Rithm Capital Corp
For the period ended Sep 30, 2024. Filed Nov 5, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 5, 2024
RITM$9.23-2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-12.
0001556593-24-000029
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-05.
0001556593-24-000041
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 348 previous paragraphs and 320 current paragraphs.
192 unchanged; 98 reworded; 29 added; 55 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 49 previous and 44 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (29)
Current report
The US economy expanded at a solid rate during the third quarter of 2024 as real gross domestic product (“GDP”) rose an annualized 2.8% following an average annualized increase of 2.3% in the first half of the year. The 10-year breakeven inflation rate from Treasury Inflation Protected Securities was 2.19% on September 30, 2024 versus 2.29% on June 30, 2024. The unemployment rate rose to 4.3% in July 2024 followed by a decline for two straight months through September 2024 with the rate of 4.1%. The labor market appeared solid during the third quarter with low levels of unemployment claims, job growth that outpaced new labor market entrants, and job openings that continued to exceed the number of unemployed job seekers.
Current report
Although overall inflation rates were reduced by declining oil prices, progress towards lower underlying inflation has stalled in recent months. The 12-month increase in the core Consumer Price Index (“CPI”) was 3.3% in September and June 2024. Headline CPI price inflation in September 2024 stood at 2.4%, down from a 2024 high of 3.5% in March, as CPI energy prices declined 5.5% over the last six months.
Current report
During the third quarter of 2024, job creation remained steady with an average payroll growth of 148,000 jobs per month versus an average of 147,000 jobs per month in the second quarter. The unemployment rate was unchanged at 4.1% in September compared to June. The balance between the supply of and demand for labor continued to gradually improve with the ratio of job openings to unemployed job seekers at 1.15 in September 2024 as compared to 1.21 in June. However, year-over-year wage growth picked up slightly to 3.9% in September 2024 from 3.8% in June 2024, indicating a still tight labor market.
Current report
(A)Includes GSE and Non-Agency MSRs of $24.4 billion and $42.6 billion underlying UPB, respectively, serviced by third-party subservicers discussed further in Investment Portfolio section below.
Current report
(A)Includes GSE and Non-Agency MSRs of $24.4 billion and $42.6 billion underlying UPB, respectively, serviced by third-party subservicers discussed further in Investment Portfolio section below.
Current report
(G)Includes GSE and Non-Agency MSRs of $24.4 billion and $42.6 billion underlying UPB, respectively, serviced by third-party subservicers discussed further in Investment Portfolio section below.
Current report
In addition to MSRs and MSR financing receivables, our investment portfolio includes investments in Excess MSRs, which represent the MSR component exceeding the base fee.
Current report
Servicing revenue, net decreased $685.2 million, primarily driven by changes to the fair value of the MSR portfolio from a change in the forward mortgage interest rate curve during the third quarter of 2024.
Current report
Servicing revenue, net decreased $547.1 million, primarily driven by changes to the fair value of the MSR portfolio from a change in the forward mortgage interest rate curve during the third quarter of 2024.
Current report
Interest income increased $72.1 million quarter over quarter, primarily driven by higher average investments in Treasury securities during the third quarter compared to the second quarter, and additional float income as a result of the Computershare Acquisition (Note 3 to our consolidated financial statements). Average custodial balances were $14.3 billion during the third quarter compared to $11.8 billion during the second quarter.
Current report
Interest income increased $281.6 million year over year, primarily driven by increases in investments in residential mortgage loans and consumer loans, as well as higher average custodial balances driven by the Computershare Acquisition (Note 3 to our consolidated financial statements).
Current report
Interest expense and warehouse line fees increased $44.2 million quarter over quarter, primarily due to an increase in borrowings related to higher average investments in Treasury securities and an increase in borrowings related to an increase in residential mortgage loan investments.
Current report
Interest expense and warehouse line fees increased $380.0 million year over year, primarily due to an increase in borrowings related to increases in investments in residential mortgage loans and consumer loans. Additionally, there was an increase in MSR financing driven by higher average drawn balances to fund the Sculptor Acquisition and the Computershare Acquisition (Note 3 to our consolidated financial statements) during the nine months ended September 30, 2024. The drawn balances for acquisition funding were partially paid down by September 30, 2024.
Current report
General and administrative expenses remained relatively flat quarter over quarter, primarily due to non-recurring integration and acquisition costs from the second quarter Computershare Acquisition (Note 3 to our consolidated financial statements), offset by (i) an increase in intangible amortization expense resulted from the Computershare Acquisition, (ii) tax service fees due to seasonality and (iii) fees incurred on securitizations during the third quarter of 2024.
Current report
Nine months ended September 30, 2024 compared to thenine months ended September 30, 2023
Current report
Realized and unrealized gains (losses), net increased $427.7 million quarter over quarter largely due to an increase in value of our agency and Treasury securities driven by lower interest rates and an increase in value of our on mortgage loans receivable, partially offset by a decrease in value of our Excess MSRs.
Current report
Income tax changed by $130.1 million from expense to benefit, of which $3.6 million and $126.5 million relate to current and deferred tax expense, respectively. The change from deferred tax expense to benefit wasprimarily driven by a decrease in the fair value of MSRs held within taxable entities.
