Q2 2026 Onity Group Inc Earnings Call

August 6, 2026

Speaker #1: Please stand by. Your meeting is about to begin. Hello and welcome, everyone. Joining today's ONITY GROUP's second quarter earnings and business update conference call.

Operator: Hello and welcome everyone joining today's Onity Group's Q2 Earnings and Business Update Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star one on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Valerie Haertel, Vice President, Investor Relations. Please go ahead.

Speaker #1: At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the Q&A session. To register to ask a question at any time, please press star 1 on your telephone keypad.

Operator 3: Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star one on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Valerie Haertel, vice president, investor relations. Please go ahead.

Speaker #1: Please note, this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Valerie Haertel, Vice President, Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Good morning, and welcome to ONITY GROUP's second quarter 2026 earnings call. Please note that our earnings release and presentation are available on our website at onitygroup.com.

Valerie Haertel: Good morning and welcome to Onity Group's Q2 2026 earnings call. Please note that our earnings release and presentation are available on our website at onitygroup.com. Speaking on the call will be Chair, President, and Chief Executive Officer, Glen Messina, and Chief Financial Officer, Sean O'Neil. As a reminder, our comments today may contain forward-looking statements made pursuant to the Safe Harbor provisions of the Federal Securities Laws. These statements, which speak only as of the date they are made, may be identified by reference to a future period or by use of forward-looking terminology and address matters involving assumptions, risks, and uncertainties, including those described in our SEC filings. In addition, the presentation and our comments contain references to non-GAAP financial measures such as adjusted pre-tax income.

Valerie Haertel: Good morning and welcome to Onity Group's Q2 2026 Earnings Call. Please note that our earnings release and presentation are available on our website at onitygroup.com. Speaking on the call will be Chair, President, and Chief Executive Officer, Glen Messina, and Chief Financial Officer, Sean O'Neil. As a reminder, our comments today may contain forward-looking statements made pursuant to the Safe Harbor provisions of the Federal Securities Laws. These statements, which speak only as of the date they are made, may be identified by reference to a future period or by use of forward-looking terminology and address matters involving assumptions, risks, and uncertainties, including those described in our SEC filings. In addition, the presentation and our comments contain references to non-GAAP financial measures such as adjusted pre-tax income.

Speaker #2: Speaking on the call will be Chair, President, and Chief Executive Officer Glen Messina, and Chief Financial Officer Sean O'Neil. As a reminder, our comments today may contain forward-looking statements made pursuant to the Safe Harbor Provisions of the Federal Securities Laws.

Speaker #2: These statements, which speak only as of the date they are made, may be identified by reference to a future period or by use of forward-looking terminology and address matters involving assumptions, risks, and uncertainties, including those described in our SEC filings.

Speaker #2: In addition, the presentation and our comments contain references to non-GAAP financial measures, such as adjusted pre-tax income, we believe these non-GAAP measures provide a useful supplement to discussions and analysis of our financial condition because they are measures that management uses to assess the performance of our operations, and allocate resources.

Valerie Haertel: We believe these non-GAAP measures provide a useful supplement to discussions and analysis of our financial condition because they are measures that management uses to assess the performance of our operations and allocate resources. Non-GAAP measures should be viewed in addition to and not as an alternative for the company's reported GAAP results. A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures and management's reasons for including them may be found in the press release and the appendix to the investor presentation. We made changes to our non-GAAP methodology this quarter and encourage you to review the presentation's note regarding non-GAAP financial measures. Now I will turn the call over to Glen Messina.

Speaker #2: Non-GAAP measures should be viewed in addition to, and not as an alternative for the company's reported GAAP results. A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures and management's reasons for including them may be found in the press Presentation.

Speaker #2: We made changes to our non-GAAP methodology this quarter and encourage you to review the presentation's note regarding non-GAAP financial measures. Now, I will turn the call over to Glen Messina.

Speaker #3: Thanks, Valerie. Good morning. And thank you for joining our call. We're looking forward to sharing our results for the second quarter as well as reviewing our strategy and financial objectives to deliver long-term value for our shareholders.

Glen Messina: Thanks, Valerie. Good morning, thank you for joining our call. We're looking forward to sharing our results for Q2, as well as reviewing our strategy and financial objectives to deliver long-term value for our shareholders. Let's get started on slide three. In Q2, our sound strategy and strong operating fundamentals delivered double-digit year-over-year revenue growth and record origination volume. Our balanced business performed well, with rising interest rates driving increased adjusted pre-tax income and servicing, offsetting declining adjusted pre-tax income and origination. We're excited to report we've completed the reverse asset sale to Finance of America, as well as transferred most of the legacy subservicing back to Rithm. We believe these transactions simplify the business, improve profitability and focus, increase strategic flexibility.

Speaker #3: Let's get started on slide 3. In the second quarter, our sound strategy and strong operating fundamentals delivered double-digit year-over-year revenue growth and record origination volume.

Speaker #3: Our balanced business performed well, with rising interest rates driving increased adjusted pre-tax income and servicing, offsetting declining adjusted pre-tax income, and origination. We're excited to report we've completed the reverse asset sale to finance of America as well as transferred most of the legacy subservicing back to Rhythm.

Speaker #3: We believe these transactions simplify the business, improve profitability and focus, and increase strategic flexibility. The second quarter net loss includes roughly $33 million of pre-tax costs related to these transactions, as well as market-driven unfavorable asset fair value adjustments.

Glen Messina: The Q2 net loss includes roughly $33 million of pre-tax costs related to these transactions, as well as market-driven unfavorable asset fair value adjustments. Finally, considering persistent geopolitical instability, inflation, and market volatility, we expect our full year 2026 adjusted ROE to be at the low end of our guidance range. Let's turn to slide four to review a few key financial highlights. We again delivered double-digit year-over-year revenue and servicing UPB growth, as well as record origination volume with improved revenue margins versus last quarter. Total servicing additions were up 2.8 times versus prior year, driven by our strong originations and subservicing additions, which exceeded our H1 expectations. Consumer direct continued to perform well, delivering funded volume up about 3 times over last year with improved refinance recapture rates.

Glen Messina: The Q2 net loss includes roughly $33 million of pre-tax costs related to these transactions, as well as market-driven unfavorable asset fair value adjustments. Finally, considering persistent geopolitical instability, inflation, and market volatility, we expect our full year 2026 adjusted ROE to be at the low end of our guidance range. Let's turn to slide four to review a few key financial highlights. We again delivered double-digit year-over-year revenue and servicing UPB growth, as well as record origination volume with improved revenue margins versus last quarter. Total servicing additions were up 2.8x versus prior year, driven by our strong originations and subservicing additions, which exceeded our H1 expectations. Consumer direct continued to perform well, delivering funded volume up about 3 times over last year with improved refinance recapture rates.

Speaker #3: Finally, considering persistent geopolitical instability, inflation, and market volatility, we expect our full year 2026 adjusted ROE to be at the low end of our guidance range.

Speaker #3: Let's turn to slide 4 to review a few key financial highlights. We again delivered double-digit year-over-year revenue and servicing UPB growth, as well as record origination volume with improved revenue margins versus last quarter.

Speaker #3: Total servicing additions were up 2.8 times versus prior year, driven by our strong originations and subservicing additions, which exceeded our first half expectations. Consumer Direct continued to perform well, delivering funded volume up about 3 times over last year with improved refinanced recapture rates.

Speaker #3: Our net loss includes $9 million of pre-tax costs related to the reverse asset sale and legacy subservicing transfer, as well as $24 million of pre-tax asset fair value change of which about half is related to reverse.

Glen Messina: Our net loss includes $9 million of pre-tax costs related to the reverse asset sale and legacy subservicing transfer, as well as $24 million of pre-tax asset fair value change, of which about half is related to reverse. Sean will provide more details on these costs later in the presentation. Origination adjusted pre-tax income increased over 3 times versus last year, reflecting lower interest rates driving higher industry volume levels as well as improved execution. Servicing adjusted pre-tax income decreased over 60% versus last year as lower interest rates drove an increase in MSR runoff of almost 80% versus prior year levels. Our presentation of adjusted pre-tax income now reflects MSR runoff based on actual servicing UPB runoff, all changes due to rates, inputs, and assumptions are classified as notables.

Speaker #3: Sean will provide more details on these costs later in the presentation. Origination adjusted pre-tax income increased over 3 times versus last year, reflecting lower interest rates driving higher industry volume levels as well as improved execution.

Speaker #3: Servicing adjusted pre-tax income decreased over 60% versus last year, as lower interest rates drove an increase in MSR runoff of almost 80% versus prior year levels.

Speaker #3: Our presentation of adjusted pre-tax income now reflects MSR runoff based on actual servicing UPB runoff and all changes due to rates, inputs, and assumptions are classified as notables.

Speaker #3: We believe this approach is consistent with certain of our peers and addresses feedback from investors.

