Core Insights - PHH Mortgage is set to launch a new suite of proprietary non-qualified mortgage (non-QM) products called FlexIQ on October 20, 2025, through its Correspondent Lending channel [1][2] - FlexIQ aims to provide a streamlined process and flexible product offerings to meet the increasing demand for non-QM products, reflecting the company's commitment to its clients [2] Product Details - FlexIQ will replace the previously offered Gold/Silver/Bronze non-QM programs, enhancing the company's product offerings [3] - The FlexIQ suite includes three product categories: Full Documentation, Alternative Documentation, and Debt Service Coverage Ratio (DSCR) [6] Company Overview - Onity Group Inc. is a leading non-bank financial services company, with PHH Mortgage being one of the largest servicers in the U.S., providing various mortgage servicing and origination solutions [4]

Core Points - Onity Group Inc. has appointed Robert S. Welborn to its Board of Directors effective October 1, 2025, as DeForest B. Soaries Jr. will not stand for re-election at the 2026 Annual Meeting of Shareholders [1][2][3] Group 1: Board Changes - Robert S. Welborn brings extensive experience in data science and analytics from his previous roles at Meta, General Motors, and USAA, which will support Onity's technology innovation agenda [2][3] - DeForest B. Soaries Jr. has been a board member since 2015 and will continue to serve until the 2026 Annual Meeting, where he will step down [2][3] Group 2: Company Overview - Onity Group Inc. is a leading non-bank financial services company specializing in mortgage servicing and originations through its brands, PHH Mortgage and Liberty Reverse Mortgage [4] - PHH Mortgage is one of the largest servicers in the U.S., while Liberty is a major reverse mortgage lender, helping customers meet personal and financial needs [4]

Summary of Onity Group Conference Call Company Overview - **Company Name**: Onity Group - **Ticker**: O-N-I-T - **Business Model**: Independent non-bank mortgage servicer and originator, involved in servicing and originating mortgages, with a balanced business model that reacts favorably to interest rate changes [2][3][4] Key Financial Metrics - **Servicing Portfolio**: Approximately $307 billion in Unpaid Principal Balance (UPB) [4] - **Adjusted Return on Equity (ROE)**: Year-to-date at 18%, with guidance of 16% to 18% [4][20] - **Earnings Per Share**: GAAP-diluted earnings per share and book value per share were discussed, but specific figures were not provided [5] Market Position and Strategy - **Industry Rank**: Top ten correspondent lender and significant player in the reverse originations market [4] - **Growth Strategy**: Focus on capital-like growth through partnerships, retaining Mortgage Servicing Rights (MSRs), and enhancing customer experience [5][6] - **Market Dynamics**: The mortgage market has fluctuated between $1.7 trillion to $2 trillion recently, with a total servicing market of approximately $14 trillion [7][8] Operational Performance - **Recapture Rate**: Improved recapture rate of 88% for consumer direct and low 40s blended rate, indicating strong performance compared to peers [29][30] - **Technology Utilization**: Emphasis on using technology such as machine learning and robotics to enhance operational efficiency and customer experience [17][18] Financial Health and Leverage - **Current Leverage**: Approximately 3.2 to 1, improved from over 4 to 1 in 2024 [23] - **Debt Management**: Restructured debt, reduced total debt by $140 million, and focused on organic growth to improve leverage [23][24] Transformation and Regulatory History - **Company Transformation**: Significant changes since the merger of Ocwen and PHH Mortgage, including management upgrades and technology improvements [25][26] - **Regulatory Challenges**: Past regulatory issues have been resolved, leading to a more favorable outlook for the company [11][25] Investment Thesis - **Valuation**: Currently trading at a 65% to 70% discount to book value, presenting a potential value investment opportunity [10][34] - **Market Opportunities**: M&A activity in the industry could create opportunities for Onity, especially as competitors consolidate [31][32] Future Outlook - **Guidance for 2025**: Continued strong performance expected, with a focus on growing the servicing book by 10% or more and maintaining high hedge effectiveness [20][21] - **Market Resilience**: Confidence in the business model's performance across varying interest rate environments [21] Additional Insights - **Customer Experience**: High net promoter scores indicate strong customer satisfaction, comparable to leading retail brands [16] - **M&A Impact**: Increased M&A activity in the sector may lead to shifts in subservicing relationships, providing competitive advantages [32][33] This summary encapsulates the key points discussed during the Onity Group conference call, highlighting the company's operational strategies, financial metrics, market position, and future outlook.

Company Overview - Onity Group is a leading nonbank financial services company specializing in mortgage origination and servicing solutions [1] - The company operates under primary brands including PHH Mortgage and Liberty Reverse Mortgage, with PHH being one of the nation's leading market servicers and Liberty being one of the largest reverse mortgage lenders [1] Company History and Leadership - Founded in 1988, Onity has over three decades of experience serving customers [2] - The company operates in the U.S., U.S. Virgin Islands, India, and the Philippines [2] - Glen Messina, the Chair, President, and CEO of Onity, has extensive leadership experience from companies like PHH Corporation and General Electric, and has been guiding Onity's growth and strategy since 2018 [2]

Onity Group Inc. Conference Call Summary Company Overview - Onity Group Inc. is a leading non-bank financial services company specializing in mortgage originations and servicing solutions, operating brands such as PHH Mortgage and Liberty Reverse Mortgage [1][2] - Founded in 1988, Onity serves customers in the U.S., U.S. Virgin Islands, India, and the Philippines [1] Core Business Insights - Onity focuses on correspondent and co-issue markets, as well as consumer direct for portfolio recapture [3] - The servicing portfolio is balanced 50/50 between owned servicing and sub-servicing, optimizing returns and minimizing capital deployment [3][4] - Onity ranks among the top 10 non-bank mortgage originators and servicers in the U.S. [3] Financial Performance - Year-to-date adjusted Return on Equity (ROE) stands at 18%, competitive with peers [4][10] - The company has transformed from a specialty servicer to a diversified business with improved profitability [5] - The debt-to-equity ratio has been reduced from over 4:1 to a more manageable level [4] Strategic Focus Areas - Onity's strategy is built on five pillars: balance and diversification, prudent capital-light growth, industry-leading cost structure, top-tier operating performance, and dynamic asset management [5] - Future priorities include accelerating growth, enhancing operating performance, and elevating customer experience [6] Market Dynamics - The mortgage servicing industry is valued at $14.4 trillion, with $4 trillion in sub-servicing [7] - The industry has seen $1.8 trillion in originations over the past year, with a robust refinancing environment due to a decrease in interest rates [8][9] - Onity's origination volumes are expected to increase in a lower interest rate environment, positioning the company favorably [9] Competitive Positioning - Onity has consistently increased its market position through organic growth, winning clients from competitors [10][11] - The company emphasizes technology and process improvement to maintain a competitive edge against larger players [10][19] - Onity's cost structure is significantly better than the industry average, with servicing costs 23% lower for performing loans and over 50% lower for non-performing loans compared to peers [19] Technology and Innovation - Continuous investment in technology has led to improved customer experiences and operational efficiencies [20][21] - The company has automated over 190 processes, saving approximately 50,000 hours of manual work per month [22] - Onity has introduced an AI-based search engine for sub-servicing clients, enhancing data accessibility [23] Capital Management and Growth Outlook - Onity has restructured its balance sheet, eliminating $140 million in corporate and MSR debt [24] - The company targets a 10% growth in servicing UPB, maintaining a balanced mix of owned and sub-servicing [25] - Guidance for adjusted ROE remains at 16% to 18%, with expectations for continued growth in originations and servicing [25][26] Industry Trends and Opportunities - The recent acquisition of Mr. Cooper by Rocket is seen as an opportunity for Onity, particularly in the sub-servicing space [35] - The potential exit of GSEs from conservatorship could lead to both opportunities and risks, with expectations for innovation and competition in the market [38][39] Conclusion - Onity is positioned for growth in a favorable market environment, with a strong focus on technology, customer experience, and operational efficiency [27][40]

Barclays 23rd Annual Global Financial Services Conference Glen Messina Chairman, President and Chief Executive Officer Sean O'Neil Executive Vice President and Chief Financial Officer September 9, 2025 © 2025 Onity Group Inc. All rights reserved. NON-GAAP FINANCIAL MEASURES This presentation contains references to adjusted pre-tax income (loss) and adjusted pre-tax return on equity, both non-GAAP financial measures. We believe these non-GAAP financial measures provide a useful supplement to discussions and ...

