ONIT

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 8:30 a.m. ET Vice President, Investor Relations - Valerie Haertel Chair, President and Chief Executive Officer - Glen Messina Chief Financial Officer - Sean O'Neil Operator: Hello, and welcome, everyone, joining today's Onity Group's Second Quarter Earnings and Business Update Conference Call. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to Valerie Haertel, Vice President, Investor Relations. Please go ahead. Valerie Haertel: Good morning, and welcome to Onity Group's Second Quarter 2026 Earnings Call. Please note that our earnings release and presentation are available on our website at onitygroup.com. Speaking on the call will be Chair, President and Chief Executive Officer, Glen Messina; and Chief Financial Officer, Sean O'Neil. As a reminder, our comments today may contain forward-looking statements made pursuant to the safe harbor provisions of the federal securities laws. These statements, which speak only as of the date they are made, may be identified by reference to a future period or by use of forward-looking terminology and address matters involving assumptions, risks and uncertainties, including those described in our SEC filings. In addition, the presentation and our comments contain references to non-GAAP financial measures, such as adjusted pretax income. We believe these non-GAAP measures provide a useful supplement to discussions and analysis of our financial condition because they are measures that management uses to assess the performance of our operations and allocate resources. Non-GAAP measures should be viewed in addition to and not as an alternative for the company's reported GAAP results. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures and management's reasons for including them may be found in the press release and the appendix to the investor presentation. We made changes to our non-GAAP methodology this quarter and encourage you to review the presentations note regarding non-GAAP financial measures. Now I will turn the call over to Glen Messina. Glen Messina: Thanks, Valerie. Good morning and thank you for joining our call. We're looking forward to sharing our results for the second quarter, as well as reviewing our strategy and financial objectives to deliver long-term value for our shareholders. Let's get started on Slide 3. In the second quarter, our sound strategy and strong operating fundamentals delivered double-digit year-over-year revenue growth and record origination volume. Our balance business performed well with rising interest rates driving increased adjusted pretax income and servicing, offsetting declining adjusted pretax income and origination. We're excited to report we've completed the reverse asset sale to Finance of America, as well as transferred most of the legacy subservicing back to Rithm. We believe these transactions simplify the business, improve profitability and focus an increased strategic flexibility. The second quarter net loss includes roughly $33 million of pretax costs related to these transactions, as well as market-driven unfavorable asset fair value adjustments. Finally, considering persistent geopolitical instability, inflation and market volatility, we expect our full year 2026 adjusted ROE to be at the low end of our guidance range. Let's turn to Slide 4 to review a few key financial highlights. We again delivered double-digit year-over-year revenue and servicing UPB growth, as well as record origination volume with improved revenue margins versus last quarter. Total servicing additions were up 2.8x versus prior year, driven by our strong originations and subservicing additions, which exceeded our first half expectations. Consumer Direct continued to perform well, delivering funded volume up about 3x over last year with improved refinance recapture rates. Our net loss includes $9 million of pretax costs related to the reverse asset sale and legacy subservicing transfer, as well as $24 million of pretax asset fair value change, of which about half is related to reverse. John will provide more details on these costs later in the presentation. Origination adjusted pretax income increased over 3x versus last year, reflecting lower interest rates driving higher industry volume levels, as well as improved execution. Servicing adjusted pretax income decreased over 60% versus last year as lower interest rates drove an increase in MSR runoff of almost 80% versus prior year levels. Our presentation of adjusted pretax income now reflects MSR runoff based on actual servicing UPB runoff and all changes due to rates, inputs and assumptions are classified as notables. We believe this approach is consistent with certain of our peers and addresses feedback from investors. Let's turn to Slide 5 to discuss the actions we're taking that we believe will improve long-term ROE performance. We are taking focused and deliberate actions to improve ROE long term that we organize into 3 categories: servicing scale, portfolio optimization and technology-driven productivity. Regarding scale, every $50 billion in servicing can reduce fixed cost per loan by 13%. We continue to target a roughly 50-50 mix of owned servicing and subservicing to grow our portfolio on a capital-efficient basis, as well as balance EPS growth and ROE. Our organic growth strategy focused on delivering positive outcomes for customers has driven steady servicing portfolio growth. Next is optimizing our own servicing and subservicing portfolios. We've reduced our investment in reverse MSRs because yields are 2 percentage points lower than forward and are not easily leveraged and they have a higher relative volatility. We are leveraging machine learning using client assets and consumer data to identify what we believe are the most profitable MSRs to focus our origination activities and improve returns. In subservicing, we've largely exited the Rithm subservicing and are growing in commercial and reverse, which is more profitable and requires specialized skills and systems, which we have. Finally, technology-driven productivity has been a foundational element of our strategy embedded in our business culture. We've significantly reduced expenses since the acquisition of PHH, while delivering servicing portfolio growth and building a top 10 nonbank originations platform from scratch. Robotic process automation, intelligent document processing and natural language processing have reduced manual effort, as well as transform document management and customer engagement. Future investments are focused on driving additional productivity, improving recapture and enhancing the customer experience. Let's turn to Slide 6 to review what I believe differentiates Onity from our peers. We've built a strong foundation and a growing customer-focused business by consistently delivering positive and differentiated outcomes for our customers. We're a top 10 nonbank originator servicer and subservicer with a balanced and resilient business built to perform through business cycles. Our award-winning technology-enabled platform has been recognized as a top-tier servicer by Fannie Mae, Freddie Mac and HUD for 5 consecutive years. Our platform delivers superior operating outcomes for our customers, which when combined with our enterprise sales model, expansive product suite and diverse capabilities fuels meaningful portfolio growth. We've built a strong foundation by shedding in profitable assets and relationships, investing in talent and technology and building trust with clients by delivering a positive experience and targeted solutions that create measurable value. We're now growing from a position of strength with a more focused and simplified business with increased strategic flexibility. Let's turn to Slide 7 to review our balanced business model. While there may be variability in any given quarter due to evolving market dynamics, our balanced business continues to demonstrate long-term resiliency to changes in interest rates. The complementary profitability dynamics of origination and servicing balance each other as interest rates have declined in the 12 months ended the second quarter of 2026 versus the 12 months ended second quarter of 2025. And with interest rates increasing in the second quarter, servicing adjusted pretax income has improved, offsetting declining origination income. We continuously optimize operations capacity and scalability, as well as our MSR investment profile to enable our balanced business model to operate as intended through interest rate cycles. Let's turn to Slide 8 for more about our growth focus and actions. Our enterprise sales approach and focus on delivering value for clients is producing terrific results. In the second quarter, our originations grew 64% versus prior year, outpacing industry volume growth and achieving record levels since we built our platform. We've improved our refinance recapture rate to 51% in the second quarter, up 3 percentage points versus the prior year, with a roughly 3x increase in refinance payoff volume. Our recapture performance has continued to exceed the ICE industry average for the last 12 months, and we believe we're delivering top-tier recapture performance versus our third-party origination-centric peers. With mortgage interest rates increasing, we've seen a doubling of home equity product volume versus the second quarter of last year. We believe this is a valuable product for consumers and one that helps us manage operating capacity and improve customer retention. As a reminder, we do not include home equity volume in our refinance recapture rates. Our originations team is performing very well, and we're continuing to invest in technology and process optimization to enhance the customer experience, reduce costs and improve scalability and competitiveness. Let's turn to Slide 9 to see what we're working on. We're embedding AI, analytics and automation across our lending platform to improve our recapture rate by increased capacity and improving human performance. We are using voice agents to support customer communication across several aspects of the lending and servicing process. Voice agents create historically unparalleled capacity to engage borrowers seeking to refinance or access their home equity and generate actionable leads for our sales team. This is driving improved connectivity with customers and increasing engagement, which in turn drives increased locks and fundings. AI call monitoring analytics provide insights to optimize marketing, improve opportunity identification, fine-tuned value propositions and improve sales performance. Real-time agentic AI integration through our partnership with Blend is aimed at optimizing customer and employee workflows and providing a faster more guided experience. Technology allows us to turn interactions, borrower signals and workflow events into intelligence that drives superior recap performance and customer experience. It's clear that our investments are delivering tangible results, and we remain excited about the future potential of our investment pipeline. Let's turn to Slide 10 to discuss subservicing. The disruption created by industry consolidation among subservicers continues to create opportunities. We are winning new clients with strong platform performance and a compelling value proposition. First half subservicing additions of $35 billion exceeded our guidance with key wins with capital partners, banks and independent mortgage banks, and we continue to have an active opportunity pipeline across all 3 segments. We're excited about the growth we're seeing in business purpose residential and commercial subservicing driven by our expanded product offerings. UPB is up 25% versus prior year, and we were named the servicer on our first single-family rental securitization for a top-tier client in that space. We continue to invest in technology to improve transparency, increase turn times and client service functionality. Our efforts are yielding results as evidenced by our client Net Promoter Score of 70 in the first half of 2026, a level raggling some of the best service organizations. Let's turn to Slide 11 to talk about how we've grown our servicing portfolio. Total servicing UPB ended the quarter up 10% year-over-year versus total industry servicing growth of 3% with growth in both owned MSR and subservicing. Year-over-year servicing additions net of runoff of $76 billion was largely driven by organic growth and more than offset planned transfers to Rithm and other client asset sale-driven deboardings. With MSR demand keeping prices elevated, we continue to see clients monetize their older MSRs, while replenishing their portfolio with new originations. There should be no question as to our ability to compete for business and grow our servicing portfolio. Our double-digit portfolio growth despite the Rithm transfer and client MSR sales highlights the strength of our value proposition and the power of our origination capability. Now I'll turn it over to Sean to discuss our financial results in more detail. Sean O'Neil: Thanks, Glen. Let's turn to Slide 12, where we describe the impact to GAAP pretax income. The main story here is that the bulk of the decline in pretax income, about $24 million, is due to nonrecurring transaction costs or fair value marks on reverse assets. Ongoing operations and servicing was the strongest contributor to the $6 million increase in GAAP pretax income quarter-over-quarter. The Finance of American transaction and to a lesser extent, costs associated with the Rithm deboarding created a $9 million negative onetime impact in the quarter. This was further exacerbated by a decline in the fair value of the reverse assets due to mark-to-market impacts, primarily less favorable HECM spreads. The majority of these assets, about 80% of the fair value, have been sold to Finance of America. Thus, the impact of fair value changes on the remaining portfolio will be greatly reduced. Furthermore, the assets we are retaining are older and have less sensitivity to spread movements given their shorter duration. The remaining mark-to-market impacts were due to a mild increase in delinquency as well as hedge costs. Regarding delinquencies, if you refer to the appendix page on MSR valuation, you will see the 30-plus delinquency bucket on GSEs deteriorated. However, the Ginnie Mae delinquency buckets improved quarter-over-quarter. The 30-plus category is the most volatile measure, so we focus more on the longer periods, such as the 60 and 90 plus. We are closely monitoring the portfolio for any indications of longer-term stress on borrowers. The final impact is $4 million due to both hedge costs and fair value inputs, which is a small percentage of the $2.5 billion fair value MSR book that we hedge. Please turn to Slide 13 for a perspective on MSR fair value impacts. This graph shows 3 different drivers of MSR fair value broken into runoff, rates net of hedge and inputs and assumptions. Runoff is the actual MSR value of unpaid principal balance that either paid in full or amortized during the quarter. Then we show the impact of interest rates net of hedge and finally, MSR fair value changes from inputs and assumptions. This last category includes changes in loan characteristics such as delinquency status, borrower escrow payments, assumptions for prepayments, loan defaults, servicing costs, ancillary income, discount rate and changes in bulk market MSR prices, all of which impact modeled cash flows and MSR fair value. Runoff is always detrimental to net income and can increase due to several variables, including higher prepayment speeds due to lower interest rates. You can see this impact from Q4 '25 through the current quarter when we had several refinance surges due to a temporary but meaningful drop in mortgage rates. Another driver of runoff is portfolio size, which has been increasing. With respect to the other categories, both interest rates net of hedge as well as input and assumptions become smaller drivers when considered across multiple quarters in a cumulative fashion. The average of either of these categories shows a volatility of about plus or minus 3 basis points. That's why we showed these impacts in notables, which impacts net income, but do not include them in adjusted pretax income, given the periodic volatility or swings, we believe this is similar to several large competitors in our space. Please turn to Slide 14 for a similar view of Reverse. Here, you can see that the Reverse book experiences far more volatility than the forward book. The impact from interest rates and inputs and assumptions are both materially greater as a percentage of the total balances in Reverse compared to forward on the prior page. This shows how our recent sale of the majority of this book should lessen MSR fair value volatility going forward. Please turn to Slide 15 for a recap of key financial measures. Revenue was up 24%, continuing the strong year-over-year growth trend. Both servicing