Altisource Asset Management Corp
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-KxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEARENDED DECEMBER 31, 2017ORoTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934COMMISSION FILE NUMBER: 001-36063Altisource Asset Management Corporation(Exact name of registrant as specified in its charter)UNITED STATES VIRGIN ISLANDS66-0783125(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)5100 Tamarind ReefChristiansted, United States Virgin Islands 00820(Address of principal executive office)(340) 692-1055(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:(Title of Each Class)(Name of exchange on which registered)Common stock, par value $0.01 per shareNYSE MKTSecurities registered pursuant to Section 12(g) of the Act: None.Indicate by check if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required tosubmit and post such files). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. ¨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 thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large Accelerated Filer¨ Accelerated Filer¨Non-Accelerated Filerx(Do not check if a smaller reporting company)Smaller Reporting Company¨ Emerging Growth Company¨If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No xThe aggregate market value of common stock held by non-affiliates of the registrant was $44.7 million, based on the closing share price as reported on theNew York Stock Exchange on June 30, 2017 and the assumption that all Directors and executive officers of the registrant and their families and beneficialholders of 10% of the registrant's common stock are affiliates. This determination of affiliate status is not necessarily a conclusive determination for any otherpurpose.As of February 19, 2018, 1,601,835 shares of our common stock were outstanding (excluding 1,216,840 shares held as treasury stock).Portions of the registrant's definitive proxy statement for the registrant's 2018 annual meeting, to be filed within 120 days after the close of the registrant'sfiscal year, are incorporated by reference into Part III of this Annual Report on Form 10-K.Altisource Asset Management CorporationDecember 31, 2017Table of ContentsPart I1Item 1. Business.1Item 1A. Risk Factors.9Item 1B. Unresolved Staff Comments.31Item 2. Properties.32Item 3. Legal Proceedings.32Item 4. Mine Safety Disclosures.33Part II34Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.34Item 6. Selected Financial Data.36Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.37Item 7A. Quantitative and Qualitative Disclosures About Market Risk.50Item 8. Consolidated Financial Statements and Supplementary Data.50Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.51Item 9A. Controls and Procedures.52Item 9B. Other Information.54Part III55Item 10. Directors, Executive Officers and Corporate Governance.55Item 11. Executive Compensation.55Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.55Item 13. Certain Relationships and Related Transactions, and Director Independence.55Item 14. Principal Accountant Fees and Services.55Part IV56Item 15. Exhibits.56Signatures57i(table of contents)References in this report to “we,” “our,” “us,” or the “Company” refer to Altisource Asset Management Corporation and its consolidated subsidiaries, unlessotherwise indicated. References in this report to “Front Yard” refer to Front Yard Residential Corporation, formerly Altisource Residential Corporation, andits consolidated subsidiaries, unless otherwise indicated.Special note on forward-looking statementsOur disclosure and analysis in this Annual Report on Form 10-K contain “forward-looking statements” within the meaning of Section 27A of the SecuritiesAct of 1933, as amended, which we refer to as the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934, as amended (the “ExchangeAct”). In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,”“intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases thatare predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements bydiscussions of strategy, plans or intentions.The forward-looking statements contained in this report reflect our current views about future events and are subject to numerous known and unknown risks,uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-lookingstatement. Factors that may materially affect such forward-looking statements include, but are not limited to:•our ability to implement our business strategy and the business strategy of Front Yard;•our ability to retain Front Yard as a client;•our ability to retain and maintain our strategic relationships;•the ability of Front Yard to generate a return on invested capital in excess of applicable hurdle rates or cash available for distribution to itsstockholders under our management;•our ability to obtain additional asset management clients or businesses;•our ability to effectively compete with our competitors;•Front Yard's ability to complete future or pending transactions;•the failure of service providers to effectively perform their obligations under their agreements with us and Front Yard;•general economic and market conditions; and•governmental regulations, taxes and policies.While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future performance. Such forward-looking statements speak only as of their respective dates, and we assume no obligation to update them to reflect changes in underlying assumptions orfactors, new information or otherwise. For a further discussion of these and other factors that could cause our future results to differ materially from anyforward-looking statements contained herein, please refer to the section “Item 1A. Risk factors.”ii(table of contents)Part I Item 1. BusinessOverviewAltisource Asset Management Corporation (“we,” “our,” “us” or the “Company”) was incorporated in the United States Virgin Islands (“USVI”) on March 15,2012 (our “inception”), and we commenced operations in December 2012. Our primary business is to provide asset management and certain corporategovernance services to institutional investors. In October 2013, we applied for and were granted registration by the Securities and Exchange Commission (the“SEC”) as a registered investment adviser under section 203(c) of the Investment Advisers Act of 1940. We operate in a single segment focused on providingasset management and certain corporate governance services to investment vehicles.Our primary client currently is Front Yard Residential Corporation, formerly Altisource Residential Corporation (“Front Yard”), a public real estateinvestment trust (“REIT”) focused on acquiring and managing quality, affordable single-family rental (“SFR”) properties for America's families. Front Yard iscurrently our primary source of revenue and will drive our results.Since we are heavily reliant on revenues earned from Front Yard, investors may obtain additional information about Front Yard in its SEC filings, including,without limitation, Front Yard’s financial statements and other important disclosures therein, available at http://www.sec.gov andhttp://ir.frontyardresidential.com/financial-information.On March 31, 2015, we entered into a new asset management agreement with Front Yard (the “AMA”), under which we continue to be the exclusive assetmanager for Front Yard for an initial term of 15 years from April 1, 2015, with two potential five-year extensions. The AMA provides for a fee structure inwhich we are entitled to a base management fee, an incentive management fee and a conversion fee for loans and real estate owned (“REO”) properties thatbecome rental properties during each quarter; therefore, our operating results are highly dependent on Front Yard's operating results. See the “AssetManagement Agreement” section for additional details of the AMA.Prior to January 1, 2016, we concluded that Front Yard was a variable interest entity (“VIE”), and we consolidated the accounts of Front Yard in ourconsolidated financial statements. Effective January 1, 2016, we adopted the provisions of Accounting Standards Update (“ASU”) 2015-02, Consolidation(Topic 810) – Amendments to the Consolidation Analysis (“ASU 2015-02”) and performed an analysis of our relationship with Front Yard pursuant to theamended guidance. We determined that the compensation we receive in return for our services to Front Yard is commensurate with the level of effort requiredto perform such services and the arrangement includes customary terms, conditions or amounts present in arrangements for similar services negotiated atarm’s length; therefore, Front Yard is no longer a VIE under the amended guidance. As a result, effective January 1, 2016, we no longer consolidate theaccounts of Front Yard. We have applied ASU 2015-02 using the modified retrospective approach, which has resulted in a cumulative-effect adjustment toour equity on January 1, 2016. As a result, periods prior to January 1, 2016 were not impacted. The adoption effectively removed those balances previouslydisclosed that related to Front Yard from our consolidated financial statements and eliminated the amounts previously reported as non-controlling interests inFront Yard as a consolidated affiliate. Subsequent to adoption, our consolidated revenues consist of management fees and expense reimbursements receivedfrom Front Yard under the AMA, and our consolidated expenses consist of salaries and employee benefits, legal and professional fees and general andadministrative expenses.Due to the significance of Front Yard's consolidated financial statements to our historical consolidated financial statements in periods prior to January 1,2016, our consolidated financial statements have limited comparability with our consolidated financial statements in 2015 and prior periods.Front Yard has also entered into property management service agreements with two separate third-party property managers, Altisource Portfolio SolutionsS.A. (“ASPS”) and Main Street Renewal LLC (“MSR”, together with ASPS, the “Property Managers”) to provide, among other things, leasing and leasemanagement, operations, maintenance, repair and property management services in respect of its SFR properties. ASPS also provides similar propertymanagement, property preservation, maintenance and repair services in respect of Front Yard's REO portfolio while we determine whether to convert suchproperties into rental properties or sell them. We believe that Front Yard's relationships with its Property Managers and access to their renovation andproperty management vendor and internal networks enable Front Yard to competitively acquire and maintain large portfolios of SFR properties or individualSFR properties on a targeted basis.Front Yard also has servicing agreements with two mortgage loan servicers with respect to the remaining mortgage loans in its portfolio.1(table of contents)Additionally, our wholly owned subsidiary, NewSource Reinsurance Company Ltd. (“NewSource”), is a title insurance and reinsurance company licensedwith the Bermuda Monetary Authority (“BMA”). NewSource commenced reinsurance activities during the second quarter of 2014. In December 2014,NewSource determined that the economics of the initial business did not warrant the continuation of its initial reinsurance quota share agreement with anunrelated third party. NewSource therefore transferred all of the risk of claims and future losses underwritten to an unrelated third party, and its reinsuranceand insurance business has been dormant since that time.Our Business StrategyOur business strategy is to (i) provide asset management services to Front Yard in a manner that builds long-term value and a stable income stream for FrontYard's stockholders while generating management fees to AAMC and (ii) to develop additional scalable investment strategies and vehicles by leveraging theexpertise of our management team.Front Yard's Business StrategyWe are committed to assisting Front Yard in executing its strategy of being one of the top SFR REITs serving American families and their communities with aview to providing consistent and robust returns on equity and long-term growth for its investors. We believe that Front Yard's business model, under ourmanagement, provides Front Yard with a competitive advantage. We also believe the operating capabilities we provide to Front Yard are difficult to replicate.Front Yard's portfolio of SFR properties has grown substantially in recent years, and we continue to manage Front Yard's rental homes efficiently, effectivelyand in line with Front Yard's key operating metric targets.We believe there is a compelling opportunity in the SFR market and that we have implemented the right strategic plan for Front Yard to capitalize on thesustained growth in SFR demand. Front Yard targets the moderately priced single-family home market to acquire rental properties, which in our view offerdesirable yield opportunities. In the current market, we believe tighter credit availability for lower-income buyers and the relative scarcity of institutionalbuyers and operators should result in reduced price competition for reasonably priced homes. We believe that, when combined with sustained renter demandfor quality, affordable homes, Front Yard's lower home acquisition costs and careful evaluation of capital expenditure requirements prior to acquisition willoffer attractive yield opportunities. We view this as a significant differentiator for Front Yard.We expect Front Yard to hold SFR property assets over the long term with a focus on developing Front Yard's brand. We also believe that the forecastedgrowth for the SFR marketplace, in combination with Front Yard's ability to acquire and effectively manage assets with attractive yields in strategic marketsprovide Front Yard with a significant opportunity to establish itself as a leading SFR equity REIT.From an operational standpoint, Front Yard's Property Managers with whom we have established relationships both employ established, nationwiderenovation and property management infrastructures that provide Front Yard with geographic reach and a low cost, scalable property management structurethat has allowed Front Yard to grow in a cost-efficient manner and is difficult to replicate in the industry today. Due to the partnerships we have establishedwith its Property Managers, we believe that Front Yard's growth is not constrained by the cost and operational obstacles associated with building a newproperty management services platform. To date, Front Yard has not determined to develop its own infrastructure for the collection of rents, the completion ofrenovations and other operational matters critical to the management of properties on a large scale because its Property Managers have well-developedplatforms to do so.Front Yard's Acquisition StrategyThrough the judicious use of cash under our management, Front Yard's strong financing relationships and the sale of mortgage loans and REO properties,Front Yard has capitalized on opportunities to buy pools of stabilized rental homes and individual residential properties at attractive yields. Front Yardcontinues to have significant liquidity, and we anticipate Front Yard will execute upon similar acquisition opportunities as they become available. We alsobelieve that Front Yard's focus on affordable housing provides it with a potential advantage, as Front Yard is focused on homes where we expect lower tenantturnover.We have been successful in our pursuit of this strategy on Front Yard's behalf to date, having increased Front Yard's SFR portfolio to approximately 12,000homes at December 31, 2017. We expect Front Yard to continue to opportunistically source, bid on and acquire additional SFR properties that meet itstargeted metrics under our management over the course of 2018.2(table of contents)Strengths that AAMC Brings to Front YardWe are committed to a business strategy that will enable Front Yard to grow and maintain a substantial SFR portfolio and become one of the largestnationwide SFR REITs. Our goal is to enhance Front Yard's long-term stockholder value through the execution of its business plan with a focus on itscompetitive strengths. We believe these strengths will enable Front Yard to grow and provide strong stabilized results over time, which we expect will, inturn, result in improved results for AAMC. Front Yard's strong competitive position is based on the following strengths through our management:•Acquisition Strategy Enables Front Yard to Build a Portfolio that we Expect will Provide Attractive Yields to its Stockholders. Through ourpersonnel and technical expertise, we have developed a disciplined market and asset selection approach and a valuation model for Front Yard thatuses proprietary and market data to evaluate and project the performance of SFR assets. This valuation model has been built with multiple broadeconomic inputs as well as individual property-level inputs to determine which properties will produce attractive yields and how much to pay forthese properties to best achieve optimal results. These internally-developed tools help Front Yard to evaluate the most attractive SFR properties forsale. We also leverage Front Yard's property managers' property inspection, management and rental infrastructure and related data flows to identifyand acquire attractive assets in any geographical locations into which Front Yard desires to grow. We intend to continue to build this infrastructureand employ regional teams that will focus on specified geographical areas and use their developed regional experience to continually refine FrontYard's acquisition strategy and to achieve rental portfolio growth with properties marked by strong stabilized occupancy rates and optimal economicreturns. We also believe that Front Yard's focus on affordable housing provides it with a potential advantage, as Front Yard is focused on homeswhere we expect lower tenant turnover.•Relationships with the Property Managers and their Nationwide Property Management Infrastructures. With the support of its Property Managers'nationwide vendor networks, we believe that Front Yard is strategically positioned to operate SFR properties across the United States at an attractivecost structure. Front Yard's Property Managers' infrastructures provide it with cost-efficient, scalable platforms as Front Yard continues to grow itsSFR portfolio.•Depth of Management Experience. We believe the experience and technical expertise of our management team is one of Front Yard's key strengths.Our team has a broad and deep knowledge of the mortgage and real estate markets with decades of experience in real estate, mortgage trading,housing, financial services and asset management. Their experience in the real estate industry brings a wealth of understanding of the markets inwhich Front Yard operates and can help Front Yard build its portfolio in a manner that brings attractive potential returns to its stockholders.Management and its supporting teams have expertise and extensive contacts that enable us to source SFR assets through access to auctions andsellers of SFR assets and obtain financing to optimize available leverage. Due to our management team's expertise, Front Yard has been able tostrategically sell non-performing and re-performing loans to sustain a strong dividend while also using the liquidity generated from these sales toincrease its SFR portfolio by approximately 39% in 2017. We believe that our asset evaluation process and the experience and judgment of ourexecutive management team in identifying, assessing, valuing and acquiring new residential rental properties and related assets will help Front Yardto appropriately value the residential rental assets at the time of purchase and to quickly and efficiently grow its portfolio.Asset Management AgreementPursuant to the AMA, we design and implement Front Yard's business strategy, administer its business activities and day-to-day operations and providecorporate governance services, subject to oversight by Front Yard's Board of Directors. We are responsible for, among other duties: (1) performing andadministering all of Front Yard's day-to-day operations; (2) defining investment criteria in Front Yard's investment policy in cooperation with its Board ofDirectors; (3) sourcing, analyzing and executing asset acquisitions, including the related financing activities; (4) analyzing and executing sales of REOproperties and residential mortgage loans; (5) overseeing the Property Managers' renovation, leasing and property management of Front Yard's SFRproperties; (6) overseeing the servicing of Front Yard's remaining residential mortgage loans; (7) performing asset management duties and (8) performingcorporate governance and other management functions, including financial, accounting and tax management services.We provide Front Yard with a management team and support personnel who have substantial experience in the acquisition and management of residentialproperties and residential mortgage loans. Our management also has significant corporate governance experience that enables us to manage Front Yard'sbusiness and organizational structure efficiently. We have agreed not to provide the same or substantially similar services without the prior written consent ofFront Yard's Board of Directors to any business or entity competing against Front Yard in (a) the acquisition or sale of SFR and/or REO properties, non-3(table of contents)performing and re-performing mortgage loans or other similar assets; (b) the carrying on of an SFR business or (c) any other activity in which Front Yardengages. Notwithstanding the foregoing, we may engage in any other business or render similar or different services to any businesses engaged in lending orinsurance activities or any other activity other than those described above. Further, at any time following Front Yard's determination and announcement thatit will no longer engage in any of the above-described competitive activities, we would be entitled to provide advisory or other services to businesses orentities in such competitive activities without Front Yard's prior consent.On March 31, 2015, we entered into the AMA with Front Yard. The AMA, which became effective on April 1, 2015, provides for the following managementfee structure:•Base Management Fee. We are entitled to a quarterly base management fee equal to 1.5% of the product of (i) Front Yard's average invested capital(as defined in the AMA) for the quarter multiplied by (ii) 0.25, while it has fewer than 2,500 SFR properties actually rented (“Rental Properties”). Thebase management fee percentage increases to 1.75% of average invested capital while Front Yard has between 2,500 and 4,499 Rental Properties andincreases to 2.0% of average invested capital while it has 4,500 or more Rental Properties; •Incentive Management Fee. We are entitled to a quarterly incentive management fee equal to 20% of the amount by which Front Yard's return oninvested capital (based on AFFO, defined as net income attributable to holders of common stock calculated in accordance with GAAP plus realestate depreciation expense minus recurring capital expenditures on all real estate assets owned by Front Yard) exceeds an annual hurdle return rateof between 7.0% and 8.25% (or 1.75% and 2.06% per quarter), depending on the 10-year treasury rate. To the extent Front Yard has an aggregateshortfall in its return rate over the previous seven quarters, that aggregate return rate shortfall gets added to the normal quarterly 1.75% return hurdlefor the next quarter before we are entitled to an incentive management fee. The incentive management fee increases to 22.5% while Front Yard hasbetween 2,500 and 4,499 Rental Properties and increases to 25% while it has 4,500 or more Rental Properties; and •Conversion Fee. We are entitled to a quarterly conversion fee equal to 1.5% of the market value of assets converted into leased single-family homesby Front Yard for the first time during the quarter.Because Front Yard has more than 4,500 Rental Properties, we are entitled to receive a base management fee of 2.0% of Front Yard’s invested capital and apotential incentive management fee percentage of 25% of the amount by which Front Yard exceeds its then-required return on invested capital threshold.Front Yard has the flexibility to pay up to 25% of the incentive management fee to us in shares of its common stock. Under the AMA, Front Yard will not berequired to reimburse us for the allocable compensation and routine overhead expenses of our employees and staff, all of which will now be covered by thebase management fee described above. Only the compensation and benefits of the general counsel dedicated to Front Yard and certain other out-of-pocketexpenses incurred on Front Yard's behalf are reimbursed by Front Yard.Under the AMA, Front Yard reimburses us for the compensation and benefits of the General Counsel dedicated to Front Yard and certain other out-of-pocketexpenses incurred on Front Yard's behalf.The AMA requires that we are the exclusive asset manager for Front Yard for an initial term of 15 years from April 1, 2015, with two potential five-yearextensions, subject to Front Yard achieving an average annual return on invested capital of at least 7.0%. Under the AMA, neither party is entitled toterminate the AMA prior to the end of the initial term, or each renewal term, other than termination by (a) us and/or Front Yard “for cause” for certain eventssuch as a material breach of the AMA and failure to cure such breach, (b) Front Yard for certain other reasons such as its failure to achieve a return on investedcapital of at least 7.0% for two consecutive fiscal years after the third anniversary of the AMA or (c) Front Yard in connection with certain change of controlevents.Under the previous asset management agreement, Front Yard paid us a quarterly incentive management fee based on a percentage of its cash available fordistribution to its stock.If the AMA were terminated by Front Yard, our financial position and future prospects for revenues and growth would be materially adversely affected.4(table of contents)Access to Established Nationwide Property Management InfrastructurePursuant to its property management agreements with ASPS and MSR, Front Yard's Property Managers provide Front Yard with, among other services,property management, leasing, renovation management and valuation services. Front Yard's arrangements with each of its Property Managers are scalable andallow Front Yard to operate and manage its SFR properties with cost and operational efficiency as well as predictability.We work directly with the vendor management teams and repair professionals of the Property Managers on Front Yard's behalf. Our construction and vendormanagement team also often interfaces with the general contractors and vendors themselves to maintain relationships with the vendor networks. Through ourteam, Front Yard coordinates with the Property Managers and their vendor networks to establish a collective approach to the renovation management,maintenance, repair and materials supply chain in an effort to create a unified look and feel for Front Yard's SFR properties.Information with respect to each of Front Yard's Property Managers is provided below:ASPSASPS has developed a nationwide operating infrastructure enabled by technology and standardized and centrally managed processes. It also has a globalback office organization that evaluates property management and renovation vendors, solicits the appropriate vendors to perform requested work, assigns thework to the vendor with the best possible combination of cost and delivery capabilities, provides uniform property management and inspection criteria,provides technology to review and assess properties, verifies that the vendor’s work is complete and pays the vendor.In addition to the SFR property management services provided to Front Yard, as of December 31, 2017, ASPS managed more than 23,000 vacant pre-foreclosure and REO assets in all 50 states, and these types of properties are typically far more intensive to manage than tenant-occupied rentals. ASPS hasthe capacity to conduct more than 173,000 inspections and 92,000 repair and maintenance orders on a monthly basis and has more than 8,300 centrallymanaged vendors operating nationwide. ASPS also leverages sophisticated systems and strong vendor oversight to mitigate risks for its clients, stringentenough to satisfy the requirements of three top-10 bank clients and four of the largest non-bank mortgage servicers in the United States. ASPS's brokerage isthe seventh largest real estate brokerage in the United States, operating in 50 states and managing over 23,000 transactions annually.MSRMSR is a vertically integrated property manager of SFR properties, purpose built to provide end-to-end acquisition, development and management services.MSR’s centralized platform consists of teams dedicated to acquisitions, renovation, marketing and leasing, property management and other supportfunctions. In addition, MSR’s technology partnerships provide it with proprietary technology solutions that support field efficiency and performance. FrontYard's relationship with MSR offers important diversification for its cost-effective external property management structure.We believe MSR's cost-effective property management infrastructure and technology-driven market analyses will result in increased long-term value forFront Yard's stockholders.In addition, MSR has a proprietary acquisition platform that is capable of simultaneously deploying capital across multiple acquisition channels and inmultiple markets. The acquisition team reviews a number of factors, such as the local housing market, population growth, market economics and yieldconsiderations. MSR has a portfolio of 11,000 properties in 25 of Front Yard's current and target markets. We continue to explore additional opportunities forFront Yard to leverage MSR's property acquisition abilities to further grow its SFR portfolio.Front Yard's Investment ProcessWe continue to hire key personnel and portfolio managers with substantial experience in the real estate market. Using extensive market connections and adisciplined market and asset selection approach incorporating advanced quantitative models, our capital markets group has demonstrated expertise insourcing, analyzing and negotiating the purchase of both large and small portfolios of rented single-family properties. This expertise has enabled us topurchase a total of 10,470 SFR properties, the majority of which were stabilized rentals at acquisition, in our targeted markets since the third quarter of 2015.5(table of contents)Front Yard's Financing StrategyFront Yard intends to continue to finance its real estate investments with debt and equity, the proportions and character of which may vary based upon theparticular characteristics of its portfolio and on market conditions. To the extent available at the relevant time, Front Yard's financing sources may includebank credit facilities, seller financing arrangements, warehouse lines of credit, securitization financing, term financing, structured financing arrangements andrepurchase agreements, among others. Front Yard may also seek to raise additional capital through public or private offerings of debt or equity securities,depending upon market conditions. For additional information on our financing arrangements, see “Item 7. Management's Discussion and Analysis ofFinancial Condition and Results of Operations – Liquidity and Capital Resources.” Front Yard's Investment Committee and Investment PolicyWe conduct substantially all of the investment activities on behalf of Front Yard pursuant to the AMA. Front Yard’s Board of Directors has adopted a broadinvestment policy designed to facilitate our management of Front Yard’s capital and assets and our maintenance of an investment portfolio profile that meetsFront Yard’s objectives. We report to Front Yard’s Investment Committee, whose role is to act in accordance with the investment policy and guidelinesapproved by Front Yard’s Board of Directors for the investment of its capital. As part of an overall investment portfolio strategy, the investment policyprovides that we can facilitate Front Yard’s purchase or sale of non-performing or sub-performing residential mortgage loans, residential mortgage backedsecurities and real estate assets. We are also authorized, on behalf of Front Yard, to offer leases on acquired single-family residential real estate. Theinvestment policy may be modified by Front Yard’s Board of Directors without the approval of our stockholders.The objective of Front Yard’s investment policy is to oversee our efforts to achieve a return on assets consistent with Front Yard’s business objective and tomaintain adequate liquidity to meet Front Yard’s financial covenants and regular cash requirements.The Investment Committee is authorized to approve the financing of Front Yard’s investment positions through bank credit facilities, seller financingarrangements, warehouse lines of credit, securitization financing, term financing, structured financing arrangements and repurchase agreements, amongothers, provided such agreements are negotiated with counterparties approved by the Investment Committee. We are also permitted to hedge Front Yard’sinterest rate exposure on its financing activities through the use of interest rate swaps or caps, forwards, futures and options, subject to prior approval fromFront Yard’s Investment Committee.Investment Committee Approval of CounterpartiesFront Yard’s Investment Committee is authorized to consider and approve, based on our recommendations:•the financial soundness of institutions with which Front Yard plans to transact business and recommendations with respect thereto;•Front Yard’s risk exposure limits with respect to the dollar amounts of total exposure with a given institution; and•investment accounts and trading accounts to be opened with banks, broker-dealers and financial institutions.Investment Committee GuidelinesThe activities of Front Yard’s Investment Committee are subject to the following guidelines, which we must follow in making recommendations to theInvestment Committee:•No investment will be made that would cause Front Yard or any of its subsidiaries to fail to qualify as a REIT for U.S. federal income tax purposes;•No investment will be made that would cause Front Yard to be required to register as an investment company under the Investment Company Act of1940, as amended (the “Investment Company Act”); and•Until appropriate investments can be identified, Front Yard may invest available cash in interest-bearing and short-term investments that areconsistent with (a) Front Yard’s intention to qualify as a REIT and (b) Front Yard’s exemption from registration as an investment company under theInvestment Company Act.6(table of contents)Broad Investment Policy RisksFront Yard's investment policy is very broad and, therefore, its Investment Committee and we have extensive latitude in determining the types of assets thatare appropriate investments for Front Yard and to make individual investment decisions. In the future, we may make investments with lower rates of returnthan those anticipated under current market conditions and/or may make investments with greater risks to achieve those anticipated returns. Front Yard'sBoard of Directors will periodically review its investment policy and its investment portfolio but will not typically review or approve each proposedinvestment made by us unless, for example, it falls outside our previously approved investment policy or constitutes a related party transaction.In addition, in conducting periodic reviews, Front Yard's Board of Directors will rely primarily on information provided to it by us. We may use complexstrategies, and transactions entered into by us on behalf of Front Yard may be costly, difficult or impossible to unwind by the time they are reviewed by FrontYard's Board of Directors. Further, Front Yard may change its investment policy and targeted asset classes at any time without the consent of its stockholders,which could result in it making investments that are different in type from, and possibly riskier than, its current investments or the investments currentlycontemplated. Changes in Front Yard's investment strategy, investment policy and targeted asset classes may increase its exposure to interest rate risk,counterparty risk, default risk and real estate market fluctuations, which could materially and adversely affect Front Yard and, in turn, could adversely affectthe fees we earn under our asset management agreement.EmployeesAs of December 31, 2017, we had 62 full-time employees in the USVI, the United States, the Cayman Islands and India. Our employees undertake assetmanagement functions for Front Yard that include acquisitions, capital markets access, risk management, accounting, internal audit, corporate managementand legal services. Our executive officers are also officers of Front Yard.On January 18, 2016, we hired a new dedicated General Counsel for Front Yard. Although he is not employed by Front Yard, his primary duties are to act asFront Yard's General Counsel, and he reports to Front Yard's Board of Directors and Chief Executive Officer. Front Yard also directs and approves hiscompensation and reimburses us for all costs associated with his employment.Service Providers for AAMC's BusinessWe have entered into a support services agreement with ASPS (the “ASPS support services agreements”), pursuant to which ASPS may provide, as necessary,services to us in such areas as human resources, vendor management operations, corporate services, risk management and six sigma, quality assurance,treasury, finance and accounting, tax, compliance and other support services. In addition, we have entered into trademark license agreements with ASPS thatprovides us with non-exclusive, non-transferable, non-sublicensable, royalty free license to use the name “Altisource.” We also entered into a technologyservices agreement with ASPS pursuant to which ASPS provides us with technology support services for network management and telephony.Our CompetitionWe are in a highly competitive market and are competing with other asset managers. Our competitors may have greater resources, more personnel, moreclients, more sources of revenue and more capital than we do. Some of our competitors' clients may have the advantage of having significant amounts ofcapital, lower cost of capital or access to funding sources not available to our client. Additionally, our competitors and competitors' clients may have higherrisk tolerances or may be willing to accept lower returns on investment. Some of our competitors may be regarded by potential clients as having betterexpertise related to specific assets.7(table of contents)Front Yard's CompetitionFront Yard faces competition from various sources for the acquisition of SFR properties. Front Yard's competition includes other REITs, hedge funds,developers, private equity funds and partnerships. To effectively compete, Front Yard will rely upon our management team and their substantial industryexpertise. We believe our relationship with Front Yard and the terms of the AMA provide Front Yard with a competitive advantage and help Front Yard assessthe investment risks and determine appropriate pricing. We expect Front Yard's integrated approach of acquiring SFR properties as well as converting sub-performing and non-performing residential mortgage loans into rental properties will enable Front Yard to compete more effectively for attractive investmentopportunities. However, there can be no assurance that Front Yard will be able to achieve its business goals or expectations due to the competitive pricingand other risks that it faces. Front Yard's competitors may have greater resources and access to capital and higher risk tolerances than Front Yard, may be ableto pay higher prices for assets or may be willing to accept lower returns on investment. As the inventory of available SFR properties and related assets willfluctuate, the competition for assets and financing may increase.Front Yard also faces significant competition in the SFR market from other real estate companies, including REITs, investment companies, partnerships anddevelopers. To effectively manage rental yield and occupancy levels, Front Yard will rely upon the ability of our management team to supervise therenovation, yield management and property management services on its acquired properties. Despite these efforts, some of Front Yard's competitors' SFRproperties may be of better quality, be in more desirable locations than its properties or have leasing terms more favorable than Front Yard offers. In addition,Front Yard's ability to compete and meet its return objectives depends upon, among other factors, trends of the national and local economies, the financialcondition and liquidity of current and prospective tenants, availability and cost of capital, taxes and governmental regulations. Given the significantcompetition, complexity