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Consolidated%20Financial%20Statements) Unaudited consolidated financial statements for Q2 2025 and 2024, covering balance sheets, income, equity, cash flows, and detailed accounting notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) | Metric | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :----------------------------- | :--------- | :--------- | | Total Assets | 16,531.3 | 16,435.4 | 95.9 | 0.6 | | Total Liabilities | 15,999.5 | 15,942.5 | 57.0 | 0.4 | | Total Stockholders' Equity | 481.9 | 442.9 | 39.0 | 8.8 | - Total assets increased by **$95.9 million**, or **0.6%**, from December 31, 2024, to June 30, 2025, primarily driven by a **$758.1 million** increase in Loans held for sale and a **$166.4 million** increase in MSRs, partially offset by a **$654.5 million** decrease in Loans held for investment[11](index=11&type=chunk)[258](index=258&type=chunk) - Total liabilities increased by **$57.0 million**, or **0.4%**, mainly due to a **$667.3 million** increase in Mortgage loan financing facilities and a **$260.7 million** increase in MSR financing facilities, partially offset by a **$619.1 million** decrease in HMBS-related borrowings[11](index=11&type=chunk)[259](index=259&type=chunk) [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) | Metric | 3 Months Ended June 30, 2025 (Millions $) | 3 Months Ended June 30, 2024 (Millions $) | Change ($) | Change (%) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Total Revenue | 246.6 | 246.4 | 0.2 | 0.1 | | MSR valuation adjustments, net | (27.3) | (32.7) | 5.4 | -16.5 | | Total Operating Expenses | 109.5 | 104.0 | 5.5 | 5.3 | | Income before income taxes | 22.8 | 13.5 | 9.3 | 68.9 | | Net income attributable to common stockholders | 20.5 | 10.5 | 10.0 | 95.2 | | Basic EPS | 2.55 | 1.34 | 1.21 | 90.3 | | Diluted EPS | 2.40 | 1.33 | 1.07 | 80.5 | | Metric | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | Change ($) | Change (%) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Total Revenue | 496.4 | 485.5 | 10.9 | 2.2 | | MSR valuation adjustments, net | (66.2) | (44.3) | -21.9 | 49.4 | | Total Operating Expenses | 229.4 | 208.4 | 21.0 | 10.1 | | Income before income taxes | 32.0 | 45.3 | -13.3 | -29.4 | | Net income attributable to common stockholders | 41.6 | 40.6 | 1.0 | 2.5 | | Basic EPS | 5.23 | 5.23 | 0.00 | 0.0 | | Diluted EPS | 4.90 | 5.09 | -0.19 | -3.7 | - Net income attributable to common stockholders increased by **$10.0 million** (**95.2%**) for the three months ended June 30, 2025, compared to the same period in 2024, primarily due to higher income before income taxes and lower MSR valuation adjustments[13](index=13&type=chunk) [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric | 3 Months Ended June 30, 2025 (Millions $) | 3 Months Ended June 30, 2024 (Millions $) | Change ($) | Change (%) | | :----------------------- | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Net income | 21.5 | 10.5 | 11.0 | 104.8 | | Comprehensive income | 21.6 | 11.8 | 9.8 | 83.1 | | Metric | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | Change ($) | Change (%) | | :----------------------- | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Net income | 43.6 | 40.6 | 3.0 | 7.4 | | Comprehensive income | 43.8 | 42.0 | 1.8 | 4.3 | [Consolidated Statements of Changes in Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) | Metric | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :----------------------------- | :--------- | :--------- | | Total Stockholders' Equity | 481.9 | 442.9 | 39.0 | 8.8 | | Accumulated Deficit | (74.0) | (117.6) | 43.6 | -37.1 | | Common Stock Shares Outstanding | 8,055,222 | 7,873,053 | 182,169 | 2.3 | - Total stockholders' equity increased by **$39.0 million**, or **8.8%**, from December 31, 2024, to June 30, 2025, primarily due to **$43.6 million** in net income, partially offset by preferred stock dividends and the exercise of common stock warrants[19](index=19&type=chunk)[260](index=260&type=chunk) - The accumulated deficit improved by **$43.6 million**, moving from **$(117.6) million** at December 31, 2024, to **$(74.0) million** at June 30, 2025, reflecting the net income generated during the period[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | Change ($) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :--------- | | Net cash used in operating activities | (746.9) | (375.0) | (371.9) | | Net cash provided by investing activities | 886.5 | 128.4 | 758.1 | | Net cash provided by (used in) financing activities | (148.6) | 240.8 | (389.4) | | Net decrease in cash, cash equivalents and restricted cash | (9.0) | (5.7) | (3.3) | | Cash, cash equivalents and restricted cash at end of period | 256.6 | 249.4 | 7.2 | - Operating activities used **$746.9 million** in cash for the six months ended June 30, 2025, a significant increase from **$375.0 million** used in the prior year, primarily due to higher net cash paid on loans held for sale and increased originated MSRs[22](index=22&type=chunk)[395](index=395&type=chunk) - Investing activities provided **$886.5 million** in cash, a substantial increase from **$128.4 million** in the prior year, mainly driven by **$1,018 million** net cash received from HECM reverse mortgages, partially offset by MSR investments[22](index=22&type=chunk)[396](index=396&type=chunk) - Financing activities used **$148.6 million** in cash, a shift from providing **$240.8 million** in the prior year, largely due to net repayments on HMBS-related borrowings and advance match funded liabilities, despite drawdowns on MSR and mortgage loan financing facilities[22](index=22&type=chunk)[397](index=397&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) [Note 1 - Organization and Basis of Presentation](index=12&type=section&id=Note%201%20-%20Organization%20and%20Basis%20of%20Presentation) - Onity Group Inc. is a non-bank mortgage servicer and originator, operating through its primary subsidiary PHH Mortgage Corporation, with approximately **4,200 employees** globally, including significant operations in India and the Philippines[24](index=24&type=chunk)[28](index=28&type=chunk) - The company performs primary and subservicing activities for its MSR portfolio and on behalf of other servicers and investors, including GSEs and Ginnie Mae, and originates various types of mortgage loans[26](index=26&type=chunk)[27](index=27&type=chunk) - Onity completed the sale of its **15%** equity interest in MAV Canopy HoldCo I, LLC, effective November 27, 2024[25](index=25&type=chunk) [Note 2 – Securitizations and Variable Interest Entities](index=13&type=section&id=Note%202%20%E2%80%93%20Securitizations%20and%20Variable%20Interest%20Entities) - Onity securitizes and sells forward loans, generally retaining MSRs, and accounts for these as sales. For reverse mortgages, transfers are accounted for as secured financings, with