Rithm Capital Corp

Previous wording

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and notes thereto, and with Part II, Item 1A, “Risk Factors” of this Report and Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and notes thereto, and with Part II, Item 1A, “Risk Factors” of this Report and Part I, Item 1A, “Risk Factors” of our Amended 2023 Form 10-K/A.

Previous wording

We seek to generate long-term value for our investors by using our investment expertise to identify, manage and invest in real estate related and other financial assets and more recently, broader asset management capabilities, in each case, that provides investors with attractive risk-adjusted returns. Our investments in real estate related assets include our equity interest in operating companies, including leading origination and servicing platforms held through wholly-owned subsidiaries, Newrez LLC (“Newrez”) and Genesis, as well as investments in SFR, title, appraisal and property preservation and maintenance businesses. Our real estate related strategy also involves opportunistically pursuing acquisitions and seeking to establish strategic partnerships that we believe enable us to maximize the value of our investments by offering products and services related to the lifecycle of transactions that affect each mortgage loan and underlying residential property or collateral. We operate our asset management business primarily through our wholly-owned subsidiary, Sculptor and its affiliates. Sculptor is a leading global alternative asset manager and provides asset management services and investment products across credit, real estate and multi-strategy platforms through commingled funds, separate accounts and other alternative investment vehicles. We acquired Sculptor on November 17, 2023 pursuant to the Agreement and Plan of Merger (including the schedules and exhibits thereto and as amended by Amendment No. 1 to the Merger Agreement and Amendment No. 2 to the Merger Agreement). For more information about our investment guidelines, see “Part I, Item 1. Business—Investment Guidelines” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

We seek to generate long-term value for our investors by using our investment expertise to identify, manage and invest in real estate related and other financial assets and more recently, broader asset management capabilities, in each case, that provides investors with attractive risk-adjusted returns. Our investments in real estate related assets include our equity interest in operating companies, including leading origination and servicing platforms held through wholly-owned subsidiaries, Newrez LLC (“Newrez”) and Genesis, as well as investments in SFR, title, appraisal and property preservation and maintenance businesses. Our real estate related strategy also involves opportunistically pursuing acquisitions and seeking to establish strategic partnerships that we believe enable us to maximize the value of our investments by offering products and services related to the lifecycle of transactions that affect each mortgage loan and underlying residential property or collateral. We operate our asset management business primarily through our wholly-owned subsidiary, Sculptor and its affiliates. Sculptor is a leading global alternative asset manager and provides asset management services and investment products across credit, real estate and multi-strategy platforms through commingled funds, separate accounts and other alternative investment vehicles. We acquired Sculptor on November 17, 2023 pursuant to an Agreement and Plan of Merger (including the schedules and exhibits thereto and as amended by Amendment No. 1 to the Merger Agreement and Amendment No. 2 to the Merger Agreement). For more information about our investment guidelines, see “Part I, Item 1. Business—Investment Guidelines” of our Amended 2023 Form 10-K/A.

Previous wording

As of March 31, 2024, we had approximately $42.1 billion in total assets and approximately $32.3 billion in assets under management (“AUM”).

Current wording

As of June 30, 2024, we had approximately $42.0 billion in total assets and approximately $32.1 billion in assets under management (“AUM”).

Previous wording

We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2024; however, uncertainty related to market volatility, inflationary pressures causing the federal funds rate to remain elevated and the ongoing conflict between Israel and various regional adversaries makes any estimates and assumptions as of March 31, 2024 inherently less certain than they would be absent the current economic environment. Actual results may materially differ from those estimates. Market volatility and inflationary pressures and their impact on the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our financial condition, results of operations, liquidity and ability to pay distributions.

Current wording

We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2024; however, uncertainty related to market volatility, inflationary pressures causing the federal funds rate to remain elevated and various regional adversaries and uncertainties related to trade and fiscal policy given the November elections makes any estimates and assumptions as of June 30, 2024 inherently less certain than they would be absent the current economic environment. Actual results may materially differ from those estimates. Market volatility and inflationary pressures and their impact on the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our financial condition, results of operations, liquidity and ability to pay distributions.

