FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

U.S. GAAP requires the categorization of fair value measurement into three broad levels which form a hierarchy based on the transparency of inputs to the valuation.

Level 1 – Quoted prices in active markets for identical instruments.

Level 2 – Valuations based principally on other observable market parameters, including:

•Quoted prices in active markets for similar instruments,

•Quoted prices in less active or inactive markets for identical or similar instruments,

•Other observable inputs (such as interest rates, yield curves, volatilities, prepayment rates, loss severities, credit risks and default rates), and

•Market corroborated inputs (derived principally from or corroborated by observable market data).

Level 3 – Valuations based significantly on unobservable inputs.

Rithm Capital follows this hierarchy for its fair value measurements. The classifications are based on the lowest level of input that is significant to the fair value measurement.

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 March 31, 2023 were as follows:

	Principal Balance or Notional Amount		Carrying Value		Fair Value
					Level 1		Level 2		Level 3		Total
Assets
Excess MSRs(A)	$	65,506,301	$	299,303	$	—	$	—	$	299,303	$	299,303
MSRs and MSR financing receivables(A)	535,865,895		8,886,209		—		—		8,886,209		8,886,209
Servicer advance investments	339,309		389,905		—		—		389,905		389,905
Real estate and other securities	25,589,381		8,987,572		—		8,041,518		946,054		8,987,572
Residential mortgage loans, held-for-sale	113,108		97,511		—		—		97,611		97,611
Residential mortgage loans, held-for-sale, at fair value	2,803,432		2,743,809		—		2,488,389		255,420		2,743,809
Residential mortgage loans, held-for-investment, at fair value	498,602		426,259		—		—		426,259		426,259
Residential mortgage loans subject to repurchase	1,189,907		1,189,907		—		1,189,907		—		1,189,907
Consumer loans	310,877		340,525		—		—		340,525		340,525
Mortgage loans receivable(B)	1,946,422		1,946,422		—		349,499		1,596,923		1,946,422
Notes receivable	66,305		—		—		—		—		—
Loans receivable	32,105		32,105		—		—		32,105		32,105
Cash, cash equivalents and restricted cash	1,800,346		1,800,346		1,800,346		—		—		1,800,346
Other assets(C)	N/A		21,377		—		—		21,377		21,377
Derivative assets	26,844,923		43,904		—		7,797		36,107		43,904
			$	27,205,154	$	1,800,346	$	12,077,110	$	13,327,798	$	27,205,254
Liabilities
Secured financing agreements	$	11,761,793	$	11,760,930	$	—	$	11,760,930	$	—	$	11,760,930
Secured notes and bonds payable(D)	9,822,078		9,728,605		—		—		9,656,481		9,656,481
Unsecured senior notes, net of issuance costs	545,490		545,490		—		—		491,662		491,662
Residential mortgage loan repurchase liability	1,189,907		1,189,907		—		1,189,907		—		1,189,907
Derivative liabilities	183,040		46,954		—		45,873		1,081		46,954
			$	23,271,886	$	—	$	12,996,710	$	10,149,224	$	23,145,934

(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 March 31, 2023, the fair value of Rithm Capital’s interests in the mortgage loans receivable securitization was $47.4 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 $23.1 million as of March 31, 2023.

(D)Includes 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 $598.1 million as of March 31, 2023.

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, 2022	$	321,803	$	8,889,403	$	398,820	$	950,860	$	8,786	$	713,896	$	363,756	$	94,401	$	1,714,053	$	13,455,778
Transfers
Transfers from Level 3	—		—		—		—		—		(80,896)		—		—		(90,020)		(170,916)
Transfers to Level 3	—		—		—		—		—		19,404		—		—		—		19,404
Gain (loss) included in net income
Credit losses on securities(D)	—		—		—		146		—		—		—		—		—		146
Change in fair value of excess MSRs(D)	(9,818)		—		—		—		—		—		—		—		—		(9,818)
Change in fair value of excess MSRs, equity method investees(D)	(1,414)		—		—		—		—		—		—		—		—		(1,414)
Servicing revenue, net(E)
Included in servicing revenue(E)	—		(142,304)		—		—		—		—		—		—		—		(142,304)
Change in fair value of:
Servicer advance investments	—		—		(735)		—		—		—		—		—		—		(735)
Residential mortgage loans	—		—		—		—		—		12,534				—		—		12,534
Consumer loans	—		—		—		—		—		—		(5,991)		—		—		(5,991)
Gain (loss) on settlement of investments, net	172		—		—		—		—		—		—		—		—		172
Other income (loss), net(D)	(104)		—		—		13,218		26,240		39,738		—		231		—		79,323
Gains (losses) included in OCI(F)	—		—		—		2,988		—		—		—		—		—		2,988
Interest income	3,431		—		4,630		9,138		—		—		2,546		2,134		—		21,879
Purchases, sales and repayments
Purchases, net(G)	—		—		232,446		2,400		—		9,695		6,831		—		—		251,372
Proceeds from sales	(703)		(1,403)				—		—		(34,995)		—		—		—		(37,101)
Proceeds from repayments	(14,064)		—		(245,256)		(32,696)		—		(25,984)		(26,617)		(64,661)		(456,747)		(866,025)
Originations and other	—		140,513		—		—		—		28,287		—		—		429,637		598,437
Balance at March 31, 2023	$	299,303	$	8,886,209	$	389,905	$	946,054	$	35,026	$	681,679	$	340,525	$	32,105	$	1,596,923	$	13,207,729

