FAIR VALUE MEASUREMENTS (AS RESTATED)

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS (AS RESTATED)

FAIR VALUE MEASUREMENTS (AS RESTATED)

Fair value represents the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date (i.e., an exit price). The Company holds a variety of assets, certain of which are not publicly traded or that are otherwise illiquid. Significant judgment and estimation go into the assumptions that drive the fair value of these assets. Due to the inherent uncertainty of valuations of investments that are determined to be illiquid or do not have readily ascertainable fair values, the estimates of fair value may differ from the values ultimately realized, and those differences can be material.

US GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is impacted by a number of factors, including the type and the specific characteristics of the assets and liabilities, including existence and transparency of transactions between market participants. Assets and liabilities with readily available actively quoted prices or for which fair value can be measured from actively-quoted prices generally will have a higher degree of market price observability and lesser degree of judgment used in measuring fair value.

Assets and liabilities measured at fair value are classified and disclosed into one of the following categories based on the observability of inputs used in the determination of fair values:

Level 1 – Quoted prices in active markets for identical instruments.

Level 2 – Valuations based principally on other observable market parameters, including:

•Quoted prices in active markets for similar instruments,

•Quoted prices in less active or inactive markets for identical or similar instruments,

•Other observable inputs, such as interest rates, yield curves, volatilities, prepayment rates, loss severities, credit risks and default rates (“CDR”), and

•Market corroborated inputs (derived principally from or corroborated by observable market data).

Level 3 – Valuations based significantly on unobservable inputs.

Rithm Capital follows this hierarchy for its fair value measurements. The classifications are based on the lowest level of input that is significant to the fair value measurement.

The carrying values and fair values of assets and liabilities recorded at fair value on a recurring basis, as well as other financial instruments for which fair value is disclosed, as of March 31, 2024 were as follows, as restated:

	Principal Balance or Notional Amount		Carrying Value		Fair Value
					Level 1		Level 2		Level 3		Net Asset Value (“NAV”)		Total
Assets
Excess MSRs(A)	$	58,577,476	$	255,111	$	—	$	—	$	255,111	$	—	$	255,111
MSRs and MSR financing receivables(A)	526,673,826		8,706,723		—		—		8,706,723		—		8,706,723
Servicer advance investments	313,271		374,511		—		—		374,511		—		374,511
Real estate and other securities(B)	24,017,832		14,857,286		4,497,542		9,566,210		793,535		—		14,857,287
Residential mortgage loans, HFS	89,460		74,415		—		—		74,415		—		74,415
Residential mortgage loans, HFS, at fair value	3,701,355		3,691,700		—		3,353,549		338,151		—		3,691,700
Residential mortgage loans, HFI, at fair value	434,474		365,398		—		—		365,398		—		365,398
Residential mortgage loans subject to repurchase	1,845,889		1,845,889		—		1,845,889		—		—		1,845,889
Consumer loans	1,154,642		1,103,799		—		—		1,103,799		—		1,103,799
Derivative and hedging assets	7,493,928		102,227		62,672		7,492		32,063		—		102,227
Mortgage loans receivable	2,028,938		2,042,913		—		—		2,042,913		—		2,042,913
Notes receivable	503,397		364,977		—		—		364,977		—		364,977
Loans receivable	27,997		27,997		—		—		27,997		—		27,997
Cash, cash equivalents and restricted cash	1,530,983		1,530,983		1,530,983		—		—		—		1,530,983
Reverse repurchase agreements	3,040,756		3,040,756		—		3,040,756		—		—		3,040,756
Assets of consolidated CFEs - funds(E)	324,631		350,043		11,705		—		—		338,337		350,042
Assets of consolidated CFEs - loan securitizations(E)	3,795,368		3,632,016		32,739		3,257,446		341,831		—		3,632,016
Other assets	N/A		62,810		—		—		62,810		—		62,810
			$	42,429,554	$	6,135,641	$	21,071,342	$	14,884,234	$	338,337	$	42,429,554
Liabilities
Secured financing agreements	$	18,278,569	$	18,271,046	$	—	$	18,090,307	$	180,739	$	—	$	18,271,046
Secured notes and bonds payable(C)	9,802,163		9,721,315		—		—		10,060,762		—		10,060,762
Unsecured notes, net of issuance costs	1,298,492		1,205,411		—		—		1,202,005		—		1,202,005
Residential mortgage loan repurchase liability	1,845,889		1,845,889		—		1,845,889		—		—		1,845,889
Payable for investments purchased(D)	1,271,542		1,271,542		1,271,542		—		—		—		1,271,542
Treasury securities payable	2,985,000		2,992,477		2,992,477		—		—		—		2,992,477
Derivative liabilities	4,882,926		33,586		—		15,654		17,932		—		33,586
Liabilities of consolidated CFEs - funds(E)	222,250		223,188		5,065		—		218,123		—		223,188
Liabilities of consolidated CFEs - loan securitizations(E)	3,339,784		3,141,121		16,527		2,800,532		324,062		—		3,141,121
			$	38,705,575	$	4,285,611	$	22,752,382	$	12,003,623	$	—	$	39,041,616

(A)The notional amount represents the total UPB of the residential mortgage loans underlying the MSRs, MSR financing receivables and Excess MSRs. Rithm Capital does not receive an excess mortgage servicing amount on non-performing loans in Agency portfolios.

