MORTGAGE SERVICING RIGHTS AND MSR FINANCING RECEIVABLES

12 Months Ended

Dec. 31, 2024

Transfers and Servicing [Abstract]

MORTGAGE SERVICING RIGHTS AND MSR FINANCING RECEIVABLES

MORTGAGE SERVICING RIGHTS AND MSR FINANCING RECEIVABLES

The following table summarizes activity related to MSRs and MSR financing receivables:

Balance as of December 31, 2022	$	8,889,403
Originations(A)	786,655
Proceeds from sales(B)	(704,436)
Change in Fair Value Due To:
Realization of cash flows(C)	(518,978)
Change in valuation inputs and assumptions	(46,706)
Balance as of December 31, 2023	8,405,938
Acquisition	700,207
Originations(A)	1,396,154
Sales	11,026
Change in Fair Value Due To:
Realization of cash flows(C)	(607,169)
Change in valuation inputs and assumptions	415,515
Balance as of December 31, 2024	$	10,321,671

(A)Represents MSRs retained on the sale of originated residential mortgage loans. Includes $54.4 million and $0.0 million of MSRs capitalized through co-issue with third-parties for the years ended December 31, 2024 and 2023, respectively.

(B)Relates primarily to excess servicing cash flows sold on certain agency loans with a total UPB of approximately $91.4 billion during the year ended December 31, 2023. In connection with these sales, the Company recorded a gain of approximately $5.2 million during the period, which is included within change in fair value of MSRs and MSR financing receivables in the consolidated statements of operations.

(C)Based on the paydown of the underlying residential mortgage loans.

The following table summarizes components of servicing revenue, net:

	Year Ended December 31,
	2024		2023		2022
Servicing fee revenue, net and interest income from MSRs and MSR financing receivables	$	1,833,221	$	1,735,060	$	1,698,977
Ancillary and other fees	160,098		124,297		132,377
Servicing fee revenue, net and fees	1,993,319		1,859,357		1,831,354
Change in Fair Value Due To:
Realization of cash flows(A)	(602,241)		(518,978)		(631,120)
Change in valuation inputs and assumptions, net of realized gains (losses)(B)	434,667		(46,706)		1,448,811
Change in fair value of derivative instruments	—		—		(11,316)
Gain (loss) on settlement of derivative instruments	—		—		(79,041)
Servicing Revenue, Net	$	1,825,745	$	1,293,673	$	2,558,688

(A)Net of $4.9 million of realization of cash flows related to excess spread financing for the year ended December 31, 2024. There was no excess spread financing during the years ended December 31, 2023 and 2022 (Note 12).

(B)Net of $19.2 million of change in valuation inputs and assumptions related to excess spread financing for the year ended December 31, 2024. There was no excess spread financing during the years ended December 31, 2023 and 2022 (Note 12).

The following table summarizes MSRs and MSR financing receivables by type as of December 31, 2024 and 2023:

	UPB of Underlying Mortgages		Weighted Average Life (Years)(A)	Carrying Value(B)
2024
GSE	$	383,014,320	6.5	$	6,413,199
non-Agency	70,022,636		5.4	836,408
Ginnie Mae(C)	137,177,395		6.4	3,072,064
Total / Weighted Average	$	590,214,351	6.4	$	10,321,671
2023
GSE	$	351,642,337	7.7	$	5,333,013
non-Agency	48,928,545		6.8	678,913
Ginnie Mae(C)	127,863,627		7.1	2,394,012
Total / Weighted Average	$	528,434,509	7.5	$	8,405,938

(A)Represents the weighted average expected timing of the receipt of expected cash flows for this investment.

(B)Represents the fair value for this investment. As of December 31, 2024 and 2023, weighted average discount rates of 8.9% (range of 8.7% – 10.3%) and 8.5% (range of 7.9% – 10.8%), respectively, were used to value Rithm Capital’s MSRs and MSR financing receivables, respectively.

