ONITY GROUP INC.
For the period ended Mar 31, 2025. Filed Apr 30, 2025.
View on SEC.govAbout this filing
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.
Mar 31, 2025 · Filed Apr 30, 2025
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 2024-09-30; filed 2024-11-07.
0001628280-24-046004
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-04-30.
0001628280-25-021113
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 312 previous paragraphs and 300 current paragraphs.
127 unchanged; 107 reworded; 63 added; 73 removed; 5 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 (63)
Current report
(2)Represents the UPB of loans for which the MSR is purchased.
Current report
In the three months ended March 31, 2025, the average 30-year fixed rate mortgage rate increased 24 basis points (vs. the three months ended December 31, 2024), reducing borrower affordability and further contracting the origination market. When comparing the three months ended March 31, 2025 to the three months ended March 31, 2024, the average 30-year fixed rate mortgage rate was mostly flat (up 9 basis points).
Current report
In 2024, the Federal Reserve reduced its federal funds target rate a total of 1 percentage point between September and December 2024 (50-basis point reduction in September and two consecutive 25-basis point reductions in November and December). In the first quarter of 2025, the Federal Reserve kept the federal funds rate unchanged. The 1-month SOFR largely followed the Federal Reserve actions, as illustrated in the below graph, resulting in a 27-basis point decline in its quarterly average.
Current report
Despite the Federal Reserve actions, the 10-year Treasury rate remained mostly flat year over year in 2024 (up 3 basis points) but increased 77 basis points in the fourth quarter of 2024, and declined 35 basis points in the first quarter of 2025, driving MSR fair values down at March 31, 2025.
Current report
•Originations gain on sale of $15.6 million
Current report
•Cash position of $178.0 million
Current report
•Total assets of $16.3 billion
Current report
Onity reported $22.1 million net income in the first quarter of 2025, an improvement of $50.2 million compared to the $28.1 million loss in the fourth quarter of 2024, largely driven by expenses recognized in the fourth quarter of 2024 in connection with our corporate debt refinancing and strategic transactions, with the following considerations:
Current report
•$25.0 million increase in revenue, largely attributed to a $23.6 million increase in gains on our reverse mortgage portfolio of loans held for investment and HMBS-related borrowings, net driven by a decline in market rates.
Current report
•$18.5 million higher loss on MSR valuation adjustments, net largely driven by the impact of interest rates, net of hedging derivatives. While separately presented in our consolidated financial statements, the change in fair value of our reverse mortgage portfolio attributable to interest rates discussed above is included as a partial offset to the change in fair value of our MSR portfolio attributable to interest rates, for hedging and risk management purposes.
Current report
•$4.3 million increase in Operating expenses, primarily driven by an increase in our accrual for probable losses in connection with the settlement of a legacy litigation matter, partly offset by a decrease in Compensation and benefits as a result of higher annual bonus and awards expense recognized in the fourth quarter of 2024.
Current report
•$40.6 million decline in Other expense, net mostly driven by expenses recognized in the fourth quarter of 2024 in connection with our corporate debt refinancing and strategic transactions, and a $4.6 million decline in net interest expense in the first quarter of 2025. In the fourth quarter of 2024, we recognized a $51.2 million loss on debt extinguishment and $16.2 million earnings (including gain on sale) on our 15% equity interest in MAV Canopy, sold in November 2024.
Current report
•$7.4 million increase in Income tax benefit, largely due to the favorable resolution of a prior year uncertain tax position in the first quarter of 2025.
Current report
Revenue
Current report
Total revenue for the three months ended March 31, 2025 increased $25.0 million, or 11% compared to the three months ended December 31, 2024 due to a $26.8 million, or 14% increase in Servicing revenue, partially offset by a $1.8 million, or 6% decrease in Originations revenue.
Current report
•The increase in Servicing revenue is primarily due to a $23.6 million increase in Gain on reverse loans held for investment and HMBS-related borrowings, net largely driven by a favorable decline in market rates. In addition, Gain on loans held for sale, net improved $5.8 million (lower loss within Servicing) mostly attributed to the impact of market interest rates on reverse mortgage loan buyouts. Servicing and subservicing fees decreased by $2.7 million due to lower float earnings partly offset by higher servicing fees with a 7% higher average servicing UPB.
Current report
•The 6% decrease in Originations revenue is primarily attributed to lower fees (other revenue) due to lower funded volume as Originations gains (forward and reverse loans) remained mostly flat.
Current report
Compared to the three months ended March 31, 2024, total revenue for the three months ended March 31, 2025 was $10.7 million, or 4% higher due to a $2.1 million, or 1% increase in Servicing revenue and an $8.7 million, or 43% increase in Originations revenue.
Current report
•The increase in Servicing revenue is mostly due to an $8.3 million increase in Gain on reverse loans held for investment and HMBS-related borrowings, net mostly driven by a favorable decrease in market interest rates vs. an increase in the prior year period, partially offset by changes in yield spreads.
Current report
•The increase in Originations revenue is primarily driven by an increase in Gain on loans held for sale, net in our Consumer Direct channel, attributed to our increased recapture operational capability. In addition, fee revenue increased due to higher production volume in both our Consumer Direct and Correspondent channels.
