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What changed in ONITY GROUP INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ONITY GROUP INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+671 added−747 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-27)

Top changes in ONITY GROUP INC.'s 2024 10-K

671 paragraphs added · 747 removed · 515 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

95 edited+30 added−48 removed83 unchanged
Biggest changeIn addition: • On March 4, 2021, we issued 1,184,768 warrants to Oaktree to purchase shares of our common stock at an exercise price of $26.82 per share, subject to anti-dilution adjustments. • On May 3, 2021, we issued 261,248 warrants to Oaktree to purchase additional common stock at an exercise price of $24.31 per share, subject to anti-dilution adjustments. • On May 3, 2021, we issued to Oaktree 426,705 shares at a purchase price of $23.15 per share.
Biggest changeIn addition, in conjunction with the senior secured note issuances: • On March 4, 2021, we issued 1,184,768 warrants to Oaktree to purchase shares of our common stock at an exercise price of $26.82 per share, subject to anti-dilution adjustments.
Our ability to achieve our objectives is highly dependent on the success of our business relationships with our critical counterparties like the GSEs, FHFA, Ginnie Mae, our lenders, regulators, significant customers and our ability to attract new customers, all of which are impacted by our capability to adequately address the competitive challenges we face. 14 Market Risk See Item 7A.
Our ability to achieve our objectives is highly dependent on the success of our business relationships with our critical counterparties like the GSEs, FHFA, Ginnie Mae, our lenders, regulators, significant customers and our ability to attract new customers, all of which are impacted by our capability to adequately address the competitive challenges we face. Market Risk See Item 7A.
We own MSRs outright, where we typically receive all the servicing economics, and we subservice on behalf of other institutions that own the MSRs, in which case we typically earn a smaller fee for performing the subservicing activities. Special servicing is a form of subservicing where we generally manage only delinquent loans on behalf of a loan owner.
We own MSRs outright, where we typically receive all the servicing economics, and we subservice on behalf of other institutions that own the MSRs, in which case we typically earn a relatively smaller fee for performing the subservicing activities. Special servicing is a form of subservicing where we generally manage only delinquent loans on behalf of a loan owner.
Our mortgage loans are conventional (conforming to the underwriting standards of the GSEs) and government-insured loans (insured by the FHA or VA) (collectively Agency loans). We generally package and sell the loans in the secondary mortgage market, through GSE and Ginnie Mae guaranteed securitizations and whole loan transactions.
Our mortgage loans are conventional (conforming to the underwriting standards of the GSEs) and government-insured loans (insured by the FHA or VA) (collectively Agency loans). We generally package and sell promptly the loans in the secondary mortgage market, through GSE and Ginnie Mae guaranteed securitizations and whole loan transactions.
Originations The primary source of revenue of our Originations segment is gain on loan sales. We originate and purchase residential mortgage loans that we promptly sell or securitize on a servicing retained basis, thereby generating mortgage servicing rights.
Originations The primary source of revenue in our Originations segment is gain on loan sales. We originate and purchase residential mortgage loans that we promptly sell or securitize on a servicing retained basis, thereby generating mortgage servicing rights.
The third line of defense, Internal Audit, provides independent assurance as to the effectiveness of the design, implementation and embedding of the risk management frameworks, as well as the management of the risks and controls by the first line and control oversight by the second line.
The third line of defense, Internal Audit, provides independent assurance as to the effectiveness of the design, implementation and embedding of the risk management frameworks, as well as the management of the risks and controls by the 14 first line and control oversight by the second line.
We earn contractual monthly servicing fees (which are typically payable as a percentage of UPB) pursuant to servicing agreements as well as other ancillary fees relating to our servicing activities such as late fees.
We earn contractual monthly servicing fees (which are typically payable as a fixed percentage of UPB) pursuant to servicing agreements as well as other ancillary fees relating to our servicing activities such as late fees.
Finally, our licensed entities are required to renew their licenses, typically on an annual basis, and to do so they must satisfy the license renewal requirements of each jurisdiction, which generally include financial requirements such as providing audited financial statements or satisfying minimum net worth requirements and non-financial requirements such as satisfactory completion of examinations relating to the licensee’s compliance with applicable laws and regulations.
Our licensed entities are required to renew their licenses, typically on an annual basis, and to do so they must satisfy the license renewal requirements of each jurisdiction, which generally include financial requirements such as providing audited financial statements and satisfying minimum net worth requirements and non-financial requirements such as satisfactory completion of examinations relating to the licensee’s compliance with applicable laws and regulations.
Our most recent employee survey indicated strong engagement levels of 82% favorable. Our training platform focuses not only on the technical domain skills essential to role success, but includes competency-based programs to develop leadership capabilities and skills needed for the future. Succession planning occurs annually and is reviewed by the CEO and the Compensation and Human Capital Committee.
Our most recent employee survey indicated strong engagement levels of 85% favorable. Our training platform focuses not only on the technical domain skills essential to role success but includes competency-based programs to develop leadership capabilities and skills needed for the future. Succession planning occurs annually and is reviewed by the CEO and the Compensation and Human Capital Committee.
Additionally, we provide employees with a comprehensive employee assistance program that includes virtual counseling, personalized health coaching for diabetes and other chronic conditions, stress management and financial planning workshops, online guided meditation and yoga, and more. Ocwen also provides a generous paid time off (PTO) program to support employees’ need to rest and recharge.
Additionally, we provide employees with a comprehensive employee assistance program that includes virtual counseling, personalized health coaching for diabetes and other chronic conditions, stress management and financial planning workshops, online guided meditation, and yoga, and more. Onity also provides a generous paid time off (PTO) program to support employees’ need to rest and recharge.
Our compensation programs, including salaries and short- and long-term incentives, are centered on our pay-for-performance philosophy, aligning the interests of employees and stakeholders by rewarding both individual and overall company performance. Ocwen’s health and welfare benefit programs strive to keep employees productive and engaged at work by serving the total well-being of employees and their families.
Our compensation programs, including salaries and short- and long-term incentives, are centered on our pay-for-performance philosophy, aligning the interests of employees and stakeholders by rewarding both individual and overall company performance. Onity’s health and welfare benefit programs strive to keep employees productive and engaged at work by serving the total well-being of employees and their families.
Our medical and family leave programs offer paid disability absences and paid parental/adoption leave, in addition to FMLA-required schedule flexibility and job security. Outside the U.S., our employee benefit programs provide comparable and market appropriate benefits focused on supporting our employees well-being and retirement needs. Training and development.
Our medical and family leave programs offer paid disability absences and paid parental/adoption leave, in addition to FMLA-required schedule flexibility and job security. Outside the U.S., our employee benefit programs provide comparable, and market appropriate benefits focused on supporting our employee’s well-being and retirement needs. Training and development.
Our enterprise sales department strives to expand our network of servicing and subservicing clients and source new flow and co-issue or subservicing agreements. We compete as a low cost provider with our demonstrated expertise to service mortgage assets across borrowers of every credit level and with our recapture ability.
Our enterprise sales department strives to expand our network of servicing and subservicing clients and source new flow and co-issue or subservicing agreements. We compete as a low cost provider with our demonstrated expertise to service mortgage assets across borrowers of every credit level and our recapture capabilities.
In addition to learning programs designed to build functional and leadership competency for all levels of leadership throughout the organization, Ocwen offers a Leadership Development Training curriculum specifically designed to prepare employees at the Supervisor level and above with the competencies to make them successful in their roles as leaders.
In addition to learning programs designed to build functional and leadership competency for all levels of leadership throughout the organization, Onity offers a Leadership Development Training curriculum specifically designed to prepare employees at the Supervisor level and above with the competencies to make them successful in their roles as leaders.
To better serve our stakeholders and communities, Ocwen created a Community Advisory Council in 2014, consisting of 15 leaders from a diverse group of national non-profit organizations, consumer advocacy groups and civil rights organizations, as a platform to collaborate and share ideas on how to help homeowners.
To better serve our stakeholders and communities, Onity created a Community Advisory Council in 2014, consisting of 15 leaders from a diverse group of national non-profit organizations, consumer advocacy groups and civil rights organizations, as a platform to collaborate and share ideas on how to help homeowners.
Ocwen is committed to providing our employees with high-quality training and learning experiences targeted to increase industry knowledge levels, improve process efficiency and promote personal growth, which in turn helps improve customer experience, reduce foreclosures and contribute to our success as an organization.
Onity is committed to providing our employees with high-quality training and learning experiences targeted to increase industry knowledge levels, improve process efficiency, and promote personal growth, which in turn helps improve customer experience, reduce foreclosures, and contribute to our success as an organization.
These include both internal and external vulnerability assessments, penetration testing, incident response table-top exercises, and breach readiness and response drills. For more detailed information regarding Ocwen’s approach to information security risk management, see “Item 1. Business - Risk Management.” Environmental Impact .
These include both internal and external vulnerability assessments, penetration testing, incident response table-top exercises, and breach readiness and response drills. For more detailed information regarding Onity’s approach to information security risk management, see “Item 1. Business - Risk Management.” Environmental Impact .
Ocwen facilitates professional development through the lifecycle of employees through functional business training, regulatory and compliance training, and skill and competency development programs. We also provide individualized one-on-one coaching to help customer-facing staff guide customers to positive experiences.
Onity facilitates professional development through the lifecycle of employees through functional business training, regulatory and compliance training, and skill and competency development programs. We also provide individualized one-on-one coaching to help customer-facing staff guide customers to positive experiences.
We compete with large and small financial services companies, including bank and non-bank entities, in the servicing, lending and MSR transaction markets. Our competitors include large and regional banks, large non-bank servicers and mortgage originators, and real estate investment trusts.
We compete with large and small financial services companies, including bank and non-bank entities, in the forward and reverse servicing, lending and MSR transaction markets. Our competitors include large and regional banks, large non-bank servicers and mortgage originators, and real estate investment trusts.
In addition, every effort is made to ensure that Ocwen’s personnel policies and practices (including those relating to compensation, benefits, transfer, retention, termination, training and self-development opportunities, as well as social and recreational programs) are administered without discrimination on the basis of any legally protected characteristic. Promoting equal opportunity and diversity.
In addition, every effort is made to ensure that Onity’s personnel policies and practices (including those relating to compensation, benefits, transfer, retention, termination, training, and self-development opportunities, as well as social and recreational programs) are administered without discrimination on the basis of any legally protected characteristic. Promoting equal opportunity.
At Ocwen, we believe homeownership is an important part of achieving financial independence, and our philosophy in this regard is “helping homeowners is what we do.” This philosophy is what guides us in our commitment to the communities we serve.
At Onity, we believe homeownership is an important part of achieving financial independence, and our philosophy in this regard is “helping homeowners is what we do.” This philosophy is what guides us in our commitment to the communities we serve.
RELATIONSHIP We service loans on behalf of Rithm under various agreements, including traditional subservicing agreements, where Rithm is the legal owner of the MSRs, and in connection with legacy MSR transfers, referred to as Rights to MSRs, where Ocwen retains legal title to the underlying MSRs but Rithm has generally assumed risks and rewards consistent with an MSR owner.
RELATIONSHIP We service loans on behalf of Rithm under various agreements, including traditional subservicing agreements, where Rithm is the legal owner of the MSRs, and in connection with legacy MSR transfers, referred to as Rights to MSRs (RMSR), where Onity retains legal title to the underlying MSRs but Rithm has generally assumed risks and rewards consistent with an MSR owner.
We continue to foster an environment in which every team member has the opportunity to grow and achieve his or her professional goals, with support and encouragement. We regularly measure employee engagement – our employees’ pride, energy and optimism that fuels their effort – and implement action plans that respond to employee feedback.
We continue to foster an environment in which every team member has the opportunity to gain experience and achieve his or her professional goals, with support and encouragement. We regularly measure employee engagement – our employees’ pride, energy and optimism that fuels their effort – and implement action plans that respond to employee feedback.
The general trend among federal, state and local legislative bodies and regulatory agencies as well as state attorneys general has been toward increasing laws, regulations, investigative proceedings and enforcement actions with regard to residential mortgage lenders and servicers, which could increase the possibility of adverse regulatory action against us.
The general trend among federal, state and local legislative bodies and regulatory agencies as well as state attorneys general has been toward increasing laws, regulations, investigative proceedings and enforcement actions with regard to residential real estate lenders and servicers, which could increase the possibility of adverse regulatory action against us.
See Note 12 — Investment in Equity Method Investee and Related Party Transactions, Note 14 — Borrowings, and Note 16 — Stockholders’ Equity to the Consolidated Financial Statements for additional information. 10 HUMAN CAPITAL RESOURCES We believe the success of our organization is highly dependent on the quality and engagement of our human capital resources.
See Note 12 — Investment in Equity Method Investee and Related Party Transactions, Note 14 — Borrowings and Note 17 — Stockholders’ Equity to the Consolidated Financial Statements for additional information. HUMAN CAPITAL RESOURCES We believe the success of our organization is highly dependent on the quality and engagement of our human capital resources.
Ocwen has adopted a “Three Lines of Defense” model to enable risks and controls to be properly managed on an on-going basis. The model delineates business line management's accountabilities 15 and responsibilities over risk management and the control environment and includes mechanisms to assess the effectiveness of executing these responsibilities.
Onity has adopted a “Three Lines of Defense” model to enable risks and controls to be properly managed on an on-going basis. The model delineates business line management's accountabilities and responsibilities over risk management and the control environment and includes mechanisms to assess the effectiveness of executing these responsibilities.
Ocwen’s benefits programs strive to keep employees productive and engaged at work by serving the total well-being of employees’ and their families’ physical, mental and financial health.
Onity’s benefits programs strive to keep employees productive and engaged at work by serving the total well-being of employees’ and their families’ physical, mental, and financial health.
The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers, including Ocwen, that file electronically with the SEC. The address of that site is www.sec.gov.
The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers, including Onity, that file electronically with the SEC. The address of that site is www.sec.gov.
We strive to develop a working environment and culture that fosters our company values: • Integrity : Do What’s Right – Always • Service Excellence : Consistently Delivering on Our Commitments • People : Develop, Grow and Value All Employees • Teamwork : Succeed Together as a Global Team • Embracing Change : Value Innovation and New Thinking We had a total of approximately 4,500 employees at December 31, 2023.
We strive to develop a working environment and culture that fosters our company values: • Integrity : Do What’s Right – Always • Service Excellence : Consistently Delivering on Our Commitments • People : Develop, Grow and Value All Employees • Teamwork : Succeed Together as a Global Team • Embracing Change : Value Innovation and New Thinking We had a total of approximately 4,300 employees at December 31, 2024.
Certain of our competitors, especially large banks, may have substantially lower costs of capital and greater financial resources, which can create competitive challenges in certain situations.
Certain of our competitors, especially large banks, may have substantially lower costs of capital and greater financial resources, which can create competitive challenges for us in certain situations.
As legal MSR owner, or in compliance with the Rights to MSRs agreements, Rithm is responsible for financing all servicing advance obligations in connection with the loans underlying the MSRs.
As legal MSR owner, or in compliance with the Rights to MSRs agreement, Rithm is responsible for financing all servicing advance obligations in connection with the loans underlying the MSRs.
Ocwen’s information security plans are developed to meet or exceed Federal Financial Institutions Examination Council standards. See Item 1 C. “Cybersecurity” below.
Onity’s information security plans are developed to meet or exceed Federal Financial Institutions Examination Council standards. See Item 1 C. “Cybersecurity” below.
In addition, PHH was recognized for servicing excellence through Freddie Mac’s Servicer Honors and Rewards Program (SHARP SM ) award in the top tier servicing group for the 2022 program year for the third consecutive year, and as subservicer for the 2023 program year.
In addition, PHH was recognized for servicing excellence through Freddie Mac’s Servicer Honors and Rewards Program (SHARP SM ) award in the top tier servicing group for the 2022 program year for the third consecutive year, and as subservicer for the 2024 program year for the second consecutive year.
The following table summarizes our latest key servicer ratings: PHH Moody’s S&P Fitch Forward Residential Prime Servicer SQ3+ Above Average RPS3+ Residential Subprime Servicer SQ3+ Above Average RPS3+ Residential Special Servicer SQ3+ Above Average RSS3 Residential Second/Subordinate Lien Servicer SQ3+ Above Average RPS3 Residential Home Equity Servicer — — RPS3 Residential Alt-A Servicer — — RPS3 Master Servicer SQ3+ Above Average RMS3 Ratings Outlook N/A Stable Stable Date of last action August 10, 2023 March 22, 2023 February 15, 2024 Reverse Residential Reverse Servicer — Above Average — Ratings Outlook — Stable — Date of initial rating — May 27, 2022 — 8 In addition to servicer ratings, each of the agencies will from time to time assign an outlook (or a ratings watch such as Moody’s review status) to the rating status of a mortgage servicer.
The following table summarizes our latest key servicer ratings: PHH Moody’s S&P Fitch Forward Residential Prime Servicer SQ3+ Above Average RPS3+ Residential Subprime Servicer SQ3+ Above Average RPS3+ Residential Special Servicer SQ3+ Above Average RSS3 Residential Second/Subordinate Lien Servicer SQ3+ Above Average RPS3 Residential Home Equity Servicer — — RPS3 Residential Alt-A Servicer — — RPS3 Master Servicer SQ3+ Above Average RMS3 Ratings Outlook N/A Stable Stable Date of last action August 10, 2023 October 11, 2024 February 15, 2024 Reverse Residential Reverse Servicer — Above Average — Ratings Outlook — Stable — Date of initial rating — October 11, 2024 — 8 In addition to servicer ratings, each of the agencies will from time to time assign an outlook (or a ratings watch such as Moody’s review status) to the rating status of a mortgage servicer.
Our General Counsel serves as our Chief Ethics Officer and works with members of our Internal Audit function to ensure every ethics complaint and communication to our Board is addressed in accordance with our company policies. Benefits.
Our General Counsel serves as our Chief Ethics Officer and collaborates with members of our Internal Audit function to ensure every ethics complaint and communication to our Board is addressed in accordance with our company policies. 11 Benefits.
On February 15, 2024, Fitch affirmed PHH's Master Servicer rating and Stable outlook, reflecting the company's effective enterprise-wide risk environment and compliance management framework, satisfactory loan servicing performance metrics, special servicing expertise, and efficient servicing technology. The ratings also consider the financial condition of PHH's parent, Ocwen Financial Corporation. RITHM CAPITAL CORP.
On February 15, 2024, Fitch affirmed PHH's Master Servicer rating and Stable outlook, reflecting the company's effective enterprise-wide risk environment and compliance management framework, satisfactory loan servicing performance metrics, special servicing expertise, and efficient servicing technology. The ratings also consider the financial condition of PHH's parent, Onity Group Inc. RITHM CAPITAL CORP.
The financial information of our segments is presented in our financial statements in Note 23 — Business Segment Reporting and discussed in the individual business operations sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The financial information for our segments is presented in our financial statements in Note 24 — Business Segment Reporting and discussed in the individual business operations sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
We typically earn subservicing and special servicing fees either as a percentage of UPB or on a per loan basis based on delinquency status. Our reverse owned servicing activities are reflected in our financial statements with the portfolio of securitized reverse loans held for investment and the related HMBS borrowings.
We typically earn subservicing and special servicing fees either as a percentage of UPB or on a per loan basis based on delinquency status. Our reverse owned servicing activities are mainly reflected in our financial statements with the gain on reverse loans held for investment and HMBS-related borrowings, net.
Further, the CFPB promulgated certain amendments to RESPA (Regulation X) that became effective on August 31, 2021 and that impose certain 7 additional COVID-19-related requirements with respect to loss mitigation, early intervention call requirements, and initiating new foreclosures. COMPETITION The financial services markets in which we operate are highly competitive and fragmented, and we expect them to remain so.
Further, the CFPB promulgated certain amendments to RESPA (Regulation X) that became effective on August 31, 2021 and that impose certain 7 additional COVID-19-related requirements with respect to loss mitigation, early intervention call requirements, and initiating new foreclosures. COMPETITION The financial services markets in which we operate are highly competitive and fragmented, and we do not expect that to change.
Ocwen’s cybersecurity controls are structured around a multi-layered defense-in-depth strategy designed to protect the integrity of the network against potential breaches. Our workforce undergoes regular training to recognize, avert, and report cybersecurity risks and incidents. In parallel, Ocwen’s third-party risk management program assesses and supervises the information security practices of our vendors.
Onity’s cybersecurity controls are structured around a multi-layered defense-in-depth strategy designed to protect the integrity of the network against potential breaches. Our workforce undergoes regular training designed to enhance their ability to recognize, avert, and report cybersecurity risks and incidents. In parallel, Onity’s third-party risk management program assesses and supervises the information security 12 practices of our vendors.
In 2023, Ocwen continued its commitment to operate through a primarily remote working model, reducing the percentage of employees commuting daily to the office. Fewer associates in the offices afforded the opportunity to reduce our office footprint in several markets.
In 2024, Onity continued its commitment to operate through a primarily remote working model, reducing the percentage of employees commuting daily to the office. Fewer associates in the offices afforded the opportunity to reduce our office footprint in several markets.
If Rithm exercises its right to terminate all or some of the agreements (for convenience by October 2024 or for cause at any time), we might need to right-size certain aspects of our servicing business as well as the related corporate support functions, and we may need to adjust our daily liquidity management due to the reduction of servicing float balances associated with the Rithm servicing agreements.
If Rithm exercises its right to terminate the subservicing agreements for convenience or for cause at any time, we might need to right-size certain aspects of our servicing business as well as the related corporate support functions, and we may need to adjust our daily liquidity management due to the reduction of servicing float balances associated with the Rithm agreements.
Ocwen continues to find meaningful ways to give back to the communities where we live and work.
Onity continues to find meaningful ways to give back to the communities where we live and work.
Responsible information security management. Ocwen maintains a comprehensive information security program designed to safeguard the confidentiality, integrity and availability of its data and information systems. Ocwen’s Board of Directors is consistently updated on information security risks, which are managed through a strategic blend of policies, advanced tools and technologies, and continuous staff awareness initiatives.
Responsible information security management. Onity maintains a comprehensive information security program designed to safeguard the confidentiality, integrity and availability of its data and information systems. Onity’s Board of Directors is periodically updated on information security risks, which are managed through a strategic blend of policies, advanced tools and technologies, and continuous staff awareness initiatives.
