On November 14, 2016, the Company agreed to sell to Freedom
Mortgage Corporation (Freedom Mortgage) the Excess MSRs Freedom
Mortgage had previously sold to the Company. The sale is
structured to occur in two steps: (1) on November 15, 2016, the
Company sold, and Freedom Mortgage purchased, the Excess MSRs
arising under both the Pool 1 Excess MSR Acquisition Agreement,
dated as of October 9, 2013, between Freedom Mortgage and the
Company, and the Flow and Bulk Excess MSR Acquisition Agreement,
dated as of October 9, 2013, between Freedom Mortgage and the
Company and (2) on or about December 15, 2016, the Company will
sell, and Freedom Mortgage will purchase, the Excess MSRs arising
under the Pool 2 Excess MSR Acquisition Agreement, dated as of
October 9, 2013, between Freedom Mortgage and the Company. The
purchase price will equal the product of sixty basis points (60
bps) and the aggregate UPB of the applicable mortgage loans as of
the close of business on the last day of the month prior to the
month of the applicable closing. In connection with each closing:
(i) the Company will release its lien on the MSRs underlying the
Excess MSRs being sold and repay the related portion of its
outstanding Term Loan and (ii) the applicable Excess MSR
acquisition agreement(s) will be terminated. In connection with
the second closing, the Acknowledgement Agreement among Ginnie
Mae, Freedom and the Company will be terminated. Payments will be
in cash provided, however, that all or part of the payment for
the second closing may take the form of Ginnie Mae MSRs if Ginnie
Mae and the Company’s independant directors approve. In
addition, Freedom Mortgage will make quarterly yield maintenance
payments in 2017 aggregating $3.0 million.

We expect to recognize a gain on sale and to invest the proceeds
of the sale (after repayment of the Term Loan) in RMBS pending
redeployment of those funds to acquisitions of MSRs.

In connection with the sale, the Company’s Acknowledgment
Agreement with Ginnie Mae and Freedom Mortgage will be
terminated. As the Company has previously disclosed, the
Acknowledgment Agreement exposes the Company to potential
liability to Ginnie Mae if Freedom Mortgage defaults on its
Ginnie Mae servicing obligations. Based on the growth of Freedom
Mortgages Ginnie Mae servicing portfolio, which has more than
doubled since the Company entered into the Acknowledgment
Agreement, the Company believes its counterparty risk to Freedom
Mortgage has increased disproportionately compared to the
Companys economic interest in Freedom Mortgage’s Ginnie Mae
servicing portfolio. By engaging in this transaction, the Company
expects to eliminate any potential liability it could have to
Ginnie Mae if Freedom Mortgage defaults on its Ginnie Mae
servicing obligations.

The Company is party to a management agreement (the Management
Agreement) with Cherry Hill Mortgage Management, LLC (the
Manager), a Delaware limited liability company established by Mr.
Middleman. The Manager is a party to a Services Agreement with
Freedom Mortgage Corporation (Freedom Mortgage) which is owned
and controlled by Mr. Middleman. The Manager is owned by a blind
trust for the benefit of Mr. Middleman. At the request of Ginnie
Mae, Mr. Middleman has agreed not to stand for re-election to the
Companys board of directors in 2017.