# ONITY GROUP INC. (ONIT) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ONITY GROUP INC.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/873860/000162828025007126/ocn-20241231.htm
Accession: 0001628280-25-007126
Filing date: 2025-02-21
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/ONIT/
All MD&A years: /company/ONIT/mda/
Previous year: /company/ONIT/mda/fy2023/ (FY 2023)
Next year: /company/ONIT/mda/fy2025/ (FY 2025)

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. 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.

OVERVIEW

General

We are a leading non-bank mortgage servicer and originator providing solutions through our primary brands, PHH Mortgage and Liberty Reverse Mortgage. PHH is one of the largest non-bank servicers in the country based on UPB, focused on delivering a variety of servicing and lending programs. PHH is also one of the largest correspondent lenders in the U.S. based on origination UPB. Liberty is one of the nation’s largest reverse mortgage lenders and servicers based on origination and securitization UPB, dedicated to education and providing loans that help customers meet their personal and financial needs by drawing upon their home equity. 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. Our Originations business is part of our balanced business model to generate gains on loan sales and profitable returns, and to support the replenishment and the growth of our servicing portfolio. Through our retail, correspondent and wholesale channels, we originate and purchase conventional and government-insured forward and reverse mortgage loans that we sell or securitize on a servicing retained basis. In addition, we grow our mortgage servicing volume through MSR flow purchase agreements, Agency Cash Window and co-issue programs, bulk MSR purchase transactions, and subservicing agreements. On June 10, 2024, Ocwen Financial Corporation changed its name to Onity Group Inc.

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Volume Overview

The table below summarizes the volume of Originations by channel during 2024, compared with the volume of the two preceding years. The volume of Originations is a key driver of the profitability of our Originations segment, along with margins, and also a key driver of the replenishment and growth of our Servicing segment. 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.

[[GREPCENT_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)"]]
[[/GREPCENT_TABLE]]

(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.

(2)Represents the UPB of loans for which the MSR is purchased.

(3)Represents the UPB of reverse mortgage loans that have been securitized on a servicing retained basis. The loans are recognized on our consolidated balance sheets under GAAP without any separate recognition of MSRs.

(4)Bulk MSR purchases include $3.9 billion UPB for which PHH was previously performing the subservicing that were purchased from third parties in 2024.

(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.

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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. The relative weight of performing and delinquent loans or servicing and subservicing also drive the amount and timing of gross revenue and expenses. In 2024, our total average servicing and subservicing portfolio increased $7.1 billion, or 2%, net of runoff and sales, primarily driven by $8.1 billion of subservicing additions. Our average owned MSR servicing portfolio stayed relatively flat year over year, with a $0.8 billion, or 1% decrease.

[[GREPCENT_TABLE]]
[["$ in billions","Average UPB","","$ Change"],["","Years Ended December 31,","","2024 vs 2023","","2023 vs 2022"],["","2024","","2023","","2022"],["Owned MSR","$","123.0","","","$","123.8","","","$","121.9","","","$","(0.8)","","$","1.9"],["Subservicing (including reverse subservicing)","64.5","","","56.4","","","57.0","","","8.1","","(0.7)"],["Rithm","43.1","","","47.0","","","52.0","","","(3.9)","","(5.0)"],["MAV","50.0","","","51.9","","","42.5","","","(2.0)","","9.4"],["Other MSR capital partners","9.1","","","4.6","","","\u2014","","","4.5","","4.6"],["Reverse mortgage loans (owned)","9.0","","","7.8","","","7.4","","","1.2","","0.4"],["Other servicing (including whole loans)","0.9","","","0.9","","","0.8","","","\u2014","","0.2"],["Total servicing and subservicing UPB (average)","$","299.6","","","$","292.4","","","$","281.6","","","$","7.1","","","$","10.9"]]
[[/GREPCENT_TABLE]]

As of December 31, 2024 and 2023, the total servicing and subservicing UPB amounted to $301.7 billion and $288.4 billion, respectively, a net increase of $13.3 billion or 4.6%.

The following table presents key market interest rates which are important drivers of our businesses. 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).

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2024","","2023","","2022"],["30-year fixed rate mortgage (FRM) (1)"],["Average","6.72%","","6.80%","","5.30%"],["End of period","6.85%","","6.61%","","6.42%"],["10-year Treasury rate (end of period)","4.58%","","3.88%","","3.88%"],["1-month Term SOFR (average)","5.11%","","5.07%","","1.85%"]]
[[/GREPCENT_TABLE]]

(1)Source: Freddie Mac PMMS - Primary Mortgage Market Survey

In 2024, the average 30-year fixed rate mortgage rate remained mostly flat (down 8 basis points vs. 2023) resulting in a continued depressed origination market due to borrower affordability. 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 average 1-month term SOFR remained flat (up 4 basis points vs. 2023) following the Federal Reserve respective actions in 2023 and 2024, as illustrated in the below graph.

In 2023, mortgage interest rates continued to rise following the decision of the Federal Reserve to continue to raise its federal funds target rate (with four times a 25-basis point increase from February to July 2023), resulting in the 30-year fixed rate mortgage reaching its peak 7.79% in October, 2023 and its yearly average up 1.5 percentage points higher than the prior year. This rate increase continued to depress the origination market, significantly limiting refinance opportunities and maintaining pressure on borrower affordability. The 30-year fixed rate mortgage dropped in the fourth quarter of 2023 to return to levels similar to December 31, 2022 (up 19 basis points). Similarly, while the 10-year Treasury rate, a benchmark for MSR fair value changes attributable to rates, stayed flat year-over-year, it increased 140 basis points from March 31, 2023 to October 31, 2023 and decreased 100 basis points from October 31, 2023 to December 31, 2023.

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The following graph compares market interest rates over the current and comparative periods:

Financial Highlights

Results of operations for 2024

•Net income attributable to common stockholders of $33 million, or $4.28 income per share basic and $4.13 diluted

•Servicing and subservicing fee revenue of $832 million

•Originations gain on sale of $58 million

• $60 million MSR valuation gain attributable to rate and assumption changes, net of hedging

Financial condition at the end of the year

•Stockholders’ equity of $443 million, or $56.26 book value per common share

•MSR investment of $2.5 billion, and $301.7 billion total servicing and subservicing UPB

•Cash position of $185 million

•Total assets of $16.4 billion

Business Strategy

We established the following strategy to return to sustainable profitability and create long-term value for shareholders:

•Balance and diversification: Maintain a scale position in origination and servicing to address market-cycle opportunities;

•Prudent capital-light growth: Emphasize on capital-light subservicing to drive servicing portfolio UPB growth and expand higher margin products and origination channels to drive accretive MSR investments;

•Industry-leading cost structure: Achieve industry cost leadership through continuous cost and process improvement, optimizing global operations and technology, and drive innovation, including artificial intelligence based solutions;

•Top-tier operating performance and capabilities: Deliver industry top-tier servicing operational performance and increase borrower and client satisfaction;

•Dynamic asset management: Optimize investment returns and liquidity through dynamic and opportunistic asset purchases and sales.

Our growth and asset management strategy includes purchasing assets and/or operations of complementary businesses, by means of acquisition, merger or other transaction forms. Our strategy may also include pursuing large transactions, including bulk purchases or sales of MSRs. We have engaged in such transactions in the past, and we continue to explore opportunities that may be accretive to our business and stockholders’ value.

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

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Form 10-K. The segment information presented below is prepared under GAAP, consistent with the amounts included in our consolidated financial statements.

[[GREPCENT_TABLE]]
[["Condensed 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"]]
[[/GREPCENT_TABLE]]

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.

Revenue and Other income (expense) decreased due to the effects of our accounting derecognition of MSRs previously sold to Rithm for which the sale accounting criteria were met effective December 31, 2023 ($124.9 million servicing fees recognized in 2023 with remittance reported as Pledged MSR liability expense in Other income (expense). On December 31, 2023, we derecognized from our balance sheet $421.7 million non-Agency MSRs and Pledged MSR liability associated with Rithm servicing agreements with a UPB of $33.4 billion for which MSR sale accounting criteria was met. As PHH continues to subservice the portfolio, our statement of operations in 2024 reflects subservicing fee revenue as opposed to the gross presentation of servicing fee revenue and offsetting servicing fee remittances within Pledged MSR liability expense, a component of Other income (expense), net, prior to December 31, 2023. These required presentation changes do not affect the amount of net fee retained by Onity in connection with the Rithm servicing agreements.

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Total Revenue

The below table presents total revenue by segment:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","% Change"],["2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Servicing and subservicing fees","$","832.5","","$","947.3","","$","862.6","","(12)%","","10%"],["Gain on reverse loans held for investment and HMBS-related borrowings, net","42.5","","$","46.7","","$","36.1","","(9)","","29"],["Gain on loans held for sale, net","59.0","","$","40.6","","$","22.0","","45","","85"],["Other revenue, net","42.0","","$","32.0","","$","33.2","","31","","(4)"],["Total revenue","$","976.0","","$","1,066.7","","$","953.9","","(9)%","","12%"],["Servicing","$","866.7","","$","994.6","","$","828.5","","(13)%","","20%"],["Originations","109.3","","72.1","","141.1","","52","","(49)"],["Corporate","\u2014","","\u2014","","\u2014","","100","","n/m"],["Total segment revenue (1)","$","976.0","","$","1,066.7","","$","969.6","","(9)","","10"]]
[[/GREPCENT_TABLE]]

(1)Refer to Note 24 — Business Segment Reporting for a reconciliation to Total revenue for 2022.

Total segment revenue for 2024 was $90.7 million, or 9%, lower as compared to 2023 predominantly due to the accounting derecognition of Rithm servicing fees described above ($124.9 million servicing fees presented gross in 2023), partially offset by a $37.1 million increase in Originations revenue driven by higher volume.

•The $114.7 million decrease in Servicing and subservicing fees is mainly due to the effects of our accounting derecognition of MSRs previously sold to Rithm, partly offset by $10.5 million higher collection of previously deferred non-Agency servicing fees, among other factors.

•The $4.3 million decline in Gain on reverse loans held for investment and HMBS-related borrowings, net is mostly driven by increasing interest rates partially offset by yield spread tightening (and is part of our MSR hedging strategy, see below).

•The $18.4 million increase in Gain on loans held for sale, net is due to a $27.3 million increase in Originations mostly attributed to higher volumes, partly offset by $8.9 million lower gains in Servicing attributed to reverse mortgage buyouts. The increase in Originations volume is notable in both our Consumer Direct and Correspondent channels with our increased recapture operational capability and our owned MSR replenishment strategy following opportunistic MSR bulk sales.

•The $10.0 million increase in Other revenue, net is largely driven by fees on higher loan production volume.

MSR Valuation Adjustments, Net

The table below presents the components of MSR valuation adjustments, net which include MSRs, MSR pledged liabilities and ESS financing liabilities at fair value, along with MSR hedging derivatives:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["2024","","2023","","2022"],["Realization of expected cash flows (runoff)","$","(156.6)","","$","(143.6)","","$","(164.5)"],["Fair value gains (losses) due to rate and assumption changes","173.3","","(55.5)","","261.0"],["MSR hedging derivative fair value gain (loss)","(112.9)","","(33.1)","","(106.9)"],["MSR valuation adjustments, net (1)","$","(96.2)","","$","(232.2)","","$","(10.4)"]]
[[/GREPCENT_TABLE]]

(1)Excludes fair value changes of reverse mortgage loans held-for-investment and HMBS related borrowing due to rates and assumptions that are part of the MSR hedging strategy. 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.

The $96.2 million loss on MSR valuation adjustments, net in 2024 is comprised of $156.6 million runoff, $173.3 million fair value gain attributed to rates and assumption changes and $112.9 million loss on MSR hedging derivatives. MSR valuation adjustments, net decreased by $136.1 million (lower loss) in 2024 compared to 2023 largely driven by interest rates, favorable assumption updates and changes in our hedge coverage ratio, as discussed below.

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•MSRs are subject to runoff, a fair value decline due to the realization of expected cash flows and yield based on projected borrower behavior, including scheduled amortization of the loan UPB together with projected voluntary prepayments. The unfavorable $13.0 million increase in runoff year-over-year is mostly due to the impact of higher market rate changes on expected cash flows.

•The $173.3 million fair value gain due to rates and assumptions in 2024 is largely attributed to favorable assumption updates to reflect market participant perspectives on MSRs and actual market trade pricing levels and an increase in interest rates. 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 $112.9 million derivative loss is primarily driven by the increase in market interest rates discussed above. The $79.7 million year-over-year increase in hedging losses is mainly due to market interest rates changes noted above, also considering the change in our hedge coverage ratio. During 2023, we gradually increased our minimum hedge coverage ratio from 25% to 60%, with the minimum increasing to 95% in December 2023, adjusted to 90% in April 2024. Also refer to Item 7A. Quantitative and Qualitative Disclosures about Market Risk for further detail on our hedging strategy and its effectiveness.