and originations contributed to the year-over-year growth in revenue due to higher volumes and stronger execution, which included improved recapture, reduced servicing advances and better data analytics. Sequential revenue growth was up slightly as servicing increased more than the origination decline. This is primarily due to growth in the owned MSR volume driving revenues. Operating efficiency continued to improve on a 12-month trailing basis, which reflects our long-term focus on cost-effective growth and book value per share is up significantly, about $13 year-over-year. Please turn to Slide 16 for detail on originations. Originations pretax income grew by over 3x on a year-over-year basis, driven by higher volume across the combined business. The $15.5 billion of funded volume in the second quarter was our largest quarter in history. The strongest contributor was the B2B channel. This is correspondent lending and co-issue. The volume improvement did not come at the expense of margins as those also improved due to our strong enterprise sales efforts and continued improvements on analytics to drive margin management. Consumer Direct remained profitable but generated lower adjusted pretax income from 2 drivers. The first is lower lock volume in the second quarter by 30% quarter-over-quarter. Lock volume is a key metric for recognizing revenue. The second is elevated consumer direct operating expense due to lagging commissions from the first quarter refinance surge. With respect to staffing, our objective is to balance efficiency with flexibility. We optimize our capacity levels to balance current earnings growth and accommodate any future interest rate decline. Hence, our origination staffing is at levels to support higher than current volumes. Both B2B and consumer direct channels benefited from a continued focus on growing new products, including non-QM and second liens. Second liens have more than doubled in volume year-over-year with over $70 million funding in the second quarter. Please turn to Slide 17 for our servicing performance. Starting with the middle graph, strong owned MSR growth helped drive servicing revenues up 13% from the prior year and 3% sequential quarter. Servicing adjusted pretax income improved on a sequential quarter due to better float income and better runoff as mortgage rates stayed elevated in the second quarter. Year-over-year, adjusted pretax income is still lower, driven primarily by higher runoff, which you can see at the bottom of the right graph, which is then partially offset by improved revenues. Please turn to Slide 18 for details on improved advances in servicing. Building on the strong improvements we saw last quarter, servicing continues to improve the advanced balances with a 33% decline over the last 2 years. This comes even as we grow owned servicing UPB as we focus on the small percentage of loans that drive the most advances. As you can see by the dark blue graph, the bulk of our advances are linked to delinquencies in our non-agency owned MSR book. We have been deploying various strategies such as AI-enabled agents that assist our contact center in quickly providing the most effective range of solutions for the borrower. As we scale AI-powered solutions for our contact center, we are targeting an annual savings of about $3 million at our current portfolio size. Slide 19 gives our approach to capital allocation. Our considerations for capital deployment focus on organic growth, liquidity and returning capital to investors. Organic growth includes adding owned MSR via profitable originations activity. Other examples include broadening our product offering for both originations and servicing. In parallel, we maintain sufficient liquidity to ensure we meet both regulatory and lender requirements, as well as holding enough buffer for various stress scenarios. We also consider ways to return capital to investors. Our 10-Q provides information on the recently completed $10 million share buyback, as well as the ongoing $20 million buyback, which reflect the value we see in acquiring shares that are priced materially lower than book value. On Slide 20, we provide our updated view on 2026 guidance. As Glen mentioned earlier, we are guiding to the lower end of the adjusted pretax income range of 10% to 15% based on current market conditions and the first half results. The other areas we provide guidance on are unchanged. We continue to grow our total servicing book with strong growth this most recent quarter, improve our operating efficiency and maintain strong hedging performance. Back to you, Glen. Glen Messina: Thanks, Sean. Let's turn to Slide 21 for a few comments before we open the call for questions. Onity is a top 10 nonbank mortgage originator, servicer and subservicer with a balanced and resilient business that is winning and growing in our target markets. Our second quarter results demonstrate that our growth strategy is sound and our operating fundamentals are strong. We've built a technology-enabled award-winning platform that is efficient, delivers differentiated performance and excellent service. We are taking focused and decisive actions to improve ROE over the long term organized into 3 categories: increasing servicing scale, portfolio optimization and technology-driven productivity. To that end, we believe the reverse asset sale to Finance of America and the legacy subservicing transfer simplify the business, improve profitability and focus and increased strategic flexibility. With a strong foundation, simplified business and greater flexibility, we believe we are well positioned to navigate the current environment, capitalize on attractive opportunities and continue delivering sustainable, prudent growth. All of this adds up to a business that delivers adjusted ROE comparable to our peers with increasing scale and market position at a more attractive valuation. With that operator, let's open the call for questions. Operator: [Operator Instructions] We will take our first question from Bose George with KBW. Francesco Labetti: This is Frank Labetti on for Bose. I just want to start, you guys nicely laid out the goals for your pretax adjusted ROE range. Can you just help quantify what bridges the gap to the lower end of the range given you're in the 9% range currently and the market is pretty volatile. So, yes. Glen Messina: So, look, we -- based on the ROE expansion actions that we laid out in the presentation on Page 5 in terms of driving improving servicing scale, optimizing the servicing portfolio and then obviously continuing to drive productivity. Look, we believe those are going to help us improve the ROE of the business despite some of the volatility that exists in the marketplace where we really saw some of that volatility hit us in the past is the loan origination pipeline hedging, we saw some -- a lot of noise in that during the first quarter of this year, and that's in the second quarter that seemed to behave a lot better. We saw improved margins in the origination space, even though there continues to be market volatility, and we would have record origination volumes as well, too. So, look, we feel good about the actions we're taking to drive improved adjusted pretax ROE. And we feel a little bit better about our ability to manage some of the volatility that we've experienced in the first half of the year. So, yes, those are the actions that we think get us into the ROE range. Sean, anything you want to add? Sean O'Neil: Yes. Frankie, I'd add that some of the pressure we've seen on adjusted pretax income over the last 3 quarters has been very high runoff. If rates do stay elevated, that theoretically should improve over time. That improves servicing adjusted pretax income, and we continue to show an ability to generate pretax income in originations even a rather difficult quarter like the one that just happened. Francesco Labetti: Great. That's very helpful. And then just a little more broadly, banks had a pretty meaningful increase in volumes and taking share during the quarter. How do you see them evolving in the market? And then secondly, in the correspondent channel, can you just talk about competition you're seeing there just at the GSE cash would note? Glen Messina: Sure. So, Frankie, look, banks have always been a force to be reckoned with. When they want to play in this space, they typically come in and buy and buy aggressively. And quite frankly, we're seeing a number of bank buyers of MSRs in the marketplace during the first half of this year who have a seemingly insatiable desire for MSR assets. Net-net, we think that's good for valuations, but obviously, creates an interesting competitive dynamic. If the bank capital regulations, proposed relaxing of bank capital regulations for holding MSRs change. Look, I think there's a number of financial institutions, which I should say, banks who have strong mortgage franchises today, they'll continue to grow them. Based on our conversations with experts around the banking industry, it doesn't seem to be a whole lot of folks who would be considering a wholesale change in their strategy of I'm going to go -- I'm not a mortgages today, I'm going to go gangbusters. That's not the predominant thinking. Those who are in will likely get bigger and increase their franchise. That said, it makes businesses like ours more valuable in the sense that if somebody is thinking about getting into the mortgage space, it's hard to start de novo. If you want to get in, you get in with scale. And you look at a business like ours that has billions of dollars of custodial and escrow deposits, which are considered to be sticky deposits, that's an interesting situation. I think maybe how banks think about looking at nonbank mortgage companies. In terms of competition in the correspondent space, look, I think our correspondent team is just doing a phenomenal job. They are focused on value-based selling using an enterprise sales strategy. And look, our ability to achieve record origination volumes where, frankly, industry origination volumes with rates up are not looking as encouraging as they were in the first quarter. The team is just doing a phenomenal job. And again, we -- I think Sean talked about margins increased from 23 to 26 basis points as well. So, look, correspondent has always been competitive and it's the most competitive -- well, maybe compared to broker, but it might be second most competitive space in the industry. But I think our team is just doing a terrific job there. Really proud of them. And again, that's part of why we were able to record origination volumes. Operator: Our next question comes from [ Randy Binner ] with Texas Capital. Unknown Analyst: This is all very helpful. And so I'd like to, if I can, just ask about the ROE again and maybe play some of that back because it was lower in the first quarter, I just want to make sure my model is kind of reflecting getting to that 10%. And so, kind of isolating it to 3 things. And I just want to -- I'd love to kind of hear your thoughts or feedback on this. So one, you're going to have an ongoing buyback. So that helps the denominator. If you can comment on kind of your plan to execute on that, that would be helpful. The second thing is, your other revenue line has been better at least versus our expectation. And understanding what that is and the sustainability of that other revenue line is just marginally helpful. And then the third thing and most importantly is that -- and you've said this kind of quite clearly, the MSR mark should be more stable, I think, because of everything you've laid out your program plus your program is augmented more broadly and reverse going away will make it more stable. But how do we keep tracking that? Do we look at the MOVE index on Bloomberg? Or like how do we judge that lower kind of vol in MSR as we get through the third quarter and even the fourth quarter? So sorry, that was a lot there, but just trying to build the building blocks of the low end of the ROE. Glen Messina: A couple of things here. So, let me start with the share buyback program. We completed the $10 million authorization from the Board. The Board then reauthorized another $20 million in share repurchases. When our Q comes out later today, you'll see in our Q the amount of shares we bought back and the dollar volumes and average share price, and we're continuing to -- it's a 10b5-1 program. It continues to execute, and that's going to run its course. So, the share buyback should continue generally at the rate that we saw in the second quarter. And again, that will be disclosed in our Q. As it relates to MSR volatility, I'd say the volatility in our MSR forward MSR, so I want to separate forward from reverse. Volatility in the forward MSR certainly has been, as Sean pointed out in his charts, within the range of what I call the reasonable expectation for volatility. So, net-net, when you look at the forward MSR change due to rates, inputs and assumptions, it was about a $4 million net expense or net cost in the second quarter versus basically breakeven in the first quarter. So, a slight deterioration on one of Sean's charts. I think he showed a $4 million unfavorable change. But when I look at it, it's -- it was $0 to $4 million loss, right? So, on $150 billion, $170 billion of MSR UPB, very small range there. Delinquency trends that was the next thing Sean talked about. We did see an improvement in the Ginnie Mae delinquencies as we would have expected. We did see a slight -- we saw an uptick in GSE delinquencies, Sean. It looks like those are beginning to abate, and we're seeing those return to normal. So, we feel pretty good about the consumer. We're not seeing anything that would suggest in the next 6 months, there's going to be a radical shift in consumer payment behavior. It's going to be seasonality that always happens, right? So, I think the forward MSR volatility is much -- I think it's well controlled and it's within the range. Our capital markets team is doing a terrific job managing that asset. On the reverse side, I got to tell you, we saw an extreme amount of volatility in that asset between the first and second quarter. To give you an order of magnitude, in the second quarter, net unfavorable fair value adjustments to rates inputs and assumptions of about $12 million on the reverse MSR, and that's on a UPB of about $10 billion -- sorry, $12 million on $10 billion, which when you think about it in a relative scale as compared to the forward side, just the volatility is off the charts. And that -- in the first quarter, it was a $4 million good guy, right, or a $3 million good guy, and that's how you get to the $15 million swing that Sean showed on this chart. So, by virtue of decreasing, we're selling about 80% of our MSRs to Finance of America, who is much better equipped as a solely reverse mortgage-focused company to deal with that volatility and address it. I think on a go-forward basis, we would expect to see much less volatility in the reverse MSR. Randy, I may have missed your second point? Unknown Analyst: Yes. That was super helpful. And I love the detail is helpful just to have confidence and kind of modeling a lower ball around the MSRs. The other part -- the third question I had, and these are just -- again, this is just me looking at the numbers and trying to identify the 3 kind of moving pieces. But incrementally, at least for me, the other revenue line has performed well year-to-date. And so, the question is what's in that other revenue line? What is -- and then is it sustainable to kind of deliver $20 million of rev because it's consistently had that number $19.1 million and $20.4 million in the first and second quarter, respectively. So, is that sustainable? And what is it? Glen Messina: Sean, I'll turn it over to you. You just as maybe just to tee it up for you. There's probably escrow earnings and things like that are falling into that other revenue line, but I'll turn it over to you. Sean O'Neil: Yes. Randy, how is it going? Yes, that is driven somewhat by ancillary income that we get off of higher owned MSRs. And so, as you see the growth in our owned MSRs, you're going to see that both on the top line where you see servicing and subservicing fees and then as well as some that in other revenue net. And so yes, we think that is sustainable and continue to look for that as well as gain on sales to continue to drive growth. Unknown Analyst: All right. Great. And then if I can just do one follow-up on a comment that Glen made that I had observed in the market as well. So, I love your insight. But you said you mentioned some of the GSE delinquencies had bumped up and then -- but now are improving. I just want to focus on that. Is that what you -- is that the case? And if so, do you know what kind of caused those to go higher and then improve? Glen Messina: Yes. So, we did see a bump up in particularly the 30-day bucket in GSE delinquencies. And you'll see that if you look at our earnings supplement, there's the MSR valuation page. And you'll see that the delinquencies in GSE spiked up and largely sitting in the 30-day bucket. Look, our -- based on some of our work looking historically over the past couple of years, there's this unusual seasonal spike in delinquencies right around the 4th of July holiday. And I don't know what it is and what the consumer psyche is around it. But we do see -- tend to see delinquencies, 30-day delinquencies rise just in the month of June before the 4th of July holiday and then fall after the 4th of July holiday. So, Sean, any more insights you want to put into that? Sean O'Neil: Our servicing leaders speculate that's because people actually end up missing depending where the holiday falls, and they make 2 payments in the month of July. And you'll see seasonally a lot of times the 30-plus recovers in the following month. So, until we see details on July, we can't go too much into that. But I'd add that changes in 30-plus are kind of -- could be seasonal, could be driven by many things. We tend to look at the 60 and the 90-plus metrics for longer-term impact. We'll continue to monitor that going forward, of course. Unknown Analyst: I guess people are just too busy going to the beach and living their lives to pay that bill. So -- but they catch up. So, I guess that's good. Operator: [Operator Instructions] And at this time, there are no further questions in queue. I will now turn the meeting back to Glen Messina for closing comments. Glen Messina: Thanks, Nicky. And certainly, thanks to all our shareholders and our key business partners for your support of the Onity business. I also want to thank and recognize the Board of Directors and the global business team for all their hard work and commitment to our success. And I look forward to updating you on our progress on our next earnings call. Thank you so much. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. Before you buy stock in Onity Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Onity Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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Interested in Onity Group Inc.? Here are five stocks we like better. Revenue rose 24% year over year, while funded originations reached a record $15.5 billion, up 64%, driven primarily by correspondent lending and co-issue activity. Origination margins also improved to 26 basis points. Onity reported a quarterly net loss after approximately $33 million in transaction costs and unfavorable fair-value adjustments, including expenses tied to its reverse asset sale to Finance of America and the transfer of legacy subservicing to Rithm. Management expects full-year 2026 adjusted ROE at the low end of its 10%–15% guidance range amid geopolitical, inflationary and market pressures, while pursuing servicing growth, AI-driven cost savings and additional share repurchases. Onity Group (NYSE:ONIT) reported double-digit year-over-year revenue growth and record quarterly origination volume in the second quarter of 2026, while transaction costs and unfavorable fair-value adjustments contributed to a net loss. Chair, President and Chief Executive Officer Glen Messina said the company’s balanced mortgage origination and servicing model continued to provide offsetting earnings dynamics as interest rates changed. Higher rates during the second quarter supported servicing profitability, while origination adjusted pre-tax income declined sequentially. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling “Our sound strategy and strong operating fundamentals delivered double-digit year-over-year revenue growth and record origination volume,” Messina said. He added that Onity completed its reverse asset sale to Finance of America and transferred most of its legacy subservicing business back to Rithm. Messina said the transactions are intended to simplify the company’s operations, improve profitability and focus, and provide greater strategic flexibility. The quarterly net loss included approximately $33 million of pre-tax costs associated with the transactions and market-driven unfavorable asset fair-value adjustments. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Chief Financial Officer Sean O’Neil said revenue increased 24% from a year earlier, supported by higher servicing and origination volumes, improved recapture rates, lower servicing advances and data analytics. Sequential revenue growth was modest, as servicing growth more than offset an origination decline. Funded originations reached $15.5 billion in the second quarter, the largest quarterly volume in the company’s history. Messina said originations rose 64% from the prior-year period and outpaced industry growth. The business-to-business channel, including correspondent lending and co-issue activity, was the largest contributor to the volume increase. → No Hangover: Revisiting Microsoft One Week After Earnings O’Neil said origination pre-tax income rose more than threefold from the prior year, driven by increased combined-business volume and stronger execution. Margins improved as well, with Messina noting that margins increased from 23 basis points to 26 basis points. Consumer-direct lending remained profitable, though its adjusted pre-tax income declined sequentially. O’Neil attributed that decline to a 30% quarter-over-quarter decrease in lock volume and higher operating expenses from commissions tied to the first-quarter refinance surge. Onity’s refinance recapture rate was 51% in the second quarter, up three percentage points from a year earlier, while refinance payoff volume increased roughly threefold. The company also reported that home-equity product volume doubled from the prior-year quarter. Second-lien originations more than doubled year over year, with more than $70 million funded during the quarter. Total servicing unpaid principal balance rose 10% from a year earlier, compared with 3% growth for the overall servicing industry, according to Messina. Servicing additions net of runoff totaled $76 billion year over year, primarily reflecting organic growth and offsetting planned transfers to Rithm and deboardings associated with client asset sales. First-half subservicing additions reached $35 billion, exceeding management’s guidance. Onity said it won business from capital partners, banks and independent mortgage banks and saw growth in business-purpose residential and commercial subservicing. Commercial and business-purpose residential subservicing UPB rose 25% from a year earlier. Servicing revenue increased 13% year over year and 3% sequentially, helped by growth in owned mortgage servicing rights, or MSRs. Servicing adjusted pre-tax income improved from the first quarter because of better float income and improved runoff as mortgage rates remained elevated during the second quarter. However, servicing adjusted pre-tax income remained lower than a year earlier, primarily because MSR runoff increased nearly 80% year over year as lower rates in prior quarters contributed to refinancing activity. The company changed its non-GAAP methodology for adjusted pre-tax income. Under the revised approach, MSR runoff is based on actual servicing UPB runoff, while changes related to rates, inputs and assumptions are classified as notable items rather than included in adjusted pre-tax income. O’Neil said approximately $24 million of the decline in GAAP pre-tax income was related to nonrecurring transaction costs or fair-value marks on reverse assets. The Finance of America sale and costs associated with the Rithm deboarding created a $9 million negative one-time effect during the quarter. The remaining pressure came largely from lower fair values on reverse assets, including less favorable HECM spreads. O’Neil said about 80% of the fair value of those reverse assets has been sold to Finance of America, which should materially reduce the company’s exposure to reverse MSR valuation volatility. Management said the remaining reverse assets are older and have shorter duration, making them less sensitive to spread movements. Other fair-value impacts included a mild increase in delinquencies and hedge costs. Messina said the company saw an increase in GSE 30-day delinquencies, which management believes may reflect a seasonal pattern around the Fourth of July holiday. He said the company is monitoring longer-term 60- and 90-day delinquency measures more closely and has not seen indicators of a material shift in borrower payment behavior. Onity outlined three areas intended to improve long-term return on equity: increasing servicing scale, optimizing its portfolio and expanding technology-driven productivity. Management said every $50 billion of servicing growth can reduce fixed cost per loan by 13%. The company is targeting an approximate 50-50 mix of owned servicing and subservicing. It has reduced its investment in reverse MSRs, citing yields about two percentage points below forward MSRs, limited leverageability and greater volatility. Onity is also deploying machine learning, voice agents, call-monitoring analytics and workflow tools through its partnership with Blend. O’Neil said the company is targeting roughly $3 million in annual savings at its current portfolio size as it scales AI-powered contact-center solutions. The company completed a $10 million share repurchase authorization and has an additional $20 million buyback authorization in place. Management said the repurchase program reflects its view that its shares are trading materially below book value. Looking ahead, Messina said persistent geopolitical instability, inflation and market volatility led the company to expect full-year 2026 adjusted ROE at the low end of its guidance range. O’Neil said the company was guiding to the lower end of its stated 10% to 15% range based on current market conditions and first-half results. Onity Group, listed on the New York Stock Exchange under the ticker ONIT, is a technology company specializing in enterprise operations management software. Its platform is designed to help legal, finance, human resources and corporate services teams automate and streamline mission-critical workflows. Leveraging artificial intelligence and no-code automation tools, Onity's solutions aim to reduce manual processes, improve visibility and ensure compliance across complex organizational structures. The company's flagship offerings include contract lifecycle management, matter management, e-billing and spend management, as well as enterprise deal management. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Onity Group Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Record origination volume and significant subservicing additions driving double-digit revenue and servicing growth Strategically repositioned the business through reverse asset sale and transfer of legacy subservicing WEST PALM BEACH, Fla., Aug. 06, 2026 (GLOBE NEWSWIRE) -- Onity Group Inc. (NYSE: ONIT) (“Onity” or the “Company”) today announced its second quarter 2026 results. Second Quarter 2026: Net loss attributable to common stockholders of $13 million; diluted EPS of ($1.53); ROE of (8%) Adjusted pre-tax income* of $14 million, resulting in annualized adjusted ROE* of 9% Net loss includes $9 million pre-tax cost related to reverse asset sale and legacy subservicing transfer and $24 million pre-tax unfavorable asset fair value changes $283 million in total revenue, up 15% vs Q2 2025; $281 million in adjusted revenue,* up 24% vs Q2 2025 $42 billion in total servicing additions, including quarterly record of over $15 billion in Originations, up 64% vs Q2 2025; $341 billion in ending servicing UPB, up 10% vs Q2 2025 2026 Outlook: Maintained adjusted ROE* guidance range at 10% - 15%, expected to be at the lower end of the range, in light of persistent geopolitical instability, inflation, and market volatility Reaffirming previous guidance on servicing UPB growth, MSR hedge effectiveness, and operating efficiency * Beginning with Q2 2026, we changed the methodology used to calculate Adjusted Pre-Tax Income and Adjusted ROE. See “Note Regarding Non-GAAP Financial Measures” below. Glen A. Messina, Chair, President and CEO of Onity Group, said, “Our second quarter results demonstrate that our growth strategy is sound and our operating fundamentals are strong. We delivered double-digit revenue and servicing UPB growth with record origination volume and significant subservicing additions. We also completed servicing portfolio repositioning actions to simplify the business, improve profitability and focus, and increase strategic flexibility. At the same time, net loss was impacted by portfolio restructuring costs as well as market-driven unfavorable asset fair value changes; however, these items do not diminish the progress we are making or the strength and direction of the business.” Messina continued, “Onity is a top 10 non-bank servicer and originator with increasing scale, a balanced business model that is working as intended, and a modernized technology platform. With a strong foundation, simplified business and greater flexibility, we believe we are well positioned to navigate the current environment, capitalize on attractive opportunities, and continue delivering prudent growth.” Additional Second Quarter 2026 Operating and Business Highlights Completed transaction with Finance of America Reverse LLC for sale of reverse assets; sold approximately 80% of reverse MSRs, based on fair value as of June 30, 2026; net proceeds of approximately $77 million First half 2026 subservicing additions of $35 billion exceeds prior first half guidance Funded recapture volume up 3.1x, compared to Q2 2025 Transferred approximately $22 billion of Rithm servicing UPB in first half 2026; $8 billion UPB remaining of which $4 billion is expected to transfer, subject to receipt of consents Servicing advances decreased 33% vs Q2 2024 to $369 million, while owned forward servicing UPB increased 44% vs Q2 2024 to $176 billion Repurchased 141,343 shares of Onity common stock during Q2, utilizing $5.8 million Book value per share of $73, up $13 compared to Q2 2025 Webcast and Conference Call Onity will hold a conference call on Thursday, August 6, 2026, at 8:30 a.m. (ET) to review the Company’s second quarter 2026 operating results. All interested parties are welcome to participate. You can access the conference call by dialing (800) 245-3047 or (203) 518-9765 approximately 10 minutes prior to the call; please reference the conference ID “Onity.” Participants can also access the conference call through a live audio webcast available from the Shareholder Relations page at onitygroup.com under Events and Presentations. An investor presentation will accompany the conference call and be available by visiting the Shareholder Relations page at onitygroup.com prior to the call. A replay of the conference call will be available via the website approximately two hours after the conclusion of the call. A telephonic replay will also be available approximately three hours following the call’s completion through August 20, 2026, by dialing (844) 512-2921 or (412) 317-6671; please reference access code 11162006. About Onity Group Onity Group Inc. (NYSE: ONIT) is a leading non-bank financial services company delivering mortgage servicing and originations solutions through Onity Mortgage Corporation. As one of the largest mortgage servicers in the country, we help consumers and business clients achieve their homeownership and financial goals with a wide range of servicing and lending programs powered by a technology-enabled, customer-centric platform. Headquartered in West Palm Beach, Florida, with offices and operations in the United States, the U.S. Virgin Islands, India and the Philippines, we have been serving our customers since 1988. For additional information, please visit onitygroup.com or onitymortgage.com. Forward Looking Statements This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminology. Forward-looking statements are typically identified by words such as “expect”, “believe”, “foresee”, “anticipate”, “intend”, “estimate”, “goal”, “strategy”, “plan” “target” and “project” or conditional verbs such as “will”, “may”, “should”, “could” or “would” or the negative of these terms, although not all forward-looking statements contain these words, and includes statements in this press release regarding our guidance on adjusted ROE, UPB growth, MSR hedge rate effectiveness and operating efficiency, our ability to sustain growth, capitalize on opportunities and create value, and the impact of the servicing portfolio repositioning on our business, profitability and growth opportunities. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Readers should bear these factors in mind when considering such statements and should not place undue reliance on such statements. Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. In the past, actual results have differed from those suggested by forward looking statements and this may happen again. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the potential for ongoing disruption in the financial markets and in commercial activity generally as a result of U.S. and global political events, changes in monetary and fiscal policy, and other sources of instability; the impacts of inflation, employment disruption, and other financial difficulties facing our borrowers; the timing for receipt of required consents to transfer certain Rithm Capital Corp. assets, the size of the portfolio following transfer, and our ability identify and execute on alternative sources of revenue for our servicing business; the adequacy of our financial resources, including our ability to sell, fund and recover servicing advances, whole loans, future draws on existing reverse loans, and HECM and forward loan buyouts and put backs, as well as repay, renew and extend borrowings, borrow additional amounts when required, meet our asset investment objectives and comply with our debt agreements, including the financial and other covenants contained in them; our ability to interpret correctly and comply with current or future liquidity, net worth and other financial and other requirements of regulators, the Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac) (together, the GSEs), and the Government National Mortgage Association (Ginnie Mae); the timing for implementation of our technology and AI-based initiatives and the extent to which they contribute to our future success; breach or failure of Onity’s, our contractual counterparties’, or our vendors’ information technology or other security systems or privacy protections, including any failure to protect customers’ data, resulting in disruption to our operations, loss of income, reputational damage, costly litigation and regulatory penalties; our reliance on our technology vendors to adequately maintain and support our systems, including our servicing systems, loan originations and financial reporting systems, and uncertainty relating to our ability to transition to alternative vendors, if necessary, without incurring significant cost or disruption to our operations; our ability to close MSR and other transactions; our ability to grow our reverse servicing business; the extent to which acquisitions and other strategic initiatives will contribute to achieving our growth objectives; increased servicing costs based on increased borrower delinquency levels or other factors; uncertainty related to past, present or future claims, litigation, cease and desist orders and investigations regarding our servicing, foreclosure, modification, origination and other practices brought by government agencies and private parties, including state regulators, the Consumer Financial Protection Bureau (CFPB), State Attorneys General, the Securities and Exchange Commission (SEC), the Department of Justice or the Department of Housing and Urban Development (HUD); the reactions of key counterparties, including lenders, the GSEs and Ginnie Mae, to our regulatory engagements and litigation matters; increased regulatory scrutiny and media attention; any adverse developments in existing legal proceedings or the initiation of new legal proceedings; our ability to effectively manage our regulatory and contractual compliance obligations; our ability to comply with our servicing agreements, including our ability to maintain our seller/servicer and other statuses with the GSEs and Ginnie Mae; our servicer and credit ratings as well as other actions from various rating agencies, including any future downgrades; as well as other risks and uncertainties detailed in our reports and filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2025. Anyone wishing to understand Onity’s business should review our SEC filings. Our forward-looking statements speak only as of the date they are made and, we disclaim any obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise. Note Regarding Non-GAAP Financial Measures This press release contains references to adjusted pre-tax income (loss), adjusted ROE and adjusted revenue, all non-GAAP financial measures. We believe these non-GAAP financial measures provide a useful supplement to discussions and analysis of our financial condition, because they are measures that management uses to assess the financial performance of our operations and allocate resources. In addition, management believes that this presentation may assist investors with understanding and evaluating our initiatives to drive improved financial performance. Management believes, specifically, that the removal of fair value changes of our net MSR exposure due to changes in market interest rates and assumptions provides a useful, supplemental financial measure as it enables an assessment of our ability to generate earnings regardless of market conditions and the trends in our underlying businesses by removing the impact of fair value changes due to market interest rates and assumptions, which can vary significantly between periods. Beginning with the three months ended June 30, 2026, for purposes of calculating Income Statement Notables and Adjusted Pre-Tax Income, we changed the methodology used to calculate MSR Valuation Adjustments due to rates and assumption changes by including as Income Statement Notables (and therefore excluding from Adjusted Pre-Tax Income) the impact of non-UPB collateral changes such as delinquency status, borrower escrow payments and balances and loan aging. We made this change because management believes that this runoff calculation more closely reflects the actual runoff of the UPB measured in fair value in isolation. In addition, this change is responsive to investor requests to simplify our presentation of operating results, and we believe this presentation is consistent with the approach utilized by certain of our peer companies within our industry. However, our non-GAAP measures should not be analyzed in isolation or as a substitute to analysis of our GAAP pre-tax income (loss), GAAP pre-tax ROE or GAAP revenue nor a substitute for cash flows from operations. There are certain limitations to the analytical usefulness of the adjustments we make to GAAP pre-tax income (loss), GAAP pre-tax ROE and GAAP revenue and, accordingly, we use these adjustments only for purposes of supplemental analysis. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, Onity’s reported results under accounting principles generally accepted in the United States. Other companies may use non-GAAP financial measures with the same or similar titles that are calculated differently to our non-GAAP financial measures. As a result, comparability may be limited. Readers are cautioned not to place undue reliance on analysis of the adjustments we make to GAAP pre-tax income (loss), GAAP pre-tax ROE and GAAP revenue. The Company has not provided reconciliations of guidance for adjusted ROE, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. The Company is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include the change in fair value of our net MSR exposure due to changes in market interest rates and assumptions which can vary significantly between periods and are difficult to predict in advance in order to include in a GAAP estimate. Notables In the table below, we adjust GAAP pre-tax income for the following factors: MSR valuation adjustments, expense notables, and other income statement notables. MSR valuation adjustments are comprised of changes to Forward MSR and Reverse mortgage valuations due to rates and assumption changes. Expense notables include significant legal and regulatory settlement expenses, severance and retention costs, LTIP stock price changes, consolidation of office facilities and other expenses (such as costs associated with strategic transactions). Other income statement notables include non-routine transactions that are not categorized in the above. Beginning with the three months ended December 31, 2025, for purposes of calculating Adjusted ROE, we changed the methodology used to calculate adjusted average equity to a monthly average. We made this change to improve the accuracy of net income impact on equity. See calculations preceding “Average Adjusted Equity” in the “Adjusted ROE Calculation” table below. In addition, as noted above, beginning with the three months ended June 30, 2026, for the purposes of calculating MSR Valuation Adjustments, we now include the impact of non-UPB collateral changes such as delinquency status, borrower escrow payments and balances and loan aging. See calculations preceding “Total MSR Valuation Adjustments due to rates and assumption changes, net” in the “Notables” table below. Presentation of past periods has been conformed to the current presentation. Utilizing methodology in effect as of March 31, 2026 would result in Q1’26 Adjusted Pre-Tax Income (Loss) of ($6 million) and Q2’26 Adjusted Pre-Tax Income (Loss) of ($5 million). a)  MSR valuation adjustments that are due to changes in market interest rates and assumptions, net of overall fair value gains / (losses) on MSR hedge, including FV changes of Pledged MSR liabilities associated with MSR transferred to MSR capital partners and ESS financing liabilities at fair value that are due to changes in market interest rates and assumptions, a component of MSR valuation adjustments, net; effective in Q2’26, we changed the methodology used to calculate MSR Valuation Adjustments due to rates and assumption changes; presentation of past periods has been conformed to the current presentation; without this change, Forward MSR valuation adjustments due to rates and assumption changes, net would be $6M in Q2’25, $11M in Q1’26, and $4M in Q2’26, and Total MSR valuation adjustments due to rates and assumption changes, net would be $6M in Q2’25, $20M in Q1’26, and $0M in Q2’26; see “Note Regarding Non-GAAP Financial Measures” above for additional information b)  The changes in fair value due to market interest rates were measured by isolating the impact of market interest rate changes on the valuation model output per our MSR valuation process c)  FV changes of reverse loans and HMBS-related borrowings due to market interest rates and assumptions, a component of gain on reverse loans and HMBS-related borrowings, net d)  Severance and retention due to organizational rightsizing or reorganization e)  Long-term incentive program (LTIP) compensation expense changes attributable to stock price changes during the period f)  Contains costs associated with but not limited to rebranding and other strategic initiatives and transactions g)  Contains non-routine transactions including but not limited to early payoff expense and fair value assumption changes on other investments recorded in other income/expense h)  Certain previously presented notable categories with nil numbers for each period shown have been omitted Adjusted ROE Calculation a)  Effective in Q4’25, adjusted average equity used in adjusted ROE is now a monthly average; presentation of past periods has been conformed to the current presentation; without this change, adjusted ROE would be 14% in Q2’25; see “Notables” above for more information; effective in Q2’26, we changed the methodology used to calculate MSR Valuation Adjustments due to rates and assumption changes; presentation of past periods has been conformed to the current presentation; without this change, Adjusted pre-tax income (loss) would be $16M in Q2’25, ($6M) in Q1’26, and ($5M) in Q2’26, and Adjusted ROE would be 14% in Q2’25, (4%) in Q1’26, and (3%) in Q2’26; see “Note Regarding Non-GAAP Financial Measures” above for additional information Adjusted Revenue Calculation a)  Contains non-routine transactions and other discrete revenue impacts Condensed Consolidated Balance Sheets (unaudited) Condensed Consolidated Statements of Operations (unaudited) For Further Information Contact: Valerie Haertel, VP, Investor Relations(561) [email protected] Dico Akseraylian, SVP, Corporate Communications(856) [email protected]

This article first appeared on GuruFocus. Revenue: Revenue increased 24% year-over-year, driven by higher volumes and stronger execution in both servicing and originations. Originations Volume: Record funded volume of $15.5 billion in the second quarter, up 64% year-over-year. Originations Adjusted Pre-tax Income: Increased over three times versus last year. Servicing Adjusted Pre-tax Income: Decreased over 60% year-over-year due to higher MSR runoff, but improved sequentially. Net Loss: Includes roughly $33 million of pre-tax costs related to the reverse asset sale, legacy subservicing transfer, and market-driven unfavorable asset fair value adjustments. Total Servicing UPB: Ended the quarter up 10% year-over-year, with servicing additions net of runoff of $76 billion. Subservicing Additions: $35 billion in the second quarter, exceeding guidance. Refinance Recapture Rate: Improved to 51% in the second quarter, up 3 percentage points versus the prior year. Home Equity Product Volume: Doubled versus the second quarter of last year, with over $70 million funded in the second quarter. Book Value per Share: Up about $13 year-over-year. 2026 Guidance: Adjusted pre-tax income expected at the low end of the 10% to 15% growth range. Warning! GuruFocus has detected 7 Warning Signs with ONIT. Is ONIT fairly valued? Test your thesis with our free DCF calculator. Release Date: August 06, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record origination volume with funded volume of $15.5 billion in Q2 2026, up 64% year-over-year, outpacing industry growth. Double-digit year-over-year revenue growth of 24%, driven by strong performance in both servicing and originations. Completed the reverse asset sale to Finance of America and transferred most legacy subservicing back to Rhythm, simplifying the business and improving strategic flexibility. Improved refinance recapture rate to 51% in Q2 2026, up 3 percentage points year-over-year, with a roughly 3 times increase in refinance payoff volume. Subservicing additions of $35 billion exceeded guidance, with strong growth in business purpose residential and commercial subservicing, and a Client Net Promoter Score of 70. Servicing portfolio grew 10% year-over-year, outpacing industry growth of 3%, despite planned transfers and client MSR sales. Technology investments, including AI and voice agents, are driving improved customer engagement and operational efficiency, with targeted annual savings of about $3 million. Completed a $10 million share buyback and initiated a new $20 million buyback program, reflecting confidence in the stock's value relative to book value. Servicing advances declined 33% over the last two years, improving liquidity and reducing risk. Adjusted pre-tax income in originations grew over three times year-over-year, with improved margins from 23 to 26 basis points. Net loss in Q2 2026 includes $33 million of pre-tax costs related to the reverse asset sale, legacy subservicing transfer, and market-driven unfavorable asset fair value adjustments. Servicing adjusted pre-tax income decreased over 60% year-over-year due to higher MSR runoff, which increased almost 80% versus prior year levels. Full-year 2026 adjusted ROE is expected to be at the low end of the guidance range (10% to 15%) due to persistent geopolitical instability, inflation, and market volatility. Reverse MSR portfolio experienced significant fair value volatility, with a $12 million unfavorable adjustment in Q2 2026, highlighting the risk of this asset class. Consumer Direct adjusted pre-tax income declined due to a 30% quarter-over-quarter drop in lock volume and elevated operating expenses from lagging commissions. GSE 30-plus delinquency bucket deteriorated in Q2 2026, though management attributes this to seasonal factors and expects improvement. The company faces competitive pressure from banks in the correspondent channel, which could impact margins and market share. MSR runoff is expected to remain elevated if interest rates stay low, pressuring servicing profitability. The company's adjusted pre-tax income guidance is subject to market volatility, and the lower end of the range reflects uncertainty. The reverse asset sale and subservicing transfer resulted in a $9 million one-time negative impact on GAAP pre-tax income in Q2 2026. Q: Can you quantify what bridges the gap to the lower end of your adjusted pre-tax ROE guidance range, given current market volatility?A: CEO Glen Messina stated that the company's ROE expansion actions, including improving servicing scale, optimizing the servicing portfolio, and driving productivity, are expected to improve ROE despite market volatility. He noted that while the first quarter saw significant noise from loan origination pipeline hedging, the second quarter behaved better with improved margins and record origination volumes. CFO Sean O'Neill added that the high MSR runoff pressure seen over the last three quarters should improve if rates stay elevated, which would boost servicing's