(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 is 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.

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, 2022	$	319,486
Transfers
Gains (losses) included in net income
Other income(A)	4,005
Purchases, sales and repayments
Proceeds from sales	—
Payments	(36,838)
Other	—
Balance at March 31, 2023	$	286,653

(A)Gain (loss) recorded in earnings during the period is 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.

Excess MSRs, MSRs and MSR Financing Receivables Valuation

The following table summarizes certain information regarding the ranges and weighted averages of inputs used as of March 31, 2023:

	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	3.0% – 12.3% (7.2%)	0.2% – 6.1% (3.2%)	0.0% – 91.8% (56.0%)	6 – 31 (19)	11 – 29 (21)
Excess MSRs Held through Investees	8.7% – 11.3% (9.6%)	1.9% – 4.2% (2.8%)	45.3% – 64.3% (59.0%)	15 – 26 (22)	15 – 22 (19)
MSRs and MSR Financing Receivables(G)
Agency	0.2% – 99.1% (7.8%)	0.1% – 66.7% (1.9%)	—(H)	7 – 104 (30)	0 – 40 (23)
Non-Agency	0.7% – 84.1% (15.1%)	1.0% – 75.0% (22.0%)	—(H)	1 – 216 (46)	0 – 57 (24)
Ginnie Mae	0.4% – 82.5% (10.3%)	0.2% – 75.0% (7.2%)	—(H)	18 – 144 (41)	0 – 35 (27)
Total/Weighted Average—MSRs and MSR Financing Receivables	0.2% – 99.1% (9.0%)	0.1% – 75.0% (4.9%)	—(H)	1 – 216 (34)	0 – 57 (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 $6.85 – $7.06 ($6.92) per loan per month was used to value the agency MSRs. A weighted average cost of subservicing of $7.28 – $9.53 ($9.07) per loan per month was used to value the Non-Agency MSRs, including MSR financing receivables. A weighted average cost of subservicing of $8.24 – $8.58 ($8.24) 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, recapture rate represents the expected recapture rate with the successor subservicer appointed by NRM.

(H)Recapture is not considered a significant input for MSRs and MSR financing receivables.

With respect to valuing the PHH-serviced MSRs and MSR financing receivables, which include a significant servicer advances receivable component, the cost of financing servicer advances receivable is assumed to be LIBOR plus 2.1%.

As of March 31, 2023, a weighted average discount rate of 8.3% (range of 8.0% – 8.5%) was used to value Rithm Capital’s Excess MSRs (directly and through equity method investees). As of March 31, 2023, a weighted average discount rate of 8.4% (range of 7.6% – 10.8%) was used to value Rithm Capital’s MSRs and MSR financing receivables.

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)
March 31, 2023	1.3% – 2.2% (2.2%)	3.4% – 4.6% (4.6%)	3.4% – 19.7% (19.3%)	18.0 – 19.8 (19.8)	bps	5.7% – 6.2% (5.7%)	21.8 – 21.9 (21.9)

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

(B)Mortgage servicing amount is net of 6.2 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.

Real Estate and Other Securities Valuation

As of March 31, 2023, 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	$	8,041,143	$	7,878,353	$	8,041,518	$	—	$	8,041,518	2
Non-Agency RMBS(C)	17,548,238		926,335		946,040		14		946,054		3
Total	$	25,589,381	$	8,804,688	$	8,987,558	$	14	$	8,987,572

(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, 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 55.5% 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	$	525,004	5.0% – 15.0% (6.8%)	0.0% – 100.0% (6.6%)	0.0% – 20.0% (0.2%)	0.0% – 74.0% (7.9%)

(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.