Previous wording

Rithm Capital’s servicing and origination businesses operated through its wholly-owned subsidiaries Newrez, New Residential Mortgage LLC (“NRM”) and Caliber Home Loans Inc. (“Caliber”), through December 31, 2023. The operations of Caliber were fully integrated into Newrez in the fourth quarter of 2023, and as such operated within Newrez during the quarter ended March 31, 2024.

Current wording

Rithm Capital’s servicing and origination businesses operated through its wholly-owned subsidiaries Newrez, New Residential Mortgage LLC (“NRM”) and Caliber Home Loans Inc. (“Caliber”), through December 31, 2023. The operations of Caliber were fully integrated into Newrez in the fourth quarter of 2023, and as such operated within Newrez during the six months ended June 30, 2024.

Previous wording

We have a multi-channel lending platform, offering purchase and refinance loan products. We originate loans through our Retail channel, provide refinance opportunities to eligible existing servicing customers through our Direct to Consumer channel, and purchase originated loans through our Wholesale and Correspondent channels. We originate or purchase residential mortgage loans conforming to the underwriting standards of the GSEs and Ginnie Mae, government-insured residential mortgage loans which are insured by the Federal Housing Administration (“FHA”), the Department of Veterans Affairs and the US Department of Agriculture, and RMBS and other securities are issued by either public trusts or private label securitization entities (“Non-Agency”) and non-qualified residential mortgage loans (“Non-QM”) through our SMART Loan Series. Our Non-QM loan products provide a variety of options for highly qualified borrowers who fall outside the specific requirements of residential mortgage loans issued by the GSEs or Ginnie Mae (“Agency”).

Current wording

We have a multi-channel lending platform, offering purchase and refinance loan products. We originate loans through our Retail channel, offer purchase, refinance and closed end second opportunities to eligible existing servicing customers through our Direct to Consumer channel, and purchase originated loans through our Wholesale and Correspondent channels. We originate or purchase residential mortgage loans conforming to the underwriting standards of the GSEs and Ginnie Mae, government-insured residential mortgage loans which are insured by the Federal Housing Administration (“FHA”), the Department of Veterans Affairs and the US Department of Agriculture, and RMBS and other securities are issued by either public trusts or private label securitization entities (securities issued as such, known as “Non-Agency”) and non-qualified residential mortgage loans (“Non-QM”) through our SMART Loan Series. Our Non-QM loan products provide a variety of options for highly qualified borrowers who fall outside the specific requirements of agency residential mortgage loans issued by the GSEs or Ginnie Mae (securities issued as such, known as “Agency”) . We originate closed end second lien home equity loans to our existing consumers to access the equity in their home without the need to pay off their existing first lien mortgage.

Previous wording

Our servicing business operates through our performing and special servicing divisions. The performing loan servicing division services performing Agency and government-insured loans. Shellpoint Mortgage Servicing (“SMS”), our special servicing division, services delinquent government-insured, Agency and Non-Agency loans on behalf of the owners of the underlying mortgage loans. We are highly experienced in loan servicing, including loan modifications, and seek to help borrowers avoid foreclosure. As of March 31, 2024, the performing loan servicing division serviced $447.3 billion UPB of loans, and SMS serviced $130.2 billion UPB of loans, for a total servicing portfolio of $577.5 billion UPB, increased $9.5 billion from the prior quarter. The increase was primarily attributable to loan production, partially offset by scheduled and voluntary prepayment loan activity.

