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Reverse Mortgage Investment Trust Inc. – ‘S-11’ on 12/19/14

On:  Friday, 12/19/14, at 5:25pm ET   ·   Accession #:  1047469-14-10050   ·   File #:  333-201179

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

12/19/14  Reverse Mortgage Inv Trust Inc.   S-11                  12:6.7M                                   Merrill Corp/New/FA

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 1: S-11        Registration Statement for Securities of a Real     HTML   2.65M 
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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

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As filed with the Securities and Exchange Commission on December 19, 2014

Registration Statement No.             

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-11
FOR REGISTRATION
UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES

Reverse Mortgage Investment Trust Inc.
(Exact name of registrant as specified in its governing instruments)

1455 Broad Street, Floor 2
Bloomfield, New Jersey 07003
(973) 542-7170
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Craig M. Corn
Chief Executive Officer
1455 Broad Street, Floor 2
Bloomfield, New Jersey 07003
(973) 542-7024
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

         If any of the Securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:    o

         If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         If this Form is a post effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         If this Form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.    o

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

CALCULATION OF REGISTRATION FEE

(1)

Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Includes the offering price of common stock that may be purchased by the underwriters upon the exercise of their overallotment option.

         The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these shares until the registration statement filed with the Securities and Exchange Commission becomes effective. This preliminary prospectus is not an offer to sell these shares and it is not soliciting an offer to buy these shares in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated December 19, 2014

Preliminary Prospectus

                  Shares

Common Stock

         Reverse Mortgage Investment Trust Inc. is a leading fully integrated finance company solely focused on the reverse mortgage industry. We originate, acquire, service, invest in and manage reverse mortgage loans and securities backed by reverse mortgage loans. We focus primarily on home equity conversion mortgage loans, which are reverse mortgage loans that are insured by the Federal Housing Administration, and mortgage-backed securities backed by such loans, the ultimate payment of principal and interest of which is guaranteed by the Government National Mortgage Association.

         This is our initial public offering and no public market currently exists for shares of our common stock. We are offering                        shares of our common stock, and the selling stockholders named in this prospectus are offering                        shares of our common stock. We will not receive any proceeds from the sale of the shares of our common stock by the selling stockholders. We expect the initial public offering price of our shares of common stock to be between $            and $            per share. We intend to apply to have our common stock listed on the New York Stock Exchange under the symbol "RMIT."

         We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012.

         We intend to elect to qualify as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, commencing with our taxable year ending December 31, 2014. To assist us in complying with the limitations on the concentration of ownership of a REIT imposed by the Internal Revenue Code, among other purposes, our charter will prohibit, with certain exceptions, ownership by any person of more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock, the outstanding shares of any class or series of our preferred stock or the aggregate outstanding shares of all classes and series of our capital stock. See "Description of Capital Stock—Restrictions on Ownership and Transfer."

         Investing in our common stock involves risks. You should read the section entitled "Risk Factors" beginning on page 25 for a discussion of certain risk factors that you should consider before investing in our common stock.

         We have granted the underwriters an option to purchase up to an additional                shares of our common stock from us at the initial public offering price, less the underwriting discounts and commissions, within 30 days after the date of this prospectus to cover overallotments, if any.

         Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

         The shares sold will be ready for delivery on or about                , 2015.

         FBR

The date of this prospectus is                , 2015.

CONTENTS

        You should rely only on the information contained in this prospectus, any free writing prospectus prepared by us or information to which we have referred you. We and the selling stockholders have not, and the underwriters have not, authorized anyone to provide you with additional information or information different from that contained in this prospectus. We and the selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of shares of our common stock.

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MARKET AND INDUSTRY DATA AND FORECASTS

        Certain market and industry data included in this prospectus has been obtained from third-party sources that we believe to be reliable. Market estimates are calculated by using independent industry sources and publications, government publications and third-party forecasts in conjunction with our assumptions about our markets. Although we believe that these sources are reliable, we have not independently verified such third-party information and we cannot assure you of the accuracy or completeness of the data. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the headings "Cautionary Statements Concerning Forward-Looking Statements" and "Risk Factors" in this prospectus.

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GLOSSARY

        The following is a glossary of certain industry terms used in this prospectus:

        "Agency" means a U.S. government agency, such as Ginnie Mae, or a U.S. government sponsored enterprise, such as Fannie Mae or Freddie Mac.

        "Agency HMBS" means mortgage-backed securities backed by HECM loans, the ultimate payment of principal and interest of which is guaranteed by Ginnie Mae.

        "Agency MBS" means traditional forward mortgage-backed securities, the timely payment of principal and interest of which is guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. For purposes of this definition, Agency MBS does not include Agency HMBS.

        "Agency H-REMIC securities" means securities issued by real estate mortgage investment conduits collateralized by Agency HMBS.

        "ARM" means a mortgage loan whose rate of interest is adjusted periodically to reflect market conditions.

        "CFPB" means the Consumer Financial Protection Bureau.

        "CFTC" means the Commodity Futures Trading Commission.

        "convexity" is a measurement of the sensitivity of the duration of a security to changes in interest rates.

        "CPR" means conditional prepayment rate.

        "Dodd-Frank Act" means the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

        "expected interest rate" means the interest rate as utilized by the FHA to calculate available loan proceeds in accordance with FHA guidelines for adjustable and fixed-rate HECM loans, respectively.

        "Fannie Mae" means the Federal National Mortgage Association, a U.S. government sponsored enterprise.

        "FHA" means the Federal Housing Administration, a division of HUD.

        "FHA debenture rate" means the regulatory established interest rate of the FHA used for purposes of calculating a mortgage claim.

        "FHA insurance" means the insurance provided by the U.S. federal government through the FHA for qualifying mortgage insurance loans made by FHA-approved lenders.

        "Freddie Mac" means the Federal Home Loan Mortgage Corporation, a U.S. government sponsored enterprise.

        "funded fair value" means the fair value gain associated with the securitization through the Ginnie Mae HMBS program of a HECM loan based on its unpaid principal balance at the time of securitization.

        "futures" or "forward contracts" means a financial contract obligating counterparties to buy or sell an asset or financial instrument at a predetermined future date and price.

        "Ginnie Mae" means the Government National Mortgage Association, a division of HUD.

        "Ginnie Mae issuer" means an issuer that has been approved by Ginnie Mae to issue Agency HMBS and service the related underlying collateral.

        "HECM loan" means a home equity conversion mortgage loan, more commonly known as a reverse mortgage loan, that is insured by the FHA.

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        "H-REMIC" means a real estate mortgage investment conduit comprised of Agency HMBS.

        "HUD" means the Department of Housing and Urban Development, a U.S. government agency.

        "LIBOR" means the London Interbank Offered Rate, which is the benchmark interest rate that banks charge each other for loans.

        "loan limit" means the FHA-prescribed maximum claim amount limit for a HECM loan.

        "mandatory purchase event" means an issuer's obligation under Ginnie Mae's HMBS program to purchase all participations related to a HECM loan when the outstanding principal balance of the related HECM loan equals or exceeds 98% of the maximum claim amount.

        "maturity event" means an event that causes a reverse mortgage loan to become due and payable, which for a HECM loan includes the death of a borrower (provided there is no deferral of the due and payable status by an eligible non-borrowing spouse), a change in ownership of the home or status of the home as a principal residence, failure of the borrower to occupy the property for a period of longer than 12 consecutive months because of physical or mental illness, or the failure of the borrower to meet certain obligations (which remain uncured) such as the payment of property taxes or insurance premiums.

        "maximum claim amount" means the maximum dollar amount that the FHA will pay on a claim for insurance benefits with respect to a HECM loan or on assignment of a HECM loan to the FHA. This amount is the lowest of the appraised value of the property at the time of loan origination, the sale price of the property being purchased, or the national mortgage limit as determined by FHA guidelines (the current limit is $625,500).

        "MIP" means the mortgage insurance premium paid by a mortgagor to obtain mortgage insurance on a mortgage loan. The fee may be collected as a lump sum at loan closing or as a periodic amount included in the monthly payment, or both.

        "non-Agency HMBS" means private label reverse mortgage-backed securities that are issued outside of the Ginnie Mae HMBS program that are backed by HECM loans. The ultimate payment of principal and interest on these securities is not guaranteed by an Agency.

        "non-Agency reverse mortgage-backed securities" means private label mortgage-backed securities that are issued outside of the Ginnie Mae HMBS program that are backed by private reverse mortgage loans. The ultimate payment of principal and interest on these securities is not guaranteed by an Agency.

        "non-supervised FHA mortgagee" means non-depository mortgage lenders approved by the FHA to perform the origination, underwriting, purchasing, holding, servicing, and selling of FHA insured mortgages.

        "originate" means to fund or purchase a loan.

        "principal limit" means the full committed amount of the originated loan and is equal to the principal limit factor multiplied by the maximum claim amount, which amount is determined at the time of loan origination and does not change over the life of the loan.

        "principal limit factor" is the factor based on the youngest spouse's age and the expected interest rate that is used to calculate the initial principal limit as mandated by HUD.

        "private reverse mortgage loan" means a non-FHA insured reverse mortgage loan.

        "REO" means real estate owned.

        "re-securitization" means the process of pooling already-securitized financial instruments and creating new financial instruments that are repaid from the collection or other liquidation of the already-securitized financial instruments.

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        "reverse mortgage loan" is a type of home loan that is available to homeowners who are 62 years or older that enables them to convert a portion of the equity in their home into cash.

        "securitization" means the process of pooling loans or other income producing financial assets and issuing new financial instruments that are repaid primarily from the cash flows, servicing, collection or other liquidation of the underlying pooled assets.

        "tail" means a principal addition to a reverse mortgage borrower's loan balance that may be securitized.

        "tail fair value" means the fair value gain we recognize based on the discounted net present value of all anticipated cash flows associated with future tail securitizations, including future net Ginnie Mae required servicing fees, the estimated gain or loss on the securitization of tails, and the cash outflows associated with credit losses or operational costs that may arise from certain shortfalls on FHA loss claims or potential losses on disposition of REO retained by us after a claim is settled with the FHA.

        "undisbursed principal limit" means, at any time, the difference between the principal limit and the unpaid principal balance of a reverse mortgage loan at such time.

        "unpaid principal balance" means, at any time, the used (or drawn against) portion, including accrued interest, of a reverse mortgage loan at such time.

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SUMMARY FINANCIAL DATA

        The following table presents summary historical financial data as of and for the periods indicated. The summary financial data are derived from our historical financial statements and should be read in conjunction with the more detailed information contained in the financial statements and accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations," which are included elsewhere in this prospectus. The summary balance sheet data as of December 31, 2013 have been derived from our audited financial statements included elsewhere in this prospectus. The summary operating and balance sheet data as of and for the three and nine months ended September 30, 2014 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. Due to our limited operating history, the summary operating and balance sheet data presented below do not reflect comparable period over period results, nor are they indicative of future financial condition or results of operations.

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RISK FACTORS

        You should carefully consider each of the following risk factors and all of the other information set forth in this prospectus before deciding to invest in our common stock. The risks and uncertainties described below are not the only ones we face. If any of the following risks actually occur, our business, financial condition and results of operations could be harmed and we may not be able to achieve our goals. If that occurs, the value of our common stock could decline and you could lose some or all of your investment.

Risks Relating to Our Business

We have limited operating history and may not be able to operate our business successfully, find suitable investments, or generate sufficient revenue to make or sustain distributions to our stockholders.

        We have limited operating history, and we cannot assure you that we will be able to operate our business successfully, find suitable investments or implement our operating policies and strategies as described in this prospectus. Our ability to provide attractive risk-adjusted returns to our stockholders over the long term is dependent on our ability both to generate sufficient cash flow to pay an attractive dividend and to achieve capital appreciation, and we cannot assure you we will do either. There can be no assurance that we will be able to generate sufficient revenue from operations to pay our operating expenses and make distributions to stockholders. The results of our operations and the implementation of our business plan depend on several factors, including the availability of opportunities for investment in our target assets, the level and volatility of interest rates, the availability of adequate equity capital as well as short and long-term financing, conditions in the financial markets and economic conditions.

Recent difficulties in the reverse mortgage industry have led to new legislation and rulemaking, which could lead to a reduction in the size of the available market, the consequences of which could have a material adverse impact on our business, liquidity, financial condition and results of operations.

        According to a 2012 report by the CFPB, as of the end of February 2012, 9.4% of outstanding HECM loans were in default on the payment of real estate taxes and/or property insurance premiums. In response to these and other factors, in an effort to strengthen the HECM loan program, the FHA has undertaken a number of steps that could, among other things, reduce the size of the overall reverse mortgage market. For example, the FHA raised its MIP and reduced the amount borrowers could borrow. In addition, on August 9, 2013, the President signed into law the Reverse Mortgage Stabilization Act of 2013, giving the FHA the authority to more closely manage the HECM loan program. The bill grants the FHA the ability to make structural changes to the HECM loan program through a series of administrative mortgagee letters, which allows the FHA to act more quickly than is possible with the traditional regulatory change process. Following the bill's passage, the FHA issued a mortgagee letter on September 3, 2013 implementing the following structural changes to the HECM loan program effective September 30, 2013:

•

a consolidation of previous HECM loan products into a single HECM loan product with one principal limit table;



•

a lower upfront MIP for borrowers who draw 60% or less of their initial principal limit (0.5% upfront MIP, compared to 2.50% for those who take more than 60% of their initial principal limit);



•

a utilization restriction limiting borrowers from drawing no more than the greater of 60% of their initial principal limit or their mandatory obligations (such as an existing mortgage) plus an additional 10% of their principal limit at the time of closing and during the first year of the loan; and



•

the creation of a single disbursement lump sum payment option, which allows borrowers to take a single lump sum disbursement (following the same utilization guidelines above), but not have access to any more funds for the life of the loan, except for certain repair or property charge set asides, if elected and established on a loan (subsequently, the FHA, through a mortgagee letter that was

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published in June 2014, refined a borrower's ability to use the single disbursement lump sum payment option by requiring such option to be used on all fixed-rate HECM loans and not permitting such option to be used for any adjustable-rate HECM loans).

        On November 10, 2014, the FHA published the financial assessment guidelines which the FHA mandated that all lenders must implement for new applications on or after March 2, 2015. The guidelines mandate that lenders evaluate a HECM loan applicant's willingness and capacity to meet his or her ongoing real estate tax and property insurance premium obligations. Lenders will be required to evaluate an applicant's sources of cash flow, credit history and payment history before rendering a credit decision. Lenders will still be able to originate a HECM loan to some applicants who have not demonstrated a willingness and/or capacity to meet their ongoing real estate tax and property insurance premium obligations by mandating a life expectancy set-aside (i.e., "freezing" a portion of the principal limit that cannot be drawn by the borrowers based on the results of the financial assessment).

        These program changes could further limit the size of the available market as they have reduced the proceeds a borrower would be able to borrow. Any of the foregoing modifications to the HECM loan program, or others that are not yet contemplated or implemented, could increase the costs of underwriting the HECM loans, decrease the attractiveness of HECM loans to potential borrowers, limit the number of borrowers eligible to receive HECM loans and/or decrease the maximum size of HECM loans, any of which could decrease the availability of our target assets, which could have a material adverse impact on our business, liquidity, financial condition and results of operations.

If the market for HECM loans and other reverse mortgage loans does not develop as we anticipate, our business, liquidity, financial condition and results of operations may be materially adversely affected.

        The growth of our business depends, in large part, on the anticipated growth in demand for HECM loans and other reverse mortgage loans. We expect the demand for HECM loans to increase significantly as more potential borrowers reach 62 years of age with limited retirement savings. However, according to the CFPB, homeowners have historically shown a general reluctance to enter into reverse mortgages for a variety of reasons, such as a belief that the product should be used only as a last resort, a desire to own the home free and clear after many years of making mortgage payments and a desire to leave the home to their children or other heirs as an inheritance. In addition, periods of declining real estate values may reduce the level of new reverse mortgage loan originations since borrowers would be entitled to receive less proceeds. If the growth in demand for reverse mortgage loans is not as significant as we anticipate or does not occur as rapidly as we expect, our business, liquidity, financial condition and results of operations may be materially adversely affected.

Difficult and volatile conditions in the mortgage and residential real estate markets, as well as the broader financial markets, may cause us to experience losses related to our assets and there can be no assurance that we will be successful in executing our business strategies amidst such conditions.

        Our results of operations may be materially affected by conditions in the market for reverse mortgages and mortgage-related assets, including reverse mortgage-backed securities, as well as the residential real estate market, the financial markets and the economy in general. Continuing concerns about the mortgage market and the real estate market, as well as inflation, energy costs, geopolitical issues, unemployment and the availability and cost of credit, have contributed to increased volatility and diminished expectations for the economy and markets going forward. In particular, the U.S. residential mortgage market has been severely affected by changes in the lending landscape and has experienced defaults, credit losses and significant liquidity concerns, and there is no assurance that these conditions have stabilized or that they will not worsen. Further, there has been significant volatility in the price of residential mortgage assets. All of these factors have impacted investor perception of the risk associated with residential mortgage assets and had an impact on the value of existing real property and mortgages and new demand for homes and mortgages, which has weighed, and may continue to weigh, heavily on real estate and mortgage prices and

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performance. Further deterioration of the mortgage and residential real estate markets may affect our ability to identify target assets that will provide us with attractive return opportunities and may cause us to experience losses related to our assets. Declines in the value of our portfolio, or perceived market uncertainty about the value of our assets, would likely make it difficult for us to obtain financing on favorable terms or at all. Our profitability may be materially adversely affected if we are unable to obtain cost effective financing. An increase in the volatility and deterioration in the broader residential mortgage and securitization markets as well as the broader financial markets may adversely affect the performance and market value of our assets, which may reduce our earnings.

We operate in a competitive market for investment opportunities and future competition may limit our ability to originate desirable investments in our target assets and could also affect the pricing of these assets.

        We compete with several third-party providers for origination and servicing opportunities, including other independent non-bank originators and servicers. Our competitive position in the reverse mortgage sector is largely determined by our ability to differentiate ourselves from other third-party originators and servicers through our technology, compliance and responsiveness to the demands of the industry regulators. In addition, a number of entities compete with us in acquiring and originating assets and obtaining financing. In acquiring and originating our target assets, we may compete with other public and private REITs, specialty finance companies, savings and loan associations, credit unions, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies and other entities. In addition, other REITs and other entities with similar asset acquisition objectives that may be organized in the future may compete with us in acquiring and originating assets and obtaining financing. These competitors may be significantly larger than us, may have access to greater capital and other resources or may have other advantages. Furthermore, some competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Current market conditions may attract more competitors, which may increase the competition for sources of financing. An increase in the competition for sources of funding could adversely affect the availability and cost of financing, and thereby adversely affect the market price of our capital stock. Many of our competitors are not subject to the operating constraints associated with REIT qualification or maintenance of our exclusion from registration as an investment company under the 1940 Act. Furthermore, competition for investments in our target assets may lead to the price of such assets increasing, which may further limit our ability to generate desired returns. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will continue to be able to identify and make investments that are consistent with our investment objective.

