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VARIABLE INTEREST ENTITIES (AS RESTATED)
 12 Months Ended
Dec. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
VARIABLE INTEREST ENTITIES (AS RESTATED) VARIABLE INTEREST ENTITIES (AS RESTATED)
In the normal course of business, Rithm Capital enters into transactions with SPEs, which primarily consist of trusts established for a limited purpose. The SPEs have been formed for the purpose of transactions in which the Company transfers assets into an SPE in return for various forms of debt obligations supported by those assets. In these transactions, the Company typically receives cash and/or other interests in the SPE as proceeds for the transferred assets. The Company retains the right to service the transferred receivables. The Company first evaluates whether it holds a variable interest in the entity. Where the Company has a variable interest, it is required to determine whether the entity is a VIE or a Voting Interest Entity (“VOE”), the classification of which will determine the consolidation model that the Company is required to follow when determining whether it should consolidate the entity.

VIEs are defined as entities in which (i) equity at risk investors do not have the characteristics of a controlling financial interest, (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties, or (iii) substantially all of the activities of the entity are performed on behalf of the party with disproportionately few voting rights. Where an entity does not have the characteristics of a VIE, it is a VOE. A VIE is required to be consolidated by the primary beneficiary, which is defined as the party that has the power to direct the activities of a VIE that most significantly impact its economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that could be potentially significant to the VIE.

To assess whether Rithm Capital has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, Rithm Capital considers all the facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes identifying (i) the activities that most significantly impact the VIE’s economic performance and (ii) which party, if any, has power over those activities. To assess whether Rithm Capital has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, Rithm Capital considers all of its economic interests and applies judgment in determining whether these interests, individually or in the aggregate, are considered potentially significant to the VIE. When an SPE meets the definition of a VIE and the Company determines that it is the primary beneficiary, the Company consolidates the SPE in its consolidated financial statements.

For certain consolidated VIEs that meet the definition of a CFE, which is a variable interest entity that holds financial assets, issues beneficial interests in those assets and has no more than nominal equity, Rithm Capital has elected to account for the assets and liabilities of these entities under the CFE measurement alternative. The CFE measurement alternative allows companies to elect to measure both the financial assets and financial liabilities of a CFE using the more observable of the fair value of the financial assets or fair value of the financial liabilities. The net equity in an entity accounted for under the CFE election effectively represents the fair value of the beneficial interests Rithm Capital owns in the entity. The assets of the consolidated CFEs can only be used to settle obligations and liabilities of these consolidated CFEs and are not available for
general use by the Company. The liabilities of these consolidated CFEs are liabilities only of these entities and creditors have no recourse to the Company for the consolidated CFEs’ liabilities.
Consolidated VIEs
Advance Purchaser
Rithm Capital, through a taxable wholly-owned subsidiary, is the managing member of Advance Purchaser and owns approximately 89.3% of Advance Purchaser as of December 31, 2023. Rithm Capital is deemed to be the primary beneficiary of Advance Purchaser as a result of its ability to direct activities that most significantly impact the economic performance of the entities and its ownership of a significant equity investment. See Note 8 for details.
Newrez Joint Ventures
A wholly-owned subsidiary of Newrez, Newrez Ventures LLC (formerly known as Shelter Mortgage Company LLC) (“Newrez Ventures”), is a mortgage originator specializing in retail originations. Newrez Ventures operates its business through a series of joint ventures (“Newrez Joint Ventures”) and is deemed to be the primary beneficiary of such Newrez Joint Ventures as a result of its ability to direct activities that most significantly impact the economic performance of the Newrez Joint Venture entities and its ownership of a significant equity investment.

Residential Mortgage Loans

The Company securitizes, sells and services residential mortgage loans. Securitization transactions typically involve the use of VIEs and are accounted for either as sales or as secured financings. Certain of these activities may involve SPEs which, by their nature, are deemed to be VIEs.

