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What changed in ONITY GROUP INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of ONITY GROUP INC.'s 2024 and 2025 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 2025 report.

+681 added−641 removedSource: 10-K (2026-02-17) vs 10-K (2025-02-21)

Top changes in ONITY GROUP INC.'s 2025 10-K

681 paragraphs added · 641 removed · 475 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

77 edited+20 added−40 removed91 unchanged
Biggest changeAt December 31, 2024, approximately 76% of our workforce was located outside the U.S. Onity Group Inc. is a Florida corporation organized in February 1988. With our predecessor companies, we have been servicing residential mortgage loans since 1988. We have been originating forward mortgage loans since 2012 and reverse mortgage loans since 2013.
Biggest changeWe are headquartered in West Palm Beach, Florida with offices and operations in the U.S., in the United States Virgin Islands (USVI), in India and the Philippines. At December 31, 2025, approximately 75% of our workforce was located outside the U.S. Onity Group Inc. is a Florida corporation organized in February 1988.
REGULATION Our business is subject to extensive regulation and supervision by federal, state, local and foreign governmental authorities, including the CFPB, HUD, the SEC and various state agencies that license our servicing and lending activities. Accordingly, we are regularly subject to examinations, inquiries and requests, including civil investigative demands and subpoenas.
REGULATION Our business is subject to extensive regulation and supervision by federal, state, local and foreign governmental authorities, including the CFPB, the HUD, the SEC and various state agencies that license our servicing and lending activities. Accordingly, we are regularly subject to examinations, inquiries and requests, including civil investigative demands and subpoenas.
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.
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 practices of our vendors.
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.
Our ability to achieve our objectives is highly dependent on the success of our business relationships with our critical counterparties like the GSEs, 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 regularly evaluate capital structure options that we believe will most effectively provide the necessary capacity to support our investment objectives, address upcoming debt maturities and contractual amortization, and accommodate our business needs. Our objective is to maximize the total investment capacity through diversification of our funding sources while optimizing cost, advance rates and terms.
We regularly evaluate capital structure options that we believe will most effectively provide the necessary capacity to support our investment objectives, address upcoming debt maturities and contractual amortization, and accommodate our 12 business needs. Our objective is to maximize the total investment capacity through diversification of our funding sources while optimizing cost, advance rates and terms.
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 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.
The Internal Audit function provides periodic reporting on its activities to senior management and the Board of Directors for transparency. All business units and overhead functions are subject to unrestricted audits by our internal audit department. Internal audit is granted unrestricted access to our records, physical properties, systems, management and employees in order to perform these audits.
The Internal Audit function provides periodic reporting on its activities to senior management and the Board of Directors for transparency. 13 All business units and overhead functions are subject to unrestricted audits by our internal audit department. Internal audit is granted unrestricted access to our records, physical properties, systems, management and employees in order to perform these audits.
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.
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 advances from the loan or property liquidation proceeds before most other claims on these proceeds.
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.
Advances are contractually 5 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.
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 .
These include both internal and external vulnerability assessments, penetration testing, incident response table-top exercises, and 11 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 .
Due to its concentration in our portfolio, we monitor Rithm’s payment performance, liquidity and capital on a regular basis. Counterparty credit risk exists with our third-party originators, including our correspondent lenders, from whom we purchase originated mortgage loans.
Due to its concentration in our portfolio, we monitor Rithm’s payment performance, liquidity and capital on a regular basis. 14 Counterparty credit risk exists with our third-party originators, including our correspondent lenders, from whom we purchase originated mortgage loans.
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.
The charitable events at our office locations around the globe in 2025 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.
We must comply with a large number of federal, state and local consumer protection and other laws and regulations, including, among others, the CARES Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), the Telephone Consumer Protection Act (TCPA), the Gramm-Leach-Bliley Act, the Fair Debt Collection Practices Act (FDCPA), the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), the Servicemembers Civil Relief Act, the Homeowners Protection Act, the Home Mortgage Disclosure Act (HMDA), the Federal Trade Commission Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, as well as individual state and local laws, and federal and local bankruptcy rules.
As a mortgage originator and servicer, we must comply with a large number of federal, state and local consumer protection and other laws and regulations, including, among others, the CARES Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), the Telephone Consumer Protection Act (TCPA), the Gramm-Leach-Bliley Act, the Fair Debt Collection Practices Act (FDCPA), the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), the Servicemembers Civil Relief Act, the Homeowners Protection Act, the Home Mortgage Disclosure Act (HMDA), the Federal Trade Commission Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, as well as individual state and local laws, and federal and local bankruptcy rules.
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.
In addition, PHH was recognized for servicing excellence through Freddie 7 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 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.
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.
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 13 MSR financing facilities.
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 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 believe that our competitive strengths also 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 service excellence and operational expertise has been recognized by the Agencies.
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.
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, 2025.
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.
Our most recent employee survey indicated strong engagement levels of 86% 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.
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.
To better serve our stakeholders and communities, Onity created a Community Advisory Council in 2014, consisting of 14 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.
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.
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 approximately $7 million to these organizations, and more than $28 million since 2012. Charitable activity.
The results achieved through our equal opportunity programs have been central to building that culture, which promotes integrity, respect, and teamwork. We are committed to these programs as equal opportunity is essential to our innovation and employee engagement and aids in the retention of key talent.
The results achieved through our programs have been central to building a culture, which promotes integrity, respect, and teamwork. We are committed to these programs as equal opportunity is essential to our innovation and employee engagement and aids in the retention of key talent.
Strategic Risk We are exposed to risk with respect to the strategic initiatives we have taken to return to sustainable growth and profitability. Strategic risk represents the risk to shareholder or enterprise value, current or future earnings, capital and liquidity from adverse business decisions and/or improper implementation of business strategies.
Strategic Risk We are exposed to risk with respect to the strategic initiatives we have taken to deliver sustainable growth and profitability. Strategic risk represents the risk to shareholder or enterprise value, current or future earnings, capital and liquidity from adverse business decisions and/or improper implementation of business strategies.
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.
In 2025, 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.
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.
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 and HMBS-related borrowings, net.
To support this non-discriminatory culture of equal opportunity we engage with both internal and external groups and organizations to ensure that our culture enables employees to consistently demonstrate our company values. Our company culture drives success for all our stakeholders, from employees and clients to homeowners, investors, and the communities we serve.
To support this non-discriminatory culture we engage with both internal and external groups and organizations to ensure that our culture enables employees to consistently demonstrate our company values. Our company culture drives success for all our stakeholders, from employees and clients to homeowners, investors, and the communities we serve.
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.
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 38% of the number of loans serviced underlying our MSRs at December 31, 2025.
Onity relies on employee-led resource groups to help support employee development and foster our culture of equal opportunity. More than half of our workforce are members of these groups, which collectively hosted more than 30 employee events globally. Commitment to Ethics.
Onity relies on employee-led resource groups to help support employee development and foster our culture of equal opportunity and inclusion. More than half of our workforce are members of these groups, which collectively hosted more than 30 employee events globally.
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.
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 our increasing use of technology and innovative solutions.
We estimate how our liquidity needs may be impacted by a number of factors, including fluctuations in asset and liability levels due to our business strategy, asset valuations, changes in cash flows from operations, levels of interest rates, debt service requirements including contractual amortization, margin calls and maturities, and unanticipated events, including legal and regulatory expenses.
We estimate how our liquidity needs may be impacted by a number of factors, including fluctuations in asset and liability levels due to our business strategy, asset and hedging derivative valuations, changes in cash flows from operations or advance obligations, levels of interest rates, debt service requirements including contractual amortization, margin calls and maturities, and unanticipated events, including legal and regulatory expenses.
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 Originations pipeline and MSR hedging activities, and maintaining liquidity earmarks at levels to support potential changes in loans and MSR fair values.
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.
Onity strives to foster an inclusive 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 employees’ individual differences, life experiences, inventiveness, and unique capabilities, knowledge and talent.
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.
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. Community development.
We also assess market conditions and capacity for debt issuance in the various markets that we access to fund our business needs. We have established internal processes to anticipate future cash needs and continuously monitor the availability of funds pursuant to our existing debt arrangements.
We also assess market conditions and capacity for debt issuance in the various markets that we access to fund our business needs. We have established internal processes to anticipate future cash needs, evaluate stress scenarios and continuously monitor the availability of funds pursuant to our existing debt arrangements or certain liquidity actions.
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.
In 2025, our Originations business generated total volume additions of $84.8 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 / Consumer Direct . We originate forward and reverse mortgage loans directly with borrowers through our retail lending business.
California has the largest concentration with 15% of the total loans serviced.
California has the largest concentration with 14% of the total loans serviced.
Operational risk includes the following key risks: • legal risk, as we can have legal disputes with borrowers or counterparties; • compliance risk, as we are subject to many federal and state rules and regulations; • third-party risk, as we have many processes that have been outsourced to third parties; • information technology risk, as we operate many information systems that depend on proper functioning of hardware and software; • information security risk, as our information systems and associates handle personal financial data of borrowers, and • business continuity risk, as natural disasters, pandemics, extreme weather, and other unexpected events can cause disruption to our operations.
Operational risk includes the following key risks: • legal risk, as we can have legal disputes with borrowers or counterparties; • compliance risk, as we are subject to many federal and state rules and regulations; • third-party risk, as we have many processes that have been outsourced to third parties; • information technology risk, as we operate many information systems that depend on proper functioning of hardware and software; • information security risk, as our information systems and associates handle personal financial data of borrowers, and • business continuity risk, as natural disasters, pandemics, extreme weather, and other unexpected events can cause disruption to our operations; • model risk, as we measure instruments and risks, develop forecasts, and make decisions based on model estimation outputs that may be incorrect or misused.
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.
Approximately 1,100 of our employees were employed in the U.S. and USVI, and approximately 3,200 of our employees were employed in our operations in India and the Philippines.
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.
We compete with large and small financial services companies, including bank and non-bank servicers and mortgage originators, and real estate investment trusts, in the forward and reverse servicing, subservicing, lending and MSR transaction markets.
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.
We organize a variety of community outreach programs and events with local and national organizations around the country to assist homeowners. Our outreach events began during the 2008 mortgage crisis and have continued since then. In 2025, we hosted 41 borrower outreach events across 21 states in partnership with various HUD certified housing counseling agencies.
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”.
To achieve our financial objectives, we believe we need to execute on our business strategy discussed under “Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations-Overview-Business Strategy”.
PHH received Fannie Mae’s Servicer Total Achievement and Rewards (STAR TM ) performer recognition for the 2024 program year for the fourth consecutive year.
Specifically, PHH received Fannie Mae’s Servicer Total Achievement and Rewards (STAR TM ) performer recognition for the 2025 program year for the fifth consecutive year.
This risk can manifest itself in various ways, including process execution errors, clerical or technological failures or errors, business interruptions and frauds, all of which could cause us to incur losses.
Operational Risk Operational risk is inherent in each of our business lines and related support activities. This risk can manifest itself in various ways, including process execution errors, clerical or technological failures or errors, business interruptions and frauds, all of which could cause us to incur losses.
Upon the sale of our 15% interest in MAV Canopy in November 2024, PHH and MAV amended the Subservicing Agreement to provide that PHH will be the exclusive subservicer for an initial term of five years through November 2029 subject to certain extensions of all MSRs that MAV currently owns, for all future MSRs that MAV acquires from PHH, and for the majority of MAV’s MSR portfolio overall, as defined.
In November 2024, Onity sold to Oaktree its 15% equity interest in MAV and the Subservicing Agreement was amended to provide that PHH will be the exclusive subservicer for an initial term of five years through November 2029 subject to certain extensions of all MSRs that MAV then owned, for all future MSRs that MAV acquires from PHH, and for the majority of MAV’s MSR portfolio overall, as defined.
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.
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 that enhances our returns.
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.
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.
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.
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.
Client concentration - Rithm is one of our largest servicing clients, accounting for $41.2 billion of UPB or 14% of the UPB of our total servicing and subservicing portfolio, and approximately 63% of all delinquent loans that Onity serviced as of December 31, 2024.
Client concentration - Rithm is our largest subservicing client, accounting for $32.2 billion of UPB or 10% of the UPB and 19% of the loan count of our total servicing and subservicing portfolio, and approximately 50% of all delinquent loans that Onity serviced as of December 31, 2025.
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.
The following table summarizes our latest key servicer ratings and outlook: PHH Moody’s S&P Fitch Forward Residential Prime Servicer SQ3+ Above Average RPS2- Residential Subprime Servicer SQ3+ Above Average RPS2- Residential Special Servicer SQ3+ Above Average RSS2- Residential Second/Subordinate Lien Servicer SQ2- Above Average RPS3+ Residential Home Equity Servicer — — RPS3+ Residential Alt-A Servicer — — RPS2- Master Servicer SQ3+ Above Average RMS3 Small Balance Commercial Primary and Special Servicer — Above Average SBPS2- and SBSS2- CMBS Loan Level Special Servicer, Master Servicer and Primary Servicer — — CLLSS3+, CMS3 and CPS3+ Ratings Outlook N/A Stable Stable Date of last action June 11, 2025 October 11, 2024 May 29, 2025 Reverse Residential Reverse Servicer — Above Average — Ratings Outlook — Stable — Date of last action — October 11, 2024 — 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.
Pay equity as viewed through a merit-based lens is a key component of Onity’s employment value proposition and regulatory compliance. We regularly evaluate our performance management, merit increase incentive award and promotion processes to ensure that all employees, regardless of race, gender, and other protected characteristics, are evaluated objectively based on their performance. Talent Development .
We regularly evaluate our performance management, merit increase incentive award and promotion processes to ensure that all employees, regardless of race, gender, and other protected characteristics, are evaluated objectively based on their performance. Talent Development .
Management closely monitors growth, and can adjust originations pricing quickly to manage its liquidity profile as needed. We have typically amended sizing on existing facilities or entered into new secured facilities in anticipation of our changing liquidity needs. Operational Risk Operational risk is inherent in each of our business lines and related support activities.
Management closely monitors growth, and can adjust originations pricing quickly to manage its liquidity profile as needed. We have typically amended sizing on existing facilities or entered into new secured facilities in anticipation of our changing liquidity needs. Also refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources.
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.