Ocwen strives to foster an environment in which all stakeholders can participate and contribute to the success of the organization’s enterprise, taking full advantage of the collective sum of individual differences, life experiences, inventiveness, self-expression and unique capabilities, knowledge and talent.
Onity strives to foster an environment in which people of all backgrounds can participate and contribute to the success of the organization’s enterprise, taking full advantage of the collective sum of individual differences, life experiences, inventiveness, self-expression and unique capabilities, knowledge and talent.
The costs incurred by servicers in meeting advancing obligations consist principally of the interest expense incurred in financing the advance receivables and the costs of arranging such financing. Under subservicing agreements, Ocwen is promptly reimbursed by the owners of the MSRs who generally finance the advances and incur the associated financing cost.
Advances are contractually non-interest bearing. The costs incurred by servicers in meeting advancing obligations consist principally of the interest expense incurred in financing the advance receivables and the costs of arranging such financing. Under subservicing agreements, Onity is promptly reimbursed by the owners of the MSRs who generally finance the advances and incur the associated financing cost.
Market conditions, including interest rates and future economic projections, could impact investor demand to hold MSRs, which may result in our loss of additional subservicing relationships, or significantly decrease the number of loans under such relationships.
Market conditions, including interest rates and future economic projections, could impact investor demand to hold MSRs, which may result in our loss of subservicing relationships (including MAV, MSR capital partners and others), or significantly decrease the number of loans under such relationships.
PHH also achieved HUD’s Tier 1 servicer ranking for the 2023 program year, for the third consecutive year. In our Originations business, we face intense competition in most areas, including rates, margin, fees, customer service and name recognition.
PHH also achieved HUD’s Tier 1 servicer ranking for the 2024 program year, for the fourth consecutive year. In our Originations business, we face intense competition in most areas, including rates, margins, fees, customer service and name recognition.
We mitigate this risk by monitoring purchase levels from our third-party originators (to reduce concentration risk), by performing regular quality control reviews of the third-party originators’ underwriting standards and by regular reviews of the creditworthiness of third-party originators. Concentration Risk Our Servicing segment has exposure to concentration risk and client retention risk.
We mitigate this risk by monitoring purchase levels from our third-party originators (to reduce concentration risk), by performing regular quality control reviews of the third-party originators’ underwriting standards and by regular reviews of the creditworthiness of third-party originators.
The mortgaged properties securing the residential loans that we service are geographically dispersed throughout all 50 states, the District of Columbia and two U.S. territories. The five largest concentrations of properties are located in California, Texas, Florida, New York and New Jersey, comprising 40% of the number of loans serviced at December 31, 2023.
Geographic concentration - The mortgaged properties securing the residential loans that we service are geographically dispersed throughout all 50 states, the District of Columbia and two U.S. territories. The five largest concentrations of properties are located in California, Texas, Florida, New Jersey and New York, comprising 39% of the number of loans serviced underlying our MSRs at December 31, 2024.
PHH received Fannie Mae’s Servicer Total Achievement and Rewards (STAR TM ) performer recognition for the 2023 program year for the third consecutive year.
PHH received Fannie Mae’s Servicer Total Achievement and Rewards (STAR TM ) performer recognition for the 2024 program year for the fourth consecutive year.
Approximately 1,100 of our employees were employed in the U.S. and USVI, and approximately 3,400 of our employees were employed in our operations in India and the Philippines.
Approximately 1,000 of our employees were employed in the U.S. and USVI, and approximately 3,300 of our employees were employed in our operations in India and the Philippines.
ITEM 1. BUSINESS When we use the terms “Ocwen,” “OCN,” “we,” “us” and “our,” we are referring to Ocwen Financial Corporation and its consolidated subsidiaries. OVERVIEW We are a financial services company that services and originates both forward and reverse mortgage loans, through our primary brands, PHH Mortgage and Liberty Reverse Mortgage.
ITEM 1. BUSINESS When we use the terms “Onity,” “ONIT,” “we,” “us” and “our,” we are referring to Onity Group Inc. and its consolidated subsidiaries. OVERVIEW We are a financial services company that services and originates both forward and reverse mortgage loans, through our primary brands, PHH Mortgage and Liberty Reverse Mortgage.
California has the largest concentration with 15% of the total loans serviced. 17 AVAILABLE INFORMATION Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are made available free of charge through our website (www.ocwen.com) as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
AVAILABLE INFORMATION Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are made available free of charge through our website (www.onitygroup.com) as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
We believe our competitive strengths flow from our existing client relationships and from our focus on providing strong customer service, our brand recognition for our Liberty Reverse Mortgage business, our long-standing and well established offshore operations and use of technology.
We believe our competitive strengths flow from our existing client relationships and from our focus on providing strong customer service, our brand recognition, our long-standing and well-established APAC operations and use of technology.
Some of our competitors, including the larger banks, have substantially lower costs of capital and strong retail presence, which can create competitive challenges in certain situations. We will continue to face increased competitive pressures in the future as the refinance opportunities remain limited with elevated interest rates.
Some of our competitors, including the larger banks, have substantially lower costs of capital and strong retail presence, which can create competitive challenges in certain situations. For example, if interest rates remain elevated, we expect to face continued competitive pressures as the refinance opportunities remain limited.
To achieve our near-term financial objectives, we believe we need to execute on the key business initiatives discussed under “Item 7. Management Discussion and Analysis-Overview-Business Initiatives”.
To achieve our near-term financial objectives, we believe we need to execute on our business strategy discussed under “Item 7. Management Discussion and Analysis-Overview-Business Strategy”.
The ratings also consider the financial condition of PHH’s parent, Ocwen Financial Corporation. The affirmed ratings and Stable outlook on PHH’s residential servicer ratings are reflective of the company’s continued business growth, diversified sourcing strategies and overall loan servicing performance.
The affirmed ratings and Stable outlook on PHH’s residential servicer ratings are reflective of the company’s continued business growth, diversified sourcing strategies and overall loan servicing performance.
We believe that our competitive strengths flow from our ability to control and drive down delinquencies using proprietary processes, our superior operating performance, our lower cost to service, our deep know-how as a long-time operator of servicing loans and our long-standing and well established offshore operations.
We believe that our competitive strengths flow from our ability to control and drive down delinquencies using proprietary processes, our superior operating performance, our lower cost to service, our deep know-how as a long-time operator of servicing loans and our long-standing and well-established Asia-Pacific (APAC) operations. Our operational expertise has been recognized by the Agencies.
We are focused on increasing recapture rates on our existing servicing portfolio to grow this business. We also originate retail reverse loans to non-Ocwen servicing customers. Correspondent Lending . Our correspondent lending operation purchases forward and reverse mortgage loans that have been originated by a network of approved third-party lenders, under our lending and risk management programs.
We also originate retail reverse loans to non-Onity servicing customers. Correspondent Lending . Our correspondent lending operation purchases forward and reverse mortgage loans that have been originated by a network of approved third-party lenders, under our lending and risk management programs.
We originate forward and reverse mortgage loans directly with borrowers through our retail lending business. Our forward lending business benefits from our servicing portfolio by offering rate and term refinance options to qualified borrowers seeking to lower their mortgage payments and cash-out refinance options. Depending on borrower eligibility, we refinance eligible customers into conforming or government-insured products.
Our forward lending business benefits from our servicing portfolio by offering rate and term refinance options to qualified borrowers seeking to lower their mortgage payments and cash-out refinance options. Depending on borrower eligibility, we refinance eligible customers into conforming or government-insured products. We are focused on increasing recapture rates on our existing servicing portfolio to grow this business.
Our total rewards (compensation and benefits) programs are developed to attract, motivate and retain employees. They demonstrate the value the employee provides to the organization, are designed to be competitive to the marketplace, and connect directly to key business strategies.
Strategic talent reviews to identify, develop and promote top talent are part of our performance management processes. Rewards . Our total rewards (compensation and benefits) programs are developed to attract, motivate, and retain employees. They demonstrate the value the employee provides to the organization, are designed to be competitive to the marketplace, and connect directly to key business strategies.
We organize a variety of community outreach programs and events with local and national organizations around the country to assist homeowners, particularly in communities of color. Our outreach events began during the 2008 mortgage crisis and have continued since then.
We organize a variety of community outreach programs and events with local and national organizations around the country to assist homeowners, particularly in communities of color. Our outreach events began during the 2008 mortgage crisis and have continued since then. In 2024, we hosted 42 borrower outreach events across 32 states in partnership with nine HUD certified housing counseling agencies.
Ocwen provides grants and sponsorship funding to local and national nonprofit organizations each year, in support of the work they do to help distressed communities and homeowners. Over the past four years, Ocwen has contributed over $6 million to these organizations, and nearly $28 million since 2012.
Onity provides grants and sponsorship funding to local and national nonprofit organizations each year, in support of the work they do to help distressed communities and homeowners. Since the COVID pandemic, Onity has contributed nearly $7 million to these organizations, and more than $28 million since 2012. Charitable activity.
Our net return includes servicing revenue net of servicing costs, less MSR portfolio runoff, and less MSR and advance funding cost. Our net return is impacted by fair value changes of our owned MSRs, net of hedging, that vary based on market conditions. Our subservicing portfolio generates a relatively stable source of revenue to enhance our returns.
Our net return is impacted by fair value changes of our owned MSRs, net of hedging, that vary based on market conditions. Our subservicing portfolio generates a relatively stable source of revenue that enhances our returns.
In order to diversify our sources of servicing and reduce our reliance on others, we have been developing our origination of MSRs through different channels, including our portfolio recapture channel, retail, wholesale and correspondent lending.
In order to diversify our sources of servicing and reduce our reliance on others, we have been developing our origination of MSRs through different channels, including our portfolio recapture channel, retail, wholesale and correspondent lending. 4 The chart below summarizes our current business model: We report our activities in three segments, Servicing, Originations and Corporate.
The charitable events at our office locations around the globe included distributing meals and supporting local food banks, helping economically disadvantaged children and at-risk youth, helping schools for hearing-impaired children, holding toy drives and back-to-school supply drives, helping the homeless, supporting victims of crimes, providing financial assistance to families impacted by cancer, making donations to first responders, helping communities impacted by the pandemic with donations and medical equipment, hosting blood drives through the American Red Cross and making donations to the Mortgage Bankers Association’s (MBA) Opens Doors Foundation to help families with a critically ill or injured child.
The charitable events at our office locations around the globe in 2024 included raising funds for autism and cancer research, supporting local food banks through food drives and volunteering, helping economically disadvantaged children and the elderly, donating supplies to schools for vision-impaired children, holding toy drives and back-to-school supply drives, making donations to first responders and military veterans, hosting blood drives through the American Red Cross and OneBlood and making donations to the Mortgage Bankers Association’s (MBA) Opens Doors Foundation to help families with a critically ill or injured child.
Ocwen is committed to providing equal opportunity in all areas of employment, compensation, training and promotion. Company policies prohibit discrimination of any form in all of the locations in which Ocwen operates.
Onity remains committed to fostering a non-discriminatory equal opportunity environment where equal opportunity in all areas of employment selection, compensation, training, and promotion are provided. Company policies prohibit discrimination of any form in all of the locations in which Onity operates.
We originate forward mortgage loans directly with customers (consumer direct channel) as well as through correspondent lending arrangements. We originate reverse mortgage loans in all three channels, through our correspondent lending arrangements, broker relationships (wholesale) and retail channels.
We originate forward mortgage loans directly with customers (consumer direct channel) as well as through correspondent lending arrangements. We originate reverse mortgage loans in three channels, through our correspondent lending arrangements, broker relationships (wholesale) and retail channels. Per-loan gain on sale margins vary by channel, with correspondent typically being the lowest margin and retail the highest, commensurate with fulfillment costs.
The Oaktree relationship included the launch of an MSR investment vehicle (referred to as MAV or MAV Canopy) to scale up our servicing business in a capital efficient manner and investments in our debt and equity.
OAKTREE AND MAV RELATIONSHIP We established a strategic alliance with Oaktree in 2020 that we amended in November 2024. The Oaktree relationship included the launch of an MSR investment vehicle (referred to as MAV as the operating company or MAV Canopy as MAV’s parent entity) to scale up our servicing business in a capital efficient manner.
In addition, we perform a comprehensive review of the loan files where we receive investor requests for repurchase and indemnification to establish the validity of the claims and determine our obligation. 16 In limited circumstances, we may retain the full risk of loss on loans sold to the extent that the liquidation value of the asset collateralizing the loan is insufficient to cover the loan itself and associated servicing expenses.
In limited circumstances, we may retain the full risk of loss on loans sold to the extent that the liquidation value of the asset collateralizing the loan is insufficient to cover the loan itself and associated servicing expenses.
Pursuant to an agreement with Oaktree executed on February 2021, we issued to Oaktree in a private placement $285.0 million of Ocwen senior secured notes in two separate tranches.
Financial Interests In 2021, we issued to Oaktree in a private placement $285.0 million of Onity senior secured notes due 2027 in two separate tranches.
While subservicing fees are relatively lower, we do not incur any significant capital utilization or funding of advances and are not exposed to fair value volatility. In 2021, we expanded our servicing and subservicing portfolio with the launch of MAV, our MSR joint venture with Oaktree.
While subservicing fees are relatively lower than servicing fees, we do not incur any significant capital utilization or funding of advances and are not exposed to MSR fair value volatility. We target a balanced mix of our portfolio between servicing and subservicing based on capital allocation and returns.
We are committed to and regularly evaluate our practices to ensure pay is fair and equitable, and competitive to the marketplace. Environmental, Social and Corporate Governance (ESG) Practices and Corporate Sustainability Our Board of Directors and our management are committed to ensuring Ocwen has responsible practices to address the needs of its customers, employees and the communities it serves.
Environmental, Social and Corporate Governance (ESG) Practices and Corporate Sustainability Our Board of Directors and our management are committed to ensuring Onity has responsible practices to address the needs of its customers, employees, and the communities it serves. Our approach is represented by the following policies and programs: Policy on non-discrimination.
On February 13, 2024, Fitch affirmed PHH’s residential servicer ratings and downgraded its outlook from Positive to Stable for Prime and Subprime products. The rating outlook remains Stable for the other products. The rating actions reflect PHH’s comprehensive enterprise-wide internal control environment, extensive industry experience and highly-developed global loan servicing platform, competitive loan servicing performance metrics, and effective technology platform.
The rating outlook remains Stable for the other products. The rating actions reflect PHH’s comprehensive enterprise-wide internal control environment, extensive industry experience and highly-developed global loan servicing platform, competitive loan servicing performance metrics, and effective technology platform. The ratings also consider the financial condition of PHH’s parent, Onity Group Inc..
We monitor MSR asset valuations and communicate closely with our lenders for this asset class to ensure adequate liquidity is maintained for mark-to-market valuation changes within MSR financing facilities. We manage this risk in multiple ways, including but not limited to engaging in MSR hedging activities, and maintaining liquidity earmarks at levels to support potential changes in MSR fair values.
We manage this risk in multiple ways, including but not limited to engaging in MSR hedging activities, and maintaining liquidity earmarks at levels to support potential changes in MSR fair values.
Our Originations business also includes the sourcing and acquisition of new subservicing clients. In 2023, our Originations business generated total volume additions of $50.4 billion in UPB (refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview for further details). Retail Lending .
In 2024, our Originations business generated total volume additions of $85.6 billion in UPB (refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview for further details). Retail Lending . We originate forward and reverse mortgage loans directly with borrowers through our retail lending business.
Our servicing clients include some of the largest financial institutions in the U.S., including the GSEs, Ginnie Mae and non-Agency residential mortgage-backed securities (RMBS) trusts, and other large MSR investors, including Rithm, MAV and MAM (RMS). As of December 31, 2023, our servicing and subservicing portfolio consisted of approximately 1.3 million loans with a UPB of $288.4 billion.
Our servicing clients include some of the largest financial institutions in the U.S., including the GSEs, Ginnie Mae and non-Agency residential mortgage-backed securities (RMBS) trusts, and other large MSR investors, including Rithm, MAV and MAM, an affiliate of Waterfall Asset Management, LLC (“Waterfall”).
Because of the relative size of the servicing agreements with Rithm, if Rithm exercises its right to terminate all or some of the agreements (for convenience by October 2024 or for cause at any time), we may need to right-size certain aspects of our servicing business as well as the related corporate support functions, and we may need to adjust our daily liquidity management due to the reduction of servicing float balances associated with the Rithm servicing agreements. 9 OAKTREE AND MAV RELATIONSHIP We established a strategic alliance with Oaktree in 2020 to support refinancing our corporate debt and help advance our growth initiatives.
Because of the relative size of the servicing agreements with Rithm, if Rithm exercises its right to terminate the subservicing agreements, we might need to right-size certain aspects of our servicing business as well as the related corporate support functions, and we may need to adjust our daily liquidity management due to the reduction of servicing float balances associated with the Rithm servicing agreements.
These amounts include principal and interest payments, property taxes and insurance premiums and amounts to maintain, repair and market real estate properties on behalf of our servicing clients.
These amounts include principal and interest payments, property taxes and insurance premiums and amounts to maintain, repair and market real estate properties on behalf of our servicing clients. Most of our advances have the highest reimbursement priority, entitling us to repayment of the 5 advances from the loan or property liquidation proceeds before most other claims on these proceeds.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur business is substantially dependent on our ability to process and monitor a large number of transactions, many of which are complex, across various parts of our business. These transactions often must adhere to the terms of a complex set of legal and regulatory standards, as well as the terms of our servicing and other agreements.
Biggest changeIf our systems and infrastructure fail to operate effectively, such failures could damage our business and reputation, harm our relationships with key stakeholders and lead to regulatory sanctions or penalties. 31 Our business is substantially dependent on our ability to process and monitor a large number of transactions, many of which are complex, across various parts of our business.
A significant portion of our business is in the states of California, Texas, Florida, New York and New Jersey, and our business may be significantly harmed by a slowdown in the economy or the occurrence of a natural disaster in those states.
A significant portion of our business is in the states of California, Texas, Florida, New Jersey and New York , and our business may be significantly harmed by a slowdown in the economy or the occurrence of a natural disaster in those states.
A significant portion of the mortgage loans that we service and originate are secured by properties in California, Texas, Florida, New York and New Jersey. Any adverse economic conditions in these markets, including a downturn in real estate values, could increase loan delinquencies.
A significant portion of the mortgage loans that we service and originate are secured by properties in California, Texas, Florida, New Jersey and New York. Any adverse economic conditions in these markets, including a downturn in real estate values, could increase loan delinquencies.
We may find that we overpaid for the acquired businesses or assets or that the economic conditions underlying our acquisition decision have changed. It may also take several quarters or longer for us to fully integrate newly acquired business and assets into our business, during which period our results of operations and financial condition may be negatively affected.
We may find that we overpaid for the acquired businesses or assets or that the economic conditions underlying our acquisition decision have changed. It may also take several quarters or longer for us to fully integrate newly acquired businesses and assets into our business, during which period our results of operations and financial condition may be negatively affected.
(Black Knight) • Failure by us or our vendors to adequately update technology systems and processes, interruption or delay in our or our vendors’ operations due to cybersecurity breaches or system failures, and resulting economic loss or regulatory penalties • Adverse changes in political or economic stability or government policies in the U.S., India, the Philippines or the USVI • Disruption in our operations and reduced profitability in our servicing operations as a result of severe weather or natural disaster events • Material increase in loan put-backs and related liabilities for breaches of representations and warranties regarding sold loans or MSRs • Heightened reputational risk due to media and regulatory scrutiny of companies that originate and securitize reverse mortgages • Incurrence of losses by our captive reinsurance entity from catastrophic events, particularly in areas where a significant portion of the insured properties are located • Incurrence of litigation costs and related losses if the validity of a foreclosure action is challenged by a borrower or if a court overturns a foreclosure • Failure to maintain minimum servicer ratings and impairment of our ability to sell or fund servicing advances, access financing, consummate future servicing transactions, and maintain our status as an approved servicer by the GSEs • Volatility of our earnings due to MSR valuation changes, financial instrument valuation changes and other factors • Loss of the confidence of investors and counterparties if we fail to reasonably estimate the fair value of our assets and liabilities or our internal controls over financial reporting are found to be inadequate Tax Risks • Changes in tax law and interpretations and tax challenges • Failure to retain or collect the tax benefits provided by the USVI, or certain past income becoming subject to increased U.S. federal income taxation • Inability to utilize our net operating losses carryforwards and other deferred tax assets due to “ownership change” as defined in Section 382 of the Internal Revenue Code or other factors Risks Relating to Ownership of Our Common Stock • Substantial volatility in our common stock price • The vote by large shareholders of their shares to influence matters requiring shareholder approval in a way that management does not believe represents the best interests of all shareholders • The issuance of additional securities authorized by the board of directors that causes dilution and depresses the price of our securities • Future offerings of debt securities that are senior to our common stock in liquidation, or equity securities that are senior to our common stock in respect of liquidation and distributions • Certain provisions in our organizational documents and regulatory restrictions may make takeovers more difficult, and significant investments in our common stock may be restricted Legal and Regulatory Risks The business in which we engage is complex and heavily regulated.
