RESIDENTIAL MORTGAGE LOANS

12 Months Ended

Dec. 31, 2022

Rithm Capital accumulated its residential mortgage loan portfolio through various bulk acquisitions and the execution of call rights. Rithm Capital, through its Mortgage Company, originates residential mortgage loans for sale and securitization to third parties and generally retains the servicing rights on the underlying loans.

Loans are accounted for based on Rithm Capital’s strategy for the loan, and on whether the loan was credit-impaired at the date of acquisition. As of December 31, 2022, Rithm Capital accounts for loans based on the following categories:

•Loans Held-for-Investment, at fair value

•Loans Held-for-Sale, at lower of cost or fair value

•Loans Held-for-Sale, at fair value

The following table summarizes residential mortgage loans outstanding by loan type:


	December 31,
	2022								2021
	Outstanding Face Amount		Carrying Value		Loan Count	Weighted Average Yield		Weighted Average Life (Years)(A)	Carrying Value
Total residential mortgage loans, held-for-investment, at fair value(B)	$	538,710	$	452,519	9,612	8.5	%	4.3	$	569,933


Acquired performing loans(C)	85,049		72,425		2,249	8.5	%	5.2	130,634
Acquired non-performing loans(D)	32,798		28,602		448	7.8	%	3.0	2,287
Total residential mortgage loans, held-for-sale, at lower of cost or market	$	117,847	$	101,027	2,697	8.3	%	4.6	$	132,921

Acquired performing loans(C)(E)	947,910		890,131		4,474	5.7	%	19.2	2,070,262
Acquired non-performing loans(D)(E)	369,220		340,342		1,938	4.3	%	27.9	315,063
Originated loans	2,070,758		2,066,798		5,760	6.5	%	29.5	8,829,599
Total residential mortgage loans, held-for-sale, at fair value	$	3,387,888	$	3,297,271	12,172	6.0	%	26.4	$	11,214,924

Total residential mortgage loans, held-for-sale, at fair value/lower of cost or market	$	3,505,735	$	3,398,298					$	11,347,845

(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, held-for-investment, at fair value is grouped and presented as part of Residential Loans and Variable Interest Entity Consumer Loans, Held-for-Investment, at Fair Value on the Consolidated Balance Sheets.

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

(D)As of December 31, 2022, Rithm Capital has placed non-performing loans, held-for-sale on nonaccrual status, except as described in (E) below.

(E)Includes $523.1 million and $299.2 million UPB of Ginnie Mae EBO performing and non-performing loans, respectively, on accrual status as contractual cash flows are guaranteed by the FHA.

The following table summarizes the geographic distribution of the underlying residential mortgage loans:


	Percentage of Total Outstanding Unpaid Principal Amount
	December 31,
State Concentration	2022		2021
Florida	10.9	%	10.1	%
California	10.2	%	15.7	%
Texas	8.9	%	6.7	%
New York	6.8	%	7.1	%
Washington	4.4	%	7.5	%
Georgia	4.2	%	3.1	%
New Jersey	3.8	%	3.8	%
Illinois	3.6	%	2.8	%
Indiana	3.2	%	2.0	%
Maryland	3.1	%	3.1	%
Other U.S.	40.9	%	38.1	%
	100.0	%	100.0	%

See Note 19 regarding the financing of residential mortgage loans.

The following table summarizes the difference between the aggregate unpaid principal balance and the aggregate fair value of loans:


	December 31,
	2022						2021
Days Past Due	UPB		Fair Value		Fair Value Over (Under) UPB		Unpaid Principal Balance		Fair Value		Fair Value Over (Under) UPB

90+	$	468,147	$	423,321	$	(44,826)	$	779,178	$	740,043	$	(39,135)

Call Rights

Rithm Capital has executed calls with respect to Non-Agency RMBS trusts and purchased performing and non-performing residential mortgage loans and REO assets contained in such trusts prior to their termination. In certain cases, Rithm Capital sold portions of the purchased loans through securitizations, and retained bonds issued by such securitizations. In addition, Rithm Capital received par on the securities issued by the called trusts which it owned prior to such trusts’ termination. For the year ended December 31, 2022, Rithm Capital executed calls on a total of 5 trusts and recognized no interest income on securities held in the collapsed trusts and $8.3 million of gain on securitizations accounted for as sales. For the year ended December 31, 2021, Rithm Capital executed calls on a total of 75 trusts and recognized $3.3 million of interest income on securities held in the collapsed trusts and $29.0 million of gain on securitizations accounted for as sales. Refer to Note 24 for transactions with affiliates.