As legal MSR owner, or in compliance with the RMSR agreement, Rithm is responsible for financing all servicing advance obligations in connection with the loans underlying the MSRs. The servicing transfer will result in the reduction of Servicing and subservicing fees and associated Pledged MSR liability expense.
In connection with the renewals, the parties made changes to certain economic terms of the agreements including a reduction to Onity’s subservicing fees. The underlying loans are almost exclusively non-Agency loans, involving a higher level of operational and regulatory risk, and requiring substantial direct and oversight staffing relative to Agency loans.
The underlying loans are almost exclusively non-Agency loans, involving a higher level of operational and regulatory risk, and requiring substantial direct and oversight staffing relative to Agency loans.
These complex requirements can and do change as laws and regulations are enacted, promulgated, amended, interpreted and enforced. See Item 1A. Risk Factors – Legal and Regulatory Risks for further information.
These complex requirements can and do change as laws and regulations are enacted, promulgated, amended, interpreted and enforced.
Our workforce is dedicated to creating positive outcomes for homeowners, communities and investors through caring service and innovative solutions.
HUMAN CAPITAL RESOURCES We believe the success of our organization is highly dependent on the quality and engagement of our human capital resources. Our workforce is dedicated to creating positive outcomes for homeowners, communities and investors through caring service and innovative solutions.
Training courses are housed in our continuously reviewed and updated learning management system. Our training and development programs are important contributors to our ability to deliver industry-leading customer service. Over the past few years, PHH has been recognized for servicing excellence through Freddie Mac’s SHARP SM and Fannie Mae’s STAR TM awards and HUD’s ranking. Community development.
Strategic talent reviews to identify, develop and promote top talent are part of our performance management processes. 10 Our training and development programs are important contributors to our ability to deliver industry-leading customer service. Over the past few years, PHH has been recognized for servicing excellence through Freddie Mac’s SHARPSM and Fannie Mae’s STARTM awards and HUD’s ranking. Rewards.
On October 11, 2024, S&P affirmed the Above Average ratings and Stable outlook citing the company’s experienced management and team, effective systems and technology, sound control framework and good servicing performance metrics, among other factors. On February 13, 2024, Fitch affirmed PHH’s residential servicer ratings and revised its outlook from Positive to Stable for Prime and Subprime products.
A negative outlook is generally used to indicate that a rating “may be lowered,” while a positive outlook is generally used to indicate a rating “may be raised.” On October 11, 2024, S&P affirmed the Above Average ratings and Stable outlook citing the company’s experienced management and team, effective systems and technology, sound control framework and good servicing performance metrics, among other factors.
We currently provide solutions through our primary operating, wholly-owned subsidiary, PHH Mortgage Corporation (PHH), formerly referred to as PMC. BUSINESS MODEL AND SEGMENTS We seek to create value and maximize returns for shareholders through balance and diversification, prudent capital-light growth, industry-leading cost structure, top tier operating performance and capabilities, and dynamic asset management.
BUSINESS MODEL AND SEGMENTS We seek to create value and maximize returns for shareholders through balance and diversification, prudent capital-light growth, industry-leading cost structure, top tier operating performance and capabilities, and dynamic asset management. Our core competencies revolve around our Servicing business with an Originations platform to replenish and pursue growth of our servicing portfolio.
MAV may freely sell or transfer any MSRs thereafter. As of December 31, 2024, PHH subserviced a total $41.2 billion UPB on behalf of MAV under the Subservicing Agreement, of which $21.5 billion of MSRs were previously sold by PHH to MAV and do not qualify for sale accounting.
The ROFO will remain effective through November 2029 subject to certain extensions or terminations. As of December 31, 2025, PHH subserviced a total $38.3 billion UPB on behalf of MAV under the Subservicing Agreement, of which $20.1 billion of MSRs were previously sold by PHH to MAV and do not qualify for sale accounting.
We manage derivative counterparty credit risk by entering into financial instrument transactions through national exchanges, primary dealers or approved counterparties and using mutual margining agreements whenever possible to limit potential exposure. 15 Rithm is contractually obligated, pursuant to our agreements with them related to the Rights to MSRs, to make all advances required in connection with the loans underlying such MSRs.
We regularly evaluate the financial position and creditworthiness of our counterparties and disperse risk among multiple counterparties to the extent possible. We manage derivative counterparty credit risk by entering into financial instrument transactions through national exchanges, primary dealers or approved counterparties and using mutual margining agreements whenever possible to limit potential exposure.
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”).
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. As of December 31, 2025, our servicing and subservicing portfolio consisted of approximately 1.4 million loans with an unpaid principal balance (UPB) of $328.3 billion.
Our core competencies revolve around our Servicing business with an Originations platform to replenish and pursue growth of our servicing portfolio. Our Servicing business is comprised of two components, our owned mortgage servicing rights (MSR) servicing portfolio and our subservicing portfolio that complement each other when managing scale.
Our Servicing business is comprised of two components, our owned mortgage servicing rights (MSR) servicing portfolio and our subservicing portfolio that complement each other when managing scale. We invest our capital to fund purchases and originations of our owned MSRs, for which we establish a targeted return on investment.
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 review all our programs and practices to ensure they remain competitive, compliant, non-discriminatory and promote opportunity and fairness based on merit. Promoting equal opportunity and inclusion. Onity remains committed to fostering a non-discriminatory environment providing for equal opportunity in all areas of employment, including applicant selection, compensation, training, and promotion. Company policies prohibit discrimination of any form.
In November 2024, we prepaid Oaktree the $285.0 million senior secured notes due 2027 in connection with our corporate debt refinancing and our sale of MAV Canopy that generated $50.0 million cash proceeds. Oaktree was allocated $50.0 million principal amount of the new corporate debt issued in such refinancing.
In November 2024, we prepaid Oaktree the $285.0 million senior secured notes due 2027 in connection with our corporate debt refinancing and the 15% MAV sale discussed above. In 2025, Oaktree sold its 426,705 shares of our common stock in the open market.
Onity’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. Pursuant to our model risk management framework, models are generally subject to risk assessment and management by the model owners, developers, and users (i.e., first line of defense), and effective model risk oversight by Risk Management.
We review all our programs and practices to ensure they remain competitive, compliant, non-discriminatory and promote opportunity and fairness based on merit. 10 Our affinity groups are open to everyone, and when coupled with a culture of appreciation, help provide a comprehensive ecosystem for all our employees to flourish in within our merit-based pay for performance culture.
Our affinity groups are open to everyone, and when coupled with a culture of appreciation, help provide a comprehensive ecosystem for all our employees to flourish within our merit-based pay for performance culture. Pay equity as viewed through a merit-based lens is a key component of Onity’s employment value proposition and regulatory compliance.
See Note 8 — Other Financing Liabilities, at Fair Value. Rithm is one of our largest servicing clients, accounting for $41.2 billion of UPB or 14% of the UPB of our total servicing and subservicing portfolio, and approximately 63% of all delinquent loans that Onity serviced as of December 31, 2024.
As of December 31, 2025, Rithm accounted for $32.2 billion, or 10% of the UPB and 19% of the loan count of our total servicing and subservicing portfolio, and approximately 50% of all delinquent loans that Onity services.
In 2021, PHH entered into a number of agreements with MAV, 9 the licensed mortgage subsidiary of MAV Canopy, including a Subservicing Agreement, Joint Marketing Agreement and Recapture Agreement. On November 27, 2024, Onity sold to Oaktree its 15% equity interest in MAV Canopy.
PHH entered into a number of agreements with MAV, including a Subservicing Agreement, Joint Marketing Agreement and Recapture Agreement.
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.
As of December 31, 2025, Oaktree, MAV and affiliates were no longer deemed Related 9 Parties. See Note 12 — Investment in Equity Method Investee and Related Party Transactions and Note 17 — Stockholders’ Equity to the Consolidated Financial Statements for additional information.
This long-standing core competency continues to be a guiding principle as we seek to grow our business and improve our financial performance. We are headquartered in West Palm Beach, Florida with offices and operations in the U.S., in the United States Virgin Islands (USVI), in India and the Philippines.
We are a leader in the servicing industry that is focused on creating positive outcomes for homeowners, clients, and investors. This long-standing core competency continues to be a guiding principle as we seek to grow our business and improve our financial performance.
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.
OAKTREE AND MAV RELATIONSHIP We established a strategic alliance with Oaktree in 2020 that was amended in November 2024, and financial interests were further unwound in 2025. Oaktree’s MSR investment vehicle (referred to as MAV) was our second largest subservicing client in 2025.
In 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.
In connection with these debt and equity issuances, we issued to Oaktree 1,446,016 warrants to purchase shares of our common stock at an average exercise price of $26.37 per share, representing 15% of our then outstanding common stock.
The minimum net worth requirements to which our licensed entities are subject are unique to each state and type of license. See Item 1A. Risk Factors – Legal and Regulatory Risks for further information.
The minimum net worth requirements to which our licensed entities are subject are unique to each state and type of license. COMPETITION The financial services markets in which we operate are highly competitive and fragmented, and we do not expect that to change.
MAV Investment and Subservicing On December 21, 2020, Onity and Oaktree formed a joint venture MAV Canopy for the purpose of investing in GSE MSRs exclusively subserviced by PHH, with Oaktree and Onity holding 85% and 15% interests, respectively, and initially agreeing to invest equity up to $250.0 million over three years.
MAV Investment and Subservicing The Oaktree relationship included the launch of MAV, an MSR investment vehicle in 2021 to scale up Onity’s servicing business in a capital efficient manner, with 85% and 15% interests held by Oaktree and Onity, respectively, and an initial equity commitment of $250.0 million over three years.
In both our servicing and originations businesses, new competitors continue to emerge, including companies that developed new technology around customer interactions and process automation. In our Servicing business, we compete based on price, operating performance, service quality and customer and client satisfaction.
We primarily compete for profitable growth in our respective markets, rather than scale. In our Servicing business, we compete based on price, operating performance, service quality and customer and client satisfaction.
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.
Financial Interests In 2021, we issued to Oaktree $285.0 million of 12% senior secured notes due 2027 and 426,705 shares of our common stock, representing 4.9% of our then outstanding common stock, at a price per share of $23.15, for an aggregate purchase price of $9.9 million.
In addition, the parties agreed to a six-month lockout during which MAV shall not sell or otherwise transfer any MSRs owned by MAV at the MAV Canopy sale date without the prior consent of PHH. Following this initial six-month period, the lockout restriction is subject to reduction in 25% increments through September 30, 2027.
In addition, the parties agreed to certain MSR sale restrictions by MAV in 25% annual increments through September 30, 2027. MAV may freely sell or transfer any MSRs thereafter. MAV has a right of first offer (ROFO) for any GSE MSRs that PHH desires to sell that meet certain criteria.
Removed
In June 2024, we rebranded our company to Onity Group reflecting the progressive transformation of our business. We are a leader in the servicing industry that helps homeowners stay in their homes and improves financial outcomes for mortgage loan investors.
Added
With our predecessor companies, we have been servicing residential mortgage loans since 1988. We have been originating forward mortgage loans since 2012 and reverse mortgage loans since 2013.
Removed
We invest our capital to fund purchases and originations of our owned MSRs, for which we establish a targeted return on investment. Our net return includes servicing revenue net of servicing costs, less MSR portfolio runoff, and less MSR and advance funding cost.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeLegal 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.
Biggest changeLegal 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 Financing and Liquidity Risks • 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 • Inability to meet future advance financing obligations if Rithm were to fail to comply with its servicing advance obligations under the subservicing agreement • Inability to appropriately manage, forecast or estimate risks with our liquidity positions • Failure to satisfy current or future minimum net worth and liquidity requirements established by regulators, GSEs, Ginnie Mae, lenders, or other counterparties Risks Related to Our Strategy, Performance and the Economy • Failure to receive timely regulatory approval of our transaction with Finance of America Reverse LLC could negatively impact our liquidity, operations, and reputation with potential business partners • Inability to execute our strategic plan to deliver sustainable profitability or pursue business or asset acquisitions • 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 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 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.
Failure to select the appropriate technology investments, or to implement them correctly and efficiently, could have a significant negative impact on our operations. Furthermore, rapid technological advancements that could make existing products or services obsolete could negatively impact on our operations.
Failure to select the appropriate technology investments, or to implement them correctly and efficiently, could have a significant negative impact on our operations. Furthermore, rapid technological advancements that could make existing products or services obsolete could negatively impact our operations.
We operate in a highly competitive industry that could become even more competitive as a result of economic, legislative, regulatory or technological changes. Competition to service mortgage loans and for mortgage loan originations comes primarily from commercial banks and savings institutions and non-bank lenders and mortgage servicers.
We operate in a highly competitive industry that could become even more competitive as a result of economic, legislative, regulatory or technological changes. Competition to service mortgage loans and for mortgage loan originations comes primarily from non-bank lenders and mortgage servicers and commercial banks and savings institutions.
For example, we are currently a defendant in various matters alleging that (1) certain fees imposed on borrowers relating to 21 payment processing, payment facilitation, or payment convenience violate state laws similar to the Fair Debt Collection Practices Act, (2) certain fees we assess on borrowers are marked up improperly in violation of applicable state and federal law, (3) we breached fiduciary duties we purportedly owe to benefit plans due to the discretion we exercise in servicing certain securitized mortgage loans, (4) certain legacy mortgage reinsurance arrangements violated RESPA, (5) we failed to subservice loans appropriately pursuant to subservicing and other agreements, (6) we violated the False Claims Act related to our participation in the Home Affordable Modification Program, and (7) we originated and sold loans to counterparties that were not underwritten in accordance with applicable guidelines.
For example, we are currently a defendant in various matters alleging that (1) certain fees imposed on borrowers relating to payment processing, payment facilitation, or payment convenience violate state laws similar to the Fair Debt Collection Practices Act, (2) certain fees we assess on borrowers are marked up improperly in violation of applicable state and federal law, (3) we breached fiduciary duties we purportedly owe to benefit plans due to the discretion we exercise in servicing certain securitized mortgage loans, (4) certain legacy mortgage reinsurance arrangements violated RESPA, (5) we failed to subservice loans appropriately pursuant to subservicing and other agreements, (6) we violated the False Claims Act related to our participation in the Home Affordable Modification Program, and (7) we originated and sold loans to counterparties that were not underwritten in accordance with applicable guidelines.
