Onity Group Inc.(US:ONIT)2025-11-06 21:29Loan 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].