of the market, changing financial and economic conditions and evolving single-family tenant demographics and demands, wecannot assure you that Front Yard will be successful in acquiring or managing SFR properties that satisfy its return objectives.Government ApprovalOutside of routine business and regulatory filings to continue our registration as an investment adviser, we do not believe it is necessary to obtain anygovernment approval to operate our business.Environmental MattersWe do not believe there are any environmental matters that will materially affect the conduct of our business.As an owner of real estate, Front Yard is subject to various federal, state and local environmental laws, regulations and ordinances and also could be liable tothird parties resulting from environmental contamination or noncompliance with environmental laws at its properties. We are tasked with monitoring theselaws, regulations and ordinances and conducting due diligence in acquired properties for Front Yard. Environmental laws can impose liability on an owner oroperator of real property for the investigation and remediation of contamination at or migrating from such real property without regard to whether the owneror operator knew of or was responsible for the presence of the contaminants. The liability is generally not limited under such laws and could exceed theproperty's value and the aggregate assets of the liable party. The presence of contamination or the failure to remediate contamination could adversely affectFront Yard's ability to sell, lease or renovate the real estate or borrow using the real estate as collateral. Although we do not believe these risks directly exposeus to environmental liability as a separate independent company, these and other risks related to environmental matters could have an adverse impact onFront Yard, and such risks are described in more detail in “Item 1A. Risk Factors.”Governmental Regulations We do not believe there are any governmental regulations that will materially affect the conduct of our business.Available InformationWe file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other information with the SEC. These filings areavailable to the public over the Internet at the SEC's website at http://www.sec.gov. You may also read and copy any document we file at the SEC's publicreference room located at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1 800-SEC-0330 for further information on the public referenceroom.8(table of contents)Our principal Internet address is http://www.altisourceamc.com, and we encourage investors to use it as a way of easily finding information about us. Wepromptly make available on this website, free of charge, the reports that we file with or furnish to the SEC along with corporate governance informationincluding our Corporate Governance Guidelines, our Code of Business Conduct and Ethics and select press releases. The contents of our website areavailable for informational purposes only and shall not be deemed incorporated by reference in this report.Item 1A. Risk FactorsThe following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. If any of the following risksactually occur, our business, operating results and financial condition could be materially adversely affected.Risks Related to Our BusinessWe have a limited operating history. If we are unable to implement our business strategy as planned, we will be materially and adversely affected.We commenced operations in 2012, and our business model is relatively untested and evolving. Businesses like ours that have a limited operating historyand a limited client base present substantial business and financial risks and may suffer significant losses. As a result, we cannot predict our results ofoperations, financial condition and cash flows. Our results for prior periods are not necessarily indicative of our results for any future period, and we may nothave sufficient additional capital to implement our business model. There can be no assurance that our business will be profitable or that it will besustainable. The earnings potential of our proposed business is unproven, and the absence of an operating history makes it difficult to evaluate our prospects.We may not be able to implement our business strategy as planned, which could materially and adversely affect us.Failure of Front Yard to achieve desired results could result in drastically reduced management fees to us, which would have a material adverse effect onour operating results and financial condition.In March 2015, we entered into the AMA with Front Yard. The AMA, which became effective on April 1, 2015, provides for the management fee structuredescribed under “Item 1. Business - Asset Management Agreement.” The three components of the fee structure are the base management fee, which iscurrently 2.0% of Front Yard’s average invested capital (as defined in the AMA); the conversion fee, which is 1.5% of the market value of the single-familyhomes leased by Front Yard for the first time during the quarter; and the incentive management fee, which is currently 25% of the amount, if any, by whichFront Yard’s return on invested capital (based on AFFO as defined in the AMA) exceeds an annual hurdle return rate of between 7.0% and 8.25% (dependingon the 10-year treasury rate). To the extent Front Yard has an aggregate shortfall in its return rate over the previous seven quarters, that aggregate return rateshortfall gets added to the normal quarterly 1.75% return hurdle for the next quarter before we are entitled to an incentive management fee.Since the effective date of the AMA, we have not yet earned any incentive management fees because Front Yard has not achieved a return in invested capital,as defined in the AMA, of greater than 1.75% in any quarter since April 1, 2015. In addition, since Front Yard’s performance has resulted in shortfalls of the1.75% return on invested capital for the past seven quarters, those shortfalls have been added to the return on invested capital Front Yard must achieve beforeentitling us to an incentive management fee. We cannot be certain as to whether or when we will earn an incentive management fee under the AMA. If FrontYard is unable to achieve a return on invested capital that entitles us to earn an incentive management fee, our operating results and financial conditionwould be significantly limited, which, absent additional new revenue streams, could materially and adversely affect us.Front Yard is our primary client, and we are primarily reliant on Front Yard to generate our revenues. A loss of Front Yard as a client and/or our inabilityto obtain or develop new clients would materially adversely affect us.Front Yard currently is our primary customer. The loss of this key customer or its failure to pay us would adversely affect our revenues, results of operationsand financial condition. Despite Front Yard’s or our efforts, Front Yard may fail to substantially grow or have adverse financial performance for a number ofreasons, including, without limitation, failure to maintain adequate liquidity, an inability to grow through equity offerings and/or debt facilities, generationof poor or inadequate returns or an inability to, or substantial delays in, growing or monetizing its portfolio. Under the AMA, neither party is entitled toterminate the AMA prior to the end of the initial term or each renewal term. However, Front Yard has the ability to terminate us (a) “for cause” for certainevents such as a material breach of the AMA and failure to cure such breach, (b) for certain other reasons9(table of contents)such as its failure to achieve a return on invested capital of at least 7.0% for two consecutive fiscal years after the third anniversary of the AMA or (c) inconnection with certain change of control events. There can be no assurance that Front Yard will not be entitled to terminate us prior to the end of the initialterm or any renewal term, particularly after April 2018, if Front Yard’s results do not achieve the required returns for two consecutive years. Front Yard mayalso make a decision to abandon the SFR business, which may have the constructive effect of terminating the AMA or drastically reducing our fees under theAMA.Since we are heavily reliant on revenues earned from Front Yard, investors may obtain additional information about Front Yard in its SEC filings, including,without limitation, Front Yard’s financial statements and other important disclosures therein, available at http://www.sec.gov andhttp://ir.frontyardresidential.com/financial-information.We may not be able to obtain or develop additional clients on acceptable terms or at all. Our ability to attract, develop and/or maintain additional clientsmay depend, in large part, on the success of Front Yard under our management and our ability to continue to develop and implement Front Yard’s businessplan profitably and enable Front Yard to maintain and grow its shareholder returns and dividends. We may be unable to reduce our reliance on Front Yard formanagement fees, and our failure to do so could materially and adversely affect our results of operation and financial condition and could adversely affectour ability to attract additional clients and the sustainability of our business model.The success of our business is dependent on Front Yard and its ongoing access to sufficient and cost-effective sources of capital.Front Yard may require additional working capital to implement its investment strategies and may need to utilize a variety of funding sources to providesufficient capital to effectively carry out its business plan over the long term. We will have significant responsibilities in advising Front Yard on its capitalraising activities. Our success is dependent on Front Yard's ability to obtain such capital. Front Yard utilizes various sources of liquidity, including, withoutlimitation, accessing the capital markets to issue debt or equity securities; engaging in collateralized or other borrowings, including repurchase agreementsand warehouse facilities from third party banks; or entering into securitization transactions, all or any of which may not be available or have terms that arenot cost effective, therefore having an adverse impact on Front Yard's financial performance. Front Yard currently is our primary customer. The loss of thiskey customer or its failure to pay us would adversely affect our revenues, results of operation and financial condition. We may not be able to obtainadditional clients on acceptable terms or at all. Therefore, we may be unable to reduce our reliance on Front Yard for management fees.The asset management business is intensely competitive.The asset management business is intensely competitive, driven by a variety of factors, including asset performance, the quality of service provided toclients, brand recognition and business reputation. Our asset management business competes with a number of other asset managers. A number of factorsserve to increase our competitive risks:•A number of our competitors may have greater financial, technical, marketing and other resources and more personnel than we do;•Our clients may not perform as well as the clients of our competitors;•Several of our competitors and their clients have significant amounts of capital, and many of them have similar management objectives to ours,which may create additional competition for management opportunities;•Some of these competitors' clients may also have a lower cost of capital and access to funding sources that are not available to our clients, whichmay create competitive disadvantages for us with respect to funding opportunities;•Some of our competitors' clients may have higher risk tolerances, different risk assessments or lower return thresholds, which could allow them tofacilitate the acquisition and management by their clients of a wider variety of assets and allow them to advise their clients to bid more aggressivelythan our clients for assets on which we would advise our clients to bid;•There are relatively few barriers to entry impeding new asset management firms, and the successful efforts of new entrants into the asset managementbusiness is expected to continue to result in increased competition;•Some of our competitors may have better expertise or be regarded by potential clients as having better expertise with regard to specific assets; and•Other industry participants will from time to time seek to recruit members of our management team and other employees away from us.10(table of contents)Suboptimal economics of real estate-related insurance activities, or a failure to commence and/or grow the business of NewSource could adversely impactour investment in NewSource.We invested $2.0 million in 100% of the common stock of NewSource during 2013, and we invested an additional $5.0 million in 2015. Despite thecommencement in 2014 of NewSource’s title reinsurance business operations, NewSource determined that the economics of the initial business activities didnot warrant the continuation of its initial reinsurance quota share agreement with an unrelated third party. NewSource therefore transferred all of the risk ofclaims and future losses underwritten to an unrelated third party for a price of $3.2 million.We are continuing to evaluate NewSource's real estate related insurance and reinsurance strategy and considering related opportunities. There is no assurancethat we will be able to develop or grow NewSource's business strategy or operations or engage in insurance and reinsurance activities at all. In any such event,the business model for NewSource would become challenged or the growth of NewSource would become hampered, which would adversely affect theeconomics of our investment in NewSource and/or generate stockholder returns to us.We are subject to the risks of securities laws liability and related civil litigation.We may be subject to risk of securities litigation and derivative actions from time to time as a result of being publicly traded, including the remainingunresolved actions set forth in “Item 3. Legal Proceedings.” There can be no assurance that any settlement or liabilities in such actions or any future lawsuitsor claims against us would be covered or partially covered by our insurance policies, which could have a material adverse effect on our earnings in one ormore periods. While we and our Board of Directors deny the allegations of wrongdoing against us in the unresolved actions initiated against us, there can beno assurance as to the ultimate outcome or timing of their resolutions. The range of possible resolutions could include determinations and judgments againstus or settlements that could require substantial payments by us, including the costs of defending such suits, which could have a material adverse effect on ourfinancial condition, results of operations and cash flows. An adverse resolution of any future lawsuits or claims against us could have an adverse effect on ourbusiness, financial condition and/or operating results.An unidentified material weakness in our internal control over financial reporting could, if not remediated, result in material misstatements in ourfinancial statements.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibilitythat a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Our management isresponsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.There can be no assurance that material weaknesses will not arise in the future or that any remediation efforts will be successful. If additional materialweaknesses or significant deficiencies in our internal controls are discovered in the future, we could be required to restate our financial results or experience adecline in the price of our securities.Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving theirobjectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal control over financialreporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and canprovide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance thatmisstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.Our success depends on our senior management team, and if we are not able to retain them, it could have a material adverse effect on us.We are highly dependent upon the continued services and experience of our senior management team. We depend on the services of members of our seniormanagement team to, among other things, continue the development and implementation of our growth strategies and maintain and develop our clientrelationships. In the event that, for any reason, we are unable to retain our key personnel, it may be difficult for us to secure suitable replacements onacceptable terms. This would adversely impact the development and implementation of our growth strategies.11(table of contents)The continuing unpredictability of the credit markets may restrict our clients' or our access to capital and may make it difficult or impossible for us toobtain any required additional financing.The domestic and international credit markets continue to be unpredictable. In the event that we need additional capital for our business, we may have adifficult time obtaining it and/or the terms upon which we can obtain it would have an adverse impact on our financial performance. In addition, failures ofour clients to raise capital or access capital markets could adversely impact their ability to grow and/or generate adequate returns on capital, which couldadversely impact any management fees we earn.Our business could be significantly impacted if we suffer failure or disruptions of our information systems.We rely heavily on communications, data processing and other information processing systems to conduct our business and support our day-to-day activities,most services of which are provided through ASPS. Thus, our business requires the continued operation of ASPS's sophisticated information technologysystems and network infrastructure. These systems are vulnerable to interruption by fire, loss, system malfunction and other events that are beyond ourcontrol. Systems interruptions could reduce our ability to provide our services and could have an adverse effect on our operations and financial performance.Our inability to replace or successfully replicate these information services from a third party or develop them internally could have an adverse impact on ourbusiness and results of operations.Failure to retain the tax benefits provided by the USVI would adversely affect our financial performance.We are incorporated under the laws of the USVI and are headquartered in the USVI. The USVI has an Economic Development Commission (the “EDC”) thatprovides benefits (“EDC Benefits”) to certain qualified businesses in the USVI that enable us to avail ourselves of significant tax benefits for a thirty yearperiod. We received our certificate to operate as a company that qualifies for EDC Benefits as of February 1, 2013, which provides us with a 90% credit onour taxes so long as we comply with the requirements of the EDC and our certificate of benefits. It is possible that we may not be able to retain ourqualifications for the EDC Benefits or that changes in U.S. federal, state, local or USVI taxation statutes or applicable regulations may cause a reduction in oran elimination of the EDC Benefits, all of which could result in a significant increase to our tax expense, and, therefore, adversely affect our financialcondition and results of operations.The Tax Cuts & Jobs Act (the “TCJA”) was enacted on December 22, 2017 and made significant changes to the Code. Although management is stillevaluating the effects of the TCJA, we do not believe that the TCJA will significantly impact our consolidated financial statements.Our USVI operations may become subject to United States federal income taxation.AAMC, our parent company incorporated under the laws of the USVI, intends to operate in a manner that will cause us to be treated as not engaging in a tradeor business within the United States, which will cause us to be exempt from current United States federal income taxation on our net income. However,because there are no definitive standards provided by the Code, regulations or court decisions as to the specific activities that constitute being engaged in theconduct of a trade or business within the United States, and as any such determination is essentially factual in nature, we cannot assure you that the IRS willnot successfully assert that we are engaged in a trade or business within the United States.If the IRS were to successfully assert that we have been engaged in a trade or business within the United States in any taxable year, various adverse taxconsequences could result, including the following:•We may become subject to current United States federal income taxation on our net income from sources within the United States;•We may be subject to United States federal income tax on a portion of our net investment income, regardless of its source;•We may not be entitled to deduct certain expenses that would otherwise be deductible from the income subject to United States taxation; and•We may be subject to United States branch profits tax on profits deemed to have been distributed out of the United States.12(table of contents)United States persons who own shares may be subject to United States federal income taxation on our undistributed earnings and may recognize ordinaryincome upon disposition of shares.Significant potential adverse United States federal income tax consequences generally apply to any United States person who owns shares in a passiveforeign investment company (“PFIC”). We cannot provide assurance that we will not be a PFIC in any future taxable year.In general, we would be a PFIC for a taxable year if either (i) 75% or more of our income constitutes “passive income” or (ii) 50% or more of our assetsproduce “passive income.” Passive income generally includes interest, dividends and other investment income. We believe that we are currently operating,and intend to continue operating, our business in a way that should not cause us to be a deemed PFIC; however, we cannot assure you the IRS will notsuccessfully challenge this conclusion.United States persons who, directly or indirectly or through attribution rules, own 10% or more of our shares (“United States 10% Shareholders”), based oneither voting power or value, may be subject to the controlled foreign corporation (“CFC”) rules. Under the CFC rules, each United States 10% Shareholdermust annually include his pro rata share of the CFC's “subpart F income,” even if no distributions are made. Also, all capital gains from the sale of PFIC shareswill be treated as ordinary income for federal income tax purposes and thus are not eligible for preferential long-term capital gains rates.We believe that the dispersion of our ordinary shares among holders will generally prevent new shareholders who acquire shares from being United States10% Shareholders. We cannot assure you, however, that these rules will not apply to you. If you are a United States person, we strongly urge you to consultyour own tax adviser concerning the CFC rules.United States tax-exempt organizations who own shares may recognize unrelated business taxable income.If you are a United States tax-exempt organization, you may recognize unrelated business taxable income with respect to our insurance-related income if aportion of our subpart F income is allocated to you. In general, subpart F income will be allocated to you if we are a CFC and you are a United States 10%Shareholder and certain exceptions do not apply. In general, with respect to insurance revenues related to NewSource, we will be treated as a CFC only ifNewSource would be taxed as an insurance company were it a U.S. corporation, its applicable insurance liabilities exceed 25% of its total assets and electiverelief provisions do not apply. Although we do not believe that any United States persons will be allocated subpart F income, we cannot assure you that thiswill be the case. If you are a United States tax-exempt organization, we advise you to consult your own tax adviser regarding the risk of recognizing unrelatedbusiness taxable income.We may in the future become subject to the Global Intangible Low-Taxed Income provisions.The Tax Cuts and Job Reform Act requires U.S. shareholders of CFCs to include in income, as a deemed dividend, the global intangible low-taxed income(“GILTI”) of the CFCs. The GILTI regime is designed to decrease the incentive for a U.S. group to shift corporate profits to low-taxed jurisdictions. We are notcurrently impacted by the GILTI provisions, as the entirety of the aggregate net income for each of our CFCs is excluded from our “net tested income” (thebasis on which the tax is calculated), as it constitutes Subpart F income and is subject to an effective foreign tax rate greater than 90% of the maximum U.S.corporate income tax rate.We cannot rule out the possibility that we will in the future find ourselves subject to the GILTI rules, should the income of our CFCs no longer be entirelySubpart F income and be taxed at a foreign tax rate greater than 90% if the U.S. corporate income tax rate.Change in United States tax laws may be retroactive and could subject us and/or United States persons who own shares to United States income taxationon our undistributed earnings.The tax laws and interpretations regarding whether we are engaged in a United States trade or business, are a CFC or a PFIC are subject to change, possibly ona retroactive basis. New regulations or pronouncements interpreting or clarifying such rules may be forthcoming from the IRS. We are not able to predict if,when or in what form such guidance will be provided and whether such guidance will have a retroactive effect.13(table of contents)The impact of the initiative of the Organization for Economic Cooperation and Development to eliminate harmful tax practices is uncertain and couldadversely affect our tax status in the United States Virgin Islands.The Organization for Economic Cooperation and Development has published reports and launched a global dialogue among member and non-membercountries on measures to limit harmful tax competition. These measures are largely directed at counteracting the effects of tax havens and preferential taxregimes in countries around the world. While the USVI is currently a jurisdiction that has substantially implemented internationally agreed tax standards, weare not able to predict if additional requirements will be imposed and, if so, whether changes arising from such additional requirements will subject us toadditional taxes.Concentration of Credit RiskWe maintain our cash and cash equivalents at financial or other intermediary institutions. The combined account balances at each institution typicallyexceed FDIC insurance coverage of $250,000 per depositor, and, as a result, there is a concentration of credit risk related to amounts on deposit in excess ofFDIC insurance coverage. At December 31, 2017, substantially all of our cash and cash equivalent balances held at financial institutions exceeded FDICinsured limits. Any event that would cause a material portion of our cash and cash equivalents at financial institutions to be uninsured by the FDIC couldhave a material adverse effect on our financial condition and results of operations.Risks Related to Our Management and Our RelationshipsWe could have conflicts with Front Yard, and our Directors or management could have conflicts of interest due to their relationship with Front Yard,which may be resolved in a manner adverse to us.We have engaged, and continue to engage, in a substantial amount of business with Front Yard. Conflicts may arise between Front Yard and us because of ourongoing agreement with Front Yard and because of the nature of our respective businesses.Each of our executive officers is also an executive officer of Front Yard and has interests in our relationship with Front Yard that may be different than theinterests of our stockholders. As a result, they may have obligations to us and Front Yard and could have conflicts of interest with respect to matterspotentially or actually involving or affecting us and Front Yard. In particular, these individuals have a direct interest in the financial success of Front Yardthat may encourage these individuals to support strategies in furtherance of the financial success of Front Yard that could potentially adversely impact us.We follow policies, procedures and practices to avoid potential conflicts with respect to our dealings with Front Yard, including where necessary, certain ofour officers recusing themselves from discussions on, and approvals of transactions with Front Yard. We also manage potential conflicts of interest throughoversight by independent members of our Board of Directors (independent directors constitute a majority of our Board of Directors), and we will also seek tomanage these potential conflicts through dispute resolution and other provisions of our agreements with Front Yard. Although we continue to seek ways tolessen many of these potential conflicts of interest, there can be no assurance that such measures will be effective, that we will be able to resolve all conflictswith Front Yard or that the resolution of any such conflicts will be no less favorable to us than if we were dealing with a third party that had none of theconnections we have with Front Yard.Our Directors have the right to engage or invest in the same or similar businesses as ours.Our Directors may have other investments and business activities in addition to their interest in, and responsibilities to, us. Under the provisions of ourCharter and our bylaws (the “Bylaws”), our Directors have no duty to abstain from exercising the right to engage or invest in the same or similar businesses asours or employ or otherwise engage any of the other Directors. If any of our Directors who are also directors, officers or employees of any company acquiresknowledge of a corporate opportunity or is offered a corporate opportunity outside of his capacity as one of our Directors, then our Bylaws provide that suchDirector will be permitted to pursue that corporate opportunity independently of us, so long as the Director has acted in good faith. Our Bylaws provide that,to the fullest extent permitted by law, such a Director will be deemed to have satisfied his fiduciary duties to us and will not be liable to us for pursuing sucha corporate opportunity independently of us. This may create conflicts of interest between us and certain of our Directors and result in less than favorabletreatment of us and our stockholders. As of this date, none of our Directors is directly involved as a director, officer or employee of a business that competeswith us, but there can be no assurance that will remain unchanged in the future.14(table of contents)Risks related to our common stockThe market price and trading volume of our common stock may be volatile and may be affected by market conditions beyond our control.The price at which our common stock trades has fluctuated, and may continue to fluctuate, significantly. The market price of our common stock mayfluctuate in response to many things, including but not limited to, the following:•variations in actual or anticipated results of our operations, liquidity or financial condition;•changes in, or the failure to meet, our financial estimates or those of by securities analysts;•actions or announcements by our competitors;•potential conflicts of interest, or the discontinuance of our strategic relationships with Front Yard, ASPS and/or MSR;•actual or anticipated accounting problems;•regulatory actions;•lack of liquidity;•changes in the financial condition or stock price of Front Yard;•changes in the market outlook for the real estate, mortgage or housing markets;•technology changes in our business;•changes in interest rates that lead purchasers of our common stock to demand a higher yield;•actions by our stockholders;•speculation in the press or investment community;•general market, economic and political conditions, including an economic slowdown or dislocation in the global credit markets;•failure to maintain the listing of our common stock on the NYSE MKT;•failure of Front Yard to qualify or maintain qualification as a REIT;•failure of Front Yard to maintain its exemption from registration under the Investment Company Act;•changes in accounting principles;•passage of legislation or other regulatory developments that adversely affect us or our industry; and•departure of our key personnel.The market prices of securities of asset management service providers have experienced fluctuations that often have been unrelated or disproportionate to theoperating results of these companies. These market fluctuations could result in extreme volatility in the market price of our common stock.Furthermore, our small size and different investment characteristics may not continue to appeal to our current investor base that may seek to dispose of largeamounts of our common stock. There is no assurance that there will be sufficient buying interest to offset those sales, and, accordingly, the market price of ourcommon stock could be depressed and/or experience periods of high volatility.Risks to Us Related to Front Yard’s Business Risks and Operating PerformanceFront Yard is our primary source of revenue and will drive our potential future growth. Any risk associated with Front Yard's business that would adverselyaffect its ability to generate revenue and pay distributions to its shareholders is a risk to our business, as our revenues, results of operations and financialcondition significantly depend upon the management fees paid to us by Front Yard. Any risk that ultimately adversely affects Front Yard could adverselyaffect the revenues we can generate under the asset management agreement, our results of operations and our financial condition. The risks related to FrontYard’s business are provided below.Front Yard has a limited and evolving operating history. If Front Yard is unable to implement its business strategy as planned, it will be materially andadversely affected.Front Yard commenced operations approximately four years ago, and its business model is relatively untested and evolving. Businesses like Front Yard’s thathave a limited operating history present substantial business and financial risks and may suffer significant losses. As a result we cannot predict Front Yard’sresults of operations, financial condition and cash flows. Front Yard only began to generate residential rental revenue during 2013, and its historical financialresults have been largely attributable to purchasing residential mortgage loans and other rental-related assets at a discount. As a result of the changes to itsacquisition strategy and evolving market conditions, Front Yard has not completed any residential mortgage loan portfolio acquisitions since 2014, FrontYard may not pursue further acquisitions of such loans. Further, there can be no assurance that15(table of contents)Front Yard will be able to identify and successfully acquire portfolios of SFR properties or related assets on favorable terms or at all.We anticipate significant growth in Front Yard's rental portfolio, which may result in our inability to effectively manage its rental portfolio, including, butnot limited to, delays in renovations, suboptimal tenant underwriting and other operational inefficiencies that could reduce Front Yard's profitability ordamage its reputation. Generally, we expect that Front Yard's SFR portfolio may grow at an uneven pace, if at all, as opportunities to acquire SFR portfolioson acceptable terms may be irregularly timed and may involve large or small portfolios of SFR properties. The timing and extent of Front Yard's success inacquiring such assets cannot be predicted due to market conditions, limited financial resources or other constraints.As a result of the foregoing developments, results from prior periods are not necessarily indicative of Front Yard's results for any future period, and Front Yardmay not have sufficient additional capital to implement its business model. There can be no assurance that Front Yard's business will remain profitable or thatits profitability will be sustainable. Any of these adverse consequences would have a material adverse impact on our results of operations and businessprospects.Front Yard is operating in an emerging industry, and the long-term viability of its investment strategy on an institutional scale is unproven.Large-scale institutional investment in single-family residential homes for rent is a relatively recent phenomenon that has emerged out of the mortgage andhousing crisis that began in late 2007. Prior to that time, SFR homes were generally not viewed as viable assets for investment on a large scale byinstitutional investors. Consequently, the long-term viability of the SFR property investment strategy on an institutional scale has not yet been proven. As aparticipant in this emerging industry, Front Yard is subject to the risk that SFR properties may not prove to be a viable long-term investment strategy on aninstitutional scale for a permanent capital vehicle. If it turns out that this investment strategy is not a viable one, Front Yard would be materially andadversely affected and may not be able to sustain the growth of its assets and results from operations that it seeks.Front Yard's failure to raise equity capital and/or obtain adequate debt financing could adversely affect its ability to increase its rental portfolio, manageits existing assets and generate stockholder returns.Front Yard's success has been, may continue to be, largely dependent on its ability use its remaining free capital or to raise equity capital and obtain debtfinancing to increase the size of its rental portfolio, manage its existing assets and generate attractive stockholder returns. Front Yard requires significantfinancial resources and relies on cost-effective leverage to maintain its obligations under its debt facilities and to continue to acquire portfolios of SFRproperties. If Front Yard is unable to continue to raise equity capital, or leverage its portfolio through financing facilities, its current portfolio and cash fromoperations may become inadequate to meet its financial obligations, and any such failures would have a material adverse impact on the management fees weearn under the AMA.Front Yard uses leverage as a component of its financing strategy in an effort to increase its buying power and enhance its returns. No assurance can beprovided that Front Yard will be able to timely access all funds available under its financing arrangements, refinance such financing arrangements or obtainother debt or equity financing on favorable terms or at all.In any event, limited availability of credit may have an adverse effect on Front Yard's ability to obtain financing on favorable terms, thereby increasingfinancing costs and/or requiring Front Yard to accept financing with increasing restrictions. Front Yard's long-term ability to grow through additionalinvestments will be limited if it cannot obtain additional debt or equity financing.Front Yard may not be able to successfully operate its business or generate sufficient operating cash flows to make or sustain distributions to itsstockholders.There can be no assurance that Front Yard will be able to successfully operate its business or generate sufficient cash to make distributions to its stockholders.Front Yard's ability to make or sustain distributions to its stockholders depends on many factors, including the following: the availability of attractive risk-adjusted investment opportunities that satisfy its investment strategy and its success in identifying and consummating such opportunities on favorable terms;the level and expected movement of home prices; the occupancy rates and rent levels of rental properties; the restoration, maintenance, marketing and otheroperating costs related to its SFR and REO properties; the level and volatility of interest rates; our ability to effectively manage a significant increase in thenumber of properties in Front Yard’s SFR portfolio; its ability to sell its remaining mortgage loans on favorable terms; the availability of short-term and long-term financing on favorable terms; conditions in the16(table of contents)financial, real estate, housing and mortgage markets and the general economic conditions, as to which no assurance can be given. We cannot assure you thatFront Yard will be able to make investments with attractive risk-adjusted returns or will not seek investments with greater risk to obtain the same level ofreturns or that the value of its investments in the future will not decline substantially. Existing and future government regulations may result in additionalcosts or delays, which could adversely affect the implementation of Front Yard's investment strategy, which could materially and adversely affect our resultsof operations and financial condition.Front Yard has