Q - ONITY GROUP
For the period ended Jun 30, 2025. Filed Aug 5, 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.
Jun 30, 2025 · Filed Aug 5, 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 2025-03-31; filed 2025-04-30.
0001628280-25-021113
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-05.
0001628280-25-037847
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 300 previous paragraphs and 319 current paragraphs.
173 unchanged; 102 reworded; 43 added; 22 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 34 previous and 37 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 (43)
Current report
Market Update
Current report
The average 30-year fixed rate mortgage rate was mostly flat for all periods presented at elevated levels relative to the past decade, impacting borrower affordability and overall origination market volumes. The average 30-year fixed rate mortgage between 2015 to 2024 was 4.85% excluding the 2020 and 2021 years impacted by Covid 19.
Current report
As further illustrated in the below graph, the 10-year Treasury rate remained mostly flat in the second quarter 2025 and declined 35 basis points in the first quarter of 2025. The 10-year Treasury rate declined 34 basis points during the six months ended June 30, 2025 compared to an increase of 48 basis points during the same period of 2024.
Current report
In April 2025, capital markets experienced a sharp, temporary rise in volatility. Interest rate volatility spiked in early April 2025, as measured by the Intercontinental (ICE) Bank of America/Merrill Lynch Option Volatility Estimate (MOVE) Index, raising to 140 in April 2025 and returning in May-June 2025 to the 90-100 range or levels observed in the first quarter of 2025.
Current report
Another key driver of our Originations business is the overall mortgage origination market volume, that is sensitive to home sales and home prices and other macroeconomic conditions, such as gross domestic product and unemployment. We source a large part of our Originations volume from Correspondent lenders and the industry volume is a relevant benchmark. The following graphs present the average of industry volumes (in $ billions) released by the MBA and Fannie Mae in the current and comparative periods. The average industry volume grew 42% quarter over quarter (Q2’25 vs Q1’25), largely driven by seasonality, and 23% year over year (Q2’25 vs Q2’24), largely driven by the impact of interest rates on refinance. On a year-to-date basis, the average industry volume grew 16% in the first six months of 2025 as compared with the first six months of 2024. Comparatively, our Originations volumes (Correspondent and Consumer Direct channels) grew 39% in the second quarter of 2025 vs first quarter of 2025 and 32% vs second quarter of 2024, and 38% in the first six months of 2025 vs first six months of 2024.
Current report
Source: MBA Mortgage Finance Forecast as of July 17, 2025 and Fannie Mae Housing Forecast as of July 11, 2025. Most recent current period volumes are forecasts. In $ billions.
Current report
•Originations gain on sale of $15.4 million
Current report
•Cash position of $194.3 million
Current report
•Total assets of $16.5 billion
Current report
•$10.4 million decrease in Operating expenses, driven by litigation accruals recorded in the first quarter of 2025 in connection with the settlement of a legacy litigation matter, and reimbursements received in the second quarter of 2025 related to prior years’ legal expenses.
Current report
•$5.1 million increase in Other expense, net largely driven by higher net interest expense to finance the MSR growth.
Current report
•$14.3 million Income tax expense variance, mostly due to the favorable resolution of a $13.3 million prior year uncertain tax position recognized in the first quarter of 2025.
Current report
•The 2% decrease in Servicing revenue is primarily due to an $11.1 million decrease in Gain on reverse loans held for investment and HMBS-related borrowings, net largely driven by an unfavorable change in market interest rates vs. the prior quarter and certain unfavorable assumption updates in the second quarter of 2025. Such changes in fair value due to market rates are included as a partial offset to the change in fair value of our MSR portfolio attributable to interest rates, as part of our MSR hedging strategy. Servicing and subservicing fees increased by $7.9 million largely due to seasonally increased float earnings as well as higher servicing fees with a 3% higher average servicing UPB.
Current report
•The 3% increase in Originations revenue is primarily attributed to higher fees (other revenue) due to higher funded volume. Gain on loans held for sale remained mostly flat with margins adversely impacted by market volatility in April 2025.
Current report
•The unfavorable $6.7 million increase in runoff expense is mostly due to MSR portfolio growth.
Current report
Compensation and benefits expense for the three months ended June 30, 2025 increased $3.5 million, or 6% compared to the three months ended March 31, 2025, largely due to an increase in incentive compensation expenses (increase in the fair value of cash-settled share-based awards driven by our stock price increase) and higher commissions on higher Originations production volume.
