OCN - Earnings call 3 2023 | Onity Group Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Ocwen Financial Corporation Third Quarter Earnings and Business Update Conference Call. [Operator Instructions] This call is being recorded on Tuesday, November 7, 2023.I would now like to turn the conference over to Mr. Dico Akseraylian, Senior Vice President, Corporate Communications.

Dico Akseraylian

Good morning, and thank you for joining us for Ocwen's third quarter 2023 earnings call. Please note that our earnings release and slide presentation are available on our website.

comments will and Chair O'Neil.As the Chief the and call Officer, Chief a Safe the forward-looking presentation Messina; contain the Glen Financial our laws. Harbor on provisions be pursuant federal and Ocwen's Executive reminder, statements of Speaking made may securities to today Officer, Sean that or of forward-looking terminology These forward-looking by identified use be different reference to uncertain. address by matters are statements may a at degrees future period and

and should should place this bear in mind You on reliance statements. not such uncertainty undue

assess management's these turn the to of and view resources. viewed their GAAP in presentation of release statements, the provide of most may comments We forward-looking to call results why among results. Forward-looking our actual useful I and financial the income, to the they again.In contain press as found the useful measures and GAAP adjusted statements Messina. such presentation.Now, will financial are on that SEC measures measures and uses of which presentation others. the discussions allocate uncertainties may and measures, because analysis well non-GAAP comparable our happen investor our an our be to financial by the Glen past, including be reference over in the the have to a risks and used this may assumptions, directly as non-GAAP as measures differed and date financial filings. speak only be financial non-GAAP measures In in in the condition this measures described of the investors materially appendix as operations they should made, not from to company's reported uncertainties, management Non-GAAP risks addition pre-tax suggested are and supplement as to involve for believe performance these alternative A reconciliation addition, those

Glen Messina

diversified call. market and which address Today, turn year our quarter our than highlights the gain to we'll pre-tax by was has the results, our quarter our for third $XX long-term you to for joining the the deliver the to Good servicing and driven and third benefits take better income and Adjusted second morning, quarter continued of the our that balanced loan and versus X. key segment. servicing pre-tax the originations and Both business. for in during few slightly environment income our quarter review initiatives whole progress please Slide report profitable realized third quarter. for actions improved primarily against were reflect quarter. materially I'm last excited quarter, Dico. Thanks, and quarter of excluding thanks Adjusted for same transaction shareholders.Now the the value a our million reverse through

quarter results again, X% per Our consensus, adjusted million achieved above quarter, $X driven third pre-tax mortgage with prior XXXX. second May versus prior on but or hedge servicing coverage subservicing total we to extend year, quarter $X.XX for annualized X% that up share quarter, the reported than third up X% versus capital and X% by the zero, the return a increased In MSR lower XX% the partners UPB Subservicing second was versus UPB. and report and increased of the UPB market-based benchmarking equity.Net by largely agreed in and pleased the process. through growth second resulting the of driven income year.We're Oaktree for MAV commitment to quarter have mutually ratio XQ. clients the banking period and items versus quarter loan transaction were from roughly and gain reverse whole is our largely valuation in MSR our Notable

XXXX. to our seriously and We extend and Rithm trust us. In have relationships their Oaktree we and take helping objectives.We the are December with agreed enterprise-wide to on cost to in they've of mutually management. greatly We confidence subservicing appreciate placed through committed addition, Rithm them focus our continue and their agreement achieve

quarter quarter 'XX second second than annualized notables lower expenses, excluding the are expense than XXXX. operating materially Third lower baseline our and quarter

XXXX During the opportunistically available. $XXX liquidity our $XX reduction repurchased million attractive strategy business to operate the of at higher key to third and of of Slide down million guidance, quarter, performing liquidity to liquidity remainder hedge track We're with pre-tax we on of helped results prices capital our debt to our our in as prioritizing our increased the X. The continued excess business of debt our achieve and XXXX.Please the the us versus against well due industry is for current line PHH allocation to and year execution coverage. we're adjusted key very turn demands and with objectives return are believe our quarter. we're is equity The environment. we executing end is notes have prior initiatives and business pleased corporate to reduce reposition return on our corporate of initiatives this in profitably Total the

investing XXXX, adjusted remains While the we it's servicing, on income for a the which objectives financial achieved start environment and cost favorable and require expect for we the for focused competencies over to ROE performance have and contribution to compliance with XXXX foreseeable to current continued We've will continuously on guidance we've core dynamics the return sustaining risk we and future. originations forward date. equity challenging, levers have maintaining material This X the this. performance pre-tax our delivering do persist a quarters. improved The line of increasing we're operating financial disciplined relying on and to industry from with income business us.Next, without segment.Looking financial originations improvements on focus a a and the X our balance past our demonstrated are improvement, approach, in MSR management prudent environment is

