Company: RITM-PC
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0001556593-25-000007
Chunk: 36

Company: Rithm Capital Corp.
Filing Date: 2025-02-18
Form: 10-K
Item: Item 1A
Chunk 36
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•rates of prepayment and repayment of the underlying loans;

•potential fluctuations in prevailing interest rates and credit spreads;

•rates of delinquencies and defaults, and related loss severities;

•costs of engaging a subservicer to service MSRs;

•market discount rates;

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•recapture rates (for Excess and Full MSRs); and/or

•amount and timing of servicer advance and recoveries (for servicer advance investments and servicer advance receivables).

Our assumptions could differ materially from actual results. The use of different estimates or assumptions in connection with the valuation of these investments could produce materially different fair values, which could have a material adverse effect on our consolidated financial position and results of operations. A valuation is only an estimate of value and is not a precise measure of realizable value. Ultimate realization of the market value of a private asset depends to a great extent on economic and other conditions beyond our control. Valuations do not necessarily represent the price at which a private investment would sell, as market prices of private investments can only be determined by negotiation between a willing buyer and seller. The ultimate realization of the value of our investments may be materially different than the fair values reflected in our consolidated financial statements.

Significant and widespread decreases in the fair values of our assets could result in:

•impairment of goodwill or indefinite-lived intangible assets;

•breaches of financial covenants under borrowing facilities (related to liquidity, net worth, or leverage);

•immediate repayment obligations under these facilities and other credit agreements  ; 

•cross-defaults under other debt agreements or facilities

•constrain dividend distributions;

•limit capital-raising initiatives; and/or

•require financial restatements, eroding investor confidence.

While we may engage in discussions with financing counterparties regarding covenant breaches, there is no assurance they would negotiate terms or agree to amendments. A sustained reduction in cash flows could materially impair our ability to pay dividends to stockholders at expected levels or at all. Significant decrease in fair value could cause regulatory inquiries into financial reporting practices. 

Prepayment and Delinquency Exposure

Our expectation of prepayment rates is a significant assumption underlying our cash flow projections. Prepayment rate is the measurement of how quickly borrowers pay down the UPB of their loans or how quickly loans are otherwise brought current, modified, liquidated or charged off. A significant increase in prepayment rate  may materially reduce ultimate cash flows and/or interest income, potentially resulting in fair value write-downs.  This decrease in