Current report
Nine months ended September 30, 2024 compared to thenine months ended September 30, 2023
Current report
Overview
Current report
Use of Funds
Current report
Short-Term Borrowings
Current report
Unsecured Notes
Current report
On March 19, 2024, the Company issued $775.0 million in 8.000% senior unsecured notes due 2029 (the “2029 Senior Notes”), with interest payable semi-annually starting October 1, 2024, and net proceeds of approximately $483.0 million. The 2029 Senior Notes, maturing on April 1, 2029, are redeemable from April 1, 2026, at prices ranging from 104% to 100% of the principal amount. On September 16, 2020, the Company issued $550.0 million in 6.250% senior unsecured notes due 2025 (the “2025 Senior Notes”), with interest payable semi-annually starting April 15, 2021, and net proceeds of approximately $544.5 million. The 2025 Senior Notes, maturing on October 15, 2025, became redeemable from October 15, 2022, at prices decreasing from 103.125% to 100%. In connection with the offering of the 2029 Senior Notes, the Company tendered for and repurchased $275.0 million of its 2025 Senior Notes for cash in a total amount of $282.4 million, leaving $275.0 million of the 2025 Senior Notes outstanding. For more information regarding our indebtedness, refer to Note 18 of the consolidated financial statements.
Current report
Source of Funds
Current report
The following table summarizes our preferred shares outstanding (dollars in thousands, except share and per share amounts):
Current report
(E)Effective August 15, 2024, dividends on the Series A and Series B accumulate at a floating rate. For the third quarter 2024 dividend, the Series A accrued dividends at a percentage of the $25.00 liquidation preference per share of the Series A equal to a floating rate of a three-month LIBOR plus a spread of 5.802%, and dividends on the Series B accumulated at a percentage of the $25.00 liquidation preference per share of the Series B preferred shares equal to a floating rate of a three-month LIBOR plus a spread of 5.640%.
Current report
On September 24, 2024, Rithm Capital underwrote a public offering of 30.0 million shares of its common stock at a par value of $0.01 per share for gross proceeds of $340.2 million, before deducting estimated offering costs.
Current report
We generally need to distribute at least 90% of our taxable income each year (subject to certain adjustments) to our shareholders to qualify as a REIT under the Code. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital to support our activities. Dividends declared for the quarter ended September 30, 2024 were $129.9 million.
Current report
Net cash provided by (used in) operating activities was approximately $(0.4) billion and $1.7 billion for the nine months ended September 30, 2024 and 2023, respectively. The net cash used in operating activities is primarily attributable to higher mortgage origination volumes.
Removed paragraphs (55)
Previous report
On August 12, 2024, the Company filed the Amended Reports which included the restatement of certain prior period financial information. Certain prior period financial information contained in this Management’s discussion and analysis of financial condition and results of operations was restated in the Amended Reports, including information presented in following tables identified “As Restated” as well as prior period information referenced in this section. Accordingly, this Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the Amended Reports.
Previous report
The economic data suggests that the US economy continued to expand at a solid rate during the second quarter of 2024. Real gross domestic product (“GDP”) rose an annualized 2.8% in the second quarter following an increase of 1.4% in the first quarter. Market inflation expectations remained anchored; the 10-year breakeven inflation rate remained tightly bound around a 2.33% average, ranging from a low of 2.18% to a high of 2.43% during the quarter. The unemployment rate continued to drift higher during the second quarter with the rate in June at 4.1% compared to 3.8% in March and 3.7% in December, which suggests that the economy during the first half of the year grew at a pace slower than its potential growth. The labor market continued to rebalance as job openings were estimated to have fallen by around 700,000 in the first six months of the year, which lowered the number of vacancies per unemployed job seeker to 1.2 in June 2024 from 1.4 in December 2023.
Previous report
The progress towards lower inflation slowed in the first quarter but the second quarter inflation data showed further moderation. The 12-month increase in core consumer price index (“CPI”), which only slowed from 3.9% in December 2023 to 3.8% in March 2024, cooled further to 3.3% in June 2024. Headline CPI price inflation in June 2024 stood at 3.0%.
Previous report
During the second quarter of 2024, the US labor market continued to expand but nonetheless appeared to make progress in balancing the demand for and supply of labor. Average monthly payroll growth during the second quarter was 168,000 compared to 267,000 in the first quarter. The unemployment rate edged up to 4.1% in June from 3.8% in March, which although historically low represents an increase of 0.7 percentage points from the low in April 2023. Combined with a decline in the job openings rate from 5.3% in February 2024 to 4.9% in June 2024, the labor market continued to show improved balance between the supply of and demand for labor. Reflecting this improved balance, wage growth continued to slow with the increase in average hourly earnings in June 2024 slowing to 3.8% from 4.1% in March 2024.
Previous report
(A)Annualized rate based on the advance estimate.
Previous report
(A)Includes GSE and Non-Agency MSRs of $24.9 billion and $43.6 billion underlying UPB, respectively, serviced by third-party subservicers discussed further in Investment Portfolio section below.
Previous report
(A)Includes GSE and Non-Agency MSRs of $24.9 billion and $43.6 billion underlying UPB, respectively, serviced by third-party subservicers discussed further in Investment Portfolio section below.
Previous report
(G)Includes GSE and Non-Agency MSRs of $24.9 billion and $43.6 billion underlying UPB, respectively, serviced by third-party subservicers discussed further in Investment Portfolio section below.
Previous report
(A)Excludes other asset-backed securities, including bonds backed by consumer loans.
Previous report
(B)The current amount of interest received on the underlying loans in excess of the interest paid on the securities, as a percentage of the outstanding collateral balance for the quarter ended June 30, 2024.
Previous report
The following table summarizes the geographic location of our portfolio of loans included in Mortgage loans receivable, at fair value on the Consolidated Balance Sheets as of June 30, 2024 (dollars in thousands):
Previous report
Servicing revenue, net decreased $123.0 million, primarily driven by an increase in portfolio runoff and changes to the fair value of the MSR portfolio due to changes in valuation inputs and assumptions, including interest and prepayment rates, as well as increased UPBs.
