ONITY GROUP INC
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
ONIT$31.00-3.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0001628280-24-034197
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0001628280-24-046004
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 315 previous paragraphs and 312 current paragraphs.
128 unchanged; 119 reworded; 62 added; 67 removed; 1 previous and 3 current paragraphs rearranged.
Tables are not compared: 34 previous and 34 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (62)
Current report
(3)Bulk MSR purchases include $0.9 billion UPB for which PHH was previously performing the subservicing that were purchased from third parties during the third quarter of 2024.
Current report
Volume Overview
Current report
The following graph compares market interest rates over the current and comparative periods:
Current report
•Originations gain on sale of $16.4 million
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•Cash position of $201.6 million
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•Total assets of $13.2 billion
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Business Strategy
Current report
•Balance and diversification: Maintain a scale position in origination and servicing to address market-cycle opportunities;
Current report
•A $19.3 million increase in revenue, mostly attributed to our Servicing segment due to a $9.6 million favorable change in fair value of loans held for sale attributed to market interest rate declines and favorable assumption updates on reverse buyouts and $9.1 million additional gains on our reverse mortgage portfolio of loans held for investment and HMBS-related borrowings. The reverse portfolio gains in the third quarter are driven by a decline in market interest rates (vs. an increase in the second quarter) and are part of our MSR hedge strategy.
Current report
•Mostly flat MSR valuation adjustments, net with the net loss in both quarters driven by the MSR realization of expected cash flows or runoff. In both the second and third quarters of 2024, the fair value changes of the MSR exposure due to interest rates were largely offset with hedging derivatives.
Current report
•An $8.5 million increase in Operating expenses, primarily due to reimbursements received in the second quarter of 2024 from mortgage loan investors related to prior year legal expenses and payments following resolution of legacy litigation matters, and a higher estimated annual cash awards expense based on our year-to-date financial performance.
Current report
•A $3.3 million increase in Income tax expense, mostly due to the increase in pre-tax earnings.
Current report
Total segment revenue for the three months ended September 30, 2024 increased $19.3 million, or 8% compared to the three months ended June 30, 2024 due to an $18.9 million increase in Servicing revenue and a $0.4 million increase in Originations revenue. The increase in Servicing revenue is driven by a $9.6 million increase in Gain on loans held for sale, net mostly attributed to reverse mortgage loan buyouts in the third quarter of 2024, and a $9.1 million increase in Gain on reverse loans held for investment and HMBS-related borrowings, net driven by a favorable decline in market rates (vs. an increase in the second quarter), partially offset by unfavorable yield spread widening (vs. favorable tightening in the second quarter). In addition, servicing and subservicing fees increased by $0.1 million with offsetting factors as float earnings increased with seasonally higher average float balances, offset by a decrease in servicing fees mostly due to MAV’s sale of MSRs (previously sold by Onity to MAV in a transaction which did not qualify for sale accounting treatment) during the three months ended June 30, 2024.
Current report
For the nine months ended September 30, 2024, the $75.8 million loss on MSR valuation adjustments, net is comprised of $118.2 million runoff, $92.4 million fair value gain attributed to rate and assumption changes and $50.0 million loss on MSR hedging derivatives.
Current report
•The unfavorable $11.2 million increase in runoff is mostly due to the impact of lower market rates on expected cash flows and our replenishment of lower note rate MSRs sold in 2023 with new higher note rate originations.
Current report
Compensation and benefits expense for the three months ended September 30, 2024 increased $4.6 million, or 8% compared to the three months ended June 30, 2024, largely due to higher estimated annual cash awards expense based on our year-to-date financial performance.
Current report
Compared to the nine months ended September 30, 2023, Compensation and benefits expense for the nine months ended September 30, 2024 decreased $3.3 million, or 2% largely due to a decrease in salaries and benefits, offset in part by an increase in estimated annual cash awards expense discussed above. Our total average headcount declined 7%, mostly due to efficiencies in Servicing and runoff of our reverse subservicing portfolio.
Current report
Professional services expense for the three months ended September 30, 2024 increased $6.6 million compared to the three months ended June 30, 2024 primarily due to reimbursements received in the second quarter of 2024 from mortgage loan investors related to prior year legal expenses and payments following favorable resolution of legacy litigation matters.
Current report
Also refer to Key Trends and Outlook below and Note 22 – Subsequent Events for discussion of recent asset acquisitions and financing transactions.
Current report
Key Trends and Outlook
Current report
Net interest expense- Interest expense varies based on changes in average debt balance and changes in interest rate on our variable rate debt. The average balance of collateralized financing facilities trends with the balance of the underlying assets discussed above (including MSR, advances and loans). We expect interest expense on our collateralized financing facilities to trend with short-term interest rate changes. Interest expense on our warehouse loan facilities is expected to be largely offset by interest income on our Originations pipeline loans. We also expect interest expense on our corporate debt to decline upon the consummation of our refinancing transactions, refer to Note 22 – Subsequent Events.
Current report
MSR Valuation Adjustments
Current report
Our servicing activities of reverse loans are generally consistent with forward mortgage loan servicing as described above, with the following additional functions: the funding of borrower advances or draws under their approved borrowing capacity and the repurchase of loans upon reaching a limit:
Current report
Since 2023, we have opportunistically acquired reverse mortgage assets from financial institutions, including active and inactive reverse mortgage loan buyouts, advances, claim receivables from HUD and real estate properties. We finance our asset acquisitions together with the buyouts of our own portfolio through on-balance sheet private placement securitizations (referred to as OLIT). The financial performance of our reverse asset management is reported within the Servicing segment, primarily as Gains (losses) on loans held for sale, and is affected by multiple factors, including liquidation timeline and changes in market interest rates.
Current report
On October 11, 2024, S&P affirmed the Above Average ratings and Stable outlook citing the company’s experienced management and team, effective systems and technology, sound control framework and good servicing performance metrics, among other factors.
Current report
(3)Includes MSRs sold to an unrelated third party with a UPB of $8.5 billion for which PHH is performing interim subservicing.
Current report
(4)Excludes MSRs and whole loans acquired from unrelated third parties in the third quarter of 2024 with a UPB of $0.9 billion for which PHH was previously performing the subservicing.
Current report
Servicing and subservicing fees (excluding Ancillary income) for the three months ended September 30, 2024 declined $3.2 million compared to the three months ended June 30, 2024, due to a 3% decrease in average servicing UPB, driven by MAV’s sale of MSRs (previously sold by Onity to MAV in a transaction which did not qualify for sale accounting treatment). Subservicing fees remained unchanged compared to the three months ended June 30, 2024.
Current report
Compared to the nine months ended September 30, 2023, Gain on loans held for sale, net for the nine months ended September 30, 2024 decreased by $2.0 million, mostly due to reverse mortgage buyouts in connection with our opportunistic acquisitions and securitization strategy.
