,856	)		(68,975	)
Net cash used in operating activities		(10,980	)		(7,661	)
Cash flows from investing activities:
Purchase of investments		(19,973	)		(130,469	)
Proceeds from sales and maturities of investments		86,278			146,920
Net cash provided by investing activities		66,305			16,451
Cash flows from financing activities:
Redeemable convertible series B preferred stock dividends		(13,500	)		(13,500	)
Notes payable – principal repayments		(18,774	)		(2,185	)
Net cash used in financing activities		(32,274	)		(15,685	)
Increase (decrease) in cash and cash equivalents		23,051			(6,895	)
Cash and cash equivalents, beginning of period		2,491			9,924
Cash and cash equivalents, end of period	$	25,542		$	3,029
Supplementary disclosure of cash flow information:
Cash paid during the period:
Interest	$	1,991		$	2,008


Revenue - service related, net	$	8
Salaries, wages and benefits expense	(8)
General and administrative expense	(7)
Interest income	43
Interest expense	(33)

Income from discontinued operations before income tax expense	3
Less: Income tax expense	1
Net income from discontinued operations	$	2


MSRs and Related Liabilities	March 31, 2022		December 31, 2021
MSRs - fair value	$	6,006	$	4,223

Excess spread financing - fair value	$	815	$	768
Mortgage servicing rights financing - fair value	30		10
MSR related liabilities - nonrecourse at fair value	$	845	$	778


	March 31, 2022				December 31, 2021
MSRs - UPB and Fair Value Breakdown	UPB		Fair Value		UPB		Fair Value
Investor Pools
Agency	$	377,225	$	5,635	$	302,851	$	3,859
Non-agency	34,615		371		36,357		364
Total	$	411,840	$	6,006	$	339,208	$	4,223


	Discount Rate				Total Prepayment Speeds				Cost to Service per Loan
MSRs - Hypothetical Sensitivities	100 bps Adverse Change		200 bps Adverse Change		10% Adverse Change		20% Adverse Change		10% Adverse Change		20% Adverse Change
March 31, 2022
Mortgage servicing rights	$	(207)	$	(399)	$	(134)	$	(259)	$	(56)	$	(113)

December 31, 2021
Mortgage servicing rights	$	(141)	$	(272)	$	(148)	$	(286)	$	(46)	$	(93)


	Discount Rate				Prepayment Speeds
Excess Spread Financing - Hypothetical Sensitivities	100 bps Adverse Change		200 bps Adverse Change		10% Adverse Change		20% Adverse Change
March 31, 2022
Excess spread financing	$	31	$	64	$	23	$	47

December 31, 2021
Excess spread financing	$	26	$	54	$	28	$	58


Advances and Other Receivables, Net	March 31, 2022		December 31, 2021
Servicing advances, net of $16 and $19 purchase discount, respectively	$	1,075	$	1,263
Receivables from agencies, investors and prior servicers, net of $8 and $12 purchase discount, respectively	121		132
Reserves	(152)		(167)
Total advances and other receivables, net	$	1,044	$	1,228


	Three Months Ended March 31,
Reserves for Advances and Other Receivables	2022		2021
Balance - beginning of period	$	167	$	208
Provision and other additions(1)	16		15
Write-offs	(31)		(17)
Balance - end of period	$	152	$	206


Mortgage Loans Held for Sale	March 31, 2022		December 31, 2021
Mortgage loans held for sale – UPB	$	3,607	$	4,257
Mark-to-market adjustment(1)	(14)		124
Total mortgage loans held for sale	$	3,593	$	4,381


		March 31, 2022				Three Months Ended March 31, 2022
Derivative Financial Instruments	Expiration Dates	Outstanding Notional		Fair Value		Gains/(Losses)
Assets
Mortgage loans held for sale
Loan sale commitments	2022	$	543	$	1	$	(24)
Derivative financial instruments
IRLCs	2022	3,122		72		(62)
LPCs	2022	203		2		(1)
Forward MBS trades	2022	4,653		79		72

Total derivative financial instruments - assets		$	7,978	$	153	$	9
Liabilities
Derivative financial instruments
IRLCs	2022	$	551	$	5	$	5
LPCs	2022	658		8		6
Forward MBS trades	2022	695		6		(2)
Swap futures	2022	1,097		49		43
Total derivative financial instruments - liabilities		$	3,001	$	68	$	52