Previous report
Servicing revenue, net increased $170.4 million, primarily driven by changes to the fair value of the MSR portfolio due changes in valuation inputs and assumptions, including interest and prepayment rates, as well as increased UPBs.
Previous report
Interest income increased $48.8 million quarter over quarter, primarily driven the acquisition of additional Agency and Treasury bonds and additional float income as a result of the Computershare Acquisition. This was partially offset by decreased interest income earned on our shorter duration consumer loans due to portfolio runoff.
Previous report
Interest income increased $193.3 million year over year, primarily driven by higher interest rates and the Computershare Acquisition, which added approximately $900 million in custodial balances.
Previous report
Interest expense and warehouse line fees increased $56.1 million quarter over quarter, primarily due to an increase in borrowings related to treasury and agency securities purchased at the end of the first quarter and increased financing costs on our floating rate MSR and advance financing during the second quarter.
Previous report
Interest expense and warehouse line fees increased $247.3 million year over year, primarily due to an increase in borrowings related to treasury and agency securities and increased financing costs on our floating rate MSR and advance financing during the six months ended June 30, 2024.
Previous report
General and administrative expenses increased $9.9 million quarter over quarter, primarily driven by integration and acquisition costs as a result of the Computershare Acquisition (Note 3 to our consolidated financial statements).
Previous report
Six months ended June 30, 2024 compared to thesix months ended June 30, 2023
Previous report
Realized and unrealized gains (losses), net increased $30.1 million quarter over quarter primarily driven by changes in valuation inputs and assumptions for residential mortgage loans and real estate and other securities related to projected asset recovery, interest and prepayment rates.
Previous report
Six months ended June 30, 2024 compared to thesix months ended June 30, 2023
Previous report
Our cash flow provided by operations differs from our net income due to these primary factors: (i) the difference between (a) accretion and amortization and unrealized gains and losses recorded with respect to our investments and (b) cash received therefrom, (ii) unrealized gains and losses on our derivatives, and recorded impairments, if any, (iii) deferred taxes and (iv) principal cash flows related to HFS loans, which are characterized as operating cash flows under GAAP.
Previous report
Debt Obligations
Previous report
The following table summarizes certain information regarding our debt obligations (dollars in thousands):
Previous report
(A)Net of deferred financing costs.
Previous report
(B)Debt obligations with a stated maturity through the date of issuance were refinanced, extended or repaid.
Previous report
(C)Associated with accrued interest payable of approximately $164.5 million as of June 30, 2024.
Previous report
(D)Includes $11.3 million with an average fixed-rate of 5.0% with the remaining based on SOFR interest rates.
Previous report
(E)SOFR-based floating interest rates. Includes repurchase agreements and related collateral on non-agency securities retained through consolidated securitizations.
Previous report
(F)Repurchase agreements have a fixed-rate. Includes financing on and collateral for US Treasuries purchased to cover short sales. Collateral carrying value includes margin deposits.
Previous report
(G)All SOFR- or Euro Interbank Offered Rate (EURIBOR)-based floating interest rates.
Previous report
(H)Includes $4.5 billion of MSR notes with an interest equal to the sum of (i) a floating rate index equal to SOFR, and (ii) a margin ranging from 2.5% to 3.7%; and $0.9 billion of MSR notes with fixed interest rates ranging 3.0% to 5.4%. The outstanding face amount of the collateral represents the UPB of the residential mortgage loans underlying the MSRs and MSR financing receivables securing these notes.
Previous report
(I)Includes debt with an interest rate equal to the sum of (i) a floating rate index equal to SOFR, and (ii) a margin ranging from 1.6% to 3.7%. Collateral includes servicer advance investments, as well as servicer advances receivable related to the MSRs and MSR financing receivables owned by NRM and Newrez.
Previous report
(J)Includes (i) SpringCastle debt, which is primarily composed of the following classes of asset-backed notes held by third parties: $172.2 million UPB of Class A notes with a coupon of 2.0% and $53.0 million UPB of Class B notes with a coupon of 2.7% and (ii) $581.1 billion of debt collateralized by the Marcus loans with an interest rate of SOFR plus a margin of 3.0%.
Previous report
(K)Includes $830.6 million of fixed-rate notes with an interest rate ranging from 3.5% to 7.1%.
Previous report
(L)See Note 20 for the balance sheets of consolidated CFEs.
Previous report
(M)Includes$120.0 million UPB of Class A notes with a fixed coupon of 4.3%,$70.0 million UPB of Class B notes with a fixed coupon of 6.0%,$15.0 million UPB of Class C notes with a fixed coupon of 6.8%, and$17.3 million UPB of Subordinated notes, held within consolidated funds (Note 20 to our consolidated financial statements). Weighted average life is based on expected maturity.
Previous report
Corporate Debt
Previous report
On March 19, 2024, the Company issued in a private offering $775 million aggregate principal amount of 8.000% senior unsecured notes due 2029 (the “2029 Senior Notes”) at an issue price of 98.981%. Interest on the 2029 Senior Notes accrues at the rate of 8.000% per annum with interest payable semi-annually in arrears on each April 1 and October 1, commencing on October 1, 2024. Net proceeds from the offering were approximately $483 million, after deducting the initial purchasers’ discounts and commissions, estimated offering expenses payable by us and partial repurchase of 2025 Senior Notes discussed below.
Previous report
The 2029 Senior Notes mature on April 1, 2029. The notes become redeemable at any time and from time to time, on or after April 1, 2026, at a price equal to the following fixed redemption prices (expressed as a percentage of principal amount of the 2029 Senior Notes to be redeemed):
Showing the first 40 of 55 passages. Open the source sections for the rest.
Reworded paragraphs (98)
Previous wording
Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and notes thereto, and with Part II, Item 1A, “Risk Factors” of this Report and Part I, Item 1A, “Risk Factors” of our Amended 2023 Form 10-K/A.