Current report
The following table summarizes the impact of our MSR interest rate hedging strategy on Servicing segment results. Refer to MSR Hedging Strategy section of Item 3. Quantitative and Qualitative Disclosures about Market Risks for further detail. Net MSR portfolio exposure gains (losses) comprise the fair value changes of the MSR portfolio attributable to rates and assumption changes, the MSR hedging derivative gains and losses, and other fair value changes of the HECM loans and HMBS-related borrowings used as a hedge for risk management purposes.
Current report
(1)See MSR valuation adjustments, net within the Overview section of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Current report
(2)Excludes MSR valuations adjustments, net reported within the Originations Segment.
Current report
The Net MSR portfolio exposure gains of $10.3 million for the three months ended September 30, 2024 are largely driven by favorable assumption updates to reflect actual market trade pricing levels as our MSR hedge strategy was effective at reducing net fair value changes due to interest rate changes. With a 90-110% targeted hedge coverage ratio, the fair value losses of the MSR portfolio due to the decline in market interest rates in the third quarter of 2024 were largely offset by gains on MSR hedging derivatives and loans held for investment net of HMBS-related borrowings. The favorable change from the prior quarter is driven by favorable assumption updates, higher hedge performance and lower hedge costs despite volatile market conditions.
Current report
The favorable change of Net MSR portfolio exposure gains for the nine months ended September 30, 2024 compared to losses for the nine months ended September 30, 2023 is mainly driven by changes in interest rates, our adoption of a 95-105% hedge coverage ratio in December 2023 (revised to 90-110% in April 2024) and assumption updates that reflect market trade pricing levels in the respective periods.
Current report
Compensation and benefits expense for the three months ended September 30, 2024 increased $1.4 million or 6% compared to the three months ended June 30, 2024 primarily due to an increase in estimated annual cash awards based on our year-to-date financial performance.
Current report
Compared to the nine months ended September 30, 2023, Compensation and benefits expense for the nine months ended September 30, 2024 decreased $5.5 million or 7%, mostly driven by the headcount reduction. The average headcount decreased 8% driven by the integration of reverse servicing and the runoff of our reverse subservicing portfolio. The increase in the estimated annual cash awards in the third quarter of 2024 discussed above was offset by severance expense recorded in the nine months ended September 30, 2023.
Current report
Compared to the nine months ended September 30, 2023, Servicing expense for the nine months ended September 30, 2024 declined $11.5 million. The decline in servicing expenses is primarily attributed to a $7.2 million favorable change in provision for indemnification obligations driven by recoveries and favorable resolutions in the nine months ended September 30, 2024 and new demands in the nine months ended September 30, 2023. In addition, the decline in servicing expense is due to lower claim loss on Ginnie Mae loan repurchases, driven by lower severity, partially offset by a higher insurance loss expense in line with higher quota share on reinsurance premiums assumed.
Current report
Compared to the nine months ended September 30, 2023, Professional services expense for the nine months ended September 30, 2024 declined $7.9 million mostly due to the reimbursements received in the second quarter of 2024 from mortgage loan investors discussed above and a reduction in outsourcing costs in our reverse subservicing business.
Current report
The following table presents details related to interest expense and its drivers.
Current report
Interest expense for the three months ended September 30, 2024 remained mostly flat (decreased 1%), compared to the three months ended June 30, 2024.
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Removed paragraphs (67)
Previous report
•Originations gain on sale of $16.7 million
Previous report
•Cash position of $203.1 million
Previous report
•Total assets of $13.1 billion
Previous report
Business Initiatives
Previous report
•Leveraging the core strengths of our balanced and diversified business through a continued focus on servicing and maintaining agility to address market-cycle opportunities;
Previous report
•A $7.3 million increase in revenue, largely driven by higher volumes in Originations.
Previous report
•A $21.1 million higher loss on MSR valuation adjustments, net primarily due to unfavorable interest rate hedge performance and cost.
Previous report
•A $5.0 million increase in Other expense, net, primarily due to an increase in financing and transaction costs, and flat Operating expenses.
Previous report
Total segment revenue for the three months ended June 30, 2024 increased $7.3 million, or 3% as compared to the three months ended March 31, 2024 due to a $9.2 million increase in Originations revenue offset in part by a $1.9 million decrease in Servicing revenue:
Previous report
•The decrease in Servicing revenue is mostly driven by a $5.8 million decrease in Gain on reverse loans held for investment and HMBS-related borrowings, net due to more favorable market conditions (tighter yield spread) in the first quarter of 2024, and a $2.0 million reduction in Gain on loans held for sale, net mostly driven by reverse mortgage loan buyouts. These decreases were partially offset by a $6.0 million increase in servicing and subservicing fees largely driven by float earnings with seasonally higher average float balances.
Previous report
•The increase in Originations revenue is driven by our forward channels which reported a $7.6 million increase in gains on sale mostly attributed to our Correspondent channel due to an increase in both volume and margin. The increase in volume is primarily due to our MSR replenishment and growth strategy after our recent MSR bulk sales. The increase in margin is the result of our continued focus on pricing management and execution.
Previous report
For the six months ended June 30, 2024, the $44.3 million loss on MSR valuation adjustments, net is comprised of $77.9 million runoff, $138.0 million fair value gain attributed to rate and assumption changes and $104.3 million loss on MSR hedging derivatives. The $73.6 million lower loss in MSR valuation adjustments, net for the six months ended June 30, 2024 as compared to the same period of 2023 is largely driven by favorable changes in market interest rates and assumptions, net of hedging, as further discussed below.
Previous report
Compensation and benefits expense for the three months ended June 30, 2024 increased $1.4 million, or 3% as compared to the three months ended March 31, 2024, mostly due to a $2.2 million increase in incentive compensation expense attributed to an increase in cash-settled share-based awards expense and increase in equity classified share-based awards expense mostly due to new awards and lower forfeitures. These increases were offset in part by a $1.1 million decrease in salaries and benefits due to the reduction of headcount.
Previous report
As compared to the six months ended June 30, 2023, Compensation and benefits expense for the six months ended June 30, 2024 decreased $7.1 million, or 6% largely due to a decrease in salaries and benefits and a decline in incentive compensation. Our total average headcount declined 6%, mostly driven by a 12% decrease in our average U.S. based headcount, reflecting our ongoing goal to improve efficiencies and create an industry leading cost structure. The decline in incentive compensation is attributed to a decrease in the fair value of cash-settled share-based awards following the decline of our common stock price, offset by the impact of new share-based awards.