Operating Expenses

The table below presents the key components of operating expenses:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","","","% Change"],["2024","","2023","","2022","","","","","","2024 vs 2023","","2023 vs 2022"],["Compensation and benefits","$","232.5","","","$","229.2","","","$","289.4","","","","","","","1","%","","(21)","%"],["Servicing and origination","52.3","","","57.3","","","64.9","","","","","","","(9)","","","(12)"],["Technology and communications","52.9","","","52.5","","","57.9","","","","","","","1","","","(9)"],["Professional services","52.6","","","22.3","","","49.3","","","","","","","136","","","(55)"],["Occupancy, equipment and mailing","31.4","","","31.8","","","41.8","","","","","","","(1)","","","(24)"],["Other expenses","14.7","","","19.0","","","29.1","","","","","","","(23)","","","(35)"],["Total operating expenses","$","436.5","","","$","412.1","","","$","532.4","","","","","","","6","%","","(23)","%"],["Servicing","$","273.0","","","$","301.7","","","$","315.6","","","","","","","(10)","%","","(4)","%"],["Originations","88.3","","","80.8","","","148.5","","","","","","","9","","","(46)"],["Corporate","75.2","","","29.6","","","68.3","","","","","","","154","","","(57)"],["","$","436.5","","","$","412.1","","","$","532.4","","","","","","","6","%","","(23)","%"],["Average headcount","4,374","","","4,670","","","5,476","","","","","","","(6)","","","(15)"]]
[[/GREPCENT_TABLE]]

Compensation and benefits expense for 2024 increased $3.3 million, or 1%, as compared to 2023 largely due to an $8.9 million increase in incentive compensation attributed to our improved financial performance in 2024 and a $3.1 million increase in commissions due to higher production volume in our Originations segment, partially offset by a $6.1 million decrease in salaries and benefits. Our total average headcount declined 6% (including a 11% decline in total average U.S. based headcount), driven by efficiencies in our Servicing activities and runoff of our reverse servicing portfolio.

Servicing and origination expense for 2024 decreased $5.0 million, or 9%, as compared to 2023, mostly driven by a $10.7 million decrease in Servicing expense, partially offset by $5.1 million higher Originations expense. The decrease in Servicing expense is primarily due to lower claim loss on Ginnie Mae loan repurchases, and recoveries and favorable resolutions of our indemnification obligations in 2024. The increase in Originations expense was driven by higher production volume and a provision release for representation and warranty indemnification recorded in 2023 due to favorable resolution of demands.

Professional services expense for 2024 increased $30.3 million, or 136%, as compared to 2023 primarily due to the reversal of our loss contingency accrual related to the CFPB and other matters resolved in 2023 and an increase in other litigation-related expenses recognized in 2024, largely offset by higher recoveries of prior year expenses in 2024 as compared to 2023.

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Other Income (Expense)

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","","","% Change"],["2024","","2023","","2022","","","","","","2024 vs 2023","","2023 vs 2022"],["Interest income","$","93.3","","","$","78.0","","","$","45.6","","","","","","","20","","","71"],["Interest expense","(288.9)","","","(273.6)","","","(186.0)","","","","","","","6","","","47"],["Net interest expense","$","(195.6)","","","$","(195.6)","","","$","(140.4)","","","","","","","\u2014","%","","39","%"],["Pledged MSR liability expense","(175.4)","","","(296.3)","","","(255.0)","","","","","","","(41)","","","16"],["Gain (loss) on extinguishment of debt","(49.4)","","","1.3","","","0.9","","","","","","","n/m","","43"],["Earnings of equity method investee","22.9","","","7.3","","","18.5","","","","","","","214","","","(61)"],["Other, net","(6.6)","","","2.8","","","(10.2)","","","","","","","(337)","","","(127)"],["Other income (expense), net","$","(404.1)","","","$","(480.5)","","","$","(386.2)","","","","","","","(16)","","","24"]]
[[/GREPCENT_TABLE]]

Loss on extinguishment of debt for 2024 includes the recognition of a $53.4 million loss on our redemption in November 2024 of all of the outstanding PMC Senior Secured Notes due 2026 and Onity Senior Secured Notes due 2027, comprised of 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. In addition, during 2024, we repurchased and extinguished a portion of the PMC Senior Secured Notes and recognized a gain of $4.1 million (prior to their redemption). 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.

Other, net expense for 2024 increased (higher net expense) $9.3 million as compared to 2023 primarily driven by $5.7 million of compensation from a subservicer related to a negotiated subservicing termination in the fourth quarter of 2023. The payment received offsets an unfavorable impact to the fair value of the associated MSRs (reported as a loss in MSR valuation adjustments, net). In addition, early payoff protection expense increased by $5.7 million in 2024 in connection with our MSR opportunistic sale transactions.

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.

Income Tax Expense (Benefit)

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2024","","2023","","2022"],["Income tax expense (benefit)","$","5.3","","","$","5.6","","","$","(0.8)"],["Income (loss) before income taxes","39.3","","","(58.1)","","","24.9"],["Effective tax rate","14","%","","(10)","%","","(3)","%"]]
[[/GREPCENT_TABLE]]

Our effective tax rate for the periods indicated in the table above is lower than the 21% federal statutory income tax rate primarily due to the full valuation allowance recorded on our net U.S. federal and state deferred tax assets. We conduct periodic evaluations of positive and negative evidence to determine whether it is more likely than not that the deferred tax asset can be realized in future periods. 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 evaluated all positive and negative evidence and determined that a full valuation allowance at December 31, 2024 remains appropriate. Refer to Note 21 — Income Taxes for further details on deferred tax assets.

For 2024, income tax expense of $5.3 million was driven primarily by pre-tax earnings in foreign jurisdictions and current taxable income in the U.S. The increase in the effective tax rate is primarily due to the $97.3 million increase in pre-tax earnings in 2024 compared to 2023.

Under our transfer pricing agreements, our operations in India and Philippines are compensated on a cost-plus basis for the services they provide, such that even when we have a consolidated pre-tax loss from operations these foreign operations have taxable income, which is subject to statutory tax rates in these jurisdictions that are higher than the U.S. statutory rate of 21%.

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Financial Condition

[[GREPCENT_TABLE]]
[["Financial Condition Summary","December 31,","","$ Change","","% Change"],["2024","","2023"],["Cash and cash equivalents","$","184.8","","","$","201.6","","","$","(16.8)","","","(8)","%"],["Restricted cash","80.8","","","53.5","","","27.3","","","51"],["MSRs, at fair value","2,466.3","","","2,272.2","","","194.0","","","9"],["Advances, net","577.2","","","678.8","","","(101.6)","","","(15)"],["Loans held for sale","1,290.2","","","677.3","","","612.9","","","91"],["Loans held for investment, at fair value","11,125.3","","","7,975.5","","","3,149.7","","","39"],["Receivables, net","176.4","","","154.8","","","21.6","","","14"],["Investment in equity method investee","\u2014","","","37.8","","","(37.8)","","","(100)"],["Premises and equipment, net","11.0","","","13.1","","","(2.1)","","","(16)"],["Other assets","111.3","","","106.2","","","5.1","","","5"],["Contingent loan repurchase asset","412.2","","","343.0","","","69.2","","","20"],["Total assets","$","16,435.4","","","$","12,513.7","","","$","3,921.6","","","31","%"],["Total Assets by Segment"],["Servicing","$","15,242.5","","","$","11,687.6","","","$","3,554.8","","","30","%"],["Originations","945.0","","","551.9","","","393.1","","","71"],["Corporate","247.9","","","274.3","","","(26.3)","","","(10)"],["","$","16,435.4","","","$","12,513.7","","","$","3,921.6","","","31","%"],["HMBS-related borrowings, at fair value","$","10,872.1","","","$","7,797.3","","","$","3,074.8","","","39"],["Other financing liabilities, at fair value","846.9","","","900.0","","","(53.1)","","","(6)"],["Advance match funded liabilities","417.1","","","499.7","","","(82.6)","","","(17)"],["Mortgage loan financing facilities, net","1,528.2","","","710.6","","","817.6","","","115"],["MSR financing facilities, net","957.9","","","916.2","","","41.7","","","5"],["Senior notes, net","487.4","","","595.8","","","(108.4)","","","(18)"],["Other liabilities","420.6","","","349.3","","","71.4","","","20"],["Contingent loan repurchase liability","412.2","","","343.0","","","69.2","","","20"],["Total liabilities","15,942.5","","","12,111.9","","","3,830.5","","","32"],["Mezzanine equity","49.9","","","\u2014","","","49.9","","","n/m"],["Total stockholders\u2019 equity","442.9","","","401.8","","","41.1","","","10"],["Total liabilities and equity","$","16,435.4","","","$","12,513.7","","","$","3,921.6","","","31","%"],["Total Liabilities by Segment"],["Servicing","$","14,712.8","","","$","11,276.5","","","$","3,436.3","","","30","%"],["Originations","928.3","","","517.5","","","410.8","","","79"],["Corporate","301.4","","","318.0","","","(16.6)","","","(5)"],["","$","15,942.5","","","$","12,111.9","","","$","3,830.5","","","32","%"],["Book value per share","$","56.26","","","$","52.29","","","$","3.97","","","8","%"]]
[[/GREPCENT_TABLE]]

Total assets increased by $3.9 billion, or 31%, between December 31, 2023 and December 31, 2024 mostly due to a $3.1 billion increase in Loans held for investment following our acquisition of $2.9 billion reverse mortgage loans and capitalization of interest. Refer to Note 5 – Reverse Mortgages for additional information. In addition, Loans held for sale increased $612.9

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million driven by the acquisitions of reverse mortgage buyouts and the growth in our Originations pipeline. MSRs increased $194.0 million mostly attributed to $487.2 million MSR additions partially offset by $211.0 million sales and $85.7 million derecognition of MSRs sold to MAV. These increases were partially offset by a $101.6 million decline in servicing advances, mainly due to lower delinquencies in our non-Agency MSR portfolio, and $37.8 million decline in Investment in equity method investee as a result of the sale of our 15% ownership interest in MAV Canopy in November 2024.

Total liabilities increased by $3.8 billion, or 32%, as compared to December 31, 2023 largely due to factors described above. Our HMBS-related borrowings increased by $3.1 billion mostly due to the $2.9 billion acquisition of reverse mortgage assets and assumption of HMBS-related borrowings, and an increase in fair value attributable to interest. Mortgage loan financing facilities increased $817.6 million due to the higher loans held for sale balance at December 31, 2024, including the issuance of OLIT Notes in 2024 for reverse mortgage loan buyouts. In addition, MSR financing facilities increased $41.7 million with an increase in our MSR portfolio despite a lower utilization of available borrowing capacity at December 31, 2024. We issued $49.9 million preferred stock in 2024 that is presented as mezzanine equity. Partially offsetting these increases, Senior notes, net decreased $108.4 million due to our redemption of all of the outstanding 7.875% PMC Senior Secured Notes due 2026 and Onity Senior Secured Notes due 2027, and issuance of new PHH Corporation 9.875% Senior Notes due November 2029. Advance match funded liabilities decreased $82.6 million consistent with the decline in servicing advances discussed above, and Other financing liabilities decreased $53.1 million primarily due to the derecognition of MSRs previously sold to MAV noted above and partially offset by additional ESS financing.

Total stockholders’ equity increased $41.1 million during 2024 mostly due to $33.9 million net income and $5.4 million compensation related to equity-classified awards. See Note 17 — Stockholders’ Equity for additional information.

Key Trends and Outlook

The following discussion provides information regarding certain key drivers of our financial performance and includes certain forward-looking statements that are based on the current beliefs and expectations of Onity’s management and are subject to significant risks and uncertainties. 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. There is no assurance that actual results will be in line with the outlook information set forth below, and Onity does not undertake to update any forward-looking statements. Refer to the Segment results of operations section for further detail, the description of our business environment, initiatives and risks.

Servicing and subservicing fee revenue - Our servicing fee revenue is a function of the volume being serviced - UPB for servicing fees and loan count for subservicing fees. We expect we will continue to grow our servicing and subservicing portfolio through our multi-channel Originations platform, MSR bulk acquisitions and subservicing additions. We expect ancillary float income to trend with short-term interest rates also considering changes in average float balances due to seasonality and portfolio growth.