win billion on converting pipeline originations portfolio, subservicing to hold opportunity both the billion subservicing we our and while range. owned to in laser-focused our purchase UPB and MSR working growing by opportunities. partners capital We're MSR fund our with our First, $XXX new $XXX

excess liquidity permits, Second, further decrease continue as debt well to repurchases business the to delever enterprise as volatility. through opportunistic and risk improve as expect ROE to our earnings we

segment enhance of opportunities originated in is by delinquency This XX% we Third, distressed profitability our Roughly owned improving includes a further the of XXXX. and are MSR or unique subprime we legacy our prior and resulting capitalize our over subservicing commercial ROE as asset we match This well believe sets. positioning billion comprised and XX% of to returns market as of where continuously can Mae transaction not the consistent total on expertise. owned skill Ginnie transactions areas levels.Lastly, our for UPB MSRs. is from $XX with delivering to and portfolio has identify other loans scanning we have cycle target disruption asset consolidation market special and pre-crisis that

flexible with always, deliver Slide we and executing maximize performance committed turn committed for to As the We're improvements shareholders.Please on value dynamic our further shareholders. considering we've value to all remain driven to and objectives pleased financial options for X. this in to market are our to

offers Our cycle. the benefits market several balanced diversified in business and current

foremost, current strength. conditions us a and to and position of a market business from servicer navigate We are, our first servicing enables

slow business drive Our Despite improvement. and replenish earnings originations MSR well owned continuous higher its servicing subservicing. in as strong by current delivering well business cost conditions, portfolio MSR purpose performance run-off, as our earnings and our serves float is market cash flow to driven growth

the expertise capability niches, mitigation in over default optimistic is levels. also We've and giving balance reverse loans loan these assets Our performance flow within been unique and driving management past the small in quarter, and This years. margin second is to also and in commercial to whole about projected subservicing loss distressed to skills potential well carefully X purchase by those our cash this servicing capabilities commercial assets.In delinquent diverse securitization subservicing grow mortgages. reverse strong was the and enabled growth earnings our same able We're opportunities reverse special niche. higher in subservicing, rise performing above and of invest

the driving remain servicing on consumers.Lastly, with growing areas in mix these we acting opportunities clients as high-return growing diversified of XX% increased investors, increased higher to business recession. portfolio on please versus event and volume channels our GSE products believe higher subservicing. from mix with and products of margin Mae MSRs owned remain to in value X. portfolio on channels increased seeing and is and are growth products sequential the channels originations owned a by a year. add to volume helps where quarter, our compared in basis. the on event XX organic In transactions a focused prior our of quarter margin servicing in our Over subservicing margin Slide materially as the from We of risk and a well and We recession Ginnie advances third as servicing.Now percentage we origination our to can We focused XX% of and turn points subservicing mitigate exposure lower higher PLS

subservicing. percentage versus volume.Our strong in down was and growth team mix in points both an to enterprise MSRs X sales due However, increase originations overall owned total quarter the delivered second

banking quarter servicing mortgage than and year XX% in business subservicing prior sales levels.Our originations industry XX% Subservicing more capital billion MSR than clients versus has partners year third of to versus volume. roughly us to run-off offsetting capital the the additions double Rithm the second more allowed the our grow and subservicing $XX and down total total contraction portfolio. to MSR were growth with in up However, quarter retained partners subservicing our subservicing additions significantly prior due for was the

strong, in X% versus year. quarter excluding Our the originations additions billion over additions to and Rithm up clients portfolio subservicing subservicing processes quarter.While subservicing in the subservicing RFP of remains making and interest selling in quarter in due to XX% $XXX last a boarded on see We've decision XX market. billion third extend MSRs continued last basis we is third sequential including difficult the the months, potential $X up or

XXXX. these range be expect Our Based X win environment, billion not additions, This XX% MSR do business MSRs billion.Please an subservicing capital the with billion we're situations. expected in retain relationships additions subservicing a $XX client the to is in targeting over mix bid. that X. servicing can partner competitors on approximately MSR if to subservicing quarter subservicing increase wins the quarters on have.Considering incremental to to we UPB to capital second of turn our more billion of the can traditional with or We $XXX partner, ability us the our Slide through to roughly of total bid of subservicing new partner the in next $XX capital $XXX our the helpful several giving optionality

to continues cost competitive performance, industry top-tier platform structure. highly operational servicing a Our deliver maintaining while

been have operating we Our capabilities breadth And is for HUD in and by Freddie delivering of investors. Fannie performance industry-leading unmatched Mae, recognized for industry. the Mac

