FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

U.S. GAAP requires the categorization of fair value measurement into three broad levels which form a hierarchy based on the transparency of inputs to the valuation.

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), 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 June 30, 2022 were as follows:

					Fair Value
	Principal Balance or Notional Amount		Carrying Value		Level 1		Level 2		Level 3		Total
Assets
Excess MSRs(A)	$	73,121,546	$	337,050	$	—	$	—	$	337,050	$	337,050
MSRs and MSR financing receivables(A)	548,095,165		8,626,409		—		—		8,626,409		8,626,409
Servicer advance investments	341,328		379,901		—		—		379,901		379,901
Real estate and other securities	25,301,502		7,988,802		—		7,064,068		924,734		7,988,802
Residential mortgage loans, held-for-sale	131,937		117,053		—		—		118,299		118,299
Residential mortgage loans, held-for-sale, at fair value	5,388,033		5,293,937		—		4,736,171		557,766		5,293,937
Residential mortgage loans, held-for-investment, at fair value	576,750		510,744		—		—		510,744		510,744
Residential mortgage loans subject to repurchase	1,758,509		1,758,509		—		1,758,509		—		1,758,509
Consumer loans	380,603		423,735		—		—		423,735		423,735
Mortgage loans receivable(B)	1,756,079		1,756,079		—		352,867		1,403,212		1,756,079
Notes receivable	61,785		52,692		—		—		52,692		52,692
Loans receivable	164,321		164,901		—		—		164,901		164,901
Cash, cash equivalents and restricted cash	1,944,808		1,944,808		1,944,808		—		—		1,944,808
Other assets(C)	N/A		28,965		1,754		—		27,211		28,965
Derivative assets	34,903,771		194,507		—		120,723		73,784		194,507
			$	29,578,092	$	1,946,562	$	14,032,338	$	13,600,438	$	29,579,338
Liabilities
Secured financing agreements	$	13,969,519	$	13,967,234	$	—	$	13,967,234	$	—	$	13,967,234
Secured notes and bonds payable(D)	9,370,942		9,322,026		—		1,074,062		8,447,185		9,521,247
Unsecured senior notes, net of issuance costs	544,167		544,167		—		—		478,841		478,841
Residential mortgage loan repurchase liability	1,758,509		1,758,509		—		1,758,509		—		1,758,509
Derivative liabilities	4,487,083		57,224		—		45,014		12,210		57,224
			$	25,649,160	$	—	$	16,844,819	$	8,938,236	$	25,783,055

(A)The notional amount represents the total unpaid principal balance 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 Rithm Capital’s economic interests in the VIEs consolidated and accounted for under the collateralized financing entity (“CFE”) election. As of June 30, 2022, the fair value of Rithm Capital’s interests in the mortgage loans receivable securitization was $40.0 million.

(C)Excludes the indirect equity investment in a commercial redevelopment project that is accounted for at fair value on a recurring basis based on the NAV of Rithm Capital’s investment. The investment had a fair value of $28.5 million as of June 30, 2022.

(D)Includes SAFT 2013-1, SCFT 2020-A and 2022-RTL1 mortgage-backed securities issued for which the fair value option for financial instruments was elected and resulted in a fair value of $698.1 million as of June 30, 2022.

The following table summarizes assets measured at fair value on a recurring basis using Level 3 inputs:

	Level 3
	Excess MSRs(A)(B)		MSRs and MSR Financing Receivables(A)		Servicer Advance Investments		Non-Agency RMBS		Derivatives(C)		Residential Mortgage Loans		Consumer Loans		Notes and Loans Receivable		Mortgage Loans Receivable		Total
Balance at December 31, 2021	$	344,947	$	6,858,803	$	421,807	$	951,942	$	111,778	$	2,423,337	$	507,291	$	290,180	$	1,515,762	$	13,425,847
Transfers
Transfers from Level 3	—		—		—		—		—		(776,774)		—		(1,000)		(405,286)		(1,183,060)
Transfers to Level 3	—		—		—		—		—		—		—		—				—
Gain (loss) included in net income
Credit losses on securities(D)	—		—		—		(776)		—		—		—		—				(776)
Change in fair value of excess MSRs(D)	(1,564)		—		—		—		—		—		—		—				(1,564)
Change in fair value of excess MSRs, equity method investees(D)	1,859		—		—		—		—		—		—		—				1,859
Servicing revenue, net(E)
Included in servicing revenue(E)	—		981,581		—		—		—		—		—		—				981,581
Change in fair value of:
Servicer advance investments	—		—		(1,797)		—		—		—		—		—				(1,797)
Residential mortgage loans	—		—		—		—		—		(132,397)				—				(132,397)
Consumer loans	—		—		—		—		—		—		(20,964)		—				(20,964)
Gain (loss) on settlement of investments, net	37		—		—		(1,560)		—		—		—		—		(43,868)		(45,391)
Other income (loss), net(D)	—		—		—		(36,803)		(50,204)		(2,734)		—		(9,628)				(99,369)
Gains (losses) included in OCI(F)	—		—		—		(25,620)		—		—				—				(25,620)
Interest income	20,605		—		6,854		5,818		—		—		7,695		6,792				47,764
Purchases, sales and repayments
Purchases, net(G)	—		(613)		500,000		148,590		—		1,586,374		14,350		—				2,248,701
Proceeds from sales	(997)		(4,284)				—		—		(1,865,401)		—		—				(1,870,682)
Proceeds from repayments	(27,837)		—		(546,963)		(116,857)		—		(162,733)		—		(68,751)		(704,398)		(1,627,539)
Originations and other	—		790,922		—		—		—		(1,162)		(84,637)		—		1,041,002		1,746,125
Balance at June 30, 2022	$	337,050	$	8,626,409	$	379,901	$	924,734	$	61,574	$	1,068,510	$	423,735	$	217,593	$	1,403,212	$	13,442,718