Gain on sale of loans held for sale - Our gain on sale is driven by both Originations volume and margin, and is channel-sensitive. The updated industry forecasts (MBA and Fannie Mae) suggest a 15% increase in loan origination in 2025 as compared to 2023 with approximately 50 basis point lower 30-year fixed mortgage interest rates in the second half of 2025. We anticipate growth in our Consumer Direct channel considering our increased recapture capabilities. We expect to continue to prudently grow our Correspondent volume at margins that are accretive to the business as part of our MSR replenishment and growth strategy after the opportunistic MSR bulk sales in 2024. We expect continued competitive pressure on margins across all channels. We expect some further volatility of gain (loss) on sale on loans held for sale related to reverse mortgage buyouts (mostly inactive loans) due to the increased size of the portfolio.

Gain on reverse loans held for investment and HMBS-related borrowings, net - The reverse mortgage origination gain is driven by the same factors as gain on sale of loans held for sale, with smaller volumes in the reverse mortgage market and generally larger margins. With our experience and brand in the marketplace, we expect to continue to maintain or prudently grow our portfolio albeit with some channel mix changes. We expect continued uncertain market interest rate and spread conditions. The fair value of the net reverse servicing asset is expected to continue to follow market conditions, with fair value gains or losses generally associated with declining or increasing interest rates and spread, respectively, and is part of our forward MSR hedging strategy. On November 1, 2024, we completed the acquisition of $2.9 billion UPB of HECM loans along with HMBS-related borrowings and other assets from MAM that we subserviced. We expect higher net interest income (reported as fair value changes) due to higher UPB and increased volatility in fair value changes that we expect would largely be offset with our MSR hedging strategy. Refer to Item 7.A. Quantitative and Qualitative Disclosures About Market Risk for further detail on our hedge strategy.

MSR valuation adjustments, net - Our net MSR fair value changes include multiple components. First, amortization of our investment is a function of the UPB, capitalized value of the MSR relative to the UPB, and prepayments. We expect the MSR realization of expected cash flows to generally follow the growth or size of our MSR portfolio net of ESS financing liabilities and pledged MSR liabilities with our MSR capital partners. Second, MSR fair value changes are driven by changes in interest

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rates and assumptions, such as forecasted prepayments. Third, the MSR fair value changes due to changes in interest rates are partially offset by derivative fair value changes that economically hedge the MSR portfolio to the extent of our hedge coverage ratio and hedge performance. Refer to the sensitivity analysis in Item 7A.Quantitative and Qualitative Disclosures About Market Risk for further detail.

Operating expenses - Compensation and benefits are a significant component of our cost-to-service and cost-to-originate and is directly correlated to headcount levels. Headcount in Servicing is primarily driven by the number of loans or UPB being serviced and subserviced, and by the relative mix of performing, delinquent and defaulted loans. As servicing volume is expected to modestly increase (see above), we expect a stable workforce with productivity gains. We expect our Originations headcount and operating expenses to align with the expected growth in volume. Our operating expenses are expected to correlate with volumes, with some productivity and efficiencies expected through our technology and continuous improvement initiatives.

Net interest expense - Interest expense varies based on changes in average debt balance and changes in short-term interest rates on our variable rate debt. The average balance of collateralized financing facilities trends with the balance of the underlying assets discussed above (including MSR, advances and loans). Interest expense on our warehouse loan facilities is expected to be largely offset by interest income on our Originations pipeline loans. We also expect interest expense on our corporate debt to decline as a result of the corporate debt refinancing transactions in the fourth quarter of 2024.

Stockholders’ equity - With the above considerations, we expect our businesses to continue to generate net income and increase our equity in 2025, absent any significant adverse change in interest rates, hedge performance or other factors. While our profitability was negatively affected by our refinancing transactions in the fourth quarter of 2024, partly offset by the gain on MAV sale, we expect our profitability in 2025 to be favorably impacted by such refinancing transactions, with an overall lower interest expense on our corporate debt after consideration of preferred stock dividends.

SEGMENT RESULTS OF OPERATIONS

We report our activities in three segments, Servicing, Originations and Corporate that reflect other business activities that are currently individually insignificant. Our business segments reflect the internal reporting that we use to evaluate operating and financial performance and to assess the allocation of our resources.

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. Our servicing portfolio includes conventional, government-insured and non-Agency mortgage loans, including reverse mortgage loans classified as loans held for investment on our balance sheet. As of December 31, 2024, we serviced 1.4 million mortgage loans with an aggregate UPB of $301.7 billion.

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.

Concentration

Rithm is one of our largest subservicing clients. Servicing and subservicing fees from Rithm amounted to $96.5 million, or 16% of total servicing and subservicing fees (excluding ancillary income) in 2024, and the related remittances to Rithm presented as Pledged MSR liability expense amounted to $36.1 million. 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. Consistent with a subservicing relationship, Rithm is responsible for funding the advances we service on its behalf. The servicing agreements automatically renew annually unless notice of termination is provided. Refer to Note 8 — Other Financing Liabilities, at Fair Value.

Loan Resolutions

We have a strong track record of success as a leader in the servicing industry in foreclosure prevention and loss mitigation that helps homeowners stay in their homes and improves financial outcomes for mortgage loan investors. 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. Loan resolution activities address the pipeline of delinquent loans and generally lead to (i) modification of the loan terms, (ii) repayment plan alternatives, (iii) a discounted payoff of the loan (e.g., a “short sale”), or (iv) foreclosure or deed-in-lieu-of-foreclosure and sale of the resulting REO. 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,

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including recent broker price opinions to value the mortgaged property. Our proprietary model includes, among other things, an assessment of re-default risk.

Advance Obligation

As a servicer, we are generally obligated to advance funds in the event borrowers are delinquent on their monthly mortgage related payments. We advance principal and interest (P&I Advances), taxes and insurance (T&I Advances) and legal fees, property valuation fees, property inspection fees, maintenance costs and preservation costs on properties that have been foreclosed (Corporate Advances). For certain loans in non-Agency securitization trusts, we have the ability to cease making P&I advances and immediately recover advances previously made from the general collections of the respective trust if we determine that our P&I advances cannot be recovered from the projected future cash flows. With T&I and Corporate advances, we continue to advance if net future cash flows exceed projected future advances without regard to advances already made.

Most of our advances have the highest reimbursement priority (i.e., they are “top of the waterfall”), so we are entitled to repayment from respective loan or REO liquidation proceeds before any interest or principal is paid on the bonds that were issued by the trust. In the majority of cases, advances in excess of respective loan or REO liquidation proceeds may be recovered from pool-level proceeds. The costs incurred in meeting these obligations consist principally of the interest expense incurred in financing the servicing advances. Most subservicing agreements, including our agreements with Rithm and MAV, provide for prompt reimbursement of any advances from the owner of the servicing rights. Refer to Note 26 — Commitments to the Consolidated Financial Statements for further description of servicer advance obligations.

MSR Valuation Adjustments

The financial performance of our Servicing segment is impacted by the changes in fair value of the MSR portfolio due to changes in market interest rates, among other factors. Our MSR hedging policy is designed to reduce the expected volatility of the MSR portfolio fair value due to market interest rates commensurate with the target hedge coverage ratio determined by our Market Risk Committee. Refer to Item 7A. Quantitative and Qualitative Disclosures about Market Risk for further detail on our hedging strategy.

Significant Variables

The following factors could significantly impact the results of our Servicing segment from period to period.

Aggregate UPB and Loan Count. Servicing fees are generally earned as a percentage of UPB and subservicing fees are earned on a per-loan basis or as a percentage of UPB. As a result, the change in aggregate UPB and loan count for which we have servicing rights or subservice will directly impact our revenue contributed by our Servicing segment. 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. The financial performance of our Servicing segment is heavily dependent on our ability to scale our operations to cost-effectively and efficiently perform servicing activities in accordance with our servicing agreements.

Delinquencies. Delinquencies impact our financial results and operating cash flows for our Servicing segment. Non-performing loans are more expensive to service because the loss mitigation activities that we must undertake to keep borrowers in their homes or to foreclose, if necessary, are costlier than the activities required to service a performing loan. These loss mitigation activities include increased contact with the borrower for collection and the development of forbearance plans or loan modifications by highly skilled associates who command higher compensation as well as the higher compliance costs associated with these, and similar activities. In addition, when borrowers are delinquent, the amount of funds that we are required to advance to the investors increases. We utilize servicing advance financing facilities (match funded liabilities) to finance a portion of our advances. As a result, increased delinquencies result in increased interest expense.

Prepayment Speed. The rate at which portfolio UPB declines can have a significant impact on our Servicing segment. Items reducing UPB include scheduled and unscheduled principal payments (runoff), refinancing, loan modifications involving forgiveness of principal, voluntary property sales and involuntary property sales such as foreclosures. 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. 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. 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.

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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. Owned portfolio loans are insured by the FHA, which provides protection against risk of borrower default, and are securitized through the Ginnie Mae program.

Our servicing activities of reverse loans are generally consistent with forward mortgage loan servicing as described above, with the following additional functions: the funding of borrower advances or draws under their approved borrowing capacity and the repurchase of loans upon reaching a limit:

a.Borrower draw funding obligation - Under the terms of ARM-based HECM loan agreements, the borrowers have additional borrowing capacity. Borrower draws or tails are funded by the servicer and are securitized. We do not incur any substantive underwriting, marketing or compensation costs in connection with any future draws, although we must maintain sufficient capital resources and available borrowing capacity to ensure that we are able to fund these future draws prior to securitization with Ginnie Mae (generally less than 30 days).

b.Loan repurchase obligation - As an HMBS issuer, we are required to purchase loans out of the Ginnie Mae securitization pools once they reach 98% of the maximum claim amount (MCA buyouts). Active buyouts are assigned to HUD and payment is received from HUD through a claims process, generally within 30 days. HUD reimburses us for the outstanding principal balance on the loan up to the maximum claim amount; we bear the risk of exposure if the outstanding balance on a loan exceeds the maximum claim amount. Inactive buyouts (loans that are in default for one of the following reasons - title conveyances or the borrower is deceased, no longer occupies the property or is delinquent on tax and insurance payments) are generally liquidated through foreclosure and subsequent sale of REO. State specific foreclosure and REO liquidation timelines have a significant impact on the timing and amount of our recovery. If we are unable to sell the property securing the inactive reverse loan for an acceptable price within the timeframe established by HUD (six months), we are required to make an appraisal-based claim to HUD. In such cases, HUD reimburses us for the loan balance, eligible expenses and interest, less the appraised value of the underlying property. 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. The significance of future losses associated with appraisal-based claims is dependent upon the volume of inactive loans, condition of foreclosed properties and the general real estate market.

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. Tails are participations in previously securitized HECM loans and are created by additions to principal for borrower draws on lines-of-credit (scheduled and unscheduled), interest, servicing fees, and mortgage insurance premiums.

The fair value of our Ginnie Mae securitized HECM loan portfolio, net of HMBS-related Borrowings generally decreases as market interest rates rise and increases as market rates fall. The exposure is managed as part of our MSR hedging strategy (see Item 7A - Quantitative and qualitative disclosures about market risk, Loans Held for Investment and HMBS-related Borrowings and the associated interest rate sensitivity disclosure).

Gain (loss) on reverse loans held for investment and HMBS-related borrowings, net strictly reflects the financial performance of owned loans/servicing and excludes any subservicing activity. The financial performance associated with the subservicing of reverse mortgage loans on behalf of investors is primarily reflected within Servicing and subservicing fees, net.

Since 2023, we have opportunistically acquired reverse mortgage assets from financial institutions, including active and inactive reverse mortgage loan buyouts, advances, HUD claim receivables and real estate properties. We finance our asset acquisitions along with the buyouts of our own portfolio through on-balance sheet private placement securitizations (referred to as OLIT). The financial performance of such reverse asset management is reported within the Servicing segment, largely within Gains (losses) on loans held for sale, that are driven by multiple factors, including liquidation timeline and changes in market interest rates.