adjusted pre-tax income. Q: How do you see banks evolving in the mortgage market, and what competition are you seeing in the correspondent channel?A: CEO Glen Messina noted that banks are aggressive buyers of MSRs, which is good for valuations. He believes banks already in the mortgage business will likely grow their franchises, but there isn't a wholesale shift from those outside the space. He highlighted that this dynamic makes businesses like Onity more valuable due to their sticky custodial and escrow deposits. Regarding correspondent lending, he praised the team's value-based selling and enterprise sales strategy, which drove record volumes and improved margins from 23 to 26 basis points despite a competitive environment. Q: Can you provide more detail on the building blocks to achieve the low end of the ROE range, specifically regarding the buyback, the "other revenue" line, and MSR volatility?A: CEO Glen Messina confirmed the completion of the $10 million buyback and the ongoing $20 million repurchase program, which should continue at a similar rate. On MSR volatility, he explained that forward MSR volatility is well-controlled, with a net cost of only $4 million in Q2 on a large portfolio. He emphasized that the reverse MSR was the source of extreme volatility, with a $12 million unfavorable fair value adjustment in Q2, but selling 80% of that book to Finance of America should greatly reduce future volatility. CFO Sean O'Neill added that the "other revenue" line is driven by ancillary income from higher owned MSRs and is considered sustainable. Q: You mentioned a bump in GSE delinquencies. What caused that, and is it improving?A: CEO Glen Messina explained that the uptick was primarily in the 30-day delinquency bucket and appears to be an unusual seasonal spike around the July 4th holiday. He noted that this pattern has been observed historically, with 30-day delinquencies rising in June and falling after the holiday. CFO Sean O'Neill added that the company focuses more on 60 and 90-plus delinquency metrics for longer-term stress, and those trends are being closely monitored. Q: Can you elaborate on the drivers of the GAAP pre-tax income decline in the second quarter?A: CFO Sean O'Neill explained that the bulk of the decline, about $24 million, was due to non-recurring transaction costs and fair value marks on reverse assets. The Finance of America transaction and RHYTM deboarding created a $9 million one-time negative impact. The remaining impact was from a decline in the fair value of reverse assets due to less favorable HECM spreads, a mild increase in delinquency, and hedge costs. He noted that with 80% of the reverse assets sold, the impact of future fair value changes will be greatly reduced. Q: What drove the record origination volume and improved margins in the second quarter?A: CFO Sean O'Neill stated that the $15.5 billion in funded volume was the largest quarter in history, driven primarily by the B2B channel (correspondent lending and co-issue). He noted that volume growth did not come at the expense of margins, which improved due to strong enterprise sales efforts and analytics-driven margin management. Consumer Direct remained profitable but saw lower adjusted pre-tax income due to a 30% quarter-over-quarter decline in lock volume and elevated operating expenses from lagging commissions. Q: How is the company's strategy on servicing scale and portfolio optimization progressing?A: CEO Glen Messina highlighted that total servicing UPB grew 10% year-over-year, outpacing the industry's 3% growth. The company is targeting a 50/50 mix of owned servicing and subservicing to grow capital-efficiently. He noted the successful completion of the reverse asset sale to Finance of America and the transfer of legacy subservicing back to RHYTM, which simplifies the business and improves profitability. The company is also leveraging machine learning to identify the most profitable MSRs and has largely exited the RHYTM subservicing to focus on more profitable commercial and reverse segments. Q: Can you provide an update on the company's technology investments and their impact on performance?A: CEO Glen Messina discussed the embedding of AI, analytics, and automation across the lending platform. Voice agents are being used to engage borrowers and generate leads, which has improved connectivity and driven increased blocks and fundings. AI call monitoring analytics are optimizing marketing and sales performance. The company is also partnering with Blend for real-time agentic AI integration. These investments have contributed to a refinance recapture rate of 51%, up 3 percentage points year-over-year, and a Client Net Promoter Score of 70. Q: What is the outlook for the full year 2026 guidance?A: CEO Glen Messina stated that due to persistent geopolitical instability, inflation, and market volatility, the company expects full-year 2026 adjusted ROE to be at the low end of its guidance range of 10% to 15%. CFO Sean O'Neill confirmed that other areas of guidance remain unchanged, including growth in the total servicing book, improved operating efficiency, and strong hedging performance. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management attributes the 81% improvement in first-half adjusted net income to a transition from foundational investment to a scalable, productive operating model. The 21% year-over-year increase in funded volume was driven by structural improvements in customer engagement and conversion rather than just top-of-funnel growth. Operational efficiency improved significantly, with retail funded loans per call center officer increasing nearly 30% sequentially due to better pipeline management. The acquisition of a $5.2 billion HECM MSR portfolio from Onity is framed as a strategic move to diversify the servicing footprint and create cross-sell opportunities for proprietary products. Management views the current macroeconomic environment—characterized by high home equity and rising retirement costs—as a durable tailwind for their specialized home equity solutions. Proprietary product demand is strengthening as these solutions currently offer better cash flow to consumers compared to traditional HECM products in the current rate environment. Full-year 2026 guidance is reaffirmed at $2.8 billion to $3.1 billion in funded volume and $4.50 to $5.00 in adjusted EPS, supported by strong submission momentum. The primary capital allocation priority is the retirement of $150 million in senior secured notes due in November 2026 to reduce financing costs and improve recurring earnings. Post-debt retirement, management expects to evaluate a broader range of actions including potential stock repurchases, dividends, or further business investments. Future earnings power is expected to benefit from the compounding effects of AI-enabled technology platforms that have already accelerated time-to-application by approximately 57%. Management anticipates a more normalized effective tax rate going forward following the release of the deferred tax asset valuation allowance. A GAAP net loss of $29 million was primarily driven by $84 million in negative fair value adjustments, largely resulting from interest rate movements and a $24 million non-cash charge related to the company's stock price increase. The Onity MSR acquisition, valued at approximately $70 million, is expected to generate a mid-teens yield and is already incorporated into the full-year 2026 guidance. Management highlighted that tangible equity value was impacted by GAAP fair value marks, which are subject to volatility from interest rates, home price appreciation, and credit spreads. A reporting structure amendment for Class B shares was implemented to provide a clearer view of fully diluted market capitalization without changing economic ownership. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management noted growing demand for proprietary products because they currently offer better cash flow to consumers as interest rates fluctuate. The choice between products is typically driven by which option provides the most equity access for the customer at current market rates. Management explicitly stated that share buybacks are likely on hold until the $150 million debt retirement is completed in November. Decisions regarding buybacks or dividends will be evaluated in late 2026 based on stock price, balance sheet strength, and the 2027 outlook. Interest rate volatility created some margin pressure; while HECM spreads remained tight, proprietary securitization pricing saw some impact. Management occasionally chooses not to reprice the pipeline during sudden rate moves to avoid customer disruption, which can cause short-term margin volatility. The 'Helix' and 'Joy AI' platforms are the foundational drivers behind recent productivity gains and digital funnel improvements. These technologies helped the company reach its year-end prequalification targets six months ahead of schedule.

Interested in Altisource Portfolio Solutions S.A.? Here are five stocks we like better. Revenue growth accelerated in Q2 as Altisource reported service revenue of $48.7 million, up 19% year over year, driven by customer wins in both the origination and servicer/real estate segments. The company said this more than offset declines in business tied to Rithm. Customer diversification improved sharply, with revenue from customers other than Onity and Rithm rising to 65% of total service revenue, the highest level since the company’s IPO. Management also pointed to growing Hubzu inventory and a stronger sales pipeline as signs of continued progress. Margins and cash flow were pressured despite growth, as adjusted EBITDA declined due to prior-year one-time benefits, higher growth-related costs, and a $6.6 million use of operating cash tied mainly to receivables. Altisource said it repurchased $2 million of debt and is using AI initiatives to improve efficiency and support future margin expansion. Altisource Portfolio Solutions (NASDAQ:ASPS) reported higher second-quarter 2026 service revenue as new customer wins helped offset a decline in business tied to Rithm, while management said the company is making progress toward diversifying its customer base and improving efficiency through artificial intelligence initiatives. Chairman and Chief Executive Officer Bill Shepro said Altisource generated service revenue of $48.7 million in the quarter, up 19% from the second quarter of 2025 and 8% from the prior quarter. The increase reflected growth in both of the company’s operating segments, including a 62% year-over-year increase in the origination segment and an 8% increase in the servicer and real estate segment. → 3 Photonics Companies Making Quantum Tech Possible “Service revenue growth from customer wins has more than replaced the loss of a portion of the Rithm-related business, as demonstrated by our more diversified customer base and growing Hubzu inventory,” Shepro said. Despite the revenue growth, Shepro said adjusted EBITDA and adjusted EBITDA margins declined from the prior-year period, primarily because the second quarter of 2025 included a non-recurring benefit related to a legacy matter in the servicer and real estate segment and because Altisource incurred higher costs to support revenue growth. Those factors were partially offset by a second-quarter 2026 gain from the repurchase of $2 million of the company’s term loan. → Could Truth API Become Trump Media’s First Meaningful Revenue Driver? GAAP pre-tax earnings were nearly breakeven in the quarter, compared with $200,000 of pre-tax income in the second quarter of 2025. Net cash used in operating activities was $6.6 million, which Shepro said was driven almost entirely by higher receivables tied to revenue growth. The company ended the quarter with $23.2 million in unrestricted cash. Altisource’s countercyclical servicer and real estate segment generated $34.4 million in second-quarter service revenue, an 8% increase from the same period last year. Shepro attributed the growth primarily to customer wins in the Hubzu, title and trustee businesses, partially offset by fewer Rithm-related referrals. → AeroVironment’s Stock Is Down, But Drone Demand Is Taking Off Segment adjusted EBITDA was $11.7 million, down 2% year over year. Shepro said the decline reflected the prior-year non-recurring benefit in the marketplace business and 2026 EBITDA losses related to Rithm, which were largely offset by EBITDA growth from customer wins. Altisource won an estimated $5.2 million in annualized stabilized service revenue in the servicer and real estate segment during the quarter. The company also generated $9.1 million of second-quarter revenue, or $36.5 million annualized, from sales wins since 2024. Its estimated weighted average sales pipeline for the segment ended the quarter at $8.2 million on a stabilized basis. Shepro highlighted growth in Hubzu inventory as a key indicator for future revenue. Hubzu inventory increased 30% during the quarter to 22,300 assets from 17,200 assets at March 31, 2026. In response to a question from B. Riley Securities analyst Timothy D’Agostino, Shepro said it typically takes nine to 12 months to sell an REO file after receipt, depending on factors such as redemption periods or eviction processes. For foreclosure referrals, he said Altisource typically receives the referral at the foreclosure start, and it takes around 12 months on average to reach foreclosure sale, though timelines vary by state. The company’s origination segment posted a 62% increase in second-quarter service revenue compared with the prior-year period, driven primarily by sales wins. Adjusted EBITDA declined as Altisource invested in leadership and staff and incurred higher outside fees and services to support growth. During the quarter, the origination segment secured an estimated $7.1 million in wins, primarily in Lenders One. The segment ended the quarter with an estimated weighted average sales pipeline of $20 million. Shepro said management expects service revenue and adjusted EBITDA in the origination segment to grow based on onboarding of recent sales wins, the existing pipeline and forecasted market conditions. Altisource said it is reducing its dependence on Onity and Rithm. In the second quarter, revenue from customers other than Onity, Rithm and customers associated with their portfolios rose to 65% of total service revenue, up from 46% a year earlier. Shepro said this represented the company’s highest percentage of service revenue from customers other than Onity and Rithm since Altisource went public in 2009. Asked about the future contribution from Onity and Rithm, Shepro said it is difficult to forecast because it depends on Onity’s portfolio growth and delinquency trends. He said Altisource expects revenue from Rithm portfolios serviced or sub-serviced by Onity to decline over the next couple of months, but added that the company believes it is “closer to the end than the beginning” of that transition. Shepro said the decline may continue in the third quarter and should begin to stabilize in the fourth quarter. Altisource reduced outstanding debt during the quarter by repurchasing $2 million of its term loan. Shepro said the company has the ability under its debt agreements to buy back up to $3 million in purchase price of debt annually, subject to approval from the first-lien or super-senior term loan lenders. “If we have the opportunity to opportunistically buy back debt, we think that’s a good use of cash, particularly when we’re buying back at a discount,” Shepro said. He added that the company remains focused on building the business, growing revenue and improving margins, with the goal of generating more free cash flow and positioning Altisource to eventually refinance its debt. Napier Park Global Managing Director Shachar Minkove asked about working capital, noting that receivables were a use of cash during the quarter. Chief Financial Officer Michelle Esterman said the increase was associated with revenue growth and some seasonality. Shepro said there was “nothing out of the ordinary” and that cash was already building back up early in the third quarter. Shepro said Altisource has moved over the past year from evaluating AI to deploying it in practical ways across the company. He said the company is using AI to improve customer-facing capabilities, operating efficiency, revenue generation and software development. Altisource has established a centralized AI enablement model and is applying AI-first software development to new applications and platform modernization. Shepro said the initiatives are already improving software development speed and productivity and could help reduce commercial off-the-shelf software costs while strengthening platforms including Equator, Hubzu and REALSynergy. Management said Altisource continues to operate in a difficult market marked by low delinquency rates and origination volumes. Shepro cited a modest increase in 90-plus day mortgage delinquency rates to 1.55% in May 2026 from 1.45% in December 2025. Loans that were 90-plus days delinquent plus loans in foreclosure totaled 857,000 as of May 31, up 28% from May 2025 and 7% from December 2025. Foreclosure starts for the first five months of 2026 were 14% higher than the same period in 2025, while foreclosure sales were 19% higher, though both remained well below pre-pandemic levels. In the origination market, second-quarter mortgage origination unit volume rose 9% year over year, driven by a 37% increase in refinance volume and a 4% decrease in purchase volume. Shepro said the ramp of sales wins and efficiency initiatives should drive roughly flat third-quarter adjusted EBITDA and higher fourth-quarter adjusted EBITDA. He said the company remains focused on its Project 45 objective of reaching $45 million in run-rate adjusted EBITDA by the fourth quarter of 2028. Altisource Portfolio Solutions SA (NASDAQ: ASPS) is a provider of proprietary technology and specialized services to the mortgage and real estate industries. Founded in 2009, the company helps financial institutions, investors and loan servicers streamline processes across the full loan lifecycle, from origination and valuation through default management, asset disposition and investor reporting. Core offerings include loan servicing and asset management solutions, property preservation and inspection services, valuation and due diligence, title and settlement services, as well as vendor management platforms. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Altisource Portfolio Solutions Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