Current report
The $27.3 million higher loss in MSR valuation adjustments, net in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 is primarily driven by the impact of interest rate changes, net of hedge activity and favorable assumption updates in the three months ended March 31, 2024 that did not recur in the three months ended March 31, 2025.
Current report
•The unfavorable $1.2 million increase in runoff is mostly due to MSR portfolio growth.
Current report
•The change from a $53.7 million loss from derivatives in the three months ended March 31, 2024 to a $20.8 million gain in the three months ended March 31, 2025 is mainly due to the market interest rate changes noted above.
Current report
Compensation and benefits expense for the three months ended March 31, 2025 decreased $6.9 million, or 11% compared to the three months ended December 31, 2024, largely due to a $5.2 million decrease in incentive compensation with a higher annual bonus and awards expense recognized in the fourth quarter of 2024. In addition, salaries and benefits expense decreased $1.1 million.
Current report
Compared to the three months ended March 31, 2024, Compensation and benefits expense for the three months ended March 31, 2025 increased $3.8 million, or 7% largely due to a $4.2 million increase in incentive compensation primarily driven by an increase in the fair value of cash-settled share-based awards during the three months ended March 31, 2025 (increase in our stock price vs. a decrease in the comparative period). Other offsetting factors include a $1.5 million increase in commissions on higher Originations production volume, a $1.0 million decrease in salaries and benefits and a $1.0 million decrease in severance expense. Our total average headcount declined 4%, mostly due to a decrease in Servicing headcount attributed to efficiencies and runoff of our reverse subservicing portfolio, partially offset by an increase in Originations headcount mostly related to our Consumer Direct channel.
Current report
Compared to the three months ended March 31, 2024, Servicing and origination expenses for the three months ended March 31, 2025 decreased $2.0 million largely due to a decrease in Servicing with a lower provision expense for Ginnie Mae claim receivables, among other offsetting factors.
Current report
Professional services expense for the three months ended March 31, 2025 increased $10.1 million compared to the three months ended December 31, 2024 primarily due to an increase in our accrual for probable losses at March 31, 2025 in connection with the settlement of a legacy matter, and reimbursements received in the fourth quarter of 2024 from a mortgage insurer related to prior year legal expenses.
Current report
Compared to the three months ended March 31, 2024, Professional services expense for the three months ended March 31, 2025 increased $10.6 million, driven by the same factors discussed above.
Current report
Refer to the segments for discussion and analysis of Interest income and Interest expense. Refer to the Servicing segment for discussion and analysis of Pledged MSR liability expense and earnings of our former equity method investee, MAV Canopy sold in the fourth quarter of 2024.
Current report
We believe it is reasonably possible that by December 31, 2025, we could release some or all of our valuation allowance that currently offsets our net U.S. deferred tax asset. Any release of our valuation allowance requires significant judgment and is contingent on continued analysis of the positive and negative evidence and actual and expected future profitability. As such, the exact timing and amount of any valuation allowance release is subject to change. Refer to Note 18 - Income Taxes for additional information.
Current report
Total liabilities decreased by $193.3 million, or 1%, compared to December 31, 2024, due largely to the factors described above. Our HMBS-related borrowings decreased by $284.5 million with repayments exceeding new securitizations after the $2.9 billion acquisition of reverse mortgage loans and assumption of HMBS-related borrowings in November 2024. Advance match funded liabilities decreased $39.6 million consistent with the decline in servicing advances (mainly T&I). The $80.6 million decline in Other liabilities is mainly driven by derivative fair value balances that follow interest rate market conditions, the payment of annual bonuses and the reduction of the servicing float balance due to Rithm. Partially offsetting these decreases, MSR financing facilities increased $178.1 million with an increase in our MSR portfolio. Our borrowings under Mortgage loan financing facilities increased $49.2 million due to the higher loans held for sale balance.
Current report
Total equity increased $17.2 million during the three months ended March 31, 2025 mainly due to $22.1 million net income for the period partially offset by the exercise of common stock warrants and the quarterly dividend on preferred stock.
Current report
In addition, the Servicing segment includes our wholly-owned captive reinsurance business (referred to as CRL), which provides re-insurance related to direct physical loss coverage on foreclosed real estate properties owned or serviced by us. CRL assumes a 90% (60% through January 2024) quota share of insurance coverage written by a third-party insurer issued to PHH.
Current report
(6)Related to our owned MSR forward servicing portfolio.
Current report
Servicing and subservicing fees (excluding Ancillary income) for the three months ended March 31, 2025 increased $5.3 million or 4% compared to the three months ended December 31, 2024, driven by a 7% increase in average servicing UPB (with additional $7.4 million servicing fee collection), partially offset by a 4% reduction in subservicing volume (with a $2.0 million decline in subservicing fee). The increase in average servicing UPB is due to recent bulk MSR acquisitions and robust originations as part of our replenishment and growth initiative. The decline in subservicing fee is driven by the Rithm portfolio, and reverse portfolio due to runoff.
