Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Q2 2022 Earnings Presentation
25 slides from Onity's earnings presentation, Aug 4, 2022
Slide 1: Business Update Second Quarter 2022
Business Update Second Quarter 2022 August 4, 2022 © 2022 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS reverse servicing business; our ability to retain clients and employees Anyone wishing to understand Ocwen’s business should review our This presentation contains forward-looking statements within the of acquired businesses, and the extent to which acquisitions and our SEC
Slide 3: Executive Summary
Executive Summary • Owned MSR value appreciation and profitability improvement Balanced and diversified 1 business model • Actively growing subservicing and end-to-end reverse mortgage businesses • Special servicing expertise to support borrowers, clients and investors Results reflect impact of • Q2
Slide 4: Navigating a volatile and unpredictable interest and spread rate environment
Navigating a volatile and unpredictable interest and spread rate environment Forward Mortgage Market Reverse Mortgage Market • Interest rates up higher and faster than anticipated • Interest rates up over 125bps in Q2 vs. 25bps in Q1 • MBS spreads historically wide; volatile rate swings • HMBS sprea
Slide 5: Leveraging the core strengths of our balanced and diversified business model
Leveraging the core strengths of our balanced and diversified business model Balanced and diversified business model Industry-leading operational execution Top 5 reverse originator with growing that is working as designed driving subservicing growth market share and end-to-end capabilities Forward S
Slide 6: Driving prudent growth adapted for the environment
Driving prudent growth adapted for the environment Driving capital efficient servicing growth by managing mix of Increasing mix of higher margin products owned servicing and subservicing Servicing $69 GNMA, Best Efforts, Non- Additions Owned Servicing Delegated, DTC as a % of in $B Subservicing Owne
Slide 7: Reducing cost structure across the organization to match market realities
Reducing cost structure across the organization to match market realities • Sustainable cost reduction with a focus on demand • Targeting annualized cost reduction of $60M in management and most essential activities Originations, Servicing and overhead costs by Q4 vs. Q2 • Rationalizing staffing lev
Slide 8: Optimizing liquidity, financing sources and custodial arrangements
Optimizing liquidity, financing sources and custodial arrangements • Dynamically managing owned MSRs and growing subservicing portfolio with investment partners and clients Total Liquidity • MSR financing facility upsize; improved spreads, advance rates; aligned interest rate index to match custodia
Slide 9: Allocating capital to deliver value for shareholders
Allocating capital to deliver value for shareholders • Opportunistic purchase of $25M in PHH notes at 94.5% of par; one- time earnings (almost $1M) and positive effects on leverage OCN Share Price ratios/triggers • Authorization for up to $50M in share purchases; purchased ~$17M through July 31 at a
Slide 10: Q2 financial results reflect impact of higher rates and spreads, asset sales
Q2 financial results reflect impact of higher rates and spreads, asset sales Q2’22 Financial Highlights Adjusted Pre-tax Income(b) Bridge ($M, except per share metrics) Q1’22 to Q2’22 Q2'22 Q1'22 Q2'21 ($M) Net Income (Loss) 10 58 (10) EPS $1.12 $6.30 ($1.15) (9) (11) 11 ROE 8% 46% (9%) Book Value p
Slide 11: Servicing performance drivers continue to improve; Q2 results impacted by strategic asset sales and marks
Servicing performance drivers continue to improve; Q2 results impacted by strategic asset sales and marks Business Update Forward Servicing Profitability Drivers • Q2 adjusted pre-tax income includes Adjusted Pre-tax Income(a) Growing Portfolio ($14M) impact from MSR and EBO sales $3 $15 ($1) • Deli
Slide 12: Taking action to improve profitability in forward lending
Taking action to improve profitability in forward lending; Correspondent Lending (CL) materially improved, further cost reduction underway in Consumer Direct (CD) Business Update Forward Originations Profitability Drivers • CL profit improvement driven by 47% Adjusted Pre-tax Income(a) Revenue Margi