Current wording

Our servicing business operates through our performing and special servicing divisions. The performing loan servicing division services performing Agency and government-insured loans. Shellpoint Mortgage Servicing (“SMS”), our special servicing division, services delinquent government-insured, Agency and Non-Agency loans on behalf of the owners of the underlying mortgage loans. We are highly experienced in loan servicing, including loan modifications, and seek to help borrowers avoid foreclosure. As of June 30, 2024, the performing loan servicing division serviced $486.4 billion unpaid principal balance (“UPB”) of loans, and SMS serviced $255.2 billion UPB of loans, for a total servicing portfolio of $741.6 billion UPB, increased $164.1 billion from the prior quarter. The increase was primarily attributable to an increase in third party servicing

Previous wording

We generate revenue through servicing and sales of residential mortgage loans, including, but not limited to, gain on residential loans originated and sold and the value of MSRs retained on transfer of the loans. Profit margins per loan vary by channel, with Correspondent typically being the lowest and Direct to Consumer being the highest. We sell conforming loans to the GSEs and

Current wording

We generate revenue through servicing and sales of residential mortgage loans, including, but not limited to, gain on residential loans originated and sold and the value of MSRs retained on transfer of the loans. Profit margins per loan vary by channel, with Correspondent typically being the lowest and Direct to Consumer being the highest. We sell conforming loans to the GSEs and Ginnie Mae and securitize Non-QM residential loans. We utilize warehouse financing to fund loans at origination through the sale date.

Previous wording

(A)Includes realized gains on loan sales and related new MSR capitalization, changes in repurchase reserves, changes in fair value of interest rate lock commitments, changes in fair value of loans HFS and economic hedging gains and losses.

Current wording

(A)Includes realized gains on loan sales and related new MSR capitalization, changes in repurchase reserves, changes in fair value of interest rate lock commitments, changes in fair value of residential mortgage loans, held-for-sale (“HFS”) and economic hedging gains and losses.

Previous wording

(B)Includes loan origination fees of $177.7 million and $107.8 million for the three months ended March 31, 2024 and December 31, 2023, respectively.

Current wording

(B)Includes loan origination fees of $233.8 million and $177.7 million for the three months ended June 30, 2024 and March 31, 2024, respectively. Includes loan origination fees of $411.5 million and $162.9 million for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

Total Gain on originated residential mortgage loans, HFS, net increased $32.2 million to $140.7 million for the three months ended March 31, 2024 compared to the three months ended December 31, 2023. The increase is attributable to an increase in pull through adjusted lock volume across most channels. Purchase originations comprised 83% of funded loans for the three months ended March 31, 2024 compared to 87% for the three months ended December 31, 2023. The higher percentage of refinance originations was primarily driven by a decline in interest rates at the end of 2023 into early 2024.

Current wording

Total Gain on originated residential mortgage loans, HFS, net increased $12.7 million to $153.3 million for the three months ended June 30, 2024 compared to the three months ended March 31, 2024. The increase is attributable to an increase in pull through adjusted lock volume across most channels driven by seasonal demand. Purchase originations comprised 87% of funded loans for the three months ended June 30, 2024, higher than 83% for the three months ended March 31, 2024. Total Gain on originated residential mortgage loans, HFS, net increased $45.8 million to $294.0 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase is attributable to an increase in pull through adjusted lock volume primarily driven by increased correspondent volume offsetting reductions in Retail/Joint Venture. Purchase originations comprised 85% of funded loans for the six months ended June 30, 2024, comparable to 86% for the six months ended June 30, 2023, as interest rates remained elevated year-over-year, reducing refinance opportunities.

Previous wording

For the three months ended March 31, 2024, funded loan origination volume was $10.8 billions, up from $8.9 billion in the prior quarter. Gain on sale margin for the three months ended March 31, 2024 was 1.20%, 3 basis points lower than the 1.23% for the prior quarter, primarily due to channel mix (refer to the tables above).

Current wording

For the three months ended June 30, 2024, funded loan origination volume was $14.6 billion, up from $10.8 billion in the prior quarter. Gain on sale margin for the three months ended June 30, 2024 was 1.00%, 20 bps lower than the 1.20% for the prior quarter, primarily due to lower correspondent margins driven by a competitive pricing environment. For the six months ended June 30, 2024, funded loan origination volume was $25.4 billion, up from $16.9 billion compared to the six months ended June 30, 2023. Gain on sale margin for the six months ended June 30, 2024 was 1.09%, 31 bps lower than the 1.40% for the six months ended June 30, 2023, primarily due to channel mix and lower margins in third party originations driven by an increased competitive environment (refer to the tables above).