Current report
Compared to the three months ended March 31, 2024, our servicing and subservicing fees (excluding Ancillary income) for the three months ended March 31, 2025 remained mostly flat, with a $3.4 million decrease in subservicing fees partially offset by a $2.9 million increase in servicing fees (due to the same factors described above). The decrease in subservicing fees is largely due to the acquisition of the reverse subservicing portfolio from Waterfall in the fourth quarter of 2024 and the deboarding of $5.7 billion UPB Rithm loans in the first quarter of 2025.
Current report
Ancillary income for the three months ended March 31, 2025 declined by $8.0 million, or 14% compared to the three months ended December 31, 2024 primarily due to a $7.7 million decline in float earnings attributable to seasonally lower average float balances and lower average interest rates (as a benchmark, the average 1-month term SOFR declined by 27 basis points).
Current report
Compared to the three months ended March 31, 2024, ancillary income for the three months ended March 31, 2025 remained mostly flat (declined by 1%), with some offsetting factors, including a $2.9 million decline in reverse subservicing ancillary fees driven by the acquisition of previously-subserviced client portfolio (from Waterfall) in the fourth quarter of 2024 and portfolio runoff, and a $1.7 million increase in late charges. Float earnings remained flat with an offsetting impact of higher float balances due to increased servicing volume overall and lower average interest rates (as a benchmark, the average 1-month term SOFR declined by 101 basis points).
Current report
We recognized a $3.8 million loss on loans held for sale, net for the three months ended March 31, 2025, compared to a $9.6 million loss recognized in the three months ended December 31, 2024, mostly attributed to losses on reverse mortgage buyouts. The $5.8 million favorable variance quarter-over-quarter is mostly driven by market interest rate changes in the respective periods (unrealized losses in the fourth quarter of 2024 vs. unrealized gains in the first quarter of 2025), partly offset by an increase in losses on new repurchases (largely attributed to the reverse portfolio acquired from Waterfall in the fourth quarter of 2024).
Current report
We recognized a $3.8 million loss on loans held for sale, net for the three months ended March 31, 2025, compared to a $1.8 million gain recognized in the three months ended March 31, 2024. The $5.7 million unfavorable variance year-over-year is mostly driven by the factors discussed above for the first quarter 2025 and gains recognized in the first quarter 2024 on previously acquired reverse mortgage buyouts.
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Removed paragraphs (73)
Previous 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.
Previous report
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 report
•Originations gain on sale of $16.4 million
Previous report
•Cash position of $201.6 million
Previous report
•Total assets of $13.2 billion
Previous report
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 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.
Previous 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.
Previous 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.
Previous report
•A $3.3 million increase in Income tax expense, mostly due to the increase in pre-tax earnings.
Previous report
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 report
Total Revenue
Previous 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.
Previous report
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 report
•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 report
•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 report
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 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.
Previous report
•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 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.
Previous 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.
Previous report
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 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.
Previous report
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 report
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 report
Refer to Servicing segment for discussion of Pledged MSR liability expense (primarily impacted by the accounting presentation change of the derecognized Rithm MSR on December 31, 2023) and Earnings of equity method investee (predominantly impacted by the fair value changes of MAV’s MSR portfolio).
Previous report
Total liabilities increased by $646.6 million, or 5%, compared to December 31, 2023, due largely to factors described above. Our borrowings under Mortgage loan financing facilities increased $645.3 million due to the higher loans held for sale balance at September 30, 2024, including the issuance of OLIT Notes in 2024 in connection with the securitization of reverse mortgage loan buyouts. Our HMBS-related borrowings increased by $335.1 million mostly due to fair value changes attributable to interest. Partially offsetting these increases, Advance match funded liabilities decreased $122.5 million consistent with the decline in servicing advances driven by our collection efforts, and Senior notes, net decreased $60.7 million mostly due to our repurchases of PMC Senior Secured Notes during the first and third quarters of 2024. MSR financing facilities declined $111.4 million with a decrease in our MSR portfolio and lower utilization of available borrowing capacity at September 30, 2024. Other financing liabilities declined by $73.8 million primarily due to the derecognition of MSRs previously sold to MAV.
Previous report
Total equity increased $66.4 million during the nine months ended September 30, 2024, mainly due to $62.0 million net income for the period and $2.9 million compensation related to equity-classified awards.
Previous report
Also refer to Key Trends and Outlook below and Note 22 – Subsequent Events for discussion of recent asset acquisitions and financing transactions.
Previous report
We earn contractual monthly servicing fees pursuant to servicing agreements pertaining to MSRs we own, which are typically payable as a fixed percentage of UPB, as well as ancillary fees that include float earnings, late fees, and other fees, where permitted. We also earn fees under subservicing arrangements with other institutions that own MSRs, which are typically on a per-loan basis and vary based on loan delinquency status.