(B)Includes US Treasury Bills classified as Level 1 and held at amortized cost basis of $24.9 million (see Note 8). Carrying value equals fair value for all other securities.

(C)Includes SCFT 2020-A (as defined below) MBS issued for which the fair value option for financial instruments was elected and resulted in a fair value of $221.9 million as of March 31, 2024.

(D)Represents the cost of Agency and Non-Agency securities purchased and not settled as of the reporting date. The purchases settled prior to issuance.

(E)Represents assets and notes issued by consolidated VIEs accounted for under the CFE election.

The following table summarizes the changes in the Company’s Level 3 inputs financial assets for the period presented:

	Level 3
	Excess MSRs(A)(B)		MSRs and MSR Financing Receivables(A)		Servicer Advance Investments		Non-Agency Securities		Derivatives(C)		Residential Mortgage Loans		Consumer Loans		Notes and Loans Receivable		Mortgage Loans Receivable(D)		Total
Balance at December 31, 2023 (As Restated)	$	271,150	$	8,405,938	$	376,881	$	804,029	$	23,804	$	513,381	$	1,274,005	$	429,550	$	2,232,913	$	14,331,651
Transfers
Transfers from Level 3	—		—		—		—		—		—		—		—		—		—
Transfers to Level 3	—		—		—		—		—		106		—		—		—		106
Gain (loss) included in net income
Credit losses on securities(E)	—		—		—		(662)		—		—		—		—		—		(662)
Servicing revenue, net(F)
Included in servicing revenue(F)	—		84,175		—		—		—		—		—		—		—		84,175
Change in fair value of
Excess MSRs(E)	(1,867)		—		—		—		—		—		—		—		—		(1,867)
Excess MSRs, equity method investees(E)	—		—		—		—		—		—		—		—		—		—
Servicer advance investments	—		—		8,115		—		—		—		—		—		—		8,115
Consumer loans	—		—		—		—		—		—		(30,117)		—		—		(30,117)
Residential mortgage loans	—		—		—		—		—		5,596		—		—		—		5,596
Gain (loss) on settlement of investments, net	—		—		—		36		—		—		—		—		—		36
Other income (loss), net(E)	—		—		—		2,860		(9,612)		1,824		—		—		14,873		9,945
Gains (losses) included in OCI(G)	—		—		—		737		—		—		—		—		—		737
Interest income	2,446		—		7,315		8,496		—		—		10,152		1,094		—		29,503
Purchases, sales and repayments
Purchases, net(H)	—		—		212,656		17,579		—		216,405		4,113		—		—		450,753
Proceeds from sales	—		671				—		—		(17,766)		—		—		—		(17,095)
Proceeds from repayments	(16,618)		$	—	(230,456)		(39,540)		—		(16,042)		(154,354)		(37,670)		(505,091)		(999,771)
Originations and other	—		215,939		—		—		(61)		45		—		—		642,049		857,972
Balance at March 31, 2024 (As Restated)	$	255,111	$	8,706,723	$	374,511	$	793,535	$	14,131	$	703,549	$	1,103,799	$	392,974	$	2,384,744	$	14,729,077

(A)Includes the recapture agreement for each respective pool, as applicable.

(B)Amounts include Rithm Capital’s portion of the Excess MSRs held by the respective joint ventures in which Rithm Capital has a 50% interest.

(C)For the purpose of this table, the IRLC asset and liability positions and other commitment derivatives are shown net.

(D)Includes mortgage loans receivable of consolidated CFEs classified as level 3 in the fair hierarchy.

(E)Gain (loss) recorded in earnings during the period is attributable to the change in unrealized gain (loss) relating to Level 3 assets still held at the reporting dates and realized gain (loss) recorded during the period.

(F)See Note 6 for further details on the components of servicing revenue, net.

(G)Gain (loss) included in unrealized gain (loss) on available-for-sale securities, net in the Consolidated Statements of Comprehensive Income.

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

The following table summarizes the changes in the Company’s Level 3 financial liabilities for the period presented, as restated:

	Level 3
	Asset-Backed Securities Issued		Notes Payable of Consolidated Funds		Mortgage Loans Receivable Notes Payable of CFE		Total
Balance at December 31, 2023	$	235,770	$	218,157	$	318,998	$	772,925
Gains (losses) included in net income
Other income(A)	(411)		(34)		5,064		4,619
Purchases, sales and repayments
Proceeds from sales	—		—		—		—
Payments	(13,437)		—		—		(13,437)
Balance at March 31, 2024	$	221,922	$	218,123	$	324,062	$	764,107

(A)Gain (loss) recorded in earnings during the period is attributable to the change in unrealized gain (loss) relating to Level 3 financial liabilities still held at the reporting dates and realized gain (loss) recorded during the period.

