A property manager based in New York Rhythm Capitalowner of a multi-channel lender Nowrezreported a 58% increase in refinancing to $3 billion in the third quarter of 2024 after housing prices fell due to The Federal Reserve‘s 50 basis-point rate cut. But management expects things to calm down going forward.
“I think we’re going to benefit greatly from what I would call the market in general,” Newrez President Baron Silverstein told analysts on an earnings call Tuesday. “Having said that, we are looking at our direct lending channels, as we continue to gain momentum by reinvesting our capital, so we can continue to improve and expand.”
Rhythm reported $97 million in GAAP revenue from July to September, compared to $213 million in the prior quarter. Management said servicing has been a bright spot in Rithm’s operations, providing opportunities for recapitalization.
In the third quarter, its service book generated net taxable income of $223 million, compared to $221 million in the prior quarter. This resulted in a portfolio of $878 billion in unpaid principal balance (UPB), including $755 billion in real estate purchase rights (MSRs) owned by the company.
“Year to date, we have recovery rates of 55% when we include secondary liens as a backup tool, and 38% is our overall recovery rate in the third quarter,” Silverstein told analysts.
On the origination side, Rhythm had net income of $81 million in the third quarter, compared to $52 million in the second quarter. The lender originated $15.9 billion in loans in Q3 2024, up from $14.6 billion in Q2 2024 and $10.9 billion in Q3 2023.
The volume of the company’s origin in the communication area reached $ 11.8 billion in the third quarter. This figure dwarfed its volume in the wholesale ($2 billion) and direct-to-consumer channel ($2.1 billion), per fill Securities and Exchange Commission (SEC).
Sales margin improved to 1.23% in the third quarter, from 1.05% in the previous quarter. The company’s mortgage business expenses were $58 million in the third quarter, compared to $45 million in the second quarter.
Rithm chairman, CEO and president Michael Nierenberg said that turning Newrez into a public company will be “a 2025 event.” The company’s total book value is approximately $2.9 billion.
“Obviously, we have to find a way to get our equity values to trade where we should,” Nierenberg told analysts. “So, I think it’s going to be the ’25 event when we also take this company public, and we’re going to explore that.”
In September, the company raised $300 million in equity. Nierenberg said Rithm has funded its growth through “its active businesses, balance sheet and high-yield junior debt.” He pointed out that as of 2021, the company has issued $5.8 billion without raising equity.
“As we think about danger, there are many battles going on. We are in the middle of an election that could be very competitive,” said Nierenberg. “And as many of you know, we are always busy expanding our platform through M&A, so I would say that all of these factors are good reasons why we want to have more capital.”
Regarding the financial health of customers, Nierenberg said borrowers taking out loans in 2020 and 2021 are “in very good shape.” He added, “You may see crime go up a lot, but overall, it looks like the consumer is in the right position.”
Rithm had $2 billion in cash and liquidity at the end of September.
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