OCN - Earnings call 4 2023 | Onity Group Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Ocwen Financial Corporation Fourth Quarter Earnings and Business Update Conference Call. [Operator Instructions]This call is being recorded on Tuesday, February 27, 2024.I would now like to turn the conference over to Dico Akseraylian, Senior Vice President, Corporate Communications. Please go ahead.

Dico Akseraylian

Good morning, and thank you for joining us for Ocwen's Fourth Quarter and Full Year 2023 Earnings Call.Please note that our earnings release and slide presentation are available on our website.Speaking on the call will be Ocwen's Chair and Chief Executive Officer, Glen Messina; and Chief Financial Officer, Sean O'Neil.As a reminder, the presentation and our comments today may contain forward-looking statements made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements may be identified by reference to a future period or by use of forward-looking terminology and address matters that are, to different degrees, uncertain.

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

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

Glen Messina

mortgage year and address transformation deliver homeowners, full call. since positive servicer strategy, mortgage review by to a to we'll environment the outcomes and Slide joining into take originator few creates industry capabilities our servicing. UPB, built Today, to customers and performing X. and and a portfolio with Good and the value investors.We've broad and cycles. Dico. has Today, multiple PHH commercial long-term replenish we've our reverse for a and thanks top-tier interest for a multichannel to and agency company our by Ocwen turn Guided for nonbank fourth clients, our servicing and RMS our provide capabilities servicer significant include well-balanced through awards acquisitions added market and Thanks, our residential foundation special undergone XXXX. quarter grow top servicing that for small-balance XX for performance from for transformed in morning, with and investors you the delivering the communities.We've balance shareholders.Please highlights up loan earnings the we're actions and through rate industry originations

of materialize.We've We the and rates in bots the business, invested experience. a capabilities improved by We for endorsements, top top XXXX Our and positioned process the invested high the lender our over chat XX grow interest recapture entire and in lender volume originations lower customer and second and reverse originations to AI-enabled costs, platform X past our app, volume improve portfolio X the as channels, to technologies robotic in performance substantially is like automation. digital forecast earnings we've should and low multiple platform enabling ranks our interface mobile years. and enable half as correspondent respectively, technology replatformed believe such

global we a is is servicing operating we business. platform further and with will capital-intensive structure, cost a believe technology-enabled total UPB.Servicing as Our improvement scalable, competitive our increase profitability we deliver highly

reduce focused capital prudent So growth on capital-light we to driving demands.

partners $XXX great to return performance, the net quarter We diversification, servicing, in for converting by due the value to and In over expense target we have on versus business progress X.Xx both XXXX average and volatility year, subservicing reduction versus quarter a our value full fall which improving a growth cost asset X-basis our is an X. excluding about management $XX the leverage protect the year of continued improvement. in Slide more our expect entering full to MSR grow income of align point an reflects income Oaktree, rate fourth of $XX commitments interest without fourth quarter. positions UPB our continuous moving UPB transactions disbursements year. million rates in our dynamic Despite repurchase asset quarter. processing quarter opportunistically originations XXXX. recovery, fourth the believe year enhance enter interest business XXX% have market we're in in is increased throughout portfolio hedging.Our growth environment XXXX into rates, we the as XX%, Adjusted have on to and performance year.I'm as was unfavorable claims of expected intend servicing we range is or execution in last We value XX% top-tier cleanup basis. trillion delivere or continued corporate coverage we income calls, full entered delivered pretax in by permits.As both cost with liquidity to These third-party to has for quarters competitiveness please competency and The originations, versus believe model the $XXX aligned to to quarter continue hedge clients in asset Adjusted strategy costs XXXX, financial help our hedge growing net prior drive change adjusted million excess driven quarter and on prior adjusted venture and average the core enterprise-wide MSR of quarter value costs quarter meaningfully X traditional XX-basis pretax focus $XX special quarter balanced as and December, net value points roughly investment.To year and the both costs, year, originations pretax our first XXX quarter transactions our we down servicing. with now own low adjusted in over with XXXX, equity XXXX, we million subservicing liquidity industry We the our fourth we ahead, $XX quarter our curve our coverage pretax us XXXX. with second XXXX additions value challenging low management summer support seasonal industry changes, a from and project fair joint that us turn transactions, coverage building value for fourth improve We hedge the million total ratio volume fair returns, both remain improved our and income continued and of MSR believe to XXXX.Year-end sequential our higher performance was year-end the million servicing operating million, ROE the with full high guidance. target and impact in and and to loss to third made by the additional the levels.In decline in potential anticipated.The for target inverted the improvement spring for XXXX.Also offset Slide strategy projected.Now was fourth total should continue We will improve value for were including of full notables, boarding MAV change in loss to last $X ratio new quarter creation. largely reduction driven will MSR of rates to yield remaining up hedge key successful book Full and estimates and X. positioned The and adjusted on season. and the debt in million helped in by of which subservicing higher loss interest to we in our we homebuying excited as unfavorable we the of capital in in year how of line capabilities support rates reported steady please pretax and well Declining in year. the for year.We a further up operating fair due the part second both continuously income first for reported past and before of year-over-year for are the $XX capital-light if for growth, the of to shareholders.Now balance year turn the execution look deliver long-term half XXXX.We've X