been delinquencies, We for by have previous delivered Mortgage we the customer claims the also about value, named our timeframe Company experience delivered appraised cure quarters, while maximize servicing servicers. for numerous in the National XX-plus mortgages.Across selling of our we've and expertise by Brokers allowed XXXX metrics, price Year to In sales the ability to our spoke performance HUD. clients, ability reverse improvement other within versus we versus HUD performance superior of superior in Affiliate assignment day Association REO our properties

industry borrowers quarter also either the forbearance consistently Mortgage mitigation achieved than the with full paid more loss you our in compared by active levels or as fourth MBA. have Inside current, lower to industry average an Here reported we the of reported of since as by plan the XXXX, see addition, again, exited delinquency Finance.In can as average,

our servicing basis structure cost annual even bank us has against than for Study continuous Operations positioned fully are size. points UPB peers an on servicing independent with servicing X our in relative and loan banking our we're pure-play on and of competitive of UPB XX% average competitors results every per par cost peers this concentration UPB PLS lower metrics structure, our cost our our when improvement can of If are we discussed servicer Based subservicers. cost continuous cost industry's upon does in operators size comes large I on due XXXX, strongest forward roughly Slide forward grow with in efficiency the total the structure, X. the rely large other and we loaded we of non-performing servicing. residential cost XX% to and a MBA's versus twice group focus sheer improve the operating UPB. competitiveness along are than compare for servicing not our over Our With in and measured loans of banking servicers capability. we large with Moreover, twice peers.The variable, lower the of industry's cost largest group, one that of to process demonstrate technology performing Servicing highly believe our size. mortgage has turn mortgage to the residential group peer fixed global industry.Please includes and It improvement, This our we believe our basis inflated this relative or scale. as semi investments X comparison.Our points of servicing strategic large materially from I independent more further the largest high cost

improved delivering borrower improved we're efficiency, we're delivering and While experience. also client

Scores over up up Promoter X XX points percentage are client and were Our Net year points. Net Scores last percentage Promoter subservicing

enhancing the client XX/X reducing process app by technologies digital time, facing interface automation. enabling improve customer and such and multiple as channels variation.We're the to and we've mobile using information, and and Over to several last experience in to invest like cycle automation bar chatbots access reducing enabling process our additional robotic assistance technology years, continued

Our AI-powered rate. XXX,XXX an success XX% hosted with chatbot sessions has

operational both robust platform.To to accuracy than supporting These to technologies response have we years a XX the over as productivity technology inquiries individuals team infrastructure mobile while turn per speed, and which needs. X,XXX have in to their with hours. XX in to invested as our bots addressing together of per clients, about with enable most a in transparency as deliver to dedicated clients.Please Slide platform to and our bots over support to borrowers clients we self-service responsiveness, average development. up month. an experience industry tenure client to has X. we our LoanSpan people, scale subservicing app less XX of further clients. to Our are This to holistic X process XXX and investing work performance committed portfolio XXX,XXX new year, client XX improve has our enabling under addressed We've in processes mining log-ins And data build access, in Discovery well for technology superior and We're provide and

on our on which capital inception. support successful UPB MSR relationships billion relationships We these since our a growth objectives most to joint of capital-light with continue to has MAV, of focus its is partner expanding $XX venture The our basis. purchased

MAV total extend mentioned, As additional capacity mutually billion I have transaction and investment support XXXX to a and have in the the billion UPB partners of to we May X previously $XX variety to of we've using we Oaktree to to agreed billion supported by grown past structures. period capital servicing for $XX $XX servicing acquisitions.Over years,

MSR Nearly conviction X purchases UPB more With the our MSRs. funding. for we we MAV. leveraged manage fund on them partners partner exposure level investment market our MSR XX as Over bulk All the or originations our can to of about owning to to capital than as ability partners discipline active multiple helps requirements.Our rates channels months, for through relationships changes individually the interest purchases MSR with business. growth dependent nearly have generate investor-driven our due double valuation have well long-term an last capital-light originations introduces all and investors, added capital currently our of enhances price either to have approach capacity to

to they achieve results the and help investor and over I'll them structures discuss scale turn I evaluating of it third our placed types. developing partners to and on their Sean thank team growth focused we're ahead, to investor trust and multiple for potential asset support other diverse range a across profitability in our objectives quarter. for MSR have and growth the Oaktree additional relationships our Looking our confidence want to objectives.Now to