Previous report
The other operating expenses in the table above (excluding Compensation and benefits, Servicing and originations expense, and Professional services) for the three months ended June 30, 2024 were mostly flat as compared to the three months ended March 31, 2024. As compared to the six months ended June 30, 2023, other operating expenses decreased $4.9 million mostly due to declines in mailing expenses and amortization expense related to reverse servicing intangible assets and discount on servicing advances acquired in the fourth quarter of 2023.
Previous report
We conduct periodic evaluations of positive and negative evidence to determine whether it is more likely than not that the deferred tax asset can be realized in future periods. In these evaluations, we give more significant weight to objective evidence, such as our actual financial condition and historical results of operations, as compared to subjective evidence, such as projections of future taxable income or losses. The U.S. jurisdiction is in a cumulative loss position for the three-year period ended June 30, 2024. We recognize that cumulative losses in recent years is an objective form of negative evidence in assessing the need for a valuation allowance and that such negative evidence is difficult to overcome. Other factors considered in these evaluations are estimates of future taxable income, future reversals of taxable temporary differences, taxable income in prior carryback years, and the impact of tax planning strategies that may be implemented, if warranted. We evaluated all positive and negative evidence and determined that a full valuation allowance at June 30, 2024 remains appropriate. The income tax expense (benefit) is primarily comprised of income taxes in foreign jurisdictions. Also refer to Note 20 - Income Taxes to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023 for further details on deferred tax assets.
Previous report
Key Trends
Previous report
Effective in the fourth quarter of 2023, the Servicing segment includes CR Limited (CRL), our wholly-owned captive reinsurance subsidiary previously included in the Corporate Items and Other segment. Segment results for the six months ended June 30, 2023 have been recast to conform to the current segment presentation. CRL provides re-insurance related to coverage on foreclosed real estate properties owned or serviced by us. CRL assumes a 90% (60% through January 2024) quota share of REO insurance coverage written by a third-party insurer under a blanket policy issued to PHH. The underlying REO policy provides coverage for direct physical loss on commercial and residential properties, subject to certain limitations.
Previous report
The financial performance of our Servicing segment is impacted by the changes in fair value of the MSR portfolio due to changes in market interest rates, among other factors. Our MSR portfolio is carried at fair value, with changes in fair value recorded in earnings, within MSR valuation adjustments, net. The fair value of our MSRs is typically correlated to changes in market interest rates; as interest rates decrease, the value of the MSR portfolio typically decreases as a result of higher anticipated prepayment speeds. Conversely, as interest rates increase, the value of the servicing portfolio typically increases as a result of lower anticipated prepayment speeds. Prepayments do not vary linearly with interest rates resulting in the convexity of the MSR, i.e., the interest rate sensitivity of the MSR changes when interest rates change. Specifically, as interest rates further increase, the lower the fair value of the MSR increases. The sensitivity of MSR fair value to interest rates is typically higher for higher credit quality loans, such as our Agency loans. Our Non-Agency portfolio is significantly seasoned, with an average loan age of approximately 18 years, exhibiting little response to movements in market interest rates.
Previous report
To determine fair value, we engage third-party valuation experts who generally utilize: (a) transactions involving instruments with similar collateral and risk profiles, adjusted as necessary based on specific characteristics of the asset or liability being valued; and/or (b) industry-standard modeling, such as a discounted cash flow model and prepayment model, in arriving at their estimate of fair value. The prices provided by the valuation experts reflect their observations and assumptions related to market activity, generally the bulk market, incorporating available industry survey results and client feedback, and including risk premiums and liquidity adjustments. While interest rates are a key value driver, MSR fair value may change for other market-driven factors, including but not limited to the supply and demand of the market or the required yield or perceived value by investors of such MSRs.
Previous report
Significant Variables
Previous report
The following factors could significantly impact the results of our Servicing segment from period to period.
Previous report
Aggregate UPB and Loan Count. Servicing fees are generally earned as a percentage of UPB and subservicing fees are earned on a per-loan basis or as a percentage of UPB. As a result, the change in aggregate UPB and loan count for which we have servicing rights or subservice will directly impact our revenue contributed by our Servicing segment. Aggregate UPB and loan count decline over time as a result of portfolio run-off or sales and increase to the extent we retain MSRs from new originations or engage in MSR acquisitions.
Previous report
Cost to Service and Operating Efficiency. Our operating results for our Servicing segment are heavily dependent on our ability to scale our operations to cost-effectively and efficiently perform servicing activities in accordance with our servicing agreements.
Previous report
Delinquencies. Delinquencies impact our financial results and operating cash flows for our Servicing segment. Non-performing loans are more expensive to service because the loss mitigation activities that we must undertake to keep borrowers in their homes or to foreclose, if necessary, are costlier than the activities required to service a performing loan. These loss mitigation activities include increased contact with the borrower for collection and the development of forbearance plans or loan modifications by highly skilled associates who command higher compensation as well as the higher compliance costs associated with these, and similar activities.
Previous report
In addition, when borrowers are delinquent, the amount of funds that we are required to advance to the investors increases. We utilize servicing advance financing facilities, which are asset-backed (i.e., match funded liabilities) securitization facilities, to finance a portion of our advances. As a result, increased delinquencies result in increased interest expense.
Previous report
Prepayment Speed. The rate at which portfolio UPB declines can have a significant impact on our Servicing segment. Items reducing UPB include scheduled and unscheduled principal payments (runoff), refinancing, loan modifications involving forgiveness of principal, voluntary property sales and involuntary property sales such as foreclosures. Prepayment speed impacts future servicing fees, runoff and valuation of MSRs, float earnings on float balances and interest expense on advances. Increases in anticipated lifetime prepayment speeds generally cause MSR valuation to decrease because MSRs are valued based on total expected servicing income over the life of a portfolio. The converse is true when expectations for prepayment speeds decrease. Prepayments do not vary linearly with interest rates resulting in the convexity of the MSR, i.e., the interest rate sensitivity of the MSR changes when interest rates change. Specifically, as interest rates further increase, the lower the fair value of the MSR increases.
Previous report
Interest rates. In addition to the impact of interest rate changes on prepayment speeds, the fair value of the MSR and associated hedging activities, float earnings on float balances, and the funding cost of servicing advances and MSR financing facilities are directly impacted by interest rate changes.
Previous report
Our reverse business activities include both the subservicing of reverse mortgage loans on behalf of investors and the servicing of our owned portfolio.
Previous report
The activities and financial performance related to our owned portfolio of reverse mortgage loans that are securitized and classified as held for investment, at fair value, together with the HMBS-related borrowings, at fair value are reflected in the Servicing segment. For reference, the activities and financial performance related to our owned portfolio of reverse mortgage loans prior to securitization are reflected in the Originations segment. Once a reverse mortgage loan is securitized, our activities are generally consistent with other loan servicing as described above, with the following variations.