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Operating Metrics

The following table provides selected operating statistics for our Servicing segment:

[[GREPCENT_TABLE]]
[["Selected Operating Statistics","","","","","","","% Change"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Assets Serviced at December 31"],["Unpaid principal balance (UPB) in billions:"],["Performing loans (1)","$","289.7","","","$","276.5","","","$","276.2","","","5","%","","\u2014","%"],["Non-performing loans","11.5","","","11.4","","","12.9","","","1","","","(12)"],["Non-performing real estate","0.4","","","0.5","","","0.7","","","(10)","","","(28)"],["Total","$","301.7","","","$","288.4","","","$","289.8","","","5","","","\u2014"],["Non-performing to total %","4.0%","","4.1%","","4.7%","","(4)","","","(12)"],["Conventional loans","$","198.0","","","$","187.4","","","$","186.2","","","6","%","","1","%"],["Government-insured loans","38.5","","","33.3","","","32.6","","","15","","","2"],["Non-Agency loans","65.1","","","67.6","","","71.0","","","(4)","","","(5)"],["Total","$","301.7","","","$","288.4","","","$","289.8","","","5","","","\u2014"],["Conventional loans to total %","65.6%","","65.0%","","64.2%","","1","","","1"],["Servicing portfolio (2)","$","142.7","","","$","131.4","","","$","134.5","","","9","%","","(2)","%"],["Subservicing portfolio"],["Subservicing - forward","53.1","","","27.3","","","31.8","","","95","","","(14)"],["Subservicing - commercial","4.5","","","3.5","","","2.9","","","27","","","21"],["Subservicing - reverse","9.1","","","17.1","","","23.2","","","(47)","","","(26)"],["Total subservicing","66.7","","","47.9","","","58.0","","","39","","","(17)"],["MAV (3) (4)","41.2","","","55.9","","","48.2","","","(26)","","","16"],["Rithm (4) (5)","41.2","","","45.0","","","49.1","","","(8)","","","(8)"],["Other MSR capital partners (4)","9.9","","","8.2","","","\u2014","","","20","","","n/m"],["Total","$","301.7","","","$","288.4","","","$","289.8","","","5","","","\u2014"],["MSR weighted average note rate (6)","4.2","%","","3.9","%","","3.5","%","","9","","","12"],["Prepayment speed (CPR)"],["Voluntary CPR","5.0","%","","4.1","%","","7.6","%","","22","%","","(47)","%"],["Involuntary CPR","0.3","","","0.3","","","0.4","","","(3)","","","(20)"],["Total CPR (7)","8.5","","","7.6","","","11.2","","","12","","","(32)"],["Number of completed modifications (in thousands)","17.7","","","14.6","","","16.8","","","21","%","","(13)","%"],["n/m: not meaningful"]]
[[/GREPCENT_TABLE]]

(1)Performing loans include those loans that are less than 90 days past due and those loans for which borrowers are making scheduled payments under loan modification, forbearance or bankruptcy plans. We consider all other loans to be non-performing.

(2)Includes HECM reverse mortgage loans held for investment with a UPB of $10.7 billion that are recognized in our consolidated balance sheet at December 31, 2024.

(3)Includes $19.7 billion UPB subserviced and $21.5 billion UPB of MSRs sold to MAV that did not achieve sale accounting treatment.

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(4)Loans serviced pursuant to our sale or transfer agreements with MAV, Rithm and others for which sale accounting is not achieved, and loans subserviced.

(5)Includes $32.1 billion UPB of subserviced loans on behalf of Rithm at December 31, 2024.

(6)Related to our owned MSR forward servicing portfolio.

(7)Total CPR includes voluntary and involuntary prepayments, as shown in the table, plus scheduled principal amortization.

The following table provides selected operating statistics related to our owned reverse mortgage loans held for investment reported within our Servicing segment:

[[GREPCENT_TABLE]]
[["","","","","","","","% Change"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Reverse Mortgage Loans at December 31"],["Unpaid principal balance (UPB):"],["Loans held for investment (1)","$","10,618.8","","","$","7,605.5","","","$","7,199.6","","","40","%","","6","%"],["Active Buyouts (2)","158.8","","","68.4","","","73.0","","","132","","","(6)"],["Inactive Buyouts (2)","525.3","","","198.1","","","121.4","","","165","","","63"],["Total","$","11,302.8","","","$","7,872.1","","","$","7,394.0","","","44","","","6"],["Future draw commitments (UPB):","3,077.7","","","1,782.0","","","1,756.6","","","73","","","1"],["Fair value:"],["Loans held for investment (1)","$","10,950.8","","","$","7,868.5","","","$","7,392.6","","","39","","","6"],["HMBS related borrowings","10,872.1","","","7,797.3","","","7,326.8","","","39","","","6"],["Net asset value","$","78.6","","","$","71.2","","","$","65.8","","","10","","","8"],["Net asset value to UPB","0.74","%","","0.94","%","","0.91","%"]]
[[/GREPCENT_TABLE]]

(1)Excludes unsecuritized loans reported within the Originations segment.

(2)Buyouts are reported as Loans held for sale, Receivables or REO depending on loan and foreclosure status.

The following table provides a breakdown of our servicer advances, net of allowance for losses:

[[GREPCENT_TABLE]]
[["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"]]
[[/GREPCENT_TABLE]]

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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:

[[GREPCENT_TABLE]]
[["","Amount of UPB ($ in billions)","","Count (000\u2019s)"],["","2024","","2023","","2022","","2024","","2023","","2022"],["Portfolio at January 1","$","288.4","","","$","289.8","","","$","268.0","","","1,344.5","","","1,378.8","","","1,353.3"],["Additions (1) (2) (3)","85.3","","","50.7","","","85.3","","","319.6","","","164.2","","","292.2"],["MSR Sales","(14.8)","","","\u2014","","","(11.2)","","","(54.6)","","","(0.3)","","","(0.3)"],["Servicing transfers (1) (3)","(25.3)","","","(23.3)","","","(18.0)","","","(91.1)","","","(80.1)","","","(114.3)"],["Runoff","(32.0)","","","(28.7)","","","(34.3)","","","(123.3)","","","(118.1)","","","(152.1)"],["Portfolio at December 31","$","301.7","","","$","288.4","","","$","289.8","","","1,395.1","","","1,344.5","","","1,378.8"]]
[[/GREPCENT_TABLE]]

(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.

(2)Additions include purchased MSRs on portfolios with a UPB of $5.5 billion that have not yet transferred to the PHH servicing system as of December 31, 2024. Because we have legal title to the MSRs, the UPB and count of the loans are included in our reported servicing portfolio. The seller continues to subservice the loans on an interim basis between the transaction closing date and the servicing transfer date.

(3)Includes MSRs acquired from an unrelated third party in the third quarter of 2024 with a UPB of $0.9 billion for which PHH was previously performing the subservicing.

63

Financial Performance

The following table presents selected results of operations of our Servicing segment. The amounts presented are before the elimination of balances and transactions with our other segments:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","% Change"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Revenue"],["Servicing and subservicing fees","$","830.5","","","$","945.2","","","$","860.5","","","(12)","%","","10","%"],["Gain (loss) on loans held for sale, net","1.4","","","10.3","","","(15.1)","","","(87)","","","(168)"],["Gain (loss) on reverse loans held for investment and HMBS-related borrowings, net","16.5","","","23.5","","","(25.1)","","","(30)","","","(194)"],["Other revenue, net","18.2","","","15.5","","","8.3","","","17","","","88"],["Total revenue","866.7","","","994.6","","","828.5","","","(13)","","","20"],["MSR valuation adjustments, net","(109.7)","","","(243.9)","","","(36.0)","","","(55)","","","577"],["Operating expenses"],["Compensation and benefits","100.6","","","107.2","","","126.2","","","(6)","","","(15)"],["Servicing expense","42.8","","","53.5","","","53.1","","","(20)","","","1"],["Occupancy, equipment and mailing","27.3","","","28.1","","","31.2","","","(3)","","","(10)"],["Professional services","28.0","","","35.1","","","26.6","","","(20)","","","32"],["Technology and communications","24.7","","","24.6","","","24.7","","","\u2014","","","\u2014"],["Corporate overhead allocations","45.8","","","45.5","","","46.2","","","1","","","(2)"],["Other expenses","3.7","","","7.8","","","7.6","","","(52)","","","2"],["Total operating expenses","273.0","","","301.7","","","315.6","","","(10)","","","(4)"],["Other income (expense)"],["Interest income","32.9","","","21.7","","","12.9","","","51","","","68"],["Interest expense","(184.4)","","","(173.3)","","","(114.8)","","","6","","","51"],["Pledged MSR liability expense","(175.6)","","","(296.4)","","","(255.0)","","","(41)","","","16"],["Loss on debt redemption","(0.1)","","","\u2014","","","\u2014","","","n/m","","n/m"],["Earnings of equity method investee","22.9","","","7.3","","","18.5","","","214","","","(61)"],["Other, net","(6.8)","","","1.7","","","(10.8)","","","(504)","","","(116)"],["Other income (expense), net","(311.2)","","","(439.0)","","","(349.2)","","","(29)","","","26"],["Income before income taxes","$","172.8","","","$","9.9","","","$","127.7","","","n/m","","(92)","%"]]
[[/GREPCENT_TABLE]]

Servicing and Subservicing Fees

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","% Change"],["","2024","","2023","","","2022","","2024 vs 2023","","2023 vs 2022"],["Loan servicing and subservicing fees:"],["Servicing and subservicing fees","$","618.6","","","$","736.0","","","","$","738.5","","","(16)","%","","\u2014","%"],["Ancillary income","211.9","","","209.1","","","","122.0","","","1","","","71"],["Total","$","830.5","","","$","945.2","","","","$","860.5","","","(12)","%","","10","%"]]
[[/GREPCENT_TABLE]]

64

The following table and discussion present the drivers of servicing and subservicing fees.

[[GREPCENT_TABLE]]
[["","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)","%","","\u2014","%"]]
[[/GREPCENT_TABLE]]

(1) In $ billions, (2) In % of UPB, annualized, (3) In $ millions, (4) In thousands, (5) In dollars.

(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.

(7) Includes an average 258 thousand loans subserviced under Rithm agreements in the 2024, of MSRs previously sold to Rithm for which the sale accounting criteria were met effective December 31, 2023.

Servicing and subservicing fees (excluding ancillary income) for 2024 decreased $117.5 million, with a $153.3 million decrease in servicing fees and a $35.8 million increase in subservicing fees.

These variances are largely due to the effects of our accounting derecognition of MSRs previously sold to Rithm for which the sale accounting criteria were not met until December 31, 2023 ($124.9 million servicing fees remitted to Rithm recognized in 2023). Effective January 1, 2024, as PHH continues to subservice the portfolio, the statement of operations reflects subservicing fee revenue as opposed to the previous gross presentation of servicing fee revenue (collections) and separate offsetting presentation of servicing fee remittances within Pledged MSR liability expense (see further discussion below). These required accounting presentation changes do not affect the amount of net fee retained by Onity in connection with the Rithm servicing agreements (Loan servicing and subservicing fees less Pledged MSR liability expense).

The $153.3 million decrease in servicing fees is primarily attributed to $175.5 million servicing fees collected on behalf of Rithm as discussed above. In addition, servicing fees on our GSE servicing portfolio declined mostly due to MSR sales. These decreases were partially offset by the growth in Ginnie Mae servicing UPB, the growth in servicing UPB of other MSR capital partners, and $10.5 million higher collection of previously deferred non-Agency servicing fees.

The $35.8 million increase in subservicing fees is largely driven by $45.6 million subservicing fees on Rithm agreements due to the effects of our derecognition of MSRs previously sold to Rithm as discussed above. In addition, subservicing fees increased due to a 149% increase in the forward subservicing portfolio. These increases were partially offset by $17.4 million lower subservicing fees on a 38% lower reverse mortgage subservicing portfolio due to runoff and our acquisition of reverse mortgage loans from MAM in November 2024 that we previously subserviced.

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The following table presents the detail of our ancillary income:

[[GREPCENT_TABLE]]
[["Ancillary Income","Years Ended December 31,","","","","% Change"],["","2024","","2023","","2022","","","","2024 vs 2023","","2023 vs 2022"],["Custodial accounts (float earnings)","$","129.3","","","$","110.7","","","$","26.2","","","","","17","","","323"],["Late charges","34.3","","","38.3","","","41.0","","","","","(10)","%","","(7)","%"],["Reverse subservicing ancillary fees","22.3","","","33.5","","","20.4","","","","","(33)","","","64"],["Other","25.9","","","26.7","","","34.4","","","","","(3)","","","(23)"],["Ancillary income","$","211.9","","","$","209.1","","","$","122.0","","","","","1","%","","71","%"]]
[[/GREPCENT_TABLE]]

Ancillary income for 2024 increased by $2.8 million, or 1% as compared to 2023 largely driven by an $18.6 million increase in float earnings mostly due to higher average float balance, partially offset by an $11.2 million decline in reverse subservicing ancillary fees driven by portfolio runoff and acquisition of previously-subserviced client portfolio. The $3.9 million decline in late charges is driven by the Rithm portfolio derecognition partially offset by an increase in payoff volume.

Gain (Loss) on Loans Held for Sale, Net

We recognized a $1.4 million gain on loans held for sale, net for 2024, as compared to the $10.3 million gain recognized in 2023. The $8.9 million decline is largely driven by $15.7 million revaluation gains recorded in 2023 on reverse mortgage buyouts opportunistically acquired at a discount and securitized, and lower redelivery losses in 2024 on Ginnie Mae forward loan repurchases and modifications.

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.

