How Rithm Capital’s (RITM) Latest Non-Prime RMBS Sponsorship May Shape Its Diversification Strategy

• KBRA recently assigned preliminary ratings to eight classes of mortgage-backed notes from New Residential Mortgage Loan Trust 2025-NQM5, a non-prime RMBS transaction sponsored by Rithm Capital, primarily backed by loans from Champions Funding, NewRez, and Home Express Mortgage, and serviced by Shellpoint Mortgage Servicing.
• This RMBS transaction underscores Rithm Capital’s ongoing activity in the non-prime mortgage space and highlights its expanding presence as a sponsor in securitized real estate finance.
• We’ll examine how Rithm Capital’s new non-prime RMBS sponsorship may influence its diversification efforts and long-term earnings profile.

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Rithm Capital Investment Narrative Recap

To invest in Rithm Capital, you need to believe that the company can sustain its growth and improve earnings by expanding in key mortgage and credit markets, despite margin pressures and reliance on interest rate trends. The recent non-prime RMBS deal shows active diversification but does not materially shift the current focus: steady origination volumes and maintaining income growth, while the most immediate risk remains persistent margin compression from aggressive competition in mortgage origination and servicing.

Among Rithm’s recent announcements, the Q2 2025 earnings report stands out, with net income reaching US$311.72 million. This improved profitability is relevant because future gains may depend on the quality and performance of new credit products, such as the non-prime RMBS, and how well these contribute to earnings without increasing exposure to credit or funding risks.

However, in contrast to recent diversification, investors should keep an eye on how competitive pressures in mortgage servicing could...

Read the full narrative on Rithm Capital (it's free!)

Rithm Capital's outlook projects $6.3 billion in revenue and $1.3 billion in earnings by 2028. This requires 19.5% annual revenue growth and a $619.3 million increase in earnings from the current $680.7 million.

Uncover how Rithm Capital's forecasts yield a $14.40 fair value, a 32% upside to its current price.

Exploring Other Perspectives

Three Simply Wall St Community fair value estimates for Rithm Capital range from US$14.40 to US$32.01 per share. While some see significant opportunity, the pressure from margin compression across the mortgage sector reminds us that opinions and future expectations can vary widely, explore multiple viewpoints for a more complete picture.

Explore 3 other fair value estimates on Rithm Capital - why the stock might be worth over 2x more than the current price!

Build Your Own Rithm Capital Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Rithm Capital research is our analysis highlighting 5 key rewards and 2 important warning signs that could impact your investment decision.
• Our free Rithm Capital research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Rithm Capital's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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