Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Q2 2021 Earnings Presentation
29 slides from Onity's earnings presentation, Aug 5, 2021
Slide 1: Business Update Second Quarter 2021
Business Update Second Quarter 2021 August 5, 2021 © 2021 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS re-engineering efforts and other actions; our ability to continue NON-GAAP FINANCIAL MEASURES This presentation contains forward-looking statements within to grow our origination business and increase our origination This presentation contains certain non-GAAP financial th
Slide 3: Ocwen is a mortgage originator and servicer
Ocwen is a mortgage originator and servicer focused on creating positive outcomes for homeowners, communities and investors Balanced and Diversified Business Model Competitive Advantages Diversified, sustainable originations to balance earnings and drive servicing portfolio growth ✓ Growth potential
Slide 4: Executive Summary
Executive Summary Financial results for the • Adjusted pre-tax income consistent with past 3 quarters 1 quarter are consistent with • June adjusted pre-tax income reflects improved earnings our expectations performance and 34% annualized adjusted pre-tax ROE Execution of our operating • Improved sca
Slide 5: Market Outlook and Competitive Environment
Market Outlook and Competitive Environment Industry Forecasts Strong for 2021 Key Highlights • Industry volume continues to be robust compared to Refinance ($T) 4.1 Purchase ($T) 3.7 historic levels 2.4 2.7 1.7 2.6 2.0 • Reverse mortgage endorsement volume increased 21% 0.9 0.5 1.1 in 1st half of 20
Slide 6: We are executing well against our objectives
We are executing well against our objectives – operating and financial results are consistent with expectations OBJECTIVES TARGET PROGRESS (a) Up to $150B in Total • 55% of total servicing additions Accelerate growth 1 Servicing Additions funded Achieve and • Recapture rate up 4 points QoQ Strengthe
Slide 7: Originations delivering solid progress on growth and recapture
Originations delivering solid progress on our actions to accelerate growth, improve recapture performance, and grow our client and consumer base Total Servicing Additions ($B) 69 Bulk for Investment Subservicing incl. MAV • Double digit growth YoY in every channel TPO Reverse 51 Consumer Direct • ~$
Slide 8: Focused on growing higher margin products, channels and services
Focused on growing higher margin products, channels and services; flow MSRs redirected to MAV starting 3Q to grow performing subservicing Consumer Direct Reverse GNMA Origination Volume ($M) Origination Volume ($M) Origination Volume ($M) +37% +87% +128% 1,292 1,172 603 440 691 514 1H'20 1H'21 1H'20
Slide 9: Reducing servicing operating cost and improving customer experience
Reducing servicing operating cost and improving customer experience through technology, process simplification, scale, and portfolio composition Servicing operating costs ↓ 8.4% QoQ Technology & Process Refinement Improve our cost leadership • 100% cloud to support technology roadmap • New mobile ap
Slide 10: Operating performance continues to exceed industry benchmarks
Operating performance continues to exceed industry benchmarks in several areas; Net Promoter Score slightly down due to new boardings and seasonality Average speed of answer 2-3X Abandon Rates around half of Superior performance for Borrowers exiting FB versus faster than the MBA average industry av
Slide 11: Actions to expand servicing revenue opportunities
Actions to expand servicing revenue opportunities on track for full-year target; timing and mix will be different than expected Call Rights Inaugural Transaction on target to close Targeting $20+M vs. $4-$8M in Call Rights Q3 Preparing for previously planned for 2021 Deal team a 2nd larger establish
Slide 12: Agreement with RMS expected to double reverse servicing portfolio
Agreement with RMS expected to double reverse servicing portfolio with growth opportunities through five-year subservicing agreement Transaction Overview Potential Benefits • Agreement with Reverse Mortgage Solutions • Transaction expected to double reverse (RMS) and parent company Mortgage Assets s
Slide 13: Seventh consecutive month of positive Adjusted Pre-tax Income
Seventh consecutive month of positive Adjusted Pre-tax Income Stable adjusted PTI in moratorium environment Delivering growth objectives & cost leadership Q2’21 Q1’21 Q2’20 +2.9% CQGR (b) -2.5% Quarterly Operating Ratio (c) Adjusted Pre-tax Income (Loss)(a) $6 $7 $8 190 194 173 Q2’20 Notables(d)(e)
Slide 14: June actual results reflect improved earnings performance
June actual results reflect improved earnings performance with an annualized adjusted pre-tax return on equity of 34% Actual Adjusted PTI(a) in June x 3 = $38M* ($ millions) 224 • June ‘21 reflects first full month of performance including all 186 servicing additions for the quarter. • Going forward