Glen Messina: We believe this approach is consistent with certain of our peers and addresses feedback from investors. Let's turn to slide five to discuss the actions we're taking that we believe will improve long-term ROE performance. We are taking focused and deliberate actions to improve ROE long term that we organize into three categories: servicing scale, portfolio optimization, and technology-driven productivity. Regarding scale, every $50 billion in servicing can reduce fixed cost per loan by 13%. We continue to target a roughly 50/50 mix of own servicing and subservicing to grow our portfolio on a capital-efficient basis, as well as balance EPS growth and ROE. Our organic growth strategy focused on delivering positive outcomes for customers has driven steady servicing portfolio growth. Next is optimizing our own servicing and subservicing portfolios.

Speaker #2: Let's turn to slide 5 to discuss the actions we're taking that we believe will improve long-term ROE performance. We are taking focused and deliberate actions to improve ROE long-term that we organize into three categories.

Speaker #2: Servicing scale, portfolio optimization, and technology-driven productivity. Regarding scale, every $50 billion in servicing can reduce fixed costs per loan by 13%. We continue to target a roughly 50/50 mix of owned servicing and subservicing to grow our portfolio on a capital-efficient basis as well as balance EPS growth and ROE.

Speaker #2: Our organic growth strategy focused on delivering positive outcomes for customers has driven steady growth. Next is optimizing our owned servicing and subservicing portfolios.

Speaker #3: We've reduced our investment in reverse MSRs because yields are 2 percentage points lower than forward and are not easily leveraged and they have a higher relative volatility.

Glen Messina: We've reduced our investment in reverse MSRs because yields are 2 percentage points lower than forward, and they're not easily leveraged, and they have a higher relative volatility. We are leveraging machine learning using client, asset, and consumer data to identify what we believe are the most profitable MSRs to focus our origination activities and improve returns. In subservicing, we've largely exited the Rithm subservicing and are growing in commercial and reverse, which is more profitable and requires specialized skills and systems which we have. Finally, technology-driven productivity has been a foundational element of our strategy embedded in our business culture. We've significantly reduced expenses since the acquisition of PHH while delivering servicing portfolio growth and building a top 10 non-bank originations platform from scratch. Robotic process automation, intelligent document processing, and natural language processing have reduced manual effort as well as transformed document management and customer engagement.

Speaker #3: We are leveraging machine learning using client asset and consumer data to identify what we believe are the most profitable MSRs to focus our origination activities and improve returns.

Speaker #3: In subservicing, we've largely exited the Rhythm subservicing and are growing in commercial and reverse, which are more profitable and require specialized skills and systems that we have.

Speaker #3: Finally, technology-driven productivity has been a foundational element of our strategy embedded in our business culture. We've significantly reduced expenses since the acquisition of PHH while delivering servicing portfolio growth and building a top 10 non-bank originations platform from scratch.

Glen Messina: We've significantly reduced expenses since the acquisition of PHH while delivering servicing portfolio growth and building a top 10 non-bank originations platform from scratch. Robotic process automation, intelligent document processing, and natural language processing have reduced manual effort as well as transformed document management and customer engagement.

Speaker #3: Robotic process automation intelligent document processing and natural language processing have reduced manual effort as well as transformed document management and customer engagement. Future investments are focused on driving additional productivity improving recapture and enhancing the customer experience.

Glen Messina: Future investments are focused on driving additional productivity, improving recapture, and enhancing the customer experience. Let's turn to slide six to review what I believe differentiates Onity from our peers. We've built a strong foundation and a growing customer-focused business by consistently delivering positive and differentiated outcomes for our customers. We're a top 10 non-bank originator, servicer, and sub-servicer with a balanced and resilient business built to perform through business cycles. Our award-winning technology-enabled platform has been recognized as a top-tier servicer by Fannie Mae, Freddie Mac, and HUD for five consecutive years. Our platform delivers superior operating outcomes for our customers, which, when combined with our enterprise sales model, expansive product suite, and diverse capabilities, fuels meaningful portfolio growth.

Speaker #2: Let's turn to slide 6 to review what I believe differentiates ONITY from our peers.

Speaker #3: We've built a strong foundation and a growing, customer-focused business by consistently delivering positive and differentiated outcomes for our customers. We're top 10 non-bank originator servicer and subservicer with a balance of resilient business built to perform through business cycles.

Speaker #3: Our award-winning technology-enabled platform has been recognized as a top-tier servicer by Fannie Mae Freddie Mac and HUD for five consecutive years. Our platform delivers superior operating outcomes for our customers which, when combined with our enterprise sales model, expansive product suite, and diverse capabilities, fuels meaningful portfolio growth.

Speaker #3: We've built a strong foundation by shedding a profitable assets and relationships investing in talent and technology and building trust with clients by delivering a positive experience and targeted solutions that create measurable value.

Glen Messina: We've built a strong foundation by shedding unprofitable assets and relationships, investing in talent and technology, and building trust with clients by delivering a positive experience and targeted solutions that create measurable value. We're now growing from a position of strength with a more focused and simplified business with increased strategic flexibility. Let's turn to slide seven to review our balanced business model. While there may be variability in any given quarter due to evolving market dynamics, our balanced business continues to demonstrate long-term resiliency to changes in interest rates. The complementary profitability dynamics of origination and servicing balance each other as interest rates have declined in the 12 months ended the Q2 2026 versus the 12 months ended Q2 2025. With interest rates increasing in the Q2, servicing adjusted pre-tax income has improved, offsetting declining origination income.

Speaker #3: We're now growing from a position of strength with a more focused and simplified business with increased strategic flexibility.

Speaker #2: Let's turn to slide 7 to review our balanced business model.

Speaker #3: While there may be variability in any given quarter due to evolving market dynamics, our balanced business continues to demonstrate long-term resiliency to changes in interest rates.

Speaker #3: The complementary profitability dynamics of origination and servicing balance each other as interest rates have declined in the 12-months ended the second quarter of 2026 versus the 12-months ended the second quarter of 2025.

Glen Messina: The complementary profitability dynamics of origination and servicing balance each other as interest rates have declined in the 12 months ended the Q2 2026 versus the 12 months ended Q2 2025. With interest rates increasing in the Q2, servicing adjusted pre-tax income has improved, offsetting declining origination income.

Speaker #3: And with interest rates increasing in the second quarter, servicing adjusted pre-tax income has improved offsetting declining origination income.

Speaker #2: We continuously optimize operations capacity and scalability as well as our MSR investment profile to enable our balanced business model to operate as intended through interest rate cycles.

Glen Messina: We continuously optimize operations capacity and scalability as well as our MSR investment profile to enable our balanced business model to operate as intended through interest rate cycles. Let's turn to slide eight for more about our growth focus and actions. Our enterprise sales approach and focus on delivering value for clients is producing terrific results. In Q2, our originations grew 64% versus prior year, outpacing industry volume growth and achieving record levels since we built our platform. We've improved our refinance recapture rate to 51% in Q2, up three percentage points versus the prior year with a roughly three times increase in refinance payoff volume. Our recapture performance has continued to exceed the ICE industry average for the last 12 months, and we believe we're delivering top-tier recapture performance versus our third-party origination-centric peers.

Speaker #2: Let's turn to slide 8 for more about our growth focus and actions.

Speaker #3: Our enterprise sales approach and focus on delivering value for clients is producing terrific results. In the second quarter, our originations grew 64% versus prior year outpacing industry volume growth and achieving record levels since we built our platform.

Speaker #3: We've improved our refinance recapture rate to 51% in the second quarter up 3 percentage points versus the prior year with a roughly 3 times increase in refinance payoff volume.

Speaker #3: Our recapture performance has continued to exceed the ICE industry average for the last 12 months and we believe we're delivering top-tier recapture performance versus our third-party origination-centric peers.

Speaker #3: With mortgage and rates increasing, we've seen a doubling of home equity product volume versus the second quarter of last year. We believe this is a valuable product for consumers and one that helps us manage operating capacity and improve customer retention.

Glen Messina: With mortgage interest rates increasing, we've seen a doubling of home equity product volume versus Q2 of last year. We believe this is a valuable product for consumers and one that helps us manage operating capacity and improve customer retention. As a reminder, we do not include home equity volume in our refinance recapture rates. Our originations team is performing very well and we're continuing to invest in technology and process optimization to enhance the customer experience, reduce costs, and improve scalability and competitiveness. Let's turn to slide nine to see what we're working on. We're embedding AI, analytics, and automation across our lending platform to improve our recapture rate by increasing capacity and improving human performance. We are using voice agents to support customer communication across several aspects of the lending and servicing process.

Speaker #3: As a reminder, we do not include home equity volume in our refinance recapture rates. Our originations team is performing very well and we're continuing to invest in technology and process optimization to enhance the customer experience reduce costs and improve scalability and competitiveness.

Speaker #2: Let's turn to slide 9 to see what we're working on.

Speaker #3: We're embedding AI, analytics, and automation across our lending platform to improve our recapture rate by increasing capacity and improving human performance. We are using voice agents to support customer communication across several aspects of the lending and servicing process.

Speaker #3: Voice agents create historically unparalleled capacity to engage borrowers seeking to refinance or access their home equity and generate actionable lease for our sales team.