Current wording
Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and notes thereto, and with Part II, Item 1A, “Risk Factors” included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 and Part I, Item 1A, “Risk Factors” of our Amended 2023 Form 10-K/A.
Previous wording
We seek to generate long-term value for our investors by using our investment expertise to identify, manage and invest in real estate related and other financial assets and more recently, broader asset management capabilities, in each case, that provides investors with attractive risk-adjusted returns. Our investments in real estate related assets include our equity interest in operating companies, including leading origination and servicing platforms held through wholly-owned subsidiaries, Newrez LLC (“Newrez”) and Genesis, as well as investments in SFR, title, appraisal and property preservation and maintenance businesses. Our real estate related strategy also involves opportunistically pursuing acquisitions and seeking to establish strategic partnerships that we believe enable us to maximize the value of our investments by offering products and services related to the lifecycle of transactions that affect each mortgage loan and underlying residential property or collateral. We operate our asset management business primarily through our wholly-owned subsidiary, Sculptor and its affiliates. Sculptor is a leading global alternative asset manager and provides asset management services and investment products across credit, real estate and multi-strategy platforms through commingled funds, separate accounts and other alternative investment vehicles. We acquired Sculptor on November 17, 2023 pursuant to an Agreement and Plan of Merger (including the schedules and exhibits thereto and as amended by Amendment No. 1 to the Merger Agreement and Amendment No. 2 to the Merger Agreement). For more information about our investment guidelines, see “Part I, Item 1. Business—Investment Guidelines” of our Amended 2023 Form 10-K/A.
Current wording
We seek to generate long-term value for our investors by using our investment expertise to identify, manage and invest in real estate related and other financial assets and more recently, broader asset management capabilities, in each case, that provides investors with attractive risk-adjusted returns. Our investments in real estate related assets include our equity interest in operating companies, including leading origination and servicing platforms held through wholly-owned subsidiaries, Newrez LLC (“Newrez”) and Genesis, as well as investments in SFR, title, appraisal and property preservation and maintenance businesses. Our real estate related strategy also involves opportunistically pursuing acquisitions and seeking to establish strategic partnerships that we believe enable us to maximize the value of our investments by offering products and services related to the lifecycle of transactions that affect each mortgage loan and underlying residential property or collateral. We operate our asset management business primarily through our wholly-owned subsidiary, Sculptor and its affiliates, acquired on November 17, 2023, and RCM Manager, which manages Great Ajax, a publicly traded mortgage REIT pursuant to a management agreement, dated June 11, 2024 (as may be amended, modified and/or supplemented from time to time, the “Great Ajax Management Agreement”). Sculptor is a leading global alternative asset manager and provides asset management services and investment products across credit, real estate and multi-strategy platforms through commingled funds, separate accounts and other alternative investment vehicles. For more information about our investment guidelines, see “Part I, Item 1. Business—Investment Guidelines” of our Amended 2023 Form 10-K/A.
Previous wording
As of June 30, 2024, we had approximately $42.0 billion in total assets and approximately $32.1 billion in assets under management (“AUM”).
Current wording
As of September 30, 2024, we had approximately $42.3 billion in total assets and approximately $34.3 billion in assets under management (“AUM”).
Previous wording
During the second quarter of 2024, the housing market showed signs of further slowing as total home sales (new and existing) in June were reported at an annual rate of 4.51 million compared to 5.02 million in the middle of the first quarter. Home price growth also moderated with the 12-month increase in the median resale price of an existing home at 4.1% in June, which compared to 5.6% in February.
Current wording
Home sales remained at low levels in the third quarter of 2024 with total home sales (new and existing) in September reported at an annual rate of 4.58 million, showing little change from 4.57 million at the end of the second quarter, down from 4.77 million in 2023 and 5.72 million in 2022. Home price growth moderated further with the 12-month increase in the median resale price of an existing home at 3.0% in September 2024, which compares to 4.1% in June 2024.
Previous wording
The market conditions discussed above influence our investment strategy and results. On balance, bond yields and mortgage rates were little changed in the second quarter as the Fed signaled that it needed greater confidence that inflation was headed to its target of 2% but also that the policy rate had likely peaked. The 30-year fixed mortgage rate was 6.86% at the end of the second quarter compared to 6.79% at the end of the first quarter.
Current wording
The economic conditions discussed above influence our investment strategy and results. The Federal Open Market Committee cut the federal funds rate target range by 50 basis points on September 18, 2024, and further signaled that future interest rate adjustments are likely to be more gradual. The 30-year fixed mortgage rate was 6.08% at the end of the third quarter compared to 6.86% at the end of the second quarter.
Previous wording
The following table summarizes the annualized 10-year US Treasury rate and the annualized 30-year fixed mortgage rate:
Current wording
The following table summarizes the annualized 10-year US Treasury rate according to the Federal Reserve and the 30-year fixed mortgage rate according to Freddie Mac:
Previous wording
On March 5, 2021, Intercontinental Exchange Inc. (“ICE”) announced that ICE Benchmark Administration Limited, the administrator of the London Interbank Offered Rate (“LIBOR”), intended to stop publication of the majority of USD-LIBOR tenors (overnight, 1-, 3-, 6- and 12-month) on June 30, 2023. On January 1, 2022, ICE discontinued the publication of the 1-week and 2-month tenors of USD-LIBOR. In the US, the Alternative Reference Rates Committee has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for US dollar-based LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by US Treasury securities and is based on directly observable US Treasury-backed repurchase transactions.