Current report
On May 29, 2025, Fitch upgraded PHH’s residential primary servicer ratings and affirmed its stable outlook for all products. In addition, Fitch affirmed PHH’s residential Master Servicer rating. The rating actions reflect the company’s growth strategy based on diversification between its loan origination and servicing businesses as well as its third-party subservicing efforts, effective enterprise risk management controls and processes, and continuous technology enhancements. The ratings also take into consideration the company’s ongoing rebranding efforts, which commenced on June 10, 2024.
Current report
On June 11, 2025, Moody's upgraded the second lien servicer quality (SQ) assessment from SQ3+ to SQ 2- and affirmed the prime, subprime, special servicer, and master SQ assessments for PHH at SQ3+. The upgrade of PHH 's second lien servicing assessment is mainly driven by i) improvement in the company's second lien roll rates, ii) cure rates, and iii) recidivism rates.
Current report
With a high targeted hedge coverage ratio, the fair value volatility of the MSR portfolio due to changes in market interest rates, net of hedges (including the reverse exposure) was reduced for the periods presented. The Net MSR portfolio exposure gains of $9.8 million in the second quarter of 2025 and $7.8 million in the first quarter of 2025 are largely driven by favorable other input and assumption updates. The $11.4 million lower Net MSR portfolio exposure gains for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 is mainly driven by less favorable input and assumption updates driven by HECM spread tightening in 2025, partly offset by favorable market rate impact net of hedging compared to prior year period.
Current report
Compensation and benefits expense for the three months ended June 30, 2025 remained flat (decreased 1%), compared to the three months ended March 31, 2025, consistent with headcount.
Current report
(1)See Note 8 — Other Financing Liabilities, at Fair Value. The servicing fee and ancillary income collections on such transferred MSRs are recognized within Servicing and subservicing fees.
Current report
Pledged MSR liability expense for the three months ended June 30, 2025 remained mostly stable (increased 3%) as compared to the three months ended March 31, 2025 consistent with a stable volume serviced.
Current report
Operating expenses for the three months ended June 30, 2025 increased $3.4 million, or 15% compared to the three months ended March 31, 2025 primarily due to $1.5 million higher Origination expense, driven by higher production volume, and $1.4 million higher Compensation and benefits largely due to higher commissions on higher production volume.
Current report
Interest expense for the three months ended June 30, 2025 was flat (decreased $0.1 million) as compared to the three months ended March 31, 2025.
Current report
•Increased the borrowing capacity under a GSE MSR facility from $500.0 million to $650.0 million in January 2025, and subsequently decreased the borrowing capacity under another GSE MSR facility from $400.0 million to $250.0 million in February 2025.
Current report
•In connection with the transfer of certain GSE MSR investment activities between our licensed entities in the second quarter of 2025 (PHH and PAS - See Note 20 – Regulatory Requirements), we completed the following:
Current report
◦Issued variable-rate advance receivable notes (PGAF Series 2025-VF1) with a maximum borrowing capacity of $350.0 million and an Expected Repayment Date of May 28, 2027. Concurrently, we reduced the maximum borrowing capacity under the existing OMART and OGAF advance facilities from $500.0 million to $350.0 million and from $200.0 million to $100.0 million, respectively.
Current report
◦Entered into a new GSE MSR facility at PAS with similar terms to the existing PHH facility, with an aggregate capacity of $650.0 million, further increased to $750.0 million in June 2025.
Current report
◦Repaid the amount due under an existing $250.0 million GSE MSR facility at PHH and PAS entered into a new facility with similar terms, including the same borrowing capacity and a maturity date of May 2027.
Current report
•Increased the borrowing capacity under the GNMA MSR facility from $300.0 million to $400.0 million in June 2025.
Current report
We manage our liquidity on a daily basis to fund our business and comply with debt covenants and regulatory liquidity requirements. Our liquidity position may vary significantly during a given month, generally with the lowest liquidity amount around mid-month due to the cash flow remittance requirements under our servicing agreements and the highest around or a few days after month end as we collect monthly installments from borrowers and benefit from float balances. Other factors include but are not limited to daily variation margins with our derivative instruments and MSR financing facilities. It is not uncommon for our liquidity to materially decline from peak to trough within a month and recover through borrower payment behaviors.