Previous wording

(A)Includes other fees earned from third parties of $14.1 million and $10.9 million for the three months ended March 31, 2024 and December 31, 2023, respectively.

Current wording

(A)Includes other fees earned from third parties of $13.6 million and $14.1 million for the three months ended June 30, 2024 and March 31, 2024, respectively, and $27.7 million and $23.7 million for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

Our servicing segment includes owned MSRs serviced by Newrez. As of March 31, 2024, 86.7% of the underlying UPB of mortgages related to owned MSRs is serviced by Newrez.

Current wording

Our servicing segment consists of owned MSRs primarily serviced by Newrez. As of June 30, 2024, 88.3% of the underlying UPB of mortgages related to owned MSRs is serviced by Newrez.

Previous wording

In addition to MSRs serviced by Newrez discussed in the previous section, we contract with certain subservicers to perform the related servicing duties on the residential mortgage loans underlying our MSRs and MSR financing receivables. As of March 31, 2024, third-party subservicers include PHH Mortgage Corporation and Valon Mortgage, Inc., which subservice 8.5% and 4.8%, or $44.6 billion and $25.5 billion, of the underlying UPB of the related mortgages, respectively.

Current wording

In addition to MSRs serviced by Newrez discussed in the previous section, we contract with PHH Mortgage Corporation (“PHH”) and Valon Mortgage, Inc. (“Valon”) to perform the related servicing duties on the residential mortgage loans underlying a certain portion of our MSRs and MSR financing receivables. As of June 30, 2024, PHH and Valon subservice 7.4% and 4.3%, or $43.6 billion and $24.9 billion, of the underlying UPB of the related mortgages, respectively.

Previous wording

(B)Excess MSRs serviced by Mr. Cooper Group Inc. (“Mr. Cooper”) and SLS, we also invested in related servicer advance investments, including the basic fee component of the related MSR (Note 6) on $14.9 billion UPB underlying these Excess MSRs.

Current wording

(B)Excess MSRs serviced by Mr. Cooper Group Inc. (“Mr. Cooper”), we also invested in related servicer advance investments, including the basic fee component of the related MSR (Note 14) on $14.0 billion UPB underlying these Excess MSRs.

Previous wording

The following tables summarize the collateral characteristics of the loans underlying our direct Excess MSRs as of March 31, 2024 (dollars in thousands):

Current wording

The following tables summarize the collateral characteristics of the loans underlying our direct Excess MSRs and the new joint venture with Sculptor non-consolidated funds as of June 30, 2024 (dollars in thousands):

Previous wording

The following summarizes additional information regarding our servicer advance investments and related financing, as of and for the three months ended March 31, 2024 (dollars in thousands):

Current wording

The following summarizes additional information regarding our servicer advance investments and related financing, as of and for the six months ended June 30, 2024 (dollars in thousands):

Previous wording

(A)Agency RMBS and US Treasury Notes are held at fair value under the fair value option election. US Treasury Bills are held-to-maturity at amortized cost basis.

Current wording

(A)Agency RMBS and US Treasuries are held at fair value under the fair value option election. US Treasury Bills are held-to-maturity at amortized cost basis.

Previous wording

(A)The Agency RMBS portfolio consists of 100.0% fixed-rate securities (based on amortized cost basis).

Current wording

(A)The Agency RMBS portfolio consists of 100.0% fixed-rate securities (accounted for on amortized cost basis).

Previous wording

We largely employ our Agency RMBS and Treasury positions, or government-backed securities, as a hedge to our MSR portfolio and for REIT status. Our government-backed securities portfolio was $14.1 billion as of March 31, 2024. We finance the investments with short-term borrowings under master uncommitted repurchase agreements. These borrowings generally bear interest rates offered by the counterparty for the term of the proposed repurchase transaction (e.g., 30 days, 60 days, etc.) of a specified margin over SOFR. At March 31, 2024 and December 31, 2023, the Company pledged Agency RMBS and US Treasuries with a carrying value of approximately $12.8 billion and $8.6 billion, respectively, as collateral for borrowings under repurchase agreements. We expect to continue to finance our government-backed securities acquisitions with repurchase agreement financing. See Note 18 to our consolidated financial statements for further information regarding financing of our government-backed securities, including a summary of activity related to financing from December 31, 2023 to March 31, 2024.