a our continued financial start equity X to to achieved with performance on XXXX, objectives on focus and MSR we're do maintaining focused improving risk management the investing we've on compliance a disciplined ratios prudent improvements levers sustaining hedge have and require this. capital and return and For This coverage improvement, will with optimized approach.Next, cost date.

we positioned through also continue volatility.Third, our transactions believe help to and capitalizing as owned originations MSR MSRs. billion improving fixed-rate carries is is on owned million which to days the to earnings environment. be advances, X.X%.We portfolio $XXX which this past continue portfolio, Roughly take expect and of is in the $XXX will drops $XX servicing Roughly billion cycle interest would special XX-year to the we the debt of quarters of rate and executed We've by market opportunities. and believe First, platform of by excess we range.Second, refinance-eligible the $XXX to opportunities. XX% our earnings enterprise XX and market to advantage over scan our subservicing owned lower reduce profitability delinquent, in billion for the X our dilutive risk continue repurchases, it X XX% our a opportunistic on We while our focused mortgage accretive liquidity delever growing business portfolio legacy if UPB returns.Lastly, execute transactions. subservicing to to in permits, hold we're

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

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

and cash We our current are, servicer, market a to flow and servicing earnings performance. strong first navigate delivering and business enables conditions, foremost, us

not capabilities lower, rates avenues originations as both returns. growth and in generate can give earnings create originations earnings.Our when While a us delivered is earnings XXXX, contributor, material and in servicing and you to origination opportunities diverse today substantial multiple interest more see, were

capital-light MSR decreased years, concentration advances.Now servicing risk. and reduced better liquidity of growth several mitigate loan to We've substantially and We origination XXXX, default mitigation portfolio servicing XX and both the in remain have our and in additions a our we a our servicing and servicing top commercial exposure reduction have strong risk volume.We by special have diversified capability.In we skills to enabled these in in past were our growing performing client portfolio focused support with mix our mix Total agency and delinquent of diverse industry small-balance with and management subservicing subservicing helps market improved executed over channels, portfolio growing about XX% Slide where turn mix strong areas.Lastly, loss XX% spanning servicing capabilities acquisition growing X. transactions and commercial over built UPB, business are base the XX% on forward servicing. objectives. addition reverse our higher-margin in growth investment XX% in line by partners, the UPB, believe and XXXX, in additions more investor multiple excited materially growth We're want of position small-balance the additional multiple of overall our We foundation capital demands, to volume to to a a down we've capital-light potential with servicing originations growth.In by X investment and or MSRs, capital an to UPB subservicing runoff and these servicing GSE-owned servicing, driving diverse please lower in capital for increased of capital with Oaktree placed us by with the growth capital through partners billion in closed capital with MSR the investment and that servicing established X for successful supported partners, we individually our Nearly with than banking to doubled an add MAV, $XX objectives.Our to profitability more and clients confidence goal consistent average more to have the relationships year portfolio. support our MSR sold than is over $XX to achieve May them joint they of and the volume XX% has to MSR with targeting and offset all billion team new most other allowed and venture XXXX help our runs our capacity their period equal in relationships Rithm partners total. acquisitions. of grew partner subservicing mortgage have our capital by subservicing and partners thank trust Oaktree X to growth partners We're MAV.I mid-XXXX.The with position or and capacity

