Core Points - KBRA has assigned preliminary ratings to 10 classes of mortgage-backed notes from New Residential Mortgage Loan Trust 2025-NQM6, a $494.4 million non-prime RMBS transaction sponsored by Rithm Capital Corp [1][2] - The underlying pool consists of 985 residential mortgages with a weighted average original credit score of 753, a weighted average loan-to-value (LTV) of 70.8%, and a weighted average combined LTV (CLTV) of 70.9% [2] Summary by Sections Transaction Overview - The NRMLT 2025-NQM6 transaction is valued at $494.4 million and is backed by a pool of 985 residential mortgages [1][2] - The primary originators of the mortgages are Champions Funding, LLC (36.0%) and NewRez LLC (34.9%), with all loans serviced by NewRez LLC [1] Borrower Characteristics - Borrowers in the NRMLT 2025-NQM6 pool have a non-zero weighted average original credit score of 753 [2] - The loans exhibit a weighted average original LTV of 70.8% and a weighted average combined LTV of 70.9% [2] - Approximately 6.6% of the pool has an initial interest-only period [2] Rating Methodology - KBRA's rating approach involved a loan-level analysis using its Residential Asset Loss Model (REALM), third-party loan file due diligence, cash flow modeling, and reviews of key transaction parties [3]

Group 1 - The article discusses Rithm Capital Corp. (NYSE: RITM) and compares it with Annaly, suggesting that investors interested in mortgage REITs should consider holding Rithm [1] - The author, Sensor Unlimited, has a PhD in financial economics and has been covering the mortgage market, commercial market, and banking industry for a decade [1] - Sensor Unlimited contributes to the investing group Envision Early Retirement, which focuses on generating high income and growth through dynamic asset allocation [1] Group 2 - The article does not contain any disclosures regarding stock positions or plans to initiate positions in the mentioned companies [2] - It emphasizes that past performance is not indicative of future results and does not provide specific investment recommendations [3]

Core Viewpoint - The focus is on creating a portfolio that emphasizes growth and dividend income, aiming for an easy retirement through compounding dividend income and growth [1]. Group 1: Investment Strategy - The investment strategy is structured to generate monthly dividend income that grows through reinvestment and annual increases [1]. Group 2: Personal Position - The individual has a beneficial long position in the shares of RITM, indicating confidence in the stock's performance [1].

Core Insights - The article discusses Rithm Capital Corp.'s Series A 7.50% Preferred Stock (RITM.PR.A) and its previous 'Buy' rating, highlighting a partial redemption of the series [1] Company Overview - Rithm Capital Corp. has been actively involved in capital markets, with a focus on providing transparency and analytics through Binary Tree Analytics (BTA) [1] - BTA specializes in Closed-End Funds (CEFs), Exchange-Traded Funds (ETFs), and Special Situations, aiming for high annualized returns with low volatility [1] Investment Background - The investment team has over 20 years of experience in the finance sector, with a strong educational background in finance from a top university [1]

Group 1 - Rithm (RITM) shares have increased by 1.6% over the past four weeks, closing at $11.07, with a mean price target of $14.14 indicating a potential upside of 27.7% [1] - The mean estimate consists of seven short-term price targets with a standard deviation of $1.11, where the lowest estimate is $12.50 (12.9% increase) and the highest is $16.00 (44.5% increase) [2] - Analysts show strong agreement on RITM's ability to report better earnings, with a positive trend in earnings estimate revisions suggesting potential upside [4][11] Group 2 - The Zacks Consensus Estimate for RITM's current year has increased by 1.2% over the last 30 days, with one estimate moving higher and no negative revisions [12] - RITM holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13] - While the consensus price target may not be a reliable indicator of RITM's potential gains, it does provide a directional guide for price movement [14]

Group 1 - The equity market serves as a significant mechanism for wealth creation or destruction over the long term through daily price fluctuations [1] - Pacifica Yield focuses on long-term wealth creation by targeting undervalued high-growth companies, high-dividend stocks, REITs, and green energy firms [1]