Previous report
Servicing and subservicing fees (excluding Ancillary income) for the three months ended June 30, 2024 remained flat (increased $0.7 million) as compared to the three months ended March 31, 2024, with a $1.5 million, or 1% increase in servicing fees partially offset by a $0.9 million, or 3% decline in subservicing fees. As the average servicing UPB remained flat, the increase in servicing fees is mostly driven by additional borrower collections on liquidated loans. The decline in subservicing fees is primarily driven by the runoff of the reverse subservicing portfolio, partially offset by the increase in forward subservicing.
Previous report
For the six months ended June 30, 2024 and 2023, we recognized gains of $1.7 million and $13.8 million, respectively, mostly due to gains on reverse mortgage buyouts associated with our acquisitions and securitization strategy. The gain reported in the six months ended June 30, 2023 is mostly attributable to the revaluation of reverse mortgage buyouts opportunistically acquired at a discount and securitized in the second quarter.
Previous report
•Net interest income is primarily driven by the volume of securitized UPB as it is the interest income earned on the securitized loans offset against interest expense incurred on the HMBS-related borrowings, and represents a key component of our compensation for servicing the portfolio, which is generally a percentage of the outstanding UPB.
Previous report
•Other fair value changes are primarily driven by changes in market-based inputs or assumptions. Market interest rates and yield spreads directly impact projected asset life and the tail value of the HECM reverse mortgage loans. As our HECM loan portfolio is predominantly comprised of ARMs, higher interest rates cause the loan balance to accrue and reach the 98% maximum claim amount liquidation event more quickly, shortening the life of the servicing net asset and resulting in a lower fair value. Conversely, lower interest rates generally result in favorable net fair value impacts on our HECM reverse mortgage loans and the related HMBS financing liability. Fair value changes are also impacted by market conditions including spreads.
Previous report
•Note that the fair value changes of the net asset value between securitized HECM loans and HMBS (referred to as our reverse MSR) attributable to interest rate changes are effectively used as a hedge of our forward MSR portfolio. See further description of our hedging strategy and its effectiveness in Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Previous report
Compensation and benefits expense for the three months ended June 30, 2024 remained mostly flat (decreased $0.7 million or 3%) as compared to the three months ended March 31, 2024 primarily as a result of lower headcount.
Previous report
As compared to the six months ended June 30, 2023, Compensation and benefits expense for the six months ended June 30, 2024 decreased $6.3 million or 11%, mostly driven by a $3.8 million decrease in salaries and benefits expense and a $1.6 million decrease in severance expense. Average Servicing headcount decreased 8% overall, with a higher reduction in the U.S., reflecting our ongoing goal to improve efficiencies and create an industry leading cost structure, also driven by the further integration of reverse servicing and runoff of our reverse subservicing portfolio.
Previous report
As compared to the six months ended June 30, 2023, Servicing expense for the six months ended June 30, 2024 declined $7.2 million, primarily attributed to a release of indemnification obligations driven by recoveries and favorable resolutions in the six months ended June 30, 2024, lower claim losses driven by lower severity, and lower expenses on our reverse subservicing portfolio due to a decline in volume.
Previous report
Other operating expenses (total operating expenses less Compensation and benefits and Servicing expense) for the three months ended June 30, 2024 decreased $4.8 million as compared to the three months ended March 31, 2024 mostly due to a $4.3 million decline in Professional services, primarily legal expenses. The decline in legal expenses is due to reimbursements received in the second quarter of 2024 from mortgage loan investors related to prior year legal expenses and payments following resolution of legacy litigation matters, partially offset by higher litigation-related expenses.
Previous report
As compared to the six months ended June 30, 2023, other operating expenses for the six months ended June 30, 2024 decreased by $14.3 million primarily driven by lower headcount and cost saving initiatives, with a $9.4 million decline in Professional services mostly due to a decrease in legal expenses attributed to the reimbursements in the second quarter of 2024 related to legacy litigation matters discussed above as well as cost reduction initiatives in our reverse subservicing business, a $1.4 million reduction in Occupancy, equipment and mailing expense due to lower mailing expense, and a $2.5 million reduction in other expenses. The reduction in other expenses is mostly driven by lower amortization expense related to intangible assets and discount on servicing advances.
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Reworded paragraphs (119)
Previous wording
On June 10, 2024, Ocwen Financial Corporation changed its name to Onity Group Inc. We are a leading non-bank mortgage servicer and originator providing solutions through our primary brands, PHH Mortgage and Liberty Reverse Mortgage. PHH is one of the largest non-bank servicers in the country based on UPB, focused on delivering a variety of servicing and lending programs. PHH is one of the largest correspondent lenders in the U.S. based on origination UPB. Liberty is one of the nation’s largest reverse mortgage lenders and servicer based on origination and securitization UPB, dedicated to education and providing loans that help customers meet their personal and financial needs. We serviced or subserviced 1.4 million loans with a total UPB of $304.5 billion on behalf of more than 4,000 investors and 120 subservicing clients as of June 30, 2024. We service all mortgage loan classes, including conventional, government-insured, non-Agency, small-balance commercial and multi-family loans. Our Originations business is part of our balanced business model to generate gains on loan sales and profitable returns, and to support the replenishment and the growth of our servicing portfolio. Through our retail, correspondent and wholesale channels, we originate and purchase conventional and government-insured forward and reverse mortgage loans that we sell or securitize on a servicing retained basis. In addition, we grow our mortgage servicing volume through MSR flow purchase agreements, Agency Cash Window and co-issue programs, bulk MSR purchase transactions, and subservicing agreements.
Current wording
We are a leading non-bank mortgage servicer and originator providing solutions through our primary brands, PHH Mortgage and Liberty Reverse Mortgage. PHH is one of the largest non-bank servicers in the country based on UPB, focused on delivering a variety of servicing and lending programs, and is also one of the largest correspondent lenders in the U.S. based on origination UPB. Liberty is one of the nation’s largest reverse mortgage lenders and servicer based on origination and securitization UPB, dedicated to education and providing loans that help customers meet their personal and financial needs by drawing upon their home equity. We serviced or subserviced 1.4 million loans with a total UPB of $298.9 billion on behalf of more than 4,000 investors and 120 subservicing clients as of September 30, 2024. We service all mortgage loan classes, including conventional, government-insured, non-Agency, small-balance commercial and multi-family loans. Our Originations business is part of our balanced business model to generate gains on loan sales and profitable returns, and to support the replenishment and the growth of our servicing portfolio. Through our retail, correspondent and wholesale channels, we originate and purchase conventional and government-insured forward and reverse mortgage loans that we sell or securitize on a servicing retained basis. In addition, we grow our mortgage servicing volume through MSR flow purchase agreements, Agency Cash Window and co-issue programs, bulk MSR purchase transactions, and subservicing agreements. On June 10, 2024, Ocwen Financial Corporation changed its name to Onity Group Inc.
