Company: RITM-PC
Filing Date: 2025-08-01
Form Type: 10-Q
Source: 0001556593-25-000024
Chunk: 415

Company: Rithm Capital Corp.
Filing Date: 2025-08-01
Form: 10-Q
Item: Item 8
Chunk 415
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 changes in interest rates.

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control.

The interest rates on our secured financing agreements, as well as adjustable-rate mortgage loans in our securitizations, are generally based on SOFR, which is subject to national, international and other regulatory guidance for reform. The recent transition from LIBOR to SOFR involves operational risks, including, but not limited to, reduced experience understanding and modeling SOFR-based assets and liabilities which in turn increases the difficulty of investing, hedging and risk management. 

The table below provides comparative estimated changes in our book value based on a parallel shift in the yield curve (assuming an unchanged mortgage basis), including changes in our book value resulting from potential related changes in discount rates:

Estimated Change in Book Value (in $ millions)(A)Interest Rate Change (bps)June 30, 2025December 31, 2024+50bps+47.6+27.4+25bps+42.6+24.5-25bps-80.1-46.3-50bps-197.8-114.3

(A)Amounts shown are pre-tax.

120

Mortgage Basis Spread Risk

Mortgage basis measures the spread between the yield on current coupon MBS and benchmark rates including treasuries and swaps. The level of mortgage basis is driven by demand and supply of mortgage-backed instruments relative to other rate-sensitive assets. Changes in the mortgage basis have an impact on prepayment rates driven by the ability of borrowers underlying our portfolio to refinance. A lower mortgage basis would imply a lower mortgage rate which would increase prepayment speeds due to higher refinance activity and, therefore, lower fair value of our mortgage portfolio. The mortgage basis is also correlated with other spread products such as corporate credit. 

The table below provides comparative estimated changes in our book value based on changes in mortgage basis: 

Estimated Change in Book Value (in $ millions)(A)Mortgage Basis Change (bps)June 30, 2025December 31, 2024+20bps+38.9-2.8+10bps+19.4-1.4-10bps-19.4+1.4-20bps-38.9+2.8

(A)Amounts shown are pre-tax.

Prepayment Rate Exposure

Prepayment rates significantly affect the value of MSRs and MSR financing