Rithm Capital posts $3M loss as it “right-sizes” mortgage business

REIT formerly known as New Residential attributes loss to break fee with Fortress

Rithm Capital, formerly known as New Residential Investment, lost $3.3 million in the second quarter of 2022, largely due to fees caused by its break from Fortress Investment Group and a decline in residential mortgage originations.

In an earnings presentation Tuesday, executives at Rithm said the company paid approximately $325 million to break from an affiliate of the asset management firm and be internally managed. Resulting cost savings should be about $60 million, executives said.

The rebrand comes as Rithm looks to reduce expenses across its businesses and complete the integration of its mortgage companies New Rez and Caliber.

In an investor presentation, Rithm said it reduced run-rate administrative expenses at its mortgage division to $1.9 billion, down from $2.6 billion at the beginning of 2022 and $3 billion pro forma at the acquisition of Caliber. It has completed the integration to one origination platform and is “focused on identifying ways to drive additional cost savings through the end of the year,” the investor presentation said, adding the positioning is ” right-sizing origination business for current cycle and focused on innovative ways to reach consumers.”

The real estate investment trust has shed hundreds of jobs at its mortgage companies throughout 2022, with the most recent layoff occurring in July.

The originations business segment lost $26.4 million, down from a $26.5 million profit in the first quarter. Origination volume in the second quarter came in at $19.1 billion, down from $26.9 billion in the first quarter.

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Rithm’s servicing segment generated $427.2 million in net income in the second quarter, thanks to surging values in mortgage servicing rights. The MSR portfolio totaled $623 billion UPB at the end of the quarter, down from $626 billion at the conclusion of the first quarter. Servicer advance balances came in at $3 billion as of June 30, 2022, down 3% from the end of the first quarter.

In the second quarter, Rithm priced one securitization representing $346 million UPB of collateral. It also acquired $444 million in non-QM loans and grew its single-family rental portfolio by 324 units.

The company had a cash position of $1.8 billion at the end of the quarter.

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