See Note 21 in the Company’s Amended 2023 Form 10-K/A for a listing of criteria used to determine the significant inputs for each asset class.

Excess MSRs, MSRs and MSR Financing Receivables Valuation

Fair value estimates of Rithm Capital’s MSRs and Excess MSRs were based on internal pricing models. The valuation technique is based on discounted cash flows. Significant inputs used in the valuations included expectations of prepayment rates, delinquency rates, recapture rates for Excess MSRs, the mortgage servicing amount or excess mortgage servicing amount of the underlying residential mortgage loans, as applicable, and discount rates that market participants would use in determining the fair values of MSRs on similar pools of residential mortgage loans. In addition, for MSRs, significant inputs included the market-level estimated cost of servicing.

Significant increases (decreases) in the discount rates, prepayment or delinquency rates, or costs of servicing, in isolation would result in a significantly lower (higher) fair value measurement, whereas significant increases (decreases) in the recapture rates or mortgage servicing amount or excess mortgage servicing amount, as applicable, in isolation would result in a significantly higher (lower) fair value measurement. Generally, a change in the delinquency rate assumption is accompanied by a directionally similar change in the assumption used for the prepayment rate.

The following table summarizes certain information regarding the ranges and weighted averages of inputs used as of March 31, 2024:

	Significant Inputs(A)
	Prepayment Rate(B)	Delinquency(C)	Recapture Rate(D)	Mortgage Servicing Amount or Excess Mortgage Servicing Amount (bps)(E)	Collateral Weighted Average Maturity (Years)(F)
Excess MSRs Directly Held	2.5% – 12.0% (6.6%)	0.2% – 15.0% (6.2%)	0.0% – 91.3% (55.4%)	7 – 32 (20)	11 – 26 (20)
Excess MSRs Held through Investees	7.4% – 10.1% (8.6%)	1.8% – 5.0% (3.2%)	45.4% – 64.1% (59.2%)	16 – 25 (21)	14 – 21 (18)
MSRs and MSR Financing Receivables
Agency	0.6% – 83.7% (6.4%)	0.1% – 100.0% (1.7%)	—(G)	12 – 136 (27)	0 – 40 (22)
Non-Agency	0.8% – 83.5% (7.7%)	0.8% – 80.0% (26.6%)	—(G)	1 – 277 (46)	0 – 40 (20)
Ginnie Mae	4.5% – 81.9% (9.1%)	0.1% – 71.4% (8.1%)	—(G)	19 – 119 (44)	0 – 39 (27)
Total/Weighted Average—MSRs and MSR Financing Receivables	0.6% – 83.7% (7.3%)	0.1% – 100.0% (5.5%)	—(G)	1 – 277 (33)	0 – 40 (24)

(A)Weighted by fair value of the portfolio.

(B)Projected annualized weighted average lifetime voluntary and involuntary prepayment rate using a prepayment vector.

(C)Projected percentage of residential mortgage loans in the pool for which the borrower is expected to miss a mortgage payment.

(D)Percentage of voluntarily prepaid loans that are expected to be refinanced by the related servicer or subservicer, as applicable.

(E)Weighted average total mortgage servicing amount, in excess of the basic fee as applicable, measured in basis points (“bps”). As of March 31, 2024, weighted average costs of subservicing of $6.91 – $7.09 ($6.95) per loan per month was used to value the agency MSRs. Weighted average costs of subservicing of $7.54 – $9.55 ($9.17) per loan per month was used to value the non-agency MSRs, including MSR financing receivables. Weighted average cost of subservicing of $8.37 per loan per month was used to value the Ginnie Mae MSRs.

(F)Weighted average maturity of the underlying residential mortgage loans in the pool.

(G)Recapture is not considered a significant input for MSRs and MSR financing receivables.

With respect to valuing the PHH-serviced MSRs and MSR financing receivables, which include a significant servicer advances receivable component, the cost of financing servicer advances receivable is assumed to be SOFR plus 4.1%.

As of March 31, 2024, a weighted average discount rate of 8.8% (range of 8.5% – 9.0%) was used to value Rithm Capital’s Excess MSRs (directly and through equity method investees). As of March 31, 2024, a weighted average discount rate of 8.5% (range of 7.9% – 10.8%) was used to value Rithm Capital’s MSRs and MSR financing receivables.