Sean O'Neil

financial both and XX profitable. impact improvement quarter continued perspective. opportunistic originations income we whole turn both And the very I'm positive operational second adjusted in third Glen. Thank net the pre-tax removing showed pleased of gain from after the in with our quarter, in you, to Please the income. the transaction Slide reverse for performance Servicing highlights. are loan GAAP the and and financial

income originations million quarter drivers regulatory several occur at income of our the $XX $X did Our income, primarily gain our of After column, reflect adjusting million $XX the of repurchase quarter-over-quarter of the as as million the of well significant in this from as servicing this improvement million coverage legal and the of $XX for we over and a employees, reflecting work well last reflects GAAP million $X businesses quarter adjusted balanced to debt.The transaction the corporate million our net continue GAAP, business the quarter lower in an aligns not strength volatility blue of with whole of P&L those, XXXX, from indicating from of gain as ratio. the million. positive impact in net and to our as to $XX we're a resilience pleased million notables well $X recognized net retirement GAAP GAAP closely model.Going pre-tax our dedicated hedge loan $X that hard settlements. quarter, results which operations material as the and no income due third and a higher

out, Glen instruments quarter debt liquidity the the this to to down support hedging is and cash in the higher repurchase, volume. used the originations pointed slightly due higher As

the early shows the origin, upper bottom adjusted net as income ROE the of million on total the as more detail cover and are referring requirements.With of impacts rate of the PHH well growth, in The that I debt corporate alone. the at ROE new We adjusted call.For impact QX growth months view few million shows a profitability expect the income, liquidity growing in X%-plus our bar of impact now for as business with left quarters XX% positive Our positive we In QX. and operating tax upper the income the only our to FHFA turn result, PTI $XX in income both robust servicing will down more at continue seasonal in we transaction view so portfolio in income of bridges This forward will XX loss adjusted and guidance initiated adjusted please net existing the XX. October, right to the provide stands some more when balanced do the to $XXX XXXX changes quarter-over-quarter We our at transaction total segment excess going in blue the some model throughout positive that deliver to for view end carryforwards. debt due effective shows held the pre-tax is we impact detailed to and quarter well. XXXX I'm consecutive can Mae with debt my This to quarter QX The corporate quarter well year XX comparison. total used trend the showing million, whole excess going be the on liquidity and impact remains quarter. repurchase Page segment comments, million the the is assumptions the GAAP $XXX impacts, of the Ginnie for $XX all bridged segments both tax loan repurchase the The indicates the to for liquidity on earnings see clearly you improving net impact and pre-tax delivering about entity. actually ago. offset pages.Page for highlights a in removed our pre-tax from third in is

billion due billion debt. rate the is fair into line between achieve in The sheet quarter. the is GAAP the here our that will transactions sheet third the XX, $XXX and of interest actually million value our shows represents Our interest value what and show the to our our MSR excess balance bring $X.X and appears that discount UPB in line balance retirement ongoing our to illustrates of fair about with million of expense. gain accounting net impact of the risk. leaves Page is fair capital-light for additional us both in reduced risk. competitors.On a we the provided, balance approach guidance to billion to on the we $X.X well $XXX transactions, We debt-to-equity payment $X.XX the hedging graphs hedge. intend I where interest fair difference maintain publicly-traded sized of sheet, We an with amount of MSR fair recorded we have UPB book for assets. range our value, of describe is which third with the metric on the of to obligations of our bought the $X.X thus the quarter MSR strategy consistently delever This The left value This of a our in rate debt on billion which our value, which have through as capital-light in servicing strategy didn't the and as been of sale, billion to that but $XXX assets.This reduce spread MSR owned represents exposure on

As based comparisons that market we've X our trading well PwC KPMG experts and as own filings, as public our valuation observed surveys upon independent model levels discussed, MSR from input to use output. and is valuation

last of above hedge segment. interest a year.Now hedge segment in expenses of to cover pre-tax servicing coverage the rising ratio upper earnings coverage graph in rates. quarters coming mark-to-market consistently mark-to-model higher we hedge an X right million process the we XX% the from from to shows data lower with adjusted from that detailed ratio and at The both is XX of and quarters is second target due reverse servicing the quarter-over-quarter are of improvement in falling X million volatility a on start operating $X left information this than our where coverage different Page and of last reverse. chart income forward on set more This Our quarter The $X improvements. we will and mitigates shows XX% the approach approach.The XX% the both ratio

and due PTI, run-off as and the was in revenues servicing subservicing. to well higher income continues as XX and The pre-tax quarters improved by forward mark-to-market, XX% margins for versus Float to significantly or by grew migration forward volume asset origination but business lending and co-issue lower from of the quarter-over-quarter both higher. total prior origination down as an adjusted of income third million Page billion turn this prior reverse. overview They're of which billion grew volumes our the quarter UPB. slightly some significantly to a Correspondent quarter correspondent excludes subservicing balances $X segment quarter. quarterly the year-over-year.Please of Forward were when assets across also quarter-over-quarter, and than lagged X% saw higher to year up XX% $X sales for improve $X.X

