FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of Carrying Values and Fair Values of Financial Assets Recorded at Fair Value on a Recurring Basis

The carrying values and fair values of assets and liabilities recorded at fair value on a recurring basis, as well as other financial instruments for which fair value is disclosed, as of September 30, 2022 were as follows:

	Principal Balance or Notional Amount		Carrying Value		Fair Value
					Level 1		Level 2		Level 3		Total
Assets
Excess MSRs(A)	$	70,067,350	$	322,168	$	—	$	—	$	322,168	$	322,168
MSRs and MSR financing receivables(A)	544,177,595		8,895,074		—		—		8,895,074		8,895,074
Servicer advance investments	334,818		371,418		—		—		371,418		371,418
Real estate and other securities	26,609,422		9,437,008		—		8,497,960		939,048		9,437,008
Residential mortgage loans, held-for-sale	122,251		104,019		—		—		104,019		104,019
Residential mortgage loans, held-for-sale, at fair value	4,126,288		3,933,392		—		3,234,369		699,023		3,933,392
Residential mortgage loans, held-for-investment, at fair value	557,143		470,935		—		—		470,935		470,935
Residential mortgage loans subject to repurchase	1,897,142		1,897,142		—		1,897,142		—		1,897,142
Consumer loans	353,163		393,599		—		—		393,599		393,599
Mortgage loans receivable(B)	1,919,913		1,919,913		—		349,911		1,570,002		1,919,913
Notes receivable	65,463		35,168		—		—		35,168		35,168
Loans receivable	164,829		164,335		—		—		164,335		164,335
Cash, cash equivalents and restricted cash	1,949,575		1,949,575		1,949,575		—		—		1,949,575
Other assets(C)	N/A		27,765		1,490		—		26,275		27,765
Derivative assets	32,522,492		353,073		—		339,286		13,787		353,073
			$	30,274,584	$	1,951,065	$	14,318,668	$	14,004,851	$	30,274,584
Liabilities
Secured financing agreements	$	13,657,210	$	13,655,247	$	—	$	13,655,247	$	—	$	13,655,247
Secured notes and bonds payable(D)	9,763,823		9,653,664		—		—		9,449,354		9,449,354
Unsecured senior notes, net of issuance costs	544,612		544,612		—		—		473,193		473,193
Residential mortgage loan repurchase liability	1,897,142		1,897,142		—		1,897,142		—		1,897,142
Derivative liabilities	2,830,258		67,314		—		10,661		56,653		67,314
			$	25,817,979	$	—	$	15,563,050	$	9,979,200	$	25,542,250

(A)The notional amount represents the total unpaid principal balance of the residential mortgage loans underlying the MSRs, MSR financing receivables and Excess MSRs. Rithm Capital does not receive an excess mortgage servicing amount on non-performing loans in Agency portfolios.

(B)Includes Rithm Capital’s economic interests in the VIEs consolidated and accounted for under the collateralized financing entity (“CFE”) election. As of September 30, 2022, the fair value of Rithm Capital’s interests in the mortgage loans receivable securitization was $46.0 million.

(C)Excludes the indirect equity investment in a commercial redevelopment project that is accounted for at fair value on a recurring basis based on the NAV of Rithm Capital’s investment. The investment had a fair value of $28.5 million as of September 30, 2022.

(D)Includes SAFT 2013-1, SCFT 2020-A and 2022-RTL1 mortgage-backed securities issued for which the fair value option for financial instruments was elected and resulted in a fair value of $653.2 million as of September 30, 2022.

Schedule of Financial Assets Measured at Fair Value on a Recurring Basis using Level 3 Inputs

The following table summarizes assets measured at fair value on a recurring basis using Level 3 inputs:

	Level 3																		Total
	Excess MSRs(A)(B)		MSRs and MSR Financing Receivables(A)		Servicer Advance Investments		Non-Agency RMBS		Derivatives(C)		Residential Mortgage Loans		Consumer Loans		Notes and Loans Receivable		Mortgage Loans Receivable
Balance at December 31, 2021	$	344,947	$	6,858,803	$	421,807	$	951,942	$	111,778	$	2,423,337	$	507,291	$	290,180	$	1,515,762	$	13,425,847
Transfers
Transfers from Level 3	—		—		—		—		—		(1,004,907)		—		(1,000)		(425,805)		(1,431,712)
Transfers to Level 3	—		—		—		—		—		306,222		—		—		—		306,222
Gain (loss) included in net income
Credit losses on securities(D)	—		—		—		(920)		—		—		—		—		—		(920)
Change in fair value of excess MSRs(D)	(5,422)		—		—		—		—		—		—		—		—		(5,422)
Change in fair value of excess MSRs, equity method investees(D)	(1,964)		—		—		—		—		—		—		—		—		(1,964)
Servicing revenue, net(E)
Included in servicing revenue(E)	—		985,135		—		—		—		—		—		—		—		985,135
Change in fair value of:
Servicer advance investments	—		—		(2,828)		—		—		—		—		—		—		(2,828)
Residential mortgage loans	—		—		—		—		—		(174,196)				—		—		(174,196)
Consumer loans	—		—		—		—		—		—		(26,774)		—		—		(26,774)
Gain (loss) on settlement of investments, net	104		—		—		(1,560)		—		—		—		—		(43,868)		(45,324)
Other income (loss), net(D)	(66)		—		—		(30,254)		(154,644)		(35,041)		—		(31,903)		—		(251,908)
Gains (losses) included in OCI(F)	—		—		—		(34,929)		—		—		—		—		—		(34,929)
Interest income	28,017		—		7,371		10,010		—		—		10,960		10,481		—		66,839
Purchases, sales and repayments
Purchases, net(G)	—		(250)		744,671		217,660		—		1,790,332		22,070		9,000		—		2,783,483
Proceeds from sales	(997)		(8,149)				(11,960)		—		(1,893,216)		—		—		—		(1,914,322)
Proceeds from repayments	(42,451)		—		(799,603)		(160,941)		—		(238,676)		(119,948)		(77,255)		(999,144)		(2,438,018)
Originations and other	—		1,059,535		—		—		—		(3,897)		—		—		1,523,057		2,578,695
Balance at September 30, 2022	$	322,168	$	8,895,074	$	371,418	$	939,048	$	(42,866)	$	1,169,958	$	393,599	$	199,503	$	1,570,002	$	13,817,904

(A)Includes the recapture agreement for each respective pool, as applicable.

(B)Amounts include Rithm Capital’s portion of the Excess MSRs held by the respective joint ventures in which Rithm Capital has a 50% interest.

(C)For the purpose of this table, the IRLC asset and liability positions are shown net.

(D)Gain (loss) recorded in earnings during the period are attributable to the change in unrealized gain (loss) relating to Level 3 assets still held at the reporting dates and realized gain (loss) recorded during the period.

(E)The components of Servicing Revenue, Net are disclosed in Note 5.

(F)Gain (loss) included in Unrealized Gain (Loss) on Available-for-Sale Securities, Net in the Consolidated Statements of Comprehensive Income.

(G)Net of purchase price adjustments and purchase price fully reimbursable from MSR sellers as a result of prepayment protection.

Schedule of Financial Liabilities Measured at Fair Value on a Recurring Basis using Level 3 Inputs

Liabilities measured at fair value on a recurring basis using Level 3 inputs changed as follows:

	Level 3
	Asset-Backed Securities Issued
Balance at December 31, 2021	$	511,107
Transfers
Gains (losses) included in net income
Other income(A)	(38,133)
Purchases, sales and repayments
Proceeds from sales	—
Payments	(131,687)
Other	—
Balance at September 30, 2022	$	341,287

(A)Gain (loss) recorded in earnings during the period are attributable to the change in unrealized gain (loss) relating to Level 3 liabilities still held at the reporting dates and realized gain (loss) recorded during the period.

Summary of Measurement Inputs and Valuation Techniques

The following table summarizes certain information regarding the ranges and weighted averages of inputs used as of September 30, 2022:

	Significant Inputs(A)
	Prepayment Rate(B)	Delinquency(C)	Recapture Rate(D)	Mortgage Servicing Amount or Excess Mortgage Servicing Amount (bps)(E)	Collateral Weighted Average Maturity (Years)(F)
Excess MSRs Directly Held	2.9% – 13.0% (7.7%)	0.2% – 8.5% (4.2%)	—% – 91.9% (55.5%)	6 – 31 (19)	11 – 29 (21)
Excess MSRs Held through Investees	9.0% – 12.8% (10.3%)	2.2% – 5.1% (3.5%)	45.3% – 64.0% (58.6%)	15 – 26 (22)	16 – 22 (19)
MSRs and MSR Financing Receivables
Agency(H)	0.1% – 91.8% (8.0%)	0.1% – 66.7% (1.8%)	—% – 19.9% (12.2%)	1 – 108 (30)	0 – 40 (23)
Non-Agency(H)	0.9% – 84.3% (14.8%)	1.1% – 75.0% (19.8%)	4.6% – 28.1% (9.8%)	10 – 173 (46)	0 – 36 (24)
Ginnie Mae(H)	4.6% – 81.2% (10.4%)	0.3% – 90.0% (7.6%)	8.1% – 29.9% (17.4%)	18 – 75 (40)	0 – 39 (28)
Total/Weighted Average—MSRs and MSR Financing Receivables	0.1% – 91.8% (9.2%)	0.1% – 90.0% (4.8%)	—% – 29.9% (10.0%)	1 – 173 (34)	0 – 40 (24)

(A)Weighted by fair value of the portfolio.