The following table presents the components of the net fair value change and is comprised of net interest income and other fair value gains or losses. Net interest income is primarily driven by the volume of securitized UPB as it is the interest income earned on the securitized loans offset against interest expense incurred on the HMBS-related borrowings, and represents a key component of our compensation for servicing the portfolio, which is generally a fixed percentage of the outstanding UPB. Other fair value changes are primarily driven by changes in market-based inputs or assumptions. Lower interest rates generally result in favorable net fair value impacts on our HECM reverse mortgage loans and the related HMBS financing liability and higher interest rates generally result in unfavorable net fair value impacts. 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.

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","","% Change"],["","2024","","2023","","2022","","","2024 vs 2023","","2023 vs 2022"],["Net interest income (servicing fee)","$","26.2","","","$","23.6","","","21.9","","","","11","","","7","%"],["Other change in fair value of securitized loans held for investment and HMBS-related borrowings, net","(9.7)","","","(0.1)","","","(47.1)","","","","n/m","","(100)","%"],["Gain (loss) on reverse loans held for investment and HMBS-related borrowings, net (Servicing)","$","16.5","","","$","23.5","","","$","(25.1)","","","","(30)","%","","(194)","%"]]
[[/GREPCENT_TABLE]]

Gain (loss) on reverse loans held for investment and HMBS-related borrowings, net for 2024 declined $6.9 million as compared to 2023, mostly driven by an unfavorable increase in market interest rates, partially offset by yield spread tightening. While not the only benchmark for the reverse mortgage exposure, the 10-year Treasury rate increased 70 basis points in 2024 resulting in a $9.7 million other fair value loss. Interest rates and yield spreads remain relatively flat during 2023 resulting in a $0.1 million other fair value loss recorded in 2023. As our HECM loan portfolio is predominantly comprised of ARMs, higher interest rates cause the loan balance to accrue and reach the 98% maximum claim amount liquidation event more quickly, shortening the life of the servicing net asset. Other change in fair value is partially hedged with our forward MSR hedge strategy. Net interest income, which effectively represents the servicing fee that we collect through monthly securitization, increased $2.7 million in 2024 as compared with 2023, mostly due to the growth of the loan portfolio, including our acquisition of reverse mortgage loans from MAM in November 2024 that we previously subserviced.

66

MSR Valuation Adjustments, Net

Refer to the discussion above within Overview -Results of Operations and Financial Condition-MSR Valuation Adjustments, Net.

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. Net MSR portfolio exposure gains (losses) comprise the fair value changes of the MSR portfolio attributable to rates and assumption changes, the MSR hedging derivative gains and losses, and other fair value changes of the HECM loans and HMBS-related borrowings used as a hedge for risk management purposes.

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","% Change"],["2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["MSR fair value gains (losses) due to rate and assumption changes (1) - Servicing (2)","159.7","","(67.2)","","251.1","","(338)","%","","(127)","%"],["MSR hedging derivative fair value gain (loss) (1)","(112.9)","","(33.1)","","(122.6)","","241","","","(73)"],["Other change in fair value of securitized loans held for investment and HMBS-related borrowings, net (3)","(9.7)","","(0.1)","","(47.1)","","n/m","","(100)"],["Net MSR portfolio exposure gains (losses)","$","37.2","","(100.4)","","81.5","","(137)","%","","(223)","%"]]
[[/GREPCENT_TABLE]]

(1)See MSR valuation adjustments, net within the Overview section of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(2)Excludes MSR valuations adjustments, net reported within the Originations Segment.

(3)See “Other change in fair value of securitized loans held for investment and HMBS-related borrowings, net” in above table.

The favorable change of Net MSR portfolio exposure gains for 2024 compared to losses for 2023 is mainly driven by assumption updates that reflect actual market trade pricing levels in the respective years, our adoption of a 95-105% interest rate hedge coverage ratio in December 2023 (revised to 90-110% in April 2024), and respective changes in interest rates.

Compensation and Benefits

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","% Change"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Compensation and benefits","$","100.6","","","$","107.2","","","$","126.2","","","(6)","%","","(15)","%"],["Average Employment - Servicing","3,133","","","3,414","","","3,645","","","(8)","%","","(6)"]]
[[/GREPCENT_TABLE]]

Compensation and benefits expense for 2024 declined $6.6 million, or 6%, as compared to 2023 largely driven by an 8% headcount reduction resulting in a $5.8 million decrease in salaries and benefits. The decrease in average headcount, with a 14% decrease in the U.S., was mostly attributed to the integration of reverse servicing and the runoff of our reverse subservicing portfolio, also reflecting our goal to improve efficiencies and create an industry leading cost structure. Declines in severance expense and commissions were mostly offset by an increase in annual cash awards expense due to our improved financial performance in 2024.

Servicing Expense

Servicing expense primarily includes claim losses and interest curtailments on government-insured loans, provision expense for advances and servicing representation and warranties, and certain loan-volume related expenses. Servicing expense for 2024 was $10.7 million lower as compared to 2023 primarily attributed to $6.8 million lower claim loss on Ginnie Mae loan repurchases, driven by lower new repurchase volume and severity, and a $6.0 million favorable change in provision for indemnification obligations mostly driven by recoveries and favorable resolutions in 2024. These declines in servicing expense were partially offset by $2.7 million higher CRL insurance loss expense following the higher quota share on reinsurance premiums assumed, among other offsetting factors.

Other Operating Expenses

Other operating expenses (total operating expenses less Compensation and benefit expense and Servicing expense) for 2024 decreased by $11.4 million as compared to 2023. Professional services expense declined $7.1 million mostly due to reimbursements received in 2024 related to prior year legal expenses and payments received following resolution of legacy litigation matters, partially offset by higher legal expenses in 2024, and a reduction in costs in our reverse subservicing

67

businesses. Other expenses declined mostly driven by lower amortization expense related to intangible assets and discount on servicing advances.

Other Income (Expense)

Other income (expense) primarily includes net interest expense and pledged MSR liability expense.

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","% Change"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Interest Expense"],["Advance match funded liabilities","$","37.3","","","$","41.4","","","$","19.8","","","(10)","%","","110","%"],["Mortgage loan financing facilities","40.9","","","21.9","","","9.5","","","87","","","129"],["MSR financing facilities","72.4","","","70.6","","","47.0","","","3","","","50"],["Corporate debt interest expense allocation","26.5","","","30.2","","","31.0","","","(12)","","","(2)"],["Escrow","7.4","","","9.3","","","7.5","","","(20)","","","24"],["Total interest expense","$","184.4","","","$","173.3","","","$","114.8","","","6","%","","51","%"],["Average balances"],["Advance match funded liabilities","$","391.1","","","$","427.7","","","$","461.1","","","(9)","%","","(7)","%"],["Mortgage loan financing facilities","404.5","","","254.7","","","227.2","","","59","","","12"],["MSR financing facilities","875.9","","","884.6","","","942.6","","","(1)","","","(6)"],["Total asset-backed financing","$","1,671.6","","","$","1,567.0","","","$","1,630.9","","","7","%","","(4)","%"],["Effective average interest rate"],["Advance match funded liabilities","9.54","%","","9.68","%","","4.29","%","","(1)","%","","125","%"],["Mortgage loan financing facilities","10.10","","","8.59","","","4.18","","","18","","","106"],["MSR financing facilities","8.26","","","7.98","","","4.99","","","4","","","60"],["Average 1 month Term SOFR","5.11","%","","5.07","%","","1.85","%","","1","%","","174","%"]]
[[/GREPCENT_TABLE]]

Interest expense for 2024 increased by $11.1 million, or 6%, compared to 2023, driven by a $19.0 million increase in interest expense on mortgage loan financing facilities attributed to the OLIT securitization of acquired reverse mortgage buyouts. The increase was partially offset by a $4.1 million decrease in interest expense on advance match funded facilities, mostly driven by the decline in average borrowings for servicing advances due to our advance collection efforts, and $3.7 million decrease in corporate debt interest allocation mostly due to lower financing needs.

Interest income for 2024 increased $11.2 million, or 51%, compared to 2023 primarily due to the reverse mortgage buyouts acquired in the first and third quarters of 2024 and the second quarter of 2023.

Pledged MSR liability expense includes the servicing fee remittance related to the MSR sales or transfers that do not meet sale accounting criteria and are presented on a gross basis in our consolidated financial statements, together with the servicing spread remittance associated with our ESS financing liability at fair value. See Note 8 — Other Financing Liabilities, at Fair Value to the Consolidated Financial Statements.

The following table provides the components of Pledged MSR liability expense:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2024","","2023","","","","2022"],["Servicing fees collected on behalf of third parties","$","139.1","","","$","308.9","","","","","$","322.5"],["Less: Subservicing fee retained","(26.6)","","","(77.6)","","","","","(82.8)"],["Ancillary fee/income and other settlement (including expense reimbursement)","11.3","","","13.7","","","","","6.1"],["Net servicing fee remittance (1)","123.8","","","244.9","","","","","245.9"],["ESS servicing spread remittance","51.8","","","51.5","","","","","9.1"],["Pledged MSR liability expense","$","175.6","","","$","296.4","","","","","$","255.0"]]
[[/GREPCENT_TABLE]]

68

(1)For MSR transfers that do not meet sale accounting criteria. See Note 8 — Other Financing Liabilities, at Fair Value to the Consolidated Financial Statements.

Pledged MSR liability expense for 2024 decreased $120.8 million as compared to 2023, largely due to the accounting derecognition of MSRs previously sold to Rithm for which sale accounting criteria were met effective December 31, 2023 ($33.4 billion UPB), partially offset by the increase in the portfolio of MSRs sold to MSR capital partners. As discussed above, effective January 1, 2024, as PHH continues to subservice the portfolio, our statement of operations reflects subservicing fee revenue as opposed to the previous gross presentation of servicing fee revenue (collections) and separate offsetting presentation of servicing fee remittances within Pledged MSR liability expense.

Rithm represented the largest portfolio of MSRs transferred, failing sale accounting, and the largest component of Pledged MSR liability expense through 2023. In 2024, Servicing fee and Pledged MSR liability expense continue to be presented on a gross basis for those MSRs sold to Rithm for which title has not transferred, also referred to as Right to MSR ($9.1 billion UPB at December 31, 2024). The following table presents a subset of the above table related to Rithm, specifically the subservicing fees retained by Onity together with the associated serviced UPB on behalf of Rithm. The retained subservicing fee percentage of UPB for Rithm (0.16%) reflects the nature of the portfolio and delinquencies (22% delinquent more than 30 days as of December 31, 2024).

[[GREPCENT_TABLE]]
[["Rithm Servicing and Subservicing Fees","Years Ended December 31,","","% Change"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Servicing fees collected on behalf of Rithm","$","50.9","","","$","230.2","","","$","255.0","","","(78)","%","","(10)","%"],["Less: Subservicing fee retained (3)","(14.8)","","","(67.1)","","","(74.0)","","","(78)","","","(9)","%"],["Pledged MSR liability expense (Net servicing fees remitted to Rithm) (1) (2)","$","36.1","","","$","163.1","","","$","181.0","","","(78)","%","","(10)","%"],["Average Rithm UPB ($ in billions)","$","9.5","","","$","47.0","","","$","52.0","","","(80)","%","","(10)","%"],["Average annualized retained subservicing fees as a % of Rithm UPB","0.16","%","","0.14","%","","0.14","%","","9","%","","\u2014","%"]]
[[/GREPCENT_TABLE]]

(1)Reported within Pledged MSR liability expense.

(2)Excludes ancillary income.

(3)Net subservicing compensation of Onity retained and contractually agreed upon with Rithm.

Earnings of equity method investee, namely MAV Canopy, for 2024 increased $15.6 million as compared to 2023, mostly attributable to the $13.7 million gain, net of transaction costs, we recognized on the sale of our 15% ownership interest in November 2024.

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). We generally sell the loans in the secondary mortgage market through GSE and Ginnie Mae mortgage securitizations on a servicing retained basis. The Originations business generates a gain on sale of loans, which represents the difference between the origination or purchase value and the sale or securitization value of the loans, along with fee revenue.

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. Origination recapture volume and related gains are a natural economic hedge, to a certain degree, to the impact of declining MSR values as interest rates decline. In addition to rate and term refinance activities, our Consumer Direct channel targets purchase mortgage loans, cash-out, debt consolidation, mortgage insurance premium reduction, and new customer acquisition.

2- Correspondent Lending

Our correspondent lending channel drives the replenishment and growth of our MSR portfolio. We purchase closed loans that have been underwritten to investor guidelines from our network of correspondent sellers and sell and securitize them, on a servicing retained basis. We 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 provide customary origination representations and warranties to investors in connection with our loan sales and securitization activities. We receive customary origination representations and warranties from our network of approved correspondent lenders. 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. Loans originated under this program are generally insured by the FHA, which provides protection against risk of borrower default. 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. The Agency Cash Window programs we participate in, and purchase MSR from, allow mortgage companies and financial institutions to sell whole loans servicing released to the respective agency and sell the MSR to the winning bidder. In addition, we partner with other originators to replenish our MSRs through flow purchase agreements. As of December 31, 2024, we have relationships with 496 approved sellers through the Agency Cash Window co-issue programs, or 216 net new sellers since December 31, 2023. 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 do not report any revenue or gain associated with subservicing within the Originations segment as the impact is captured in the Servicing segment. However, sales efforts and certain costs - marginal compensation and benefits - are managed and reported within the Originations segment.