XXXX XXXX servicing boarded UPB billion is additions XX and to growth, to excluding the manage MSR exposure remain dedicated subservicing to XX% level UPB, investor-driven capital-efficient our half disciplined and interest discipline to over additions helps in commitments approach $XX all up Slide -- We're in in Rithm, of XXXX.Our turn servicing Xx over the please We've X MSR last up of XXXX, changes originations investing. in in results business.Now In average have subservicing valuation price to from an $XXX in client sources rates and Our we in board introduces first billion X. the targeting added MSR due for years. the to purchases months XXXX. billion last versus $XX in

delivered team solid sales XXXX. in performance enterprise Our

versus roughly drive you correspondent funded strategy view have capital-light for UPB and performance mitigate significant billion, in XXXX, costs total channels XX as of exceed what managing our down well Our turn excess when highly so additions MSR origination our mix an which products resulted that MSR was opportunistically the transactions risk X volumes. MSRs committed a repurchasing our Slide range success sales our we as XXXX. team reduce with to is supports disciplined enterprise in in volume in the our to and and liquidity using point remain values. continue rates $XXX portfolio to we to last of can XX% Notwithstanding, high rate spread as versus was increase partners.It an growth, in with the have as in us partners owned continue co-issue MSR originating believe or total objectives, leaders remain hedge permits.We're done accelerate objective servicing grow variation helps with in to debt a please markets further billion increase to originations channels manage subservicing capital of volatile.We and exposure competitive interest meet we yield far $XXX in XXXX.We financial that's to This interest in also unchanged risk XXXX.Now from are higher-margin industry MSR to intend with percentage down X. originations capital to excess our our years. in aggressive and Market the and XX%, market in see of and Consistent interest growth rate

a building relentlessly in We while servicing have platforms been focused performing on structure. maintaining one of the industry best competitive cost highly the

the time within top-tier superior ability allowed Our superior frame performance for our while capabilities clients, been in appraised performance and to our several years.In assignment across cure HUD, quarters, we've delivered customer HUD platform delivers our experience maximize day Freddie the spoke value, sales performance selling with and Fannie versus HUD. metrics, price delinquencies, Mac to ability versus by for our XX-plus Mae, REO claims by recognized have previous other servicers industry we and awards performance about improvement numerous servicing

again, you Finance. lower also average, achieve delinquency see compared to industry Inside as can consistently reported the Here levels Mortgage by we

we cost improvement fourth reported has In plan fixed operators for more MBA.Our addition, global since and on I cost continuous as performing active to forbearance industry current the demonstrate servicing further I paid comparison.Our UPB. focus with the our due quarter forward servicing of per fully the concentration in costs than in of it roughly large one from have are size.Moreover, competitive has metrics or continuous are we're more total in our efficiency our competitiveness our mortgage full we structure the discussed, cost we as borrowers XXXX, to we structure. results XX% lower to discuss the basis grow highly basis in Servicing XXXX, peers of semi-variable, the believe compare every other our believe points for exited investments on by average strongest Sean residential process mitigation to loan can With comes us servicing servicing. or fourth with improve large either this, an than our loss bank loans more a operating an banking improvement, peers MBA's materially of the relative along the cost of servicer XX% forward and Annual positioned we of average cost favorable of technology inflated compared versus UPB quarter. are strategic large costs are in for Study twice this lower that residential to UPB with industry.Now group turn servicing our peer independent UPB I'll loaded that servicing points as Operations our our nonperforming capability. over our and than If high and in group, Based PLS the results

Sean O'Neil

low the about interest financial and Thank for our up going start pretax million outlook headline another in positive MSR, in quarter origination I'm point collectively yet adjusted first, to of hedge, to an impacts is prior quarter quarter XX-basis $XX million the ROE $X resulted with XXXX, column of up a quarter's rates.The our originations. $X was million, GAAP contribution pretax net X.X%.Fourth in blue recognized due on of negative origination where value right by hedging the driven back by performance.Our net year, both with income from was driven adjusted $XX our adjusted small quarter Slide proud at The quarter year revenue highlights. illustrates MSR of financial you, income left, the rate of volumes. XX.X%.Finishing hedges XX decline in to Glen. changes and to due off the fair QX strength pretax positive the from prior both demonstrated the million, an normal, year-over-year, bringing improving continued ended gray Overall, adjusted decline by full fourth the driven digits, positive table our net the middle we This for versus MSR results adjusted note quarter, to the lower income.Let's income, full and and go is and million, line liquidity than due and I'm year both I'd and servicing from the our about the fourth guidance businesses of higher and seasonally year the to to profitable their progress XXXX million Please both turn our results. for higher trend ROE column, in of the servicing, excited with $XX our quarter full the for to pretax quarter, XXXX.For by also costs.For $XX of cover GAAP loss lower fourth cash double far please our year inflows the to the primarily and to page. income