(B)Projected annualized weighted average lifetime voluntary and involuntary prepayment rate using a prepayment vector.

(C)Projected percentage of residential mortgage loans in the pool for which the borrower will miss its mortgage payments.

(D)Percentage of voluntarily prepaid loans that are expected to be refinanced by the related servicer or subservicer, as applicable.

(E)Weighted average total mortgage servicing amount, in excess of the basic fee as applicable, measured in basis points (bps). A weighted average cost of subservicing of $6.10 – $7.00 ($6.90) per loan per month was used to value the agency MSRs. A weighted average cost of subservicing of $7.30 – $15.10 ($8.40) per loan per month was used to value the Non-Agency MSRs, including MSR Financing Receivables. A weighted average cost of subservicing of $8.20 – $8.30 ($8.20) per loan per month was used to value the Ginnie Mae MSRs.

(F)Weighted average maturity of the underlying residential mortgage loans in the pool.

(G)For certain pools, the Excess MSR will be paid on the total UPB of the mortgage portfolio (including both performing and delinquent loans until REO). For these pools, no delinquency assumption is used.

(H)For certain pools, recapture rate represents the expected recapture rate with the successor subservicer appointed by NRM.

As of September 30, 2022, securities valuation methodology and results are further detailed as follows:

					Fair Value
Asset Type	Outstanding Face Amount		Amortized Cost Basis		Multiple Quotes(A)		Single Quote(B)		Total		Level
Agency RMBS	$	9,098,824	$	9,082,503	$	8,497,960	$	—	$	8,497,960	2
Non-Agency RMBS(C)	17,510,598		938,933		939,033		15		939,048		3
Total	$	26,609,422	$	10,021,436	$	9,436,993	$	15	$	9,437,008

(A)Rithm Capital generally obtained pricing service quotations or broker quotations from two sources, one of which was generally the seller (the party that sold Rithm Capital the security) for Non-Agency RMBS. Rithm Capital evaluates quotes received and determines one as being most representative of fair value, and does not use an average of the quotes. Even if Rithm Capital receives two or more quotes on a particular security that come from non-selling brokers or pricing services, it does not use an average because it believes using an actual quote more closely represents a transactable price for the security than an average level. Furthermore, in some cases, for Non-Agency RMBS, there is a wide disparity between the quotes Rithm Capital receives. Rithm Capital believes using an average of the quotes in these cases would not represent the fair value of the asset. Based on Rithm Capital’s own fair value analysis, it selects one of the quotes which is believed to more accurately reflect fair value. Rithm Capital has not adjusted any of the quotes received in the periods presented. These quotations are generally received via email and contain disclaimers which state that they are “indicative” and not “actionable” — meaning that the party giving the quotation is not bound to actually purchase the security at the quoted price. Rithm Capital’s investments in Agency RMBS are classified

within Level 2 of the fair value hierarchy because the market for these securities is very active and market prices are readily observable.

The third-party pricing services and brokers engaged by Rithm Capital (collectively, “valuation providers”) use either the income approach or the market approach, or a combination of the two, in arriving at their estimated valuations of RMBS. Valuation providers using the market approach generally look at prices and other relevant information generated by market transactions involving identical or comparable assets. Valuation providers using the income approach create pricing models that generally incorporate such assumptions as discount rates, expected prepayment rates, expected default rates and expected loss severities. Rithm Capital has reviewed the methodologies utilized by its valuation providers and has found them to be consistent with GAAP requirements. In addition to obtaining multiple quotations, when available, and reviewing the valuation methodologies of its valuation providers, Rithm Capital creates its own internal pricing models for Level 3 securities and uses the outputs of these models as part of its process of evaluating the fair value estimates it receives from its valuation providers. These models incorporate the same types of assumptions as the models used by the valuation providers, but the assumptions are developed independently. These assumptions are regularly refined and updated at least quarterly by Rithm Capital, and reviewed by its valuation group, which is separate from its investment acquisition and management group, to reflect market developments and actual performance.

For 57.4% of Non-Agency RMBS, the ranges and weighted averages of assumptions used by Rithm Capital’s valuation providers are summarized in the table below. The assumptions used by Rithm Capital’s valuation providers with respect to the remainder of Non-Agency RMBS were not readily available.