Failure or alleged failure to comply with the terms of our regulatory settlements or applicable federal, state and local consumer protection laws, regulations and licensing requirements could lead to any of the following: • administrative fines and penalties and litigation; • loss of our licenses and approvals to engage in our servicing and lending businesses; • governmental investigations and enforcement actions; • civil and criminal liability, including class action lawsuits and actions to recover incentive and other payments made by governmental entities; • breaches of covenants and representations under our servicing, debt or other agreements; • damage to our reputation; • inability to raise capital or otherwise secure the necessary financing to operate the business and refinance maturing liabilities; • changes to our operations that may otherwise not occur in the normal course, and that could cause us to incur significant costs; or • inability to execute our business strategy.
Failure or alleged failure to comply with the terms of our remaining regulatory settlements or applicable federal, state and local consumer protection laws, regulations and licensing requirements could lead to any of the following: • administrative fines and penalties and litigation; • loss of our licenses and approvals to engage in our servicing and lending businesses; • governmental investigations and enforcement actions; • civil and criminal liability, including class action lawsuits and actions to recover incentive and other payments made by governmental entities; • breaches of covenants and representations under our servicing, debt or other agreements; • damage to our reputation; • inability to raise capital or otherwise secure the necessary financing to operate the business and refinance maturing liabilities; • changes to our operations that may otherwise not occur in the normal course, and that could cause us to incur significant costs; or • inability to execute our business strategy.
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.
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.
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.
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 or own, servicing fees that we can charge and costs that we incur to comply with new servicing requirements.
The proliferation of social media websites as well as the personal use of social media by our employees and others, including personal blogs and social network profiles, also may increase the risk that negative, inappropriate or unauthorized information may be posted or released publicly that could harm our reputation or have other negative consequences, including as a result of our employees interacting with our customers in an unauthorized manner in various social media outlets.
The proliferation of social media websites as well as the personal use of social media by our employees and others, including personal blogs and social network profiles, also may increase the risk that negative, inappropriate or unauthorized 35 information may be posted or released publicly that could harm our reputation or have other negative consequences, including as a result of our employees interacting with our customers in an unauthorized manner in various social media outlets.
Market price fluctuations in our common stock may be due to factors both within and outside our control, including regulatory or legal actions, acquisitions, dispositions or other material public announcements or speculative trading in our stock (e.g., traders “shorting” our common stock), as well as a variety of other factors including, but not limited to those set forth under this Item 1.A.
Market price fluctuations in our common stock may also be due to factors both within and outside our control, including regulatory or legal actions, acquisitions, dispositions or other material public announcements or speculative trading in our stock (e.g., traders “shorting” our common stock), as well as a variety of other factors including, but not limited to those set forth under this Item 1.A.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not 33 limited to: loss of customers; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
(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.
(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 16 • Heightened reputational risk due to media and regulatory scrutiny of companies that originate, securitize or service 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 • Inability to realize our recorded net deferred tax assets 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 that 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.
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.
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.
Applicable data privacy and security obligations may require us, or we may voluntarily choose, to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents (including those impacting our vendors), or to take other actions, such as providing credit monitoring and identity theft protection services, and we have done so in the past.
Applicable data privacy and security obligations may require us, or we may voluntarily choose, to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents (including those impacting our vendors), or to take other actions, such as providing credit monitoring and identity theft protection services, and 34 we have done so in the past.
We originate and securitize FHA-insured HECM reverse mortgages, which subjects us to risks that could have a material adverse effect on our business, reputation, liquidity, financial condition and results of operations. We originate, securitize and service FHA-insured HECM mortgages. The reverse mortgage business is subject to substantial risks, including market, credit, interest rate, liquidity, operational, reputational and legal risks.
We originate and securitize FHA-insured HECM reverse mortgages, which subjects us to risks that could have a material adverse effect on our business, reputation, liquidity, financial condition and results of operations. We originate, purchase, securitize and service FHA-insured HECM mortgages. The reverse mortgage business is subject to substantial risks, including market, credit, interest rate, liquidity, operational, reputational and legal risks.
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.
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 or data protection 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, operational, 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.
If we are not successful in capturing and reporting the new HMDA data, and analyzing and correcting any adverse patterns, we could be exposed to regulatory actions and private litigation against us, we could suffer reputational damage and we could incur losses, any of which could materially and adversely impact our business, financial condition and results of operations.
If we are not successful in capturing and reporting the new HMDA data, and analyzing and correcting any 21 adverse patterns, we could be exposed to regulatory actions and private litigation against us, we could suffer reputational damage and we could incur losses, any of which could materially and adversely impact our business, financial condition and results of operations.
Any of these occurrences could have a material adverse effect on our business, reputation, financing activities, liquidity, financial condition or results of operations. In 2022, Ginnie Mae announced updated minimum financial eligibility requirements for Ginnie Mae issuers and included a new risk-based capital ratio effective December 31, 2024.
Any of these occurrences could have a material adverse effect on our business, reputation, financing activities, liquidity, financial condition or results of operations. In 2022, Ginnie Mae announced updated minimum financial eligibility requirements for Ginnie Mae issuers and included a new risk-based capital ratio (RBCR) effective December 31, 2024.
These seller/servicer obligations include financial covenants that include capital requirements related to tangible net worth, as defined by the applicable agency, an obligation to provide audited consolidated financial statements within 90 days of the applicable entity’s fiscal year end as well as extensive requirements regarding servicing, selling and other matters.
These seller/servicer obligations include financial covenants that include capital requirements related to tangible net worth, as defined by the applicable agency, an obligation to 29 provide audited consolidated financial statements within 90 days of the applicable entity’s fiscal year end as well as extensive requirements regarding servicing, selling and other matters.
No repayment of the mortgage is required until a default event under the terms of the mortgage occurs such as the borrower fails to pay real estate taxes or maintain proper insurance, the borrower dies, the borrower moves out of the home, or the home is sold. Foreclosures involving HECM reverse mortgages generally occur more frequently than forward mortgages.
No repayment of the mortgage is required until a default event under the terms of the mortgage occurs such as the borrower fails to pay real estate taxes or maintain proper insurance, the borrower dies, the borrower moves out of the home, or the home is sold. Foreclosures involving HECM reverse mortgages generally occur more frequently than 38 forward mortgages.
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, business plans, transactions, and financial information (collectively, sensitive data).
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process) personal data and other sensitive information, including 32 proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, business plans, transactions, and financial information (collectively, sensitive data).
Accordingly, we could become more highly leveraged, resulting in an increase in debt service obligations and an increased risk of default on our obligations. If we were to liquidate, holders of our debt and lenders with respect to other borrowings would receive a distribution of our available assets before the holders of our common stock.
Accordingly, we could become more highly leveraged, resulting in an increase in debt service 42 obligations and an increased risk of default on our obligations. If we were to liquidate, holders of our debt and lenders with respect to other borrowings would receive a distribution of our available assets before the holders of our common stock.
An accounting estimate is considered critical if it requires that management make assumptions about matters that were highly uncertain at the time the accounting estimate was made. If actual results differ from our judgments and assumptions, then it may have an adverse impact on the results of operations and cash flows.
An accounting 26 estimate is considered critical if it requires that management make assumptions about matters that were highly uncertain at the time the accounting estimate was made. If actual results differ from our judgments and assumptions, then it may have an adverse impact on the results of operations and cash flows.
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.
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.
The risks associated with acquisitions include, among others: • unanticipated issues in integrating servicing, information, communications and other systems; • unanticipated incompatibility in servicing, lending, purchasing, logistics, marketing and administration methods; • unanticipated liabilities assumed from the acquired business; • not retaining key employees; and • the diversion of management’s attention from ongoing business concerns.
The risks associated with acquisitions include, among others: • unanticipated issues in integrating servicing, information, communications and other systems; 37 • unanticipated incompatibility in servicing, lending, purchasing, logistics, marketing and administration methods; • unanticipated liabilities assumed from the acquired business; • not retaining key employees; and • the diversion of management’s attention from ongoing business concerns.
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.
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 guaranteeing 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.
We have significant exposure to third-party risks, as we are dependent on vendors, including Black Knight, Altisource and other vendors for a number of key services to operate our business effectively and in compliance with applicable regulatory and contractual obligations, and on banks and other financing sources to finance our business.
We have significant exposure to third-party risks, as we are dependent on vendors, including Black Knight, for a number of key services to operate our business effectively and in compliance with applicable regulatory and contractual obligations, and on banks and other financing sources to finance our business.
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 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.
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.
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. Our Board of Directors may authorize the issuance of additional securities that may cause dilution and may depress the price of our securities.
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.
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.
Fair value is estimated based on a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions that market participants would use in pricing the 26 asset or liability developed based on market data obtained from sources independent of the reporting entity.
Fair value is estimated based on a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity.
If our vendors do not adequately maintain and support our systems, including our servicing systems, loan originations and financial reporting systems, our business and operations could be materially and adversely affected. Altisource and other vendors supply us with other services in connection with our business activities such as property preservation and inspection services and valuation services.
If our vendors do not adequately maintain and support our systems, including our servicing systems, loan originations and financial reporting systems, our business and operations could be materially and adversely affected. Other vendors supply us with other services in connection with our business activities such as property preservation and inspection services and valuation services.
Non-compliance with the laws and regulations of India or the Philippines could result in (i) restrictions on our operations in these countries, (ii) fines, penalties or sanctions or (iii) reputational damage. Our operations are vulnerable to disruptions resulting from severe weather events.
Non-compliance with the laws and regulations of India or the Philippines could result in (i) restrictions on our operations in these countries, (ii) fines, penalties or sanctions or (iii) reputational damage. 36 Our operations are vulnerable to disruptions resulting from severe weather events.
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.
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.
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.
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.
Historical losses significantly eroded stockholders’ equity and weakened our financial condition. We established a set of key initiatives to achieve our objective of returning to sustainable profitability in the shortest timeframe possible within an appropriate risk and compliance environment.
Historical losses significantly eroded stockholders’ equity and weakened our financial condition. We previously established a set of key initiatives to achieve our objective of returning to sustainable profitability in the shortest timeframe possible within an appropriate risk and compliance environment.
In addition, we must structure our business so each licensed entity satisfies the net worth and liquidity requirements applicable to it, which can be challenging. The minimum net worth and liquidity requirements to which our licensed entities are subject vary by state and type of license.
In addition, we must structure our business so that each licensed entity satisfies the net worth and liquidity requirements applicable to it, which can be challenging. The minimum net worth and liquidity requirements to which our licensed entities are subject vary by state and type of license.
There are various proposals that deal with the future of the GSEs, including with respect to their ownership and role in the mortgage market, as well as proposals to implement GSE reforms relating to borrowers, lenders and investors in the mortgage market. Thus, the long-term future of the GSEs remains uncertain.
There are various proposals that deal with the future of the GSEs, including with respect to their ownership and role in the mortgage market, as well as proposals to implement GSE reforms relating to borrowers, lenders, servicers and investors in the mortgage market. Thus, the long-term future of the GSEs remains uncertain.
Such remedies include curtailment of our ability to sell newly originated loans or even termination of our ability to sell, service or securitize such loans altogether. Any such curtailment or termination would likely have a material adverse impact on our business, liquidity, financial condition and results of operations.
Such remedies include curtailment of our ability to sell newly originated loans or even termination of our ability to sell, service or securitize such loans altogether. Any such curtailment or termination would likely have a material adverse impact on our business, reputation, liquidity, financial condition and results of operations.
We are actively looking for opportunities to grow our business through acquisitions of businesses and assets. The performance of the businesses and assets we acquire through acquisitions may not match the historical performance of our other assets. Nor can we assure you that the businesses and assets we may acquire will perform at levels meeting our expectations.
We are actively looking for opportunities to grow our business through acquisitions of businesses and assets. The performance of the businesses and assets we acquire may not match the historical performance of our other assets. Nor can we assure that the businesses and assets we may acquire will perform at levels meeting our expectations.
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
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.
Generally, the fair value of the pipeline will decline in value when interest rates increase and will rise in value when interest rates decrease. We economically hedge our pipeline interest rate risk with freestanding derivatives such as TBAs and forward sale contracts.
Generally, the fair value of the pipeline will decline in value when interest rates increase and will rise in value when interest rates decrease. We economically hedge our pipeline interest rate risk with freestanding derivatives such as MBS TBAs and forward sale contracts.
Any change in the ownership of the GSEs, or in their 28 programs or role within the mortgage market, could materially and adversely affect our business, liquidity, financial position and results of operations. A disruption in the mortgage capital markets may affect our financial and results of operations.
Any change in the ownership of the GSEs, or in their programs or role within the mortgage market, could materially and adversely affect our business, liquidity, financial position and results of operations. A disruption in the mortgage capital markets may affect our financial and results of operations.
If Black Knight were to fail to properly fulfill its contractual obligations to us, including through a failure to provide services at the required level to maintain and support our systems, our business and operations would suffer.
If Black Knight were to fail to properly fulfill its contractual obligations to us, including through a failure to provide services at the required level to maintain and support our systems, our business, reputation and operations would suffer.
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.
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.
Further, certain one-time expenses associated with such acquisitions may have a negative impact on our results of operations and financial condition. We cannot assure you that acquisitions will not adversely affect our liquidity, results of operations and financial condition.
Further, certain one-time expenses associated with such acquisitions may have a negative impact on our results of operations and financial condition. We cannot assure that acquisitions will not adversely affect our liquidity, results of operations and financial condition.
If regulators allege that we do not comply with the terms of our regulatory settlements, or if we enter into future regulatory settlements, it could significantly impact our ability to maintain and grow our servicing portfolio.
If regulators allege that we do not comply with the terms of our prior regulatory settlements, or if we enter into future regulatory settlements, it could significantly impact our ability to maintain and grow our servicing portfolio.
In the future, we are likely to become subject to other private legal proceedings alleging failures to comply with applicable laws and regulations, including putative class actions, in the ordinary course of our business.
In the future, we are likely to become subject to other private legal 20 proceedings alleging failures to comply with applicable laws and regulations, including putative class actions, in the ordinary course of our business.
We must also satisfy the minimum net worth and liquidity requirements of the GSEs and Ginnie Mae in order to maintain our approved status with such agencies and the minimum net worth and liquidity requirements set forth in our agreements with our lenders.