Previous report
MAV represented $41.9 billion, or 14% of the UPB and 11% of the loan count of our total servicing and subservicing portfolio as of September 30, 2024. In May 2021, PHH entered into a subservicing agreement with MAV for exclusive rights to service the mortgage loans underlying MSRs owned by MAV. MAV provides us with a source of additional subservicing volume, either with the MSRs that MAV purchases outright from third parties or with the MSRs that MAV purchases from PHH. Refer to Note 11 - Investment in Equity Method Investee and Related Party Transactions and Note 22 – Subsequent Events.
Previous report
In addition to servicer ratings, the agencies may from time to time assign an outlook to the rating status. A negative outlook is generally used to indicate that a rating “may be lowered,” while a positive outlook is generally used to indicate a rating “may be raised”.
Previous report
On February 13, 2024, Fitch affirmed PHH’s residential servicer ratings and revised its outlook from Positive to Stable for Prime and Subprime products. The rating outlook remains Stable for the other products. The rating actions reflect PHH’s comprehensive enterprise-wide internal control environment, extensive industry experience and highly-developed global loan servicing platform, competitive loan servicing performance metrics, and effective technology platform. The ratings also consider the financial condition of PHH’s parent, Onity Group Inc. The affirmed ratings and Stable outlook on PHH’s residential servicer ratings are reflective of the company’s continued business growth, diversified sourcing strategies and overall loan servicing performance.
Previous report
On February 15, 2024, Fitch affirmed PHH's Master Servicer rating and Stable outlook, reflecting the company's effective enterprise-wide risk environment and compliance management framework, satisfactory loan servicing performance metrics and efficient servicing technology. The ratings also consider the financial condition of PHH's parent, Onity Group Inc.
Previous 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.
Previous report
(2)Conventional loans include prime loans with a UPB of $10.2 billion and $10.5 billion at September 30, 2024 and June 30, 2024, respectively, that we service or subservice. This compares to prime loans with a UPB of $13.3 billion at September 30, 2023. Prime loans are generally good credit quality loans that meet GSE underwriting standards.
Previous report
(2)Additions include purchased MSRs on portfolios with a UPB of $472.9 million and $113.0 million that have not yet transferred to the PHH servicing system as of September 30, 2024 and September 30, 2023, respectively, but for which we have legal title. The seller continues to subservice the loans on an interim basis until servicing transfer.
Previous report
(3)Includes MSRs sold to an unrelated third party with a UPB of $8.5 billion for which PHH is performing interim subservicing.
Previous 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.
Previous report
(6) Includes$35.3 billion average UPB of MSRs in the nine months ended September 30, 2023, previously sold to Rithm for which the sale accounting criteria were met effective December 31, 2023.
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Reworded paragraphs (107)
Previous 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.
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. PHH 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 servicers 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 $304.6 billion on behalf of more than 4,000 investors and 124 subservicing clients as of March 31, 2025. 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.
Previous 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.
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 first quarter of 2025, we added $16.8 billion of new volume, with $4.9 billion of subservicing additions, $7.0 billion of new Originations production and $4.9 billion bulk acquisitions, as further detailed in the below table.
Previous wording
(2)Represents the UPB of reverse mortgage loans that have been securitized on a servicing retained basis. The loans are recognized on our consolidated balance sheets under GAAP without any separate recognition of MSRs.
Current wording
(3)Represents the UPB of reverse mortgage loans that have been securitized on a servicing retained basis. The loans are recognized on our consolidated balance sheets under GAAP without any separate recognition of MSRs.
Previous 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.
Current wording
The following table summarizes the average volume of our Servicing segment, on a current and comparative basis. 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 amount and timing of gross revenue and expenses. Our average total servicing and subservicing UPB increased by $4.8 billion or 1.6% during the first quarter of 2025 compared to prior quarter and increased by $13.1 billion or 4.5% as compared to the prior year quarter, net of runoff.
Previous 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%.
Current wording
As of March 31, 2025 and December 31, 2024, the total servicing and subservicing UPB amounted to $304.6 billion and $301.7 billion, respectively, a net increase of $3.0 billion or 1.0%.
Previous wording
Results of operations for the third quarter of 2024
Current wording
Results of operations for the first quarter of 2025
Previous wording
•Net income of $21.4 million, or $2.72 per share basic and $2.65 per share diluted
Current wording
•Net income attributable to common stockholders of $21 million, or $2.68 per share basic and $2.50 diluted
Previous wording
•Servicing and subservicing fee revenue of $211.1 million
Current wording
•Servicing and subservicing fee revenue of $203.3 million
Previous wording
•$8.7 million MSR valuation gain attributable to rate and assumption changes, net of hedging
Current wording
•$2.2 million MSR valuation gain attributable to input and assumption changes, net of hedging
Previous wording
•Stockholders’ equity of $468.2 million, or $59.50 book value per common share
Current wording
•Stockholders’ equity of $460.2 million, or $57.66 book value per common share
Previous wording
•MSR investment of $2.2 billion, and $298.9 billion total servicing and subservicing UPB
Current wording
•MSR investment of $2.5 billion, and $304.6 billion total servicing and subservicing UPB
Previous 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;
Current wording
•Prudent capital-light growth: Emphasize on capital-light subservicing to drive servicing portfolio UPB growth and expand higher margin products and origination channels to drive accretive MSR investments;
Previous 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;
Current wording
•Industry-leading cost structure: Achieve industry cost leadership through continuous cost and process improvement, optimizing global operations and technology, and drive innovation, including artificial intelligence based solutions;
Previous wording
•Top-tier operating performance and capabilities: Delivering industry top-tier servicing operational performance and driving increased borrower and client satisfaction;
Current wording
•Top-tier operating performance and capabilities: Deliver industry top-tier servicing operational performance and increase borrower and client satisfaction;
Previous 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.