Previous wording
The table below summarizes the volume of Originations by channel in the second quarter of 2024 compared with the volume of the preceding quarter, and the six months ended June 30, 2024 compared with the corresponding period of the prior year. The volume of Originations is a key driver of the profitability of our Originations segment, together with margins, and a key driver of the replenishment and growth of our Servicing segment. In the second quarter of 2024, we added $18.8 billion of new volume, mainly $11.6 billion of new subservicing and $7.0 billion of non-bulk new servicing, as further detailed in the below table.
Current wording
The table below summarizes the volume of Originations by channel on a current and comparative basis. The volume of Originations is a key driver of the profitability of our Originations segment, along with margins, and also a key driver of the replenishment and growth of our Servicing segment. In the third quarter of 2024, we added $18.5 billion of new volume, mainly $8.4 billion of new subservicing and $8.5 billion of new Originations production, as further detailed in the below table.
Previous wording
(3)Includes interim subservicing, including the volume of UPB associated with short-term interim subservicing for certain clients as a support to their originate-to-sell business.
Current wording
(4)Includes interim subservicing, including the volume of UPB associated with short-term interim subservicing for certain clients as a support to their originate-to-sell business.
Previous wording
The following table summarizes the average volume of our Servicing segment during the second quarter of 2024 compared with the preceding quarter, and the six months ended June 30, 2024 compared with the corresponding period of the prior year. The average servicing volume is a key driver of the profitability of our Servicing segment. The relative weight of performing and delinquent loans or servicing and subservicing also drive the gross revenue and expenses, and their timing. Our average total servicing and subservicing UPB increased $13 billion or 5% during the second quarter of 2024 as compared to prior quarter, as subservicing UPB increased $15 billion or 30%, as further detailed in the below table.
Current wording
The following table summarizes the average volume of our Servicing segment, a key driver of the profitability of our Servicing segment, on a current and comparative basis. The relative weight of performing and delinquent loans or servicing and subservicing also drive the amount and timing of gross revenue and expenses. Our average total servicing and subservicing UPB remained flat during the third quarter of 2024 compared to prior quarter.
Previous wording
As of June 30, 2024 and March 31, 2024, the total servicing and subservicing UPB amounted to $304.5 billion and $302.3 billion, respectively, a net increase of $2.2 billion or 1%.
Current wording
As of September 30, 2024 and June 30, 2024, the total servicing and subservicing UPB amounted to $298.9 billion and $304.5 billion, respectively, a net decrease of $5.6 billion or 2%.
Previous wording
The following table presents key market interest rates. As further discussed, the 30-year fixed rate mortgage is a key driver of Originations volume, the 10-year Treasury rate is a key benchmark for MSR valuation and hedging activities, and the 1-month SOFR is a key benchmark for the profitability of our Servicing segment (including float earnings and asset-backed financing cost). Quarter over quarter, the average 30-year fixed rate mortgage rate increased 24 basis points, the 10-year Treasury rate increased by 16 basis points, and the average 1-month SOFR remained constant. When comparing the six months ended June 30, 2024 to the six months ended June 30, 2023, the average 30-year fixed rate mortgage rate increased 42 basis points, the 10-year Treasury rate increased by 55 basis points, and the average 1-month SOFR increased by 51 basis points.
Current wording
Quarter over quarter, the average 30-year fixed rate mortgage rate declined 45 basis points, the 10-year Treasury rate declined by 55 basis points, and the average 1-month term SOFR declined by 11 basis points. When comparing the nine months ended September 30, 2024 to the nine months ended September 30, 2023, the average 30-year fixed rate mortgage rate increased 11 basis points, the 10-year Treasury rate declined by 78 basis points, and the average 1-month term SOFR increased by 30 basis points.
Previous wording
Results of operations for the second quarter of 2024
Current wording
Results of operations for the third quarter of 2024
Previous wording
•Net income of $10.5 million, or $1.34 per share basic and $1.33 per share diluted
Current wording
•Net income of $21.4 million, or $2.72 per share basic and $2.65 per share diluted
Previous wording
•Servicing and subservicing fee revenue of $210.8 million
Current wording
•Servicing and subservicing fee revenue of $211.1 million
Previous wording
•$5.4 million MSR valuation gain attributable to rate and assumption changes, net of hedging
Current wording
•$8.7 million MSR valuation gain attributable to rate and assumption changes, net of hedging
Previous wording
•Stockholders’ equity of $446.2 million, or $56.88 book value per common share
Current wording
•Stockholders’ equity of $468.2 million, or $59.50 book value per common share
Previous wording
•MSR investment of $2.3 billion, and $304.5 billion total servicing and subservicing UPB
Current wording
•MSR investment of $2.2 billion, and $298.9 billion total servicing and subservicing UPB
Previous wording
We established the following key operating objectives to return to sustainable profitability and create long-term value for shareholders. As our near-term priority remains to return to sustainable profitability, we continue to execute our strategy around these objectives:
Current wording
We established the following strategy to return to sustainable profitability and create long-term value for shareholders:
Previous wording
•Driving prudent growth adapted for the environment, including emphasis on subservicing to drive capital-light servicing portfolio UPB growth and expansion of higher margin originations products and clients to drive accretive MSR investments;
Current wording
•Prudent capital-light growth: Emphasize on capital-light subservicing to drive servicing portfolio UPB growth and emphasize higher margin origination channels and products to drive accretive MSR investments;
Previous wording
•Reducing cost structure across the organization to achieve industry cost leadership by maintaining continuous cost improvement discipline and optimizing technology, global operations, and scale;
Current wording
•Industry-leading cost structure: Optimize cost structure across the organization to achieve industry cost leadership through continuous cost and process improvement, optimizing technology, global operations, and scale;
Previous wording
•Delivering industry top-tier servicing operational performance and driving increased borrower and client satisfaction;
Current wording
•Top-tier operating performance and capabilities: Delivering industry top-tier servicing operational performance and driving increased borrower and client satisfaction;
Previous wording
•Optimizing liquidity, diversifying capital sources, including our multi-investor partnership model to fund new MSR originations which enables capital-light servicing portfolio growth and interest rate risk mitigation, and allocating capital to deliver value for shareholders, including deleveraging through opportunistic repurchases of our senior secured notes.
Current wording
•Dynamic asset management: Optimize investment returns and liquidity through opportunistic asset purchases and sales, leveraging third party capital sources, including our multi-investor partnership model to fund new MSR origination to deliver value for shareholders, including deleveraging.
Previous wording
Our growth strategy includes acquiring assets and/or operations of complementary businesses, by means of acquisition, merger or other transaction forms. Our strategy may also include pursuing large transactions, including bulk purchases or sales of MSRs. We have engaged in such transactions in the past, and we continue to explore opportunities that may be accretive to our business and stockholders’ value.