Current wording

We largely employ our Agency RMBS and US Treasury positions, or government-backed securities, as a hedge to our MSR portfolio and for REIT status. Our government-backed securities portfolio was $9.3 billion as of June 30, 2024. We finance the investments with short-term borrowings under master uncommitted repurchase agreements. These borrowings generally bear interest rates offered by the counterparty for the term of the proposed repurchase transaction (e.g., 30 days, 60 days, etc.) of a specified margin over SOFR. At June 30, 2024 and December 31, 2023, the Company pledged Agency RMBS and US Treasuries with a carrying value of approximately $9.5 billion and $8.5 billion, respectively, as collateral for borrowings under repurchase agreements. We expect to continue to finance our government-backed securities acquisitions with repurchase agreement financing. See Note 18 to our consolidated financial statements for further information regarding financing of our government-backed securities, including a summary of activity related to financing from December 31, 2023 to June 30, 2024.

Previous wording

Within our Non-Agency RMBS portfolio, we retain and own risk retention bonds from our securitizations in accordance with risk retention regulations under the Dodd-Frank Act. As of March 31, 2024, 53.0% of our Non-Agency RMBS portfolio was related to bonds retained pursuant to required risk retention regulations.

Current wording

Within our Non-Agency RMBS portfolio, we retain and own risk retention bonds from our securitizations that we do not consolidate in accordance with risk retention regulations under the Dodd-Frank Act. We also retain and own bonds from our consolidated private label mortgage securitizations which eliminate in consolidation. The equity value is reflected in Assets of consolidated CFEs and Liabilities of consolidated CFEs on the Consolidated Balance Sheets, and is excluded from the tables below. As of June 30, 2024, 65.7% of our Non-Agency RMBS portfolio was related to bonds retained pursuant to required risk retention regulations.

Previous wording

(A)Fair value, which is equal to carrying value for all securities.

Current wording

(B)Fair value, which is equal to carrying value for all securities.

Previous wording

(A)The Non-Agency RMBS portfolio consists of 36.9% floating rate securities and 63.1% fixed-rate securities (based on amortized cost basis).

Current wording

(A)The Non-Agency RMBS portfolio consists of 21.7% floating rate securities and 78.3% fixed-rate securities (accounted for on amortized cost basis).

Previous wording

We finance our investments in Non-Agency RMBS with short-term borrowings under master uncommitted repurchase agreements. These borrowings generally bear interest rates offered by the counterparty for the term of the proposed repurchase transaction (e.g., 30 days, 60 days, etc.) of a specified margin over SOFR. At March 31, 2024 and December 31, 2023, the Company pledged Non-Agency RMBS with a carrying value of approximately $1.0 billion and $1.0 billion, respectively, as collateral for borrowings under repurchase agreements. A portion of collateral for borrowings under repurchase agreements is subject to daily mark-to-market fluctuations and margin calls. The remaining collateral is not subject to daily margin calls unless the collateral coverage percentage, a quotient expressed as a percentage equal to the current carrying value of outstanding debt divided by the market value of the underlying collateral, becomes greater than or equal to a collateral trigger. The difference between the collateral coverage percentage and the collateral trigger is referred to as a “margin holiday.” See Note 18 to our consolidated financial statements for further information regarding financing of our Non-Agency RMBS, including a summary of activity related to financing from December 31, 2023 to March 31, 2024.