Significant Variables

The following factors could significantly impact the results of our Originations segment from period to period.

Mortgage Rates. Changes in mortgage rates, primarily the 30-year fixed rate mortgage, directly impact the demand for both purchase and refinance forward mortgages and therefore impact the production volumes and financial results of our Originations segment. Small changes in mortgage rates directly impact housing affordability for both first-time and move-up home buyers and affect their ability to purchase a home. For refinance loans, current market mortgage rates must be considered relative to the rates on the current mortgage debt outstanding.

Market Size and Composition. The volume of new or refinanced loans is impacted by changes to existing, or development of new, GSE or other government sponsored programs. Changes in GSE or HUD guidelines and costs and the availability of alternative financing sources, such as non-Agency proprietary loans and traditional home equity loans, impact borrower demand for forward and reverse mortgages and therefore can impact the volume of mortgage originations.

Margins. Changes in pricing margin for mortgages are closely correlated with changes in market size for mortgage loans. 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. Among our channels, our margins per loan are highest in the retail channel and lowest in the correspondent channel. We work directly with the borrower to process, underwrite and close loans in our retail and reverse wholesale channels. In our retail channel, we also identify the customer and take loan applications. As a result, our retail channel is the most people- and cost-intensive and experiences the greatest volume volatility.

Investor Demand. The liquidity of the secondary market for mortgage loans impacts the size of the mortgage loan market by defining loan attributes and credit guidelines for loans that investors are willing to buy and at what price. 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).

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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. More specifically, employment levels and home prices are variables that can each have a material impact on mortgage volume. Employment levels, the level of wages and the stability of employment are underlying factors that impact credit qualification. The effect of home prices on lending volumes is significant and complex. As home prices go up, home equity increases and this improves the position of existing homeowners either to refinance or to sell their home, which often leads to a new home purchase and a new forward mortgage loan, or in the case of a reverse mortgage, increase the size of the mortgage loan available and the number of potential borrowers. However, if home prices increase rapidly, the effect on affordability for first-time and move-up buyers can dampen the demand for mortgage loans. The more restrictive standards for loan to value (LTV) ratios, debt to income (DTI) ratios and employment that characterize the current market amplify the significance and sensitivity of the housing market and related mortgage lending volumes to employment levels and home prices. If home prices decline due to increased mortgage interest rates or for other reasons, home sales may decline and it may be more difficult for homeowners to refinance existing mortgages, thereby negatively impacting mortgage volume.

Operating Metrics

The following table provides selected operating statistics for our Originations segment:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","% Change"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Funded Loan UPB by Channel (in billions)"],["Forward loans"],["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)","%"],["% Purchase production","80","","","85","","","71","","","(7)","","","19"],["% Refinance production","20","","","15","","","29","","","37","","","(48)"],["Weighted average note rate (%)","6.4","%","","6.5","%","","5.0","%","","(1)","","","29"],["Reverse loans (1)"],["Correspondent","$","0.5","","","$","0.4","","","$","0.7","","","23","%","","(38)","%"],["Wholesale","0.1","","","0.2","","","0.3","","","(17)","","","(52)"],["Retail","0.1","","","0.1","","","0.4","","","6","","","(77)"],["","$","0.8","","","$","0.7","","","$","1.4","","","11","%","","(51)","%"],["UPB of MSR Purchases by Channel (in billions)"],["Agency Cash Window / Flow MSR","$","11.9","","","$","9.1","","","$","11.3","","","31","%","","(20)","%"],["Bulk purchases","7.0","","","0.4","","","4.3","","","n/m","","(91)"],["Bulk reverse purchases","3.9","","","0.1","","","0.2","","","n/m","","(62)"],["","$","22.8","","","$","9.6","","","$","15.8","","","139","","","(39)"],["Total","$","40.6","","","$","22.8","","","$","34.0","","","78","%","","(33)","%"],["Short-term loan commitment (2)(at year end; in millions)"],["Consumer Direct","$","165.7","","","$","69.6","","","$","43.5","","","138","%","","60","%"],["Correspondent","1,145.9","","","522.9","","","593.8","","","119","%","","(12)","%"],["Total Forward loans","$","1,311.6","","","$","592.5","","","$","637.3","","","121","%","","(7)","%"],["Reverse loans","$","25.6","","","$","22.1","","","$","15.5","","","16","%","","42","%"],["Average Headcount - Originations","495","","","501","","","993","","","(1)","%","","(50)","%"]]
[[/GREPCENT_TABLE]]

(1)Loan production excludes reverse mortgage loan draws by borrowers disbursed subsequent to origination that are reported within the Servicing segment.

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(2)Also refer to interest rate lock commitments in Note 18 — Derivative Financial Instruments and Hedging Activities. The amounts are presented before application of any pull-through adjustment.

Financial Performance

The following table presents the results of operations of our Originations segment. The amounts presented are before the elimination of balances and transactions with our other segments:

[[GREPCENT_TABLE]]
[["","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)"]]
[[/GREPCENT_TABLE]]

(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.

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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):

[[GREPCENT_TABLE]]
[["","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)","%"]]
[[/GREPCENT_TABLE]]

(1)Defined as the UPB of loans funded in the period.

(2)Ratio of gain on Loans held for sale to funded UPB. Note that the ratio differs from the day-one gain on sale margin upon lock.

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. The higher gain in 2024 is mainly due to a 36% increase in our total volume, exceeding the overall 17% mortgage origination growth in the industry. The increase in Consumer Direct gain is driven by a 153% increase in loan funded volume, attributed to our increased recapture operational capability and the relative interest rate environment in 2024 as compared to 2023, the lowest production year for refinance over the past 20 years. The increase in Correspondent gain is largely driven by the increased loan production volume, attributed to our MSR replenishment strategy following our opportunistic MSR bulk sales. While the channel margins remained relatively consistent with 2023, the aggregate margin increased due to the change in the channel mix. The elevated interest rate environment continues to adversely impact both purchase and refinance borrower activities due to a lack of affordability.

Gain on Reverse Loans Held for Investment and HMBS-Related Borrowings, Net

The following table provides information regarding Gain on reverse loans held for investment and HMBS-related borrowings, net of the Originations segment that comprises fair value changes of the pipeline and unsecuritized reverse mortgage loans held for investment, at fair value, together with volume and margin (including loan fees):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","% Change"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Origination UPB (1) (in billions)","$","0.8","","","$","0.7","","","$","1.4","","","11","%","","(53)","%"],["Origination margin (2)","3.41","%","","3.41","%","","4.25","%","","\u2014","","","(20)","%"],["Gain on reverse loans held for investment and HMBS-related borrowings, net (Originations)","$","25.9","","","$","23.2","","","$","61.2","","","12","%","","(62)","%"]]
[[/GREPCENT_TABLE]]

(1)Defined as the UPB of loans funded in the period.

(2)Ratio of origination gain to funded UPB; includes loan fees.

Gain on reverse loans held for investment and HMBS-related borrowings, net increased $2.7 million, or 12% as compared to 2023 attributed to higher origination volume and a stable aggregate margin. The increase is mostly driven by our Retail and Correspondent channels that experienced higher volumes. Industry-wide HECM securitization volume saw a 42% increase when comparing 2024 to 2023, and industry-wide HECM endorsements were down 12%. Similar to the forward mortgage market described above, the elevated interest rate environment continues to adversely impact reverse mortgage borrower activities due to a lack of affordability as elevated rates directly reduce HECM loan proceeds available to borrowers.

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Other revenue, net

Other revenue, net for 2024 increased $7.1 million, or 38% as compared to 2023 primarily due to the 36% increase in our Consumer Direct and Correspondent production volume.

MSR Valuation Adjustments, Net

MSR valuation adjustments, net includes revaluation gains on certain MSRs opportunistically purchased through the Agency Cash Window programs, and flow purchases. As an aggregator of MSRs, we may purchase MSRs from smaller originators with a purchase price at a discount to fair value and we recognize valuation adjustments for differences in exit markets in accordance with the accounting fair value guidance. 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.

Operating Expenses

Operating expenses for 2024 increased $7.5 million, or 9%, as compared to 2023, mostly due to $5.1 million higher Originations expense and $3.4 million higher Compensation and benefits. The increase in Originations expense was driven by higher production volume and a provision release for representation and warranty indemnification recorded in 2023 due to favorable resolution of demands. The increase in Compensation and benefits was driven by a $4.2 million increase in commissions on higher production volume and a $1.3 million increase in incentive compensation, partially offset by a $2.4 million decrease in salaries and benefits with a decrease in average U.S. based headcount as part of our cost-reduction efforts.

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. 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.

Interest income for 2024 increased $2.6 million, or 5% as compared to 2023 largely due to a higher average loans held for sale balance. Similarly, Interest expense for 2024 increased $1.6 million, or 3% as compared to 2023 primarily due to an increase in average warehouse financing debt balance, consistent with higher average loans held for sale balances.

Corporate

Corporate includes expenses of corporate support services and activities that are not directly related to other reportable segments

•Interest expense on corporate debt is allocated to the Servicing segment and the Originations segment based on relative financing requirements, with the exception of the Onity Senior Secured Notes through their redemption date in November 2024. 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.

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The following table presents selected results of operations of Corporate. The amounts presented are before the elimination of balances and transactions with our other segments:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","% Change"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Revenue","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","n/m"],["Operating expenses"],["Compensation and benefits","85.4","","","79.0","","","78.1","","","8","%","","1","%"],["Professional services","22.5","","","(14.7)","","","17.9","","","(253)","","","(182)"],["Technology and communications","21.0","","","20.9","","","23.9","","","\u2014","","","(12)"],["Occupancy, equipment and mailing","1.7","","","1.6","","","6.0","","","5","","","(73)"],["Servicing and origination","1.6","","","1.1","","","0.7","","","53","","","48"],["Other expenses","5.6","","","5.9","","","9.5","","","(4)","","","(38)"],["Total operating expenses before corporate overhead allocations","137.8","","","93.8","","","136.1","","","47","","","(31)"],["Corporate overhead allocations"],["Servicing segment","(45.8)","","","(45.5)","","","(46.2)","","","1","","","(2)"],["Originations segment","(16.8)","","","(18.7)","","","(21.6)","","","(10)","","","(13)"],["Total operating expenses","75.2","","","29.6","","","68.3","","","154","","","(57)"],["Other income (expense), net"],["Interest income","6.0","","","4.5","","","1.5","","","33","","","207"],["Interest expense","(46.3)","","","(43.7)","","","(42.2)","","","6","","","3"],["Gain (loss) on extinguishment of debt","(49.3)","","","1.3","","","0.9","","","n/m","","36"],["Other, net","0.9","","","1.4","","","2.4","","","(38)","","","(41)"],["Other income (expense), net","(88.7)","","","(36.4)","","","(37.4)","","","143","","","(3)"],["Loss before income taxes","$","(163.9)","","","$","(66.1)","","","$","(105.7)","","","148","","","(37)"],["n/m: not meaningful"]]
[[/GREPCENT_TABLE]]

Compensation and Benefits

Compensation and benefits expense for 2024 increased $6.4 million as compared to 2023, mainly driven by a $5.6 million increase in incentive compensation due to our improved financial performance in 2024.

Professional Services

Professional services expense for 2024 increased $37.2 million as compared to 2023, largely explained by the reversal recorded in 2023 of our loss contingency accrual related to the CFPB and other matters resolved in our favor in 2023. In addition, in 2024 legal fees and litigation-related expenses increased in 2024, with lower recoveries of prior years’ legal expenses from mortgage insurers. Other professional fees also increased in 2024 driven by higher utilization of consulting services related to corporate strategy and business initiatives.

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. In addition, during 2024 (prior to their redemption) and 2023, we repurchased and extinguished a portion of the PMC Senior Secured Notes and recognized gains on debt extinguishment, net of $4.1 million and $1.3 million, respectively.

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LIQUIDITY AND CAPITAL RESOURCES

Overview

In 2024 (fourth quarter), we successfully executed our corporate debt refinancing which resulted in the extension of our corporate debt maturity and the reduction of our overall cost of funds:

•PHH Corporation issued $500 million aggregate principal amount of 9.875% Senior Notes Due 2029 at a price of 99.956%. The net proceeds from the sale of the notes, together with the net proceeds from the sale of our investment in MAV Canopy (see below) and available liquidity, were used to redeem all of the outstanding $289.1 million principal PMC Senior Secured Notes due 2026 and $285.0 million principal Onity Senior Secured Notes due 2027 at a premium pursuant to the respective agreements.