Glen Messina: Voice agents create historically unparalleled capacity to engage borrowers seeking to refinance or access their home equity and generate actionable leads for our sales team. This is driving improved connectivity with customers and increasing engagement, which in turn drives increased locks and fundings. AI call monitoring analytics provide insights to optimize marketing, improve opportunity identification, fine-tune value propositions, and improve sales performance. Real-time agentic AI integration through our partnership with Blend is aimed at optimizing customer and employee workflows and providing a faster, more guided experience. Technology allows us to turn interactions, borrower signals, and workflow events into intelligence that drives superior recapture performance and customer experience. It's clear that our investments are delivering tangible results, and we remain excited about the future potential of our investment pipeline. Let's turn to slide 10 to discuss sub-servicing. The disruption created by industry consolidation among sub-servicers continues to create opportunities.

Speaker #3: This is driving improved connectivity with customers and increasing engagement, which in turn drives increased locks and fundings. AI call monitoring analytics provide insights to optimize marketing, improve opportunity identification, fine-tune value propositions, and improve sales performance.

Speaker #3: Real-time agentic AI integration through our partnership with Blend is aimed at optimizing customer and employee workflows, and providing a faster, more guided experience. Technology allows us to turn interactions, borrower signals, and workflow events into intelligence that drives superior recapture performance and customer experience.

Speaker #3: It's clear that our investments are delivering tangible results and we remain excited about the future potential of our investment pipeline.

Glen Messina: It's clear that our investments are delivering tangible results, and we remain excited about the future potential of our investment pipeline. Let's turn to slide 10 to discuss sub-servicing. The disruption created by industry consolidation among sub-servicers continues to create opportunities.We are winning new clients with strong platform performance and a compelling value proposition. H1 sub-servicing additions of $35 billion exceeded our guidance with key wins with capital partners, banks, and independent mortgage banks, and we continue to have an active opportunity pipeline across all three segments. We're excited about the growth we're seeing in business purpose residential and commercial subservicing driven by our expanded product offerings. UPB is up 25% versus prior year, and we were named the servicer on our first single-family rental securitization for a top-tier client in that space.

Speaker #2: Let's turn to slide 10 to discuss subservicing.

Speaker #3: The disruption created by industry consolidation among subservicers continues to create opportunities. We are winning new clients with strong platform performance and a compelling value proposition.

Glen Messina: We are winning new clients with strong platform performance and a compelling value proposition. H1 sub-servicing additions of $35 billion exceeded our guidance with key wins with capital partners, banks, and independent mortgage banks, and we continue to have an active opportunity pipeline across all three segments. We're excited about the growth we're seeing in business purpose residential and commercial subservicing driven by our expanded product offerings. UPB is up 25% versus prior year, and we were named the servicer on our first single-family rental securitization for a top-tier client in that space. We continue to invest in technology to improve transparency, increase term times, and client self-service functionality. Our efforts are yielding results, as evidenced by our client Net Promoter score of 70 in H1 of 2026, a level rivaling some of the best service organizations.

Speaker #3: First half subservicing additions of 35 billion dollars exceeded our guidance with key wins with capital partners, banks, and independent mortgage banks and we continue to have an active opportunity pipeline across all three segments.

Speaker #3: We're excited about the growth we're seeing in business purpose residential and commercial subservicing driven by our expanded product offerings. UPB is up 25% versus prior year and we renamed the servicer on our first single-family rental securitization for a top-tier client in that space.

Speaker #3: We continue to invest in technology to improve transparency increase turn times and client service service functionality. Our efforts are yielding results as evidenced by our client net promoter score of 70 in the first half of 2026 a level rivaling some of the best service organizations.

Glen Messina: We continue to invest in technology to improve transparency, increase term times, and client self-service functionality. Our efforts are yielding results, as evidenced by our client Net Promoter score of 70 in H1 of 2026, a level rivaling some of the best service organizations. Let's turn to slide 11 to talk about how we've grown our servicing portfolio. Total servicing UPB ended the quarter up 10% year over year versus total industry servicing growth of 3%, with growth in both owned MSR and subservicing. Year over year servicing additions, net of runoff of $76 billion was largely driven by organic growth and more than offset planned transfers to Rithm and other client asset sale-driven deboardings. With MSR demand keeping prices elevated, we continue to see clients monetize their older MSRs while replenishing their portfolio with new originations.

Speaker #2: Let's turn to slide 11 to talk about how we've grown our servicing portfolio.

Glen Messina: Let's turn to slide 11 to talk about how we've grown our servicing portfolio. Total servicing UPB ended the quarter up 10% year over year versus total industry servicing growth of 3%, with growth in both owned MSR and subservicing. Year over year servicing additions, net of runoff of $76 billion was largely driven by organic growth and more than offset planned transfers to Rithm and other client asset sale-driven deboardings. With MSR demand keeping prices elevated, we continue to see clients monetize their older MSRs while replenishing their portfolio with new originations. There should be no question as to our ability to compete for business and grow our servicing portfolio. Our double-digit portfolio growth, despite the Rithm transfer and client MSR sales, highlights the strength of our value proposition and the power of our origination capability.

Speaker #3: Total servicing UPB ended the quarter up 10% year over year versus total industry servicing growth of 3% with growth in both owned MSR and subservicing.

Speaker #3: Year over year servicing additions net of runoff of 76 billion dollars was largely driven by organic growth and more than offset planned transfers to rhythm and other client asset sale driven deboardings.

Speaker #3: With MSR demand keeping prices elevated we continue to see clients monetize their older MSRs while replenishing their portfolio with new originations. There should be no question as to our ability to compete for business and grow our servicing portfolio.

Glen Messina: There should be no question as to our ability to compete for business and grow our servicing portfolio. Our double-digit portfolio growth, despite the Rithm transfer and client MSR sales, highlights the strength of our value proposition and the power of our origination capability. Now I'll turn it over to Sean to discuss our financial results in more detail.

Speaker #3: Our double digit portfolio growth despite the rhythm transfer and client MSR sales highlights the strength of our value proposition and the power of our origination capability.

Speaker #2: Now I'll turn it over to Sean to discuss our financial results in more detail.

Glen Messina: Now I'll turn it over to Sean to discuss our financial results in more detail.

Speaker #4: Thanks Glenn. Let's turn to slide 12 where we describe the impact to gap pre-tax income. The main story here is that the bulk of the decline in pre-tax income about 24 million dollars is due to non-recurring transaction costs or fair value marks on reverse assets.

Sean O'Neil: Thanks, Glen. Let's turn to slide 12, where we describe the impact to GAAP pre-tax income. The main story here is that the bulk of the decline in pre-tax income, about $24 million, is due to non-recurring transaction costs or fair value marks on reverse assets. Ongoing operations and servicing was the strongest contributor to the $6 million increase in GAAP pre-tax income quarter over quarter. The Finance of America transaction, and to a lesser extent, costs associated with the Rithm deboarding, created a $-9 million one-time impact in the quarter. This was further exacerbated by a decline in the fair value of the reverse assets due to mark-to-market impacts, primarily less favorable HECM spreads. The majority of these assets, about 80% of the fair value, have been sold to Finance of America. Thus, the impact of fair value changes on the remaining portfolio will be greatly reduced.

Sean O’Neil: Thanks, Glen. Let's turn to slide 12, where we describe the impact to GAAP pre-tax income. The main story here is that the bulk of the decline in pre-tax income, about $24 million, is due to non-recurring transaction costs or fair value marks on reverse assets. Ongoing operations and servicing was the strongest contributor to the $6 million increase in GAAP pre-tax income quarter over quarter. The Finance of America transaction, and to a lesser extent, costs associated with the Rithm deboarding, created a $-9 million one-time impact in the quarter. This was further exacerbated by a decline in the fair value of the reverse assets due to mark-to-market impacts, primarily less favorable HECM spreads. The majority of these assets, about 80% of the fair value, have been sold to Finance of America. Thus, the impact of fair value changes on the remaining portfolio will be greatly reduced.

Speaker #4: Ongoing operations and servicing was the strongest contributor to the 6 million dollar increase in gap pre-tax income quarter over quarter. The finance of American transaction and to a lesser extent cost associated with the rhythm deboarding created a 9 million dollar negative one-time impact in the quarter.

Speaker #4: This was further exacerbated by a decline in the fair value of the reverse assets due to mark-to-mark impacts primarily less favorable HECM spreads. The majority of these assets about 80% of the fair value have been sold to finance of America.

Speaker #4: Thus the impact of fair value changes on the remaining portfolio will be greatly reduced. Furthermore the assets we are retaining are older and have less sensitivity to spread movements given their shorter duration.

Sean O'Neil: The assets we are retaining are older and have less sensitivity to spread movements given their shorter duration. The remaining mark-to-market impacts were due to a mild increase in delinquency as well as hedge costs. Regarding delinquencies, if you refer to the appendix page on MSR valuation, you will see the 30-plus delinquency bucket on GSEs deteriorated. However, the Ginnie Mae delinquency buckets improved quarter over quarter. The 30-plus category is the most volatile measure, so we focus more on the longer periods, such as the 60 and 90-plus. We are closely monitoring the portfolio for any indications of longer-term stress on borrowers. The final impact is $4 million due to both hedge costs and fair value inputs, which is a small percentage of the $2.5 billion fair value MSR book that we hedge. Please turn to slide 13 for perspective on MSR fair value impacts.