leveraged its investments and expects to continue to do so, which may materially and adversely affect its return on investments and mayreduce cash available for distribution to Front Yard's stockholders.To the extent available, we intend to continue to leverage Front Yard's investments through borrowings, the level of which may vary based on the particularcharacteristics of Front Yard's investment portfolio and on market conditions. We have leveraged certain of Front Yard's investments to date through itsrepurchase agreements. When Front Yard enters into any repurchase agreement, it may sell securities, residential mortgage loans or residential properties tolenders (i.e., repurchase agreement counterparties) and receives cash from the lenders. The lenders are obligated to resell the same assets back to Front Yard atthe end of the term of the transaction. Because the cash Front Yard receives from the lender when it initially sells the assets to the lender is less than the valueof those assets, if the lender defaults on its obligation to resell the same assets back to Front Yard, it could incur a loss on the transaction. In addition,repurchase agreements generally allow the counterparties, to varying degrees, to determine a new market value of the collateral to reflect current marketconditions or for other reasons. If such counterparty determines that the value of the collateral has decreased, it may initiate a margin call and require FrontYard to either post additional collateral to cover such decrease or repay a portion of the outstanding borrowing. Should this occur, in order to obtain cash tosatisfy a margin call, Front Yard may be required to liquidate assets at a disadvantageous time, which could cause it to incur further losses. In the event FrontYard is unable to satisfy a margin call, its counterparty may sell the collateral, which may result in significant losses to Front Yard.Front Yard's repurchase and other financing agreements generally require it to comply with various financial covenants, including those relating to tangiblenet worth, profitability and its ratio of total liabilities to tangible net worth, and to maintain minimum amounts of cash or cash equivalents sufficient tomaintain a specified liquidity position. We expect any future financing arrangements will have similar provisions. In the event that Front Yard is unable tosatisfy these requirements, it could be forced to sell additional investments at a loss which could materially and adversely affect Front Yard.Front Yard's repurchase and other financing agreements are complex and require a significant level of oversight by management. In part, this is due to the factthat the single-family residential properties and other assets that collateralize these facilities do not produce consistent cash flows and require specificactivities to be performed at specific points in time in order to preserve value. Front Yard's inability to comply with the terms and conditions of theseagreements could materially and adversely impact it. In addition, Front Yard's outstanding repurchase and other financing agreements contain, and we expectany future repurchase and other financing agreements will contain, events of default, including payment defaults, substantial margin calls, breaches offinancial and other covenants and/or certain representations and warranties, cross-defaults, servicer termination events, guarantor defaults, bankruptcy orinsolvency proceedings and other events of default customary for these types of agreements. Because Front Yard's financing agreements will typicallycontain cross-default provisions, a default that occurs under any one agreement could allow the lenders under its other agreements to also declare a default.Any losses Front Yard incurs on its repurchase and other financing agreements could materially and adversely affect Front Yard.Front Yard has utilized repurchase agreements, seller financing arrangements, term financing arrangements, loan agreements and securitization transactions tofinance its portfolio and may in the future utilize other sources of borrowings, including bank credit facilities, warehouse lines of credit and structuredfinancing arrangements, among others, each of which may have similar risks to repurchase agreement financing and securitizations, including, but not limitedto, covenant compliance, events of default, acceleration and margin calls. The percentage of leverage Front Yard employs, which could increase substantiallyin the future, varies depending on assets in its portfolios, its available capital, its ability to obtain and access financing arrangements with lenders and thelenders’ and rating agencies’ estimate of the stability of its investment portfolio’s cash flow. There can be no assurance that new sources of financing will beavailable to Front Yard in the future or that existing sources of financing will continue to be available to it. Front Yard's governing documents contain nolimitation on the amount of debt it may incur. Front Yard's return on investments and cash available for distribution to its stockholders may be reduced to theextent that changes in market conditions increase the cost of its financing relative to the income that can be derived from the investments acquired. FrontYard's debt service payments will reduce cash flow available for distribution to stockholders. Front Yard may not be able to meet its debt service obligationsand, to the extent that it cannot, it risks the loss of some or all of its assets to foreclosure or sale to satisfy the obligations.17(table of contents)If these risks are realized by Front Yard, our ability to generate management fees could be harmed and our results of operations and financial condition couldbe materially and adversely affected.Front Yard utilizes non-recourse long-term financing structures, and such structures expose it to risks which could result in losses to Front Yard.Front Yard currently utilizes securitization and other non-recourse long-term financing for certain of its investments and intends to continue to do so if, andto the extent, available. In such structures, Front Yard's lenders typically have only a claim against the assets collateralizing the debt rather than a generalclaim against Front Yard as an entity, subject to certain exceptions. In addition, long-term financing structures may offer significantly less flexibility torefinance or terminate on cost-effective terms or at all and, as a result, could make it more difficult for Front Yard to capitalize on changes in marketconditions, including the availability of less expensive debt. In the event it is unable to renew or refinance existing long-term facilities, Front Yard mayincrease its reliance on short-term facilities, which would likely be recourse to Front Yard as an entity.Front Yard may also continue to finance its investments with relatively short-term facilities until a sufficient portfolio is accumulated. If Front Yard is unableto renew, refinance or obtain new long-term and/or short-term facilities, it may be required to seek other forms of potentially less attractive financing or toliquidate assets at an inopportune time or price. In such an event, Front Yard's overall results of operations and financial condition would be materiallyadversely impacted, which would adversely impact our ability to generate management fees.Front Yard's inability to make interest and/or principal payments on the seller financing obtained in connection with certain of its acquisitions wouldhave a material adverse effect on its results of operations and financial condition.In connection with Front Yard's acquisition of 4,262 homes on September 30, 2016 (the “HOME SFR Transaction”) and 3,465 homes in three closings during2017 (the “HOME Flow Transaction”), certain of Front Yard's subsidiaries that own the underlying properties (each a “HOME Borrower”), borrowedapproximately 75% of the aggregate purchase price for each transaction. These loans (the “HOME SFR Loans”) are each secured by the membership interestsin each HOME Borrower and the properties and other assets held by such HOME Borrower. Upon the occurrence of a default of the payment of principaland/or interest on one or more of the HOME SFR Loans, recourse may generally be had against the assets of the applicable HOME Borrower and themembership interests in such HOME Borrower. The primary security and source of payment for the HOME SFR Loans is the cash flows generated by theproperties and the other collateral described in the underlying loan agreements (the “HOME SFR Loan Agreements”). Since revenues from the properties heldby the relevant HOME Borrower generally serve as the primary source for monthly payments due on the corresponding HOME SFR Loan, if revenue from theproperties is reduced or if expenses incurred in the operation of the properties increase, the ability of such HOME Borrower to make payments with respect tosuch HOME SFR Loan may be impaired. Similarly, the HOME SFR Loan Agreements require the applicable HOME Borrower to make a balloon payment atthe ultimate maturity date of the corresponding HOME SFR Loan. The ability of the relevant HOME Borrower to sell and/or refinance the properties and tomake the payment on the maturity date or the equity owner of the HOME Borrower (each a “HOME Equity Owner”), to sell and/or refinance its equity interestin such HOME Borrower to timely perform its guaranty obligations with respect to such maturity date payment, could be impaired by a decline in the valueof the collateral properties. If a HOME Borrower is unable to make payments under the applicable HOME SFR Loan or fails to make payment at maturity, thelender would be able to take possession/title to the membership interests of such HOME Borrower and the properties and other assets of such HOMEBorrower to satisfy and discharge the corresponding HOME SFR Loan obligations. In such an event, Front Yard's overall results of operations and financialcondition would be materially adversely affected.Even though the HOME SFR Loans are non-recourse to Front Yard and all of its subsidiaries other than the relevant HOME Equity Owner and HOMEBorrower, Front Yard has agreed to limited bad act indemnification obligations to the lender for the payment of (i) certain losses arising out of certain bad orwrongful acts of the HOME Equity Owners and HOME Borrowers with respect to the HOME SFR Loans and (ii) a portion of the principal amount of theHOME SFR Loans and certain other obligations under the HOME SFR Loan Agreements in the event Front Yard causes certain voluntary bankruptcy eventsof the applicable HOME Equity Owner or HOME Borrower. Any of such liabilities could have a material adverse effect on Front Yard's results of operationsand/or financial condition.Front Yard may incur significant costs in renovating its properties, and it may underestimate the costs or amount of time necessary to completerestorations.While a substantial portion of the SFR properties Front Yard has acquired to date meet its rental specifications at the time of acquisition, properties frequentlyrequire additional renovations prior to renting. Before renting a property, Front Yard's18(table of contents)Property Managers perform a detailed assessment, with an on-site review of the property, to identify the scope of renovation to be completed. Beyondcustomary repairs, we may, on Front Yard's behalf, instruct the Property Managers to undertake improvements designed to optimize the overall propertyappeal and increase the value of the property. Though we endeavor to conduct property inspections and due diligence prior to Front Yard's acquisition ofnew SFR portfolios, we expect that nearly all of Front Yard's rental properties will require some level of renovation immediately upon their acquisition or inthe future following expiration of a lease or otherwise. Front Yard may acquire properties that we plan to extensively renovate and restore. In addition, inorder to reposition properties in the rental market, Front Yard will be required to make ongoing capital improvements and may need to perform significantrenovations and repairs from time to time. Consequently, Front Yard is exposed to the risks inherent in property renovation, including potential costoverruns, increases in labor and materials costs, delays by contractors in completing work, delays in the timing of receiving necessary work permits andcertificates of occupancy, poor workmanship and improper oversight by its Property Managers. If our assumptions regarding the cost or timing of renovationsacross Front Yard's properties prove to be materially inaccurate, it may be more costly or take significantly more time than anticipated to develop and growits SFR portfolio, which could materially and adversely affect Front Yard. This could, in turn, materially and adversely affect our ability to generatemanagement fees.The availability of portfolios of single-family residential properties for purchase on favorable terms may decline as market conditions change, our industrymatures and/or additional purchasers for such portfolios emerge, and the prices for such portfolios may increase, any of which could materially andadversely affect us.In recent years, there has been an increase in supply of single-family residential property portfolios available for sale. Because Front Yard operates in anemerging industry, market conditions may be volatile, and the prices at which portfolios of single-family residential properties can be acquired may increasefrom time to time, or permanently, due to new market participants seeking such portfolios, a decrease in the supply of desirable portfolios or other adversechanges in the geographic areas that we may target from time to time. For these reasons, the supply of single-family residential properties that Front Yard mayacquire may decline over time, which could materially and adversely affect Front Yard and its growth prospects.Portfolios of properties that Front Yard has acquired or may acquire may include properties that do not fit its investment criteria, and divestiture of suchproperties may be costly or time consuming or both, which may adversely affect its operating results.Front Yard acquired, and expects to continue to acquire, portfolios of single-family residential properties, many of which are, or will be, subject to existingleases. To the extent the management and leasing of such properties has not been consistent with its property management and leasing standards, Front Yardmay be subject to a variety of risks, including risks relating to the condition of the properties, the credit quality and employment stability of the tenants andcompliance with applicable laws, among others. In addition, financial and other information provided to Front Yard regarding such portfolios during our duediligence may be inaccurate, and Front Yard may not be able to obtain relief under contractual remedies, if any. If Front Yard concludes that certainproperties acquired as part of a portfolio do not fit its investment criteria, it may decide to sell such properties and may be required to renovate the propertiesprior to sale, to hold the properties for an extended marketing period and/or sell the property at an unfavorable price, any of which could materially andadversely affect Front Yard.Competition in identifying and acquiring residential rental assets could adversely affect Front Yard's ability to implement its business strategy, whichcould materially and adversely affect Front Yard.Front Yard faces competition from various sources for investment opportunities, including REITs, hedge funds, private equity funds, partnerships, developersand others. Some third-party competitors have substantially greater financial resources and access to capital than Front Yard does and may be able to acceptmore risk than Front Yard can. Competition from these companies may reduce the number of attractive investment opportunities available to Front Yard orincrease the bargaining power of asset owners seeking to sell, which would increase the prices of assets. If such events occur, Front Yard's ability toimplement its business strategy could be adversely affected, which could materially and adversely affect Front Yard. Given the existing competition,complexity of the market and requisite time needed to make such investments, no assurance can be given that Front Yard will be successful in acquiringinvestments that generate attractive risk-adjusted returns. Furthermore, there is no assurance that such investments, once acquired, will perform as expected. Ifthese risks are realized by Front Yard, our ability to generate management fees could be harmed and our results of operations and financial condition could bematerially and adversely affected.19(table of contents)Failure of ASPS or MSR to effectively perform their obligations under their respective agreements with Front Yard could materially and adversely affectFront Yard.Front Yard has engaged ASPS and MSR to provide services. If for any reason Front Yard's Property Managers are unable to perform the services describedunder these agreements at the level and/or the cost anticipated or fail to allocate sufficient resources to meet Front Yard's needs for additional services underthese agreements, qualified alternate service providers may not be readily available on a timely basis, on favorable terms or at all, which would adverselyaffect Front Yard's performance. The performance of Front Yard's SFR portfolio will be affected by management decisions relating to the properties, which inturn may be affected by events or circumstances impacting its Property Managers or their respective affiliates, or the financial condition or results ofoperations of any of the foregoing. In certain circumstances and subject to the restrictions set forth in the property management agreements between each ofFront Yard and its Property Managers, Front Yard's Property Managers have broad discretion with the respect to the management of the properties, including,without limitation, certain renovations, maintenance and certain matters related to leasing, including marketing and selection of tenants. Front Yard'sProperty Managers do not have long-term established track records to demonstrate their successful operation over a significant period of time. It is difficult toevaluate potential future performance of Front Yard's Property Managers and their ability to continue to perform management services effectively or withinFront Yard's existing cost and expense assumptions without the benefit of such established track records.Front Yard's Property Managers' ability to perform their obligations under the respective property management services agreements will be affected byvarious factors, including, among other things, their ability to hire sufficient personnel and retain key personnel, the number of Front Yard's properties thatthey manage and the volume of properties under management for their other clients. Increases in the number of properties under management by Front Yard'sProperty Managers that Front Yard may purchase or that the Property Managers themselves manage away from Front Yard may require them to hire additionalqualified personnel. No assurance can be made that either of the Property Managers will be successful in attracting and retaining skilled personnel or inintegrating any new personnel into their respective organizations and into the respective property management structures for Front Yard's acquired properties.Moreover, as the size of Front Yard's Property Managers' respective property management portfolios increases, the resources dedicated to Front Yard coulddecrease or require its Property Managers' personnel to focus on clients other than Front Yard. Such a decrease in productivity may adversely affect themanagement of Front Yard's properties.Front Yard's Property Managers' failure to perform the services under their respective property management agreements or Front Yard's inability to retainqualified alternate service providers to replace and/or supplement them could result in a material adverse effect on Front Yard.Termination of a Property Manager could have a material adverse effect on Front Yard's business, results of operations and financial condition.In certain limited circumstances, Front Yard is permitted or required to terminate a Property Manager in connection with their management of all or a portionof the SFR portfolio that they currently manage. There is a high risk of a disruption in Front Yard's operations and possible lapse in quality should theapplicable portfolio of properties experience a change in operators or key leadership personnel, particularly in the transition period immediately followingsuch changes. There is no assurance that one or more adequate replacement property managers capable of managing the relevant portfolio of SFR propertieswould be available and willing to assume the existing Property Manager’s duties upon terms (including the compensation) that are the same or morefavorable than those set forth in the existing property management agreement with the relevant Property Manager. Even if one or more replacement propertymanagers were engaged, there is no assurance that such replacement managers individually or collectively would be able to perform management servicesadequately or within existing cost and expense assumptions.If any of these foregoing risks materialize, this would have a material adverse effect on the performance of these properties or could cause a default of FrontYard's obligations under the MSR loan agreement, and Front Yard's business, results of operations and financial condition would therefore be materiallyharmed.Front Yard may be materially and adversely affected by risks affecting the single-family rental properties in which its investments may be concentrated atany given time, as well as from unfavorable changes in the related geographic regions.Front Yard's assets are not subject to any geographic diversification requirements or concentration limitations, and, as a result, circumstances or events thatimpact a geographic region in which Front Yard has a significant concentration of properties, including a downturn in regional economic conditions ornatural disasters, could materially and adversely affect Front Yard.20(table of contents)Entities that sell residential rental portfolios may group the portfolios by location or other metrics that could result in a concentration of Front Yard'sportfolio by geography, SFR property characteristics and/or borrower or tenant demographics. Such concentration could increase the risk of loss to FrontYard if the particular concentration in its portfolio is subject to greater risks or undergoing adverse developments. In addition, adverse conditions in the areaswhere the properties or borrowers are located (including business layoffs or downsizing, industry slowdowns, changing demographics, oversupply, reduceddemand and other factors) may have an adverse effect on the value of its investments. A material decline in the demand for single-family housing or rentals inthe areas where Front Yard owns assets may materially and adversely affect Front Yard. Lack of diversification can increase the correlation of non-performance and foreclosure risks among Front Yard's investments. If these risks are realized by Front Yard, our ability to generate management fees could beharmed and our results of operations and financial condition could be materially and adversely affected.Short-term leases of residential property expose Front Yard more quickly to the effects of declining market rents.We anticipate that a majority of Front Yard's leases to tenants of SFR properties will be for a term of one to two years. As these leases permit the residents toleave at the end of the lease term without penalty, we anticipate Front Yard's rental revenues will be affected by declines in market rents more quickly than ifits leases were for longer terms. Short-term leases may result in high turnover, resulting in additional cost to renovate and maintain the property and loweroccupancy levels. Because Front Yard has a limited operating history, its tenant turnover rate and related cost estimates may be less accurate than if we hadmore operating data upon which to base these estimates.Front Yard may be unable to secure funds for property restoration or other capital improvements, which could limit its ability to attract, retain or replacetenants.When Front Yard acquires or otherwise takes title to single-family properties or when tenants fail to renew their leases or otherwise vacate their space, FrontYard generally will be required to expend funds for property restoration and leasing commissions in order to lease the property. If Front Yard has notestablished reserves or set aside sufficient funds for such expenditures, it may have to obtain financing from other sources, as to which no assurance can begiven. Front Yard may also have future financing needs for other capital improvements to restore its properties. If Front Yard needs to secure financing forcapital improvements in the future but are unable to secure such financing on favorable terms or at all, Front Yard may be unable or unwilling to make capitalimprovements or it may be required or may choose to defer such improvements. If this happens, Front Yard's properties may suffer from a greater risk ofobsolescence or decreased marketability, a decline in value or decreased cash flow as a result of fewer potential tenants being attracted to the property orexisting tenants not renewing their leases. If Front Yard does not have access to sufficient funding in the future, it may not be able to make necessary capitalimprovements to its properties, and its properties’ ability to generate revenue may be significantly impaired. If these risks are realized by Front Yard, ourability to generate management fees could be harmed and our results of operations and financial condition could be materially and adversely affected.Front Yard's revenue and expenses are not directly correlated, and, because a large percentage of its costs and expenses are fixed and some variableexpenses may not decrease over time, it may not be able to adapt its cost structure to offset any declines in its revenue.Many of the expenses associated with Front Yard's business, such as acquisition costs, restoration and maintenance costs, HOA fees, personal and realproperty taxes, insurance, compensation and other general expenses are fixed and would not necessarily decrease proportionally with any decrease inrevenue. Front Yard's assets also will likely require a significant amount of ongoing capital expenditure. Front Yard's expenses, including capitalexpenditures, will be affected by, among other things, any inflationary increases, and cost increases may exceed the rate of inflation in any given period.Certain expenses, such as HOA fees, taxes, insurance and maintenance costs are recurring in nature and may not decrease on a per-unit basis as Front Yard'sportfolio grows through additional property acquisitions. By contrast, Front Yard's revenue is affected by many factors beyond our control, such as theavailability and price of alternative rental housing and economic conditions in its markets. As a result, Front Yard may not be able to fully, or even partially,offset any increase in its expenses with a corresponding increase in its revenues. In addition, state and local regulations may require Front Yard to maintain itsproperties, even if the cost of maintenance is greater than the potential benefit. If these risks are realized by Front Yard, our ability to generate managementfees could be harmed and our results of operations and financial condition could be materially and adversely affected.Competition could limit Front Yard's ability to lease single-family rental properties or increase or maintain rents.Front Yard's SFR properties, when acquired, will compete with other housing alternatives to attract residents, including rental apartments, condominiums andother single-family homes available for rent as well as new and existing condominiums and21(table of contents)single-family homes for sale. Front Yard's competitors’ SFR properties may be better quality, in a more desirable location or have leasing terms morefavorable than Front Yard can provide. In addition, Front Yard's ability to compete and generate favorable returns depends upon, among other factors, trendsof the national and local economies, the financial condition and liquidity of current and prospective renters, availability and cost of capital, taxes andgovernmental regulations. Given Front Yard's significant competition, we cannot assure you that it will be successful in acquiring or managing SFRproperties that generate favorable returns, which would materially and adversely affect our ability to generate management fees.If rents in Front Yard's markets do not increase sufficiently to keep pace with rising costs of operations, its operating results and cash available fordistribution will decline.The success of Front Yard's business model will substantially depend on conditions in the SFR property market in its geographic markets. Front Yard's assetacquisitions are premised on assumptions about, among other things, occupancy and rent levels. If those assumptions prove to be inaccurate, Front Yard'soperating results and cash available for distribution will be lower than expected, potentially materially. This, in turn, could materially and adversely affectour ability to generate management fees. Rental rates and occupancy levels have benefited in recent periods from macroeconomic trends affecting the U.S.economy and residential real estate and mortgage markets in particular, including the following:•a tightening of credit that has made it more difficult to finance a home purchase, combined with efforts by consumers generally to reduce theirexposure to credit;•economic and employment conditions that have increased foreclosure rates; and•reduced real estate values that challenged the traditional notion that homeownership is a stable investment.A decrease in rental rates would have a material adverse effect on the performance of Front Yard's SFR portfolio or could cause a default of its obligationsunder one or more financing agreements, and Front Yard's business, results of operations and financial condition would therefore be materially harmed.If the current trend favoring renting rather than homeownership reverses, the single-family rental market could decline.The SFR market is currently significantly larger than in historical periods. We do not expect the favorable trends in the SFR market to continue indefinitely.Eventually, continued strengthening of the U.S. economy and job growth, together with the large supply of foreclosed single-family residential properties,the current availability of low residential mortgage rates and government sponsored programs promoting home ownership, may contribute to a stabilizationor reversal of the current trend that favors renting rather than homeownership. In addition, we expect that as investors increasingly seek to capitalize onopportunities to purchase undervalued housing properties and convert them to productive uses, the supply of SFR properties will decrease and thecompetition for tenants will intensify. A softening of the rental property market in Front Yard's markets would adversely affect its operating results and cashavailable for distribution, potentially materially. This, in turn, could materially and adversely affect our ability to generate management fees.Suboptimal tenant underwriting and defaults by Front Yard's tenants may materially and adversely affect Front Yard.Front Yard's success will depend, in large part, upon its ability to attract and retain qualified tenants for its properties. This will depend, in turn, upon FrontYard's ability to screen applicants, identify good tenants and avoid tenants who may default. Front Yard will inevitably make mistakes in its selection oftenants, and it may rent to tenants whose default on its leases or failure to comply with the terms of the lease or HOA regulations could materially andadversely affect Front Yard. For example, tenants may default on payment of rent; make unreasonable and repeated demands for service or improvements;make unsupported or unjustified complaints to regulatory or political authorities; make use of Front Yard's properties for illegal purposes; damage or makeunauthorized structural changes to its properties that may not be fully covered by security deposits; refuse to leave the property when the lease is terminated;engage in domestic violence or similar disturbances; disturb nearby residents with noise, trash, odors or eyesores; fail to comply with HOA regulations; sub-let to less desirable individuals in violation of Front Yard's leases or permit unauthorized persons to live with them. The process of evicting a defaultingtenant from a family residence can be adversarial, protracted and costly. Furthermore, some tenants facing eviction may damage or destroy the property.Damage to Front Yard's properties may significantly delay re-leasing after eviction, necessitate expensive repairs, reduce the rental revenue generated by theproperty or impair its value. In addition, Front Yard will incur turnover costs associated with re-leasing the properties, such as marketing expenses andbrokerage commissions, and will not collect revenue while the property is vacant. Although Front Yard will attempt to work with tenants to prevent suchdamage or destruction, there can be no assurance that it will be successful in all or most cases. Such tenants will not only cause Front Yard not to achieve itsfinancial objectives for the properties in which they live, but may subject Front Yard to liability, and may damage Front Yard's reputation with its othertenants and in the communities where it does business. If these risks are realized by Front Yard, our ability to22(table of contents)generate management fees could be harmed and our results of operations and financial condition could be materially and adversely affected.A significant uninsured property or liability loss could have a material adverse effect on Front Yard.Front Yard carries commercial general liability insurance and property insurance with respect to its SFR properties on terms we consider commerciallyreasonable. However, many of the policies covering casualty losses are subject to substantial deductibles and exclusions, and Front Yard will be self-insuredup to the amount of the deductibles and exclusions. For example, Front Yard may not always be fully insured against losses arising from floods, windstorms,fires, earthquakes, acts of war or terrorism or civil unrest because they are either uninsurable or the cost of insurance makes it economically impractical. If anuninsured property loss or a property loss in excess of insured limits were to occur, Front Yard could lose its capital invested in a property or group ofproperties as well as the anticipated future revenues from affected SFR properties or groups of properties. Further, inflation, changes in building codes andordinances, environmental considerations and other factors might also prevent Front Yard from using insurance proceeds to replace or renovate a propertyafter it has been damaged or destroyed.In the event that Front Yard incurs a casualty loss that is not fully covered by insurance, the value of its assets will be reduced by the amount of any suchuninsured loss, and Front Yard could experience a significant loss of capital invested and potential revenues in these properties and could potentially remainobligated under any recourse debt associated with the property. Further, if an uninsured liability to a third party were to occur, Front Yard would incur thecost of defense and settlement with or court ordered damages to that third party. A significant uninsured property or liability loss could adversely affect FrontYard's financial condition, operating results, cash flows and ability to make distributions on its common stock.A significant number of Front Yard's single-family rental properties may be part of homeowners’ associations. Front Yard and its renters will be subject tothe rules and regulations of such homeowners’ associations which may be arbitrary or restrictive and violations of such rules may subject us to additionalfees and penalties and litigation which may be costly.A significant number of Front Yard's SFR properties and non-rental REO properties may be subject to HOAs which are private entities that regulate theactivities of and levy assessments on properties in a residential subdivision. Some of the HOAs that will govern Front Yard's SFR and REO properties mayenact onerous or arbitrary rules that restrict Front Yard's ability to renovate, market or lease its SFR properties or require it to renovate or maintain suchproperties at standards or costs that are in excess of our planned operating budgets. Such rules may include requirements for landscaping, limitations onsignage promoting a property for lease or sale or the use of specific construction materials to be used in renovations. Some HOAs also impose limits on thenumber of property owners who may rent their homes which, if met or exceeded, may cause Front Yard to incur additional costs to sell the affected propertyand opportunity costs of lost rental income. Furthermore, many HOAs impose restrictions on the conduct of occupants of homes and the use of common areas,and Front Yard may have renters who violate these HOA rules for which Front Yard may be liable as the property owner. Additionally, the boards of directorsof the HOAs that will govern its SFR and REO properties may not make important disclosures or may block Front Yard's access to HOA records, initiatelitigation, restrict its ability to sell, impose assessments or arbitrarily change the HOA rules. Front Yard may be unaware of or unable to review or comply withcertain HOA rules before acquiring an SFR or REO property, and any such excessively restrictive or arbitrary regulations may cause Front Yard to sell suchproperty, if possible, prevent it from renting such property or otherwise reduce its cash flow from such property. Any of the above-described occurrences maymaterially and adversely affect Front Yard’s and our results of operations and financial condition.We rely on information supplied by prospective tenants in managing Front Yard's business.We rely on information supplied to us by prospective tenants in their rental applications as part of our due diligence process to make leasing decisions, andwe cannot be certain that this information is accurate. In particular, we rely on information submitted by prospective tenants regarding household income,tenure at current job, number of children and size of household. Moreover, these applications are submitted to us at the time we evaluate a prospective tenant,and we do not require tenants to provide us with updated information during the terms of their leases, notwithstanding the fact that this information can, andfrequently does, change over time. Even though this information is not updated, we will use it to evaluate the overall average credit characteristics of FrontYard's portfolio over time. If tenant-supplied information is inaccurate or Front Yard's tenants’ creditworthiness declines over time, we may make poor leasingdecisions and Front Yard's portfolio may contain more credit risk than we believe exists, which could harm Front Yard’s and our results of operations andfinancial condition.23(table of contents)Failure of Front Yard's third party mortgage servicers to effectively perform their servicing obligations under the servicing agreements could have amaterial adverse effect on Front Yard.Front Yard is contractually obligated to service its remaining residential mortgage loans. Front Yard does not have any employees, servicing platforms,licenses or technical resources necessary to service its mortgage loans. Consequently, Front Yard has engaged mortgage servicers to service the mortgageloans in its portfolio. If for any reason, Front Yard's mortgage servicers are unable to service these loans at the level and/or the cost that we anticipate, or ifFront Yard fails to pay or otherwise defaults under the servicing agreements and its mortgage servicers cease to act as Front Yard's servicers, alternate servicersmay not be readily available on favorable terms, or at all, which could have a material adverse effect on Front Yard.Difficulties in selling REO properties could limit Front Yard's flexibility and/or harm its liquidity.Federal tax laws may limit Front Yard's ability to earn a gain on the sale of its properties if it is found to have held or acquired the properties with the intent toresell, and this limitation may adversely affect its willingness to sell REO properties under favorable conditions or if necessary for funding purposes. FrontYard typically contributes REO properties that will not meet its rental profile to its