We may change our operational policies (including our investment strategies and policies and the target assets in which we may invest) with the approval of our board of directors but without stockholder approval or notice to our stockholders at any time, which may adversely affect the market value of our common stock and our ability to make distributions to our stockholders.

        Our board of directors determines our operational policies and may amend or revise our policies, including our policies with respect to our target assets, such as expanding our target assets to include other real estate-related assets, dispositions, growth, operations, indebtedness, capitalization and dividends, or approve transactions that deviate from these policies, without a vote of, or notice to, our stockholders at any time. We may change our investment strategy at any time with the approval of our board of directors but without the consent of or notice to our stockholders, which could result in our making investments that are different in type from, and possibly riskier than, the investments contemplated in this prospectus.

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We expect to continue to use leverage as part of our investment strategy but we do not have a formal policy limiting the amount of debt we may incur. Our board of directors may change our leverage policy without stockholder consent.

        We expect to continue to use leverage as part of our investment strategy but we do not have a formal policy limiting the amount of debt we may incur. The amount of leverage we deploy for particular investments in our target assets depends upon our assessment of a variety of factors, which may include the availability of particular types of financing and our assessment of the credit, liquidity, price volatility and other risks of those assets and the creditworthiness of our financing counterparties. Our charter and bylaws do not limit the amount of indebtedness we can incur and, other than RMF which, as a Ginnie Mae issuer, must meet certain minimum capital requirements equal to $5 million plus 1% of the outstanding balance of Agency HMBS that it issues and has been authorized by Ginnie Mae to issue in the future, we are not required to maintain any particular consolidated debt-to-equity leverage ratio. Although we currently do not have a targeted debt-to-equity ratio for our assets, we expect to deploy over time, assuming current market conditions continue, on a debt-to-equity basis, four to eight times leverage on our Agency HMBS, non-Agency HMBS and Agency H-REMIC securities, depending on our asset composition. Our board of directors has discretion to deviate from or change our leverage policy at any time without the consent of our stockholders, which could result in an investment portfolio with a different risk profile.

Our ability to generate returns for our stockholders through our investment, finance and operating strategies is subject to the existing market conditions, and we may make significant changes to these strategies in response to changing market conditions.

        We have been formed to generate attractive risk-adjusted returns to our stockholders over the long term through dividend distributions and capital appreciation. We seek to achieve this objective by originating, acquiring, servicing, investing in, and managing a diversified portfolio of our target assets. In the future, to the extent that market conditions change and we have sufficient capital to do so, we may, depending on prevailing market conditions, change our investment strategy in response to opportunities available in different interest rate, economic, regulatory and credit environments. As a result, we cannot predict the percentage of our equity that will be invested in any of our target assets at any given time.

We cannot at the present time predict the unintended consequences and market distortions that may stem from far ranging governmental intervention in the economic and financial system or from regulatory reform of the oversight of the financial markets.

        The U.S. government, the U.S. Federal Reserve, the U.S. Treasury, the SEC and other governmental and regulatory bodies have taken or are taking various actions in an effort to address the underlying causes of, and to contain the fallout from, the recent global financial crisis. This far ranging government intervention in the economic and financial system may carry unintended consequences and cause market distortions. We are unable to predict at this time the extent and nature of any such unintended consequences and market distortions.

        On July 21, 2010, President Obama signed into law the Dodd-Frank Act. The Dodd-Frank Act may impact the residential mortgage loan securitization market in that it seeks to reform the asset-backed securitization market (including the reverse mortgage-backed securities market) by requiring the retention of a portion of the credit risk inherent in the pool of securitized assets and by imposing additional registration and disclosure requirements. Some of the provisions of the Dodd-Frank Act have become effective or been implemented, while others are in the process of being implemented or will become effective in the future. Provisions of the Dodd-Frank Act require significant revisions to the legal and regulatory framework that applies to the asset-backed securities markets and securitizations. Certain of the new requirements may affect our ability to securitize our assets. For example, in response to the requirements of the Dodd-Frank Act, the SEC proposed certain revisions to Regulation AB, which provides a comprehensive regime for the registration, disclosure and reporting of asset-backed securities.

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The proposed revisions, which built on earlier revisions proposed by the SEC, would affect both the existing Regulation AB regime created specifically for public issuance, as well as asset-backed securities sold in most private offerings. The SEC has not sought to finalize its proposed revisions to Regulation AB, nor has the SEC indicated what changes, if any, it will make to its proposed revisions prior to finalization.

        We cannot predict when, if at all, the final revisions to Regulation AB will be effective, nor what the content of such final revisions will contain. Similarly, we cannot predict how any final revisions will affect our ability to securitize our assets.

        The Dodd-Frank Act also created a new regulator, the CFPB, which now oversees many of the core laws that regulate the mortgage industry, including among others, the Real Estate Settlement Procedures Act and the Truth in Lending Act as well as other federal consumer financial protection laws and fair lending laws applicable to reverse mortgages. We cannot predict what actions, if any, that the CFPB will take in the reverse mortgage markets, nor what the impact of such actions will be on the mortgage markets or our results of operations, financial condition and business.

        In addition, recent state legislative proposals have considered strengthening consumer protections for reverse mortgage borrowers by extending a consumer's right of rescission, increasing disclosure requirements and calling for the imposition of a fiduciary duty on those who offer, sell, or arrange the sale of a reverse mortgage. Concern over lending practices has led some states to expand oversight to include prior approval of the specific reverse mortgage lending programs offered, in addition to licensing requirements. Moreover, recently, a number of local governmental authorities have announced that they are evaluating eminent domain as one of several potential alternatives to help resolve housing finance challenges. This type of legislation and action could have a severe negative impact on the mortgage markets and may introduce risks that are difficult, if not impossible, to quantify. There is no certainty as to whether any governmental actors and entities will take these steps, or ultimately pass other legislation that will affect the reverse mortgage markets. However, such actions could have a dramatic impact on our business, results of operations and financial condition, and the cost of complying with any additional laws and regulations could have a material adverse effect on our financial condition and results of operations. In addition to the foregoing, the U.S. government, U.S. Federal Reserve, U.S. Treasury and other governmental and regulatory bodies may enact additional legislation or regulatory action that could have a material and adverse effect on our ability to execute our business strategies.

There may be material changes to the laws, regulations, rules or practices of or applicable to the FHA, HUD, Ginnie Mae or Fannie Mae which could materially adversely affect the reverse mortgage industry as a whole.

        The reverse mortgage industry is largely dependent upon the FHA, HUD and government agencies like Ginnie Mae. In addition, the reverse mortgage industry is dependent on Fannie Mae as a result of the large portfolio of reverse mortgages that it holds. There can be no guarantee that any or all of these entities will continue to participate in the reverse mortgage industry or that they will not make material changes to the laws, regulations, rules or practices applicable to reverse mortgage programs. For example, on June 25, 2013, a bipartisan group of Senators introduced a draft bill titled the "Housing Finance Reform and Taxpayer Protection Act of 2013" to the U.S. Senate, which would wind down government sponsored enterprises—Fannie Mae and Freddie Mac—over a period of five years and replace the public securitization market used by the government sponsored enterprises with a public-private alternative market. On July 22, 2013, members of the U.S. House Committee on Financial Services introduced a similar draft bill titled "Protecting American Taxpayers and Homeowners Act" to the U.S. House of Representatives. While distinguishable in some respects from the Senate version, the House bill would also eliminate Fannie Mae and Freddie Mac and seek to increase the opportunities for private capital to participate in, and consequently bear the risk of loss in connection with, government-guaranteed mortgage-backed securities. Additional provisions of the bill included, among other things, phasing out the FHA HECM loan program within two years of enactment of the bill and reducing the size and scope of the FHA. In March 2014, a bipartisan group of U.S. senators led by members of the U.S. Senate Banking

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Committee announced that they had agreed on a bill to overhaul the nation's housing finance system and eliminate Fannie Mae and Freddie Mac. The bill would replace Fannie Mae and Freddie Mac with a new federal regulator, called the Federal Mortgage Insurance Corporation, to provide guarantees for government mortgages and regulate the system. As the insurer of last resort, the Federal Mortgage Insurance Corporation would require 10% in private capital reserves. The guarantee, provided for a fee equivalent to 0.1% interest, would not kick in until the private reserves were exhausted. The bill would also set a minimum down payment of 5% for home buyers, except for first-time home buyers, who would instead be required to put down 3.5% for the mortgage to qualify for the guarantee. There is no way to know if these proposals will become law or, should one of the proposals become law, if or how the enacted law will differ from the current draft of the bill or its impact on our company's business or the reverse mortgage market.

        Prior to 2009, Fannie Mae was a significant investor in HECM loans and as a result holds a large portfolio of reverse mortgages. According to the annual report on Form 10-K for the fiscal year ended December 31, 2013 filed by Fannie Mae, Fannie Mae held an outstanding unpaid principal balance of reverse mortgage loans and Fannie Mae mortgage-backed securities backed by reverse mortgage loans of $48.0 billion as of December 31, 2013 and $50.2 billion as of December 31, 2012. Since September 2008, Fannie Mae has been placed into the conservatorship of the Federal Housing Finance Agency, or FHFA, in response to increased market concerns about Fannie Mae's ability to withstand future credit losses associated with securities held in its investment portfolio and on which it provides guarantees without the direct support of the federal government. Under this conservatorship, Fannie Mae is required to reduce the amount of mortgage loans it owns or for which it provides guarantees. In addition to the FHFA becoming the conservator of Fannie Mae, the U.S. Treasury and FHFA entered into a preferred stock purchase agreement with Fannie Mae pursuant to which Fannie Mae is obligated, among other things, to wind down its mortgage and Agency securities portfolios by 15% each year until its mortgage assets reach $250 billion. As a result, it is possible that Fannie Mae may decide to sell some or all of the reverse mortgages in its portfolio. Although there are some characteristics of Fannie Mae's reverse mortgage assets that differ from our anticipated portfolio (e.g., Fannie Mae's reverse mortgage assets are seasoned and not newly-issued and are indexed to the one-year Constant Maturity Treasury index which cause investors to typically demand a discount on price), the resultant increase in market supply of reverse mortgage loans or securities could result in a market price decline of the assets in our portfolio.

        In addition, if participation by Ginnie Mae in the reverse mortgage market were reduced or eliminated, or its structure were to change (e.g., limitation or removal of the guarantee obligation), our ability to originate HECM loans and acquire Agency HMBS could be adversely affected. These developments could materially and adversely impact our portfolio. We could be negatively affected in a number of ways depending on the manner in which related events unfold for Ginnie Mae. A reduction in the supply of HECM loans and Agency HMBS could negatively affect the pricing of our existing HECM loans and Agency HMBS. We rely on our HECM loans and Agency HMBS as collateral for our financings under our borrowings. Any decline in their value, or perceived market uncertainty about their value, may make it more difficult for us to obtain financing on our assets on acceptable terms or at all, or to maintain our compliance with the terms of any financing transactions. Further, the current support provided by the U.S. government through Ginnie Mae, and any additional support it may provide in the future, could have the effect of lowering the interest rates we expect to receive from HECM loans and Agency HMBS, thereby tightening the spread between the interest we earn on our assets and the cost of financing those assets, and may increase the prices of HECM loans and Agency HMBS, thereby lowering the yields we would expect to receive on the assets we purchase. Future legislation affecting Ginnie Mae may create market uncertainty and have the effect of reducing the actual or perceived credit quality of Ginnie Mae and the securities issued by it. As a result, such laws could increase the risk of loss on our investments in HECM loans and Agency HMBS. It also is possible that such laws could adversely impact the market for such assets and the spreads at which they trade.

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        In addition, our status as an approved non-supervised FHA mortgagee and an approved Ginnie Mae issuer is subject to compliance with FHA's and Ginnie Mae's respective regulations, guides, handbooks, mortgagee letters and all participants' memoranda. Any discontinuation of, or significant reduction or material change in, the operation of these entities or the loss of our approved non-supervised FHA mortgagee/Ginnie Mae issuer status would have a material adverse effect on our overall business and our financial position, results of operations and cash flows.

Although the steps taken by the FHA since 2008 have resulted in positively affecting the value of the MMI Fund, which insures mortgages made by the FHA, such as HECM loans, the economic value of the HECM loan portfolio in the MMI Fund is still negative and there can be no assurance that the FHA will continue to take steps to support the HECM loan program.

        In November 2012, the HUD Annual Report to the U.S. Congress, or the 2012 HUD Annual Report, detailed some of the challenges with the health of the MMI Fund. According to the report, the MMI Fund capital reserve ratio fell below zero to negative 1.44% in 2012 with actuarial assessments estimating the economic value of the MMI Fund to be negative $16.3 billion as of the end of 2012, with the economic value of HECM loans estimated at negative $2.8 billion and the traditional forward mortgage loan estimated at negative $13.5 billion. The report highlighted factors of the HECM loan program which contributed to the strain on the MMI Fund, including higher utilization rates than were projected, lower than anticipated home price appreciation rates, higher default rates than anticipated and increased longevity of HECM loan borrowers.

        The 2013 Annual Report to the U.S. Congress, which HUD released on December 13, 2013, noted that the steps taken by the FHA since 2008 to restore capital, including adjusting premiums and tightening credit policies, have resulted in positively affecting the value of the MMI Fund. The report showed that the value of the MMI Fund had improved by $15 billion since 2012, growing from negative $16.3 billion at the end of 2012 to negative $1.3 billion at the end of 2013, which represented a 92% improvement in the capital reserve ratio rising from negative 1.44% to negative 0.11%. The report also included the results of two independent actuarial evaluations of the MMI Fund. The independent assessments forecasted considerable improvement in the actuarial economic forecasts of HECM loans in the MMI Fund. One actuarial report estimated that the HECM loans in the MMI Fund had an economic value of $3.7 billion as of 2013 and forecasted that the economic value of the HECM loan portfolio would increase to $7.1 billion by the end of 2020. The other actuarial report estimated that the HECM loans in the MMI Fund had an economic value of $6.5 billion as of 2013 with the potential to grow to $15.4 billion by the end of 2020. In evaluating the HECM loans, the actuarial reports based their estimates on projected improvements in the performance of existing loans and the addition of new books of business, attributable in part to recent and forthcoming changes in the HECM loan program, which are expected to improve loan performance.

        The 2014 Annual Report to the U.S. Congress, which HUD released on November 17, 2014, indicated that the economic value of the MMI Fund had further improved by $6 billion (a $21 billion improvement over two years) to a positive $4.8 billion, with a positive capital reserve ratio of 0.41%, and $40 billion in available cash reserves. According to HUD, this improvement was driven by aggressive policy changes, a 14% improvement in delinquency rates, a 16% improvement in recovery rates and the fact that foreclosures were down 68% since the height of the crisis. The economic value of the traditional forward mortgage loan portfolio had improved by $13.8 billion, from negative $7.9 billion to positive $5.9 billion, with a corresponding improvement in the capital ratio to 0.56%. However, the report showed that the economic value of the HECM loan portfolio had deteriorated from positive $6.5 billion to negative $1.2 billion, with a corresponding decline in the HECM loan capital reserve ratio to negative 1.20% from negative 0.11%. The report noted that the increase in economic value relating to HECM loans in 2013 was primarily a result of a $4.0 billion discretionary transfer of capital from the traditional forward mortgage loan portfolio in the MMI Fund to the HECM loan portfolio and a $1.7 billion mandatory appropriation.

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        Although the steps taken by the FHA since 2008 have resulted in positively affecting the value of the MMI Fund, the economic value of the HECM loan portfolio in the MMI Fund is still negative as indicated by the 2014 Annual Report to the U.S. Congress and there can be no assurance that the FHA will continue to take steps to support the HECM loan program.

Concerns over U.S. fiscal policy, as well as any further downgrade of U.S. government securities by credit rating agencies and the economic crisis in Europe, could have a material adverse effect on our business, financial condition and results of operations.

        Financial markets have recently been affected by concerns over U.S. fiscal policy. Although the U.S. government passed legislation at the beginning of 2013 averting the so-called "fiscal cliff" (which, in the absence of such legislation, would have resulted in automatic tax increases and spending cuts at the end of 2012), significant uncertainty remains relating to the stability of the U.S. fiscal and budgetary policy. This uncertainty, together with the continuing U.S. debt and budget deficit concerns, as well as recent issues relating to sovereign debt conditions in Europe, continue to contribute to the possibility of additional economic slowdowns and/or credit rating downgrades. The impact of U.S. fiscal uncertainty, or any further downgrades to the U.S. government's sovereign credit rating, or its perceived creditworthiness, or the impact of the recent crisis in Europe with respect to the ability of certain countries to continue to service their sovereign debt obligations, is inherently unpredictable and could adversely affect U.S. and global financial markets and economic conditions. In addition, any further downgrade of U.S. government securities by credit rating agencies, and/or a worsening or expansion of the recent crisis in Europe, may have an adverse impact on fixed income markets, which in turn could cause our net income to decline or have a material adverse effect on our financial condition.

        If the European economic situation were to worsen, or expand to other countries within Europe, we may be subject to enhanced risk of counterparty failure as well as related problems arising from a lack of liquidity in our markets.

        There can be no assurance that governmental or other measures to aid economic recovery will be effective. These developments and the government's credit concerns in general could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. In addition, any decreased credit rating of U.S. government securities could create broader financial turmoil and uncertainty, which may exert downward pressure on the price of our shares of common stock. Continued adverse economic conditions could have a material adverse effect on our business, financial condition and results of operations.

Mortgage loan modification and refinancing programs and future legislative action may adversely affect the value of, and our returns on, our other target assets.

        The U.S. government, through the U.S. Federal Reserve, the FHA and the Federal Deposit Insurance Corporation, has implemented a number of federal programs designed to assist homeowners, including the Home Affordable Modification Program (which provides homeowners with assistance in avoiding residential mortgage loan foreclosures) and the Hope for Homeowners Program (which allows certain distressed borrowers to refinance their mortgages into FHA insured loans in order to avoid residential mortgage loan foreclosures). A number of these homeowner assistance programs have been enhanced or expanded. In addition, current administration officials and certain members of the U.S. Congress have indicated support for additional legislative relief for homeowners, including an amendment of the bankruptcy laws to permit the modification of mortgage loans in bankruptcy proceedings. Loan modifications are more likely to be used when borrowers are less able to refinance or sell their homes due to market conditions and when the potential recovery from a foreclosure is reduced due to lower property values. A significant number of loan modifications could result in decreased demand for HECM loans, which historically have been used by many borrowers to pay off their primary forward mortgage. Further,

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amendments to the bankruptcy laws that result in the modification of outstanding mortgage loans may adversely affect the value of, and the returns on, our assets.

Our ability to originate, service and foreclose on reverse mortgage loans in the future could be limited by the increasing number of proposed U.S. federal, state and local laws affecting certain mortgage-related assets.