Current wording
•Dynamic asset management: Optimize investment returns and liquidity through dynamic and opportunistic asset purchases and sales.
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 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.
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
Previous wording
The below table presents total revenue by type and segment:
Current wording
The below table presents revenue by type and segment:
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 MSR Hedging Strategy section of Item 3. Quantitative and Qualitative Disclosures about Market Risks for further detail and the discussion below within Servicing.
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 Risk for further detail and the discussion below within Servicing.
Previous wording
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 wording
The $38.9 million loss on MSR valuation adjustments, net for the three months ended March 31, 2025 is comprised of $41.1 million runoff, $18.6 million fair value loss attributed to input and assumption changes and $20.8 million gain on MSR hedging derivatives.
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 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.
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 $2.7 million higher runoff quarter-over-quarter is mostly due to MSR portfolio growth.
Previous 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.
Current wording
•The $18.6 million fair value loss due to input and assumption changes is attributed to a decline in interest rates in the quarter, partially offset by favorable other input and assumption updates. The change from an $80.9 million fair value gain in the three months ended December 31, 2024 to a $18.6 million fair value loss in the three months ended March 31, 2025 is mostly driven by changes in market interest rates, as the 10-year Treasury rate declined 35 basis points in the three months ended March 31, 2025 and increased 77 basis points in the three months ended December 31, 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 $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.
Current wording
•MSR hedging derivative fair value changes are designed to partially offset the expected fair value changes of the net MSR, MSR pledged liabilities and ESS exposure, commensurate with our target hedge coverage ratio. The $20.8 million derivative gain recognized in the three months ended March 31, 2025 and the variance from the prior quarter are driven by the rate changes discussed above. We maintained a high hedge coverage ratio in both quarters. Also refer to Item 3. Quantitative and Qualitative Disclosures about Market Risk for further detail on our hedging strategy and its effectiveness.
Previous 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.
Current wording
•The change from an $82.0 million fair value gain in the three months ended March 31, 2024 to an $18.6 million fair value loss in the three months ended March 31, 2025 is primarily driven by changes in market interest rates, as the 10-year Treasury rate declined 35 basis points during the three months ended March 31, 2025 compared to an increase of 32 basis points during the same period of 2024, and certain favorable assumption updates in the three months ended March 31, 2024 to reflect actual market trade pricing levels.
Previous 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 .
Current wording
Servicing and origination expense for the three months ended March 31, 2025 was mostly flat compared to the three months ended December 31, 2024, with additional provision expense on Servicing advances mostly offset by the reversal of a liability for representation and warranty indemnification obligations in our Originations segment.
Previous 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.
Current wording
In November 2024, we redeemed all of the outstanding PMC Senior Secured Notes due 2026 and Onity Senior Secured Notes due 2027, resulting in the recognition of a loss on extinguishment of debt primarily due to the accelerated write-off of unamortized discount and debt issuance costs, the payment of a make-whole redemption premium and a transaction fee to Oaktree. During March 2024, we repurchased a total of $47.4 million of the PMC Senior Secured Notes and recognized a gain on debt extinguishment, net of the associated write-off of unamortized discount and debt issuance costs.
Previous 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.
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 ($179.8 million as of December 31, 2024). 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 due primarily to our history of cumulative operating losses, we determined that a full valuation allowance at March 31, 2025 remains appropriate.
Previous 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.
Current wording
Our income tax benefit for the three months ended March 31, 2025 is primarily driven by the favorable resolution of a prior-year uncertain tax position during the current quarter. The decrease in the effective tax rate for the three months ended March 31, 2025 compared to the same period of 2024 is primarily due to recognizing income tax benefit of $13.3 million related to the reversal of the uncertain tax liability.
Previous 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.
Current wording
Total assets decreased $176.1 million, or 1%, between December 31, 2024 and March 31, 2025 with a $312.8 million decrease in reverse Loans held for investment driven by the runoff of the portfolio exceeding originations and capitalization of interest since the acquisition of the $2.9 billion portfolio of reverse mortgage loans from Waterfall in November 2024 that is relatively more aged. In addition, servicing advances declined $63.2 million largely driven by seasonal reduction of taxes and insurance (T&I) balances. These decreases were partially offset by a $112.0 million increase in our Loans held for sale portfolio driven by the growth of our Originations pipeline, and an $81.1 million increase in our MSR portfolio due to $158.8 million MSR additions, partially offset by runoff and other fair value losses.