Reverse continue when profitability an We stay purchase It focus. continues from rates spreads channel driver be to do this and and product which be recent term retail corporate volumes channel gain capital.Consumer cost slightly below averages, key decline. HMBS breakeven. has a of our origination to flat historical to yield direct sale. This future the margin experienced on increase refinancing, will for or mortgage continue to price rate trade of to had than the appropriate cash-out suppresses declines volumes wider linked the shifted

XXXX you on consider view the a year-over-year origination to our of to Page increase is also gave better We which in performing year Using data which end our a can due ensure prevailing likely the the discount yield, same flat.Please stock sized XXXX, origination-centric negative year-over-year the but an cost the some XX volumes, treasury impressive slightly volume when to turn Russell in quarter-over-quarter. corner for even back strong more price. for can stock point peers. The by both progress, company. originate is book is right underperforming on lower in to seen our to essentially recent segment This a Index, the our the the XX-year line continue market impact with that appropriately and is be starting group of now have

the earnings X book following lower the at measured release have servicing last from the our price bulk However, share quarters.The for book end the come to versus of as discount business the graph value. quarter profits our in is

our our than to Glen. book, to market trends all support period stock positive reduce in difficult a during assert senior you, we the our growth run willingness that ability originations a at We currently servicing our big stronger a receive.Back growth continue profit and profitability, secured price in to debt, to

Glen Messina

Thanks, turn few of pre-tax I'm to and comments achieved we the Sean. delivered XX to wrap-up we adjusted executing. before how Slide third annualized proud team go ROE results a for Please quarter, target. our is our Q&A. In

diversified in investors.We Our remain a in cycles.We're of and across performance improvements for perform across clients, superior and mitigate and to operating types. investment global our and continuous and and with supports steadfast capability, risks ability efficient business operating industry-leading delivers pursuit cost prudent by to and cost our an creates process grow Through business balance opportunities, investor our we've executing multiple built and platform bars leadership industry mature subservicing capacity technology strategy, focused, capabilities driving growth product leveraging our that servicing for growth improvement. measurable multiple

remain and to driving satisfaction to and borrowers experience people, and improvements in process borrower committed are clients. superior delivering a and investment technology Our client improved

capital as sheet unique our our on deleveraging investment and volatility to liquidity of and recent growth permits strong expand to and the to liquidity believe financial reflective our risks. do is opportunities.With position, price further partner business our Overall, excited for our these of we're continue and the performance growth and structure-related relationships improve We rate economic about our capitalize prudently subservicing excess balance not capital relationships, and interest the strength potential opportunities support and share enable managing we of for are capital mitigate financial business.

strategy, positioned environment up ahead let's business we to and questions. long-term for shareholders.And continue our call our open for with we execute to As navigate market we well that, Laura, the deliver value believe the are

Operator

Bose have our of the first Instructions] from George from line KBW. [Operator We coming question

Bose George

your next cost cost First XX% or over your by, of the said of the servicing next wanted more just quarters, you trend course the service the how about growing guess, over little year? ask of of about see do couple a I to service. you With UPB now

Glen Messina

your Bose, question. thanks for

said, of don't about semi those obviously, I and costs that we've servicing are costs business. we XX% As grow directly And as our our scale fixed got variable.

So we're servicing about X% our going cost to to variable call you can productivity think it, to drive, continue platform. in X%

that a objectives, to we deliver servicing quite growth the that nicely. that to expect gets are our extent on our leveraged XX% And successful base go-forward delivering basis. in cost of We

we'll position. and think in against favorably competitive us we peers our puts to that So strong continue quite a compare believe

Bose George

great. that Okay, mark are And also, Like, that valuation Is on That's HECM the of on the piece? that. there's the what And to the the helpful. I assume that then servicing? wider actually hedging on HECM, spreads? no drivers switching move

Glen Messina

Yes.

So just against servicing. hedge generally servicing forward our HECM as a our acts

speak, so MSR, forward an HECM than MSRs. react in way rates interest inverse So to to

if wider. equal, can would rates by tighten, HECM lose value widen, MSR spreads would actually then HECM If And as the value widening they lower. HECM or that the MSRs be contracting. go all spreads being up, obviously, other value if And value. So change things well be MSR

and a of we -- our overall at So against hedge yielding our reverse as as a hedging part as the strategy. it look MSRs forward MSRs

Bose George

diluted just actually, And quarter-over-quarter. drove share like -- went sense. that? one count What The it count share makes the up That looks small Okay. one.