Residential Mortgage Loans Valuation

Rithm Capital, through its Mortgage Company, originates residential mortgage loans that it intends to sell into Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securitizations. Residential mortgage loans held-for-sale, at fair value are typically pooled together and sold into certain exit markets, depending upon underlying attributes of the loan, such as agency eligibility, product type, interest rate and credit quality. The Mortgage Company also originates non-qualified mortgage loans that it intends to sell to private investors. Residential mortgage loans held-for-sale, at fair value are valued using a market approach by utilizing either: (i) the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value of a whole mortgage loan, (ii) current commitments to purchase loans or (iii) recent observable market trades for similar loans, adjusted for credit risk and other individual loan characteristics. As these prices are derived from market observable inputs, Rithm Capital classifies these valuations as Level 2 in the fair value hierarchy. Originated residential mortgage loans held-for-sale for which there is little to no observable trading activity of similar instruments are valued using Level 3 measurements based upon dealer price quotes or historical sale transactions for similar loans.

Residential mortgage loans held-for-sale, at fair value also includes nonconforming seasoned mortgage loans acquired and identified for securitization, which are valued using internal pricing models to forecast loan level cash flows based on a potential securitization exit using inputs such as default rates, prepayments speeds and discount rates, and may include adjustments based on consensus pricing (broker quotes). As the internal pricing model is based on certain unobservable inputs, Rithm Capital classifies these valuations as Level 3 in the fair value hierarchy.

For non-performing loans, asset liquidation cash flows are derived based on the estimated time to liquidate the loan, the estimated value of the collateral, expected costs and estimated home price levels. Estimated cash flows for both performing and non-performing loans are discounted at yields considered appropriate to arrive at a reasonable exit price for the asset. Rithm Capital classifies these valuations as Level 3 in the fair value hierarchy.

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:

Performing Loans	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Acquired loans	$	54,252	7.4% – 10.1% (8.4%)	3.6% – 8.0% (5.9%)	2.8% – 3.7% (3.3%)	19.7% – 31.2% (25.5%)
Originated loans	168,041		N/A	N/A	N/A	N/A
Residential mortgage loans held-for-sale, at fair value	$	222,293

Non-Performing Loans	Fair Value		Discount Rate	Annual change in home prices	Liquidation Timeline (in years)	Current Value of Underlying Properties
Acquired	$	19,247	10.7% – 10.7% (10.7%)	18.1%– 25.7% 20.5%)	2.4 – 4.0 (2.9)	201.1%% – 241.3% (214.1%)
Originated	13,880		N/A	N/A	N/A	N/A
Residential mortgage loans held-for-sale, at fair value	$	33,127

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	$	426,259	8.8% – 10.7% (9.1%)	2.9% – 8.0% (6.5%)	3.5% – 12.7% (5.9%)	19.7% – 52.2% (36.7%)

Consumer Loans Valuation

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	$	340,525	8.3% – 9.3% (8.6%)	7.4% – 32.8% (27.8%)	0.0% – 7.2% (4.2%)	59.4% – 59.4% (59.4%)

Mortgage Loans Receivable Valuation

The estimated fair value approximates carrying value as most loans are variable-rate that reprice frequently and with minimal credit risk and severity risk. Rithm Capital classifies mortgage loans receivable as Level 3 in the fair value hierarchy.

Rithm Capital has securitized certain mortgage loans receivable which are held as part of a collateralized financing entity (“CFE”). A CFE is a variable interest entity that holds financial assets, issues beneficial interests in those assets and has no more than nominal equity and the beneficial interests have contractual recourse only to the related assets of the CFE. GAAP allows entities to elect to measure both the financial assets and financial liabilities of the CFE using the more observable of the fair value of the financial assets and the fair value of the financial liabilities of the CFE. Rithm Capital has elected the fair value option (“FVO”) for initial and subsequent recognition of the debt issued by its consolidated securitization trust and has determined that the consolidated securitization trust meets the definition of a CFE. See Note 20 for further discussion regarding VIEs and securitization trusts. Rithm Capital determined the inputs to the fair value measurement of the financial liabilities of

its CFE to be more observable than those of the financial assets and, as a result, has used the fair value of the financial liabilities of the CFE to measure the fair value of the financial assets of the CFE. The fair value of the debt issued by the CFE is typically valued using external pricing data, which includes third-party valuations. The securitized mortgage loans receivable, which are assets of the CFE, are included in Mortgage Loans Receivable, at Fair Value, on the Company’s Consolidated Balance Sheets. The debt issued by the CFE is included in Secured Notes and Bonds Payable on the Company’s Consolidated Balance Sheets. Unrealized gain (loss) from changes in fair value of the debt issued by the CFE is included in Other Income (Loss), Net in the Company’s Consolidated Statements of Operations. The securitized mortgage loans receivable and the debt issued by the Company’s CFE are both classified as Level 2.