Previous wording
Servicing and subservicing fee revenue - Our servicing fee revenue is a function of the volume being serviced - UPB for servicing fees and loan count for subservicing fees. We expect we will continue to grow our servicing and subservicing portfolio through our multi-channel Originations platform and through MSR capital partners, with an emphasis on subservicing. We expect ancillary float income to trend with short-term interest rates considering seasonal changes in average float balances.
Current wording
Servicing and subservicing fee revenue - Our servicing fee revenue is a function of the volume being serviced - UPB for servicing fees and loan count for subservicing fees. We expect we will continue to grow our servicing and subservicing portfolio through our multi-channel Originations platform, MSR bulk acquisitions, and subservicing additions. We expect ancillary float income to trend with short-term interest rates also considering changes in average float balances due to seasonality and portfolio growth.
Previous wording
Gain on sale of loans held for sale- Our gain on sale is driven by both volume and margin and is channel-sensitive. The updated industry forecasts suggest an increase in loan origination in 2025 driven by lower interest rates. We anticipate growth in our Consumer Direct channel considering the updated industry forecast and our increased recapture capabilities. We expect to continue to prudently grow our Correspondent volume at margins that are accretive to the business as part of our MSR replenishment and growth strategy after the opportunistic MSR bulk sales in 2024. We expect continued competitive pressure on margins across all channels.
Current wording
Gain on sale of loans held for sale- Our gain on sale is driven by both Originations volume and margin, and is channel-sensitive. The updated industry forecasts (average of MBA, April 2025 and Fannie Mae, April 2025) suggest a 17% increase in loan origination in 2025 as compared to 2024, with the 30-year fixed rate mortgage expected to end 2025 at 6.5%. However, macroeconomic conditions and their impact on the housing and capital markets remain highly uncertain. We anticipate growth in our Consumer Direct channel driven by our increased recapture capabilities that may be curtailed if interest rates remain at the current levels or increase. If this should occur, we expect home equity lending products will be more attractive to consumers and will be a more important product. We expect to continue to prudently grow year-over-year our Correspondent volume at margins that are accretive to the business as part of our MSR replenishment and growth strategy after the opportunistic MSR bulk sales in 2024. We also expect continued competitive pressure on margins across all channels and volatility of gain on sale associated with GSE pricing dependency and volatile interest rates. We expect some further volatility of gain (loss) on sale on loans held for sale related to reverse mortgage buyouts (mostly inactive loans) due to the increased size of the portfolio.
Previous wording
Gain on reverse loans held for investment and HMBS-related borrowings, net- The reverse mortgage origination gain is driven by the same factors as gain on sale of loans held for sale, with smaller volumes in the reverse mortgage market and generally larger margins. With our experience and brand in the marketplace, we expect to continue to maintain or prudently grow our portfolio albeit with some channel mix changes. We expect continued uncertain market interest rate and spread conditions. The fair value of the net reverse servicing asset is expected to continue to follow market conditions, with fair value gains or losses generally associated with declining or increasing interest rates and spread, respectively, and is part of our forward MSR hedging strategy. On November 1, 2024, we completed the acquisition of $3.0 billion UPB of HECM loans along with HMBS-related borrowings and other assets from MAM that we subserviced. We expect higher net interest income (reported as fair value changes) due to higher UPB and increased volatility in fair value changes that we expect would largely be offset with our MSR hedging strategy, refer to Note 22 – Subsequent Events and Item 3. Quantitative and Qualitative Disclosures About Market Risk for further detail on our hedge strategy.
Current wording
Gain on reverse loans held for investment and HMBS-related borrowings, net- The reverse mortgage origination gain is driven by the same factors as gain on sale of loans held for sale, with smaller volumes in the reverse mortgage market and generally larger margins. With our experience and brand in the marketplace, we expect to continue to maintain or prudently grow our portfolio albeit with some channel mix changes. We expect continued uncertain market interest rate and spread conditions. The fair value of the net reverse servicing asset is expected to continue to follow market conditions, with fair value gains or losses generally associated with declining or increasing interest rates and spread, respectively, and is part of our forward MSR hedging strategy. On November 1, 2024, we completed the acquisition of $2.9 billion UPB of HECM loans along with HMBS-related borrowings and other assets from MAM that we subserviced. We expect higher net interest income (reported as fair value changes) due to higher UPB and increased volatility in fair value changes that we expect would largely be offset with our MSR hedging strategy. Refer to Item 3. Quantitative and Qualitative Disclosures About Market Risk for further detail on our hedge strategy.
Previous wording
MSR valuation adjustments, net -Our net MSR fair value changes include multiple components. First, amortization of our investment is a function of the UPB, capitalized value of the MSR relative to the UPB, and prepayments. We expect the MSR realization of expected cash flows to generally follow the growth or size of our MSR portfolio net of ESS financing liabilities and pledged MSR liabilities with our MSR capital partners. Second, MSR fair value changes are driven by changes in interest rates and assumptions, such as forecasted prepayments. Third, the MSR fair value changes due to changes in interest rates are partially offset by derivative fair value changes that economically hedge the MSR portfolio to the extent of our hedge coverage ratio and hedge performance. Refer to the sensitivity analysis in Item 3. Quantitative and Qualitative Disclosures About Market Risk for further detail.
