It may be "business as usual" at Newrez following its rivals' recent blockbuster merger, but preparations are underway that could see the lender separating from parent Rithm Capital by year's end.
Still, Rocket Cos.'
"It's going to be business as usual as we go forward," said Rithm Capital President and CEO Michael Nierenberg in the company's first-quarter earnings call.
"While saying that, I do think as a result of the Cooper-Rocket deal, there'll be an opportunity to pick up some servicing as a result of the sheer size of the combination of those platforms," he continued.
Growth in subservicing operations is also not out of the question. "Our pipeline is active," according to Newrez President Baron Silverstein.
"They had a lot of subservicing," Silverstein said, referring to Mr. Cooper. "Those clients are obviously evaluating their alternatives and options as well."
Newrez origination and servicing activity
The executives' comments came as Newrez reported growth in both servicing and originations that led to net income of $146.7 million in the first quarter, with the total driven lower by fair value losses and related hedge impacts on its portfolio from a volatile rate environment.
The latest number came in 53.6%
"Our multichannel strategy allows us to optimize opportunities in all market environments, and all of our channels remain profitable in the first quarter," Silverstein said.
First-quarter lending production totaled $11.8 billion, which was down from $17.3 billion over the prior three months. The number represented growth on a year-over-year basis, though, increasing from $10.8 billion.
Gain on sale for Newrez originations improved to 137 basis points compared to 131 and 129 bps on a quarterly and annual basis.
Unpaid balance within its servicing portfolio grew to $844.9 billion in the most recent quarter, up incrementally from $843.9 billion three months earlier and $647.5 million over the same period in 2024, a year that saw Rithm
Total Newrez quarterly revenue equaled $498.8 million, which was lower by 70% and 35.8% from $1.66 billion in fourth quarter 2024 and $776.7 million a year ago.
The future of Rithm and Newrez
Mortgage banking activity helped propel Rithm to profits of $36.5 million in the first quarter
As Rithm expanded its business scope over the past few years, Nierenberg regularly remarked that the real estate investment trust and asset manager was "extremely undervalued" based on its stock price, especially when compared to its peers. The company, which trades as RITM on the New York Stock Exchange, opened at $10.41 on Friday morning.
Unlocking Rithm's potential has been a top priority for Nierenberg, leading him to look for avenues to increase shareholder value. Among the strategies is the separation of certain assets, including Newrez. Proposed at various times in the company's history,
Other possibilities Rithm's CEO mentioned include moving the company to an externally managed structure or forming a separate legal entity, known as a C corporation.
"There's a number of different things that we look at daily," Nierenberg said, "I'm hopeful that we'll have some kind of capital action by the end of '25."
Supporting the prospects of a possible Newrez spinoff were analysts at investment banking firm BTIG.
"We've been bullish on the prospects for RITM to spin out or monetize its ~$4 billion of net capital in Newrez, mostly because we think the business has stronger and more stable value if it can flexibly retain earnings outside the current REIT structure," wrote Eric Hagen and Jake Katsikas in a research note published after the earnings call.
Rithm also left the door open for more merger and acquisition activity this year, a
"This is not just to do deals. This is to figure out how we play on a much broader and bigger scale, because I do think you need to be bigger to compete with some of the very best asset management firms out there," Nierenberg said.