Performance was characterized by a balanced business model where a 3.5x year-over-year increase in origination income partially offset a $54 million decline in servicing income. Servicing results were pressured by record MSR runoff and a spike in FHA late-stage delinquencies following recent changes to FHA loan modification rules. Management attributed a significant portion of missed revenue to origination capacity limits, as the borrower response to rate drops was 38% higher than historical models predicted. Market volatility, compounded by geopolitical events and GSE policy announcements, reduced pipeline hedge effectiveness and impacted loan sales performance. The company is pivoting toward 'specialty subservicing' in business-purpose residential and commercial sectors, where complexity is higher but returns are more attractive. Strategic focus has shifted to integrating AI across the borrower journey to improve lead generation signal detection and automate document categorization with 95% accuracy. Full-year 2026 adjusted ROE guidance was revised downward to a range of 10% to 15% to account for persistent interest rate volatility and 'higher-for-longer' rate assumptions. Management expects FHA delinquency levels to normalize by the end of the second quarter as modification resolutions begin to flow through the system. The company is targeting $50 billion in total subservicing additions for the full year, supported by a robust pipeline of five agreements currently under negotiation. Capacity planning models have been updated to reflect heightened consumer rate sensitivity, supported by a 34% increase in Consumer Direct staffing since the end of Q4. The revised Finance of America Reverse transaction is expected to generate $70 million to $80 million in proceeds while reducing balance sheet exposure to HECM assets. The Finance of America Reverse transaction was resubmitted to Ginnie Mae after the original proposal was not approved; the new terms involve selling 57% of the owned reverse servicing portfolio. A seasonal dip in float income, totaling $8 million, impacted sequential revenue due to the timing of escrow tax disbursements. Management identified a $27 million incremental adjusted pretax income opportunity by addressing hedging volatility, staffing gaps, and FHA delinquency normalization. The company insourced its MSR valuation process in Q1 to increase agility in running scenario analyses while maintaining third-party agents as guardrails. Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management sized the Q1 impact of FHA delinquencies at $4 million to $6 million and expects this to bleed through favorably in Q2 and Q3 as levels normalize. If delinquencies remain flat relative to the end of Q1, there will be zero additional impact on runoff; improvement in delinquency rates would act as a tailwind. Hedging and loan sale improvements are market-dependent and could reverse quickly if volatility subsides. Staffing-related gains in Consumer Direct will be realized throughout the remainder of the year, contingent on the volume of future refinancing surges. Beyond the FHA-specific issues, the increase in realized cash flows was driven by a genuine quarter-over-quarter increase in prepayments due to borrower interest rate sensitivity. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.

Image source: The Motley Fool. May 5, 2026 Chair, President, and Chief Executive Officer — Glen Messina Chief Financial Officer — Sean O'Neil Head of Investor Relations — Valerie Haertel Valerie Haertel: Good morning, and welcome to Onity Group's first quarter 2026 earnings call. Please note that our earnings release and presentation are available on our website at onitygroup.com. Speaking on the call will be Chair, President, and Chief Executive Officer, Glen Messina; and Chief Financial Officer, Sean O'Neil. As a reminder, our comments today may contain forward-looking statements made pursuant to the safe harbor provisions of the federal securities laws. These statements may be identified by reference to a future period or by use of forward-looking terminology and address matters that are uncertain. Forward-looking statements speak only as of the date they are made and involve assumptions, risks, and uncertainties, including those described in our SEC filings. In the past, actual results have differed materially from those suggested by forward-looking statements, and this may happen again. In addition, the presentation and our comments contain references to non-GAAP financial measures, such as adjusted pretax income. We believe these non-GAAP measures provide a useful supplement to discussions and analysis of our financial condition because they are measures that management uses to assess the performance of our operations and allocate resources. Non-GAAP measures should be viewed in addition to and not as an alternative for the company's reported GAAP results. A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures and management's reasons for including them may be found in the press release and the appendix to the investor presentation. Now I will turn the call over to Glen Messina. Glen Messina: Thanks, Valerie. Good morning, everyone, and thank you for joining our call. We're looking forward to sharing our results for the first quarter, as well as reviewing our strategy and financial objectives to deliver long-term value for our shareholders. Let's get started on Slide 3. In the first quarter, we delivered double-digit year-over-year growth in adjusted revenue, origination volume, subservicing additions, and total servicing UPB. Our balanced business performed well in the face of record prepayments with origination profitability partially offsetting higher MSR runoff in servicing. First quarter results were impacted by heightened interest rate and financial market volatility, higher-than-expected refinancing activity, and increased FHA late-stage delinquencies driven by recent changes to the FHA loan modification rules. We are taking decisive actions to address these items while continuing to execute on our growth initiatives and the fundamentals of our balanced business model, which has proven resilient over the long term. As a result of discussions with Ginnie Mae, we've revised our recent proposed strategic partnership with Finance of America Reverse and resubmitted the transaction for approval. Finally, considering ongoing market volatility due to geopolitical events, we are revising our full year 2026 adjusted ROE guidance to 10% to 15%. Let's turn to Slide 4 to review a few key financial highlights. We increased revenue double-digit year-over-year, reflecting strong growth in origination volume, subservicing additions, and total servicing UPB. Elevated refinancing activity, driven by lower interest rates and higher-than-expected consumer refinancing response, helped Consumer Direct increase origination volume by nearly 4x over the first quarter of last year. Net income attributable to common shareholders for the first quarter was $7 million, or $0.74 per share diluted, down from $21 million last year. Similarly, our adjusted pretax loss of $6 million was below prior year and last quarter adjusted pretax income levels as origination income only partially offset higher MSR runoff. While origination adjusted pretax income of $34 million was up 3.5x over prior year, it included the impact of both market volatility effects on origination pipeline hedging and loan sales performance and capacity limits due to the elevated consumer refinancing response. Servicing income was down $54 million versus prior year due to higher-than-expected MSR runoff and higher FHA late-stage delinquencies due to the recent FHA modification rule changes. Let's turn to Slide 5 for a discussion about the first quarter market environment. During the first quarter, we experienced increased volatility in key drivers of mortgage activity resulting from the GSE's announcement of their intent to purchase mortgage-backed securities compounded by the impacts of the war in Iran. This is reflected in the intra-quarter high and low points of the ICE BofA MOVE Index, an indicator of U.S. Treasury bond volatility, as well as 30-year mortgage rates and the MBA Refi Index. This increased volatility contributed to reduced origination pipeline hedge effectiveness and lower loan sales performance. On the right is a comparison of the refinancing response for mortgages originated in 2023 and later in the second half of 2024 compared to the 6 months ending March of this year. In a little more than a year since the last refinancing surge, a less severe rate drop from high to low and marginally lower mortgage interest rates produced almost a 38% higher refinancing response in this most recent refinancing period, exceeding the level we predicted. Let's turn to Slide 6 to review the actions we're taking to address these items. In total, we believe addressing the factors that affected our results in the first quarter can deliver up to $27 million in incremental adjusted pretax income. We believe the origination pipeline hedging and loan sales performance has a quarterly adjusted pretax income improvement opportunity of between $5 million to $7 million. We are naturally exposed to variation in hedge and loan sales performance due to market and spread volatility. Historically, this impact has been both positive and negative, and we expect this can naturally reverse with reduced volatility. Next, the higher-than-expected borrower reaction to the first quarter decline in mortgage rates exceeded our origination staffing capacity based on modeling from past experience. We believe this prevented us from realizing $8 million to $14 million of adjusted pretax income in the first quarter. We've updated our capacity planning models to reflect recent borrower behaviors, have increased our Consumer Direct staffing level since the end of Q4 by 34%, and we are continuing to invest in AI tools and enabling technology to increase origination scalability. Next, we believe there's a $4 million to $6 million quarterly adjusted pretax income improvement opportunity with the normalization of FHA delinquencies. We've improved borrower communication, frequency of early intervention, and introduced digital tools to assist borrowers. We continue to expect FHA delinquencies will normalize by the end of the second quarter. Lastly, we are using machine learning to evaluate loan-level runoff and recapture propensity to inform our investing decisions and recapture strategies. Over time, we expect this can have a favorable impact on MSR runoff in future refinance-driven markets, and the improvement opportunity will vary depending upon interest rates. Let's turn to Slide 7 to review our balanced business model. While there may be variability in any given quarter due to evolving market dynamics, our balanced business continues to demonstrate long-term resiliency to changes in interest rates. As interest rates have declined, and despite the significant impact from market volatility, origination income has increased over 2.5x versus the prior 12-month period. Our strong originations income has helped to offset a reduction in servicing income in the most recent 12 months versus the prior 12-month period, despite a doubling of MSR runoff. We remain committed to executing our growth initiatives and the fundamentals of our balanced business model, which works as intended over the long term. Let's turn to Slide 8 for more about our growth focus and actions. In the first quarter, our originations team doubled volume year-over-year versus 44% growth for the overall industry. In Business-to-Business, our enterprise sales approach, product breadth, and client service delivery model have been highly effective growth enablers. In Consumer Direct, our continued investment in talent and technology enabled volume growth of 4x versus prior year as declining rates increased consumer refinancing demand. Refinance payoff units in the first quarter were up 3.6x prior year level and up 35% versus the prior quarter. Despite these headwinds, our Consumer Direct team improved the refinance recapture rate 3 percentage points versus the prior quarter. And our last 12 months refinance recapture rate continues to outperform the ICE industry average. We're continuing to invest in technology and process optimization to enhance customer experience, reduce costs, and improve scalability and competitiveness in both Business-to-Business and Consumer Direct. Let's turn to Slide 9 to see what we've accomplished in subservicing. The disruption created by the trend of industry consolidation among subservicers continues to create opportunity for us. The level of interest from prospective clients exploring subservicing options and alternatives remains high. First quarter subservicing additions were up 94% versus prior year, driven by new relationships and existing clients. Also in the first quarter, we signed 2 new clients and have 5 more agreements under negotiations. We believe we're on track to achieve our first half subservicing additions target of $28 billion and achieve over $50 billion for the full year. We continue to invest in technology with the next generation of our LASI client-focused AI assistant technology to drive an exceptional client experience. Our continued AI investment and strong servicing performance have helped us achieve a client Net Promoter Score level rivaling Amazon, Apple, and Google. In specialty subservicing, we continue to expand our business purpose residential and commercial subservicing portfolio, increasing UPB 28% versus last year. While the requirements are more complex than performing residential servicing, the returns are better. We have the expertise, and we're investing to enable continued growth in 2026. Overall, we believe we're well positioned to take advantage of the disruption in subservicing market, and we continue to invest in our sales and operating capabilities to pursue a robust opportunity pipeline. Let's turn to Slide 10 to talk about how we've grown our servicing portfolio. Total servicing UPB ended the quarter up 11% year-over-year versus total industry servicing growth of 3%, with growth in both owned MSR and subservicing. Year-over-year servicing additions net of runoff of $53 billion more than offset planned transfers to Rithm and other client deboardings. With MSR demand keeping prices elevated, several of our clients have taken the opportunity to monetize their MSRs and are replenishing their portfolio as industry origination volume increases. Our ability to grow our servicing portfolio while our clients execute opportunistic MSR sales highlights the power of our origination capability and success of our growth strategy. Now please turn to Slide 11 where our technology is continuing to enhance our business performance. We're integrating AI into every stage of the borrower journey across our business with a keen focus on maximizing our recapture rate. Our investment focus for 2026 is on 3 key areas: lead generation, lead conversion, and platform scalability. In lead generation, we're increasing signal detection for refinance-ready borrowers, leveraging unstructured data to inform our marketing and messaging. In lead conversion, we're maximizing conversion with targeted value propositions and workflow assignments. In platform