The following table summarizes the estimated change in fair value of Rithm Capital’s interests in the Agency MSRs, owned as of March 31, 2024, given several parallel shifts in the discount rate, prepayment rate and delinquency rate:

Fair value at March 31, 2024	$	5,477,522
Discount rate shift in %	-20%			-10%			10%			20%
Estimated fair value	$	5,916,038		$	5,688,536		$	5,281,385		$	5,098,703
Change in estimated fair value:
Amount	$	438,516		$	211,014		$	(196,137)		$	(378,819)
Percentage	8.0		%	3.9		%	(3.6)		%	(6.9)		%
Prepayment rate shift in %	-20%			-10%			10%			20%
Estimated fair value	$	5,712,739		$	5,589,924		$	5,374,997		$	5,279,423
Change in estimated fair value:
Amount	$	235,217		$	112,402		$	(102,525)		$	(198,099)
Percentage	4.3		%	2.1		%	(1.9)		%	(3.6)		%
Delinquency rate shift in %	-20%			-10%			10%			20%
Estimated fair value	$	5,564,061		$	5,524,189		$	5,424,447		$	5,365,476
Change in estimated fair value:
Amount	$	86,539		$	46,667		$	(53,075)		$	(112,046)
Percentage	1.6		%	0.9		%	(1.0)		%	(2.0)		%

The following table summarizes the estimated change in fair value of Rithm Capital’s interests in the Non-Agency MSRs, including MSR financing receivables, owned as of March 31, 2024, given several parallel shifts in the discount rate, prepayment rate and delinquency rate:

Fair value at March 31, 2024	$	666,958
Discount rate shift in %	-20%			-10%			10%			20%
Estimated fair value	$	736,242		$	700,014		$	636,705		$	608,936
Change in estimated fair value:
Amount	$	69,284		$	33,056		$	(30,253)		$	(58,022)
Percentage	10.4		%	5.0		%	(4.5)		%	(8.7)		%
Prepayment rate shift in %	-20%			-10%			10%			20%
Estimated fair value	$	705,048		$	685,527		$	649,291		$	632,451
Change in estimated fair value:
Amount	$	38,090		$	18,569		$	(17,667)		$	(34,507)
Percentage	5.7		%	2.8		%	(2.6)		%	(5.2)		%
Delinquency rate shift in %	-20%			-10%			10%			20%
Estimated fair value	$	702,058		$	685,264		$	647,274		$	626,531
Change in estimated fair value:
Amount	$	35,100		$	18,306		$	(19,684)		$	(40,427)
Percentage	5.3		%	2.7		%	(3.0)		%	(6.1)		%

The following table summarizes the estimated change in fair value of Rithm Capital’s interests in the Ginnie Mae MSRs, owned as of March 31, 2024, given several parallel shifts in the discount rate, prepayment rate and delinquency rate:

Fair value at March 31, 2024	$	2,562,243
Discount rate shift in %	-20%			-10%			10%			20%
Estimated fair value	$	2,767,898		$	2,661,043		$	2,470,671		$	2,385,605
Change in estimated fair value:
Amount	$	205,655		$	98,800		$	(91,572)		$	(176,638)
Percentage	8.0		%	3.9		%	(3.6)		%	(6.9)		%
Prepayment rate shift in %	-20%			-10%			10%			20%
Estimated fair value	$	2,710,793		$	2,632,485		$	2,498,505		$	2,439,407
Change in estimated fair value:
Amount	$	148,550		$	70,242		$	(63,738)		$	(122,836)
Percentage	5.8		%	2.7		%	(2.5)		%	(4.8)		%
Delinquency rate shift in %	-20%			-10%			10%			20%
Estimated fair value	$	2,739,713		$	2,654,908		$	2,463,189		$	2,359,206
Change in estimated fair value:
Amount	$	177,470		$	92,665		$	(99,054)		$	(203,037)
Percentage	6.9		%	3.6		%	(3.9)		%	(7.9)		%

Each of the preceding sensitivity analyses is hypothetical and is provided for illustrative purposes only. There are certain limitations inherent in the sensitivity analyses presented. In particular, the results are calculated by stressing a particular economic assumption independent of changes in any other assumption; in practice, changes in one factor may result in changes in another, which might counteract or amplify the sensitivities. Also, changes in the fair value based on a 10% variation in an assumption generally may not be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear.

Servicer Advance Investments Valuation

The following table summarizes certain information regarding the ranges and weighted averages of significant inputs used in valuing the servicer advance investments, including the basic fee component of the related MSRs:

	Significant Inputs
	Outstanding Servicer Advances to UPB of Underlying Residential Mortgage Loans	Prepayment Rate(A)	Delinquency	Mortgage Servicing Amount(B)		Discount Rate	Collateral Weighted Average Maturity (Years)(C)
Servicer advance investments	1.2% – 2.4% (2.4%)	3.9% – 4.9% (4.8%)	6.6% – 20.0% (19.7%)	18.2 – 19.9 (19.8)	bps	6.2% – 6.7% (6.2%)	20.9 – 21.6 (21.6)

(A)Projected annual weighted average lifetime voluntary and involuntary prepayment rate using a prepayment vector.

