Onity Group Inc.

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

Thanks, Valerie. Good morning, everyone, and thank you for joining our call. We're looking forward to sharing our third quarter results and reviewing our strategy and financial objectives to deliver long-term value for our shareholders. Let's get started on slide three. Our third quarter results again demonstrate the effectiveness of our strategy and the strength of our execution. Our balanced business delivered sustained results with lower interest rates driven by originations profitability offsetting MSR runoff. Record origination volume and steady servicing profitability drove increased adjusted pre-tax income versus the second quarter and continued book value growth. Adjusted ROE exceeded our guidance for the quarter and year to date and we're expecting to exceed our guidance for the full year. underscoring our commitment to strong shareholder returns. Let's turn to slide four to review a few highlights for the quarter. We delivered adjusted pre-tax income of $31 million and annualized adjusted return on equity of 25%, driven by strong originations performance and favorable fair value gains on reverse buyout loans and servicing. GAAP net income and earnings per share of $2.03 reflect a $4 million or 48% per share tax provision expense related to tax planning strategies to support future utilization of our deferred tax asset. Average servicing UPB continued to grow steadily, fueled by year-over-year volume growth, which exceeded total industry originations growth for the same period. And finally, book value increased to $62 per share, up 5% versus prior year. We believe our third quarter results demonstrate our effectiveness in navigating changing market conditions with a balanced business model working as designed. Let's turn to slide five for more about the capability of our balanced business. We believe our scale in both servicing and originations enables us to perform well with high or low interest rates. You can see on the left, our total business is delivering improved performance as we have grown servicing and improved overall productivity. Originations is responding well to changing market conditions with profitability increasing as rates have generally declined in the second and third quarter. If interest rates were to materially decline like in 2021, we believe industry origination volume and margins would increase while higher MSR runoff would reduce servicing earnings. In this scenario, we would expect originations to again deliver most of our earnings. Regardless of interest rates, we're always maintaining agility to capitalize on asset management and other opportunities consistent with our strategy to create value for shareholders. Let's turn to slide six for more about our growth focus and actions. We delivered servicing portfolio growth versus the prior quarter and prior year driven by double-digit originations growth in the same periods. We've increased our owned MSR portfolio, consistent with our objective to retain more MSRs to grow earnings and book value, as well as reload our portfolio for recapture opportunity. Ending total servicing in the third quarter is up $17 billion, or 6%, year over year, with $39 billion in servicing additions, net of runoff, more than offsetting planned transfers to Rhythm and opportunistic client MSR sales. With MSR demand keeping prices elevated, several of our clients have taken the opportunity to monetize their MSRs and are replenishing their portfolio as industry origination volume increases. I believe our ability to replenish and grow our portfolio while our clients execute opportunistic MSR sales highlights the power of our origination capability and the success of our growth strategy. Now please turn to slide seven for some highlights on our Originations performance. In the third quarter, our Originations team delivered volume growth of 39% and 26% versus prior year and prior quarter respectively, in both cases exceeding the industry and many of our public peers. Consumer Direct is demonstrating strong growth driven by declining rates in the third quarter and improved execution. In business to business, we leverage an enterprise sales approach to deliver our wide range of products, delivery methods, and services, coupled with a strong focus on client service. We've continuously invested in technology and process optimization to enhance the customer experience, reduce cost, and improve scalability and competitiveness in both business to business and consumer direct. We're launching new and upgraded products and services to expand our addressable market and access higher margin market segments, create alternatives for our customers, and manage operating capacity for surges in refinancing activity. To highlight how far we've come in origination, our third quarter funded volume was the highest we've recorded with a market size that's only 41% of the 2021 market peak. Let's turn to slide eight to discuss our recapture platform. Our consumer direct team is delivering top-tier recapture performance to enhance MSR returns for us and several of our subservicing clients. As you can see on the left, funded volume was 1.8 times the prior year level, with an interest rate environment that is comparable between the two periods, reflecting the success of our investments. Based on our refinance recapture benchmarking, our third quarter year-to-date recapture performance, excluding home equity products, is better than