taxable REIT subsidiary in order to sell and generate gains or losses at thetaxable REIT subsidiary upon such sales. In addition, Front Yard's REO properties that it intends to sell may at times be difficult to dispose of quickly or atfavorable prices. These potential difficulties in selling real estate in Front Yard's markets may limit its ability to either sell properties that it deems unsuitablefor rental or change or reduce the REO properties in its portfolio promptly in response to changes in economic or other conditions. Front Yard's failure to sellor delays in selling its REO properties could potentially cause a strain on its liquidity, and it may be forced to reduce prices and/or continue to hold suchREO properties without leverage, which could materially and adversely affect our ability to generate management fees.The growth of Front Yard's SFR portfolio, at least in the short term, is expected to be partially dependent on its ability to sell non-rental REO properties. IfFront Yard is unable to sell these assets at optimal prices or on a timely basis, or if the market shifts, creating lower sales prices, Front Yard's ability to utilizethe equity embedded in these assets would be harmed, which would have a material adverse effect on its ability to convert the proceeds of such sales intobuying power for the acquisition of SFR properties. Furthermore, a large portion of the sale proceeds of such non-rental REOs are utilized to purchase theassets off of Front Yard's repurchase and loan facilities for which the assets are collateral. If a higher than expected portion of the loan sale consideration mustbe utilized to repurchase assets off of its facilities, Front Yard's ability to purchase SFR properties may also be adversely affected, which would slow thegrowth of its rental portfolio.Front Yard's SFR and REO properties are not liquid assets, which could limit its ability to vary its portfolio or to realize the value at which such assets arecarried if it is required to dispose of them.Front Yard's SFR and REO properties are not liquid assets, which could limit Front Yard's ability to vary its portfolio or to realize the value at which suchassets are carried if Front Yard is required to dispose of them. Front Yard's inability to sell individual or portfolios of SFR and/or REO properties onacceptable terms and/or in accordance with its anticipated timing could materially and adversely affect Front Yard's financial condition.Front Yard's inability to promptly foreclose upon defaulted residential mortgage loans could increase its costs and/or diminish its expected return oninvestments.Front Yard's ability to seek alternative resolutions for the underlying properties and, in certain cases, where appropriate, promptly foreclose upon defaultedresidential mortgage loans plays a critical role in the valuation of the residential mortgage assets in which it has invested and the expected return on thoseinvestments. Certain of the mortgage loans in Front Yard's portfolio may already be in foreclosure proceedings, in which case conversion could be as soon asthree to six months, but in other cases conversion could take up to 24 months or longer. There are a variety of factors that may inhibit Front Yard's ability,through its mortgage servicers, to foreclose upon a residential mortgage loan and get access to the real property within the timelines modeled as part of thevaluation process. These factors include, without limitation: state foreclosure timelines and deferrals associated therewith (including with respect tolitigation, bankruptcy and statute of limitations); unauthorized occupants living in the property; federal, state or local legislative action or initiativesdesigned to provide homeowners with assistance in avoiding residential mortgage loan foreclosures and that serve to delay the foreclosure process; HAMPand similar programs that require specific procedures to be followed to explore the refinancing of a residential mortgage loan prior to the commencement of aforeclosure proceeding; declines in real estate values and sustained high levels of unemployment that increase the number of foreclosures and placeadditional pressure on the judicial and administrative systems.24(table of contents)In addition, certain issues, including “robo-signing,” have been identified throughout the mortgage industry that relate to affidavits used in connection withthe residential mortgage loan foreclosure process. A portion of Front Yard's investments are sub-performing and non-performing residential mortgage loans,many of which are already subject to foreclosure proceedings. There can be no assurance that similar practices have not been followed in connection withresidential mortgage loans that are already subject to foreclosure proceedings at the time of purchase. To the extent we determine that any of the loans inFront Yard's portfolio are impacted by these issues, Front Yard may be required to recommence the foreclosure proceedings relating to such loans, therebyresulting in additional delay that could have the effect of increasing its costs and/or diminishing its expected return on its investments. The uncertaintysurrounding these issues could also result in legal, regulatory or industry changes to the foreclosure process as a whole, any or all of which could lengthen theforeclosure process and negatively impact Front Yard's business.Fair values of Front Yard's mortgage loans may not be precise and may materially and adversely affect its operating results, which, in turn, wouldmaterially and adversely affect Front Yard.The values of Front Yard's remaining mortgage loans may not be precisely determinable. We measure the fair value of Front Yard's mortgage loans monthly,but the fair value at which Front Yard's mortgage loans are recorded may not be an indication of their realizable value. Ultimate realization of the value of amortgage loan depends to a great extent on economic and other conditions that are beyond our control. Further, our fair value determination is only anestimate based on a number of factors incorporated into our mortgage loan valuation model and requires judgment of the price at which a mortgage loan canbe sold since market prices of mortgage loans can only be determined by negotiation between a willing buyer and seller. In certain cases, our assessment ofthe fair value of Front Yard's mortgage loans includes inputs provided by third-party dealers and pricing services, and valuations of certain securities or otherassets in which we invest are often difficult to obtain and are subject to judgments that may vary among market participants. Changes in the estimated fairvalues of Front Yard's mortgage loans are directly charged or credited to earnings for the period. If Front Yard were to liquidate a particular mortgage loan, therealized value may be more than or less than the amount at which such mortgage loan was recorded. We could be materially and adversely affected bynegative determinations that reduce the fair value of Front Yard's mortgage loans, and such valuations may fluctuate over short periods of time.We value the properties underlying Front Yard's mortgage loans and recognize unrealized gains in each period when Front Yard's mortgage loans aretransferred to real estate owned. The fair value of residential properties is estimated using broker price opinions (“BPOs”) provided by third-party brokers.BPOs are subject to the judgments of the particular broker formed by visiting the property, assessing general home values in the area, reviewing comparablelistings and reviewing comparable completed sales. These judgments may vary among brokers and may fluctuate over time based on housing marketactivities and the influx of additional comparable listings and sales. Front Yard's results could be materially and adversely affected if the judgments used bythe brokers prove to be incorrect or inaccurate.If these risks are realized by Front Yard, our ability to generate management fees could be harmed and our results of operations and financial condition couldbe materially and adversely affected.We utilize analytical models and data in connection with the valuation of Front Yard's investments, and any incorrect, misleading or incompleteinformation used in connection therewith would subject Front Yard to potential risks.We rely heavily on models and data, including analytical models (both proprietary models developed by us and those supplied by third parties) andinformation and data supplied by third parties. Models and data are used to value Front Yard's assets or potential investments and also in connection withperforming due diligence on Front Yard's investments. In the event models and data prove to be incorrect, misleading or incomplete, any decisions made inreliance thereon expose us to potential risks. For example, by relying on incorrect models and data, especially valuation models, Front Yard may be inducedto buy certain investments at prices that are too high, to sell certain other investments at prices that are too low or to miss favorable opportunities altogether,all of which could adversely affect our ability to generate management fees.25(table of contents)Changes in global economic and capital market conditions, including periods of generally deteriorating occupancy and real estate industry fundamentals,may materially and adversely affect Front Yard.There are risks to the ownership of real estate and real estate related assets, including decreases in residential property values, changes in global, national,regional or local economic, demographic and real estate market conditions as well as other factors particular to the locations of Front Yard's investments. Aprolonged recession and a slow recovery could materially and adversely affect Front Yard as a result of, among other items, the following:•joblessness or unemployment rates that adversely affect the local economy;•an oversupply of or a reduced demand for SFR properties for rent;•a decline in employment or lack of employment growth;•the inability or unwillingness of residents to pay rent increases or fulfill their lease obligations;•a decline in rental rate, which may be accentuated since we expect Front Yard to generally have rent terms of one to two years;•rent control or rent stabilization laws or other laws regulating housing that could prevent us from raising rents to offset increases in operating costs;•changes in interest rates and availability and terms of debt financing; and•economic conditions that could cause an increase in Front Yard's operating expenses such as increases in property taxes, utilities and routinemaintenance.These conditions could also adversely impact the financial condition and liquidity of the renters that will occupy Front Yard's real estate properties and, as aresult, their ability to pay rent to Front Yard.Inflation or deflation may adversely affect Front Yard's results of operations and cash flows.Increased inflation could have an adverse impact on interest rates, property management expenses and general and administrative expenses, as these costscould increase at a rate higher than Front Yard's rental and other revenue. Conversely, deflation could lead to downward pressure on rents and other sources ofincome without an accompanying reduction in Front Yard's expenses. Accordingly, inflation or deflation may adversely affect Front Yard's results ofoperations and cash flows, which could materially and adversely affect our ability to generate management fees.Changes in applicable laws or noncompliance with applicable law could materially and adversely affect Front Yard.As an owner of real estate, Front Yard is required to comply with numerous federal, state and local laws and regulations, some of which may conflict with oneanother or be subject to limited judicial or regulatory interpretations. These laws and regulations may include zoning laws, building codes, landlord-tenantlaws and other laws generally applicable to Front Yard's business operations. Noncompliance with laws or regulations could expose Front Yard to liability.Lower revenue growth or significant unanticipated expenditures may result from Front Yard's need to comply with changes in (i) laws imposing remediationrequirements and potential liability for environmental conditions existing on properties or the restrictions on discharges or other conditions, (ii) rent controlor rent stabilization laws or other residential landlord-tenant laws or (iii) other governmental rules and regulations or enforcement policies affecting therehabilitation, use and operation of Front Yard's SFR properties, including changes to building codes and fire and life-safety codes. If these risks are realizedby Front Yard, our ability to generate management fees could be harmed and our results of operations and financial condition could be materially andadversely affected.Single-family residential properties that are subject to foreclosure or short-sales are subject to risks of theft, vandalism or other damage that could impairtheir value.When a residential property is subject to foreclosure, it is possible that the homeowner may cease to maintain the property adequately or that the propertymay be abandoned by the homeowner and become susceptible to theft or vandalism. Lack of maintenance, theft and vandalism can substantially impair thevalue of the property. To the extent Front Yard initiates foreclosure proceedings, some of its properties could be impaired.Contingent or unknown liabilities could materially and adversely affect Front Yard.Front Yard's acquisition activities are subject to many risks. Front Yard may acquire properties that are subject to unknown or contingent liabilities,including liabilities for or with respect to liens attached to properties, unpaid real estate taxes, utilities or26(table of contents)HOA charges for which a prior owner remains liable, clean-up or remediation of environmental conditions or code violations, claims of vendors or otherpersons dealing with the acquired properties and tax liabilities, among other things. In each case, Front Yard's acquisition may be without any, or with onlylimited, recourse with respect to unknown or contingent liabilities or conditions. As a result, if any such liability were to arise relating to Front Yard'sproperties, or if any adverse condition exists with respect to Front Yard's properties that is in excess of its insurance coverage, Front Yard might have to paysubstantial sums to settle or cure it, which could materially and adversely affect Front Yard. The properties Front Yard acquires may also be subject tocovenants, conditions or restrictions that restrict the use or ownership of such properties, including prohibitions on leasing or requirements to obtain theapproval of HOAs prior to leasing. We may not discover such restrictions during the acquisition process and such restrictions may adversely affect FrontYard's ability to operate such properties as it intends. This, in turn, could materially and adversely affect our ability to generate management fees.The costs and amount of time necessary to secure possession and control of a certain properties may exceed our assumptions, which would delay FrontYard's receipt of revenue from, and return on, the property.A majority of the SFR properties Front Yard has acquired have had an existing tenant at the time of acquisition. However, certain SFR and non-rental REOproperties require Front Yard to secure possession. In certain circumstances, Front Yard may have to evict occupants who are in unlawful possession before itcan secure possession and control of the property. The holdover occupants may be the former owners or tenants of a property, or they may be squatters orothers who are illegally in possession. Securing control and possession from these occupants can be both costly and time-consuming. If these costs anddelays exceed our expectations, Front Yard's and our financial performance may suffer because of the increased expenses incurred or the unexpected delays inturning the properties into revenue-producing rental properties.Eminent domain could lead to material losses on Front Yard's investments.It is possible that governmental authorities may exercise eminent domain to acquire land on which Front Yard's properties are built in order to build roads orother infrastructure. Any such exercise of eminent domain would allow Front Yard to recover only the fair value of the affected properties, which we believemay be interpreted to be substantially less than the actual value of the property. Several cities are also exploring proposals to use eminent domain to acquireresidential loans to assist borrowers to remain in their homes, potentially reducing the supply of single-family properties for sale in Front Yard's markets. Anyof these events can cause a material loss to Front Yard, which could materially and adversely affect our ability to generate management fees.Front Yard likely will incur costs due to litigation, including but not limited to, class actions, tenant rights claims and consumer demands.There are numerous tenants’ rights and consumer rights organizations throughout the country. As Front Yard grows in scale, it may attract attention fromsome of these organizations and become a target of legal demands or litigation. Many such consumer organizations have become more active and betterfunded in connection with mortgage foreclosure-related issues and displaced home ownership. Some of these organizations may shift their litigation,lobbying, fundraising and grass roots organizing activities to focus on landlord-tenant issues as more entities engage in the SFR property market. Additionalactions that may be targeted at Front Yard include eviction proceedings and other landlord-tenant disputes, challenges to title and ownership rights(including actions brought by prior owners alleging wrongful foreclosure by their lender or servicer) and issues with local housing officials arising from thecondition or maintenance of an SFR property. While we intend to conduct Front Yard's rental business lawfully and in compliance with applicable landlord-tenant and consumer laws, such organizations might work in conjunction with trial and pro bono lawyers in one state or multiple states to attempt to bringclaims against Front Yard on a class action basis for damages or injunctive relief. We cannot anticipate what form such legal actions might take or whatremedies they may seek. Any of such claims may result in a finding of liability that may materially and adversely affect Front Yard.Additionally, these organizations may lobby local county and municipal attorneys or state attorneys general to pursue enforcement or litigation against FrontYard or may lobby state and local legislatures to pass new laws and regulations to constrain Front Yard's business operations. If they are successful in anysuch endeavors, they could directly limit and constrain Front Yard's business operations and impose on Front Yard significant litigation expenses, includingsettlements to avoid continued litigation or judgments for damages or injunctions. Any of the above-described occurrences may materially and adverselyaffect Front Yard, which could materially and adversely affect our ability to generate management fees.27(table of contents)Security breaches and other disruptions could compromise Front Yard's and/or our information and expose us to liability, which would cause our businessand reputation to suffer.In the ordinary course of Front Yard's and our business, we, through ASPS, MSR or Front Yard's mortgage servicers, may acquire and store sensitive data onour network, such as our proprietary business information and personally identifiable information of Front Yard's prospective and current tenants. The secureprocessing and maintenance of this information is critical to our business strategy. Despite our security measures, our information technology andinfrastructure may be subject to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromiseour networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of informationcould result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to ouroperations and the services we provide to customers or damage our reputation, which could materially and adversely affect Front Yard and/or us.Front Yard may incur substantial costs due to environmental contamination or non-compliance.Under various federal, state and local environmental and public health laws, regulations and ordinances, Front Yard may be required, regardless of knowledgeor responsibility, to investigate and remediate the effects of hazardous or toxic substances or petroleum product releases at its single-family residentialproperties (including in some cases, asbestos-containing construction materials, lead-based paints, contaminants migrating from off-site sources and naturalsubstances such as methane, mold and radon gas) and may be held liable under these laws or common law to a governmental entity or to third parties forproperty, personal injury or natural resources damages and for investigation and remediation costs incurred as a result of the contamination. These damagesand costs may be substantial and may exceed any insurance coverage Front Yard may have for such events, which could materially and adversely affect FrontYard. The presence of such substances or the failure to properly remediate the contamination may adversely affect Front Yard's ability to borrow against, sellor rent the affected property. In addition, some environmental laws create or allow a government agency to impose a lien on the contaminated site in favor ofthe government for damages and costs it incurs as a result of the contamination, which may also adversely affect Front Yard's ability to borrow against, sell orrent the affected property. If these risks are realized by Front Yard, our ability to generate management fees could be harmed and our results of operations andfinancial condition could be materially and adversely affected.Front Yard properties will be subject to property and other taxes that may increase over time.Front Yard will be responsible for property taxes for its single-family residential properties when acquired, which may increase as tax rates change andproperties are reassessed by taxing authorities. If Front Yard fails to pay any such taxes, the applicable taxing authorities may place a lien on the property andthe property may be subject to a tax sale. Increases in property taxes would also adversely affect Front Yard's yield from rental properties. Any suchoccurrence may materially and adversely affect Front Yard which, in turn, could materially and adversely affect us.If Front Yard is deemed to be an investment company under the Investment Company Act, it would have significant adverse consequences to Front Yardand us.Front Yard does not intend or expect to be an investment company under the Investment Company Act of 1940, as amended (the “Investment CompanyAct”), since it will not engage primarily or hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather,Front Yard will be primarily engaged in the business of purchasing or otherwise acquiring real estate and mortgages on real estate, specifically SFR assets. Tothe extent that the SEC determines that Front Yard is in fact an investment company, Front Yard intends to rely on the exception from the InvestmentCompany Act set forth in Section 3(c)(5)(C) of the Investment Company Act, which excludes from the definition of investment company “any person who isnot engaged in the business of issuing redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates, and who isprimarily engaged in one or more of the following businesses: . . .(C) purchasing or otherwise acquiring mortgages and other liens on and interests in realestate.” The SEC generally requires that for the exception provided by Section 3(c)(5)(C) to be available, at least 55% of an entity's be comprised ofmortgages and other liens on and interests in real estate, also known as “qualifying interests,” and at least another 25% of the entity’s assets must becomprised of additional qualifying interests or real estate-type interests (with no more than 20% of the entity’s assets comprised of miscellaneous assets). Anysignificant acquisition by Front Yard of non-real estate assets without the acquisition of substantial real estate assets could cause Front Yard to meet thedefinitions of an “investment company.” If Front Yard is deemed to be an investment company, Front Yard may be required to register as an investmentcompany if it is unable to dispose of the disqualifying assets, which could have a material adverse effect on Front Yard.28(table of contents)Registration under the Investment Company Act would require Front Yard to comply with a variety of substantive requirements that impose, among otherthings:•limitations on capital structure;•restrictions on specified investments;•restrictions on leverage or senior securities;•restrictions on unsecured borrowings;•prohibitions on transactions with affiliates and•compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase Front Yard'soperating expenses.If Front Yard were required to register as an investment company but failed to do so, it would be prohibited from engaging in its business, and criminal andcivil actions could be brought against it.Registration with the SEC as an investment company would be costly, would subject Front Yard to a host of complex regulations and would divert attentionfrom the conduct of Front Yard's business. In addition, if Front Yard purchases or sells any real estate assets to avoid becoming an investment company underthe Investment Company Act, it could materially adversely affect its net asset value, the amount of funds available for investment and its ability to paydistributions to its stockholders. Any such occurrences would adversely impact our income from the management fees paid by Front Yard.Risks Related to Front Yard's Qualification as a REITFront Yard’s failure to qualify as a REIT would materially and adversely affect Front Yard and us.Front Yard made an election to be treated as a REIT for U.S. federal income tax purposes beginning with the year ended December 31, 2013. However, wecannot assure you that Front Yard will remain qualified as a REIT. Moreover, Front Yard's qualification and taxation as a REIT will depend upon its ability tomeet on a continuing basis, through actual operating results, certain qualification tests set forth in the federal income tax laws. Accordingly, no assurance canbe given that Front Yard's actual results of operations for any particular taxable year will satisfy such requirements. If Front Yard fails to qualify as a REIT inany taxable year, it will face serious tax consequences that will substantially reduce the funds available for distribution to its stockholders because:•Front Yard would not be allowed a deduction for dividends paid to stockholders in computing its taxable income, thus becoming subject to federalincome tax;•Front Yard could be subject to increased state and local taxes; and•Unless Front Yard is entitled to relief under certain federal income tax laws, it could not re-elect REIT status until the fifth calendar year after theyear in which it failed to qualify as a REIT. In addition, if Front Yard fails to qualify as a REIT, it will no longer be required to make distributions.As a result of all these factors, Front Yard's failure to qualify as a REIT could impair its ability to expand its business and raise capital, and it could materiallyand adversely affect Front Yard and the market price of its common stock. If these risks are realized by Front Yard, our ability to generate management feescould be harmed and our results of operations and financial condition could be materially and adversely affected.Front Yard's tax position with respect to the accrual of interest and market discount income with respect to distressed mortgage loans involves risk.Front Yard has not accrued interest income or market discount on defaulted or delinquent loans when certain criteria are satisfied. The criteria generally relateto whether those amounts are uncollectible or of doubtful collectability. If the Internal Revenue Service were to challenge this position successfully, FrontYard could be subject to entity level excise tax as a result of “deficiency dividends” that it may be required to pay to its stockholders at the time of such anadjustment to its income in order to maintain its qualification as a REIT. This, in turn, could materially and adversely affect our ability to generatemanagement fees.29(table of contents)Compliance with REIT requirements may cause Front Yard to forego otherwise attractive opportunities which may hinder or delay its ability to meet itsinvestment objectives and reduce your overall return.To qualify as a REIT, Front Yard is required at all times to satisfy certain tests relating to, among other things, the sources of our income, the nature anddiversification of its assets, its financing, hedging and investment strategies, the ownership of its stock and amounts it distributes to its stockholders.Compliance with the REIT requirements may preclude Front Yard from certain financing or hedging strategies or cause it to forego otherwise attractiveopportunities which may hinder or delay its ability to meet its investment objectives and reduce your overall return. For example, Front Yard may be requiredto pay distributions to stockholders at disadvantageous times or when it does not have funds readily available for distribution.Compliance with REIT requirements may force Front Yard to liquidate otherwise attractive investments, which could materially adversely affect FrontYard.To qualify as a REIT, at the end of each calendar quarter, at least 75% of Front Yard's assets must consist of qualified real estate assets, cash, cash items andgovernment securities. In addition, no more than 20% of the value of Front Yard's assets may be represented by securities of one or more taxable REITsubsidiaries. Except for securities that qualify for purposes of the 75% asset test above and investments in Front Yard's qualified REIT subsidiaries and itstaxable REIT subsidiaries, its investment in the value of any one issuer’s securities may not exceed 5% of the value of its total assets, and it may not ownmore than 10% of the total vote or value of the outstanding securities of any one issuer, except, in the case of the 10% value test, certain “straight debt”securities. In order to satisfy these requirements, Front Yard may be forced to liquidate otherwise attractive investments, potentially at a loss, which couldmaterially and adversely affect Front Yard. This, in turn, could materially and adversely affect our ability to generate management fees.Failure to make required distributions would subject Front Yard to federal corporate income tax.We intend to continue to operate Front Yard in a manner so as to qualify as a REIT for federal income tax purposes. In order to qualify as a REIT, Front Yardgenerally is required to distribute at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding any netcapital gain, each year to its stockholders. To the extent that Front Yard satisfies this distribution requirement, but distribute less than 100% of its REITtaxable income, it will be subject to federal corporate income tax on its undistributed taxable income. In addition, Front Yard will be subject to a 4%nondeductible excise tax if the actual amount that it pays out to its stockholders in a calendar year is less than a minimum amount specified under the Code.The IRS may deem the gains from sales of Front Yard's properties to be subject to a 100% prohibited transaction tax.From time to time, Front Yard may be forced to sell properties that do not meet its investment objectives or it may need to sell properties, mortgage loans orother assets either because they do not meet its rental portfolio objectives or to satisfy its REIT distribution requirements. In general, REITs do not sellresidential assets out of the REIT so they are not determined to be a “dealer.” If Front Yard were to purchase real estate assets with a view toward re-sellingthem, it could be considered a “dealer” of real estate, which could cause Front Yard to fail to meet its REIT requirements or such sales could be considered“prohibited transactions.” Because Front Yard has historically purchased large portfolios of mortgage loans with a view toward converting them into rentalhomes, there may be assets that it purchases as part of all-or none portfolios that are not acceptable for its portfolio and necessary to sell. Typically, FrontYard contributes REO properties that it determines will not meet its rental portfolio criteria to its taxable REIT subsidiary to prevent the sales from beingdeemed prohibited transactions. The IRS may deem one or more sales of Front Yard's properties to be “prohibited transactions.” If the IRS takes the positionthat Front Yard has engaged in a “prohibited transaction” (i.e., if Front Yard sells a property held by us primarily for sale in the ordinary course of our trade orbusiness), then any gain it recognizes from such sale would not disqualify Front Yard as a REIT, but such gains would be subject to a 100% tax. The Codesets forth a safe harbor for REITs that wish to sell property without risking the imposition of the 100% tax; however, there is no assurance that Front Yard willbe able to qualify for the safe harbor. Front Yard does not intend to hold property for sale in the ordinary course of business; however, there is no assurancethat its position will not be challenged by the IRS especially if it makes frequent sales or sales of property in which it has short holding periods. This, in turn,could materially and adversely affect our ability to generate management fees.In the future, Front Yard could be required to sell assets, borrow funds or raise equity capital to fund its distributions or to make a portion of itsdistributions in the form of a taxable stock distribution.Front Yard's Board of Directors has the sole discretion to determine the timing, form and amount of any distributions to its stockholders, and the amount ofsuch distributions may be limited. In the future, Front Yard could be required to sell assets,30(table of contents)borrow funds or raise equity capital to fund its distributions or to make a portion of its distributions in the form of a taxable stock distribution. Front Yard'sBoard of Directors will make determinations regarding distributions based upon various factors, including its historical and projected financial condition andrequirements, liquidity and results of operations, financing covenants, maintenance of its REIT qualification, applicable law and other factors, as its Board ofDirectors may deem relevant from time to time. To the extent that Front Yard is required to sell assets in adverse market conditions or borrow funds atunfavorable rates, it could be materially and adversely affected. To the extent Front Yard may have to raise equity capital, it may be unable to do so atattractive prices, on a timely basis or at all, which could adversely affect its ability to make distributions to its stockholders. This, in turn, could materiallyand adversely affect our ability to generate management fees.Even if Front Yard qualifies as a REIT, it may be subject to tax liabilities that could materially and adversely affect Front Yard.Even if Front Yard qualifies for taxation as a REIT, it may be subject to certain federal, state and local taxes on its income and assets, including taxes on anyundistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. Inaddition, Front Yard could, in certain circumstances, be required to pay an excise tax or penalty tax (which could be significant in amount) in order to utilizeone or more of the relief provisions under the Code to maintain its qualification as a REIT. In order to meet the REIT qualification requirements or to avertthe imposition of a 100% tax that applies to certain gains derived by a REIT from sales of “dealer property,” Front Yard may also move or hold some of itsassets or conduct activities through a TRS. In addition, if Front Yard lends money to a TRS, the TRS may be unable to deduct all or a portion of the interestpaid to Front Yard, which could result in an even higher corporate level tax liability. Any of these taxes would decrease cash available for distribution toFront Yard's stockholders.Furthermore, the Code imposes a 100% tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s length basis. Wewill structure Front Yard's transaction with any TRS on terms that we believe are arm’s length to avoid incurring the 100% excise tax described above. Therecan be no assurances, however, that Front Yard will be able to avoid application of the 100% tax. Any such additional tax liabilities would have an adverseeffect on Front Yard and us.Ordinary dividends payable by REITs are generally taxed at U.S. federal income tax rates, higher than tax rates applicable to dividends from SubchapterC corporations.Effective for tax years beginning in 2018, the maximum U.S. federal income tax rate for “qualifying dividends” payable by Subchapter C U.S. corporations toindividual U.S. stockholders is 23.8%, including the 3.8% Medicare tax. Beginning in 2018, subject to a number of limitations, individuals receivingordinary dividends payable by REITs will be eligible for up to a 20% deduction. For those individuals qualifying for the full 20% deduction, the maximumtax rate on such dividends will be 33.4%, including the 3.8% Medicare tax.Front Yard may be subject to legislative or regulatory tax changes that could materially and adversely affect Front Yard.At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended.We cannot predict when or if any new federal income tax law, regulation or administrative interpretation or any amendment to any existing federal incometax law, regulation or administrative interpretation, will be adopted, promulgated or become effective, and any such law, regulation or interpretation maytake effect retroactively. Front Yard and its stockholders could be materially and adversely affected by any such change in or any new, federal income taxlaw, regulation or administrative interpretation. This, in turn, could materially and adversely affect our ability to generate management fees.Item 1B. Unresolved Staff CommentsNone.31(table of contents)Item 2. PropertiesOn April 16, 2015, we entered into a lease with respect to approximately 5,000 square feet of office space located at 5100 Tamarind Reef, Christiansted, VI00820. The lease has an initial term of five years from the date the premises are first occupied, and we have an option to extend the lease for an additionalfive-year term. The annual rent during the initial five-year term under the lease is $120,000, which increases to $130,800 per annum during the renewal term.Initially, the landlord was required to make renovations and build offices in the premises under the lease. During the renovation period, the landlord providedus with approximately 4,000 square feet of temporary space. During July 2017, the renovations were completed, and we occupied the office space effectiveJuly 24, 2017, which is the commencement date of the initial five-year term of the lease.In addition, we entered into a lease of approximately 5,700 square feet of office space in Bangalore, India for the employees of our India subsidiary. Thelease, which was executed on October 16, 2015, has an initial term of five years and requires monthly payments of 291,159 Indian rupees (approximately$4,500 United States dollars) per month beginning December 16, 2015.Item 3. Legal proceedingsFrom time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. Set forth below is a summary of legalproceedings to which we are a party as of December 31, 2017 or which settled during 2017:City of Cambridge Retirement System v. Altisource Asset Management Corp., et al.On January 16, 2015, a putative shareholder class action complaint was filed in the United States District Court of the Virgin Islands by a purportedshareholder of AAMC under the caption City of Cambridge Retirement System v. Altisource Asset Management Corp., et al., 15-cv-00004. The action namesas defendants AAMC, our former Chairman, William C. Erbey, and certain officers of AAMC and alleges that the defendants violated federal securities lawsby failing to disclose material information to AAMC shareholders concerning alleged conflicts of interest held by Mr. Erbey with respect to AAMC’srelationship and transactions with Front Yard, Altisource Portfolio Solutions S.A., Home Loan Servicing Solutions, Ltd., Southwest Business Corporation,NewSource Reinsurance Company and Ocwen Financial Corporation (“Ocwen”), including allegations that the defendants failed to disclose (i) the nature ofrelationships between Mr. Erbey, AAMC and those entities; and (ii) that the transactions were the result of an allegedly unfair process from which Mr. Erbeyfailed to recuse