(C)As of December 31, 2024 and 2023, Rithm Capital has approximately $2.7 billion and $1.8 billion in residential mortgage loans subject to repurchase and the related residential mortgage loans repurchase liability on its consolidated balance sheets.

Residential Mortgage Loans Subject to Repurchase

Rithm Capital, through Newrez, is an approved issuer of Ginnie Mae MBS and originates and securitizes government-insured residential mortgage loans. As the issuer of the Ginnie Mae-guaranteed securitizations, Rithm Capital has the unilateral right to repurchase loans from the securitizations when they are delinquent for more than 90 days. Loans in forbearance that are three or more consecutive payments delinquent are included as delinquent loans permitted to be repurchased. As a result, once the delinquency criteria have been met and regardless of whether the repurchase option has been exercised, the Company recognizes delinquent loans as if they had been repurchased with a corresponding liability. As of December 31, 2024 and 2023, Rithm Capital reflected approximately $2.7 billion and $1.8 billion, respectively, in residential mortgage loans subject to repurchase and residential mortgage loan repurchase liability on its consolidated balance sheets. Rithm Capital may re-pool repurchased loans into new Ginnie Mae securitizations upon re-performance of the loan or otherwise sell to third-party investors. The Company does not change the accounting for MSRs related to previously sold loans upon re-recognizing loans eligible for repurchase. Rather, upon repurchase of a loan, the MSR is written off. As of December 31, 2024 and 2023, Rithm Capital holds approximately $0.5 billion and $0.4 billion, respectively, of such repurchased loans presented within residential mortgage loans, held-for-sale on its consolidated balance sheets.

Onity MSR Financing Receivable Transactions

In July 2017, Onity Group Inc. (formerly known as Ocwen Financial Corporation) (collectively with certain affiliates, “Onity”), and subsequently PHH Mortgage Corporation (“PHH”) (as successor through acquisition by Onity), and Rithm Capital entered into an agreement to transfer to Rithm Capital, Onity’s remaining interests in MSRs relating to loans with an aggregate UPB of approximately $110.0 billion and with respect to which Rithm Capital already held certain rights (“Rights to MSRs”). Additionally, in January 2018, Onity sold and transferred to Rithm Capital certain Rights to MSRs and other assets related to MSRs for loans with an UPB of approximately $86.8 billion, of which approximately $10.4 billion UPB, as of December 31, 2024, of underlying loans consents have not been received and all other conditions to transfer have not been met and, accordingly, are recorded as MSR financing receivables, at fair value.

Geographic Distributions

The table below summarizes the geographic distribution of the residential mortgage loans underlying the MSRs and MSR financing receivables:

	Percentage of Total Outstanding Unpaid Principal Amount
State Concentration	December 31, 2024		December 31, 2023
California	16.5	%	17.1	%
Florida	8.2	%	8.6	%
Texas	6.6	%	6.2	%
New York	5.7	%	6.0	%
Washington	5.2	%	5.8	%
New Jersey	4.1	%	4.3	%
Virginia	3.7	%	3.6	%
Maryland	3.4	%	3.4	%
Illinois	3.3	%	3.3	%
Georgia	3.1	%	3.0	%
Other U.S.	40.2	%	38.7	%
	100.0	%	100.0	%

Geographic concentrations of investments expose Rithm Capital to the risk of economic downturns within the relevant states. Any such downturn in a state where Rithm Capital holds significant investments could affect the underlying borrower’s ability to make mortgage payments and therefore could have a meaningful, negative impact on the MSRs.

Residential Mortgage Loan Servicing and Subservicing

Newrez performs servicing of residential mortgage loans for unaffiliated parties under servicing agreements. The servicing agreements do not meet the criteria to be recognized as a servicing right asset and, therefore, are not recognized in the consolidated balance sheets. The UPB of residential mortgage loans serviced for others as of December 31, 2024 and 2023 was $242.9 billion and $102.5 billion, respectively. Rithm Capital earned servicing revenue of $219.6 million, $139.4 million and $132.1 million for the years ended December 31, 2024, 2023 and 2022, respectively, related to unaffiliated serviced loans presented within servicing revenue, net in the consolidated statements of operations.