several of our peers in the ICE reported average. In addition, our refinance recapture rate where the previous loan was originated by our consumer direct channel is 85%, on par with other retail originators. This points out the significant upside in recapture as we continue to improve our first time recapture capability. We continue to invest in talent, AI tools, predictive analytics, and leverage internal and external data sources to help us better understand our customers, proactively identify opportunities, and further improve our capability and the customer experience. Let's turn to slide nine to discuss our near-term expectations for subservicing. We continue to see a high level of interest amongst prospective clients to explore subservicing options and alternatives. We've signed nine new clients so far this year and have six new agreements under negotiation. We expect subservicing additions in the second half of $32 billion, or over two and a half times the first half level, driven by these new relationships, our existing clients, and synthetic subservicing with our MSR capital partners. And we expect that momentum to continue into the first half of 2026, the subservicing additions from these clients of over two times the first half of 2025. One area where we are seeing attractive growth opportunities is the small balance commercial segment where our subservicing UPB is up 9% versus the second quarter and up 32% year over year. While the requirements are more complex than performing residential servicing, the returns are better, we have the expertise, and we're investing to drive continued growth here. Overall, we're excited about the growth potential in subservicing. and we continue to invest in our sales and operating capabilities to pursue a robust opportunity pipeline. Regarding our subservicing relationship with Rhythm, we have received notice of non-renewal and expect to transfer this portfolio to them starting in the first quarter of 2026. Approximately $8.5 billion of UPB requires trustee and other consent, the timing and success of which are uncertain. We appreciate the opportunity to have served Rhythm and its customers for nearly 10 years. The Rhythm subservicing is a shrinking portfolio of mainly low-balance pre-2008 subprime loans and accounts for over half our delinquent loans and borrower litigation. The portfolio attributes result in a high cost of servicing and declining profitability. For the third quarter of 2025, the Rhythm subservicing was less than 5% of our total adjusted revenues and one of our least profitable portfolios before corporate allocations. After corporate allocations, it lost money in the last two quarters, with third quarter loss increasing over the second. For the past several years, we've assumed in our planning the subservicing would not be renewed for the coming year, and our plans for 2026 assume the same. We expect to adjust our cost structure and replace the earnings contribution with more profitable business that are aligned with our current growth focus and not our past. We do not expect the removal of these loans to have a material financial impact for the full year of 2026. Let's turn to slide 10 to talk about our continued investment in technology. We've been investing across four categories of AI, robotics, natural language processing, vision, and machine learning to improve business performance and competitiveness on several dimensions. We've cultivated our own award-winning robotic process automation center of excellence and technology innovation lab, which support projects of increasing size and complexity. These projects typically focus on four desired outcomes, drive cost leadership, accelerate revenue growth, maximize customer retention, and deliver superior operating performance. I'm proud of what the team has accomplished through focused and purposeful investment to enable a highly competitive platform top tier recapture performance, and an improved customer experience. We continue to utilize this four by four approach to technology innovation and to ensure our investments are aligned with delivering outcomes that matter most to our stakeholders. Let's turn to slide 11 to see what we've accomplished and where we're taking our technology program. We believe our AI investments have been an important enterprise-wide performance enabler, creating value for all Onity stakeholders. Our past investments in AI have been focused on improving cycle times, processing cost, customer access and self-service, scalability of operations, customer opportunity identification, and reducing delinquencies. The outcomes of these efforts are reflected in the center column of this slide, and as you can see, they've had a profound impact on our business. Today, our focus is continued integration of robotics, large language models, and machine learning across all operations to empower our people and processes where every process is optimized, every decision is data informed, and every outcome is superior. For our people, our goal is to provide them with enhanced tools and data-enabled intelligence that drives heightened responsiveness, real-time decisions, and superior outcomes. For our customers, our focus is increased personalization, enhanced self-service, continuous improvement in ease of use, and anticipating their needs. The opportunity here is exciting, and the potential impact is incredibly powerful. Now I'll turn it over to Sean to discuss our results for the quarter in more detail.