Current report
Capital Adequacy and Leverage
Current report
Our licensed entities are subject to capital requirements by different agencies and regulators, including but not limited to the GSEs, Ginnie Mae and HUD. We believe our licensed entities are adequately capitalized at June 30, 2025 as reflected by the most restrictive regulatory requirements disclosed in Note 20 – Regulatory Requirements.
Current report
Our aggregate mezzanine and stockholders’ equity ($531.8 million at June 30, 2025) relative to total assets denotes a high leverage ratio. Our regulators assess our leverage ratio by deducting from total assets the amount of securitized reverse mortgage loans held for investment (HECM loans) pledged to HMBS due to the “lack of true sale accounting treatment of the HMBS Program” as per the Ginnie Mae guide. As of June 30, 2025, as illustrated below, out of $16.5 billion total assets, $10.3 billion securitized HECM loans remain reported on our balance sheet with the associated HMBS liability as they do not meet sale accounting treatment under GAAP. In addition, under the Ginnie Mae risk based capital ratio, HECM loans held for investment are risk-weighted at zero percent.
Current report
We conduct our Servicing and Originations businesses with asset-backed financing at high effective advance rates, resulting in a relatively low amount of equity required by lenders to finance our operations, consistent with these asset classes in the industry. Originations/pipeline mortgage loans held for sale are financed by our warehouse financing lines with an advance rate generally exceeding 95%, eligible servicing advances are financed by our match-funded advance financing facilities with an advance rate of approximately 90%, and reverse buyouts (loans held for sale, receivables and REO) are generally financed by OLIT securitization liabilities with an initial effective advance rate exceeding 90% of market value.
Current report
Accordingly, we assess our capital needs, structure and leverage predominantly with respect to our capital investments, mainly our owned MSR. We prudently manage amount, risks and returns of our owned MSR within the limits of our available capital, as summarized below:
Current report
(1)See Note 12 – Borrowings, Collateral table.
Current report
(2)Includes $1,724 million owned MSR and $1,183 million MSR financing facilities, excluding ESS ($541 million net).
Current report
(3)Includes $129 million unsecuritized HECM loans and tails, $77 million associated warehouse mortgage loan financing ($53 million net), and$88 million of HECM net asset value or economic reverse MSR.
Current report
(4)Other assets include Advances, net, Loans held for sale, at fair value, Ginnie Mae claim receivables, net, REO and Debt service accounts (a component of Restricted cash).
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Removed paragraphs (22)
Previous 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).
Previous 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.
Previous report
•Originations gain on sale of $15.6 million
Previous report
•Cash position of $178.0 million
Previous report
•Total assets of $16.3 billion
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
•The unfavorable $1.2 million increase in runoff is mostly due to MSR portfolio growth.
Previous 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.
Previous report
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 three months ended March 31, 2025 were largely offset by gains on MSR hedging derivatives and loans held for investment net of HMBS-related borrowings. The Net MSR portfolio exposure gains of $7.8 million in the first quarter of 2025 are largely driven by favorable other input and assumption updates.
Previous report
The $22.2 million lower Net MSR portfolio exposure gains for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 is mainly driven by certain favorable assumption updates in the first quarter of 2024 to reflect actual market trade pricing levels.
Previous report
Compensation and benefits expense for the three months ended March 31, 2025 decreased $1.7 million or 7% compared to the three months ended December 31, 2024 primarily due to higher annual cash awards expense recorded in the three months ended December 31, 2024 based on our financial performance for 2024, and a 3% reduction in average headcount (with 5% reduction in the U.S.) in the three months ended March 31, 2025.
Previous report
(1)For MSR transfers that do not meet sale accounting criteria. See Note 8 — Other Financing Liabilities, at Fair Value.
Previous report
Pledged MSR liability expense for the three months ended March 31, 2025 was mostly flat as compared to the three months ended December 31, 2024.
Previous report
5- Subservicing Growth
Previous report
We source additional servicing volume through our subservicing and interim servicing agreements, through our existing relationships and our enterprise sales initiatives. We do not report any revenue or gain associated with subservicing within the Originations segment as the impact is captured in the Servicing segment.