Current wording
On March 5, 2021, Intercontinental Exchange Inc. (“ICE”) announced that ICE Benchmark Administration Limited, the administrator of the London Interbank Offered Rate (“LIBOR”), intended to stop publication of the majority of USD-LIBOR tenors (overnight, 1-, 3-, 6- and 12-month) on June 30, 2023. On January 1, 2022, ICE discontinued the publication of the 1-week and 2-month tenors of USD-LIBOR. In the US, the Alternative Reference Rates Committee has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for US dollar-based LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by US Treasury (“Treasury”) securities and is based on directly observable US Treasury-backed repurchase transactions.
Previous wording
(A)Includes assets and liabilities of certain consolidated VIEs that meet the definition of collateralized financing entities ("CFEs"). The assets of the CFEs can only be used to settle obligations and liabilities of the CFEs for which creditors do not have recourse to Rithm Capital Corp.
Current wording
(A)Includes assets and liabilities of certain consolidated variable interest entities that meet the definition of collateralized financing entities (“CFEs”). The assets of the CFEs can only be used to settle obligations and liabilities of the CFEs for which creditors do not have recourse to Rithm Capital Corp.
Previous wording
Rithm Capital’s servicing and origination businesses operated through its wholly-owned subsidiaries Newrez, New Residential Mortgage LLC (“NRM”) and Caliber Home Loans Inc. (“Caliber”), through December 31, 2023. The operations of Caliber were fully integrated into Newrez in the fourth quarter of 2023, and as such operated within Newrez during the six months ended June 30, 2024.
Current wording
Rithm Capital’s servicing and origination businesses operates through its wholly-owned subsidiaries Newrez and New Residential Mortgage LLC (“NRM”).
Previous wording
We have a multi-channel lending platform, offering purchase and refinance loan products. We originate loans through our Retail channel, offer purchase, refinance and closed end second opportunities to eligible existing servicing customers through our Direct to Consumer channel, and purchase originated loans through our Wholesale and Correspondent channels. We originate or purchase residential mortgage loans conforming to the underwriting standards of the GSEs and Ginnie Mae, government-insured residential mortgage loans which are insured by the Federal Housing Administration (“FHA”), the Department of Veterans Affairs and the US Department of Agriculture, and RMBS and other securities are issued by either public trusts or private label securitization entities (securities issued as such, known as “Non-Agency”) and non-qualified residential mortgage loans (“Non-QM”) through our SMART Loan Series. Our Non-QM loan products provide a variety of options for highly qualified borrowers who fall outside the specific requirements of agency residential mortgage loans issued by the GSEs or Ginnie Mae (securities issued as such, known as “Agency”) . We originate closed end second lien home equity loans to our existing consumers to access the equity in their home without the need to pay off their existing first lien mortgage.
Current wording
We have a multi-channel lending platform, offering purchase and refinance loan products. We originate loans through our Retail channel, offer purchase, refinance and closed end second opportunities to eligible existing servicing customers through our Direct to Consumer channel, and purchase originated loans through our Wholesale and Correspondent channels. We originate or purchase residential mortgage loans conforming to the underwriting standards of the GSEs and Ginnie Mae; government-insured residential mortgage loans which are insured by the Federal Housing Administration (“FHA”), the Department of Veterans Affairs and the US Department of Agriculture; RMBS and other securities that are issued by either public trusts or private label securitization entities (“Non-Agency” securities); and non-qualified residential mortgage loans (“Non-QM”) through our SMART Loan Series. Our Non-QM loan products provide a variety of options for highly qualified borrowers who fall outside the specific requirements of agency residential mortgage loans issued by the GSEs or Ginnie Mae (“Agency” securities). We originate closed end second lien home equity loans to our existing consumers to access the equity in their home without the need to pay off their existing first lien mortgage.
Previous wording
Our servicing business operates through our performing and special servicing divisions. The performing loan servicing division services performing Agency and government-insured loans. Shellpoint Mortgage Servicing (“SMS”), our special servicing division, services delinquent government-insured, Agency and Non-Agency loans on behalf of the owners of the underlying mortgage loans. We are highly experienced in loan servicing, including loan modifications, and seek to help borrowers avoid foreclosure. As of June 30, 2024, the performing loan servicing division serviced $486.4 billion unpaid principal balance (“UPB”) of loans, and SMS serviced $255.2 billion UPB of loans, for a total servicing portfolio of $741.6 billion UPB, increased $164.1 billion from the prior quarter. The increase was primarily attributable to an increase in third party servicing
Current wording
Our servicing business operates through our performing and special servicing divisions. The performing loan servicing division services performing Agency and government-insured loans. Shellpoint Mortgage Servicing (“SMS”), our special servicing division, services delinquent government-insured, Agency and Non-Agency loans on behalf of the owners of the underlying mortgage loans. We are highly experienced in loan servicing, including loan modifications, and seek to help borrowers avoid foreclosure. As of September 30, 2024, the performing loan servicing division serviced $510.3 billion unpaid principal balance (“UPB”) of loans, and SMS serviced $244.4 billion UPB of loans, for a total servicing portfolio of $754.7 billion UPB, an increase of $13.1 billion from the prior quarter. The increase was primarily attributable to new client acquisition and loan production, partially offset by scheduled and voluntary prepayment loan activity.
Previous wording
(B)Includes loan origination fees of $233.8 million and $177.7 million for the three months ended June 30, 2024 and March 31, 2024, respectively. Includes loan origination fees of $411.5 million and $162.9 million for the six months ended June 30, 2024 and 2023, respectively.
Current wording
(B)Includes loan origination fees of $289.0 million and $233.8 million for the three months ended September 30, 2024 and June 30, 2024, respectively. Includes loan origination fees of $700.4 million and $268.8 million for the nine months ended September 30, 2024 and 2023, respectively.