Rithm Capital sells pools of conforming mortgage loans through GSE and Ginnie Mae sponsored programs with the servicing retained by Newrez. The Company has several financing vehicles in the form of mortgage loan participation and sale agreements with financial institutions, or Purchasers, to sell pools of agency residential mortgage loans.

Newrez Mortgage Participant LLC, NPF Trust EBO I and Newrez Trust II were formed to acquire, receive, participate, hold, release and dispose of participation interests in certain of Newrez’s residential mortgage loans HFS (“MLHFS PC”). These facilities transfer the MLHFS PC in exchange for cash. Newrez is the primary beneficiary of the VIE and therefore consolidates the SPE. The transferred MLHFS PC is classified on the Consolidated Balance Sheets as residential mortgage loans, HFS and the related warehouse credit facility liabilities as part of Secured Financing Agreements. Newrez retains the risks and benefits associated with the assets transferred to the SPEs.

Mortgage-Backed Securitization
In May 2021, Newrez issued $750.0 million in notes through a securitization facility (the “2021-1 Securitization Facility”) that bear interest at 30-day SOFR plus a margin. The 2021-1 Securitization Facility is secured by newly originated, first-lien, fixed- and adjustable-rate residential mortgage loans eligible for purchase by the GSEs and Ginnie Mae. Through a master repurchase agreement, Newrez sells its originated residential mortgage loans to the 2021-1 Securitization Facility, which then issues notes to third party qualified investors, with Newrez retaining the trust certificate. The loans serve as collateral with the proceeds from the note issuance ultimately financing the originations. The 2021-1 Securitization Facility will terminate on the earlier of (i) the three-year anniversary of the initial closing date, (ii) the Company exercising its right to optional prepayment in full or (iii) a repurchase triggering event. The Company is the primary beneficiary of the 2021-1 Securitization Facility as it has both (i) the power to direct the activities of a VIE that most significantly impact its economic performance and (ii) the obligation to absorb losses or the right to receive benefits from the VIE that could be potentially significant to the VIE.

Consumer Loan Companies
Rithm Capital has a co-investment in a portfolio of consumer loans held through certain limited liability entities (the “Consumer Loan Companies”), which hold the SpringCastle loans. As of December 31, 2023, Rithm Capital owns 53.5% of the limited liability company interests in and consolidates the Consumer Loan Companies.
On September 25, 2020, certain entities comprising the Consumer Loan Companies, in a private transaction, issued $663.0 million of asset-backed notes (“SCFT 2020-A”) securitized by a portfolio of consumer loans.

The Consumer Loan Companies consolidate certain entities that issued securitized debt collateralized by the consumer loans (the “Consumer Loan SPVs”). The Consumer Loan SPVs are VIEs of which the Consumer Loan Companies are the primary beneficiaries.

Consolidated CFEs:

Loan Securitizations - Mortgage Loans Receivable

In March 2022, Rithm Capital sponsored a securitization trust, classified as a VIE, that issue securitized debt collateralized by mortgage loans receivable (the “2022-RTL1 Securitization”) for which a wholly-owned subsidiary of Rithm Capital serves as asset manager. Rithm Capital acquired all of the most subordinated trust certificates for $20.9 million. Rithm Capital concluded that the most subordinate tranche trust certificates absorb a majority of the trusts expected losses or receive a majority of the trusts’ expected residual returns. Rithm Capital also concluded that the securitization’s asset manager has the ability to direct activities that could impact the trust’s economic performance. As a result, Rithm Capital consolidates 2022 RTL1 Securitization.

The assets of the consolidated the 2022 RTL1 Securitization may only be used to settle obligations of 2022 RTL1 Securitization and are not available to creditors of the Company. The investors in the consolidated 2022 RTL1 Securitization have no recourse against the assets of the Company, and there is no recourse to the Company for the consolidated entities’ liabilities.

As of December 31, 2023, 2022-RTL1 Securitization assets consist of a pool of performing, adjustable-rate and fixed-rate, interest-only, mortgage loans (construction, renovation and bridge), secured by a first lien or a first and second lien on a non-owner occupied mortgaged property with original terms to maturity of up to 36 months, with an aggregate UPB of approximately $353.6 million and an aggregate principal limit of approximately $461.2 million. Refer to Note 21 regarding the fair value measurements of consolidated loan securitizations.

