Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Q3 2021 Earnings Presentation
25 slides from Onity's earnings presentation, Nov 8, 2021
Slide 1: Business Update Third Quarter 2021
Business Update Third Quarter 2021 November 8, 2021 © 2021 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS repay, renew and extend borrowings, borrow additional only as of the date they are made and, we disclaim any This presentation contains forward-looking statements within amounts as and when required, meet our MSR or other asset obligation to update or revise forward-lookin
Slide 3: 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 Four pillar servicing portfolio balance earnings and drive servicing
Slide 4: Executive Summary
Executive Summary • GAAP Net Income of $22M with Adjusted Pre-tax Income of $37M Financial results for the • Achieved annualized quarterly ROE of 19% 1 quarter exceeded our expectations • 8 consecutive quarters of positive Adjusted Pre-tax Income • Originations and subservicing additions up 77% vers
Slide 5: Originations delivering solid progress on actions to accelerate growth
Originations delivering solid progress on our actions to accelerate growth, improve recapture performance, and grow our client and consumer base Servicing Additions ($B) Seller Base Refinance Recapture YTD $103B Up ~2.5x YoY Rate Up 6pts YoY Oct’21 Actual 36% 20B 700 +6pts +77% +158% 24% 11B 11 4 18
Slide 6: Delivering strong growth in higher margin products, channels and services
Delivering strong growth in higher margin products, channels and services Forward and Reverse Consumer Direct channels Higher margin Reverse Originations add higher margin volume and retain customers continues growth momentum Origination Volume ($M) +61% 667 +86% 428 415 230 Q3 '20 Q3 '21 Q3 '20 Q3
Slide 7: 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(a) Continuing automation and expanding ↓3.1 bps YoY communication channels Achieved 11 bps EOY Target in Q2 12.3 bps 9.2 bps Omni-
Slide 8: Operating performance continues to exceed industry benchmarks
Operating performance continues to exceed industry benchmarks in several areas; Net Promoter Score continues to improve Average speed of answer 3-4x faster Abandon rates 50% of MBA average than the MBA average Q3 ‘21 Q3 ‘21 (Minutes) 4% 1.5 2% 0.4 (a) (a) Ocwen MBA Ocwen MBA Higher % of borrowers ex
Slide 9: Actions to expand and diversify servicing revenue opportunities are on track
Actions to expand and diversify servicing revenue opportunities are on track NRZ revenue and loan count(a) concentration continues to decline Q3 ‘20 Q3 ‘21 17% 35% Revenue 65% 83% 67% of total non-performing loans 33% 46% Loan Count 54% 67% Owned Servicing + Non-NRZ Subservicing NRZ Subservicing (a)
Slide 10: Best-in-class servicing platform with value proposition to subservicing clients
We’ve built a best-in-class servicing platform that can offer a compelling value proposition to subservicing clients with capacity for growth Delivering best practices in subservicing anchored in our 6 “C” model COMPETENCY: Leading, high-scale servicer with diversified Swift portfolio; proven track
Slide 11: Market Outlook and Competitive Environment
Market Outlook and Competitive Environment Industry Forecasts Decline 28% YoY for 2022 Industry Highlights • Consensus industry forecast for ~28% reduction in industry origination volume – still historically large $4.1 $4.2 Refinance ($T) • Originations margin pressure until excess capacity Purchase
Slide 12: We are executing well against our objectives
We are executing well against our objectives – operating and financial results are consistent with expectations On Track for Preliminary Targets OBJECTIVES 2021 Targets (a) for 2022 Up to $150B in total $100B+ in total Accelerate growth 1 servicing additions servicing additions Strengthen recapture
Slide 13: Eighth consecutive quarter of positive Adjusted Pre-tax Income
