| FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair value represents the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date (i.e., an exit price). The Company holds a variety of assets, certain of which are not publicly traded or that are otherwise illiquid. Significant judgment and estimation go into the assumptions that drive the fair value of these assets. Due to the inherent uncertainty of valuations of investments that are determined to be illiquid or do not have readily ascertainable fair values, the estimates of fair value may differ from the values ultimately realized, and those differences can be material. US GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is impacted by a number of factors, including the type and the specific characteristics of the assets and liabilities, including existence and transparency of transactions between market participants. Assets and liabilities with readily available actively quoted prices or for which fair value can be measured from actively-quoted prices generally will have a higher degree of market price observability and lesser degree of judgment used in measuring fair value. Assets and liabilities measured at fair value are classified and disclosed into one of the following categories based on the observability of inputs used in the determination of fair values: 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 (“CDR”), 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, 2024 were as follows: Principal Balance or Notional Amount Carrying Value Fair Value Level 1 Level 2 Level 3 Net Asset Value (“NAV”) Total Assets Excess MSRs (A) $ 56,559,914 $ 395,606 $ — $ — $ 395,606 $ — $ 395,606 MSRs and MSR financing receivables (A) 587,043,388 9,693,331 — — 9,693,331 — 9,693,331 Servicer advance investments 302,282 357,220 — — 357,220 — 357,220 Real estate and other securities (B) 19,081,035 10,134,642 24,866 9,300,237 809,539 — 10,134,642 Residential mortgage loans, HFS 83,301 72,894 — — 72,894 — 72,894 Residential mortgage loans, HFS, at fair value 3,807,723 3,837,929 — 3,822,208 15,721 — 3,837,929 Residential mortgage loans, HFI, at fair value 421,507 368,866 — — 368,866 — 368,866 Residential mortgage loans subject to repurchase 1,905,625 1,905,625 — 1,905,625 — — 1,905,625 Consumer loans 1,011,653 946,367 — — 946,367 — 946,367 Derivative and hedging assets 11,640,055 54,357 11,828 19,134 23,395 — 54,357 Mortgage loans receivable 2,049,266 2,049,266 — — 2,049,266 — 2,049,266 Notes receivable 464,240 364,977 — — 364,977 — 364,977 Loans receivable 29,114 29,114 — — 29,114 — 29,114 Cash, cash equivalents and restricted cash 1,535,691 1,535,691 1,561,715 — — — 1,561,715 Assets of consolidated CFEs - funds (D) 318,315 354,013 10,892 — — 343,121 354,013 Assets of consolidated CFEs - loan securitizations (D) 4,056,450 3,878,790 39,352 3,347,335 492,103 — 3,878,790 Other assets N/A 55,586 — — 55,586 — 55,586 $ 36,034,274 $ 1,648,653 $ 18,394,539 $ 15,673,985 $ 343,121 $ 36,060,298 Liabilities Secured financing agreements $ 15,181,358 $ 15,179,899 $ — $ 14,985,142 $ 194,757 $ — $ 15,179,899 Secured notes and bonds payable (C) 10,030,061 9,955,891 — — 10,475,128 — 10,475,128 Unsecured notes, net of issuance costs 1,288,021 1,197,294 — — 1,194,395 — 1,194,395 Residential mortgage loan repurchase liability 1,905,625 1,905,625 — 1,905,625 — — 1,905,625 Derivative liabilities 7,445,641 35,100 — 11,976 23,124 — 35,100 Excess spread financing 16,149,789 116,142 — — 116,142 — 116,142 Notes Receivable Financing 323,452 352,683 — — 352,683 — 352,683 Liabilities of consolidated CFEs - funds (D) 222,250 223,726 1,925 — 221,801 — 223,726 Liabilities of consolidated CFEs - loan securitizations (D) 3,579,739 3,352,107 12,734 2,887,692 451,682 — 3,352,108 $ 32,318,467 $ 14,659 $ 19,790,435 $ 13,029,712 $ — $ 32,834,806 (A) The notional amount represents the total UPB 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) For the purpose of this table, real estate and other securities include government and government-backed securities, non-agency RMBS and CLOs, including US Treasury Bills classified as Level 1 and held at amortized cost basis of $24.9 million (see Note 6). (C) Includes SCFT 2020-A (as defined