PresentationSean O'NeilExecutive VP & CFO My name is Sean O'Neill, I'm the CFO at Onity. And spend a few minutes telling you a little bit about our company and then see if you have any questions. You can read that at your leisure. Okay. So this is the place mat of kind of who we are, what businesses we're in. We are a nonbank mortgage servicer and originator. So a servicer means we take care of MSRs for ourselves. Those are the ones we own, we take care of them for other people, that's subservicing. Differ ...

Onity Group (NYSE:ONIT) 2025 Conference Summary Company Overview - Onity Group operates as a non-bank mortgage servicer and originator, managing both owned and sub-serviced Mortgage Servicing Rights (MSRs) [1][2] - The company engages in various types of loans including forward loans, reverse loans, conventional loans, and small balance commercial and multifamily loans [2] Business Model - Onity has two primary business segments: servicing and origination - **Servicing**: Manages MSRs for itself and for other clients, with a focus on both owned and sub-serviced MSRs [1][2] - **Origination**: Operates through correspondent lending and direct-to-consumer channels, utilizing advanced technologies like quantitative modeling and machine learning [3] Financial Performance - Year-to-date Return on Equity (ROE) was reported at 25% with a book value per share of approximately $62, reflecting a $2.71 increase year-over-year [3] - The debt-to-equity ratio stood at 3.1 to 1 as of the end of the third quarter [3] Market Insights - The mortgage origination market is projected to reach approximately $1.9 trillion, with a servicing market estimated at $14.5 trillion, typically six to eight times the origination market [5] - Onity's investment thesis highlights profitability that is comparable or superior to peers, with a more attractive valuation, indicating a value play for investors [6] Strategic Initiatives - The company is focused on capital-like growth through sub-servicing and aims to enhance its scale to improve net income margins [4] - Onity has announced a transaction to exit the reverse sub-servicing market, simplifying its business model and allowing for redeployment of approximately $9.6 billion in assets [10][12] Competitive Landscape - The company has signed nine new clients in the sub-servicing space and is negotiating with several large clients for future growth [12] - The competitive landscape is evolving with significant M&A activity, including notable transactions involving larger players like Bayview and Rocket [22][25] Technology and Operational Efficiency - Onity emphasizes the importance of technology and operational superiority, having achieved 12 consecutive quarters of adjusted pre-tax income, with the most recent quarter reporting $31 million [7][16] - The company has received multiple awards for service excellence from GSEs and has a competitive cost structure compared to peers [14][15] Future Outlook - Onity expects to exceed its ROE guidance of 16%-18% and anticipates strong growth in its UPB [17] - The company is focused on organic growth and optimizing liquidity to handle market fluctuations [16][17] Conclusion - Onity Group is positioned for growth in the mortgage servicing and origination markets, with a balanced business model that leverages technology and operational efficiency to enhance profitability and shareholder value [18][28]

Core Viewpoint - Onity Group Inc. will present at the Bank of America Leveraged Finance Conference on December 2, 2025, led by Executive Vice President and CFO Sean O'Neil [1][2]. Company Overview - Onity Group Inc. is a prominent non-bank financial services company specializing in mortgage servicing and originations, operating under the brands PHH Mortgage and Liberty Reverse Mortgage [3]. - PHH Mortgage is recognized as one of the largest servicers in the United States, offering a range of servicing and lending programs to both consumers and business clients [3]. - Liberty Reverse Mortgage is among the largest reverse mortgage lenders in the nation, focusing on loans that assist customers in fulfilling their personal and financial needs [3]. - The company is headquartered in West Palm Beach, Florida, with operations extending to the U.S. Virgin Islands, India, and the Philippines, and has been in service since 1988 [3].

Core Viewpoint - PHH Mortgage Corporation has entered into a strategic partnership with Finance of America Reverse to reposition its role in the reverse mortgage market, transitioning to a subservicer and asset manager while selling reverse mortgage servicing rights for estimated net proceeds of $100 to $110 million [1][5]. Group 1: Transaction Details - PHH will sell reverse mortgage servicing rights (MSRs) for approximately 40,000 Ginnie Mae home equity conversion mortgage (HECM) loans, with an unpaid principal balance of $9.6 billion as of September 30, 2025 [3]. - The transaction includes a three-year subservicing agreement where PHH will act as the subservicer for the sold reverse MSRs [3]. - FAR will acquire PHH's pipeline of reverse mortgage loans and is expected to take on some of PHH's US-based reverse originations employees [4]. Group 2: Financial Implications - The estimated net proceeds from the transaction are projected to be between $100 million and $110 million, subject to adjustments based on asset balances at closing [5]. - The transaction is anticipated to close in the first quarter of 2026, pending regulatory approval and customary closing conditions [5]. - The company plans to use the net proceeds to support growth, reduce debt, and explore a share repurchase program, with expectations that the transaction will be accretive to earnings over the term of the subservicing agreement [6]. Group 3: Strategic Benefits - The partnership with FAR establishes a significant subservicing relationship, simplifying the company's balance sheet by eliminating reverse HECM assets and HMBS liabilities [8]. - This strategic move allows the company to focus on markets and products with greater growth potential, including forward originations and the recently launched FlexIQ product suite [8]. - The transaction is expected to strengthen financial metrics such as liquidity and capital ratio [8].