In relation to certain owned MSRs, Rithm Capital engages unaffiliated licensed mortgage servicers as subservicers to perform the operational servicing duties, including recapture activities, in exchange for a subservicing fee, which is recognized as subservicing expense and presented as part of general and administrative in the consolidated statements of operations. As of December 31, 2024, PHH and Valon Mortgage, Inc. subserviced 7.1% and 4.0% of owned MSRs, respectively, with the remaining 88.9% of owned MSRs serviced by Newrez (Note 1).

Servicer Advances Receivable

In connection with Rithm Capital’s ownership of MSRs, the Company assumes the obligation to serve as a liquidity provider to initially fund servicer advances on the underlying pool of mortgages it services (Note 26). These servicer advances are recorded when advanced and are included in servicer advances receivable on the consolidated balance sheets.

The table below summarizes the type of advances included in the servicer advances receivable:

	December 31,
	2024		2023
Principal and interest advances	$	640,723	$	616,801
Escrow advances (taxes and insurance advances)	1,733,426		1,442,697
Foreclosure advances	950,092		767,171
Gross advance balance(A)(B)(C)	3,324,241		2,826,669
Reserves, impairment, unamortized discount, net of recovery accruals	(125,320)		(66,419)
Total Servicer Advances Receivable	$	3,198,921	$	2,760,250

(A)Includes $673.7 million and $585.0 million of servicer advances receivable related to GSEs MSRs, respectively, recoverable either from the borrower or the Agencies.

(B)Includes $529.3 million and $405.6 million of servicer advances receivable related to Ginnie Mae MSRs, respectively, recoverable from either the borrower or Ginnie Mae. Expected losses for advances associated with Ginnie Mae loans in the MSR portfolio are considered in the MSR fair valuation through a non-reimbursable advance loss assumption.

(C)Expected losses for advances associated with loans in the MSR portfolio are considered in the MSR fair value through a non-reimbursable advance loss assumption.

Rithm Capital’s servicer advances receivable related to non-Agency MSRs generally have the highest reimbursement priority pursuant to the underlying servicing agreements (i.e., ranks “top of the waterfall”), and Rithm Capital is generally entitled to repayment from the respective loan or REO liquidation proceeds before any interest or principal is paid on the notes issued by the trust. In most cases, advances in excess of the respective loan or REO liquidation proceeds may be recovered from pool-level proceeds. Furthermore, to the extent that advances are not recoverable by Rithm Capital as a result of the subservicer’s failure to comply with applicable requirements in the relevant servicing agreements, Rithm Capital has a contractual right to be reimbursed by the subservicer. For advances on loans that have been liquidated, sold, paid in full, modified or delinquent, the Company provisioned $121.4 million, or 3.7%, and $93.7 million, or 3.3%, for expected non-recovery of advances as of December 31, 2024 and 2023, respectively.

The following table summarizes servicer advances provision activity during the period:

Balance as of December 31, 2022	$	65,428
Provision	63,016
Write-offs	(34,763)
Balance as of December 31, 2023	93,681
Provision	47,685
Write-offs	(19,970)
Balance as of December 31, 2024	$	121,396

See Note 18 regarding the financing of MSRs and servicer advances receivable.

EXCESS MORTGAGE SERVICING RIGHTS

Excess MSR assets include Rithm Capital’s ownership of Excess MSRs, and associated recapture agreements, acquired from and serviced by Mr. Cooper Group Inc. (“Mr. Cooper”). Prior to June 20, 2024, Rithm Capital owned certain pools of Excess MSR directly and certain pools through a joint venture with the Former Manager (the “Fortress Excess MSR JV”).

