DERIVATIVES AND HEDGING (AS RESTATED)

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Rithm Capital enters into economic hedges including interest rate swaps, TBAs, and short sales to hedge a portion of its interest rate risk exposure. Interest rate risk is sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, as well as other factors. Rithm Capital’s credit risk with respect to economic hedges is the risk of default on Rithm Capital’s investments that results from a borrower’s or counterparty’s inability or unwillingness to make contractually required payments.

Rithm Capital may at times hold TBAs or other short positions in order to mitigate Rithm Capital’s interest rate risk on certain specified mortgage-backed securities and MSRs. Amounts or obligations owed by or to Rithm Capital are subject to the right of set-off with the counterparty. As part of executing these trades, Rithm Capital may enter into agreements with its counterparties that govern the transactions for the purchases or sales made, including margin maintenance, payment and transfer, events of default, settlements and various other provisions. Changes in the value of hedges designed to protect against mortgage-backed securities and MSR fair value fluctuations, or hedging gains and losses, are reflected in the tables below.

Rithm Capital enters into short sales of U.S. Treasury securities to mitigate interest rate risk by borrowing the securities under reverse repurchase agreements and selling them into the market. The Company accounts for these as securities borrowing transactions and recognizes an obligation to return the borrowed securities at fair value on the Consolidated Balance Sheets based on the value of the underlying U.S. Treasury security as of the reporting date. Refer to Note 3 for further details. Gains and losses associated with U.S. Treasury securities are recognized in Realized and unrealized gains (losses), net in the Consolidated Statements of Operations.

As of December 31, 2023, Rithm Capital also held interest rate lock commitments (“IRLCs”), which represent a commitment to a particular interest rate provided the borrower is able to close the loan within a specified period, and forward loan sale and securities delivery commitments, which represent a commitment to sell specific residential mortgage loans at prices which are fixed as of the forward commitment date. Rithm Capital enters into forward loan sale and securities delivery commitments in order to hedge the exposure related to IRLCs and residential mortgage loans that are not covered by residential mortgage loan sale commitments.

Derivatives and hedges are recorded at fair value on the Consolidated Balance Sheets as follows:


		December 31,
	Balance Sheet Location	2023		2022
Derivative and hedging assets
Interest rate swaps(A)	Other assets	$	106	$	449
Interest rate lock commitments	Other assets	26,482		16,015
TBAs	Other assets	1,492		35,765
		$	28,080	$	52,229
Derivative and hedging liabilities

Interest rate lock commitments	Accrued expenses and other liabilities	$	2,678	$	7,229
TBAs	Accrued expenses and other liabilities	49,087		10,835

		$	51,765	$	18,064

(A)Net of $342.0 million and $1.2 billion of related variation margin accounts as of December 31, 2023 and 2022, respectively.

The following table summarizes notional amounts related to derivatives and hedging:


	December 31,
	2023		2022
Interest rate swaps(A)	$	7,979,988	$	23,085,000
Interest rate lock commitments	2,757,060		2,647,747

TBAs, short position(B)	6,013,100		8,473,221
TBAs, long position(B)	—		31,500

(A)Includes $8.0 billion notional of receive Secured Overnight Financing Rate (“SOFR”)/pay fixed of 2.5% and $0.0 billion notional of receive fixed of 0.0%/pay SOFR with weighted average maturities of 32 months and 0 months, respectively, as of December 31, 2023. Includes $23.1 billion notional of receive SOFR/pay fixed of 1.9% and $0.0 billion notional of receive fixed of 0.0%/pay SOFR with weighted average maturities of 35 months and 0 months, respectively, as of December 31, 2022.

(B)Represents the notional amount of Agency RMBS, classified as derivatives.

The following table summarizes gain (loss) on derivatives and hedging and the related location on the Consolidated Statements of Operations:


	Year Ended December 31,
	2023		2022		2021
Servicing revenue, net(A)
TBAs	$	—	$	(15,205)	$	10,483
Treasury futures	—		(1,746)		(23,961)
Options on treasury futures	—		5,635		(17,003)
	—		(11,316)		(30,481)

Gain on originated residential mortgage loans, held-for-sale, net(A)
Interest rate lock commitments	15,018		(102,992)		(293,699)
TBAs	(62,924)		25,700		118,564
Interest rate swaps	(1,110)		—		—
	(49,016)		(77,292)		(175,135)

Realized and unrealized gains (losses), net(B)(C)
Interest rate swaps	20,990		1,159,777		162,730


TBAs	(7,326)		309,154		(36,508)
Treasury securities payable	(68,006)		—		—
	(54,342)		1,468,931		126,222






Total gain (loss)	$	(103,358)	$	1,380,323	$	(79,394)

(A)Represents unrealized gain (loss).

(B)Excludes $0.0 million loss, $79.0 million loss, and $34.7 million loss for the year ended December 31, 2023, 2022 and 2021, respectively, included within servicing revenue, net (Note 7).

(C)Excludes $73.5 million gain, $1.3 billion gain and $240.6 million gain for the year ended December 31, 2023, 2022 and 2021, respectively, included within gain on originated residential mortgage loans, held-for-sale, net (Note 10).