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Mortgage and servicing giant Newrez LLC is laying off nearly 500 employees in Colorado and Florida as parent company Rithm Capital Corp. continues to seek to diversify during a difficult period for lenders.
Newrez and Rithm, a global asset management firm focused on real estate, credit and financial services, declined to comment on the upcoming layoffs of 420 Newrez employees in Colorado and 53 employees in Florida.
But the first round of layoffs was disclosed on May 2, the day after Rithm completed its $720 million acquisition of Specialized Loan Servicing (SLS) LLC and its parent Computershare Mortgage Services Inc.
SLS is a loan servicer that specializes in collecting monthly mortgage payments from distressed borrowers, providing solutions for some homeowners who can’t make their payments, and foreclosing on others. Some of the employees Newrez laid off had similar roles to those at Computershare Mortgage Services and SLS, now doing business as Shellpoint.
Rithm previously completed 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.
Newrez, based in Fort Washington, Pa., sponsored 733 mortgage loan originators at 90 branch locations, down from 983 loan originators at 155 locations in October, according to NMLS records. Newrez also has established multiple mortgage joint ventures with real estate brokerages through its Newrez Ventures platform (formerly Shelter Mortgage Company).
Michael Kidlenberg
Although Newrez did not comment on the layoffs, Rithm President, Chairman and CEO Michael Nierenberg outlined the thinking behind the SLS acquisition during an earnings call on Oct. 2 shortly after the deal was announced.
“Essentially, this is a services deal; there’s very little on the origination side,” Nierenberg said on an Oct. 27 earnings call. “
Rithm acquired a $149 billion mortgage servicing business through the SLS transaction, the majority of which ($104 billion) consisted of loans provided by SLS as a third party. Rithm’s mortgage servicing portfolio totaled $857 billion as of March 31, including $225 billion in loans Rithm served as a third party for other lenders.
That puts Rithm on the same level as loan servicing giant Mr. Cooper, whose loan servicing portfolio has grown from $650 billion in 2021 to more than $1 trillion this year.
But Nierenberg said the acquisition of SLS was “not for so-called scale,” but to increase Rithm’s third-party service fees. These fees, along with the opportunity to refinance for homeowners served by Newrez, will help boost revenue at a time when rising mortgage rates are making it more difficult to take out new loans.
“For mortgage companies, we continue to be wary of cost-cutting initiatives, particularly in the origination area,” Nirenberg said in October. “We expect the origin business to remain under significant pressure from 8% mortgage rates.”
Mortgage rates are down from their October 2023 peak. But on May 2, the day after the SLS acquisition closed, Newrez notified labor departments in Colorado and Florida that it planned to lay off 156 workers starting July 1, including 103 in Colorado and 53 in Florida. name.
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 starting on Aug. 2.
The positions Newrez is cutting in Colorado include asset managers, insolvency officers and support staff, restructuring specialists, default support staff, loss mitigation directors and valuation analysts, which overlap with SLS staffing.
In October, Nierenberg said the SLS acquisition “strengthens our capabilities in the specialty services area. So as we move forward, you think about the global macro situation — if the U.S. economy does slow down and more specialty services are needed, there’s no one more than Newrez is better…working 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].
The last major acquisition also resulted in layoffs
Although Rithm’s $1.44 billion acquisition spree resulted in the layoff of nearly 500 employees, the company experienced sharper growing pains in 2022 as soaring mortgage rates curbed mortgage lending.
New Residential Investment Corp., as the company was then known, acquired Caliber Home Loans and Genesis Capital in 2021 before changing its name to Rithm Capital in 2022.
Caliber Home Loans’ $1.675 billion deal is part of a strategy to expand the company’s origination, servicing and asset management capabilities, including mortgage servicing rights worth $141 billion. Most of Caliber’s loan originators were laid off after the deal closed.
Rithm is laying off more than 6,500 employees in 2022 to reduce expenses, primarily in its mortgage origination division. Rithm started 2022 with 12,296 employees, then cut its workforce by 53%, ending the year with 5,723 employees.
Caliber’s operations were fully integrated into Newrez in the fourth quarter of 2023, with many former executives ultimately joining Ohio-based Union Home Mortgage.
As of December 31, 2023, Rithm reported a total of 6,570 employees, 5,656 of whom were engaged in mortgage loan origination and servicing.
Rithm is also engaged in the single-family residential rental business through its subsidiary Adoor LLC.
“Adoor is well-positioned to benefit from the current market environment by acquiring SFR properties at higher capitalization rates through its acquisition pipeline and vertically integrating its property management,” Rithm said in an April 30 investor presentation. functions.
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 an all-stock deal in January 2023 worth $18 million, with an additional $12 million in cash and equity awards provided to Darwin employees.
A week after announcing the Darwin Homes deal, Pagaya said it would cut 20 per cent of its workforce, leaving it with 712 employees by the end of the year, including 142 full-time employees in Darwin.
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