Sean O’Neil: The assets we are retaining are older and have less sensitivity to spread movements given their shorter duration. The remaining mark-to-market impacts were due to a mild increase in delinquency as well as hedge costs. Regarding delinquencies, if you refer to the appendix page on MSR valuation, you will see the 30-plus delinquency bucket on GSEs deteriorated. However, the Ginnie Mae delinquency buckets improved quarter over quarter. The 30-plus category is the most volatile measure, so we focus more on the longer periods, such as the 60 and 90-plus. We are closely monitoring the portfolio for any indications of longer-term stress on borrowers. The final impact is $4 million due to both hedge costs and fair value inputs, which is a small percentage of the $2.5 billion fair value MSR book that we hedge. Please turn to slide 13 for perspective on MSR fair value impacts.

Speaker #4: The remaining mark-to-market impacts were due to a mild increase in delinquency as well as hedge costs. Regarding delinquencies if you refer to the appendix page on MSR valuation you will see the 30 plus delinquency bucket on GSE's deteriorated.

Speaker #4: However the Ginny Mae delinquency buckets improved quarter over quarter. The 30 plus category is the most volatile measure so we focus more on the longer periods such as the 60 and 90 plus.

Speaker #4: We are closely monitoring the portfolio for any indications of longer term stress on borrowers. The final impact is 4 million dollars due to both hedge costs and fair value inputs which is a small percentage of the 2 and a half billion dollar fair value MSR book that we hedge.

Speaker #4: Please turn to slide 13 for a perspective on MSR fair value impacts. This graph shows three different drivers of MSR fair value broken into runoff, rates net of hedge, and inputs and assumptions.

Sean O'Neil: This graph shows three different drivers of MSR fair value broken into runoff, rates net of hedge, and inputs and assumptions. Runoff is the actual MSR value of unpaid principal balance that either paid in full or amortized during the quarter. We show the impact of interest rates net of hedge, and finally, MSR fair value changes from inputs and assumptions. This last category includes changes in loan characteristics such as delinquency status, borrower escrow payments, assumptions for prepayments, loan defaults, servicing costs, ancillary income, discount rate, and changes in bulk market MSR prices, all of which impact modeled cash flows and MSR fair value. Runoff is always detrimental to net income and can increase due to several variables, including higher prepayment speeds due to lower interest rates.

Sean O’Neil: This graph shows three different drivers of MSR fair value broken into runoff, rates net of hedge, and inputs and assumptions. Runoff is the actual MSR value of unpaid principal balance that either paid in full or amortized during the quarter. We show the impact of interest rates net of hedge, and finally, MSR fair value changes from inputs and assumptions. This last category includes changes in loan characteristics such as delinquency status, borrower escrow payments, assumptions for prepayments, loan defaults, servicing costs, ancillary income, discount rate, and changes in bulk market MSR prices, all of which impact modeled cash flows and MSR fair value. Runoff is always detrimental to net income and can increase due to several variables, including higher prepayment speeds due to lower interest rates.

Speaker #4: Runoff is the actual MSR value of unpaid principal balance that either paid in full or amortized during the quarter. Then we show the impact of interest rates net of hedge, and finally, MSR fair value changes from inputs and assumptions.

Speaker #4: This last category includes changes in loan characteristics such as delinquency status, borrower escrow payments, assumptions for prepayments, loan defaults, servicing costs, and salary income discount rate and changes in bulk market MSR prices all of which impact modeled cash flows and MSR fair value.

Speaker #4: Runoff is always detrimental to net income and can increase due to several variables including higher prepayment speeds due to lower interest rates. You can see this impact from Q4 25 through the current quarter when we had several refinance surges due to a temporary but meaningful drop in mortgage rates.

Sean O'Neil: You can see this impact from Q4 2025 through the current quarter, when we had several refinance surges due to a temporary but meaningful drop in mortgage rates. Another driver of runoff is portfolio size, which has been increasing. With respect to the other categories, both interest rates net of hedge as well as input and assumptions become smaller drivers when considered across multiple quarters in a cumulative fashion. The average of either of these categories shows a volatility of about ±3 basis points. That's why we show these impacts in notables, which impacts net income but do not include them in adjusted pre-tax income given the periodic volatility or swings. We believe this is similar to several large competitors in our space. Please turn to slide 14 for a similar view of reverse.

Sean O’Neil: You can see this impact from Q4 2025 through the current quarter, when we had several refinance surges due to a temporary but meaningful drop in mortgage rates. Another driver of runoff is portfolio size, which has been increasing. With respect to the other categories, both interest rates net of hedge as well as input and assumptions become smaller drivers when considered across multiple quarters in a cumulative fashion. The average of either of these categories shows a volatility of about ±3 basis points. That's why we show these impacts in notables, which impacts net income but do not include them in adjusted pre-tax income given the periodic volatility or swings. We believe this is similar to several large competitors in our space. Please turn to slide 14 for a similar view of reverse.

Speaker #4: Another driver of runoff is portfolio size which has been increasing. With respect to the other categories both interest rates net of hedge as well as input and assumptions become smaller drivers when considered across multiple quarters and accumulative fashion.

Speaker #4: The average of either of these categories shows a volatility of about plus or minus 3 basis points. That's why we show these impacts in notables which impacts net income but do not include them in adjusted pre-tax income given the periodic volatility or swings we believe this is similar to several large competitors in our space.

Speaker #4: Please turn to slide 14 for a similar view of reverse. Here you can see that the reverse book experiences far more volatility than the forward book.

Sean O'Neil: Here you can see that the reverse book experiences far more volatility than the forward book. The impact from interest rates and inputs and assumptions are both materially greater as a percentage of the total balances in reverse compared to forward on the prior page. This shows how our recent sale of the majority of this book should lessen MSR fair value volatility going forward. Please turn to slide 15 for a recap of key financial measures. Revenue was up 24%, continuing the strong year-over-year growth trend. Both servicing and originations contributed to the year-over-year growth in revenue due to higher volumes and stronger execution, which included improved recapture, reduced servicing advances, and better data analytics. Sequential revenue growth was up slightly as servicing increased more than the origination decline. This is primarily due to growth in the owned MSR volume driving revenues.

Sean O’Neil: Here you can see that the reverse book experiences far more volatility than the forward book. The impact from interest rates and inputs and assumptions are both materially greater as a percentage of the total balances in reverse compared to forward on the prior page. This shows how our recent sale of the majority of this book should lessen MSR fair value volatility going forward. Please turn to slide 15 for a recap of key financial measures. Revenue was up 24%, continuing the strong year-over-year growth trend. Both servicing and originations contributed to the year-over-year growth in revenue due to higher volumes and stronger execution, which included improved recapture, reduced servicing advances, and better data analytics. Sequential revenue growth was up slightly as servicing increased more than the origination decline. This is primarily due to growth in the owned MSR volume driving revenues.

Speaker #4: The impact from interest rates and inputs and assumptions are both materially greater as a percentage of the total balances in reverse compared to forward on the prior page.

Speaker #4: This shows how our recent sale of the majority of this book should lessen MSR fair value volatility going forward. Please turn to slide 15 for a recap of key financial measures.

Speaker #4: Revenue is up 24% continuing the strong year over year growth trend. Both servicing and originations contributed to the year over year growth in revenue due to higher volumes and stronger execution which include improved recapture, reduced servicing advances, and better data analytics.

Speaker #4: Sequential revenue growth was up slightly as servicing increased more than the origination declined. This is primarily due to growth in the owned MSR volume driving revenues.

Speaker #4: Operating efficiency continued to improve on a 12-month trailing basis which reflects our long-term focus on cost-effective growth and book value per share is up significantly about $13 year over year.

Sean O'Neil: Operating efficiency continued to improve on a 12-month trailing basis, which reflects our long-term focus on cost-effective growth, and book value per share is up significantly, about $13 year-over-year. Please turn to slide 16 for detail on originations. Originations pre-tax income grew by over three times on a year-over-year basis, driven by higher volume across the combined business. The $15.5 billion of funded volume in Q2 was our largest quarter in history. The strongest contributor was the B2B channel. This is correspondent lending and co-issue. The volume improvement did not come at the expense of margins as those also improved due to our strong enterprise sales efforts and continued improvements on analytics to drive margin management. Consumer direct remained profitable but generated lower adjusted pre-tax income from two drivers. The first is lower lock volume in Q2 by 30% quarter-over-quarter.

Sean O’Neil: Operating efficiency continued to improve on a 12-month trailing basis, which reflects our long-term focus on cost-effective growth, and book value per share is up significantly, about $13 year-over-year. Please turn to slide 16 for detail on originations. Originations pre-tax income grew by over three times on a year-over-year basis, driven by higher volume across the combined business. The $15.5 billion of funded volume in Q2 was our largest quarter in history. The strongest contributor was the B2B channel. This is correspondent lending and co-issue. The volume improvement did not come at the expense of margins as those also improved due to our strong enterprise sales efforts and continued improvements on analytics to drive margin management. Consumer direct remained profitable but generated lower adjusted pre-tax income from two drivers.