        Legislation has been proposed which, among other provisions, could hinder the ability of a servicer to foreclose promptly on defaulted mortgage loans or would permit limited assignee liability for certain violations in the mortgage loan origination process, which could result in us being held responsible for violations in the mortgage loan origination process. In particular, foreclosure practices and standards relating to HECM loans are not firmly established and often require FHA approval. For example, between 2007 and 2009, the FHA informally instructed servicers to defer foreclosure on borrowers with property charge defaults for failure to pay property real estate taxes or property insurance premiums. Servicers paid the property charges, or corporate advances, for these mortgages despite the fact that borrowers had already withdrawn their entire authorized loan proceeds and did not have any mortgage loan funds left. Servicers continued to service the loans but did not proceed with foreclosures unless some other due-and-payable event occurred (e.g., the borrower died or sold the home). The servicers expected to be reimbursed for these corporate advances through the claim filing process with the FHA. In January 2011, the FHA issued formal guidance on property charge defaults clarifying the servicer's obligations to pay outstanding property charges, to use loss mitigation to help bring the loan out of default, and to pursue foreclosure if loss mitigation proved unsuccessful. After all loss mitigation options have failed, servicers may submit a due-and-payable request to the FHA. If the request is denied, the servicer must continue attempts at loss mitigation. If the request is approved, the servicer must proceed with foreclosure. We cannot predict whether or in what form the FHA, the CFPB, the U.S. Congress or the various state and local legislatures may enact further legislation affecting this aspect (or other aspects) of our business. We will evaluate the potential impact of any initiatives which, if enacted, could affect our future practices and results of operations. We are unable to predict whether U.S. federal, state or local authorities will enact laws, rules or regulations that will require changes in our practices in the future, and any such changes could adversely affect our cost of doing business and profitability.

We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances.

        During any period in which a borrower is not making required real estate tax and property insurance premium payments, we are required under servicing agreements to advance our own funds to meet contractual obligations to pay property taxes, insurance premiums, legal expenses and other protective advances. We are also required to advance funds to maintain, repair and market real estate properties. In certain situations, our contractual obligations may require us to make certain advances for which we may not be reimbursed. In addition, in the event a mortgage loan serviced by us defaults or becomes delinquent, the repayment to us of the advance may be delayed until the mortgage loan is repaid or refinanced or a liquidation occurs. A delay in our ability to collect advances may adversely affect our liquidity, and our inability to be reimbursed for advances could adversely affect our business, financial condition or results of operations.

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Our ability to originate, service, hold and sell HECM loans and other reverse mortgage loans may be adversely affected if we are not appropriately licensed or approved by government regulators in the various jurisdictions in which we will or do conduct our business.

        We generally are required to be licensed or approved by government regulators to originate, service, hold, and sell HECM loans and other reverse mortgage loans in various jurisdictions in which we will or do conduct our business, to timely apprise such regulators of changes in the owners, senior officers and directors of our company and, in certain circumstances, to secure the approval or consent of such regulators before such changes may become effective and to timely report to such regulators with respect to our business and such changes, among other things. Most state licensing laws require that before a "change of control" can occur, including in connection with a merger, acquisition or initial public offering, applicable state banking departments must approve the change. Most of these "change of control" statutes require that, if there is an acquisition, merger or initial public offering, the acquiring company or companies being merged or going public must notify the state regulatory agency and receive agency approval before the acquisition, merger or initial public offering is finalized. In connection with the formation transactions, we submitted notifications to each regulatory agency in each state in which RMF conducts business and obtained approval from the regulatory agencies in those states where it was required before we completed our acquisition of RMF. If we are required to obtain additional licenses or agency approvals to originate HECM loans, the process may be costly and could take six months or longer. There is no assurance that we will be able to obtain additional licenses, if required, or that we will not experience significant delays in seeking such licenses. Furthermore, we may be subject to various reporting and other requirements to maintain these licenses, and there is no assurance that we may satisfy those requirements. Our failure to maintain or obtain licenses may restrict our investment options and could harm our business.

        In addition, in states in which we plan to operate, a regulatory agency may regulate and enforce laws relating to mortgage loan origination companies and mortgage loan servicing companies. These rules and regulations generally provide for licensing as a mortgage origination company or mortgage servicing company. In certain states, we may also be subject to periodic examination by state regulatory authorities and some states may require special licensing or extensive regulation of our business. We may not be able to obtain or maintain all material licenses and permits required for our operations in certain states. The states that do not currently provide extensive regulation of our business may later choose to do so, and if such states so act, we may not be able to obtain or maintain all requisite licenses and permits.

        Future regulatory changes may increase our costs through stricter licensing laws, disclosure laws or increased fees, or may impose conditions to licensing that we are unable to meet. In addition, we may be subject to periodic examinations by state regulators, which could result in penalties imposed by state regulators due to compliance errors. Future state legislation and changes in existing regulation may significantly increase our compliance costs. This could make our business cost-prohibitive in the affected state or states, and our failure to satisfy those or other regulatory requirements could materially and adversely affect our business, financial condition and results of operations.

State or federal governmental examinations, legal proceedings or enforcement actions and related costs could have a material adverse effect on our liquidity, financial condition and results of operations.

        We may be involved in regulatory reviews and legal proceedings concerning matters that arise in the ordinary course of our business. An adverse result in regulatory actions or examinations or private lawsuits may adversely affect our financial results. Regulatory investigations, both state and federal, can be either formal or informal. The costs of responding to the investigations can be substantial. In addition, government-mandated changes to servicing practices could lead to higher costs and additional administrative burdens.

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We cannot predict the outcome of litigation regarding the "non-borrowing spouse" issue and its effect on the reverse mortgage industry.

        A provision of the National Housing Act, under which HECM loans are insured by the FHA, provides that the FHA may not insure a HECM loan unless it provides that the homeowner's obligation to satisfy the HECM loan is deferred until, among other things, the homeowner's death, and that, for purposes of this provision, homeowner includes the spouse of the homeowner. The FHA previously had interpreted this provision as applying to HECM loan mortgagors, and not to their spouses if they were not otherwise borrowing mortgagors (who generally are referred to as non-borrowing spouses). Recent court interpretations of these requirements, in decisions issued by the U.S. District Court for the District of Columbia, have caused the FHA to revise its requirements in this area, and may require it to make further adjustments, certain of which may adversely impact those who originate or originated, purchase or purchased, and service or serviced such loans. Under those revisions made by the mortgagee letter 2014-07 that was issued on April 25, 2014, and which became effective August 4, 2014, HECM loan applications taken on or after August 4, 2014 need to be underwritten to take into account the age of any non-borrowing spouses (having the effect of lowering the amount (net principal limit) of loan proceeds that may be made available under the HECM loan); new certifications (initial and annual) will be required to be made by HECM loan mortgagors, among others; non-borrowing spouses will be permitted to occupy the home securing the HECM loan for a potentially lengthy deferral period following the death of the HECM loan borrowing mortgagor; and, during these deferral periods, HECM loans will not be assumable (and therefore additional HECM loan proceeds may not be made available to the non-borrowing spouse) but generally still will be assignable to the FHA after the death of the borrowing mortgagor if the loan balance reaches 98% of the HECM loan maximum claim amount. Although these changes should bring additional clarity to the circumstances under which HECM loans involving non-borrowing spouses may be made, the available HECM loan amounts for such loans will be lower, and the origination and servicing requirements related to them may be more onerous, causing additional potential losses to us of market share or as a result of FHA audits or the curtailment of mortgage insurance claims payments by the FHA in connection with such HECM loans.

        The courts have determined with respect to the loans in question in the litigation that in the past the FHA inappropriately required HECM loan borrowing mortgagors (or their heirs) to satisfy the terms of their HECM loans upon the death of such borrowing mortgagors and without regard to the rights of their non-borrowing spouses under such provisions. However, it has yet to be determined with finality in those court decisions whether, and to what extent, this ruling applies to other HECM loans with non-borrowing spouses, and whether the costs associated with such non-borrowing spouses continuing to occupy such homes subsequent to such borrowing mortgagor deaths, though not subject to the terms of such HECM loans, will need to or be borne by entities that originated, purchased or serviced or service such HECM loans, or by the FHA. Pending that court determination, the FHA has provided for an extension of the time within which foreclosure must be initiated or concluded in such cases where there is an occupying non-borrowing spouse. That determination is subject to, among other things, a final decision being reached by the U.S. District Court for the District of Columbia in Plunkett v Donovan. Whether, and the extent to which, the costs associated therewith will need to or be borne by entities that originated, purchased, or serviced such loans (as opposed to the FHA) also has yet to be finally determined. An adverse decision by the court impacting the FHA could endanger the ongoing viability of the FHA HECM loan program. In addition, an adverse decision by the FHA as a result of this litigation also could adversely affect us. Further, to the extent we purchase HECM loans with case numbers issued prior to August 4, 2014, where a non-borrowing spouse is involved, we could face third party litigation claims in connection with such loans. Finally, for HECM loans with case numbers issued prior to August 4, 2014, our policy was to refrain from making loans where a non-borrowing spouse exists, subject to very limited and proscribed circumstances, including when: (1) a non-borrowing spouse has never been on the title to the home, and does not have any community property rights to the property, or (2) a non-borrowing spouse does not reside in the home and does not have any community property rights to the property. While we believe, given the current litigation

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environment, these policies are warranted and prudent, we cannot assure that they do not expose us to claims under fair lending laws.

We may be subject to liability for potential violations of predatory lending laws, which could adversely impact our results of operations, financial condition and business.

        Various U.S. federal, state and local laws have been enacted that are designed to discourage predatory lending practices. If any of our loans are found to have been originated in violation of predatory or abusive lending laws, we could incur losses, which could adversely impact our results of operations, financial condition and business.

Negative public opinion could damage our reputation and adversely affect our earnings.

        Reputation risk, or the risk to our business, earnings and capital from negative public opinion, is inherent in our business. Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending and debt collection practices, corporate governance, and actions taken by government regulators and community organizations in response to those activities. Negative public opinion can also result from media coverage, whether accurate or not. Negative public opinion can adversely affect our ability to attract and retain customers and employees and can expose us to litigation and regulatory action. Although we take steps to minimize reputation risk in dealing with our customers, business partners and communities, this risk will always be present in our organization.

We depend on communications and information systems and systems failures could significantly disrupt our business, which could adversely affect our business, financial condition and results of operations.

        Our business is dependent on our communications and information systems. Any failure or interruption of such systems caused by fire, power loss, telecommunications failures, unauthorized intrusion, computer viruses and disabling devices, natural disasters and other similar events may interrupt or delay our ability to provide services to our borrowers. Security breaches, acts of vandalism and developments in computer capabilities could result in a compromise or breach of the technology that we use to protect our borrowers' personal information and transaction data. Despite our efforts to ensure the integrity of our systems, it is possible that we may not be able to anticipate or implement effective preventive measures against all security breaches, especially because the techniques used change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources, including third parties such as persons involved with organized crime or associated with external service providers. Those parties may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to our data or that of our customers or clients. These risks may increase in the future as we continue to increase our reliance on the internet and use of web-based product offerings and on the use of cybersecurity.

        A successful penetration or circumvention of the security of our systems or a defect in the integrity of our systems or cybersecurity could cause serious negative consequences for our business, including significant disruption of our operations, misappropriation of our confidential information or that of our customers, or damage to our computers or operating systems and to those of our customers and counterparties. Any of the foregoing events could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation exposure and harm to our reputation, all of which could adversely affect our business, financial condition and results of operations.

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We depend on the accuracy and completeness of information about borrowers and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations.

        In deciding whether to extend a loan to borrowers, we may rely on information furnished to us by or on behalf of borrowers. We also may rely on representations of borrowers as to the accuracy and completeness of that information. In addition, when we originate loans, we rely heavily upon information supplied by third parties, including the information contained in the loan application, appraisal, and title information. While we have a practice of independently verifying borrower and third-party information, such information may be intentionally or negligently misrepresented and such misrepresentation may not be detected. Whether a misrepresentation is made by the loan applicant, another third party or one of our employees, we generally bear the risk of loss associated with the misrepresentation. We have controls and processes designed to help us identify misrepresented information; however, we may not have detected or may not detect all misrepresented information in our loan originations or from our business clients. Any such misrepresented information could materially and adversely affect our business, financial condition and results of operations.

The success and growth of our business will depend upon our ability to adapt to and implement technological changes.

        Our mortgage loan origination business is dependent upon our ability to effectively interface with our brokers, borrowers and other third parties and to efficiently process loan applications and closings. The origination process is becoming more dependent upon technological advancement. Tango 2.0, our proprietary state-of-the-art loan origination and operations software, and other technologies may not meet our needs for technological advancement in the future. The development of new technologies and maintaining and improving current technologies may require significant capital expenditures and maintaining the technological proficiency of our personnel may require significant expense.

        As technological requirements increase in the future, we may have to more fully develop these capabilities to remain competitive, and any failure to do so could adversely affect our business, financial condition and results of operations.

We may be unable to operate within the parameters that allow us to be excluded from regulation as a commodity pool operator, which would subject us to additional regulation and compliance requirements, and could materially adversely affect our business and financial condition.

        The Dodd-Frank Act established a comprehensive new regulatory framework for derivative contracts commonly referred to as "swaps." Under the Dodd-Frank Act, any investment fund that trades in swaps may be considered a "commodity pool," which would cause its operators to be regulated as a "commodity pool operator," or CPO. In December 2012, the Commodity Futures Trading Commission issued a no-action letter giving relief to operators of mortgage REITs from the requirement to register as a CPO. In order to qualify, we must, among other non-operation requirements: (1) limit our initial margin and premiums required to establish our swap or futures positions to no more than 5% of the fair market value of our total assets; and (2) limit our net income derived annually from our swaps and futures positions that are not "qualifying hedging transactions" to less than 5% of our gross income. The need to operate within these parameters could limit the use of swaps by us below the level that we would otherwise consider optimal or may lead to the registration of our company or our directors as commodity pool operators, which will subject us to additional regulatory oversight, compliance and costs.

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Risks Related to Our Assets

We will have broad discretion in the use of a significant part of the net proceeds from this offering and future capital and we may not use them effectively.

        Our management currently intends to use the net proceeds from this offering in the manner described in the "Use of Proceeds," and will have broad discretion in the application of the net proceeds from this offering and future capital.

        Our stockholders will not have input into our investment decisions. The failure of our management to apply the net proceeds from this offering and future capital effectively or find investments that meet our investment criteria in sufficient time or on acceptable terms could result in unfavorable returns or cause a material adverse effect on our business, financial condition, liquidity and results of operations.

There is variability when payments will be made on our HECM loans, Agency HMBS and non-Agency HMBS because the actual rate and timing of maturity events, voluntary prepayment events and mandatory purchase events could differ significantly from our expectations.

        The FHA insures HECM loans. The ultimate payment of the principal and interest of Agency HMBS is guaranteed by Ginnie Mae. However, the timing of any payment of principal and interest is uncertain, and will be made in respect of our HECM loans, Agency HMBS and non-Agency HMBS only upon (i) a maturity event, (ii) a borrower voluntary prepayment event which can occur at any time, (iii), solely in the case of Agency HMBS, a mandatory purchase event, which is an issuer's obligation to purchase all participations related to a HECM loan when the outstanding principal balance of the related HECM loan reaches 98% of its maximum claim amount (which is the lowest of the appraised value of the property at the time of loan origination, the sales price of the property being purchased or the national mortgage limit as determined in accordance with FHA guidelines, which is currently $625,500) or (iv) solely in the case of non-agency HMBS, an optional purchase event, where the sponsor (or an affiliate thereof) of the non-Agency HMBS may have the option to purchase the HECM loans collateralizing such securitization trust when the outstanding principal balance of the related HECM loan reaches 98% of its maximum claim amount. Consequently, payments of principal and accumulated interest will be made on Agency HMBS only (i) when and to the extent a payment or payoff is made on an underlying HECM loan to which the Agency HMBS relate and/or (ii) upon the purchase of all participations related to an underlying HECM loan by the related issuer of the Agency HMBS, which will occur in connection with the assignment of the HECM loan to the FHA. Similarly, payments of principal and accumulated interest will be made on non-Agency HMBS only (i) when and to the extent a payment or payoff is made on an underlying HECM loan to which the non-Agency HMBS relate and/or (ii) upon the purchase of an underlying HECM loan by the sponsor (or an affiliate thereof) of the non-Agency HMBS, which will occur in connection with the assignment of the HECM loan to FHA.

        The rate of principal payments (including prepayments or partial payments) of the HECM loans depends on a variety of economic, social, geographic, demographic, legal and other factors, including changes in home prices, prevailing market interest rates, borrower mortality, and FHA guidelines regarding the HECM loans, and will affect the weighted average lives and the yields we realize on our HECM loans, Agency HMBS and non-Agency HMBS. HECM loans may respond differently than traditional forward mortgage loans to the factors that influence prepayment. There is variability when any amounts might be paid on HECM loans, Agency HMBS and non-Agency HMBS backed by participations in HECM loans because it is uncertain: (i) when any maturity event might occur, (ii) whether a HECM loan borrower will choose to prepay amounts advanced in whole or in part, (iii) in the case of an adjustable-rate HECM loan, when amounts owed on a HECM loan will equal or exceed 98% of the maximum claim amount and (iv) solely in the case of Agency HMBS, whether a Ginnie Mae issuer will exercise any option to purchase any participations related to a HECM loan out of an Agency HMBS upon a maturity event.

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        Our expectations related to maturity events occurring prior to HECM loans reaching 98% of the maximum claim amount may reflect our projections of life expectancy, recent developments and expectations as to future developments in health care for elderly persons, mobility of elderly households, regional differences in availability of health care, life expectancy and other matters, gender differences with respect to health risks and life expectancy. However, the actual rate and timing of maturity events could differ significantly from our expectations. We, the FHA and Ginnie Mae will not undertake any investigation of the health of the borrowers under the HECM loans. Rapid progress in the health sciences or increased availability of health care, for example, could prolong the lives of borrowers or postpone relocation of borrowers into long-term care facilities. The availability of home nursing care could cause borrowers who would otherwise relocate to remain in their homes, delaying the occurrence of an anticipated maturity event. Conversely, other factors such as the absence of health care insurance available to borrowers or required life-sustaining medical treatments could accelerate the occurrence of an anticipated maturity event.

        It is highly unlikely that a maturity event, voluntary payment by the borrower, any mandatory purchase event or an optional purchase event will occur at any constant rate or at the same rate at any one time. The timing of changes in the incidence of maturity events, voluntary prepayment events, mandatory purchase events or optional purchase events may affect the actual yield on our assets, even if the average rate of maturity events, voluntary prepayment events, mandatory purchase events or optional purchase events is consistent with our expectation. As a result, the effect on the yield on our assets of the occurrence of maturity events, voluntary prepayment events, mandatory purchase events or optional purchase events occurring at a rate higher (or lower) than the rate anticipated by us during the period immediately following the issue date of the Agency HMBS or non-Agency HMBS, is not likely to be offset by a later equivalent reduction (or increase) in the rate of occurrence of maturity events, voluntary prepayment events, mandatory purchase events or optional purchase events. If the actual rate and timing of maturity events, borrower prepayments, mandatory purchase events and optional purchase events differ significantly from our expectations, the market value of our assets may be materially adversely affected.

Prepayment rates may adversely affect the value of our portfolio of assets.