Current wording
MSR valuation adjustments, net -Our net MSR fair value changes include multiple components. First, amortization of our investment is a function of the UPB, capitalized value of the MSR relative to the UPB, and prepayments. We expect the MSR realization of expected cash flows to generally follow the growth or size of our MSR portfolio net of ESS financing liabilities and pledged MSR liabilities with our MSR capital partners. Second, MSR fair value changes are driven by changes in interest rates and assumptions, such as forecasted prepayments. Third, the MSR fair value changes due to changes in interest rates are partially offset by derivative fair value changes that economically hedge the MSR portfolio to the extent of our hedge coverage ratio and hedge performance. We expect increased uncertainties related to hedge performance and higher hedge cost in an environment of higher economic and capital market volatility. Refer to the sensitivity analysis in Item 3. Quantitative and Qualitative Disclosures About Market Risk for further detail.
Previous wording
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 wording
Net interest expense- Interest expense varies based on changes in average debt balance and changes in short-term interest rates 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). 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 as a result of the corporate debt refinancing transactions in the fourth quarter of 2024.
Previous wording
Stockholders’ equity - With the above considerations, we expect our businesses to continue to generate net income and increase our equity in 2025, absent any significant adverse change in interest rates, hedge performance or other factors. We also expect our profitability in the fourth quarter of 2024 to be negatively affected by our refinancing transactions, partly offset by the expected gain on MAV sale. Conversely, we expect our profitability in 2025 to be favorably impacted by our refinancing transactions, with an overall lower interest expense on our corporate debt after consideration of preferred stock dividend. Refer to Note 22 – Subsequent Events.
Current wording
Stockholders’ equity - With the above considerations, we expect our businesses to continue to generate net income and increase our equity in 2025, absent any significant adverse change in interest rates, hedge performance and cost, or other factors. In addition, we believe it is reasonably possible that by December 31, 2025, we could release some or all of our valuation allowance that currently offsets our net U.S. deferred tax asset, resulting in an increase to net income and stockholders’ equity.
Previous wording
Our activities are organized into two reportable business segments that reflect our primary lines of business - Servicing and Originations - as well as a Corporate Items and Other segment.
Current wording
Our activities are organized into two reportable business segments that reflect our primary lines of business - Servicing and Originations - as well as a Corporate segment.
Previous wording
As of September 30, 2024, we serviced 1.4 million mortgage loans with an aggregate UPB of $298.9 billion.
Current wording
This segment is primarily comprised of our mortgage servicing and subservicing business. We earn servicing and subservicing fees, including ancillary income, and incur cost to service the loans which varies depending on delinquency status. We are exposed to MSR valuation adjustments and advancing obligations when we own the MSR. Our servicing portfolio includes conventional, government-insured and non-Agency mortgage loans, including reverse mortgage loans classified as loans held for investment on our balance sheet. As of March 31, 2025, we serviced 1.4 million mortgage loans with an aggregate UPB of $304.6 billion.
Previous wording
Rithm is one of our largest subservicing clients accounting for $42.2 billion, or 14% of the UPB and 25% of the loan count of our total servicing and subservicing portfolio as of September 30, 2024, and approximately 64% of all delinquent loans that Onity services. The servicing agreements automatically renew annually unless notice of termination is provided. Refer to Note 8 — Other Financing Liabilities, at Fair Value and Note 22 – Subsequent Events.
Current wording
Rithm is one of our largest subservicing clients. Servicing and subservicing fees from Rithm amounted to $22.2 million, or 14% of total servicing and subservicing fees (excluding ancillary income) in the three months ended March 31, 2025 ($24.9 million and 16% in the three months ended March 31, 2024, respectively), and the related remittances to Rithm presented as Pledged MSR liability expense amounted to $9.0 million. Rithm accounted for $34.7 billion, or 11% and 21% of the total serviced UPB and loan count, respectively, of our servicing and subservicing portfolio as of March 31, 2025, and 58% of all delinquent loans that Onity serviced, for which the cost to service and the associated risks are higher ($44.1 billion, 15%, 25% and 66% as of March 31, 2024, respectively). Consistent with a subservicing relationship, Rithm is responsible for funding the advances we service on its behalf. The servicing agreements automatically renew annually unless notice of termination is provided.
Previous wording
We have a strong track record of success as a leader in the servicing industry in foreclosure prevention and loss mitigation that helps homeowners stay in their homes and improves financial outcomes for mortgage loan investors. Reducing delinquencies also enables us to recover advances and recognize additional ancillary income such as late fees, which we do not recognize on delinquent loans until they are brought current. Loan resolution activities address the pipeline of delinquent loans and generally lead to (i) modification of the loan terms, (ii) repayment plan alternatives, (iii) a discounted payoff of the loan (e.g., a “short sale”), or (iv) foreclosure or deed-in-lieu-of-foreclosure and sale of the resulting REO. Loan modifications must be made in accordance with the applicable servicing agreement as such agreements may require approvals or impose restrictions upon, or even forbid, loan modifications. To select an appropriate loan modification option for a borrower, we perform a structured analysis, using a proprietary model, of all options using information provided by the borrower as well as external data, including recent broker price opinions to value the mortgaged property. Our proprietary model includes, among other things, an assessment of re-default risk.
