Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Q3 2020 Earnings Presentation
25 slides from Onity's earnings presentation, Oct 20, 2020
Slide 1: Business Update: Preliminary Third Quarter 2020
Business Update Preliminary Third Quarter 2020 October 20, 2020 © 2020 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS increased servicing costs based on increased borrower Our forward-looking statements speak only as of the date they delinquency levels or other factors; our ability to consummate a are made and, we disclaim any obligation to update or revise This presentation contains forw
Slide 3: Continued turnaround and profitability momentum
Continued turnaround and profitability momentum … today’s Ocwen is stronger, more efficient and more diversified Diversified and balanced business model, well Impact of forbearance tracking favorably to 1 5 positioned to capitalize on growth opportunities forecast, necessary liquidity to fund portfo
Slide 4: Ocwen is a leading mortgage special servicer and originator
Ocwen is a leading mortgage special servicer and originator creating positive outcomes for homeowners, communities and investors Balanced and Diversified Positioned to Benefit from Macro Business Model Industry Trends Servicing – scale, diversity and proven core • Fed committed to record low interes
Slide 5: 3Q results reflect continued strong execution on key priorities
3Q results reflects continued strong execution on our key priorities Improving Profitability(a) Delivering originations growth ($ millions) ($ billions) $54 $31 Servicing additions Subservicing additions $11.4 +115% 4.7 +24% $(322) $5.3 3.8 6.7 +4x 1.6 2Q’18 2Q’20 3Q’20 Annualized Annualized Annuali
Slide 6: Multi-channel originations platform delivering solid growth in all channels
Our multi-channel originations platform is delivering solid YoY and sequential quarter growth in all channels Origination volume continues to outpace recent periods Originations team executing very well Servicing additions Subservicing additions(a) +115% • Increasing volume offsetting expected margi
Slide 7: Differentiated Enterprise Sales approach and origination capacity expansion
Driving differentiated Enterprise Sales approach and origination capacity expansion to fuel future owned MSR and subservicing growth Product Capability Ocwen offers a broad portfolio of services • Forw ard, Reverse and Small across the mortgage lifecycle Balance Commercial • GSE, Government, Non-Age
Slide 8: Servicing delivers strong operating performance anchored by special servicing
Servicing continues to deliver strong operating performance anchored by a core competency in special servicing Shorter Delinquency Cycle Drives Faster Recovery Call Center Response to COVID-19 Better than Industry (May 2019 – April 2020 Reporting Period (9/21 – 9/27 Reporting Period) Source: Moody C
Slide 9: COVID-19 forbearance tracking favorable to forecast
COVID-19 forbearance (FB) tracking favorable to forecast Total loans on FB declining, generally consistent Owned servicing FB plan levels comparable to other with industry, ~75,000 active FB plans(a) non-bank servicers # of Active Open FB Plans ('000s) Total plans 130 131 Ow ned plans 115 118 114 10
Slide 10: Servicing portfolio composition strategy provides balance and diversity
Servicing portfolio composition strategy provides balance and diversity to manage risks and optimize returns through economic cycles Performing 1 Special 2 Performing 3 Special 4 Owned Owned Subservicing Subservicing UPB: $34B, ALB: UPB: $44B, ALB: UPB: $21B, ALB: $133k, UPB: $87B, ALB: $149k, $194k
Slide 11: Total liquidity position improved from 2Q
Total liquidity position improved from 2Q; balance sheet optimization on- track and liquidity position supports our volume and business objectives Liquidity Servicing Advance Trend favorable to Forecast ($ millions) $413 $314 $92 $1,137 $901 $833 $314 $321 Q2'20 Q3'20 Q2'20 Q3'20 Q3'20 Actuals Actua
Slide 12: Continued progress on the implementation of MAV
Continued progress on the implementation of MAV Overview Benefits • In advanced discussions with potential Expected to provide up to $55B in synthetic investors to launch MSR asset vehicle subservicing (“MAV”) focused on investing in Agency MSRs Supports subservicing and recapture services growth ob