Glen Messina

shares. Yes. any Typically, issue didn't we certainly

thing only compensation plans drive diluted would the share-based for employees. typically, the be So the our that of would maturation count share

Operator

from Kyle the Jefferies. line Our of next Joseph from question comes

Kyle Joseph

channel? us but had little a give us guys compression. rates correspondent out that where pulling in banks good if channel, are there. volumes, competitive the some just bit the the on things you in update an of you you just competitively on Obviously, dynamics margin rising an But give could mortgage On update quarter, saw obviously,

Glen Messina

Sure. continues would say. be correspondent the Look, competitive, fiercely I channel to

in be Fannie a fiercely don't market volume de-emphasized as are presence to leader. We have XXXX, all not leader. are exited I We in strong channel.So that volume the forecast think price to though frankly, or channel, levels. MBA strive price contracting aim wouldn't the it and who rebound and going other be players some competitive have AmeriHome and PennyMac, or the even industry people suggest there's other know are either There who the well, in for very others and a XXXX, Mae material has with market correspondent we

We expect of permits consistent channel. expect continue again, And continue as our originating -- competitive highly capital. and it's disciplined to to going with focus MSRs remain a be we cost to to opportunity competitive on

Kyle Joseph

and or Got capital opportunities of -- on we, seen staying that banks on terms of servicing we've just the headlines go-forward terms obviously, months for on potential Ocwen behavior Helpful. And from And the seeing in side, lot requirements. on basis? of there's But industry you're X it. in more then a out since Valley. selling what Silly net a are

Glen Messina

was Yes. Look, I Fargo their the portfolio. prominent they're most think Wells in announcing downsizing MSR

hard do We really smaller and seeing some basis. the want bulk they other a to from MSR well packages are are we And think go-forward enter long market banks about MSRs seeing banking as own on community. the

III the within Endgame Endgame capacity We further the and rules the put to own rules don't III Basel have banks MSRs. are Basel likely to unfortunately, expect, MSRs hold who on pressure

to MSRs think originations market a affecting result to the are is and coming facing do robust be as a IMBs mortgage holding of the really going -- quarters that just the and tough largely fairly we for bulk So constraints banks several constraints assets. market increasing continue

Operator

Next from question Eric BTIG. Hagen from line the of comes

Eric Hagen

that for change being of origination and how versus you feel So interest maybe in or X% servicing the how next And return do reverse ROE both forward rates to response business? is outlook would the of lower? you that a coming the like much higher year, do pre-tax feel from side like

Glen Messina

pretty Yes. our returns are servicing our the platform. Right coming now, I'd the at from majority of looking results, obvious say, it's

performance But reverse interest forward servicing margins historically, more our in of and as servicing We we'll do if refinancing rates is originations if steady, generates good mean performance our see, platform. up. volume way, again, struggling widened stay That laid strong of from a originations, Look, returns. like profitable -- less to basis out you said, rates is. rates that that. have versus out forward, well expect and as run-off subservicing change typically be volume have down a go-forward interest to as of that profit continues just reverse continue would on MSR picks would I go opportunity terms Sean, think shift. expect and up.In from dynamic, We'd coming increasing would typically servicing originations originations relative for profitability as reverse coming platform And see more we go material

will model. a the us it's serve reverse look, and basis. So of interest balanced And well allows originations both benefits business us to forward our the we environment. to impact Having of go-forward servicing rate on continue balance expect and balance and that out the

Kyle Joseph

thereabout do I to follow-up marks back items X% and one-time Yes. other on A -- stock or if ROE to would your that exceeding the something or think or approach that. you contribute mark-to-market either debt? change mean, buying

Glen Messina

you as There I any really assets quarter. and and MSR items. from any fully the transaction values, wasn't distressed zero notable So neutral throughout we're there this essentially gains was quarter, opportunistic saw, impact think hedged

to we continues the price think stock financial the deleveraging it. reflects do and potential sheet of trading Look, more risk higher that which does to against have fact And we leverage on think peers a about priority our earnings focused our creates higher stock structure Our relative we our balance -- leverage the contribute volatility. higher be company, to as earnings volatility. capital increased the

is debt. applications allocate near-term preference really different ratios our a for in here about as repurchase then capital. liquidity our So our available think the debt of it's consistent excess we can more variety And when average, to group our with become peer to

Eric Hagen

Yes. No, sense. that makes

billion subservicing. how add margin of cost kind for you're Can commercial you And subservicing may of Just you I around the of every think like And talk what of nature gross on kind from servicing? about subservicing. pre-tax you $X think subservicing I resi What's here? profit mean, compared about how the questions talk incremental margin? of a Like, heard thumb of forward guys the there? there to rule should the I be subservicing? a someone couple is about

Glen Messina

Yes.