(Black Knight) • Failure by us or our vendors to adequately update technology systems and processes, interruption or delay in our or our vendors’ operations due to cybersecurity breaches or system failures, and resulting economic loss or regulatory penalties • Adverse changes in political or economic stability or government policies in the U.S., India, the Philippines or the USVI • Disruption in our operations and reduced profitability in our servicing operations as a result of severe weather or natural disaster events • Material increase in loan put-backs and related liabilities for breaches of representations and warranties regarding sold loans or MSRs • Heightened reputational risk due to media and regulatory scrutiny of companies that originate and securitize reverse mortgages 17 • Incurrence of losses by our captive reinsurance entity from catastrophic events, particularly in areas where a significant portion of the insured properties are located • Incurrence of litigation costs and related losses if the validity of a foreclosure action is challenged by a borrower or if a court overturns a foreclosure • Failure to maintain minimum servicer ratings and impairment of our ability to sell or fund servicing advances, access financing, consummate future servicing transactions, and maintain our status as an approved servicer by the GSEs • Volatility of our earnings due to MSR valuation changes, financial instrument valuation changes and other factors • Loss of the confidence of investors and counterparties if we fail to reasonably estimate the fair value of our assets and liabilities or our internal controls over financial reporting are found to be inadequate Tax Risks • Changes in tax law and interpretations and tax challenges • Failure to retain or collect the tax benefits provided by the USVI, or certain past income becoming subject to increased U.S. federal income taxation • Inability to utilize our net operating losses carryforwards and other deferred tax assets due to “ownership change” as defined in Section 382 of the Internal Revenue Code or other factors Risks Relating to Ownership of Our Common Stock • Substantial volatility in our common stock price • The vote by large shareholders of their shares to influence matters requiring shareholder approval in a way that management does not believe represents the best interests of all shareholders • The issuance of additional securities authorized by the Board of Directors that causes dilution and depresses the price of our securities • Future offerings of debt securities that are senior to our common stock in liquidation, or equity securities that are senior to our common stock in respect of liquidation and distributions • Certain provisions in our organizational documents and regulatory restrictions may make takeovers more difficult, and significant investments in our common stock may be restricted Legal and Regulatory Risks The business in which we engage is complex and heavily regulated.
These laws and regulations apply to all facets of our business, including, but not limited to, licensing, loan originations, consumer disclosures, default servicing and collections, foreclosure, filing of claims, registration of vacant or foreclosed properties, handling of escrow accounts, payment application, interest rate adjustments, assessment of fees, loss mitigation, use of credit reports, handling of unclaimed property, safeguarding of non-public personally identifiable information about our customers, and the ability of our employees to work remotely.
These laws and regulations apply to all facets of our business, including, but not limited to, licensing, loan originations, consumer disclosures, default servicing and collections, foreclosure, filing of claims, registration of vacant or foreclosed properties, 18 handling of escrow accounts, payment application, interest rate adjustments, assessment of fees, loss mitigation, use of credit reports, handling of unclaimed property, safeguarding of non-public personally identifiable information about our customers, and the ability of our employees to work remotely.
While the holders of these termination rights have not exercised them to date, they have not waived the right to do so, and we could, in the future, be subject to terminations either as a result of servicer ratings downgrades or future adverse actions by ratings agencies, which could have an adverse effect on our business, financing activities, financial condition and results of operations.
While the holders of these termination rights have not exercised them to date, they have not waived the right to do so, and we could, in the future, be subject to terminations either as a result of servicer ratings downgrades or future adverse actions by ratings agencies, which 40 could have an adverse effect on our business, financing activities, financial condition and results of operations.
If we fail to comply with our debt agreements and are unable to avoid, remedy or secure a waiver of any resulting default, we may be subject to adverse action by our lenders, including termination of further funding, acceleration of outstanding obligations, enforcement of liens against the assets securing or otherwise supporting our obligations and other legal remedies.
If we fail to comply with our debt agreements and are unable to avoid, remedy or secure a waiver of any resulting default, we may be subject to adverse action by our lenders, including termination of further funding, 25 acceleration of outstanding obligations, enforcement of liens against the assets securing or otherwise supporting our obligations and other legal remedies.
For example, declining home prices and increasing loan-to-value ratios may preclude many borrowers from refinancing their existing loans or obtaining new loans. Any of the foregoing could adversely affect our business, liquidity, financial condition and results of operations. 31 A significant increase in prepayment speeds could adversely affect our financial results. Prepayment speed is a significant driver of our business.
For example, declining home prices and increasing loan-to-value ratios may preclude many borrowers from refinancing their existing loans or obtaining new loans. Any of the foregoing could adversely affect our business, liquidity, financial condition and results of operations. A significant increase in prepayment speeds could adversely affect our financial results. Prepayment speed is a significant driver of our business.
Failure to satisfy any of the requirements to which our licensed entities are subject could result in a 21 variety of regulatory actions ranging from a fine, a directive requiring a certain step to be taken, a suspension or, ultimately, a revocation of a license, any of which could have a material adverse impact on our results of operations and financial condition.
Failure to satisfy any of the requirements to which our licensed entities are subject could result in a variety of regulatory actions ranging from a fine, a directive requiring a certain step to be taken, a suspension or, ultimately, a revocation of a license, any of which could have a material adverse impact on our results of operations and financial condition.
Reputational issues may arise from the following, among other factors: • negative news about Ocwen or the mortgage industry generally; • allegations of non-compliance with legal and regulatory requirements; • ethical issues, including alleged deceptive or unfair servicing or lending practices; • our practices relating to collections, foreclosures, property preservation, modifications, interest rate adjustments, loans impacted by natural disasters, escrow and insurance; • consumer privacy concerns; • consumer financial fraud; • data security issues related to our customers or employees; • cybersecurity issues and cyber incidents, whether actual, threatened, or perceived; • customer service or consumer complaints; • legal, reputational, credit, liquidity and market risks inherent in our businesses; • a downgrade of or negative watch warning on any of our servicer or credit ratings; and • alleged or perceived conflicts of interest.
Reputational issues may arise from the following, among other factors: • negative news about Onity or the mortgage industry generally; • allegations of non-compliance with legal and regulatory requirements; • ethical issues, including alleged deceptive or unfair servicing or lending practices; • our practices relating to collections, foreclosures, property preservation, modifications, interest rate adjustments, loans impacted by natural disasters, escrow and insurance; • consumer privacy concerns; • consumer financial fraud; • data security issues related to our customers or employees; • cybersecurity issues and cyber incidents, whether actual, threatened, or perceived; • customer service or consumer complaints; • legal, reputational, credit, liquidity and market risks inherent in our businesses; • a downgrade of or negative watch warning on any of our servicer or credit ratings; and • alleged or perceived conflicts of interest.
The recovery timeline for inactive repurchased loans depends on various factors, 41 including foreclosure status at the time of repurchase, state-level foreclosure timelines, and the post-foreclosure REO liquidation timeline. The timing and amount of our obligations with respect to MCA repurchases are uncertain as repurchase is dependent largely on circumstances outside of our control.
The recovery timeline for inactive repurchased loans depends on various factors, including foreclosure status at the time of repurchase, state-level foreclosure timelines, and the post-foreclosure REO liquidation timeline. The timing and amount of our obligations with respect to MCA repurchases are uncertain as repurchase is dependent largely on circumstances outside of our control.
See the next risk factor below for additional detail concerning these regulatory settlements. From time to time, we also receive 19 requests (including requests in the form of subpoenas and civil investigative demands) from federal, state and local agencies for records, documents and information relating to our servicing and lending activities.
See the next risk factor below for additional detail concerning these regulatory settlements. From time to time, we also receive requests (including requests in the form of subpoenas and civil investigative demands) from federal, state and local agencies for records, documents and information relating to our servicing and lending activities.
Further, if the MSRs sold by MAV include MSRs previously sold by PHH, we may recognize additional 33 losses on the associated MSR and Pledged MSR liability reported at fair value on our consolidated balance sheets (see Note 12 — Investment in Equity Method Investee and Related Party Transactions).
Further, if the MSRs sold by MAV include MSRs previously sold by PHH, we may recognize additional losses on the associated MSR and Pledged MSR liability reported at fair value on our consolidated balance sheets (see Note 12 — Investment in Equity Method Investee and Related Party Transactions).
NOL carryforwards, Section 163(j) disallowed interest carryforwards and certain built-in losses or deductions may be subject to annual limitations under Internal Revenue Code Section 382 (Section 382) (or comparable provisions of foreign or state law) in the event that certain changes in ownership were to occur as measured under Section 382.
NOL carryforwards, Section 163(j) disallowed interest expense carryforwards and certain built-in losses or deductions may be subject to annual limitations under Internal Revenue Code Section 382 (Section 382) (or comparable provisions of foreign or state law) in the event that certain changes in ownership were to occur as measured under Section 382.
To the extent borrowers living in impacted areas experience a financial hardship and become unable to meet their mortgage obligations or choose to abandon severely damaged property, our servicing operations will become more costly due to the increased expense of servicing 39 delinquent mortgages and managing REO property.
To the extent borrowers living in impacted areas experience a financial hardship and become unable to meet their mortgage obligations or choose to abandon severely damaged property, our servicing operations will become more costly due to the increased expense of servicing delinquent mortgages and managing REO property.
We may not be able to achieve the synergies we anticipate from acquired businesses, and we may not be able to grow acquired businesses in the manner we anticipate. In fact, the businesses we acquire could decrease in size, even if the integration process is successful. Further, prices at which acquisitions can be made fluctuate with market conditions.
We may not be able to achieve the synergies we anticipate from acquired businesses, and we may not be able to grow acquired businesses in the manner we anticipate. In fact, the businesses we acquire could decrease in size, even if the integration process is successful. 38 Further, prices at which acquisitions can be made fluctuate with market conditions.
We have in the past and may in the future experience delays in closing our acquisitions, or certain aspects of them. For example, we and the applicable seller are often required to obtain 40 certain regulatory and contractual consents as a prerequisite to closing, such as the consents of GSEs, the FHFA, RMBS trustees or regulators.
We have in the past and may in the future experience delays in closing our acquisitions, or certain aspects of them. For example, we and the applicable seller are often required to obtain certain regulatory and contractual consents as a prerequisite to closing, such as the consents of GSEs, the FHFA, RMBS trustees or regulators.
All of the above factors could have a material adverse effect on our business, reputation, liquidity, financial condition and results of operations. Our HMBS repurchase obligations may reduce our liquidity, and if we are unable to comply with such obligations, it could materially adversely affect our business, financial condition, and results of operations.
All of the above factors could have a material adverse effect on our business, reputation, liquidity, financial condition and results of operations. 39 Our HMBS repurchase obligations may reduce our liquidity, and if we are unable to comply with such obligations, it could materially adversely affect our business, financial condition, and results of operations.
If any of the following risks actually occur, our business, financial condition, liquidity and results of operations could be materially and adversely affected. If this were to happen, the value of our common stock could significantly decline, and you could lose some or all of your investment.
If any of the following risks actually occur, our business, financial condition, liquidity and results of operations could be materially and adversely affected. If this were to happen, the value of our 16 common stock could significantly decline, and you could lose some or all of your investment.
As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing 35 activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services.
As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services.
An unfavorable outcome to a tax audit could result in higher tax expense. Any “ownership change” as defined in Section 382 of the Internal Revenue Code could substantially limit our ability to utilize our net operating losses carryforwards and other deferred tax assets.
An unfavorable outcome to a tax audit could result in higher tax expense. 41 Any “ownership change” as defined in Section 382 of the Internal Revenue Code could substantially limit our ability to utilize our net operating losses carryforwards and other deferred tax assets.
HMDA requires financial institutions to report certain mortgage data in an effort to provide the regulators and the public with information that will help show whether financial institutions are serving the housing credit needs of the neighborhoods and communities in which they are located.
HMDA requires financial institutions to report certain mortgage data in an effort to provide the regulators and the public with information that will help show whether financial institutions are serving the housing credit needs of the neighborhoods 22 and communities in which they are located.
These regulatory requirements may discourage potential acquisition proposals or investments, may delay or prevent a change in control of us and may impact demand for, and the trading price of, our common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
These regulatory requirements may discourage potential acquisition proposals or investments, may delay or prevent a change in control of us and may impact demand for, and the trading price of, our common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 43
In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to provide our products or services, loss of sensitive data and income, reputational harm, and diversion of funds.
In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to provide our products or services, loss of sensitive data and income, reputational harm, and diversion of 34 funds.
We are exposed to foreign currency exchange rate risk in connection with our investment in non-U.S. dollar currency operations to the extent that our foreign exchange positions remain unhedged. Our operations in the Philippines and India expose us to foreign currency exchange rate risk.
In addition, we are exposed to foreign currency exchange rate risk in connection with our investment in non-U.S. dollar currency operations to the extent that our foreign exchange positions remain unhedged. Our operations in the Philippines and India expose us to foreign currency exchange rate risk.
We face intense competition for qualified individuals from numerous financial services and other companies, some of which have greater resources, better recent financial performance, fewer regulatory challenges and better reputations than we do.
We face intense competition for qualified individuals from 36 numerous financial services and other companies, some of which have greater resources, better recent financial performance, fewer regulatory challenges and better reputations than we do.
To the extent that FHFA, the GSEs, HUD, Ginnie Mae or other authoritative body implement reforms that materially affect the market not only for conventional and/or government-insured loans but also the non-qualifying loan markets, such reforms could have a material adverse effect on the creation of new MSRs, the economics or performance of any MSRs that we acquire, servicing fees that we can charge and costs that we incur to comply with new servicing requirements.
To the extent that FHFA, the GSEs, HUD, Ginnie Mae or other authoritative body implements reforms that materially affect the market not only for conventional and/or government-insured loans but also for non-qualifying loan markets, such reforms could have a material adverse effect on the creation of new MSRs, the economics or performance of any MSRs that we acquire, servicing fees that we can charge and costs that we incur to comply with new servicing requirements.
Various states have implemented regulations which specifically restrict the ability to perform certain servicing and originations functions offshore and, from time to time, various state regulators have scrutinized the operations of our foreign subsidiaries.
Various states have implemented regulations which specifically 23 restrict the ability to perform certain servicing and originations functions offshore and, from time to time, various state regulators have scrutinized the operations of our foreign subsidiaries.
Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance.
Certain states also impose stricter requirements for processing certain personal data, including sensitive data, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance.
Unexpected changes in market rates or secondary liquidity may have a materially adverse impact on the cash flows or operating performance of Ocwen. The expected hedge coverage profile may not correlate to the asset as desired, resulting in poorer performance than had we not hedged at all. In addition, hedging strategies involve transaction and other costs.
Unexpected changes in market rates or secondary liquidity may have a materially adverse impact on the cash flows or operating performance of Onity. The expected hedge coverage profile may not correlate to the asset as desired, resulting in poorer performance than had we not hedged at all. In addition, hedging strategies involve transaction and other costs.
As an HMBS issuer, we assume the obligation to purchase loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of the maximum claim amount (MCA repurchases). Active repurchased loans are assigned to HUD and payment is typically received within 75 days of repurchase.
As an HMBS issuer, we assume the obligation to purchase loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of the maximum claim amount (MCA repurchases). Active repurchased loans are assigned to HUD and payment is typically received within 60 days of repurchase.
Ocwen continues to monitor the ownership in its stock to evaluate whether any additional ownership changes have occurred that would further limit our ability to utilize certain tax attributes. As such, our analysis regarding the amount of tax attributes that may be available to offset taxable income in the future without restrictions imposed by Section 382 may continue to evolve.
Onity continues to monitor the ownership in its stock to evaluate whether any additional ownership changes have occurred that would further limit our ability to utilize certain tax attributes. As such, our analysis regarding the amount of tax attributes that may be available to offset taxable income in the future without restrictions imposed by Section 382 may continue to evolve.
Similarly, failure by Ocwen to meet operational requirements, including service levels, critical reporting and other obligations, could also result in termination or transfer for cause. In addition, if there is a change of control to which Rithm did not consent, Rithm could terminate for cause and direct the transfer of servicing away from Ocwen.
Similarly, failure by Onity to meet operational requirements, including service levels, critical reporting and other obligations, could also result in termination or transfer for cause. In addition, if there is a change of control to which Rithm did not consent, Rithm could terminate for cause and direct the transfer of servicing away from Onity.
In addition, several trustees are currently defending themselves against claims by RMBS investors that the trustees failed to properly oversee mortgage servicers - including Ocwen - in the servicing of hundreds of trusts. Trustees subject to those suits have informed Ocwen that they may seek indemnification for losses they suffer as a result of the filings.
In addition, several trustees are currently defending themselves against claims by RMBS investors that the trustees failed to properly oversee mortgage servicers - including Onity - in the servicing of hundreds of trusts. Trustees subject to those suits have informed Onity that they may seek indemnification for losses they suffer as a result of the filings.
Summary of Risk Factors As a non-bank mortgage company, we are exposed in the normal course of business to multiple risks shared by other participants in our industry. In addition, some of the risks we face are unique to Ocwen or such risks could have a different or greater impact on Ocwen than on other companies.
Summary of Risk Factors As a non-bank mortgage company, we are exposed in the normal course of business to multiple risks shared by other participants in our industry. In addition, some of the risks we face are unique to Onity or such risks could have a different or greater impact on Onity than on other companies.
In the past, we have entered into significant settlements with the NY DFS, the CA DFPI, and the 2013 O cwen National Mortgage Settlement which involved payments of significant monetary amounts, monitoring by third-party firms for which we were financially responsible and other restrictions on our business.
In the past, we have entered into significant settlements with the NY DFS, the CA DFPI, and the 2013 O nity National Mortgage Settlement which involved payments of significant monetary amounts, monitoring by third-party firms for which we were financially responsible and other restrictions on our business.
Our debt agreements contain various qualitative and quantitative covenants, including financial covenants, covenants to operate in material compliance with applicable laws and regulations, monitoring and reporting obligations and restrictions on our ability to engage in various activities, including but not limited to incurring or guarantying additional debt, paying dividends or making distributions on or purchasing equity interests of Ocwen and its subsidiaries, repurchasing or redeeming capital stock or junior capital, repurchasing or redeeming subordinated debt prior to maturity, issuing preferred stock, selling or transferring assets or making loans or investments or other restricted payments, entering into mergers or consolidations or sales of all or substantially all of the assets of Ocwen and its subsidiaries, creating liens on assets to secure debt, and entering into transactions with affiliates.
Our debt agreements contain various qualitative and quantitative covenants, including financial covenants, covenants to operate in material compliance with applicable laws and regulations, monitoring and reporting obligations and restrictions on our ability to engage in various activities, including but not limited to incurring or guarantying additional debt, paying dividends or making distributions on or purchasing equity interests of Onity and its subsidiaries, repurchasing or redeeming capital stock or junior capital, repurchasing or redeeming subordinated debt prior to maturity, issuing certain types of preferred stock, selling or transferring assets or making loans or investments or other restricted payments, entering into mergers or consolidations or sales of all or substantially all of the assets of Onity and its subsidiaries, creating liens on assets to secure debt, and entering into transactions with affiliates.
Further, under our Rights to MSRs agreements, in certain circumstances, Rithm has the right to sell its Rights to MSRs to a third-party and require us to transfer title to the related MSRs, subject to an Ocwen option to acquire at a price based on the winning third-party bid rather than selling to the third party.
Further, under our Rights to MSRs agreements, in certain circumstances, Rithm has the right to sell its Rights to MSRs to a third-party and require us to transfer title to the related MSRs, subject to an Onity option to acquire at a price based on the winning third-party bid rather than selling to the third party.
CFPB We are subject to supervision by the CFPB. In April 2017, the CFPB filed a lawsuit in the federal district court for the Southern District of Florida against Ocwen, OMS and OLS alleging violations of federal consumer financial laws relating to our servicing business dating back to 2014.
CFPB We are subject to supervision by the CFPB. In April 2017, the CFPB filed a lawsuit in the federal district court for the Southern District of Florida against Onity, OMS and OLS alleging violations of federal consumer financial laws relating to our servicing business dating back to 2014.
Termination of some or all of our subservicing rights due to sales by MAV or termination of the entire Subservicing Agreement for cause could result in the loss of a significant portion of Ocwen’s total subservicing portfolio and materially and adversely affect Ocwen’s business, liquidity, financial condition and results of operations.
Termination of some or all of our subservicing rights due to sales by MAV or termination of the entire Subservicing Agreement for cause could result in the loss of a significant portion of Onity’s total subservicing portfolio and materially and adversely affect Onity’s business, liquidity, financial condition and results of operations.
If situations arise in which management and certain large shareholders have divergent views, we may be unable to take actions management believes to be in the best interests of Ocwen. Further, certain of our large shareholders also hold significant percentages of stock in companies with which we do business.
If situations arise in which management and certain large shareholders have divergent views, we may be unable to take actions management believes to be in the best interests of Onity. Further, certain of our large shareholders also hold significant percentages of stock in companies with which we do business.
This lawsuit was resolved in Ocwen’s favor in 2023 following years of litigation that generated significant legal expense and adversely impacted our reputation and business. The CFPB has resumed normal course supervisory activities with respect to our business and operations.
This lawsuit was resolved in Onity’s favor in 2023 following years of litigation that generated significant legal expense and adversely impacted our reputation and business. The CFPB has resumed normal course supervisory activities with respect to our business and operations.
Remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations.
Remote work has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations.
In addition, we have licensed insurance subsidiaries in New York and Vermont. Accordingly, there can be no effective change in control of Ocwen unless the person seeking to acquire control has made the relevant filings and received the requisite approvals in New York and Vermont.
In addition, we have licensed insurance subsidiaries in New York and Vermont. Accordingly, there can be no effective change in control of Onity unless the person seeking to acquire control has made the relevant filings and received the requisite approvals in New York and Vermont.
In addition, MAV has the right to terminate the Subservicing Agreement entirely in the event of certain events of default, including failure by Ocwen to meet financial or operational requirements, including service levels. MAV may also terminate the Subservicing Agreement in the event of a change of control of Ocwen or PHH.
In addition, MAV has the right to terminate the Subservicing Agreement entirely in the event of certain events of default, including failure by Onity to meet financial or operational requirements, including service levels. MAV may also terminate the Subservicing Agreement in the event of a change of control of Onity or PHH.
Because of the relatively limited number of servicing clients, our failure to meet the expectations of any significant client could materially impact our business. Ocwen has suffered reputational damage as a result of our regulatory settlements and the associated scrutiny of our business.
Because of the relatively limited number of servicing clients, our failure to meet the expectations of any significant client could materially impact our business. Onity has suffered reputational damage as a result of our regulatory settlements and the associated scrutiny of our business.
In addition to our reliance on the vendors discussed above, our business is reliant on a number of technological vendors that provide services such as integrated cloud applications and financial institutions that provide essential banking services on a daily basis.
In addition to our reliance on the vendors discussed above, our business is reliant on a number of technology vendors that provide services such as integrated cloud applications and financial institutions that provide essential banking services on a daily basis.
For instance, the NY DFS Cybersecurity Regulation requires New York insurance companies, banks, and other regulated financial services institutions - including certain Ocwen entities licensed in the state of New York - to assess their cybersecurity risk profile.