Previous wording
Total Gain on originated residential mortgage loans, HFS, net increased $12.7 million to $153.3 million for the three months ended June 30, 2024 compared to the three months ended March 31, 2024. The increase is attributable to an increase in pull through adjusted lock volume across most channels driven by seasonal demand. Purchase originations comprised 87% of funded loans for the three months ended June 30, 2024, higher than 83% for the three months ended March 31, 2024. Total Gain on originated residential mortgage loans, HFS, net increased $45.8 million to $294.0 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase is attributable to an increase in pull through adjusted lock volume primarily driven by increased correspondent volume offsetting reductions in Retail/Joint Venture. Purchase originations comprised 85% of funded loans for the six months ended June 30, 2024, comparable to 86% for the six months ended June 30, 2023, as interest rates remained elevated year-over-year, reducing refinance opportunities.
Current wording
Total gain on originated residential mortgage loans, HFS, net increased $25.0 million to $178.3 million for the three months ended September 30, 2024, compared to the three months ended June 30, 2024. The increase is attributable to an increase in pull through adjusted lock volume due to higher refinance activity as interest rates moved lower during the quarter. Refinance originations comprised 19% of funded loans for the three months ended September 30, 2024, higher than 13% for the three months ended June 30, 2024. Total gain on originated residential mortgage loans, HFS, net increased $98.5 million to $472.3 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase is attributable to an increase in pull through adjusted lock volume primarily driven by increased production volume in the Correspondent channel. Refinance originations comprised 16% of funded loans for the nine months ended September 30, 2024, higher than 13% for the nine months ended September 30, 2023, due to higher refinance activity as interest rates moved lower during the third quarter of 2024.
Previous wording
For the three months ended June 30, 2024, funded loan origination volume was $14.6 billion, up from $10.8 billion in the prior quarter. Gain on sale margin for the three months ended June 30, 2024 was 1.00%, 20 bps lower than the 1.20% for the prior quarter, primarily due to lower correspondent margins driven by a competitive pricing environment. For the six months ended June 30, 2024, funded loan origination volume was $25.4 billion, up from $16.9 billion compared to the six months ended June 30, 2023. Gain on sale margin for the six months ended June 30, 2024 was 1.09%, 31 bps lower than the 1.40% for the six months ended June 30, 2023, primarily due to channel mix and lower margins in third party originations driven by an increased competitive environment (refer to the tables above).
Current wording
For the three months ended September 30, 2024, funded loan origination volume was $15.9 billion, up from $14.6 billion in the prior quarter. Gain on sale margin for the three months ended September 30, 2024, was 1.13%, 13 bps higher than the 1.00% for the prior quarter, primarily due to higher margin Direct to Consumer originations and improvements in Correspondent and Wholesale margins. For the nine months ended September 30, 2024, funded loan origination volume was $41.3 billion, up from $28.0 billion compared to the nine months ended September 30, 2023. Gain on sale margin for the nine months ended September 30, 2024, was 1.10%, 24 bps lower than the 1.34% for the nine months ended September 30, 2023, primarily due to an increase in Correspondent production relative to total production (refer to the tables above).
Previous wording
The table below provides the mix of our serviced assets portfolio between subserviced performing servicing (labeled as “Performing Servicing”) and subserviced non-performing, or special servicing (labeled as “Special Servicing”). Newrez subservices on behalf of Rithm Capital or its subsidiaries and for third parties for the periods presented.
Current wording
The table below provides the mix of Newrez serviced assets portfolio between subserviced performing servicing (labeled as “Performing Servicing”) and subserviced non-performing, or special servicing (labeled as “Special Servicing”). Third-party servicing includes loan portfolios serviced on behalf of Rithm Capital or its subsidiaries and non-affiliated third parties for the periods presented.
Previous wording
(A)Includes other fees earned from third parties of $13.6 million and $14.1 million for the three months ended June 30, 2024 and March 31, 2024, respectively, and $27.7 million and $23.7 million for the six months ended June 30, 2024 and 2023, respectively.
Current wording
(A)Includes other fees earned from third parties of $19.4 million and $13.6 million for the three months ended September 30, 2024 and June 30, 2024, respectively, and $47.1 million and $36.3 million for the nine months ended September 30, 2024 and 2023, respectively.
Previous wording
Our servicing segment consists of owned MSRs primarily serviced by Newrez. As of June 30, 2024, 88.3% of the underlying UPB of mortgages related to owned MSRs is serviced by Newrez.
Current wording
As noted above, our servicing segment includes owned MSRs primarily serviced by Newrez. As of September 30, 2024, 88.6% of the underlying UPB of mortgages related to owned MSRs is serviced by Newrez.
Previous wording
An MSR provides a mortgage servicer with the right to service a pool of residential mortgage loans in exchange for a portion of the interest payments made on the underlying residential mortgage loans, plus ancillary income and custodial interest. An MSR is made up of two components: a basic fee and an Excess MSR. The basic fee is the amount of compensation for the performance of servicing duties (including advance obligations), and the Excess MSR is the amount that exceeds the basic fee.
Current wording
An MSR provides a mortgage servicer with the right to service a pool of residential mortgage loans in exchange for a portion of the interest payments made on the underlying residential mortgage loans, plus ancillary income and custodial interest. An MSR is made up of two components: a base fee and an Excess MSR. The base fee is the amount of compensation for the performance of servicing duties (including advance obligations), and the Excess MSR is the amount that exceeds the base fee.
Previous wording
In addition to MSRs serviced by Newrez discussed in the previous section, we contract with PHH Mortgage Corporation (“PHH”) and Valon Mortgage, Inc. (“Valon”) to perform the related servicing duties on the residential mortgage loans underlying a certain portion of our MSRs and MSR financing receivables. As of June 30, 2024, PHH and Valon subservice 7.4% and 4.3%, or $43.6 billion and $24.9 billion, of the underlying UPB of the related mortgages, respectively.