        The value of our assets may be affected by prepayment rates on HECM loans occurring before the HECM loans reach 98% of the maximum claim amount. If we purchase HECM loans, Agency HMBS and non-Agency HMBS, we anticipate that the HECM loans or the underlying mortgages will prepay at a projected rate generating an expected yield. HECM loans have recently traded at a premium to par values, and if we purchase assets at a premium to par value, when borrowers prepay their mortgage loans faster than expected, the corresponding prepayments on the Agency HMBS or non-Agency HMBS may reduce the expected yield on such securities because we will have to amortize the related premium on an accelerated basis. Conversely, if we purchase assets at a discount to par value, when borrowers prepay their mortgage loans slower than expected, the decrease in corresponding prepayments on the Agency HMBS or non-Agency HMBS may reduce the expected yield on such securities because we will not be able to accrete the related discount as quickly as originally anticipated. Prepayment rates on loans may be affected by a number of factors including, but not limited to, changes in home prices, the availability of alternative mortgage credit such as home equity lines of credit and attractive refinancing programs, the relative economic vitality of the area in which the related properties are located, the servicing of the HECM loans, possible changes in tax laws, potential changes in the regulatory environment governing reverse mortgages, other opportunities for investment, borrower occupancy of the home, homeowner mobility and other economic, social, geographic, demographic and legal factors and other factors beyond our control. Consequently, such prepayment rates cannot be predicted with certainty and no strategy can completely insulate us from prepayment or other such risks. In periods of declining interest rates, prepayment rates on our fixed rate HECM loans, Agency HMBS and non-Agency HMBS may increase. Similarly, if the FHA were to increase principal limit factors, prepayment rates on our HECM loans, Agency HMBS and non-Agency HMBS may increase. If general interest rates decline at the same time, the proceeds of such

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prepayments received during such periods are likely to be invested by us in assets yielding less than the yields on the assets that were prepaid. In addition, the market value of the assets may, because of the risk of prepayment, benefit less than other fixed income securities from declining interest rates.

The HECM loans that we originate are subject to delinquency, foreclosure and loss, which could result in losses to us.

        HECM loans are secured by a one to four-unit building with one unit occupied by a borrower, a manufactured home or a unit in an FHA-approved condominium, and are subject to risks of delinquency, foreclosure and loss to us if we are unable to assign the loan to the FHA when the loan reaches 98% of the maximum claim amount. The ability of a borrower to pay real estate taxes and property insurance premiums is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair borrowers' abilities to pay these costs.

        In the event of any default under a HECM loan held directly by us, we will bear a risk of loss of principal if the FHA insurance is impaired or to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan in excess of the maximum claim amount, which could have a material adverse effect on our cash flow from operations. In the event of the bankruptcy of a mortgage borrower, the servicer generally will suspend all advancing under a HECM loan that otherwise would give rise to additional loan amounts until the bankruptcy has been resolved unless otherwise approved by the bankruptcy court. The commencement of such proceedings is likely to have the effect of delaying the liquidation of the related collateral property (e.g., by delaying the commencement of foreclosure proceedings) or other repayment of the related HECM loan and, in the case of proceedings initiated by the estate or heirs of the related borrower, may result in rescheduling (i.e., delaying) payments due thereunder. The cessation of such advancing may also have the effect of reducing the amounts collected thereon by preventing loss mitigation in the form of maximizing preservation of the value of the related property, causing tax liens to arise and attach thereto or otherwise prime the lender's lien. Foreclosure of a HECM loan can be an expensive and lengthy process which could have a substantial negative effect on our anticipated return on the foreclosed HECM loan.

An increase in foreclosure rates may increase our cost of servicing, which could materially and adversely affect our business, liquidity, financial condition and results of operations.

        We originate and service reverse mortgage loans. Loan defaults on reverse mortgage loans leading to foreclosures may occur if borrowers fail to meet maintenance obligations, such as payment of real estate taxes or property insurance premiums. An increase in foreclosure rates may increase our cost of servicing, which could materially and adversely affect our business, liquidity, financial condition and results of operations.

We may face delays in our ability, or we may be unable, to assign HECM loans from the Agency HMBS pool that have reached 98% of their maximum claim amounts to the FHA, which could result in losses to us.

        We issue Agency HMBS collateralized by the HECM loans we originate, and we may need to fund future repurchases of HECM loans which collateralize the Agency HMBS under certain circumstances. We may only assign a loan to the FHA if the loan is not in default. Under the Ginnie Mae HMBS program, we will be required to repurchase the HECM loan from the Agency HMBS pool when the outstanding principal balance of the HECM loan is equal to or greater than 98% of the maximum claim amount. If the HECM loan is not in default, we can assign the repurchased HECM loan to the FHA and receive reimbursement. If the HECM loan is in default (e.g., if the borrower has failed to pay real estate taxes or property insurance premiums), the FHA will not accept the loan for assignment and we must continue to hold and service the loan. In a tax and insurance delinquency scenario, the borrower may be given an extended amount of time to cure the delinquency, which could affect the underlying performance of the

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loan. As servicer, we will be required to engage in certain mitigation procedures to help the borrower try and become current and only after these procedures are documented as unsuccessful may we submit a due-and-payable request to the FHA. Once this request is approved by the FHA, we can then proceed with foreclosure. If, upon disposition of the collateral, a deficit exists between the value of the collateral and the loan balance, the FHA will reimburse us for most HECM loan losses incurred by us; however, we will not receive insurance proceeds in excess of the maximum claim amount. If we face delays in our ability, or are unable, to assign HECM loans that have reached 98% of their maximum claim amounts to the FHA, we must continue to hold and service the loan, which could expose us to reduced or negative interest margin and losses which could have a material adverse impact on our business, liquidity, financial condition, results of operations and our ability to make distributions to our stockholders.

There is no assurance that the limit on HECM loans will continue to be suspended by legislative action, which could significantly affect our business.

        The National Housing Act, which authorizes the FHA HECM loan program, places a limit (or "cap") on the number of HECM loans that the FHA will insure at 275,000. Currently, the number of HECM loans insured by the FHA exceeds 275,000; however, this "cap" on the number of HECM loans has been successively suspended by legislation each year since 2006. We cannot assure you that this suspension of the "cap" will be renewed or continue and if such "cap" is not suspended in the future, it could materially and significantly limit our HECM loan purchases and substantially constrain our business operations.

        In addition, on October 1, 2013, the U.S. federal government shut down for a period of 17 days due to a budget impasse. During this period, the U.S. federal government suspended non-essential U.S. government operations, including operations under the oversight of HUD such as the FHA HECM loan program. If another budget impasse occurs and the U.S. government shuts down as a result, such shut-down could result in the suspension of the HECM loan program, causing delays in the insuring of loans and processing and payment of FHA claims, which could significantly affect our business.

We may suffer operating losses as a result of not being fully reimbursed for certain costs and interest expenses on our HECM loans, or if we fail to service loans in conformity with FHA's guidelines.

        The FHA will reimburse us for most HECM loan losses incurred by us, up to the maximum claim amount, if, upon disposition of the collateral a deficit exists between the value of the collateral and the loan balance. However, there are certain costs and expenses that the FHA will not reimburse. The FHA will generally only reimburse the greater of two-thirds of any foreclosure costs and $75, the remainder of which we must bear. Additionally, the FHA pays the FHA debenture rate instead of the interest rate from the date the loan becomes due and payable to the date of the disposition of the property or final appraisal. In general, the FHA debenture rate is set by the Secretary of the HUD in the month the loan was endorsed by the FHA, which rate shall not exceed the annual interest rate as determined by the Secretary of the Treasury based on the average yield of all outstanding marketable Treasury obligations of 15 or more years, and will apply to the loan throughout its life. In the event the pass through rate to an Agency HMBS investor exceeds the FHA debenture rate, the Ginnie Mae issuer or servicer will suffer an interest rate loss between the date of default and the date the loan is purchased out of the Agency HMBS pool. Any such loss related to unreimbursed foreclosure costs or the spread between the FHA debenture rate we receive and the rate we must pay Agency HMBS investors could adversely impact our results of operations, financial condition and business. The extent of our exposure to any such losses or spread will depend on factors, such as the size of the loan, the magnitude of loan default, the then current valuation of the home at time of default, the length of time the loan is in default, whether we will have sufficient financial resources to buy the loan out of the Agency HMBS pool at the time of default, or possible changes in FHA's or Ginnie Mae's regulations that may impact this exposure in the future.

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        Additionally, if we fail, or a sub-servicer we engage fails, to service HECM loans in conformity with FHA's guidelines, we may be subject to financial penalties that could affect our ability to receive loss claims or the FHA debenture rate reimbursement. Should we consistently fail to meet the quality criteria of either the FHA or Ginnie Mae, we could lose our right to service the portfolio, which would adversely impact our results of operations, financial condition and business. The FHA may also at its discretion request indemnification from a lender on a possible loss on a HECM loan if it determines that the loan was not originated or serviced in conformity with its rules or regulations.

We will be exposed to the full credit loss for any loans that are not originated and subsequently serviced in conformity with the FHA's policies.

        In order for the HECM loans we originate to be insured against credit loss by the FHA, they must be originated and subsequently serviced in conformity with the FHA's policies. A denial of FHA insurance for loans that are not originated or serviced in compliance with these policies would expose us to the full credit loss for any non-conforming loans that we have originated. In addition, the FHA conducts periodic post endorsement reviews and may require us to remedy a deficiency with the HECM loan or indemnify the FHA against potential losses if they were to find a loan that did not meet their policy guidelines.

        If the FHA subsequently determines that a HECM loan should not have been insured, then the FHA may continue to insure the HECM loan but will require that we indemnify them for their continued insurance commitment. This would require that we reimburse the FHA for losses incurred on the HECM loan.

If we make inaccurate certifications or fail to follow guidelines when originating a FHA-insured loan, we may lose the insurance or guarantee on the loan and suffer losses and/or pay penalties.

        As part of our activities as an approved FHA lender, we make certain loan level certifications to the FHA (e.g., that a HECM loan is eligible for FHA insurance) and annual certifications regarding compliance with HUD-FHA regulations. Violations of HUD-FHA regulations can result in monetary penalties or require us to provide indemnifications against loss or loans declared ineligible for their programs.

        As a result of the housing crisis, the FHA/HUD has stepped up enforcement initiatives. In addition to regular FHA/HUD audits, HUD's Inspector General has become active in enforcing FHA regulations with respect to individual loans and has partnered with the Department of Justice, or the DOJ, in filing lawsuits against lenders for systemic violations. The penalties resulting from such lawsuits can be much more severe, since systemic violations can be applied to groups of loans and penalties may be subject to treble damages. The DOJ has used the Federal False Claims Act and other federal laws and regulations in prosecuting these lawsuits. In order to be liable under the Federal False Claims Act for a FHA-insured loan, the government needs to have paid an insurance claim on a FHA-insured loan and the related lender must have made false claims in connection with the submission of the insurance claim. In recent actions against FHA lenders, the DOJ has charged that the existence of loan origination or underwriting deficiencies has rendered loan level certifications by the related FHA lender false and that the failure of a FHA lender to implement adequate quality control plans rendered the FHA lender's annual certification to be false. As a result of false certifications, it has been alleged that HUD accepted ineligible loans for FHA insurance, which ultimately defaulted and resulted in losses to the MMI Fund. These cases can be brought by either the government itself, or by a private person through a qui tam claim action in the name of the government. We are not subject to any of these claims, but we cannot assure you that similar claims will not be brought against us in the future.

        There have been increased occurrences of claims under the Federal False Claims Act involving FHA-insured loans in recent years. While we seek to mitigate the potential risk of any lawsuits under the Federal False Claims Act and/or other federal laws and regulations by instituting a thorough quality control program, if the DOJ were to find potential violations by us, we could be subject to material

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monetary penalties and/or losses, and may even be subject to lawsuits alleging systemic violations which could result in treble damages.

We may incur losses as a result of paying interest to an Agency HMBS holder to the end of the month on a HECM loan that paid off during the same monthly accounting period.

        As an issuer of Agency HMBS, we are required to pay the interest on an Agency HMBS up to the end of the month in which an underlying HECM loan was paid off. We are not allowed to regulate or control when a borrower may wish to pay off his loan. To the extent that borrowers repay their loans at the beginning of the month, our liability as a Ginnie Mae issuer would be larger. Although we are paid a servicing fee in respect of the Agency HMBS we issue, the servicing fee we receive may not fully compensate us for any deficit arising out of the timing difference between the interest we pay on Agency HMBS and the interest we receive on the underlying HECM loan, and any significant deficit may adversely impact our earnings.

We may not realize gains or income from our assets, which could cause the value of our common stock to decline.

        We seek to generate attractive risk-adjusted returns to our stockholders over the long term through dividend distributions and capital appreciation. However, the assets we originate or purchase may not appreciate in value and, in fact, may decline in value, and these assets may default on interest and/or principal payments. Accordingly, we may not be able to realize gains or income from our assets. Any gains that we do realize may not be sufficient to offset any other losses we experience. Any income that we realize may not be sufficient to offset our expenses.

Reverse mortgage loans may be subject to increased risks due to less restrictive or effective underwriting standards as compared to traditional forward mortgage loans.

        According to the November 2012 HUD Annual Report to the U.S. Congress, HECM loans accounted for less than 7% of the loan balance insured by the FHA but more than 17% of expected losses. One reason for the higher default rates may be the less stringent underwriting standards that were historically in place whereby lenders were able to originate reverse mortgage loans without performing credit checks or financial assessments on borrowers. Although more stringent underwriting standards will be implemented as part of the FHA program changes for HECM loan applications taken on or after March 2, 2015, there is no assurance that such changes will achieve their purpose. Further, less optimum underwriting standards by us or those from whom we purchase HECM loans could lead to increased rates of delinquency, foreclosure, bankruptcy and loss, which would adversely impact our results of operations, financial condition and business.

Our portfolio of assets may be concentrated and will be subject to risk of default.

        To the extent that our portfolio is concentrated in any one region or type of loan or security, downturns relating generally to such region or type of loan or security may result in defaults on a number of our assets within a short time period, which may reduce our net income and the value of our shares and accordingly reduce our ability to make distributions to our stockholders.

We are subject to fallout risk related to our reverse mortgage pipeline.

        Fallout risk is generally created when the terms of the loan to be originated are set at the same time the sale terms are established. When arrangements are made to pool the loans for securitization but the deal has not yet been completed, we face the risk that the deal will not close and the loan will fall out of the mortgage pipeline. Although we use financial instruments (or hedging instruments) to hedge fallout risk, fallout risk is sensitive to many factors, including property appraisal, interest rate fluctuations, borrower eligibility, and other factors beyond our control and there is no assurance that we will be able to

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successfully use hedge instruments that closely correlate to our pipeline of locked loans and effectively monitor our fallout pipeline exposure over time.

Our use of models and data in connection with the valuation of our assets subjects us to potential risks in the event that such models are incorrect, misleading, or based on incomplete information.

        As part of our investment process, we use proprietary models and data to evaluate, depending on the asset class, the expected frequency of maturity events, mandatory purchase events, borrower prepayment rates and house price appreciation and depreciation by region and foreclosure frequency, cost, and timing. Models and data will be used to underwrite loan originations, value assets or potential assets and also in connection with hedging our acquisitions. Many of the models are based on historical trends. These trends may not be indicative of future results. Furthermore, the assumptions underlying the models may prove to be inaccurate, causing the models to also be incorrect. In the event models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose us to potential risks. For example, by relying on incorrect models and data, especially valuation models, we may be induced to buy certain assets at prices that are too high, to originate certain loans at yields that are too low, to sell certain other assets at prices that are too low or to miss favorable opportunities altogether.

Increases in interest rates could adversely affect the value of our fixed-rate assets and cause our interest expense to increase, which could result in reduced earnings or losses and negatively affect our profitability as well as the cash available for distribution to our stockholders.

        We focus primarily on originating, acquiring, servicing, investing in, and managing HECM loans, Agency HMBS, non-Agency HMBS and other reverse mortgage-related assets. In a normal yield curve environment, our fixed rate assets will generally decline in value if long-term interest rates increase. Declines in market value in these assets may ultimately reduce earnings or result in losses to us, which may negatively affect cash available for distribution to our stockholders.

        A significant risk associated with these assets is the risk that both long-term and short-term interest rates will increase significantly. If long-term rates increased significantly, the market value of these assets could decline and the overall duration would likely not increase as each fixed-rate HECM loan will still reach 98% of the maximum claim amount (and therefore likely be assigned to the FHA) within a predetermined time period. At the same time, an increase in short-term interest rates would increase the amount of interest owed on the short-term borrowings, such as repurchase agreements, warehouse facilities and bank credit facilities (including term loans and revolving facilities) we enter into to finance the acquisition and origination of these assets, which could result in reduced earnings or losses and negatively affect our profitability.

Increases in interest rates could adversely affect the value of our floating-rate assets, which could result in reduced earnings or losses and negatively affect our profitability as well as the cash available for distribution to our stockholders.

        Increases in interest rates on our floating-rate Agency HMBS and non-Agency HMBS may shorten the duration and related weighted-average life as the accumulation of interest on the HECM loan balance will occur at a faster rate and the loan balance will reach 98% of the maximum claim amount faster than was previously estimated. Depending on when this event occurs in a loan's life cycle, the increased premium amortization (in the event a premium is paid for the Agency HMBS or non-Agency HMBS) or decreased discount accretion (in the event a discount is incurred when the Agency HMBS or non-Agency HMBS was purchased) may not be offset by the higher net margins from the increased interest rates. In addition, future increases in margins associated with floating-rate HECM loans could decrease the value of our existing floating-rate HECM loans which contain a lower margin. Declines in the market values of these assets may ultimately reduce earnings or result in losses to us, which may negatively affect cash available for distribution to our stockholders. We could realize a loss if our floating-rate assets were sold.

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We may experience an "other-than-temporary" impairment in the fair value of our assets.

        A decline in the fair market value of our assets may require us to recognize an "other-than-temporary" impairment against such assets under GAAP if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of such assets. If such a determination were to be made, we would recognize unrealized losses through earnings and write down the amortized cost of such assets to a new cost basis, based on the fair value of such assets on the date they are considered to be other-than-temporarily impaired. Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and the adjusted amortized cost of such assets at the time of sale. If we are required to recognize an "other-than-temporary" impairment, our business, liquidity, financial condition and results of operations may be materially adversely affected.

The failure of a sub-servicer to effectively service our HECM loans or the HECM loans which collateralize the Agency HMBS we issue would materially and adversely affect us.

        As a non-supervised FHA mortgagee and a Ginnie Mae issuer, we use a sub-servicer to manage collections on each of the underlying loans. Both default frequency and default severity of loans may depend upon the quality of the sub-servicer, as overseen by us as the issuer and primary servicer. If sub-servicers are not vigilant in encouraging borrowers to make their real estate tax and property insurance premium payments, the borrowers may be far less likely to make these payments, which could result in a higher frequency of default. If sub-servicers take longer to mitigate losses or liquidate non-performing assets, loss severities may be higher than originally anticipated. Moreover, unlike the forward mortgages space where there are many sub-servicing options, in the reverse mortgage industry, we believe the number of viable sub-servicers with the requisite Ginnie Mae authority is more limited. Unless more sub-servicers enter this space, the quality of sub-servicing practices may not continue to develop and we could have limited options in the event of sub-servicer failure. The failure of a sub-servicer to effectively service the HECM loans we own or the HECM loans underlying the Agency HMBS we issue and hold in our portfolio or underlying the Agency HMBS we have sold to third parties would materially and adversely affect us.