Loan Servicing and Originations - As of September 30, 2025, the company serviced or subserviced 1.4 million loans with a total UPB of $315.5 billion[236]. - In Q3 2025, the company added $24.1 billion of new volume, including $10.9 billion from subservicing additions and $11.9 billion from new Originations production[237]. - The average total servicing and subservicing UPB increased by $4.5 billion or 1.5% during Q3 2025 compared to the prior quarter[240]. - The company serviced all mortgage loan classes, including conventional, government-insured, non-Agency, small-balance commercial, and multi-family loans[236]. - The company's Originations volume growth outpaced the industry, with a 23% increase compared to Q2 2025 and a 53% increase compared to Q3 2024[252]. - The total servicing and subservicing UPB amounted to $315.5 billion as of September 30, 2025, reflecting a net increase of $6.0 billion or 1.9% from the previous quarter[242]. - The company plans to continue growing its servicing and subservicing portfolio through multi-channel originations and MSR bulk acquisitions[299]. - The company expects a 16% increase in loan origination in 2026 compared to 2025, driven by macroeconomic conditions and market dynamics[300]. Financial Performance - Net income attributable to common stockholders was $18 million, or $2.19 per share basic and $2.03 diluted[255]. - Total revenue for the three months ended September 30, 2025 increased by $33.7 million, or 14%, compared to the previous quarter, driven by a $16.0 million increase in Servicing revenue and a $17.6 million increase in Originations revenue[260]. - Total revenue increased to $280.3 million in Q3'25, up from $246.6 million in Q2'25, reflecting a growth of approximately 13.0%[297]. - The company reported a $31 million gain on originations sale[255]. - The nine months ended September 30, 2025 saw total revenue increase by $25.5 million, or 3%, compared to the same period in 2024[261]. - The company reported a total of $24.5 billion UPB of subserviced loans on behalf of Rithm as of September 30, 2025[333]. - The company reported a gain of $3.4 million on loans held for sale for the three months ended September 30, 2025, a significant improvement from a loss of $5.0 million in the previous quarter[348]. Operating Expenses and Income - Operating expenses for the three months ended September 30, 2025 were $125.8 million, a 15% increase from the previous quarter[267]. - Operating expenses for the three months ended September 30, 2025, increased by 19% to $74.7 million compared to $62.6 million in the previous quarter[339]. - The company experienced a 38% decline in income before income taxes, reporting $25.2 million for the three months ended September 30, 2025, down from $40.4 million in the previous quarter[339]. - Operating expenses for the nine months ended September 30, 2025, increased by $12.8 million, with a 24% increase in compensation and benefits driven by higher commissions[393]. - Compensation and benefits expense for the three months ended September 30, 2025 increased by 2% to $23.4 million compared to $22.9 million in Q2 2025, while for the nine months ended September 30, 2025, it decreased by $6.3 million or 8% compared to the same period in 2024[356][357]. Market Conditions and Interest Rates - The 30-year fixed rate mortgage average declined to 6.58% in Q3 2025, down 20 basis points from the previous quarter[244]. - The average 30-year fixed rate mortgage rate remains elevated compared to the past decade, impacting borrower affordability[244]. - The industry mortgage origination volume grew 3% quarter over quarter and 16% year over year in Q3 2025, driven by increased refinance activity[251]. - The fair value volatility of the MSR portfolio was reduced due to a high targeted hedge coverage ratio, resulting in losses of $1.0 million in Q3 2025 and gains of $9.8 million in Q2 2025, with a $22.6 million decrease in gains for the nine months ended September 30, 2025 compared to the same period in 2024[355]. Client Relationships and Servicing Agreements - Rithm, a major subservicing client, will not renew its servicing agreements effective January 31, 2026, which accounted for approximately $33.0 billion, or 10% of the total UPB[307][308]. - Servicing and subservicing fees from Rithm amounted to $60.2 million, or 13% of total fees for the nine months ended September 30, 2025[329]. - Rithm accounted for 55% of all delinquent loans serviced by the company as of September 30, 2025[308][329]. - The company has relationships with 732 approved correspondent sellers as of September 30, 2025, which supports the replenishment and growth of the MSR portfolio[377]. - As of September 30, 2025, the company has relationships with 521 approved sellers through the Agency Cash Window co-issue programs[379]. Assets and Liabilities - Total assets decreased by $328.0 million or 2% from December 31, 2024 to September 30, 2025, primarily due to a decline in reverse loans held for investment[284]. - Total liabilities decreased by $386.4 million compared to December 31, 2024, largely due to a $947.6 million decrease in HMBS-related borrowings[285]. - Total stockholders' equity increased to $501 million at September 30, 2025, compared to $443 million at December 31, 2024[422]. - The company holds $16.1 billion in total assets, with $9.9 billion in securitized HECM loans reported on the balance sheet[422]. Future Outlook and Strategy - The company aims for prudent capital-light growth by emphasizing capital-light subservicing to drive servicing portfolio UPB growth[255]. - The company expects to generate net income and increase stockholders' equity by 2026, barring any adverse impacts from interest rates or regulatory changes[306]. - The company has been acquiring reverse mortgage assets since 2023, financing these acquisitions through on-balance sheet private placement securitizations[325]. - The company regularly evaluates financing structure options, including asset-backed financing, to support investment plans and reduce funding costs[420].