Speaker #4: Please turn to slide 16 for detail on originations. Originations pre-tax income grew by over three times on a year over year basis driven by higher volume across the combined business.

Speaker #4: The 15 and a half billion dollars of funded volume in the second quarter was our largest quarter in history. The strongest contributor was the B2B channel this is correspondent lending and co-issue.

Speaker #4: The volume improvement did not come at the expense of margins as those also improved due to our strong enterprise sales efforts and continued improvements on analytics to drive margin management.

Speaker #4: Consumer direct remained profitable but generated lower adjusted pre-tax income from two drivers. The first is lower lock volume in the second quarter by 30% quarter over quarter.

Sean O’Neil: The first is lower lock volume in Q2 by 30% quarter-over-quarter. Lock volume is a key metric for recognizing revenue. The second is elevated consumer direct operating expense due to lagging commissions from the Q1 refinance surge. With respect to staffing, our objective is to balance efficiency with flexibility. We optimize our capacity levels to balance current earnings growth and accommodate any future interest rate decline. Hence, our origination staffing is at levels to support higher than current volumes. Both B2B and consumer direct channels benefited from a continued focus on growing new products, including non-QM and second liens. Second liens have more than doubled in volume year-over-year, with over $70 million funding in the Q2. Please turn to slide 17 for our servicing performance.

Speaker #4: Lock volume is a key metric for recognizing revenue. The second is elevated consumer direct operating expense due to lagging commissions from the first quarter refinance surge.

Sean O'Neil: Lock volume is a key metric for recognizing revenue. The second is elevated consumer direct operating expense due to lagging commissions from the Q1 refinance surge. With respect to staffing, our objective is to balance efficiency with flexibility. We optimize our capacity levels to balance current earnings growth and accommodate any future interest rate decline. Hence, our origination staffing is at levels to support higher than current volumes. Both B2B and consumer direct channels benefited from a continued focus on growing new products, including non-QM and second liens. Second liens have more than doubled in volume year-over-year, with over $70 million funding in the Q2. Please turn to slide 17 for our servicing performance. Starting with the middle graph, strong owned MSR growth helped drive servicing revenues up 13% from the prior year and 3% sequential quarter.

Speaker #4: With respect to staffing our objective is to balance efficiency with flexibility. We optimize our capacity levels to balance current earnings growth and accommodate any future interest rate decline.

Speaker #4: Hence our origination staffing is at levels to support higher than current volumes. Both B2B and consumer direct channels benefited from a continued focus on growing new products including non-QM and second liens.

Speaker #4: Second liens of more than doubled in volume year over year with over 70 million dollars funding in the second quarter. Please turn to slide 17 for our servicing performance.

Speaker #4: Starting with the middle graph strong owned MSR growth helped drive servicing revenues up 13% from the prior year and 3% sequential quarter. Servicing adjusted pre-tax income improved on a sequential quarter due to better float income and better runoff as mortgage rates stayed elevated in the second quarter.

Sean O’Neil: Starting with the middle graph, strong owned MSR growth helped drive servicing revenues up 13% from the prior year and 3% sequential quarter. Servicing adjusted pre-tax income improved on a sequential quarter due to better float income and better runoff as mortgage rates stayed elevated in the Q2. Year-over-year, adjusted pre-tax income is still lower, driven primarily by higher runoff, which you can see at the bottom of the right graph, which is then partially offset by improved revenues. Please turn to slide 18 for details on improved advances in servicing.

Sean O'Neil: Servicing adjusted pre-tax income improved on a sequential quarter due to better float income and better runoff as mortgage rates stayed elevated in the Q2. Year-over-year, adjusted pre-tax income is still lower, driven primarily by higher runoff, which you can see at the bottom of the right graph, which is then partially offset by improved revenues. Please turn to slide 18 for details on improved advances in servicing. Building on the strong improvements we saw last quarter, servicing continues to improve the advanced balances with a 33% decline over the last 2 years. This comes even as we grow owned servicing UPB as we focus on the small percentage of loans that drive the most advances. As you can see by the dark blue graph, the bulk of our advances are linked to delinquencies in our non-agency owned MSR book.

Speaker #4: Year over year adjusted pre-tax income is still lower driven primarily by higher runoff which you can see at the bottom of the right graph which is then partially offset by improved revenues.

Speaker #4: Please turn to slide 18 for details on improved advances in servicing. Building on the strong improvements we saw last quarter servicing continues to improve the advanced balances with a 33% decline over the last two years.

Sean O’Neil: Building on the strong improvements we saw last quarter, servicing continues to improve the advanced balances with a 33% decline over the last 2 years. This comes even as we grow owned servicing UPB as we focus on the small percentage of loans that drive the most advances. As you can see by the dark blue graph, the bulk of our advances are linked to delinquencies in our non-agency owned MSR book.

Speaker #4: This comes even as we grow owned servicing UPB, as we focus on the small percentage of loans that drive the most advances. As you can see by the dark blue graphs, the bulk of our advances are linked to delinquencies and are in the non-agency owned MSR book.

Speaker #4: We have been deploying various strategies such as AI enabled agents that assist our contact center in quickly providing the most effective range of solutions for the borrower.

Sean O'Neil: We have been deploying various strategies such as AI-enabled agents that assist our contact center in quickly providing the most effective range of solutions for the borrower. As we scale AI-powered solutions for our contact center, we are targeting an annual savings of about $3 million at our current portfolio size. Slide 19 gives our approach to capital allocation. Our considerations for capital deployment focus on organic growth, liquidity, and returning capital to investors. Organic growth includes adding owned MSR via profitable originations activity. Other examples include broadening our product offering for both originations and servicing. In parallel, we maintain sufficient liquidity to ensure we meet both regulatory and lender requirements, as well as holding enough buffer for various stress scenarios. We also consider ways to return capital to investors.

Sean O’Neil: We have been deploying various strategies such as AI-enabled agents that assist our contact center in quickly providing the most effective range of solutions for the borrower. As we scale AI-powered solutions for our contact center, we are targeting an annual savings of about $3 million at our current portfolio size. Slide 19 gives our approach to capital allocation. Our considerations for capital deployment focus on organic growth, liquidity, and returning capital to investors. Organic growth includes adding owned MSR via profitable originations activity. Other examples include broadening our product offering for both originations and servicing. In parallel, we maintain sufficient liquidity to ensure we meet both regulatory and lender requirements, as well as holding enough buffer for various stress scenarios. We also consider ways to return capital to investors.

Speaker #4: As we scale AI powered solutions for our contact center we are targeting an annual savings of about $3 million at our current portfolio size.

Speaker #4: Slide 19 gives our approach to capital allocation. Our considerations for capital deployment focus on organic growth, liquidity, and returning capital to investors. Organic growth includes adding owned MSR via profitable originations activity other examples include broadening our product offering for both originations and servicing.

Speaker #4: In parallel we maintain sufficient liquidity to ensure we meet both regulatory and lender requirements as well as holding enough buffer for various stress scenarios.

Speaker #4: We also consider ways to return capital to investors our 10Q provides information on the recently completed $10 million share buyback as well as the ongoing $20 million buyback which reflect the value we see in acquiring shares that are priced materially lower than book value.

Sean O'Neil: Our 10-Q provides information on the recently completed $10 million share buyback, as well as the ongoing $20 million buyback, which reflect the value we see in acquiring shares that are priced materially lower than book value. On slide 20, we provide our updated view on 2026 guidance. As Glen mentioned earlier, we are guiding to the lower end of the adjusted pre-tax income range of 10% to 15% based on current market conditions and the H1 results. The other areas we provide guidance on are unchanged. We continue to grow our total servicing book with strong growth this most recent quarter, improve our operating efficiency, and maintain strong hedging performance. Back to you, Glen.

Sean O’Neil: Our 10-Q provides information on the recently completed $10 million share buyback, as well as the ongoing $20 million buyback, which reflect the value we see in acquiring shares that are priced materially lower than book value. On slide 20, we provide our updated view on 2026 guidance. As Glen mentioned earlier, we are guiding to the lower end of the adjusted pre-tax income range of 10% to 15% based on current market conditions and the H1 results. The other areas we provide guidance on are unchanged. We continue to grow our total servicing book with strong growth this most recent quarter, improve our operating efficiency, and maintain strong hedging performance. Back to you, Glen.

Speaker #4: On slide 20 we provide our updated view on 2026 guidance. As Glen mentioned earlier we are guiding to the lower end of the adjusted pre-tax income range of 10 to 15% based on current market conditions and the first half results.

Speaker #4: The other areas we provide guidance on are unchanged. We continue to grow our total servicing book with strong growth this most recent quarter improve our operating efficiency and maintain strong hedging performance.

Speaker #4: Back to you Glen.

Speaker #1: Thanks Sean. Let's turn to slide 21 for a few comments before we open the call for questions. ONITY is a top 10 non-bank mortgage originator servicer and subservicer with a balanced and resilient business that is winning and growing in our target markets.