himself. The action seeks, among other things, an award of monetary damages to the putative class in an unspecified amount and an award ofattorney’s and other fees and expenses. AAMC and Mr. Erbey are the only defendants who have been served with the complaint.On May 12, 2015, the court entered an order granting the motion of Denver Employees Retirement Plan to be lead plaintiff, and lead plaintiff filed anamended complaint on June 19, 2015.AAMC and Mr. Erbey filed a motion to dismiss the amended complaint for failure to state a claim upon which relief can be granted, and on April 6, 2017, theCourt issued an opinion and order granting defendants’ motion to dismiss.On May 1, 2017, Plaintiff filed a motion for leave to amend the complaint and, at the same time, filed a proposed first amended consolidated complaint.AAMC and Mr. Erbey opposed the motion, and on July 5, 2017, the Court issued an opinion and order denying with prejudice the motion of the Plaintiff forleave to file the first amended consolidated complaint.On July 7, 2017, Plaintiff filed a notice of appeal with the Third Circuit Court of Appeals with respect to the federal district court's April 6, 2017memorandum and order granting Defendants’ motion to dismiss, the April 6, 2017 order granting Defendants’ motion to dismiss and the July 5, 2017 orderdenying with prejudice Plaintiff’s motion for leave to file the first amendment consolidated complaint in the matter. On September 18, 2017, Appellant filedits appeal brief, and briefing on the appeal motion was completed on November 15, 2017.We believe the amended complaint is without merit. At this time, we are not able to predict the ultimate outcome of this matter, nor can we estimate the rangeof possible loss, if any.Kanga v. Altisource Asset Management Corporation, et al.On March 12, 2015, a shareholder derivative action was filed in the Superior Court of the Virgin Islands, Division of St. Croix, by a purported shareholder ofAAMC under the caption Nanzeen Kanga v. William Erbey, et al., SX-15-CV-105. The action names as defendants William C. Erbey and each of the currentand former members of AAMC's Board of Directors and alleges that Mr. Erbey and AAMC’s directors breached fiduciary duties in connection with thedisclosures that are the subject of32(table of contents)the City of Cambridge Retirement System case described above and certain other matters involving the relationship of Front Yard and AAMC.On May 15, 2015, the plaintiff and the defendants filed an agreed motion to stay the action until the earliest of any of the following events: (i) the City ofCambridge Retirement System action is dismissed with prejudice; (ii) any of the defendants in the City of Cambridge Retirement System action file an answerin that action; and (iii) defendants do not move to stay any later-filed derivative action purportedly brought on behalf of us arising from similar facts asthe Kanga action and relating to the same time frame or such motion to stay is denied.At this time, we are not able to predict the ultimate outcome of this matter, nor can we estimate the range of possible loss, if any.Item 4. Mine safety disclosures Not applicable.33(table of contents)Part IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationOur common stock has been listed on the NYSE MKT under the symbol “AAMC” since December 13, 2013. The following table sets forth the high and lowclose of day sales prices for our common stock as reported by the New York Stock Exchange for the periods indicated: 2017 2016Quarter ended High Low High LowMarch 31 $85.90 $53.00 $20.01 $11.77June 30 92.00 64.00 24.37 12.20September 30 109.35 73.50 18.50 12.55December 31 90.00 71.90 57.75 21.18The number of holders of record of our common stock as of February 19, 2018 was 49. The number of beneficial stockholders is substantially greater than thenumber of holders as a large portion of our stock is held through brokerage firms. Information regarding securities authorized for issuance under equitycompensation plans is set forth in Note 6 to the consolidated financial statements.The information under the heading “Equity Compensation Plan Information” in our definitive proxy statement for the 2018 Annual Meeting of Stockholdersto be filed with the SEC not later than 120 days after December 31, 2017 is incorporated herein by reference.DividendsWe will pay dividends at the sole and absolute discretion of our Board of Directors in the light of conditions then existing, including our earnings, financialcondition, liquidity, capital requirements, the availability of capital, general overall economic conditions and other factors. We paid no dividends frominception through December 31, 2017.Issuance of Preferred Shares to USVI EmployeesOn January 5, 2017, we issued an aggregate of 900 shares of preferred stock to certain of our USVI employees pursuant to our 2016 Employee Preferred StockPlan. These shares of preferred stock are mandatorily redeemable by us in the event of the holder's termination of service with the Company for any reason;therefore, these shares are classified within accounts payable and accrued liabilities in our consolidated balance sheet.Issuer Purchases of Equity SecuritiesIn March 2014, the Board of Directors authorized total repurchases of up to $300.0 million of common stock. At December 31, 2017, we have remainingapproximately $34.5 million authorized by our Board of Directors for share repurchases. Repurchased shares are held as treasury stock and available forgeneral corporate purposes. No repurchases of common stock were made pursuant to this stock repurchase plan during the quarter ended December 31, 2017.At December 31, 2017, we had repurchased an aggregate total of 1,190,606 shares of common stock as part of this stock repurchase plan.No repurchase plan has expired during the year ended December 31, 2017.34(table of contents)Performance GraphThe following stock price performance graph compares the performance of our common stock to the S&P 500 and the Dow Jones U.S. Asset Manager Index.The stock price performance graph assumes an investment of $100 in our common stock and the two indices on December 31, 2012 and further assumes thereinvestment of all dividends. Stock price performance is not necessarily indicative of future results. Year Ended December 31,Index 2013 2014 2015 2016 2017Altisource Asset Management Corporation $1,134.15 $378.20 $20.93 $65.24 $99.51S&P 500 129.60 144.36 143.31 156.98 187.47Dow Jones U.S. Asset Manager Index 143.69 154.86 136.33 148.06 187.91The performance graph above is being furnished as part of this Annual Report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish theCompany’s stockholders with such information and, therefore, is not deemed to be filed, or incorporated by reference in any filing, by the Company under theSecurities Act of 1933 or the Securities Exchange Act of 1934.35(table of contents)Item 6. Selected Financial DataThe following table sets forth selected financial data derived from our audited consolidated financial statements ($ in thousands, except per share data). Thehistorical results presented below may not be indicative of our future performance. The data should be read in conjunction with our consolidated financialstatements and notes thereto, included elsewhere in this report, and “Item 7. Management's Discussion and Analysis of Financial Condition and Results ofOperations.” Year Ended December 31, 2017 2016 2015 2014 2013Total revenue$18,160 $19,991 $248,099 $423,298 $72,297Net (loss) income attributable to stockholders(6,969) (4,935) (3,290) 59,679 (5,293)(Loss) earnings per basic common share(4.57) (2.93) (1.59) 26.31 (2.26)(Loss) earnings per diluted common share(4.57) (2.93) (1.59) 21.07 (2.26) As of December 31, 2017 2016 2015 2014 2013Total assets$60,387 $65,748 $2,518,601 $2,756,447 $1,402,811Repurchase and loan agreements— — 763,369 1,013,133 600,089Other secured borrowings— — 502,599 321,698 —Prior to January 1, 2016, we concluded that Front Yard was a VIE, and we consolidated the accounts of Front Yard in our consolidated financial statements.Effective January 1, 2016, we adopted the provisions of ASU 2015-02 and performed an analysis of our relationship with Front Yard pursuant to the amendedguidance. We determined that the compensation we receive in return for our services to Front Yard is commensurate with the level of effort required toperform such services and the arrangement includes customary terms, conditions or amounts present in arrangements for similar services negotiated at arm’slength; therefore, Front Yard is no longer a VIE under the amended guidance. As a result, effective January 1, 2016, we no longer consolidate the accounts ofFront Yard. We have applied ASU 2015-02 using the modified retrospective approach, which has resulted in a cumulative-effect adjustment to our equity onJanuary 1, 2016. As a result, periods ending prior to the adoption were not impacted. The adoption effectively removed those balances previously disclosedthat related to Front Yard from our consolidated financial statements and eliminated the amounts previously reported as non-controlling interests in FrontYard as a consolidated affiliate. Subsequent to adoption, our consolidated revenues consist of management fees and expense reimbursements received fromFront Yard under the AMA, and our consolidated expenses consist of salaries and employee benefits, legal and professional fees and general andadministrative expenses.Due to the significance of Front Yard's consolidated financial statements to our historical consolidated financial statements in periods prior to January 1,2016, our consolidated financial statements have limited comparability with our consolidated financial statements in prior periods.36(table of contents)Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsOur CompanyWe were incorporated in the United States Virgin Islands on March 15, 2012. In October 2013, we applied for and were granted registration by the SEC as aregistered investment adviser under section 203(c) of the Investment Advisers Act of 1940. We operate in a single segment focused on providing assetmanagement and certain corporate governance services to institutional investors.Our primary client currently is Front Yard, a publicly-traded REIT focused on acquiring and managing quality, affordable SFR properties for America'sfamilies. Front Yard is currently our primary source of revenue and will drive our results.Since we are heavily reliant on revenues earned from Front Yard, investors may obtain additional information about Front Yard in its SEC filings, including,without limitation, Front Yard’s financial statements and other important disclosures therein, available at http://www.sec.gov andhttp://ir.frontyardresidential.com/financial-information.Our strategy for Front Yard is to build long-term shareholder value through the creation of a large portfolio of SFR homes that are targeted to operate at anattractive yield. We believe there is a compelling opportunity in the SFR market and that we have implemented the right strategic plan for Front Yard tocapitalize on the sustained growth in single-family rental demand. We target the moderately priced single-family home market for Front Yard that, in ourview, offers attractive yield opportunities for Front Yard that should benefit AAMC in the form of growing management fees as Front Yard continues to grow.Prior to January 1, 2016, we had concluded that Front Yard was a VIE that we consolidated in our consolidated financial statement. Effective January 1, 2016,we adopted the provisions of ASU 2015-02, and we determined that Front Yard is no longer a VIE under the amended guidance. As a result, effective January1, 2016, we no longer consolidate the accounts of Front Yard. Due to the significance of Front Yard's accounts to the Company's historical consolidatedfinancial statements, the comparability of the Company's consolidated financial statements as of and for the year ended December 31, 2017 have limitedcomparability with periods ending on or before December 31, 2015.Additionally, our wholly owned subsidiary, NewSource, is a title insurance and reinsurance company licensed with the Bermuda Monetary Authority.NewSource commenced reinsurance activities during the second quarter of 2014. In December 2014, NewSource determined that the economics of the initialbusiness did not warrant the continuation of its initial reinsurance quota share agreement with an unrelated third party. NewSource therefore transferred all ofthe risk of claims and future losses underwritten to an unrelated third party, and its reinsurance and insurance business has been dormant since that time. Weconsolidate NewSource in our consolidated financial statements.Management OverviewDuring fiscal year 2017, we continued to make substantial progress in guiding Front Yard's transformation into a 100% SFR equity REIT by continuing tofocus on Front Yard's strategic objectives of (i) identifying and acquiring SFR properties with attractive yields; (ii) completing the sale of the vast majority ofFront Yard's mortgage loans and non-rental REO properties that do not meet Front Yard's rental criteria; and (iii) extending the duration of Front Yard'sfinancing arrangements to better match the long-term nature of its rental portfolio.Front Yard's Acquisitions in 2017On March 30, 2017, we facilitated Front Yard's agreement to acquire up to 3,500 SFR (the “HOME Flow Transaction”) from entities sponsored by AmherstHoldings, LLC (“Amherst”). In March, June and November 2017, Front Yard acquired an aggregate of 3,465 SFR properties under the HOME FlowTransaction in three separate closings:•In the first closing on March 30, 2017, Front Yard's indirect wholly owned subsidiary, HOME SFR Borrower II, LLC (“HOME Borrower II”), acquired757 SFR properties for an aggregate purchase price of $106.5 million.•In the second closing on June 29, 2017, Front Yard's indirect wholly owned subsidiary, HOME SFR Borrower III, LLC (“HOME Borrower III”),acquired 751 SFR properties for an aggregate purchase price of $117.1 million.37(table of contents)•In the third and final closing on November 29, 2017, Front Yard's indirect wholly owned subsidiary, HOME SFR Borrower IV, LLC (“HOMEBorrower IV”) acquired 1,957 SFR properties for an aggregate purchase price of $305.1 million.Combined with Front Yard's other 2017 SFR acquisition activities and conversions of REO properties to SFR properties, the homes acquired in the HOMEFlow transaction have increased Front Yard's total SFR portfolio by 39% from 8,603 homes at December 31, 2016 to 11,975 homes at December 31, 2017.Front Yard's Transformative Dispositions in 2017As of December 31, 2017, Front Yard has completed the disposition of the vast majority of its remaining mortgage loans. During 2017, Front Yard sold anaggregate of 2,995 mortgage loans to third-party purchasers, resolved an additional 120 mortgage loans, and converted an aggregate of 248 mortgage loansto REO properties. As a result of these efforts, Front Yard's mortgage loan portfolio was reduced to 111 mortgage loans with a carrying value of $11.5 millionand an aggregate unpaid principal balance of only $29.4 million at December 31, 2017.In addition, Front Yard has continued to make significant progress on the sale of its non-rental REO properties with an additional 1,710 of such propertiessold during the year ended December 31, 2017. We expect Front Yard to continue to sell its remaining REO properties that do not meet its rental profile assoon as reasonably practicable based on market conditions.Optimization of Front Yard's Financing in 2017We have continued our efforts to optimize Front Yard's financing structure. During 2017, we facilitated Front Yard's entry into the following financingarrangements that we believe better match the long-term nature of Front Yard's assets than the shorter-term repurchase and loan agreements historically usedto finance its portfolios while providing Front Yard with protection against rising interest rates.•On March 30, 2017, in connection with the first closing under the HOME Flow Transaction, Front Yard obtained approximately $79.9 million ofproceeds from a seller financing arrangement (the “HOME II Loan Agreement”), representing 75% of the aggregate purchase price. Initially, theHOME II Loan Agreement had an interest rate based on one-month LIBOR plus a fixed component spread of 2.75% and an initial maturity date ofOctober 9, 2019, which Front Yard has the option to extend for three successive one-year periods, provided, among other things, that there is noevent of default under the HOME II Loan Agreement on each maturity date. On November 13, 2017, the HOME II Loan Agreement was amended andrestated to (i) increase the principal amount to $83.3 million, (ii) reduce the fixed component spread of the interest rate to 2.10% and (iii) change theinitial maturity date to November 9, 2019.•On April 6, 2017, Front Yard entered into a fixed rate, five-year credit and security agreement with an aggregate principal balance of $100.0 million(the “Term Loan Agreement”) with American Money Management Corporation, as agent, on behalf of Great American Life Insurance Company andGreat American Insurance Company as initial lenders, and each other lender added from time to time as a party to the Term Loan Agreement.•On June 29, 2017, in connection with the second closing under the HOME Flow Transaction, Front Yard obtained approximately $87.8 million ofproceeds from a seller financing arrangement (the “HOME III Loan Agreement”), representing 75% of the aggregate purchase price. Initially, theHOME III Loan Agreement had an interest rate based on one-month LIBOR plus a fixed component spread of 2.30% and an initial maturity date ofOctober 9, 2019, which Front Yard has the option to extend for three successive one-year periods, provided, among other things, that there is noevent of default under the HOME III Loan Agreement on each maturity date. On November 13, 2017, the HOME III Loan Agreement was amendedand restated to (i) increase the principal amount to $89.2 million, (ii) reduce the fixed component spread of the interest rate to 2.10% and (iii) changethe initial maturity date to November 9, 2019.•On November 29, 2017, in connection with the third and final closing under the HOME Flow Transaction, Front Yard obtained an aggregate ofapproximately $228.8 million of proceeds from two separate seller financing arrangements (collectively, the “HOME IV Loan Agreements”),representing 75% of the aggregate purchase price. The HOME IV Loan Agreements have a fixed interest rate of 4.00% and a maturity date ofDecember 9, 2022.In addition to these long-term facilities, on April 6, 2017, we managed Front Yard's amendment and restatement of its loan and security agreement withNomura Corporate Funding Americas, LLC to, among other things, extend the termination date of the38(table of contents)facility by one year to April 5, 2018. Lastly, we also managed Front Yard's amendment and extension of its repurchase facility (the “CS RepurchaseAgreement”) with Credit Suisse First Boston Mortgage Capital, LLC (“CS”). In connection therewith, certain of the financial covenants under the CSRepurchase Facility were updated to customary provisions to better reflect Front Yard's business, and the maturity date was extended to November 16, 2018.The aggregate maximum borrowing capacity of the CS Repurchase Facility remained unchanged at $350.0 million.We believe all of the foregoing developments continue to be critical to our strategy of building long-term stockholder value for Front Yard through thecreation of a large portfolio of SFR homes that we target operating for Front Yard at an attractive yield. To the extent Front Yard is successful inimplementing this strategy under our management, the fees we earn under the AMA should be positively impacted.Observations on Current Market OpportunitiesWe believe there is a compelling opportunity in the SFR market and that we have implemented the right strategic plan for Front Yard to capitalize on thesustained growth in SFR demand. Front Yard targets the moderately-priced single-family home market to acquire rental units that, in our view, offer optimalyield opportunities. In the current market, tighter credit availability for lower-income buyers and the relative scarcity of institutional buyers and operatorsshould result in reduced price competition for reasonably priced homes. We believe that, when combined with sustained renter demand for affordable homes,Front Yard's lower home acquisition costs and careful evaluation of capital expenditure requirements prior to acquisition will offer attractive yieldopportunities. We view this as a significant differentiator for Front Yard.Asset Management Agreement with Front YardPursuant to the AMA, we design and implement Front Yard's business strategy, administer its business activities and day-to-day operations and providecorporate governance services, subject to oversight by Front Yard's Board of Directors. We are responsible for, among other duties: (1) performing andadministering all of Front Yard's day-to-day operations; (2) defining investment criteria in Front Yard's investment policy in cooperation with its Board ofDirectors; (3) sourcing, analyzing and executing asset acquisitions, including the related financing activities; (4) analyzing and executing sales of REOproperties and residential mortgage loans; (5) overseeing the Property Managers' renovation, leasing and property management of Front Yard's SFRproperties; (6) overseeing the servicing of Front Yard's remaining residential mortgage loans; (7) performing asset management duties and (8) performingcorporate governance and other management functions, including financial, accounting and tax management services.We provide Front Yard with a management team and support personnel who have substantial experience in the acquisition and management of residentialrental properties and residential mortgage loans. Our management also has significant corporate governance experience that enables us to manage FrontYard's business and organizational structure efficiently. We have agreed not to provide the same or substantially similar services without the prior writtenconsent of Front Yard's Board of Directors to any business or entity competing against Front Yard in (a) the acquisition or sale of SFR and/or REO properties,non-performing and re-performing mortgage loans or other similar assets; (b) the carrying on of an SFR business or (c) any other activity in which Front Yardengages. Notwithstanding the foregoing, we may engage in any other business or render similar or different services to any businesses engaged in lending orinsurance activities or any other activity other than those described above. Further, at any time following Front Yard's determination and announcement thatit will no longer engage in any of the above-described competitive activities, we would be entitled to provide advisory or other services to businesses orentities in such competitive activities without Front Yard's prior consent.On March 31, 2015, we entered into the AMA with Front Yard. The AMA, which became effective on April 1, 2015, provides for the following managementfee structure:•Base Management Fee. We are entitled to a quarterly base management fee equal to 1.5% of the product of (i) Front Yard's average invested capital(as defined in the AMA) for the quarter multiplied by (ii) 0.25, while it has fewer than 2,500 SFR properties actually rented (“Rental Properties”). Thebase management fee percentage increases to 1.75% of average invested capital while Front Yard has between 2,500 and 4,499 Rental Properties andincreases to 2.0% of average invested capital while it has 4,500 or more Rental Properties; •Incentive Management Fee. We are entitled to a quarterly incentive management fee equal to 20% of the amount by which Front Yard's return oninvested capital (based on AFFO, defined as net income attributable to holders of common stock calculated in accordance with GAAP plus realestate depreciation expense minus recurring capital expenditures on all real estate assets owned by Front Yard) exceeds an annual hurdle return rateof between 7.0% and39(table of contents)8.25% (or 1.75% and 2.06% per quarter), depending on the 10-year treasury rate. To the extent Front Yard has an aggregate shortfall in its return rateover the previous seven quarters, that aggregate return rate shortfall gets added to the normal quarterly 1.75% return hurdle for the next quarterbefore we are entitled to an incentive management fee. The incentive management fee increases to 22.5% while Front Yard has between 2,500 and4,499 Rental Properties and increases to 25% while it has 4,500 or more Rental Properties; and •Conversion Fee. We are entitled to a quarterly conversion fee equal to 1.5% of the market value of assets converted into leased single-family homesby Front Yard for the first time during the quarter. Because Front Yard has more than 4,500 Rental Properties, we are entitled to receive a base management fee of 2.0% of Front Yard’s invested capital and apotential incentive management fee percentage of 25% of the amount by which Front Yard exceeds its then-required return on invested capital threshold.Front Yard has the flexibility to pay up to 25% of the incentive management fee to us in shares of its common stock.Under the AMA, Front Yard reimburses us for the compensation and benefits of the General Counsel dedicated to Front Yard and certain other out-of-pocketexpenses incurred on Front Yard's behalf.The AMA requires that we are the exclusive asset manager for Front Yard for an initial term of 15 years from April 1, 2015, with two potential five-yearextensions, subject to Front Yard achieving an average annual return on invested capital of at least 7.0%. Under the AMA, neither party is entitled toterminate the AMA prior to the end of the initial term, or each renewal term, other than termination by (a) us and/or Front Yard “for cause” for certain eventssuch as a material breach of the AMA and failure to cure such breach, (b) Front Yard for certain other reasons such as its failure to achieve a return on investedcapital of at least 7.0% for two consecutive fiscal years after the third anniversary of the AMA or (c) Front Yard in connection with certain change of controlevents.If the AMA were terminated by Front Yard, our financial position and future prospects for revenues and growth would be materially adversely affected.Metrics Affecting Our Consolidated ResultsSubsequent to January 1, 2016Subsequent to our deconsolidation of Front Yard effective January 1, 2016, our operating results are affected by various factors and market conditions,including the following:RevenuesOur revenues primarily consist of quarterly fees due to us under the AMA, including a base management fee, an incentive management fee and a conversionfee as described above and reimbursements of out-of-pocket expenses in our management of Front Yard's business. The base management fee is derived as apercentage of Front Yard’s average invested capital, and the conversion fee is based on the number and value of mortgage loans and/or REO properties thatFront Yard converts to rental properties for the first time in each period. The incentive management fee is directly dependent upon Front Yard's financialperformance being in excess of a 7.0%-8.25% minimum return on invested capital and will vary with Front Yard's financial performance. Expensereimbursements we receive from Front Yard relate primarily to travel and other out-of-pocket expenses solely related to our management of Front Yard'sbusiness and the base salary, bonus, benefits and stock compensation, if any, solely of the general counsel dedicated to Front Yard. All other salary, bonus,benefits and stock compensation of AAMC’s employees (other than Front Yard share-based compensation issued to them by Front Yard) are theresponsibility of AAMC and are not reimbursed by Front Yard. In addition, we receive dividends on the shares of Front Yard common stock that we own,which we record as other income. The amount of dividends we receive will vary with Front Yard's financial performance, taxable income, liquidity needs andother factors deemed relevant by Front Yard's Board of Directors. Lastly, we recognize changes in the fair value of our holdings of Front Yard common stockas other comprehensive income or loss, which will be directly dependent upon fluctuations in the market price of Front Yard's common stock.40(table of contents)ExpensesOur expenses consist primarily of salaries and employee benefits, legal and professional fees and general and administrative expenses. Salaries and employeebenefits includes the base salaries, incentive bonuses, medical coverage, retirement benefits, relocation, non-cash share-based compensation and otherbenefits provided to our employees for their services. Legal and professional fees include services provided by third-party attorneys, accountants and otherservice providers of a professional nature. General and administrative expenses include costs related to the general operation and overall administration ofour business as well as non-cash share-based compensation expense related to restricted stock awards to non-employees and Directors.Prior to January 1, 2016Prior to our deconsolidation of Front Yard effective January 1, 2016, our operating results were heavily dependent upon Front Yard’s operating results.Although our results continue to be heavily dependent on Front Yard’s operating results, our reported consolidated results of operations for periods prior toJanuary 1, 2016 consolidated the financial results of Front Yard, which were a significant component of our consolidated results. As a result of ourdeconsolidation of Front Yard, the results of operations in periods commencing on or after January 1, 2016 have limited comparability to periods prior toJanuary 1, 2016. Front Yard’s results are affected by various factors, some of which are beyond our control, and the Front Yard financial data that is no longera part of our financial statements includes the following:Front Yard's RevenuesFront Yard’s revenues primarily consisted of the following:i.Rental revenues. Minimum contractual rents from leases were recognized on a straight-line basis over the terms of the leases in residential rentalrevenues. Therefore, actual amounts billed in accordance with the lease during any given period may have been higher or lower than the amount ofrental revenue recognized for the period.ii.Net realized gain on mortgage loans. Front Yard recorded net realized gains, including the reclassification of previously accumulated net unrealizedgains, upon the liquidation of a loan, which may have consisted of short sale, third-party sale of the underlying property, refinancing or full debtpay-off of the loan.iii.Change in unrealized gains from the conversion of loans to REO. Upon conversion of loans to REO, Front Yard marked the properties to the then-most recent market value. The difference between the carrying value of the asset at the time of conversion and the then-most recent market value,based on broker price opinions (“BPOs”), was recorded in Front Yard's statement of operations as change in unrealized gain on mortgage loans.iv.Change in unrealized gains from the change in fair value of loans. After Front Yard's sub-performing and non-performing mortgage loans wereacquired, the fair value of each loan was adjusted in each subsequent reporting period as the loan proceeded to a particular resolution (i.e.,modification or conversion to real estate owned). As a loan approached resolution, the resolution timeline for that loan decreased and costsembedded in the discounted cash flow model for loan servicing, foreclosure costs and property insurance were incurred and removed from futureexpenses. The shorter resolution timelines and reduced future expenses each increased the fair value of the loan. The increase in the value of the loanwas recognized in change in unrealized gain on mortgage loans in Front Yard's statements of operations.v.Net realized gain on real estate. REO properties that did not meet Front Yard's investment criteria were sold out of its taxable REIT subsidiary. Therealized gain or loss recognized in financial statements reflects the net amount of realized and unrealized gains on sold REOs from the time ofacquisition to sale completion.Front Yard's ExpensesFront Yard's expenses primarily consisted of residential property operating expenses, depreciation and amortization, selling costs and impairment, mortgageloan servicing, interest expense, general and administrative expenses, expense reimbursements as well as fees to us from Front Yard under the applicable assetmanagement agreement. Residential property operating expenses were expenses associated with Front Yard's ownership and operation of rental properties,including expenses such as property management fees, expenses towards repairs, utility expenses on vacant properties, turnover costs, property taxes,insurance and HOA dues. Depreciation and amortization was a non-cash expense associated with the ownership of real estate,41(table of contents)which was depreciated on a straight-line basis over a fixed life. Selling costs and impairment represented Front Yard's estimated and actual costs to sell aproperty or mortgage loan and an amount that represented the carrying amount over the estimated fair value less costs to sell. Mortgage loan servicing costswere primarily for servicing fees, foreclosure fees and advances of residential property insurance. Interest expense consisted of the costs to borrow money inconnection with Front Yard's debt financing of its portfolios. General and administrative expenses consisted of the costs related to the general operation andoverall administration of Front Yard's business. Under the previous asset management agreement, expense reimbursement consisted primarily of ouremployee salaries in direct correlation to the services they provide on Front Yard’s behalf and other personnel costs and corporate overhead. Under the AMA,there are no general expense or salary reimbursements except for the compensation and benefits of the general counsel dedicated to Front Yard and certainother out-of-pocket expenses incurred on Front Yard's behalf. The fees from Front Yard consisted of compensation due from Front Yard under the applicableasset management agreement. Under the previous asset management agreement, fees due from Front Yard were based on the amount of cash available fordistribution to its stockholders for each period. Under the AMA, the management fees we receive from Front Yard are based on a combination of a percentageof Front Yard's invested capital, a conversion fee for assets that convert to single-family rentals during each period and Front Yard's return on invested capital.The percentage payment on each of these metrics will vary based on Front Yard's number of leased properties. The fees due from Front Yard under therespective asset management agreements were eliminated in consolidation but increased our net income by reducing the amount of net income attributable tonon-controlling interest.Summary Management Reporting InformationPrior to our deconsolidation of Front Yard, we evaluated the operations of AAMC on a stand-alone basis in addition to evaluating our consolidated financialperformance, which included the results of Front Yard and NewSource under U.S. GAAP. In evaluating our operating performance and managing our business,we considered the management fees and reimbursement of expenses paid to us by Front Yard as well as our stand-alone operating expenses. We maintainedour internal management reporting on this basis. The following table presents our consolidating statement of operations, which is reconciled to U.S. GAAP.Accordingly, the entries necessary to consolidate AAMC's subsidiaries, including, but not limited to, elimination of fees paid under the asset managementagreement and reimbursed expenses, are reflected in the Consolidating Entries column.Upon our adoption of ASU 2015-02, we are no longer required to consolidate the results of Front Yard. Therefore, we do not present the table for periodsbeginning on or subsequent to January 1, 2016.The following tables include non-GAAP performance measures that we believe are useful to assist investors in gaining an understanding of the trends andoperating results for our business on a stand-alone basis. This information should be considered in addition to, and not as a substitute for, our financial resultsdetermined in accordance with U.S. GAAP.42(table of contents)Altisource Asset Management CorporationConsolidating Statement of OperationsYear ended December 31, 2015(In thousands) Front Yard(GAAP) NewSource Stand-alone (Non-GAAP) AAMC Stand-alone(Non-GAAP) ConsolidatingEntries AAMCConsolidated(GAAP)Revenues: Rental revenues$13,233 $— $— $— $13,233Change in unrealized gain on mortgageloans88,829 — — — 88,829Net realized gain on mortgage loans94,493 — — — 94,493Net realized gain on real estate50,932 — — — 50,932Interest income611 564 — (563) 612Conversion fee— — 1,037 (1,037) —Base management fee— — 14,565 (14,565) —Incentive management fee— — 7,994 (7,994) —Expense reimbursements— — 750 (750) —Total revenues248,098 564 24,346 (24,909) 248,099Expenses: Salaries and employee benefits— — 16,294 — 16,294Legal and professional fees6,480 199 6,632 (2,000) 11,311Residential property operating expenses66,266 — — — 66,266Real estate depreciation and amortization7,472 — — — 7,472Selling costs and impairment72,230 — — — 72,230Mortgage loan servicing costs62,346 — — — 62,346Interest expense53,694 — — (563) 53,131General and administrative6,101 — 2,232 (750) 7,583Management fees22,966 630 — (23,596) —Total expenses297,555 829 25,158 (26,909) 296,633Other income: Dividend income1,518 — 211 (1,729) —Other income2,000 — — (2,000) —Total other income3,518 — 211 (3,729) —Loss before income taxes(45,939) (265) (601) (1,729) (48,534)Income tax expense66 — 288 — 354Net loss(46,005) (265) (889) (1,729) (48,888)Net loss attributable to non-controllinginterest in consolidated affiliate— — — 45,598 45,598Net loss attributable to stockholders(46,005) (265) (889) 43,869 (3,290)Amortization of preferred stock issuancecosts— — (206) — (206)Net loss attributable to commonstockholders(46,005) (265) (1,095) 43,869 (3,496)43(table of contents)Primary Driver of Our Operating ResultsOur performance in each particular period will be affected by our ability to manage Front Yard’s business and rental portfolio effectively. If there are declinesin Front Yard’s performance in either return on invested capital or in growing Front Yard’s rental portfolio and related operating metrics, our fees in each suchperiod would be adversely affected. Conversely, if there are improvements in Front Yard’s performance in either return on invested capital or in growingFront Yard’s rental portfolio and related operating metrics, our fees in each period would be positively affected. Front Yard's operating results historicallyhave been affected by various factors including, but not limited to, the number and performance of Front Yard's SFR properties, its ability to use financing togrow its SFR portfolio, its operating expenses, the success of its loan resolution methodologies and the size of its portfolio. The extent to which we aresuccessful in managing these factors for Front Yard affects our ability to generate management fees, which are our primary source of income.Under the AMA, we are entitled to a base management fee, a conversion fee and an incentive management fee. The base management fee, which is derived asa percentage of Front Yard’s average invested capital, provides us with quarterly minimum revenues that are meant to cover our employment and otheroverhead costs and expenses. The conversion fee is based on the number and value of mortgage loans and/or REO properties that Front Yard converts torental properties for the first time in each period and will fluctuate over time. The incentive management fee is earned only if Front Yard exceeds the currentrequired return threshold on invested capital (as defined in the AMA).With respect to our incentive management fee, in the event Front Yard’s return on invested capital is below the required hurdle rate in a quarter, a return rateshortfall in incentive management fees is created that is carried forward and added to the next quarter's hurdle for the seven most recent trailing quarters oruntil the shortfall is reduced by Front Yard's future performance above the hurdle rate. As of December 31, 2017, the aggregate return shortfall from the priorseven quarters under the AMA was approximately 55.82% of invested capital. As each quarter with a shortfall rolls off the trailing seven quarters, theaggregate shortfall will change by the difference in the quarter that rolls off versus the most recently completed quarter. If and when the trailing seven