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

(B)Amounts represent 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 are shown net.

(D)Gain (loss) recorded in earnings during the period are 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.

(E)The components of Servicing Revenue, Net are disclosed in Note 5.

(F)Gain (loss) included in Unrealized Gain (Loss) on Available-for-Sale Securities, Net in the Consolidated Statements of Comprehensive Income.

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

Liabilities measured at fair value on a recurring basis using Level 3 inputs changed as follows:

	Level 3
	Asset-Backed Securities Issued
Balance at December 31, 2021	$	511,107
Transfers
Gains (losses) included in net income
Other income(A)	(28,503)
Purchases, sales and repayments
Proceeds from sales	—
Payments	(101,942)
Other	—
Balance at June 30, 2022	$	380,662

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

Excess MSRs, Excess MSRs Equity Method Investees, MSRs and MSR Financing Receivables Valuation

The following table summarizes certain information regarding the ranges and weighted averages of inputs used as of June 30, 2022:

	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 (Note 4)
Agency
Original Pools	3.3% – 6.0% (4.7%)	0.1% – 6.1% (0.7%)	0.6% – 8.1% (2.1%)	15 – 31 (21)	11 – 20 (18)
Recaptured Pools	3.3% – 5.4% (4.3%)	0.1% – 1.4% (0.5%)	—% – 7.3% (1.4%)	20 – 27 (23)	18 – 23 (22)
	3.3% – 6.0% (4.5%)	0.1% – 6.1% (0.6%)	—% – 8.1% (1.8%)	15 – 31 (22)	11 – 23 (20)
Non-Agency(G)
Mr. Cooper and SLS Serviced:
Original Pools	3.1% – 9.1% (5.7%)	1.2% – 8.6% (6.2%)	—% – 9.8% (3.2%)	6 – 25 (15)	17 – 29 (23)
Recaptured Pools	2.1% – 3.1% (2.5%)	0.1% – 0.2% (0.2%)	0.6% – 5.0% (1.0%)	22 – 25 (23)	21 – 23 (23)
	2.1% – 9.1% (5.0%)	0.1% – 8.6% (6.2%)	—% – 9.8% (2.7%)	6 – 25 (17)	17 – 29 (23)
Total/Weighted Average—Excess MSRs Directly Held	2.1% – 9.1% (4.7%)	0.1% – 8.6% (2.7%)	—% – 9.8% (2.2%)	6 – 31 (19)	11 – 29 (21)
Excess MSRs Held through Equity Method Investees (Note 4)
Agency
Original Pools	4.7% – 5.9% (5.3%)	0.5% – 1.2% (0.7%)	1.1% – 3.0% (2.3%)	15 – 25 (19)	16 – 18 (17)
Recaptured Pools	4.5% – 4.9% (4.6%)	0.2% – 1.2% (0.7%)	0.7% – 2.5% (1.7%)	21 – 26 (24)	20 – 22 (21)
Total/Weighted Average—Excess MSRs Held through Investees	4.5% – 5.9% (4.9%)	0.2% – 1.2% (0.7%)	0.7% – 3.0% (1.9%)	15 – 26 (22)	16 – 22 (20)
Total/Weighted Average—Excess MSRs All Pools	2.1% – 9.1% (4.8%)	0.1% – 8.6% (2.0%)	—% – 9.8% (2.1%)	6 – 31 (20)	11 – 29 (21)
MSRs and MSR Financing Receivables
Agency(H)	0.5% – 83.2% (7.4%)	0.1% – 75.0% (1.5%)	—% – 60.3% (5.8%)	1 – 100 (29)	0 – 40 (23)
Non-Agency(H)	1.8% – 83.3% (7.8%)	0.4% – 66.7% (12.1%)	1.7% – 34.6% (8.8%)	19 – 213 (48)	0 – 31 (24)
Ginnie Mae(H)	4.2% – 82.3% (9.6%)	0.1% – 75.0% (7.2%)	2.4% – 14.4% (7.1%)	18 – 82 (40)	0 – 37 (28)
Total/Weighted Average—MSRs and MSR Financing Receivables	0.5% – 83.3% (7.9%)	0.1% – 75.0% (3.8%)	—% – 60.3% (10.0%)	1 – 213 (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 will miss its mortgage payments.