On June 20, 2024, Rithm Capital, together with certain Sculptor nonconsolidated funds, acquired an excess MSR portfolio from the Former Manager (including the Former Manager’s ownership in the Fortress Excess MSR JV) for approximately $124.0 million. A new joint venture with such Sculptor nonconsolidated funds was formed for the acquisition. Rithm Capital owns an 80.0% interest in and manages the joint venture, and as a result, consolidates this joint venture. Following the acquisition from the Former Manager, all of Rithm Capital’s ownership in pools of Excess MSRs is consolidated on its consolidated balance sheet and is presented in other assets at fair value. See Note 20 for noncontrolling interests related to these Excess MSRs.

Mr. Cooper, as servicer, performs all of the servicing and advancing functions on the Company’s Excess MSR assets, retains the ancillary income and assumes servicing obligations and liabilities as the servicer of the underlying loans in the portfolio.

As part of the Computershare Acquisition (Note 3), Rithm Capital acquired MSRs owned by SLS underlying certain Excess MSRs owned by Rithm Capital. Accordingly, those Excess MSRs have been reclassified to full MSRs on Rithm Capital’s consolidated balance sheets.

Investments in Excess MSRs

The following table presents activity related to the consolidated investments in Excess MSRs measured at fair value:

	Total
Balance as of December 31, 2022(A)	$	321,803
Interest income	18,310
Other income	267
Proceeds from repayments	(41,552)
Proceeds from sales	(2,779)
Change in fair value	(15,227)
Activity of Investments in Equity Method Investees:
Distributions of earnings from equity method investees	(2,219)
Distributions of capital from equity method investees	(9,968)
Change in fair value of investments in equity method investees	2,515
Balance as of December 31, 2023(A)	271,150
Purchases	122,887
Interest income	29,815
Other income	(656)
Proceeds from repayments	(55,750)
Proceeds from sales	(499)
Change in fair value	10,820
Acquisition of Assets from Fortress Excess MSR JV:
Distributions of earnings from equity method investees	(344)
Distributions of capital from equity method investees	(8,846)
Change in fair value of investments in equity method investees	1,617
Reclassification of SLS serviced Excess MSRs to full MSRs	(1,032)
Balance as of December 31, 2024	$	369,162

(A)Rithm Capital’s total investment in Excess MSRs as of December 31, 2023 and 2022 includes $62.8 million and $72.4 million of indirect investments in Excess MSRs, respectively. As a result of Rithm Capital’s investment in the Fortress Excess MSR JV during the second quarter of 2024, all of the Company’s investments in Excess MSRs are direct investments as of December 31, 2024, as shown in the table above.

The following summarizes Rithm Capital’s direct investments in Excess MSRs:

	December 31, 2024
	UPB of Underlying Mortgages		Interest in Excess MSR		Weighted Average Life Years(A)	Amortized Cost Basis		Carrying Value(B)
			Rithm Capital(C)(D)	Mr. Cooper
Total	$	53,494,378	65.0% – 80.0% (69.9%)	20.0% – 35.0% (30.9%)	5.9	$	321,962	$	369,162

	December 31, 2023
	UPB of Underlying Mortgages		Interest in Excess MSR			Weighted Average Life Years(A)	Amortized Cost Basis		Carrying Value(B)
			Rithm Capital(C)(D)	Former Manager-managed funds	Mr. Cooper
Total	$	42,957,347	32.5% – 100.0% (56.5%)	—% – 50.0%	—% – 35.0%	6.3	$	181,721	$	208,385

(A)Represents the weighted average expected timing of the receipt of expected cash flows for this investment.

(B)Carrying value represents the fair value of the pools and recapture agreements, as applicable.

(C)Amounts in parentheses represent weighted averages.

(D)Rithm Capital also invested in related servicer advance investments, including the base fee component of the related MSR as of December 31, 2024 and 2023 (Note 14) on $13.3 billion and $15.5 billion UPB, respectively, underlying these Excess MSRs.

Changes in fair value of Excess MSRs investments consist of the following:

	Year Ended December 31,
	2024		2023		2022
Original and Recaptured Pools	$	10,820	$	(12,712)	$	(1,436)

As of December 31, 2024 and 2023, weighted average discount rates of 8.4% and 8.8%, respectively, were used to value Rithm Capital’s investments in Excess MSRs.