Rithm Capital inks $1.5B deal for investor loans

Rithm Capital's investor lending operations will get a financial boost thanks to a new partnership to help fund the purchase of over $1 billion worth of loans.

The New York-based real estate investment trust announced it had reached an agreement with an unnamed "large institutional investor" to fund the acquisition of up to $500 million worth of residential transition loans in the short term, with potential for that total to reach $1.5 billion.   

Residential transition loans, or RTL, are typically taken out by real estate investors for the purchase and rehabilitation of units aimed for rental or resale. The properties are often touted as an option to help some consumers move into homeownership.  

"I'm pleased to share this important step in the continued growth of our funds business, reinforcing our commitment to expanding Rithm's asset management capabilities," said Rithm President and CEO Michael Nierenberg in a press release.

"This is another example of the breadth and depth of our platform, which enables us to create bespoke investment solutions that fit the individual needs of our investors," he continued.

The move marks another step by the REIT to diversify its business model beyond single-family residential lending. Rithm, the parent company of national home lender Newrez, has made a concerted effort toward establishing itself as an alternative asset manager through various mergers and partnerships after rebranding itself in 2022. The company was previously known as New Residential Investment Corp. 

The newly acquired loans will be serviced by Rithm's RTL subsidiary, Genesis Capital. Parties involved with the purchase plan to form an investment partnership that will be managed by Rithm Capital Advisors.  

"We are grateful for the continued confidence and support of our partners and look forward to capitalizing on the compelling opportunities that exist in the growing residential transitional loan sector," Nierenberg added. 

The outlook for residential transition lending

The new partnership comes at a time as the segment's leaders make no secret they anticipate more liquidity and financing opportunities in RTL. Much of the funding that can fuel growth is expected to shift from the traditional banking community toward institutional sources, industry leaders recently suggested.  

Some emerging residential transition lenders have also seen an influx of interest and operational support, including capital, coming from partners in the banking community and independent mortgage banks.  

Along with the development of new lenders, secondary market RTL activity has been marked by several transactions since Morningstar DBRS first established ratings methodology for segment transactions in 2023. Toorak Capital closed the first rated securitization last year, consisting of $240 million worth of loans. 

It was followed later in 2024 by the largest-ever rated securitization of RTL loans from Genesis. Valued at $500 million, the transaction saw participation from 25 different investors.