RESIDENTIAL MORTGAGE LOANS

9 Months Ended

Sep. 30, 2024

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 September 30, 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 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:


	September 30, 2024								December 31, 2023
	Outstanding Face Amount		Carrying Value		Loan Count	Weighted Average Yield		Weighted Average Life (Years)(A)	Carrying Value
Investments of consolidated CFEs(B)	$	3,072,082	$	2,956,663	8,068	5.6	%	26.1	$	3,038,587
Residential mortgage loans, HFI, at fair value	409,000		378,032		7,615	8.1	%	5.5	379,044



Residential Mortgage Loans, HFS:
Acquired performing loans(C)	$	57,957	$	53,007	1,708	7.9	%	5.4	$	57,038
Acquired non-performing loans(D)	20,382		16,932		243	9.1	%	6.7	21,839
Total Residential Mortgage Loans, HFS	$	78,339	$	69,939	1,951	8.2	%	5.7	$	78,877

Residential Mortgage Loans, HFS, at Fair Value:
Acquired performing loans(C)(E)	$	255,673	$	247,065	1,330	5.5	%	22.3	$	400,603
Acquired non-performing loans(D)(E)	221,555		206,108		1,060	4.8	%	27.0	204,950
Originated loans	2,580,423		2,662,761		8,585	6.6	%	29.1	1,856,312
Total Residential Mortgage Loans, HFS, at Fair Value	$	3,057,651	$	3,115,934	10,975	6.4	%	28.4	$	2,461,865

(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)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.

(C)Performing loans are generally placed on non-accrual status when principal or interest is 90 days or more past due.

(D)As of September 30, 2024, Rithm Capital has placed non-performing loans, HFS on non-accrual status, except as described in (E) below.

(E)Includes $178.8 million and $208.2 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 as of September 30, 2024.

See Note 18 regarding the financing of residential mortgage loans.

The following table summarizes the past due status and difference between the aggregate UPB and the aggregate carrying value of residential mortgage loans, HFS and residential mortgage loans, HFI at fair value on the consolidated balance sheets:


	September 30, 2024						December 31, 2023
Days Past Due	UPB		Carrying Value		Carrying Value Over (Under) UPB		UPB		Carrying Value		Carrying Value Over (Under) UPB
Current	$	3,241,643	$	3,285,610	$	43,967	$	2,690,198	$	2,638,230	$	(51,968)
90+	303,347		278,295		(25,052)		313,122		281,556		(31,566)
Total	$	3,544,990	$	3,563,905	$	18,915	$	3,003,320	$	2,919,786	$	(83,534)

The following table summarizes the activity for the period of residential mortgage loans, HFS and residential mortgage loans, HFI 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	$	379,044	$	78,877	$	2,461,865	$	2,919,786
Originations	—		—		41,452,524		41,452,524
Sales	—		(2,307)		(41,410,797)		(41,413,104)
Purchases/additional fundings	—		—		1,140,787		1,140,787
Proceeds from repayments	(34,729)		(7,594)		(77,422)		(119,745)
Transfer of loans (to) from other assets(A)	—		(2,730)		(455,298)		(458,028)
Transfer of loans to REO	(2,266)		(1,271)		(2,790)		(6,327)
Transfers of loans to HFS	(52)		—		—		(52)
Transfer of loans from HFI	—		—		52		52
Impairment (loss) reversal	—		4,964		—		4,964
Fair value adjustments due to:
Changes in instrument-specific credit risk	24,135		—		11,353		35,488
Other factors	11,900		—		(4,340)		7,560
Balance at September 30, 2024	$	378,032	$	69,939	$	3,115,934	$	3,563,905

(A)Includes loans transferred to consolidated CFEs and receivable modifications resulting in transfers between other assets and residential mortgage loans.

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. See Note 20 for detail on Rithm’s continuing involvement.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Gain (loss) on residential mortgage loans originated and sold, net(A)	$	(94,216)	$	(178,658)	$	(435,845)	$	(306,031)
Gain (loss) on settlement of residential mortgage loan origination derivative instruments(B)	(95,899)		67,377		(101,346)		65,798
MSRs retained on transfer of residential mortgage loans(C)	343,884		266,644		915,194		609,460
Other(D)	11,464		5,892		32,006		2,751
Realized gain on sale of originated residential mortgage loans, net	165,233		161,255		410,009		371,978
Change in fair value of residential mortgage loans	22,987		(19,299)		28,348		40,190
Change in fair value of interest rate lock commitments (Note 17)	15,711		(8,630)		8,379		(2,288)
Change in fair value of derivative instruments (Note 17)	(19,236)		15,904		34,158		27,202
Gain on Originated Residential Mortgage Loans, HFS, Net	$	184,695	$	149,230	$	480,894	$	437,082

(A)Includes residential mortgage loan origination fees of $289.0 million and $105.9 million for the three months ended September 30, 2024 and 2023, respectively, and $700.4 million and $268.8 million for the nine months ended September 30, 2024 and 2023, respectively. Includes gain on residential mortgage loan securitizations accounted for as sales of $17.0 million for the three and nine months ended September 30, 2024 and no gain or loss for the three and nine months ended September 30, 2023.

(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.