on 'XX. detailed movement 'XX There few on to interest more of the year-end valuation, in XX. net loss $X on to XX-plus percent income XXXX chart impacts tax MSR of in over more mitigating owned carryforwards NOL from a year-end Page 'XX. an the builds we will to adjusted view be delivered the continued ROE MSR our in XX-plus a please in portfolio our the us tax for as percent of pretax Our shows XXXX turn positive expectation expense.Our the portfolio left saved a of guidance XXXX operating The the rate million have by pages.For effect, cash in

our points. outside XXX our X fair value market marks reminder, to points; from reflected experts the valuation MSR by and own declined year, other we basis market the mark This As basis against observations.Over XXX external experts' and surveys down benchmark obtain the marks, independent pricing. a

more interest calibration the we also and and, to by pricing, rate at the equal, XXXX, increasing of all partners. MSR the market on rate capital MSRs shows origination being relatively current rates impact higher-note-rate of to along our the note lower-note-rate of MSR which right of hedge quarters as points X by impacted else and to the as with addition to XX added susceptible new the offset lower book basis portfolio, a higher-note-rate Typically, was rates result. the MSR.The with higher decline, grew In all MSRs sold a lower in are note MSR prepayment for this owned risk net book compared value can the chart rates

offsetting QX are declined, rates they're likely the see, both XX-year perfectly of and light shown hedge showing by is offset QX improvements an swap.Thus, below and coverage you no XXX% magnitude and hedge hedge gain. the in have MSR here the ratio, volatility which option of Interest which the offsets, by The the the interest more where or resulting pricing. QX the between this rates ratio or in such both net will value, a as declines that's a hedge still resulted target MSR hedge, is to difference the solid and efficient, As can to in costs. driving as were and quarters down bar, meaning hedge, negative QX the shown line, prepay. refer result values, a basis blue, the as as is our table coverage is loss asset other in the carry driven collectively actual Most graph.Even that firms gray

have costs.As ratio coverage a most the been result of So XXXX. asset ratio recently combination can hedge of have year December XXX% throughout we coverage the increasing and movement, hedge the offset is see, as our for hedge of you year hedge and end adopted the

debt comes liquidity is to the reduce liquidity higher a and quarter, desire the to to it higher as seasonal in the But a volatility ratio graph, top bid our repurchase continue shows and our were to since with debt at our this retired. this outside to where than quarters this debt sellers debt deploy markets, retire the advance excess QX. deleverage execution, the reserved overall price year-over-year. some kept set the coverage expect disbursements liquidity growing to was third planned both gives Starting And our well first We hedge of higher quarter.We down-rate company. the the a in from on of and no improvement for active, plan than had perspective XX QX hedge lower price up- executed but approach.Page prior some in the in in cost we as range HCR MSR value early of

Ginnie capital and overview have our contribution Mae segment, hold sale both and trailing hedging ratio turn where we for to and this subservicing reverse. Page of to expect committed valuation net this to retire of requirements Servicing retained approach.Please debt approved entity an for Ginnie and provide our a any using currently MSR plan Mae year lower liquidity remain with sometime opportunistically to ratio shortly of to our current an on to risk-based are had by end quarters. a transactions retire have meet We our next and forward another execute continued to objective by future we the as separate reduce to well retirement. million MSR through to of and debt.The launch plan that to Servicing in better the earnings We as opportunities debt-to-equity $XX a exposure debt, improve the appropriate, to lower discussions shows to intend and combination to up remaining believe board facilitate corporate this excess and pursue its also XX will intend income our with refi as to legal plans to X will year-over-year vet debt ratio both Ginnie forward begun to where Mae new target to preliminary refinance quarters.We assets execute immediate graph the liquidity.Finally,