scalability, we're focused on expanding engagement capacity and taking work out of the process to maximize human capability. These actions are having a tremendous impact. Leads on payoffs that resulted in new loans are up 40% year-over-year, and lead to lock conversion has improved 60% year-over-year. This includes a 34% increase in engagement and an 8% increase in conversion for conventional loans, the toughest to recapture. We've seen a 25% improvement in contact rate on leads coming through our digital channels with our AI-powered voice agent, and over 350 document types are categorized and data extracted with 95% accuracy, driving increased scalability. While lots of companies are talking about AI these days, we are one of the few companies that are delivering tangible results across both servicing and originations. We remain focused on integrating AI and machine learning to improve how we invest, enhance borrower understanding and engagement, maximize opportunity conversion, and improve outcomes across our business. Now please turn to Slide 12 for an update on our transaction with Finance of America Reverse. As disclosed in our public release this morning, our proposed transaction with Finance of America Reverse was not approved as submitted. However, based on discussions with Ginnie Mae, we've revised our transaction and resubmitted it for approval. In the revised transaction, we'll be selling approximately 57% of our owned reverse servicing portfolio to Finance of America, representing approximately 77% of our reverse MSR investment. We expect between $70 million to $80 million in proceeds before holdbacks and pricing adjustments as of March 31. The origination, product marketing, and subservicing elements of the transaction remain consistent with the original transaction terms. We expect about 70% of the remaining reverse servicing portfolio will run off in 4 years. As before, we will continue to engage in reverse mortgage asset management transactions and activities. Overall, benefits of the transaction remain largely the same. We will establish a significant subservicing relationship with the reverse mortgage market leader, reduce our balance sheet exposure to HECM assets and liabilities, improve our liquidity and capital ratio metrics, and we'll enhance our focus on other high-growth business areas. The transaction is still subject to Ginnie Mae approval and is currently under review. Now I'll turn it over to Sean to discuss our results in more detail. Sean O'Neil: Thanks, Glen. Let's turn to Slide 13 for a recap of key financial measures by quarter. Revenue was up 26%, continuing the strong year-over-year growth trend, which increased from last quarter's impressive 20% year-over-year growth. Sequential quarter revenue growth was flat due to seasonal Q1 decline in float income, which was $8 million lower quarter-over-quarter and is a component of servicing revenue. Originations delivered continued strong revenue growth over 2x year-over-year and 7% sequentially. Operating efficiency continued to improve on both year-over-year and sequential quarters, which reflects our long-term focus on cost-effective growth. Book value per share is up $17 year-over-year and up $1 on a sequential quarter basis. Now let's turn to Slide 14 for a detailed view of adjusted pretax income by segment. On the left side, Originations adjusted pretax income was significantly higher year-over-year by $24 million. This reflects an improvement in our recapture efforts as well as lower mortgage rates in February. A later slide will show the continued trends of record levels of funded origination in both our Consumer Direct and B2B channels. Year-over-year servicing adjusted PTI declined by $54 million, predominantly driven by high MSR runoff in the last 2 quarters and partially offset by growth in float volumes and other positive operational improvements from growth of our servicing portfolio. The illustration to the right is an approximation of where the first quarter 2026 adjusted PTI could potentially have landed had we been able to address 3 key drivers: first, the ongoing elevated FHA delinquencies impacting servicing income due to the loan mod change in the fourth quarter. We saw delinquency cures from FHA mods starting to trend back to a normal level at the tail end of the first quarter. We are taking action to address this area through improved borrower communication, early intervention, and digital tools to assist borrowers. Second, the impact of rate volatility on our origination pipeline marks and associated hedge costs. Third, the need to have a more fully scaled Consumer Direct operations to capture the heightened response by borrowers on interest rate sensitivity. We've updated our capacity planning models to reflect recent borrower behaviors, increased our Consumer Direct staffing levels, and we are continuing to invest in machine learning to maximize portfolio recapture. Had we been able to address all of these drivers, combined with the process improvements we now have in place, we believe we could have significantly mitigated our $6 million adjusted pretax loss up to an approximate $21 million adjusted pretax income. Please turn to Slide 15 for observations on how we allocate additional capital. Our previously stated considerations for capital remain unchanged. On the left, we show an increase in capital is typically immediately deployed to delever and replace mark-to-market MSR debt with longer tenure non-mark-to-market high-yield debt. Then, other deployment avenues are considered. These include M&A opportunities, increasing growth-oriented assets such as MSRs, buying back shares, or other deleveraging options. The right graph provides an illustrative view of incremental MSR purchases and the projected 2-year adjusted pretax income improvement. Please turn to Slide 16 for a deep dive on Originations pretax income trends. Originations pretax income grew by 3.5x on a year-over-year basis, which was driven by more than doubling of volume across the combined channel view of the business. The strongest contributor for either year-over-year or sequential quarter income was the Consumer Direct retail channel, which benefited from the ongoing recapture enhancements as well as higher staffing levels, resulting in a sevenfold increase in adjusted PTI. Both B2B and Consumer Direct channels benefited from a growth focus on new products, including non-QM and closed-end seconds. As a reminder, we don't include closed-end volumes in our recapture calculations. Please turn to Slide 17 for a channel view for originations. The B2B channel, which includes both correspondent and co-issue activities, saw about a 2x increase in volume year-over-year and slightly better margins than the first quarter of 2025. On a sequential basis, it had roughly the same volume but saw margin pressure late in the quarter due to interest rate volatility. Consumer Direct had even better performance, posting strong volume gains year-over-year of 4x and a 50% increase on the sequential quarter. However, we did see lower margins in the first quarter, again, driven by interest rate volatility. We also showed some improved metrics for Consumer Direct with higher revenue per loan and improved cost per loan versus prior year. Please turn to Slide 18 for our Servicing segment performance. Servicing revenues were up 12% year-over-year, but down slightly from last quarter. The quarter's decline was driven primarily by lower float revenue from a typical seasonal dip. This is due to escrow tax disbursements that lowered deposit volumes late into the fourth quarter and early in the first quarter. Servicing-owned UPB is a driver of both revenue and income, and it grew about 18% year-over-year, and total UPB grew about 10% year-over-year. Our Servicing segment experienced the first quarter of adjusted pretax loss in 16 quarters, primarily driven by MSR runoff and seasonal float income declines. As you can see in the lower right, the impact from runoff tripled year-over-year from $33 million to $99 million. This is mainly driven by higher prepayments linked to borrower interest rate sensitivity and the lingering delinquencies from the FHA mod changes in the fourth quarter, which we expect to normalize in the second quarter. Please turn to Slide 19 for details on improved advances in the Servicing segment. Over the last 2 years, we have decreased advances by almost 30% while we have grown our owned UPB simultaneously by a similar rate. As you can see by the dark blue graph, the bulk of our advances are linked to delinquencies in our PLS or nonagency-owned MSR book. We have been deploying various strategies and process improvements to reduce these advances, which then assist the P&L with lower interest expense. These strategies range from increased digital contact with borrowers to AI-enabled agents that assist our contact center in quickly providing the most effective range of solutions for both the borrower and the MSR owner. Regarding digital, we continue to experience approximately 90% of our inbound contacts being handled with digital channels such as chats, the mobile app, or website responses. Please turn to Slide 20 for an assessment of our continued strong hedging performance. Once again, our MSR hedge strategy continued to perform well and as intended in the first quarter. Our strategy is designed to mitigate interest rate risk, and the hedge has been effective in minimizing the impact of interest rate on our MSR valuation net of hedge for the last 9 quarters. We frequently review and assess our hedge strategy to manage risk and optimize liquidity and total returns. Of note, we insourced our MSR valuation process in the first quarter. This was accomplished by adopting an MSR model used by many industry participants, including third-party valuation agents. This gives us more agility to run numerous scenarios to both ensure our valuations are consistent with current data and adjust our hedge accordingly. We continue to use multiple third-party valuation agents to provide guardrails to our valuation. On Slide 21, we provide our updated view on 2026 guidance. As Glen mentioned earlier, we are widening our adjusted ROE range from 13% to 15% to 10% to 15%. This is to accommodate ongoing and potential future interest rate volatility. Our updated guidance on adjusted ROE is not dependent on the Finance of America transaction closing. The other areas we provided guidance on are unchanged. We continue to grow our total servicing book, $338 billion, or up 11% on the year, improve our operating efficiency, and continued strong hedging performance. Back to you, Glen. Glen Messina: Thanks, Sean. Let's turn to Slide 22 for a few comments before we open the call for questions. We delivered solid performance in several key areas of our business, including double-digit year-over-year growth in adjusted revenue, origination volume, subservicing additions, and total servicing UPB. We've built a technology-enabled, award-winning servicing platform that is efficient, delivers differentiated performance, and excellent service. We've been recognized for the fifth year in a row by Fannie Mae and Freddie Mac for delivering top-tier servicing for our owned portfolio or for our subservicing clients. We are taking decisive actions to address the items that impacted our first quarter performance while continuing to execute on our growth initiatives and the fundamentals of our balanced business model, which has proven resilient over the long term. We remain focused on accelerating profitable growth in 2026 and creating value for all stakeholders, supported by expanded use of AI-powered technologies to drive service excellence, reduce costs, and grow revenue. Finally, subject to Ginnie Mae approval, we look forward to completing our transaction with Finance of America Reverse, which will establish a subservicing relationship with the market leader, permit capital reallocation, and enable greater focus on other high-value growth opportunities. Overall, we remain optimistic about the potential for our business. And with that, operator, let's open the call for questions. Operator: [Operator Instructions] And we'll take our first question from Bose George with KBW. Bose George: Actually, first, on the MSR runoff. I think last quarter you noted that the higher FHA delinquency issue was $14 million impact. What was that number this quarter? And just trying to figure out how big a piece of that $17 million increase in MSR realizations came from the FHA. Glen Messina: Bose, we sized that at approximately $4 million to $6 million in the first quarter. And as we noted last quarter, we did expect that there would be some carryover effect into the first quarter, again, $4 million to $6 million. But again, we're expecting delinquencies to normalize by the end of the second quarter based on some of the things that Sean talked about in terms of seeing modifications begin and resolutions begin to flow again. Bose George: Okay. And so the rest of the increase in the realized cash flows was from actual increase in prepayments that you saw quarter-over-quarter? Glen Messina: That's correct, Bose. Bose George: And then in terms of -- is there a P&L impact as well from the higher FHA delinquencies? So next quarter, if delinquencies stabilize at these levels, I assume that the marks decline or go away, but is there a P&L impact we should think about if delinquencies remain somewhat elevated because of this issue? Glen Messina: Yes. If delinquencies, let's say, don't change, so if they just stay flat, Sean, correct me, but I think that would produce 0 impact from a runoff perspective. If delinquencies actually improve, that would be a favorable impact to runoff or a reduction of runoff. So as delinquencies move around, again, if they go up vis-a-vis end of the first quarter, it could be increased runoff. If they get better, it could be less runoff. Bose George: And then just one on the pipeline hedging. You noted the volatility there. Does that just flow through the gain on sale so that, that shows up as a slightly lower margin? Glen Messina: That's correct, Bose. That would show up through gain on sale. And again, I think as you know, when you have a lot of market volatility, unfortunately, it does increase hedge costs and reduce hedge effectiveness as a result of pull-through in your pipeline, your actual pull-through deviating from your estimates. And that all boils down into a gain on sale impact. Operator: [Operator Instructions] We'll move next to Doug Harter with BTIG. Douglas Harter: As you think about the updated guidance, how much of that is just reflecting the fact that the first quarter came in below that range versus what -- as we think about what the expected range for quarters 2 through 4 would be? Sean O'Neil: Doug, it's Sean. The range of expected guidance incorporates both the reduced adjusted ROE we're seeing this quarter as well as anticipating high rate volatility and essentially elevated rates for a longer period of time. And so it's a combination of both. Douglas Harter: And then as you look at Slide 6 with the opportunities that you lay out, what would be the time frame that you would expect really for the first 3, obviously, the fourth one is more challenging. But how do you think about the opportunity or the time line to achieving those first 3 items on Slide 6? Glen Messina: Doug, on the first one for the origination pipeline and loan sales effectiveness, again, that could vary from quarter-to-quarter. So that is relative volatility. We have seen that move in both directions over time. Case in point would be the second quarter of last year when Liberation Day and the tariffs were announced, there was an adverse impact on the quarter, and it reversed out the next quarter. So timing is going to be market volatility dependent. On the Originations scalability, that takes -- obviously, that is going to be dependent upon the level of refinancing activity and a refinancing surge. So that is somewhat market dependent. But the incremental staffing and the incremental investments, we'll start to see improvements of that in Q2, Q3, Q4, right? So that will take into effect through the balance of the year. And the magnitude is going to be a function of what is the surge in refinancing volume since that's basically what we're quantifying here was the lost refinancing opportunity. On the FHA modification changes, we expect delinquencies to normalize by the end of the second quarter. So assuming that they do normalize, we'll see most of this bleed through in the second and third quarter. Operator: [Operator Instructions] And it does appear that there are no further questions at this time. I would now like to hand back to Glen Messina for any additional or closing remarks. Glen Messina: Great. Thank you, Chloe. Look, we'd like to thank our shareholders and key business partners for their ongoing support of Onity. And I also want to thank and recognize our Board of Directors and global business team for their hard work and commitment to our success. And we look forward to updating everyone on our progress on our next earnings call. Thank you very much. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. Before you buy stock in Onity Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Onity Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Onity Group (ONIT) Q1 2026 Earnings Transcript was originally published by The Motley Fool