Thanks, Glenn. Let's turn to slide 12 for a recap of the key financial measures. 2025 continues to be a strong year for us, as evidenced by the following third quarter results. Revenue grew by double digits both year over year and over the trailing quarter. This was driven by both the servicing and origination operating units. Our third quarter adjusted return on equity was 25% and exceeded our full year 2025 guidance, both for the quarter and year to date. Our ability to deliver steady net income added over $2 to book value per share in the quarter. Please turn to slide 13 for historical trend of our adjusted pre-tax income, which is positive for the 12th straight quarter. We posted a strong quarter for adjusted pre-tax income at $31 million. This shows the strength of our balanced business where originations and servicing each support growth and a diverse range of interest rate environments. The year-to-date adjusted ROE was 20% above the upper end of our guidance, and as mentioned, we expect to exceed our full-year adjusted ROE guidance of 16% to 18%. Gap ROE was 14%, and the appendix has a walk from net income to adjusted PTI to help you understand the differences. Please turn to slide 14 for the pre-tax income results for the origination segment. Origination's adjusted pre-tax income was significantly higher year-over-year and versus last quarter. This was driven primarily by strong execution of recapture and improved performance on our B2B channel, which drove record funding levels and improved margins in most channels. Consumer Direct continued another strong quarter driven by recapture performance, resulting in elevated funding volumes. We also benefited from stronger closed-end second volumes Business to business saw elevated volumes and margins as well with growth in our Ginnie Mae mix. Reverse originations maintained profitability with higher margins on lower volumes. This was a breakout quarter for originations as we were able to post margin gains amid record volume. Please turn to slide 15 for the servicing segment. Servicing remained a solid contributor to adjusted pre-tax income with $31 million for the quarter. Forward servicing again experienced growth in average UPB with higher revenue both sequentially and year-over-year. The revenue left from servicing growth was offset by higher runoff in the third quarter. This was driven by a greater amount of owned MSRs as well as higher prepay speed. The ability to capture some of this runoff is measured in the recapture metric. Reverse servicing pre-tax income rebounded to a positive $4 million in the quarter driven primarily by stronger gain on sale on the reverse assets. Regarding delinquency, our owned MSR portfolio exhibited improved delinquency statistics again this quarter. For example, our Ginnie Mae MSR portfolio had better delinquency metrics than the broader Ginnie Mae market. Please see the MSR valuation page in the appendix for more details on delinquency by investor type. Page 16 will give you an assessment of our continued strong hedging performance. The hedge strategy on the MSR continues to perform well and as intended. As a reminder, our strategy is designed to mitigate interest rate risk, and our hedge has been effective in minimizing the impact of interest rates on our MSR valuation net of hedge, as you can see on the graph. Over the last two plus years, we have increased our hedge coverage ratio such that by the end of 2023, we were seeking to hedge most of our interest rate exposure. When we compare our results with information in the public domain, we believe we provide an effective MSR hedge at an efficient cost relative to our peers. Given that an MSR hedge is dependent on the interest rate and relative derivatives market, we frequently review and assess our hedge strategy. to manage risk and optimize liquidity as well as total returns. Please turn to 17 for commentary on our guidance for full year 2025. As mentioned, following the strong quarter of net income, we now expect to exceed our 2025 adjusted ROE guidance. Note that this guidance on ROE is not dependent on the release of some of the valuation allowance, but is rather driven by our view of the strength of the operating businesses. Our UPV growth for the full year is now estimated to be between 5 and 10% versus the prior guidance of 10 plus percent. We don't believe the positive but smaller growth will have an adverse effect on our 26 forecast as we are generating growth in higher margin servicing areas that need less UPV to deliver comparable pre-tax income. Consider Glenn's earlier comments on commercial subservicing as an example. Overall, I'm pleased to report another good quarter that grew book value per share and delivered a continued strong return on equity for our shareholders. Back to you, Glenn.