Previous report
Operating expenses for the three months ended March 31, 2025 decreased $2.9 million, or 11% compared to the three months ended December 31, 2024 primarily due to $1.2 million lower Originations expense, driven by a provision release for representation and warranty indemnification due to favorable demand resolutions, and $0.8 million lower Compensation and benefits largely due to lower commissions on lower production volume.
Previous report
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 debt extinguishment 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.
Previous report
PHH will be required to maintain a minimum of 6% ratio of Adjusted Net Worth less Excess MSRs, as defined, to risk weighted assets. We are currently implementing certain actions intended to achieve compliance with the requirements. We intend to continue to operate our Ginnie Mae issuer activities through PHH which would be subject to the risk-based capital rules, and separately conduct certain GSE MSR investment activities through PHH Asset Services LLC (PAS), a wholly owned subsidiary of PHH Corporation and Onity. We have received all necessary licensing and regulatory approvals to operate PAS except for one state with whom discussions are ongoing.
Reworded paragraphs (102)
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. 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.
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 $309.5 billion on behalf of more than 3,900 investors and 122 subservicing clients as of June 30, 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 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.
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 second quarter of 2025, we added $15.2 billion of new volume, with $5.5 billion of subservicing additions, $9.4 billion of new Originations production and $0.3 billion bulk acquisitions, as further detailed in the below table.
Previous 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.
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 $2.5 billion or 0.8% during the second quarter of 2025 compared to the prior quarter (3.3% annualized) and increased by $8.4 billion or 2.8% as compared to the prior year six months, net of runoff. For comparison purposes, the total industry mortgage debt outstanding increased 2.6% quarter over quarter (annualized) and 2.8% year over year (source: Mortgage Bankers Association (MBA) Mortgage Finance Forecast as of July 17, 2025).
Previous 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%.
Current wording
As of June 30, 2025 and March 31, 2025, the total servicing and subservicing UPB amounted to $309.5 billion and $304.6 billion, respectively, a net increase of $4.9 billion or 1.6% (6.4% annualized).
Previous wording
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 wording
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 and prepayments in Servicing, 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).
Previous wording
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 wording
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 half of 2025, the Federal Reserve kept the federal funds rate unchanged. The 1-month SOFR largely followed the Federal Reserve actions in 2024, as illustrated in the below graph, resulting in a 101 basis points decline year over year, and remained flat in its quarterly average in 2025.
Previous wording
Results of operations for the first quarter of 2025
Current wording
Results of operations for the second quarter of 2025
Previous wording
•Net income attributable to common stockholders of $21 million, or $2.68 per share basic and $2.50 diluted
Current wording
•Net income attributable to common stockholders of $20 million, or $2.55 per share basic and $2.40 diluted
Previous wording
•Servicing and subservicing fee revenue of $203.3 million
Current wording
•Servicing and subservicing fee revenue of $211.3 million
Previous wording
•$2.2 million MSR valuation gain attributable to input and assumption changes, net of hedging
Current wording
•$16.2 million MSR valuation gain attributable to input and assumption changes, net of hedging
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•Stockholders’ equity of $460.2 million, or $57.66 book value per common share
Current wording
•Stockholders’ equity of $481.9 million, or $59.82 book value per common share
Previous wording
•MSR investment of $2.5 billion, and $304.6 billion total servicing and subservicing UPB
Current wording
•MSR investment of $2.6 billion, and $309.5 billion total servicing and subservicing UPB
Previous wording
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 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, 2024.
Previous wording
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 wording
Onity reported $21.5 million net income in the second quarter of 2025, flat compared to the $22.1 million net income in the first quarter of 2025, with the following considerations:
Previous wording
•$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 wording
•$3.2 million decrease in revenue, largely attributed to a $11.1 million decrease in gains on our reverse mortgage portfolio of loans held for investment and HMBS-related borrowings, net driven by an unfavorable change in market interest rates and assumptions that are part of our MSR hedging strategy (see below). Partially offsetting this decrease, Servicing and subservicing fees increased by $7.9 million mostly due to increased float earnings as well as higher servicing fees with a 3% higher average servicing UPB.
Previous wording
•$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 wording
•$11.7 million lower loss on MSR valuation adjustments, net largely driven by favorable assumption updates and 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.
Previous wording
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 wording
Total revenue for the three months ended June 30, 2025 decreased $3.2 million, or 1% compared to the three months ended March 31, 2025 due to a $4.1 million, or 2% decrease in Servicing revenue, partially offset by a $0.9 million, or 3% increase in Originations revenue.
