Newrez lays off nearly 500 employees after acquisition of Rithm – Inman

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

Newrez and Rithm – a global asset management firm focused on real estate, lending and financial services – declined to comment on the impending layoffs of 420 Newrez employees in Colorado and 53 employees in Florida.

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

SLS is a loan servicing company that specializes in collecting monthly mortgage payments from distressed borrowers, providing training to some homeowners who cannot meet their payments, and taking control of others. Some of the workers Newrez is laying off serve in similar roles to those at Computershare Mortgage Services and SLS, which now does business as Shellpoint.

Rithm previously completed another major 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.

Fort Washington, Pa.-based Newrez sponsors 733 origination lenders operating in 90 locations, up from 983 origination lenders in 155 locations in October, according to NMLS data. Newrez also partners with real estate brokers on a number of joint mortgage ventures through the Newrez Ventures platform, formerly known as Shelter Mortgage Company.

Michael Nierenberg

While Newrez would not comment on the layoffs, Rithm chairman, president and CEO Michael Nierenberg outlined the SLS acquisition during an earnings call shortly after the deal was announced Oct. 2.

“It’s actually a service contract; there is very little on the front end,” Nierenberg said on an Oct. 27 earnings call.

As part of the SLS transaction, Rithm acquired a $149 billion mortgage servicing business, most of which ($104 billion) consisted of loans that SLS serviced as a third party. As of March 31, Rithm’s mortgage servicing portfolio was $857 billion, including $225 billion of loans that Rithm services as a third party to other lenders.

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

Nierenberg, however, said the SLS takeover was “not about so-called scale” but about raising Rithm’s third-party service fees. These fees, as well as the ability to offer refinancing to homeowners served by Newrez, will help boost profits at a time when elevated mortgage rates are making it harder to take out new loans.

“For mortgage companies, we continue to remain vigilant on expense reduction initiatives, particularly in the entry-level segments,” Nierenberg said in October. “We expect origination activity to remain under enormous pressure with mortgage rates at 8 percent.”

Mortgage rates have fallen from their highs in October 2023. However, on May 2 – the day after the SLS acquisition closed – Newrez notified the state departments of labor in Colorado and Florida of its plans to lay off 156 employees – 103 in Colorado and 53 in Florida – effective from July 1.

On June 3, Newrez filed another notice with Colorado officials under the Worker Adjustment and Retraining Act (WARN), informing them of its plans to lay off 317 workers at the company’s Greenwood Village facility beginning August 2.

The positions Newrez is vacating in Colorado include asset managers, bankruptcy supervisors and support associates, turnaround specialists, insolvency support associates, loss mitigation supervisors and valuation analysts – roles that overlap with staff at SLS .

In October, Nierenberg said the acquisition of SLS “increases our capacity in the dedicated service space. So, when we think about the global macro picture, if the U.S. economy does slow down and there is a need for more specialized service, there is no one better than Newrez… to work with homeowners and consumers. “

(In 2020, SLS agreed to provide $1.275 million in consumer relief and pay a $250,000 civil monetary penalty to settle allegations by the Consumer Financial Protection Bureau that it improperly excluded certain borrowers, without admitting or denying the allegations.)

The last large acquisition also resulted in layoffs

While Rithm’s $1.44 billion acquisition spree led to the layoff of nearly 500 employees, the company experienced even more dramatic growth pain in 2022 as skyrocketing mortgage rates curtailed mortgage lending activity.

Prior to changing its name to Rithm Capital in 2022, New Residential Investment Corp. (as the company was then called) 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 of mortgage servicing rights. Most of Caliber’s original lenders were released after the closing of this transaction.

To reduce expenses in 2022, Rithm has laid off more than 6,500 employees, mainly in its mortgage lending segment. Starting 2022 with 12,296 employees on its payroll, Rithm reduced its workforce by 53 percent, ending the year with 5,723 employees.

The Caliber business was fully integrated into Newrez in the fourth quarter of 2023, with many former executives joining Ohio-based Union Home Mortgage.

As of December 31, 2023, Rithm had a total of 6,570 employees, of which 5,656 were involved in the granting and servicing of mortgage loans.

Rithm also operates a single-family home rental business through its subsidiary Adoor LLC.

“Adoor is well positioned to capitalize on the current market environment by 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. for a new property management platform, Adoor Property Management LLC.

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

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

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Email Matt Carter