We must also satisfy the minimum net worth, capital and liquidity requirements of the GSEs and Ginnie Mae in order to maintain our approved status with such agencies and the minimum net worth and liquidity requirements set forth in our agreements with our lenders.
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.
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.
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.
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.
Failure to maintain minimum servicer ratings could adversely affect our ability to sell or fund servicing advances going forward, could affect the terms and availability of debt financing facilities that we may seek in the future, and could impair our ability to consummate future servicing transactions or adversely affect our dealings with lenders, other contractual counterparties and regulators, including our ability to maintain our status as an approved servicer by Fannie Mae and Freddie Mac.
Failure to maintain minimum servicer ratings could adversely affect our ability to sell or fund servicing advances going forward, could affect the terms and availability of debt financing facilities that we may seek in the future, and could impair our ability to consummate future servicing transactions or adversely affect our dealings with lenders, subservicing clients, other contractual counterparties and regulators, including our ability to maintain our status as an approved servicer by Fannie Mae and Freddie Mac.
We must structure and operate our business to comply with applicable laws and regulations and the terms of our regulatory settlements. This can require judgment with respect to the requirements of such laws and regulations and such settlements.
We must structure and operate our business to comply with applicable laws and regulations and the terms of our remaining regulatory settlements. This can require judgment with respect to the requirements of such laws and regulations and such settlements.
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.
Accordingly, they could materially and adversely affect our business and our financial condition, liquidity and results of operations. 18 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.
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.
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 cybersecurity incidents, whether experienced by us or a third-party, will not materially and adversely impact us.
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.
For example, 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.
We must comply with a large number of federal, state and local consumer protection and other laws and regulations including, among others, the CARES Act, the Dodd-Frank Act, the TCPA, the Gramm-Leach-Bliley Act, the FDCPA, RESPA, TILA, the Fair Credit Reporting Act, the Servicemembers Civil Relief Act, the Homeowners Protection Act, the Federal Trade Commission Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, as well as individual state laws pertaining to licensing, general mortgage origination and servicing practices and foreclosure and federal and local bankruptcy rules.
We must comply with a large number of federal, state and local consumer protection and other laws and regulations including, among others, the CARES Act, the Dodd-Frank Act, the TCPA, the Gramm-Leach-Bliley Act, the FDCPA, RESPA, TILA, the Fair Credit Reporting Act, the Servicemembers Civil Relief Act, the Homeowners Protection Act, the Federal Trade Commission Act, the Fair Credit Reporting Act, the Federal Acquisition Regulation, the Equal Credit Opportunity Act, as well 17 as individual state laws pertaining to licensing, general mortgage origination and servicing practices and foreclosure and federal and local bankruptcy rules.
In addition, we use mortgage loan warehouse facilities to fund newly originated loans, HECM tails, buyouts and a number of other assets on a short-term basis until they are sold to secondary market investors, including GSEs or other third-party investors.
In addition, we use mortgage loan warehouse facilities to fund newly originated loans, HECM tails, buyouts and a number of other assets on a short-term basis until they are sold to secondary market investors, including GSEs, Ginnie Mae or other third-party investors.
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Overview-Business Initiatives. There can be no assurance that we will continue to successfully execute on these initiatives, or that even if we do execute on these initiatives we will be able to return to sustained profitability.
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Overview-Business Initiatives. There can be no assurance that we will continue to successfully execute on these initiatives, or that even if we do execute on these initiatives we will be able to deliver sustained profitability.
If we fail to satisfy minimum net worth and liquidity requirements established by regulators, GSEs, Ginnie Mae, lenders, or other counterparties, our business, financing activities, financial condition or results of operations could be materially and adversely affected.
If we fail to satisfy minimum net worth, capital and liquidity requirements established by regulators, GSEs, Ginnie Mae, lenders, or other counterparties, our business, reputation, financing activities, financial condition or results of operations could be materially and adversely affected.
If we are unable to maintain adequate financing, or other sources of capital are not available, we could be forced to suspend, curtail or reduce our revenue generating objectives, which could harm our results of operations, liquidity, financial condition and business prospects.
If we are unable to maintain adequate financing, or other sources of capital are not available, we could be forced to suspend, curtail or reduce our revenue generating activities, which could harm our results of operations, liquidity, financial condition and business prospects.
Based on SEC filings, we understand several shareholders each own or control over five percent of our common stock. These large shareholders individually and collectively have the ability to vote a meaningful percentage of our outstanding common stock on all matters put to a vote of our shareholders.
Based on SEC filings, several shareholders each own or control over five percent of our common stock. These large shareholders individually and collectively have the ability to vote a meaningful percentage of our outstanding common stock on all matters put to a vote of our shareholders.
While certain of these restrictions have been eased in connection with our resolution of state regulatory matters and acquisition of PHH Corporation, we are still restricted in our ability to grow our portfolio under the terms of our agreements with the NY DFS.
While the majority of these restrictions have been eased in connection with our resolution of state regulatory matters and acquisition of PHH Corporation, we are still restricted in our ability to grow our portfolio under the terms of our agreements with the NY DFS.
While we currently plan to renew, replace or extend all of the above debt agreements consistent with our historical practice, t here can be no assurance that we will be able to do so on appropriate terms or at all and, if we fail to do so, we may not have adequate sources of funding for our business.
While we currently plan to renew, replace or extend all of the above debt agreements consistent with our historical practice, there can be no assurance that we will be able to do so on appropriate terms or at all and, if we fail to do so, we may not have adequate sources of funding for our business.
Our regulatory settlements and public allegations regarding our business practices by regulators and other third parties may affect other regulators’, rating agencies’, and creditors’ perceptions, which could adversely impact our financial results and ongoing operations.
Regulatory settlements and public allegations regarding our business practices by regulators and other third parties may affect other regulators’, rating agencies’, and creditors’ perceptions, which could adversely impact our financial results and ongoing operations. Regulatory settlements and public allegations regarding our business practices by regulators and other third parties may affect other regulators’, rating agencies’ and creditors’ perceptions of us.
In addition to the expense of responding to subpoenas and other requests for information from such agencies, in the event that any of these engagements result in allegations of wrongdoing by us, we may incur fines or penalties or significant legal expenses defending ourselves against such allegations.
In addition to the expense of responding to subpoenas, civil investigative demands, and other requests for information from such agencies, in the event that any of these engagements result in allegations of wrongdoing by us, we may incur fines or penalties or significant legal expenses defending ourselves against such allegations.
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.
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, Ginnie Mae, RMBS trustees or regulators.
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.
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 19 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.
We use the Black Knight MSP servicing system pursuant to a seven-year agreement with Black Knight expiring in 2026, and we are highly dependent on the successful functioning of it to operate our loan servicing business effectively and in compliance with our regulatory and contractual obligations.
We use the Black Knight MSP servicing system pursuant to a seven-year agreement with Black Knight expiring in 2026, subject to auto-renewals, and we are highly dependent on the successful functioning of it to operate our loan servicing business effectively and in compliance with our regulatory and contractual obligations.
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.
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 in the past as a result of regulatory settlements and the then associated scrutiny of our business.
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.
We believe our licensed entities were in compliance with all of their minimum net worth, capital and liquidity requirements at December 31, 2025. However, it is possible that regulators could disagree with our calculations.
The CFPB continues to take a very active role in the mortgage industry, and its rule-making and regulatory agenda relating to loan servicing and origination continues to evolve. Individual states have also been active, as have other regulatory organizations such as the MMC, a multistate coalition of various mortgage banking regulators.
The CFPB historically has taken a very active role in the mortgage industry, and its rule-making and regulatory agenda relating to loan servicing and origination continues to evolve. Individual states have also been active, as have other regulatory organizations such as the MMC, a multistate coalition of various mortgage banking regulators.
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.
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.
As a result of our servicing and loan origination activities, we are subject to minimum net worth and liquidity requirements established by state regulators, GSEs, Ginnie Mae, lenders, and other counterparties. Losses incurred in prior years and in 2023 have eroded our net worth.
As a result of our servicing and loan origination activities, we are subject to minimum net worth, capital and liquidity requirements established by state regulators, GSEs, Ginnie Mae, lenders, and other counterparties. Losses incurred in prior years eroded our net worth in those years.
During the remittance cycle, which starts in 24 the middle of each month, we depend on our lenders to provide us with a significant portion of the cash necessary to make the advances that we are required to make as servicer.
Especially during the peak remittance cycle, which typically starts in the middle of each month, we depend on our lenders to provide us with a significant portion of the cash necessary to make the advances that we are required to make as servicer.
Our amended and restated articles of incorporation provide that the total number of shares of all classes of capital stock that we have authority to issue is 33.3 million, of which 13.3 million are common shares and 20.0 million are preferred shares, of which 2.4 million have been designated as Series B Preferred Stock. See Note 16 — Mezzanine Equity.
Our amended and restated articles of incorporation provide that the total number of shares of all classes of capital stock that we have authority to issue is 33.3 million, of which 13.3 million are common shares and 20.0 million are preferred shares, of which 2.4 million have been designated as Series B Preferred Stock.
The CFPB and state regulators have also increasingly focused on the use, and adequacy, of technology in the mortgage servicing industry, privacy concerns and other topical issues, such as communications from debt collectors and the ability of borrowers to repay mortgage loans, including in relation to COVID-19.
The CFPB and state regulators have also historically focused on the use, and adequacy, of technology in the mortgage servicing industry, privacy concerns and other topical issues, such as communications from debt collectors and the ability of borrowers to repay mortgage loans, including in relation to the government shutdown.
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.
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 2,800, or 65%, of our employees as of December 31, 2025 are located in India.
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.
At December 31, 2025, such servicing advances made by Rithm were approximately 24 $298.0 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.
Messina or any other executive officer. The unexpected loss of the services of Mr. Messina or any of our other senior officers could have a material adverse effect on us. More generally, our future success depends, in part, on our ability to identify, attract and retain highly skilled servicing, lending, finance, risk, compliance and technical personnel.
Messina or any of our other senior officers could have a material adverse effect on us. More generally, our future success depends, in part, on our ability to identify, attract and retain highly skilled servicing, lending, finance, risk, compliance and technical personnel.
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.
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeTo 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.
Biggest changeDepending on the environment or system, these safeguards may 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.
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.
Additionally, depending on the environment or system, we may 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. 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.
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. 44
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.
In addition, all Onity executives, along with employees generally, are required to refresh their cybersecurity and IT threat-recognition training annually or more frequently if circumstances warrant.
In 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.
In 2024 and 2025, 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.
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.
ITEM 1C. CYBERSECURITY Risk Management and Strategy We have established an information security framework designed to identify, assess, and manage cybersecurity risks that could impact our critical information systems and confidential data.
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.
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. 43 In addition, we have processes in place designed to assess and manage, to the extent within our control, cybersecurity risks associated with third-party service providers.
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To mitigate and manage these risks, we have implemented various technical, physical, and organizational safeguards.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCroix, 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.
Biggest changeCroix, USVI (5) Leased 6,100 Total U.S. 139,800 APAC facilities (1) Bangalore, India Leased 22,300 Mumbai, India (6) Leased 17,700 Pune, India Leased 3,900 Manila, Philippines Leased 13,100 Total APAC 57,000 Total 196,800 (1) Supports our servicing and originations operations, as well as our corporate functions. (2) Primarily supports our reverse originations operations. (3) Primarily supports our reverse servicing operations.
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.
The following table sets forth information relating to our principal facilities at December 31, 2025: Location Owned/Leased Approximate Square Footage Principal executive offices West Palm Beach, Florida Leased 41,900 Document storage and imaging facility West Palm Beach, Florida Leased 51,900 Business operations and support offices U.S. facilities: Mt.
Effective 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.
Effective February 2025, we exercised the early termination option to terminate the lease on 36,200 square feet of space (including on 29,900 square feet, which was previously abandoned) and the lease term for the remaining space was extended through January 2028. (4) Effective September 2025, we entered into a new lease agreement expiring in January 2031.
Laurel, New Jersey (1) Leased 18,270 Rancho Cordova, California (2) Leased 8,094 Houston, Texas - Walters Road (3) Leased 15,678 St.
Laurel, New Jersey (1) Leased 18,300 Rancho Cordova, California (2) Leased 8,100 Houston, Texas - Walters Road (3) Leased 9,400 Plano, Texas (4) Leased 4,100 St.
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.
We operate through a hybrid workforce model which combines remote work for substantially all of our global workforce and in-office when required. During 2025, we exited a total of 36,200 of leased square feet.
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.
This facility primarily supports our forward originations operations. (5) Primarily supports our forward servicing operations. (6) Effective December 2025, we terminated the lease agreement on existing 15,200 square feet of space, and effective November 2025, we entered into a new five-year lease agreement for 17,700 square feet of space.
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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
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In January 2026, we vacated the old lease and occupied the new lease, as mutually agreed between the parties. We regularly evaluate current and projected space requirements, considering the constraints of our existing lease agreements and the expected scale of our businesses.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeNumber 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.
Biggest changeSuch 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. 47 Unregistered Sales of Equity Securities and Use of Proceeds All unregistered sales of equity securities have been previously disclosed.
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 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. NMI Holdings, Inc. BankUnited, Inc. PennyMac Financial Services, Inc. Finance of America Companies, Inc. Radian Group Inc.
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.
Our Compensation and Human Capital Committee modified the peer group in 2025 on the recommendation of our independent compensation consultant in order to ensure the constituent companies remain aligned with Onity in key metrics.
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.
Stock Return Performance The following graph compares the cumulative total shareholder return (TSR) on the common stock of Onity Group Inc. since December 31, 2020, with the cumulative TSR on the stocks included in (i) the Russell 2000 Index and (ii) the current peer group of companies Onity uses to inform compensation decisions, and (iii) the peer group used to inform compensation decisions in 2024.
We currently do not intend to pay cash dividends in the foreseeable future but intend to reinvest earnings in our business.
We currently do not intend to pay cash dividends on our common stock in the foreseeable future but intend to reinvest earnings in our business.
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]
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, 2025. ITEM 6. [RESERVED]
“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.
“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. FTSE International Limited is authorized and regulated by the Financial Conduct Authority as a benchmark administrator.
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.
Cooper Group Inc. is not included in the weighted average cumulative TSR calculation because loanDepot Inc. was publicly listed after the beginning of the five-year measurement period, and Guild Holdings Company and Mr. Cooper Group Inc. are no longer publicly listed.
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.