For instance, the NY DFS Cybersecurity Regulation requires New York insurance companies, banks, and other regulated financial services institutions - including certain Onity entities licensed in the state of New York - to assess their cybersecurity risk profile.
The minimum net worth requirements to which our licensed entities are subject are unique to each state and type of license. We believe our licensed entities were in compliance with all of their minimum net worth requirements at December 31, 2023.
The minimum net worth requirements to which our licensed entities are subject are unique to each state and type of license. We believe our licensed entities were in compliance with all of their minimum net worth requirements at December 31, 2024.
We believe our licensed entities were in compliance with all of their minimum net worth and liquidity requirements at December 31, 2023. However, it is possible that regulators could disagree with our calculations.
We believe our licensed entities were in compliance with all of their minimum net worth and liquidity requirements at December 31, 2024. However, it is possible that regulators could disagree with our calculations.
Further, if we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we could experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms.
Further, if we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, we could experience material adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms.
There are a number of foreign laws and regulations that are applicable to our operations in India and the Philippines, including laws and regulations that govern licensing, employment, safety, taxes and insurance and laws and regulations that govern the creation, continuation and winding up of companies as well as the relationships between shareholders, our corporate entities, the public and the government in these countries.
There are a number of foreign laws and regulations that are applicable to our operations in India and the Philippines, including laws and regulations that govern licensing, employment, privacy and data security, safety, taxes and insurance and laws and regulations that govern the creation, continuation and winding up of companies as well as the relationships between shareholders, our corporate entities, the public and the government in these countries.
To the extent that an examination or other regulatory engagement results in an alleged failure by us to comply with applicable laws, regulations or licensing requirements, or if allegations are made that we have failed to comply with applicable laws, regulations or licensing requirements or the commitments we have made in connection with our regulatory settlements (whether such allegations are made through administrative actions such as cease and desist orders, through legal proceedings or otherwise) or if other regulatory actions of a similar or different nature are taken in the future against us, this could lead to (i) administrative fines, penalties and litigation, (ii) loss of our licenses and approvals to engage in our servicing and lending businesses, (iii) governmental investigations and enforcement actions, (iv) civil and criminal liability, including class action lawsuits and actions to recover incentive and other payments made by governmental entities, (v) breaches of covenants and representations under our servicing, debt or other agreements, (vi) damage to our reputation, (vii) inability to raise capital or otherwise secure the necessary funding to operate the business, (viii) changes to our operations that may otherwise not occur in the normal course, and that could cause us to incur significant costs, and (ix) inability to execute on our business strategy.
Any future settlements or other regulatory actions against us could have a material adverse impact on our business, reputation, operating results, liquidity and financial condition. 20 To the extent that an examination or other regulatory engagement results in an alleged failure by us to comply with applicable laws, regulations or licensing requirements, or if allegations are made that we have failed to comply with applicable laws, regulations or licensing requirements or the commitments we have made in connection with our regulatory settlements (whether such allegations are made through administrative actions such as cease and desist orders, through legal proceedings or otherwise) or if other regulatory actions of a similar or different nature are taken in the future against us, this could lead to (i) administrative fines, penalties and litigation, (ii) loss of our licenses and approvals to engage in our servicing and lending businesses, (iii) governmental investigations and enforcement actions, (iv) civil and criminal liability, including class action lawsuits and actions to recover incentive and other payments made by governmental entities, (v) breaches of covenants and representations under our servicing, debt or other agreements, (vi) damage to our reputation, (vii) inability to raise capital or otherwise secure the necessary funding to operate the business, (viii) changes to our operations that may otherwise not occur in the normal course, and that could cause us to incur significant costs, and (ix) inability to execute on our business strategy.
For example, because we send over 2 million communications in an average month, a process problem such as erroneous letter dating has the potential to negatively affect many parts of our business and have widespread negative implications. We are similarly dependent on our employees.
For example, because we send over millions of communications in an average month, a process problem such as erroneous letter dating has the potential to negatively affect many parts of our business and have widespread negative implications. We are similarly dependent on our employees.
Our MSR financing facilities provide funding based on an advance rate of MSR value that is subject to periodic mark-to-market valuation adjustments (MSR valuation is expected to decline if market interest rates decline).
Our MSR financing facilities provide funding based on an advance rate against MSR value that is subject to periodic mark-to-market valuation adjustments (MSR valuation is expected to decline if market interest rates decline).
It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent misconduct may not be effective in all cases. Misconduct by our employees, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our reputation and our business.
It is not always possible to deter employee misconduct, and the precautions we take that are designed to detect and prevent misconduct may not be effective in all cases. Misconduct by our employees, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our reputation and our business.
Our failure to address, or to appear to fail to address, the various regulatory, operational and other challenges facing Ocwen could give rise to reputational risk that could cause harm to us and our business prospects.
Our failure to address, or to appear to fail to address, the various regulatory, operational and other challenges facing Onity could give rise to reputational risk that could cause harm to us and our business prospects.
It is possible these interlocking ownership positions could cause these shareholders to take actions based on factors other than solely what is in the best interests of Ocwen. Our board of directors may authorize the issuance of additional securities that may cause dilution and may depress the price of our securities.
It is possible these interlocking ownership positions could cause these shareholders to take actions based on factors other than solely what is in the best interests of Onity. 42 Our Board of Directors may authorize the issuance of additional securities that may cause dilution and may depress the price of our securities.
Legal and Regulatory Risks • Failure to operate our business in compliance with complex legal or regulatory requirements or contractual obligations • Adverse litigation outcomes • Adverse changes to GSE and Ginnie Mae business models, initiatives and other actions Risks Related to Our Financial Performance, Financing Our Business, Liquidity and Net Worth, and the Economy • Inability to execute our strategic plan to return to sustainable profitability or pursue business or asset acquisitions • Inability to access capital to meet the financing requirements of our business, or noncompliance with our debt agreements or covenants • Inability to obtain sufficient servicer advance financing necessary to meet the financing requirements due to increased delinquencies or forbearance plans • Inability to obtain sufficient warehouse financing necessary to meet the financing requirements for reverse mortgage loan repurchases or draws • Failure to satisfy current or future minimum net worth and liquidity requirements established by regulators, GSEs, Ginnie Mae, lenders, or other counterparties • Policies or regulations adopted by the GSEs or Ginnie Mae that may be more advantageous to our competitors’ business models than our own • Inability to appropriately manage liquidity, interest rate and foreign currency exchange risks, including ineffective hedging strategies • Inability to control decisions made by the management of MSR Asset Vehicle LLC which potentially impact our subservicing portfolio, funding for growth in our originations business and the profitability of our investment • Economic slowdown or downturn, a capital market disruption, or a deterioration of the housing market, including but not limited to, in the states where we have some concentration of our business • Inability to acquire additional profitable client relationships 18 • Inability to meet future advance financing obligations if Rithm were to fail to comply with its servicing advance obligations under the subservicing agreement Operational Risks and Other Risks Related to Our Business • Disruption in our operations or technology systems due to the failure or disagreements of our service providers to fulfill their obligations under their agreements with us, including but not limited to Black Knight Financial Services, Inc.
Legal and Regulatory Risks • Failure to operate our business in compliance with complex legal or regulatory requirements or contractual obligations • Adverse litigation outcomes • Adverse changes to GSE and Ginnie Mae business models, initiatives and other actions Risks Related to Our Financial Performance, Financing Our Business, Liquidity and Net Worth, and the Economy • Inability to execute our strategic plan to return to sustainable profitability or pursue business or asset acquisitions • Inability to access capital to meet the financing requirements of our business, or noncompliance with our debt agreements or covenants • Inability to obtain sufficient servicer advance financing necessary to meet the financing requirements due to increased delinquencies or forbearance plans • Inability to obtain sufficient warehouse financing necessary to meet the financing requirements for reverse mortgage loan repurchases or draws • Failure to satisfy current or future minimum net worth and liquidity requirements established by regulators, GSEs, Ginnie Mae, lenders, or other counterparties • Policies or regulations adopted by the GSEs or Ginnie Mae that may be more advantageous to our competitors’ business models than our own • Inability to appropriately manage liquidity, interest rate and foreign currency exchange risks, including ineffective hedging strategies • Inability to control decisions by the management of MSR Asset Vehicle LLC to exercise their contractual rights to sell MSRs, which potentially impacts the size of our subservicing portfolio • Economic slowdown or downturn, a capital market disruption, or a deterioration of the housing market, including but not limited to, in the states where we have some concentration of our business • Inability to acquire additional profitable client relationships • Inability to meet future advance financing obligations if Rithm were to fail to comply with its servicing advance obligations under the subservicing agreement Operational Risks and Other Risks Related to Our Business • Disruption in our operations or technology systems due to the failure or disagreements of our service providers to fulfill their obligations under their agreements with us, including but not limited to Black Knight Financial Services, Inc.
We are subject to a number of ongoing federal and state regulatory examinations, consent orders, inquiries, subpoenas, civil investigative demands, requests for information and other actions that could result in further adverse regulatory action against us, including certain matters summarized below. See Note 24 — Regulatory Requirements and Note 26 — Contingencies to the Consolidated Financial Statements.
We are subject to a number of ongoing federal and state regulatory examinations, consent orders, inquiries, subpoenas, civil investigative demands, requests for information and other actions that could result in further adverse regulatory action against us, including certain matters summarized below. See Note 25 — Regulatory Requirements and Note 27 — Contingencies to the Consolidated Financial Statements.
Governmental bodies have taken regulatory and legal actions against us in the past and may in the future impose regulatory fines or penalties or impose additional requirements or restrictions on our activities that could increase our operating expenses, reduce our revenues or otherwise adversely affect our business, financial condition, liquidity, results of operations, ability to grow and reputation.
Accordingly, they could materially and adversely affect our business and our financial condition, liquidity and results of operations. 19 Governmental bodies have taken regulatory and legal actions against us in the past and may in the future impose regulatory fines or penalties or impose additional requirements or restrictions on our activities that could increase our operating expenses, reduce our revenues or otherwise adversely affect our business, financial condition, liquidity, results of operations, ability to grow and reputation.
If Rithm sells its Rights to MSRs to a third party, the transaction can only be completed if the third-party buyer can obtain the necessary third-party consents to transfer the MSRs. Rithm also has the obligation to use reasonable efforts to encourage such third-party buyer to enter into a subservicing agreement with Ocwen.
If Rithm sells its Rights to MSRs to a third party, the transaction can only be completed if the third-party buyer can obtain the necessary third-party consents to transfer the MSRs. Rithm also has the obligation to use reasonable efforts to encourage such third-party buyer to enter into a subservicing agreement with 30 Onity.
We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties on whom we rely on may fail to comply with such obligations, which could negatively impact our business operations.
We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties with whom we work may fail to comply with such obligations, which could negatively impact our business operations.
Security breaches, computer viruses, phishing attacks, worms, cyberattacks, ransomware, hacking, social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential 36 harvesting, personnel misconduct or error, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, attacks enhanced or facilitated by AI, telecommunications failures, earthquakes, fires, floods, and other similar threats could result in a compromise or breach of the technology that we or our vendors use to protect our sensitive data and other information that we must keep secure.
Security breaches, malicious code (such as viruses and worms), phishing attacks, cyberattacks, ransomware attacks, hacking, social-engineering attacks (including through deep fakes, which are increasingly more difficult to identify as fake, and phishing attacks), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, attacks enhanced or facilitated by AI, telecommunications failures, earthquakes, fires, floods, and other similar threats could result in a compromise or breach of the technology that we or our vendors use to protect our sensitive data and other information that we must keep secure.
Ocwen may lose future compensation for subservicing, however, if no subservicing agreement is ultimately entered into with the third-party buyer.
Onity may lose future compensation for subservicing, however, if no subservicing agreement is ultimately entered into with the third-party buyer.
OMS was incorporated under the laws of the USVI and operated in a manner that caused a substantial amount of its net income to be treated as not related to a trade or business within the U.S., which caused such income to be exempt from U.S. federal income taxation.
We may be subject to increased U.S. federal income taxation. OMS was incorporated under the laws of the USVI and operated in a manner that caused a substantial amount of its net income to be treated as not related to a trade or business within the U.S., which caused such income to be exempt from U.S. federal income taxation.
A termination for cause and transfer of servicing could materially and adversely affect Ocwen’s business, liquidity, financial condition and results of operations.
A termination for cause and transfer of servicing could materially and adversely affect Onity’s business, liquidity, financial condition and results of operations.
Our operations are vulnerable to disruptions resulting from severe weather events, including our operations in India, the Philippines, the USVI and Florida. Approximately 3,400, or 76%, of our employees as of December 31, 2023 are located in India or the Philippines.
Our operations are vulnerable to disruptions resulting from severe weather events, including our operations in India, the Philippines, the USVI and Florida. Approximately 3,300, or 76%, of our employees as of December 31, 2024 are located in India or the Philippines.
In the past few years, numerous U.S. states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data.
In the past few years, numerous U.S. states have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data.
Quantitative and Qualitative Disclosures about Market Risk. 29 In our Originations business, we are exposed to interest rate risk and related price risk on our pipeline (i.e., interest rate loan commitments (IRLCs) and mortgage loans held for sale) from the commitment date up until the date the commitment is cancelled or expires, or the loan is sold into the secondary market.
In our Originations business, we are exposed to interest rate risk and related price risk on our pipeline (i.e., interest rate loan commitments (IRLCs) and mortgage loans held for sale) from the commitment date up until the date the commitment is 27 cancelled or expires, or the loan is sold into the secondary market.
At December 31, 2023, such servicing advances made by Rithm were approximately $450.8 million. However, under the Rights to MSRs structure, we are contractually required under our servicing agreements with the RMBS trusts to make the relevant servicing advances even if Rithm does not perform its contractual obligations to fund those advances.
At December 31, 2024, such servicing advances made by Rithm were approximately $408.5 million. However, under the Rights to MSRs structure, we are contractually required under our servicing agreements with the RMBS trusts to make the relevant servicing advances even if Rithm does not perform its contractual obligations to fund those advances.
Preparing for and complying with these obligations requires us to devote significant resources and may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.
Preparing for and complying with these obligations requires us to devote significant resources and has in the past and may in the future necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive data and information technology systems, and those of the third parties upon which we rely. We have programs in place designed to detect and respond to security incidents.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive data and information technology systems, and those of the third parties with whom we work. We have programs in place designed to detect and respond to security incidents.
MCA repurchases are expected to continue to increase due to the seasoning of our portfolio, and the increased flow of HECMs and REO that are reaching 98% of their maximum claim amount.
MCA repurchases are expected to continue to increase due to the seasoning of our portfolio, the acquisition of more seasoned portfolios, and the increased flow of HECMs and REO that are reaching 98% of their maximum claim amount.
Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation (including class claims) and mass arbitration demands; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse business consequences.
Our (or the third parties with whom we work) actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation (including class claims) and mass arbitration demands; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse business consequences.
For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (CPRA) (collectively, CCPA), applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.
For example, the California Consumer Privacy Act of 2018 (CCPA), applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.
We have operations in India and the Philippines that could be adversely affected by changes in the political or economic stability of these countries or by government policies in India, the Philippines or the U.S. Approximately 3,000, or 67%, of our employees as of December 31, 2023 are located in India.
We have operations in India and the Philippines that could be adversely affected by changes in the political or economic stability of these countries or by government policies in India, the Philippines or the U.S. Approximately 2,900, or 67%, of our employees as of December 31, 2024 are located in India.
While none of the cybersecurity incidents that we have experienced to date have had a material adverse impact on our business, financial condition or operations, a recent cybersecurity incident involving one of our vendors briefly impacted our operations, and we cannot assure that future incidents will not materially and adversely impact us.
While none of the cybersecurity incidents that we have experienced to date have had a material adverse impact on our business, financial condition or operations, recent cybersecurity incidents involving our vendors and other contractual counterparties briefly impacted our operations, and we cannot assure that future third-party incidents will not materially and adversely impact us.
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely). We may not, however, detect and remediate all such vulnerabilities including on a timely basis.
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work). We may not, however, detect and remediate all such vulnerabilities including on a timely basis.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe monitor third-party risks through due diligence questionnaires and periodic assessments, and we track the status of reported risks within our centralized risk governance framework. In 2023 and 2024, cybersecurity incidents have occurred involving our vendors and other contractual counterparties that did not materially and adversely impact our operations.
Biggest changeIn 2023 and 2024, cybersecurity incidents occurred involving our vendors and other contractual counterparties that did not materially and adversely impact our operations. However, we cannot assure that future third party incidents will not materially and adversely impact us.
Risk Factors in this annual report on Form 10-K, including “Cybersecurity risks and the failure to maintain the security, confidentiality, integrity, and availability of our information technology systems or data, and those maintained on our behalf, could result in a material adverse impact to our business, including without limitation regulatory investigations or actions, a material interruption to our ability to provide services to our customers, damage to our reputation and/or subject us to costs, fines and penalties or lawsuits and otherwise adversely affect our operations.” Cybersecurity Governance Our Board of Directors addresses the Ocwen’s cybersecurity risk management as part of its general oversight function.
Risk Factors in this annual report on Form 10-K, including “Cybersecurity risks and the failure to maintain the security, confidentiality, integrity, and availability of our information technology systems or data, and those maintained on our behalf, could result in a material adverse impact to our business, including without limitation regulatory investigations or actions, a material interruption to our ability to provide services to our customers, damage to our reputation and/or subject us to costs, fines and penalties or lawsuits and otherwise adversely affect our operations.” Cybersecurity Governance Our Board of Directors addresses Onity’s cybersecurity risk management as part of its general oversight function.
Cybersecurity-related risk events are reported to Ocwen’s Enterprise Risk and Compliance Committee, an executive level management committee designed to assist the Chief Executive Officer and CRCO in executing our Enterprise Risk Management Program, including with respect to cybersecurity.
Cybersecurity-related risk events are reported to Onity’s Enterprise Risk and Compliance Committee, an executive level management committee designed to assist the Chief Executive Officer and CRCO in executing our Enterprise Risk Management Program, including with respect to cybersecurity.
The Enterprise Risk and Compliance Committee provides a formal governance and oversight infrastructure for identifying and monitoring cybersecurity risks and compliance-related issues facing Ocwen, which includes escalation to the Risk and Compliance Committee of the Board as appropriate.
The Enterprise Risk and Compliance Committee provides a formal governance and oversight infrastructure for identifying and monitoring cybersecurity risks and compliance-related issues facing Onity, which includes escalation to the Risk and Compliance Committee of the Board as appropriate.
The CISO is responsible for cybersecurity staffing and maintaining an up-to-date cybersecurity policy and processes framework designed to promote a strong cybersecurity posture, drive security awareness, and facilitate a coordinated response to cybersecurity incidents.
The CISO is responsible for cybersecurity staffing and maintaining an up-to-date cybersecurity policy and processes framework designed to promote a strong cybersecurity resilience, drive security awareness, and facilitate a coordinated response to cybersecurity incidents.
In addition, all Ocwen executives, along with employees generally, are required to refresh their cybersecurity and IT threat-recognition training annually or more frequently if circumstances warrant.
In addition, all Onity executives, along with employees 44 generally, are required to refresh their cybersecurity and IT threat-recognition training annually or more frequently if circumstances warrant.
Business - Risk Management are 45 categorized according to our enterprise risk assessment guidelines and are tracked in a centralized enterprise risk system. Cybersecurity risks are regularly reviewed by our IT Risk Committee and Enterprise Risk and Compliance Committee (discussed further below). We also engage third-party service providers for assistance in identifying, assessing, and managing cybersecurity risks.
Cybersecurity risks are categorized according to our enterprise risk assessment guidelines and are tracked in a centralized enterprise risk system. Cybersecurity risks are periodically reviewed by our IT Risk Committee and Enterprise Risk and Compliance Committee (discussed further below). We also engage third-party service providers for assistance in identifying, assessing, and managing cybersecurity risks.
Vendors are categorized based on a set of criteria that assess the importance of their services and the sensitivity of the information they access.
Vendors are categorized based on a set of criteria that assess the importance of their services and the sensitivity of the information and systems they have access to.
The Risk and Compliance Committee of the Board of Directors is responsible for overseeing Ocwen’s overall risk management processes, including cybersecurity-related risks, and receives regular updates from the Chief Information Security Officer (CISO) concerning Ocwen’s significant cybersecurity threats and the processes Ocwen has implemented to address them.
The Risk and Compliance Committee of the Board of Directors is responsible for overseeing Onity’s overall risk management processes, including cybersecurity-related risks, and receives periodic updates from the Chief Information Security Officer (CISO) concerning Onity’s significant cybersecurity threats and the processes Onity has implemented to address them.
We cannot assure that future incidents will not materially and adversely impact us. For a description of the risks from cybersecurity threats that may materially affect us and how they may do so, see our risk factors under Part 1. Item 1A.
For a description of the risks from cybersecurity threats that may materially affect us and how they may do so, see our risk factors under Part 1. Item 1A.
Depending on the environment or system, these include, for example, information security policies and procedures, perimeter security controls such as firewalls and intrusion prevention systems, network security controls including multi-factor authentication and role-based access controls, and server and endpoint security controls such as anti-malware.
To mitigate and manage these risks, we have implemented various technical, physical, and organizational safeguards. Depending on the environment or system, these safeguards include, for example, information security policies and procedures, perimeter security controls such as firewalls and intrusion prevention systems, network security controls including multi-factor authentication and role-based access controls, and server and endpoint security controls such as anti-malware.
In the past, these services have included external penetration testing, audit services, legal counsel, threat intelligence, forensic investigation, and managed security service providers. In addition, we have processes in place for assessing and managing risks associated with third-party service providers.
In the past, these third parties have provided us with services that include external penetration testing, cybersecurity audits, legal counsel, threat intelligence information, forensic investigations, and managed security service. In addition, we have processes in place for assessing and managing cybersecurity risks associated with third-party service providers.
Our information security team employs a variety of methods to identify and evaluate cybersecurity risks, including risk and control self-assessments, vulnerability assessments and penetration testing, breach and attack simulations, ransomware table-top assessments, cyber threat intelligence review, as well as internal and external assessments. To mitigate and manage these risks, we have implemented various technical, physical, and organizational safeguards.