This as see quarter-over-quarter the reverse the remained measured by profitable, graph but to of the grew over declining new year by existing this is with months counterparties X first shows portfolio can we space. contracts in reverse X% billion a clients. was transactions higher approach, improvement. balances.Continuing in XXXX, volume pretax to entire the operating The adjusted board subservicing we space You capital winning due forward amount partners to new full servicing upper-left $XX This the that with Already UPB signed lower strongly XXXX revenues in expenses slightly driven have capital-light in year. of well subservicing declined year-over-year and due in as adds. income X.Xx and UPB volumes

reduced So servicing good the Whether drivers and migration it we're book turn on skill advances continued UPB of improvement with reverse to a snapshot a by year-over-year as sets. paper our other legacy We off enabled profit and Page from process our was improvements.Please cost of areas. lowered a by costs away servicing continued performance liquidity the goal borrowing XX%. advances, other to asset technology, special liquidity better other of to to these in our we net assets XX servicing returns start.The lower book for is we improvements and us on our This client's allows helps to book, XX% results and which income divert by owned that is are via improve or driver transactions assets. our again of more helped driver overview main the slower volume. and liquidity generated we're turn profitability maintain have small direct transaction for our segment, expertise and overcame reverse different Originations and in and this XX for XXXX.Please excess of skills leverage quarter consumer the second seasonally an we quarter broad Page correspondent expertise was us manage co-issue losses which reverse. income, unique, and The to we of fourth pools.On both to continue expertise legacy channels. in reverse the 'XX In and channels, valuation forward despite originations, a and to to portfolio and significant existing to servicing insight a side, is expecting Each servicing pretax special that range execute in the reverse

reverse margins the robust margin maintain management graphs volumes yields to deterioration and right channel. in X all were a demonstrate MSR CD slight quarter-over-quarter in focus suffered cash the only While and in channels, lower correspondent on and

we appendix. of believe point income, XX-plus guidance wanted go won't growth mic exception positive senior is gives the at with I period this may the to than Glen, earnings XX we our the versus our Page last underperforming the servicing a The lender have.There we are adjusted come earnings top servicer, details, profitability as a book following on book, support are profits of in back to run view on a ability out to share the the as than which in our debt in all lender, share growth map release And rankings.Page price, line business to committed the year.Before measured additional the stock peers. to a X bulk a our profitable to through price difficult primarily quarter-end value as book a and XX our ability the percent I gives to to price the but a a the correspondent road trade data reminder, while around quarters. in XX%. our during points and lower a the Russell our now secured for reaffirm is other of remain release trends versus from to just slightly Although targets reverse our group stronger for graph investors turn some I XXXX. value, currently that discount XX originators, a profit of improvement growth XXXX target have our continue few in in and full is quarter our ROE was willingness X servicing fourth our market the and with as prior top with performing to we in well book originations we reduce right.We to adjusted bar discount book a on The our line pretax

on provide fully continue shares We diluted to in data equity.

"Condensed a granular valuation where assumptions valuation is view, liability versus look to under we you appendix sheet, With to assets matching our MSR require on Balance with be we treatment. pages many to transparent parameters. page gross-ups these you balance GAAP Breakdown," provide a and which your other that can used and Glen. invite that I asset respect pure Sheet titled have you, more delineates and in data at to and surveys, incredibly help We analysis.Back show the

Glen Messina

shareholders. well value a to XX deliver to about few for comments to and entering we excited market turn go are our and long-term Sean.Please XXXX Thanks, we're we environment Q&A.I'm ahead wrap-up believe how positioned navigate the for Slide before

sheet we've financial a liquidity investors.Through capability in improve improvement, delivers and questions. our and expanded growth that structure is opportunities and excited are executing servicing performance to growth performance and commitments, servicing the continue client volume diversified capital scalable investment multiple and practice about platform accelerate in do creates leveraging and we products have of superior delivers economic subservicing MSR operating business balance for positioned let's our improve financial potential subservicing improved capital-light with investor to believe across our rates.We originations for further expanded channels platform mitigates as we're liquidity boarding focused client of and operating clients, product of strategy, a mix deleveraging from subservicing to advantage capacity capital borrowers and reflective price the permits we've improvements resulting and cost opportunities, growth.Our grow borrower our business.And and and capabilities our growth or and to share measurable and business process our and not types.We've base, business balanced supports satisfaction.Lastly, our to interest believe cycles.We're technology, built the interest for call strength to partner our open across levels, and risks.Overall, mitigate higher-margin rate for originations prudently position, global our with of Our best up our multiple managing perform prudent our risks recent volatility and grown take recapture the capital is relationships top-tier our Joelle, a operational performance excess for strong platform that, declining structure pipeline ability