Derivatives Valuation

Rithm Capital enters into economic hedges including interest rate swaps, caps and TBAs, which are categorized as Level 2 in the valuation hierarchy. Rithm Capital generally values such derivatives using quotations, similarly to the method of valuation used for Rithm Capital’s other assets that are classified as Level 2 in the fair value hierarchy.

As a part of the mortgage loan origination business, Rithm Capital enters into forward loan sale and securities delivery commitments, which are valued based on observed market pricing for similar instruments and therefore, are classified as Level 2. In addition, Rithm Capital enters into IRLCs, which are valued using internal pricing models (i) incorporating market pricing for instruments with similar characteristics, (ii) estimating the fair value of the servicing rights expected to be recorded at sale of the loan and (iii) adjusting for anticipated loan funding probability. Both the fair value of servicing rights expected to be recorded at the date of sale of the loan and anticipated loan funding probability are significant unobservable inputs and therefore, IRLCs are classified as Level 3 in the fair value hierarchy.

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	$	35,026	0.0% – 100.0% (80.3%)	0.5 – 336.8 (205.6)

Asset-Backed Securities Issued

Rithm Capital was deemed to be the primary beneficiary of the SCFT 2020-A securitization, and therefore, Rithm Capital’s Consolidated Balance Sheets include the asset-backed securities issued by the SCFT 2020-A trust. Rithm Capital elected the fair value option for these financial instruments and the asset-backed securities issued were valued consistently with Rithm Capital’s Non-Agency RMBS described above.

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	$	286,653	5.2% – 5.2% (5.2%)	20.7% – 20.7% (20.7%)	4.4% – 4.4% (4.4%)	94.7% – 94.7% (94.7%)

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances, such as when there is evidence of impairment. For residential mortgage loans held-for-sale, SFR properties and foreclosed real estate accounted for as REO, Rithm Capital applies the lower of cost or fair value accounting and may be required, from time to time, to record a nonrecurring fair value adjustment. Upon the occurrence of certain events, the Company re-measures the fair value of long-lived assets, including property, plant and equipment, operating lease ROU assets, intangible assets and goodwill if an impairment or observable price adjustment is recognized in the current period.

At March 31, 2023, assets measured at fair value on a nonrecurring basis were $100.1 million. The $100.1 million of assets include approximately $88.9 million of residential mortgage loans held-for-sale and $11.2 million of REO. The fair value of Rithm Capital’s residential mortgage loans, held-for-sale is estimated based on a discounted cash flow model analysis using internal pricing models and is categorized within Level 3 of the fair value hierarchy. The following table summarizes the inputs used in valuing these residential mortgage loans as of March 31, 2023:

	Fair Value and Carrying Value		Discount Rate	Weighted Average Life (Years)(A)	Prepayment Rate	CDR(B)	Loss Severity(C)
Performing loans	$	70,897	5.3% – 10.1% (8.5%)	4.5 – 8.0 (5.0)	3.6% – 8.0% (7.4%)	2.8% – 4.1% (3.5%)	19.7% – 31.2% (21.3%)
Non-performing loans	17,967		10.7% – 10.7% (10.7%)	2.4 – 4.0 (3.1)	2.8% – 2.9% (2.8%)	12.7% – 26.4% (20.5%)	33.8% – 46.7% (41.1%)
Total/weighted average	$	88,864	9.0%	4.6	6.5%	6.9%	25.3%

(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.

The fair value of REO is estimated using a broker’s price opinion discounted based upon Rithm Capital’s experience with actual liquidation values and, therefore, is categorized within Level 3 of the fair value hierarchy. These discounts to the broker price opinion generally range from 10% – 25% (weighted average of 21%), depending on the information available to the broker.

The total change in the recorded value of assets for which a fair value adjustment has been included in the Consolidated Statements of Operations for the three months ended March 31, 2023 consisted of a reversal of valuation allowance of $0.9 million for residential mortgage loans and a reversal of valuation allowance of $0.7 million for REO.