Core Insights - The company reported strong third quarter results, demonstrating effective strategy execution and a balanced business model that adapts well to changing market conditions [5][30]. - Adjusted pretax income reached $31 million, with an annualized adjusted return on equity (ROE) of 25%, exceeding guidance for the quarter and year to date [6][22]. - The company experienced record origination volume and steady servicing profitability, contributing to book value growth, which increased to $62 per share, up 5% year over year [7][29]. Financial Performance - Revenue grew by double digits year over year and over the trailing quarter, driven by both servicing and origination units [22]. - The adjusted ROE for the year-to-date was 20%, above the upper end of guidance, with expectations to exceed the full year adjusted ROE guidance of 16% to 18% [23][28]. - GAAP net income was reported at $2.03 per share, reflecting a tax provision expense of $4 million related to tax planning strategies [6][22]. Business Segments - The origination segment saw a significant increase in adjusted pretax income, driven by strong recapture execution and improved performance in the B2B channel [24]. - The servicing segment contributed $31 million to adjusted pretax income, with growth in average UPB and revenue, although offset by higher runoff [25]. - The company’s Consumer Direct team achieved a recapture performance rate of 85%, indicating strong customer retention and growth potential [13][24]. Market Conditions and Strategy - The company is well-positioned to capitalize on both high and low interest rate environments, with a focus on maintaining agility in asset management [8][30]. - The servicing portfolio grew by $17 billion or 6% year over year, driven by double-digit origination growth [9]. - The company anticipates continued interest in subservicing options, with expectations for subservicing additions in the second half of the year to exceed $32 billion [14]. Technology and Innovation - The company has invested in AI and technology to enhance operational efficiency, customer experience, and competitive positioning [19][21]. - The focus on integrating robotics and machine learning aims to optimize processes and improve decision-making across operations [20][21]. - The technology investments have resulted in improved cycle times, processing costs, and customer access, contributing to overall business performance [20].

Financial Performance - Onity reported a strong third quarter in 2025, with an Adjusted Return on Equity (ROE) of 25%[12], exceeding the 16-18% guidance[10, 12] - The company's book value per share increased by $2 QoQ and $2.71 YoY, reaching $62.21[12] - Onity achieved $31 million in Adjusted Pre-Tax Income (PTI) for the third quarter of 2025[12] - The company's GAAP Diluted Earnings Per Share (EPS) was $2.03, resulting in a GAAP ROE of 14%[12] Servicing Portfolio - The total servicing Unpaid Principal Balance (UPB) reached $316 billion in Q3 2025[12, 77] - Owned Mortgage Servicing Rights (MSR) UPB grew QoQ and YoY, reinforcing the company's focus on growth[19] - The company is actively managing its MSR portfolio, with client deboarding primarily driven by opportunistic MSR sales due to favorable market pricing[22, 23] Originations - Originations volume increased by 39% YoY, exceeding the industry growth of 16%[12, 24, 25] - Onity's multi-channel strategy in Originations focuses on B2B and customer retention[27] - The company's refinance recapture rate is 1.9x the industry average[30] Subservicing - Onity has a robust pipeline of subservicing opportunities, with 9 new clients signed in FY'25 and 6 agreements under contract negotiation[35] - The company is capitalizing on commercial expansion opportunities, with UPB +9% QoQ and +32% YoY[35] AI and Technology - Onity is expanding its AI-powered platform to grow revenue, reduce costs, and drive service excellence[36] - Robotic Process Automation (RPA) in 200+ processes saves 85,000+ manual work hours per month[40]

