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DERIVATIVES AND HEDGING | 6 Months Ended
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Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES AND HEDGING | DERIVATIVES AND HEDGING Rithm Capital enters into economic hedges including interest rate swaps, to-be-announced forward contract positions (“TBAs”) and treasury 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 in order to mitigate Rithm Capital’s interest rate risk on certain specified MBSs 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 economic hedges designed to protect against MBSs and MSR fair value fluctuations, or hedging gains and losses, are reflected in the tables below. Rithm Capital enters into short sales of US 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 US Treasury security as of the reporting date. As of June 30, 2024, the Company meets the netting criteria per ASC 210 and therefore the Company presents the US Treasury payable net of related repurchase agreements as Other assets on the consolidated balance sheets. Gains and losses associated with US Treasury securities are recognized in Realized and unrealized gains (losses), net in the Consolidated Statements of Operations. As of June 30, 2024, 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 economic hedges are recorded at fair value and presented in Other assets or Accrued expenses and other liabilities on the Consolidated Balance Sheets, as follows:
|  |  | June 30, 2024 |  | December 31, 2023 (As Restated)
Derivative and hedging assets |  |  |  |  |
Interest rate swaps(A) |  |  | $ | — |  |  | $ | 106 |
IRLCs |  |  | 23,395 |  |  | 26,482 |
TBAs |  |  | 19,134 |  |  | 1,492 |
Treasury short sales(B) |  |  | 11,828 |  |  | — |
|  |  | $ | 54,357 |  |  | $ | 28,080 |
Derivative and hedging liabilities |  |  |  |  |
IRLCs |  |  | 6,984 |  |  | 2,678 |
TBAs |  |  | 11,976 |  |  | 49,087 |
Other commitments(C) |  |  | 16,140 |  |  | — |
|  |  | $ | 35,100 |  |  | $ | 51,765 |
(A)Net of $1.1 million and $342.0 million of related variation margin accounts as of June 30, 2024 and December 31, 2023, respectively. (B)Net of $1.5 billion of related reverse repurchase agreements as of June 30, 2024. As of December 31, 2023, treasury securities payable and related reverse repurchase agreements are presented on a gross basis on the Consolidated Balance Sheets. (C)During the first quarter of 2024, a subsidiary of the Company entered into an agreement with an affiliate, which could result in the subsidiary being required to make a payment under certain circumstances dependent upon amounts realized from an investment of the affiliate, subject to a maximum amount of $25.5 million. The agreement is classified as a derivative liability and measured at fair value. The following table summarizes notional amounts related to derivatives and hedging:
| June 30, 2024 |  | December 31, 2023 (As Restated)
Interest rate swaps(A) | $ | 3,375,000 |  |  | $ | 7,979,988 |
IRLCs | 4,438,032 |  |  | 2,757,060 |
Treasury short sales(B) | 1,485,000 |  |  | 1,800,000 |
TBAs, short position(C) | 9,763,300 |  |  | 6,013,100 |
Other commitments | 24,364 |  |  | — |
(A)Includes $0.7 billion notional of receive Secured Overnight Financing Rate (“SOFR”)/pay fixed of 4.6% and $2.7 billion notional of receive fixed of 4.3%/pay SOFR with weighted average maturities of 29 months and 48 months, respectively, as of June 30, 2024. Includes $8.0 billion notional of receive 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. (B)Represents the notional amount of US Treasury Notes sold short. (C)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:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Gain on originated residential mortgage loans, HFS, net(A) |  |  |  |  |  |  |
IRLCs | $ | (14,817) |  |  | $ | (19,898) |  |  | $ | (7,332) |  |  | $ | 6,342 |
TBAs | 15,484 |  |  | 71,212 |  |  | 53,394 |  |  | 13,229 |
Interest rate swaps | — |  |  | (684) |  |  | — |  |  | (1,931) |
| $ | 667 |  |  | $ | 50,630 |  |  | $ | 46,062 |  |  | $ | 17,640 |
Realized and unrealized gains (losses), net(B) |  |  |  |  |  |  |
Interest rate swaps | 1,429 |  |  | 215,445 |  |  | 30,590 |  |  | 71,820 |
TBAs | (14,424) |  |  | 507 |  |  | (12,901) |  |  | (6,875) |
Treasury short sales(C) | 12,952 |  |  | — |  |  | 41,297 |  |  | — |
Other commitments | 957 |  |  | — |  |  | (16,140) |  |  | — |
| $ | 914 |  |  | $ | 215,952 |  |  | $ | 42,846 |  |  | $ | 64,945 |
Total gain (loss) | $ | 1,581 |  |  | $ | 266,582 |  |  | $ | 88,908 |  |  | $ | 82,585 |
(A)Represents unrealized gain (loss). (B)Excludes $10.1 million gain and $11.5 million loss for the three months ended June 30, 2024 and 2023, respectively, and $5.4 million loss and $1.6 million loss for the six months ended June 30, 2024 and 2023, respectively, included within Gain on originated residential mortgage loans, HFS, net (Note 7). (C)Refer to the table below for detail regarding US Treasury short sales:
| June 30, 2024 |  |
| Face |  | Sale proceeds |  | Fair value |  | Unrealized gain (loss) position |  | Reverse repurchase agreements(A) |  | Net asset (liability)(B)
Short sale liabilities | $ | 1,485,000 |  |  | 1,490,306 |  |  | $ | 1,483,816 |  |  | $ | 6,491 |  |  | $ | 1,496,956 |  |  | $ | 13,140 |
(A)Reverse repurchase agreements are lending facilities used to borrow securities to effectuate short sales of US Treasury securities. (B)Represents the net carrying value included in Other assets on the Consolidated Balance Sheets, excluding accrued interest receivable (payable).

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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