When we securitize HECM loans or other reverse mortgage loans, we may be required to indemnify or repurchase such loans.

        When we securitize HECM loans into Agency HMBS, we will be required to covenant and warrant to Ginnie Mae, among other things, that the HECM loans related to each participation included in the Agency HMBS are eligible under the requirements of the National Housing Act and the Ginnie Mae Mortgage-backed Securities Guide, and that we will take all actions necessary to continue to ensure the HECM loans continued eligibility. The Ginnie Mae HMBS program requires that we remove the participation related to any HECM loan that does not meet the requirements of the Ginnie Mae Mortgage-backed Securities Guide. For example, we may be required to remove a HECM loan from an Agency HMBS as a result of the HECM loan failing to remain FHA insured. Similarly, to the extent that we include other reverse mortgage loans in securitization transactions (other than an Agency HMBS), we will generally be required to make customary representations and warranties which, if breached, may require that we repurchase the related reverse mortgage loans. A HECM loan that is removed from an Agency HMBS (or other reverse mortgage loan from another securitization transaction) may, at the time it is removed, be worth only a fraction of the original price.

        For any HECM loan or other reverse mortgage loan that we are obligated to repurchase or provide indemnification for, we may attempt to mitigate our exposure by seeking indemnification and/or repurchase from an originating broker or closed-loan seller (i.e., a seller that underwrites and funds the loan in its own name), if applicable, but we may not be successful in seeking such indemnification and any

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such broker or closed-loan seller may be unwilling or unable to indemnify us. The remedies available to us when we purchase a mortgage loan from a closed-loan seller through our correspondent channel are generally broader than those available to us against an originating broker, where the loan is closed in our name and with our funds. Significant repurchase or indemnification requirements could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Any credit ratings assigned to our assets will be subject to ongoing evaluations and revisions and we cannot assure you that those ratings will not be downgraded.

        Some of our assets may be rated by nationally recognized statistical rating organizations. Any credit ratings on our assets are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any such ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our assets in the future, the value of these assets could significantly decline, which would adversely affect the value of our portfolio and could result in losses upon disposition or the failure of borrowers to satisfy their debt service obligations to us.

We are subject to counterparty risk and may be unable to seek indemnity or require our counterparties to repurchase HECM loans or other reverse mortgage loans if they breach representations and warranties, which could cause us to suffer losses.

        When we purchase HECM loans or other reverse mortgage loans, our counterparty will typically make customary representations and warranties about such loans to us. Our loan purchase agreements will entitle us to seek indemnity and/or demand repurchase of the loans in the event our counterparty breaches a representation or warranty given to us. However, there can be no assurance that our loan purchase agreements will contain appropriate representations and warranties, that we will be able to enforce our contractual right to repurchase, or that our counterparty will remain solvent or otherwise be able to honor its obligations under our loan purchase agreements. Our inability to obtain indemnity or require repurchase of a significant number of loans could harm our business, financial condition, liquidity, results of operations and our ability to make distributions to our stockholders.

Our ability to transact business with any one or number of counterparties, the potential lack of independent evaluation of such counterparties' financial capabilities, and the absence of a regulated market to facilitate settlement may increase the potential for losses to us, especially during unusually adverse market conditions.

        We may effect certain transactions in "over-the-counter" or "interdealer" markets. The participants in such markets may not be subject to appropriate credit evaluation and thorough regulatory oversight, as are members of "exchange based" markets. To the extent we invest in over-the-counter transactions on these markets, we may be exposed to credit risks with regard to parties with whom we trade and may also bear the risk of settlement default. These risks may differ materially from those entailed in exchange-traded transactions, which generally are backed by clearing organization guarantees, daily marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries. In particular, over-the-counter derivative transactions are bilateral agreements and can only be closed out with the other party to the transactions, and, therefore, generally do not benefit from such exchange protections. If a counterparty defaults, we will have contractual remedies, but there is no assurance that the counterparty will be able to meet its contractual obligations or that, in the event of default, we will succeed in enforcing them.

        We are also not restricted from dealing with any particular counterparty or from concentrating any or all of our transactions with a single counterparty. Although we regularly monitor our dealings with our counterparties in order to manage open exposures, our ability to transact business with any one or number of counterparties, the potential lack of independent evaluation of such counterparties' financial

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capabilities, and the absence of a regulated market to facilitate settlement may increase the potential for losses to us, especially during unusually adverse market conditions.

In the event that we foreclose on the collateral securing a HECM loan, we will own the real estate property, which would subject us to increased carrying costs and principal losses.

        The FHA allows a six-month period for a lender to dispose of the property after such lender obtains a marketable security interest in the collateral in connection with a foreclosure. At the foreclosure sale, the lender must bid the lesser of the debt or the current appraised value of the property. In the event a property is sold within this period and a deficit arises because the outstanding loan amount is greater than the proceeds received from such sale, a loss claim is filed with the FHA, and the lender will receive reimbursement from the FHA for losses and expenses up to the maximum claim amount. However, in the event a property is not sold within this period, a final appraisal will be completed and, if required, a loss claim will be filed with the FHA based on that valuation. A lender will then assume the collateral as real estate owned, or REO, booked at this fair value and assume all risks associated with its ultimate disposition, including decreasing collateral values and collateral values worth less than the final FHA valuation upon which the loss claim is based. Depending on market conditions, we may face carrying costs and principal losses in the eventual disposition of REO, either of which would adversely impact our results of operations, financial condition and business.

Our real estate assets are subject to risks particular to real property, which may reduce our return from an affected property or asset and reduce or eliminate our ability to make distributions to stockholders.

        We own assets secured by real estate and may own real estate directly in the future, either through direct acquisitions or upon a default of reverse mortgage loans. Real estate investments are subject to various risks, including:

•

acts of God, including earthquakes, floods and other natural disasters, which may result in uninsured losses;



•

acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001;



•

adverse changes in national and local economic and market conditions;



•

changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances;



•

costs of remediation and liabilities associated with environmental conditions such as indoor mold; and



•

the potential for uninsured or under-insured property losses.

        If any of these or similar events occurs, it may reduce our return from an affected property or asset and reduce or eliminate our ability to make distributions to our stockholders.

Liability relating to environmental matters may impact the value of properties that we may purchase or the properties underlying our investments.

        Under various U.S. federal, state and local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances released on its property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances.

        The presence of hazardous substances may adversely affect an owner's ability to sell real estate or borrow using real estate as collateral. To the extent that an owner of a property underlying one of our

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HECM loans or debt investments becomes liable for removal costs, the ability of the owner to pay real estate taxes or property insurance premiums may be reduced, which in turn may adversely affect the value of the relevant mortgage asset held by us and our ability to make distributions to our stockholders.

        In the course of our business, we may take title to real estate, and, if we do take title, we could be subject to environmental liabilities with respect to these properties. The presence of hazardous substances, if any, on our properties may adversely affect our ability to sell the affected properties and we may incur substantial remediation costs, thus harming our financial condition. The discovery of material environmental liabilities attached to such properties could have a material adverse effect on our results of operations and financial condition and our ability to make distributions to our stockholders.

The lack of liquidity of our assets may adversely affect our business, including our ability to value and sell our assets.

        We may purchase or originate assets or other instruments that are not liquid, or that are not publicly traded. Moreover, turbulent market conditions, such as those currently in effect, could significantly and negatively impact the liquidity of our assets. It may be difficult or impossible to obtain third-party pricing on the assets we purchase or originate. Illiquid assets typically experience greater price volatility, as a ready market does not exist, and can be more difficult to value. In addition, validating third-party pricing for illiquid assets may be more subjective than more liquid assets. The illiquidity of our assets may make it difficult for us to sell such assets if the need or desire arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our assets. To the extent that we utilize leverage to finance our purchase or origination of assets that are or become liquid, the negative impact on us related to trying to sell assets in a short period of time for cash could be greatly exacerbated. As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which could adversely affect our results of operations and financial condition.

The relative illiquidity of the Agency HMBS market compared to the Agency MBS market may cause it to be more susceptible to market swings.

        While the market for Agency HMBS has grown rapidly since its inception in 2007, it remains relatively small compared to the Agency MBS market. As of September 30, 2014, there were over $48.2 billion of Agency HMBS outstanding, compared to over $5.5 trillion of outstanding Agency MBS as of September 30, 2014. The relative illiquidity of the Agency HMBS market compared to the Agency MBS market may cause it to be more susceptible to market swings, which could result in greater volatility in the price of shares of our common stock.

We may acquire pools of loans, securities or servicing rights associated with loans originated in the past by third parties that have greater risk of loss related to defaulted loans or servicing responsibilities, which may result in us incurring greater losses than anticipated.

        We may acquire pools of loans, securities or servicing rights associated with loans originated by third parties in the past. Such loans, securities or servicing rights may have greater risk of loss related to default or failure to comply with FHA or Finnie Mae servicing requirements, which can result in our loss of servicing rights, and result in us incurring greater losses than anticipated.

Some of the assets in our portfolio are recorded at fair value and there is uncertainty as to the value of these assets and any decline in the fair value of our assets will adversely impact our results of operation, financial condition and business.

        Some of the assets in our portfolio are in the form of securities that are not publicly traded. The fair value of securities and other investments that are not publicly traded may not be readily determinable. Future net servicing related cash flows are also be recorded at fair value. These servicing assets reflect the

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fair value of our estimated future net servicing cash flows, the estimated future market value in excess of, or at a discount to the book amount of, the undrawn principal limits of loans we have originated and will securitize into future issued Agency HMBS, and the estimated future losses that may arise from FHA claims or REO losses we expect to incur as part of our issuer and servicing obligations.

        We value these assets quarterly at fair value, as determined in accordance with GAAP, which may include unobservable inputs. Because such valuations are subjective, the fair value of certain of our assets may fluctuate over short periods of time and our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Our results of operations for a given period could be adversely affected if our determinations regarding the fair value of these assets were materially higher than the values that we ultimately recognize upon their disposal or cash realization.

        In addition, declines in the fair value of our securities on which we have not elected the fair value accounting option (which we may elect on an investment by investment basis), solely related to interest rate fluctuations, will impact our stockholders' equity. Changes in the fair value of securities on which we have elected the fair value option are accounted for in the income statement and may be offset by the change in fair value of any related interest rate hedge associated with those securities. Fair value declines or increases as a result of a change in the credit quality or credit loss exposure of our reverse mortgage loans and reverse mortgage-backed securities or changes in fair value of our servicing assets are recognized as unrealized losses through the income statement. Any reductions in fair value would adversely impact our results of operations, financial condition and business.

Loss of our exclusions or exemptions from registration pursuant to the 1940 Act would adversely affect us, the market price of shares of our capital stock and our ability to distribute dividends.

        We conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the 1940 Act. We are organized as a holding company and conduct our businesses primarily through our majority and wholly owned subsidiaries. We conduct our operations so that we and our subsidiaries do not come within the definition of an investment company. The loss of our exclusions or exemptions from registration pursuant to the 1940 Act could require us to restructure our operations, sell certain of our assets or abstain from the purchase of certain assets, which could have an adverse effect on our financial condition and results of operations.

        We rely on guidance published by the SEC or its staff or on our analyses of such guidance to determine which assets qualify for certain exclusions. In August 2011, the SEC issued a concept release pursuant to which it solicited public comments on a wide range of issues relating to companies engaged in the business of acquiring mortgages and mortgage-related instruments and that rely on Section 3(c)(5)(C) of the 1940 Act. The concept release and the public comments thereto have not yet resulted in SEC rulemaking or interpretative guidance, and we cannot predict what form any such rulemaking or interpretive guidance may take. There can be no assurance, however, that the laws and regulations governing the 1940 Act status of REITs, or guidance from the SEC or its staff regarding the exclusion from registration as an investment company on which we or certain of our subsidiaries may rely, will not change in a manner that adversely affects our operations. In addition, we may be limited in our ability to make certain investments or we may be forced to expand the types of assets that we acquire or invest in, which in either case, could result in us or our subsidiaries holding assets we might wish to sell or selling assets we might wish to hold or modifying our strategy as described in this prospectus.

        While we will monitor our compliance with our exclusion from registration as an investment company under the 1940 Act, changes to such laws and regulations or new or different guidance from the SEC or its staff regarding the exclusion from registration on which we rely, including with respect to which assets qualify for such exclusion, could require us, among other things, either to (a) change the manner in which we conduct our operations in order to maintain our exemption from registration as an investment

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company, (b) limit our ability to make certain investments and/or effect sales of our assets in a manner that, or at a time when, we would not otherwise choose to do so, or (c) register as an investment company, any of which could have a material adverse effect on us and the market price of our shares of capital stock and our ability to distribute dividends. If we were required to register as an investment company under the 1940 Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the 1940 Act), portfolio composition, including restrictions with respect to diversification and industry concentration, our ability to make distributions and other matters. For additional information, see "Business—Operating and Regulatory Structure—1940 Act Considerations."

Rapid changes in the values of our target assets may make it more difficult for us to maintain our qualification as a REIT or our exclusion from the 1940 Act.

        If the market value or income potential of our target assets declines as a result of increased interest rates, prepayment rates, general market conditions, government actions or other factors, we may need to increase our real estate assets and income or liquidate our non-qualifying assets, including our interest in RMF, to qualify and maintain our qualification as a REIT or our exclusion from the 1940 Act. If the decline in real estate asset values or income occurs quickly, this may be especially difficult to accomplish. This difficulty may be exacerbated by the illiquid nature of any non-real estate assets we may own. Accordingly, we may have to make decisions regarding the acquisition and disposition of certain of our assets that we otherwise would not make absent the REIT and 1940 Act considerations.

Risks Related to Financing

We use leverage in executing our business strategy, which may adversely affect the return on our assets and may reduce cash available for distribution to our stockholders, as well as increase losses when economic conditions are unfavorable.

        We use leverage to finance our assets through borrowings from a number of sources, including repurchase agreements, warehouse facilities, securitizations and re-securitizations, bank credit facilities (including term loans and revolving facilities) and public and private issuances of equity and debt securities. To the extent available on desirable terms, we primarily finance our Agency HMBS, non-Agency HMBS and Agency H-REMIC securities with short-term borrowings through master repurchase agreements and to fund the origination of HECM loans and other obligations with respect to those loans with borrowings under warehouse facilities. Over time, as market conditions change, in addition to these financings, we may use other forms of leverage. Weakness in the financial markets, the residential mortgage markets and the economy generally could adversely affect one or more of our potential lenders and could cause one or more of our potential lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing. The return on our assets and cash available for distribution to our stockholders may be reduced to the extent that market conditions prevent us from leveraging our assets or increase the cost of our financing relative to the income that can be derived from the assets purchased. Our financing costs will reduce cash available for distributions to stockholders. We may not be able to meet our financing obligations and, to the extent that we cannot, we risk the loss of some or all of our assets to liquidation or sale to satisfy the obligations.

An increase in our borrowing costs relative to the interest we receive on our leveraged assets may adversely affect our profitability and our cash available for distribution to our stockholders.

        Borrowing rates are currently at historically low levels that may not be sustained in the long run. An increase in short-term interest rates at the time that we seek to enter into new borrowings would reduce the spread between the returns on our assets and the cost of our borrowings. This would adversely affect the returns on our assets, which might reduce earnings and, in turn, cash available for distribution to our stockholders. In addition, because repurchase agreements and warehouse facilities are short-term

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commitments of capital, lenders may respond to market conditions making it more difficult for us to secure continued financing. If we are not able to renew our then existing facilities or arrange for new financing on terms acceptable to us, or if we default on our covenants or are otherwise unable to access funds under any of these facilities, we may have to curtail our asset acquisition and origination activities and/or dispose of assets.

Lenders may increase their lending standards for, or choose not to lend to, non-bank finance companies, such as us, seeking to finance adjustable-rate HECM loans and reverse mortgage loans which are not fully drawn at origination due to the unpredictability of future funding requirements under such loans.

        We will need to fund draws under our adjustable-rate HECM loans and other reverse mortgage loans which are not fully drawn at origination, and these draws may be unpredictable in both timing and dollar size. Both the need for capital itself and the uncertainty around the timing and size of future draws can be particularly problematic for smaller non-depositary and/or lightly capitalized issuers relying on warehouse lines of credit. In addition, we also need a ready source of capital to repurchase HECM loans which are part of the Agency HMBS we purchase or originate, once the HECM loan reaches 98% of its maximum claim amount and before we may assign such loan to the FHA. Following the market turmoil in 2008 and the switch to the Ginnie Mae securitization model in 2009, warehouse lenders were generally unwilling to allow Ginnie Mae issuers to use their warehouse lines of credit to fund future draws on adjustable-rate loans. Thus, non-bank issuers without access to a bank's liquidity and resources (or a well-capitalized parent company) were largely unable to issue adjustable-rate securities because they had no way to fund the future draws. Because of these risks, in the first two years of the Ginnie Mae HMBS program, Ginnie Mae was generally not approving non-bank mortgage companies to issue adjustable-rate Agency HMBS. However, in 2011, as lending conditions improved, Ginnie Mae began approving non-bank mortgage companies. If lenders increase their lending standards for, or choose not to lend to, nonbank finance companies, such as us, seeking to finance adjustable-rate HECM loans and other reverse mortgage loans due to the unpredictability of future funding requirements under such loans, we may have to curtail our asset acquisition and origination activities and/or dispose of assets.

We rely on short-term financing and thus are especially exposed to changes in the availability of financing.

        Our ability to originate and acquire reverse mortgage loans and reverse mortgage-backed securities may be impacted by our ability to secure and/or renew repurchase agreements, warehouse facilities, securitizations and re-securitizations and bank credit facilities (including term loans and revolving facilities) on acceptable terms. It is possible that the lenders that do or will provide us with financing could experience changes in their ability to advance funds to us, independent of our performance or the performance of our portfolio of assets. Furthermore, if many of our potential lenders are unwilling or unable to provide us with financing, we could be forced to sell our assets at an inopportune time when prices are depressed. In addition, if the regulatory capital requirements imposed on our lenders change, they may be required to significantly increase the cost of the financing that they provide to us. Our lenders also may revise their eligibility requirements for the types of assets they are willing to finance or the terms of such financings, based on, among other factors, the regulatory environment and their management of perceived risk, particularly with respect to assignee liability.

        The recent dislocations in the residential mortgage sector have caused many lenders to tighten their lending standards, reduce their lending capacity or exit the market altogether. Further contraction among lenders, insolvency of lenders or other general market disruptions could adversely affect one or more of our lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing on attractive terms or at all. This could increase our financing costs and reduce our access to liquidity. Furthermore, if many of our lenders or potential lenders are unwilling or unable to provide us with financing, we could be forced to sell our assets at an inopportune time when prices are

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depressed. We can provide no assurance that lenders will be willing or able to provide us with sufficient financing.