Glen Messina: Thanks, Sean. Let's turn to slide 21 for a few comments before we open the call for questions. Onity is a top 10 non-bank mortgage originator, servicer, and sub-servicer with a balanced and resilient business that is winning and growing in our target markets. Our Q2 results demonstrate that our growth strategy is sound and our operating fundamentals are strong. We've built a technology-enabled, award-winning platform that is efficient, delivers differentiated performance, and excellent service. We are taking focused and decisive actions to improve ROE over the long term, organized into three categories: increasing servicing scale, portfolio optimization, and technology-driven productivity. To that end, we believe the reverse asset sale to Finance of America. The legacy subservicing transfer simplified the business, improved profitability and focus, and increased strategic flexibility.

Speaker #1: Our second quarter results demonstrate that our growth strategy is sound and our operating fundamentals are strong. We've built a technology enabled award-winning platform that is efficient, delivers differentiated performance, and excellent service.

Speaker #1: We are taking focused and decisive actions to improve ROE over the long term, organized into three categories: increasing servicing scale, portfolio optimization, and technology-driven productivity.

Speaker #1: To that end we believe the reverse asset sale to finance of America and the legacy subservicing transfer simplify the business improve profitability and focus and increase strategic flexibility.

Speaker #1: With a strong foundation, simplified business, and greater flexibility, we believe we are well positioned to navigate the current environment, capitalize on attractive opportunities, and continue delivering sustainable, prudent growth.

Glen Messina: With a strong foundation, simplified business, and greater flexibility, we believe we are well-positioned to navigate the current environment, capitalize on attractive opportunities, and continue delivering sustainable, prudent growth. All this adds up to a business that delivers adjusted ROE comparable to our peers, with increasing scale and market position at a more attractive valuation. With that, operator, let's open the call for questions.

Speaker #1: All this adds up to a business that delivers adjusted ROE comparable to our peers with increasing scale and market position at a more attractive valuation.

Speaker #1: With that operator let's open the call for questions.

Speaker #2: Thank you. And if you would like to ask a question, please press star one on your telephone keypad. To leave the queue at any time, press star two.

Operator 3: Thank you. If you would like to ask a question, please press star one on your telephone keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. We will take our first question from Bose George with KBW. Please go ahead. Your line is open.

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. We will take our first question from Bose George with KBW. Please go ahead. Your line is open.

Speaker #2: Once again that is star and one to ask a question. We will take our first question from both George with KBW. Please go ahead your line is open.

Speaker #3: Hey guys good morning. This is Frank Gilabetti on for Bose. I just want to start you guys nicely laid out the the goals for you're pre pre-tax adjusted ROE range.

Frankie Libetti: Hey, guys. Good morning. This is Frankie Libetti on for Bose. I just want to start, you guys nicely laid out the goals for your pre-tax adjusted ROE range. Can you just help quantify what bridges the gap to the lower end of the range, given you're in the 9% range currently and market is pretty volatile? Yeah.

Frankie Labetti: Hey, guys. Good morning. This is Frankie Libetti on for Bose. I just want to start, you guys nicely laid out the goals for your pre-tax adjusted ROE range. Can you just help quantify what bridges the gap to the lower end of the range, given you're in the 9% range currently and market is pretty volatile? Yeah.

Speaker #3: Can you just help quantify what bridges the gap to the lower end of the range given your in this 9% range currently and market is pretty volatile so yeah.

Speaker #4: good morning. So look we you know based on the ROE expansion actions that we laid out in the presentation you know on page five in terms of driving improving servicing scale you know optimizing the servicing portfolio and then obviously continue to drive you know productivity look we we believe those are going to you know help us improve the ROE of the business you know despite some of the volatility that exists in the marketplace you know where we really saw you know some of that volatility hit us in the past is the you know the loan origination pipeline hedging we saw some you know a lot of noise in that during the you know the first quarter of of this year and that's you know in the second quarter that you know that seemed to behave a lot better you know we saw improved margins in the origination space even though you know that there continues to be market volatility and you know we'd have record origination volumes as well too.

Glen Messina: Good morning. Look, based on the ROE expansion actions that we laid out in the presentation on page five in terms of driving improving servicing scale, optimizing the servicing portfolio, and then obviously continuing to drive productivity. Look, we believe those are going to help us improve the ROE of the business despite some of the volatility that exists in the marketplace. Where we really saw some of that volatility hit us in the past is the loan origination pipeline hedging. We saw a lot of noise in that during Q1 of this year, and in Q2 that seemed to behave a lot better. We saw improved margins in the origination space even though there continues to be market volatility, and we'd had record origination volumes as well too. Look, we feel good about the actions we're taking to drive improved adjusted pre-tax ROE.

Speaker #4: So you know look we we feel good about you know the actions we're taking to drive you know improved adjusted pre-tax ROE and you know we feel a little bit better about you know our ability to manage some of the volatility that we've you know experienced in the first half of the year so yeah those are the actions that we think get us into the you know into the ROE range.

Glen Messina: We feel a little bit better about our ability to manage some of the volatility that we've experienced in H1 of the year. Yeah, those are the actions that we think get us into the ROE range. Sean, anything you want to add?

Speaker #1: Sean anything you want to add?

Speaker #5: Yeah hey Frankie I I'd add that some of the pressure we've seen on adjusted pre-tax income over the last three quarters has been very high runoff if rates do say elevated you know that theoretically should improve over time that improves servicings adjusted pre-tax income and we continue to show an ability to generate pre-tax income in originations even a rather difficult quarter like the one that just happened.

Sean O'Neil: Yeah. Hey, Frankie. I'd add that some of the pressure we've seen on adjusted pre-tax income over the last three quarters has been very high runoff. If rates do stay elevated, that theoretically should improve over time. That improves servicing's adjusted pre-tax income, and we continue to show an ability to generate pre-tax income in originations, even a rather difficult quarter like the one that just happened.

Sean O’Neil: Yeah. Hey, Frankie. I'd add that some of the pressure we've seen on adjusted pre-tax income over the last three quarters has been very high runoff. If rates do stay elevated, that theoretically should improve over time. That improves servicing's adjusted pre-tax income, and we continue to show an ability to generate pre-tax income in originations, even a rather difficult quarter like the one that just happened.

Speaker #3: Great, thank you. That's very helpful. And then, just a little more broadly, you know, banks had a pretty meaningful increase in valuation and volumes, and took share during the quarter.

Frankie Libetti: Great. Thank you. That's very helpful. Then just a little more broadly, banks had a pretty meaningful increase in volumes and taking share during the quarter. How do you see them evolving in the market? Then secondly, in the correspondent channel, can you just talk about competition you're seeing there, especially at the GSE cash window? Thanks.

Frankie Labetti: Great. Thank you. That's very helpful. Then just a little more broadly, banks had a pretty meaningful increase in volumes and taking share during the quarter. How do you see them evolving in the market? Then secondly, in the correspondent channel, can you just talk about competition you're seeing there, especially at the GSE cash window? Thanks.

Speaker #3: How do you see them evolving in the market? And then secondly, in the correspondent channel, can you just talk about the competition you're seeing there? Is that at the GSE cash window?

Speaker #3: Thanks.

Speaker #4: Sure. so Frankie look I you know banks have always been a force to be reckoned with when they want to play in this space they typically come in and buy and buy aggressively.

Glen Messina: Sure. Frankie, look, banks have always been a force to be reckoned with. When they want to play in this space, they typically come in and buy and buy aggressively. Quite frankly, we're seeing a number of bank buyers of MSRs in the marketplace during the H1 of this year who have a seemingly insatiable desire for MSR assets. Net-net, we think that's good for valuations, obviously creates an interesting competitive dynamic. If the proposed relaxing of bank capital regulations for holding MSRs change, I think there's a number of financial institutions, which I should say banks who have strong mortgage franchises today. They'll continue to grow them. Based on our conversations with experts around the banking industry, doesn't seem to be a whole lot of folks who would be considering a wholesale change in their strategy of, "I'm not a mortgagor today.

Speaker #4: And you know quite frankly we're seeing a number of bank buyers of MSRs in the marketplace you know during the first half of this year who have you know a seemingly insatiable desire for for MSR assets net net we think that's good for valuations but obviously you know creates you know an interesting competitive dynamic.

Speaker #4: you know if the bank capital regulations proposed relaxing of bank capital regulations for holding MSRs there's a number of financial institutions which I should say banks who you know have strong mortgage franchises today they'll continue to grow them you know based on you know our conversations with experts around you know the banking industry doesn't seem to be a whole lot of folks who would be you know in considering a wholesale change in their strategy of you know I'm gonna go I'm not a mortgage today I'm gonna go gangbusters that's not the predominant thinking you know those who are in will pro likely get bigger and increase their franchise.

Glen Messina: I'm going to go gangbusters." That's not the predominant thinking. Those who are in will likely get bigger and increase their franchise. That said, it makes businesses like ours more valuable in the sense that if somebody is thinking about getting into the mortgage space, it's hard to start de novo. If you want to get in, you get in with scale. You look at a business like ours that has billions of dollars of custodial and escrow deposits, which are considered to be sticky deposits. That's an interesting situation. I think maybe how banks think about looking at non-bank mortgage companies. In terms of competition in the correspondent space, I think our correspondent team is just doing a phenomenal job. They are focused on value-based selling using an enterprise sales strategy.