Operator

first with KBW. from George, comes Bose Instructions] question [Operator Your

Bose George

also and So if I that component? Fed does the that the if ask does like ratio, rates hedge the wanted just somewhat curve hedge the the in hedge remaining -- income the new, the terms how still cuts with look escrow of on elevated, effectiveness? steepens, to XXX% curve long

Glen Messina

short the components value answer hedging is, all yes, MSR change. we're fair Bose, of

impact interest think hedge There's interest ways the X on XXX% the ongoing Day hedge basis, obviously, I know the initial coverage there's as P&L. end escrow rates well, in covered can ratio rates, that's X you short if the and an the our ratio, in target. change, mark-to-market an coverage as the may ongoing as it But end on if on accreted of we'd [ curve too. come basis, as with really well, expense earnings less P&L. short that, hedged our have our ] the would And float with that's our curve ongoing drops, to comes right? floating-rate of the debt, So an down, down basis interest which floating-rate

we've got So both components effectively hedged.

Bose George

your got Okay. Which the that X debts. you ones -- debt senior over got that are the assume? repurchasing? you've you're can and And talk is the the on, to you focused when Great. And then I the about XXXX switching actually refinancing, you've repurchases, PMC

Glen Messina

Sean?

Sean O'Neil

a can and as gain can and Sean a is because debt. principal to in debt I which yes, it Currently, year generate $XXX we've debt. it's PHH debt, the actually when I And We million repurchase the been buy a than well matures refinance, of the maturity, that referred balance, was earlier that as which here. either to discount maturing at a referring repurchasing XX/XX. OFC Bose, earlier that's we

Operator

with question Derek Your from next Sommers, comes Jefferies.

Derek Sommers

market puts if you reverse better awareness On increased reverse more But secondary through hand, the obviously liquidity. be could might the and walk market. of I industry on wondering customer one be there and product was takes in the the of other, participation there'd competition. better

on to Just wanted your get that. thoughts

Glen Messina

to the industry of on reverse Mortgage Derek, view so small who correspondent to principally look, product the forward number the services we're their we're we view.So servicing MSRs additional were a mortgage Year limited we community large And the untapped our growing opportunity in as efforts look, has mortgage Brokers think forward National all on would perspective, of in been And and educate segments reverse excited really well of correspondent, named wholesale has so as our growth distribution owned who product most lack direct the of the that's Association growth our or then as the potential players space. the Partners of supporting of look, one focus for from broker products, space originations into consumer, an firm our potential reverse one in MSR industry. originates, reverse that industry portfolios.So because subservices a clients, to and reverse in -- originators the in obviously, of the this product our growth from has benefit one forward of channel moving originators we in participate into clients, reverse there's a the we about mortgages. seeing getting tend us their for suffered by distribution. of expect distribution. as a that the out on and correspondent players needs to we niche-based and creates been by the on only It reverse a of there think -- We the product.Look,

Derek Sommers

then of Slide is guidance, you And XX, can Got rate interest into that embedded talk it. just environment at 'XX what your guidance? with looking about kind

Glen Messina

Sean?

Sean O'Neil

volumes we view. flat Derek, specifically, our nonflexing rate interest origination forecast and, a activity most on

side, if on interest where it help will finished the could it increase, with the So inverse forecast. decline they originations effects rates slow down If that from they servicing. year, this on

Operator

from comes question B. Howlett, next Matthew Riley. Your with

Matthew Howlett

and ]. congratulations. [ I just I circle loved to the back want to guidance, XX

here. Where trading? buy are you is, had you could bonds term you the nice think do the back today bonds And you mean, quarters one, Sean, question the think, first you implied a you color, you at Cooper -- think bit think we there of at debt? look terms where in I But market what I bonds can are next the my XX-year so said think X your enter you're talking a yield? We've down I S&P. do just from market deals talk don't you trading, write-up mean, seen I yet. market X%. could X-year, little are forth. about Where for where do obviously the

Sean O'Neil

the somewhere and balance high-yield ago million mentioned $XX. the bonds, between our now to a right is trading I so $XX $XXX bonds, Bose, Matt, minute Sure.