Current wording
Our growth and asset management strategy includes purchasing assets and/or operations of complementary businesses, by means of acquisition, merger or other transaction forms. Our strategy may also include pursuing large transactions, including bulk purchases or sales of MSRs. We have engaged in such transactions in the past, and we continue to explore opportunities that may be accretive to our business and stockholders’ value.
Previous wording
The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our unaudited consolidated financial statements and the related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations appearing in our Annual Report filed on Form 10-K for the fiscal year ended December 31, 2023.
Current wording
The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our unaudited consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations appearing in our Annual Report filed on Form 10-K for the fiscal year ended December 31, 2023. In our discussion of results of operations, we compare our current quarterly results to the immediately preceding quarter, and current year-to-date results to the corresponding year-to-date results of the preceding year.
Previous wording
Onity reported $10.5 million net income in the second quarter of 2024, a decrease of $19.6 million as compared to $30.1 million net income in the first quarter of 2024, mostly driven by the following:
Current wording
Onity reported $21.4 million net income in the third quarter of 2024, an increase of $10.9 million compared to the second quarter of 2024, mostly driven by the following:
Previous wording
On December 31, 2023, we derecognized from our balance sheet $421.7 million non-Agency MSRs and Pledged MSR liability associated with Rithm servicing agreements with a UPB of $33.4 billion for which MSR sale accounting criteria was met. As PHH continues to subservice the portfolio, our statement of operations in 2024 reflects subservicing fee revenue as opposed to the gross presentation of servicing fee revenue and offsetting servicing fee remittances within Pledged MSR liability expense, a component of Other income (expense), net, prior to December 31, 2023. These required presentation changes do not affect the amount of net fee retained by Onity in connection with the Rithm servicing agreements. For comparison purposes, the statement of operations for the six months ended June 30, 2023 reflects $65.0 million servicing fee collected on behalf of and remitted to Rithm and reported both as Revenue (Servicing and subservicing fees) and as Other income (expense), net (Pledged MSR liability expense) associated with the MSR that achieved sale accounting treatment on December 31, 2023, with no impact on Net income (loss).
Current wording
When comparing to the nine months ended September 30, 2024, the statement of operations for the nine months ended September 30, 2023 reflects $95.3 million servicing fees collected on behalf of and remitted to Rithm and reported gross, both as Revenue (Servicing and subservicing fees) and as Other income (expense), net (Pledged MSR liability expense) associated with the MSR that achieved sale accounting treatment on December 31, 2023, with no impact on Net income (loss). On December 31, 2023, we derecognized from our balance sheet $421.7 million non-Agency MSRs and Pledged MSR liability associated with Rithm servicing agreements with a UPB of $33.4 billion for which MSR sale accounting criteria was met. As PHH continues to subservice the portfolio, our statement of operations in 2024 reflects subservicing fee revenue as opposed to the gross presentation of servicing fee revenue and offsetting servicing fee remittances within Pledged MSR liability expense, a component of Other income (expense), net, prior to December 31, 2023. These required presentation changes do not affect the amount of net fee retained by Onity in connection with the Rithm servicing agreements.
Previous wording
The below table presents total revenue by segment:
Current wording
The below table presents total revenue by type and segment:
Previous wording
As compared to the six months ended June 30, 2023, total segment revenue for the six months ended June 30, 2024 was $48.4 million or 9% lower, due to a $63.6 million decline in Servicing revenue offset by a $15.2 million increase in Originations revenue.
Current wording
Compared to the nine months ended September 30, 2023, total segment revenue for the nine months ended September 30, 2024 was $38.2 million or 5% lower, due to a $62.0 million decline in Servicing revenue offset by a $23.7 million increase in Originations revenue.
Previous wording
•The decline in Servicing revenue is mostly due to a $54.7 million decrease in servicing and subservicing fees largely due to the effects of our derecognition of MSRs previously sold to Rithm for which the sale accounting criteria were met effective December 31, 2023, as discussed above ($65.0 million fees collected and remitted to Rithm recognized in the six months ended June 30, 2023). In addition, Gain on loans held for sale, net declined $12.2 million primarily due to the revaluation gain of reverse mortgage buyouts opportunistically acquired at a discount and securitized, recognized in the six months ended June 30, 2023.
Current wording
•The decline in Servicing revenue is mostly due to an $81.4 million decrease in servicing and subservicing fees largely due to the effects of our accounting derecognition of MSRs previously sold to Rithm for which the sale accounting criteria were met effective December 31, 2023, as discussed above ($95.3 million fees collected and remitted to Rithm recognized in the nine months ended September 30, 2023). Partially offsetting this decrease, Gain on reverse loans held for investment and HMBS-related borrowings, net increased $19.4 million due to a decrease in market rates vs. an increase in the prior year period and yield spread tightening vs. widening in the prior year period.
Previous wording
•The increase in Originations revenue is primarily driven by an $11.4 million increase in gain on sale of forward loans due to an increase in volume for both our Correspondent and Consumer Direct channels, with similar factors discussed above.
Current wording
•The increase in Originations revenue is primarily driven by an $18.9 million increase in Gain on loans held for sale, net (forward loans) due to an increase in volume and margin for both our Correspondent and Consumer Direct channel. The increase in Correspondent volume is mostly attributed to our owned MSR replenishment strategy after the opportunistic MSR bulk sales in 2024. The increase in Consumer Direct volume is driven by the recent decline in interest rates generating additional recapture opportunities.
Previous wording
(1)Excludes fair value changes of reverse mortgage loans held-for-investment and HMBS related borrowing due to rates and assumptions that are part of the MSR hedging strategy. Refer to the MSR Hedging Strategy section of Item 3. Quantitative and Qualitative Disclosures about Market Risks for further detail.
Current wording
(1)Excludes fair value changes of reverse mortgage loans held-for-investment and HMBS related borrowing due to rates and assumptions that are part of the MSR hedging strategy. Refer to MSR Hedging Strategy section of Item 3. Quantitative and Qualitative Disclosures about Market Risks for further detail and the discussion below within Servicing.
Previous wording
The $32.7 million loss on MSR valuation adjustments, net for the three months ended June 30, 2024 is comprised of $38.0 million runoff, $56.0 million fair value gain attributed to rate and assumption changes and $50.6 million loss on MSR hedging derivatives. As we maintained a high hedge coverage ratio in both quarters, the $21.1 million higher loss in MSR valuation adjustments, net in the three months ended June 30, 2024 as compared to the three months ended March 31, 2024 is largely driven by unfavorable hedge performance and costs in the second quarter of 2024 and certain favorable assumption updates reported in the first quarter of 2024 to reflect actual market trades.