Loan Securitizations - Residential Mortgage Loans

Rithm Capital sponsors certain mortgage securitization trusts, considered VIEs, to securitize performing Non-QM loans and seasoned mortgage loans. The Company consolidates certain trusts for which it is the primary beneficiary. The Company acts as the primary servicer for such trusts and therefore has the ability to direct activities that could impact these trusts’ economic performance. Generally, the Company retains a vertical tranche of notes issued by these trusts for risk retention purposes in addition to the most subordinated tranches and “interest only” interests. Such retained interests were eliminated in consolidation. Depending on the type of the securitization, the underlying pool of assets may consist of performing, amortizing and interest only, fixed rate and adjustable rate mortgage loans secured by first liens on single family residential properties, planned unit developments and condominiums.

The assets of these consolidated loan securitizations may only be used to settle obligations of these entities and are not available to creditors of the Company. The investors in these consolidated loan securitizations have no recourse against the assets of the Company, and there is no recourse to the Company for the consolidated entities’ liabilities. Refer to Note 3 for further details.

As of December 31, 2023, the Notes payable, at fair value of Liabilities of consolidated CFEs due to third parties had a fair value of $2.6 billion. Rithm’s retained interest in the consolidated CFEs was $0.4 billion. Refer to Note 21 regarding the fair value measurements of consolidated loan securitizations and to Note 3 for further information.

Funds

In the ordinary course of business, Sculptor sponsors the formation of consolidated funds that are considered VIEs. The Company consolidates certain VIEs for which it is the primary beneficiary either directly or indirectly through a consolidated entity. The assets of these consolidated funds may only be used to settle obligations of these entities and are not available to
creditors of the Company or Sculptor. The investors in these consolidated funds have no recourse against the assets of the Company or Sculptor. There is no recourse to the Company or Sculptor for the consolidated funds’ liabilities.

The Company, through Sculptor, consolidates a structured alternative investment solution, which issued notes in the aggregate principal amount of $350.0 million, of which approximately $127.8 million were retained by Sculptor and eliminated in consolidation. The retained notes consists of $20.0 million Class A notes, $20.0 million of Class C notes and $87.8 million of subordinated notes. As of December 31, 2023, the consolidated notes payable due to third parties had a fair value of $218.2 million.

Sculptor’s structured alternative investment solution entered into a $52.5 million credit facility maturing March 18, 2025. This credit facility is capped at $20.0 million of total borrowing capacity per quarter, bearing interest of SOFR plus margin of 3.0%. The facility is also subject to an annual 1.15% unused commitment fee. As of December 31, 2023, the consolidated funds have not drawn on the facility.