me go So in let order. reverse

than particularly forward. complex, are requirements for more has assets. and The structure cost life reverse much of it, a end So reverse resi commercial subservicing higher at the, call I'll

inspections back they're are and in that conveying complex have loss more stead properties to or do; and make things you mitigation HUD. conveyance good property sure kept And more the -- certs, So to the loans to occupancy like. there's process

multifamily costs a range on higher basis servicing a portfolio.If quarter's you as go between that the typical lot subservicing the depending small marginal forward. commercial X.X it's to last on for we are that look our and Obviously, a X, grow, portfolio profitability But would as well presentation, servicing a average have at basis X profitability the a points to points on So reverse as we so marginal of X the relationship, points. subservicing for basis to would our continue basis, subservicing scale that's to X of for contract we balance size growth plain expect portfolio a we that relationship. did of it, generally, upon current, X of can the typical pretty broad vanilla -- relationship, if basis call largely X for show

Operator

Howlett Riley. from We coming question Instructions] from next our B. [Operator Matthew of line have the

Matthew Howlett

focus want million. around all on repurchases, the obviously, $XX quarter. good to on Congrats I debt

going question some could seasonality for senior you of want origination you of you steps terms that My of of with What focus the think transactions you how did terms to is synthetic And those included down last sort quarter. could debt? you knock you mentioned that cash you I can do down be Glen, leverage area in then to Is to deleveraging? the in the said peer deleveraging? What group. some liquidity, in generate much do? on taking to it Clearly, there's more business. October.

Glen Messina

primarily do -- would we maintain MSR to a expect or owned level our our target going growth as look, in Matt, So our to we growth UPB. leveraging need be subservicing and of We MSR be to said, is primarily capital partners.

is $XXX to billion believe between service coverage $XXX and billion level debt ratio. what are we target maintain appropriate Our

So have well.So focus to debt. on allocate we balances, basis, as as look, we debt pay down expect on continue liquidity to while that a our corporate our would permits go-forward excess we do to coverage excess debt service liquidity

the $XX far priority marketplace. We own maintaining a capital allocating of secured corporate this our continue notes permit in At reduce. of the available in how last months and by and not Obviously, reduce focus of target stage we've stratifications our allocating million want excess flexible set think a so, need when is easiest So debt quarter. we'll senior liquidity prudent as it's game, maintain much reduction. do the debt well the debt PHH to further debt XX we about on specific The reduce to servicing opportunities the approach to of to to we as various reduce of debt. to to our or UPB against

Sean O'Neil

Sean. it's Matt, Yes.

is than cetera, you owned something thing synthetic more in mentioned promote subservice other MSR we a on we do liquidity the -- have make an subservicing more else, transactions more MSR. constant tension whether delever, make other The to significantly to was servicer it engaging to any significantly measure be we et and

in You see that the can Q. all

market the so watch of is. to it's a where And target a it's kind relevant --

And useful the flows it cash a so the frees commensurate with be it it's into lower transaction. in when today, the then market rewards future. But us to cash up could sell subservicing,

you to something of capability doing if kind that's production have NPV understand your on what and to total X-year to cash move X direction. that you're in So take you a

Matthew Howlett

of all taking the the profile, feel I I Look, on can certainly and I'll down time? to that you're levels over with amount think peers, portfolio, can Sean, Rithm? or like, PennyMac you those you the sort what in goal you the ask appreciate that you a owned you Do over it down Glen, the take line bring different and Glen maybe actions peer understand confident certain it you're I being here? Do ROEs -- Is of said a and getting Cooper leverage feel time way.

Glen Messina

review to eliminate board. risk normative have our all structure allocate right allocation capital in basis volatility eliminate of it's peers. a and on look, to to the with the look, time risk, and goal our capital allocated for as believe capital more right our go-forward the try compared that's now, earnings. But -- we business. way potentially we a We the look, the capital to it's And is Look, to believe priority ratio as leverage Yes. the

are the a as make go-forward accretive changes, environment that on continuously evaluate most we'll market basis. allocation decisions priorities think the capital So our shareholders to and we

Matthew Howlett

No, those with look, line a multiple you certainly in deserve folks.

just kind could negotiated of for the -- mean, you But your business with third-party you progress you on a congrats your do mean, that still past, bank, partners. capital of third-party in So subservicing the you do the have be with where some partners, I call is of could the -- that pipeline I have capital you sort you've it? a making. most subservicing, on entered go going transactions. in to subservice some discussions win banks portfolio Do in and you're through without

Glen Messina

Yes.

in variety of subservicing So a our portfolio. so speak, to different we've profile, client got

towers independent So it would to include client the banks banks, credit look mortgage we investors. unions, at. financial of X and essentially are that tend profiles kind Those

billion for with their dollars -- subservicing in bank return we've near a if really for good who's So That objectives. be profile commensurate a we smaller yes, tough service especially do to mortgages it's community make business, It's couple of would MSR and banks. cost regional today a returns. to anywhere got them outstanding, competitive

responsibilities. with a capabilities to structure scale in competitive good way to operating for platform their larger the a participate more So offering a them consumers product burden cost is with the a leveraging not and our subservicing have of