HECM loans classified as Loans held for investment[37](index=37&type=chunk)[43](index=43&type=chunk) | Metric | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :----------------------------------- | :-------------------------- | :----------------------------- | | Carrying value of MSRs (forward loans) | 819.7 | 734.2 | | UPB of loans transferred (forward loans) | 55,313.1 | 49,641.2 | | Maximum exposure to loss (forward loans) | 56,234.5 | 50,505.0 | - The company consolidates various Special Purpose Entities (SPEs) or Variable Interest Entities (VIEs) for financing loans held for sale, advances, and MSRs, where recourse is generally limited to the assets of the respective SPEs[44](index=44&type=chunk)[46](index=46&type=chunk)[48](index=48&type=chunk)[50](index=50&type=chunk) [Note 3 – Fair Value](index=15&type=section&id=Note%203%20%E2%80%93%20Fair%20Value) - Fair value measurements are categorized into a three-level hierarchy, with Level 3 inputs reflecting unobservable assumptions. A significant portion of Onity's financial instruments, including MSRs, Loans held for investment, and HMBS-related borrowings, are classified as Level 3[52](index=52&type=chunk)[53](index=53&type=chunk)[91](index=91&type=chunk)[403](index=403&type=chunk) | Asset/Liability | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :------------------------------------------ | :-------------------------- | :----------------------------- | | Loans held for sale, at fair value | 2,048.3 | 1,290.2 | | Loans held for investment, at fair value | 10,470.8 | 11,125.3 | | MSRs, at fair value | 2,632.6 | 2,466.3 | | HMBS-related borrowings, at fair value | 10,253.1 | 10,872.1 | | Other financing liabilities, at fair value | 818.1 | 846.9 | - Key unobservable assumptions for Level 3 assets and liabilities include conditional prepayment rates, discount rates, delinquency rates, and cost to service, with changes in these assumptions potentially leading to significant fair value changes[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) [Note 4 – Loans Held for Sale - Fair Value](index=21&type=section&id=Note%204%20%E2%80%93%20Loans%20Held%20for%20Sale%20-%20Fair%20Value) | Metric | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :-------------------------------- | :-------------------------- | :----------------------------- | | Total fair value | 2,048.3 | 1,290.2 | | UPB of Originations and purchases | 10,162.0 | 7,409.4 | | Proceeds from sales | (9,215.6) | (6,837.4) | | Fair value gain (loss) on loans held for sale, at fair value | (108.9) | (82.2) | - The fair value of Loans held for sale increased by **$758.1 million** to **$2,048.3 million** at June 30, 2025, driven by higher originations and purchases, with a net fair value loss of **$108.9 million** for the six months ended June 30, 2025[75](index=75&type=chunk)[77](index=77&type=chunk) | Component of Gain (Loss) | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | | :----------------------------------------- | :------------------------------------ | :------------------------------------ | | MSRs retained on transfers | 142.9 | 102.4 | | Gain (loss) on sale of forward mortgage loans | (116.6) | (77.8) | | Change in fair value of loans held for sale | 9.5 | (3.4) | | Gain on loans held for sale, at fair value | 34.0 | 20.2 | | Gain (loss) on economic hedge derivatives | (28.2) | 9.7 | | Change in fair value of IRLCs | 17.8 | (1.6) | | Total Gain on loans held for sale, net | 22.2 | 27.4 | [Note 5 - Reverse Mortgages](index=22&type=section&id=Note%205%20-%20Reverse%20Mortgages) | Metric | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :------------------------------------------ | :-------------------------- | :----------------------------- | | Fair value of reverse mortgage loans held for investment | 10,470.8 | 11,125.3 | | HECM loans - securitized, pledged to HMBS-related borrowings | 10,341.3 | 10,950.8 | | New HECM loan originations and HECM loan tails - unsecuritized | 129.5 | 174.5 | - The fair value of reverse mortgage loans held for investment decreased by **$654.5 million** to **$10,470.8 million** at June 30, 2025, primarily due to repayments exceeding new originations and securitizations[80](index=80&type=chunk)[82](index=82&type=chunk)[258](index=258&type=chunk) | Component of Gain (Loss) | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | | :---------------------------------------------------------------- | :------------------------------------ | :------------------------------------ | | Fair value gains (losses) of Reverse loans held for investment | 374.6 | 334.4 | | Fair value gains (losses) of HMBS related borrowings | (340.7) | (312.0) | | Total fair value gains (losses) included in earnings | 33.9 | 22.4 | | Gain on new originations | 11.1 | 11.0 | | Net interest income (servicing fee) | 16.4 | 12.0 | | Total Gain on Reverse Loans Held for Investment and HMBS related Borrowings, Net | 35.7 | 23.9 | [Note 6 – Advances](index=24&type=section&id=Note%206%20%E2%80%93%20Advances) | Advance Type | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :-------------------------------- | :-------------------------- | :----------------------------- | | Principal and interest | 131.2 | 150.1 | | Taxes and insurance | 211.9 | 314.2 | | Foreclosures, bankruptcy, REO and other | 124.6 | 120.3 | | Total advances, before allowance for losses | 467.8 | 584.6 | | Allowance for losses | (6.4) | (7.4) | | Advances, net | 461.4 | 577.2 | - Net servicing advances decreased by **$115.8 million**, or **20%**, to **$461.4 million** at June 30, 2025, primarily due to a seasonal reduction in taxes and insurance (T&I) balances and lower delinquencies in the non-Agency MSR portfolio[86](index=86&type=chunk)[258](index=258&type=chunk)[395](index=395&type=chunk) | Investor | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :--------- | :-------------------------- | :----------------------------- | | GSE | 43.9 | 94.0 | | Ginnie Mae | 51.6 | 70.6 | | Non-Agency | 365.9 | 412.6 | | Total, net | 461.4 | 577.2 | [Note 7 – Mortgage Servicing](index=25&type=section&id=Note%207%20%E2%80%93%20Mortgage%20Servicing) | MSR Type | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :------------------------------------------------ | :-------------------------- | :----------------------------- | | Owned MSRs | 2,051.8 | 1,869.6 | | Total transferred MSR, subject to Pledged MSR liability | 580.8 | 596.7 | | Total MSRs (Fair Value) | 2,632.6 | 2,466.3 | | Total MSRs (UPB in billions) | 181.5 | 170.3 | - The fair value of the total MSR portfolio increased by **$166.4 million**, or **6.7%**, to **$2,632.6 million** at June 30, 2025, driven by **$278.6 million** in net additions (including recognized MSRs on loan sales and purchases), partially offset by fair value losses recognized in earnings[89](index=89&type=chunk)[91](index=91&type=chunk)[258](index=258&type=chunk) | Servicing