(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). A weighted average cost of subservicing of $6.10 – $7.00 ($6.70) per loan per month was used to value the agency MSRs. A weighted average cost of subservicing of $7.30 – $15.10 ($10.10) per loan per month was used to value the Non-Agency MSRs, including MSR Financing Receivables. A weighted average cost of subservicing of $8.20 – $8.30 ($8.30) 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)For certain pools, the Excess MSR will be paid on the total UPB of the mortgage portfolio (including both performing and delinquent loans until REO). For these pools, no delinquency assumption is used.

(H)For certain pools, recapture rate represents the expected recapture rate with the successor subservicer appointed by NRM.

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 LIBOR plus 2.1%.

As of June 30, 2022, a weighted average discount rate of 7.8% (range 7.5% – 8.0%) was used to value Rithm Capital’s Excess MSRs (directly and through equity method investees). As of June 30, 2022, a weighted average discount rate of 7.5% (range 7.0% – 9.0%) was used to value Rithm Capital’s MSRs and MSR Financing Receivables.

Servicer Advance Investments Valuation

The following table summarizes certain information regarding the ranges and weighted averages of 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)
June 30, 2022	0.9% – 1.8% (1.8%)	4.5% – 6.0% (5.9%)	3.6% – 15.5% (15.2%)	17.4 – 19.8 (19.8)	bps	5.2% – 5.7% (5.2%)	22.0 – 22.2 (22.0)

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

(B)Mortgage servicing amount is net of 10.9 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

As of June 30, 2022, securities valuation methodology and results are further detailed as follows:

					Fair Value
Asset Type	Outstanding Face Amount		Amortized Cost Basis		Multiple Quotes(A)		Single Quote(B)		Total		Level
Agency RMBS	$	7,996,986	$	8,219,305	$	7,064,068	$	—	$	7,064,068	2
Non-Agency RMBS(C)	17,304,516		921,858		924,734		—		924,734		3
Total	$	25,301,502	$	9,141,163	$	7,988,802	$	—	$	7,988,802

(A)Rithm Capital generally obtained pricing service quotations or broker quotations from two sources, one of which was generally the seller (the party that sold Rithm Capital the security) for Non-Agency RMBS. Rithm Capital evaluates quotes received and 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 RMBS, 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 more 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 actually 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 very 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 RMBS. 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 valuation group, which is separate from its investment acquisition and management group, to reflect market developments and actual performance.

For 53.0% of Non-Agency RMBS, 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 RMBS were not readily available.

	Fair Value		Discount Rate	Prepayment Rate(a)	CDR(b)	Loss Severity(c)
Non-Agency RMBS	$	489,732	3.5% – 15.0% (5.2%)	0.0% – 25.0% (8.9%)	0.0% – 12.0% (1.5%)	0.0% – 88.0% (26.3%)

(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.

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

(C)Includes Rithm Capital’s investments in interest-only notes for which the fair value option for financial instruments was elected.

Residential Mortgage Loans Valuation

Rithm Capital, through its wholly owned subsidiaries, Newrez and Caliber, originates mortgage loans that it intends to sell into Fannie Mae, Freddie Mac, and Ginnie Mae mortgage backed securitizations. Residential mortgage loans held-for-sale, 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. Residential mortgage loans held-for-sale, 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 held-for-sale for which there is little to no observable trading activity of similar instruments are valued using Level 3 measurements based upon dealer price quotes or historical sale transactions for similar loans.