	Fair Value		Discount Rate	Prepayment Rate(a)	CDR(b)	Loss Severity(c)
Non-Agency RMBS	$	538,658	4.0% – 16.9% (6.0%)	0.0% – 25.0% (4.6%)	0.0% – 12.0% (1.1%)	0.0% – 88.0% (21.4%)

(a)Represents the annualized rate of the prepayments as a percentage of the total principal balance of the pool.

(b)Represents the annualized rate of the involuntary prepayments (defaults) as a percentage of the total principal balance of the pool.

(c)Represents the expected amount of future realized losses resulting from the ultimate liquidation of a particular loan, expressed as the net amount of loss relative to the outstanding balance.

(B)Rithm Capital was unable to obtain quotations from more than one source on these securities.

(C)Includes Rithm Capital’s investments in interest-only notes for which the fair value option for financial instruments was elected.

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing residential mortgage loans held-for-sale, at fair value classified as Level 3:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Acquired loans	$	443,841	5.3% – 8.5% (5.8%)	2.7% – 7.5% (4.1%)	1.2% – 29.7% (7.3%)	4.0% – 51.1% (12.1%)
Originated loans	255,182
Residential mortgage loans held-for-sale, at fair value	$	699,023

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing residential mortgage loans held-for-investment, at fair value classified as Level 3:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Residential mortgage loans held-for-investment, at fair value	$	470,935	3.3% – 8.5% (8.4%)	2.9% – 24.4% (5.8%)	0.1% – 13.1% (8.8%)	40.3% – 64.1% (52.1%)

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing consumer loans held-for-investment, at fair value, classified as Level 3:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Consumer loans, held-for-investment, at fair value	$	393,599	8.0% – 9.0% (8.3%)	6.2% – 33.7% (29.2%)	0.0% – 6.6% (4.2%)	52.1% – 52.1% (52.1%)

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing IRLCs:

	Fair Value		Loan Funding Probability	Fair Value of Initial Servicing Rights (Bps)
IRLCs, net	$	(42,866)	0.0% – 100.0% (81.7%)	16.1 – 345.0 (244.9)

The following table summarizes certain information regards the ranges and weighted averages of inputs used in valuing Asset-Backed Securities Issued:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Asset-backed securities issued	$	341,287	3.3% – 6.3% (6.1%)	21.8% – 24.4% (22.0%)	0.1% – 4.2% (3.9%)	44.0% – 94.9% (91.8%)

Summary of Certain Information Regarding the Inputs used in Valuing the Servicer Advances

Servicer Advance Investments Valuation

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing the Servicer Advance Investments, including the basic fee component of the related MSRs:

	Significant Inputs
	Outstanding Servicer Advances to UPB of Underlying Residential Mortgage Loans	Prepayment Rate(A)	Delinquency	Mortgage Servicing Amount(B)		Discount Rate	Collateral Weighted Average Maturity (Years)(C)
September 30, 2022	1.2% – 1.9% (1.8%)	3.3% – 4.6% (4.6%)	3.5% – 14.5% (14.2%)	17.9 – 19.8 (19.8)	bps	5.2% – 5.7% (5.2%)	22.0 – 22.0 (22.0)

(A)Projected annual weighted average lifetime voluntary and involuntary prepayment rate using a prepayment vector.

(B)Mortgage servicing amount is net of 10.9 bps which represents the amount Rithm Capital paid its servicers as a monthly servicing fee.

(C)Weighted average maturity of the underlying residential mortgage loans in the pool.

Schedule of Inputs Used in Valuing Residential Mortgage Loans

The following table summarizes the inputs used in valuing these residential mortgage loans as of September 30, 2022:

	Fair Value and Carrying Value		Discount Rate	Weighted Average Life (Years)(A)	Prepayment Rate	CDR(B)	Loss Severity(C)
Performing loans	$	86,418	5.3% – 8.5% (8.0%)	3.9 – 7.7 (4.3)	3.1% – 5.5% (4.9%)	4.0% – 9.9% (9.4%)	4.0% – 51.1% (41.4%)
Non-performing loans	17,601		5.4% – 8.5% (6.8%)	1.8 – 3.9 (3.0)	2.7% – 2.9% (2.9%)	12.6% – 13.1% (12.8%)	7.1% – 41.4% (22.2%)
Total/weighted average	$	104,019	7.8%	4.1	4.6%	10.0%	38.1%

(A)The weighted average life is based on the expected timing of the receipt of cash flows.

(B)Represents the annualized rate of the involuntary prepayments (defaults) as a percentage of the total principal balance.

(C)Loss severity is the expected amount of future realized losses resulting from the ultimate liquidation of a particular loan, expressed as the net amount of loss relative to the outstanding loan balance.