The inability to securitize our portfolio could hurt our performance and our ability to grow our business.

        Based on our assessment of current market conditions, we expect to continue to originate HECM loans and, to a lesser extent, other reverse mortgage loans with the intention of securitizing them and possibly retaining all or a part of the securitized assets in our portfolio. In addition, we will securitize principal additions to a borrower's loan balance, which we refer to collectively as "tails." To the extent we are unable to securitize the HECM loans or other reverse mortgage loans that we originate, or future tails, we will be forced to seek out other forms of financing which may not provide as attractive terms. In addition, we expect to fund future tails with cash on hand until such tails are securitized. Accordingly, the inability to securitize our portfolio could severely hurt our performance and our ability to grow our business.

If a counterparty to our repurchase transactions defaults on its obligation to resell the underlying loan or security back to us at the end of the transaction term, or if the value of the loan or security has declined as of the end of that term, or if we default on our obligations under the repurchase agreement, we will lose money on our repurchase transactions.

        To date, we have entered into repurchase agreements with seven financial institutions. As of September 30, 2014, 55.1% of our outstanding borrowings under our repurchase agreements were with one counterparty. When we engage in repurchase transactions, we expect to generally sell loans or securities to lenders (i.e., repurchase agreement counterparties) and receive cash from the lenders. The lenders will be obligated to resell the same loans or securities back to us at the end of the term of the transaction. Because the cash we will receive from the lender when we initially sell the loans or securities to the lender is less than the value of those loans or securities (this difference is the haircut), if the lender defaults on its obligation to resell the same loans or securities back to us we would incur a loss on the transaction equal to the amount of the haircut (assuming there was no change in the value of the loans or securities). We would also lose money on a repurchase transaction if the value of the underlying loans or securities has declined as of the end of the transaction term, as we would have to repurchase the loans or securities for their initial value but would receive loans or securities worth less than that amount. Further, if we default on one of our obligations under a repurchase transaction, the lender will be able to terminate the transaction and cease entering into any other repurchase transactions with us. Certain of our repurchase agreements contain cross-default provisions, so that if a default occurs under any one agreement, the lenders under our other agreements could also declare a default. If a default occurs under any of our repurchase agreements and the lenders terminate one or more of our repurchase agreements, we may need to enter into replacement repurchase agreements with different lenders. There can be no assurance that we will be successful in entering into such replacement repurchase agreements on the same terms as the repurchase agreements that were terminated or at all. Any losses we incur on our repurchase transactions could adversely affect our earnings and thus our cash available for distribution to our stockholders.

Our rights under our repurchase agreements may be subject to the effects of the bankruptcy laws in the event of the bankruptcy or insolvency of us or our lenders under the repurchase agreements, which may allow our lenders to repudiate our repurchase agreements.

        In the event of our insolvency or bankruptcy, certain repurchase agreements may qualify for special treatment under the U.S. Bankruptcy Code, the effect of which, among other things, would be to allow the lender under the applicable repurchase agreement to avoid the automatic stay provisions of the U.S. Bankruptcy Code and to foreclose on the collateral agreement without delay. In the event of the insolvency or bankruptcy of a lender during the term of a repurchase agreement, the lender may be permitted, under applicable insolvency laws, to repudiate the contract, and our claim against the lender for damages may be

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treated simply as an unsecured creditor. In addition, if the lender is a broker or dealer subject to the Securities Investor Protection Act of 1970, or an insured depository institution subject to the Federal Deposit Insurance Act, our ability to exercise our rights to recover our securities under a repurchase agreement or to be compensated for any damages resulting from the lender's insolvency may be further limited by those statutes. These claims would be subject to significant delay and, if and when received, may be substantially less than the damages we actually incur.

The repurchase agreements, warehouse facilities, securitizations and re-securitizations and bank credit facilities (including term loans and revolving facilities) that we use to finance our asset acquisitions and originations may require us to provide additional collateral and may restrict us from leveraging our assets as fully as desired.

        We use repurchase agreements, warehouse facilities, securitizations and re-securitizations and bank credit facilities (including term loans and revolving facilities) to finance our asset acquisitions and originations. All of our financing agreements are uncommitted and the counterparty may refuse to advance funds under the agreements to us. If the market value of the loans or securities pledged or sold by us to a funding source decline in value, the lending institution has the right to initiate a margin call in its sole discretion, which would require us to provide additional collateral or pay down a portion of the funds advanced, but we may not have the funds available to do so. Posting additional collateral will reduce our liquidity and our ability to make distributions to our stockholders and limit our ability to leverage our assets, which could adversely affect our business and could cause the value of our common stock to decline. In situations where we are required to post margin or other collateral with a counterparty, the counterparty may fail to segregate the collateral or may commingle the collateral with the counterparty's own assets. As a result, in the event of the counterparty's bankruptcy or insolvency, our collateral may be subject to the conflicting claims of the counterparty's creditors and we may be exposed to the risk of a court treating us as a general unsecured creditor of the counterparty, rather than as the owner of the collateral.

        We may also be forced to sell assets at significantly depressed prices to meet margin calls, post additional collateral and to maintain adequate liquidity, which could cause us to incur losses. Moreover, to the extent we are forced to sell assets at such time, given market conditions, we may be selling at the same time as others facing similar pressures, which could exacerbate a difficult market environment and which could result in our incurring significantly greater losses on our sale of such assets. In an extreme case of market duress, a market may not even be present for certain of our assets at any price. In the event we do not have sufficient liquidity to meet margin calls and post additional collateral, lending institutions can accelerate repayment of our indebtedness, increase our borrowing rates, liquidate our collateral or terminate our ability to borrow. Such a situation would likely result in a rapid deterioration of our financial condition and possibly necessitate a filing for protection under the U.S. Bankruptcy Code. In the event of our bankruptcy, our borrowings may qualify for special treatment under the U.S. Bankruptcy Code. This special treatment would allow the lenders under these agreements to avoid the automatic stay provisions of the U.S. Bankruptcy Code and to liquidate the collateral under these agreements without delay. See "—Our rights under our repurchase agreements may be subject to the effects of the bankruptcy laws in the event of the bankruptcy or insolvency of us or our lenders under the repurchase agreements, which may allow our lenders to repudiate our repurchase agreements." Further, financial institutions may require us to maintain a certain amount of cash that is not invested or to set aside non-levered assets sufficient to maintain a specified liquidity position which would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity. If we are unable to meet these collateral obligations, then, as described above, our financial condition could deteriorate rapidly.

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Certain of our financing facilities may contain covenants that restrict our operations and may inhibit our ability to grow our business and increase revenues.

        To date, we have entered into two uncommitted warehouse facilities with an aggregate of $100 million borrowing capacity. As of September 30, 2014, we had an aggregate of $73.5 million in borrowings outstanding under these warehouse facilities. In addition, we have entered into seven uncommitted repurchase agreements. All of these financing facilities contain, and we expect that other financing facilities that we may enter into in the future will contain, restrictions, covenants, and representations and warranties that, among other things, require us to satisfy specified financial, asset quality, loan eligibility and/or loan performance tests, including minimum cash reserve, tangible net worth and profitability requirements. If we fail to meet or satisfy any of these covenants or representations and warranties, we would be in default under these agreements and our lenders could elect to declare all amounts outstanding under the agreements to be immediately due and payable, enforce their respective interests against collateral pledged under such agreements and restrict our ability to make additional borrowings. In addition, our financing agreements contain cross-default provisions, so that if a default occurs under any one agreement, the lenders under our other agreements could also declare a default. On September 30, 2014, RMF was not in compliance with the tangible net worth requirement of one warehouse lender and the profitability requirement of another warehouse lender. Although both agreements were amended with a retroactive effective date, resulting in us being in compliance with such requirements as of September 30, 2014, there can be no assurance that we will be in compliance with our covenant requirements under our financing facilities in the future.

        The covenants and restrictions in our financing facilities may restrict our ability to, among other things:

•

incur or guarantee additional debt;



•

make certain investments, acquisitions or originations;



•

make distributions on or repurchase or redeem capital stock;



•

engage in mergers or consolidations;



•

finance reverse mortgage loans with certain attributes;



•

reduce net worth or liquidity below certain levels;



•

grant liens or incur operating losses for more than a specified period;



•

enter into transactions with affiliates; and



•

hold reverse mortgage loans for longer than established time periods.

        These restrictions may interfere with our ability to obtain financing, including any financing needed to qualify as a REIT, or to engage in other business activities, which may significantly limit or harm our business, financial condition, liquidity and results of operations. A default and resulting repayment acceleration could significantly reduce our liquidity, which could require us to sell our assets to repay amounts due and outstanding. This could also significantly harm our business, financial condition, results of operations, and our ability to make distributions, which could cause the value of our common stock to decline. A default will also significantly limit our financing alternatives such that we will be unable to pursue our leverage strategy, which could curtail the returns on our assets.

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Risks Related to Hedging

We have entered into hedging transactions that could expose us to contingent liabilities in the future and adversely impact our financial condition.

        Subject to qualifying and maintaining our qualification as a REIT, part of our strategy involves entering into hedging transactions that could require us to fund cash payments in certain circumstances (e.g., the early termination of the hedging instrument caused by an event of default or other early termination event, or the decision by a counterparty to request margin securities it is contractually owed under the terms of the hedging instrument). The amount due would be equal to the unrealized loss of the open swap positions with the respective counterparty and could also include other fees and charges. These economic losses are reflected in our results of operations, and our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could adversely impact our financial condition.

The use of interest rate hedges will introduce the risk of interest rate mismatches and exposures, which could materially adversely affect our business, financial condition and results of operations and ability to make distributions to our stockholders.

        Our adjustable-rate reverse mortgage-backed securities will generally be subject to interest rate caps, which potentially could cause such reverse mortgage-backed securities to acquire many of the characteristics of fixed-rate securities if interest rates were to rise above the cap levels. This could result in our receipt of less cash income on such assets than we would need to pay the interest cost on our related borrowings. During periods of changing interest rates, these mismatches could cause our business, financial condition and results of operations and ability to make distributions to our stockholders to be materially adversely affected.

Hedging against interest rate exposure may adversely affect our earnings, which could reduce our cash available for distribution to our stockholders.

        Subject to qualifying and maintaining our qualification as a REIT, we may pursue various hedging strategies to seek to reduce our exposure to adverse changes in interest rates. Our hedging activity will vary in scope based on the level and volatility of interest rates, the type of assets held and liabilities incurred and other changing market conditions. Interest rate hedging may fail to protect or could adversely affect us because, among other things:

•

interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;



•

available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought;



•

the duration of the hedge may not match the duration of the related liability;



•

the amount of income that a REIT may earn from certain hedging transactions, other than through TRSs, to offset interest rate losses is limited by U.S. federal tax provisions governing REITs;



•

the credit quality of the hedging counterparty owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and



•

the hedging counterparty owing money in the hedging transaction may default on its obligation to pay.

        Our hedging transactions, which are intended to limit losses, may actually adversely affect our earnings, which could reduce our cash available for distribution to our stockholders.

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        In addition, hedging instruments involve risk since they may not be traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities. Consequently, there are no requirements with respect to record keeping, financial responsibility or segregation of customer funds and positions. Furthermore, the enforceability of agreements underlying hedging transactions may depend on compliance with applicable statutory and commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements. The business failure of a hedging counterparty with whom we enter into a hedging transaction will most likely result in its default. Default by a party with whom we enter into a hedging transaction may result in the loss of unrealized profits and force us to cover our commitments, if any, at the then current market price. Although generally we will seek to reserve the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the hedging counterparty and we may not be able to enter into an offsetting contract in order to cover our risk. We cannot assure you that a liquid secondary market will exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in losses.

If we pursue and fail to qualify for hedge accounting treatment, our operating results may suffer because losses on the derivatives that we enter into may not be offset by a change in the fair value of the related hedged transaction.

        Although it is not currently contemplated, we may pursue and fail to qualify for hedge accounting treatment relating to derivative and hedging transactions. We may fail to qualify for hedge accounting treatment for a number of reasons, including if we use instruments that do not meet the Accounting Standards Codification, or ASC, Topic 815 definition of a derivative (such as short sales), we fail to satisfy ASC Topic 815 hedge documentation and hedge effectiveness assessment requirements or our instruments are not highly effective. If we pursue and fail to qualify for hedge accounting treatment, our operating results may suffer because losses on the derivatives that we enter into may not be offset by a change in the fair value of the related hedged transaction.

Risks Related to Our Organization and Structure

We have limited experience operating as a REIT, which may adversely affect our financial condition, results of operations, the market price of our common stock and our ability to satisfy debt service obligations and make distributions to our stockholders.

        We were formed in October 2013 and our senior management team has limited experience operating a REIT. We cannot assure you that our senior management team's past experience will be sufficient to operate our company successfully as a REIT. Failure to qualify as a REIT or maintain REIT qualification could adversely affect our financial condition, results of operations, the market price of our common stock and our ability to satisfy debt service obligations and make distributions to our stockholders.

We depend upon Brean Capital to provide us with various services and if our strategic services agreement with Brean Capital is terminated, we may not be able to timely replace these services on terms favorable to us.

        We have entered into a strategic services agreement with Brean Capital pursuant to which Brean Capital provides us with comprehensive capital markets support to facilitate the growth of our portfolio management and reverse mortgage origination, securitization and servicing business. Under the agreement, Brean Capital provides certain services to us, which services include, among others, the following: (1) secondary marketing services, including managing our loan pipeline and assisting us with our hedging strategies as well as advising and assisting us in the selling of Agency HMBS to, and trading with, third parties and on the pooling of loans, and providing related market support; (2) advisory services to our executive officers and directors, including analyzing, modeling and developing our portfolio of securities, providing assistance with and analyzing the purchase price to be paid by us for any securities purchased from RMF, providing market data relating to financing options, assisting us with and analyzing potential

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hedging options, providing market data to support our structure and operations as well as research and market intelligence; (3) systems services such as access to certain technology, office space and other infrastructure support; and (4) such other services that may be agreed to by the parties from time to time. We have relied and will rely on Brean Capital to provide these services to us. If the strategic services agreement is terminated, we will have to obtain such services on our own or hire employees or another third-party firm to perform them. We may not be able to replace these services or hire such employees or another third-party firm in a timely manner or on terms, including cost and level of expertise, that are as favorable as those we received from Brean Capital.

Our business could be harmed if key personnel terminate their employment with us.

        Our success depends, to a significant extent, on the continued services of Craig M. Corn, David Peskin, Robert V. Sivori, St. John Bannon and Timothy A. Isgro and the other members of our senior management team. On February 13, 2014, we entered into employment agreements with certain of our officers, including Mr. Corn, our Chief Executive Officer, Mr. Peskin, our President, Mr. Sivori, our Chief Operating Officer, Mr. Bannon, our Chief Financial Officer and Treasurer, and Mr. Isgro, our Chief Investment Officer. These employment agreements provide for an initial term of three years. Notwithstanding these agreements, there can be no assurance that any of them will remain employed by us. The loss of services of one or more members of our senior management team could harm our business and our prospects.

Certain provisions of Maryland law could inhibit changes in control.

        Certain provisions of the Maryland General Corporation Law, or the MGCL, may have the effect of deterring a third-party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock. We are subject to the "business combination" provisions of the MGCL that, subject to limitations, prohibit certain business combinations (including a merger, consolidation, statutory share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities) between us and an "interested stockholder" (defined generally as any person who beneficially owns 10% or more of our then outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding voting stock) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder. After the five-year prohibition, any business combination between us and an interested stockholder generally must be recommended by our board of directors and approved by the affirmative vote of at least (1) 80% of the votes entitled to be cast by holders of outstanding shares of our voting stock and (2) two-thirds of the votes entitled to be cast by holders of our voting stock other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder. These super-majority vote requirements do not apply if, among other conditions, our common stockholders receive a minimum price, as defined under the MGCL, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. The "business combination" provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a board of directors prior to the time that the interested stockholder becomes an interested stockholder. Our board of directors has by resolution exempted business combinations between us and (1) any other person, provided, that such business combination is first approved by our board of directors (including a majority of our directors who are not affiliates or associates of such persons), (2) Craig M. Corn or any of his affiliates and associates and (3) any person acting in concert with any of the foregoing, from these provisions of the MGCL. As a result, any person described in the preceding sentence may be able to enter into business combinations with us that may not be in the best interests of our stockholders, without compliance by our company with the five-year prohibition, the supermajority vote requirements and the

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other provisions of the statute. There can be no assurance that our board of directors will not amend or revoke the exemption at any time.

        The "control share" provisions of the MGCL provide that, subject to certain exceptions, a holder of "control shares" of a Maryland corporation (defined as shares which, when aggregated with all other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of issued and outstanding "control shares") has no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquiror of control shares, our officers and our employees who are also our directors. Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock. Our board of directors may amend or repeal such provision at any time without the approval of our stockholders. There can be no assurance that this provision will not be amended or eliminated at any time in the future.

        Additionally, Title 3, Subtitle 8 of the MGCL permits the board of directors of a Maryland corporation with at least three independent directors and a class of stock registered under the Exchange Act, without stockholder approval and regardless of what is currently provided in its charter or bylaws, to implement certain takeover defenses. Such takeover defenses may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium for our common stock or otherwise be in their best interests.

        In addition, the provisions of our charter on the removal of directors and the advance notice provisions of our bylaws could delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for holders of our common stock or otherwise be in their best interest. Our charter contains a provision whereby we elect, at such time as we become eligible to do so (which we expect will be upon completion of this offering), to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to the filling of vacancies on the board of directors which could have similar anti-takeover effects. See "Certain Provisions of the Maryland General Corporation Law and Our Charter and Bylaws."

The authorized but unissued shares of our common and preferred stock may prevent a change in our control.

        Our charter permits our board of directors to authorize us to issue additional shares of our authorized but unissued common or preferred stock. In addition, our board of directors may, without stockholder approval, amend our charter to increase the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have the authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the terms of the classified or reclassified shares. As a result, our board of directors may establish a series of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for shares of our common stock or otherwise be in the best interest of our stockholders.

The concentration of ownership by certain entities may limit other stockholders from influencing significant corporate decisions.

        We expect certain entities affiliated with BlueMountain Capital Management, LLC, or BlueMountain, will collectively own approximately        % of the outstanding shares of our common stock upon completion of this offering (or approximately        % if the underwriters exercise their overallotment option in full), and certain entities affiliated with American Financial Group, Inc. will collectively own approximately        % of the outstanding shares of our common stock upon completion of this offering (or approximately        % if the underwriters exercise their overallotment option in full). In addition, BlueMountain was granted a one-time right to designate two nominees for election as directors, who both

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were elected as directors and whose terms began upon the completion of our February 2014 private offering. BlueMountain's designated board members may have substantial influence over us and the concentration of ownership in us by certain entities affiliated with BlueMountain and American Financial Group, Inc. may influence the outcome of any matters submitted to our stockholders for approval.

Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests.

        Our charter limits the liability of our present and former directors and officers to us and our stockholders for money damages to the maximum extent permitted under Maryland law. Under Maryland law, our present and former directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from:

•

actual receipt of an improper benefit or profit in money, property or services; or



•

active and deliberate dishonesty by the director or officer that was established by a final judgment and was material to the cause of action adjudicated.