Financial Performance - Net income attributable to common stockholders was $18 million, with diluted EPS of $2.03 and ROE of 14%[7] - Net income attributable to common stockholders for Q3'25 was $18 million, a decrease of 14.3% from $21 million in Q3'24[23] - Total revenue for Q3'25 increased to $280.3 million, up 5.8% from $265.7 million in Q3'24[26] - Adjusted pre-tax income was $31 million, resulting in an annualized adjusted ROE of 25%[7] - Adjusted pre-tax income for Q3'25 was $31 million, consistent with Q3'24, despite notable items impacting earnings[24] - The company reported a GAAP return on equity (ROE) of 14% for Q3'25, down from 19% in Q3'24[24] - Basic earnings per share (EPS) for Q3'25 was $2.19, down from $2.72 in Q3'24[26] Originations and Servicing - Originations volume reached $12 billion, up 39% year-over-year, exceeding the industry growth rate[7] - Average servicing UPB increased to $312 billion, up $7 billion year-over-year[7] - Funded recapture volume increased 1.8 times year-over-year, with a refinance recapture rate of 1.9 times the industry average[8] - Nine new subservicing clients were added year-to-date[8] - Mortgage servicing rights (MSRs) at fair value rose to $2,762.9 million in Q3'25, compared to $2,223.6 million in Q3'24, reflecting a significant increase of 24.2%[25] Liquidity and Assets - Total liquidity stood at $221 million as of September 30, 2025[8] - Cash and cash equivalents decreased to $172.8 million in Q3'25 from $201.6 million in Q3'24, a decline of 14.3%[25] - Total assets as of September 30, 2025, were $16,107.4 million, an increase from $13,226.7 million in the previous year[25] Future Expectations - The company expects to exceed the 2025 adjusted ROE guidance range of 16% - 18%[7] - The company anticipates releasing a significant portion of the $180 million deferred tax asset valuation allowance by year-end 2025[7] - The company plans to recognize changes in fair value due to interest rates for reverse loan buyouts as notable items starting Q4'24, which may impact future earnings reporting[23] Subservicing Agreements - The Rithm subservicing agreements, representing approximately $33 billion or 10% of total servicing UPB, will not be renewed effective January 31, 2026[9] Valuation Adjustments - The company experienced a net loss of $45 million in MSR valuation adjustments for Q3'25, compared to a loss of $31.5 million in Q3'24[26]

Core Insights - Onity Group Inc. reported exceptional performance in Q3 2025, with record originations and robust servicing earnings, driven by a multi-channel strategy and technological advancements [4][7]. Financial Performance - Net income attributable to common stockholders was $18 million, with diluted EPS of $2.03 and an ROE of 14% [7]. - Adjusted pre-tax income was $31 million, leading to an annualized adjusted ROE of 25% [7]. - Book value per share increased to $62, up $2.71 year-over-year [7]. - Originations volume reached $12 billion, a 39% increase year-over-year, surpassing the industry growth rate [7]. - Average servicing UPB rose to $312 billion, an increase of $7 billion year-over-year [7]. Business Highlights - Funded recapture volume increased 1.8 times year-over-year, with a year-to-date refinance recapture rate of 1.9 times the industry average [8]. - The company added 9 new subservicing clients year-to-date [8]. - Commercial servicing UPB grew by 32% year-over-year [8]. - Average owned servicing UPB was $159 billion, up 21% year-over-year [8]. - Total liquidity stood at $221 million as of September 30, 2025 [8]. Rithm Subservicing Agreements Update - Rithm Capital Corp. will not renew its subservicing agreements effective January 31, 2026, which represented approximately $33 billion, or 10%, of Onity's total servicing UPB as of September 30, 2025 [6]. - The company does not anticipate a material financial impact from this termination for the full year of 2026 [6]. - The Rithm portfolio was primarily composed of pre-2008 subprime loans and was one of the least profitable portfolios in Onity's servicing business [9]. Future Outlook - The company expects to exceed its adjusted ROE guidance for 2025, which is set between 16% and 18% [7]. - Onity plans to release a significant portion of a $180 million deferred tax asset valuation allowance by year-end 2025 [7].

Core Points - Onity Group Inc. will hold a conference call on November 6, 2025, at 8:30 a.m. (ET) to discuss its third quarter 2025 operating results and provide a business update [1] - The conference call can be accessed by dialing (833) 316-1983 or (785) 838-9310, with a conference ID "Onity" [2] - An investor presentation will be available on the Shareholder Relations page prior to the call, and a replay will be accessible approximately two hours after the call [3] Company Overview - Onity Group Inc. is a leading non-bank financial services company that provides mortgage servicing and originations solutions through its primary brands, PHH Mortgage and Liberty Reverse Mortgage [4] - PHH Mortgage is one of the largest servicers in the U.S., offering various servicing and lending programs [4] - Liberty Reverse Mortgage is among the largest reverse mortgage lenders in the nation, focusing on loans that assist customers with personal and financial needs [4]