Matthew Howlett

or is of the is in curious capital? third-party mix have right? whether some include? it Just that those part that's mean, going is the guidance you of also And the guidance, I that -- to

Glen Messina

It's all in.

we so look, growth discussed client speak, So by profile have publicly. established don't targets, we to each necessarily that

can achieve all our what we Our growth in transactions on subservicing we types. from profile client subservicing believe expected guidance includes and

Matthew Howlett

going estimated of us Did And it? you last on focus is end asset. of fully give quarter? It then because substantial? And it And sort the And always tax year size again, of you asset doesn't It I the on question, reserve Great. or know tax outlook look you. for not reserve some like to that that profitable. like whether or releasing I did. you deferred partially you're you. this on release could the Sean, looks any that Got deferred

Sean O'Neil

Yes.

your the go allowance, I'll backwards. to we is -- for your allowance To our total offset by -- except valuation valuation and update last asset, So question, annually. deferred which tax don't we

that see except won't K. the you So in

As north last $XXX it of asset. tax K, was was little deferred million of the a the

several release continued going have partially before You're profitability to or see quarters of can that -- see we more to you'll either fully.

but transactions there been allowance asset than other net this been operating has not tax any that losses, deferred point. valuation involve no at So the have just the the to offsetting existing that up with profit lifted free

Matthew Howlett

then And said said it you $XXX I'm XXX million? million or you. sorry. Got remind it $XXX was -- you was me,

Sean O'Neil

to give on it right don't includes believe you -- and drivers. handy other go back deferred at allowance K. I valuation I the the the some I the have have look our asset -- now. K. tax actual It plus me exact out I can was number of

Matthew Howlett

you. Got

be looking saying, some could as come the as it it if in -- you're that fully $XX be on right, I'm per much book value released theoretically that reserve at time? was what I could mean, could Just if -- at point share. it

Sean O'Neil

our the time council, significant as external At a that's deferred create some The owned impact produce with over from We yes, could that tax MSRs releases have because it network. tax to liability offset believe now. reason point declines partially. input also it [Indiscernible] MSRs, usually a be significant our a you but in can improvement that, time, should that

Matthew Howlett

be going Look, guidance. really good significant are I appreciate completely for Congrats time. to the of Yes, solid different exactly, period that. a to results your to I and you're and going taxpayer on a obviously look forward look update. not ratios

Operator

[Operator question line follow-up from coming Eric Hagen a BTIG. the Instructions] from of have We

Eric Hagen

that million MSR that say around And I $X.X you like allocated? is -- billion? Can associated that advances, of that funding the advanced the $X.X mentioned with is you billion. think you what owned portfolio is is is how $XXX that's is by the net

Sean O'Neil

Yes.

look MSR you of near the the on valuation. deck, if page there's a So earnings end

had if XX delinquencies, fairly this then Fannie-Freddie And extreme can at the have Ginnies Ginnies, hang mix you majority Ginnies drive of pre-XXXX can of which vast as what PLS the the The look and XX, delinquencies very buckets, advances.So And pretty the think for old newer our bulk I call, XX, see or delinquent and I'd is, delinquent normal the is of you which Ginnies low, third the and somewhere pointed very the other are crisis middle. in second, XX% PLS a GSEs earlier, a there, book. out that normal to delinquent. our the Ginnies, book non-agency Hence, X.X. the will you down. low. bring that our the improve we've that for focus at from advances column or Page because on And comment Glen it's The it advances now the renewed of the non-agency our actually non-agency of quarter, quarter. are on a are resolution column, several quarters kind out XX is see coming Glen's

of of finance has newer to our delinquencies in the on GSEs, up. the terms excess have book, And we Ginnies aligned kind pick all that. a that capacity and which be event relatively In would that low the now newer advanced advances normative advances with right fairly do

Operator

questions Mr. for this comments. to closing over further at call to final no are back Glen now the time. turn Messina like There I'd

Glen Messina

I Directors call. and their Board and everyone you. Thanks, success. business team work forward of Laura. our their like support for shareholders I'd quarter for also hard business. our to partners on our Thank our and updating our to and business thank next on of our I'd look key our to to earnings global like commitment progress thank recognize

Operator

Thank you that day. you today. We a your for lovely Ladies and Have you thank conference please lines. this ask call gentlemen, disconnect much. concludes participating so and for your

Onity (ONIT) 7 Nov 232023 Q3 Earnings call transcript