below) MBS issued for which the fair value option for financial instruments was elected and resulted in a fair value of $205.3 million as of June 30, 2024. (D) Represents assets and notes issued of consolidated VIEs accounted for under the CFE election. The following table summarizes the changes in the Company’s Level 3 financial assets for the period presented: Level 3 Excess MSRs (A) MSRs and MSR Financing Receivables (A) Servicer Advance Investments Real Estate and Other Securities Derivatives (B) Residential Mortgage Loans Consumer Loans Notes and Loans Receivable Mortgage Loans Receivable (C) Total Balance at December 31, 2023 (As Restated) $ 271,150 $ 8,405,938 $ 376,881 $ 804,029 $ 23,804 $ 513,381 $ 1,274,005 $ 429,550 $ 2,232,914 $ 14,331,652 Transfers Transfers from Level 3 — — (7,873) — — (142,046) — — — (149,919) Transfers to Level 3 — — — — — 1,389 — — — 1,389 Computershare Mortgage Acquisition (Note 3) (1,032) 697,494 — — — — — — — 696,462 Gain (loss) included in net income Credit losses on securities (D) — — — (914) — — — — — (914) Servicing revenue, net (E) Included in servicing revenue (E) — 7,251 — — — — — — — 7,251 Change in fair value of Excess MSRs (D) 19,430 — — — — — — — — 19,430 Excess MSRs, equity method investees (D) 1,617 — — — — — — — — 1,617 Servicer advance investments — 6,388 — — — — — — 6,388 Consumer loans — — — — — (51,389) — — (51,389) Residential mortgage loans — — — — 24,641 — — — 24,641 Gain (loss) on settlement of investments, net (656) — — 36 — — — — — (620) Other income (loss), net (D) — — 5,585 (23,472) 4,348 — — 25,552 12,013 Gains (losses) included in OCI (F) — — (3,474) — — — — — (3,474) Interest income 10,522 — 13,254 14,869 — — 15,978 2,211 — 56,834 Purchases, sales and repayments Purchases, net (G) 122,887 — 400,652 80,517 — 246,892 — — — 850,948 Proceeds from sales — 2,404 — — — (61,532) 10,098 — — (49,030) Proceeds from repayments (28,312) $ — (432,082) (91,109) — (32,086) (302,325) (37,670) (1,035,473) (1,959,057) Originations and other 580,244 — — (61) (170,400) — — 1,318,376 1,728,159 Balance at June 30, 2024 $ 395,606 $ 9,693,331 $ 357,220 $ 809,539 $ 271 $ 384,587 $ 946,367 $ 394,091 $ 2,541,369 $ 15,522,381 (A) Includes the recapture agreement for each respective pool, as applicable. (B) For the purpose of this table, the IRLC asset and liability positions and other commitment derivatives are shown net. (C) Includes mortgage loans receivable of consolidated CFEs classified as Level 3 in the fair value hierarchy. (D) Gain (loss) recorded in earnings during the period is 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) See Note 5 for further details on the components of servicing revenue, net. (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. The following table summarizes the changes in the Company’s Level 3 financial liabilities for the period presented: Level 3 Asset-Backed Securities Issued Notes Payable of CFEs - Consolidated Funds Notes Payable of CFEs - Mortgage Loans Receivable Excess Spread Financing Notes Receivable Financing Total Balance at December 31, 2023 (As Restated) $ 235,770 $ 218,157 $ 318,998 $ — $ — $ 772,925 Transfers Transfers from Level 3 — — — — — — Transfers to Level 3 — — — — 352,683 352,683 Computershare Mortgage Acquisition (Note 3) — — — 125,168 — 125,168 Gains (losses) included in net income — Servicing revenue, net (A) — — — (9,026) — (9,026) Other income (A) 2,451 3,644 5,228 — — 11,323 Purchases, sales and repayments Purchases — — — — — — Proceeds from sales — — 451,128 — — 451,128 Payments (32,935) — (324,062) — — (356,997) Other — — 390 — — 390 Balance at June 30, 2024 $ 205,286 $ 221,801 $ 451,682 $ 116,142 $ 352,683 $ 1,347,594 (A) Gain (loss) recorded in earnings during the period is attributable to the change in unrealized gain (loss) relating to Level 3 financial liabilities still held at the reporting dates and realized gain (loss) recorded during the period. See Note 21 in the Company’s Amended 2023 Form 10-K/A for a listing of criteria used to determine the significant inputs for each asset class. Excess MSRs, MSRs and MSR Financing Receivables and Excess Spread Financing Valuation Fair value estimates of Rithm Capital’s MSRs and related