Revenue Component | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Servicing fee | 199.3 | 182.1 | | Subservicing fee | 46.5 | 54.3 | | MAV - Servicing fee / Transferred MSR | 26.7 | 35.8 | | Rithm and Others-Servicing fee/Transferred MSR | 38.2 | 37.8 | | Custodial accounts (float earnings) | 59.4 | 59.1 | | Total Servicing and subservicing fees | 414.6 | 415.3 | [Note 8 — Other Financing Liabilities, at Fair Value](index=28&type=section&id=Note%208%20%E2%80%94%20Other%20Financing%20Liabilities%2C%20at%20Fair%20Value) | Liability Type | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :------------------------------------ | :-------------------------- | :----------------------------- | | Pledged MSR liability, at fair value | 569.6 | 583.5 | | ESS financing liability, at fair value | 248.6 | 263.3 | | Total Other financing liabilities, at fair value | 818.1 | 846.9 | - Other financing liabilities, at fair value, decreased by **$28.8 million** to **$818.1 million** at June 30, 2025, primarily due to derecognition of financing liabilities and realization of expected cash flows, partially offset by MSR transfers[97](index=97&type=chunk)[100](index=100&type=chunk) | Pledged MSR Liability Expense | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | | :------------------------------------------ | :------------------------------------ | :------------------------------------ | | Rithm and others net servicing fee remittance | 36.0 | 34.3 | | MAV net servicing fee remittance | 22.8 | 30.7 | | ESS servicing spread remittance | 26.1 | 26.1 | | Total Pledged MSR liability expense | 84.9 | 91.0 | [Note 9 – MSR Valuation Adjustments, Net](index=30&type=section&id=Note%209%20%E2%80%93%20MSR%20Valuation%20Adjustments%2C%20Net) | Component | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | | :------------------------------------------ | :------------------------------------ | :------------------------------------ | | Total MSRs | (112.2) | 79.2 | | Pledged MSR liabilities | 15.9 | (17.5) | | ESS financing liabilities | 14.8 | (1.7) | | Derivative fair value gain (loss) (MSR economic hedges) | 15.3 | (104.3) | | MSR valuation adjustments, net | (66.2) | (44.3) | - MSR valuation adjustments, net, resulted in a **$66.2 million** loss for the six months ended June 30, 2025, an increase from a **$44.3 million** loss in the prior year, primarily driven by the impact of interest rate changes, net of hedge activity, and higher runoff due to MSR portfolio growth[110](index=110&type=chunk)[244](index=244&type=chunk) - The total changes in fair value due to rates and assumptions resulted in a **$18.4 million** gain for the six months ended June 30, 2025, compared to a **$33.7 million** gain in the prior year, reflecting less favorable input and assumption updates[110](index=110&type=chunk)[245](index=245&type=chunk) [Note 10 – Receivables](index=31&type=section&id=Note%2010%20%E2%80%93%20Receivables) | Receivable Type | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :------------------------------------ | :-------------------------- | :----------------------------- | | Government-insured loan claims - Reverse | 112.5 | 83.3 | | Government-insured loan claims - Forward | 25.2 | 31.5 | | Income taxes receivable | 29.2 | 28.2 | | Total Receivables, net | 204.6 | 176.4 | | Allowance for losses | (15.3) | (18.1) | - Net receivables increased by **$28.2 million**, or **16%**, to **$204.6 million** at June 30, 2025, primarily due to an increase in government-insured loan claims for reverse mortgages[114](index=114&type=chunk)[258](index=258&type=chunk) - The allowance for losses decreased by **$2.8 million** to **$15.3 million** at June 30, 2025, reflecting net charge-offs exceeding provision expense[115](index=115&type=chunk) [Note 11 – Other Assets](index=31&type=section&id=Note%2011%20%E2%80%93%20Other%20Assets) | Asset Type | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :------------------------------------ | :-------------------------- | :----------------------------- | | REO | 48.3 | 43.9 | | Derivatives, at fair value | 41.2 | 15.4 | | Prepaid expenses | 23.1 | 26.1 | | Deferred tax assets, net | 3.7 | 3.2 | | Total Other assets | 129.1 | 111.3 | - Other assets increased by **$17.9 million**, or **16%**, to **$129.1 million** at June 30, 2025, largely driven by an increase in derivatives at fair value[116](index=116&type=chunk)[258](index=258&type=chunk) [Note 12 – Borrowings](index=32&type=section&id=Note%2012%20%E2%80%93%20Borrowings) | Borrowing Type | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :------------------------------------ | :-------------------------- | :----------------------------- | | Advance match funded liabilities | 342.5 | 417.1 | | Mortgage loan financing facilities, net | 2,195.5 | 1,528.2 | | MSR financing facilities, net | 1,218.6 | 957.9 | | Senior notes, net | 488.5 | 487.4 | | Total Borrowings | 4,245.1 | 3,390.6 | - Mortgage loan financing facilities, net, increased by **$667.3 million** to **$2,195.5 million**, and MSR financing facilities, net, increased by **$260.7 million** to **$1,218.6 million**, reflecting growth in the Originations pipeline and MSR portfolio[121](index=121&type=chunk)[126](index=126&type=chunk)[259](index=259&type=chunk) - Advance match funded liabilities decreased by **$74.6 million** to **$342.5 million**, consistent with the seasonal decline in servicing advances[117](index=117&type=chunk)[259](index=259&type=chunk) - Onity issued **$500.0 million** aggregate principal amount of **9.875%** Senior Notes due November 1, 2029, on November 6, 2024, which are guaranteed by Onity and certain subsidiaries[131](index=131&type=chunk) [Note 13 – Other Liabilities](index=37&type=section&id=Note%2013%20%E2%80%93%20Other%20Liabilities) | Liability Type | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :------------------------------------ | :-------------------------- | :----------------------------- | | Servicing-related obligations | 61.4 | 65.1 | | Checks held for escheat | 56.0 | 54.1 | | Other accrued expenses | 54.8 | 78.4 | | Due to Rithm - Advance collections and servicing fees | 49.2 | 63.4 | | Derivatives, at fair value | 26.8 | 27.6 | | Total Other liabilities | 365.0 | 420.6 | - Other liabilities decreased by **$55.6 million**, or **13%**, to **$365.0 million** at June 30, 2025, mainly due to the payment of annual bonuses, reduction of servicing float balance due to Rithm, and favorable resolution of a prior-year uncertain tax position[144](index=144&type=chunk)[259](index=259&type=chunk) [Note 14 – Stockholders' Equity](index=37&type=section&id=Note%2014%20%E2%80%93%20Stockholders'%20Equity) - On February 13, 2025, Oaktree exercised warrants to purchase **261,248 shares** of common stock, settled in cash for **$3.5 million**, which reduced stockholders' equity without changing the number of issued and outstanding