Eighth consecutive quarter of positive Adjusted Pre-tax Income…with ROE of 19% and EPS more than 2x Analysts’ Consensus forecast Increasing Adjusted PTI as business builds scale Delivering growth objectives & cost leadership Q3'21 Q3'20 Adjusted Pre-tax Income (Loss)(a) $37 $14 +38% $248 Adjusted Pr
Slide 14: Our balanced business model is operating well
Our balanced business model is operating well; originations growth and profitability replenishing servicing portfolio and offsetting runoff impact Growing Originations products and deliveries to offset Servicing building scale and margin normalization operating profitably Adjusted PTI ($M) (b)(c)(d)
Slide 15: Well positioned for 2022 …targets by segment
Well positioned for 2022 …targets by segment Objectives Originations Servicing Corporate (a) Total originations revenue (GOS, origination fees 850+ CL and Refi vol Accelerate Qtrly MSR vol and interest income)/(orig. vol. ex. bulk). ~75% of flow sellers dropping 54% ~15% total prepays originations w
Slide 16: Wrap Up
Wrap Up • GAAP Net Income of $22M with Adjusted Pre-tax Income of $37M Financial results for the • Achieved annualized quarterly ROE of 19% 1 quarter exceeded our expectations • 8 consecutive quarters of positive Adjusted Pre-tax Income • Originations and subservicing additions up 77% versus Q3’20 E
Slide 17: Appendix
Appendix • Notes Regarding Non-GAAP Financial Measures • Expense Notables • Income Statement Notables • Expense Notables by Segment • Income Statement Notables by Segment • GAAP ROE & Adjusted Pre-tax ROE • MSR Valuation Assumptions • End Notes Ocwen Financial Corporation 17
Slide 18: 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 19: Expense Notables
Expense Notables Expense Overview $ Millions Q3'21 Q3'20 OCN OCN I Operating Expenses (as reported) 145 150 (a) Adjustments for Notables Re-engineering costs - (7) Significant legal & regulatory settlement expenses (3) (3) CFPB & state regulatory defense & escrow analysis costs - (2) Expense recover
Slide 20: Income Statement Notables
Income Statement Notables Income Overview $ Millions Q3'21 Q3'20 OCN OCN I Reported Pre-Tax Income / (Loss) 10 (11) (a) Adjustments for Notables Expense Notables (from prior slide) 5 19 (b) Non-Agency MSR FV Change (68) (14) (b) Agency MSR FV Change, net of macro hedge 10 4 NRZ/MAV MSR Liability FV
Slide 21: Expense Notables by Segment
Expense Notables by Segment Expense Overview $ Millions Q3'21 Q3'20 Servicing Originations Servicing Originations I Operating Expenses 81 43 80 35 Adjustments for Notables (a) Re-engineering costs (0) - (1) (1) Significant legal and regulatory settlement expenses (3) - 0 - NRZ consent process expens
Slide 22: Income Statement Notables by Segment
Income Statement Notables by Segment $ Millions Q3'21 Q3'20 Servicing Originations Servicing Originations I Reported Pre-Tax Income / (Loss) 17 17 (28) 30 Adjustments for Notables Expense Notables (from prior table) 2 (0) 3 1 (a) Non-Agency MSR FV Change (68) - (14) - (a) Agency MSR FV Change, net o
Slide 23: GAAP ROE & Adjusted Pre-tax ROE
GAAP ROE & Adjusted Pre-tax ROE GAAP ROE Calculations $ Millions Q3'21 Q3'20 OCN OCN I Reported Net Income 22 (9) II Annualized Net Income (I * 4) 86 (38) Equity Beginning Period Equity 447 433 Ending Period Equity 470 424 III Average Equity 458 429 IV GAAP ROE (II / III) 19% -9% Adjusted Pre-tax RO
Slide 24: MSR Valuation Assumptions – Owned MSRs
MSR Valuation Assumptions – Owned MSRs (a) 3rd part 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) NRZ sale transactions did not achieve sale accounting treat
Slide 25: End Notes
End Notes SLIDE 3 SLIDE 11 SLIDE 14 a) Consumer Direct channel is higher margin a) Prospects where we’ve had an active dialogue a) Includes interim subservicing boarded and exited lending without use of a third-party originator within the quarter (formerly Ocwen’s Recapture channel) SLIDE 12 b) See