Previous wording
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 wording
Compared to the six months ended June 30, 2024, total revenue for the six months ended June 30, 2025 was $10.9 million, or 2% higher due to a $2.1 million increase in Servicing revenue and an $8.8 million, or 18% increase in Originations revenue.
Previous wording
•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 wording
•The increase in Servicing revenue is mostly due to an $11.4 million increase in Gain on reverse loans held for investment and HMBS-related borrowings, net largely offset by a $10.5 million decrease in Gain on loans held for sale. The increase in Gain on reverse loans held for investment and HMBS-related borrowings, net is mostly driven by a favorable decrease in market interest rates vs. an increase in the prior year period, partially offset by unfavorable assumption updates in the current year period (including less favorable yield spread tightening vs. the prior year period). The unfavorable variance in Gain on loans held for sale is mostly driven by losses on new buyouts (largely attributed to the reverse portfolio acquired from Waterfall in the fourth quarter of 2024), and gains recognized in the first quarter of 2024 on previously acquired reverse mortgage buyouts.
Previous wording
•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 wording
•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 our Correspondent channel, although loan production volume increased, the gain for the six months ended June 30, 2025 decreased mostly due to a margin decline attributed to the volatile market conditions at the beginning of the second quarter of 2025. In addition, fee revenue increased due to higher production volume in both our Consumer Direct and Correspondent channels.
Previous 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.
Current wording
The $27.3 million loss on MSR valuation adjustments, net for the three months ended June 30, 2025 is comprised of $43.4 million runoff expense, $21.7 million fair value gain attributed to input and assumption changes and $5.5 million loss 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 $2.7 million higher runoff quarter-over-quarter is mostly due to MSR portfolio growth.
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 $2.3 million higher runoff quarter-over-quarter is mostly due to MSR portfolio growth.
Previous 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.
Current wording
•The $21.7 million fair value gain due to input and assumption changes is mostly attributed to favorable other input and assumption updates to reflect strong MSR market transaction prices. The change from an $18.6 million fair value loss in the three months ended March 31, 2025 to a $21.7 million fair value gain in the three months ended June 30, 2025 is also driven by changes in market interest rates, as the 10-year Treasury rate remained flat in the three months ended June 30, 2025 and declined 35 basis points in the three months ended March 31, 2025.
Previous 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.
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 $5.5 million derivative loss recognized in the three months ended June 30, 2025 and the variance from the prior quarter are driven by the rate changes discussed above and hedge costs. 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
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 wording
The $66.2 million loss on MSR valuation adjustments, net for the six months ended June 30, 2025 is comprised of $84.6 million runoff expense and $18.4 million fair value gain attributed to input and assumption changes net of hedges. The $21.9 million higher loss in MSR valuation adjustments, net in the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 is primarily driven by the impact of interest rate changes, net of hedge activity, and higher runoff mostly due to MSR portfolio growth.
Previous 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.
Current wording
•The change from a $138.0 million fair value gain in the six months ended June 30, 2024 to a $3.1 million fair value gain in the six months ended June 30, 2025 is primarily driven by changes in market interest rates, as the 10-year Treasury rate declined 34 basis points during the six months ended June 30, 2025 compared to an increase of 48 basis points during the same period of 2024.
Previous wording
•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 wording
•The change from a $104.3 million loss from derivatives in the six months ended June 30, 2024 to a $15.3 million gain in the six months ended June 30, 2025 is mainly due to the market interest rate changes noted above.
Previous wording
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 wording
Compared to the six months ended June 30, 2024, Compensation and benefits expense for the six months ended June 30, 2025 increased $9.8 million, or 9% largely due to the same factors described above. 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 the growth of our Consumer Direct channel.
Previous 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.
Current wording
Servicing and origination expense for the three months ended June 30, 2025 was flat compared to the three months ended March 31, 2025, with some offset between the two segments. The higher Originations expense in the second quarter of 2025 driven by higher production volume, was offset by the lower provision expense on non-Agency servicing advances.
Previous wording
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 wording
Compared to the six months ended June 30, 2024, Servicing and origination expenses for the six months ended June 30, 2025 decreased $3.0 million largely due to a lower provision expense for Ginnie Mae claim receivables and servicing advances, partly offset by an increase in provision for indemnification obligations mostly driven by favorable resolutions in 2024, among other offsetting factors.
