Company: RITM-PC
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0001556593-25-000007
Chunk: 219

Company: Rithm Capital Corp.
Filing Date: 2025-02-18
Form: 10-K
Item: Item 8
Chunk 219
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 and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Valuation of Mortgage Servicing Rights and Mortgage Servicing Rights Financing ReceivablesDescription of the MatterThe Company invests in Mortgage Servicing Rights and Mortgage Servicing Rights Financing Receivables (collectively “MSRs”) totaling $10.3 billion as of December 31, 2024 as included in Note 5 to the consolidated financial statements. Additionally, in connection with the Company’s acquisition of Computershare Mortgage Services Inc., the Company acquired MSRs totaling $700 million as of May 1, 2024 (the “acquired MSRs”) as included in Note 3 to the consolidated financial statements. The Company records MSRs at fair value on a recurring basis with changes in fair value recognized in the statement of operations. These fair value estimates are based on valuation techniques used to estimate future cash flows that incorporate significant unobservable inputs and assumptions. As included in Note 19 to the consolidated financial statements, MSRs are classified as Level 3 in the fair value hierarchy.Auditing management’s fair value of MSRs was complex because the valuations are driven by significant inputs and assumptions, including discount rates and prepayment rates, that are highly judgment