Excess Spread Financing and Excess MSRs were based on internal pricing models. The valuation technique is based on discounted cash flows. Significant inputs used in the valuations included expectations of prepayment rates, delinquency rates, recapture rates for Excess MSRs, the mortgage servicing amount or excess mortgage servicing amount of the underlying residential mortgage loans, as applicable, and discount rates that market participants would use in determining the fair values of MSRs on similar pools of residential mortgage loans. In addition, for MSRs, significant inputs included the market-level estimated cost of servicing. Significant increases (decreases) in the discount rates, prepayment or delinquency rates, or costs of servicing, in isolation would result in a significantly lower (higher) fair value measurement, whereas significant increases (decreases) in the recapture rates or mortgage servicing amount or excess mortgage servicing amount, as applicable, in isolation would result in a significantly higher (lower) fair value measurement. Generally, a change in the delinquency rate assumption is accompanied by a directionally similar change in the assumption used for the prepayment rate. The following table summarizes certain information regarding the ranges and weighted averages of inputs used as of June 30, 2024: Significant Inputs (A) Prepayment (B) Delinquency (C) Recapture (D) Mortgage Servicing Amount or Excess Mortgage Servicing Amount (bps) (E) Collateral Weighted Average Maturity (Years) (F) Excess MSRs Directly Held 2.4% – 11.5% (6.9%) 0.3% – 15.0% (5.0%) 0.0% – 91.6% (56.4%) 7 – 32 (21) 11 – 28 (19) MSRs, MSR Financing Receivables, Excess Spread Financing Agency 2.5% – 99.4% (5.8%) 0.0% – 100.0% (1.6%) — (G) 2 – 159 (27) 0 – 40 (23) Non-Agency 1.8% – 100.0% (8.7%) 0.0% – 100.0% (24.1%) — (G) 1 – 156 (44) 0 – 58 (22) Ginnie Mae 2.1% – 78.5% (8.8%) 0.0% – 100.0% (7.7%) — (G) 8 – 154 (45) 0 – 42 (27) Total/Weighted Average — MSRs, MSR Financing Receivables, Excess Spread Financing 1.8% – 100.0% (6.9%) 0.0% – 100.0% (5.3%) — (G) 1 – 159 (34) 0 – 58 (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 is expected to miss a mortgage payment. (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”). As of June 30, 2024, weighted average costs of subservicing of $6.86 – $6.97 ($6.89) per loan per month was used to value the agency MSRs. Weighted average costs of subservicing of $8.54 – $10.72 ($9.42) per loan per month was used to value the non-agency MSRs, including MSR financing receivables. Weighted average cost of subservicing of $8.20 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) Recapture is not considered a significant input for MSRs, MSR financing receivables, and Excess Spread Financing. 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 SOFR plus 95 bps. As of June 30, 2024, a weighted average discount rate of 8.8% (range of 8.5% – 9.0%) was used to value Rithm Capital’s Excess MSRs. As of June 30, 2024, a weighted average discount rate of 8.9% (range of 8.7% – 10.3%) was used to value Rithm Capital’s MSRs, MSR financing receivables, and Excess Spread Financing. The following table summarizes the estimated change in fair value of Rithm Capital’s interests in the Agency MSRs, owned as of June 30, 2024, given several parallel shifts in the discount rate, prepayment rate and delinquency rate: Fair value at June 30, 2024 $ 6,079,335 Discount rate shift in % -20% -10% 10% 20% Estimated fair value $ 6,601,506 $ 6,344,320 $ 5,835,324 $ 5,609,934 Change in estimated fair value: Amount $ 522,171 $ 264,985 $ (244,011) $ (469,401) Percentage 8.6 % 4.4 % (4.0) % (7.7) % Prepayment rate shift in % -20% -10% 10% 20% Estimated fair value $ 6,363,422 $ 6,216,274 $ 5,951,290 $ 5,831,466 Change in estimated fair value: Amount $ 284,087 $ 136,939 $ (128,045) $ (247,869) Percentage 4.7 % 2.3 % (2.1) % (4.1) % Delinquency rate shift in % -20% -10% 10% 20% Estimated fair value $ 6,096,639 $ 6,088,185 $ 6,070,197 $ 6,060,853 Change in estimated fair value: Amount $ 17,304 $ 8,850 $ (9,138) $ (18,482) Percentage 0.3 % 0.1 % (0.2) % (0.3) % The following table summarizes the estimated change in fair value of Rithm Capital’s interests