Current wording
In addition to MSRs serviced by Newrez discussed in the previous section, we contract with PHH Mortgage Corporation (“PHH”) and Valon Mortgage, Inc. (“Valon”) to perform the related servicing duties on the residential mortgage loans underlying a certain portion of our MSRs and MSR financing receivables. As of September 30, 2024, PHH and Valon subservice 7.2% and 4.2%, or $42.6 billion and $24.4 billion, of the underlying UPB of the related mortgages, respectively.
Previous wording
(A)The MSR is a weighted average as of June 30, 2024, and the Excess MSR represents the difference between the weighted average MSR and the basic fee (which fee remains constant).
Current wording
(A)The MSR is a weighted average as of September 30, 2024, and the Excess MSR represents the difference between the weighted average MSR and the base fee (which fee remains constant).
Previous wording
(B)Excess MSRs serviced by Mr. Cooper Group Inc. (“Mr. Cooper”), we also invested in related servicer advance investments, including the basic fee component of the related MSR (Note 14) on $14.0 billion UPB underlying these Excess MSRs.
Current wording
(B)Represents excess MSRs serviced by Mr. Cooper Group Inc. (“Mr. Cooper”). We also invested in related servicer advance investments, including the base fee component of the related MSR (Note 14) on $13.7 billion UPB underlying these Excess MSRs.
Previous wording
The following tables summarize the collateral characteristics of the loans underlying our direct Excess MSRs and the new joint venture with Sculptor non-consolidated funds as of June 30, 2024 (dollars in thousands):
Current wording
The following tables summarize the collateral characteristics of the loans underlying our direct Excess MSRs and the Excess MSRs held in a joint venture with Sculptor non-consolidated funds as of September 30, 2024 (dollars in thousands):
Previous wording
which a servicer is compensated. Servicer advances are generally reimbursable payments made by a servicer (i) when the borrower fails to make scheduled payments due on a residential mortgage loan, including during forbearance periods, or (ii) to support the value of the collateral property. Servicer advance investments are associated with specified pools of residential mortgage loans in which we have contractually assumed the servicing advance obligation and include the related outstanding servicer advances, the requirement to purchase future servicer advances and the rights to the basic fee component of the related MSR.
Current wording
which a servicer is compensated. Servicer advances are generally reimbursable payments made by a servicer (i) when the borrower fails to make scheduled payments due on a residential mortgage loan, including during forbearance periods, or (ii) to support the value of the collateral property. Servicer advance investments are associated with specified pools of residential mortgage loans in which we have contractually assumed the servicing advance obligation and include the related outstanding servicer advances, the requirement to purchase future servicer advances and the rights to the base fee component of the related MSR.
Previous wording
The following is a summary of our servicer advance investments, including the right to the basic fee component of the related MSRs (dollars in thousands):
Current wording
The following is a summary of our servicer advance investments, including the right to the base fee component of the related MSRs (dollars in thousands):
Previous wording
(A)Represents the fair value of the servicer advance investments, including the basic fee component of the related MSRs.
Current wording
(A)Represents the fair value of the servicer advance investments, including the base fee component of the related MSRs.
Previous wording
The following summarizes additional information regarding our servicer advance investments and related financing, as of and for the six months ended June 30, 2024 (dollars in thousands):
Current wording
The following summarizes additional information regarding our servicer advance investments and related financing, as of and for the nine months ended September 30, 2024 (dollars in thousands):
Previous wording
(B)Annualized measure of the cost associated with borrowings. Gross cost of funds primarily includes interest expense and facility fees. Net cost of funds excludes facility fees.
Current wording
(B)Represents the annualized measure of the cost associated with borrowings. Gross cost of funds primarily includes interest expense and facility fees. Net cost of funds excludes facility fees.
Previous wording
(A)Agency RMBS and US Treasuries are held at fair value under the fair value option election. US Treasury Bills are held-to-maturity at amortized cost basis.
Current wording
(A)Agency RMBS are held at fair value under the fair value option election. Treasury securities include $24.7 million of short term Treasury bills held-to-maturity at amortized cost with the remaining held at fair value under the fair value option election.
Previous wording
The following table summarizes the net interest spread of our Agency RMBS portfolio for the three months ended June 30, 2024:
Current wording
The following table summarizes the net interest spread of our government and government-backed securities portfolio for the three months ended September 30, 2024:
Previous wording
(A)The Agency RMBS portfolio consists of 100.0% fixed-rate securities (accounted for on amortized cost basis).
Current wording
(A)The government and government-backed securities portfolio consists of 100.0% fixed-rate securities (accounted for on amortized cost basis).
Previous wording
We largely employ our Agency RMBS and US Treasury positions, or government-backed securities, as a hedge to our MSR portfolio and for REIT status. Our government-backed securities portfolio was $9.3 billion as of June 30, 2024. We finance the investments with short-term borrowings under master uncommitted repurchase agreements. These borrowings generally bear interest rates offered by the counterparty for the term of the proposed repurchase transaction (e.g., 30 days, 60 days, etc.) of a specified margin over SOFR. At June 30, 2024 and December 31, 2023, the Company pledged Agency RMBS and US Treasuries with a carrying value of approximately $9.5 billion and $8.5 billion, respectively, as collateral for borrowings under repurchase agreements. We expect to continue to finance our government-backed securities acquisitions with repurchase agreement financing. See Note 18 to our consolidated financial statements for further information regarding financing of our government-backed securities, including a summary of activity related to financing from December 31, 2023 to June 30, 2024.