Our information security team employs a variety of methods to identify and evaluate material risks from cybersecurity threats, including risk and control self-assessments, vulnerability assessments and penetration testing, breach and attack simulations, ransomware table-top assessments, cyber threat intelligence reviews, as well as internal and external cybersecurity assessments.
Depending on the nature of the services provided, the sensitivity of information systems and data at issue, and the identity of the provider, our vendor management process may involve different levels of assessment designed to help identify cybersecurity risks associated with the provider.
Depending on the nature of the services provided, the sensitivity of information systems and data at issue, and the identity of the provider, our vendor management process may involve different levels of assessment designed to help identify cybersecurity risks associated with the provider, such as due diligence questionnaires and periodic assessments, and we track the status of reported third party risks within our centralized risk governance framework.
Additionally, depending on the environment or system, we utilize application security controls, data security controls including encryption, data loss prevention controls, immutable data backups, and security awareness programs. These aforementioned security measures are integrated into our broader enterprise risk management strategies. Cybersecurity risks identified through the processes described above under Item 1.
Additionally, depending on the environment or system, we utilize certain application security controls, data security controls including encryption, data loss prevention controls, immutable data backups, and security awareness programs for our personnel. Our assessment and management of material risks from cybersecurity threats are integrated into our broader enterprise risk management strategies.
In addition, our cybersecurity incident response processes are designed to escalate material cybersecurity incidents to members of management as part of the enterprise level Crisis Management Framework.
In addition, our cybersecurity incident response processes are designed to escalate material cybersecurity incidents to members of management as part of the enterprise level Crisis Management Framework. The CISO, CIO, CRCO and senior operating unit leaders are part of the crisis management team in an effort to promote the prompt investigation of and response to cybersecurity incidents.
ITEM 1C. CYBERSECURITY Risk Management and Strategy We have established information security protocols aimed at the identification, assessment, and management of significant cybersecurity risks that could impact our vital information systems and confidential data.
ITEM 1C. CYBERSECURITY Risk Management and Strategy We have established information designed to identify, assess, and manage cybersecurity risks that could impact our critical information systems and confidential data.
Removed
The CISO, CIO, CRCO and senior operating unit leaders are part of the crisis management team in an effort to promote the prompt mitigation of cybersecurity incidents and facilitate the notification of appropriate stakeholders. 46

Item 2. Properties

Properties — owned and leased real estate

7 edited+1 added−1 removed0 unchanged
Biggest change(2) Primarily supports reverse lending operations. (3) Primarily supports our reverse servicing operations. We exercised the early termination option to terminate the lease by January 31, 2025 (original lease term extended through January 2027). (4) Primarily supports our forward servicing operations. (5) Effective January 2023, we terminated the lease on 45,725 square feet of space.
Biggest changeEffective February 2025, we exercised the early termination option to terminate the lease on 36,171 square feet of space (including on 29,901 square feet, which was previously abandoned) and the lease term for the remaining space was extended through January 2028. (4) Primarily supports our forward servicing operations.
The following table sets forth information relating to our principal facilities at December 31, 2023: Location Owned/Leased Square Footage Principal executive offices West Palm Beach, Florida Leased 41,858 Document storage and imaging facility West Palm Beach, Florida Leased 51,931 Business operations and support offices U.S. facilities: Mt.
The following table sets forth information relating to our principal facilities at December 31, 2024: Location Owned/Leased Square Footage Principal executive offices West Palm Beach, Florida Leased 41,858 Document storage and imaging facility West Palm Beach, Florida Leased 51,931 Business operations and support offices U.S. facilities: Mt.
Croix, USVI (4) Leased 6,096 Offshore facilities (1) Bangalore, India (5) Leased 22,325 Mumbai, India (6) Leased 15,218 Pune, India Leased 3,826 Manila, Philippines Leased 13,134 Former operations and support offices no longer utilized Houston, Texas - Walters Road (7) Leased 29,901 (1) Supports our servicing and lending operations, as well as our corporate functions.
Croix, USVI (4) Leased 6,096 APAC facilities (1) Bangalore, India Leased 22,325 Mumbai, India Leased 15,218 Pune, India Leased 3,826 Manila, Philippines Leased 13,134 Former operations and support offices no longer utilized Houston, Texas - Walters Road (3) Leased 29,901 (1) Supports our servicing and lending operations, as well as our corporate functions. (2) Primarily supports reverse lending operations.
ITEM 2. PROPERTIES Ocwen Financial Corporation is headquartered in West Palm Beach, Florida, at 1661 Worthington Road, Suite 100. We have offices and facilities in the U.S., the USVI, India and the Philippines, all of which are leased.
ITEM 2. PROPERTIES Onity Group Inc. is headquartered in West Palm Beach, Florida, at 1661 Worthington Road, Suite 100. We have offices and facilities in the U.S., the USVI, India and the Philippines, all of which are leased.
Laurel, New Jersey (1) Leased 18,270 Rancho Cordova, California (2) Leased 17,157 Houston, Texas - Walters Road (3) Leased 15,678 St.
Laurel, New Jersey (1) Leased 18,270 Rancho Cordova, California (2) Leased 8,094 Houston, Texas - Walters Road (3) Leased 15,678 St.
That information is incorporated into this item by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 47 PART II
LEGAL PROCEEDINGS See Note 27 — Contingencies to the Consolidated Financial Statements for a description of our material legal proceedings. That information is incorporated into this item by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
We operate through a hybrid workforce model which combines remote work for substantially all of our global workforce and in-office when required. During 2023, we exited a total of 105,471 of leased square feet. ITEM 3. LEGAL PROCEEDINGS See Note 26 — Contingencies to the Consolidated Financial Statements for a description of our material legal proceedings.
We regularly evaluate current and projected space requirements, considering the constraints of our existing lease agreements and the expected scale of our businesses. We operate through a hybrid workforce model which combines remote work for substantially all of our global workforce and in-office when required. During 2024, we exited a total of 18,995 of leased square feet. 45 ITEM 3.
Removed
(6) Effective March 2023, we reduced the office space by 10,447 square feet. (7) The lease of this facility, which expires on January 31, 2025, was partially abandoned as of December 31, 2023. We regularly evaluate current and projected space requirements, considering the constraints of our existing lease agreements and the expected scale of our businesses.
Added
Effective August 2024, we terminated the lease on 17,157 square feet of space and entered into a new lease agreement. (3) Primarily supports our reverse servicing operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

16 edited+0 added−1 removed5 unchanged
Biggest changeThe returns of each peer group company are weighted according to their respective stock market capitalization at the beginning of the period. 48 Period Ending Index / Peer Group 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Ocwen Financial Corporation $ 100.00 $ 102.24 $ 143.83 $ 198.86 $ 152.14 $ 153.03 Russell 2000 $ 100.00 $ 123.72 $ 146.44 $ 166.50 $ 130.60 $ 150.31 Current Peer Group $ 100.00 $ 130.48 $ 134.35 $ 157.67 $ 129.27 $ 168.76 2022 Peer Group $ 100.00 $ 133.55 $ 132.48 $ 161.83 $ 133.03 $ 171.59 (1) © 2023 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”).
Biggest changeThe returns of each peer group company are weighted according to their respective stock market capitalization at the beginning of the period. 46 Period Ending Index / Peer Group 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Onity Group Inc. $ 100.00 $ 140.68 $ 194.50 $ 148.81 $ 149.68 $ 149.44 Russell 2000 $ 100.00 $ 118.36 $ 134.57 $ 105.56 $ 121.49 $ 133.66 Peer Group $ 100.00 $ 103.75 $ 120.87 $ 99.11 $ 129.27 $ 153.76 (1) © 2025 London Stock Exchange Group plc and its applicable group undertakings (“LSEG”).
The Compensation and Human Capital Committee selected the following peer group (Current Peer Group) as the comparator for benchmarking, including competitors in the mortgage finance industry and mortgage real estate investment trusts. Associated Banc-Corp Mr. Cooper Group Inc. Axos Financial, Inc. PennyMac Financial Services, Inc. BankUnited, Inc. Radian Group Inc. Finance of America Companies, Inc.
The Compensation and Human Capital Committee selected the following peer group as the comparator for benchmarking, including competitors in the mortgage finance industry and mortgage real estate investment trusts. Associated Banc-Corp Mr. Cooper Group Inc. Axos Financial, Inc. PennyMac Financial Services, Inc. BankUnited, Inc. Radian Group Inc. Finance of America Companies, Inc.
The graph assumes that $100 was invested in our common stock, each index listed below, and each company in the peer group (except as described above) on December 31, 2018, and the reinvestment of all dividends.
The graph assumes that $100 was invested in our common stock, each index listed below, and each company in the peer group (except as described above) on December 31, 2019, and the reinvestment of all dividends.
We have chosen to present the Russell 2000 for comparison purposes because we believe the Russell 2000 is comprised of companies which more closely resemble Ocwen in terms of market capitalization than other indices.
We have chosen to present the Russell 2000 for comparison purposes because we believe the Russell 2000 is comprised of companies which more closely resemble Onity in terms of market capitalization than other indices.
Our Compensation and Human Capital Committee modified the peer group in 2023 on the recommendation of our independent compensation consultant in order to ensure the constituent companies remain aligned with Ocwen in key metrics.
Our Compensation and Human Capital Committee modified the peer group in 2023 on the recommendation of our independent compensation consultant in order to ensure the constituent companies remain aligned with Onity in key metrics.
FTSE International Limited is authorized and regulated by the Financial Conduct Authority as a benchmark administrator. All information is provided for information purposes only and data is provided "as is" without warranty of any kind.
FTSE International Limited is authorized and regulated by the Financial Conduct Authority as a benchmark administrator. Refinitiv Benchmark Services (UK) Limited is authorized and regulated by the Financial Conduct Authority as a benchmark administrator. All information is provided for information purposes only and data is provided "as is" without warranty of any kind.
The Compensation and Human Capital Committee of Ocwen’s Board of Directors determines the constitution of our peer groups after considering the recommendations of our independent compensation consultant, who identifies potential peers based on a number of metrics including industry classification, revenues, assets and number of employees.
The Compensation and Human Capital Committee of Onity’s Board of Directors determines the constitution of our peer group after considering the recommendations of our independent compensation consultant, who identifies potential peers based on a number of metrics including industry classification, revenues, assets and number of employees.
Webster Financial Corporation MGIC Investment Corporation WSFS Financial Corporation The cumulative TSR performance of peer group companies Finance of America Companies, Inc., Guild Holdings Company, Home Point Capital Inc., loanDepot Inc. and UWM Holdings is not included in the weighted average cumulative TSR calculation because they were publicly listed after the beginning of the five-year measurement period.
Webster Financial Corporation MGIC Investment Corporation WSFS Financial Corporation The cumulative TSR performance of peer group companies Guild Holdings Company, loanDepot Inc. and UWM Holdings is not included in the weighted average cumulative TSR calculation because they were publicly listed after the beginning of the five-year measurement period.
We have selected our peer groups for comparison purposes because Ocwen’s management uses information about the peer groups to make compensation decisions and we believe that information is relevant to our shareholders.
We have selected our peer group for comparison purposes because Onity’s management uses information about the peer group to make compensation decisions and we believe that information is relevant to our shareholders.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The common stock of Ocwen Financial Corporation is traded under the symbol “OCN” on the NYSE. Dividends We have never declared or paid cash dividends on our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The common stock of Onity Group Inc. is traded under the symbol “ONIT” on the NYSE. Dividends We have never declared or paid cash dividends on our common stock.
Number of Holders of Common Stock On February 22, 2024, 7,684,401 shares of our common stock were outstanding and held by approximately 47 holders of record. Such number of stockholders does not reflect the number of individuals or institutional investors holding our stock in nominee name through banks, brokerage firms and others.
Number of Holders of Common Stock On February 14, 2025, 7,873,053 shares of our common stock were outstanding and held by approximately 44 holders of record. Such number of stockholders does not reflect the number of individuals or institutional investors holding our stock in nominee name through banks, brokerage firms and others.
Stock Return Performance The following graph compares the cumulative total shareholder return (TSR) on the common stock of Ocwen Financial Corporation since December 31, 2018, with the cumulative TSR on the stocks included in (i) the Russell 2000 Index, (ii) the current peer group of companies Ocwen uses to inform compensation decisions, and (iii) the peer group used to inform compensation decisions in 2022.
Stock Return Performance The following graph compares the cumulative total shareholder return (TSR) on the common stock of Onity Group Inc. since December 31, 2019, with the cumulative TSR on the stocks included in (i) the Russell 2000 Index and (ii) the peer group of companies Onity uses to inform compensation decisions.
Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the quarter ended December 31, 2023. Purchases of Equity Securities by the Issuer and Affiliates We did not repurchase any shares of our common stock during the quarter ended December 31, 2023. 49 ITEM 6. [RESERVED]
Unregistered Sales of Equity Securities and Use of Proceeds All unregistered sales of equity securities have been previously disclosed. 47 Purchases of Equity Securities by the Issuer and Affiliates We did not repurchase any shares of our common stock during the quarter ended December 31, 2024. ITEM 6. [RESERVED]
“FTSE®”, “Russell®”, “FTSE Russell®”, “MTS®”, “FTSE4Good®”, “ICB®”, “Mergent®”, “The Yield Book®” and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under license, by FTSE, Russell, MTSNext, FTSE Canada, Mergent, FTSE FI, YB.
“FTSE®”, “Russell®”, “FTSE Russell®”, “FTSE4Good®”, “ICB®”, “Refinitiv”, “Beyond Ratings®”, “WMRTM”, “FRTM” and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSEG or their respective licensors and are owned, or used under license, by FTSE, Russell, FTSE Canada, FTSE FI, FTSI FI Europe, WOFE, RBSL, RL or BR.
The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) MTSNext Limited (“MTSNext”), (5) Mergent, Inc. (“Mergent”), (6) FTSE Fixed Income LLC (“FTSE FI”), (7) The Yield Book Inc (“YB”) and (8) Beyond Ratings S.A.S. (“BR”).
The LSEG includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) FTSE Fixed Income Europe Limited (“FTSE FI Europe”), (5) FTSE Fixed Income LLC (“FTSE FI”), (6) FTSE (Beijing) Consulting Limited (“WOFE”), (7) Refinitiv Benchmark Services (UK) Limited (“RBSL”), (8) Refinitiv Limited (“RL”) and (9) Beyond Ratings S.A.S.
All rights reserved. FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB.
(“BR”). All rights reserved. FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, WOFE, RBSL, RL and BR.
Removed
Compared to the 2022 peer group, the Current Peer Group reflects the addition of Axos Financial, Inc. and WSFS Financial Corporation and the removal of Home Point Capital Inc. and Navient Corporation.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

198 edited+93 added−129 removed90 unchanged
Biggest changeThe amounts presented are before the elimination of balances and transactions with our other segments: Years Ended December 31, % Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 Revenue Servicing and subservicing fees $ 945.2 $ 860.5 $ 773.5 10 % 11 % Gain (loss) on loans held for sale, net 10.3 (15.1) 46.6 (168) (132) Gain (loss) on reverse loans held for investment and HMBS-related borrowings, net 23.5 (25.1) (2.3) (194) 975 Other revenue, net 15.5 8.3 7.8 88 6 Total revenue 994.6 828.5 825.5 20 — MSR valuation adjustments, net (243.9) (36.0) (143.4) 577 (75) Operating expenses Compensation and benefits 107.2 126.2 108.2 (15) 17 Servicing expense 53.5 53.1 98.8 1 (46) Occupancy, equipment and mailing 28.1 31.2 26.6 (10) 17 Professional services 35.1 26.6 31.9 32 (16) Technology and communications 24.6 24.7 23.8 — 4 Corporate overhead allocations 45.5 46.2 47.7 (2) (3) Other expenses 7.8 7.6 6.7 2 14 Total operating expenses 301.7 315.6 343.7 (4) (8) Other income (expense) Interest income 21.7 12.9 8.2 68 57 Interest expense (173.3) (114.8) (80.8) 51 42 Pledged MSR liability expense (296.4) (255.0) (221.3) 16 15 Earnings of equity method investee 7.3 18.5 3.6 (61) 411 Other, net 1.7 (10.8) 4.1 (116) (365) Other income (expense), net (439.0) (349.2) (286.2) 26 22 Income before income taxes $ 9.9 $ 127.7 $ 52.2 (92) % 145 % 62 The following table provides selected operating statistics for our Servicing segment: % Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 Assets Serviced at December 31 Unpaid principal balance (UPB) in billions: Performing loans (1) $ 276.5 $ 276.2 $ 254.2 — % 9 % Non-performing loans 11.4 12.9 13.1 (12) (2) Non-performing real estate 0.5 0.7 0.7 (28) — Total $ 288.4 $ 289.8 $ 268.0 — 8 Non-performing to total % 4.1% 4.7% 5.2% (12) (10) Conventional loans (2) $ 187.4 $ 186.2 $ 166.3 1 % 12 % Government-insured loans 33.3 32.6 28.8 2 13 Non-Agency loans 67.6 71.0 72.8 (5) (2) Total $ 288.4 $ 289.8 $ 268.0 — 8 Conventional loans to total % 65.0% 64.2% 62.1% 1 3 Servicing portfolio (3) $ 131.4 $ 134.5 $ 135.9 (2) % (1) % Subservicing portfolio Subservicing - forward 30.8 34.7 29.4 (11) 18 Subservicing - reverse 17.1 23.2 13.9 (26) 67 Total subservicing 47.9 58.0 43.3 (17) 34 MAV (4) (5) 55.9 48.2 33.0 16 46 Rithm (formerly NRZ) (5) (6) 45.0 49.1 55.8 (8) (12) Other MSR capital partners (5) $ 8.2 $ — $ — n/m n/m Total $ 288.4 $ 289.8 $ 268.0 — 8 Number (in 000’s): Performing loans (1) 1,295.9 1,319.8 1,287.0 (2) % 3 % Non-performing loans Non-performing loans - Rithm 20.7 24.1 30.7 (14) (21) Non-performing loans - Other 25.4 31.6 30.7 (20) 3 46.0 55.7 61.4 (17) (9) Non-performing real estate 2.6 3.3 4.9 (22) (33) Total 1,344.5 1,378.8 1,353.3 (2) 2 63 % Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 Conventional loans (2) 721.9 734.2 686.5 (2) % 7 % Government-insured loans 160.3 168.1 168.1 (5) — Non-Agency loans 462.3 476.5 498.7 (3) (4) Total 1,344.5 1,378.8 1,353.3 (2) 2 Servicing portfolio 577.4 605.7 636.1 (5) % (5) % Subservicing portfolio Subservicing - forward 113.7 126.0 105.6 (10) 19 Subservicing - reverse 62.2 93.7 54.7 (34) 71 Total subservicing 175.9 219.7 160.3 MAV (5) 201.0 170.7 131.6 18 30 Rithm (5) 357.7 382.7 425.4 (7) (10) Other MSR capital partners (5) 32.5 — — n/m n/m 1,344.5 1,378.8 1,353.3 (2) 2 Prepayment speed (CPR) (7) 12-month % Voluntary CPR 4.1 % 7.6 % 17.6 % (47) % (57) % 12-month % Involuntary CPR 0.3 0.4 0.7 (20) (43) Total 12-month % CPR 7.6 11.2 21.1 (32) (47) Number of completed modifications (in thousands) 14.6 16.8 17.3 (13) % (3) % Revenue recognized in connection with loan modifications $ 14.2 $ 21.9 $ 27.8 (35) (21) n/m: not meaningful (1) Performing loans include those loans that are less than 90 days past due and those loans for which borrowers are making scheduled payments under loan modification, forbearance or bankruptcy plans.
Biggest changeThe amounts presented are before the elimination of balances and transactions with our other segments: Years Ended December 31, % Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Revenue Servicing and subservicing fees $ 830.5 $ 945.2 $ 860.5 (12) % 10 % Gain (loss) on loans held for sale, net 1.4 10.3 (15.1) (87) (168) Gain (loss) on reverse loans held for investment and HMBS-related borrowings, net 16.5 23.5 (25.1) (30) (194) Other revenue, net 18.2 15.5 8.3 17 88 Total revenue 866.7 994.6 828.5 (13) 20 MSR valuation adjustments, net (109.7) (243.9) (36.0) (55) 577 Operating expenses Compensation and benefits 100.6 107.2 126.2 (6) (15) Servicing expense 42.8 53.5 53.1 (20) 1 Occupancy, equipment and mailing 27.3 28.1 31.2 (3) (10) Professional services 28.0 35.1 26.6 (20) 32 Technology and communications 24.7 24.6 24.7 — — Corporate overhead allocations 45.8 45.5 46.2 1 (2) Other expenses 3.7 7.8 7.6 (52) 2 Total operating expenses 273.0 301.7 315.6 (10) (4) Other income (expense) Interest income 32.9 21.7 12.9 51 68 Interest expense (184.4) (173.3) (114.8) 6 51 Pledged MSR liability expense (175.6) (296.4) (255.0) (41) 16 Loss on debt redemption (0.1) — — n/m n/m Earnings of equity method investee 22.9 7.3 18.5 214 (61) Other, net (6.8) 1.7 (10.8) (504) (116) Other income (expense), net (311.2) (439.0) (349.2) (29) 26 Income before income taxes $ 172.8 $ 9.9 $ 127.7 n/m (92) % Servicing and Subservicing Fees Years Ended December 31, % Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Loan servicing and subservicing fees: Servicing and subservicing fees $ 618.6 $ 736.0 $ 738.5 (16) % — % Ancillary income 211.9 209.1 122.0 1 71 Total $ 830.5 $ 945.2 $ 860.5 (12) % 10 % 64 The following table and discussion present the drivers of servicing and subservicing fees.
Most of our advances have the highest reimbursement priority (i.e., they are “top of the waterfall”) so that we are entitled to repayment from respective loan or REO liquidation proceeds before any interest or principal is paid on the bonds that were issued by the trust.
Most of our advances have the highest reimbursement priority (i.e., they are “top of the waterfall”), so we are entitled to repayment from respective loan or REO liquidation proceeds before any interest or principal is paid on the bonds that were issued by the trust.