in the Non-Agency MSRs, including MSR financing receivables, owned as of June 30, 2024, given several parallel shifts in the discount rate, prepayment rate and delinquency rate: Fair value at June 30, 2024 $ 885,053 Discount rate shift in % -20% -10% 10% 20% Estimated fair value $ 978,489 $ 929,530 $ 844,090 $ 806,673 Change in estimated fair value: Amount $ 93,436 $ 44,477 $ (40,963) $ (78,380) Percentage 10.6 % 5.0 % (4.6) % (8.9) % Prepayment rate shift in % -20% -10% 10% 20% Estimated fair value $ 939,289 $ 911,268 $ 860,064 $ 836,525 Change in estimated fair value: Amount $ 54,236 $ 26,215 $ (24,989) $ (48,528) Percentage 6.1 % 3.0 % (2.8) % (5.5) % Delinquency rate shift in % -20% -10% 10% 20% Estimated fair value $ 900,052 $ 892,478 $ 877,898 $ 870,916 Change in estimated fair value: Amount $ 14,999 $ 7,425 $ (7,155) $ (14,137) Percentage 1.7 % 0.8 % (0.8) % (1.6) % The following table summarizes the estimated change in fair value of Rithm Capital’s interests in the Ginnie Mae MSRs, owned as of June 30, 2024, given several parallel shifts in the discount rate, prepayment rate and delinquency rate: Fair value at June 30, 2024 $ 2,728,943 Discount rate shift in % -20% -10% 10% 20% Estimated fair value $ 2,966,767 $ 2,842,986 $ 2,623,622 $ 2,526,134 Change in estimated fair value: Amount $ 237,824 $ 114,043 $ (105,321) $ (202,809) Percentage 8.7 % 4.2 % (3.9) % (7.4) % Prepayment rate shift in % -20% -10% 10% 20% Estimated fair value $ 2,888,042 $ 2,804,727 $ 2,659,509 $ 2,595,473 Change in estimated fair value: Amount $ 159,099 $ 75,784 $ (69,434) $ (133,470) Percentage 5.8 % 2.8 % (2.5) % (4.9) % Delinquency rate shift in % -20% -10% 10% 20% Estimated fair value $ 2,774,102 $ 2,751,475 $ 2,706,569 $ 2,684,392 Change in estimated fair value: Amount $ 45,159 $ 22,532 $ (22,374) $ (44,551) Percentage 1.7 % 0.8 % (0.8) % (1.6) % Each of the preceding sensitivity analyses is hypothetical and is provided for illustrative purposes only. There are certain limitations inherent in the sensitivity analyses presented. In particular, the results are calculated by stressing a particular economic assumption independent of changes in any other assumption; in practice, changes in one factor may result in changes in another, which might counteract or amplify the sensitivities. Also, changes in the fair value based on a 10% variation in an assumption generally may not be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Servicer Advance Investments Valuation The following table summarizes certain information regarding the ranges and weighted averages of significant inputs used in valuing the servicer advance investments, including the basic fee component of the related MSRs, as of June 30, 2024: 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) Servicer advance investments 2.4% 4.8% 19.8% 19.9 bps 6.2% 21.4 (A) Projected annual weighted average lifetime voluntary and involuntary prepayment rate using a prepayment vector. (B) Mortgage servicing amount is net of 2.2 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 Rithm Capital’s real estate and other securities valuation methodology and results are detailed below. Treasury securities are valued using market-based prices published by the US Department of the Treasury and are classified as Level 1. The table below is as of June 30, 2024: Fair Value Asset Type Outstanding Face Amount Amortized Cost Basis Multiple Quotes (A) Single Quote (B) Total Level Government-backed securities (C) $ 9,561,293 $ 9,362,992 $ 9,300,237 $ — $ 9,300,237 2 Non-agency and other securities (D) 9,494,742 779,758 548,047 261,492 809,539 3 Total $ 19,056,035 $ 10,142,750 $ 9,848,284 $ 261,492 $ 10,109,776 (A) Rithm Capital generally obtains pricing service quotations or broker quotations from two sources. Rithm Capital evaluates quotes received, 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 securities, 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 most 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 purchase the security at the quoted price. Rithm Capital’s investments in government-backed securities are classified within Level 2 of the fair value hierarchy because the market for these securities is 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 securities. 