Compared to the 2024 peer group, the Current Peer Group reflects the addition of Merchants Bancorp, NMI Holdings, Inc. and TFS Financial Corporation, and the removal of South State Corporation and Webster Financial Corporation. 46 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, 2020, and the reinvestment of all dividends.
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.
The LSEG includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. “FTSE Canada”), (4) FTSE Fixed Income LLC “FTSE FI”), (5) FTSE (Beijing) Consulting Limited (“WOFE”). All rights reserved.
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.
All information is provided for information purposes only and data is provided "as is" without warranty of any kind.
(“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.
FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, FTSE FI, WOFE, and other LSEG entities providing LSEG Benchmark and Index services.
Removed
South State Corporation Guild Holdings Company UWM Holdings Corporation LendingTree, Inc. Walker & Dunlop, Inc. loanDepot, Inc.
Added
Guild Holdings Company TFS Financial Corporation LendingTree, Inc. UWM Holdings Corporation loanDepot, Inc. Walker & Dunlop, Inc. Merchants Bancorp WSFS Financial Corporation MGIC Investment Corporation The cumulative TSR performance of peer group companies Guild Holdings Company, loanDepot Inc. and Mr.
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The 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”).
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The returns of each peer group company are weighted according to their respective stock market capitalization at the beginning of the period.
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Period Ending Index / Peer Group 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Onity Group Inc. $ 100.00 $ 138.26 $ 105.78 $ 106.40 $ 106.23 $ 158.39 Russell 2000 $ 100.00 $ 113.69 $ 89.18 $ 102.64 $ 112.93 $ 125.68 Current Peer Group $ 100.00 $ 110.62 $ 87.68 $ 114.41 $ 127.57 $ 144.75 2024 Peer Group $ 100.00 $ 113.64 $ 92.49 $ 116.92 $ 134.61 $ 151.16 (1) © 2025 London Stock Exchange Group plc and its applicable group undertakings (“LSEG”).
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Number of Holders of Common Stock On February 13, 2026, 8,521,636 shares of our common stock were outstanding and held by approximately 42 holders of record.

Item 7. Management's Discussion & Analysis

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

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Biggest changeCondensed Statements of Operations Years Ended December 31, % Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Revenue $ 976.0 $ 1,066.7 $ 953.9 (9) % 12 % MSR valuation adjustments, net (96.2) (232.2) (10.4) (59) n/m Operating expenses 436.5 412.1 532.4 6 (23) Other income (expense), net (404.1) (480.5) (386.2) (16) 24 Income (loss) before income taxes 39.3 (58.1) 24.9 (168) (333) Income tax expense (benefit) 5.3 5.6 (0.8) (4) (795) Net income (loss) 33.9 (63.7) 25.7 (153) (348) Segment income (loss) before income taxes Servicing $ 172.8 $ 9.9 $ 127.7 n/m (92) % Originations 30.4 (2.0) 2.9 n/m (169) Corporate (163.9) (66.1) (105.7) 148 (37) $ 39.3 $ (58.1) $ 24.9 (168) % (333) % n/m: not meaningful Onity reported $33.9 million net income in 2024, as compared to a $63.7 million net loss in 2023, or a net improvement of $97.6 million, mostly driven by the following: • A $136.1 million lower loss on MSR valuation adjustments, net, primarily driven by higher market interest rates (the 10-year Treasury rate remained flat in 2023, and increased 70 basis points in 2024 ) and favorable assumption updates as compared to unfavorable updates in 2023 to reflect actual market trade pricing levels; • A $13.7 million net gain on the sale of our investment in MAV Canopy in November 2024; • A $49.4 million loss on debt extinguishment primarily mostly due to our corporate debt refinancing in November 2024 and redemption of the PMC Senior Secured Notes due 2026 and Onity Senior Secured Notes due 2027; • A $32.4 million increase in Originations profitability driven by higher volumes, with our increased recapture operational capability and our MSR replenishment strategy following bulk sales; and • The reversal of litigation accruals in 2023 (within Professional services expenses) related to the resolution of the CFPB and other matters.
Biggest changeThe segment information presented below is prepared under GAAP, consistent with the amounts included in our consolidated financial statements. 52 Condensed Statements of Operations Years Ended December 31, % Change 2025 2024 2023 2025 vs 2024 2024 vs 2023 Revenue $ 1,066.7 $ 976.0 $ 1,066.7 9 % (9) % MSR valuation adjustments, net (169.8) (96.2) (232.2) 77 (59) Operating expenses 491.7 436.5 412.1 13 6 Other income (expense), net (342.4) (404.1) (480.5) (15) (16) Income (loss) before income taxes 62.7 39.3 (58.1) 60 (168) Income tax expense (benefit) (126.8) 5.3 5.6 n/m (4) Net income (loss) (1) 189.5 33.9 (63.7) 459 (153) n/m: not meaningful (1) Before preferred stock dividend The following chart displays income (loss) before income taxes by segment for the years presented (also refer to the respective segment discussions): Onity reported $189.5 million of net income in 2025, as compared to a $33.9 million in 2024, an improvement of $155.6 million, reflecting an increase in income before income taxes of $23.5 million and an increase in income tax benefit of $132.1 million.
These facilities contain eligibility criteria that include aging and concentration limits by loan type among other provisions. Currently, our financing agreements generally have maximum terms of 364-days. The funds are typically repaid using the proceeds from the sale of the loans to the secondary market investors, usually within 30 days.
These facilities contain eligibility criteria that generally include aging and concentration limits by loan type among other provisions. Currently, our financing agreements generally have maximum terms of 364-days. The funds are typically repaid using the proceeds from the sale of the loans to the secondary market investors, usually within 30 days.
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.
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 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 conduct our Originations business through the following five channels: 1- Consumer Direct Our Consumer Direct channel for forward mortgage loans focuses on targeting existing servicing customers by offering them competitive mortgage refinance opportunities, where permitted by the governing servicing and pooling agreement. A portion of our servicing portfolio is susceptible to refinance activity during periods of declining interest rates.
We conduct our Originations business through the following channels: 1- Consumer Direct Our Consumer Direct channel for forward mortgage loans focuses on targeting existing servicing customers by offering them competitive mortgage refinance opportunities, where permitted by the governing servicing and pooling agreement. A portion of our servicing portfolio is susceptible to refinance activity during periods of declining interest rates.
Other, net is mostly driven by early payoff protection expense in 2024 in connection with our MSR sale transactions. Originations We originate and purchase loans and MSRs through multiple channels. Loans generally conform to the underwriting standards of Fannie Mae or Freddie Mac (GSEs) or are government-insured (FHA, VA or USDA).
Other, net is mostly driven by early payoff protection expense recognized in 2024 in connection with our MSR sale transactions. Originations We originate and purchase loans and MSRs through multiple channels. Loans generally conform to the underwriting standards of Fannie Mae or Freddie Mac (GSEs) or are government-insured (FHA, VA or USDA).
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.
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.
The Federal Reserve reduced its federal funds target rate a total of 1 percentage point between September and December 2024 (50-basis point reduction in September and consecutive 25-basis point reductions in November and December). Despite the Federal Reserve actions the 10-year Treasury rate increased by 70 basis points year over year, driving MSR fair values up.
The Federal Reserve reduced its federal funds target rate a total of 1 percentage point between September and December 2024 (50-basis point reduction in September and two consecutive 25-basis point reductions in November and December). Despite the Federal Reserve actions the 10-year Treasury rate increased by 70 basis points year over year, driving MSR fair values up.
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.
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, including recent broker price opinions to value the mortgaged property.
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.
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.
As servicer, we are required to advance to investors the loan P&I installments not collected from borrowers for those delinquent loans, including those on forbearance plans. Loan payoffs and prepayments are a source of additional liquidity and are dependent on the interest rate environment.
As servicer, we are generally required to advance to investors the loan P&I installments not collected from borrowers for those delinquent loans, including those on forbearance plans. Loan payoffs and prepayments are a source of additional liquidity and are dependent on the interest rate environment.
As loan demand and market capacity move out of alignment, pricing adjusts. In a growing market, margins expand and in a contracting market, margins tighten as lenders seek to keep their production at or close to full capacity. Managing capacity and cost is critical as volumes change.
As loan demand and market capacity move out of alignment, pricing adjusts. In a growing market, margins expand and in a contracting market, margins tighten as lenders seek to keep their production at or close to full capacity. Managing capacity and 78 cost is critical as volumes change.
We follow the fair value hierarchy to prioritize the inputs utilized to measure fair value and classify instruments as Level 3 when the valuation technique requires significant unobservable inputs or assumptions. We review and modify, as necessary, our fair value hierarchy classifications on a quarterly basis.
We follow the fair value hierarchy to prioritize the inputs utilized to measure fair value and classify instruments as Level 3 when the valuation technique requires significant unobservable inputs or assumptions. 90 We review and modify, as necessary, our fair value hierarchy classifications on a quarterly basis.
Remaining Borrowing Capacity represents Total Borrowing Capacity less outstanding borrowings, subject to eligible collateral. We may utilize committed borrowing capacity under our financing facilities to the extent we have sufficient eligible collateral to borrow against and otherwise satisfy the applicable conditions to funding.
Remaining Borrowing Capacity represents Total Borrowing Capacity less outstanding borrowings, subject to eligible collateral. We may utilize borrowing capacity under our financing facilities to the extent we have sufficient eligible collateral to borrow against and otherwise satisfy the applicable conditions to funding.
Reducing delinquencies also enables us to recover advances and recognize additional ancillary income such as late fees, which we do not recognize on delinquent loans until they are brought current.
Reducing delinquencies enables us to recover advances and recognize additional ancillary income such as late fees, which we do not recognize on delinquent loans until they are brought current.
Sources of Funds Our primary sources of funds for near-term liquidity in normal course include: • Collections of servicing and subservicing fees and ancillary revenues; • Collections of advances in excess of new advances; • Proceeds from match funded advance financing facilities; • Proceeds from other borrowings, including warehouse facilities, MSR financing facilities, MSR transfers and ESS financing; • Proceeds from sales and securitizations of originated loans and purchased loans; and • Net positive working capital from changes in other assets and liabilities.
Sources of Funds Our primary sources of funds for near-term liquidity in the normal course include: • Collections of servicing and subservicing fees and ancillary revenues; 87 • Collections of advances in excess of new advances; • Proceeds from match funded advance financing facilities; • Proceeds from other borrowings, including warehouse facilities, MSR financing facilities, MSR transfers and ESS financing; • Proceeds from sales and securitizations of originated loans and purchased loans; and • Net positive working capital from changes in other assets and liabilities.
Thereafter, all the risks and costs associated with maintaining and liquidating the property remains with us; we may incur additional losses on REO properties as they progress through the liquidation processes related to delayed timelines due to market conditions, sales commissions, property preservation costs or property tax and insurance advances.
Thereafter, all the risks and costs associated with maintaining and liquidating the property remain with us; we may incur additional losses on REO properties as they progress through the liquidation processes related to delayed timelines due to market conditions, sales commissions, property preservation costs or property tax and insurance advances.
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).
As further discussed, the 30-year fixed rate mortgage is a key driver of Originations volume and prepayments in Servicing, 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).
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.
The Gain on reverse loans and HMBS-related borrowings, net reported within the Servicing segment includes the net fair value changes of securitized reverse mortgage loans 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 and HMBS-related borrowings, that effectively represents tails and servicing value.
We initially recognize our MSR originations and purchases with the associated economics in our Originations segment, and transfer the MSR to our Servicing segment once the MSR is initially recognized on our balance sheet with all subsequent performance associated with the MSR, including funding cost, run-off and other fair value changes reflected in our Servicing segment. 5- Subservicing Growth We source additional servicing volume through our subservicing and interim servicing agreements, through our existing relationships and our enterprise sales initiatives.
We initially recognize our MSR originations and purchases with the associated economics in our Originations segment, and transfer the MSR to our Servicing segment once the MSR is initially recognized on our balance sheet with all subsequent performance associated with the MSR, including funding cost, runoff and other fair value changes reflected in our Servicing segment. 5- Subservicing Growth We source additional servicing volume through our subservicing and interim servicing agreements, through our existing relationships and our enterprise sales initiatives.
Results of Operations and Financial Condition The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our audited consolidated financial statements and the related notes thereto appearing elsewhere in this Annual Report on 51 Form 10-K.
Results of Operations and Financial Condition The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our audited consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K.
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.
Refer to Forward-Looking Statements beginning on page 2 and the Risk Factors section beginning on page 15 , 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.
We regularly monitor and project cash flows over various time horizons to anticipate and mitigate liquidity risk. We maintain liquidity buffers to be responsive to the level of risks, including stressed market interest rate conditions and operational risk.
We regularly monitor and project cash flows over various time horizons to anticipate and mitigate liquidity risk. We maintain liquidity buffers to be responsive to the level of risks, including liquidity peaks and troughs, stressed market interest rate conditions and operational risk.
During 2023, we repurchased $15.0 million of PMC Senior Secured Notes at a discount and recognized a $1.3 million gain on debt extinguishment, net of the respective write-off of unamortized discount and debt issuance costs.
During 2024, we repurchased $15.0 million of PMC Senior Secured Notes at a discount and recognized a $1.3 million gain on debt extinguishment, net of the respective write-off of unamortized discount and debt issuance costs.
In these evaluations, we gave more significant weight to objective evidence, such as our actual financial condition and historical results of operations, as compared to subjective evidence, such as projections of future taxable income or losses.
In these evaluations, we give more significant weight to objective evidence, such as our actual financial condition and historical results of operations, as compared to subjective evidence, such as projections of future taxable income or losses.
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 cannot currently estimate the amount, if any, of reasonably possible losses above amounts that have been recorded at December 31, 2025. 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.
Refer to Note 3 — Fair Value for the range and weighted average of significant unobservable assumptions used (expressed as a percentage of UPB) as of December 31, 2024 and December 31, 2023.
Refer to Note 3 — Fair Value for the range and weighted average of significant unobservable assumptions used (expressed as a percentage of UPB) as of December 31, 2025 and December 31, 2024.
Our medium- and long-term requirements for cash include: • Payment of interest and principal repayment of our PLS Notes that mature in 2025 and our Senior Notes Due 2029 (1) ; • Payment of interest and principal repayment of our OLIT securitization note issuances that have a three-year mandatory call date; • Any payments associated with the confirmation of loss contingencies; and • Any other payments required under contractual obligations discussed above that extend beyond one year.