					March 31, 2022				December 31, 2021
	Maturity Date	Collateral	Capacity Amount		Outstanding		Collateral Pledged		Outstanding		Collateral Pledged
Advance Facilities
$400 advance facility(1)	August 2023	Servicing advance receivables	$	400	$	219	$	312	$	234	$	318
$350 advance facility	October 2022	Servicing advance receivables	350		156		189		160		197
$350 advance facility	January 2023	Servicing advance receivables	350		158		186		162		190
$75 advance facility	December 2022	Servicing advance receivables	75		53		79		58		89
Advance facilities principal amount			586		766		614		794

Warehouse Facilities
$4,000 warehouse facility	February 2023	Mortgage loans or MBS	4,000		987		1,118		1,224		1,341
$2,500 warehouse facility	October 2022	Mortgage loans or MBS	2,500		746		772		991		1,024
$1,600 warehouse facility(2)	September 2023	Mortgage loans or MBS	1,600		148		161		409		425
$1,500 warehouse facility	June 2022	Mortgage loans or MBS	1,500		349		352		356		345
$750 warehouse facility	October 2022	Mortgage loans or MBS	750		256		272		256		270
$550 warehouse facility	August 2022	Mortgage loans or MBS	550		48		49		87		89
$500 warehouse facility	June 2023	Mortgage loans or MBS	500		216		224		188		194
$500 warehouse facility	September 2022	Mortgage loans or MBS	500		284		293		419		430
$500 warehouse facility	June 2022	Mortgage loans or MBS	500		137		163		39		39
$500 warehouse facility	August 2023	Mortgage loans or MBS	500		178		184		38		39
$325 warehouse facility	December 2022	Mortgage loans or MBS	325		38		38		67		67
$250 warehouse facility(3)	May 2022	Mortgage loans or MBS	250		1		2		5		6
$200 warehouse facility	June 2022	Mortgage loans or MBS	200		31		39		46		58
$30 warehouse facility(4)	January 2022	Mortgage loans or MBS	30		—		—		—		—
Warehouse facilities principal amount			3,419		3,667		4,125		4,327

MSR Facilities
$800 warehouse facility(1)(5)	August 2023	MSR	800		260		1,345		260		1,107
$400 warehouse facility	August 2022	MSR	400		300		1,246		—		838
$400 warehouse facility(2)	September 2023	MSR	400		215		1,114		—		745
$50 warehouse facility	November 2023	MSR	50		25		84		10		124
MSR facilities principal amount			800		3,789		270		2,814

Advance, warehouse and MSR facilities principal amount			4,805		$	8,222	5,009		$	7,935
Unamortized debt issuance costs			(10)				(12)
Advance and warehouse facilities, net			$	4,795			$	4,997


Year Ending December 31,	Amount
2022 through 2026	$	—
Thereafter	2,700
Total unsecured senior notes principal amount	$	2,700


	March 31, 2022		December 31, 2021
Consolidated Transactions with VIEs	Transfers Accounted for as Secured Borrowings		Transfers Accounted for as Secured Borrowings
Assets
Restricted cash	$	47	$	50
Advances and other receivables, net	375		387
Total assets	$	422	$	437

Liabilities
Advance facilities, net(1)	$	314	$	322
Payables and other liabilities	—		1
Total liabilities	$	314	$	323


Unconsolidated Securitization Trusts	March 31, 2022		December 31, 2021
Total collateral balances - UPB	$	1,074	$	1,122
Total certificate balances	$	1,061	$	1,112


Principal Amount of Transferred Loans 60 Days or More Past Due	March 31, 2022		December 31, 2021
Unconsolidated securitization trusts	$	134	$	138


	Three Months Ended March 31,
Computation of Earnings Per Share	2022		2021
Net income from continuing operations	$	658	$	559
Less: Undistributed earnings from continuing operations attributable to participating stockholders	—		5

Net income from continuing operations attributable to Mr. Cooper common stockholders	$	658	$	554

Net income from discontinued operations	$	—	$	2
Less: Undistributed earnings from discontinued operations attributable to participating stockholders	—		—
Net income from discontinued operations attributable to Mr. Cooper common stockholders	$	—	$	2

Net income	$	658	$	561
Less: Undistributed earnings attributable to participating stockholders	—		5

Net income attributable to common stockholders	$	658	$	556

Earnings from continuing operations per common share attributable to Mr. Cooper:
Basic	$	8.91	$	6.20
Diluted	$	8.59	$	5.90

Earnings from discontinued operations per common share attributable to Mr. Cooper:
Basic	$	—	$	0.02
Diluted	$	—	$	0.02