Financial Performance - As of September 30, 2025, Rithm Capital had approximately $47.2 billion in total assets and $37.5 billion in assets under management (AUM) [422] - The book value per common share increased to $12.83 as of September 30, 2025, up from $12.71 as of June 30, 2025, reflecting a net income attributable to common stockholders of $36.5 million for the three months ended March 31, 2025 [423] - The company reported a net income of $228.798 million for the three months ended September 30, 2025, down from $318.006 million in the previous quarter [536] - Net income attributable to common stockholders for the three months ended September 30, 2025 was $193.662 million, a decrease of $90.237 million compared to the previous quarter [536] - Interest income for the nine months ended September 30, 2025 decreased by $90.7 million, primarily due to a reduced securities portfolio and elevated default rates related to certain consumer loans [540] - For the nine months ended September 30, 2025, servicing revenue, net increased by $0.5 million, driven by a $55.9 billion increase in servicing UPB compared to the same period in 2024 [538] Market Conditions - The unemployment rate increased to 4.3% in August 2025 from 4.1% in June 2025, indicating a slight loosening in the labor market [428] - The nominal 10-year Treasury yield declined slightly to 4.15% at the end of September 2025 from 4.23% at the end of June 2025 [427] - Core personal consumption expenditure inflation was 2.9% in August 2025, with the overall Consumer Price Index (CPI) rising to 3.0% in September 2025 from 2.7% in June 2025 [426] - Elevated interest rates during the reporting period may have impacted borrowers' willingness to enter into mortgage transactions [533] - The Federal Open Market Committee cut interest rates by a quarter percentage point in September 2025, with projections for two more rate cuts in the year [425] Loan Origination and Servicing - The origination business funded $16.4 billion of mortgages for the three months ended September 30, 2025, and $44.5 billion for the nine months ended September 30, 2025, compared to $41.3 billion for the same period in 2024 [436] - Funded loan origination volume for the three months ended September 30, 2025, was $16.4 billion, up from $16.3 billion for the previous quarter [445] - Purchase originations comprised 74.8% of funded loans for the three months ended September 30, 2025, an increase from 72.8% in the previous quarter [443] - Refinance originations comprised 26.4% of funded loans for the nine months ended September 30, 2025, higher than 16.4% for the same period in 2024 [444] - The total servicing portfolio reached $877.5 billion UPB as of September 30, 2025, an increase of $13.3 billion from June 30, 2025, primarily due to new client acquisition and loan production [437] Debt and Liquidity - The company reported total debt of $27.50 billion as of September 30, 2025, down from $28.28 billion at the end of 2024 [434] - Total outstanding debt obligations amounted to $32.5 billion as of September 30, 2025 [567] - The company has margin exposure on $16.5 billion of secured financing agreements, which could significantly impact liquidity if collateral value declines [568] - As of September 30, 2025, approximately $1.3 billion of available liquidity was held at NRM and Newrez, with $0.7 billion in excess of regulatory liquidity requirements [563] - The company expects to meet its long-term liquidity requirements through cash on hand and additional borrowings if needed [587] Strategic Initiatives - Rithm Capital is exploring growth opportunities in direct lending, insurance, private equity, and infrastructure spaces [421] - A strategic investment partnership was announced to fund the acquisition of up to $500 million of residential transition loans, with potential total acquisitions of up to $1.5 billion [520] - The company entered into a Purchase and Sale Agreement to acquire Crestline for $300 million, expected to close in Q4 2025 [569] - The acquisition of Paramount is valued at approximately $1.6 billion and is also expected to close in Q4 2025 [571] Asset Management - The company’s asset management platform had approximately $37.5 billion in assets under management (AUM) as of September 30, 2025 [519] - Asset management revenues for the nine months ended September 30, 2025, were $267.6 million, primarily driven by management fees and incentive income [527] - The company has unfunded capital commitments of $303.5 million to certain funds managed by Sculptor as of September 30, 2025 [611] Other Financial Metrics - Total gain on originated residential mortgage loans, held-for-sale, net increased by $3.3 million to $176.0 million for the three months ended September 30, 2025, compared to the previous quarter [443] - Total servicing fees for the three months ended September 30, 2025, were $515,409,000, a QoQ increase of $6,080,000 and a YoY increase of $235,009,000 [449] - The company reported a pull-through adjusted lock volume of $17.68 billion for the three months ended September 30, 2025, compared to $16.66 billion in the previous quarter [445] - The total outstanding face amount of Non-Agency securities was $8.6 billion, with an amortized cost basis of $669.1 million as of September 30, 2025 [480]