The following table summarizes the activity for residential mortgage loans:


	Loans Held-for-Investment		Loans Held-for-Sale, at Lower Cost or Fair Value		Loans Held-for-Sale, at Fair Value		Total
Balance at December 31, 2020	$	674,179	$	509,887	$	4,705,816	$	5,889,882
Caliber acquisition (Note 3)	—		—		7,685,681		7,685,681
Originations	—		—		123,059,895		123,059,895
Sales	—		(374,683)		(131,960,935)		(132,335,618)
Purchases/additional fundings	—		—		8,102,055		8,102,055
Proceeds from repayments	(120,247)		(32,826)		(520,334)		(673,407)
Transfer of loans to other assets(A)	—		(585)		22,112		21,527
Transfer of loans to real estate owned	(15,165)		(7,145)		(3,958)		(26,268)


Valuation provision on loans	—		38,273		—		38,273
Fair value adjustments due to:
Changes in instrument-specific credit risk	(2,020)		—		(18,099)		(20,119)
Other factors	33,186		—		142,691		175,877
Balance at December 31, 2021	$	569,933	$	132,921	$	11,214,924	$	11,917,778

Originations	—		—		67,406,228		67,406,228
Sales	—		(4,426)		(81,648,703)		(81,653,129)
Purchases/additional fundings	7,182		—		6,880,225		6,887,407
Proceeds from repayments	(80,661)		(17,777)		(394,613)		(493,051)
Transfer of loans to other assets(A)	—		—		(25,375)		(25,375)
Transfer of loans to real estate owned	(4,956)		(1,386)		(752)		(7,094)
Transfers of loans to held-for-sale	(1,580)		—		—		(1,580)
Transfers of loans to from held-for-investment	—		—		1,582		1,582
Valuation provision on loans	—		(8,305)		—		(8,305)
Fair value adjustments due to:
Changes in instrument-specific credit risk	(33,086)		—		(36,204)		(69,290)
Other factors	(4,313)		—		(100,041)		(104,354)
Balance at December 31, 2022	$	452,519	$	101,027	$	3,297,271	$	3,850,817

(A)Represents loans for which foreclosure has been completed and for which Rithm Capital has made, or intends to make, a claim with the governmental agency that has guaranteed the loans that are grouped and presented as part of claims receivable in Other Assets (Note 14).

Net Interest Income

The following table summarizes the net interest income for residential mortgage loans:


	December 31,
	2022		2021		2020
Interest income:
Loans held-for-investment, at fair value	$	45,287	$	44,369	$	53,264
Loans held-for-sale, at lower of cost or fair value	6,898		23,280		50,130
Loans held-for-sale, at fair value	211,238		260,062		135,729
Total interest income	263,423		327,711		239,123

Interest expense:
Loans held-for-investment, at fair value	17,583		16,919		21,029
Loans held-for-sale, at lower of cost or fair value	3,402		21,333		22,541
Loans held-for-sale, at fair value and SFR properties	181,071		159,413		90,064
Total interest expense	202,056		197,665		133,634

Net interest income	$	61,367	$	130,046	$	105,489

Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net

The Mortgage Company originates conventional, government-insured and nonconforming residential mortgage loans for sale and securitization. The GSEs or Ginnie Mae guarantee conventional and government-insured mortgage securitizations and mortgage investors issue nonconforming private label mortgage securitizations while the Mortgage Company generally retains the right to service the underlying residential mortgage loans. In connection with the transfer of loans to the GSEs or mortgage investors, Rithm Capital reports Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net in the Consolidated Statements of Income.

The following table summarizes the components of Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net:


	Year Ended December 31,
	2022		2021		2020
Gain (loss) on residential mortgage loans originated and sold, net(A)	$	(1,106,458)	$	460,062	$	811,288
Gain (loss) on settlement of residential mortgage loan origination derivative instruments(B)	1,285,219		240,610		(361,755)
MSRs retained on transfer of residential mortgage loans(C)	1,222,742		1,331,626		666,414
Other(D)	33,551		107,249		49,270
Realized gain on sale of originated residential mortgage loans, net	$	1,435,054	$	2,139,547	$	1,165,217
Change in fair value of residential mortgage loans	(271,530)		(137,503)		99,908
Change in fair value of interest rate lock commitments (Note 18)	(102,992)		(293,699)		249,183
Change in fair value of derivative instruments (Note 18)	25,700		118,564		(115,216)
Gain on originated residential mortgage loans, held-for-sale, net	$	1,086,232	$	1,826,909	$	1,399,092

(A)Includes residential mortgage loan origination fees of $0.6 billion, $2.3 billion and $1.7 billion in the year ended December 31, 2022, 2021 and 2020, respectively.

(B)Represents settlement of forward securities delivery commitments utilized as an economic hedge for residential mortgage loans not included within forward loan sale commitments.

(C)Represents the initial fair value of the capitalized mortgage servicing rights upon loan sales with servicing retained.

(D)Includes fees for services associated with the residential mortgage loan origination process.