Rithm drops Onity as subservicer on $33B portfolio

Rithm Capital will no longer use Onity Group’s servicing subsidiary, PHH Mortgage Corp., as the subservicer of a $33 billion portfolio primarily composed of pre-2008 loans — ending an agreement that has lasted nearly a decade.

Onity, which released its third-quarter earnings on Thursday, said it was notified by Rithm on Oct. 31 of its intent to not renew the subservicing contract, with the termination taking effect on Jan. 31, 2026. 

Most of the portfolio transfer is expected to occur during the first half of 2026. But $8.5 billion in unpaid principal balance (UPB) requires the consent of trustees and other parties, creating uncertainty around the timing and completion of the transfers.

Onity’s total servicing book stood at $311.5 billion in UPB at the end of Q3 2025, meaning that the Rithm portfolio represents about 10% of the total. Still, the company said it does not expect a material financial impact.

“The Rithm subservicing is a shrinking portfolio of mainly low-balance, pre-2008 subprime loans and accounts for over half our delinquent loans and borrower litigation,” Glen Messina, Onity’s chair, president and CEO, said during the earnings call. “For 2025, the Rithm subservicing was less than 5% of our total adjusted revenues, and one of our least profitable portfolios before corporate allocations.”

Messina said the elimination of this portfolio will allow the company to streamline and simplify infrastructure, further the digital transformation of the business, and increase focus on products and services that contribute to its growth path. He expects to adjust the cost structure and replace the earnings contribution with more profitable businesses. 

The portfolio is now “about 25% of the size it was five years ago,” Messina said. “It has gotten to the point where the portfolio is so small, delinquencies are high, and the cost of servicing is high,” Messina said. “It is uneconomical for us and our client to maintain the current relationship.” 

Messina said Onity has signed nine new clients so far this year and has six new agreements under negotiation. “We expect subservicing additions in the second half of $32 billion, or over 2.5 times the first-half level,” he added.