Our medium- and long-term requirements for cash include: • Payment of interest and principal repayment of our Senior Notes Due 2029 (1) ; • Payment of interest and principal repayment of our OLIT securitization note issuances that have a three-year mandatory call date; • Any payments associated with the confirmation of loss contingencies; and • Any other payments required under contractual obligations discussed above that extend beyond one year.
Refer to the MSR Hedging Strategy section of Item 7A. Quantitative and Qualitative Disclosures about Market Risks for further detail and the discussion below within Servicing.
Refer to the MSR Hedging Strategy section of Item 7A. Quantitative and Qualitative Disclosures About Market Risk for further detail and the discussion below within Servicing.
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, assumptions or outputs.
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.
Discussions of year-to-year comparisons between 2024 and 2023 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, 2024 filed with the SEC on February 21, 2025.
The fair value of both reverse mortgage loans held for investment and HMBS-related borrowings is based primarily on discounted cash flow methodologies. Inputs to the discounted cash flows of these assets include future draws and tail securitization spreads, conditional prepayment rate (including voluntary and involuntary prepayments) and discount rate.
The fair value of both reverse mortgage loans held for sale pooled into HMBS, previously, held for investment and HMBS-related borrowings is based primarily on discounted cash flow methodologies. Inputs to the discounted cash flows of these assets include future draws and tail securitization spreads, conditional prepayment rate (including voluntary and involuntary prepayments) and discount rate.
(5) Includes interim subservicing, including the volume of UPB associated with short-term interim subservicing for certain clients as a support to their originate-to-sell business. 49 The following table summarizes the average volume of our Servicing segment in 2024, compared with the two preceding years. The average servicing volume is a key driver of the profitability of our Servicing segment.
(4) Includes interim subservicing, including the volume of UPB associated with short-term interim subservicing for certain clients as a support to their originate-to-sell business. 49 The following table summarizes the average volume of our Servicing segment in 2025, compared with the two preceding years. The average servicing volume is a key driver of the profitability of our Servicing segment.
Gain (Loss) on Reverse Loans Held for Investment and HMBS-Related Borrowings, Net Gain (loss) on reverse loans held for investment and HMBS-related borrowings, net reported in the Servicing segment is the net change in fair value of securitized loans held for investment and HMBS-related borrowings. It excludes reverse subservicing that is reflected in Servicing and subservicing fees.
Gain (Loss) on Reverse Loans and HMBS-Related Borrowings, Net Gain (loss) on reverse loans and HMBS-related borrowings, net reported in the Servicing segment is the net change in fair value of securitized loans and HMBS-related borrowings. It excludes reverse subservicing that is reflected in Servicing and subservicing fees.
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.
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 growth and optimize our financing costs.
Substantially all of the mortgage loans that we originate or purchase are sold or securitized in the secondary mortgage market in the form of residential mortgage-backed securities guaranteed by Fannie Mae or Freddie Mac and, in the case of mortgage-backed securities guaranteed by Ginnie Mae, are mortgage loans insured or guaranteed by the FHA, VA or United States Department of Agriculture (USDA).
Substantially all of the mortgage loans that we originate or purchase are sold or securitized in the secondary mortgage market in the form of residential mortgage-backed securities guaranteed by Fannie Mae or Freddie Mac and, in the case of mortgage-backed securities guaranteed by Ginnie Mae, are mortgage loans insured or guaranteed by the FHA, VA or USDA.
Aggregate UPB and loan count decline over time as a result of portfolio run-off or sales and increase to the extent we retain MSRs from new originations or engage in MSR acquisitions. Cost to Service and Operating Efficiency .
Aggregate UPB and loan count decline over time as a result of portfolio runoff or sales and increase to the extent we retain or add MSRs from new originations or engage in MSR acquisitions. Cost to Service and Operating Efficiency .
Valuation of MSRs and Other Financing Liabilities, at Fair Value We originate MSRs from our lending activities and acquire MSRs through flow purchase agreements, Agency Cash Window programs or bulk purchases. We account for MSRs, pledged MSR liabilities and ESS financing liabilities at fair value (reported within Other financing liabilities, at fair value).
Valuation of MSRs and MSR related Financing Liabilities, at Fair Value We originate MSRs from our originations activities and acquire MSRs through flow purchase agreements, Agency Cash Window programs or bulk purchases. We account for MSRs, pledged MSR liabilities and ESS financing liabilities at fair value (reported within MSR related financing liabilities, at fair value).
We record such valuation adjustments as MSR valuation adjustments, net within the Originations segment since the segment’s business objective is the sourcing of new MSRs at targeted returns. Changes in MSR valuation adjustments, net period over period are mostly due to volume changes.
We record such valuation adjustments as MSR valuation adjustments, net within the Originations segment since the segment’s business objective is the sourcing of new MSRs at targeted returns. Changes in MSR valuation adjustments, net year over year are largely due to volume changes.
Our judgement is informed by the transactions we observe in the market, by our actual portfolio performance and by the advice and information we obtain from our valuation experts, amongst other factors.
Our judgment is informed by the 91 transactions we observe in the market, by our actual portfolio performance and by the advice and information we obtain from our valuation experts, amongst other factors.
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.
We believe that we are in compliance with the covenants in our debt agreements and associated regulatory requirements as of December 31, 2025. 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 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.
We do not provide or assume any origination representations and warranties in connection with our MSR purchases. As of December 31, 2025, we have recorded a liability for representation and warranty obligations and similar indemnification obligations of $23.0 million. See Note 27 — Contingencies for additional information.
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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in millions, including for charts, 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 2025 and 2024 items and provides year-to-year comparisons between 2025 and 2024.
(6) Includes $34.9 billion and $38.7 billion average UPB of MSRs in the 2023 and 2022, previously sold to Rithm for which the sale accounting criteria were met effective December 31, 2023.
(6) Includes $34.9 billion average UPB of MSRs in 2023 previously sold to Rithm for which the sale accounting criteria were met effective December 31, 2023.
The following table summarizes the impact of our MSR interest rate hedging strategy on Servicing segment results along with the impact of fair value changes due to assumption updates. Refer to MSR Hedging Strategy section of Item 3. Quantitative and Qualitative Disclosures about Market Risks for further detail.
The following chart summarizes the impact of our MSR interest rate hedging strategy on Servicing segment results along with the impact of fair value changes due to other input and assumption updates (refer to the MSR Hedging Strategy section of Item 7A. Quantitative and Qualitative Disclosures about Market Risks for further detail).
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.
In 2025, we added $84.8 billion of new volume, with $33.3 billion of subservicing additions, $42.7 billion of new Originations production and $8.8 billion bulk acquisitions, as further detailed in the below table. $ In billions UPB $ Change Years Ended December 31, 2025 vs 2024 2024 vs 2023 2025 2024 2023 Mortgage servicing originations Retail - Consumer Direct MSR (1) $ 1.9 $ 0.9 $ 0.4 $ 1.0 $ 0.5 Correspondent MSR (1) 22.3 16.1 12.2 6.2 4.0 Flow and Agency Cash Window MSR purchases (2) 17.8 11.9 9.1 5.9 2.8 Reverse mortgage origination (3) 0.6 0.8 0.7 (0.1) 0.1 Total Originations production 42.7 29.7 22.3 13.0 7.4 Bulk MSR purchases (2) 8.8 10.9 0.5 (2.1) 10.4 Total servicing additions 51.5 40.6 22.8 10.9 17.9 Interim forward subservicing 12.9 7.9 6.8 5.0 1.1 Other new subservicing 20.4 37.0 20.8 (16.6) 16.2 Total subservicing additions (4) 33.3 44.9 27.6 (11.6) 17.3 Total servicing and subservicing UPB additions $ 84.8 $ 85.5 $ 50.4 $ (0.8) $ 35.1 (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.
Offsetting cash outflows include $659 million to redeem or repurchase all of our 7.875% PHH Senior Secured Notes and 9.875% Onity Senior Secured Notes, $83 million of net repayments on advance match funded liabilities, and $71 million of net payments on the financing liabilities related to MSRs transferred and ESS financings due to runoff.
Offsetting cash outflows include $659 million to redeem or repurchase all of our 7.875% PHH Senior Secured Notes and 9.875% Onity Senior Secured Notes, $83 million of net repayments on advance match funded liabilities, and $71 million of payments on MSR related financing liabilities due to runoff.
As of December 31, 2024, we reported a $2.5 billion fair value of MSRs and $0.8 billion Other financing liabilities. We determine the fair value of MSRs, pledged MSR liabilities and ESS financing liabilities primarily using discounted cash flow methodologies.
As of December 31, 2025, we reported a $2.8 billion fair value of MSRs and $0.8 billion MSR related financing liabilities. We determine the fair value of MSRs, pledged MSR liabilities and ESS financing liabilities primarily using discounted cash flow methodologies.
Prepayment speed impacts future servicing fees, runoff and valuation of MSRs, float earnings on float balances and interest expense on advances. Increases in anticipated lifetime prepayment speeds generally cause MSR valuation adjustments to increase because MSRs are valued based on total expected servicing income over the life of a portfolio. The converse is true when expectations for prepayment speeds decrease.
Prepayment speed impacts future servicing fees, runoff and valuation of MSRs, float earnings on float balances and interest expense on advances. Increases in anticipated lifetime prepayment speeds generally cause MSR valuation adjustments to increase because MSRs are 66 valued based on total expected servicing income over the life of a portfolio.
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.
Quantitative and Qualitative Disclosures about Market Risk for a sensitivity analysis reflecting the estimated change in the fair value of our MSRs, reverse loans held for sale pooled into HMBS, previously held for investment and loans held for sale carried at fair value as well as any related derivatives at December 31, 2025, given hypothetical instantaneous parallel shifts in the yield curve.
Other Income (Expense) In November 2024, we redeemed all of the outstanding PMC Senior Secured Notes due 2026 and Onity Senior Secured Notes due 2027, resulting in the recognition of a $53.4 million loss on debt extinguishment due to the accelerated write-off of $36.8 million unamortized discount and debt issuance costs, the payment of an $11.6 million make-whole redemption premium and a $5.0 million transaction fee to Oaktree.
The redemption of PMC Senior Secured Notes due 2026 and Onity Senior Secured Notes due 2027 in November 2024, resulted in the recognition of a $53.4 million loss on debt extinguishment due to the accelerated write-off of $36.8 million unamortized discount and debt issuance costs, the payment of an $11.6 million make-whole redemption premium and a $5.0 million transaction fee to Oaktree.
The Servicing segment includes CR Limited (CRL), our wholly-owned captive reinsurance subsidiary, which provides re-insurance related to direct physical loss coverage on foreclosed real estate properties owned or serviced by us. CRL assumes a 90% (60% through January 2024) quota share of insurance coverage written by a third-party insurer issued to PHH.
In addition, the Servicing segment includes our wholly-owned captive reinsurance business (referred to as CRL), which provides re-insurance related to direct physical loss coverage on foreclosed real estate properties owned or serviced by us. CRL generally assumes a 90% (60% through January 2024) quota share of insurance coverage written by a third-party insurer issued to PHH.
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.
We have short-term commitments to lend $2.5 billion in connection with our forward and reverse mortgage loan IRLCs outstanding at December 31, 2025. In addition, we have originated floating-rate reverse mortgage loans under which the borrowers have additional borrowing capacity of $2.9 billion at December 31, 2025.
During 2024, we funded $255.2 million of the $1.8 billion borrowing capacity available as of December 31, 2023. We are able to immediately securitize these borrower draws or advances under the Ginnie Mae program.
During 2025, we funded $314.8 million of the $3.1 billion borrowing capacity available as of December 31, 2024. We are able to immediately securitize these borrower draws or advances under the Ginnie Mae program.
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.
Our total accrual for probable and estimable legal and regulatory matters, including accrued legal fees, was $27.6 million at December 31, 2025. It is possible that we will incur 93 losses relating to threatened and pending litigation that materially exceed the amount accrued.
As of December 31, 2024, 91% of our assets and 74% of our liabilities were reported at fair value, with fair value changes reported in our statement of operations. Substantially all our assets and liabilities at fair value were classified as Level 3 instruments due to unobservable inputs.
As of December 31, 2025, 90% of our assets and 68% of our liabilities were reported at fair value, with fair value changes reported in our statement of operations. Substantially all our assets and liabilities at fair value were classified as Level 3 instruments due to unobservable inputs.
See Note 8 — Other Financing Liabilities, at Fair Value to the Consolidated Financial Statements.
See Note 8 — MSR Related Financing Liabilities, at Fair Value to the Consolidated Financial Statements.
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.
We serviced or subserviced 1.4 million loans with a total UPB of $328.3 billion on behalf of more than 3,900 investors and 119 subservicing clients as of December 31, 2025. We service all mortgage loan classes, including conventional, government-insured, non-Agency, small-balance commercial and multi-family loans.
The Stable Outlook reflects S&P’s expectations that Onity will maintain certain levels of debt ratio and debt-interest coverage while continuing to grow and diversify its servicing portfolio.
S&P also affirmed the B- rating to Onity with a Stable Outlook. The Stable Outlook reflects S&P’s expectations that Onity will maintain certain levels of debt ratio and debt-interest coverage while continuing to grow and diversify its servicing portfolio.
With intercompany financing agreements, the financing cost of the Servicing and Originations segments reflects, and is consistent with the financing needs of the licensed entity PHH that carries out these businesses. • Certain expenses incurred by corporate support services, such as technology, legal, risk and compliance, or finance are allocated to the Servicing and Originations segments using various methodologies intended to approximate the utilization of such services. 74 The following table presents selected results of operations of Corporate.
With intercompany financing agreements, the financing cost of the Servicing and Originations segments reflects, and is consistent with the financing needs of the licensed subsidiaries that carry out these businesses. • Certain expenses incurred by corporate support services, such as technology, legal, risk and compliance, or finance are allocated to the Servicing and Originations segments using various methodologies intended to approximate the utilization of such services.
Rating Agency Rated Entity Long-term Corporate Rating Review Status / Outlook Date of last action Moody’s Onity B3 Stable October 21, 2024 S&P Onity B- Stable October 21, 2024 On October 21, 2024, Moody’s assigned a Caa1 rating to the new PHH Corporation Senior Notes Due 2029.