        Our charter authorizes us to indemnify our directors and officers for actions taken by them in those and other capacities to the maximum extent permitted by Maryland law. Our bylaws require us to indemnify each present and former director or officer, to the maximum extent permitted by Maryland law, in connection with the defense of any proceeding to which he or she is made, or threatened to be made, a party or a witness by reason of his or her service to us. Our charter and bylaws also permit us to indemnify and advance expenses to any individual who served our predecessor in any of the capabilities described above. In addition, we may be obligated to pay or reimburse the expenses incurred by such persons in connection with any such proceedings without requiring a preliminary determination of their ultimate entitlement to indemnification. See "Certain Provisions of the Maryland General Corporation Law and Our Charter and Bylaws—Indemnification and Limitation of Directors' and Officers' Liability."

Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our management.

        Our charter provides that, subject to the rights of holders of any class or series of preferred stock, a director may be removed with or without cause upon the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors. Upon completion of this offering, vacancies on our board of directors may be filled only by a majority of the remaining directors in office, even if less than a quorum. These requirements make it more difficult to change our management by removing and replacing directors and may prevent a change in control of our company that is in the best interests of our stockholders.

Ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their shares.

        In order for us to qualify as a REIT for each taxable year after 2014, no more than 50% in value of our outstanding capital stock may be beneficially owned, directly or constructively, by five or fewer individuals during the last half of any calendar year, and at least 100 persons must beneficially own our stock during at least 335 days of a taxable year of 12 months, or during a proportionate portion of a shorter taxable year. "Individuals" for this purpose include natural persons, private foundations, some employee benefit plans and trusts, and some charitable trusts. To assist us in qualifying and maintaining our REIT qualification, among other purposes, our charter generally prohibits any person, including a "group," as defined in Section 13(d)(3) of the Exchange Act, from directly or indirectly owning more than 9.8% in value or in number of shares, whichever is more restrictive, of the aggregate outstanding shares of our capital stock, the outstanding shares of any class or series of our preferred stock or the outstanding shares of our common stock. We have granted BlueMountain, together with certain of its affiliates, and American

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Financial Group, Inc., together with certain of its affiliates, a waiver of the ownership limitations contained in our charter in connection with their purchases of shares of our common stock in our February 2014 private offering. These and other limits on ownership and transfer of our stock contained in our charter could have the effect of discouraging a takeover or other transaction in which holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests.

Risks Related to Conflicts of Interest

Our strategic services agreement with Brean Capital was not negotiated on an arm's-length basis and may require us to incur fees that do not reflect current market standards, and we may choose not to enforce, or to enforce less vigorously, our rights under the strategic services agreement because of our desire to maintain our ongoing relationship with Brean Capital.

        Robert M. Fine, the Chief Executive Officer of Brean Capital, serves on our board of directors. We have entered into a strategic services agreement with Brean Capital pursuant to which we are required to purchase certain services from Brean Capital on an exclusive basis going forward. For a description of the services and related fees, see "Business—Our Strategic Relationship with Brean Capital" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations." The terms of the strategic services agreement were not negotiated on an arm's-length basis and may require us to incur fees that do not reflect current market standards. In addition, the strategic services agreement requires, among other things, that we use Brean Capital to broker the sale of any Agency HMBS that RMF originates, including any sale to our company, for a fee, which fee we must pay even if a company other than Brean Capital brokers such sale. As our volume of reverse mortgage loan originations and Agency HMBS issuances increase, the amount of these fees will correspondingly increase. These arrangements could cause us to pay more fees than we would otherwise be required to pay, which could adversely affect our business, operating results and financial condition.

We did not receive independent third-party appraisals, valuations or fairness opinions in connection with our acquisition of RMF. Therefore, the terms of acquisition may not have been as favorable to us had we acquired RMF from unaffiliated parties, and the consideration we paid for RMF may have exceeded the fair market value of RMF.

        On July 11, 2014, we acquired RMF from the holders of membership interests in RMF pursuant to a merger agreement, which had been approved by our then sitting board of directors of RMIT prior to the completion of the February 2014 stock offering. Prior to the merger, our executive officers and directors, directly or indirectly, collectively held approximately 44.7% of the outstanding membership interests in RMF. The acquisition was not negotiated at arm's length, and the terms may not have been as favorable to us as they would have been if we had acquired RMF from unaffiliated parties. In addition, we did not receive any independent third-party appraisals, valuations or fairness opinions in connection with the acquisition, and the consideration we paid for RMF may be more than its fair market value. See "Certain Relationships and Related Party Transactions—Formation Transactions."

The employment agreements of certain of our officers were not negotiated on an arm's-length basis and we may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with them.

        We have entered into employment agreements with certain of our officers pursuant to which such officers will devote substantially their full business time attention to our affairs. See "Our Management—Employment Agreements." These employment agreements were not negotiated on an arm's-length basis. We may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with the individuals party to these agreements.

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Termination of the employment agreements with members of our management team could be costly and prevent a change in control of our company.

        The employment agreements with certain of our officers each provide that if their employment with us terminates under certain circumstances, we may be required to pay them significant amounts of severance compensation, thereby making it costly to terminate their employment. Furthermore, these provisions could delay or prevent a transaction or a change in control of our company that might involve a premium paid for shares of our common stock or otherwise be in the best interests of our stockholders, which could adversely affect the market price of our common stock.

Risks Related to Our Common Stock and this Offering

There is no public market for our common stock and a market for our common stock may never develop, which could cause our common stock to trade at a discount and make it difficult for holders of our common stock to sell their shares.

        Prior to this offering, there has been no public market for our shares of common stock. The initial public offering price for our shares of common stock will be determined by negotiations between the underwriters and us. We cannot assure you that the initial public offering price will correspond to the price at which our shares of common stock will trade in the public market subsequent to this offering or that the price of our shares of common stock available in the public market will reflect our actual financial performance.

        We intend to apply to list our shares of common stock on the New York Stock Exchange, or the NYSE, under the symbol "RMIT." Listing on the NYSE would not ensure that an actual market will develop for our common shares. Accordingly, no assurance can be given as to:

•

the likelihood that an active market will develop for the shares of our common stock;



•

the liquidity of any such market;



•

the ability of our stockholders to sell their shares of our common stock; or



•

the price that our stockholders may obtain for their shares of our common stock.

        Even if an active trading market develops, the market price for shares of our common stock may be highly volatile and could be subject to wide fluctuations after this offering. Some of the factors that could negatively affect our share price include:

•

our expected operating results and our ability to make distributions to our stockholders in the future;



•

use of the proceeds of this offering;



•

volatility in our industry, interest rates and spreads, the debt or equity markets, the general economy or the real estate market specifically, whether the result of market events or otherwise;



•

the availability of financing on acceptable terms or at all;



•

events or circumstances which undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or man-made disasters or threatened or actual armed conflicts;



•

the availability of attractive risk-adjusted investment opportunities in reverse mortgage loans, reverse mortgage-backed securities and other real estate-related assets that satisfy our investment objectives and strategies;

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•

the degree and nature of our competition;



•

changes in our personnel and lack of availability of qualified personnel;



•

unanticipated costs, delays and other difficulties in executing our long-term growth strategy;



•

the timing of cash flows, if any, from our investments;



•

an increase in interest rates;



•

the performance, financial condition and liquidity of our borrowers; and



•

legislative and regulatory changes (including changes to laws governing the taxation of REITs or exclusions or exemptions from registration as an investment company under the 1940 Act).

The offering price per share of the common stock may not accurately reflect its actual value.

        Immediately prior to this offering, there was no public market for our common stock. The initial public offering price was determined by negotiations between us and the representatives of the underwriters of this offering. Among the factors considered in determining the initial public offering price were our future prospects and those of our industry in general, our revenues, results of operations and certain other financial and operating information in recent periods, and the valuation measures, market prices of securities and certain financial and operating information of companies engaged in activities similar to ours. The offering price per share of our common stock offered under this prospectus may not accurately reflect the value of our common stock and may not be realized upon any subsequent disposition of the shares.

Investors in this offering will suffer immediate dilution.

        The initial public offering price of shares of our common stock is higher than what our net tangible book value per share will be immediately after the formation transactions and this offering. Purchasers of shares of our common stock in this offering will incur immediate dilution of approximately $            in net tangible book value per share of our shares of common stock, based upon the midpoint of the range set forth on the cover page of this prospectus. See "Dilution."

The preparation of our financial statements involves use of estimates, judgments and assumptions, and our financial statements may be materially affected if our estimates prove to be inaccurate.

        Financial statements prepared in accordance with GAAP require the use of estimates, judgments and assumptions that affect the reported amounts. Different estimates, judgments and assumptions reasonably could be used that would have a material effect on the financial statements, and changes in these estimates, judgments and assumptions are likely to occur from period to period in the future. Significant areas of accounting requiring the application of management's judgment include, but are not limited to, determining the fair value of our assets. These estimates, judgments and assumptions are inherently uncertain and, if they prove to be wrong, we face the risk that charges to income will be required. Any such charges could significantly harm our business, financial condition, results of operations and the price of our securities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an understanding of our business, financial condition and results of operations.

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For as long as we are an "emerging growth company," we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.

        In April 2012, President Obama signed into law the JOBS Act. We are an "emerging growth company," as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from, or reduced disclosure obligations relating to, various reporting requirements that are normally applicable to public companies.

        We will, in general, qualify as an "emerging growth company" until the earliest of:

•

the last day of our fiscal year following the fifth anniversary of the date of this offering;



•

the last day of our fiscal year in which we have annual gross revenue of $1.0 billion or more;



•

the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; and



•

the date on which we are deemed to be a "large accelerated filer," which will occur at such time as we (1) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of our most recently completed second fiscal quarter, (2) have been required to file annual and quarterly reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, for a period of at least 12 months and (3) have filed at least one annual report pursuant to the Exchange Act.

        Under the JOBS Act, emerging growth companies are not required to (1) provide an auditor's attestation report on management's assessment of the effectiveness of internal control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act, (2) comply with new audit rules adopted by the Public Company Accounting Oversight Board, or the PCAOB, after April 5, 2012 (unless the SEC determines otherwise), (3) provide certain disclosures relating to executive compensation generally required for larger public companies or (4) hold shareholder advisory votes on executive compensation. We have not yet made a decision as to whether to take advantage of any or all of the JOBS Act exemptions that are applicable to us. If we do take advantage of any of these exemptions, we do not know if some investors will find our common stock less attractive as a result.

        Additionally, the JOBS Act provides that an "emerging growth company" may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means an "emerging growth company" can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. However, we are electing to "opt out" of such extended transition period, and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.

We expect to become subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared.

        Upon completion of this offering, we will become a public reporting company subject to the rules and regulations established from time to time by the SEC and the NYSE. These rules and regulations will require, among other things, that we establish and periodically evaluate procedures with respect to our internal controls over financial reporting. Reporting obligations as a public company are likely to place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel. In addition, as a public company we will be required to document and assess our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. Section 404 requires

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annual management assessments of the effectiveness of our internal controls over financial reporting and, after we are no longer an "emerging growth company" for purposes of the JOBS Act, our independent registered public accounting firm may need to express an opinion on the effectiveness of our internal controls over financial reporting. To the extent applicable, these reporting and other obligations place or will place significant demands on our management, administrative, operational, internal audit and accounting resources and will cause us to incur significant expenses. We may need to upgrade our systems or create new systems; implement additional financial and management controls, reporting systems and procedures; expand or outsource our internal audit function; and hire additional accounting, internal audit and finance staff. If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired. We expect to have in place accounting, internal audit and other management systems and resources that will allow us to maintain compliance with the requirements of the Sarbanes-Oxley Act either at the time of the completion of this offering or at the end of any phase-in periods following the completion of this offering permitted by the NYSE, the SEC and the JOBS Act. If we fail to maintain effective internal controls, if our management is unable to certify the effectiveness of our internal controls (at the time they are required to do so), or if our independent registered public accounting firm cannot deliver (at such time as it is required to do so) a report attesting to the effectiveness of our internal control over financial reporting, we could be subject to regulatory scrutiny and a loss of public confidence, which could harm our reputation and the market price of our common stock. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and adversely affect our results of operations and financial condition.

As a public company, we will incur additional costs and face increased demands on our management.

        Following completion of this offering, we will be a listed, public company. As a public company with listed equity securities, we will need to comply with an extensive body of regulations that did not apply to us previously, including provisions of the Sarbanes-Oxley Act, regulations of the SEC and requirements of the NYSE. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, particularly after we are no longer an emerging growth company. We will need to:

•

institute a more comprehensive compliance function;



•

design, establish, evaluate and maintain a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the PCAOB;



•

comply with rules promulgated by the NYSE;



•

prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;



•

establish new internal policies, such as those relating to disclosure controls and procedures and insider trading;



•

involve and retain to a greater degree outside counsel and accountants in the above activities; and



•

establish an investor relations function.

        In addition, we also expect that being a public company subject to these rules and regulations will require us to incur substantial costs to obtain director and officer liability insurance coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers.

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Future sales of our common stock may depress our share price.

        Our board of directors, without common stockholder approval but subject to the rules of the NYSE, may authorize us to issue additional authorized and unissued shares of common stock and preferred stock on the terms and for the consideration it deems appropriate. In addition, in connection with the formation transactions, we have issued 1,175,113 shares of our common stock to certain holders of membership interests in RMF. Furthermore, we have granted registration rights to investors who purchased shares of our common stock in our February 2014 private offering and to holders of membership interests in RMF who received shares of our common stock in the formation transactions. Under the registration rights agreement, we are required, among other things, to: (i) file with the SEC a resale shelf registration statement registering all of the registrable shares (as defined in the registration rights agreement) that are not sold by the selling stockholders in this offering no later than August 1, 2014; and (ii) use our commercially reasonable efforts to cause the resale shelf registration statement to be declared effective by the SEC as soon as practicable after the filing and in any event no later than February 13, 2015. However, if we file this registration statement before the effective date of the shelf registration statement and we have used or are using commercially reasonable efforts to complete this offering, our obligation to cause the shelf registration statement to become effective under the Securities Act by February 13, 2015 may be deferred until the 60^th day after the closing date of this offering; provided, however, that if we file this registration statement before the effective date of the shelf registration statement, and the deadline for causing the shelf registration statement to go effective is after the 60 day period beginning on the closing date of this offering, we will be required to cause the shelf registration statement to be declared effective no later than 60 days after the closing date of this offering. We have filed a resale shelf registration statement registering the registrable shares with the SEC. See "Stock Eligible for Future Sale—Registration Rights." These registration rights of our stockholders and the sales of substantial amounts of our common stock following the effectiveness of the shelf registration statement could cause the market price of our common stock to decline and impair our ability to raise capital. We also may grant additional registration rights in connection with any future issuance of our common stock.

        Subject to certain exceptions, we and each of our executive officers and directors have agreed with the underwriters to be bound by lock-up agreements that prohibit us and them from selling, pledging, transferring or otherwise disposing any of our shares of common stock, or any securities convertible into or exercisable for any of our shares of common stock, for a period of        days from the date of this prospectus. In addition, the underwriters of this offering have required our other stockholders who purchased our common stock in our February 2014 private offering or who received shares of our common stock in the formation transactions not to, subject to certain exceptions, directly or indirectly, sell, offer to sell, grant any option or otherwise transfer or dispose of our common stock for       days following the effective date of this registration statement, in the case of the selling stockholders in this offering, and for a period of 30 days prior to and up to 60 days (or 180 days, in the case of any holder that is one of our officers, directors or employees) following the effective date of this registration statement, in the case of holders who are not selling stock in this offering. Upon the expiration or, if applicable, release of the foregoing restrictions,             shares of our common stock will become eligible for sale in the public markets. The market price of our common stock may decline significantly when the restrictions on resale by certain of our stockholders lapse.

        We cannot predict the effect, if any, future sales of our common stock or the availability of shares for future sales, on the market price of our common stock. Sales of substantial amounts of common stock or the perception that such sales could occur may adversely affect the prevailing market price for our common stock. See "Stock Eligible for Future Sale—Lock-Up Periods."

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Our senior executive officers and several of our directors may not be able to organize and effectively manage a publicly traded company which could adversely affect our overall financial position.

        Some of our senior executive officers or directors have not previously organized or managed a publicly traded company, and our senior executive officers and directors may not be successful in doing so in this case. The demands of organizing and managing a publicly traded company are much greater as compared to a private company and our senior executive officers and directors may not be able to meet those increased demands. Failure to organize and effectively manage us could adversely affect our overall financial position.

Future offerings of debt securities, which would rank senior to our common stock upon our liquidation, and future offerings of equity securities, which would dilute our existing stockholders, may adversely affect the market value of our common stock.

        In the future, we may attempt to increase our capital resources by making offerings of debt or additional offerings of equity securities, including commercial paper, medium-term notes, senior or subordinated notes and classes of preferred stock. Upon liquidation, holders of our debt securities and preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market value of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common stock bear the risk of our future offerings reducing the market value of our common stock and diluting their share holdings in us.

We have not established a minimum distribution payment level and we cannot assure you of our ability to pay distributions in the future.

        To qualify and maintain our qualification as a REIT and generally not be subject to U.S. federal income and excise tax, we intend to make regular quarterly distributions to holders of our common stock out of legally available funds. Currently, we intend to pay quarterly distributions which, on an annual basis, will equal all or substantially all of our net taxable income. We have not, however, established a minimum distribution payment level and our ability to pay distributions may be adversely affected by a number of factors, including the risk factors described in this prospectus. All distributions will be made at the discretion of our board of directors and will depend on our earnings, our financial condition, any debt covenants, qualification and maintenance of our REIT qualification, restrictions on making distributions under Maryland law and other factors as our board of directors may deem relevant from time to time. We may not be able to make distributions in the future and our board of directors may change our distribution policy in the future. We believe that a change in any one of the following factors, among others, could adversely affect our results of operations and impair our ability to pay distributions to our stockholders:

•

the profitability of the assets we hold, purchase or originate;



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our ability to make profitable acquisitions and originations;



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margin calls or other expenses that reduce our cash flow;



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defaults in our asset portfolio or decreases in the value of our portfolio; and



•

the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.

        We cannot assure you that we will achieve results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions in the future. In addition, some of our

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distributions may include a return of capital. See "Distribution Policy" for additional details regarding our distribution policy.

An increase in market interest rates may have an adverse effect on the market price of our common stock.

        One of the factors that investors may consider in deciding whether to buy or sell shares of our common stock is our distribution rate as a percentage of our share price relative to market interest rates. If the market price of our common stock is based primarily on the earnings and return that we derive from our investments and income with respect to our investments and our related distributions to stockholders, and not from the market value of the investments themselves, then interest rate fluctuations and capital market conditions will likely affect the market price of our common stock. For instance, if market rates rise without an increase in our distribution rate, the market price of our common stock could decrease as potential investors may require a higher distribution yield on our common stock or seek other securities paying higher distributions or interest.

Risks Related to Our Taxation as a REIT

Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code and our failure to qualify or remain qualified as a REIT would subject us to U.S. federal income tax and applicable state and local tax, which would reduce the amount of cash available for distribution to our stockholders.

