A Newrez spinoff is temporarily off the table, as its parent company focuses on maximizing the mortgage lender's value to support the overall business, Rithm Capital leaders said in its latest earnings call.
After reproposing the
"I think, right now, when you look at the company and the growth of the company, we're likely not going to list it separately today. We're going to continue to grow the business," said Rithm Capital President and CEO Michael Nierenberg on Monday.
"Once we continue to do that — and that's something we're very much focused on — and grow our footprint in third-party servicing, which the team has done a great job doing during the quarter, then I think you're going to start to see their feel the full realization as far as what that so-called company is worth," he added.
Servicing rights and
Newrez' non-QM business grew "dramatically" over the past quarter, leading to the launch of correspondent and wholesale origination channels, Nierenberg said.
"We are gaining market share in non-QM originations, but expect to see similar growth in both home equity and our prime jumbo products," Nierenberg said.
Newrez originations and servicing by the numbers
Nierenberg's comments came after Rithm reported another profitable quarter in its mortgage operations, with total pre-tax income totaling $305 million. The number included fair value gains of $29.9 million in mortgage servicing rights, with Newrez finishing in the black for the third straight quarterly period.
Second-quarter income improved 107.9% from $146.7 million
Originations raked in $86.6 million of profits during the quarter, while servicing accounted for $263.4 million, including the positive fair-value changes. Numbers increased from first-quarter income of $65.1 million and $62.3 million, rising 33% and 323% respectively. Year-over-year, originations pre-tax income grew 67.5% from $51.7, while servicing swung up 9.2% from $241.2 million
Profits came off of $16.3 billion in originations volume, which was up 38.1% from $11.8 billion posted three months earlier. Second-quarter production also increased year over year by 11.6% when compared to the $14.6 billion funded during the same time frame in 2024.
Gain on sale margins dropped, though, to 122 basis points down from 137 in the first quarter. The number increased from 105 bps a year ago.
While a small slice of production, non-QM activity provided momentum for originations activity, with the $700 million generated more than doubling on an annual basis from $300 million. Non-QM also surged from $400 million in production in the first quarter.
Total unpaid balance in the Newrez servicing portfolio stood at $864.2 billion, rising from $844.9 billion in the first quarter and $741.6 billion a year ago. Rithm leaders touted its third-party servicing growth, with Newrez seeing 6.7% growth in the segment and adding 10 new clients in the most recent earnings period.
Newrez revenue came in at $925.6 million, growing from $707.2 in the first quarter and $648.8 million a year ago.
Contributing to positive trending numbers was the mortgage lender's recent lean
"We've seen significant cost benefits, and we know where our roadmap is driving us today. We're going to continue to see significant benefits across the board for what I'll say is our AI initiatives and our platform," he said.
Newrez's bottom line propelled Rithm Capital to a company-wide profit of $283.9 million to shareholders in the second quarter when adjusted for generally accepted accounting principles, representing a 677% leap from the January-to-March reporting period. Year over year, Rithm net income rose 33.2% from $213.2 million.
While Rithm Capital moves on from a Newrez spinoff, the company continues to seek ways to diversify its overall business and hinted strongly at acquisitions in the near future, leaders said. Mergers figured prominently in Rithm's recent expansion as it seeks to establish itself in the alternative asset management space.
"We continue to focus on what I would call acquisitions across the board. It could be in financial services. It could be in energy transition," Nierenberg said.
"I feel like we're getting closer on a platform to be able to launch insurance products that would again help fund some of the things that we do here at Rithm," he also said.
