Onity Group slipped into the red for fourth-quarter 2024 under standard accounting principals due to costs related to a previously announced portfolio restructuring, but its full-year earnings were the highest since 2013.
For the quarter, the company took a $29 million loss to common shareholders. The Standard & Poor's Capital IQ earnings estimate was for a positive $17.96 million. Onity had recorded a profit under standard accounting principals of
However, the company's results improved on those in 2023's fourth quarter, when the company was still called Ocwen Financial Corp. During that period, the company
For the past year as a whole, the company earned around $33 million. The consensus estimate was $79.86 million. In 2023, it recorded a $63.7 million net loss.
"Servicing was still the earnings engine," said Glen Messina, Onity's chair, president and CEO, commenting on the results for the year during a call accompanying its release of results.
Originations did improve during the year, rising to $30 billion, a number that was 33% higher than in 2023. Onity originated $10 billion in the fourth quarter alone, representing a 72% increase from a year earlier and a 12% improvement over the previous three-month period.
Messina anticipates servicing will remain the main contributor to earnings in 2025, but there will be further "modest" origination gains.
One way the company plans to grow originations is by working with investors and consumers to make closed and open-end home equity loans more attractive. It also remains involved in the niche reverse-mortgage products that enable older adults to withdraw equity from their homes.
When asked during the call about a new Ginnie Mae securitization option for reverse mortgages that was underway before the election, Messina said it could benefit Onity by providing more options for the company if it moves forward.
While the company incurred a previously disclosed debt-restructuring charge in the quarter, it will pay off in reduced interest costs this year, executives said.
"With our corporate debt restructuring, we reduced both the level and average effective cost of our corporate debt, extended the maturity and simplified the structure," said Messina.
A component of the restructuring involving the sale of a 15% stake in a joint venture vehicle for servicing rights also raised some cash for the company during the quarter, as previously disclosed.
Chief Financial Officer Sean O'Neil also said during the call there could potentially be an adjustment to another previously announced transaction involving Waterfall Asset Management.
In addition to making progress on the Waterfall deal and repositioning its balance sheet to reduce leverage and extend debt maturities during the quarter, Onity also built scale in its servicing portfolio, he noted.
The total unpaid principal balance grew to $302 billion during the year, up $13 billion from year-end 2023. The company also sold $15 billion in mortgage servicing rights it released above book value.
Onity aims for a 50-50 balance between owned MSRs and subservicing in its portfolio, Messina said. The company is currently expanding into subservicing for business-purpose residential loans in a "thoughtful and methodical way," he said.
The company's stock fell on the day shortly after the earnings call and it was trading just above $34 per share at the time. It had subsequently bounced back to levels closer to $35 by mid-morning. It had opened above $39.
"We expect the stock could linger before rebounding back to our target of $40 in the very near-term, but we take some validation in the ongoing growth and operating leverage coming together in the subservicing segment," Eric Hagen and Jake Katsikas, researchers at BTIG, said in a research note released after the earnings call.