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 independent valuation group, which is separate from its investment acquisition and management group, to reflect market developments and actual performance. For 64.2% of Non-Agency securities, 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 securities were not readily available. Fair Value Discount Rate Prepayment Rate (a) CDR (b) Loss Severity (c) Non-Agency $ 520,083 5.3% – 20.2% (7.6%) 0.0% – 20.0% (6.4%) 0.0% – 2.0% (0.5%) 0.0% – 50.0% (18.6%) (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 of the loans in default. (B) Rithm Capital was unable to obtain quotations from more than one source on these securities. (C) Presented within Government and government-backed securities on the Consolidated Balance Sheets. (D) Presented within Other assets on the Consolidated Balance Sheets. Residential Mortgage Loans Valuation Rithm Capital, through Newrez, originates residential mortgage loans that it intends to sell into Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securitizations. Residential mortgage loans HFS, 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. Newrez also originates non-qualified residential mortgage (“Non-QM”) loans that do not meet the qualified mortgage rules per the Consumer Financial Protection Bureau that it intends to sell to private investors. Residential mortgage loans HFS, 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 HFS for which there is little to no observable trading activity of similar instruments are valued using Level 3 measurements based upon (i) internal pricing models to forecast loan level cash flows using inputs such as default rates, prepayments speeds and discount rates or (ii) consensus pricing (broker quotes) or historical sale transactions for similar loans. Residential mortgage loans HFS, at fair value also include nonconforming seasoned mortgage loans acquired and identified for securitization, which are valued using internal pricing models to forecast loan level cash flows based on a potential securitization exit using inputs such as default rates, prepayments speeds and discount rates, and may include adjustments based on consensus pricing (broker quotes). Residential mortgage loans HFI, at fair value include nonconforming seasoned mortgage loans acquired and not identified for sale or securitization, which are valued using internal pricing models to forecast loan level cash flows using inputs such as default rates, prepayments speeds and discount rates, and may include adjustments based on consensus pricing (broker quotes). As the internal pricing models are based on certain unobservable inputs, Rithm Capital classifies these valuations as Level 3 in the fair value hierarchy. For non-performing loans, asset liquidation cash flows are derived based on the estimated time to liquidate the loan, the estimated value of the collateral, expected costs and estimated home price levels. Estimated cash flows for both performing and non-performing loans are discounted at yields considered appropriate to arrive at a reasonable exit price for the asset. 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 HFS, at fair value classified as Level 3 as of June 30, 2024: Performing Loans Fair Value Discount Rate Prepayment Rate CDR Loss Severity Acquired loans $ 13,970 8.2% – 8.6% (8.3%) 3.3% – 5.1% (3.8%) 1.3% – 6.1% (3.0%) 14.7% – 48.0% (40.0%) Non-Performing Loans Fair Value Discount Rate Annual change in home prices CDR Current Value of Underlying Properties Acquired loans $ 1,751 9.3% 18.7% 1.4% 325.0% The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing residential mortgage loans HFI, at fair value classified as Level 3 as of June 30, 2024: Fair Value Discount Rate Prepayment Rate CDR Loss Severity Residential mortgage loans HFI, at fair value $ 368,866 8.2% – 9.3% (8.5%) 3.0% – 5.1% (4.2%) 1.4% – 6.1% (3.9%) 14.9% – 48.0% (40.8%) Consumer Loans Valuation The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing consumer loans HFI, at fair value classified as Level 3 as of June 30, 2024: Fair Value Discount Rate Prepayment Rate CDR Loss Severity SpringCastle $ 