•Onity sold to Oaktree its 15% ownership interest in MAV Canopy for $50.0 million total cash proceeds.

In the normal course of business, we are actively engaged with existing and potential lenders and as a result add, terminate, replace or extend our debt agreements to the extent necessary to finance our operations and growth and optimize our financing costs. In addition, we completed the following transactions during 2024 impacting our liquidity and capital:

•Repurchased $70.9 million of our PMC Senior Secured Notes in the open market (prior to their redemption discussed above);

•Completed two private placement securitizations of HECM loans, and related receivables and REO properties, referred to as reverse mortgage buyouts. In February and September 2024, certain classes of asset-backed notes with an initial principal amount of $268.6 million and $330.6 million were issued at a discount, with a stated interest rate of 3% and 5% respectively, and a three-year mandatory call date;

•Entered into a $34.0 million junior-lien repurchase financing arrangement of our PLS MSR in March 2024. In November 2024, the facility was repaid and voluntarily terminated prior to its contractual termination date;

•Entered into ESS financing transactions and MSR financing transactions with MSR capital partners for aggregated proceeds of $23.8 million and $25.0 million, respectively. ESS financing transactions require PHH to remit to a third party a specified percentage of future servicing fee collections on reference pools of mortgage loans which PHH is entitled to as owner of the related MSRs. MSR financing transactions with MSR capital partners, including MAV, consist of MSR sales, where MSR title and ownership have generally passed, while PHH retains subservicing;

•Issued a new series of non-convertible, perpetual preferred stock (Series B Preferred Stock) with an aggregate liquidation preference amount of $52.8 million as consideration for the acquisition of reverse mortgage assets of Waterfall previously subserviced by PHH. Concurrently, we entered into a two-year revolving line of credit with Waterfall, collateralized by certain acquired assets. The maximum committed amount decreases from an initial $45.0 million to $15.0 million after the first securitization of the acquired HECM tails.

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):

[[GREPCENT_TABLE]]
[["","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"]]
[[/GREPCENT_TABLE]]

(1)Total Borrowing Capacity represents the maximum amount which can be borrowed, subject to eligible collateral. 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. Uncommitted amounts can be advanced at the discretion of the lender, and there can be no assurance that any uncommitted amounts will be available to us at any particular time.

76

At December 31, 2024, we had $63.7 million total available committed and uncommitted borrowing capacity based on the amount of eligible collateral as follows:

[[GREPCENT_TABLE]]
[["","December 31, 2024"],["","Total","","Committed","","Uncommitted"],["Advance facilities","$","\u2014","","","$","\u2014","","","$","\u2014"],["Mortgage loan financing facilities","6.6","","","\u2014","","","6.6"],["MSR financing facilities","57.1","","","57.1","","","\u2014"],["Total available borrowing capacity based on eligible collateral","$","63.7","","","$","57.1","","","$","6.6"]]
[[/GREPCENT_TABLE]]

At December 31, 2024, our total liquidity of $248.5 million included $184.8 million of unrestricted cash and $63.7 million total available committed and uncommitted borrowing capacity based on the amount of eligible collateral as described above. Considering the large financing and capital transactions described above, our total liquidity remained stable at December 31, 2024, as compared to $241.6 million at December 31, 2023.

We optimize our daily cash position to reduce financing costs while closely monitoring our liquidity needs and ongoing funding requirements. 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.

Use of Funds

Our primary near-term uses of funds in the normal course include:

•Payment of operating costs and corporate expenses;

•Payments for servicing advances in excess of collections including advances and draws related to reverse mortgage assets (see below);

•Investment in MSRs (purchased and originated) and other related asset acquisitions;

•Originated, purchased and repurchased loans, including reverse mortgage buyouts;

•Payment of margin calls under our MSR financing facilities and derivative instruments;

•Debt service and repayments of borrowings, including under our MSR financing, advance financing, warehouse facilities and OLIT securitization notes, and payment of interest expense including on the Senior Notes Due 2029;

•Dividend payments on Series B Preferred Stock; and

•Net negative working capital and other general corporate cash outflows.

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. 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. As an HMBS issuer, we are required to repurchase loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the loan is equal to or greater than 98% of the maximum claim amount (MCA repurchases).We carry these repurchases until reimbursement by HUD and/or property liquidation if inactive. Our reverse subservicing clients bear the financial obligation and risks associated with purchasing loans out of securitization pools within the portfolio we subservice. See Note 26 — Commitments to the Consolidated Financial Statements for additional information.

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. This amount is comprised of $1.0 billion of borrowings under forward and reverse mortgage loan financing facilities, $416.5 million outstanding under advance financing facilities based on expected repayment date, $659.7 million outstanding under GSE and Ginnie Mae MSR financing facilities maturing in the next 12 months, and $25.6 million of scheduled principal amortization on the PLS Notes secured by PLS MSRs.

With respect to liquidity management, we consider our servicing advance requirements during each investor remittance period and the uncertainties of daily margin calls on our collateralized debt facilities and derivative instruments due to interest rate fluctuations.

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. We also advance T&I and Corporate advances primarily on properties that are in default or have been foreclosed. Our obligations to make these advances are governed by servicing agreements or guides, depending on investors or guarantor. Refer to Note 26 — Commitments to the Consolidated Financial Statements for further description of our servicer advance obligations. As subservicer, we are also required to make P&I, T&I and Corporate advances

77

on behalf of servicers following the servicing agreements or guides. However, servicers are generally required to reimburse us within 30 days of our advancing under the terms of the subservicing agreements, and we are generally reimbursed by Rithm the same day we fund P&I advances, or within no more than three days for certain servicing advances.

We are generally subject to daily margining requirements under the terms of our MSR financing facilities and daily cash calls for our TBAs, interest rate swap futures or other derivatives. Declines in fair value of our MSRs due to declines in market interest rates, assumption updates or other factors require that we provide additional collateral to our lenders under MSR financing facilities. Similarly, declines in fair value of our derivative instruments require that we provide additional collateral to the clearing counterparties. While the objective of our hedging strategy is to reduce volatility due to interest rates, it is also designed to address cash and liquidity considerations. Refer to the sensitivity analysis in Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

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.

(1)Supplemental information required pursuant to the Indenture governing the Onity Senior Notes Due 2029 disclosed in Exhibit 99.1.

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.

Servicing advances are an important component of our business and represent amounts that we, as servicer, are required to advance to, or on behalf of, our servicing clients if we do not receive such amounts from borrowers. Our use of advance financing facilities is integral to our cash and liquidity management strategy. Additionally, certain of our financing and subservicing agreements permit us to retain advance collections for a period ranging from one to two business days before remittance, thus providing a source of short-term liquidity.

We use mortgage loan repurchase and participation facilities (commonly called warehouse lines) to fund newly-originated or purchased loans on a short-term basis until they are sold or securitized to secondary market investors, including GSEs or other third-party investors, and to fund repurchases of certain Ginnie Mae forward loans, HECM loans, second-lien loans and other types of loans. 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.

We also rely on the secondary mortgage market as a source of liquidity to support our lending operations. 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). We issued private placement securitizations to finance reverse mortgage buyouts, expanding our access to capital markets and reducing our reliance on warehouse financing facilities.

We regularly evaluate financing structure options including asset-backed financing to support our investment plans and accommodate our business needs. We strive to diversify our sources of funds, optimize maturities and reduce our funding cost. We continuously evaluate the allocation of our capital to MSR and other investments, the related returns, funding and liquidity requirements.

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

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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. These covenants may limit the manner in which we conduct our business and may limit our ability to engage in favorable business activities or raise additional capital to finance future operations or satisfy future liquidity needs. In addition, breaches or events that may result in a default under our debt agreements include, among other things, nonpayment of principal or interest, noncompliance with our covenants, breach of representations, the occurrence of a material adverse change, insolvency, bankruptcy, certain material judgments and litigation and changes of control. 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. At December 31, 2024, we held unrestricted cash in excess of this minimum amount. The minimum liquidity requirements for PHH contained in some debt agreements are also subject to the minimum requirement set forth by the Agencies. Refer to Note 25 — Regulatory Requirements.

Effective September 30, 2023, we implemented the revised minimum tangible net worth and liquidity requirements for GSE and Ginnie Mae seller/servicers. We believe that we are in compliance with these requirements as of December 31, 2024. Ginnie Mae announced a new risk-based capital ratio effective on December 31, 2024 for Ginnie Mae issuers. Ginnie Mae issued a waiver extending the deadline by which PHH must meet the risk-based capital ratio requirements to October 1, 2025. PHH will be required to maintain a minimum of 6% ratio of Adjusted Net Worth less Excess MSRs, as defined, to risk weighted assets. We are currently implementing certain actions intended to achieve compliance with the requirements. We intend to continue to operate our Ginnie Mae issuer activities through PHH which would be subject to the risk-based capital rules, and separately conduct certain GSE MSR investment activities through PHH Asset Services LLC (PAS), a wholly owned subsidiary of PHH Corporation and Onity. We have received all necessary licensing and regulatory approvals to operate PAS except for one state with whom discussions are ongoing.

In addition, our debt agreements generally include cross default provisions such that a default under one agreement could trigger defaults under other agreements. 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, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations. 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. The following table summarizes our current ratings and outlook by the respective nationally recognized rating agencies. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.

[[GREPCENT_TABLE]]
[["Rating Agency","","Rated Entity","","Long-term Corporate Rating","","","","Review Status / Outlook","","Date of last action"],["Moody\u2019s","","Onity","","B3","","","","Stable","","October 21, 2024"],["S&P","","Onity","","B-","","","","Stable","","October 21, 2024"]]
[[/GREPCENT_TABLE]]

On October 21, 2024, Moody’s assigned a Caa1 rating to the new PHH Corporation Senior Notes Due 2029. Moody’s also assigned a B3 corporate family rating to Onity and withdrew the B3 corporate family rating of PHH Mortgage Corporation. The entities’ outlooks are stable. Moody’s recognizes Onity's improving performance and return to profitability and adequate capitalization. At the same time, Moody’s explained the rating is constrained by Onity's modest scale compared to mortgage peers and history of uneven financial performance.

On October 21, 2024, S&P assigned a B- rating to the new PHH Corporation Senior Notes Due 2029. 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.

It is possible that additional actions by credit rating agencies could have a material adverse impact on our liquidity and funding position, including materially changing the terms on which we may be able to borrow money.

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Cash Flows

Our operating cash flow is primarily impacted by operating results, changes in our servicing advance balances, the level of mortgage loan production, the timing of sales, securitizations or liquidation of mortgage loans, and the margin calls required under our MSR financing facilities or derivative instruments. As one of the main differences between proceeds from sale and origination or purchase of loans held for sale, newly originated (capitalized) MSRs are effectively classified as operating cash flows under GAAP. Purchases of MSRs through flow purchase agreements, Agency Cash Window and bulk acquisitions are classified as investing activity. MSR investments, whether originated or purchased, represent a key indicator of our ability to generate future income in our Servicing business.

We classify changes in HECM loans held for investment as investing activity and changes in the related HMBS borrowings as financing activity. Our MSR transfer agreements with MAV, Rithm and others that do not meet sale accounting criteria have a significant impact on our consolidated statements of cash flows. Because the payments we receive in connection with the HECM loan securitizations and MSR transfer agreements are recorded as secured financings, additions to, and reductions in, the balance of those secured financings are presented as financing activity in our consolidated statements of cash flows, excluding the changes in fair value attributable to inputs and assumptions.

Our cash flows are summarized as follows:

[[GREPCENT_TABLE]]
[["$ in millions","Years Ended December 31,"],["","2024","","2023"],["Net cash provided by (used in) operating activities","$","(574)","","","$","10"],["Net cash provided by (used in) investing activities","401","","","(100)"],["Net cash provided by financing activities","183","","","71"],["Net increase (decrease) in cash, cash equivalents and restricted cash","$","10","","","$","(19)"],["Cash, cash equivalents and restricted cash at end of period","$","266","","","$","255"]]
[[/GREPCENT_TABLE]]

Cash flows for the year ended December 31, 2024

Our operating activities used $574 million of cash during the year with $837 million net cash paid on loans held for sale and $263 million other operating cash inflows, net. The $837 million net cash paid on loans held for sale is attributed to the growth of the pipeline with loan production volume exceeding sales, $246 million for the purchase of reverse mortgage buyouts, and $248 million originated MSRs. Operating cash outflows also include $46 million margin calls on derivatives. Operating cash inflows included $82 million net collections of servicing advances and earnings distributions of $9 million received from our former equity method investee MAV Canopy.