Slide 15: Our balanced business model is operating well
Our balanced business model is operating well, originations growth and profitability replenishing servicing portfolio and offsetting runoff impact Originations margins(a)(d) normalizing as expected Origination Volume ($B)(a) Adjusted PTI ($M) and Margin(bps)(b)(d) Servicing • Volume increases QoQ •
Slide 16: Liquidity maintained while increasing Bulk investments
Liquidity maintained while increasing Bulk investments Liquidity supported significant bulk MSR acquisitions $ millions Investment by Oaktree net of Ocwen investment in Amerihome $118, MAV Canopy TCB $13, other $16 28 257 69 13 (147) 276 31 244 Q1 '21 JV Investment Hedge Perfomance Bulk MSR Other Q2
Slide 17: Positioned for step change in profitability in second half
Positioned for step change in profitability the second half of the year…targets by Segments (December 2021) Objectives Originations Servicing Corporate (a) Total originations revenue (GOS, origination fees 800+ CL and Industry vol. % Accelerate Qtrly MSR vol ~14% total prepays and interest income)/(
Slide 18: Wrap-Up
Wrap-Up Financial results for the • Adjusted pre-tax income consistent with past 3 quarters 1 quarter are consistent with • June adjusted pre-tax income reflects improved earnings our expectations performance and 34% annualized adjusted pre-tax ROE Execution of our operating • Improved scale in serv
Slide 19: Appendix
Appendix • Weighted Cost of Capital Analysis • Notes Regarding Non-GAAP Financial Measures • Expense Notables • Income Statement Notables • Expense Notables by Segment • Income Statement Notables by Segment • June Notables • MSR Valuation Assumptions • End Notes Ocwen Financial Corporation 19
Slide 20: Pre-tax Weighted Average Cost of Capital
Pre-tax Weighted Average Cost of Capital 16% 14% 13.3% 13.7% 12% 10% 9.0% 8% 6.9% 7.1% 6.1% 6.4% 6% 3.3% 3.6% 3.3% 4% 2% 0% Corporate Advance Financing MSR Financing Warehouse Financing Total WACC OCN Q4 '20 OCN Q2 '21 OCN Q4 2020 OCN Q2 2021 OCN Q4 2020 OCN Q2 2021 Corporate Capital Amount WA Pre-
Slide 21: Note Regarding Adjustments to GAAP Expenses and Pre-tax Income (Loss)
Note Regarding Adjustments to GAAP Expenses and Pre-tax Income (Loss) 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 this information is instructive as an al
Slide 22: Expense Notables
Expense Notables Expense Overview $ Millions Q2'21 Q1'21 Q2'20 OCN OCN OCN I Operating Expenses (as reported) 150 140 145 Adjustments for Notables (b) Re-engineering costs - - (9) Significant legal & regulatory settlement expenses (6) - (1) Expense recoveries - - 7 Covid-19 Related Expenses - - (6)
Slide 23: Income Statement Notables
Income Statement Notables (a) FV changes that are driven by changes in interest rates, valuation inputs or other assumptions, net of unrealized gains / (losses) on macro hedge. Non-Agency = Total MSR excluding GNMA & GSE MSRs. Agency = GNMA & GSE MSRs. The adjustment does not include $9 million valu
Slide 24: Expense Notables by Segment
Expense Notables by Segment (a) Previously presented notable categories with nil numbers for each quarter shown have been omitted. Ocwen Financial Corporation 24
Slide 25: Income Statement Notables by Segment
Income Statement Notables by Segment (a) FV changes that are driven by changes in interest rates, valuation inputs or other assumptions, net of unrealized gains / (losses) on macro hedge. Non-Agency = Total MSR excluding GNMA & GSE MSRs. Agency = GNMA & GSE MSRs. The adjustment does not include $9 m
Slide 26: Expense Notables – June 2021
Expense Notables – June 2021 Expense Overview $ Millions Jun'21 OCN I Operating Expenses (as reported) 53.5 (a) Adjustments for Notables Re-engineering costs 0.0 Significant legal and regulatory settlement expenses (6.3) CFPB & state regulatory defense & escrow analysis costs (0.0) NRZ consent proce
Slide 27: Income Statement Notables – June 2021
Income Statement Notables – June 2021 Income Overview $ Millions Jun'21 OCN I Reported Pre-Tax Income / (Loss) (16.5) Adjustments for Notables Expense Notables (from prior slide) 9.1 Non-Agency MSR FV Change(a) (12.8) (a) Agency MSR FV Change, net of macro hedge 17.4 NRZ MSR Liability FV Change (Int
Slide 28: MSR Valuation Assumptions – Owned MSRs
MSR Valuation Assumptions – Owned MSRs At 6/30/2021 Non- Total FN/ FH FHA/ VA Agency Retained (in $ millions) UPB 116,438 12,615 19,749 148,802 Loan Count (000s) 468 96 121 685 Fair Value 1,312 101 124 1,537 Fair Value (% of UPB) 1.13% 0.80% 0.63% 1.03% % in COVID-19 FRB Plan 0.6% 5.3% 7.6% 2.5% % C
Slide 29: End Notes
End Notes SLIDE 3 SLIDE 13 SLIDE 15 a) Consumer Direct channel is higher margin lending a) Ex-Lump Sum of 10M from NRZ for Q2’20. See Slides a) Includes interim subservicing boarded and exited without use of a third-party originator (formerly Ocwen’s 21-27 for discussion of non-GAAP measures within