quarterperformance of Front Yard allows Front Yard to meet the hurdle return rate for the incentive management fee, AAMC will then earn an incentive managementfee for the quarter of 25% of the amount by which Front Yard’s return exceeds the hurdle.Results of OperationsThe following sets forth discussion of our results of operations for the years ended December 31, 2017, 2016 and 2015. Because the results of Front Yard wereconsolidated into our financial statements for all periods prior to January 1, 2016, the results of operations for periods beginning on or after January 1, 2016are not comparable to the results of periods prior to January 1, 2016. As such, the disclosures set forth below do not compare the results of operationsattributable to Front Yard to those of AAMC, including its wholly owned subsidiaries, from period to period.We eliminate all intercompany amounts in our consolidated financial statements, which included elimination of management fees paid or owed to us byFront Yard for periods prior to January 1, 2016. However, the effect of such amounts received from Front Yard is still recognized in net income attributable toour stockholders through the adjustment for earnings attributable to non-controlling interest for such prior periods.We did not recognize any rental revenues, change in unrealized gain on mortgage loans, net realized gain on mortgage loans, net realized gain on mortgageloans held for sale, net realized gain on real estate, residential property operating expenses, real estate depreciation and amortization, selling costs andimpairment, mortgage loan servicing costs or interest expense during the year ended December 31, 2017. All amounts recorded in our consolidated financialstatements for these captions in 2015 and 2014 are attributable to Front Yard. In addition, the net income attributable to non-controlling interest inconsolidated affiliate is no longer applicable for periods beginning on or after January 1, 2016.Fiscal Year ended December 31, 2017 Compared to Fiscal Year ended December 31, 2016Management Fees and Expense ReimbursementsPursuant to the AMA, we earned base management fees from Front Yard of $16.0 million for the year ended December 31, 2017 compared to $17.3 million forthe year ended December 31, 2016. The decrease in base management fees is primarily driven by declines in Front Yard's average invested capital as definedin the AMA, partially offset by increases in the base management fee percentage under the AMA due to the increase in the number of Rental Properties inFront Yard's portfolio to more than 4,500 homes, as described in more detail below.44(table of contents)We earned conversion fees of $1.3 million and $1.8 million for the years ended December 31, 2017 and 2016, respectively. We expect the conversion fees wereceive to fluctuate dependent upon the number and fair market value of properties converted to Rental Properties for the first time during the quarter. Weexpect reductions in the amount of conversion fees we receive as Front Yard's portfolios of mortgage loans and REO properties decline.Because Front Yard has more than 4,500 Rental Properties, we are entitled to receive a base management fee of 2% of Front Yard’s invested capital and apotential incentive management fee percentage of 25% of the amount by which Front Yard exceeds its then-required return on invested capital threshold.We recognized expense reimbursements due from Front Yard of $0.9 million for the year ended December 31, 2017 compared to $0.8 million for the yearended December 31, 2016. Expense reimbursements relate primarily to travel and other out-of-pocket costs in managing Front Yard's business and theemployment costs related to the General Counsel dedicated to Front Yard.Salaries and Employee BenefitsSalaries and employee benefits increased to $19.4 million from $17.4 million for the years ended December 31, 2017 and 2016, respectively. This increase insalaries and benefits is primarily due to increases in our employee headcount, partially offset by decreased share-based compensation expense for awardsgranted to our employees as awards vested during 2017.Legal and Professional FeesLegal and professional fees increased to $2.8 million from $2.2 million for the years ended December 31, 2017 and 2016, respectively. This increase isprimarily due to increased legal expenses during 2017 in the City of Cambridge litigation and general corporate activities.General and Administrative ExpensesGeneral and administrative expenses decreased to $3.3 million from $4.8 million for the years ended December 31, 2017 and 2016, respectively. Thisdecrease was primarily due to decreased share-based compensation expense related to non-employee awards that became fully vested during the secondquarter of 2017.Dividend IncomeDividends recognized on shares of Front Yard common stock was approximately $1.0 million for each of the years ended December 31, 2017 and 2016. Theamount of dividends we receive will vary with Front Yard's financial performance, taxable income, liquidity needs and other factors deemed relevant by FrontYard's Board of Directors.Fiscal Year ended December 31, 2016 Compared to Fiscal Year ended December 31, 2015Management Fees and Expense ReimbursementsWe recorded total management fees from Front Yard under the AMA of $19.2 million during the year ended December 31, 2016 compared to $23.0million during the year ended December 31, 2015. The reduction in management fees earned from Front Yard in 2016 was primarily due to the change in feestructure commencing April 1, 2015 upon entering into the AMA and decreases in Front Yard's average invested capital upon which the management fee iscalculated.Our management fees recorded for the year ended December 31, 2016 consisted of $17.3 million of base management fees and $1.8 million of conversionfees. We did not receive any incentive management fees under the AMA during the year ended December 31, 2016. Our management fees recorded from FrontYard during the year ended December 31, 2015 consisted of $13.9 million of base management fees and $1.0 million of conversion fees under the AMA. Inaddition, although we did not earn incentive management fees in the second, third and fourth quarters of 2015 under the AMA, we did earn $8.0 million inincentive management fees under the previous asset management agreement for the first quarter of 2015.We recognized expense reimbursements of $0.8 million for the year ended December 31, 2016 related to travel and other out-of-pocket costs in managingFront Yard's business and the employment costs related to the general counsel dedicated to Front Yard that are required to be reimbursed to us under theAMA. We recognized expense reimbursements of $0.8 million for the45(table of contents)year ended December 31, 2015 related to expenses reimbursable to us under the previous asset management agreement during the first quarter of 2015.Prior to January 1, 2016, we eliminated all management fees and expense reimbursements from Front Yard in our consolidated statement of operations.Rental RevenuesDue to our deconsolidation of Front Yard effective January 1, 2016, we did not recognize any rental revenues during the year ended December 31, 2016.Front Yard's rental revenues from its residential rental properties were $13.2 million for the year ended December 31, 2015.Change in Unrealized Gain on Mortgage LoansDue to our deconsolidation of Front Yard effective January 1, 2016, we did not recognize any change in unrealized gain on mortgage loans during the yearended December 31, 2016. Front Yard's change in unrealized gains on mortgage loans were $88.8 million for the year ended December 31, 2015, which wasdriven by $91.3 million of unrealized gains upon conversion of mortgage loans to REO, $122.4 million of unrealized gains from the net increase in the fairvalue of loans and $124.9 million of reclassifications from unrealized gains on mortgage loans to realized gains on real estate and mortgage loans.Net Realized Gain on Mortgage LoansDue to our deconsolidation of Front Yard effective January 1, 2016, we did not recognize any net realized gain on mortgage loans during the year endedDecember 31, 2016. Front Yard's net realized gains on mortgage loans was $58.1 million for the year ended December 31, 2015, during which Front Yardresolved or disposed of 824 mortgage loans, primarily from short sales, foreclosure sales and sale of re-performing loans.Net Realized Gain on Mortgage Loans Held for SaleDue to our deconsolidation of Front Yard effective January 1, 2016, we did not recognize any net realized gain on mortgage loans held for sale during theyear ended December 31, 2016. Front Yard recognized $36.4 million of net realized gains on mortgage loans held for sale during the year ended December31, 2015, primarily due to Front Yard's sale of 772 mortgage loans held for sale during the fourth quarter of 2015.Net Realized Gain on Real EstateDue to our deconsolidation of Front Yard effective January 1, 2016, we did not recognize any net realized gain on real estate during the year ended December31, 2016. Front Yard's net realized gains on real estate were $50.9 million for the year ended December 31, 2015, during which Front Yard disposed of 1,321residential properties.Interest IncomeDue to our deconsolidation of Front Yard effective January 1, 2016, we did not recognize any interest income during the year ended December 31, 2016 otherthan nominal interest on bank balances. Front Yard accreted $0.6 million of interest income on its re-performing loans acquired in June 2014 during the yearended December 31, 2015.Salaries and Employee BenefitsSalaries and employee benefits was $17.4 million during the year ended December 31, 2016 compared to $16.3 million during the year ended December 31,2015. This increase in salaries and benefits is primarily due to increases in our employee headcount as well as an increase in share-based compensationexpense for awards granted to our employees, which was primarily due to awards being granted throughout 2015.46(table of contents)Legal and Professional FeesLegal and professional fees were $2.2 million and $6.8 million during the years ended December 31, 2016 and 2015, respectively. The 2015 legal andprofessional fees exclude amounts attributable to Front Yard since we no longer consolidate Front Yard into our financial statements. This decrease isprimarily due to a significant reduction in litigation expenses from those incurred during 2015 related to ongoing motion practice in a litigation matter. Inaddition, during 2015, we had reimbursed Front Yard on a one-time basis an aggregate of $2.0 million of legal and professional fees associated with thenegotiation of the AMA pursuant to a cost-sharing agreement. Front Yard recorded $2.0 million of corresponding other income during the same period of2015. Both the $2.0 million expense recorded by us and the $2.0 million other income recorded by Front Yard were eliminated on consolidation as ofDecember 31, 2015.In addition to the above, legal and professional fees of $6.5 million were attributable to Front Yard for the year ended December 31, 2015, which includeslegal and professional fees related to litigation-based expenses and to the negotiation of the AMA during the first quarter of 2015.Residential Property Operating ExpensesDue to our deconsolidation of Front Yard effective January 1, 2016, we did not recognize any residential property operating expenses during the year endedDecember 31, 2016. Front Yard incurred $66.3 million of residential property operating expenses during the year ended December 31, 2015 related to its6,516 REO properties at December 31, 2015.Real Estate Depreciation and AmortizationDue to our deconsolidation of Front Yard effective January 1, 2016, we did not recognize any real estate depreciation and amortization during the year endedDecember 31, 2016. Front Yard incurred $7.5 million of real estate depreciation and amortization during the year ended December 31, 2015.Selling Costs and ImpairmentDue to our deconsolidation of Front Yard effective January 1, 2016, we did not recognize any selling costs and impairment during the year ended December31, 2016. Front Yard's selling costs of REO held for sale were $33.6 million for the year ended December 31, 2015. Front Yard also recognized $2.1 million inmortgage loan selling costs for the year ended December 31, 2015. Lastly, Front Yard recognized $36.5 million of REO valuation impairment for the yearended December 31, 2015.Mortgage Loan Servicing CostsDue to our deconsolidation of Front Yard effective January 1, 2016, we did not recognize any mortgage loan servicing costs during the year ended December31, 2016. Front Yard incurred $62.3 million of mortgage loan servicing costs primarily for servicing fees, foreclosure fees and advances of residentialproperty insurance for the year ended December 31, 2015.Interest ExpenseDue to our deconsolidation of Front Yard effective January 1, 2016, we did not recognize any interest expense during the year ended December 31, 2016.Front Yard incurred $53.7 million of interest expense for the year ended December 31, 2015 related to borrowings under its repurchase and loan facilities(including amortization of deferred financing costs).General and Administrative ExpensesGeneral and administrative expenses, excluding amounts attributable to Front Yard for 2015, were $4.8 million and $2.2 million for the year ended December31, 2016 and 2015, respectively. The increase was primarily due to the higher fair value of non-employee share-based compensation awards.In addition, general and administrative expenses of $6.1 million were attributable to Front Yard for the year ended December 31, 2015.47(table of contents)Dividend IncomeDuring the year ended December 31, 2016, we recognized $1.0 million of dividends from Front Yard common stock compared to $0.2 million for the yearended December 31, 2015. This increase was primarily due to our increased holdings of Front Yard's common stock during 2016. Prior to January 1, 2016, weeliminated all dividends we recognized on our holdings of Front Yard common stock in our consolidated statement of operations.Other IncomeWe recognized $0.1 million in other income for the year ended December 31, 2016, which represented a payment received by us in relation to a shareholderaction. Other income for the year ended December 31, 2015 related primarily to Front Yard's receipt of dividends on its NewSource preferred stock and itsreceipt of payment from us related to the cost-sharing agreement for costs to negotiate the AMA, all of which was eliminated upon consolidation.Liquidity and Capital ResourcesAs of December 31, 2017, we had cash and cash equivalents of $33.3 million compared to $40.6 million as of December 31, 2016. The reduction in the cashand cash equivalents in 2017 was primarily due to the use of cash to repurchase stock under our Board-approved repurchase plan or for tax withholdings onrestricted stock vestings during the year, payments of employee compensation and general corporate expenses. At December 31, 2017, we also held $19.3million in Front Yard common stock. We believe the cash and cash equivalents at December 31, 2017 is sufficient to enable us to meet anticipated short-term(one year) liquidity requirements since we are continuing to generate asset management fees under the AMA and receive dividend income on the Front Yardcommon stock we own. Our only ongoing cash expenditures are salaries and employee benefits, legal and professional fees, lease obligations and othergeneral and administrative expenses.Treasury SharesAt December 31, 2017, a total of $265.5 million in shares of our common stock have been repurchased under the authorization by our Board of Directors torepurchase up to $300.0 million in shares of our common stock. Repurchased shares are held as treasury stock and are available for general corporatepurposes. We have an aggregate of $34.5 million remaining for repurchases under our Board-approved repurchase plan.Cash FlowsWe report and analyze our cash flows based on operating activities, investing activities and financing activities. The following table summarizes our cashflows for the periods indicated ($ in thousands): Year ended December 31,2017 Year ended December 31,2016 Year ended December 31,2015Net cash provided by (used in) operating activities$365 $(192) $(183,237)Net cash (used in) provided by investing activities (1)(1,841) (152,856) 466,941Net cash used in financing activities(5,759) (11,478) (208,658)Total cash flows$(7,235) $(164,526) $75,046_______________(1)Upon deconsolidation of Front Yard effective January 1, 2016, we recognized a reduction in cash, cash equivalents and restricted cash of $137.3 million,which represented the cash, cash equivalents and restricted cash attributable to Front Yard within our consolidated balance sheet as of December 31,2015.Net cash provided by operating activities for the year ended December 31, 2017 by us consisted primarily of management fee revenues, partially offsetsalaries and employee benefits, legal and professional fees and general and administrative expenses.Net cash used in operating activities for the year ended December 31, 2016 by us consisted primarily of salaries and employee benefits, legal and professionalfees, general and administrative expenses, the refund of 2015 amounts due to Front Yard under the previous asset management agreement and an increase inreceivables from Front Yard for management fees, which was substantially offset by management fees earned during 2016. Net cash used in operatingactivities for the years ended December 31, 2015 by Front Yard and us consisted primarily of residential property operating expenses, mortgage loanservicing costs (including servicing fees, foreclosure fees and advances of residential property insurance on delinquent loans), interest expense, legal andprofessional fees and salaries and employee benefits. The management fees earned by AAMC and paid by Front Yard48(table of contents)in 2015 were eliminated in such periods due to the consolidation of Front Yard into AAMC’s financial statements for that period.Net cash used in investing activities for the year ended December 31, 2017 by us consisted of investments in short-term investments and property, plant andequipment. Net cash used in investing activities for the year ended December 31, 2016 by us consisted primarily of our purchases of the common stock ofFront Yard and a reduction of reported cash due to the deconsolidation of Front Yard. Net cash provided by investing activities for the year ended December31, 2015 to Front Yard and us consisted primarily of Front Yard's mortgage loan and real estate dispositions, partly offset by investments in real estate andrenovations of rental properties.Net cash used in financing activities for the years ended December 31, 2017 and 2016 by us consisted primarily of repurchases of our common stock. Netcash used in financing activities for the year ended December 31, 2015 by Front Yard and us consisted primarily of payments for share repurchases of FrontYard's and our common stock under the respective share repurchase programs, payment of dividends by Front Yard and net repayments of Front Yard'sborrowings.Off-balance Sheet ArrangementsWe had no off-balance sheet arrangements as of December 31, 2017 or 2016.Contractual ObligationsOn April 16, 2015, we entered into a lease with respect to approximately 5,000 square feet of office space located at 5100 Tamarind Reef, Christiansted, VI00820. The lease has an initial term of five years from the date the premises are first occupied, and we have an option to extend the lease for an additionalfive-year term. The annual rent during the initial five-year term under the lease is $120,000, which increases to $130,800 per annum during the renewal term.Initially, the landlord was required to make renovations and build offices in the premises under the lease. During the renovation period, the landlord providedus with approximately 4,000 square feet of temporary space. During July 2017, the renovations were completed, and we occupied the office space effectiveJuly 24, 2017, which is the commencement date of the initial five-year term of the lease.In addition, we entered into a lease of approximately 5,700 square feet of office space in Bangalore, India for the employees of our India subsidiary. Thelease, which was executed on October 16, 2015, has an initial term of five years and requires monthly payments of 291,159 Indian rupees (approximately$4,500 United States dollars) per month beginning December 16, 2015.The following table presents our contractual obligations for the periods indicated ($ in thousands): Amounts Due during the Years ending December 31, Total 2018 2019 - 2020 2021 - 2022 ThereafterOperating leases (1)$709 $175 $347 $187 $— $709 $175 $347 $187 $—_______________(1)Lease denominated in Indian rupees estimated at the exchange rate as of December 31, 2017.We enter into certain contracts that contain a variety of indemnification obligations. The maximum potential future payment amount we could be required topay under these indemnification obligations is unlimited. We have not incurred any costs to defend lawsuits or settle claims related to these indemnificationobligations. As a result, the estimated fair value of these agreements is minimal. Accordingly, we recorded no liabilities for these agreements as ofDecember 31, 2017 or 2016.Recent accounting pronouncementsSee Note 1, “Organization and basis of presentation - Recently issued accounting standards” to our consolidated financial statements.Critical Accounting Judgments Accounting standards require information in financial statements about the risks and uncertainties inherent in significant estimates, and the application ofgenerally accepted accounting principles involves the exercise of varying degrees of judgment. Certain amounts included in or affecting our financialstatements and related disclosures must be estimated requiring us to make certain assumptions with respect to values or conditions that cannot be known withcertainty at the time our consolidated49(table of contents)financial statements are prepared. These estimates and assumptions affect the amounts we report for our assets and liabilities and our revenues and expensesduring the reporting period and our disclosure of contingent assets and liabilities at the date of our consolidated financial statements. Actual results maydiffer significantly from our estimates and any effects on our business, financial position or results of operations resulting from revisions to these estimates arerecorded in the period in which the facts that give rise to the revision become known.We consider our critical accounting judgments to be those used in the determination of the reported amounts and disclosure related to the following:Income taxesIncome taxes are provided for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequencesattributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities aremeasured using enacted rates expected to apply to taxable income in the years in which management expects those temporary differences to be recovered orsettled. The effect on deferred taxes of a change in tax rates is recognized in income in the period in which the change occurs. Subject to our judgment, wereduce a deferred tax asset by a valuation allowance if it is “more likely than not” that some or the entire deferred tax asset will not be realized. Tax laws arecomplex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required inevaluating tax positions, and we recognize tax benefits only if it is more likely than not that a tax position will be sustained upon examination by theappropriate taxing authority.For all temporary differences, we have considered the potential future sources of taxable income against which they may be realized. In so doing, we havetaken into account temporary differences that we expect to reverse in future years and those where it is unlikely. Where it is more likely than not that therewill not be potential future taxable income to offset a temporary difference, a valuation allowance has been recorded.Item 7A. Quantitative and Qualitative Disclosures About Market RiskMarket risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changesthat affect market sensitive instruments. The primary market risk that we are currently exposed to is market risk related to our investment in Front Yard'scommon stock.Investment Risk Relating to Front Yard's Common StockWe have purchased an aggregate of 1,624,465 shares of Front Yard common stock in open market transactions, and we may purchase additional shares ofFront Yard common stock from time to time. If additional purchases are commenced, any such purchases of Front Yard common stock by us may bediscontinued at any time, or we may commence sales of such common stock. To the extent we have purchased, or continue to acquire, Front Yard commonstock, we will be exposed to risks and uncertainties with respect to our ownership of such shares, including downward pressure on Front Yard’s stock price, areduction or increase of dividends declared and paid on the Front Yard stock and/or an inability to dispose of such shares at a time when we otherwise maydesire or need to do so. There can be no assurance that we will be successful in mitigating such risks.In addition, under the terms of the AMA, Front Yard has the flexibility to pay up to 25% of our incentive management fees in shares of Front Yard commonstock. Should Front Yard make this election, we would further be exposed to the above-described market risk on the shares we receive.Item 8. Consolidated Financial Statements and Supplementary DataSee our consolidated financial statements starting on page F-1.50(table of contents)Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosurePursuant to the approval of the Audit Committee of the Board of Directors (the “Audit Committee”), on May 19, 2017, the Company dismissed Deloitte &Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm, and engaged Ernst & Young LLP (“EY”) as the Company’sindependent registered public accounting firm for the fiscal year ending December 31, 2017. The decision to dismiss Deloitte and engage EY was made as aresult of a competitive bidding process to determine the Company’s independent registered public accounting firm for the fiscal year ended December 31,2017.Deloitte's reports on the consolidated financial statements of the Company as of and for year ended December 31, 2016 did not contain any adverse opinionor a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. During the Company’s fiscal year endedDecember 31, 2016 and the subsequent interim period from January 1, 2017 through May 19, 2017, there were no disagreements with Deloitte on any matterof accounting principles or practices, financial statement disclosures or auditing scope or procedures that, if not resolved to Deloitte’s satisfaction, wouldhave caused Deloitte to make reference to the subject matter of the disagreement in connection with its reports. There were no “reportable events” as definedin Item 304(a)(1)(v) of Regulation S-K during the interim period from January 1, 2017 through May 19, 2017.During the Company’s fiscal year ended December 31, 2016, there was one “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K, which aredescribed below.As previously disclosed in the Company’s Quarterly Report on Form 10-Q/A for the three months ended June 30, 2016, the Company had concluded that itsdisclosure controls and procedures as of June 30, 2016 were not effective at the reasonable assurance level. This conclusion was based solely on a materialweakness in the Company’s internal control over financial reporting relating to the operation of its review procedures for the consolidated financialstatements and footnotes, which resulted in an error in the disclosure of loss per share of common stock for the three and six months ended June 30, 2016.Although the Company had correctly reported the net loss attributable to stockholders and weighted average common stock outstanding for the period endedJune 30, 2016, an error was identified in the loss per share of common stock for the three and six months ended June 30, 2016, causing the Company toamend the Form 10-Q to correct the error. This material weakness was fully remediated by the Company as of December 31, 2016.The Audit Committee has discussed the subject matter of the foregoing material weakness with Deloitte, and the Company has authorized Deloitte to respondfully to the inquiries of EY concerning this matter.During the fiscal year ended December 31, 2016 and the subsequent interim period through May 19, 2017, neither the Company nor anyone on its behalfconsulted with EY regarding any of the matters or events set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.51(table of contents)Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresWe carried out an evaluation required by the Exchange Act, under the supervision and with the participation of our principal executive officer and principalfinancial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act,as of December 31, 2017. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2017,our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that wefile or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and toprovide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer andprincipal financial officer, as appropriate to allow timely decisions regarding required disclosures.Management’s Report on Internal Control over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the ExchangeAct. Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2017 based on criteria established inInternal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of thisassessment, management concluded that, as of December 31, 2017, our internal control over financial reporting was effective in providing reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles and includes those policies and procedures that 1) pertain to the maintenance of records that in reasonable detail accuratelyand fairly reflect the transactions and dispositions of the assets of the issuer; 2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer arebeing made only in accordance with authorizations of management and directors of the issuer; and 3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the financial statements.The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by Ernst & Young LLP, an independent registeredcertified public accounting firm, as stated in their report that appears herein.52(table of contents)REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Altisource Asset Management CorporationOpinion on Internal Control over Financial ReportingWe have audited Altisource Asset Management Corporation's internal control over financial reporting as of December 31, 2017, based on criteria establishedin Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSOcriteria). In our opinion, Altisource Asset Management Corporation (the Company) management maintained, in all material respects, effective internal controlover financial reporting as of December 31, 2017, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheet of Altisource Asset Management Corporation as of December 31, 2017, and the related consolidated statements of operations, comprehensiveloss, stockholders' equity (deficit), and cash flows for year then ended, and our report dated March 1, 2018 expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ Ernst & Young LLPAtlanta, GeorgiaMarch 1, 201853(table of contents)Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d)of the Exchange Act that occurred during the quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.Limitations on ControlsOur disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving theirobjectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal control over financialreporting will prevent or detect all error or fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and canprovide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance thatmisstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.Item 9B. Other InformationNone.54(table of contents)Part IIIWe will file a definitive Proxy Statement for our 2018 Annual Meeting of Stockholders (the “2018 Proxy Statement”) with the Securities and ExchangeCommission, pursuant to Regulation 14A, not later than 120 days after December 31, 2017. Accordingly, certain information required by Part III has beenomitted under General Instruction G(3) to Form 10-K. Only those sections of the 2018 Proxy Statement that specifically address the items set forth herein areincorporated by reference.Item 10. Directors, Executive Officers and Corporate GovernanceThe information required by Item 10 is hereby incorporated by reference from our 2018 Proxy Statement under the captions “Election of Directors,”“Section 16(a) Beneficial Ownership Reporting Compliance” and “Code of Ethics.”Item 11. Executive CompensationThe information required by Item 11 is hereby incorporated by reference from our 2018 Proxy Statement under the captions “Executive Compensation” and“Director Compensation.”Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by Item 12 is hereby incorporated by reference from our 2018 Proxy Statement under the caption “Security Ownership of CertainBeneficial Owners and Management.”Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by Item 13 is hereby incorporated by reference from our 2018 Proxy Statement under the captions “Transactions with RelatedPersons” and “Information Regarding the Board of Directors and Corporate Governance.”Item 14. Principal Accountant Fees and ServicesThe information required by Item 14 is hereby incorporated by reference from our 2018 Proxy Statement under the captions “Independent Registered PublicAccounting Firm Fees” and “Pre-Approval Policy and Procedures.”55(table of contents)Part IVItem 15. ExhibitsExhibitsExhibit Number Description2.1 Separation Agreement, dated as of December 21, 2012, between Altisource Asset Management Corporation and Altisource PortfolioSolutions S.A. (incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed with the Commission onDecember 28, 2012).3.1 Amended and Restated Articles of Incorporation of Altisource Asset Management Corporation (incorporated by reference to Exhibit3.1 of the Registrant's Current Report on Form 8-K filed with the Commission on January 5, 2017).3.2 First Amended and Restated Bylaws of Altisource Asset Management Corporation (incorporated by reference to Exhibit 3.2 of theRegistrant's Registration Statement on Form 10 filed with the Commission on December 5, 2012).3.3 Certificate of Designations establishing the Company’s Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1of the Registrant’s Current Report on Form 8-K filed with the Commission on March 19, 2014).10.1 Asset Management Agreement, dated March 31, 2015, among Front Yard Residential Corporation (f/k/a Altisource ResidentialCorporation), Front Yard Residential L.P. (f/k/a Altisource Residential, L.P.) and Altisource Asset Management Corporation(incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the Commission on April 2, 2015).10.2 Amendment to Asset Management Agreement, dated April 7, 2015, among Front Yard Residential Corporation (f/k/a AltisourceResidential Corporation), Front Yard Residential L.P. (f/k/a Altisource Residential, L.P.) and Altisource Asset ManagementCorporation (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the Commission onApril 13, 2015).10.3 Commercial Lease, dated April 16, 2015 by and between St. Croix Financial Center, Inc. and Altisource Asset ManagementCorporation (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the Commission onApril 22, 2015).10.4† Altisource Asset Management Corporation 2016 Preferred Stock Plan (incorporated by reference to Exhibit 10.22 of the Registrant'sAnnual Report on Form 10-K filed with the Commission on March 1, 2017).10.5† Form of Preferred Stock Agreement under 2016 Employee Preferred Stock Plan (incorporated by reference to Exhibit 10.1 of theRegistrant's Current Report on Form 8-K filed with the Commission on January 5, 2017).21* Schedule of Subsidiaries23.1* Consent of Ernst & Young LLP23.2* Consent of Deloitte & Touche LLP24* Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K)31.1* Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act31.2* Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act32.1* Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act32.2* Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act101.INS* XBRL Instance Document101.SCH* XBRL Taxonomy Extension Schema Document101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document101.DEF* XBRL Taxonomy Extension Definition Linkbase Document101.LAB* XBRL Extension Labels Linkbase101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document__________* Filed herewith.† Denotes management contract or compensatory arrangement.56(table of contents)SignaturesPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to besigned on its behalf by the undersigned, thereunto duly authorized. Altisource Asset Management CorporationDate: March 1, 2018By:/s/George G. Ellison George G. Ellison Chief Executive OfficerDate: March 1, 2018By:/s/Robin N. Lowe Robin N. Lowe Chief Financial OfficerPower of AttorneyKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints George G. Ellison and Robin N.Lowe and each of them severally, his or her true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his or her name, place andstead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under theSecurities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in connection withthe Annual Report on Form 10-K and any and all amendments hereto, as fully for all intents and purposes as he or she might or could do in person, andhereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to bedone by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of theregistrant and in the capacities indicated:Signature Title Date/s/ George G. Ellison Chairman of the Board of Directors andChief Executive Officer (Principal Executive Officer) March 1, 2018George G. Ellison /s/ Ricardo C. Byrd Director March 1, 2018Ricardo C. Byrd /s/ Dale Kurland Director March 1, 2018Dale Kurland /s/ Nathaniel Redleaf Director March 1, 2018Nathaniel Redleaf /s/ John P. de Jongh, Jr. Director March 1, 2018John P. de Jongh, Jr. /s/ Robin N. Lowe Chief Financial Officer (Principal Financial Officer andPrincipal Accounting Officer) March 1, 2018Robin N. Lowe 57(table of contents)Index to Consolidated Financial StatementsReports of Independent Registered Public Accounting Firms1Consolidated Balance Sheets3Consolidated Statements of Operations4Consolidated Statements of Comprehensive Loss5Consolidated Statements of Stockholders’ Equity (Deficit)6Consolidated Statements of Cash Flows7Notes to Consolidated Financial Statements958(table of contents)REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Altisource Asset Management CorporationOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheet of Altisource Asset Management Corporation (the Company) as of December 31, 2017, andthe related consolidated statements of operations, comprehensive loss, stockholders' equity (deficit), and cash flows for the year then ended and the relatednotes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all materialrespects, the financial position of Altisource Asset Management Corporation at December 31, 2017, and the results of its operations and its cash flows for theyear then ended, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2018, expressed an unqualifiedopinion thereon.