shares[147](index=147&type=chunk) - The warrants, originally issued in 2021, were amended in October 2024 to allow Oaktree to elect a cash exercise option only with Onity's consent, otherwise requiring net share settlement[145](index=145&type=chunk)[146](index=146&type=chunk) [Note 15 – Derivative Financial Instruments and Hedging Activities](index=37&type=section&id=Note%2015%20%E2%80%93%20Derivative%20Financial%20Instruments%20and%20Hedging%20Activities) | Derivative Type | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :------------------------------------ | :-------------------------- | :----------------------------- | | Total Derivative Assets | 41.2 | 15.4 | | Total Derivative Liabilities | (26.8) | (27.6) | | Net Derivative Position | 14.4 | (12.2) | | Gain (Loss) | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | | :------------------------------------------ | :------------------------------------ | :------------------------------------ | | Forward loans IRLCs | 17.8 | (1.6) | | TBA trades (economic hedge) | (25.4) | 9.7 | | Interest rate futures, TBA trades (MSR valuation adjustments) | 15.3 | (104.3) | | Total Net Gain (Loss) | 5.3 | (96.0) | - Onity uses derivative instruments, including forward sales of MBS/Agency TBAs, exchange-traded interest rate futures, and options, to economically hedge MSR and loan pipeline interest rate risk, with changes in fair value reported in MSR valuation adjustments, net or gain on loans held for sale, net[155](index=155&type=chunk)[157](index=157&type=chunk) - The targeted MSR hedge coverage ratio was adjusted to **85%** with a range of **80%** to **100%** in May 2025, aiming to protect shareholders' equity and earnings against fair value volatility[153](index=153&type=chunk) [Note 16 – Interest Expense](index=40&type=section&id=Note%2016%20%E2%80%93%20Interest%20Expense) | Interest Expense Type | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Mortgage loan financing facilities | 57.9 | 43.5 | | MSR financing facilities | 40.2 | 37.5 | | Senior Notes Due 2029 | 25.7 | — | | Advance match funded liabilities | 15.7 | 19.8 | | Onity Senior Secured Notes | — | 22.6 | | PMC Senior Secured Notes | — | 13.9 | | Total Interest Expense | 142.7 | 140.5 | - Total interest expense increased by **$2.2 million**, or **1.6%**, for the six months ended June 30, 2025, compared to the prior year, primarily due to higher interest on mortgage loan and MSR financing facilities, partially offset by the redemption of prior corporate debt[159](index=159&type=chunk)[252](index=252&type=chunk)[323](index=323&type=chunk) [Note 17 - Income Taxes](index=40&type=section&id=Note%2017%20-%20Income%20Taxes) | Metric | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | | :----------------------- | :------------------------------------ | :------------------------------------ | | Income before income taxes | 32.0 | 45.3 | | Income tax expense (benefit) | (11.7) | 4.7 | | Effective tax rate | (36.6)% | 10.3% | - Onity recognized an income tax benefit of **$11.7 million** for the six months ended June 30, 2025, compared to an expense of **$4.7 million** in the prior year, primarily due to the favorable resolution of a **$13.3 million** prior-year uncertain tax position[160](index=160&type=chunk)[255](index=255&type=chunk) - The company maintains a full valuation allowance on its net U.S. federal and state deferred tax assets (**$179.8 million** as of December 31, 2024) due to a history of cumulative operating losses, but believes it is reasonably possible to release some or all of this allowance by December 31, 2025, contingent on continued profitability[161](index=161&type=chunk)[162](index=162&type=chunk)[254](index=254&type=chunk)[257](index=257&type=chunk) [Note 18 – Basic and Diluted Earnings (Loss) per Share](index=41&type=section&id=Note%2018%20%E2%80%93%20Basic%20and%20Diluted%20Earnings%20(Loss)%20per%20Share) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | | Net income attributable to common stockholders (Millions $) | 41.6 | 40.6 | | Basic EPS | 5.23 | 5.23 | | Diluted EPS | 4.90 | 5.09 | | Weighted average common shares outstanding (Basic) | 7,947,992 | 7,766,331 | | Dilutive weighted average shares of common stock (Diluted) | 8,486,158 | 7,982,429 | - Basic EPS remained flat at **$5.23** for the six months ended June 30, 2025, compared to the prior year, while diluted EPS decreased slightly to **$4.90** from **$5.09**, despite an increase in net income attributable to common stockholders[165](index=165&type=chunk) [Note 19 – Business Segment Reporting](index=41&type=section&id=Note%2019%20%E2%80%93%20Business%20Segment%20Reporting) - Onity operates through three reportable segments: Servicing, Originations, and Corporate, with performance evaluated based on pre-tax income[167](index=167&type=chunk)[270](index=270&type=chunk) | Segment | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | | :---------------- | :------------------------------------ | :------------------------------------ | | Servicing Revenue | 438.3 | 436.2 | | Originations Revenue | 58.1 | 49.3 | | Corporate Revenue | — | — | | Servicing Income (loss) before taxes | 73.5 | 86.7 | | Originations Income (loss) before taxes | 18.6 | 10.5 | | Corporate Income (loss) before taxes | (60.2) | (51.9) | - Servicing segment income before income taxes decreased by **15%** for the six months ended June 30, 2025, while Originations segment income before income taxes increased by **76%** for the same period[170](index=170&type=chunk)[171](index=171&type=chunk) [Note 20 – Regulatory Requirements](index=45&type=section&id=Note%2020%20%E2%80%93%20Regulatory%20Requirements) - Onity is subject to extensive federal, state, local, and foreign regulations, including capital and liquidity requirements from agencies like GSEs, HUD, FHA, VA, and Ginnie Mae[172](index=172&type=chunk)[173](index=173&type=chunk)[175](index=175&type=chunk)[177](index=177&type=chunk) | Entity | Required Net Worth (Millions $) | Reported Net Worth (Millions $) | Required Liquidity (Millions $) | Reported Liquidity (Millions $) | | :----- | :---------------------------- | :------------------------------ | :------------------------------ | :------------------------------ | | PHH | 300.0 | 354.3 | 65.8 (FHFA), 71.5 (Ginnie Mae) | 151.2 (FHFA), 523.1 (Ginnie Mae) | | PAS | 256.6 | 301.0 | 80.7 (FHFA) | 221.9 (FHFA) | - PHH received a waiver from Ginnie Mae extending the deadline to meet risk-based capital ratio (RBCR) requirements to October 1, 2025, and transferred certain GSE MSR investment activities to PAS to achieve compliance[179](index=179&type=chunk)[384](index=384&type=chunk) [Note 21 — Commitments](index=47&type=section&id=Note%2021%20%E2%80%94%20Commitments) - As a servicer, Onity is obligated to advance loan principal and interest, property taxes, and insurance premiums, with recovery mechanisms varying by loan type (PLS, Ginnie