Core Insights - Rithm (RITM) reported a revenue of $1.11 billion for Q3 2025, marking a year-over-year increase of 78.5% and exceeding the Zacks Consensus Estimate by 10.53% [1] - The company's EPS for the same quarter was $0.54, unchanged from the previous year, indicating no EPS surprise [1] Revenue Breakdown - Interest income was reported at $453.79 million, which is a decline of 17.6% year-over-year and below the average estimate of $485.25 million [4] - Servicing revenue, net, was $314.93 million, reflecting a significant year-over-year decrease of 223.9% and falling short of the average estimate of $413.89 million [4] - Other revenues amounted to $55.63 million, slightly above the average estimate of $30.99 million, with a year-over-year change of -2.8% [4] - Asset management revenue reached $84.87 million, which is a 4.7% increase year-over-year but below the average estimate of $92.22 million [4] - Gain on originated residential mortgage loans, held-for-sale, net, was reported at $196.31 million, a 6.3% increase compared to the previous year, but also below the average estimate of $207.43 million [4] Stock Performance - Rithm's shares have returned -2.6% over the past month, contrasting with the Zacks S&P 500 composite's +3.6% change [3] - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential for outperformance in the near term [3]

Core Insights - Rithm (RITM) reported quarterly earnings of $0.54 per share, matching the Zacks Consensus Estimate and remaining consistent with the previous year's earnings [1] - The company achieved revenues of $1.11 billion for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 10.53% and showing significant growth from $619.51 million year-over-year [2] - Rithm's stock has underperformed compared to the S&P 500, gaining about 0.9% since the beginning of the year, while the S&P 500 has increased by 17.2% [3] Earnings Outlook - The future performance of Rithm's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4] - The current consensus EPS estimate for the upcoming quarter is $0.54, with projected revenues of $1.29 billion, and for the current fiscal year, the EPS estimate is $2.15 on revenues of $4.3 billion [7] Industry Context - The Financial - Miscellaneous Services industry, to which Rithm belongs, is currently ranked in the top 36% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5][6]

Financial Data and Key Metrics Changes - The company generated approximately $300 million in earnings for shareholders, achieving an 18% return on equity (ROE) [4] - GAAP net income was reported at $193.7 million, or $0.35 per diluted share, with an 11% ROE [14] - Earnings available for distribution (EAD) was $297 million, or $0.54 per diluted share, marking the 24th consecutive quarter where EAD exceeded dividends paid [14] - The book value at the end of the quarter was $12.83, totaling $7.1 billion [14] - Cash and liquidity on the balance sheet stood at $2.2 billion [14] Business Line Data and Key Metrics Changes - Genesis Capital originated $1.2 billion in loans during the quarter, a 60% increase year over year [16] - The mortgage company, Newrez, reported a pre-tax income of approximately $295 million, up 7% quarter over quarter and 20% year over year, with a 20% ROE [33] - Direct origination production for Newrez increased by 32% year over year [34] - The servicing business generated $260 million in pre-tax income, an 11% increase year over year [36] Market Data and Key Metrics Changes - The company ended the quarter with a balance sheet of $47 billion, with Sculptor managing $37 billion in assets under management (AUM), Crestline with $18 billion, and Paramount with a $7 billion portfolio [10] - The demand for office space in New York is over 90% leased, while San Francisco is in the low 70% range, indicating a recovery in demand [8][28] Company Strategy and Development Direction - The company announced two acquisitions: Crestline, a credit manager, and Paramount, a Class A office REIT, to expand its product offerings without raising equity in capital markets [5][7] - The focus remains on performance rather than assets under management (AUM), aiming to provide fewer managers with more products to limited partners (LPs) [6] - The company is exploring opportunities in the energy space and plans to close its first Evergreen ABF fund on a leading wealth management platform [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position, highlighting strong earnings and the potential for growth through acquisitions and product offerings [10][90] - The company aims to drive more fee-related earnings (FRE) to enhance its valuation and is focused on growing its asset management business [42][44] - Management acknowledged the competitive landscape but emphasized their disciplined approach to underwriting and servicing, which differentiates them from peers [66] Other Important Information - The company is now involved in the insurance and reinsurance business, which it intends to grow over time [25] - The average rent for the Paramount portfolio is approximately $85 per foot, with significant potential for rent increases [8] Q&A Session Summary Question: Update on broader strategic vision and timelines - Management believes the company is fundamentally attractive from a value standpoint and is focused on growing asset management business to drive revaluation [41][42] Question: Update on third-party capital for Paramount transaction - The company expects to raise approximately $950 million to $1 billion from third parties, with $300 million to $500 million from Rithm [45][46] Question: Options for growing Rithm Capital - Management is exploring direct lending options and may consider share buybacks if growth does not materialize [55][56] Question: Discussion on Ginnie Mae streamlined refinances - These loans are cheaper to produce, impacting the gain on sale margin [51][54] Question: Share buybacks as a tool for valuation - Management indicated that the focus will be on continued growth rather than share buybacks, especially given the recent acquisitions [80] Question: Fundraising outlook for Sculptor - Management is optimistic about sustaining the fundraising pace into 2026, with significant investments planned in capital formation [82][84]