(B)Mortgage servicing amount is net of 2.2 bps which represents the amount Rithm Capital paid its servicers as a monthly servicing fee.

(C)Weighted average maturity of the underlying residential mortgage loans in the pool.

Real Estate and Other Securities Valuation

Rithm Capital’s real estate and other securities valuation methodology and results are detailed below. Treasury securities are valued using market-based prices published by the US Department of the Treasury and are classified as Level 1. The table below is as of March 31, 2024, as restated.

					Fair Value
Asset Type	Outstanding Face Amount		Amortized Cost Basis		Multiple Quotes(A)		Single Quote(B)		Total		Level
Agency	$	9,751,506	$	9,549,450	$	9,566,210	$	—	$	9,566,210	2
Non-Agency	9,741,326		765,827		581,539		211,996		793,535		3
Total	$	19,492,832	$	10,315,277	$	10,147,749	$	211,996	$	10,359,745

(A)Rithm Capital generally obtains pricing service quotations or broker quotations from two sources. Rithm Capital evaluates quotes received, determines one as being most representative of fair value and does not use an average of the quotes. Even if Rithm Capital receives two or more quotes on a particular security that come from non-selling brokers or pricing services, it does not use an average because it believes using an actual quote more closely represents a transactable price for the security than an average level. Furthermore, in some cases, for Non-Agency securities, there is a wide disparity between the quotes Rithm Capital receives. Rithm Capital believes using an average of the quotes in these cases would not represent the fair value of the asset. Based on Rithm Capital’s own fair value analysis, it selects one of the quotes which is believed to most accurately reflect fair value. Rithm Capital has not adjusted any of the quotes received in the periods presented. These quotations are generally received via email and contain disclaimers which state that they are “indicative” and not “actionable” — meaning that the party giving the quotation is not bound to purchase the security at the quoted price. Rithm Capital’s investments in Agency RMBS are classified within Level 2 of the fair value hierarchy because the market for these securities is active and market prices are readily observable.

The third-party pricing services and brokers engaged by Rithm Capital (collectively, “valuation providers”) use either the income approach or the market approach, or a combination of the two, in arriving at their estimated valuations of securities. Valuation providers using the market approach generally look at prices and other relevant information generated by market transactions involving identical or comparable assets. Valuation providers using the income approach create pricing models that generally incorporate such assumptions as discount rates, expected prepayment rates, expected default rates and expected loss severities. Rithm Capital has reviewed the methodologies utilized by its valuation providers and has found them to be consistent with GAAP requirements. In addition to obtaining multiple quotations, when available, and reviewing the valuation methodologies of its valuation providers, Rithm Capital creates its own internal pricing models for Level 3 securities and uses the outputs of these models as part of its process of evaluating the fair value estimates it receives from its valuation providers. These models incorporate the same types of assumptions as the models used by the valuation providers, but the assumptions are developed independently. These assumptions are regularly refined and updated at least quarterly by Rithm Capital and reviewed by its independent valuation group, which is separate from its investment acquisition and management group, to reflect market developments and actual performance.

For 60.3% of Non-Agency securities, the ranges and weighted averages of assumptions used by Rithm Capital’s valuation providers are summarized in the table below. The assumptions used by Rithm Capital’s valuation providers with respect to the remainder of Non-Agency securities were not readily available.

	Fair Value		Discount Rate	Prepayment Rate(a)	CDR(b)	Loss Severity(c)
Non-Agency (As Restated)	$	478,826	0.0% – 12.6% (6.6%)	0.0% – 20.0% (11.7%)	0.0% – 2.0% (1.0%)	0.0% – 49.0% (18.7%)

(a)Represents the annualized rate of the prepayments as a percentage of the total principal balance of the pool.

(b)Represents the annualized rate of the involuntary prepayments (defaults) as a percentage of the total principal balance of the pool.

(c)Represents the expected amount of future realized losses resulting from the ultimate liquidation of a particular loan, expressed as the net amount of loss relative to the outstanding balance of the loans in default.

(B)Rithm Capital was unable to obtain quotations from more than one source on these securities.

Residential Mortgage Loans Valuation

Rithm Capital, through Newrez, originates residential mortgage loans that it intends to sell into Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securitizations. Residential mortgage loans HFS, at fair value are typically pooled together and sold into certain exit markets, depending upon underlying attributes of the loan, such as agency eligibility, product type, interest rate and credit quality. Newrez also originates non-qualified residential mortgage (“Non-QM”) loans that do not meet the qualified mortgage rules per the Consumer Financial Protection Bureau that it intends to sell to private investors. Residential mortgage loans HFS, at fair value are valued using a market approach by utilizing either: (i) the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value of a whole mortgage loan, (ii) current commitments to purchase loans or (iii) recent observable market trades for similar loans, adjusted for credit risk and other individual loan characteristics. As these prices are derived from market observable inputs, Rithm Capital classifies these

valuations as Level 2 in the fair value hierarchy. Originated residential mortgage loans HFS for which there is little to no observable trading activity of similar instruments are valued using Level 3 measurements based upon (i) internal pricing models to forecast loan level cash flows using inputs such as default rates, prepayments speeds and discount rates or (ii) consensus pricing (broker quotes) or historical sale transactions for similar loans.