Glen Messina: That's not the predominant thinking. Those who are in will likely get bigger and increase their franchise. That said, it makes businesses like ours more valuable in the sense that if somebody is thinking about getting into the mortgage space, it's hard to start de novo. If you want to get in, you get in with scale. You look at a business like ours that has billions of dollars of custodial and escrow deposits, which are considered to be sticky deposits. That's an interesting situation. I think maybe how banks think about looking at non-bank mortgage companies. In terms of competition in the correspondent space, I think our correspondent team is just doing a phenomenal job. They are focused on value-based selling using an enterprise sales strategy.

Speaker #4: That said it makes you know businesses like ours you know more valuable in the sense that you know if if somebody is thinking about getting into you know the mortgage space it's you know it's hard to start de novo if you want to get in you get in with scale that and you look at a business like ours that has you know billions of dollars of custodial and escrow deposits which are considered to be sticky deposits you know that that's an interesting situation and I think you know would might may be a a you know how banks think about looking at you know non-bank mortgage companies.

Speaker #4: You know, in terms of competition in the correspondent space, you know, look, I think our correspondent team is just doing a phenomenal job.

Speaker #4: They are focused on value-based selling using an enterprise sales strategy and you know look our our your ability to achieve record origination volumes where you know frankly industry origination volumes you know with rates up are you know are are you know not looking as encouraging as they were in the first quarter.

Glen Messina: Look, our ability to achieve record origination volumes where frankly, industry origination volumes with rates up are not looking as encouraging as they were in the Q1. The team's just doing a phenomenal job. Again, I think as Sean talked about margins increase from 23 to 26 basis points as well. Look, Correspondent has always been competitive, it's the most competitive, well, maybe compared to broker, it might be second most competitive space in the industry. I think our team is just doing a terrific job. Really proud of them. Again, that's part of why we were able to achieve record origination volumes.

Speaker #4: You know team's just doing a phenomenal job and again we you know I think as Sean talked talked about you know margins increased you know from twenty-three to twenty-six basis points as well.

Speaker #4: So look you know correspondent has always been competitive and it's the most competitive well may maybe compared to broker but it it it it might be second most competitive space in in the industry.

Speaker #4: But I, you know, I think our team is just doing a terrific job there. Really proud of them and, you know, again, that's part of why we were able to achieve record origination volumes.

Speaker #3: Great. Thank you.

Frankie Libetti: Great. Thank you.

Frankie Labetti: Great. Thank you.

Speaker #2: Thank you. Our next question comes from Randy Banner with Texas Capital. Please go ahead.

Operator 3: Thank you. Our next question comes from Randy Binner with Texas Capital. Please go ahead.

Operator: Thank you. Our next question comes from Randy Binner with Texas Capital. Please go ahead.

Speaker #6: Hey good morning. thanks. This is this is all very helpful and and so I'd I'd like to if I can just ask about the ROE again and and and maybe play some of that back because because it was it was lower in the first quarter I just want to make sure my model is kind of reflecting getting to that you know ten percent.

Randy Binner: Hey, good morning. Thanks. This is all very helpful, I'd like to, if I can, just ask about the ROE again and maybe play some of that back, because it was lower in Q1. I just want to make sure my model is kind of reflecting getting to that 10%. I'm kind of isolating it to three things, and I'd love to kind of hear your thoughts or feedback on this. One, you're going to have an ongoing buyback, that helps the denominator. If you can comment on kind of your plan to execute on that'd be helpful. The second thing is your other revenue line has been better, at least versus our expectation. Understanding what that is and the sustainability of that other revenue line is just marginally helpful.

Speaker #6: And so I'm kind of isolating it to three things and I just I just want to I'd love to kind of hear your thoughts or feedback on this.

Speaker #6: So so one you know you're gonna have an ongoing buyback so that that helps the denominator. If you can comment on kind of your plan to execute on that that'd be helpful.

Speaker #6: The the the second thing is you know your other revenue line has been better at least versus our expectation and I I you know understanding what that is and the sustainability of that other revenue line is just marginally helpful.

Speaker #6: And then the third thing and most importantly is that and and you've said this kind of quite clearly the MSR marks should be more stable I think because of everything you've laid out you know your your program plus you know your your program is augmented more broadly and reverse going away will make it more stable.

Randy Binner: The third thing, most importantly, is that, you've said this kind of quite clearly, the MSR mark should be more stable, I think, because of everything you've laid out. Your program plus your program is augmented more broadly and reverse going away will make it more stable. How do we keep track of that? Do we look at the MOVE index on Bloomberg, or how do we judge that lower kind of vol in MSR as we get through Q3 and even Q4? Sorry, that was a lot there, just trying to.

Speaker #6: But how how do we you know how do we keep track of that? Do we look at the move index on Bloomberg or like how do we how do we judge that lower kind of vol in MSR as as we get through the third quarter and even the fourth quarter?

Speaker #6: So sorry that was a lot there but just just trying to. You know build the building blocks of the the low end of the ROE things.

Glen Messina: Yeah

Randy Binner: Build the building blocks of the low end of the ROE. Thanks.

Speaker #4: Yeah good morning Randy. couple of things here. so let me start with the share buyback program. You know we completed the ten million dollar authorization from the board.

Glen Messina: Yeah. Good morning, Randy. Couple of things here. Let me start with the share buyback program. We completed the $10 million authorization from the board. The board then reauthorized another $20 million in share repurchases. When our Q comes out later today, you'll see in our Q the amount of shares we've bought back and the dollar volumes and average share price. It's a 10b5-1 program. It continues to execute, and that's going to run its course. The share buyback should continue generally at the rate that we saw in Q2. Again, that'll be disclosed in our Q. As it relates to MSR volatility, I'd say the volatility in our MSR, forward MSR. Let's separate forward from reverse.

Speaker #4: you know we we we the board then reauthorized another twenty million dollars in share repurchases you know and our Q comes out later today you'll see in our Q the amount of shares we've bought back and you know the the dollar volumes and average share price and we're continuing to you know to tend to be five one program.

Speaker #4: It continues to execute and that's gonna run its course. So you know the the share buybacks should continue you know generally at the rate that we saw in the you know in in the second quarter and and again that'll be disclosed in our Q.

Speaker #4: as it relates as it relates to you know MSR volatility you you know I'd say the volatility in our in our MSR forward MSRs so let's separate forward from reverse volatility in the forward MSR you know certainly has been as Sean pointed out in his charts within within the range of what I call the reasonable expectation for volatility.

Glen Messina: Volatility in the forward MSR certainly has been, as Sean pointed out in his charts, within the range of what I call the reasonable expectation for volatility. Net-net, when you look at the forward MSR change due to rates, inputs, and assumptions, it was about a $4 million net expense or net cost in Q2 versus basically breakeven in Q1. Slight deterioration on one of Sean's charts. I think he showed a $4 million unfavorable change. When I look at it was zero to $4 million loss, right? On $150, $170 billion of MSR UPB, very small range there. Delinquency trends, that was the next thing Sean talked about. We did see an improvement in the Ginnie Mae delinquencies as we would have expected. We saw an uptick in GSE delinquencies, Sean.

Speaker #4: So you know net net you know when you look at the forward MSR change due to rates inputs and assumptions it it it was about a four million dollar net expense or net cost in the second quarter versus basically break even in the first quarter.

Speaker #4: So slight deterioration on Sean's one of Sean's charts I think he showed a you know four million dollar unfavorable change but you know when I look at it it's you know it was zero to four million loss right?

Speaker #4: So on a hundred and fifty hundred and seventy billion dollars that MSR UPB very small range there. you know delinquency trends that was the next thing Sean talked about you know I you know we did see an improvement in the GMA delinquencies as we would have expected.

Speaker #4: we did see a slight we saw an uptick in you know GSE delinquencies Sean. It looks like those are you know beginning to abate and you know we're seeing those return to normal.

Glen Messina: It looks like those are beginning to abate, and we're seeing those return to normal. We feel pretty good about the consumer. We're not seeing anything that would suggest in the next 6 months there's going to be a radical shift in consumer payment behavior. There's going to be seasonality. That always happens, right? I think the forward MSR volatility is well controlled and it's within the range, and our capital markets team is doing a terrific job managing that asset. On the reverse side, I've got to tell you, we saw an extreme amount of volatility in that asset between Q1 and Q2. To give you an order of magnitude, in Q2, net unfavorable fair value adjustments to rates, inputs, and assumptions of about $12 million on the reverse MSR, and that's on a UPB of about $10 billion.

Speaker #4: So we feel pretty good about the consumer we're not seeing anything that would suggest in the next six months there's gonna be a radical shift in consumer payment behavior.

Speaker #4: It's gonna be seasonality that always happens right? So I think the forward MSR volatility is much I I think is well controlled and it's within the range in our capital markets team is doing a terrific job managing that asset.

