Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Q1 2022 Earnings Presentation
25 slides from Onity's earnings presentation, May 5, 2022
Slide 1: Business Update First Quarter 2022
Business Update First Quarter 2022 May 5, 2022 © 2022 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS our ability to retain clients and employees of acquired Anyone wishing to understand Ocwen’s business should review This presentation contains forward-looking statements within businesses, and the extent to which acquisitions and our other our SEC filings. Our forward-look
Slide 3: Ocwen is a mortgage originator and servicer
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 • Balanced and diversified business; industry-leading servicing performance Well positioned for the 1 current market environment • Growing subservicing and end-to-end reverse mortgage businesses • Special servicing expertise to support borrowers and investors • GAAP Net Income $58M
Slide 5: Well positioned for the current market environment
Well positioned for the current market environment Industry leading operational Top 5 reverse originator with Balanced and diversified business execution driving subservicing growing market share and end-to- model that is working as designed growth end capabilities Forward Servicing PTI Recognized S
Slide 6: Servicing financial performance improving with rising interest rates
Servicing financial performance improving with rising interest rates Business Update Servicing Profitability Drivers • MSR investments delivering Increasing MSR Value Growing Portfolio significant value appreciation • 25 bps rate increase expected to result in an additional $2.7 EPS(a) • Servicing i
Slide 7: Taking the necessary actions to restore profitability in forward originations
Taking the necessary actions to restore profitability in forward originations Business Update Forward Originations Profitability Drivers Growing Client Base Improving Refinance Recapture • Pre-tax loss driven by lower margins and lock volumes and Mar’22 Actual 41% hedging ineffectiveness • Restricte
Slide 8: Unique end-to-end reverse mortgage capability delivering strong financial performance
Unique end-to-end reverse mortgage capability delivering strong financial performance Business Update Reverse Originations and Servicing Profitability Drivers • Originations generating steady Opportunities in Reverse Higher Margin Reverse Originations adjusted pre-tax income Mortgage Continues Growt
Slide 9: Earnings driven by MSR fair value adjustments offsetting origination headwinds
Earnings driven by MSR fair value adjustments offsetting origination market headwinds and reverse servicing platform build-out First Quarter Operating as Expected $M, except per share metrics Adjusted Pre-Tax Income(a) Q1 Walk YoY Q1'22 Q1'21 ($M) 7 Adjusted Pre-tax Income (Loss)(a) ($11) $7 30 Nota
Slide 10: Forward Originations profitability impacted by reduced industry volume and margins
Forward Originations profitability impacted by reduced industry volume and margins … taking actions to address market reality Adjusted PTI ($M)(a) Revenue Margins (bps)(b) 800 150 $27 (13) 659bps 700 130 Cash Window and Flow 11 Consumer Direct 600 110 2 Correspondent 500 90 400 70 14 300 50 236bps (
Slide 11: Reverse Originations profitability steady despite rising interest rates
Reverse Originations profitability steady despite rising interest rates Adjusted PTI ($M)(a) Revenue Margins (bps)(b) 1454bps 1092bps $10 $10 835bps Q1 '21 Q1 '22 441bps 406bps $0.3B UPB $0.5B UPB 173bps Reverse Origination Volume Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Consumer Direct Correspondent Whol
Slide 12: Servicing improving profitability by building scale and cost improvement
Servicing improving profitability by building scale, delivering cost improvement and integrating Reverse Subservicing platform ahead of plan. Adjusted PTI YoY grew from scaling Reverse subservicing achieved the portfolio UPB and cost leadership profitability in Q1 Adjusted GoS ($M) PTI ($M) (a) Incl
Slide 13: Clear and actionable roadmap to deliver targeted returns
Clear and actionable roadmap using proven cost management capabilities designed to deliver targeted returns before notable items Path to achieve targeted returns by Q4 ‘22 ($M) 5-6 ~15 10-11 (11) 9-10 Q1’22 Productivity & Higher Margin Products Subservicing Growth & Projected Q4’22 Adj PTI(a) Right-
Slide 14: Wrap-Up
Wrap-Up Believe we are well positioned Shifting product mix and reducing with balanced and diversified cost structure to restore profitability business model for the current in forward originations; CL margins market environment and lock volume improving Reverse origination and servicing First quart
Slide 15: Appendix
Appendix • Notes Regarding Non-GAAP Financial Measures • Expense Notables • Income Statement Notables • Expense Notables by Segment • Income Statement Notables by Segment • GAAP ROE and After-tax ROE Before Notable Items • MSR Valuation Assumptions • Roadmap Metrics • End Notes Ocwen Financial Cor
Slide 16: 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 this information is instructive as an alternative way to view certa
Slide 17: Expense Notables
Expense Notables (a) Certain previously presented notable categories with nil numbers for each quarter shown have been omitted. (b) Includes non-routine costs associated with strategic transactions including stock price changes impacting compensation expense, transaction costs related to the reverse
Slide 18: Income Statement Notables
Income Statement Notables Income Overview $ Millions Q1'22 Q1'21 OCN OCN I Reported Pre-Tax Income / (Loss) 61 12 Adjustments for Notables(a) Expense Notables (from prior slide) (17) 1 Non-Agency MSR FV Change(b) (9) (2) Agency MSR FV Change, net of macro hedge(b) (120) (25) NRZ/MAV MSR Liability FV
Slide 19: Expense Notables by Segment
Expense Notables by Segment (a) Certain previously presented notable categories with nil numbers for each quarter shown have been omitted. (b) Includes non-routine costs associated with strategic transactions including transaction costs related to the reverse platform acquisition from RMS Ocwen Fi
Slide 20: Income Statement Notables by Segment
Income Statement Notables by Segment Income Overview $ Millions Q1'22 Q1'21 Servicing Originations Servicing Originations I Reported Pre-Tax Income / (Loss) 69 (3) 13 36 Adjustments for Notables(a) Expense Notables (from prior slide) (8) 0 1 0 (b) Non-Agency MSR FV Change (9) - (2) - Agency MSR FV C
Slide 21: GAAP ROE & After-Tax ROE Before Notable Items
GAAP ROE & After-Tax ROE Before Notable Items Ocwen Financial Corporation 21
Slide 22: MSR Valuation Assumptions – Owned MSRs
MSR Valuation Assumptions – Owned MSRs At 3/31/2022 Non- Total FN/ FH FHA/ VA Agency Retained (in $ millions) UPB 87,561 11,575 16,589 115,725 Loan Count (000s) 358 87 104 548 Fair Value 1,204 120 111 1,435 Fair Value (% of UPB) 1.38% 1.04% 0.67% 1.24% % in COVID-19 FRB Plan 0.4% 2.1% 2.3% 1.0% % Cu
Slide 23: 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 and 1000+ Industry Refi Qtrly MSR vol ~13.5 % total interest income)/(orig. vol.). ~60% of originations will be Prudent vol dropping on-book, ~40% will go to
Slide 24: End Notes
End Notes SLIDE 3 SLIDE 9 (cont..) SLIDE 14 a) Consumer Direct channel is higher margin lending e) GAAP revenue is decreased by NRZ revenue is a) Assumes we achieve our objectives and there are no without use of a third-party originator (formerly Ocwen’s reclassed (decreasing revenue offset by reduc
Slide 25: End Notes
End Notes SLIDE 19 SLIDE 23 a) Certain previously presented notable categories with nil a) Total originations revenue (GOS, origination fees and numbers for each quarter shown have been omitted. interest income)/(orig. vol.). ~60% of originations will be b) Includes non-routine costs associated with