Double-digit year-over-year growth in revenue, origination volume, and total servicing UPB; Originations profitability partially offset higher MSR runoff WEST PALM BEACH, Fla., May 05, 2026 (GLOBE NEWSWIRE) -- Onity Group Inc. (NYSE: ONIT) (“Onity” or the “Company”) today announced its first quarter 2026 results. First Quarter 2026: Net income attributable to common stockholders of $7 million; diluted EPS of $0.74; ROE of 4% Adjusted pre-tax loss* of $6 million, resulting in annualized adjusted ROE* of (4%), includes impact of mortgage interest rate volatility, higher than expected refinancing activity, and elevated FHA delinquencies $294 million in total revenue, up 18% vs Q1 2025; $278 million in adjusted revenue,* up 26% vs Q1 2025 $28 billion in total servicing additions, including $20 billion in MSR additions $338 billion in ending servicing UPB, up 11% vs Q1 2025 2026 Outlook: Updated adjusted ROE* guidance range to 10% - 15% from 13% - 15%, in light of ongoing rate volatility due to geopolitical events Reaffirming previous guidance on servicing UPB growth, MSR hedge effectiveness, and operating efficiency * See “Note Regarding Non-GAAP Financial Measures” below Glen A. Messina, Chair, President and CEO of Onity Group, said, “First quarter results reflected solid underlying business momentum, with double-digit year-over-year growth in revenue, originations volume, and total servicing UPB. At the same time, mortgage rate volatility, higher than expected refinancing activity, and elevated FHA delinquencies pressured near-term performance. We are taking decisive actions to address these drivers while continuing to execute on our growth initiatives and the fundamentals of our balanced business model, which has proven resilient over the long term.” Messina continued, “Looking ahead, we remain focused on accelerating profitable growth and creating value for all stakeholders, supported by the expanded use of AI-powered technologies to drive service excellence, reduce costs, and grow revenue. Additionally, subject to Ginnie Mae approval, we look forward to completing our revised reverse mortgage transaction with Finance of America Reverse, which is expected to establish a subservicing relationship with a market leader and enable greater focus on other higher-value growth opportunities.” Additional First Quarter 2026 Operating and Business Highlights Repurchased approximately 154,000 shares of Onity common stock during Q1, utilizing $6.1 million of the $10 million authorization; as of May 1, 2026, completed the repurchase of approximately 88,000 shares with the remaining $3.9 million Raised an additional $200 million from high yield debt offering Funded recapture volume up 4x, compared to Q1 2025 Originations volume up 2x to $14 billion, compared to Q1 2025 Book value per share of $75, up $17 compared to Q1 2025 Servicing advances of $431 million on owned forward servicing UPB of $165 billion, 28% reduction in advances while UPB has grown 32% since Q1 2024 Revised previously announced transaction with Finance of America Reverse LLC and submitted to Ginnie Mae for approval For the past five years, Onity Mortgage has won the Fannie Mae STAR and Freddie Mac SHARP award for servicing its owned MSR portfolio or on behalf of its subservicing clients On March 23, 2026, the Company’s mortgage subsidiary, PHH Mortgage Corporation, officially changed its name to Onity Mortgage Corporation Webcast and Conference Call Onity will hold a conference call on Tuesday, May 5, 2026, at 8:30 a.m. (ET) to review the Company’s first quarter 2026 operating results. All interested parties are welcome to participate. You can access the conference call by dialing (800) 267-6316 or (203) 518-9783 approximately 10 minutes prior to the call; please reference the conference ID “Onity.” Participants can also access the conference call through a live audio webcast available from the Shareholder Relations page at onitygroup.com under Events and Presentations. An investor presentation will accompany the conference call and be available by visiting the Shareholder Relations page at onitygroup.com prior to the call. A replay of the conference call will be available via the website approximately two hours after the conclusion of the call. A telephonic replay will also be available approximately three hours following the call’s completion through May 19, 2026, by dialing (844) 512-2921 or (412) 317-6671; please reference access code 11161434. About Onity Group Onity Group Inc. (NYSE: ONIT) is a leading non-bank financial services company delivering mortgage servicing and originations solutions through Onity Mortgage Corporation. As one of the largest mortgage servicers in the country, we help consumers and business clients achieve their homeownership and financial goals with a wide range of servicing and lending programs powered by a technology-enabled, customer-centric platform. Headquartered in West Palm Beach, Florida, with offices and operations in the United States, the U.S. Virgin Islands, India and the Philippines, we have been serving our customers since 1988. For additional information, please visit onitygroup.com or onitymortgage.com. Forward Looking Statements This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminology. Forward-looking statements are typically identified by words such as “expect”, “believe”, “foresee”, “anticipate”, “intend”, “estimate”, “goal”, “strategy”, “plan” “target” and “project” or conditional verbs such as “will”, “may”, “should”, “could” or “would” or the negative of these terms, although not all forward-looking statements contain these words, and includes statements in this press release regarding our guidance on adjusted ROE, UPB growth, MSR hedge rate effectiveness and operating efficiency, our ability to accelerate profitable growth, and create value for all stakeholders, the expanded use of AI-powered technologies to drive service excellence, reduce costs, and grow revenue, our ability to close our transaction with Finance of America Reverse LLC (FAR) and establish a reverse subservicing relationship, and the impact of the FAR transaction and relationship on our business and growth opportunities. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Readers should bear these factors in mind when considering such statements and should not place undue reliance on such statements. Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. In the past, actual results have differed from those suggested by forward looking statements and this may happen again. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the potential for ongoing disruption in the financial markets and in commercial activity generally as a result of U.S. and global political events, changes in monetary and fiscal policy, and other sources of instability; the impacts of inflation, employment disruption, and other financial difficulties facing our borrowers; the timing for receipt of required consents to close our transaction with FAR; the timing for receipt of required consents to transfer certain Rithm Capital Corp. (Rithm) assets, the size of the portfolio at the time of transfer, and our ability to restructure operations in a timely and cost-effective manner, identify and execute on alternative sources of revenue for our servicing business, and adjust our liquidity management practices due to the reduction of servicing float balances associated with the Rithm agreements; the adequacy of our financial resources, including our ability to sell, fund and recover servicing advances, whole loans, future draws on existing reverse loans, and HECM and forward loan buyouts and put backs, as well as repay, renew and extend borrowings, borrow additional amounts when required, meet our asset investment objectives and comply with our debt agreements, including the financial and other covenants contained in them; our ability to interpret correctly and comply with current or future liquidity, net worth and other financial and other requirements of regulators, the Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac) (together, the GSEs), and the Government National Mortgage Association (Ginnie Mae);; the timing for implementation of our technology and AI-based initiatives and the extent to which they contribute to our future success; breach or failure of Onity’s, our contractual counterparties’, or our vendors’ information technology or other security systems or privacy protections, including any failure to protect customers’ data, resulting in disruption to our operations, loss of income, reputational damage, costly litigation and regulatory penalties; our reliance on our technology vendors to adequately maintain and support our systems, including our servicing systems, loan originations and financial reporting systems, and uncertainty relating to our ability to transition to alternative vendors, if necessary, without incurring significant cost or disruption to our operations; our ability to close acquisitions of MSRs and other transactions, including the ability to obtain regulatory approvals; our ability to grow our reverse servicing business; our ability to retain clients and employees of acquired businesses, and the extent to which acquisitions and our other strategic initiatives will contribute to achieving our growth objectives; increased servicing costs based on increased borrower delinquency levels or other factors; uncertainty related to past, present or future claims, litigation, cease and desist orders and investigations regarding our servicing, foreclosure, modification, origination and other practices brought by government agencies and private parties, including state regulators, the Consumer Financial Protection Bureau (CFPB), State Attorneys General, the Securities and Exchange Commission (SEC), the Department of Justice or the Department of Housing and Urban Development (HUD); the reactions of key counterparties, including lenders, the GSEs and Ginnie Mae, to our regulatory engagements and litigation matters; increased regulatory scrutiny and media attention; any adverse developments in existing legal proceedings or the initiation of new legal proceedings; our ability to effectively manage our regulatory and contractual compliance obligations; our ability to comply with our servicing agreements, including our ability to maintain our seller/servicer and other statuses with the GSEs and Ginnie Mae; our servicer and credit ratings as well as other actions from various rating agencies, including any future downgrades; as well as other risks and uncertainties detailed in our reports and filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2025. Anyone wishing to understand Onity’s business should review our SEC filings. Our forward-looking statements speak only as of the date they are made and, we disclaim any obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise. Note Regarding Non-GAAP Financial Measures This press release contains references to adjusted pre-tax income (loss), adjusted ROE and adjusted revenue, all non-GAAP financial measures. We believe these non-GAAP financial measures provide a useful supplement to discussions and analysis of our financial condition, because they are measures that management uses to assess the financial performance of our operations and allocate resources. In addition, management believes that this presentation may assist investors with understanding and evaluating our initiatives to drive improved financial performance. Management believes, specifically, that the removal of fair value changes of our net MSR exposure due to changes in market interest rates and assumptions provides a useful, supplemental financial measure as it enables an assessment of our ability to generate earnings regardless of market conditions and the trends in our underlying businesses by removing the impact of fair value changes due to market interest rates and assumptions, which can vary significantly between periods. However, these measures should not be analyzed in isolation or as a substitute to analysis of our GAAP pre-tax income (loss), GAAP pre-tax ROE or GAAP revenue nor a substitute for cash flows from operations. There are certain limitations to the analytical usefulness of the adjustments we make to GAAP pre-tax income (loss), GAAP pre-tax ROE and GAAP revenue and, accordingly, we use these adjustments only for purposes of supplemental analysis. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, Onity’s reported results under accounting principles generally accepted in the United States. Other companies may use non-GAAP financial measures with the same or similar titles that are calculated differently to our non-GAAP financial measures. As a result, comparability may be limited. Readers are cautioned not to place undue reliance on analysis of the adjustments we make to GAAP pre-tax income (loss), GAAP pre-tax ROE and GAAP revenue. The Company has not provided reconciliations of guidance for adjusted ROE, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. The Company is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include the change in fair value of our net MSR exposure due to changes in market interest rates and assumptions which can vary significantly between periods and are difficult to predict in advance in order to include in a GAAP estimate. Notables In the table below, we adjust GAAP pre-tax income for the following factors: MSR valuation adjustments, expense notables, and other income statement notables. MSR valuation adjustments are comprised of changes to Forward MSR and Reverse mortgage valuations due to rates and assumption changes. Expense notables include significant legal and regulatory settlement expenses, severance and retention costs, LTIP stock price changes, consolidation of office facilities and other expenses (such as costs associated with strategic transactions). Other income statement notables include non-routine transactions that are not categorized in the above. Beginning with the three months ended December 31, 2025, for purposes of calculating Adjusted ROE, we changed the methodology used to calculate adjusted average equity to a monthly average. We made this change to improve the accuracy of net income impact on equity. See calculations preceding “Average Adjusted Equity” in the “Adjusted ROE Calculation” table below. Presentation of past periods has been conformed to the current presentation. a) MSR valuation adjustments that are due to changes in market interest rates and assumptions, net of overall fair value gains / (losses) on MSR hedge, including FV changes of Pledged MSR liabilities associated with MSR transferred to MSR capital partners and ESS financing liabilities at fair value that are due to changes in market interest rates and assumptions, a component of MSR valuation adjustments, net b) The changes in fair value due to market interest rates were measured by isolating the impact of market interest rate changes on the valuation model output per our MSR valuation process c) FV changes of reverse loans and HMBS-related borrowings due to market interest rates and assumptions, a component of gain on reverse loans and HMBS-related borrowings, net d) Severance and retention due to organizational rightsizing or reorganization e) Long-term incentive program (LTIP) compensation expense changes attributable to stock price changes during the period f) Contains costs associated with but not limited to rebranding and other strategic initiatives and transactions g) Contains non-routine transactions including but not limited to early payoff expense and fair value assumption changes on other investments recorded in other income/expense h) Certain previously presented notable categories with nil numbers for each period shown have been omitted Adjusted ROE Calculation a) Effective in Q4’25, adjusted average equity used in adjusted ROE is now a monthly average; presentation of past periods has been conformed to the current presentation; without this change, adjusted ROE would be 6% in Q4’25 and 22% in Q1’25; see “Notables” above for more information Adjusted Revenue Calculation a) Contains non-routine transactions including but not limited to a reserve provision related to a pending strategic transaction Condensed Consolidated Balance Sheets (unaudited) Condensed Consolidated Statements of Operations (unaudited) For Further Information Contact: Valerie Haertel, VP, Investor Relations (561) 570-2969 [email protected] Dico Akseraylian, SVP, Corporate Communications (856) 917-0066 [email protected]