See Note 20 and 21 regarding the financing and fair value measurements of consolidated funds, respectively.
The table below presents the restated carrying value and classification of the assets and liabilities of consolidated VIEs on the Consolidated Balance Sheets:
Advance PurchaserNewrez Joint VenturesResidential Mortgage LoansConsumer Loan Companies
Consolidated CFEs(B)
Total
December 31, 2023 (As Restated)Loan Securitizations - Mortgage Loans ReceivableLoan Securitizations - Residential Mortgage LoansConsolidated Funds
Assets
Servicer advance investments, at fair value$367,803 $— $— $— $— — $— $367,803 
Residential mortgage loans, held-for-sale, at fair value— — 1,112,097 — — — — 1,112,097 
Consumer loans— — — 285,632 — — — 285,632 
Assets of consolidated CFEs - investments— — — — 353,594 3,038,587 321,856 3,714,037 
Cash and cash equivalents5,381 18,159 — — — — — 23,540 
Restricted cash8,273 — 6,113 6,301 7,572 6,263 18,013 52,535 
Other assets9 688 — 4,325 4,532 — 1,060 10,614 
Total Assets$381,466 $18,847 $1,118,210 $296,258 $365,698 $3,044,850 $340,929 $5,566,258 
Liabilities
Secured financing agreements(A)
— — 996,845 — — — — 996,845 
Secured notes and bonds payable(A)
274,404 — — 235,770 — — — 510,174 
Notes payable of consolidated CFEs(A)
— — — — 318,998 2,618,082 218,157 3,155,237 
Accrued expenses and other liabilities2,606 2,240 5,382 1,507 371 6,263 1,763 20,132 
Total Liabilities$277,010 $2,240 $1,002,227 $237,277 $319,369 $2,624,345 $219,920 $4,682,388 
December 31, 2022 (As Restated)
Assets
Servicer advance investments, at fair value$387,675 $— $— $— $— $— $— $387,675 
Residential mortgage loans, held-for-investment, at fair value— — 22,699 — — — — 22,699 
Residential mortgage loans, held-for-sale, at fair value— — 844,000 — — — — 844,000 
Consumer loans— — — 363,756 — — — 363,756 
Assets of consolidated CFEs - investments— — — — 349,975 2,431,867 — 2,781,842 
Mortgage loans receivable— — — — — — — — 
Cash and cash equivalents34,084 28,404 23,473 — — — — 85,961 
Restricted cash7,433 — 7,547 6,652 9,368 11,694 — 42,694 
Other assets9 1,026 165,975 5,253 234 — — 172,497 
Total Assets$429,201 $29,430 $1,063,694 $375,661 $359,577 $2,443,561 $— $4,701,124 
Liabilities
Secured financing agreements(A)
— — 51,325 — — — — 51,325 
Secured notes and bonds payable(A)
313,093 — 768,959 299,498 — — — 1,381,550 
Notes payable of consolidated CFEs(A)
— — — — 312,918 2,095,478 — 2,408,396 
Accrued expenses and other liabilities1,928 4,306 25,381 1,144 348 11,695 — 44,802 
Total Liabilities$315,021 $4,306 $845,665 $300,642 $313,266 $2,107,173 $— $3,886,073 
(A)The creditors of the VIEs do not have recourse to the general credit of Rithm Capital Corp., and the assets of the VIEs are not directly available to satisfy Rithm Capital Corp’s obligations.
(B)Reflects Assets of consolidated CFEs - Investments, at fair value and other assets and Liabilities of consolidated CFEs - Notes payable, at fair value and other liabilities on the Consolidated Balance Sheets.
Non-Consolidated VIEs
The Company retains interest in certain VIEs pursuant to required risk retention regulations. The Company does not consolidate such VIEs as it is not considered the primary beneficiary. The following table summarizes the restated carrying value of the real estate bonds issued by unconsolidated VIEs and retained by the Company, which reflects the Company’s maximum exposure to loss, as well as the UPB of transferred loans. These bonds are presented as part of Real estate and other securities on the Consolidated Balance Sheets:
As of and for the
Year Ended December 31,
2023
(As Restated)		2022
(As Restated)
Residential mortgage loan UPB and other collateral$8,237,692$9,373,222
Weighted average delinquency(A)
5.30%5.60%
Net credit losses$162,061$135,758
Face amount of debt held by third parties(B)
$7,596,408$8,682,793
Carrying value of bonds retained by Rithm Capital(C)(D)
$543,447$596,800
Cash flows received by Rithm Capital on these bonds$91,401$142,555
(A)Represents the percentage of the UPB that is 60+ days delinquent.
(B)Excludes real estate bonds retained by Rithm Capital.
(C)Includes real estate bonds retained pursuant to required risk retention regulations.
(D)Classified within Level 3 of the fair value hierarchy as the valuation is based on certain unobservable inputs including discount rate, prepayment rates and loss severity. See Note 21 for details on unobservable inputs.