Rating Agency Rated Entity Long-term Corporate Rating Review Status / Outlook Date of last action Moody’s Onity B3 Stable October 2, 2025 S&P Onity B- Stable October 21, 2024 On October 2, 2025, Moody’s affirmed the Caa1 rating of the PHH Corporation Senior Notes due 2029. Moody’s also affirmed the B3 corporate family rating of Onity.
Prepayments do not vary linearly with interest rates resulting in the convexity of the MSR, i.e., the interest rate sensitivity of the MSR changes when interest rates change. Specifically, as interest rates further increase, the lower the fair value of the MSR increases. Interest rates .
The converse is true when expectations for prepayment speeds decrease. Prepayments do not vary linearly with interest rates resulting in the convexity of the MSR, i.e., the interest rate sensitivity of the MSR changes when interest rates change. Specifically, as interest rates further increase, the lower the fair value of the MSR increases.
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.
See Note 14 — Borrowings to the Consolidated Financial Statements for additional information regarding our covenants. The most restrictive liquidity requirement under our debt agreements is for a minimum of $65.0 million in consolidated liquidity, as defined, under certain of our warehouse and MSR financing facilities agreements.
Financing cash inflows are primarily comprised of $803 million net from borrowings under our mortgage loan financing facilities due to the increase in loans held for sale, including $570 million with the issuances of the OLIT securitization of reverse mortgage buyouts, $498 million proceeds from issuance of the new PHH Corporation 9.875% Senior Notes due November 2029, $43 million net proceeds from borrowings under our MSR financing facilities, $28 million of proceeds from the sale of MSRs accounted for as a financing in connection with sales of MSRs, $24 million of proceeds from ESS financings, and $20 million proceeds from the issuance of Series B Preferred Stock in connection with the acquisition of reverse mortgage assets of MAM (cash balance transferred with all other assets acquired and liabilities assumed).
Financing cash inflows are primarily comprised of $479 million net from borrowings under our mortgage warehouse facilities due to the increase in loans held for sale, $324 million net from the issuances of the OLIT securitization of reverse mortgage buyouts, $498 million proceeds from issuance of the new PHH Corporation 9.875% Senior Notes due November 2029, $43 million net proceeds from borrowings under our MSR financing facilities, $52 million of proceeds from MSR related financing liabilities, and $20 million proceeds from the issuance of Series B Preferred Stock in connection with the acquisition of reverse mortgage assets of MAM (cash balance transferred with all other assets acquired and liabilities assumed).
Refer to the Servicing and Originations segments for discussion and analysis of Interest income and Interest expense. Refer to the Servicing segment for discussion and analysis of Pledged MSR liability expense and Earnings of equity method investee, including the related gain on sale of our investment in MAV Canopy.
Refer to the Servicing segment for discussion and analysis of Pledged MSR liability expense and Earnings of equity method investee, including the gain on sale of our investment in MAV Canopy in the fourth quarter of 2024.
Servicing This segment is primarily comprised of our mortgage servicing and subservicing business. We earn servicing and subservicing fees, including ancillary income, and incur cost to service the loans which varies depending on delinquency status. We are exposed to MSR valuation adjustments and advancing obligations when we own the MSR.
We earn servicing and subservicing fees, including ancillary income, and incur cost to service the loans which varies depending on delinquency status. We are exposed to MSR valuation adjustments and advancing obligations when we own the MSR.
Cash inflows of $1,074 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 $1,475 million, indicating a runoff of the portfolio that exceeds originations.
Cash inflows of $1,074 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 $1,475 million, indicating a runoff of the portfolio that exceeds originations. 61 Key Trends and Outlook Historical trends The following table displays historical trends of our financial performance by quarter.
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.
As of December 31, 2025, we have relationships with 742 approved correspondent sellers. 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.
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.
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 were effectively used as a hedge of our forward MSR portfolio through the third quarter of 2025. See further description of our hedging strategy and its effectiveness in Item 7A.
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.
The following table provides a breakdown of our servicer advances, net of allowance for losses: Advances by investor type December 31, 2025 Principal and Interest Taxes and Insurance Foreclosures, bankruptcy, REO and other Total Conventional $ 1.1 $ 74.9 $ 6.2 $ 82.2 Government-insured 2.0 38.9 22.5 63.3 Non-Agency 95.6 165.1 77.3 337.9 Total, net $ 98.7 $ 278.8 $ 106.0 $ 483.4 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 70 The following table provides the rollforward of activity of our portfolio of mortgage loans serviced that includes MSRs, whole loans and subserviced loans, both forward and reverse: Amount of UPB ($ in billions) Count (000’s) 2025 2024 2023 2025 2024 2023 Portfolio at January 1 $ 301.7 $ 288.4 $ 289.8 1,395.1 1,344.5 1,378.8 Additions (1) (2) 84.7 85.3 50.7 258.0 319.6 164.2 MSR Sales (3) (9.2) (14.8) — (39.2) (54.6) (0.3) Servicing transfers (1) (2) (3) (14.6) (25.3) (23.3) (64.0) (91.1) (80.1) Runoff (34.3) (32.0) (28.7) (124.3) (123.3) (118.1) Portfolio at December 31 $ 328.3 $ 301.7 $ 288.4 1,425.7 1,395.1 1,344.5 (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 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 Gain on loans held for sale, net $ 57.7 $ 30.3 $ 52.9 90 % (43) % Gain on reverse loans held for investment and HMBS-related borrowings, net 25.9 23.2 61.2 12 (62) Other revenue, net (1) 25.7 18.6 27.0 38 (31) Total revenue 109.3 72.1 141.1 52 (49) MSR valuation adjustments, net 13.6 11.7 9.9 16 18 Operating expenses Compensation and benefits 46.4 43.0 85.1 8 (49) Origination expense 7.8 2.7 11.1 192 (76) Technology and communications 7.3 7.0 9.2 4 (24) Professional services 2.2 1.9 4.8 13 (60) Occupancy, equipment and mailing 2.4 2.2 4.5 13 (52) Corporate overhead allocations 16.8 18.7 21.6 (10) (13) Other expenses 5.4 5.3 12.2 1 (56) Total operating expenses 88.3 80.8 148.5 9 (46) Other income (expense) Interest income 54.4 51.8 31.2 5 66 Interest expense (58.1) (56.6) (29.0) 3 95 Other, net (0.4) (0.2) (1.8) 124 (89) Other income (expense), net (4.2) (5.0) 0.4 (17) n/m Income (loss) before income taxes $ 30.4 $ (2.0) $ 2.9 n/m (168) (1) Includes $2.0 million, $2.1 million and $2.1 million ancillary fee income related to MSR acquisitions reported as Servicing and subservicing fees at the consolidated level for 2024, 2023 and 2022, respectively. 72 Gain on Loans Held for Sale, Net The following table provides information regarding Gain on loans held for sale by channel and the related forward loan origination volumes and margins (excluding fees that are presented in Other revenue, net): Years Ended December 31, % Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Origination UPB (1) (in billions) Correspondent $ 16.1 $ 12.2 $ 15.6 33 % (22) % Consumer Direct 0.9 0.4 1.2 153 (71) $ 17.0 $ 12.5 $ 16.8 36 % (26) % % Gain on Sale Margin (2) Correspondent 0.18 % 0.15 % 0.16 % 18 % (2) % Consumer Direct 3.13 3.22 2.30 % (3) 40 0.34 % 0.24 % 0.31 % 40 % (23) % Gain on Loans Held for Sale Correspondent $ 29.3 $ 18.8 $ 24.6 56 % (24) % Consumer Direct 28.3 11.5 28.3 146 (59) $ 57.7 $ 30.3 $ 52.9 90 % (43) % (1) Defined as the UPB of loans funded in the period.
The amounts presented are before the elimination of balances and transactions with our other segments: Years Ended December 31, % Change 2025 2024 2023 2025 vs 2024 2024 vs 2023 Revenue Gain on loans held for sale, net $ 97.1 $ 57.7 $ 30.3 68 % 90 % Gain on reverse loans and HMBS-related borrowings, net 24.3 25.9 23.2 (6) 12 Other revenue, net (1) 35.7 25.7 18.6 39 38 Total revenue 157.1 109.3 72.1 44 52 MSR valuation adjustments, net 19.5 13.6 11.7 44 16 Operating expenses Compensation and benefits 59.7 46.4 43.0 29 8 Origination expense 11.4 7.8 2.7 46 192 Technology and communications 9.5 7.3 7.0 31 4 Professional services 2.1 2.2 1.9 (2) 13 Occupancy, equipment and mailing 3.2 2.4 2.2 32 13 Corporate overhead allocations 17.0 16.8 18.7 1 (10) Other expenses 6.4 5.4 5.3 18 1 Total operating expenses 109.3 88.3 80.8 24 9 Other income (expense) Interest income 80.3 54.4 51.8 48 5 Interest expense (73.5) (58.1) (56.6) 26 3 Other, net (1.7) (0.4) (0.2) 294 124 Other income (expense), net 5.2 (4.2) (5.0) (224) (17) Income (loss) before income taxes $ 72.4 $ 30.4 $ (2.0) 138 n/m Income (loss) before income taxes to UPB (bps) 30 18 (2) 68 n/m Funded loan UPB - Forward loans (in $ billions) $ 24.2 $ 17.0 $ 12.5 42 36 Average Headcount - Originations 601 495 501 21 (1) (1) Includes $2.0 million and $2.1 million ancillary fee income related to MSR acquisitions reported as Servicing and subservicing fees at the consolidated level for 2024 and 2023, respectively. 81 Gain on Loans Held for Sale, Net The following chart displays Gain on loans held for sale by channel for the years presented: The following table and discussion present Gain on loans held for sale by channel and the main drivers, specifically the forward loan origination volumes and margins (excluding fees that are presented in Other revenue, net): Years Ended December 31, % Change 2025 2024 2023 2025 vs 2024 2024 vs 2023 Origination UPB (1) (in billions) Correspondent $ 22.3 $ 16.1 $ 12.2 38 % 33 % Consumer Direct 1.9 0.9 0.4 107 153 $ 24.2 $ 17.0 $ 12.5 42 % 36 % % Gain on Sale Margin (2) Correspondent 0.18 % 0.18 % 0.15 % (1) % 18 % Consumer Direct 3.04 3.13 3.22 % (3) (3) 0.40 % 0.34 % 0.24 % 19 % 40 % Gain on Loans Held for Sale Correspondent $ 40.2 $ 29.3 $ 18.8 37 % 56 % Consumer Direct 56.9 28.3 11.5 101 146 $ 97.1 $ 57.7 $ 30.3 68 % 90 % (1) Defined as the UPB of loans funded in the period.
Corporate overhead allocations decreased $1.9 million mainly due to targeted cost-reduction efforts. Other Income (Expense) Interest income consists primarily of interest earned on newly-originated and purchased loans during the pipeline period prior to securitization or sale to investors. Interest expense is incurred to finance the mortgage loans during the same pipeline period, which is generally approximately 20 days.
Other Income (Expense) Interest income consists primarily of interest earned on newly-originated and purchased loans during the pipeline period prior to securitization or sale to investors. Interest expense is incurred to finance the mortgage loans during the same pipeline period, which is generally approximately 20 days.
A summary of borrowing capacity under our advance facilities, mortgage warehouse facilities and MSR financing facilities is as follows (see Note 14 — Borrowings to the Consolidated Financial Statements for additional information): December 31, 2024 December 31, 2023 Total Borrowing Capacity (1) Remaining Borrowing Capacity - Committed (1) Remaining Borrowing Capacity - Uncommitted (1) Total Borrowing Capacity (1) Remaining Borrowing Capacity - Committed (1) Remaining Borrowing Capacity - Uncommitted (1) Advance facilities $ 714.4 $ 233.5 $ 63.8 $ 714.4 $ 151.1 $ 63.5 Mortgage loan financing facilities 2,553.1 212.5 1,294.3 2,696.1 372.7 1,591.7 MSR financing facilities 1,200.0 235.4 55.3 1,082.2 128.2 37.5 Total $ 4,467.5 $ 681.4 $ 1,413.4 $ 4,492.7 $ 652.1 $ 1,692.8 (1) Total Borrowing Capacity represents the maximum amount which can be borrowed, subject to eligible collateral.
A summary of borrowing capacity under our advance facilities, mortgage warehouse facilities and MSR financing facilities is as follows (see Note 14 — Borrowings to the Consolidated Financial Statements for additional information): December 31, 2025 December 31, 2024 Total Borrowing Capacity (1) Remaining Borrowing Capacity - Committed (1) Remaining Borrowing Capacity - Uncommitted (1) Total Borrowing Capacity (1) Remaining Borrowing Capacity - Committed (1) Remaining Borrowing Capacity - Uncommitted (1) Advance facilities $ 814.4 $ 458.6 $ 13.9 $ 714.4 $ 233.5 $ 63.8 Mortgage warehouse facilities 3,184.3 231.9 1,727.8 2,553.1 212.5 1,294.3 MSR financing facilities 1,470.0 172.4 30.9 1,200.0 235.4 55.3 Total $ 5,468.7 $ 862.9 $ 1,772.6 $ 4,467.5 $ 681.4 $ 1,413.4 (1) Total Borrowing Capacity represents the maximum amount which can be borrowed, subject to eligible collateral.
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.
Regarding the current maturities of our borrowings, as of December 31, 2025, we have approximately $2.4 billion of debt outstanding that would either come due, begin amortizing or require partial repayment in the next 12 months. This amount is primarily comprised of $1.2 billion of borrowings under warehouse facilities and $1.1 billion MSR financing facilities.
Rithm accounted for $41.2 billion or 14% and 24% of the total serviced UPB and loan count, respectively, of our servicing and subservicing portfolio as of December 31, 2024, and 63% of all delinquent loans that Onity serviced, for which the cost to service and the associated risks are higher.
Rithm accounted for $32.2 billion or 10% and 19% of the total serviced UPB and loan count, respectively, of our servicing and subservicing portfolio as of December 31, 2025, and 50% of all delinquent loans that Onity serviced, for which the cost to service and the associated risks are higher. MAV is our second largest subservicing client.
Gain on loans held for sale, net, increased $27.3 million, or 90%, as compared to 2023 with a $16.8 million increase in our Consumer Direct channel and a $10.5 million increase in our Correspondent channel.
