RESIDENTIAL MORTGAGE LOANS

12 Months Ended

Dec. 31, 2023

Rithm Capital accumulated its residential mortgage loan portfolio through various bulk acquisitions and the execution of call rights. Rithm Capital, through its Mortgage Company, originates residential mortgage loans for sale and securitization to third parties and generally retains the servicing rights on the underlying loans.

Loans are accounted for based on Rithm Capital’s strategy for the loan and on whether the loan was credit-impaired at the date of acquisition. As of December 31, 2023, Rithm Capital accounts for loans based on the following categories:

•Loans held-for-investment, at fair value

•Loans held-for-sale, at lower of cost or fair value

•Loans held-for-sale, at fair value

The following table summarizes residential mortgage loans outstanding by loan type:


	December 31,
	2023								2022
	Outstanding Face Amount		Carrying Value		Loan Count	Weighted Average Yield		Weighted Average Life (Years)(A)	Carrying Value
Total residential mortgage loans, held-for-investment, at fair value	$	448,060	$	379,044	8,328	8.1	%	5.5	$	452,519


Acquired performing loans(B)	67,955		57,038		1,887	8.1	%	5.9	72,425
Acquired non-performing loans(C)	26,381		21,839		326	8.5	%	5.6	28,602
Total residential mortgage loans, held-for-sale, at lower of cost or market	$	94,336	$	78,877	2,213	8.2	%	5.8	$	101,027

Acquired performing loans(B)(D)	423,644		400,603		1,972	5.7	%	16.4	890,131
Acquired non-performing loans(C)(D)	220,962		204,950		1,135	4.6	%	25.2	340,342
Originated loans	1,816,318		1,856,312		5,850	7.1	%	29.4	2,066,798
Total residential mortgage loans, held-for-sale, at fair value	$	2,460,924	$	2,461,865	8,957	6.6	%	26.8	$	3,297,271

Total residential mortgage loans, held-for-sale, at fair value/lower of cost or market	$	2,555,260	$	2,540,742					$	3,398,298

(A)For loans classified as Level 3 in the fair value hierarchy, the weighted average life is based on the expected timing of the receipt of cash flows. For Level 2 loans, the weighted average life is based on the contractual term of the loan.

(B)Performing loans are generally placed on non-accrual status when principal or interest is 90 days or more past due.

(C)As of December 31, 2023, Rithm Capital has placed non-performing loans, held-for-sale on non-accrual status, except as described in (D) below.

(D)Includes $224.5 million and $198.2 million UPB of Ginnie Mae Early Buyout Options performing and non-performing loans, respectively, on accrual status as contractual cash flows are guaranteed by the FHA.

The following table summarizes the geographic distribution of the underlying residential mortgage loans:


	Percentage of Total Outstanding Unpaid Principal Amount
	December 31,
State Concentration	2023		2022
Texas	9.5	%	8.9	%
Florida	9.3	%	10.9	%
California	8.3	%	10.2	%
New York	8.0	%	6.8	%
Georgia	4.9	%	4.2	%
New Jersey	3.9	%	3.8	%
Virginia	3.6	%	2.7	%
Illinois	3.5	%	3.6	%
Maryland	3.3	%	3.1	%
North Carolina	3.2	%	2.5	%
Other U.S.	42.5	%	43.3	%
	100.0	%	100.0	%

See Note 19 regarding the financing of residential mortgage loans.

The following table summarizes the difference between the aggregate UPB and the aggregate carrying value of loans:


	December 31,
	2023						2022
Days Past Due	UPB		Carrying Value		Carrying Value Over (Under) UPB		UPB		Carrying Value		Carrying Value Over (Under) UPB

90+	$	313,122	$	281,556	$	(31,566)	$	468,147	$	423,321	$	(44,826)

The following table summarizes the activity for residential mortgage loans:


	Loans Held-for-Investment, at Fair Value		Loans Held-for-Sale, at Lower of Cost or Fair Value		Loans Held-for-Sale, at Fair Value		Total
Balance at December 31, 2021	$	569,933	$	132,921	$	11,214,924	$	11,917,778
Originations	—		—		67,406,228		67,406,228
Sales	—		(4,426)		(81,648,703)		(81,653,129)
Purchases/additional fundings	7,182		—		6,880,225		6,887,407
Proceeds from repayments	(80,661)		(17,777)		(394,613)		(493,051)
Transfer of loans to other assets(A)	—		—		(25,375)		(25,375)
Transfer of loans to REO	(4,956)		(1,386)		(752)		(7,094)
Transfers of loans to held-for-sale	(1,580)		—		—		(1,580)
Transfers of loans to from held-for-investment	—		—		1,582		1,582
Valuation provision on loans	—		(8,305)		—		(8,305)

