Newrez Laying Off Nearly 500 Workers After Rithm Acquisitions

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Mortgage lending and servicing giant Newrez LLC is laying off nearly 500 workers in Colorado and Florida as its parent company, Rithm Capital Corp., continues its quest to diversify during a difficult time for lenders.

Newrez and Rithm — a global asset manager focused on real estate, credit and financial services — declined to comment on the pending layoffs of 420 Newrez employees in Colorado and 53 workers in Florida.

But the first round of layoffs was disclosed May 2 — the day after Rithm closed its $720 million acquisition of Specialized Loan Servicing (SLS) LLC and its parent company, Computershare Mortgage Services Inc.

SLS is a loan servicer that specializes in collecting monthly mortgage payments from distressed borrowers, providing workouts to some homeowners who can’t make their payments and foreclosing on others. Some of the employees Newrez is laying off perform similar roles as workers at Computershare Mortgage Services and SLS, which now does business as Shellpoint.

Rithm had previously closed another big deal in November — the $720 million acquisition of Sculptor Capital Management Inc., a hedge fund that invests in debt, real estate and “multi-strategy platforms” with $32 billion in assets under management.

Based in Fort Washington, Pennsylvania, Newrez sponsors 733 mortgage loan originators working out of 90 branch locations, down from 983 loan originators at 155 locations in October, according to NMLS records. Newrez is also partnered with real estate brokerages in a number of mortgage joint ventures through its Newrez Ventures platform, formerly known as Shelter Mortgage Company.

Michael Nierenberg

Although Newrez isn’t commenting on the layoffs, Rithm President, Chairman and CEO Michael Nierenberg outlined the thinking behind the SLS acquisition on an earnings call shortly after the deal was announced on Oct. 2.

“Really what it is, is a servicing deal; there’s very little on the origination side,” Nierenberg said on the Oct. 27 earnings call.

Rithm acquired $149 billion in mortgage servicing business through the SLS deal, most of it ($104 billion) consisting of loans that SLS was servicing as a third party. As of March 31, Rithm’s mortgage servicing portfolio totaled $857 billion, including $225 billion in loans that Rithm services as a third party for other lenders.

That puts Rithm in the same league as loan servicing giant Mr. Cooper, which has grown its loan servicing portfolio from $650 billion in 2021 to more than $1 trillion this year.

But Nierenberg said the SLS acquisition is “not about so-called scale,” but boosting Rithm’s third-party servicing fees. Those fees, as well as the opportunity to offer refinancing to homeowners serviced by Newrez, will help boost earnings at a time when elevated mortgage rates make it more difficult to originate new loans.

“Regarding the mortgage company, we continue to be vigilant on expense reduction initiatives, particularly in the origination segments,” Nierenberg said in October. “We expect the origination business to remain under extreme pressure with mortgage rates at 8 percent.”

Mortgage rates have come down some from their October 2023 peaks. But on May 2 — the day after the SLS acquisition closed — Newrez notified state labor departments in Colorado and Florida of its plans to lay off 156 workers — 103 in Colorado, and 53 in Florida — beginning July 1.

On June 3, Newrez filed another Worker Adjustment and Retraining Notification (WARN) Act notice with Colorado officials, informing them of plans to lay off 317 employees from the company’s Greenwood Village facility beginning on Aug. 2.

Positions Newrez is cutting in Colorado include asset managers, bankruptcy supervisors and support associates, workout specialists, default support associates, loss mitigation supervisors and valuations analysts — roles that overlap with staffing at SLS.

In October, Nierenberg said acquiring SLS “increases our capacity in the special servicing space. So as we go forward, and you think about the global macro picture — if the economy in the U.S. does slow down, and there’s a need for more special servicing, there’s going to be nobody better than Newrez … to work with homeowners and consumers.”

[In 2020 SLS agreed to provide $1.275 million in relief to consumers and pay a $250,000 civil monetary penalty to settle allegations by the Consumer Financial Protection Bureau that it improperly foreclosed on some borrowers, without admitting or denying the allegations].

Last big acquisition also resulted in layoffs

While Rithm’s $1.44 billion acquisition spree has led to layoffs of nearly 500 workers, the company went through even more dramatic growing pains in 2022, as soaring mortgage rates curbed mortgage lending.

Before changing its name to Rithm Capital in 2022, New Residential Investment Corp. (as the company was known at the time) acquired Caliber Home Loans and Genesis Capital in 2021.

The $1.675 billion Caliber Home Loans deal — part of a strategy to expand the company’s origination, servicing and asset management capabilities — included $141 billion in mortgage servicing rights. Most of Caliber’s loan originators were laid off after that deal closed.

Rithm cut more than 6,500 workers from its payrolls to reduce expenses in 2022, primarily within its mortgage originations segment. After starting out 2022 with 12,296 people on the payroll, Rithm cut its workforce by 53 percent, finishing the year with 5,723 workers.

The operations of Caliber were fully integrated into Newrez in the fourth quarter of 2023, with a number of former executives ending up at Ohio-based Union Home Mortgage.

As of Dec. 31, 2023, Rithm reported a total of 6,570 employees on its payroll, of whom 5,656 worked in mortgage origination and servicing.

Rithm is also in the single-family rental business through its subsidiary, Adoor LLC.

“Adoor is well positioned to benefit from the current market environment, acquiring SFR properties at elevated cap rates through its acquisition channels and vertically integrating its property management functions,” Rithm said in an April 30 investor presentation.

Last fall, Rithm announced a strategic partnership with Pagaya Technologies subsidiary Darwin Homes Inc. on a new property management platform, Adoor Property Management LLC.

Led by former Caliber CEO Sanjiv Das, Pagaya acquired Darwin Homes in a January 2023 all-stock transaction valued at $18 million, plus $12 million in cash and equity awards to Darwin employees.

One week after announcing the Darwin Homes deal, Pagaya said it was laying off 20 percent of its workforce, ending the year with 712 workers on the payroll — including 142 full-time Darwin employees.

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