Effective September 30, 2023, we implemented the revised minimum tangible net worth and liquidity requirements for GSE and Ginnie Mae seller/servicers. We believe that we are in compliance with these requirements as of December 31, 2023. Ginnie Mae announced a new risk-based capital ratio effective on December 31, 2024 for Ginnie Mae issuers.
Effective September 30, 2023, we implemented the revised minimum tangible net worth and liquidity requirements for GSE and Ginnie Mae seller/servicers. We believe that we are in compliance with these requirements as of December 31, 2024. Ginnie Mae announced a new risk-based capital ratio effective on December 31, 2024 for Ginnie Mae issuers.
Additionally, we utilize a number of controls to ensure the results are reasonable, including comparison, or “back testing,” of model results against actual performance and monitoring the market for recent trades, including our own price discovery in connection with potential and completed sales, and other market information that can be used to benchmark inputs or outputs.
We utilize a number of controls to ensure the results are reasonable, including comparison, or “back testing,” of model results against actual performance and monitoring the market for recent trades, including our own price discovery in connection with potential and completed sales, and other market information that can be used to benchmark inputs or outputs.
In recent years, the GSEs have been the dominant providers of secondary market liquidity for forward mortgages, keeping the product and credit spectrum relatively homogeneous and risk averse (higher credit standards). Economic Conditions. General economic conditions can impact the growth and revenue of our Originations segment by impacting the capacity for consumer credit and the supply of capital.
In recent years, the GSEs have been the dominant providers of secondary market liquidity for forward mortgages, keeping the product and credit spectrum relatively homogeneous and risk averse (higher credit standards). 70 Economic Conditions. General economic conditions can impact the growth and revenue of our Originations segment by impacting the capacity for consumer credit and the supply of capital.
We do not incur any substantive underwriting, marketing or compensation costs in connection with any future draws, although we must maintain sufficient capital resources and available borrowing capacity to ensure that we are able to fund these future draws prior to securitization with Ginnie Mae (generally less than 30 days).
We do not incur any substantive underwriting, marketing or compensation costs in connection with any future draws, although we must maintain sufficient capital resources and available borrowing capacity to ensure that we are able to fund these future draws prior to securitization with Ginnie Mae (generally less than 30 days). b.
If actual results differ from our judgments and assumptions, then it may have an adverse impact on the results of operations and cash flows. We have processes in place to monitor these judgments and assumptions, and management is required to review critical accounting policies and estimates with 82 the Audit Committee of the Board of Directors.
If actual results differ from our judgments and assumptions, then it may have an adverse impact on the results of operations and cash flows. We have processes in place to monitor these judgments and assumptions, and management is required to review critical accounting policies and estimates with the Audit Committee of the Board of Directors.
Loss severity considers the historical loss experience that we incur upon loan sale or collateral liquidation, as well as current market conditions. We monitor the adequacy of the overall liability and make adjustments, as 86 necessary, after consideration of our historical losses and other qualitative factors including ongoing dialogue and experience with our counterparties.
Loss severity considers the historical loss experience that we incur upon loan sale or collateral liquidation, as well as current market conditions. We monitor the adequacy of the overall liability and make adjustments, as necessary, after consideration of our historical losses and other qualitative factors including ongoing dialogue and experience with our counterparties.
OVERVIEW We are a leading non-bank mortgage servicer and originator providing solutions through our primary brands, PHH Mortgage and Liberty Reverse Mortgage. PHH is one of the largest non-bank servicers in the country based on UPB, focused on delivering a variety of servicing and lending programs.
OVERVIEW General We are a leading non-bank mortgage servicer and originator providing solutions through our primary brands, PHH Mortgage and Liberty Reverse Mortgage. PHH is one of the largest non-bank servicers in the country based on UPB, focused on delivering a variety of servicing and lending programs.
Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period in which the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the profitability that we achieve.
Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for 83 the period in which the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the profitability that we achieve.
Inactive repurchased loans or buyouts (loans that are in default for one of the following reasons - title conveyances or the borrower is deceased, no longer occupies the property or is delinquent on tax and insurance payments) are generally liquidated through foreclosure and subsequent sale of REO.
Inactive buyouts (loans that are in default for one of the following reasons - title conveyances or the borrower is deceased, no longer occupies the property or is delinquent on tax and insurance payments) are generally liquidated through foreclosure and subsequent sale of REO.
SEGMENT RESULTS OF OPERATIONS We report our activities in three segments, Servicing, Originations and Corporate Items and Other that reflect other business activities that are currently individually insignificant. Our business segments reflect the internal reporting that we use to evaluate operating and financial performance and to assess the allocation of our resources.
SEGMENT RESULTS OF OPERATIONS We report our activities in three segments, Servicing, Originations and Corporate that reflect other business activities that are currently individually insignificant. Our business segments reflect the internal reporting that we use to evaluate operating and financial performance and to assess the allocation of our resources.
Our proprietary model includes, among other things, an assessment of re-default risk. 59 Advance Obligation As a servicer, we are generally obligated to advance funds in the event borrowers are delinquent on their monthly mortgage related payments.
Our proprietary model includes, among other things, an assessment of re-default risk. Advance Obligation As a servicer, we are generally obligated to advance funds in the event borrowers are delinquent on their monthly mortgage related payments.
Covenants Our debt agreements contain various qualitative and quantitative covenants including financial covenants, covenants to operate in material compliance with applicable laws and regulations, monitoring and reporting obligations and restrictions on our ability to engage in various activities, including but not limited to incurring or guarantying additional debt, paying dividends or making distributions on or purchasing equity interests of Ocwen and its subsidiaries, repurchasing or redeeming capital stock or junior capital, repurchasing or redeeming subordinated debt prior to maturity, issuing preferred stock, selling or transferring assets or making loans or investments or other restricted payments, entering into mergers or consolidations or sales of all or substantially all of the assets of Ocwen and its subsidiaries, creating liens on assets to secure debt, and entering into transactions with affiliates.
Covenants Our debt agreements contain various qualitative and quantitative covenants including financial covenants, covenants to operate in material compliance with applicable laws and regulations, monitoring and reporting obligations and restrictions on our ability to engage in various activities, including but not limited to incurring or guarantying additional debt, paying dividends or making distributions on or purchasing equity interests of Onity and its subsidiaries, repurchasing or redeeming 78 capital stock or junior capital, repurchasing or redeeming subordinated debt prior to maturity, issuing preferred stock, selling or transferring assets or making loans or investments or other restricted payments, entering into mergers or consolidations or sales of all or substantially all of the assets of Onity and its subsidiaries, creating liens on assets to secure debt, and entering into transactions with affiliates.
We evaluate the reasonableness of our third-party experts’ assumptions using historical experience adjusted for 84 prevailing market conditions and benchmarks with third-party expert valuation and market participant surveys.
We evaluate the reasonableness of our third-party experts’ assumptions using historical experience adjusted for prevailing market conditions and benchmarks with third-party expert valuation and market participant surveys.
As subservicer, we are also required to make P&I, T&I and Corporate advances on behalf of servicers following the servicing agreements or guides.
As subservicer, we are also required to make P&I, T&I and Corporate advances 77 on behalf of servicers following the servicing agreements or guides.
Ocwen continues to monitor the ownership in its stock to evaluate whether any additional ownership changes have occurred that would further limit its ability to utilize certain tax attributes. As such, our analysis regarding the amount of tax attributes that may be available to offset taxable income in the future without restrictions imposed by Section 382 may continue to evolve.
Onity continues to monitor the ownership in its stock to evaluate whether any additional ownership changes have occurred that would further limit its ability to utilize certain tax attributes. As such, our analysis regarding the amount of tax attributes that may be available to offset taxable income in the future without restrictions imposed by Section 382 may continue to evolve.
We also advance T&I and Corporate advances primarily on properties that are in default or have been foreclosed. Our obligations to make these advances are governed by servicing agreements or guides, depending on investors or guarantor. Refer to Note 25 — Commitments to the Consolidated Financial Statements for further description of our servicer advance obligations.
We also advance T&I and Corporate advances primarily on properties that are in default or have been foreclosed. Our obligations to make these advances are governed by servicing agreements or guides, depending on investors or guarantor. Refer to Note 26 — Commitments to the Consolidated Financial Statements for further description of our servicer advance obligations.
See Note 14 — Borrowings to the Consolidated Financial Statements for additional information regarding our covenants. The most restrictive liquidity requirement under our debt agreements, excluding additional Agency minimum liquidity requirements, is for a minimum of $75.0 million in consolidated liquidity, as defined, under certain of our mortgage loan financing and MSR financing facilities agreements.
See Note 14 — Borrowings to the Consolidated Financial Statements for additional information regarding our covenants. The most restrictive liquidity requirement under our debt agreements, excluding additional Agency or regulatory minimum liquidity requirements, is for a minimum of $75.0 million in consolidated liquidity, as defined, under certain of our mortgage loan financing and MSR financing facilities agreements.
Quantitative and Qualitative Disclosures About Market Risk for a sensitivity analysis reflecting the estimated change in the fair value of our MSRs, HECM loans held for investment and loans held for sale carried at fair value as well as any related derivatives at December 31, 2023, given hypothetical instantaneous parallel shifts in the yield curve.
Quantitative and Qualitative Disclosures About Market Risk for a sensitivity analysis reflecting the estimated change in the fair value of our MSRs, HECM loans held for investment and loans held for sale carried at fair value as well as any related derivatives at December 31, 2024, given hypothetical instantaneous parallel shifts in the yield curve.
We expect the MSR realization of expected cash flows to follow the growth or size of our MSR portfolio net of ESS financing liabilities and pledged MSR liabilities with our MSR capital partners. Second, MSR fair value changes are driven by changes in interest rates and assumptions, such as forecasted prepayments.
We expect the MSR realization of expected cash flows to generally follow the growth or size of our MSR portfolio net of ESS financing liabilities and pledged MSR liabilities with our MSR capital partners. Second, MSR fair value changes are driven by changes in interest 57 rates and assumptions, such as forecasted prepayments.
As further discussed, the 30-year fixed rate mortgage is a key driver of the Originations volumes, the 10-year Treasury rate is a key benchmark for MSR valuation and hedging activities, and the 1-month SOFR is a key benchmark for the profitability of our Servicing segment (including float earnings and asset-backed financing cost).
As further discussed, the 30-year fixed rate mortgage is a key driver of Originations volume, the 10-year Treasury rate is a key benchmark for MSR valuation and hedging activities, and the 1-month SOFR is a key benchmark for the profitability of our Servicing segment (including float earnings and asset-backed financing cost).
We believe that we are in compliance with the covenants in our debt agreements as of December 31, 2023. Credit Ratings Credit ratings are intended to be an indicator of the creditworthiness of a company’s debt obligations. Lower ratings generally result in higher borrowing costs and reduced access to capital markets.
We believe that we are in compliance with the covenants in our debt agreements as of December 31, 2024. Credit Ratings Credit ratings are intended to be an indicator of the creditworthiness of a company’s debt obligations. Lower ratings generally result in higher borrowing costs and reduced access to capital markets.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in millions, except per share amounts and unless otherwise indicated) The Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Form 10-K generally discusses 2023 and 2022 items and provides year-to-year comparisons between 2023 and 2022.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in millions, except per share amounts and unless otherwise indicated) The Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Form 10-K generally discusses 2024 and 2023 items and provides year-to-year comparisons between 2024 and 2023.
(2) Buyouts are reported as Loans held for sale, Receivables or REO depending on the loan and foreclosure status.
(2) Buyouts are reported as Loans held for sale, Receivables or REO depending on loan and foreclosure status.
We also rely on the secondary mortgage market as a source of consistent liquidity to support our lending operations.
We also rely on the secondary mortgage market as a source of liquidity to support our lending operations.
Ocwen and PHH Corporation have both experienced historical ownership changes that have caused the use of certain tax attributes to be limited and have resulted in the write-off of certain of these attributes based on our inability to use them in the carryforward periods defined under the tax laws.
Onity and PHH Corporation have both experienced historical ownership changes that have caused the use of certain tax attributes to be limited and have resulted in the write-off of certain of these attributes based on our inability to use them in the carryforward periods defined under the tax laws.
Most subservicing agreements, including our agreements with Rithm and MAV, provide for prompt reimbursement of any advances from the owner of the servicing rights. Refer to Note 25 — Commitments to the Consolidated Financial Statements for further description of servicer advance obligations.
Most subservicing agreements, including our agreements with Rithm and MAV, provide for prompt reimbursement of any advances from the owner of the servicing rights. Refer to Note 26 — Commitments to the Consolidated Financial Statements for further description of servicer advance obligations.
Our reverse subservicing clients bear the financial obligation and risks associated with purchasing loans out of securitization pools within the portfolio we subservice. See Note 25 — Commitments to the Consolidated Financial Statements for additional information.
Our reverse subservicing clients bear the financial obligation and risks associated with purchasing loans out of securitization pools within the portfolio we subservice. See Note 26 — Commitments to the Consolidated Financial Statements for additional information.
There is no assurance that actual results will be in line with the outlook information set forth below, and Ocwen does not undertake to update any forward-looking statements. Also refer to the Segment results of operations section for further detail, the description of our business environment, initiatives and risks.
There is no assurance that actual results will be in line with the outlook information set forth below, and Onity does not undertake to update any forward-looking statements. Refer to the Segment results of operations section for further detail, the description of our business environment, initiatives and risks.
We cannot currently estimate the amount, if any, of reasonably possible losses above amounts that have been recorded at December 31, 2023. RECENT ACCOUNTING DEVELOPMENTS Recent Accounting Pronouncements For additional information, see Note 1 — Organization, Basis of Presentation and Significant Accounting Policies to the Consolidated Financial Statements for additional information.
We cannot currently estimate the amount, if any, of reasonably possible losses above amounts that have been recorded at December 31, 2024. 84 RECENT ACCOUNTING DEVELOPMENTS Recent Accounting Pronouncements For additional information, see Note 1 — Organization, Basis of Presentation and Significant Accounting Policies to the Consolidated Financial Statements for additional information.
We offer correspondent sellers the choice to take out mandatory or best efforts contracts, under which the seller's obligation to deliver the mortgage loan becomes mandatory only when and if the mortgage is closed and funded. Additionally, we offer correspondent sellers the opportunity to leverage a non-delegated underwriting option for best-efforts deliveries.
We offer correspondent sellers the choice to take out mandatory or “best-efforts” contracts, under 69 which the seller's obligation to deliver the mortgage loan becomes mandatory only when and if the mortgage is closed and funded. Additionally, we offer correspondent sellers the opportunity to leverage a non-delegated underwriting option for best-efforts deliveries.
As one of the main differences between proceeds from sale and origination or purchase of loans held for sale, newly originated MSRs are effectively classified as operating cash flows. Purchases of MSRs through flow purchase agreements, Agency Cash Window and bulk acquisitions are classified as investing activity.
As one of the main differences between proceeds from sale and origination or purchase of loans held for sale, newly originated (capitalized) MSRs are effectively classified as operating cash flows under GAAP. Purchases of MSRs through flow purchase agreements, Agency Cash Window and bulk acquisitions are classified as investing activity.
Discussions of year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023.
Discussions of year-to-year comparisons between 2023 and 2022 are not included in this Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 27, 2024.
Key Trends The following discussion provides information regarding certain key drivers of our financial performance and includes certain forward-looking statements that are based on the current beliefs and expectations of Ocwen’s management and are subject to significant risks and uncertainties.
Key Trends and Outlook The following discussion provides information regarding certain key drivers of our financial performance and includes certain forward-looking statements that are based on the current beliefs and expectations of Onity’s management and are subject to significant risks and uncertainties.
The net fair value changes of the reverse mortgage loans and related borrowings reported within the Servicing segment include the following: 61 • contractual interest income earned on securitized reverse mortgage loans, or HECM loans, net of interest expense on HMBS-related borrowings, that is, the servicing fee we are contractually entitled to and collect on a monthly basis under the Ginnie Mae MBS Guide regarding servicing HMBS; and • other fair value changes of the net balance of securitized loans held for investment and HMBS-related borrowings, that effectively represents servicing and tails.
The Gain on reverse loans held for investment and HMBS-related borrowings, net reported within the Servicing segment includes the net fair value changes of securitized reverse mortgage loans held for investment and HMBS-related borrowings, that comprise the following: • contractual interest income earned on securitized reverse mortgage loans, or HECM loans, net of interest expense on HMBS-related borrowings, that is, on a net basis, the servicing fee we are contractually entitled to and collect on a monthly basis under the Ginnie Mae MBS Guide regarding servicing HMBS; and • other fair value changes of the net balance of securitized loans held for investment and HMBS-related borrowings, that effectively represents servicing and tails.
As our HECM loan portfolio is predominantly comprised of ARMs, higher interest rates cause the loan balance to accrue and reach the 98% maximum claim amount liquidation event more quickly, shortening the life of the servicing net asset. Other fair value gains (losses) are partially hedged with our forward MSR hedge strategy.
As our HECM loan portfolio is predominantly comprised of ARMs, higher interest rates cause the loan balance to accrue and reach the 98% maximum claim amount liquidation event more quickly, shortening the life of the servicing net asset. Other change in fair value is partially hedged with our forward MSR hedge strategy.
At December 31, 2023, we held unrestricted cash in excess of this minimum amount. The minimum liquidity requirements for PHH contained in some debt agreements are also subject to the minimum requirement set forth by the Agencies. Refer to Note 24 — Regulatory Requirements.
At December 31, 2024, we held unrestricted cash in excess of this minimum amount. The minimum liquidity requirements for PHH contained in some debt agreements are also subject to the minimum requirement set forth by the Agencies. Refer to Note 25 — Regulatory Requirements.
Regarding the current maturities of our borrowings, as of December 31, 2023, we have approximately $1.0 billion of debt outstanding that would either come due, begin amortizing or require partial repayment in the next 12 months.
Regarding the current maturities of our borrowings, as of December 31, 2024, we have approximately $2.1 billion of debt outstanding that would either come due, begin amortizing or require partial repayment in the next 12 months.
Considerable judgment is used in forming conclusions about Level 3 inputs such as prepayment speeds and discount rates. Changes to these inputs could have a significant effect on fair value measurements. Valuation of Reverse Mortgage Loans Held for Investment and HMBS-related Borrowings Reverse mortgage loans are insured by the FHA and transferred into Ginnie Mae guaranteed securities (or HMBS).
Considerable judgment is used in forming conclusions about Level 3 inputs. Changes to these inputs could have a significant effect on fair value measurements. Valuation of Reverse Mortgage Loans Held for Investment and HMBS-related Borrowings Reverse mortgage loans are insured by the FHA and transferred into Ginnie Mae guaranteed securities (or HMBS).
Refer to Forward-Looking Statements beginning on page 2 and the Risk Factors section beginning on page 18 , for discussion of certain of those risks and uncertainties and other factors that could cause Ocwen’s actual results to differ materially because of those risks and uncertainties.
Refer to Forward-Looking Statements beginning on page 2 and the Risk Factors section beginning on page 16 , for discussion of certain of those risks and uncertainties and other factors that could cause Onity’s actual results to differ materially because of those risks and uncertainties.
Our growth strategy includes acquiring assets and/or operations of complementary businesses, by means of acquisition, merger or other transaction forms. Our strategy may also include pursuing large transactions, including bulk purchases or sales of MSRs .
Our growth and asset management strategy includes purchasing assets and/or operations of complementary businesses, by means of acquisition, merger or other transaction forms. Our strategy may also include pursuing large transactions, including bulk purchases or sales of MSRs .
LIQUIDITY AND CAPITAL RESOURCES Overview In the normal course of business, we are actively engaged with existing and potential lenders and as a result add, terminate, replace or extend our debt agreements to the extent necessary to finance our operations and optimize our financing costs.
In the normal course of business, we are actively engaged with existing and potential lenders and as a result add, terminate, replace or extend our debt agreements to the extent necessary to finance our operations and growth and optimize our financing costs.
In addition, when borrowers are delinquent, the amount of funds that we are required to advance to the investors increases. We utilize servicing advance financing facilities, which are asset-backed (i.e., match funded liabilities) securitization facilities, to finance a portion of our advances. As a result, increased delinquencies result in increased interest expense. Prepayment Speed .
In addition, when borrowers are delinquent, the amount of funds that we are required to advance to the investors increases. We utilize servicing advance financing facilities (match funded liabilities) to finance a portion of our advances. As a result, increased delinquencies result in increased interest expense. Prepayment Speed .
Gain on Reverse Loans Held for Investment and HMBS-Related Borrowings, Net The following table provides information regarding Gain on reverse loans held for investment and HMBS-related borrowings, net of the Originations segment that comprises fair value changes of the pipeline and unsecuritized reverse mortgage loans held for investment, at fair value, together with volume and margin (including loan fees): Years Ended December 31, % Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 Origination UPB (1) (in billions) $ 0.7 $ 1.4 $ 1.5 (53) % (6) % Origination margin (2) 3.41 % 4.25 % 5.37 % (20) (21) % Gain on reverse loans held for investment and HMBS-related borrowings, net (Originations) $ 23.2 $ 61.2 $ 82.0 (62) % (25) % (1) Defined as the UPB of loans funded in the period.
Gain on Reverse Loans Held for Investment and HMBS-Related Borrowings, Net The following table provides information regarding Gain on reverse loans held for investment and HMBS-related borrowings, net of the Originations segment that comprises fair value changes of the pipeline and unsecuritized reverse mortgage loans held for investment, at fair value, together with volume and margin (including loan fees): Years Ended December 31, % Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Origination UPB (1) (in billions) $ 0.8 $ 0.7 $ 1.4 11 % (53) % Origination margin (2) 3.41 % 3.41 % 4.25 % — (20) % Gain on reverse loans held for investment and HMBS-related borrowings, net (Originations) $ 25.9 $ 23.2 $ 61.2 12 % (62) % (1) Defined as the UPB of loans funded in the period.
Our total accrual for probable and estimable legal and regulatory matters, including accrued legal fees, was $8.3 million at December 31, 2023. It is possible that we will incur losses relating to threatened and pending litigation that materially exceed the amount accrued.
Our total accrual for probable and estimable legal and regulatory matters, including accrued legal fees, was $16.0 million at December 31, 2024. It is possible that we will incur losses relating to threatened and pending litigation that materially exceed the amount accrued.