Our investing activities provided $401 million of cash. Cash inflows primarily include $371 million net cash received in connection with our HECM reverse mortgages held for investment, $205 million proceeds from sales of MSRs, $31 million proceeds from sales of real estate as part of our reverse asset management strategy, $51 million of net cash received from our former equity method investee MAV Canopy, including $46 million proceeds received from the sale of our 15% investment in November 2024, and $15 million received from the sale of advances in connection with sales of MSRs. Offsetting cash outflows include $232 million to purchase MSRs and $37 million to purchase real estate (reverse buyouts).

Our financing activities provided $183 million of cash. 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). 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. 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 flows for the year ended December 31, 2023

Our operating activities provided a net $10 million of cash during the year, after $258 million net cash paid on loans held for sale, with loan production volumes exceeding sales, $183 million of which was used to finance newly originated MSRs.

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Operating cash flows included $76 million net collections of servicing advances and earnings distributions of $7 million received from our equity method investee MAV Canopy..

Our investing activities used $100 million of cash. The primary uses of cash in our investing activities was $120 million to purchase MSRs, $42 million to acquire advances in connection with MSR transactions and $11 million to purchase real estate. Offsetting cash inflows $45 million net cash inflows in connection with our HECM reverse mortgages, $18 million proceeds from the sale of real estate, and $4 million of capital distributions received, net of contributions, from our equity method investee MAV Canopy.

Our financing activities provided $71 million of cash. Financing cash inflows are primarily comprised of $175 million of proceeds from sale of MSRs accounted for as a financing in connection with sales of MSRs and $69 million of proceeds from ESS financings. Offsetting cash outflows include $95 million of net payments on the financing liabilities related to MSRs transferred and ESS financings due to runoff, and $36 million net repayment of borrowings under our MSR financing facilities, and $14 million of net repayment on advance match funded liabilities. We also paid $14 million to repurchase $15 million of our 7.875% PHH Senior Secured Notes. Cash inflows of $1,055 million received in connection with our reverse mortgage securitizations, which are accounted for as secured financings, were more than offset by repayments on the related financing liability of $1,070 million.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our ability to measure and report our financial position and operating results is influenced by the need to estimate the impact or outcome of future events based on information available at the date of the financial statements. 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. In developing estimates and assumptions, management uses all available information; however, actual results could materially differ from those estimates and assumptions. If actual results differ from our judgments and assumptions, then it may have an adverse impact on the results of operations and cash flows. We have processes in place to monitor these judgments and assumptions, and management is required to review critical accounting policies and estimates with the Audit Committee of the Board of Directors. The following is a summary of certain accounting policies and estimates involving significant judgments. Our significant accounting policies and critical accounting estimates are described in Note 1 — Organization, Basis of Presentation and Significant Accounting Policies to the Consolidated Financial Statements.

Fair Value Measurements

We use fair value for recognition, subsequent measurement and disclosure of certain instruments. Refer to Note 3 — Fair Value to the Consolidated Financial Statements for the fair value hierarchy, descriptions of valuation methodologies used to measure significant assets and liabilities at fair value and details of the valuation models, key inputs to those models, significant assumptions utilized, and sensitivity analyses. 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. The determination of the fair value of these Level 3 financial assets and liabilities and MSRs requires significant management judgment and estimation. See Item 7A. 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.

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. See Note 3 — Fair Value for the carrying amounts and the estimated fair values of our financial instruments and certain of our nonfinancial assets measured at fair value on a recurring and nonrecurring basis or disclosed, but not measured, using fair value.

We have various internal controls in place to ensure the appropriateness of fair value measurements. Significant fair value measures are subject to analysis and management review and approval. 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. Considerable judgment is used in forming conclusions about Level 3 inputs. Changes to these inputs could have a significant effect on fair value measurements.

Valuation of Reverse Mortgage Loans Held for Investment and HMBS-related Borrowings

Reverse mortgage loans are insured by the FHA and transferred into Ginnie Mae guaranteed securities (or HMBS). Loan transfers in these Ginnie Mae securitizations do not qualify for sale accounting and are recorded as secured financings. We record both loans held for investment and the corresponding HMBS borrowings at fair value. Our net exposure to reverse mortgages and the HMBS-related borrowings is limited to the residual value we retain, including future draw commitments and servicing value. Changes in the fair value of the loans held for investment are largely offset by changes in the value of the

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related secured financing. As of December 31, 2024, we reported $11.0 billion securitized loans held for investment at fair value and $10.9 billion HMBS-related borrowings at fair value.

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 determination of fair value requires management judgment due to the significant unobservable assumptions, including conditional prepayment rate and discount rate.

We engage third-party valuation experts to support our valuation and provide observations and assumptions related to market activities. We evaluate the reasonableness of our fair value estimate and assumptions using historical experience, or cash flow backtesting, adjusted for prevailing market conditions and benchmarks with third-party expert valuations. We believe that our back-testing and benchmarking procedures provide reasonable assurance that the fair value used in our consolidated financial statements complies with the accounting guidance for fair value measurements and disclosures and reflect the assumptions that a market participant would use.

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.

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). 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. The significant estimated future cash inflows for MSRs include servicing fees, late fees, float earnings and other ancillary fees, and significant cash outflows include the cost of servicing, the cost of financing servicing advances and compensating interest payments. The determination of the fair value of MSRs, pledged MSR liabilities and ESS financing liabilities requires management judgment relating to the significant unobservable assumptions that underlie the valuation, including prepayment speed, delinquency rates, cost to service and discount rate. 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.

To assist in the determination of fair value, we engage third-party valuation experts who generally utilize: (a) transactions involving instruments with similar collateral and risk profiles, adjusted as necessary based on specific characteristics of the asset or liability being valued; and/or (b) industry-standard modeling, such as a discounted cash flow model and a prepayment model, in arriving at their estimate of fair value. The prices provided by the valuation experts reflect their observations and assumptions related to market activity, generally the bulk market, incorporating available industry survey results and client feedback, and including risk premiums and liquidity adjustments. While interest rates are a key value driver, MSR fair value may change for other market-driven factors, including but not limited to the supply and demand of the market or the required yield or perceived value by investors of such MSRs. While the models and related assumptions used by the valuation experts are proprietary to them, we understand the methodologies and assumptions used to develop the prices based on our ongoing due diligence, which includes regular discussions with the valuation experts, and we perform additional verification and analytical procedures. We evaluate the reasonableness of our third-party experts’ assumptions using historical experience adjusted for prevailing market conditions and benchmarks with third-party expert valuation and market participant surveys. We believe that our procedures provide reasonable assurance that the fair value used in our consolidated financial statements comply with the accounting guidance for fair value measurements and disclosures and reflect the assumptions that a market participant would use.

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The following table provides the range and weighted average of significant unobservable assumptions used (expressed as a percentage of UPB) by MSR class projected for the five-year period beginning December 31, 2024:

[[GREPCENT_TABLE]]
[["","Conventional","","Government-Insured","","Non-Agency"],["Prepayment speed"],["Range","4.7% to 8.8%","","6.1% to 12.5%","","6.7% to 7.99%"],["Weighted average","6.8%","","8.2%","","7.2%"],["Delinquency"],["Range","0.4% to 1.2%","","5.7% to 10.7%","","8.5% to 17.8%"],["Weighted average","0.6%","","7.0%","","12.1%"],["Cost to service (in dollars)"],["Range","$67 to $70","","$96 to $117","","$177 to $223"],["Weighted average","$68","","$104","","$194"],["Discount rate","9.8%","","10.8%","","10.9%"]]
[[/GREPCENT_TABLE]]

Changes in these assumptions are generally expected to affect our results of operations as follows:

•Increases in prepayment speeds generally reduce the value of our MSRs as the underlying loans prepay faster which causes accelerated MSR portfolio runoff, higher compensating interest payments and lower overall servicing fees, partially offset by a lower overall cost of servicing, increased float earnings on higher float balances and lower interest expense on lower servicing advance balances.

•Increases in delinquencies generally reduce the value of our MSRs as the cost of servicing increases during the delinquency period, and the amounts of servicing advances and related interest expense also increase.

•Increases in the discount rate reduce the value of our MSRs due to the lower overall net present value of the net cash flows.

•Increases in interest rate assumptions will increase interest expense for financing servicing advances although this effect is partially offset by an increase in the amount of float earnings.

The fair value of Pledged MSR liabilities and ESS financing liabilities is generally expected to be impacted by the same assumptions as the underlying MSR, in opposite direction. Instrument or transaction specific assumption may apply and require our judgment, including the estimated life of the subservicing agreement when MSRs are sold subservicing retained, or the yield or discount rate to apply.

Income Taxes

We record a tax provision for the anticipated tax consequences of the reported results of operations. We compute the provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. We measure deferred tax assets and liabilities using the currently enacted tax rates in each jurisdiction that applies to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

We conduct periodic evaluations of positive and negative evidence to determine whether it is more likely than not that the deferred tax asset can be realized in future periods. 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.

We recognize that cumulative losses in recent years is an objective form of negative evidence in assessing the need for a valuation allowance and that such negative evidence is difficult to overcome. Other factors considered in these evaluations are estimates of future taxable income, future reversals of temporary differences, tax character and the impact of tax planning strategies that may be implemented, if warranted.

As a result of these evaluations, we recognized a full valuation allowance on our U.S. deferred tax assets at December 31, 2024 and 2023. The U.S. jurisdictional deferred tax assets are not considered to be more likely than not realizable based on all available positive and negative evidence. We intend to continue maintaining a full valuation allowance on our deferred tax assets in the U.S. until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for

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the period in which the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the profitability that we achieve.

We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

NOL carryforwards, Section 163(j) disallowed interest expense carryforwards, and certain built-in losses or deductions may be subject to annual limitations under Internal Revenue Code Section 382 (Section 382) (or comparable provisions of foreign or state law) in the event that certain changes in ownership were to occur. In addition, tax credit carryforwards may be subject to annual limitations under Internal Revenue Code Section 383 (Section 383). We periodically evaluate our NOL and tax credit carryforwards and deductions and/or certain built-in losses and whether certain changes in ownership have occurred as measured under Section 382 that would limit our ability to utilize a portion of these tax attributes. If it is determined that an ownership change(s) has occurred, there may be annual limitations on the use of these NOL and tax credit carryforwards under Sections 382 and 383 (or comparable provisions of foreign or state law).

Onity and PHH Corporation have both experienced historical ownership changes that have caused the use of certain tax attributes to be limited and have resulted in the write-off of certain of these attributes based on our inability to use them in the carryforward periods defined under the tax laws. Onity continues to monitor the ownership in its stock to evaluate whether any additional ownership changes have occurred that would further limit its ability to utilize certain tax attributes. As such, our analysis regarding the amount of tax attributes that may be available to offset taxable income in the future without restrictions imposed by Section 382 may continue to evolve.

Indemnification Obligations

We have exposure to representation, warranty and indemnification obligations because of our lending, loan sales and securitization activities, our acquisitions to the extent we assume one or more of these obligations, and in connection with our servicing practices. We initially recognize these obligations at fair value. Thereafter, the estimation of the liability considers probable future obligations based on industry data of loans of similar type segregated by year of origination, to the extent applicable, and estimated loss severity based on current loss rates for similar loans, our historical rescission rates and the current pipeline of unresolved demands. Loss severity considers the historical loss experience that we incur upon loan sale or collateral liquidation, as well as current market conditions. We monitor the adequacy of the overall liability and make adjustments, as necessary, after consideration of our historical losses and other qualitative factors including ongoing dialogue and experience with our counterparties. 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.

Litigation

In the ordinary course of business, we are a defendant in, or a party or potential party to, many threatened and pending litigation matters. We monitor our litigation matters, including advice from external legal counsel, and regularly perform assessments of these matters for potential loss accrual and disclosure. We establish liabilities for settlements, judgments on appeal and filed and/or threatened claims for which we believe it is probable that a loss has been or will be incurred and the amount can be reasonably estimated based on current information regarding these matters. Where we determine that a loss is not probable but is reasonably possible or where a loss in excess of the amount accrued is reasonably possible, we disclose an estimate of the amount of the loss or range of possible losses for the claim if a reasonable estimate can be made, unless the amount of such reasonably possible loss is not material to our financial position, results of operations or cash flows. Management’s assessment involves the use of estimates, assumptions, and judgments, including progress of the matter, prior experience, available defenses, and the advice of legal counsel and other experts. Accruals are adjusted as more information becomes available or when an event occurs requiring a change. 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. We cannot currently estimate the amount, if any, of reasonably possible losses above amounts that have been recorded at December 31, 2024.

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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.

Our adoption of the standards listed below in 2024 did not have a material impact on our consolidated financial statements:

•Leases (ASC 842) Common Control Arrangements (ASU 2023-01)

•Segment Reporting (ASC 280) Improvements to Reportable Segment Disclosures (ASU 2023-07)