Slide 13: Near-term headwinds in Reverse mortgage originations; long-term opportunity remains attractive
Near-term headwinds in Reverse mortgage originations due to rapid rate increase and widening spreads; long-term opportunity remains attractive Business Update Reverse Originations and Servicing Profitability Drivers • Reverse mortgage interest rates up over Adjusted Pre-tax Income(b) Origination Rev
Slide 14: Clear and actionable roadmap using proven cost management capabilities
Clear and actionable roadmap using proven cost management capabilities designed to deliver targeted returns before notable items Path to achieve targeted returns by Q4 ‘22 1-3 ~11 5-7 In $M 15-17 (26) 13 Q2’22 Q2 Strategic Asset Productivity & Higher Margin Products Subservicing Growth & Projected Q
Slide 15: Wrap-Up
Wrap-Up Believe we are well positioned with balanced and diversified business model Reducing enterprise-wide costs for the current market environment Optimizing liquidity, diversifying Results reflect impact of higher rates and financing sources, positioning for higher spreads, and planned asset sal
Slide 16: Appendix
Appendix • Ocwen: Who We Are • Roadmap Metrics • Notes Regarding Non-GAAP Financial Measures • Expense Notables • Income Statement Notables • GAAP ROE and After-tax ROE Before Notable Items • MSR Valuation Assumptions • End Notes Ocwen Financial Corporation 16
Slide 17: Ocwen is a mortgage originator and servicer focused on creating positive outcomes
Ocwen is a mortgage originator and servicer focused on creating positive outcomes for clients, homeowners, investors and communities Balanced and Diversified Business Model Competitive Advantages Diversified originations sources to balance Four pillar servicing portfolio optimizes risks earnings and
Slide 18: Roadmap Metrics
Roadmap Metrics Objectives Originations Servicing Corporate (a) Total originations revenue (GOS, origination fees and 1000+ Industry Refi interest income)/(orig. vol.); ~80% of originations will Qtrly MSR vol ~13% total Prudent Correspondent vol dropping be on-book, ~20% will go to MAV ~$9.5B at ~45
Slide 19: Note Regarding Non-GAAP Financial Measures
Note Regarding Non-GAAP Financial Measures In the following slides, we present supplemental information (including reconciliations) relating to certain illustrative adjustments to GAAP expenses, and pre-tax income (loss). We believe these non- GAAP financial measures provide a useful supplement to d
Slide 20: Expense Notables
Expense Notables (a) Certain previously presented notable categories with nil numbers for each quarter shown have been omitted; prior periods have been adjusted to conform with current period information (b) Severance and retention due to organizational rightsizing or reorganization (c) Long-term in
Slide 21: Income Statement Notables
Income Statement Notables (a) Certain previously presented notable categories with nil numbers for each quarter shown have been omitted; prior periods have been adjusted to conform with current period information (b) MSR FV changes that are due to changes in market interest rates, valuation inputs o
Slide 22: GAAP ROE and After-tax ROE Before Notable Items
GAAP ROE and After-tax ROE Before Notable Items Ocwen Financial Corporation 22
Slide 23: MSR Valuation Assumptions – Owned MSRs
MSR Valuation Assumptions – Owned MSRs (a) 3rd party broker assumptions (b) Total voluntary payoffs and involuntary defaults; does not include scheduled payments (c) Annual $ per loan; Ancillary includes REO fee income on Non-Agency MSRs (d) Performing represents Current and D30; NPL represents D60+
Slide 24: End Notes
End Notes SLIDE 3 SLIDE 12 SLIDE 19 a) MSR FV changes that are due to changes in market interest rates, a) See Slides 19-22 for discussion of non-GAAP measures a) Including however not limited to CFPB and certain legacy litigation valuation inputs or other assumptions, net of overall unrealized b) T
Slide 25: End Notes
End Notes SLIDE 21 SLIDE 23 a) Certain previously presented notable categories with nil numbers a) 3rd party broker assumptions for each quarter shown have been omitted; prior periods have b) Total voluntary payoffs and involuntary defaults; does not include been adjusted to conform with current per