The volume of Originations is a key driver of the profitability of our Originations segment, together with margins, and a key driver of the replenishment and growth of our Servicing segment.
The volume of Originations is a key driver of the profitability of our Originations segment, along with margins, and also a key driver of the replenishment and growth of our Servicing segment.
The fair value of the net reverse servicing asset is expected to continue to follow market conditions, with fair value gains or losses generally associated with declining or increasing interest rates and spread, respectively, and is part of our forward MSR hedging strategy. MSR valuation adjustments, net - Our net MSR fair value changes include multiple components.
The fair value of the net reverse servicing asset is expected to continue to follow market conditions, with fair value gains or losses generally associated with declining or increasing interest rates and spread, respectively, and is part of our forward MSR hedging strategy.
The following table provides the components of Pledged MSR liability expense: Years Ended December 31, 2023 2022 2021 Servicing fees collected on behalf of third parties $ 308.9 $ 322.5 $ 318.4 Less: Subservicing fee retained (77.6) (82.8) (90.4) Ancillary fee/income and other settlement (including expense reimbursement) 13.7 6.1 (6.7) Net servicing fee remittance (1) 244.9 245.9 221.3 ESS servicing spread remittance 51.5 9.1 — Pledged MSR liability expense $ 296.4 $ 255.0 $ 221.3 69 (1) For MSR transfers that do not meet sale accounting criteria.
The following table provides the components of Pledged MSR liability expense: Years Ended December 31, 2024 2023 2022 Servicing fees collected on behalf of third parties $ 139.1 $ 308.9 $ 322.5 Less: Subservicing fee retained (26.6) (77.6) (82.8) Ancillary fee/income and other settlement (including expense reimbursement) 11.3 13.7 6.1 Net servicing fee remittance (1) 123.8 244.9 245.9 ESS servicing spread remittance 51.8 51.5 9.1 Pledged MSR liability expense $ 175.6 $ 296.4 $ 255.0 68 (1) For MSR transfers that do not meet sale accounting criteria.
To select an appropriate loan modification option for a borrower, we perform a structured analysis, using a proprietary model, of all options using information provided by the borrower as well as external data, including recent broker price opinions to value the mortgaged property.
To select an appropriate loan modification option for a borrower in accordance with the applicable servicing agreement, we perform a structured analysis, using a proprietary model, of all options using information provided by the borrower as well as external data, 58 including recent broker price opinions to value the mortgaged property.
Note that the fair value changes of the net asset value between securitized HECM loans and HMBS (referred to as our reverse MSR) attributable to interest rate changes are effectively used as a hedge of our forward MSR portfolio. See further description of our hedging strategy and its effectiveness in Item 7A.
The fair value changes of the net asset value between securitized HECM loans and HMBS (referred to as our reverse MSR) attributable to interest rate changes are effectively used as a hedge of our forward MSR portfolio. See further description of our hedging strategy and its effectiveness in Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Rithm represented the largest portfolio of MSRs transferred, failing sale accounting, and the largest component of Pledged MSR liability expense during the three years 2021 through 2023.
Rithm represented the largest portfolio of MSRs transferred, failing sale accounting, and the largest component of Pledged MSR liability expense through 2023.
Our operating results for our Servicing segment are heavily dependent on our ability to scale our operations to cost-effectively and efficiently perform servicing activities in accordance with our servicing agreements. 60 Delinquencies . Delinquencies impact our financial results and operating cash flows for our Servicing segment.
The financial performance of our Servicing segment is heavily dependent on our ability to scale our operations to cost-effectively and efficiently perform servicing activities in accordance with our servicing agreements. Delinquencies . Delinquencies impact our financial results and operating cash flows for our Servicing segment.
We also paid $13.5 million to repurchase $15.0 million of our 7.875% PHH Senior Secured Notes. Cash inflows of $1.05 billion received in connection with our reverse mortgage securitizations, which are accounted for as secured financings, were more than offset by repayments on the related financing liability of $1.07 billion.
We also paid $14 million to repurchase $15 million of our 7.875% PHH Senior Secured Notes. Cash inflows of $1,055 million received in connection with our reverse mortgage securitizations, which are accounted for as secured financings, were more than offset by repayments on the related financing liability of $1,070 million.
We have short-term commitments to lend $614.6 million in connection with our forward and reverse mortgage loan IRLCs, respectively, outstanding at December 31, 2023. In addition, we have originated floating-rate reverse mortgage loans under which the borrowers have additional borrowing capacity of $1.8 billion at December 31, 2023.
We have short-term commitments to lend $1.3 billion in connection with our forward and reverse mortgage loan IRLCs outstanding at December 31, 2024. In addition, we have originated floating-rate reverse mortgage loans under which the borrowers have additional borrowing capacity of $3.1 billion at December 31, 2024.
Offsetting cash outflows include $95.3 million of net payments on the financing liabilities related to MSRs transferred and ESS financings due to runoff, $36.0 million net repayments of borrowings under our MSR financing facilities, and $13.9 million of net repayments on advance match funded liabilities.
Offsetting cash outflows include $95 million of net payments on the financing liabilities related to MSRs transferred and ESS financings due to runoff, and $36 million net repayment of borrowings under our MSR financing facilities, and $14 million of net repayment on advance match funded liabilities.
As of December 31, 2023, we have relationships with 712 approved correspondent sellers, or 112 net new sellers since December 31, 2022. We originate and purchase reverse mortgage loans through our retail, wholesale and correspondent lending channels, under the guidelines of the HECM reverse mortgage insurance program of the FHA.
As of December 31, 2024, we have relationships with 716 approved correspondent sellers, or 4 net new sellers since December 31, 2023. 3- Reverse Originations We originate and purchase reverse mortgage loans through our retail, wholesale and correspondent lending channels, under the guidelines of the HECM reverse mortgage insurance program of the FHA.
PHH is one of the largest correspondent lenders in the U.S. based on origination UPB. Liberty is one of the nation’s largest reverse mortgage lenders and servicer based on origination and securitization UPB, dedicated to education and providing loans that help customers meet their personal and financial needs.
PHH is also one of the largest correspondent lenders in the U.S. based on origination UPB. Liberty is one of the nation’s largest reverse mortgage lenders and servicers based on origination and securitization UPB, dedicated to education and providing loans that help customers meet their personal and financial needs by drawing upon their home equity.
Income Tax Benefit (Expense) Years Ended December 31, 2023 2022 2021 Income tax expense (benefit) $ 5.6 $ (0.8) $ (22.4) Income (loss) before income taxes (58.1) 24.9 (4.4) Effective tax rate (10) % (3) % 509 % Our effective tax rate for the periods indicated in the table above differs from the 21% federal statutory income tax rate primarily due to the full valuation allowance recorded on our net U.S. federal and state deferred tax assets.
Income Tax Expense (Benefit) Years Ended December 31, 2024 2023 2022 Income tax expense (benefit) $ 5.3 $ 5.6 $ (0.8) Income (loss) before income taxes 39.3 (58.1) 24.9 Effective tax rate 14 % (10) % (3) % Our effective tax rate for the periods indicated in the table above is lower than the 21% federal statutory income tax rate primarily due to the full valuation allowance recorded on our net U.S. federal and state deferred tax assets.
Offsetting cash inflows include $44.6 million net cash inflows in connection with our HECM reverse mortgages, $18.5 million proceeds from the sale of real estate, and $4.4 million of capital distributions received, net of contributions, from our equity method investee MAV Canopy. Our financing activities provided $70.8 million of cash.
Offsetting cash inflows $45 million net cash inflows in connection with our HECM reverse mortgages, $18 million proceeds from the sale of real estate, and $4 million of capital distributions received, net of contributions, from our equity method investee MAV Canopy. Our financing activities provided $71 million of cash.
We serviced or subserviced 1.3 million loans with a total UPB of $288.4 billion on behalf of more than 3,900 investors and 113 subservicing clients as of December 31, 2023. We service all mortgage loan classes, including conventional, government-insured, non-Agency, small-balance commercial and multi-family loans.
We serviced or subserviced 1.4 million loans with a total UPB of $301.7 billion on behalf of more than 4,000 investors and 125 subservicing clients as of December 31, 2024. We service all mortgage loan classes, including conventional, government-insured, non-Agency, small-balance commercial and multi-family loans.
In 2023, we added $50.4 billion of new volume, mainly $27.6 billion of new subservicing and $22.3 billion of non-bulk new servicing, as further detailed in the below table. $ In billions UPB $ Change Years Ended December 31, 2023 vs 2022 2022 vs 2021 2023 2022 2021 Mortgage servicing originations Retail - Consumer Direct MSR (1) $ 0.4 $ 1.2 $ 2.4 $ (0.9) $ (1.2) Correspondent MSR (1) 12.2 15.6 16.6 (3.4) (1.0) Flow and Agency Cash Window MSR purchases (2) 9.1 11.3 20.4 (2.3) (9.1) Reverse mortgage servicing (3) 0.7 1.4 1.5 (0.8) (0.1) Total servicing 22.3 29.5 41.0 (7.2) (11.5) Bulk purchases (2) 0.5 4.5 55.1 (4.1) (50.6) Total servicing additions 22.8 34.0 96.1 (11.3) (62.1) Interim forward subservicing 6.8 12.6 14.7 (5.8) (2.1) Other new forward subservicing 19.4 29.0 26.9 (9.5) 2.1 Reverse subservicing 1.4 13.2 14.3 (11.9) (1.1) Total subservicing additions (4) 27.6 54.8 55.9 (27.2) (1.1) Total servicing and subservicing UPB additions $ 50.4 $ 88.8 $ 152.0 $ (38.4) $ (63.2) (1) Represents the UPB of loans that have been originated or purchased (funded) during the respective periods and for which we recognize a new MSR on our consolidated balance sheets upon sale or securitization.
In 2024, we added $85.6 billion of new volume, with $44.9 billion of new subservicing, $29.7 billion of new Originations production, and $10.9 billion in bulk acquisitions, as further detailed in the below table. $ In billions UPB $ Change Years Ended December 31, 2024 vs 2023 2023 vs 2022 2024 2023 2022 Mortgage servicing originations Retail - Consumer Direct MSR (1) $ 0.9 $ 0.4 $ 1.2 $ 0.5 $ (0.9) Correspondent MSR (1) 16.1 12.2 15.6 4.0 (3.4) Flow and Agency Cash Window MSR purchases (2) 11.9 9.1 11.3 2.8 (2.3) Reverse mortgage servicing (3) 0.8 0.7 1.4 0.1 (0.8) Total servicing 29.7 22.3 29.5 7.4 (7.2) Bulk MSR purchases (2) (4) 10.9 0.5 4.5 10.4 (4.1) Total servicing additions 40.6 22.8 34.0 17.9 (11.3) Interim forward subservicing 7.9 6.8 12.6 1.1 (5.8) Other new forward subservicing 36.5 19.4 29.0 17.1 (9.5) Reverse subservicing 0.5 1.4 13.2 (0.9) (11.9) Total Subservicing additions (5) 44.9 27.6 54.8 17.3 (27.2) Total servicing and subservicing UPB additions $ 85.6 $ 50.4 $ 88.8 $ 35.2 $ (38.4) (1) Represents the UPB of loans that have been originated or purchased (funded) during the respective periods and for which we recognize a new MSR on our consolidated balance sheets upon sale or securitization.
We expect continued competitive pressure on margins across all channels. Gain on reverse loans held for investment and HMBS-related borrowings, net - The reverse mortgage origination gain is driven by the same factors as gain on sale of loans held for sale, with smaller volumes in the reverse mortgage market and generally larger margins.
Gain on reverse loans held for investment and HMBS-related borrowings, net - The reverse mortgage origination gain is driven by the same factors as gain on sale of loans held for sale, with smaller volumes in the reverse mortgage market and generally larger margins.
Our average owned MSR servicing portfolio stayed relatively flat year over year, with a $1.9 billion, or 2% increase. $ in billions Average UPB $ Change Years Ended December 31, 2023 vs 2022 2022 vs 2021 2023 2022 2021 Owned MSR $ 123.8 $ 121.9 $ 117.5 $ 1.9 $ 4.4 Rithm 47.0 52.0 61.4 (5.0) (9.4) MAV 51.9 42.5 9.1 9.4 33.4 Subservicing (including reverse subservicing) 56.4 57.0 24.7 (0.7) 32.3 Reverse mortgage loans (owned) 7.8 7.4 6.8 0.4 0.6 Commercial and other servicing 0.9 0.8 1.2 0.2 (0.4) Other MSR capital partners 4.6 — — 4.6 — Total servicing and subservicing UPB (average) $ 292.4 $ 281.6 $ 220.7 $ 10.9 $ 60.9 As of December 31, 2023 and 2022, the total servicing and subservicing UPB amounted to $288.4 billion and $289.8 billion, respectively, a net decrease of $1.3 billion or 0.5%.
Our average owned MSR servicing portfolio stayed relatively flat year over year, with a $0.8 billion, or 1% decrease. $ in billions Average UPB $ Change Years Ended December 31, 2024 vs 2023 2023 vs 2022 2024 2023 2022 Owned MSR $ 123.0 $ 123.8 $ 121.9 $ (0.8) $ 1.9 Subservicing (including reverse subservicing) 64.5 56.4 57.0 8.1 (0.7) Rithm 43.1 47.0 52.0 (3.9) (5.0) MAV 50.0 51.9 42.5 (2.0) 9.4 Other MSR capital partners 9.1 4.6 — 4.5 4.6 Reverse mortgage loans (owned) 9.0 7.8 7.4 1.2 0.4 Other servicing (including whole loans) 0.9 0.9 0.8 — 0.2 Total servicing and subservicing UPB (average) $ 299.6 $ 292.4 $ 281.6 $ 7.1 $ 10.9 As of December 31, 2024 and 2023, the total servicing and subservicing UPB amounted to $301.7 billion and $288.4 billion, respectively, a net increase of $13.3 billion or 4.6%.
Financing cash inflows are primarily comprised of $174.7 million of proceeds from the sale of MSRs accounted for as a financing in connection with sales of MSRs and $68.7 million of proceeds from ESS financings.
Financing cash inflows are primarily comprised of $175 million of proceeds from sale of MSRs accounted for as a financing in connection with sales of MSRs and $69 million of proceeds from ESS financings.
MSR Valuation Adjustments, Net The table below presents the key components of MSR valuation adjustments, net which include MSRs, MSR pledged liabilities and ESS financing liabilities at fair value, together with MSR hedging derivatives: Years Ended December 31, 2023 2022 2021 Realization of expected cash flows (runoff) $ (143.6) $ (164.5) $ (160.8) Fair value gains (losses) due to rates and assumptions (55.5) 261.0 71.9 MSR hedging derivative fair value gain (loss) (33.1) (106.9) (9.5) Sub-total fair value gains (losses) due to rates and assumptions, net of hedging (1) (88.6) 154.1 62.3 MSR valuation adjustments, net $ (232.2) $ (10.4) $ (98.5) (1) Excludes fair value changes of reverse mortgage loans held-for-investment and HMBS related borrowing due to rates and assumptions that are part of the MSR hedging strategy.
MSR Valuation Adjustments, Net The table below presents the components of MSR valuation adjustments, net which include MSRs, MSR pledged liabilities and ESS financing liabilities at fair value, along with MSR hedging derivatives: Years Ended December 31, 2024 2023 2022 Realization of expected cash flows (runoff) $ (156.6) $ (143.6) $ (164.5) Fair value gains (losses) due to rate and assumption changes 173.3 (55.5) 261.0 MSR hedging derivative fair value gain (loss) (112.9) (33.1) (106.9) MSR valuation adjustments, net (1) $ (96.2) $ (232.2) $ (10.4) (1) Excludes fair value changes of reverse mortgage loans held-for-investment and HMBS related borrowing due to rates and assumptions that are part of the MSR hedging strategy.
MSR Valuation Adjustments The financial performance of our Servicing segment is impacted by the changes in fair value of the MSR portfolio due to changes in market interest rates, among other factors. Our MSR portfolio is carried at fair value, with changes in fair value recorded in earnings, within MSR valuation adjustments, net.
MSR Valuation Adjustments The financial performance of our Servicing segment is impacted by the changes in fair value of the MSR portfolio due to changes in market interest rates, among other factors.
Our forward lending correspondent channel drives higher servicing portfolio replenishment. We purchase closed loans that have been underwritten to investor guidelines from our network of correspondent sellers and sell and securitize them, on a servicing retained basis.
We purchase closed loans that have been underwritten to investor guidelines from our network of correspondent sellers and sell and securitize them, on a servicing retained basis.
Servicing and subservicing fee revenue - Our servicing fee revenue is a function of the volume being serviced - UPB for servicing fees and loan count for subservicing fees. We expect we will continue to grow our servicing and subservicing portfolio through our multi-channel Originations platform and through MSR capital partners, with an emphasis on subservicing.
Servicing and subservicing fee revenue - Our servicing fee revenue is a function of the volume being serviced - UPB for servicing fees and loan count for subservicing fees. We expect we will continue to grow our servicing and subservicing portfolio through our multi-channel Originations platform, MSR bulk acquisitions and subservicing additions.
(3) Additions include purchased MSRs on portfolios consisting of 49 loans with a UPB of $14.9 million that have not yet transferred to the PHH servicing system as of December 31, 2023. Because we have legal title to the MSRs, the UPB and count of the loans are included in our reported servicing portfolio.
(2) Additions include purchased MSRs on portfolios with a UPB of $5.5 billion that have not yet transferred to the PHH servicing system as of December 31, 2024. Because we have legal title to the MSRs, the UPB and count of the loans are included in our reported servicing portfolio.
We do not provide or assume any origination representations and warranties in connection with our MSR purchases. As of December 31, 2023, we have recorded a liability for representation and warranty obligations and similar indemnification obligations of $32.9 million. In 2023, we recorded a $2.0 million net provision expense for indemnification. See Note 26 — Contingencies for additional information.
We do not provide or assume any origination representations and warranties in connection with our MSR purchases. As of December 31, 2024, we have recorded a liability for representation and warranty obligations and similar indemnification obligations of $27.4 million. See Note 27 — Contingencies for additional information.
Management’s assessment involves the use of estimates, assumptions, and judgments, including progress of the matter, prior experience, available defenses, and the advice of legal counsel and other experts. Accruals are adjusted as more information becomes available or when an event occurs requiring a change. In 2023, we recorded a $30.0 million provision reversal for loss contingencies.
Management’s assessment involves the use of estimates, assumptions, and judgments, including progress of the matter, prior experience, available defenses, and the advice of legal counsel and other experts. Accruals are adjusted as more information becomes available or when an event occurs requiring a change.
Refer to Note 12 — Investment in Equity Method Investee and Related Party Transactions. Loan Resolutions We have a strong track record of success as a leader in the servicing industry in foreclosure prevention and loss mitigation that helps homeowners stay in their homes and improves financial outcomes for mortgage loan investors.
Loan Resolutions We have a strong track record of success as a leader in the servicing industry in foreclosure prevention and loss mitigation that helps homeowners stay in their homes and improves financial outcomes for mortgage loan investors.
MSR valuation adjustments, net decreased by $221.8 million (higher loss) in 2023 compared to 2022 largely driven by interest rates, as discussed below. • MSRs are subject to runoff, a fair value decline due to the realization of expected cash flows and yield based on projected borrower behavior, including scheduled amortization of the loan UPB together with projected voluntary prepayments.
MSR valuation adjustments, net decreased by $136.1 million (lower loss) in 2024 compared to 2023 largely driven by interest rates, favorable assumption updates and changes in our hedge coverage ratio, as discussed below. 53 • MSRs are subject to runoff, a fair value decline due to the realization of expected cash flows and yield based on projected borrower behavior, including scheduled amortization of the loan UPB together with projected voluntary prepayments.
The following table provides the range and weighted average of significant unobservable assumptions used (expressed as a percentage of UPB) by MSR class projected for the five-year period beginning December 31, 2023: Conventional Government-Insured Non-Agency Prepayment speed Range 4.6% to 10.5% 5.0% to 13.8% 6.9% to 8.0% Weighted average 8.2% 11.1% 7.3% Delinquency Range 0.4% to 1.2% 6.1% to 10.6% 8.2% to 17.4% Weighted average 0.6% 7.3% 11.8% Cost to service (in dollars) Range $67 to $70 $98 to $114 $175 to $229 Weighted average $68 $105 $195 Discount rate 9.0% 10.4% 11.4% Changes in these assumptions are generally expected to affect our results of operations as follows: • Increases in prepayment speeds generally reduce the value of our MSRs as the underlying loans prepay faster which causes accelerated MSR portfolio runoff, higher compensating interest payments and lower overall servicing fees, partially offset by a lower overall cost of servicing, increased float earnings on higher float balances and lower interest expense on lower servicing advance balances. • Increases in delinquencies generally reduce the value of our MSRs as the cost of servicing increases during the delinquency period, and the amounts of servicing advances and related interest expense also increase. • Increases in the discount rate reduce the value of our MSRs due to the lower overall net present value of the net cash flows. • Increases in interest rate assumptions will increase interest expense for financing servicing advances although this effect is partially offset by an increase in the amount of float earnings.
We believe that our procedures provide reasonable assurance that the fair value used in our consolidated financial statements comply with the accounting guidance for fair value measurements and disclosures and reflect the assumptions that a market participant would use. 82 The following table provides the range and weighted average of significant unobservable assumptions used (expressed as a percentage of UPB) by MSR class projected for the five-year period beginning December 31, 2024: Conventional Government-Insured Non-Agency Prepayment speed Range 4.7% to 8.8% 6.1% to 12.5% 6.7% to 7.99% Weighted average 6.8% 8.2% 7.2% Delinquency Range 0.4% to 1.2% 5.7% to 10.7% 8.5% to 17.8% Weighted average 0.6% 7.0% 12.1% Cost to service (in dollars) Range $67 to $70 $96 to $117 $177 to $223 Weighted average $68 $104 $194 Discount rate 9.8% 10.8% 10.9% Changes in these assumptions are generally expected to affect our results of operations as follows: • Increases in prepayment speeds generally reduce the value of our MSRs as the underlying loans prepay faster which causes accelerated MSR portfolio runoff, higher compensating interest payments and lower overall servicing fees, partially offset by a lower overall cost of servicing, increased float earnings on higher float balances and lower interest expense on lower servicing advance balances. • Increases in delinquencies generally reduce the value of our MSRs as the cost of servicing increases during the delinquency period, and the amounts of servicing advances and related interest expense also increase. • Increases in the discount rate reduce the value of our MSRs due to the lower overall net present value of the net cash flows. • Increases in interest rate assumptions will increase interest expense for financing servicing advances although this effect is partially offset by an increase in the amount of float earnings.