Residential mortgage loans held-for-sale, at fair value also includes certain nonconforming mortgage loans originated for sale to private investors, which are valued using internal pricing models to forecast loan level cash flows using inputs such as default rates, prepayments speeds and discount rates. As the internal pricing model is based on certain unobservable inputs, 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 held-for-sale, at fair value classified as Level 3:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Acquired loans	$	536,592	4.3% – 7.5% (4.6%)	2.1% – 16.1% (9.4%)	0.2% – 18.8% (1.1%)	4.0% – 57.4% (26.5%)
Originated loans	21,174
Residential mortgage loans held-for-sale, at fair value	$	557,766

Residential mortgage loans held-for-investment, at fair value includes mortgage loans underlying the SAFT 2013-1 securitization, which are valued using internal pricing models using inputs such as default rates, prepayment speeds and discount rates. As the internal pricing model is based on certain unobservable inputs, 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 held-for-investment, at fair value classified as Level 3:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Residential mortgage loans held-for-investment, at fair value	$	510,744	3.3% – 7.5% (7.3%)	2.1% – 20.0% (7.8%)	0.3% – 18.8% (4.7%)	4.0% – 94.5% (68.4%)

Consumer Loans Valuation

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing consumer loans held-for-investment, at fair value, classified as Level 3:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Consumer loans, held-for-investment, at fair value	$	423,735	0.0% – 8.0% (8.0%)	0.0% – 23.0% (23.0%)	0.0% – 4.0% (4.0%)	0.0% – 52.0% (52.0%)

Mortgage Loans Receivable Valuation

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

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Mortgage loans receivable, at fair value	$	1,403,212	5.5% – 7.5% (6.5%)	N/A	N/A	N/A

Rithm Capital has securitized certain mortgage loans receivable which are held as part of a collateralized financing entity (“CFE”). 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 (“FVO”) 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 20 for further discussion regarding variable interest entities and securitization trusts. Rithm Capital determined the inputs to the fair value measurement of the financial liabilities of its CFE 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 CFE to measure the fair value of the financial assets of the CFE. The fair value of the debt issued by the CFE is typically valued using external pricing data, which includes third-party valuations. The securitized mortgage loans receivable, which are assets of the CFE, are included in Mortgage Loans Receivable, at Fair Value, on the Company’s Consolidated Balance Sheets. The debt issued by the CFE is included in Secured Notes and Bonds Payable on the Company’s Consolidated Balance Sheets. Unrealized gain (loss) from changes in fair value of the debt issued by the CFE is included in

Other Income (Loss), Net in the Company’s Consolidated Statements of Income. The securitized mortgage loans receivable and the debt issued by the Company’s CFE are both classified as Level 2.

Derivatives 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.

As a part of the mortgage loan origination business, Rithm Capital enters into forward loan sale and securities delivery commitments, which are valued based on observed market pricing for similar instruments and therefore, are classified as Level 2. 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:

	Fair Value		Loan Funding Probability	Fair Value of Initial Servicing Rights (Bps)
IRLCs, net	$	61,574	0.0% – 100.0% (80.6%)	2.4 – 417.2 (187.0)

Asset-Backed Securities Issued

Rithm Capital and Newrez were deemed to be the primary beneficiaries of the SCFT 2020-A and SAFT 2013-1 securitization entities, and therefore, Rithm Capital’s Consolidated Balance Sheets include the asset-backed securities issued by the trusts. Rithm Capital elected the fair value option for these financial instruments and the asset-backed securities issued were valued consistently with Rithm Capital’s Non-Agency RMBS described above.

The following table summarizes certain information regards the ranges and weighted averages of inputs used in valuing Asset-Backed Securities Issued:

	Fair Value		Discount Rate	Prepayment Rate	CDR	Loss Severity
Asset-backed securities issued	$	380,662	3.3% – 5.4% (5.2%)	22.6% – 40.0% (23.6%)	0.3% – 4.0% (3.8%)	20.0% – 92.4% (88.0%)

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 held-for-sale, single-family rental properties, and foreclosed real estate accounted for as REO, Rithm Capital applies the lower of cost or fair value accounting and may be required, from time to time, to record a nonrecurring fair value adjustment.

At June 30, 2022, assets measured at fair value on a nonrecurring basis were $81.8 million. The $81.8 million of assets include approximately $71.3 million of residential mortgage loans held-for-sale and $10.5 million of REO. The fair value of Rithm Capital’s residential mortgage loans, held-for-sale 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 June 30, 2022:

	Fair Value and Carrying Value		Discount Rate	Weighted Average Life (Years)(A)	Prepayment Rate	CDR(B)	Loss Severity(C)
Performing loans	$	57,750	7.0% – 7.0% (7.0%)	4.6 – 5.0 (4.9)	5.6% – 8.7% (6.3%)	2.2% – 4.9% (2.8%)	48.2% – 51.4% (50.6%)
Non-performing loans	13,597		7.5% – 7.5% (7.5%)	4.4 – 4.6 (4.6)	2.1% – 2.6% (2.6%)	16.5% – 18.8% (16.5%)	32.6% – 39.6% (34.1%)
Total/weighted average	$	71,347	7.1%	4.9	5.6%	5.4%	47.5%

(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 loss relative to the outstanding loan balance.

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 19%), 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 Income for the six months ended June 30, 2022 consisted of a valuation allowance of $5.3 million for residential mortgage loans and a reversal of valuation allowance of $0.7 million for REO.