Residential mortgage loans HFS, at fair value also include nonconforming seasoned mortgage loans acquired and identified for securitization, which are valued using internal pricing models to forecast loan level cash flows based on a potential securitization exit using inputs such as default rates, prepayments speeds and discount rates, and may include adjustments based on consensus pricing (broker quotes). Residential mortgage loans HFI, at fair value include nonconforming seasoned mortgage loans acquired and not identified for sale or securitization, which are valued using internal pricing models to forecast loan level cash flows using inputs such as default rates, prepayments speeds and discount rates, and may include adjustments based on consensus pricing (broker quotes). As the internal pricing models are based on certain unobservable inputs, Rithm Capital classifies these valuations as Level 3 in the fair value hierarchy.

For non-performing loans, asset liquidation cash flows are derived based on the estimated time to liquidate the loan, the estimated value of the collateral, expected costs and estimated home price levels. Estimated cash flows for both performing and non-performing loans are discounted at yields considered appropriate to arrive at a reasonable exit price for the asset. Rithm Capital classifies these valuations as Level 3 in the fair value hierarchy.

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing residential mortgage loans HFS, at fair value classified as Level 3 as of March 31, 2024:

Performing Loans	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Acquired loans	$	215,160	5.9% – 9.7% (6.4%)	2.3% – 9.1% (7.3%)	1.3% – 6.6% (2.7%)	6.9% – 55.4% (11.7%)
Originated loans(A)	32,617		4.4%	8.9%	3.6%	20.7%
Residential mortgage loans HFS, at fair value	$	247,777

Non-Performing Loans	Fair Value		Discount Rate	Annual change in home prices	CDR	Current Value of Underlying Properties
Acquired loans	$	62,848	4.8% – 10.0% (6.3%)	2.0%– 7.6% (3.8%)	1.3% – 4.3% (3.3%)	223.1% – 863.9% (243.7%)
Originated loans(A)	5,786		4.4%	N/A	3.6%	N/A
Residential mortgage loans HFS, at fair value	$	68,634

(A)Includes inputs for 66.9% and 50.8% of originated performing and non-performing loans, respectively, classified as Level 3. The remainder of performing and non-performing loans were priced using dealer price quotes and historical sale transactions for similar loans with a range of 50.9% - 100.0% (85.8%).

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing residential mortgage loans HFI, at fair value classified as Level 3 as of March 31, 2024:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Residential mortgage loans HFI, at fair value	$	365,398	7.9% – 9.8% (8.1%)	3.0% – 3.9% (3.6%)	1.3% – 6.6% (5.1%)	23.2% – 55.4% (43.4%)

Consumer Loans Valuation

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing consumer loans HFI, at fair value classified as Level 3 as of March 31, 2024:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
SpringCastle	$	267,948	8.4% – 9.4% (8.6%)	9.4% – 35.7% (15.5%)	1.7% – 7.3% (5.0%)	85.7% – 100.0% (93.6%)
Marcus	835,851		7.8%	19.8%	11.3%	86.0%
Consumer loans, HFI, at fair value	$	1,103,799

Mortgage Loans Receivable Valuation

Rithm Capital classifies mortgage loans receivable as Level 3 in the fair value hierarchy. Performing originated mortgage loans are valued using (i) a market-based approach by utilizing the fair value of securities backed by similar loans adjusted for certain factors to approximate the fair value of a whole loan or (ii) current commitments to acquire the loans. Non-performing loan liquidation cash flows are derived based on the estimated value of the collateral, estimated recoveries and costs, and estimated time to liquidate the asset. Acquired mortgage loans receivable are valued using internal pricing models to forecast cash flows with inputs such as default rates, prepayments speeds and discount rates, and may include adjustments based on consensus pricing (broker quotes). The following table summarizes certain information regarding the weighted averages of inputs used in valuing mortgage loans receivable, at fair value classified as Level 3 as of March 31, 2024:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Acquired mortgage loans receivable	$	73,934	10.7%	—%	1.8% – 2.5% (2.1%)	25.0%
Originated mortgage loans receivable	1,968,979		9.6%	N/A	N/A	N/A
Mortgage loans receivable, at fair value	$	2,042,913

Derivatives and Hedging Valuation

Rithm Capital enters into economic hedges including interest rate swaps, caps and TBAs, which are categorized as Level 2 in the valuation hierarchy. Rithm Capital generally values such derivatives using quotations, similarly to the method of valuation used for Rithm Capital’s other assets that are classified as Level 2 in the fair value hierarchy. Treasury short sales are valued using market-based prices published by the US Department of the Treasury and classified as Level 1.