Mae, GSE)[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) - Onity has unfunded lending commitments of **$3.0 billion** for floating-rate reverse mortgage loans and **$2.0 billion** for forward and reverse mortgage loan IRLCs at June 30, 2025[190](index=190&type=chunk) - Rithm, a major subservicing client, represented **11%** of total serviced UPB and **20%** of loan count, and **59%** of all delinquent loans at June 30, 2025, with **$5.7 billion** in UPB transferred to another subservicer in Q1 2025[196](index=196&type=chunk) [Note 22 – Contingencies](index=48&type=section&id=Note%2022%20%E2%80%93%20Contingencies) - Onity is involved in numerous legal proceedings, including class actions and regulatory investigations, primarily related to mortgage servicing and lending activities, with an accrual for probable and estimable legal and regulatory matters of **$24.5 million** at June 30, 2025[199](index=199&type=chunk)[200](index=200&type=chunk)[202](index=202&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - The company is in ongoing litigation with the USVI regarding income tax refunds and a new lawsuit alleging non-compliance with Economic Development Commission Certificate conditions[207](index=207&type=chunk) - Onity has exposure to representation, warranty, and indemnification obligations from lending and loan sales, with outstanding repurchase demands of **$37.8 million** UPB (**122 loans**) at June 30, 2025[214](index=214&type=chunk)[215](index=215&type=chunk) [Note 23 – Subsequent Events](index=52&type=section&id=Note%2023%20%E2%80%93%20Subsequent%20Events) - On July 10, 2025, Onity purchased a portfolio of government-insured reverse mortgage loan buyouts for **$100.4 million**, financed through a private placement securitization (OLIT 2025-HB1) with total proceeds of **$309.5 million**[219](index=219&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Detailed analysis of Onity's Q2 2025 financial condition and results, including overall performance, segment results, and key trends [Overview](index=52&type=section&id=OVERVIEW) - Onity is a leading non-bank mortgage servicer and originator, servicing **1.4 million loans** with a total UPB of **$309.5 billion** as of June 30, 2025, and aims for sustainable profitability through a balanced business model[220](index=220&type=chunk)[237](index=237&type=chunk) | Metric | 3 Months Ended June 30, 2025 (Millions $) | 3 Months Ended March 31, 2025 (Millions $) | Change ($) | Change (%) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Net income attributable to common stockholders | 20.5 | 22.1 | (1.6) | -7.2 | | Servicing and subservicing fee revenue | 211.3 | 203.3 | 8.0 | 3.9 | | Originations gain on sale | 15.4 | 15.6 | (0.2) | -1.3 | | MSR valuation gain (net of hedging) | 16.2 | (18.6) | 34.8 | -187.1 | - The company's strategy focuses on capital-light growth, industry-leading cost structure, top-tier operating performance, and dynamic asset management, including opportunistic MSR purchases and sales[237](index=237&type=chunk) [Segment Results of Operations](index=64&type=section&id=SEGMENT%20RESULTS%20OF%20OPERATIONS) - The Servicing segment's income before income taxes decreased by **15%** for the six months ended June 30, 2025, compared to the prior year, while the Originations segment's income before income taxes increased by **76%**[170](index=170&type=chunk)[171](index=171&type=chunk) - The Corporate segment's loss before income taxes increased by **16%** for the six months ended June 30, 2025, primarily due to higher professional services and compensation and benefits expenses[170](index=170&type=chunk)[171](index=171&type=chunk)[356](index=356&type=chunk) [Servicing Segment](index=64&type=section&id=SERVICING) - The Servicing segment is primarily comprised of mortgage servicing and subservicing, earning fees and incurring costs based on loan delinquency status and MSR ownership. It serviced **1.4 million loans** with an aggregate UPB of **$309.5 billion** as of June 30, 2025[271](index=271&type=chunk) | Metric | June 30, 2025 (Billions $) | March 31, 2025 (Billions $) | Change ($) | Change (%) | | :------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Performing loans UPB | 299.0 | 293.8 | 5.2 | 1.8 | | Non-performing loans UPB | 10.1 | 10.4 | (0.3) | -2.9 | | Total Servicing and Subservicing UPB | 309.5 | 304.6 | 4.9 | 1.6 | - Servicing and subservicing fees for the six months ended June 30, 2025, remained flat compared to the prior year, with an **$8.6 million** decrease in subservicing fees offset by an **$8.6 million** increase in servicing fees due to portfolio growth[301](index=301&type=chunk) [Originations Segment](index=77&type=section&id=ORIGINATIONS) - The Originations segment originates and purchases loans and MSRs through Consumer Direct, Correspondent Lending, Reverse Originations, and Co-Issue Programs, generating gain on sale and fee revenue[330](index=330&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk)[333](index=333&type=chunk)[335](index=335&type=chunk) | Metric | 6 Months Ended June 30, 2025 (Billions $) | 6 Months Ended June 30, 2024 (Billions $) | Change ($) | Change (%) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Forward loans funded UPB | 9.78 | 7.09 | 2.69 | 37.9 | | Reverse loans funded UPB | 0.34 | 0.35 | (0.01) | -2.9 | | UPB of MSR Purchases | 11.46 | 5.18 | 6.28 | 121.2 | | Total Originations UPB | 21.57 | 12.62 | 8.95 | 70.9 | - Gain on loans held for sale, net, increased by **$5.2 million** for the six months ended June 30, 2025, driven by a **121%** increase in Consumer Direct channel gain, partially offset by a **40%** decrease in Correspondent channel gain due to margin decline[343](index=343&type=chunk) [Corporate Segment](index=82&type=section&id=CORPORATE) - The Corporate segment includes expenses for corporate support services not directly related to other segments, with certain expenses and corporate debt interest allocated to Servicing and Originations[351](index=351&type=chunk)[353](index=353&type=chunk) | Metric | 6 Months Ended June 30, 2025 (Millions $) | 6 Months Ended June 30, 2024 (Millions $) | Change ($) | Change (%) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Total operating expenses before corporate overhead allocations | 83.7 | 63.6 | 20.1 | 31.6 | | Total operating expenses (after allocations) | 50.4 | 33.7 | 16.7 | 49.6 | | Loss before income taxes | (60.2) | (51.9) | (8.3) | 16.0 | - Operating expenses before corporate overhead allocations increased by **$20.2 million**, or **32%**, for the six months ended June 30, 2025, primarily due to higher professional services and compensation and benefits expenses[356](index=356&type=chunk) [Liquidity and Capital Resources](index=84&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) - Onity actively manages its debt agreements and completed several key transactions in H1 2025, including increasing