Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Q1 2021 Earnings Presentation
26 slides from Onity's earnings presentation, Apr 29, 2021
Slide 1: Business Update First Quarter 2021
Business Update First Quarter 2021 April 29, 2021 © 2021 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS increased servicing costs based on increased borrower NON-GAAP FINANCIAL MEASURES This presentation contains forward-looking statements within delinquency levels or other factors; our ability to collect This presentation contains certain non-GAAP financial the meaning of S
Slide 3: Continued strong operating and financial momentum as we pivot from turnaround to growth
Continued strong operating and financial momentum as we pivot from turnaround to growth and improved profitability Growth exceeding expectations; increasing target for total ~$14B ~$68B(a) ~50% Q1’21 Originations servicing additions from $100B+ to up to $150B for 2021 volume Q1 ’21 Bulk LOIs of up t
Slide 4: 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 homeowners, communities and investors Balanced and Diversified Business Model Diversified, sustainable originations to balance Four pillar servicing portfolio optimizes risks and earnings and drive servicing portfo
Slide 5: 2021 Market outlook and competitive environment is dynamic
2021 Market outlook and competitive environment is dynamic – rapid interest rate increase presents both headwinds and tailwinds Industry forecasts strong for 2021 Rate impacts Rising mortgage rates driving transition to purchase driven originations market • Rising rates improve MSR values Purchase s
Slide 6: We are driving five operating objectives to achieve 2021 profitability goals
We are driving five operating objectives to achieve 2021 profitability goals with focus, purpose and speed OBJECTIVES TARGET Up to $150B $100B+ in total volume with a mix of 55% owned Accelerate growth 1 servicing and 45% subservicing Strengthen recapture Achieve and maintain 30% recapture rate by p
Slide 7: Correspondent Lending
Agreements with Texas Capital Bank expected to support several of 1 our initiatives to accelerate origination and servicing growth Executed agreements to acquire Correspondent Lending PHH and TCB combined produced $5B in volume in business and purchase bulk MSR portfolio (a) Q4’20; TCB ranked 17th C
Slide 8: Originations delivered solid progress on our actions to accelerate growth
Originations delivered solid progress on our actions to accelerate 1 growth trajectory through client, product and channel expansion Objectives Q1 Progress and Actions Volume (a) scaling up significantly in 2021 Funded volum e and bulk LOIs totaling 55%+ of $68B(b) in Bulk original targeted servicin
Slide 9: Recapture continues to strengthen performance through investment in people, process and technology
Recapture continues to strengthen performance through continued 2 investment in people, process and technology Objectives Q1 Progress and Actions Recapture volume up 32% from Q4 Funded units up 31% from Q4 ($ millions) Grow Funded Volume and Units Recapture rate up 3.4% from Q4 due Improve Recapture
Slide 10: Servicing cost and operations performance tracking to expectations
Servicing cost and operations performance tracking to expectations driven by unwavering focus on technology and results 3 Improve our cost leadership Building our digital servicing platform Servicing Operating Costs down 8.5% Applications Data • 100% Cloud - Customer Facing - Rules Engines - Employe
Slide 11: Actions to expand servicing revenue opportunities delivering results
Actions to expand servicing revenue opportunities delivering results 5 consistent with expectations Objectives Q1 Progress and Actions $5M closed in Q1 Mods on track Financing despite Ginnie EBOs facilities in forbearance place extending Exploring solutions for late stage DQ / FCL Targeting $22-32M
Slide 12: Financial Updates
FINANCIAL UPDATES Ocwen Financial Corporation 12
Slide 13: Net income positive and sixth consecutive quarter of positive adjusted pre-tax income
Net income positive and sixth consecutive quarter of positive adjusted pre-tax income ($ millions, except Book Value per Share) Q1 ’21 Q4’20 VPQ$ Key Results Revenues(a) $190 $172 $18 • Revenue increase due to an increase in Servicing 123 116 7 servicing fees on $14B higher average UPB Originati