Other commitment relates to an agreement entered into by a subsidiary of Rithm Capital with its affiliate requiring a payment under certain circumstances dependent upon amounts realized from an investment of the affiliate. It is valued at the excess of cost basis over the intrinsic value of the underlying investment and classified as Level 3 in the fair value hierarchy. In addition, Rithm Capital enters into IRLCs, which are valued using internal pricing models (i) incorporating market pricing for instruments with similar characteristics, (ii) estimating the fair value of the servicing rights expected to be recorded at sale of the loan and (iii) adjusting for anticipated loan funding probability. Both the fair value of servicing rights expected to be recorded at the date of sale of the loan and anticipated loan funding probability are significant unobservable inputs and therefore, IRLCs are classified as Level 3 in the fair value hierarchy.

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing IRLCs as of March 31, 2024:

	Fair Value		Loan Funding Probability	Fair Value of Initial Servicing Rights (Bps)
IRLCs, net	$	31,228	0.4% – 100.0% (83.6%)	4.4 – 345.0 (239.7)

Asset-Backed Securities Issued

As of March 31, 2024, Rithm Capital was the primary beneficiary of the SCFT 2020-A (as defined below) securitization, and therefore, Rithm Capital’s Consolidated Balance Sheets include the asset-backed securities issued by the trust. Rithm Capital elected the fair value option for the securities and valued them consistently with Non-Agency securities described above.

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing asset-backed securities issued as of March 31, 2024:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Asset-backed securities issued	$	221,922	5.8%	15.5%	5.0%	93.6%

Notes Receivable and Loans Receivable

From time to time, Rithm Capital purchases notes and loans receivable that are generally collateralized by commercial real estate assets. Rithm Capital generally uses internal discounted cash flow pricing models to estimate the fair value of notes and loans receivable. Solely for March 31, 2024, the fair value of notes receivable was determined utilizing a market approach based on an observable trade in the specific security. Due to the fact that the fair value of Rithm Capital’s notes and loans receivable are based significantly on unobservable inputs, these are classified as Level 3 in the fair value hierarchy.

Future cash flows are generally estimated using contractual economic terms, as well as significant unobservable inputs, such as the underlying collateral performance. Other significant unobservable inputs include discount rates which estimate the market participants’ required rates of return.

The following table summarizes certain information regarding the carrying value and significant inputs used in valuing Rithm Capital’s notes and loans receivable as of March 31, 2024:

	Fair Value		Discount Rate
Notes receivable	$	364,977	N/A
Loans receivable	27,997		12.7	%
Total	$	392,974

Consolidated Funds

Investments of consolidated funds include investments held by Sculptor’s consolidated structured alternative investment solution. The investments of the consolidated structured alternative investment solution that Sculptor manages are measured at fair value using the NAV per share practical expedient.

The following table summarizes the fair value of the investments by fund type and ability to redeem such investments as of March 31, 2024:

Fund Type(A)	Fair Value		Redemption Frequency	Redemption Notice Period
Open-ended	$	241,058	Monthly - Annually(B)	30 days - 90 days(B)
Close-ended	97,279		None(C)	N/A
Total	$	338,337

(A)The structured alternative investment solution invests in both open-ended and close-ended funds. The investments in each fund may represent investments in a particular tranche of such fund subject to different withdrawal rights.

(B)$168.6 million of investments are subject to an initial lock-up period of three years during which time withdrawals or redemptions are limited. Once the lock-up period ends, the investments can be redeemed with the frequency noted above.

(C)100% of these investments cannot be redeemed, as distributions will be received as the underlying assets are liquidated, which is expected to be approximately 7 to 9 years from inception.

As of March 31, 2024, the structured alternative investment solution had unfunded commitments of $68.4 million related to the investments presented in the table above, which will be funded by capital within the consolidated funds from its underlying open-ended funds and liquid assets.

Notes payable of consolidated funds of $218.1 million as of March 31, 2024 are valued using independent pricing services and are classified as Level 3. The Company performs analytical procedures and compares independent pricing service valuations to other vendors’ pricing as applicable. The Company also performs due diligence reviews on independent pricing services on an annual basis and performs other due diligence procedures as may be deemed necessary. The Company measures the financial liabilities of its consolidated entity based on the fair value of the financial assets of the consolidated entity under the CFE election, as the Company believes the fair value of the financial assets is more observable. Notes payable of consolidated funds are included in Notes payable, at fair value and other liabilities on the Company’s Consolidated Balance Sheets. Unrealized gain (loss) from changes in fair value is included in Realized and unrealized gains (losses), net in the Company’s Consolidated Statements of Operations.