borrowing capacity for GSE MSR and GNMA MSR facilities and entering a new PLS MSR financing agreement[359](index=359&type=chunk)[361](index=361&type=chunk) | Borrowing Capacity | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :------------------------------------ | :-------------------------- | :----------------------------- | | Total Borrowing Capacity | 4,996 | 4,467 | | Remaining Borrowing Capacity - Committed | 671 | 681 | | Remaining Borrowing Capacity - Uncommitted | 1,020 | 1,413 | - Total liquidity at June 30, 2025, was **$218.1 million**, comprising **$194.3 million** of unrestricted cash and **$23.8 million** in available borrowing capacity, a decrease from **$248.5 million** at December 31, 2024, mainly due to originations growth in owned MSRs[362](index=362&type=chunk) - The company's licensed entities are adequately capitalized and comply with regulatory requirements, with a high leverage ratio due to securitized reverse mortgage loans being reported on the balance sheet but risk-weighted at zero percent by Ginnie Mae[376](index=376&type=chunk)[377](index=377&type=chunk)[384](index=384&type=chunk) [Critical Accounting Policies and Estimates](index=91&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) - Onity's critical accounting policies and estimates involve significant judgments related to fair value measurements, income taxes, allowance for losses, and loss contingencies, with **92%** of assets and **69%** of liabilities reported at fair value at June 30, 2025, primarily classified as Level 3 instruments[403](index=403&type=chunk) [Recent Accounting Developments](index=91&type=section&id=RECENT%20ACCOUNTING%20DEVELOPMENTS) - The adoption of ASU 2023-05 (Business Combinations - Joint Venture Formations) did not have a material impact on Onity's consolidated financial statements[33](index=33&type=chunk) - ASU 2023-09 (Improvements to Income Tax Disclosures) is effective for Onity in the 2025 annual period and 2026 interim periods, requiring disaggregated information on effective tax rate reconciliation and income taxes paid[34](index=34&type=chunk)[35](index=35&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=91&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Details Onity's market risk exposure, primarily from interest rate changes, and its management strategies through MSR, pipeline hedging, and sensitivity analyses [Interest Rates](index=91&type=section&id=Interest%20Rates) - Onity's primary market risk is the impact of interest rate changes on mortgage-related assets (MSRs, loans held for sale/investment, IRLCs) and commitments, as well as on float income and variable-rate borrowings[405](index=405&type=chunk) - The Market Risk Committee establishes policies for risk appetite and hedging programs, including duration, interest rate sensitivity measures, limits, and targeted hedge coverage ratios[406](index=406&type=chunk) [MSR Hedging Strategy](index=92&type=section&id=MSR%20Hedging%20Strategy) - The MSR hedging policy aims to protect shareholders' equity and earnings from fair value volatility of the interest-rate sensitive MSR portfolio exposure, which includes Agency MSRs, expected bulk transactions, and reverse MSRs[409](index=409&type=chunk)[416](index=416&type=chunk) - A new targeted hedge coverage ratio of **85%** (range **80%**-**100%**) was established in May 2025, acknowledging that partial coverage means hedging instruments may not fully offset MSR fair value changes due to various market factors[410](index=410&type=chunk)[411](index=411&type=chunk) - Derivative instruments used for MSR hedging, such as forward trades of MBS/Agency TBAs, interest rate futures, and options, are not designated as accounting hedges and are subject to daily margin requirements[413](index=413&type=chunk)[414](index=414&type=chunk) [Loans Held for Investment and HMBS-related Borrowings](index=92&type=section&id=Loans%20Held%20for%20Investment%20and%20HMBS-related%20Borrowings) - The fair value of reverse mortgage loans held for investment (HECM) generally decreases with rising market interest rates and increases with falling rates, as higher rates accelerate loan balance accrual to the maximum claim amount[415](index=415&type=chunk) - The net fair value of securitized HECM loans and HMBS-related borrowings (reverse mortgage economic MSR or HMSR) is used as a partial offset to forward MSR exposure and managed within the overall MSR hedging strategy[416](index=416&type=chunk)[417](index=417&type=chunk) [Pipeline Hedging Strategy - Loans Held for Sale and IRLCs](index=93&type=section&id=Pipeline%20Hedging%20Strategy%20-%20Loans%20Held%20for%20Sale%20and%20IRLCs) - Onity hedges interest rate and price risk in its Originations business from interest rate lock commitment (IRLC) through loan sale/securitization using derivative instruments like forward sales of Agency TBAs[418](index=418&type=chunk) - The objective is to reduce fair value volatility of IRLCs and loans, preserving the initial gain on sale margin, with daily monitoring of net market risk position and a daily limit of **+/- 5%**[418](index=418&type=chunk) [EBO and Loan Modification Hedging – Loans Held for Sale, at fair value](index=93&type=section&id=EBO%20and%20Loan%20Modification%20Hedging%20%E2%80%93%20Loans%20Held%20for%20Sale%2C%20at%20fair%20value) - In its Servicing business, Onity hedges certain Ginnie Mae EBO loans repurchased for modification and reperformance with TBAs to manage interest rate risk while these loans await redelivery[419](index=419&type=chunk) [Advance Match Funded Liabilities](index=93&type=section&id=Advance%20Match%20Funded%20Liabilities) - Onity monitors the impact of interest rate changes on the interest paid on its variable-rate advance financing debt, with earnings on cash and float balances providing a partial offset to this exposure[420](index=420&type=chunk) [Sensitivity Analysis](index=93&type=section&id=Sensitivity%20Analysis) - Onity uses daily sensitivity analyses to assess the impact of hypothetical instantaneous parallel shifts in the yield curve (**+/- 25 basis points**) on the fair value of MSRs, HECM loans, loans held for sale, and related derivatives[421](index=421&type=chunk)[422](index=422&type=chunk) | Asset/Liability | Down 25 bps (Millions $) | Up 25 bps (Millions $) | | :------------------------------------------------ | :----------------------- | :--------------------- | | Asset value of securitized HECM loans, net of HMBS-related borrowing | 5 | (5) | | Loans held for sale | 19 | (23) | | Derivative instruments | 14 | (11) | | Total MSRs - Agency and non-Agency | (40) | 39 | | IRLCs | (2) | 2 | | Total, net | (5) | 2 | - A hypothetical **100 bps** decrease in interest rates is estimated to have a net positive impact of approximately **$4.7 million** on profitability, resulting from a **$28.3 million** decrease in annual interest income and a **$33.0 million** decrease in annual interest expense on variable-rate debt[425](index=425&type=chunk) [Item 4. Controls and Procedures](index=94&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated as effective and functioning as of June 30, 2025, ensuring material information is communicated and reported timely[427](index=427&type=chunk) - No material changes to internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[428](index=428&type=chunk) [PART II - OTHER INFORMATION](index=94&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=94&type=section&id=Item%201.