Gain on loans held for sale, net, increased $39.5 million, or 68%, as compared to 2024 with a $28.5 million increase in our Consumer Direct channel and a $10.9 million increase in our Correspondent channel.
As the securitizations of reverse mortgage loans do not achieve sale accounting treatment and the loans remain reported as Loans held for investment, at fair value together with the securitization HMBS-related borrowings, revenue mostly include the fair value changes of the loan from lock date to securitization date that are reported in Gain on reverse loans held for investment and HMBS-related borrowings, net. 4- Co-Issue Programs We purchase MSRs through flow purchase agreements, the Agency Cash Window co-issue programs and bulk MSR purchases.
As the securitizations of reverse mortgage loans do not achieve sale accounting treatment and the loans remain reported as Reverse loans held for sale pooled into HMBS, at fair value, previously, Loans held for investment, at fair value together with the securitization HMBS-related borrowings, revenue mostly include the fair value changes of the loan from lock date to securitization date that are reported in Gain on reverse loans and HMBS-related borrowings, net.
Years Ended December 31, % Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Servicing fees Average servicing UPB (1) (6) $ 167.4 $ 203.0 $ 201.7 (18) % 1 % Average servicing fee (2) 0.30 0.32 0.33 (7) % (1) % Servicing fees (3) $ 503.4 $ 656.6 $ 660.3 (23) % (1) % Subservicing fees Average number of subserviced loans (4) (7) 587.9 294.1 273.1 100 % 8 % Average monthly fee per loan (5) $ 16 $ 23 $ 24 (27) % (6) % Subservicing fees (3) $ 115.2 $ 79.4 $ 78.1 45 % 2 % Servicing and subservicing fees (excluding Ancillary income) $ 618.6 $ 736.0 $ 738.5 (16) % — % (1) In $ billions, (2) In % of UPB, annualized, (3) In $ millions, (4) In thousands, (5) In dollars.
Years Ended December 31, % Change 2025 2024 2023 2025 vs 2024 2024 vs 2023 Servicing fees Average servicing UPB (1) (6) $ 183.1 $ 167.4 $ 203.0 9 % (18) % Average servicing fee (2) 0.30 0.30 0.32 (1) % (7) % Servicing fees (3) $ 546.2 $ 503.4 $ 656.6 9 % (23) % Subservicing fees (8) Average number of subserviced loans (4) (7) 566.4 587.9 294.1 (4) % 100 % Average monthly fee per loan (5) $ 15 $ 16 $ 23 (11) % (27) % Subservicing fees (3) $ 99.2 $ 115.2 $ 79.4 (14) % 45 % (1) In $ billions, (2) In % of UPB, (3) In $ millions, (4) In thousands, (5) In dollars.
We finance mortgage loans with repurchase and participation agreements, commonly referred to as warehouse lines. Our net interest margin is driven by the difference between the average mortgage note rate and the average warehouse line cost of funds, and by the average number of days loans remain in the pipeline.
Our net interest margin is driven by the difference between the average mortgage note rate and the average warehouse line cost of funds, the average balance of loans and by the average number of days loans remain in the pipeline.
In addition to the impact of interest rate changes on prepayment speeds, the fair value of the MSR and associated hedging activities, float earnings on float balances, and the funding cost of servicing advances and MSR financing facilities are directly impacted by interest rate changes. 59 Reverse Mortgages Our reverse business activities include both the subservicing of reverse mortgage loans on behalf of investors and the servicing of our owned portfolio.
Interest rates . In addition to the impact of interest rate changes on prepayment speeds, the fair value of the MSR and associated hedging activities, float earnings on float balances, and the funding cost of servicing advances and MSR financing facilities are directly impacted by interest rate changes.
The change from a $55.5 million fair value loss in 2023 to a $173.3 million fair value gain in 2024 is mostly driven by changes in market interest rates as the 10-year Treasury rate increased 70 basis points in 2024 (flat in 2023) and favorable assumption updates to reflect actual market trade pricing levels in 2024 as compared to unfavorable updates to reflect market participant perspectives on MSR fair value with actual trade pricing levels in 2023. • MSR hedging derivative fair value gains or losses are designed to partially offset the expected fair value losses or gains, respectively, of the net MSR, MSR pledged liabilities and ESS exposure, commensurate with our target hedge coverage ratio.
The change from a $173.3 million fair value gain in 2024 to a $1.2 million fair value gain in 2025 is mostly driven by changes in market interest rates as the 10-year Treasury rate declined 40 basis points in 2025 compared to an increase of 70 basis points in 2024 and less favorable input and assumption updates in 2025 including prepayment speeds. • MSR hedging derivative fair value gains or losses are designed to partially offset the expected fair value changes of the net MSR, MSR pledged liabilities and ESS exposure, commensurate with our target hedge coverage ratio.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeChange 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.
Biggest changeChange in Fair Value Due to Hypothetical Interest Rate Changes Down 100 bps Down 50 bps Down 25 bps Up 25 bps Up 50 bps Up 100 bps Asset value of securitized HECM loans, net of HMBS-related borrowing $ 19 9 5 (5) (9) $ (19) Reverse loans held for sale pooled into HMBS - Unsecuritized HECM loans and tails — — — — — — Loans held for sale 64 42 23 (29) (63) (143) Derivative instruments 133 58 26 (22) (40) (67) Total MSRs - Agency and non-Agency (208) (105) (52) 49 94 165 IRLCs (8) (5) (2) 2 5 9 Total, net exposure $ — (1) — (4) (14) $ (55) Borrowings The majority of the collateralized debt used to finance our operations is based on variable rates, but remains exposed to interest rate fluctuations between repricing dates.
In addition, changes in interest rates could materially and adversely affect the amount of escrow and float income, the volume of mortgage loan originations or result in MSR fair value changes. We also have exposure to the effects of changes in interest rates on our floating-rate borrowings, including MSR and advance financing facilities.
In addition, changes in interest rates could materially and adversely affect the amount of escrow and float income, the volume of mortgage loan originations or result in MSR fair value changes. We also have exposure to the effects of changes in interest rates on our floating-rate borrowings, including MSR financing facilities, mortgage warehouse facilities and advance financing facilities.
We report changes in fair value of these derivative instruments as gain or loss on economic hedge instruments within either Gain on loans held for sale, net or Gain on reverse loans held for investment and HMBS-related borrowings, net in our consolidated statements of operations.
We report changes in fair value of these derivative instruments as gain or loss on economic hedge instruments within either Gain on loans held for sale, net or Gain on reverse loans and HMBS-related borrowings, net in our consolidated statements of operations.
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, +/- 50 and +/- 100 basis point parallel move in rates.
As our HECM loan portfolio is predominantly comprised of ARMs, higher interest rates cause the loan balance to accrue and reach a 98% maximum claim amount liquidation event more quickly, while lower interest rates extend the timeline to reach maximum claim amount liquidation. Additionally, portfolio value is heavily influenced by market spreads for fixed and discount margin for ARMs.
As our HECM loan portfolio is predominantly comprised of ARMs, higher interest rates cause the loan balance to accrue and reach a 98% maximum claim amount liquidation event more quickly, with lower interest rates extending the timeline to liquidation. Additionally, portfolio value is heavily influenced by market spreads for fixed and discount margin for ARMs.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Dollars in millions unless otherwise indicated) Interest Rates Our principal market risk exposure is the impact of interest rate changes on our mortgage-related assets and commitments, including MSRs, loans held for sale, loans held for investment, interest rate lock commitments (IRLCs) and other derivative instruments.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Dollars in millions unless otherwise indicated) Interest Rates Our principal market risk exposure is the impact of interest rate changes on our mortgage-related assets and commitments, including MSRs, loans held for sale, loans held for sale pooled into HMBS, previously, held for investment, IRLCs and other derivative instruments.
This HMSR exposure is used as a partial offset to our forward MSR exposure and managed as part of our MSR hedging strategy described above.
This HMSR exposure is used as a partial offset to our forward MSR exposure and managed as part of our MSR hedging strategy through September 2025, as described above.
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.
Earnings on cash and float balances are a partial offset to our exposure to changes in interest expense. Sensitivity Analysis Fair Value MSRs, Loans Held for Sale, Reverse Loans Held for Sale pooled into HMBS, previously, Held for Investment and Related Derivatives We assess and manage our interest rate risk on a daily basis primarily using sensitivity analyses.
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.
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 that do not qualify for sale accounting, also referred to as Pledged MSR liabilities (See Note 8 — MSR Related 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.
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.
Also refer to below sensitivity analysis. 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 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 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.
Although active and inactive reverse mortgage loans are insured by FHA, we may incur expenses and losses in the process of repurchasing and liquidating these loans that are not reimbursable by FHA in accordance with program guidelines.
Inactive MCA repurchased loans are generally foreclosed upon and liquidated by the HMBS issuer. Although active and inactive reverse mortgage loans are insured by FHA, we may incur expenses and losses in the process of repurchasing and liquidating these loans that are not reimbursable by FHA in accordance with program guidelines.
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 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.
As servicer, we are also exposed to the impact of interest rate fluctuations on the float income we earn on balances held in trust from the date a loan payment is received from borrowers to the date funds are forwarded to investors.
Our corporate debt and reverse mortgage securitization notes are based on fixed interest rates. As servicer, we are also exposed to the impact of interest rate fluctuations on the float income we earn on balances held in trust from the date a loan payment is received from borrowers to the date funds are forwarded to investors.
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.
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, model risk observed between actual vs. expected fair value changes, and hedge costs. We continuously evaluate the use of hedging instruments with the objective of enhancing the effectiveness of our interest rate hedging strategy.
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.
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. 95 Advance Match Funded Liabilities We monitor the effect of changes in interest rates on the interest paid on our variable-rate advance financing debt.
Loans Held for Investment and HMBS-related Borrowings The fair value of our securitized HECM loan portfolio generally decreases as market interest rates rise and increases as market rates fall.
Reverse Loans Held for sale pooled into HMBS and HMBS-related Borrowings The fair value of our reverse mortgage loans held for sale pooled into HMBS, previously, held for investment generally decreases as market interest rates rise and increases as market rates fall.
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.
The following table summarizes the estimated change in the fair value of our MSRs, reverse loans held for sale pooled into HMBS, previously, loans held for investment and loans held for sale that we have elected to carry at fair value as well as any related derivatives, given hypothetical instantaneous parallel shift in the yield curves and based on our hedge coverage ratio as of December 31, 2025.
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.
Based on December 31, 2025 balances, if interest rates were to decrease by 100 bps (hypothetical instantaneous parallel shift in the yield curves), we estimate a net positive impact on our annual profitability of approximately $0.6 million resulting from a decrease of $27.7 million in annual interest income and other credits on cash deposits and float balances, and a decrease of $28.3 million in annual interest expense on our variable-rate debt.
The fair value of our securitized HECM loan portfolio net of the fair value of the HMBS-related borrowings represent a reverse mortgage economic MSR (HMSR) for risk management purposes. The fair value of our HMSR generally decreases as market interest rates rise and increases as market rates fall.
The fair value of our securitized HECM loan portfolio net of the fair value of the HMBS-related borrowings represents a reverse mortgage economic MSR (HMSR) for risk management purposes.
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.
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.
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%.
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%. Actual fair value changes of derivatives may not fully offset fair value changes of IRLCs and loans due to many factors including basis risk or market volatility.
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%. In April 2024, we changed the risk measure to a dollar DV01 that resulted in an equivalent range of approximately 90% to 110%.
In April 2024, we changed the risk measure to a dollar DV01 that resulted in an equivalent range of approximately 90% to 110%. In May 2025, we established a new targeted hedge coverage ratio of 85% with a range between 80% and 100%. The targeted ratio was increased to a range of 95% to 100%, effective end of October 2025.
Home Prices Inactive reverse mortgage loans for which the maximum claim amount has not been met are generally foreclosed upon on behalf of Ginnie Mae with the REO remaining in the related HMBS until liquidation. Inactive MCA repurchased loans are generally foreclosed upon and liquidated by the HMBS issuer.
We did not enter into any foreign currency hedging derivative instruments during the three-year period ended December 31, 2025. 96 Home Prices Inactive reverse mortgage loans for which the maximum claim amount has not been met are generally foreclosed upon on behalf of Ginnie Mae with the REO remaining in the related HMBS until liquidation.
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.
Our derivative instruments include forward trades of MBS or Agency TBAs with different banking counterparties, exchange-traded interest rate futures and options. 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.
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.
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, improve hedge effectiveness and/or optimize asset returns. 94 Effective December 2023, we established a targeted hedge coverage ratio range between 95% and 105%.
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).
From time to time, we enter into exchange-traded options contracts with purchased put options financed by written call options. 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.
Removed
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.
Added
The fair value of MSRs is subject to changes in market interest rates, among other inputs and assumptions. MSR interest rate risk includes the changes in level, slope or shape of yield curves, spreads, volatility and prepayments. While we economically mitigate the short-term prepayment risk of our MSR portfolio through recapture, we remained exposed to MSR fair value volatility.
Removed
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).
Added
Effective October 2025, without changing our interest rate risk management objective and procedures, our HECM MSR is now hedged with dedicated third-party derivative instruments, whose fair value changes are presented within Gain on reverse loans and HMBS-related borrowings, net in our consolidated statements of operations, within the Servicing segment.
Removed
As our HECM loan portfolio is predominantly comprised of ARMs, higher interest rates cause the loan balance to accrue and reach a 98% maximum claim amount liquidation event more quickly, with lower interest rates extending the timeline to liquidation.
Added
The net fair value impact due to hypothetical interest rate shocks in the below table reflects the risk management and hedging discipline we maintain, including the targeted, highly effective hedge coverage of our MSR, pipeline and reverse MSR exposures.
Removed
Advance Match Funded Liabilities We monitor the effect of changes in interest rates on the interest paid on our variable-rate advance financing debt.
Added
We evaluate our exposure and hedges on a daily basis and rebalance our positions as warranted by market conditions and as we deem necessary. For example, if rates were to significantly increase, we may change our hedge profile to reduce our targeted total net exposure in upward rate scenarios, as illustrated in the below table.
Removed
Borrowings The majority of the collateralized debt used to finance our operations is based on variable rates, but remains exposed to interest rate fluctuations between repricing dates. Our corporate debt is based on fixed interest rates.

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