Current wording
We have a strong track record of success as a leader in the servicing industry in foreclosure prevention and loss mitigation that helps homeowners stay in their homes and improves financial outcomes for mortgage loan investors. Reducing delinquencies also enables us to recover advances and recognize additional ancillary income such as late fees, which we do not recognize on delinquent loans until they are brought current. Loan resolution activities address the pipeline of delinquent loans and generally lead to (i) modification of the loan terms, (ii) repayment plan alternatives, (iii) a discounted payoff of the loan (e.g., a “short sale”), or (iv) foreclosure or deed-in-lieu-of-foreclosure and sale of the resulting REO. To select an appropriate loan modification option for a borrower in accordance with the applicable servicing agreement, we perform a structured analysis, using a proprietary model, of all options using information provided by the borrower as well as external data, including recent broker price opinions to value the mortgaged property. Our proprietary model includes, among other things, an assessment of re-default risk.
Previous wording
As a servicer, we are generally obligated to advance funds in the event borrowers are delinquent on their monthly mortgage related payments. We advance principal and interest (P&I Advances), taxes and insurance (T&I Advances) and legal fees, property valuation fees, property inspection fees, maintenance costs and preservation costs on properties that have been foreclosed (Corporate Advances). For certain loans in non-Agency securitization trusts, we have the ability to cease making P&I advances and immediately recover advances previously made from the general collections of the respective trust if we determine that our P&I advances cannot be recovered from the projected future cash flows. With T&I and Corporate advances, we continue to advance if net future cash flows exceed projected future advances without regard to advances already made.
Current wording
As a servicer, we are generally obligated to advance funds in the event borrowers are delinquent on their monthly mortgage related payments. We advance principal and interest (P&I Advances), taxes and insurance (T&I Advances) and legal fees, property valuation fees, property inspection fees, maintenance costs and preservation costs on properties that have been foreclosed (Corporate Advances). For certain loans in non-Agency securitization trusts, we have the ability to cease making P&I advances and immediately recover advances previously made from the general collections of the respective trust if we determine that our P&I advances cannot be recovered from the projected future cash flows. With T&I and Corporate advances, we continue to advance if net future cash flows exceed projected future advances without regard to advances already made. Refer to Note 22 — Commitments for further discussion on our servicing advance obligations.
Previous wording
We originate and purchase reverse mortgage loans through our Originations business, under the guidelines of the HECM reverse mortgage insurance program of the FHA. Loans are generally insured by the FHA, which provides protection against risk of borrower default, and are securitized through the Ginnie Mae program. As the securitization of reverse mortgage loans does not achieve sale accounting treatment, the loans remain on our balance sheet as Loans held for investment, at fair value together with the securitization HMBS-related borrowings, at fair value.
Current wording
Our reverse business activities include both the subservicing of reverse mortgage loans on behalf of investors and the servicing of our owned portfolio. Owned portfolio loans are insured by the FHA, which provides protection against risk of borrower default, and are securitized through the Ginnie Mae program.
Showing the first 40 of 107 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
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, 2024.
Current report — wording carried from elsewhere
HUD reimburses us for the loan balance, eligible expenses and interest, less the appraised value of the underlying property. Thereafter, all the risks and costs associated with maintaining and liquidating the property remain with us; we may incur additional losses on REO properties as they progress through the liquidation processes related to delayed timelines due to market conditions, sales commissions, property preservation costs or property tax and insurance advances. The significance of future losses associated with appraisal-based claims is dependent upon the volume of inactive loans, condition of foreclosed properties and the general real estate market.
Current report — wording carried from elsewhere
At March 31, 2025, we had $60.6 million total available committed and uncommitted borrowing capacity based on the amount of eligible collateral as follows:
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Operating expenses for the three months ended September 30, 2024 remained mostly flat, compared to the three months ended June 30, 2024.
Previous report — wording carried elsewhere
Effective September 30, 2023, we implemented the revised minimum tangible net worth and liquidity requirements for GSE and Ginnie Mae seller/servicers. We believe that we are in compliance with these requirements as of September 30, 2024.
Previous report — wording carried elsewhere
We continuously evaluate alternative financings to diversify our sources of funds, optimize maturities and reduce our funding cost. In addition, we evaluate investment and capital allocation opportunities for any excess liquidity.
Previous report — wording carried elsewhere
Our operating activities used $271.4 million of cash primarily due to net cash paid on loans held for sale of $488.7 million as loan production volume exceeded sales. Offsetting operating cash inflows include net collections of servicing advances of $147.7 million.
Previous report — wording carried elsewhere
Our investing activities used $43.6 million of cash. The primary use of cash in our investing activities was $89.6 million to purchase MSRs. Offsetting cash inflows include $36.3 million net cash inflows in connection with our HECM reverse mortgages, $2.7 million of capital distributions, net of contributions, from our equity method investee MAV Canopy and $6.1 million proceeds from the sale of advances.