Slide 14: Our balanced business model is operating well
Our balanced business model is operating well, originations growth and profitability replenishing servicing portfolio and offsetting runoff impact Originations Highlights Servicing Highlights Origination Volume ($B) (a) Adjusted PTI ($M) and Servicing UPB ($B) Adjusted PTI ($M) (b) Margin(bps) (b)(c
Slide 15: Extended corporate debt maturities and negotiating MSR funding facilities
Extended corporate debt maturities and negotiating MSR funding facilities to increase capacity and reduce cost Improved MSR facilities terms and Restructured corporate debt conditions for Q2 and beyond ✓ Refinanced all corporate debt Completed Actions(a) ✓ Increased existing facilities by $100M ✓ Re
Slide 16: Liquidity position supports planned investments and servicing advances
Liquidity position supports planned investments and servicing advances continue to track favorably Positioned for additional bulk MSR market opportunities and continued originations ($ millions) • $42M net cash consumption in Q1 for $9B MSR originations, $16B lower than Q4’20 $338 due to fewer bulk
Slide 17: COVID-19 forbearance aligned or favorable to the industry
COVID-19 forbearance (FB) aligned or favorable to the industry Total loans on FB declining, generally consistent Owned servicing FB plan levels favorable to other with industry, ~72,000 active FB plans(a) non-bank servicers # of Active Open FB Plans ('000s) % of Portfolio Volume on FB by Investor Ty
Slide 18: Earnings and profitability framework targets by December 2021
Earnings and profitability framework targets by December 2021 Objectives Originations Servicing Corporate Industry vol. (a) Total originations revenue (GOS, origination fees 600+ CL and ~17% prepays and interest income)/(orig. vol. ex. bulk and S/S). Accelerate flow sellers Qtrly MSR vol 10% lower d
Slide 19: Today's Ocwen is stronger, more efficient and with capabilities aligned
Today’s Ocwen is stronger, more efficient and with capabilities aligned with future market opportunities Diversified and balanced originator Servicing platform positioned to perform 1 focused on growth, cost leadership and 5 through cycles with diverse portfolio and superior operating performance to
Slide 20: 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 20
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 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 22: Expense Notables
Expense Notables (c) $ Millions Q4'20 Q1'21 OCN OCN OCN OCN (Annualized) (Annualized) I Operating Expenses (as reported) 144 577 140 559 Adjustments for Notables Re-engineering costs (6) (0) Significant legal and regulatory settlement expenses (16) - CFPB & state regulatory defense & escrow analysis
Slide 23: Income Statement Notables
Income Statement Notables $ Millions Q4'20 Q1'21 OCN OCN OCN OCN (Annualized) (Annualized) I Reported Pre-Tax Income / (Loss) (1) (3) 12 47 Adjustments for Notables Expense Notables (from prior slide) 16 1 (a) Non-Agency MSR FV Change (6) (2) (a) Agency MSR FV Change, net of macro hedge (9) (25) NRZ
Slide 24: Expense Notables by Segment
Expense Notables by Segment $$ Millions Millions Q4 ‘20 Q4'20 Q1 ‘21 Q1'21 (c) Servicing Originations Servicing Originations I Operating Expenses 76 36 83 37 Adjustments for Notables Re-engineering costs (1) (1) 0 (0) Significant legal and regulatory settlement expenses - - - - CFPB & state regulato
Slide 25: Income Statement Notables by Segment
Income Statement Notables by Segment $ Millions Q4'20 Q1'20 (c) Servicing Originations Servicing Originations I Reported Pre-Tax Income / (Loss) (1) 33 13 37 Adjustments for Notables Expense Notables (from prior table) 3 2 1 0 (a) Non-Agency MSR FV Change (6) - (2) - (a) Agency MSR FV Change, net of
Slide 26: MSR Valuation Assumptions – Owned MSRs
MSR Valuation Assumptions – Owned MSRs At 3/31/2021 Non- Total FN/ FH FHA/ VA Agency Retained (in $ millions) UPB 58,053 12,247 20,479 90,779 Loan Count (000s) 248 97 124 469 Fair Value 618 96 136 850 Fair Value (% of UPB) 1.06% 0.78% 0.67% 0.94% % in COVID-19 FRB Plan 1.5% 7.3% 8.5% 4.5% % Current