Current wording
We largely invest in government-backed securities (Agency and Treasury securities) as a hedge to our MSR portfolio and for REIT status. Our government-backed securities portfolio was $10.1 billion as of September 30, 2024. We finance investments in government-backed securities with short-term borrowings under master uncommitted repurchase agreements. These borrowings generally bear interest rates offered by the counterparty for the term of the proposed repurchase transaction (e.g., 30 days, 60 days, etc.) of a specified margin over SOFR. At September 30, 2024 and December 31, 2023, the Company pledged Agency RMBS and Treasury securities with a carrying value of approximately $10.1 billion and $8.6 billion, respectively, as collateral for borrowings under repurchase agreements. We expect to continue to finance our government-backed securities acquisitions with repurchase agreement financing. See Note 18 to our consolidated financial statements for further information regarding financing of our government-backed securities, including a summary of activity related to financing from December 31, 2023 to September 30, 2024.
Previous wording
Within our Non-Agency RMBS portfolio, we retain and own risk retention bonds from our securitizations that we do not consolidate in accordance with risk retention regulations under the Dodd-Frank Act. We also retain and own bonds from our consolidated private label mortgage securitizations which eliminate in consolidation. The equity value is reflected in Assets of consolidated CFEs and Liabilities of consolidated CFEs on the Consolidated Balance Sheets, and is excluded from the tables below. As of June 30, 2024, 65.7% of our Non-Agency RMBS portfolio was related to bonds retained pursuant to required risk retention regulations.
Current wording
Within our Non-Agency RMBS portfolio, we retain and own risk retention bonds from our securitizations that we do not consolidate in accordance with risk retention regulations under the Dodd-Frank Act. We also retain and own bonds from our consolidated private label mortgage securitizations which we eliminate in consolidation. The equity value is reflected in assets of consolidated CFEs and liabilities of consolidated CFEs on the consolidated balance sheets and is excluded from the tables below. As of September 30, 2024, 94.0% of our Non-Agency RMBS portfolio was related to bonds retained pursuant to required risk retention regulations.
Previous wording
(C)Excludes residual bonds with a carrying value of $17.1 million for which no coupon payment is expected.
Current wording
(A)Excludes interest only, residual and other bonds with a carrying value of $200.5 million for which no coupon payment is expected.
Previous wording
(D)The ratio of original UPB of loans still outstanding.
Current wording
(B)Represents the ratio of original UPB of loans still outstanding.
Previous wording
(E)Three-month average constant prepayment rate and default rates.
Current wording
(C)Three-month average constant prepayment rate and default rates.
Previous wording
(F)The percentage of underlying loans that are 90+ days delinquent, or in foreclosure or considered REO.
Current wording
(D)The percentage of underlying loans that are 90+ days delinquent, or in foreclosure or considered REO.
Previous wording
(A)The Non-Agency RMBS portfolio consists of 21.7% floating rate securities and 78.3% fixed-rate securities (accounted for on amortized cost basis).
Current wording
(A)The Non-Agency RMBS portfolio consists of 22.2% floating rate securities and 77.8% fixed-rate securities (accounted for on amortized cost basis).
Previous wording
•Loans held-for-sale (“HFS”), at lower of cost or fair value
Current wording
•Loans HFS, at lower of cost or fair value
Previous wording
As of June 30, 2024, we had approximately $4.3 billion outstanding face amount of loans included in Residential mortgage loans, held-for-sale and Residential mortgage loans, held-for-investment at fair value on the Consolidated Balance Sheets (see below). These investments were financed with secured financing agreements with an aggregate face amount of approximately $3.8 billion. We acquired these loans through open market purchases, loan origination through Newrez and the exercise of call rights and acquisitions.
Current wording
As of September 30, 2024, we had approximately $3.5 billion outstanding face amount of loans included in residential mortgage loans, held-for-sale and residential mortgage loans, held-for-investment at fair value on the consolidated balance sheets (see below). These investments were financed with secured financing agreements with an aggregate face amount of approximately $3.2 billion. We acquired these loans through open market purchases, loan origination through Newrez and the exercise of call rights and acquisitions.
Previous wording
(E)Includes $217.2 million and $192.6 million UPB of Ginnie Mae early buyout options performing and non-performing loans, respectively, on accrual status as contractual cash flows are guaranteed by the FHA.
Current wording
(E)Includes $178.8 million and $208.2 million UPB of Ginnie Mae early buyout options performing and non-performing loans, respectively, on accrual status as contractual cash flows are guaranteed by the FHA.
Showing the first 40 of 98 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Additionally, we have acquired and are continuing to acquire additional homes through the purchase of communities and portions of communities built for renting from regional and national home builders. Our operating results are also impacted by the amount of time it takes to market and lease a property, which can vary greatly among properties, and is impacted by local demand, our marketing techniques and the size of our available inventory.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
UPB due to the acquisition of Computershare (the “Computershare Acquisition”) (Note 3 to our consolidated financial statements) and loan production, partially offset by scheduled and voluntary prepayment loan activity.
Previous report — wording carried elsewhere
An MSR is made up of two components: a basic fee and an Excess MSR. The basic fee is the expected amount of compensation needed for the performance of servicing duties (including advance obligations), and the Excess MSR is the amount that exceeds the basic fee.
Previous report — wording carried elsewhere
Income tax expense increased$105.3 million, of which $7.8 million and $97.5 million relate to current and deferred tax expense, respectively. The increase in deferred tax expense wasprimarily driven by the net changes in the fair value of MSRs, loans and swaps held within taxable entities, as well as, income generated by the origination and servicing business segment. The increase in current tax expense is primarily driven by income generated by the asset management business segment.