Current wording

We finance our investments in Non-Agency RMBS with short-term borrowings under master uncommitted repurchase agreements. These borrowings generally bear interest rates offered by the counterparty for the term of the proposed repurchase transaction (e.g., 30 days, 60 days, etc.) of a specified margin over SOFR. At June 30, 2024 and December 31, 2023, the Company pledged Non-Agency RMBS, including securities retained through consolidated securitizations, with a carrying value of approximately $1.0 billion and $1.0 billion, respectively, as collateral for borrowings under repurchase agreements. A portion of collateral for borrowings under repurchase agreements is subject to daily mark-to-market fluctuations and margin calls. The remaining collateral is not subject to daily margin calls unless the collateral coverage percentage, a quotient expressed as a percentage equal to the current carrying value of outstanding debt divided by the market value of the underlying collateral, becomes greater than or equal to a collateral trigger. The difference between the collateral coverage percentage and the collateral trigger is referred to as a “margin holiday.” See Note 18 to our consolidated financial statements for further information regarding financing of our Non-Agency RMBS, including a summary of activity related to financing from December 31, 2023 to June 30, 2024.

Previous wording

As of March 31, 2024, we had approximately $4.2 billion outstanding face amount of residential mortgage loans (see below). These investments were financed with secured financing agreements with an aggregate face amount of approximately $3.1 billion and secured notes and bonds payable with an aggregate face amount of approximately $0.7 billion. We acquired these loans through open market purchases, loan origination through Newrez and the exercise of call rights and acquisitions.

Current wording

As of June 30, 2024, we had approximately $4.3 billion outstanding face amount of loans included in Residential mortgage loans, held-for-sale and Residential mortgage loans, held-for-investment at fair value on the Consolidated Balance Sheets (see below). These investments were financed with secured financing agreements with an aggregate face amount of approximately $3.8 billion. We acquired these loans through open market purchases, loan origination through Newrez and the exercise of call rights and acquisitions.

Previous wording

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

Current wording

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

Previous wording

(C)As of March 31, 2024, we have placed all Non-Performing Loans, HFS on non-accrual status, except as described in (D) below.

Current wording

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

Previous wording

(D)Includes $228.6 million and $222.7 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.

Current wording

(E)Includes $217.2 million and $192.6 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.

Previous wording

We finance a significant portion of our investments in residential mortgage loans with borrowings under repurchase agreements. These recourse borrowings generally bear variable interest rates offered by the counterparty for the term of the proposed repurchase transaction, generally less than one year, of a specified margin over SOFR. At March 31, 2024 and December 31, 2023, the Company pledged residential mortgage loans with a carrying value of approximately $3.4 billion and $2.2 billion, respectively, as collateral for borrowings under repurchase agreements. A portion of collateral for borrowings under repurchase agreements is subject to daily mark-to-market fluctuations and margin calls. A portion of collateral for borrowings under repurchase agreements is not subject to daily margin calls unless the collateral coverage percentage, a quotient expressed as a percentage equal to the current carrying value of outstanding debt divided by the market value of the underlying collateral, becomes greater than or equal to a collateral trigger. The difference between the collateral coverage percentage and the collateral trigger is referred to as a “margin holiday.” See Note 18 to our consolidated financial statements for further information regarding financing of our residential mortgage loans, including a summary of activity related to financing from December 31, 2023 to March 31, 2024.

Current wording

We finance a significant portion of our investments in residential mortgage loans with borrowings under repurchase agreements. These recourse borrowings generally bear variable interest rates offered by the counterparty for the term of the proposed repurchase transaction, generally less than one year, of a specified margin over SOFR. At June 30, 2024 and December 31, 2023, the Company pledged residential mortgage loans with a carrying value of approximately $4.2 billion and $2.2 billion, respectively, as collateral for borrowings under repurchase agreements. A portion of collateral for borrowings under repurchase agreements is subject to daily mark-to-market fluctuations and margin calls. A portion of collateral for borrowings under repurchase agreements is not subject to daily margin calls unless the collateral coverage percentage, a quotient expressed as a percentage equal to the current carrying value of outstanding debt divided by the market value of the underlying collateral, becomes greater than or equal to a collateral trigger. The difference between the collateral coverage percentage and the collateral trigger is referred to as a “margin holiday.” See Note 18 to our consolidated financial statements for further information regarding financing of our residential mortgage loans, including a summary of activity related to financing from December 31, 2023 to June 30, 2024.