Speaker #4: You know on the reverse side I gotta tell you we we saw an extreme amount of volatility in that asset between the first and second quarter you know to give you an order of magnitude in the second quarter you know n n net you know unfavorable fair value adjustments due to rates inputs and assumptions of about twelve million.

Speaker #4: On the reverse MSR and that's on a UPB of about ten billion sorry twelve million on ten billion which when you think about it in a relative scale as compared to the forward side just the volatility is off the charts and that you know and in the first quarter it was a four million dollar good guy right?

Glen Messina: Sorry, $12 million on $10 billion, which when you think about it in a relative scale as compared to the forward side, just the volatility is off the charts. In Q1, it was a $4 million good guy, right? Or a $3 million good guy, and that's how you get to the $15 million swing that Sean showed on his chart. By virtue of decreasing, we're selling about 80% of our MSRs to Finance of America, who is much better equipped as a solely reverse mortgage-focused company to deal with that volatility and address it. I think on a go-forward basis, we would expect to see much less volatility in the reverse MSR. Randy, I may have missed your second point.

Speaker #4: Or a three million dollar good guy and that's how you get to the fifteen million dollar swing that Sean showed on his charts. So you know by virtue of decreasing or selling about eighty percent of our MSRs to finance of America who is much better equipped as a solely reverse mortgage focused company to deal with that volatility and address it I I think I gotta go forward based as we would expect to see much less volatility.

Speaker #4: In the reverse MSR. Randy I may have missed your s your second point.

Speaker #2: Yeah that was that was super helpful and and and and that that that love the details helpful just to to have confidence and you know kind of modeling a lower lower vol around the MSRs.

Randy Binner: That was super helpful. I love the detail is helpful just to have confidence and modeling a lower bar around the MSRs. Again, this is just me looking at the numbers and trying to identify the three kind of moving pieces. Incrementally, at least for me, the other revenue line has performed well year to date. The question is: what's in that other revenue line? What is it?

Speaker #2: The other question—the third question I had—and these are just, again, this is just me looking at the numbers and trying to identify the three kind of moving pieces, but incrementally, at least for me, the other revenue line has performed well year to date. So the question is: what's in that other revenue line? Like, what is it?

Glen Messina: Oh, yeah.

Speaker #2: And then you know is it is it sustainable to kind of deliver twenty mil of rev con you know 'cause it's consistently had that number nineteen point one and twenty point four in the first and second quarter respectively.

Randy Binner: Then, is it sustainable to kind of deliver $20 mil of rev because it's consistently had that number $19.1 and $20.4 in the Q1 and Q2 respectively. Is that sustainable? What is it?

Speaker #2: So is that sustainable and and what is it?

Speaker #4: Sean I'll turn it over to you. I I you just as a you know maybe just to tee it up for you. You know there's you know probably escrow earnings and things like that are falling into that other revenue line but I'll turn it over to you.

Glen Messina: Sean, I'll turn it over to you. Maybe just to tee it up for you. There's probably escrow earnings and things like that are falling into that other revenue line, I'll turn it over to you.

Speaker #3: Yeah hey Randy how's it going? yeah that is driven somewhat by ancillary income that we get off of higher owned MSRs. And so as you see the growth in our owned MSRs you're gonna see that both on the top line where you see servicing and subservicing fees and then as well as some down in other revenue net.

Sean O'Neil: Hey, Randy. How's it going? That is driven somewhat by ancillary income that we get off of higher owned MSRs. As you see the growth in our owned MSRs, you're going to see that both on the top line where you see servicing and sub-servicing fees, and then as well as some data and other revenue net. We think that is sustainable and continue to look for that as well as gain on sales to continue to drive growth.

Sean O’Neil: Hey, Randy. How's it going? That is driven somewhat by ancillary income that we get off of higher owned MSRs. As you see the growth in our owned MSRs, you're going to see that both on the top line where you see servicing and sub-servicing fees, and then as well as some data and other revenue net. We think that is sustainable and continue to look for that as well as gain on sales to continue to drive growth.

Speaker #3: And so yeah we think that is sustainable and you know continue to look for that as well as gain on sales to continue to drive growth.

Speaker #2: All right great. And then back into Q one follow up on a comment that Glen made that I had observed in the market as well.

Randy Binner: All right, great. If I can just do one follow-up on a comment that Glen made that I had observed in the market as well. I'd love your insight, but you mentioned some of the GSE delinquencies had bumped up but now are improving. I just want to focus on that. Is that the case? If so, do you know what kind of caused those to go higher and then improve?

Speaker #2: So I'd love your in insight but that you said you mentioned some of the GSE delinquencies had had bumped up and then but now are improving.

Speaker #2: It just I just wanted to like focus on that. Is that is that what you is that the case? And and if so do do you know what what what kind of caused those to go higher and then improve?

Speaker #4: Yeah so we did see a bump up in particularly the thirty day bucket in GSE delinquencies and you'll see that you know if you look at our earnings supplement there's the MSR evaluation page and you'll see that the you know delinquencies in GSE spiked up.

Glen Messina: We did see a bump up in particularly the 30-day bucket in GSE delinquencies. You'll see that if you look in our earnings supplement, there's the MSR valuation page, and you'll see that the delinquencies in GSE spiked up and largely sitting in the 30-day bucket. Based on some of our work looking historically over the past couple of years, there's this unusual seasonal spike in delinquencies right around the Fourth of July holiday. I don't know what it is and what the consumer psyche is around it, but we do tend to see 30-day delinquencies rise just in the month of June before the Fourth of July holiday and then fall after the Fourth of July holiday. Sean, any more insights you want to put into that?

Speaker #4: and largely sitting in the thirty day bucket. you know look our our you know based on some of our work looking historically over the past couple of years this is unusual seasonal spike in delinquencies right around the fourth of July holiday and I don't know what it is and what the consumer psyche is around it but we do see tend to see delinquencies thirty day delinquencies rise just you know in the month of June before the fourth of July holiday and then fall after the fourth of July holiday.

Speaker #4: So Sean any any more insights you wanna put into that?

Speaker #3: our servicing leaders speculate that that's because people actually end up missing you know depending where the holiday falls then they make two payments in the month of July and you'll see seasonally a lot of times the thirty plus recovers in the following month.

Sean O'Neil: Our servicing leaders speculate that that's because people actually end up missing, depending where the holiday falls, then they make two payments in the month of July. You'll see seasonally a lot of times the 30-plus recovers in the following month. Till we see details on July, we can't go too much into that. I'd add that changes in 30-plus could be seasonal, could be driven by many things. We tend to look at the 60 and the 90-plus metrics for longer-term impact.

Sean O’Neil: Our servicing leaders speculate that that's because people actually end up missing, depending where the holiday falls, then they make two payments in the month of July. You'll see seasonally a lot of times the 30-plus recovers in the following month. Till we see details on July, we can't go too much into that. I'd add that changes in 30-plus could be seasonal, could be driven by many things. We tend to look at the 60 and the 90-plus metrics for longer-term impact.

Speaker #3: So so we see details on July we can't go too much into that but you know I'd add that changes in thirty plus are you know kind of could be seasonal could be driven by many things.

Speaker #3: We tend to look at the sixty and the ninety plus metrics for longer term impacts. You know looking to monitor that going forward of course.

Randy Binner: Yeah, of course.

Sean O'Neil: We'll continue to monitor that going forward, of course.

Sean O’Neil: We'll continue to monitor that going forward, of course.

Speaker #2: I guess people people are just too busy going to the beach and living their lives to to pay that check to that bill. So but they catch up.

Randy Binner: I guess people are just too busy going to the beach and living their lives to pay that bill. They catch up, so I guess that's good. Okay, thanks. Appreciate the answers.

Speaker #2: So I guess that's good. Okay thanks. Appreciate the appreciate the answers.

Speaker #1: Thank you. And once again, if you would like to ask a question, please press star one on your telephone keypad. We will pause for a moment to allow any further questions to queue.

Operator 3: Thank you. Once again, if you would like to ask a question, please press star one on your telephone keypad. We will pause for a moment to allow any further questions to queue. At this time, there are no further questions in queue. I will now turn the meeting back to Glen Messina for closing comments.

Operator: Thank you. Once again, if you would like to ask a question, please press star one on your telephone keypad. We will pause for a moment to allow any further questions to queue. At this time, there are no further questions in queue. I will now turn the meeting back to Glen Messina for closing comments.

Speaker #1: And at this time there are no further questions in queue. I will now turn the meeting back to Glen Messina for closing comments.

Speaker #4: Thanks Nikki. And certainly thanks to all our shareholders and and our key business partners for your support of the ONITY business. I also wanna thank and recognize a board of directors and the global business team for all their hard work and and commitment to our success.

Glen Messina: Thanks, Nikki. Certainly, thanks to all our shareholders and our key business partners for your support of the Onity business. I also want to thank and recognize our board of directors and the global business team for all their hard work and commitment to our success. I look forward to updating you on our progress in our next earnings call. Thank you so much.

Speaker #4: And I look forward to updating you on our progress on our next earnings call. Thank you so much.

Operator 3: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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