Previous wording
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 wording
Professional services expense for the three months ended June 30, 2025 decreased $14.3 million compared to the three months ended March 31, 2025 primarily due to an increase in our accrual for probable losses during the three months ended March 31, 2025 in connection with the settlement of a legacy matter, and reimbursements received in the three months ended June 30, 2025 related to prior years’ legal expenses.
Previous wording
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 wording
Compared to the six months ended June 30, 2024, Professional services expense for the six months ended June 30, 2025 increased $8.3 million, mostly driven by an increase in litigation-related expenses recorded in the first quarter of 2025, as discussed above.
Previous 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.
Current wording
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 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.
Current wording
Our income tax benefit for the six months ended June 30, 2025 is primarily driven by the favorable resolution of a prior-year uncertain tax position during the first quarter of 2025. The decrease in the effective tax rate for the six months ended June 30, 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 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.
Current wording
Total assets increased $96.0 million, or 1%, between December 31, 2024 and June 30, 2025 with a $758.1 million increase in our Loans held for sale portfolio driven by the growth of our Originations pipeline, and a $166.4 million increase in our MSR portfolio due to $290.2 million MSR additions, partially offset by runoff. The $654.5 million decrease in reverse Loans held for investment was driven by the runoff of the portfolio exceeding originations since the acquisition of the $2.9 billion portfolio of reverse mortgage loans from Waterfall in November 2024 that is relatively more aged (faster runoff). In addition, servicing advances declined $115.8 million largely driven by seasonal reduction of taxes and insurance (T&I) balances.
Previous wording
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 wording
Total liabilities increased by $57.0 million compared to December 31, 2024, due largely to the factors described above. Our borrowings under Mortgage loan financing facilities increased $667.3 million due to the higher loans held for sale balance, and MSR financing facilities increased $260.7 million with the increase in our MSR portfolio. HMBS-related borrowings decreased by $619.1 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, and Advance match funded liabilities decreased $74.6 million consistent with the seasonal decline in servicing advances (mainly T&I). The $55.6 million decline in Other liabilities is mainly driven by the payment of annual bonuses, the reduction of the servicing float balance due to Rithm, and the favorable resolution of a prior-year uncertain tax position.
Previous wording
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 wording
Total equity increased $38.9 million during the six months ended June 30, 2025 mainly due to $43.6 million net income for the period partially offset by the exercise of common stock warrants by Oaktree and the quarterly dividends on preferred stock.
Previous 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.
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, July 2025 and Fannie Mae, July 2025) suggest a 14% increase in loan origination in 2025 as compared to 2024, with the 30-year fixed rate mortgage expected to end 2025 mostly flat at 6.6%. 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 $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.
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 our origination volume to largely follow the industry growth 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. Refer to Item 3. Quantitative and Qualitative Disclosures About Market Risk for further detail on our hedge strategy.
Previous wording
Operating expenses- Compensation and benefits are a significant component of our cost-to-service and cost-to-originate and is directly correlated to headcount levels. Headcount in Servicing is primarily driven by the number of loans or UPB being serviced and subserviced, and by the relative mix of performing, delinquent and defaulted loans. As servicing volume is expected to modestly increase (see above), we expect a stable workforce with productivity gains. We expect our Originations headcount and operating expenses to align with the expected growth in volume. Our operating expenses are expected to correlate with volumes, with some productivity and efficiencies expected through our technology and continuous improvement initiatives.
Current wording
Operating expenses- Compensation and benefits are a significant component of our cost-to-service and cost-to-originate and is directly correlated to headcount levels. Headcount in Servicing is primarily driven by the number of loans or UPB being serviced and subserviced, and by the relative mix of performing, delinquent and defaulted loans. As servicing volume is expected to increase with relatively more performing loans (see above), we expect a stable workforce with productivity gains. We expect our Originations headcount and operating expenses to align with the expected growth in volume. Our operating expenses are expected to correlate with volumes, with some productivity and efficiencies expected through our technology and continuous improvement initiatives.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Mae MSR financing facilities maturing in the next 12 months, and $63.9 million outstanding under a new MSR financing (repurchase) agreement.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
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 report — wording carried 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.
Previous report — wording carried elsewhere
The $4.8 million reduction in interest expense for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 is driven by the corporate debt refinancing discussed above.