Current wording
The $31.5 million loss on MSR valuation adjustments, net for the three months ended September 30, 2024 is comprised of $40.2 million runoff, $45.6 million fair value loss attributed to rate and assumption changes and $54.3 million gain on MSR hedging derivatives. As we maintained a high hedge coverage ratio in both quarters, the $1.2 million lower loss in MSR valuation adjustments, net in the three months ended September 30, 2024 compared to the three months ended June 30, 2024 is largely driven by lower hedge costs in the third quarter of 2024 and certain favorable assumption updates to reflect actual market trade pricing levels.
Previous wording
•MSRs are subject to runoff, a fair value decline due to the realization of expected cash flows and yield based on projected borrower behavior, including scheduled amortization of the loan UPB together with projected voluntary prepayments. The favorable $1.8 million lower runoff quarter-over-quarter is mostly due to portfolio reduction from Agency MSR sales in the second quarter of 2024.
Current wording
•MSRs are subject to runoff, a fair value decline due to the realization of expected cash flows and yield based on projected borrower behavior, including scheduled amortization of the loan UPB together with projected voluntary and involuntary prepayments. The unfavorable $2.2 million higher runoff quarter-over-quarter is mostly due to the impact of lower market rates on expected cash flows.
Previous wording
•The $56.0 million fair value gain due to rate and assumption changes is attributed to a rise of interest rates in the quarter and favorable assumption updates to reflect market participant perspectives on MSRs with actual trade pricing levels. The 10-year Treasury rate increased 16 basis points in the three months ended June 30, 2024. The change from an $82.0 million fair value gain in the three months ended March 31, 2024 to a $56.0 million fair value gain in the three months ended June 30, 2024 is mostly driven by changes in market interest rates as the 10-year Treasury rate increased 32 basis points in the three months ended March 31, 2024.
Current wording
•The $45.6 million fair value loss due to rate and assumption changes is attributed to a decline in interest rates in the quarter, partially offset by favorable assumption updates to reflect market participant perspectives on MSRs and actual market trade pricing levels. The change from a $56.0 million fair value gain in the three months ended June 30, 2024 to a $45.6 million fair value loss in the three months ended September 30, 2024 is mostly driven by changes in market interest rates as the 10-year Treasury rate declined 55 basis points in the three months ended September 30, 2024 and increased 16 basis points in the three months ended June 30, 2024.
Previous wording
•MSR hedging derivative fair value gains or losses are designed to partially offset the expected fair value losses or gains, respectively, of the net MSR, MSR pledged liabilities and ESS exposure, commensurate with our target hedge coverage ratio. The $50.6 million derivative loss recognized in the three months ended June 30, 2024 is primarily driven by the rate increase discussed above. The $3.1 million lower loss from the $53.7 million derivative loss in the three months ended March 31, 2024 is mainly due to a lower increase in interest rates. Also refer to Item 3. Quantitative and Qualitative Disclosures about Market Risk for further detail on our hedging strategy and its effectiveness.
Current wording
•MSR hedging derivative fair value gains or losses are designed to partially offset the expected fair value losses or gains, respectively, of the net MSR, MSR pledged liabilities and ESS exposure, commensurate with our target hedge coverage ratio. The $54.3 million derivative gain recognized in the three months ended September 30, 2024 is primarily driven by the rate decrease discussed above. Also refer to Item 3. Quantitative and Qualitative Disclosures about Market Risk for further detail on our hedging strategy and its effectiveness.
Previous wording
•The $133.2 million increase in fair value gains is mostly driven by changes in market interest rates, as the 10-year Treasury rate increased 48 basis points during the six months ended June 30, 2024 as compared to a decrease of 7 basis points during the same period of 2023. In addition, we recognized certain favorable assumption updates in the six months ended June 30, 2024 compared to unfavorable updates during the same period of 2023 to reflect market participant perspectives and actual trade levels.
Current wording
•Fair value changes attributed to rates and assumptions remained flat. The market interest rate impact as the 10-year Treasury rate declined 7 basis points during the nine months ended September 30, 2024 compared to an increase of 71 basis points during the same period of 2023 was offset by certain favorable assumption updates in the nine months ended September 30, 2024 to reflect actual market trade pricing levels.
Previous wording
•The $53.2 million higher loss from derivatives is mainly due to the increase in market interest rates noted above, hedge performance and hedge costs. During the first half of 2023, we gradually increased our hedge coverage ratio from a minimum of 30% to 60% while we maintained a near 100% hedge coverage ratio during the first half of 2024.
Current wording
•The $69.7 million lower loss from derivatives is mainly due to the market interest rate changes noted above, and the impact of our hedge coverage ratio. During the first nine months of 2023, we gradually increased our minimum hedge coverage ratio from 25% to 60%, with the minimum increasing to 95% in December 2023, adjusted to 90% in April 2024.
Previous wording
Servicing and origination expense for the three months ended June 30, 2024 decreased $1.1 million as compared to the three months ended March 31, 2024, mostly driven by reverse servicing expenses recognized in the first quarter of 2024.
Current wording
Servicing and origination expense for the three months ended September 30, 2024 decreased $2.9 million compared to the three months ended June 30, 2024, mostly driven by the reversal of a liability for representation and warranty indemnification obligations due to a favorable settlement in the third quarter of 2024 .
Previous wording
As compared to the six months ended June 30, 2023, Servicing and origination expenses for the six months ended June 30, 2024 decreased $4.3 million mostly due to a $7.2 million decrease in Servicing, partially offset by $2.6 million incremental expenses in Originations. The decline in Servicing expense is primarily attributed to a release of indemnification obligations driven by recoveries and favorable resolutions, lower claim losses driven by lower severity, and lower expenses on our reverse subservicing portfolio due to a decline in volume. The increase in Originations expense is mostly driven by higher production volume and a provision release for representation and warranty indemnification recorded in the first half of 2023 due to favorable resolution of demands.
Current wording
Compared to the nine months ended September 30, 2023, Servicing and origination expenses for the nine months ended September 30, 2024 decreased $8.7 million mostly due to an $11.5 million decrease in Servicing, partially offset by $2.4 million incremental expenses in Originations. The decline in Servicing expense is primarily attributed to the release of indemnification obligations driven by recoveries and favorable resolutions in the nine months ended September 30, 2024, partially offset by higher provision expense on reverse servicing portfolio related advances and higher loss adjustment expense in line with higher reinsurance premiums assumed. The increase in Originations expense is mostly driven by higher production volume and a provision release for representation and warranty indemnification obligations recorded in the first nine months of 2023 due to favorable resolution of demands.