Previous wording

The table below summarizes the collateral characteristics of the consumer loans, including the portfolio of consumer loans purchased from Goldman Sachs Bank USA in June 2023 (the “Marcus loans” or “Marcus”) and those loans held by Rithm Capital, through certain limited liability companies (together, the “Consumer Loan Companies”), as of March 31, 2024 (dollars in thousands):

Current wording

The table below summarizes the collateral characteristics of the consumer loans, including the portfolio of consumer loans purchased from Goldman Sachs Bank USA in June 2023 (the “Marcus loans” or “Marcus”) and those loans (the “SpringCastle loans” or “SpringCastle”) held by Rithm Capital, through certain limited liability companies (together, the “Consumer Loan Companies”), as of June 30, 2024 (dollars in thousands):

Previous wording

We continue to invest in our SFR portfolio and strive to become a leader in the SFR sector by acquiring and maintaining a geographically diversified portfolio of high-quality single-family homes and leasing them to high-quality residents. As of March 31, 2024, our SFR portfolio consists of 3,928 properties with an aggregate carrying value of $1.0 billion, up from 3,888 properties with an aggregate carrying value of $1.0 billion as of December 31, 2023. During the three months ended March 31, 2024, we acquired 48 SFR properties.

Current wording

We continue to invest in our SFR portfolio and strive to become a leader in the SFR sector by acquiring and maintaining a geographically diversified portfolio of high-quality single-family homes and leasing them to high-quality residents. As of June 30, 2024, our SFR portfolio consists of 4,008 properties with an aggregate carrying value of $1.0 billion, up from 3,888 properties with an aggregate carrying value of $1.0 billion as of December 31, 2023. During the six months ended June 30, 2024, we acquired 132 SFR properties.

Previous wording

Our investment portfolio segment also includes the activity from several wholly-owned subsidiaries or minority investments in companies that perform various services in the mortgage and real estate sectors. This includes our subsidiary Guardian, which is a national provider of field services and property management services, and Adoor, which is focused on the acquisition and management of our SFR properties.

Current wording

Our investment portfolio segment also includes the activity from several wholly-owned subsidiaries or minority investments in companies that perform various services in the mortgage and real estate sectors. This includes our subsidiary Guardian Asset Management, which is a national provider of field services and property management services, and Adoor LLC, which is focused on the acquisition and management of our SFR properties.

Previous wording

Additionally, in the fourth quarter of 2023, we entered into a strategic partnership with Darwin to establish a new property management platform, Adoor Property Management LLC (“APM”). Our SFR properties currently are managed through an external property manager and APM.

Current wording

Additionally, in the fourth quarter of 2023, we entered into a strategic partnership with Darwin Homes, Inc. to establish a new property management platform, Adoor Property Management LLC (“APM”). Our SFR properties currently are managed through an external property manager and APM.

Previous wording

Loan commitments at origination are typically interest only, bear a variable interest rate tied to the SOFR plus a spread ranging from 4.0% to 17.2% and have initial terms typically ranging from 6 to 120 months in duration based on the size of the project and expected timeline for completion of construction, which we often elect to extend for several months based on our evaluation of the project. As of March 31, 2024, the average commitment size of our loans was $2.6 million, and the weighted average remaining term to contractual maturity of our loans was 12.4 months.

Current wording

Loan commitments at origination are typically interest only, bear a variable interest rate tied to the SOFR plus a spread ranging from 4.0% to 17.2% and have initial terms typically ranging from 4 to 120 months in duration based on the size of the project and expected timeline for completion of construction, which we often elect to extend for several months based on our evaluation of the project. As of June 30, 2024, the average commitment size of our loans was $2.7 million, and the weighted average remaining term to contractual maturity of our loans was 12.2 months.

Previous wording

We receive loan origination fees, or “points” at an average of 1.0% of the total commitment at origination. These origination fees factor in the term of the loan, the quality of the borrower and the underlying collateral. In addition, we charge fees on past due receivables and receive reimbursements from borrowers for costs associated with services provided by us, such as closing costs, collection costs on defaulted loans and inspection fees. In addition to origination fees, we earn loan extension fees when maturing loans are renewed or extended and amendment fees when loan terms are modified, such as increases in interest reserves and construction holdbacks in line with our underwriting criteria or upon modification of a loan. Loans are generally only renewed or extended if the loan is not in default and satisfies our underwriting criteria, including our maximum LTV ratios of the appraised value as determined at the time of loan origination or based on an updated appraisal, if required. Loan origination and renewal fees are deferred and recognized in income over the contractual maturity of the underlying loan.