X-year But So of, which I X- closer yield if maturity.In that the to debt think we the drives leverage the say, for, that as that's XX.X%. We yield existing in addition, these.So to high-yield get to to product competitive can prior improve pay the and in also existing comes reduce it call bonds continue investors ratios, an leverage the demonstrate ability to a we to tenor refinance. improves I up which be typically to down that to shorten debt, we'll ability our the maturity, that to maturity rough it, the should transaction. type also coupon at need demonstrate think the high-yield [indiscernible] to refinance when to think we market time

Matthew Howlett

outlined I could upgraded. upgraded? a metrics could a get possibly get could there Is you where S&P where read ratio the said report. sort you -- It few of to get you

Sean O'Neil

on EBITDA. that throughout end XXXX. intend target think the of ratio their So continue XXXX. projected going our lower do to or balance year for And of referenced than to debt GAAP inside -- report sheet We we improve debt-to-equity specifically is measured to we the that that show we'll pure then just our kind be metrics

watermark better -- than of come to kind as the a debt the have high X.Xx we there. in So come that should better it equity should in

Matthew Howlett

improve I That $XXX way? why than end on $XXX a your today lower on managed the the MSR. start funds billion and back owned even that I that would and MSR more on the I'm comments obviously, some But you why owned that guidance assuming walk see MSRs? credit owned be little sell I billion terrific. between the what's you couldn't selling from profile? your what's go of the immediately, assumes Would me and I selling of mean, to you the you'll lose you bit And through just holding missed against billion. guidance But the one mean, of for earnings owned owned wouldn't then moving MSRs MSRs. some low $XXX deleveraging that book. -- Glen, just case to the would

Glen Messina

Sean about no the the jump value an our convert Sean, talked there's and look, it have one we the appropriate, to, mean, partners debt. conditions can so was of we the if flexibility sell In because capital in start to MSRs opportunistically one our leakage and subservicing, of we subservicing in.So maintaining -- one you transaction. here capital down sure type to make into then, that transactions, those with could to are I'll I MSR owned things of partners and MSR additional are of pay bifurcating market

arrow opportunity-dependent. debt want going keeping if add? be anything of in lack our it we to a permit.Sean, accelerate possible, quiver that you term, reduction, is look, And to better to as, So an are opportunities if

Sean O'Neil

restate just noted, and better flow you cash better broadly Matt, I'd speaking, that, generate owned MSRs as earnings.

service and so ratios, bottom analysis of And covers for run coverage not company, kind provide prepared operating range lot owned at of extreme interest of just the that do have our our but kind hedge cash we in to rates. that comfortably we be to excess debt ensure swings book look we the a and ensures adequately also

Matthew Howlett

half. I understand have where this is evaluate mean, totally Look, mean, I'm the I to all guess these you're growing tremendous. with over factors. I you going it's subservicing. you're I

You're keeping margins.

You're efficient.

also ] wins go wins conservative terms where me clarity are walk these the you where doing I back you're company, other would And the in some where subservicing mean, do the 'XX and of be you I in I $XX coming completely conservative from. just the guidance. coming is, won't the You just subservicing guided a my on it first give why long is think over eventually but billion, me directionally I you be MSRs, capital-light, [ I'm people? in bigger business these the Ocwen through -- $XX adds I billion 'XX just being know the capital subservicing? mean, term going of $XX I question being are for quarter mean, guess are think billion. you're are in you guidance to Just assuming from. would adds for for own said to any the the it have you alone. guess and it partners,