The following table provides a breakdown of our servicer advances, net of allowance for losses: Advances by investor type December 31, 2023 Principal and Interest Taxes and Insurance Foreclosures, bankruptcy, REO and other Total Conventional $ 3.5 $ 91.2 $ 6.2 $ 100.8 Government-insured 3.3 37.7 19.3 60.2 Non-Agency 205.5 214.3 97.9 517.7 Total, net $ 212.2 $ 343.2 $ 123.3 $ 678.8 December 31, 2022 Principal and Interest Taxes and Insurance Foreclosures, bankruptcy, REO and other Total Conventional $ 3.2 $ 97.7 $ 7.5 $ 108.3 Government-insured 3.0 35.9 17.7 56.6 Non-Agency 209.1 233.9 111.0 554.0 Total, net $ 215.2 $ 367.4 $ 136.2 $ 718.9 65 The following table provides the rollforward of activity of our portfolio of mortgage loans serviced for the years ended December 31, that includes MSRs, whole loans and subserviced loans, both forward and reverse: Amount of UPB ($ in billions) Count (000’s) 2023 2022 2021 2023 2022 2021 Portfolio at January 1 $ 289.8 $ 268.0 $ 188.8 1,378.8 1,353.3 1,107.6 Additions (1) (2) (3) (4) 50.7 85.3 152.0 164.2 292.2 567.9 MSR Sales (2) — (11.2) — (0.3) (0.3) (0.2) Servicing transfers (1) (2) (23.3) (18.0) (23.1) (80.1) (114.3) (102.0) Runoff (28.7) (34.3) (49.7) (118.1) (152.1) (220.0) Portfolio at December 31 $ 288.4 $ 289.8 $ 268.0 1,344.5 1,378.8 1,353.3 (1) Includes the volume of UPB associated with short-term interim subservicing for some clients as a support to their originate-to-sell business, where loans may be boarded and deboarded within the same quarter.
The following table provides a breakdown of our servicer advances, net of allowance for losses: Advances by investor type December 31, 2024 Principal and Interest Taxes and Insurance Foreclosures, bankruptcy, REO and other Total Conventional $ 1.3 $ 87.3 $ 5.4 $ 94.0 Government-insured 1.7 47.0 21.8 70.6 Non-Agency 146.8 179.8 86.0 412.6 Total, net $ 149.8 $ 314.2 $ 113.2 $ 577.2 December 31, 2023 Principal and Interest Taxes and Insurance Foreclosures, bankruptcy, REO and other Total Conventional $ 3.5 $ 91.2 $ 6.2 $ 100.8 Government-insured 3.3 37.7 19.3 60.2 Non-Agency 205.5 214.3 97.9 517.7 Total, net $ 212.2 $ 343.2 $ 123.3 $ 678.8 62 The following table provides the rollforward of activity of our portfolio of mortgage loans serviced which includes MSRs, whole loans and subserviced loans, both forward and reverse: Amount of UPB ($ in billions) Count (000’s) 2024 2023 2022 2024 2023 2022 Portfolio at January 1 $ 288.4 $ 289.8 $ 268.0 1,344.5 1,378.8 1,353.3 Additions (1) (2) (3) 85.3 50.7 85.3 319.6 164.2 292.2 MSR Sales (14.8) — (11.2) (54.6) (0.3) (0.3) Servicing transfers (1) (3) (25.3) (23.3) (18.0) (91.1) (80.1) (114.3) Runoff (32.0) (28.7) (34.3) (123.3) (118.1) (152.1) Portfolio at December 31 $ 301.7 $ 288.4 $ 289.8 1,395.1 1,344.5 1,378.8 (1) Includes the volume of UPB associated with short-term interim subservicing for some clients as a support to their originate-to-sell business, where loans may be boarded and deboarded within the same quarter.
Use of Funds Our primary near-term uses of funds in the normal course include: • Payment of operating costs and corporate expenses; • Payments for servicing advances in excess of collections; • Investment in MSRs (purchased and originated), other asset acquisitions and MAV Canopy equity contributions; • Originated, purchased and repurchased loans, including reverse mortgage buyouts; • Payment of margin calls under our MSR financing facilities and derivative instruments; • Debt service and repayments of borrowings, including under our MSR financing, advance financing and warehouse facilities, and payment of interest expense; and • Net negative working capital and other general corporate cash outflows.
Use of Funds Our primary near-term uses of funds in the normal course include: • Payment of operating costs and corporate expenses; • Payments for servicing advances in excess of collections including advances and draws related to reverse mortgage assets (see below); • Investment in MSRs (purchased and originated) and other related asset acquisitions; • Originated, purchased and repurchased loans, including reverse mortgage buyouts; • Payment of margin calls under our MSR financing facilities and derivative instruments; • Debt service and repayments of borrowings, including under our MSR financing, advance financing, warehouse facilities and OLIT securitization notes, and payment of interest expense including on the Senior Notes Due 2029; • Dividend payments on Series B Preferred Stock; and • Net negative working capital and other general corporate cash outflows.
Our MSR transfer agreements with MAV, Rithm and others have a significant impact on our consolidated statements of cash flows.
Our MSR transfer agreements with MAV, Rithm and others that do not meet sale accounting criteria have a significant impact on our consolidated statements of cash flows.
Aggregate UPB and Loan Count . Servicing fees are generally earned as a percentage of UPB and subservicing fees are earned on a per-loan basis or as a percentage of UPB. As a result, the change in aggregate UPB and loan count for which we have servicing rights or subservice will directly impact our revenue contributed by our Servicing segment.
As a result, the change in aggregate UPB and loan count for which we have servicing rights or subservice will directly impact our revenue contributed by our Servicing segment.
We provide customary origination representations and warranties to investors in connection with our loan sales and securitization activities. We receive customary origination representations and warranties from our network of approved correspondent lenders. We recognize the fair value of the liability for our representations and warranties at the time of sale.
We provide customary origination representations and warranties to investors in connection with our loan sales and securitization activities. We receive customary origination representations and warranties from our network of approved correspondent lenders.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

23 edited+3 added−8 removed21 unchanged
Biggest changeEffective September 2022, a minimum 25% and 30% hedge coverage ratios were required for interest rate declines less than, and more than 50 basis points, respectively. During the second quarter of 2023, management raised its minimum hedge coverage ratio to 60%. Effective December 2023, we established a targeted hedge coverage ratio range between 95% and 105%.
Biggest changeDuring the second quarter of 2023, management raised its minimum hedge coverage ratio to 60%. Effective December 2023, we established a targeted hedge coverage ratio range between 95% and 105%. In April 2024, we changed the risk measure to a dollar DV01 that resulted in an equivalent range of approximately 90% to 110%.
The fair value of MSRs is subject to changes in market interest rates, among other inputs and assumptions. 87 The objective of our MSR interest rate risk management and hedging policy is to protect shareholders’ equity and earnings against the fair value volatility of interest-rate sensitive MSR portfolio exposure, considering market, liquidity, cost and other conditions.
The fair value of MSRs is subject to changes in market interest rates, among other inputs and assumptions. The objective of our MSR interest rate risk management and hedging policy is to protect shareholders’ equity and earnings against the fair value volatility of interest-rate sensitive MSR portfolio exposure, considering market, liquidity, cost and other conditions.
The fair value gains and losses of such inter-segment derivatives effectively reclassify certain derivative gains and losses between MSR valuation adjustments, net within the Servicing segment and Gain on loans held for sale, net within the Originations segment to reflect the performance of these economic hedging strategies in the appropriate segments (see Note 23 — Business Segment Reporting for the amount of such reclassification).
The fair value gains and losses of such inter-segment derivatives effectively reclassify certain derivative gains and losses between MSR valuation adjustments, net within the Servicing segment and Gain on loans held for sale, net within the Originations segment to reflect the performance of these economic hedging strategies in the appropriate segments (see Note 24 — Business Segment Reporting for the amount of such reclassification).
Depending on the magnitude and risk of our positions we may enter into forward exchange contracts to hedge against the effect of changes in the value of the India Rupee or Philippine Peso. We did not enter into any foreign currency hedging derivative instruments during the three year period ended December 31, 2023.
Depending on the magnitude and risk of our positions we may enter into forward exchange contracts to hedge against the effect of changes in the value of the India Rupee or Philippine Peso. We did not enter into any foreign currency hedging derivative instruments during the three year period ended December 31, 2024.
We report changes in fair value of these derivative instruments in MSR valuation adjustments, net in our consolidated statements of operations, within the Servicing segment. We may, from time to time, establish inter-segment derivative instruments between the MSR and pipeline hedging strategies to minimize the use of third-party derivatives (none in 2023).
We report changes in fair value of these derivative instruments in MSR valuation adjustments, net in our consolidated statements of operations, within the Servicing segment. We may, from time to time, establish inter-segment derivative instruments between the MSR and pipeline hedging strategies to minimize the use of third-party derivatives (none in 2024 or 2023).
The following table summarizes the estimated change in the fair value of our MSRs, HECM loans held for investment and loans held for sale that we have elected to carry at fair value as well as any related derivatives at December 31, 2023, given hypothetical instantaneous parallel shifts in the yield curve.
The following table summarizes the estimated change in the fair value of our MSRs, HECM loans held for investment and loans held for sale that we have elected to carry at fair value as well as any related derivatives at December 31, 2024, given hypothetical instantaneous parallel shifts in the yield curve.
In addition, in certain circumstances, we may be subject to real estate price risk to the extent we are unable to liquidate REO within the FHA program guidelines. As our reverse mortgage portfolio seasons, and the volume of MCA repurchases increases, our exposure to this risk will increase. ITEM 8.
In addition, in certain circumstances, we may be subject to real estate price risk to the extent we are unable to liquidate REO within the FHA program guidelines. As our reverse mortgage portfolio seasons, and the volume of MCA repurchases increases, our exposure to this risk will increase.
See Note 17 — Derivative Financial Instruments and Hedging Activities to the Consolidated Financial Statements for additional information regarding our use of derivatives. MSR Hedging Strategy MSRs are carried at fair value with changes in fair value being recorded in earnings in the period in which the changes occur.
See Note 18 — Derivative Financial Instruments and Hedging Activities to the Consolidated Financial Statements for additional information regarding our use of derivatives. MSR Hedging Strategy MSRs are carried at fair value with changes in fair value being recorded in earnings in the period in which the changes occur.
The interest-rate sensitive MSR portfolio exposure is defined as follows: • Agency MSR portfolio, • expected Agency MSR bulk transactions subject to letters of intent (LOI), • less the Agency MSRs subject to our sale agreements with MAV, Rithm and others, also referred to as Pledged MSR liabilities (See Note 8 — Other Financing Liabilities, at Fair Value), • less the asset value for securitized HECM loans, net of the corresponding HMBS-related borrowings • other interest-rate sensitive exposures, including our ESS financing liabilities, as deemed appropriate by the Market Risk Committee.
The interest-rate sensitive MSR portfolio exposure is defined as follows: • Agency MSR portfolio, • expected Agency MSR bulk transactions subject to letters of intent (LOI), • less the Agency MSRs subject to our sale agreements with MAV, Rithm and others, also referred to as Pledged MSR liabilities (See Note 8 — Other Financing Liabilities, at Fair Value), • less the asset value for securitized HECM loans, net of the corresponding HMBS-related borrowings (also referred to as HECM or reverse MSR for risk management purposes), • other interest-rate sensitive exposures, including our ESS financing liabilities, as deemed appropriate by the Market Risk Committee.
Such inter-segment derivatives are eliminated in our consolidated financial statements. 89 The derivative instruments are subject to margin requirements, posted as either initial or variation margin. Ocwen may be required to post or may be entitled to receive cash collateral with its counterparties through margin calls, based on daily value changes of the instruments.
Such inter-segment derivatives are eliminated in our consolidated financial statements. The derivative instruments are subject to margin requirements, posted as either initial or variation margin. Onity may be required to post or may be entitled to receive cash collateral with its counterparties through margin calls, based on daily value changes of the instruments.
The hedge coverage ratio, defined as the ratio of hedge and asset rate sensitivity (referred to as DV01) is subject to lower and upper target thresholds under our policy.
The hedge coverage ratio, defined as the ratio of hedge (including reverse MSR) to asset rate sensitivity (referred to as DV01) is subject to lower and upper target thresholds under our policy.
With a partial hedge coverage ratio, the changes in fair value of our hedging instruments may not fully offset the changes in fair value of our net MSR portfolio exposure attributable to interest rate changes.
With a less-than 100% hedge coverage ratio, the changes in fair value of our hedging instruments may not fully offset the changes in fair value of our net MSR portfolio exposure attributable to interest rate changes.
The net daily market risk position of net pull-though adjusted locks and loans held for sale, less the offsetting hedges of the forward and reverse pipelines, is monitored daily and its daily limit is +/- 5%.
The net daily market risk position of net pull-though adjusted locks and loans held for sale, less the offsetting hedges of the pipeline, is monitored daily and its daily limit is +/- 5%.
EBO and Loan Modification Hedging – Loans Held for Sale, at fair value In our Servicing business, effective February 2022, management started hedging certain Ginnie Mae EBO loans repurchased out of securitization pools for modification and reperformance with TBAs to manage the interest rate risk while these loans await redelivery.
EBO and Loan Modification Hedging – Loans Held for Sale, at fair value In our Servicing business, we hedge certain Ginnie Mae EBO loans repurchased out of securitization pools for modification and reperformance with TBAs to manage the interest rate risk while these loans await redelivery.
These derivative instruments are not designated as accounting hedges. TBAs, or To-Be-Announced securities are actively traded, forward contracts to purchase or sell Agency MBS on a specific future date. From time to time, we enter into exchange-traded options contracts with purchased put options financed by written call options.
TBAs, or To-Be-Announced securities are actively traded, forward contracts to purchase or sell Agency MBS on a specific future date. From time to time, we enter into exchange-traded options contracts with purchased put options financed by written call options.
In addition, while DV01 measures may remain within the range of our hedging strategy’s objective, actual changes in fair value of the derivatives and MSR portfolio may not offset to the same extent, due to non-parallel changes in the interest rate curve, and the basis risk inherent in the MSR profile and hedging instruments, among other factors.
In addition, while interest rate sensitivity measures (DV01) may remain within the range of our hedging strategy’s objective, actual changes in fair value of the derivatives and MSR portfolio may not offset to the same extent, due to many factors.
Our interest rate exposure spans from overnight rates to 30-year rates, with increased sensitivity related to the 5-, 10-, and 30-year rates. Sensitivity analyses are based on hypothetical change in values of different interest-rate sensitive assets and liabilities together with our hedges and are presented under a set instantaneous +/- 25 basis point parallel move in rates.
Sensitivity analyses are based on hypothetical change in values of different interest-rate sensitive assets and liabilities together with our hedges and are presented under a set instantaneous +/- 25 basis point parallel move in rates.
Based on December 31, 2023 balances, if interest rates were to increase by 100 bps on our variable rate debt and cash and float balances, we estimate a net positive impact of approximately $0.8 million resulting from an increase of $18.3 million in annual interest income and other credits on deposits and an increase of $17.5 million in annual interest expense.
Based on December 31, 2024 balances, if interest rates were to decrease by 100 bps, we estimate a net positive impact on our profitability of approximately $1.4 million resulting from a decrease of $22.2 million in annual interest income and other credits on cash deposits and float balances, and a decrease of $23.6 million in annual interest expense on our variable-rate debt.
Changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship to the change in fair value may not be linear, among other factors. 90 Change in Fair Value Down 25 bps Up 25 bps Asset value of securitized HECM loans, net of HMBS-related borrowing $ 4 $ (4) Loans held for investment - Unsecuritized HECM loans and tails — — Loans held for sale 5 (6) Derivative instruments 31 (28) Total MSRs - Agency and non-Agency (1) (38) 37 IRLCs (1) 1 Total, net $ 1 $ — (1) Primarily reflects the impact of market interest rate changes on projected prepayments on the Agency MSR portfolio, Rithm and MAV pledged MSR financing liabilities and ESS financing liabilities.
Change in Fair Value Down 25 bps Up 25 bps Asset value of securitized HECM loans, net of HMBS-related borrowing $ 5 $ (5) Loans held for investment - Unsecuritized HECM loans and tails — — Loans held for sale 17 (20) Derivative instruments 1 — Total MSRs - Agency and non-Agency (1) (25) 23 IRLCs (1) 1 Total, net $ (2) $ (1) (1) Primarily reflects the impact of market interest rate changes on projected prepayments on the Agency MSR portfolio, Rithm and MAV pledged MSR financing liabilities and ESS financing liabilities.
Changes in fair value cannot be extrapolated because the relationship to the change in fair value may not be linear and other factors may apply, such as change in yield, spreads or other assumptions. The amounts based on market risk sensitive measures are hypothetical and presented for illustrative purposes only.
These sensitivities are hypothetical and presented for illustrative purposes only. Changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship to the change in fair value may not be linear, among other factors.
Advance Match Funded Liabilities We monitor the effect of increases in interest rates on the interest paid on our variable-rate advance financing debt. Earnings on cash and float balances are a partial offset to our exposure to changes in interest expense.
Advance Match Funded Liabilities We monitor the effect of changes in interest rates on the interest paid on our variable-rate advance financing debt.
As the market dictates, management may choose to maintain the hedge coverage ratio at different thresholds, with approval of the Market Risk Committee, in order to preserve liquidity and/or optimize asset returns. Prior to September, 2022, the hedge coverage ratio was required to remain within a minimum of 40% and maximum of 60%.
As the market dictates, management may choose to maintain the hedge coverage ratio at different thresholds, with approval of the Market Risk Committee, in order to preserve liquidity and/or optimize asset returns. Effective September 2022, a minimum 25% and 30% hedge coverage ratios were required for interest rate declines less than, and more than 50 basis points, respectively.
Sensitivity Analysis Fair Value MSRs, Loans Held for Sale, Loans Held for Investment and Related Derivatives We assess and manage our interest rate risk on a daily basis primarily using sensitivity analyses. We develop sensitivity analyses to determine the impact on our earnings and financial condition across various interest rate scenarios that could be expected over different time horizons.
Earnings on cash and float balances are a partial offset to our exposure to changes in interest expense. 86 Sensitivity Analysis Fair Value MSRs, Loans Held for Sale, Loans Held for Investment and Related Derivatives We assess and manage our interest rate risk on a daily basis primarily using sensitivity analyses.
Removed
We continuously evaluate the use of hedging instruments with the objective of enhancing the effectiveness of our interest rate hedging strategy. 88 The following table illustrates the interest rate sensitivity of our MSR portfolio exposure and associated hedges at December 31, 2023.
Added
These factors include non-parallel changes in the interest rate curve, the convexity of the MSR, the basis risk inherent in the MSR profile and hedging instruments, 85 model risk observed between actual vs. expected fair value changes, and hedge costs.
Removed
Hypothetical change in values of the MSR and hedges are presented under a set instantaneous +/- 25 basis point parallel move in rates. Refer to the description below under Sensitivity Analysis for more details.
Added
We continuously evaluate the use of hedging instruments with the objective of enhancing the effectiveness of our interest rate hedging strategy. Our derivative instruments include forward trades of MBS or Agency TBAs with different banking counterparties, exchange-traded interest rate swap futures and interest rate options. These derivative instruments are not designated as accounting hedges.
Removed
Fair value at December 31, 2023 Hypothetical change in fair value due to 25 bps rate decrease (1) Hypothetical change in fair value due to 25 bps rate increase (1) Agency MSRs - interest rate sensitive (excluding MAV, Rithm and others) $ 1,496 $ (37) $ 37 Asset value of securitized HECM loans, net of HMBS-related borrowing (Reverse MSR) 71 4 (4) MSR hedging derivative instruments 15 35 (33) Total hedge position 39 (37) Hypothetical hedge coverage ratio (2) 104 % 102 % Hypothetical residual exposure to changes in interest rates $ 2 $ (1) (1) The baseline for the hypothetical change in fair value is based on a 10-year swap rate of 3.76% at December 31, 2023.
Added
We develop sensitivity analyses to determine the impact on our earnings and financial condition across various interest rate scenarios that could be expected over different time horizons. Our interest rate exposure spans from overnight rates to 30-year rates, with increased sensitivity related to the 5-, 10-, and 30-year rates.
Removed
(2) The hypothetical hedge coverage ratio above is calculated as the change in fair value of the total hedge position divided by the change in value of the Agency MSR position. The above hypothetical hedge coverage ratio reflects the instrument sensitivities as of December 31, 2023 .
Removed
The actual hedge coverage ratio during the three months ended December 31, 2023, as monitored by Risk Management, may be summarized as follows: Fair value changes for the three months ended December 31, 2023 Change in 10-year swap (basis points) (79) Agency MSRs - interest rate sensitive (excluding MAV, Rithm and others) $ (145) Asset value of securitized HECM loans, net of HMBS-related borrowing (Reverse MSR) 13 MSR hedging derivative instruments 87 Total hedge position $ 100 Actual hedge coverage ratio during the period 69 % Residual (unhedged) fair value changes due to changes in interest rates $ (45) Our derivative instruments include forward trades of MBS or Agency TBAs with different banking counterparties, exchange-traded interest rate swap futures and interest rate options.
Removed
These sensitivities are hypothetical and presented for illustrative purposes only.
Removed
The decrease in our net sensitivity from December 31, 2022 to December 31, 2023 (from approximately $24 - $26 million to nil - $1 million for a 25 basis point parallel shift in the yield curve, up and down, respectively) is primarily due to our raising of the hedge coverage ratio to 100% at December 31, 2023.
Removed
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this section is contained in the Consolidated Financial Statements of Ocwen Financial Corporation and Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm, beginning on Page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.

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