Current wording

We receive loan origination fees, or “points” at an average of 1.1% of the total commitment at origination. These origination fees factor in the term of the loan, the quality of the borrower and the underlying collateral. In addition, we charge fees on past due receivables and receive reimbursements from borrowers for costs associated with services provided by us, such as closing costs, collection costs on defaulted loans and inspection fees. In addition to origination fees, we earn loan extension fees when maturing loans are renewed or extended and amendment fees when loan terms are modified, such as increases in interest reserves and construction holdbacks in line with our underwriting criteria or upon modification of a loan. Loans are generally only renewed or extended if the loan is not in default and satisfies our underwriting criteria, including our maximum LTV ratios of the appraised value as determined at the time of loan origination or based on an updated appraisal, if required. Loan origination and renewal fees are deferred and recognized in income over the contractual maturity of the underlying loan.

Previous wording

The following table summarizes certain information related to our mortgage loans receivable activity as of and for the three months ended March 31, 2024 (dollars in thousands):

Current wording

The following table summarizes certain information related to our portfolio of loans included in Mortgage loans receivable, at fair value on the Consolidated Balance Sheets as of and for the six months ended June 30, 2024 (dollars in thousands):

Previous wording

Our asset management business primarily operates through our wholly-owned subsidiary, Sculptor. Sculptor is a leading global alternative asset manager and a specialist in opportunistic investing. Sculptor provides asset management services and investment products across credit, real estate and multi-strategy platforms with approximately $32.3 billion in AUM as of March 31, 2024. Sculptor serves its global client base through our commingled funds, separate accounts and other alternative investment vehicles. We acquired Sculptor on November 17, 2023.

Current wording

Our asset management business primarily operates through our wholly-owned subsidiary, Sculptor. Sculptor is a leading global alternative asset manager and a specialist in opportunistic investing. Sculptor provides asset management services and investment products across credit, real estate and multi-strategy platforms with approximately $32.1 billion in AUM as of June 30, 2024. Sculptor serves its global client base through our commingled funds, separate accounts and other alternative investment vehicles. We acquired Sculptor on November 17, 2023.

Previous wording

For the three months ended March 31, 2024, the first full quarter of results, our asset management revenues were $75.9 million, driven primarily by management fees. Operating expenses for the asset management business primarily consist of amortization of intangible assets, compensation and benefits, and office and professional expenses.

Current wording

For the six months ended June 30, 2024, our asset management revenues were $185.3 million, driven primarily by management fees and off-cycle crystallizations of incentive income. Operating expenses for the asset management business primarily consist of amortization of intangible assets, compensation and benefits, and office and professional expenses.

Previous wording

As of March 31, 2024, Rithm Capital’s net deferred tax liability of $898.0 million is primarily composed of deferred tax liabilities generated through the deferral of gains from residential mortgage loans sold by the origination business and changes in fair value of MSRs, loans and swaps held within taxable entities, which is reported within accrued expenses and other liabilities in the Consolidated Balance Sheets. As of March 31, 2024, a net deferred tax asset of $284.9 million reported within other assets in the Consolidated Balance Sheets primarily composed of net operating losses and tax deductible goodwill related to Sculptor.

Current wording

As of June 30, 2024, Rithm Capital’s net deferred tax liability of $951.0 million is primarily composed of deferred tax liabilities generated through the deferral of gains from residential mortgage loans sold by the origination business and changes in fair value of MSRs, loans and swaps held within taxable entities, which is reported within accrued expenses and other liabilities in the Consolidated Balance Sheets. As of June 30, 2024, a net deferred tax asset of $283.1 million reported within other assets in the Consolidated Balance Sheets primarily composed of net operating losses and tax deductible goodwill related to Sculptor.