Earnings per common share attributable to Mr. Cooper:
Basic	$	8.91	$	6.22
Diluted	$	8.59	$	5.92

Weighted average shares of common stock outstanding (in thousands):
Basic	73,864		89,458
Dilutive effect of stock awards	2,704		3,590
Dilutive effect of participating securities	—		839
Diluted	76,568		93,887

	September 30, 2017		December 31, 2016
Case-basis reserves	$	174	$	553
IBNR reserves		1		—
Premium deficiency reserves		530		258
Total losses and loss adjustment reserves	$	705	$	811


	Nine months ended September 30, 2017			Year ended December 31, 2016
Balance at beginning of period	$	811		$	5,063
Incurred (released) - prior periods		207			(669	)
Paid or terminated - prior periods		(313	)		(3,583	)
Total losses and loss adjustment reserves	$	705		$	811

	September 30, 2017
Class of securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government treasury securities	$	250	$	—	$	—		$	250
Obligations of U.S. government sponsored enterprises		2,749		—		(7	)		2,742
Corporate debt securities		3,683		—		(2	)		3,681
Foreign corporate debt securities		3,750		—		(1	)		3,749
Total fixed-maturity securities		10,432		—		(10	)		10,422
Less total unrestricted fixed-maturity securities		1,402		—		(2	)		1,400
Total fixed-maturity securities held in trust	$	9,030	$	—	$	(8	)	$	9,022

	Amortized Cost		Estimated Fair Value
Maturity in:
2017	$	6,750	$	6,749
2018		3,682		3,673
Total fixed-maturity securities	$	10,432	$	10,422

	September 30, 2017
	Level 1		Level 2		Level 3		Total
Class of securities:
U.S. government treasury securities	$	250	$	—	$	—	$	250
Obligations of U.S. government sponsored enterprises		1,497		1,245		—		2,742
Corporate debt securities		3,151		530		—		3,681
Foreign corporate debt securities		3,749		—		—		3,749
Total fixed-maturity securities		8,647		1,775		—		10,422
Money market funds		32,007		—		—		32,007
Total	$	40,654	$	1,775	$	—	$	42,429


	January 1, 2017 to September 30, 2017				January 1, 2016 to December 31, 2016
	Transfers from Level 1 to Level 2		Transfers from Level 2 to Level 1			Transfers from Level 1 to Level 2		Transfers from Level 2 to Level 1
Class of securities:
Corporate debt securities	$	—	$	901		$	—	$	5,737
Foreign corporate debt securities		—		—			—		5,295
Total transfers	$	—	$	901		$	—	$	11,032


	March 31, 2022
			Recurring Fair Value Measurements
Fair Value - Recurring Basis	Total Fair Value		Level 1		Level 2		Level 3
Assets
Mortgage loans held for sale	$	3,593	$	—	$	3,593	$	—
Mortgage servicing rights	6,006		—		—		6,006
Equity securities	62		8		—		54
Derivative financial instruments
IRLCs	72		—		—		72
LPCs	2		—		—		2
Forward MBS trades	79		—		79		—

Liabilities
Derivative financial instruments
IRLCs	5		—		—		5
LPCs	8		—		—		8
Forward MBS trades	6		—		6		—
Swap futures	49		—		49		—
Mortgage servicing rights financing	30		—		—		30
Excess spread financing	815		—		—		815


	March 31, 2022									December 31, 2021
	Range						Weighted Average			Range						Weighted Average
Level 3 Inputs	Min			Max						Min			Max
MSR
Discount rate	9.5		%	13.7		%	10.7		%	9.5		%	13.7		%	10.9		%
Prepayment speed	7.2		%	14.8		%	8.9		%	11.7		%	16.4		%	13.0		%
Cost to service per loan(1)	$	57		$	128		$	74		$	59		$	168		$	77
Average life(2)							7.4 years									5.8 years

IRLCs
Value of servicing (basis points per loan)	(0.4)			2.6			1.9			(0.7)			2.4			1.4

Excess spread financing
Discount rate	9.5		%	13.8		%	11.2		%	9.5		%	13.8		%	11.2		%
Prepayment speed	9.1		%	15.1		%	10.4		%	12.8		%	15.2		%	13.4		%
Average life(2)							6.4 years									5.4 years

Mortgage servicing rights financing
Advance financing and counterparty fee rates	4.6		%	8.6		%	6.9		%	4.5		%	7.9		%	6.5		%
Annual advance recovery rates	18.9		%	26.4		%	20.7		%	19.2		%	23.0		%	21.3		%