%20Legal%20Proceedings) Material legal proceedings are incorporated by reference from Note 22 to the Unaudited Consolidated Financial Statements - Material legal proceedings are detailed in Note 22 – Contingencies, which is incorporated by reference[430](index=430&type=chunk) [Item 1A. Risk Factors](index=94&type=section&id=Item%201A.%20Risk%20Factors) Significant risks are referenced from the 2024 Annual Report on Form 10-K, with no material changes since that filing - Significant risks are detailed in the Annual Report on Form 10-K for the year ended December 31, 2024, and no material changes have occurred since that filing[431](index=431&type=chunk)[432](index=432&type=chunk) [Item 6. Exhibits](index=94&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including organizational documents, certifications, and supplemental information - Exhibits include Amended and Restated Articles of Incorporation and Bylaws, certifications from principal executive and financial officers (Sections 302 and 906 of Sarbanes-Oxley Act), and supplemental information pursuant to the Senior Notes Indenture[433](index=433&type=chunk)[436](index=436&type=chunk)

Core Insights - Onity Group reported revenue of $246.6 million for the quarter ended June 2025, reflecting a slight increase of 0.1% year-over-year, but fell short of the Zacks Consensus Estimate of $263.75 million, resulting in a revenue surprise of -6.5% [1] - The company's earnings per share (EPS) was $1.87, significantly down from $4.07 in the same quarter last year, and also missed the consensus EPS estimate of $2.08, leading to an EPS surprise of -10.1% [1] Financial Performance Metrics - Other revenues amounted to $13 million, exceeding the average estimate of $12.3 million by two analysts [4] - Gain on loans held for sale, net, was reported at $10.4 million, below the average estimate of $15.25 million [4] - Gain on reverse loans held for investment and HMBS-related borrowings, net, was $11.9 million, compared to the average estimate of $14.75 million [4] - Servicing and subservicing fees totaled $211.3 million, which was lower than the estimated $221.5 million [4] Stock Performance - Over the past month, Onity's shares have returned -0.6%, while the Zacks S&P 500 composite has increased by +1% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - For the second quarter, the company reported GAAP net income attributable to common shareholders of $20 million, or $2.4 per share fully diluted, reflecting an annualized ROE of 17% [6][23] - Adjusted pretax income was $16 million, with an annualized adjusted ROE of 14%, impacted by $4 million from market volatility on originations revenue and margins [7][26] - Book value increased to $60 per share, up 5% year over year [7] Business Line Data and Key Metrics Changes - The servicing segment contributed $31 million to adjusted pretax income for the quarter, with forward servicing experiencing growth in average UPB [30] - Originations team delivered 35% year-over-year growth, compared to the industry's 23% growth [14] - Consumer Direct's funded volume was up 2.4 times versus the previous year, indicating strong recapture performance [15][17] Market Data and Key Metrics Changes - The Mortgage Bankers Association Refinance Application Index was up 43% over the prior year, indicating strong origination volumes despite market volatility [9] - Industry originations volume growth estimates have been lowered to 14% year over year due to interest rate expectations and slower home sales [10] Company Strategy and Development Direction - The company is focused on maintaining agility to find opportunities for shareholder value creation amid market volatility [10][36] - Continued investment in technology and process optimization is aimed at enhancing customer experience and improving scalability [14][20] - The company is increasing its owned MSR portfolio to grow book earnings and book value, while also pursuing new subservicing clients [12][31] Management's Comments on Operating Environment and Future Outlook - Management expects continued interest rate volatility and uncertainty, but believes the balanced business model is well-positioned for the dynamic market environment [10][36] - The company is optimistic about its potential for growth and shareholder returns, reaffirming its annual adjusted ROE guidance [35][34] Other Important Information - The company has been recognized for its industry-leading servicing performance by Fannie Mae, Freddie Mac, and HUD [19] - The MSR hedge strategy has been effective in minimizing the impact of interest rates on MSR valuation [33] Q&A Session Summary Question: Inquiry about professional services expenses - Management noted that professional expenses can vary based on financing structures and legal fees, with no significant issues in the current quarter [38] Question: Clarification on deferred tax assets - Management explained that counterparties generally view the increase in deferred tax assets as an improvement in total equity, and detailed the components that affect the valuation allowance [39][40] Question: M&A activity in servicing - Management indicated that M&A activity in servicing is influenced by supply and demand dynamics in the marketplace, with potential consolidation expected due to prolonged high interest rates [44][46]

Group 1 - Onity Group reported quarterly earnings of $1.87 per share, missing the Zacks Consensus Estimate of $2.08 per share, and down from $4.07 per share a year ago, representing an earnings surprise of -10.10% [1] - The company posted revenues of $246.6 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 6.5%, and showing a slight increase from year-ago revenues of $246.4 million [2] - Over the last four quarters, Onity has surpassed consensus EPS estimates two times and topped consensus revenue estimates just once [2] Group 2 - The stock has gained approximately 22.2% since the beginning of the year, outperforming the S&P 500's gain of 7.6% [3] - The current consensus EPS estimate for the coming quarter is $2.41 on revenues of $271.3 million, and for the current fiscal year, it is $10.47 on revenues of $1.07 billion [7] - The Zacks Industry Rank for Financial - Mortgage & Related Services is currently in the bottom 9% of over 250 Zacks industries, indicating potential challenges for the sector [8]