The following table summarizes the Company’s involvement with VIEs related to the asset management business that are not consolidated. The Company’s involvement, through Sculptor, is generally limited to providing asset management services and, in certain cases, investments in the VIEs. The maximum exposure to loss represents the potential loss of current investments or income and fees receivables from these entities, as well as the obligation to repay unearned revenues, primarily incentive income subject to clawback, in the event of any future fund losses, as well as unfunded commitments to certain funds that are VIEs. The Company does not provide, nor is it required to provide, any type of non-contractual financial or other support to its VIEs that are not consolidated beyond its share of capital and other commitments described in Note 24.
As of and for the
Year Ended December 31,
20232022
Net assets of unconsolidated VIEs in which the Company has a variable interest$12,782,124$—
Maximum risk of loss as a result of the Company’s involvement with unconsolidated VIEs:
Unearned income and fees37,468—
Income and fees receivable43,250—
Investments533,026—
Unfunded commitments(A)
207,575—
Maximum Exposure to Loss$821,319$—
(A)Includes commitments from certain employees and executive managing directors in the amounts of $97.5 million and $0.0 million as of December 31, 2023 and December 31, 2022, respectively.
The following table summarizes the carrying value of the Company’s unconsolidated commercial real estate projects which reflects the Company’s maximum exposure to loss. See Note 24 regarding certain guarantees provided in connection with the investments. These investments are presented as part of Equity investments within other assets on the Consolidated Balance Sheets:
December 31,
20232022
Carrying value of commercial real estate held within unconsolidated VIEs$66,652 $— 
Carrying value of Rithm Capital’s investments in unconsolidated commercial real estate VIEs$29,210 $— 

Noncontrolling Interests
Noncontrolling interests represent the ownership interests in certain consolidated subsidiaries held by entities or persons other than Rithm Capital and it is presented as a separate component of Equity on the Company’s Consolidated Balance Sheets. These interests are related to noncontrolling interests in consolidated entities that hold servicer advance investments (Note 8), the Newrez Joint Ventures, (Note 10), consumer loans (Note 11) and Sculptor investments.

Others’ interests in the equity of consolidated subsidiaries is computed as follows:
December 31, 2023December 31, 2022
Total Consolidated EquityOthers' Ownership InterestOthers' Interest in Equity of Consolidated SubsidiaryTotal Consolidated EquityOthers' Ownership InterestOthers' Interest in Equity of Consolidated Subsidiary
Advance Purchaser(A)
$104,458 10.7 %$11,157 $114,180 10.7 %$12,193 
Newrez Joint Ventures$16,607 49.5 %$8,220 $25,124 49.5 %$12,437 
Consumer Loan Companies$72,361 46.5 %$33,748 $91,263 46.5 %$42,437 

Others’ interests in the net income (loss) is computed as follows:
Year Ended December 31,
202320222021
Net income (loss)Others’ ownership interest as a percent of totalOthers’ interest in net income (loss) of consolidated subsidiariesNet income (loss)Others’ ownership interest as a percent of totalOthers’ interest in net income (loss) of consolidated subsidiariesNet income (loss)Others’ ownership interest as a percent of totalOthers’ interest in net income (loss) of consolidated subsidiaries
Advance Purchaser(A)
$7,978 10.7 %$852 $26,685 10.7 %$2,850 $(13,937)12.9 %$(1,800)
Newrez Joint Ventures$1,174 49.5 %$581 $5,487 49.5 %$2,716 $22,839 49.5 %$11,298 
Consumer Loan Companies$14,235 46.5 %$6,619 $49,892 46.5 %$23,200 $51,307 46.5 %$23,858 
(A)Rithm Capital owned 89.3% of Advance Purchaser as of the years ended December 31, 2023, 2022 and 2021.

Noncontrolling interests related to Sculptor represents the ownership interests in certain funds held by entities or persons other than the Company. These interests substantially relate to interests held by Sculptor employees in real estate funds managed by the Company adjusted for their capital activity and allocated earnings in such funds. Such employees’ portion of carried interest is expensed and recorded within compensation and benefits on the Consolidated Statements of Operations, and therefore excluded in the calculation of noncontrolling interests. As of December 31, 2023, others’ interest in the net equity of consolidated subsidiaries related to Sculptor was $41.0 million.

For a discussion of the restatement, refer to Notes 3 and 28.