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures toassess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Suchprocedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audit provides a reasonable basis for our opinion./s/ Ernst & Young LLPWe have served as the Company's auditor since 2017.Atlanta, GeorgiaMarch 1, 2018F-1(table of contents)REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofAltisource Asset Management Corporation:We have audited the accompanying consolidated balance sheet of Altisource Asset Management Corporation and subsidiaries (the "Company") as ofDecember 31, 2016, and the related consolidated statements of operations, comprehensive loss, equity (deficit), and cash flows for the years ended December31, 2016 and 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on thesefinancial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, such consolidated financial statements, present fairly, in all material respects, the financial position of Altisource Asset ManagementCorporation and subsidiaries as of December 31, 2016, and the results of their operations and their cash flows for the years ended December 31, 2016 and2015, in conformity with accounting principles generally accepted in the United States of America.As discussed in Note 1 to the consolidated financial statements, the Company generates substantially all of its revenue through its asset managementagreement with Front Yard Residential Corporation, a related party (formerly Altisource Residential Corporation). Additionally, as discussed in Notes 1 and5, the Company is reliant upon the performance of service providers, including Altisource Portfolio Solutions S.A. and Ocwen Financial Corporation (relatedparties through January 16, 2015).As discussed in Note 1 to the consolidated financial statements, the accompanying 2016 and 2015 consolidated financial statements have beenretrospectively adjusted for the adoption of ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash./s/ DELOITTE & TOUCHE LLPAtlanta, GeorgiaMarch 1, 2017 (March 1, 2018 as to the effects of the adjustment to retrospectively apply the change in accounting described in Note 1)F-2(table of contents)Altisource Asset Management CorporationConsolidated Balance Sheets(In thousands, except share and per share amounts) December 31, 2017 December 31, 2016Current assets: Cash and cash equivalents$33,349 $40,584Short-term investments625 —Available-for-sale securities (Front Yard common stock)19,266 17,934Receivable from Front Yard4,151 5,266Prepaid expenses and other assets1,022 1,964Total current assets58,413 65,748Other non-current assets1,974 —Total assets$60,387 $65,748 Current liabilities: Accrued salaries and employee benefits$5,651 $4,100Accounts payable and accrued liabilities2,085 4,587Total liabilities7,736 8,687 Commitments and contingencies (Note 4)— — Redeemable preferred stock: Series A preferred stock, $0.01 par value, 250,000 shares issued and outstanding as of December 31, 2017 and2016; redemption value $250,000249,546 249,340 Stockholders' deficit: Common stock, $.01 par value, 5,000,000 authorized shares; 2,815,122 and 1,599,210 shares issued andoutstanding, respectively, as of December 31, 2017 and 2,637,629 and 1,513,912 shares issued andoutstanding, respectively, as of December 31, 201628 26Additional paid-in capital37,765 30,696Retained earnings38,970 46,145Accumulated other comprehensive loss(1,330) (2,662)Treasury stock, at cost, 1,215,912 and 1,123,717 shares as of December 31, 2017 and 2016, respectively(272,328) (266,484)Total stockholders' deficit(196,895) (192,279)Total liabilities and equity$60,387 $65,748See accompanying notes to consolidated financial statements.F-3(table of contents)Altisource Asset Management CorporationConsolidated Statements of Operations(In thousands, except share and per share amounts) Year ended December 31,2017 Year ended December 31,2016 Year ended December 31,2015Revenues: Management fees from Front Yard$16,010 $17,334 $—Conversion fees from Front Yard1,291 1,841 —Expense reimbursements from Front Yard859 816 —Rental revenues— — 13,233Change in unrealized gain on mortgage loans— — 88,829Net realized gain on sales of mortgage loans— — 94,493Net realized gain on sales of real estate— — 50,932Interest income— — 612Total revenues18,160 19,991 248,099Expenses: Salaries and employee benefits19,393 17,369 16,294Legal and professional fees2,794 2,173 11,311Residential property operating expenses— — 66,266Real estate depreciation and amortization— — 7,472Selling costs and impairment— — 72,230Mortgage loan servicing costs— — 62,346Interest expense— — 53,131General and administrative3,320 4,772 7,583Total expenses25,507 24,314 296,633Other income: Dividend income on Front Yard common stock975 1,023 —Other income111 71 —Total other income1,086 1,094 —Loss before income taxes(6,261) (3,229) (48,534)Income tax expense708 1,706 354Net loss(6,969) (4,935) (48,888)Net loss attributable to non-controlling interest in consolidatedaffiliate— — 45,598Net loss attributable to stockholders(6,969) (4,935) (3,290)Amortization of preferred stock issuance costs(206) (207) (206)Net loss attributable to common stockholders$(7,175) $(5,142) $(3,496) Loss per share of common stock – basic: Loss per basic share$(4.57) $(2.93) $(1.59)Weighted average common stock outstanding – basic1,570,428 1,752,302 2,202,815 Loss per share of common stock – diluted: Loss per diluted share$(4.57) $(2.93) $(1.59)Weighted average common stock outstanding – diluted1,570,428 1,752,302 2,202,815See accompanying notes to consolidated financial statements.F-4(table of contents)Altisource Asset Management CorporationConsolidated Statements of Comprehensive Loss(In thousands) Year ended December31, 2017 Year ended December31, 2016 Year ended December31, 2015Net loss attributable to stockholders$(6,969) $(4,935) $(3,290)Other comprehensive income (loss): Change in unrealized loss on available-for-sale securities (Front Yardcommon stock)1,332 (1,681) —Total other comprehensive income (loss)1,332 (1,681) —Comprehensive loss$(5,637) $(6,616) $(3,290)See accompanying notes to consolidated financial statements.F-5(table of contents)Altisource Asset Management CorporationConsolidated Statements of Stockholders' Equity (Deficit)(In thousands, except share amounts) Common Stock AdditionalPaid-inCapital RetainedEarnings Accumulated OtherComprehensive Loss TreasuryStock Non-controllingInterest inConsolidatedAffiliate Total Equity(Deficit) Number ofShares Amount December 31, 20142,452,101 $25 $14,152 $54,174 $— $(245,468) $1,326,911 $1,149,794Common shares issued undershare-based compensation plans,net of shares withheld foremployee taxes104,727 1 72 — — — — 73Treasury shares repurchased— — — — — (9,516) — (9,516)Capital contribution from non-controlling interest— — — — — — 111 111Distribution from non-controlling interest— — — — — — (103,649) (103,649)Repurchase of non-controllinginterest in subsidiaries byaffiliate— — — — — — (24,983) (24,983)Acquisition of non-controllinginterest in affiliate— — 2,330 — — — (7,337) (5,007)Amortization of preferred stockissuance costs— — — (206) — — — (206)Share-based compensation— — 6,865 — — — 184 7,049Net loss— — — (3,290) — — (45,598) (48,888)December 31, 20152,556,828 26 23,419 50,678 — (254,984) 1,145,639 964,778Cumulative effect of adoption ofASU 2015-02 (Note 1)— — (2,330) 609 (981) — (1,145,639) (1,148,341)January 1, 20162,556,828 26 21,089 51,287 (981) (254,984) — (183,563)Common shares issued undershare-based compensation plans,net of shares withheld foremployee taxes80,801 — 22 — — — — 22Treasury shares repurchased— — — — — (11,500) — (11,500)Amortization of preferred stockissuance costs— — — (207) — — — (207)Share-based compensation— — 9,585 — — — — 9,585Change in unrealized loss onavailable-for-sale securities(Front Yard common stock)— — — — (1,681) — — (1,681)Net loss— — — (4,935) — — — (4,935)December 31, 20162,637,629 26 30,696 46,145 (2,662) (266,484) — (192,279)Common shares issued undershare-based compensation plans,net of shares withheld foremployee taxes177,493 2 83 — — — — 85Treasury shares repurchased— — — — — (5,844) — (5,844)Amortization of preferred stockissuance costs— — — (206) — — — (206)Share-based compensation— — 6,986 — — — — 6,986Change in unrealized loss onavailable-for-sale securities(Front Yard common stock)— — — — 1,332 — — 1,332Net loss— — — (6,969) — — — (6,969)December 31, 20172,815,122 $28 $37,765 $38,970 $(1,330) $(272,328) $— $(196,895)See accompanying notes to consolidated financial statements.F-6(table of contents)Altisource Asset Management CorporationConsolidated Statements of Cash Flows(In thousands) Year ended December31, 2017 Year ended December31, 2016 Year ended December31, 2015Operating activities: Net loss attributable to stockholders$(6,969) $(4,935) $(48,888)Adjustments to reconcile net loss to net cash used in operating activities: Change in unrealized gain on mortgage loans— — (88,829)Net realized gain on sales of mortgage loans— — (94,493)Net realized gain on sales of real estate— — (50,932)Depreciation and amortization302 — 7,472Selling costs and impairment— — 72,230Accretion of interest on re-performing mortgage loans— — (551)Share-based compensation6,986 9,585 6,865Amortization of deferred financing costs— — 7,348Loss on retirement of leasehold improvements— — 212Changes in operating assets and liabilities: Accounts receivable, net— 123 (21,919)Related party receivables1,115 (5,266) 17,491Prepaid expenses and other assets942 68 (1,023)Deferred leasing costs— — (88)Other non-current assets(1,060) — —Accrued salaries and employee benefits1,551 94 2,754Accounts payable and accrued liabilities(2,502) 2,319 15,283Related party payables— (2,180) (6,169)Net cash provided by (used in) operating activities365 (192) (183,237)Investing activities: Decrease in cash, cash equivalents and restricted cash due to deconsolidationof Front Yard (Note 1)— (137,268) —Purchases of Front Yard common stock— (15,588) —Investment in short-term investments(625) — —Investment in property, plant and equipment(1,216) — —Investment in real estate— — (119,977)Investment in renovations— — (27,410)Investment in affiliate— — (5,007)Real estate tax advances— — (29,862)Mortgage loan dispositions— — 468,111Mortgage loan payments— — 26,206Disposition of real estate— — 154,880Net cash (used in) provided by investing activities(1,841) (152,856) 466,941 See accompanying notes to consolidated financial statements.F-7(table of contents)Altisource Asset Management CorporationConsolidated Statements of Cash Flows (continued)(In thousands) Year ended December31, 2017 Year ended December31, 2016 Year ended December31, 2015Financing activities: Issuance of common stock, including stock option exercises650 593 833Repurchase of common stock(5,844) (11,500) (9,516)Payment of tax withholdings on exercise of stock options(565) (571) (760)Capital contribution from non-controlling interest— — 111Distribution to non-controlling interest— — (98,123)Repurchase of non-controlling interest in subsidiaries by affiliate— — (24,983)Proceeds from issuance of other secured borrowings— — 220,931Repayments of other secured borrowings— — (39,832)Proceeds from repurchase and loan agreements— — 347,077Repayments of repurchase and loan agreements— — (594,564)Payment of deferred financing costs— — (9,832)Net cash used in financing activities(5,759) (11,478) (208,658)Net change in cash, cash equivalents and restricted cash(7,235) (164,526) 75,046Cash, cash equivalents and restricted cash, beginning of the period40,584 205,110 130,064Cash, cash equivalents and restricted cash, end of the period$33,349 $40,584 $205,110 Supplemental disclosure of cash flow information: Cash paid for interest$— $— $46,559Income taxes paid820 132 265Transfer of mortgage loans to real estate owned, net— — 470,221Change in accrued capital expenditures— — (1,388)Changes in receivables from mortgage loan dispositions, payments and realestate tax advances, net— — (592)Changes in receivables from real estate owned dispositions— — 15,252Unpaid distribution to non-controlling interest— — 5,526Decrease in noncontrolling interest due to deconsolidation of Front Yard(Note 1)— (1,145,639) —Decrease in repurchase and loan agreements and other secured borrowingsdue to deconsolidation of Front Yard (Note 1)— (1,265,968) —Decrease in real estate assets and mortgage loans due to deconsolidation ofFront Yard (Note 1)— 2,264,296 —See accompanying notes to consolidated financial statements.F-8(table of contents)Altisource Asset Management CorporationNotes to Consolidated Financial StatementsDecember 31, 20171. Organization and Basis of PresentationAltisource Asset Management Corporation (“we,” “our,” “us,” or the “Company”) was incorporated in the U.S. Virgin Islands (“USVI”) on March 15, 2012(our “inception”) and commenced operations on December 21, 2012. Our primary business is to provide asset management and certain corporate governanceservices to institutional investors. We have also been a registered investment adviser under section 203(c) of the Investment Advisers Act of 1940 sinceOctober 2013.Our primary client currently is Front Yard Residential Corporation, formerly Altisource Residential Corporation (“Front Yard”), a public real estateinvestment trust (“REIT”) focused on acquiring and managing quality, affordable single-family rental (“SFR”) properties throughout the United States. All ofour standalone revenue for all periods presented was generated through our asset management agreement with Front Yard.On March 31, 2015, we entered into a new asset management agreement with Front Yard (the “AMA”), under which we are the exclusive asset manager forFront Yard for an initial term of 15 years from April 1, 2015, with two potential five-year extensions. The AMA provides for a fee structure in which we areentitled to a base management fee, an incentive management fee and a conversion fee for mortgage loans and real estate owned (“REO”) properties thatbecome rental properties during each quarter. Accordingly, our operating results continue to be highly dependent on Front Yard's operating results. See Note5 for additional details of the AMA.Since we are heavily reliant on revenues earned from Front Yard, investors may obtain additional information about Front Yard in its Securities andExchange Commission (“SEC”) filings, including, without limitation, Front Yard’s financial statements and other important disclosures therein, available athttp://www.sec.gov and http://ir.frontyardresidential.com/financial-information.Front Yard has property management contracts with two separate third-party service providers to provide to Front Yard, among other things, leasing and leasemanagement, operations, maintenance, repair, property management and property disposition services in respect of its SFR and REO portfolios. Also, FrontYard also has servicing agreements with two separate mortgage servicers for the remaining mortgage loans in its portfolio. If the service providers under theseagreements are unable to perform the services described under these agreements at the level and/or the cost that we anticipate, alternate service providers maynot be readily available on favorable terms, or at all, which could have a material adverse effect on Front Yard and us.Altisource Portfolio Solutions S.A. (“ASPS”), one of Front Yard's property management service providers, Ocwen Financial Corporation (“Ocwen”), a formermortgage servicer, were related parties until January 16, 2015 (see Note 5).Additionally, our wholly owned subsidiary, NewSource Reinsurance Company Ltd. (“NewSource”), is a title insurance and reinsurance company licensedwith the Bermuda Monetary Authority. NewSource commenced reinsurance activities during the second quarter of 2014. In December 2014, NewSourcedetermined that the economics of the initial business did not warrant the continuation of its initial reinsurance quota share agreement with an unrelated thirdparty. NewSource therefore transferred all of the risk of claims and future losses underwritten to an unrelated third party, and its reinsurance and insurancebusiness has been dormant since that time.Basis of presentation and use of estimatesThe accompanying audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the UnitedStates (“U.S. GAAP”).Effective January 1, 2016, the accompanying consolidated financial statements include the accounts of AAMC and its consolidated subsidiaries, which arecomprised of voting interest entities in which we are determined to have a controlling financial interest under Accounting Standards Codification (“ASC”)810, as amended by Accounting Standards Update (“ASU”) 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis (“ASU 2015-02”). Our voting interest entities consist entirely of our wholly owned subsidiaries. We also consider variable interest entities (“VIEs”) for consolidationwhere we are the primary beneficiary. With the adoption of the ASU 2015-02 effective January 1, 2016, we no longer consolidate Front Yard as a VIE, and wecurrently do not have any other potential VIEs.F-9(table of contents)Use of estimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reportedamounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.Deconsolidation of Front YardEffective January 1, 2016, we adopted the provisions of ASU 2015-02, and we performed an analysis of our relationship with Front Yard pursuant to theamended guidance. We determined that the compensation we receive in return for our services to Front Yard is commensurate with the level of effort requiredto perform such services and the arrangement includes customary terms, conditions or amounts present in arrangements for similar services negotiated atarm’s length; therefore, Front Yard is no longer a VIE under the amended guidance. As a result, effective January 1, 2016, we no longer consolidate theaccounts of Front Yard. We applied ASU 2015-02 using the modified retrospective approach, which resulted in a cumulative-effect adjustment to equity onJanuary 1, 2016. As a result, periods prior to January 1, 2016 were not impacted. The adoption effectively removed those balances previously disclosed thatrelated to Front Yard from our consolidated financial statements and eliminated the amounts previously reported as non-controlling interests in Front Yard asa consolidated affiliate. Subsequent to adoption, our consolidated revenues consist of management fees and expense reimbursements received from FrontYard under the AMA, and our consolidated expenses consist of salaries and employee benefits, legal and professional fees and general and administrativeexpenses.Preferred stockIssuance of Series A convertible preferred stock in 2014 private placementDuring the first quarter of 2014, we issued 250,000 shares of convertible preferred stock for $250.0 million (“Series A Preferred Stock”). All of theoutstanding shares of Series A Preferred Stock are redeemable by us in March 2020, the sixth anniversary of the date of issuance, and every five yearsthereafter. On these same redemption dates, each holder of Series A Preferred Stock may potentially cause us to redeem all the shares of Series A PreferredStock held by such holder at a redemption price equal to $1,000 per share from funds legally available therefor. Accordingly, we classify these shares asmezzanine equity, outside of permanent stockholders' equity.The holders of Series A Preferred Stock will not be entitled to receive dividends with respect to the Series A Preferred Stock. The shares of Series A PreferredStock are convertible into shares of our common stock at a conversion price of $1,250 per share (or an exchange rate of 0.8 shares of common stock for eachshare of Series A Preferred Stock), subject to certain anti-dilution adjustments.Upon a change of control or upon a liquidation, dissolution or winding up of the Company, holders of the Series A Preferred Stock will be entitled to receivean amount in cash per Series A Preferred Stock equal to the greater of:(i) $1,000 plus the aggregate amount of cash dividends paid on the number of shares of common stock into which such share of Series A Preferred Stockwas convertible on each ex-dividend date for such dividends; and(ii) the number of shares of common stock into which the Series A Preferred Stock is then convertible multiplied by the then current market price of thecommon stock.The Series A Preferred Stock confers no voting rights to holders, except with respect to matters that materially and adversely affect the voting powers, rightsor preferences of the Series A Preferred Stock or as otherwise required by applicable law.With respect to the distribution of assets upon the liquidation, dissolution or winding up of the Company, the Series A Preferred Stock ranks senior to ourcommon stock and on parity with all other classes of preferred stock that may be issued by us in the future.Issuance of preferred stock under the 2016 Employee Preferred Stock PlanOn May 26, 2016, the 2016 Employee Preferred Stock Plan (the “Employee Preferred Stock Plan”) was approved by our stockholders. Pursuant to theEmployee Preferred Stock Plan, the Company may grant one or more series of non-voting preferred stock, par value $0.01 per share, in the Company toinduce certain employees to become employed and remainF-10(table of contents)employees of the Company in the USVI, and any of its future USVI subsidiaries, to encourage ownership of shares in the Company by such USVI employeesand to provide additional incentives for such employees to promote the success of the Company’s business.Pursuant to our stockholder approval of the Employee Preferred Stock Plan, on December 29, 2016, the Company authorized 14 additional series of preferredstock of the Company, consisting of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F PreferredStock, Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock, Series J Preferred Stock, Series K Preferred Stock, Series L Preferred Stock,Series M Preferred Stock, Series N Preferred Stock and Series O Preferred Stock, and each series shall consist of up to an aggregate of 1,000 shares.On January 5, 2017, the Company issued an aggregate of 900 shares of preferred stock to its USVI employees. These shares of preferred stock are mandatorilyredeemable by us in the event of the holder's termination of service with the Company for any reason; therefore, at December 31, 2017, we included $9,000related to these shares within accounts payable and accrued liabilities in our consolidated balance sheet.In February 2018, our Board of Directors declared and paid an aggregate of $0.9 million of dividends on the preferred stock issued under the EmployeePreferred Stock Plan. In March 2017, our Board of Directors declared and paid an aggregate of $0.6 million of dividends on the preferred stock issued underthe Employee Preferred Stock Plan. Such dividends are included in salaries and employee benefits in our consolidated statement of operations.Recently issued accounting standardsAdoption of recent accounting standardsIn January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition ofa Business, in an effort to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactionsshould be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is effective for fiscal years beginning after December 15, 2017 andinterim periods within those fiscal years. Early adoption is permitted. We adopted the provisions of ASU 2017-01 effective January 1, 2017. This adoptionhad no significant effect on our consolidated financial statements.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in ASU 2016-18 require that astatement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash orrestricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cashequivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for publicbusiness entities for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The amendments in ASU 2016-18 should beapplied on a retrospective transition basis. Early adoption is permitted, including adoption during an interim period. Effective January 1, 2017, the Companyhas adopted the provisions of ASU 2016-18. As a result of this adoption, the Company has retrospectively included $20.6 million of cash flows related to thedecrease in restricted cash upon the deconsolidation of Front Yard in its investing activities on the cash flow statement for the year ended December 31,2016. In addition, the Company has retrospectively reclassified $7.3 million of cash flows related to changes in restricted cash from investing activities onthe cash flow statement to the cash, cash equivalents and restricted cash balances for the year ended December 31, 2015. Restricted cash balances wereattributable to Front Yard and included amounts related to tenant deposits, mortgage loan escrows and reserves for debt service established pursuant to FrontYard's repurchase and loan agreements and other secured borrowings.In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718). ASU 2016-09 makes several modifications to Topic 718related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess taxbenefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. This ASU becameeffective for interim and annual reporting periods beginning after December 15, 2016. Our adoption of this amendment on January 1, 2017 did not have asignificant effect on our consolidated financial statements.Recently issued accounting standards not yet adoptedIn May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718). The amendments in ASU 2017-09 provide guidance aboutwhich changes to the terms or conditions of a share-based payment award require an entity toF-11(table of contents)apply modification accounting in Topic 718. This ASU is effective for all entities for annual periods, and interim periods within those annual periods,beginning after December 15, 2017. The amendments in ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date.Early adoption is permitted, including adoption during an interim period. We do not expect the adoption of this standard to have a material impact on ourconsolidated financial statements.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. Theamendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows underTopic 230. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017 and interim periodswithin those fiscal years. Early adoption is permitted, including adoption during an interim period. The amendments in ASU 2016-15 should be applied on amodified retrospective transition basis. We do not expect this amendment to have a significant effect on our consolidated financial statements.In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that lessees recognize assets and liabilities for leases with leaseterms greater than twelve months in the statement of financial position and also requires improved disclosures to help users of financial statements betterunderstand the amount, timing and uncertainty of cash flows arising from leases. This ASU is effective for fiscal years beginning after December 15, 2018,including interim reporting periods within those fiscal years. Early adoption is permitted. The amendments in ASU 2016-02 should be applied on a modifiedretrospective transition basis, and a number of practical expedients may apply. These practical expedients relate to the identification and classification ofleases that commenced before the effective date, initial direct costs for leases that commenced before the effective date and the ability to use hindsight inevaluating lessee options to extend or terminate a lease or to purchase the underlying asset. We are currently evaluating the impact of this ASU on ourconsolidated financial statements; however, upon adoption, we expect to recognize a right-of-use asset and a related lease liability on our consolidatedbalance sheet for the leases we currently classify as operating leases.In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10). ASU 2016-01 requires all equity investments to bemeasured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting orthose that result in consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion ofthe total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure theliability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments eliminate the requirement to disclose thefair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s)and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balancesheet for public business entities. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, including interim periodswithin those fiscal years. Early adoption is permitted. Upon our adoption of ASU 2016-01, we expect to recognize a cumulative-effect adjustment to ourbalance sheet to reclassify our accumulated other comprehensive loss of $1.3 million to retained earnings, and we will thereafter record changes in the fairvalue of our available-for-sale securities through profit and loss.In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is a comprehensive new revenuerecognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting theconsideration it expects to receive in exchange for those goods or services. In August 2015, FASB issued ASU No. 2015-14, Revenue from Contracts withCustomers (Topic 606): Deferral of the Effective Date, which effectively delayed the adoption date of ASU 2014-09 by one year. In 2016 and 2017, the FASBissued accounting standards updates that amended several aspects of ASU 2014-09. ASU 2014-09, as amended, is effective for fiscal years, and interimperiods within those years, beginning after December 15, 2017. We have substantively completed our analysis of the impact of this standard. Due to thenature of the management fees we earn under the AMA, we do not expect this amendment to have a significant effect on our consolidated financialstatements. We anticipate applying this amendment using the modified retrospective method.2. Summary of Significant Accounting PoliciesAvailable-for-sale securitiesThe securities we hold consist solely of the common stock of Front Yard. These securities are classified as available for sale and are reported at fair value. Weadjust our investment in Front Yard common stock to fair value based on unadjusted quoted market prices in active markets. Changes in the fair value arerecorded in accumulated other comprehensive income (loss) as changes in unrealized gain (loss) on available-for-sale securities. Our ability to sell thesesecurities, or the price ultimatelyF-12(table of contents)realized for these securities, depends upon the demand in the market and potential restrictions on the timing at which we may be able to sell the Front Yardcommon stock when desired.Cash equivalentsWe consider highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.Certain account balances exceed FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess ofFDIC insurance coverage. To mitigate this risk, we maintain our cash and cash equivalents at large national or international banking institutions.ConsolidationsThe consolidated financial statements include the accounts of AAMC and its consolidated subsidiaries, which include the voting interest entities in whichwe are determined to have a controlling financial interest. Our voting interest entities consist entirely of our wholly owned subsidiaries. We also considerVIEs for consolidation where we are the primary beneficiary. We had no VIEs or potential VIEs as of and for the year ended December 31, 2017.For legal entities evaluated for consolidation, we determine whether the interests that we hold and fees paid to us qualify as a variable interest in the entity.This includes an evaluation of fees paid to us where we act as a decision maker or service provider to the entity being evaluated. Fees received by us are notvariable interests if (i) the fees are compensation for services provided and are commensurate with the level of effort required to provide those services, (ii) theservice arrangement includes only terms, conditions or amounts that are customarily present in arrangements for similar services negotiated at arm’s lengthand (iii) our other economic interests in the VIE held directly and indirectly through our related parties, as well as economic interests held by related partiesunder common control, where applicable, would not absorb more than an insignificant amount of the entity’s losses or receive more than an insignificantamount of the entity’s benefits.For those entities in which we have a variable interest, we perform an analysis to first determine whether the entity is a VIE. This determination includesconsidering whether the entity’s equity investment at risk is sufficient, whether the voting rights of an investor are not proportional to its obligation to absorbthe income or loss of the entity and substantially all of the entity's activities either involve or are conducted on behalf of that investor and its related partiesand whether the entity’s at-risk equity holders have the characteristics of a controlling financial interest. A VIE must be consolidated by its primarybeneficiary. Performance of such analysis requires the exercise of judgment.The primary beneficiary of a VIE is generally defined as the party who has a controlling financial interest in the VIE. We are generally deemed to have acontrolling financial interest in a VIE if we have (i) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performanceand (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. For purposes ofevaluating (ii) above, fees paid to us are excluded if the fees are compensation for services provided commensurate with the level of effort required to beperformed and the arrangement includes only customary terms, conditions or amounts present in arrangements for similar services negotiated at arm’s length.We also evaluate our economic interests in the VIE held directly by us and indirectly through our related parties, as well as economic interests held by relatedparties under common control, where applicable. The primary beneficiary evaluation is generally performed qualitatively on the basis of all facts andcircumstances. However, quantitative information may also be considered in the analysis, as appropriate. These analyses require judgment. Changes in theeconomic interests (either by us, our related parties or third parties) or amendments to the governing documents of the VIE could affect an entity's status as aVIE or the determination of the primary beneficiary. The primary beneficiary evaluation is updated periodically.For voting interest entities, we shall consolidate the entity if we have a controlling financial interest. We have a controlling financial interest in a votinginterest entity if (i) for legal entities other than limited partnerships, we own a majority voting interest in the entity or, for limited partnerships and similarentities, we own a majority of the entity’s kick-out rights through voting limited partnership interests and (ii) non-controlling shareholders or partners do nothold substantive participating rights and no other conditions exist that would indicate that we do not control the entity.F-13(table of contents)Earnings per shareBasic earnings per share is computed by dividing net income or loss attributable to stockholders, less amortization of preferred stock issuance costs, by theweighted average common stock outstanding during the period. Diluted earnings per share is computed by dividing net income or loss attributable tostockholders by the weighted average common stock outstanding for the period plus the dilutive effect of (i) stock options and restricted stock outstandingusing the treasury stock method and (ii) Series A Preferred Stock using the if-converted method. Weighted average common stock outstanding - basicexcludes the impact of unvested restricted stock since dividends paid on such restricted stock are non-participating.Fees under the asset management agreementIn accordance with the asset management agreement, we receive compensation from Front Yard, a related party, on a quarterly basis for our efforts in themanagement of Front Yard's business. We recognize these fees in the fiscal quarter in which they are earned by us. Refer to Note 5 for details of the feestructure under the asset management agreement. Prior to our deconsolidation of Front Yard effective January 1, 2016, our revenue and Front Yard'scorresponding expense related to these fees were eliminated in consolidation.Fair value of financial instrumentsWe designate fair value measurements into three levels based on the lowest level of substantive input used to make the fair value measurement. Those levelsare as follows:•Level 1 - Quoted prices in active markets for identical assets or liabilities.•Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are notactive; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets orliabilities.