Newrez sticks to pricing discipline, lifts Q1 earnings even as mortgage volume falls 18%

Newrez delivered a higher first-quarter 2026 profit while holding to a “pricing discipline” strategy amid intense mortgage competition, helping parent company Rithm Capital post stronger results for the period. 

The multichannel lender and servicer reported pretax operating income of $273.7 million in Q1 2026, up from $249.1 million in Q4 2025, according to filings with the Securities and Exchange Commission (SEC). The figure excludes a $23.1 million mark-to-market loss on mortgage servicing rights, hedge impacts and other non-operating items.

“While market competition continues to pressure gain on sale margins, we maintained pricing discipline, did not chase market share,” Newrez President Baron Silverstein told analysts on the company’s earnings call Tuesday.

Newrez originated $15.5 billion in mortgages in the first quarter, an 18% decline from the prior quarter that the company attributed to seasonal and interest rate factors. Volume was up 31% compared with the same quarter in 2025.

The company’s gain-on-sale margin was 1.44% in Q1, down from 1.50% in Q4 2025 but above the 1.37% margin in Q1 2025. Maintaining margins while volumes soften has been a key challenge across the industry as lenders balance pricing against capacity and fixed costs.

Most of Newrez’s production ($9.7 billion) came from its lower-margin correspondent channel, which carried a 0.44% margin in the quarter. The company said it is pushing growth in higher-margin direct origination channels, including consumer direct and wholesale, which together represented 37% of originations in Q1 2026, up 75% year over year.

Silverstein said Newrez’s revenue strategy centers on expanding its partner base, product innovation and homeowner retention, while also attacking unit costs through technology.

“Our expense initiatives are laser focused on harnessing technology to deliver operating leverage,” Silverstein said. “Our cost per loan, which is already almost half of industry average, we project an additional 15% reduction from our current run rate.”

Servicing scale

On the servicing side, the Newrez portfolio ended the first quarter with $850 billion in unpaid principal balance, including $257 billion of third-party servicing. Silverstein said the company added five new clients and boarded $22 billion of new loans in its capital-light, third-party servicing business.

“Our owned MSR portfolio continues to perform well as delinquencies remain stable quarter over quarter and the FHA delinquencies flattened as we normalize the impact of the new FHA modification guidelines,” Silverstein said.

Newrez is in the process of transitioning its loans to Valon Technologies, a mortgage servicing technology provider, deploying Valon’s operating system across millions of loans. The company said it remains on track to shift to the new platform in early 2027 and estimates total annual expense savings in excess of $65 million, or a direct cost-per-loan reduction of 15% to $93.

Newrez generated a 19% annualized operating return on equity on $5.7 billion of segment equity in the first quarter of 2026, reflecting the combination of its origination and servicing earnings.

Overall, Rithm Capital reported net income of $109.4 million in Q1 2026, up from $90.5 million in the prior quarter. Newrez’s performance contributed meaningfully to the parent’s results as Rithm looks to deploy capital across mortgage, asset-backed finance and credit strategies.

Keefe, Bruyette & Woods analysts characterized the quarter as “fairly” in line with expectations during a “volatile quarter.”

“The firm as we stand today is extremely well positioned to take advantage of market dislocations as the combination of geopolitical risks and private credit headlines give us the opportunity to deploy more capital across the firm in both the ABF and credit space. As market participants pull back, this will play to our advantage,” Michael Nierenberg, Rithm’s chairman, president and CEO, told analysts. 

Nierenberg said current mortgage-backed securities (MBS) spreads look “fair to cheap,” which could draw banks back into the market — especially if regulatory easing and strong deposit levels persist.

He noted that inflation trends, rising Treasury yields and continued heavy U.S. debt issuance will shape bank demand going forward. He also called Kevin Kevin Warsh, the Trump administration’s pick to lead the Federal Reserve, “a bit more of an inflation hawk.”

On mergers and acquisitions, he said Rithm is not actively looking to acquire another mortgage company, citing sufficient scale and a focus on efficiency and AI. He added that few independent targets remain after industry consolidation, limiting opportunities even as valuations have declined.