Previous wording
As compared to the six months ended June 30, 2023, Professional services expense for the six months ended June 30, 2024 increased $26.4 million primarily due to the reversal of our accrual related to the CFPB matter resolved in our favor in the second quarter of 2023, partially offset by the reimbursements received in the second quarter of 2024 related to legacy litigation matters discussed above.
Current wording
Compared to the nine months ended September 30, 2023, Professional services expense for the nine months ended September 30, 2024 increased $30.2 million primarily due to the reversal of our loss contingency accrual related to the CFPB matter resolved in our favor in the second quarter of 2023 and an increase in other litigation-related expenses recognized in the nine months ended September 30, 2024, largely offset by the reimbursements received in the second quarter of 2024 related to legacy litigation matters.
Previous wording
Net interest expense for the three months ended June 30, 2024 remained mostly flat (increased $0.6 million) as compared to the three months ended March 31, 2024, with certain offsetting increases and decreases. As compared to the six months ended June 30, 2023, Net interest expense for the six months ended June 30, 2024 increased $4.3 million, mostly driven by the additional financing cost incurred in connection with our acquisition and private label securitization of reverse mortgage buyouts. The increase in short-term market interest rates in the first six months of 2024, as compared to the first six months of 2023 was mostly offset by the decline in our average debt balances for servicing advances due to our collection efforts and lower Corporate debt interest expense.
Current wording
Net interest expense for the three months ended September 30, 2024 remained mostly flat compared to the three months ended June 30, 2024. Compared to the nine months ended September 30, 2023, Net interest expense for the nine months ended September 30, 2024 increased $5.5 million, mostly driven by the additional financing cost incurred in connection with our acquisition and securitization of reverse mortgage buyouts and the second lien PLS MSR financing facility entered into in March 2024. The increase in average short-term market interest rates in the first nine months of 2024 compared to the first nine months of 2023, on our variable rate borrowings was mostly offset by the decline in our average debt balances for servicing advances due to our collection efforts and lower Corporate debt interest expense attributed to our partial debt repayment.
Previous wording
During the three months ended March 31, 2024, we repurchased a total of $47.4 million of the PMC Senior Secured Notes in the open market for a price of $45.5 million and recognized a $1.4 million gain on debt extinguishment, net of the respective write-off of unamortized discount and debt issuance costs.
Current wording
During March 2024 and September 2024, we repurchased a total of $47.4 million and $23.5 million, respectively, of the PMC Senior Secured Notes for a price of $45.5 million and $23.0 million, and recognized a gain of $1.4 million and $0.3 million on debt extinguishment, net of the associated write-off of unamortized discount and debt issuance costs. During September 2023, we repurchased a total of $13.9 million of the PMC Senior Secured Notes for a price of $12.5 million and recognized a $1.2 million gain on debt extinguishment, net of the associated write-off of unamortized discount and debt issuance costs.
Previous wording
Our effective tax rate is generally lower than the 21% federal statutory income tax rate primarily due to the full valuation allowance recorded on our net U.S. federal and state deferred tax assets.
Current wording
Our annual effective tax rate is generally lower than the 21% federal statutory income tax rate primarily due to the full valuation allowance recorded on our net U.S. federal and state deferred tax assets. We evaluated all positive and negative evidence to determine whether it is more likely than not that the deferred tax asset can be realized in future periods and determined that a full valuation allowance at September 30, 2024 remains appropriate.
Previous wording
Income tax expense for the three months ended June 30, 2024 increased by $1.3 million as compared to the three months ended March 31, 2024. As compared to the six months ended June 30, 2023, Income tax expense for the six months ended June 30, 2024 increased $1.9 million. Our income tax expense is primarily driven by the jurisdictional mix of our earnings. The increase in the effective tax rate for the three months ended June 30, 2024 as compared to the three months ended March 31, 2024 was primarily driven by the increase in year-to-date earnings as of June 30, 2024 relative to full-year projected pre-tax earnings. The increase in the effective tax rate for the six months ended June 30, 2024 as compared to the same period of 2023 is primarily due to recognizing income tax expense in the U.S. driven by the increase in pre-tax earnings.
Current wording
Our income tax expense is primarily driven by the jurisdictional mix of our earnings. The increase in the effective tax rate for the nine months ended September 30, 2024 compared to the same period of 2023 is primarily due to recognizing income tax expense in the U.S. driven by the increase in pre-tax earnings.
Previous wording
Total assets increased $570.9 million, or 5%, between December 31, 2023 and June 30, 2024 due to a $429.7 million increase in our Loans held for sale portfolio as originations and purchases exceeded sales, including our acquisition of reverse mortgage buyouts, a $252.3 million fair value increase in reverse Loans held for investment mostly driven by capitalization of interest, and a $55.4 million increase in our MSR portfolio due to fair value gains attributed to rates and assumptions, partially offset by MSR sales and derecognition of MSRs previously sold to MAV. These increases were offset in part by a $128.2 million decline in servicing advances that was driven by seasonal reduction of balances.
Current wording
Total assets increased $713.0 million, or 6%, between December 31, 2023 and September 30, 2024 with a $520.4 million increase in our Loans held for sale portfolio driven by the growth our Originations pipeline and our acquisition of reverse mortgage buyouts and a $356.0 million fair value increase in reverse Loans held for investment mostly driven by capitalization of interest. These increases were offset in part by a $156.1 million decline in servicing advances that was largely driven by seasonal reduction of balances and a $48.7 million decrease in our MSR portfolio due to MSR sales and derecognition of MSRs previously sold to MAV, offset in part by fair value gains attributed to rates and assumptions and new additions in excess of runoff.
Showing the first 40 of 119 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
The following table presents key market interest rates which are important drivers of our businesses. As further discussed, the 30-year fixed rate mortgage is a key driver of Originations volume, the 10-year Treasury rate is a key benchmark for MSR valuation and hedging activities, and the 1-month SOFR is a key benchmark for the profitability of our Servicing segment (including float earnings and asset-backed financing cost).
Current report — wording carried from elsewhere
We originate and purchase reverse mortgage loans through our retail, wholesale and correspondent lending channels, under the guidelines of the HECM reverse mortgage insurance program of the FHA. Loans originated under this program are generally insured by the FHA, which provides protection against risk of borrower default. As the securitizations of reverse mortgage loans do not achieve sale accounting treatment and the loans remain reported as Loans held for investment, at fair value together with the securitization HMBS-related borrowings, revenue mostly include the fair value changes of the loan from lock date to securitization date that are reported in Gain on reverse loans held for investment and HMBS-related borrowings, net.
Current report — wording carried from elsewhere
Corporate Items and Other includes expenses of corporate support services and activities that are not directly related to other reportable segments.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Canopy. Offsetting cash outflows include $62.1 million to purchase MSRs and $12.1 million to purchase real estate primarily in connection with our reverse mortgage buyout transaction.