Company: RITM-PC
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0001556593-25-000007
Chunk: 4

Company: Rithm Capital Corp.
Filing Date: 2025-02-18
Form: 10-K
Item: Item 1
Chunk 4
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 shortage of homes nationally and existing mortgage borrowers locked into pandemic era lows in rates is suppressing supply, while demand fluctuates with mortgage rates which have ranged between 6-7% throughout 2024. Housing affordability remains a challenge with rising insurance costs adding to this. The purchase market remains the key driver to mortgage originations. As of January 2025, the Mortgage Bankers Association (“MBA”) estimated total U.S. origination volume for 2024 was $1.8 trillion, up 22% from an estimated $1.5 trillion in 2023. Furthermore, the MBA estimated that 28% of 2024 activity was related to refinance volume, an increase from 15% in 2023. Looking forward, the MBA forecasts total mortgage origination volume to increase 15% in 2025 to $2.1 trillion, with an 8% increase in purchase volume and a 34% increase in refinance volume.

Mortgage originators primarily generate their revenue from the sale of originated loans to the GSEs, Ginnie Mae or other large mortgage companies. During 2024, gain on sale margin continued to remain depressed largely driven by weakening demand for loans due to a higher interest rate environment weighing on the residential real estate market.

On the other hand, servicers generally derive their income from the contractual fees earned for servicing loans and ancillary revenue such as late fees and modification incentives. The servicing fee, along with ancillary income and other revenue, is designed to cover costs incurred to service the specified pool plus a reasonable margin. A portion of the margin is often referred to as the excess servicing fee. Servicing income is affected by the size of the servicing portfolio, both UPB and number of loans, delinquency rates and cost to service per loan.

Newrez generates servicing revenue through the servicing of owned MSRs and through subservicing for third-party clients. The owned MSR portfolio, which consists of loans originated by Newrez as well as MSRs acquired through bulk or platform acquisitions, afford opportunities for customer retention, or recapture. Newrez has built a client franchise offering performing and special subservicing for third parties with a focus on high touch and bespoke client solutions across a broad array of products. 

Our third-party solutions include performing loan servicing, special servicing (which requires high touch customer service, more frequent customer outreach than performing loan servicing and higher staffing levels and sub-servicing fees) and recovery options for deeply delinquent loans. Because of our specialty