EXCESS MORTGAGE SERVICING RIGHTS (Tables)

9 Months Ended

Sep. 30, 2023

Transfers and Servicing [Abstract]

Summary of Activity Related to the Carrying Value of Investments in Excess MSRs

The table below summarizes the components of Excess MSRs:

	September 30, 2023		December 31, 2022
Direct investments in Excess MSRs	$	217,764	$	249,366
Excess MSR joint ventures	65,212		72,437
Excess mortgage servicing rights, at fair value	$	282,976	$	321,803

The following table presents activity related to the carrying value of direct investments in Excess MSRs:

	Total(A)
Balance as of December 31, 2022	$	249,366
Interest income	16,733
Other income	150
Proceeds from repayments	(33,901)
Proceeds from sales	(669)
Change in fair value	(13,915)
Balance as of September 30, 2023	$	217,764

(A)Underlying loans serviced by Mr. Cooper Group Inc. (“Mr. Cooper”) and SLS.

The following table summarizes activity related to MSRs and MSR financing receivables:

Balance as of December 31, 2022	$	8,889,403
Purchases, net(A)	—
Originations(B)	609,460
Proceeds from sales(C)	(704,657)
Change in fair value due to:
Realization of cash flows(D)	(384,094)
Change in valuation inputs and assumptions	284,756
Balance at September 30, 2023	$	8,694,868

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

(B)Represents MSRs retained on the sale of originated residential mortgage loans.

(C)Relates primarily to excess servicing cash flows sold on certain agency loans with a total UPB of approximately $91.4 billion during the nine months ended September 30, 2023. In connection with these sales, the Company recorded a gain of approximately $5.2 million during the period, which is included within change in fair value of MSRs and MSR financing receivables in the Consolidated Statements of Operations.

(D)Based on the paydown of the underlying residential mortgage loans.

The following table summarizes MSRs and MSR financing receivables by type as of September 30, 2023:

	UPB of Underlying Mortgages		Weighted Average Life (Years)(A)	Carrying Value(B)
Agency	$	354,510,758	8.1	$	5,393,329
Non-Agency	50,056,162		6.9	704,873
Ginnie Mae(C)	126,354,300		7.7	2,596,666
Total/Weighted Average	$	530,921,220	7.9	$	8,694,868

(A)Represents the weighted average expected timing of the receipt of expected cash flows for this investment.

(B)Carrying value represents fair value. As of September 30, 2023, weighted average discount rates of 8.5% (range of 7.9% – 10.8%) were used to value Rithm Capital’s MSRs and MSR financing receivables.

(C)As of September 30, 2023, Rithm Capital holds approximately $1.4 billion in residential mortgage loans subject to repurchase and the related residential mortgage loans repurchase liability on its Consolidated Balance Sheets.

Summary of Direct Investments in Excess MSRs

The following table summarizes direct investments in Excess MSRs:

September 30, 2023										December 31, 2022
UPB of Underlying Mortgages		Interest in Excess MSR			Weighted Average Life Years(A)	Amortized Cost Basis		Carrying Value(B)		Carrying Value(B)
		Rithm Capital(C, D)	Former Manager-managed funds	Mr. Cooper
$	44,294,807	32.5% – 100.0% (56.4%)	0.0% – 50%	0.0% – 35.0%	6.5	$	189,814	$	217,764	$	249,366

(A)Represents the weighted average expected timing of the receipt of expected cash flows for this investment.

(B)Carrying value represents the fair value of the pools and recapture agreements, as applicable.

(C)Amounts in parentheses represent weighted averages.

(D)Rithm Capital is also invested in related servicer advance investments, including the basic fee component of the related MSR as of September 30, 2023 (Note 6) on $15.7 billion UPB underlying these Excess MSRs.

Changes in fair value of investments consists of the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Original and Recaptured Pools	$	(3,498)	$	(3,857)	$	(13,915)	$	(5,421)

Summary of the Financial Results of Excess MSR Joint Ventures, Accounted for as Equity Method Investees

The following tables summarize the financial results of the Excess MSR joint ventures, accounted for as equity method investees:

	September 30, 2023			December 31, 2022
Excess MSR	$	120,292		$	135,356
Other assets	10,818			10,204
Other liabilities	(687)			(687)
Equity	$	130,423		$	144,873
Rithm Capital’s investment	$	65,212		$	72,437
Rithm Capital’s percentage ownership	50.0		%	50.0		%

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Interest income	$	5,397	$	4,437	$	11,079	$	10,514
Other income (loss)	(2,391)		(12,074)		(6,949)		(14,417)
Expenses	(8)		(8)		(24)		(24)
Net income (loss)	$	2,998	$	(7,645)	$	4,106	$	(3,927)

The following table summarizes the activity of investments in equity method investees:

Balance at December 31, 2022	$	72,437
Distributions of earnings from equity method investees	—
Distributions of capital from equity method investees	(9,278)
Change in fair value of investments in equity method investees	2,053
Balance at September 30, 2023	$	65,212

Summary of Excess MSR Investments Made through Equity Method Investees

The following is a summary of Excess MSR investments made through equity method investees:

	September 30, 2023
	Unpaid Principal Balance		Investee Interest in Excess MSR(A)		Rithm Capital Interest in Investees		Amortized Cost Basis(B)		Carrying Value(C)		Weighted Average Life (Years)(D)
Agency
Original and Recaptured Pools	$	17,693,521	66.7	%	50.0	%	$	98,681	$	120,292	5.4

(A)The remaining interests are held by Mr. Cooper.

(B)Represents the amortized cost basis of the equity method investees in which Rithm Capital holds a 50% interest.

(C)Represents the carrying value of the Excess MSRs held in equity method investees, in which Rithm Capital holds a 50% interest. Carrying value represents the fair value of the pools, as applicable.

(D)Represents the weighted average expected timing of the receipt of cash flows of each investment.