•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.Income taxesIncome taxes are provided for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequencesattributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities aremeasured using enacted rates expected to apply to taxable income in the years in which management expects those temporary differences to be recovered orsettled. The effect on deferred taxes of a change in tax rates is recognized in income in the period in which the change occurs. Subject to our judgment, wereduce a deferred tax asset by a valuation allowance if it is “more likely than not” that some or the entire deferred tax asset will not be realized. Tax laws arecomplex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required inevaluating tax positions, and we recognize tax benefits only if it is more likely than not that a tax position will be sustained upon examination by theappropriate taxing authority.For all temporary differences, we have considered the potential future sources of taxable income against which they may be realized. In so doing, we havetaken into account temporary differences that we expect to reverse in future years and those where it is unlikely. Where it is more likely than not that therewill not be potential future taxable income to offset a temporary difference, a valuation allowance has been recorded.Other non-current assetsOther non-current assets includes leasehold improvements; furniture, fixtures and equipment; deferred tax assets and miscellaneous intangibles assets. Thecost basis of fixed assets is depreciated using the straight-line method over an estimated useful life of three to five years based on the nature of thecomponents.Share-based compensationFor restricted stock granted to our directors and employees, we amortize the grant date fair value as expense on a straight-line basis over the service periodwith an offsetting increase in shareholders' equity. The grant date fair value of awards with only service-based vesting conditions is determined based uponthe share price on the grant date. The grant date fair value of awards with both service-based and market-based vesting conditions is calculated using a MonteCarlo simulation.F-14(table of contents)For restricted stock grants to non-employees, the fair value was based on the share price when the shares vest, which required the amount to be adjusted ineach subsequent reporting period based on the fair value of the award at the end of the reporting period until the award had vested.Forfeitures of share-based awards are recognized as they occur.Short-term investmentsShort-term investments include certificates of deposit with original maturities greater than three months and remaining maturities less than one year. Treasury stockWe account for repurchased common stock under the cost method and include such treasury stock as a component of total shareholders’ equity. We haverepurchased shares of our common stock (i) under our Board approval to repurchase up to $300.0 million in shares of our common stock and (ii) upon ourwithholding of shares of our common stock to satisfy tax withholding obligations in connection with the vesting of our restricted stock.Accounting policies related to Front YardThe following significant accounting policies are applicable only to the accounts of Front Yard that we consolidated prior to January 1, 2016. Theseaccounting policies are no longer applicable to our consolidated financial statements as of January 1, 2016.Mortgage loans, at fair valueFront Yard accounted for its mortgage loans at fair value under the fair value option election with unrealized gains and losses recorded in current periodearnings in order to timely reflect the results of Front Yard’s investment performance. The fair value of each loan was adjusted in each subsequent reportingperiod as the loan proceeded to a particular resolution (i.e., modification or conversion to real estate owned). As a loan approached resolution, the resolutiontimeline for that loan decreased, and costs embedded in the discounted cash flow model for loan servicing, foreclosure costs and property insurance wereincurred and removed from future expenses. The shorter resolution timelines and reduced future expenses each increased the fair value of the loan. Theincrease in the value of the loan was recognized in change in unrealized gain on mortgage loans in Front Yard’s consolidated statements of operations.Front Yard also recognized unrealized gains and losses in the fair value of the loans in each reporting period when its mortgage loans were transferred to realestate owned. The transfer to real estate owned occurred when Front Yard obtained title to the property through completion of the foreclosure process. Thefair value of these assets at the time of transfer to real estate owned was estimated using broker price opinions (“BPOs”).Our capital markets group determined the fair value of mortgage loans monthly and developed procedures and controls governing the valuation processrelating to these assets. The capital markets group reported to Front Yard’s Investment Committee, which was a committee of Front Yard’s Chairman, its ChiefExecutive Officer and its Chief Financial Officer that oversaw and approved the valuations. The capital markets group also monitored the valuation model forperformance against actual results, which was reported to the Investment Committee and used to continuously improve the model.Real estate depreciation and amortizationThe cost basis of Front Yard's residential rental properties was depreciated using the straight-line method over an estimated useful life of three years to 27.5years based on the nature of the components. Lease intangibles were amortized on a straight-line basis over the remaining life of the related lease or, in thecase of acquisitions of real estate pools, over the weighted average remaining life of the related pool of leases. Expenditures directly related to successfulleasing efforts, such as lease commissions, were capitalized and subsequently amortized on a straight-line basis over the lease term of the respective leases,which generally were from one to two years.F-15(table of contents)Real estate impairmentWe performed an impairment analysis of Front Yard's real estate assets if events or changes in circumstances indicated that the carrying value may have beenimpaired, such as prolonged vacancy, identification of materially adverse legal or environmental factors, changes in expected ownership period or a declinein market value to an amount less than the carrying amount. This analysis was performed at the property level using estimated cash flows. These cash flowswere estimated based on a number of assumptions that were subject to economic and market uncertainties, including, among others, demand for rentalproperties, competition for customers, changes in market rental rates, costs to operate each property and expected ownership periods. If the carrying amountof a property exceeded the sum of its undiscounted future operating and residual cash flows, an impairment loss was recorded for excess of the carryingamount over the estimated fair value (in the case of rental residential properties and REO properties) or the estimated fair value less costs to sell (in the case ofreal estate assets held for sale).Rental revenuesMinimum contractual rents from leases were recognized on a straight-line basis over the terms of the leases in residential rental revenues. Therefore, actualamounts billed in accordance with the lease during any given period may have been higher or lower than the amount of rental revenue recognized for theperiod. Straight-line rental revenue commenced when the customer took control of the leased premises. Deferred rents receivable represented the amount bywhich straight-line rental revenue exceeded rents billed in accordance with lease agreements. Termination fee income was recognized when the customervacated the rental property, the amount of the fee was determinable and collectability was reasonably assured.Rents receivable and deferred rents receivable were reduced by an allowance for amounts that became uncollectible. We regularly evaluated the adequacy ofFront Yard's allowance for doubtful accounts. The evaluation took into consideration the aging of accounts receivable and our analysis of customer personalprofile and review past due account balances. Rents receivable and deferred rents receivable were written-off when Front Yard deemed that the amounts wereuncollectible.Restricted cashRestricted cash represented cash deposits that were legally restricted or held by third parties on Front Yard’s behalf, such as escrows and reserves for debtservice established pursuant to certain of Front Yard's repurchase and loan agreements.3. Fair Value of Financial InstrumentsThe following table sets forth the carrying amount and fair value of the Company's financial assets by level within the fair value hierarchy as of December 31,2017 and 2016 ($ in thousands): Level 1 Level 2 Level 3 Carrying Amount Quoted Prices inActive Markets Observable InputsOther Than Level 1Prices Unobservable InputsDecember 31, 2017 Recurring basis (assets) Available-for-sale securities: Front Yard common stock$19,266 $19,266 $— $— December 31, 2016 Recurring basis (assets) Available-for-sale securities: Front Yard common stock$17,934 $17,934 $— $—We did not transfer any assets from one level to another level during the years ended December 31, 2017 or 2016.The carrying values of our cash and cash equivalents, short-term investments, accounts receivable, related party receivables and accounts payable and otheraccrued liabilities are equal to or approximate fair value. The fair value of our available-for-sale securities is based on unadjusted quoted market prices fromactive markets.F-16(table of contents)As of December 31, 2017 and 2016, we held 1,624,465 shares of Front Yard's common stock, representing approximately 3.0% of Front Yard's then-outstanding common stock, which is included as available-for-sale securities in our consolidated balance sheet. All of our shares of Front Yard's commonstock were acquired in open market transactions.We recorded dividends on Front Yard's common stock of $1.0 million, $1.0 million and $0.2 million during the years ended December 31, 2017, 2016 and2015, respectively. For the year ended December 31, 2015, we eliminated our dividends from Front Yard common stock upon consolidation (see Note 1).The following table presents the cost and fair value of our available-for-sale securities as of December 31, 2017 ($ in thousands): Cost Gross UnrealizedGains Gross UnrealizedLosses Fair ValueDecember 31, 2017 Available-for-sale securities: Front Yard common stock$20,596 $— $1,330 $19,266 December 31, 2016 Available-for-sale securities: Front Yard common stock$20,596 $— $2,662 $17,934During the year ended December 31, 2016 and 2015, we acquired 1,300,000 and 324,465 shares, respectively, of Front Yard's common stock in open markettransactions at a weighted average purchase price of $11.97 and $15.41 per share, respectively.4. Commitments and ContingenciesLitigation, claims and assessmentsFrom time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. Set forth below is a summary of legalproceedings to which we are a party as of December 31, 2017 or which settled during 2017:City of Cambridge Retirement System v. Altisource Asset Management Corp., et al.On January 16, 2015, a putative shareholder class action complaint was filed in the United States District Court of the Virgin Islands by a purportedshareholder of AAMC under the caption City of Cambridge Retirement System v. Altisource Asset Management Corp., et al., 15-cv-00004. The action namesas defendants AAMC, our former Chairman, William C. Erbey, and certain officers of AAMC and alleges that the defendants violated federal securities lawsby failing to disclose material information to AAMC shareholders concerning alleged conflicts of interest held by Mr. Erbey with respect to AAMC’srelationship and transactions with Front Yard, Altisource Portfolio Solutions S.A., Home Loan Servicing Solutions, Ltd., Southwest Business Corporation,NewSource Reinsurance Company and Ocwen, including allegations that the defendants failed to disclose (i) the nature of relationships between Mr. Erbey,AAMC and those entities; and (ii) that the transactions were the result of an allegedly unfair process from which Mr. Erbey failed to recuse himself. Theaction seeks, among other things, an award of monetary damages to the putative class in an unspecified amount and an award of attorney’s and other fees andexpenses. AAMC and Mr. Erbey are the only defendants who have been served with the complaint.On May 12, 2015, the court entered an order granting the motion of Denver Employees Retirement Plan to be lead plaintiff, and lead plaintiff filed anamended complaint on June 19, 2015.AAMC and Mr. Erbey filed a motion to dismiss the amended complaint for failure to state a claim upon which relief can be granted, and on April 6, 2017, theCourt issued an opinion and order granting defendants’ motion to dismiss.On May 1, 2017, Plaintiff filed a motion for leave to amend the complaint and, at the same time, filed a proposed first amended consolidated complaint.AAMC and Mr. Erbey opposed the motion, and on July 5, 2017, the Court issued an opinion and order denying with prejudice the motion of the Plaintiff forleave to file the first amended consolidated complaint.On July 7, 2017, Plaintiff filed a notice of appeal with the Third Circuit Court of Appeals with respect to the federal district court's April 6, 2017memorandum and order granting Defendants’ motion to dismiss, the April 6, 2017 order granting Defendants’ motion to dismiss and the July 5, 2017 orderdenying with prejudice Plaintiff’s motion for leave to file the firstF-17(table of contents)amendment consolidated complaint in the matter. On September 18, 2017, Appellant filed its appeal brief, and briefing on the appeal motion was completedon November 15, 2017.We believe the amended complaint is without merit. At this time, we are not able to predict the ultimate outcome of this matter, nor can we estimate the rangeof possible loss, if any.Kanga v. Altisource Asset Management Corporation, et al.On March 12, 2015, a shareholder derivative action was filed in the Superior Court of the Virgin Islands, Division of St. Croix, by a purported shareholder ofAAMC under the caption Nanzeen Kanga v. William Erbey, et al., SX-15-CV-105. The action names as defendants William C. Erbey and each of the currentand former members of AAMC's Board of Directors and alleges that Mr. Erbey and AAMC’s directors breached fiduciary duties in connection with thedisclosures that are the subject of the City of Cambridge Retirement System case described above and certain other matters involving the relationship ofFront Yard and AAMC.On May 15, 2015, the plaintiff and the defendants filed an agreed motion to stay the action until the earliest of any of the following events: (i) the City ofCambridge Retirement System action is dismissed with prejudice; (ii) any of the defendants in the City of Cambridge Retirement System action file an answerin that action; and (iii) defendants do not move to stay any later-filed derivative action purportedly brought on behalf of us arising from similar facts asthe Kanga action and relating to the same time frame or such motion to stay is denied.At this time, we are not able to predict the ultimate outcome of this matter, nor can we estimate the range of possible loss, if any.Operating leasesWe lease office space under various operating leases. The future minimum payments under non-cancelable leases we are obligated to make as ofDecember 31, 2017 are as follows ($ in thousands):2018 $1752019 1752020 1722021 1202022 and thereafter 67 $7095. Related-party TransactionsThrough January 16, 2015, William C. Erbey served as our Chairman as well as the Executive Chairman of Ocwen, Chairman of ASPS and Chairman of FrontYard. Effective January 16, 2015, Mr. Erbey stepped down as the Executive Chairman of Ocwen and Chairman of each of us, ASPS and Front Yard and is nolonger a member of the Board of Directors for any of these companies. Accordingly, at that point, Ocwen and ASPS were no longer considered related partiesof Front Yard or AAMC as defined by ASC Topic 850, Related Party Disclosures. Transactions under our agreements with Ocwen and ASPS for the periodJanuary 1, 2015 through January 16, 2015 were not material to our consolidated results of operations.Asset management agreement with Front YardPursuant to the AMA, we design and implement Front Yard's business strategy, administer its business activities and day-to-day operations and providecorporate governance services, subject to oversight by Front Yard's Board of Directors. We are responsible for, among other duties: (1) performing andadministering all of Front Yard's day-to-day operations; (2) defining investment criteria in Front Yard's investment policy in cooperation with its Board ofDirectors; (3) sourcing, analyzing and executing asset acquisitions, including the related financing activities; (4) analyzing and executing sales of REOproperties and residential mortgage loans; (5) overseeing the Property Managers' renovation, leasing and property management of Front Yard's SFRproperties; (6) overseeing the servicing of Front Yard's remaining residential mortgage loans; (7) performing asset management duties and (8) performingcorporate governance and other management functions, including financial, accounting and tax management services.F-18(table of contents)We provide Front Yard with a management team and support personnel who have substantial experience in the acquisition and management of residentialproperties and residential mortgage loans. Our management also has significant corporate governance experience that enables us to manage Front Yard'sbusiness and organizational structure efficiently. We have agreed not to provide the same or substantially similar services without the prior written consent ofFront Yard's Board of Directors to any business or entity competing against Front Yard in (a) the acquisition or sale of SFR and/or REO properties, non-performing and re-performing mortgage loans or other similar assets; (b) the carrying on of a SFR business or (c) any other activity in which Front Yardengages. Notwithstanding the foregoing, we may engage in any other business or render similar or different services to any businesses engaged in lending orinsurance activities or any other activity other than those described above. Further, at any time following Front Yard's determination and announcement thatit will no longer engage in any of the above-described competitive activities, we would be entitled to provide advisory or other services to businesses orentities in such competitive activities without Front Yard's prior consent.On March 31, 2015, we entered into the AMA with Front Yard. The AMA, which became effective on April 1, 2015, provides for the following managementfee structure:•Base Management Fee. We are entitled to a quarterly base management fee equal to 1.5% of the product of (i) Front Yard's average invested capital(as defined in the AMA) for the quarter multiplied by (ii) 0.25, while it has fewer than 2,500 SFR properties actually rented (“Rental Properties”). Thebase management fee percentage increases to 1.75% of average invested capital while Front Yard has between 2,500 and 4,499 Rental Properties andincreases to 2.0% of average invested capital while it has 4,500 or more Rental Properties; •Incentive Management Fee. We are entitled to a quarterly incentive management fee equal to 20% of the amount by which Front Yard's return oninvested capital (based on AFFO, defined as net income attributable to holders of common stock calculated in accordance with GAAP plus realestate depreciation expense minus recurring capital expenditures on all real estate assets owned by Front Yard) exceeds an annual hurdle return rateof between 7.0% and 8.25% (or 1.75% and 2.06% per quarter), depending on the 10-year treasury rate. To the extent Front Yard has an aggregateshortfall in its return rate over the previous seven quarters, that aggregate return rate shortfall gets added to the normal quarterly 1.75% return hurdlefor the next quarter before we are entitled to an incentive management fee. The incentive management fee increases to 22.5% while Front Yard hasbetween 2,500 and 4,499 Rental Properties and increases to 25% while it has 4,500 or more Rental Properties; and •Conversion Fee. We are entitled to a quarterly conversion fee equal to 1.5% of the market value of assets converted into leased single-family homesby Front Yard for the first time during the quarter.Because Front Yard has more than 4,500 Rental Properties, we are entitled to receive a base management fee of 2.0% of Front Yard’s invested capital and apotential incentive management fee percentage of 25% of the amount by which Front Yard exceeds its then-required return on invested capital threshold.Front Yard has the flexibility to pay up to 25% of the incentive management fee to us in shares of its common stock.Under the AMA, Front Yard reimburses us for the compensation and benefits of the General Counsel dedicated to Front Yard and certain other out-of-pocketexpenses incurred on Front Yard's behalf.The AMA requires that we are the exclusive asset manager for Front Yard for an initial term of 15 years from April 1, 2015, with two potential five-yearextensions, subject to Front Yard achieving an average annual return on invested capital of at least 7.0%. Under the AMA, neither party is entitled toterminate the AMA prior to the end of the initial term, or each renewal term, other than termination by (a) us and/or Front Yard “for cause” for certain eventssuch as a material breach of the AMA and failure to cure such breach, (b) Front Yard for certain other reasons such as its failure to achieve a return on investedcapital of at least 7.0% for two consecutive fiscal years after the third anniversary of the AMA or (c) Front Yard in connection with certain change of controlevents.Under the previous asset management agreement, Front Yard paid us a quarterly incentive management fee based on its cash available for distribution to itsstockholders. Front Yard distributed any quarterly distribution to its stockholders after the application of the incentive management fee payable to us. FrontYard was required to reimburse us on a monthly basis for the (i) direct and indirect expenses we incurred or payments we made on Front Yard’s behalf,including, but not limited to, the allocable compensation and routine overhead expenses of all of our employees and staff and (ii) all other reasonableoperating and overhead expenses we incurred related to the asset management services we provided to Front Yard.F-19(table of contents)If the AMA were terminated by Front Yard, our financial position and future prospects for revenues and growth would be materially and adversely affected.Summary of related-party transactionsThe following table presents our significant transactions with Front Yard, which is a related party, for the periods indicated ($ in thousands): Year Ended December 31, 2017 2016 2015Base management fees (1)$16,010 $17,334 $13,935Conversion fees (1)1,291 1,841 1,037Expense reimbursements (1)859 816 750Incentive management fees (1)— — 7,994Professional fee sharing for negotiation of the AMA (1)— — 2,000_______________(1)Prior to January 1, 2016, we eliminated these transactions upon consolidation (see Note 1).No incentive management fee under the AMA has been earned by us because Front Yard's return on invested capital (as defined in the AMA) for the sevenquarters covered by the AMA was below the required hurdle rate. Under the AMA, to the extent Front Yard has an aggregate shortfall in its return rate over theprevious seven quarters, that aggregate return rate shortfall gets added to the normal quarterly 1.75% return hurdle for the next quarter before we are entitledto an incentive management fee. As of December 31, 2017, the aggregate return shortfall from the prior seven quarters under the AMA was approximately55.82% of invested capital. As each quarter with a shortfall rolls off the trailing seven quarters, the aggregate shortfall will change by the difference in thequarter that rolls off versus the most recently completed quarter.On September 30, 2014, pursuant to a master repurchase agreement, a subsidiary of Front Yard sold $15.0 million of the ARLP 2014-1 Class M Notes toNewSource. On September 22, 2015, such subsidiary completed its repurchase of the ARLP 2014-1 Class M Notes from NewSource at a 5.0% yield.6. Incentive Compensation and Share-based PaymentsLong-term incentive compensationOur officers and employees participate in an annual non-equity incentive program whereby they are eligible for incentive cash payments based on apercentage of their annual base salary. Our officers generally have a target annual non-equity incentive payment percentage that ranges from 50% to 100% ofbase salary. The officer's actual incentive payment for the year is determined by (i) the Company's performance versus the objectives established in thecorporate scorecard (80%) and (ii) a performance appraisal (20%).Our named executive officers and certain employees have and will receive grants of stock options and restricted stock under the 2012 Equity Incentive Plan(the “2012 Plan”). In addition, a special grant of stock options and restricted stock was made to certain Ocwen employees related to the separation under the2012 Special Equity Incentive Plan (the “2012 Special Plan”). Dividends received on restricted stock are forfeitable and are accumulated until the time ofvesting at the same rate and on the same date as on shares of common stock. Upon the vesting of stock options and restricted stock, we may withhold up tothe statutory minimum to satisfy the resulting employee tax obligation.The 2012 Plan also allows for the grant of performance awards and other awards such as purchase rights, equity appreciation rights, shares of common stockawarded without restrictions or conditions, convertible securities, exchangeable securities or other rights convertible or exchangeable into shares of commonstock, as the Compensation Committee in its discretion may determine.F-20(table of contents)The following table sets forth the number of shares of common stock reserved for future issuance. We may issue new shares or issue shares from treasury sharesupon the exercise of stock options or the vesting of restricted stock. December 31, 2017Stock options outstanding 29,450Possible future issuances under equity incentive plan 81,862 111,312As of December 31, 2017, we had 2,184,878 remaining shares of common stock authorized to be issued under our charter.Stock optionsThe following table sets forth the activity of our outstanding options: Number of Options Weighted AverageExercise Price per ShareDecember 31, 2014 239,060 $1.10Exercised (54,261) 1.35Forfeited or canceled (3,097) 4.14December 31, 2015 181,702 0.98Exercised (39,396) 0.80Forfeited or canceled (939) 3.67December 31, 2016 141,367 1.01Exercised (111,917) 0.75December 31, 2017 29,450 $2.01As of December 31, 2017, we had 29,450 outstanding options, all of which were exercisable, with a weighted average exercise price of $2.01, weightedaverage remaining life of 2.3 years and intrinsic value of $2.3 million. Of these options, none had an exercise price higher than the market price of ourcommon stock as of December 31, 2017.Restricted stockDuring the years ended December 31, 2017, we granted 20,205 shares of service-based restricted stock to members of management with a weighted averagegrant date fair value per share of $78.58 under the 2012 Plan. During the year ended December 31, 2016, we granted no shares of restricted stock to membersof management.Restricted stock granted in 2017 vests in equal annual installments on each of the first three anniversaries of the grant date, subject to acceleration orforfeiture.Restricted stock granted in 2015 and 2014 vests based on achievement of the following performance hurdles and vesting schedule:•Twenty-five percent (25%) of the grant will vest in accordance with the vesting schedule set forth below if the market value of our stock meets bothof the following conditions: (i) the market value has realized a compounded annual gain of at least twenty percent (20%) over the market value onthe date of the grant and (ii) the market value is at least double the market value on the date of the grant;•Fifty percent (50%) of the grant will vest in accordance with the vesting schedule set forth below if the market value of our stock meets both of thefollowing conditions: (i) the market value has realized a compounded annual gain of at least twenty-two and a half percent (22.5%) over the marketvalue on the date of the grant and (ii) the market value is at least triple the market value on the date of the grant and•Twenty-five percent (25%) of the grant will vest in accordance with the vesting schedule set forth below if the market value of Company stock meetsboth of the following conditions: (i) the market value has realized a compounded annual gain of at least twenty-five percent (25%) over the marketvalue on the date of the grant and (ii) the market value is at least quadruple the market value on the date of the grant.•After the performance hurdles have been achieved, 25% of the restricted stock will vest on the first anniversary of the date that the performancehurdle for that tranche was met. The remaining 75% of that tranche will either vest (i) on theF-21(table of contents)second anniversary of the date that the performance hurdle was met for certain grants or (ii) ratably over the second, third and fourth anniversaries ofthe date that the performance hurdle was met for certain grants.We granted shares of restricted stock to employees of ASPS under the 2012 Plan and 2012 Special Plan related to our separation from ASPS. We included noshare-based compensation in our consolidated financial statements for the portion of these grants made to ASPS employees. These shares of restricted stockbecame fully vested and were issued during 2017.As part of the separation, we granted restricted stock to an employee of Ocwen. We calculated the fair value of non-employee restricted stock using a MonteCarlo simulation until each market hurdle was met. Subsequent to the market hurdle being met, we calculated the fair value of non-employee restricted stockbased on the market value of shares quoted on the NYSE. The fair value was re-measured each accounting period with amortization of the resulting expenseover the vesting period. These instruments qualified for equity classification. These shares of restricted stock became fully vested and were issued during2017.Additionally, our Directors each receive annual grants of restricted stock equal to $60,000 based on the market value of our common stock at the time of theannual stockholders meeting. This restricted stock vests and is issued after a one-year service period subject to each Director attending at least 75% of theBoard and committee meetings. No dividends are paid on the shares until the award is issued. During the years ended December 31, 2017 and 2016, wegranted 2,001 and 11,119 shares of stock, respectively, pursuant to our 2013 Director Equity Plan with a weighted average grant date fair value per share of$89.93 and $19.31, respectively.We recorded $7.0 million and $9.6 million of compensation expense related to these grants for the years ended December 31, 2017 and 2016, respectively.As of December 31, 2017 and 2016, we had $4.5 million and $9.6 million, respectively, of total unrecognized share-based compensation cost to berecognized over a weighted average remaining estimated term of 1.2 years and 1.5 years, respectively.The following table sets forth the activity of our restricted stock: Number of Shares Weighted Average GrantDate Fair ValueDecember 31, 2014 175,489 $90.51Granted 53,531 174.34Vested (1) (51,305) 11.53Forfeited or canceled (23,389) 6.65December 31, 2015 154,326 158.84Granted 11,119 19.31Vested (1) (40,566) 13.34December 31, 2016 124,879 193.17Granted 22,206 79.60Vested (1) (65,576) 79.45December 31, 2017 81,509 $253.72_____________(1)The vesting date fair value of restricted stock that vested during the years ended December 31, 2017, 2016 and 2015 was $5.1 million, $0.6 million and$11.6 million, respectively.F-22(table of contents)Restricted stock granted with market-based vesting conditionsWe calculate the grant date fair value of restricted stock subject to market-based vesting conditions using a Monte Carlo simulation and amortize theresulting compensation expense over the respective vesting or service period. The fair value of restricted stock granted was determined using the followingassumptions, weighted by number of shares: Year ended December 31,2015Risk free interest rate (1) 2.89% to 3.27%Common stock dividend yield (2) 0%Expected volatility (3) 92.04% to 96.46%_____________(1)Represents the interest rate as of the grant date on US treasury bonds having the same life as the estimated life of the restricted stock grants.(2)At the date of grant, we had no history of dividend payments.(3)Based on the historical volatility of comparable companies, adjusted for our expected additional cash flow volatility.7. Income TaxesWe are domiciled in the USVI and are obligated to pay taxes to the USVI on our income. We applied for tax benefits from the USVI Economic DevelopmentCommission and received our certificate of benefits (“the Certificate”), effective as of February 1, 2013. Pursuant to the Certificate, so long as we comply itsprovisions, we will receive a 90% tax reduction on our USVI-sourced income until 2043. For the year ended December 31, 2017, we generated a tax loss inthe USVI.For the years ended December 31, 2017, 2016 and 2015, AAMC had income from AAMC Cayman SEZC Ltd., a Cayman entity disregarded for USVI taxpurposes, and from Front Yard dividends. This income was not eligible for the 90% tax reduction.Beginning on January 1, 2017, AAMC US, Inc., a domestic U.S. corporation and wholly-owned subsidiary, began operations. This entity is based entirely inthe mainland U.S. and is subject to U.S. federal and state corporate income tax.Prior to January 1, 2016, our income tax expense and accruals included those of Front Yard. During the year ended December 31, 2015, Front Yard qualifiedas a REIT, distributed the necessary amount of taxable income and, therefore, incurred no federal income tax expense; accordingly, the only federal incometaxes included in the accompanying consolidated financial statements are in connection with its taxable REIT subsidiary.The following table sets forth the components of income (loss) before income taxes: Year ended December 31,2017 Year ended December 31,2016 Year ended December 31,2015U.S. Virgin Islands $(7,259) $(3,721) $(1,249)Other 998 492 (1,687)Loss before income taxes $(6,261) $(3,229) $(2,936)F-23(table of contents)The following table sets forth the components of our deferred tax assets: December 31, 2017 December 31, 2016Deferred tax assets: Stock compensation $374 $880Accrued expenses 550 475Available-for-sale securities 307 1,027Net operating losses 114 —Other 29 21 1,374 2,403Deferred tax liability: Depreciation 14 5 1,360 2,398Valuation allowance (828) (2,377)Deferred tax asset, net $532 $21The change in deferred tax assets is included in changes in other non-current assets in the consolidated statement of cash flows for the year ended December31, 2017. Significant factors contributing to the decrease in our valuation allowance in 2017 are the reduction of the corporate income tax rate in the U.S. andU.S. Virgin Islands stemming from U.S. tax reform, reductions in the temporary differences attributable to AAMC’s investment in RESI common shares andvesting of share-based compensation awards.The following table sets forth the reconciliation of the statutory USVI income tax rate to our effective income tax rate: Year ended December 31,2017 Year ended December 31,2016 Year ended December 31,2015U.S. Virgin Islands income tax rate 38.5 % 38.5 % 38.5 %State and local income tax rates (0.1) — 4.7Excluded REIT income — — 2.6EDC benefits in the USVI (45.1) (50.7) (0.7)Foreign tax rate differential 0.3 (1.2) (3.5)Permanent and other (4.6) 2.1 (1.7)Valuation allowance — (41.5) (40.6)Effective income tax rate (1) (11.0)% (52.8)% (0.7)%________________(1) Prior to our deconsolidation of Front Yard effective January 1, 2016, our effective tax rate included the activities of Front Yard.During the tax years ended December 31, 2017 and 2016, we recognized no interest or penalties associated with unrecognized tax benefits. As ofDecember 31, 2017 and 2016, we had accrued no unrecognized tax benefits or associated interest and penalties.We remain subject to tax examination in the USVI for tax years 2014 to 2017 and in the United States for 2017.Impact of Tax ReformThe Tax Cuts & Jobs Act (the “TCJA”) was enacted on December 22, 2017. The TCJA reduces the U.S. federal corporate tax rate from 35% to 21%, requirescompanies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certainforeign-sourced earnings. At December 31, 2017, we have recorded, in accordance with ASC 740, the tax effects of enactment of the TCJA on existingdeferred tax balances, and we estimate there is no one-time transition tax on foreign earnings. Further, we estimate that the new taxes on foreign-sourcedearnings are not applicable to our foreign operations. We re-measured certain deferred tax assets and liabilities based on the rates at which they are expectedto reverse in the future, which is generally 21%. As the majority of our deferred balances are offset by a fullF-24(table of contents)valuation allowance, the revaluation of our deferred balances from TCJA was immaterial. Therefore, although management is still evaluating the effects of theTCJA, we do not believe that the TCJA will significantly impact our consolidated financial statements.On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects ofthe TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete theaccounting under ASC 740, Income Taxes. Our financial results reflect the income tax effects of the TCJA for which the accounting under ASC Topic 740 iscomplete, and we have recorded provisional amounts for those specific income tax effects of the TCJA for which the accounting under ASC Topic 740 isincomplete but a reasonable estimate could be determined. We recorded an immaterial amount of tax expense for the impact of the re-measurement of ourdeferred tax inventory. We are still analyzing certain aspects of the TCJA and refining our calculations; therefore, these estimates may change as additionalinformation becomes available.8. Earnings per ShareThe following table sets forth the components of diluted loss per share (in thousands, except share and per share amounts): Year ended December 31,2017 Year ended December 31,2016 Year ended December 31,2015Numerator Net loss attributable to stockholders$(6,969) $(4,935) $(3,290)Amortization of preferred stock issuance costs(206) (207) (206)Numerator for basic and diluted EPS - loss attributable to commonstockholders$(7,175) $(5,142) $(3,496) Denominator Weighted average common stock outstanding – basic1,570,428 1,752,302 2,202,815Weighted average common stock outstanding – diluted1,570,428 1,752,302 2,202,815 Loss per basic share$(4.57) $(2.93) $(1.59)Loss per diluted share$(4.57) $(2.93) $(1.59)We excluded the items presented below from the calculation of diluted earnings per share as they were antidilutive for the periods indicated: Year ended December 31,2017 Year ended December 31,2016 Year ended December 31,2015Numerator Amortization of preferred stock issuance costs$206 $207 $206 Denominator Stock options57,488 165,983 222,566Restricted stock38,424 40,476 85,121Preferred stock, if converted200,000 200,000 200,0009. Segment InformationOur primary business is to provide asset management and certain corporate governance services to institutional investors. Because substantially all of ourrevenue is derived from the services we provide to Front Yard under the AMA, we operate as a single segment focused on providing asset management andcorporate governance services.F-25(table of contents)10. Quarterly Financial Information (Unaudited)The following tables set forth our quarterly financial information (unaudited, $ in thousands except per share amounts): 2017 First Quarter Second Quarter Third Quarter Fourth Quarter Full YearTotal revenues$5,011 $4,643 $4,429 $4,077 $18,160Net loss attributable to stockholders(1,318) (1,742) (2,125) (1,784) (6,969)Loss per share of common stock – basic(0.89) (1.15) (1.38) (1.15) (4.57)Loss per share of common stock – diluted(0.89) (1.15) (1.38) (1.15) (4.57) 2016 First Quarter Second Quarter Third Quarter Fourth Quarter Full YearTotal revenues$4,526 $5,407 $4,854 $5,204 $19,991Net loss attributable to stockholders(940) (1,261) (1,071) (1,663) (4,935)Loss per share of common stock – basic(0.50) (0.74) (0.67) (1.09) (2.93)Loss per share of common stock – diluted(0.50) (0.74) (0.67) (1.09) (2.93)11. Subsequent EventsManagement has evaluated the impact of all events subsequent to December 31, 2017 and through the issuance of these consolidated financial statements.Except as disclosed below, management has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.On February 20, 2018, we granted 25,074 shares of service-based restricted stock to members of management with a weighted average grant date fair valueper share of $64.05.F-26Exhibit 21Subsidiaries of Altisource Asset Management CorporationName of Entity Jurisdiction of Incorporation AAMC US, Inc. DelawareAltisource Consulting S.á r.l LuxembourgAAMC Cayman SEZC Limited Cayman IslandsRiver Business Solutions Private Limited IndiaNewSource Reinsurance Company Ltd. BermudaExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the following Registration Statements:1)Registration Statement (Form S-8 No. 333-185947) of Altisource Asset Management Corporation,2)Registration Statement (Form S-8 No. 333-194112) of Altisource Asset Management Corporation, and3)Registration Statement (Form S-3 No. 333-195997) of Altisource Asset Management Corporationof our reports dated March 1, 2018, with respect to the consolidated financial statements and schedules of Altisource Asset Management Corporation and theeffectiveness of internal control over financial reporting of Altisource Asset Management Corporation included in this Annual Report (Form 10-K) ofAltisource Asset Management Corporation for the year ended December 31, 2017./s/ Ernst & Young LLPAtlanta, GeorgiaMarch 1, 2018Exhibit 23.2CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement Nos. 333-185947 and 333-194112 on Form S-8 and Registration Statement No. 333-195997 on Form S-3 of our report dated March 1, 2017 (March 1, 2018 as to the change in accounting as described in Note 1), relating to the 2016 and 2015consolidated financial statements (with the retrospective adjustments) of Altisource Asset Management Corporation and subsidiaries (the “Company”) whichreport expressed an unqualified opinion and included explanatory paragraphs related to the significance of the revenue generated from Front YardResidential Corporation, a related party (formerly Altisource Residential Corporation), and the Company’s reliance upon the performance of serviceproviders, including Altisource Portfolio Solutions S.A. and Ocwen Financial Corporation (related parties through January 16, 2015) and the change inaccounting as described in Note 1, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2017./s/ DELOITTE & TOUCHE LLPAtlanta, GeorgiaMarch 1, 2018Exhibit 31.1Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, George G. Ellison, certify that:1. I have reviewed this annual report on Form 10-K of Altisource Asset Management Corporation;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for theRegistrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theRegistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date:March 1, 2018By:/s/George G. Ellison George G. Ellison Chief Executive OfficerExhibit 31.2Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Robin N. Lowe, certify that:1. I have reviewed this annual report on Form 10-K of Altisource Asset Management Corporation;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for theRegistrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theRegistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date:March 1, 2018By:/s/Robin N. Lowe Robin N. Lowe Chief Financial OfficerExhibit 32.1Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002The undersigned, the Chief Executive Officer of Altisource Asset Management Corporation (the “Company”), hereby certifies on the date hereof, pursuant to18 U.S.C. §1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the annual report on Form 10-K for the year endedDecember 31, 2017 (“Form 10-K”), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or Section 15(d) of theSecurities Exchange Act of 1934, as amended, and that the information contained in the Form 10-K fairly presents, in all material respects, the financialcondition and results of operations of the Company.A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished tothe Securities and Exchange Commission or its staff upon request.Date:March 1, 2018By:/s/George G. Ellison George G. Ellison Chief Executive OfficerExhibit 32.2Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002The undersigned, the Chief Financial Officer of Altisource Asset Management Corporation (the “Company”), hereby certifies on the date hereof, pursuant to18 U.S.C. §1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the annual report on Form 10-K for the year endedDecember 31, 2017 (“Form 10-K”), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or Section 15(d) of theSecurities Exchange Act of 1934, as amended, and that the information contained in the Form 10-K fairly presents, in all material respects, the financialcondition and results of operations of the Company.A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished tothe Securities and Exchange Commission or its staff upon request.Date:March 1, 2018By:/s/Robin N. Lowe Robin N. Lowe Chief Financial Officer

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