Fair value adjustments due to:
Changes in instrument-specific credit risk	(33,086)		—		(36,204)		(69,290)
Other factors	(4,313)		—		(100,041)		(104,354)
Balance at December 31, 2022	$	452,519	$	101,027	$	3,297,271	$	3,850,817

Originations	—		—		37,123,264		37,123,264
Sales	—		(6,946)		(38,207,803)		(38,214,749)
Purchases/additional fundings	1,269		—		375,435		376,704
Proceeds from repayments	(51,195)		(10,773)		(181,166)		(243,134)
Transfer of loans to other assets(A)	—		286		11,376		11,662
Transfer of loans to REO	(7,148)		(2,858)		(1,459)		(11,465)
Transfers of loans to held-for-sale	(30,556)		—		—		(30,556)
Transfers of loans to from held-for-investment	—		—		30,556		30,556
Valuation (provision) reversal on loans	—		(1,859)		—		(1,859)
Fair value adjustments due to:
Changes in instrument-specific credit risk	7,540		—		4,639		12,179
Other factors	6,615		—		9,752		16,367
Balance at December 31, 2023	$	379,044	$	78,877	$	2,461,865	$	2,919,786

(A)Represents loans for which foreclosure has been completed and for which Rithm Capital has made, or intends to make, a claim with the governmental agency that has guaranteed the loans that are grouped and presented as part of claims receivable in other assets (Note 14).

Net Interest Income

The following table summarizes the net interest income for residential mortgage loans:


	December 31,
	2023		2022		2021
Interest income:
Loans held-for-investment, at fair value	$	34,658	$	45,287	$	44,369
Loans held-for-sale, at lower of cost or fair value	5,804		6,898		23,280
Loans held-for-sale, at fair value	159,233		211,238		260,062
Total interest income	199,695		263,423		327,711

Interest expense:
Loans held-for-investment, at fair value	18,893		17,583		16,919
Loans held-for-sale, at lower of cost or fair value	3,615		3,402		21,333
Loans held-for-sale, at fair value(A)	161,901		181,071		159,413
Total interest expense	184,409		202,056		197,665

Net interest income	$	15,286	$	61,367	$	130,046

(A)Includes interest expense attributed to SFR properties in the years ended December 31, 2022 and December 31, 2021.

Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net

The Mortgage Company originates conventional, government-insured and nonconforming residential mortgage loans for sale and securitization. In connection with the sale or securitization of loans to the GSEs or mortgage investors, Rithm Capital reports gain on originated residential mortgage loans, held-for-sale, net in the Consolidated Statements of Operations.

The following table summarizes the components of gain on originated residential mortgage loans, held-for-sale, net:


	Year Ended December 31,
	2023		2022		2021
Gain (loss) on residential mortgage loans originated and sold, net(A)	$	(417,180)	$	(1,106,458)	$	460,062
Gain (loss) on settlement of residential mortgage loan origination derivative instruments(B)	73,476		1,285,219		240,610
MSRs retained on transfer of residential mortgage loans(C)	786,655		1,222,742		1,331,626
Other(D)	14,622		33,551		107,249
Realized gain on sale of originated residential mortgage loans, net	$	457,573	$	1,435,054	$	2,139,547
Change in fair value of residential mortgage loans	99,877		(271,530)		(137,503)
Change in fair value of interest rate lock commitments (Note 18)	15,018		(102,992)		(293,699)
Change in fair value of derivative instruments (Note 18)	(64,034)		25,700		118,564
Gain on originated residential mortgage loans, held-for-sale, net	$	508,434	$	1,086,232	$	1,826,909

(A)Includes residential mortgage loan origination fees of $0.4 billion, $0.6 billion and $2.3 billion in the years ended December 31, 2023, 2022 and 2021, respectively.

(B)Represents settlement of forward securities delivery commitments utilized as an economic hedge for mortgage loans not included within forward loan sale commitments.

(C)Represents the initial fair value of the capitalized MSRs upon loan sales with servicing retained.

(D)Includes fees for services associated with the residential mortgage loan origination process.