Slide 13: Market dynamics present sizeable growth opportunities
Market dynamics present sizeable potential growth opportunities aligned with Ocwen’s capabilities Opportunities in Special Servicing and Opportunities in Performing Originations Reverse Mortgage Fed commitment to record low interest rates driving robust industry volumes % Loans on FB 10.4% Ref inanc
Slide 14: Financial Updates
FINANCIAL UPDATES Ocwen Financial Corporation 14
Slide 15: Fourth consecutive quarter of adjusted pre-tax income
Fourth consecutive quarter of adjusted pre-tax income ($ millions, except Book Value per Share) Q2’20 Q3’20 VPQ$ Key Results Revenues $173 $180 $7 • Revenue increase driven by volume growth Servicing 118 122 3 across originations channels. Originations 53 57 5 Corporate 2 2 (1) • Operating exp
Slide 16: Balanced business model operating well
Our balanced business model is operating well, originations growth and profitability replenishing servicing portfolio and offsetting runoff impact Originations Highlights Servicing Highlights Origination Volume ($B) Adjusted PTI ($M)(a) Servicing UPB ($B) Adjusted PTI ex. Lump-sum Servicing Servicin
Slide 17: Driving growth, balance, cost leadership and operational excellence
We are driving growth, balance and diversification, cost leadership and operational excellence to drive long-term value creation Sep 2020 – Dec 2021 Targeted Key Drivers Originations Servicing Corporate Industry Lower prepays, ~20% prepays Implement Avg revenue (a) Reduction in Market volume down fo
Slide 18: Continued turnaround and profitability momentum
Continued turnaround and profitability momentum … today’s Ocwen is stronger, more efficient and more diversified Diversified and balanced business model, well Impact of forbearance tracking favorably to 1 5 positioned to capitalize on growth opportunities forecast, necessary liquidity to fund portfo
Slide 19: Appendix
Appendix • Notes Regarding Non-GAAP Financial Measures • Expense Notables • Income Statement Notables • Expense Notables by Segment • Income Statement Notables by Segment • MSR Valuation Assumptions Ocwen Financial Corporation 19
Slide 20: Note Regarding Adjustments to GAAP Expenses and Pre-tax Income (Loss)
Note Regarding Adjustments to GAAP Expenses and Pre-tax Income (Loss) In the follow ing slides, w e present supplemental information (including reconciliations) relating to certain illustrative adjustments to GAA P expenses, and pre-tax income (loss). We believe this information is instructive as an
Slide 21: Expense Notables
Expense Notables (c) $ Millions Q2'18 Q3'20 OCN + PHH OCN OCN (Annualized) (Annualized) I Expenses (as reported)(a) 1,107 (b) II Reclassifications 5 III Deduction of MSR valuation adjustments, net (132) IV Operating Expenses (I+II+III) 979 150 598 Adjustments for Notables Re-engineering costs (32) (
Slide 22: Income Statement Notables
Income Statement Notables $ Millions Q2'18 (c) Q3'20 OCN + PHH OCN OCN (Annualized) (Annualized) (a) I Reported Pre-Tax Income / (Loss) (253) (11) (46) Adjustments for Notables Expense Notables (from prior slide) 63 19 (b) Non-Agency MSR FV Change (20) (14) (b) Agency MSR FV Change, net of macro hed
Slide 23: Expense Notables by Segment
Expense Notables by Segment $ Millions Q2'20 Q3'20 (c) Servicing Originations Servicing Originations I Operating Expenses 83 29 80 35 Adjustments for Notables Re-engineering costs (0) (0) (1) (1) Significant legal and regulatory settlement expenses 0 - - - NRZ consent process expenses - - 0 - Expens
Slide 24: Income Statement Notables by Segment
Income Statement Notables by Segment $ Millions Q2'20 Q3'20 (c) Servicing Originations Servicing Originations I Reported Pre-Tax Income / (Loss) 10 29 (28) 30 Adjustments for Notables Expense Notables (from prior table) (4) 1 3 1 Non-Agency MSR FV Change (a) 3 - (14) - (a) Agency MSR FV Change, net
Slide 25: MSR Valuation Assumptions
MSR Valuation Assumptions $ in millions At 9/30/2020 Non- Total NRZ Sold(d) FN/ FH FHA/ VA Agency Retained UPB 33,683 13,882 22,816 70,380 66,865 Loan Count (000s) 167 106 137 411 502 Fair Value 268 74 150 492 577 Fair Value (% of UPB) 0.80% 0.53% 0.66% 0.70% 0.86% Collateral Metrics: Weighted Avera