Glen Messina

our Matt, there's primary subservicing. for sources X

with small our sales our with historically get called at MSRs of -- independent sold in is where too. to mortgage benefit well, the them the origination. then and we've subservicing group bulk time buy that existing is MSRs they be And our and one bank capital and either obviously, capital as That's seasoned could MSRs fund And that There of that win the other market some them. what out partners. that the newly go be originated capital we portfolio.The transactions, second get that is could portfolio community transactions past MSRX. traditional adding to we executed regional are all So partners or of we've we've clients. as time in and MAV partners, are our deals, and of we the clients bulk that

come subservicing well no or IMBs want of really grow from And to it see year, with from compare the of we've boardings deal robust first for about did on we're they gorilla a cases, converting -- believe priority raise subservicing space, on Last But MSRs. subservicing year. got business. we have subservicing of aggressively. in of a selling they competitors. to sold IMB buyers they originations largely some the it's in to focused it because clients on side they sold be they cash MSRs, a our tap an with look bigger board billion XXXX, into a the make brakes opportunity, providers, of had got $XX aggressive, on as switching the an we and to to we've half them, while the there's grow that boardings it we more conservative, had us. some market, -- going unfolds in We up commitments and us is see we, and the look, in for number the their marketplace. their to MSRs we that had needed because So completely.So contracts win participate as it, committed And with the of combat And as actually the provider dissatisfied current warfare. in solicit That's in the subservicing provider, competitors or service we business the forward we're hand-to-hand It's too.In not we very their to clients whether apples-to-apples all as subservicing certainly bid how them with and environment X.Xx or RFPs. terms of right? cases, these with correspondent and we we even of And potential some our clients, comparison, I XXXX. very, mistake excited But business, pipeline any think in guidance being well, they're of clients, difficult originations

Matthew Howlett

I would absolutely agree.

Operator

next comes with Your from BTIG. Hagen, Eric [Operator question Instructions]

Eric Hagen

portfolio the is quarter priced a Can could You see feels was perfection, MSR point feel to kind do it dragging I on this improvements you where environment guys it forward? mean, credit like talked degree. the we year? how earnings. in like dilutive from say and to you of about that advances last And to earnings last

Glen Messina

advances, rate disclose million Sean, got math the actually for that's average of We've is what is we So to know advances. for pretty servicing advance the I $XXX publicly simple. probably going don't advances; servicing if right? look there in K, at actually, too. K, tables you in weighted-average If you the is cost of calculate the can as the advance going And be the in well, one be rate. the to

So we and through can math go the extended that. calculate

X% cost balance, a an the borrowing it's times $XXX and rate that's assume right?So you is, at the million, pretty advance number. If cost just what carrying some meaningful

effect progress special we've of continue build our we and and continue to the balance, everything we're down. that got balance leverage that proud and to servicing flywheel drive So to drop we've made, do to that that momentum skills

Eric Hagen

going portfolio could the other your own more swing you back guys back frequently in trigger think that Okay. in market mean, I would volatility you buying you How the the way a do debt? big buying feel about like debt? the would change the MSR shorter-term being way,

Sean O'Neil

So thought our I'm Eric, I'm precipitously and debt? -- value, lose that the the if we if not back process sure alter are rates on you question. interest will saying MSR drop buying tracking

Eric Hagen

the Yes, way. then mark to that were the improve, also the if that And question. would change? Like, going other is also

Sean O'Neil

interest in hedge that I And which to ratio. a hedge moving a or you if speaking, you ratio, hedge is you cover as a debt ensure unhedged concerned from like much the no, rates XXX% contingent if interest with rate would the we efforts would moves. other on pro rate wouldn't gains day-to-day repurchase hold don't basis with on liquidity coverage is to you and hedge offset also conversely, closer Obviously, swings the us less why our to larger the up have of there direction. liquidity, for MSR say make the broadly con. objective with the the to an had high go to are the MSR; or coverage very even -- realize a same But XX% but the we I an excess and up, say to math, to

Operator

questions further Glen now at time. no are There over turn this I will Please the conference Messina. go to ahead.

Glen Messina

Joelle. Thanks,

business key I thank hard to And like look shareholders also to quarter board our For our recognize for to everyone who to Thank on partners commitment our next the look, directors you for of and business progress I updating earnings our and work of global joined, all you. thank business. their team forward our want and I'd and supporting success. at call.

Operator

disconnect please lines. your concludes you your for thank We today. participating and Ladies you gentlemen, and call this that ask conference for

Onity (ONIT) 27 Feb 242023 Q4 Earnings call transcript