Consolidated Loan Securitizations

Rithm Capital has securitized certain residential mortgage loans and mortgage loans receivable which are held as part of consolidated CFEs. A CFE is a variable interest entity that holds financial assets, issues beneficial interests in those assets and has no more than nominal equity, and the beneficial interests have contractual recourse only to the related assets of the CFE. GAAP allows entities to elect to measure both the financial assets and financial liabilities of the CFE using the more observable of the fair value of the financial assets and the fair value of the financial liabilities of the CFE. Rithm Capital has elected the fair value option for initial and subsequent recognition of the debt issued by its consolidated securitization trust and has determined that the consolidated securitization trust meets the definition of a CFE. See Note 21 for further details regarding VIEs and securitization trusts. Rithm Capital determined the inputs to the fair value measurement of the financial liabilities of its consolidated CFEs to be more observable than those of the financial assets and, as a result, has used the fair value of the financial liabilities of the consolidated CFE to measure the fair value of the financial assets of the consolidated CFE. Refer to Note 2 for the accounting policies of consolidated entities. The fair value of the debt issued by the consolidated CFE is typically valued using external pricing data, which includes third-party valuations.

The securitized residential mortgage loans and mortgage loans receivable, which are assets of the consolidated CFEs, are included in Investments, at fair value and other assets, on the Company’s Consolidated Balance Sheets. The notes issued by the consolidated CFEs are included in Notes payable, at fair value and other liabilities on the Company’s Consolidated Balance Sheets. Unrealized gains (losses) from changes in fair value of the notes issued and assets of the consolidated CFEs and related interest are included in Realized and unrealized gains (losses), net in the Company’s Consolidated Statements of Operations. The securitized residential mortgage loans, mortgage loans receivable, and the notes issued by the Company’s CFEs are classified as Level 2.

Loan securitizations (As Restated)	Investments at fair value		Notes payable at fair value
Residential mortgage loans	$	3,257,446	2,800,532

Rithm Capital classifies securitized mortgage loans receivable as Level 3 in the fair value hierarchy because the notes payable are valued based significantly on unobservable inputs. The valuation methodology is in line with non-agency securities described above. The following table summarizes the inputs used in valuing the notes payable:

Loan securitizations (As Restated)	Investments at Fair Value		Notes Payable at Fair Value		Spread	Prepayment Rate(A)	CDR(B)	Loss Severity(C)
Mortgage loans receivable	$	341,831	$	324,062	2.3% - 6.6% (2.6%)	50.0%	3.0%	15.0%

(A)Represents the annualized rate of the prepayments as a percentage of the total principal balance of the pool.

(B)Represents the annualized rate of the involuntary prepayments (defaults) as a percentage of the total principal balance of the pool.

(C)Represents the expected amount of future realized losses resulting from the ultimate liquidation of a particular loan, expressed as the net amount of loss relative to the outstanding balance of the loans in default.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances, such as when there is evidence of impairment. For residential mortgage loans HFS, foreclosed real estate accounted for as REO and SFR, Rithm Capital measures the assets at the lower of cost or fair value and which may require, from time to time, a nonrecurring fair value adjustment.

At March 31, 2024, assets measured at fair value on a nonrecurring basis were $95.4 million. The $95.4 million of assets include approximately $74.4 million of residential mortgage loans HFS and $21.0 million of REO. The fair value of Rithm Capital’s residential mortgage loans, HFS is estimated based on a discounted cash flow model analysis using internal pricing models and is categorized within Level 3 of the fair value hierarchy.

The following table summarizes the inputs used in valuing these residential mortgage loans as of March 31, 2024:

	Fair Value		Discount Rate	Weighted Average Life (Years)(A)	Prepayment Rate	CDR(B)	Loss Severity(C)
Performing loans	$	54,056	6.5% – 8.3% (8.0%)	4.8 – 6.8 (5.3)	2.3% – 6.2% (4.0%)	3.7% – 7.9% (4.4%)	30.2% – 55.4% (33.7%)
Non-performing loans	20,359		5.9% – 10.0% (8.6%)	5.4 – 9.5 (6.0)	2.4% – 3.1% (2.8%)	1.3% – 9.1% (4.9%)	23.2% – 44.5% (32.0%)
Total/weighted average	$	74,415	8.1%	5.5	3.7%	4.6%	33.2%

(A)The weighted average life is based on the expected timing of the receipt of cash flows.

(B)Represents the annualized rate of the involuntary prepayments (defaults) as a percentage of the total principal balance.

(C)Loss severity is the expected amount of future realized losses resulting from the ultimate liquidation of a particular loan, expressed as the net amount of realized loss relative to the outstanding loan balance in default.

The fair value of REO is estimated using a broker’s price opinion discounted based upon Rithm Capital’s experience with actual liquidation values and, therefore, is categorized within Level 3 of the fair value hierarchy. These discounts to the broker price opinion generally range from 10% – 25% (weighted average of 20%), depending on the information available to the broker.

The total change in the recorded value of assets for which a fair value adjustment has been included in the Consolidated Statements of Operations for the three months ended March 31, 2024 consists of a valuation allowance of $0.2 million for residential mortgage loans and a reversal of valuation allowance of $0.3 million for REO.

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