244,578 9.2% – 10.2% (9.4%) 9.8% – 36.6% (14.8%) 2.8% – 8.0% (5.2%) 87.0% – 100.0% (93.9%) Marcus 701,789 7.7% 20.8% 12.6% 75.3% Consumer loans, HFI, at fair value $ 946,367 Mortgage Loans Receivable Valuation Rithm Capital classifies certain mortgage loans receivable as Level 3 in the fair value hierarchy. Performing originated mortgage loans are valued using (i) a market-based approach by utilizing the fair value of securities backed by similar loans adjusted for certain factors to approximate the fair value of a whole loan or (ii) current commitments to acquire the loans. Non-performing loan liquidation cash flows are derived based on the estimated value of the collateral, estimated recoveries and costs, and estimated time to liquidate the asset. Acquired mortgage loans receivable are valued using internal pricing models to forecast cash flows with inputs such as default rates, prepayments speeds and discount rates, and may include adjustments based on consensus pricing (broker quotes). The following table summarizes certain information regarding the weighted averages of inputs used in valuing mortgage loans receivable, at fair value classified as Level 3 as of June 30, 2024: Fair Value Discount Rate Prepayment Rate CDR Loss Severity Acquired mortgage loans receivable $ 49,478 10.6% —% 1.8% – 2.5% (1.9%) 25.0% Originated mortgage loans receivable 1,999,788 9.2% N/A N/A N/A Mortgage loans receivable, at fair value $ 2,049,266 Derivatives and Hedging 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. Treasury short sales are valued using market-based prices published by the US Department of the Treasury and classified as Level 1. Other commitment relates to an agreement entered into by a subsidiary of Rithm Capital with its affiliate requiring a payment under certain circumstances dependent upon amounts realized from an investment of the affiliate. It is valued at the excess of cost basis over the intrinsic value of the underlying investment and classified as Level 3 in the fair value hierarchy. 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 as of June 30, 2024: Fair Value Loan Funding Probability Fair Value of Initial Servicing Rights (Bps) IRLCs, net $ 16,411 0.0% – 100.0% (85.6%) 9.2 – 345.0 (242.9) Asset-Backed Securities Issued As of June 30, 2024, Rithm Capital was the primary beneficiary of the SCFT 2020-A (as defined below) securitization, and therefore, Rithm Capital’s Consolidated Balance Sheets include the asset-backed securities issued by the trust. Rithm Capital elected the fair value option for the securities and valued them consistently with Non-Agency securities described above. The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing asset-backed securities issued as of June 30, 2024: Fair Value Discount Rate Prepayment Rate CDR Loss Severity Asset-backed securities issued $ 205,286 5.8% 14.8% 5.2% 93.6% Notes Receivable, Notes Receivable Financing, and Loans Receivable From time to time, Rithm Capital purchases notes and loans receivable that are generally collateralized by commercial real estate assets. Rithm Capital generally uses internal discounted cash flow pricing models to estimate the fair value of notes receivable, notes receivable financing, and loans receivable. As of June 30, 2024, the fair value of notes receivable and notes receivable financing was determined utilizing a market approach based on an observable trade in the specific security. Due to the fact that the fair value of Rithm Capital’s notes receivable, notes receivable financing, and loans receivable are based significantly on unobservable inputs, these are classified as Level 3 in the fair value hierarchy. Future cash flows are generally estimated using contractual economic terms, as well as significant unobservable inputs, such as the underlying collateral performance. Other significant unobservable inputs include discount rates which estimate the market participants’ required rates of return. The following table summarizes certain information regarding the carrying value and significant inputs used in valuing Rithm Capital’s notes and loans receivable as of June 30, 2024: Fair Value Discount Rate Notes receivable $ 364,977 N/A Loans receiv |