        We believe that we have been organized and operated and we intend to continue to operate in a manner that will enable us to qualify as a REIT for U.S. federal income tax purposes, commencing with our taxable year ending December 31, 2014. We have not requested and do not intend to request a ruling from the Internal Revenue Service, or the IRS, that we qualify as a REIT. The U.S. federal income tax laws governing REITs are complex, and judicial and administrative interpretations of the U.S. federal income tax laws governing REIT qualification are limited. To qualify as a REIT, we must meet, on an ongoing basis, various tests regarding the nature and diversification of our assets and our income, the ownership of our outstanding shares, and the amount of our distributions. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our ability to satisfy the asset tests applicable to REITs depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis, and our ability to comply with the REIT distribution requirements will depend on our cash available for distribution. Moreover, new legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it difficult or impossible for us to qualify as a REIT. Thus, while we intend to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year.

        If we fail to qualify as a REIT in any taxable year, and we do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income, and distributions to our stockholders would not be deductible by us in determining our taxable income. In such a case, we might need to borrow money or sell assets in order to pay our taxes. Our payment of income tax would decrease the amount of our income available for distribution to our stockholders. Furthermore, if we fail to maintain our qualification as a REIT, we no longer would be required to distribute substantially all of our taxable income to our stockholders. In addition, unless we were eligible for certain statutory relief provisions, we could not re-elect to qualify as a REIT for the subsequent four taxable years following the year in which we failed to qualify.

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REIT distribution requirements could adversely affect our ability to execute our business plan and may require us to incur debt or sell assets to make such distributions.

        In order to qualify as a REIT, we must distribute to our stockholders, each calendar year, at least 90% of our REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our taxable income, we will be subject to U.S. federal corporate income tax on our undistributed income. In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws. We intend to distribute our taxable income to our stockholders in a manner intended to satisfy the REIT 90% distribution requirement and to avoid the 4% nondeductible excise tax.

        Our taxable income may substantially exceed our net income as determined by GAAP and differences in timing between the recognition of taxable income and the actual receipt of cash will occur as a result of our investments in reverse mortgage loans and interests therein, including HECM loans, Agency HMBS, Agency H-REMIC securities and other mortgage-backed securities backed by reverse mortgage loans. For example, we will be required to accrue interest income on HECM loans, Agency HMBS and Agency H-REMIC securities before we receive any payments of interest or principal on such assets, which will generally occur only upon (i) a maturity event, (ii) a borrower voluntary prepayment event, or (iii) when the outstanding loan balance of the HECM loan, or a HECM loan backing an Agency HMBS or Agency H-REMIC security, reaches 98% of the maximum claim amount and the lender assigns the loan to the FHA at par. In addition, we may be required under the terms of the indebtedness that we incur, whether to private lenders or pursuant to government programs, to use cash received from interest and principal payments to make principal payment on such indebtedness, with the effect that we will recognize taxable income but will not have a corresponding amount of cash available for distribution to our stockholders.

        As a result of the foregoing, we may generate less cash flow than taxable income in a particular year and find it difficult or impossible to meet the REIT distribution requirements in certain circumstances. In such circumstances, we may be required to: (i) sell assets in adverse market conditions, (ii) borrow on unfavorable terms, (iii) distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt, (iv) make a taxable distribution of our shares as part of a distribution in which stockholders may elect to receive shares or (subject to a limit measured as a percentage of the total distribution) cash or (v) use cash reserves, in order to comply with the REIT distribution requirements and to avoid U.S. federal corporate income tax and the 4% nondeductible excise tax. Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could adversely affect the value of our common stock.

Our ability to grow the business of RMF may be limited by the REIT requirements that restrict investment in securities of a TRS to 25% of our gross assets and dividends from a TRS, along with other nonqualifying income, to 25% of our gross income.

        We expect that we may jointly elect with RMF for RMF to be a TRS of ours at some point in the future. Following such election, we expect to hold a significant amount of assets and to generate a significant amount of income through RMF, including assets that could be treated as dealer property, HECM loan servicing fees, and other assets and income that could adversely impact our qualification as a REIT if held or earned directly by us. In order to qualify as a REIT, no more than 25% of the value of our assets may consist of stock or securities of RMF, following the effective date of its TRS election, and any other TRS, and at least 75% of our gross income must be derived from certain real-estate related sources, which do not include dividends or other income derived from a TRS. These limitations may restrict our ability to expand the business of RMF. In addition, the value of our interest in RMF is not subject to precise determination, and such value is subject to change in the future. If our HECM loans, Agency HMBS or other real estate-related assets were to decline in value, securities of RMF would represent a

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greater proportion of our total assets. In addition, it is possible that we may wish to distribute a dividend from RMF in order to reduce its value below 25% of our assets, but be unable to do so without violating the 75% REIT gross income test. Although we will monitor the aggregate value of the securities of our TRSs, including RMF, after the effective date of its TRS election, and intend to conduct our affairs so that such securities will represent less than 25% of the value of our total assets, there can be no assurance that we will be able to comply with these TRS limitations in all market conditions.

Complying with REIT requirements may force us to liquidate or forego otherwise attractive investments.

        To qualify as a REIT, we must ensure that we meet the REIT gross income tests annually and that, at the end of each calendar quarter, at least 75% of the value of our total assets consists of cash, cash items, government securities, shares in REITs and other qualifying real estate assets, including certain mortgage loans and certain kinds of mortgage-backed securities. The remainder of our investment in securities (other than government securities and REIT qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than government securities, TRS securities and securities that are qualifying real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be represented by securities of RMF, after the effective date of its TRS election, and any other TRSs we may own. See "U.S. Federal Income Tax Considerations—Asset Tests." If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio, or contribute to a TRS, otherwise attractive investments, and may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source of income or asset diversification requirements for qualifying as a REIT. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

Even if we qualify as a REIT, we may face tax liabilities that reduce our cash flow.

        Even if we qualify for taxation as a REIT, we will conduct a significant portion of our activities through RMF. Following the effective date of its TRS election, RMF and any other TRSs that we may own in the future will be subject to U.S. federal, state and local corporate income or franchise taxes. In addition, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, franchise, property and transfer taxes, including mortgage recording taxes. See "U.S. Federal Income Tax Considerations—Taxation of REITs in General." Such taxes would decrease the cash available for distribution to our stockholders.

The failure of our assets subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT.

        We have entered into repurchase agreements under which we nominally sell certain of our assets to a counterparty and simultaneously enter into an agreement to repurchase the sold assets. We believe that we will be treated for U.S. federal income tax purposes as the owner of the assets that are the subject of any such agreements and that the repurchase agreements will be treated as secured lending transactions notwithstanding that such agreements may transfer record ownership of the assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could successfully assert that we did not own the assets subject to a repurchase agreement for U.S. federal income tax purposes during the term of such repurchase agreement, in which case we could fail to qualify as a REIT.

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We may be required to report taxable income for certain investments in excess of the economic income we ultimately realize from them.

        The reverse mortgage loans and interests therein, including HECM loans, Agency HMBS, Agency H-REMIC securities and other mortgage-backed securities backed by reverse mortgage loans that we originate or acquire will be treated as having "original issue discount" for U.S. federal income tax purposes because interest on such securities will not be payable currently, but rather will be added to the outstanding loan balance as it accrues. We will be required to accrue such interest income based on a constant yield method notwithstanding the fact that such interest income is not yet payable, and we will therefore be taxed based on the assumption that all future projected interest payments due on such securities will be made. If such securities turn out not to be fully collectible, an offsetting loss deduction will become available only in the later year that uncollectability is provable. Similarly, we may be required to accrue interest income with respect to subordinate mortgage-backed securities at their stated rate regardless of whether corresponding cash payments are received or are ultimately collectable. In each case, while we would in general ultimately have an offsetting loss deduction available to us when such interest was determined to be uncollectible, the utility of that deduction could depend on our having taxable income in that later year or thereafter.

        The interest apportionment rules under U.S. Treasury Regulation Section 1.856-5(c) provide that, if a mortgage is secured by both real property and other property, a REIT is required to apportion its annual interest income to the real property security based on a fraction, the numerator of which is the value of the real property securing the loan, determined when the REIT commits to acquire the loan, and the denominator of which is the highest "principal amount" of the loan during the year. The IRS has issued Revenue Procedure 2011-16 and Revenue Procedure 2014-51 addressing a REIT's investment in distressed debt, or the Distressed Debt Revenue Procedures. The Distressed Debt Revenue Procedures interpret the "principal amount" of the loan to be the face amount of the loan, despite the Internal Revenue Code requiring taxpayers to treat any market discount, that is the difference between the purchase price of the loan and its face amount, for all purposes (other than certain withholding and information reporting purposes) as interest rather than principal.

        Although it is not contemplated that we will invest in HECM loans to which the interest apportionment rules described above would apply, if the IRS were to assert successfully that our HECM loans were secured by property other than real estate and therefore the interest apportionment rules applied for purposes of our REIT testing, and that the position taken in the Distressed Debt Revenue Procedures should be applied to our portfolio, then depending upon the value of the real property securing our HECM loans and their face amount, and the sources of our gross income generally, we may fail to meet the 75% REIT gross income test discussed under "U.S. Federal Income Tax Considerations—Gross Income Tests." If we do not meet this test, we could potentially lose our REIT qualification or be required to pay a penalty to the IRS.

The "taxable mortgage pool" rules may increase the taxes that we or our stockholders may incur, and may limit the manner in which we effect future securitizations.

        Securitizations by us or our subsidiaries could result in the creation of taxable mortgage pools for U.S. federal income tax purposes. As a result, we could have "excess inclusion income." Certain categories of stockholders, such as non-U.S. stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain tax-exempt stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to any such excess inclusion income. In the case of a stockholder that is a REIT, a regulated investment company, or RIC, common trust fund or other pass-through entity, our allocable share of our excess inclusion income could be considered excess inclusion income of such entity. In addition, to the extent that our common stock is owned in record name by tax-exempt "disqualified organizations," such as certain government-related entities and charitable remainder trusts that are not subject to tax on unrelated

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business income, we may incur a corporate level tax on a portion of any excess inclusion income. Because this tax generally would be imposed on us, all of our stockholders, including stockholders that are not disqualified organizations, generally will bear a portion of the tax cost associated with the classification of us or a portion of our assets as a taxable mortgage pool. A RIC, or other pass-through entity owning our common stock in record name, will be subject to tax at the highest U.S. federal corporate tax rate on any excess inclusion income allocated to their owners that are disqualified organizations. Moreover, we could face limitations in selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for tax purposes. Finally, if we were to fail to qualify as a REIT, any taxable mortgage pool securitizations would be treated as separate taxable corporations for U.S. federal income tax purposes that could not be included in any consolidated U.S. federal corporate income tax return. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions.

If we were to make a taxable distribution of shares of our stock, stockholders may be required to sell such shares or sell other assets owned by them in order to pay any tax imposed on such distribution.

        We may be able to distribute taxable dividends that are payable in shares of our common stock. If we were to make such a taxable distribution of shares of our common stock, stockholders would be required to include the full amount of such distribution as income. As a result, a stockholder may be required to pay tax with respect to such dividends in excess of cash received. Accordingly, stockholders receiving a distribution of our shares may be required to sell shares received in such distribution or may be required to sell other stock or assets owned by them, at a time that may be disadvantageous, in order to satisfy any tax imposed on such distribution. If a stockholder sells the shares it receives as a dividend in order to pay such tax, the sale proceeds may be less than the amount included in income with respect to the dividend. Moreover, in the case of a taxable distribution of shares of our common stock with respect to which any withholding tax is imposed on a non-U.S. stockholder, we may have to withhold or dispose of part of the shares in such distribution and use such withheld shares or the proceeds of such disposition to satisfy the withholding tax imposed.

        While the IRS, in a temporary safe harbor that has expired, and in certain private letter rulings, has ruled that a distribution of cash or shares at the election of a REIT's stockholders may qualify as a taxable stock dividend if certain requirements are met, it is unclear whether and to what extent we will be able to pay taxable dividends in cash and shares of common stock in any future period.

Although our use of TRSs, including RMF, following the effective date of its TRS election, may be able to partially mitigate the impact of meeting the requirements necessary to maintain our qualification as a REIT, our ownership of and relationship with our TRSs is limited, and a failure to comply with the limits would jeopardize our REIT qualification and may result in the application of a 100% excise tax.

        A REIT may own up to 100% of the stock of one or more TRSs. Subject to certain exceptions, a TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Both the TRS and the REIT must jointly elect to treat the TRS as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% of the value of a REIT's total assets may consist of stock or securities of one or more TRSs. In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm's-length basis. We expect to engage in transactions with RMF such as acquisitions of Agency HMBS. While we intend to conduct our affairs so that we will not be subject to the 100% excise tax with respect to transactions with RMF and any other TRS and so that we will comply with all other requirements applicable to our ownership of TRSs, there can be no assurance that we will be successful in this regard.

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Dividends payable by REITs generally do not qualify for the reduced tax rates on dividend income from regular corporations, which could adversely affect the value of our shares.

        The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, are generally not eligible for the reduced rates and therefore may be subject to a 39.6% maximum U.S. federal income tax rate on ordinary income. Although the reduced U.S. federal income tax rate applicable to dividend income from regular corporate dividends does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including shares of our common stock.

Complying with REIT requirements may limit our ability to hedge effectively.

        The REIT provisions of the Internal Revenue Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate exposure will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges interest rate risk on liabilities used to carry or acquire real estate assets, or certain other specified types of risk, and such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute non-qualifying income for purposes of both the REIT 75% and 95% gross income tests. See "U.S. Federal Income Tax Considerations—Gross Income Tests—Hedging Transactions." As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRS would be subject to tax on gains or the limits on our use of hedging techniques could expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in our TRS will generally not provide any tax benefit to us, although such losses may be carried forward to offset future taxable income of the TRS.

The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans, that would be treated as sales for U.S. federal income tax purposes.

        A REIT's net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, but including mortgage loans, held as inventory or primarily for sale to customers in the ordinary course of business, which is also referred to as dealer property. We might be subject to this tax if we were to sell or securitize loans in a manner (such as a securitization using a real estate mortgage investment conduit, or REMIC, structure, or a securitization of HECM loans into Agency HMBS followed by a sale of all or a portion of such Agency HMBS) that was treated as a sale of the loans as inventory for U.S. federal income tax purposes. Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans, other than through RMF, following the effective date of its TRS election, or another TRS, and we may be required to limit the structures we use for our securitization transactions, even though such sales or structures might otherwise be beneficial for us.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of shares of our common stock.

        At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be changed, possibly with retroactive effect. We cannot predict if or when any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective or whether any such law, regulation or interpretation may take

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effect retroactively. We and our stockholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation.

Liquidation of our assets may jeopardize our REIT qualification.

        To qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our assets to repay obligations to our lenders or to satisfy the REIT distribution requirements, we may be unable to comply with these requirements, thereby jeopardizing our qualification as a REIT, or we may be subject to a 100% prohibited transaction tax on any resultant gain if we sell assets that are treated as inventory or property held primarily for sale to customers in the ordinary course of business.

Our qualification as a REIT and exemption from U.S. federal income tax with respect to certain assets may be dependent on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets that we acquire, and the inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax.

        When purchasing securities, we may rely on opinions or advice of counsel for the issuer of such securities, or statements made in related offering documents, for purposes of determining whether such securities represent debt or equity securities for U.S. federal income tax purposes, and also to what extent those securities constitute REIT real estate assets for purposes of the REIT asset tests and produce income which qualifies under the 75% REIT gross income test. In addition, when purchasing the equity tranche of a securitization, we may rely on opinions or advice of counsel regarding the qualification of the securitization for exemption from U.S. corporate income tax and the qualification of interests in such securitization as debt for U.S. federal income tax purposes. The inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax.

Your investment has various U.S. federal income tax risks.

        Although the provisions of the Internal Revenue Code generally relevant to an investment in shares of our common stock are described in "U.S. Federal Income Tax Considerations," we urge you to consult your tax advisor concerning the effects of U.S. federal, state, local and foreign tax laws to you with regard to an investment in shares of our common stock.

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CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS

        Various statements contained in this prospectus, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include projections and estimates concerning the availability of reverse mortgage loans and reverse mortgage-backed securities, acquisition and origination opportunities and the availability of financing. Our forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "anticipate," "potential," "plan," "goal" or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this prospectus speak only as of the date of this prospectus; we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While we consider these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These and other important factors, including those discussed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. These risks, contingencies and uncertainties include, but are not limited to, the following:

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our expected operating results and our ability to make distributions to our stockholders in the future;



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use of the proceeds of this offering;



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the anticipated growth in demand for reverse mortgage loans and reverse mortgage-related assets, and the anticipated growth in the reverse mortgage securitization market and the size of these markets;



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volatility in our industry, interest rates and spreads, the debt or equity markets, the general economy or the real estate market specifically, whether the result of market events or otherwise;



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changes in our investment objectives and business strategy;



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our expected investment and underwriting process;



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the availability of financing on acceptable terms or at all;



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actions and initiatives of the U.S. government and changes to U.S. government policies and the execution and impact of these actions, initiatives and policies;



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the level of federal and state government involvement in the U.S. residential mortgage market in general and the reverse mortgage market specifically;



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events or circumstances which undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or man-made disasters or threatened or actual armed conflicts;



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the availability of attractive risk-adjusted investment opportunities;



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rates of default or decreased recovery rates on our assets;



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the degree and nature of our competition;



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unanticipated costs, delays and other difficulties in executing our long-term growth strategy;



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the timing of cash flows and payments on our assets;

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an increase in interest rates;



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the performance, financial condition and liquidity of our borrowers;



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the loss of any of our licenses to do business or our inability to obtain licenses to do business in jurisdictions where we are not so licensed;



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the loss of RMF's status as an approved non-supervised FHA mortgagee or its status as an approved Ginnie Mae issuer;



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the effects of any changes to the HECM loan program or other governmental programs that are not yet contemplated or implemented, which could increase the costs of underwriting the HECM loans, decrease the attractiveness of HECM loans to potential borrowers, limit the number of borrowers eligible to receive HECM loans and/or decrease the maximum size of HECM loans, any of which could decrease the availability of our assets;



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the effects of any changes to the servicing compensation structure for reverse mortgage servicers pursuant to programs of government sponsored enterprises or various regulatory authorities;



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changes in federal, state and local policies, laws and regulations affecting our business, including reverse mortgage financing or servicing, and changes to our licensing requirements as well as legislative, accounting and regulatory changes (including changes to laws governing the taxation of REITs, the exclusions or exemptions from registration as an investment company under the 1940 Act and changes in the manner GAAP require us to account for our investments and liabilities);



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limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes and qualify for certain exclusions or exemptions from registration under the 1940 Act;



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changes caused by the Dodd-Frank Act, including regulations required by the Dodd-Frank Act that have been promulgated or have yet to be finalized;



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increased scrutiny of participants in the reverse mortgage market and potential investigations and enforcement actions by the CFPB; and



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the potential failure to establish and maintain effective internal control over financial reporting.