RESIDENTIAL MORTGAGE LOANS (AS RESTATED)

3 Months Ended

Mar. 31, 2024

RESIDENTIAL MORTGAGE LOANS (AS RESTATED)

Rithm Capital accumulates its residential mortgage loan portfolio through originations, bulk acquisitions and the execution of call rights. A majority of the residential mortgage loan portfolio is serviced by Newrez.

Loans are accounted for based on Rithm Capital’s strategy and intent for the loan and on whether the loan was credit-impaired at the date of acquisition. As of March 31, 2024, Rithm Capital accounts for loans based on the following categories:

•Loans held-for-investment (“HFI”), at fair value

•Loans held-for-sale (“HFS”), at lower of cost or fair value

•Loans HFS, at fair value

•Investments of consolidated CFEs represent mortgage loans held by certain private label mortgage securitization trusts where Rithm Capital is determined to be a primary beneficiary and, as a result, consolidates such trusts. The assets are measured based on the fair value of the more observable liabilities of such trusts under the CFE election. The assets can only be used to settle obligations and liabilities of such trusts for which creditors do not have recourse to Rithm Capital Corp.

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


	March 31, 2024 (As Restated)								December 31, 2023 (As Restated)
	Outstanding Face Amount		Carrying Value		Loan Count	Weighted Average Yield		Weighted Average Life (Years)(A)	Carrying Value
Investments of consolidated CFEs(E)	$	3,453,537	$	3,257,446	9,397	5.6	%	26.8	$	3,038,587
Residential mortgage loans, held-for-investment, at fair value	$	434,474	$	365,398	8,070	8.1	%	5.2	$	379,044


Acquired performing loans(B)	64,851		54,056		1,841	8.0	%	5.3	57,038
Acquired non-performing loans(C)	24,609		20,359		302	8.5	%	6.0	21,839
Total residential mortgage loans, HFS, at lower of cost or market	$	89,460	$	74,415	2,143	8.1	%	5.5	$	78,877

Acquired performing loans(B)(D)	$	542,335	$	490,552	2,979	5.7	%	15.8	$	400,603
Acquired non-performing loans(C)(D)	294,077		271,316		1,501	4.8	%	23.1	204,950
Originated loans	2,864,943		2,929,832		9,029	6.8	%	29.5	1,856,312
Total residential mortgage loans, HFS, at fair value	$	3,701,355	$	3,691,700	13,509	6.5	%	27.0	$	2,461,865
Total residential mortgage loans, held-for-sale, at fair value/lower of cost or market	$	3,790,815	$	3,766,115	15,652				$	2,540,742

(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 March 31, 2024, Rithm Capital has placed non-performing loans, HFS on non-accrual status, except as described in (D) below.

(D)Includes $228.6 million and $222.7 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.

(E)Residential mortgage loans of consolidated CFEs are classified as Level 2 in the fair value hierarchy and valued based on the fair value of the more observable financial liabilities under the CFE election.

The following table summarizes the geographic distribution of Residential mortgage loans, held-for-sale and Residential mortgage loans, held-for-investment at fair value on the Consolidated Balance Sheets:


	Percentage of Total Outstanding Unpaid Principal Amount
State Concentration	March 31, 2024		December 31, 2023
California	10.3	%	8.3	%
Florida	9.8	%	9.3	%
Texas	8.2	%	9.5	%
New York	6.3	%	8.0	%
Georgia	4.8	%	4.9	%
North Carolina	3.7	%	3.2	%
Illinois	3.6	%	3.5	%
New Jersey	3.6	%	3.9	%
Virginia	3.4	%	3.6	%
Maryland	3.2	%	3.3	%
Other US	43.1	%	42.5	%
	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 Residential mortgage loans, held-for-sale and Residential mortgage loans, held-for-investment at fair value on the Consolidated Balance Sheets which are 90 days or more past due:


	March 31, 2024						December 31, 2023
Days Past Due	UPB		Carrying Value		Carrying Value Over (Under) UPB		UPB		Carrying Value		Carrying Value Over (Under) UPB

90+	$	382,646	$	344,488	$	(38,158)	$	313,122	$	281,556	$	(31,566)

The following table summarizes the activity for the period of Residential mortgage loans, held-for-sale and Residential mortgage loans, held-for-investment at fair value on the Consolidated Balance Sheets:


	Loans HFI, at Fair Value		Loans HFS, at Lower of Cost or Fair Value		Loans HFS, at Fair Value		Total
Balance at December 31, 2023 (As Restated)	$	379,044	$	78,877	$	2,461,865	$	2,919,786
Originations	—		—		10,869,683		10,869,683
Sales	—		—		(9,849,739)		(9,849,739)
Purchases/additional fundings	—		—		502,625		502,625
Proceeds from repayments	(11,854)		(3,330)		(10,029)		(25,213)
Transfer of loans (to) from other assets(A)	—		(364)		(285,165)		(285,529)
Transfer of loans to REO	(994)		(561)		(2,204)		(3,759)


Impairment (loss) reversal	—		(207)		—		(207)
Fair value adjustments due to:
Changes in instrument-specific credit risk	(3,475)		—		(390)		(3,865)
Other factors	2,677		—		5,054		7,731
Balance at March 31, 2024 (As Restated)	$	365,398	$	74,415	$	3,691,700	$	4,131,513

(A)Includes loans transferred to consolidated CFEs.

Net Interest Income

The following table summarizes the net interest income for Residential mortgage loans, held-for-sale and Residential mortgage loans, held-for-investment at fair value on the Consolidated Balance Sheets:


	Three Months Ended March 31,
	2024		2023
Interest income:
Loans HFI, at fair value	$	7,857	$	9,509
Loans HFS, at lower of cost or fair value	861		1,504
Loans HFS, at fair value	36,016		37,286
Total interest income	$	44,734	$	48,299

Interest expense:
Loans HFI, at fair value	4,224		4,670
Loans HFS, at lower of cost or fair value	716		907
Loans HFS, at fair value	37,238		42,779
Total interest expense	$	42,178	$	48,356

Net interest income	$	2,556	$	(57)

Gain on Originated Residential Mortgage Loans, HFS, Net

Newrez 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, HFS, net in the Consolidated Statements of Operations.

The following table summarizes the components of gain on originated residential mortgage loans, HFS, net:


	Three Months Ended March 31,
	2024 (As Restated)		2023 (As Restated)
Gain (loss) on residential mortgage loans originated and sold, net(A)	$	(124,113)	$	(34,314)
Gain (loss) on settlement of residential mortgage loan origination derivative instruments(B)	(15,524)		9,904
MSRs retained on transfer of residential mortgage loans(C)	215,939		140,513
Other(D)	6,493		(5,443)
Realized gain on sale of originated residential mortgage loans, net	$	82,795	$	110,660
Change in fair value of residential mortgage loans	14,268		31,598
Change in fair value of interest rate lock commitments (Note 18)	7,485		26,240
Change in fair value of derivative instruments (Note 18)	37,910		(59,230)
Gain on originated residential mortgage loans, HFS, net	$	142,458	$	109,268

(A)Includes residential mortgage loan origination fees of $177.7 million and $68.9 million for the three months ended March 31, 2024 and 2023, 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.

For a discussion of the restatement, refer to Note 3.